Transcript Staffordshire University After you APIIT Diploma or Higher

Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 1
Introduction / Stakeholders / Project Brief
Lecturer: Dr. Revenio
Learning Objectives:
-Identify the definitions of a project and the
task of management within a range of
projects.
-Recognize the primary objectives of any
projects and balancing the three objectives
-Identify key stakeholders for project.
-Identify the project brief and demonstrate its
template.
Introduction:
What is Project?
Project
is
a
temporary
endeavor
undertaken to create unique product or
service.
•Temporary means each project has a
definite end.
•Unique means that the product or service
is different in some distinguishing way form
all similar products or services.
-What is Project Management?
Project Management is the application of
knowledge, skills, tools and techniques to project
activities in order to meet stakeholder’s needs
and expectations from the project.
(The project manager must do whatever is
required to make the project happen).
So ,
What is the purpose of project management?
A project is any activity that has:
• A unique task
• A specified target
• A set timescale
• A fixed budget.
The primary objectives of any project can
be grouped under three headings:
1- Specification, performance and quality
2- Budget
3- Time to completion.
- Balancing the primary objectives
Triangle of objectives: Version 1
•The three primary objectives of quality,
cost and time are interrelated
- The time l cost relationship
•Remember that TIME IS MONEY!
•Any delays on project can easily cause
additional costs (fixed, variable and finance
costs).
- The quality l cost relationship
•The relationship between quality and project
costs is not straightforward.
•Downgrading quality is not an option. (Total
Quality Management)
•The word 'quality' is replaced by 'specification',
'specified standard', 'specified performance' or
something equivalent.
•Don’t forget people!!!
•Level of specification' replaces 'quality‘.
WHY?
Triangle of objectives: Version 2
Stakeholders:
-Stakeholder is any individual or group with
an interest in the project process or
outcome.
- External Stakeholders
-Internal Stakeholders
Common Stakeholder Expectations
•Fit for purpose
•Aesthetically pleasing
•Free from defects
•Delivered on time
•Value for money
•Reasonable running costs
•Satisfactory reliability/durability
•Supported by worthwhile guarantee
Example of stakeholders and primary objectives:
Project Brief
•A document describing the nature of the
work to be undertaken.
•Project Brief is generally short and
provides an overview of the proposed
project.
•When a Feasibility Study has taken place
the Project Brief should refer to the
Feasibility study rather than reproduce it.
•Project Brief will eventually be expanded
into a Project Initiation Document (PID).
Project Brief Template
1- Outcomes
2- Objectives
3- Outline deliverables.
4- Scope
5- Approach
6- Exclusions
7- Constraints
8- Outline business case
9- Reasons for selecting this solution
10- Outline project plan/schedule
11- Quality expectations
12-Risk assessment
Tutorial
1- “A project manager should not have other
managerial responsibilities.” Discuss
2- Discuss the importance of balancing the
three primary objectives for Project.
Sources:
-AlokRai and Ashutosh, M., (no date). Concept of Project &
Project Management. FMSBHU.
-Field, M., and Keller, L., (2001). Project Management , The
Open University, Thomson Learning, London.
- Lasa Information System Team, (2012), Project
Management:
The
Project
Brief,
[online],
URL:
http://www.ictknowledgebase.org.uk/projectbrief, [date visited
May 1st 2012].
-Lock, D., (2003), Project management, Eight Edition,
Hampshire, Gower.
-Maylor, H., (2010) , Project Management ,4th editon,
Pearson Education, Harlow, England.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 2
Project Models and Frameworks/ Project Life
Cycle
Lecturer: Revenio
Learning Objectives:
•Use project models and frameworks to
identify elements of a project
•Consider different
project life cycle.
approaches
to
the
•Identify the different stages of the project
life cycle.
The Project Models
The ICOM Model:
•The project is viewed as a conversion or
transformation of input into output under a
set of constraints and utilizing a set of
mechanisms to make the project happen.
The ICOM model
Inputs:
- Inputs include some form of want or need
which is to be satisfied through the process.
-Original needs
- Emergent needs
Constraints:
-Time
- Cost
- Quality
- Legal
- Ethical
- Environmental
- Logic
- Activation
- Indirect effects
Outputs:
-Satisfied Needs
•Converted information
•A tangible product
•Changed people
Mechanisms:
•People
•Knowledge and expertise
•Financial resources
•Tools and techniques
•Technology
Project Framework
Project life Cycle
-The sequence of phases through which the
project will evolve is a project life cycle.
-A project life cycle is basically defined by its
phases, according to which a project swims
through & finally reaches to handover stage.
-To start with, there is really no such thing as
a typical life cycle, because all projects differ
enormously.
Four-stage Project Life Cycle
D1: Define the project
The brief
D2: Design the project process
Process &
product
knowledge
The proposal/PID
D4: Develop the
process
D3: Deliver
the project
The outcomes
Four phases in Project life cycle (4 Ds)
1- Define the Project
Goals, feasibility study, specifications, tasks,
responsibilities
2- Design the Project Management
Schedules, budgets, resources, risks, staffing
3- Deliver the Project
Status reports, changes, quality, forecasts
4- Develop the Process
Train customers, transfer documents, release
resources, release staff, reasons learned
Mayor’s four phase approach
Phase
Key issues
Key questions
Define the project
Organisational & project strategy;
goal definition
What is to be done?
Why is it to be done?
Design the project
process
Modelling & planning; estimating;
resource analysis; conflict
resolution; business case
How will it be done?
Who will be involved in each
part?
When can it start and finish?
Deliver the project
Organisation; control; leadership;
decision-making; problem-solving
How should the project be
managed?
Develop the process
Assessment of process &
outcomes; evaluation; changes
for the future
How can the process be
continually improved?
Tutorial
Taking an example of a personal project that
you have recently completed , identify the
inputs, outputs , constraints and mechanisms
for the project, what is the importance of
defining the nature of constraints on a project
prior to starting work on it?
Sources:
-Field, M., and Keller, L., (2001). Project Management ,The
Open University, Thomson Learning, London.
-Lock, D., (2003),
Hampshire, Gower.
Project management,
Eight Edition,
-Maylor, H., (2010). Project Management, Fourth edition,
Pearson Education Limited, Harlow, England.
-Project Cycle Management, A short training course in project
cycle management for subdivisions of MFAR in Sri Lanka.
-Westland, J. (2007), The Project Management Life Cycle, A
book reviews by R. Max Wideman.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 3
The Successful Project Management /The
Project Management Knowledge Areas
Lecturer: Dr. Revenio
Learning Objectives:
-Identify the key activates of project manager
-Demonstrate the successful project management
factors
-Identify the factors that cause project management to
fail
- Recognize project management knowledge areas to
identify and describe best practice that are applicable
to most project most of time
-Project management plays a role in
project success but that role is
affected by many other factors
outside the direct control of the
project manager.
Key Activities of Project Managers
- Shaping goals and objectives – project
goal inevitably changes
- Obtaining resources – easy?
- Building roles and structures for their team
– “followers make their leader”
- Establishing good communications
- Seeing the whole picture –strategic vision
- Moving things forwards (especially in
difficult circumstances) - driver
The success of a project is dependent on
having:
• A realistic goal
• Competition
• Client satisfaction
• A definite goal
• Profitability
• Third parties
• Market availability
• The implementation process
•The perceived value of the project
The factors which may cause the project
management to fail include:
• Inadequate basis for project;
• Wrong person as project manager;
• top management unsupportive;
• Inadequately defined tasks;
• Lack of project management techniques;
• Management techniques misused;
• Project closedown not planned;
• Lack of commitment to project
Successful project management
requires:
-planning with a commitment to complete the
project
-careful appointment of a skilled project manager
-spending time to define the project adequately
-correctly planning the activities in the project
- ensuring correct and adequate information flows
-changing activities to accommodate frequent
changes on dynamic
-accommodating employees' personal goals with
performance and rewards.
-Making a fresh start when mistakes in
implementation have been identified.
-Applying effective Project Management
provide
organizations
the
following
advantages
•Business
advantage
through
timely
achievement of goals, optimal resource
utilization and information based decision
making.
•Competitive advantage through workforce
energized by culture of execution and
collaboration and customer satisfied by getting
the "right" results reliably
-Project Management can also bring in some
tangible benefits for individuals at various
levels in organizations. For example,
through project management:
•Executives get accurate and timely information.
so that they………………………....
•People who execute understand their roles and
responsibilities and how their work relates to the
bigger picture. So…………………………………
Project management could be described under the
following knowledge areas:
*** The purpose of these knowledge areas is to identify
and describe best practice that are applicable to most
project most of time
- Project integration: integrates the three main project
management processes of planning, execution and controlwhere inputs from several knowledge areas are brought
together.
- Project Scope Management: includes the processes
required to ensure that the project includes all the work
required to complete the project successfully. Its
primarily concerned with defining and controlling what
is or is not included in the project, to meet sponsors’
and stakeholders’ goals and objectives. It consists of
authorization, scope planning, scope definition …
-Project Time Management: includes the process required
to ensure timely performance of the project. It consists of
activity definition, activity sequencing, duration estimating,
establishing the calendar, schedule development and time
control.
-Project Cost Management: includes the process required
to ensure that the project is completed within the approved
budget. It consists of resource planning, cost estimating,
cost budgeting, cash-flow and const control.
-Project Quality Management: includes the process
required to ensure that the project will satisfy the need for
which it was undertaken. It consists of determining the
required condition, quality planning, quality assurance and
quality control.
-Project Human Management: includes the process
required to make the most effective use of the people
involved with the people involved with the project, it
consists of organization planning, staff acquisition and
team development.
- Project Communication Management: includes the
process
required
to
ensure
proper
collection
and
dissemination of project information. It consists of
communication planning, information distribution, project
meetings, progress reporting and administrative closure.
- Project Risk Management: includes the process
concerned with identifying, analyzing, and responding to
project
risk.
It
consists
of
risk
identification,
risk
quantification and impact, response development and risk
control.
- Project Procurement Management: includes the
process required to acquire goods and services from
outside the performing project team or organization. It
consists of procurement planning, solicitation planning,
solicitation, source selection, contract administration and
contract closeout.
Tutorial
- Choose one of new projects in Sultanate of Oman
and discuss the successful factors for this project.
Sources:
-Field, M., and Keller, L., (2001). Project Management,
The Open University, Thomson Learning, London.
-Goetz, R., (no date). Defining Project Goals and
Objectives, PROJECT SAMART.CO.UK.
-Maylor, H., (2010). Project Management, Fourth edition,
Pearson Education Limited, Harlow, England.
-Munns, A., and Bjeirmi, B., (1996), The role of project
management in achieving project success, International
Journal of Project Management, Vol. 14, No. 2
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 4
Strategy and Project Management /
Phase 1 (D1): Project Definition
Lecturer: Dr. Revenio
Learning Objectives:
-Recognize the role of organizational strategy in
projects and generic Project Strategies and their
typical strategic focus.
-Explore the various definitions and characteristics
of a project.
-Demonstrate the uses of feasibility study
Strategy:
What is Project Strategy?
-Project Strategy is the project perspective,
direction, and guidelines on what to do and
how to do it, to achieve the highest
competitive advantage and the best project
results.
• Selecting the right strategy at project
initiation, making it compatible to the
business strategy.
• Strategy will contribute to project
success and overall business results
Generic Project Strategies and Their Typical Strategic Focus
•Defining a project is a process of selection
and reduction of the ideas and perspectives of
those involved into a set of clearly defined
objectives, key success criteria and
evaluated risks.
- The Purpose (or Mission)
This is the reason for doing the project
- What is the project about in broad terms?
- Who wants it done and why?
- What is its title?
- The Goals
These are the targets we want to meet.
•Goals are board statements applied to the project;
goals are the “what” of the process.
•Project may have more than one goal but many
objectives per goal.
•Don’t confuse goals with objectives.
Example: Insurance Company Goal: the medical insurance
Department will increase provide options by 10%.
- What is it we want to achieve?
- When do we want to achieve it?
- What are our specific aims?
- Why are these goals essential to the project?
- The Beneficial Gains or Scope
This is how our organization will gain. Here
we define our performance criteria and set
our quality standards for the project.
- How will things be different if the project is
successfully completed?
- Is there a clear need and can it be quantified?
- Who will benefit, how will they benefit and what
will they gain?
- Do the beneficiaries agree about the need and
the proposed solution?....etc
- Objectives
•From our list of specific goals for the project we must
develop a set of measurable objectives that will confirm
that we have reached certain project milestones (or
way points) including the final one of project
completion.
•The measurable objectives (when achieved)
demonstrate the extent to which the beneficial gains
have been achieved, the goals have been met and that
the purpose of the project has been achieved.
•Always start an objective with the action verb.
Example:
Insurance Company Goal: the medical
insurance Department will increase
provide options by 10%.
Objectives:
-Identify provider options and costs
-Survey the customer to find out each
options value.
-Compare options to competitors.
Project Constraints
•Every project has constraints. The primary
ones are the tradeoff between Time,
Resources and Performance Criteria. We
must define our project so that we can
manage these constraints.
Feasibility studies
What is a Feasibility Study?
A Project Feasibility Study is an exercise that
involves documenting each of the potential
solutions to a particular business problem or
opportunity. Feasibility Studies can be
undertaken by any type of business, project or
team and they are a critical part of the Project
Life Cycle.
When to use a Feasibility Study?
- The purpose of a Feasibility Study is to identify
the likelihood of one or more solutions meeting
the stated business requirements. In other words,
if you are unsure whether your solution will
deliver the outcome you want, then a Project
Feasibility Study will help gain that clarity. During
the Feasibility Study, a variety of 'assessment'
methods are undertaken. The outcome of the
Feasibility Study is a confirmed solution for
implementation.
-A good feasibility study report can do much
to point a project in the right direction and
define its risks and achievable objectives.
Tutorial 3
- According to the (mission statements: vision and quality
policy) for Bank X; write some objectives that could be use
toward this vision and policy:
Vision Statement
“Over one million satisfied customers by 2012
through continuous enhancement of stakeholder
value”
Quality Policy
Our Quality Policy is to achieve and sustain a
reputation for quality in the national and international
markets by offering products and services that
exceed the requirements of our customers. We strive
to remain the bank of first choice in all our product
and services.
- What are the objectives for the Ministry of
Higher Education in Sultanate of Oman?
Sources:
-Burke, R., (2008), Project Management Techniques
(College Edition), Burke Publishing.
-Goetz, R., (no date), Defining Project Goals and
Objectives, PROJECT SAMART.CO.UK.
-Maylor, H., (2010) Project Management, fourth edition,
Pearson Education Limited, Harlow, England.
- Shenhar, A., Poli, M., and Lechler, T., (2002), A New
Framework for strategic Project Management, Wesley
J.Howe School of Technology Management, Hoboken, NJ
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 5
Phase 2 (D2) : Design the project
/Time Planning
Lecturer: Dr. Revenio
Learning Objectives:
-Identify the Work Breakdown Structure (WBS) for a
project
-Demonstrate the time planning and scheduling.
- Recognize the uses of time planning methods and
their limitations.
-Most projects are too complex to be estimated,
planned and controlled effectively unless they
are first divided into smaller portions of more
manageable size.
-Each project or sub-project must then itself be
further divided into smaller work packages and
tasks.
- Developing the work breakdown structure
(WBS) for a project is therefore a necessary
step in the chain of project management
activities.
Work Breakdown Structure (WBS)
Total Project
First level of project breakdown
Hospital
Housing
School
Shops
Power generation
Mining complex
Part of second level of project breakdown (Mining Complex)
Workshop and stores
Messing and wash house
Winder house
Concentrator
Refinery
Mine office
Part of third level of project breakdown (concentrator)
Ore bins
Piping and pumps
Main building
Flotation cells
Tailing disposal
Cranes
And so on
Time Planning
Whenever any job has to be accomplished
according to a time or date deadline, it is
advisable to have at least some idea of
the relationship between the time allowed
and the time needed.
Project Time Management: includes the
process required to ensure timely
performance of the project. It consists of
activity definition, activity sequencing,
duration estimating, establishing the
calendar, schedule development and time
control.
Planning and scheduling environment:
Planning and Scheduling
- Factors affect project’s planning and
scheduling:
External Factors:
Working Factors:
Contribution results:
Matrix charts
Matrix charts list one set of factors in a
column at the extreme left-hand side of a
tabulation, and align factors directly
associated with them across columns to
the right in a matrix display.
Example: Matrix charts for allocating activities to
people or other resources: Gymnasium project
Planning Projects Methods
1- Simple tabular planning (timetables)
- The easiest and simplest approach.
Case study: How not to plan a project
A prototype for a small electromechanical device needed to be designed and
built. The company's chief engineer was asked to oversee the project, and
was given a total of 19 weeks in which to have a completed and tested
prototype ready for appraisal.
The plan
When asked to prepare a plan, the chief engineer agreed the following
timetable with fellow managers:
Start
Design and draw
Purchase components
Manufacture prototypes
Assemble and test
7 Jan 2002
18 Mar 2002
15 Apr 2002
6 May 2002
Finish
15 Mar 2002
19 Apr 2002
3 May 2002
10 May 2002
-Progress meetings
-Too late
- What went wrong?
2- Bar charts (Gantt charts)
- American industrial engineer Henry Gantt (18611919).
-Bar charts are easy to draw or construct and
interpret, and can be used for a great variety of
planning requirements.
-Use for all levels of supervision and convenient as
day to day controlling tools.
Limitations of bar charts
-Rescheduling
-Inflexibility
-Interpretation and scaling
-Linked bar charts
3- Line of balance charts
-Line of balance charts are more complex
than bar charts, need more effort to design,
and are more difficult to interpret. They are
rarely used.
-The method is suitable for projects in
which a number of identical items have to
be produced singly in a planned sequence.
Such as: construction project
Example: Five house construction project
Bar chart for the construction of five similar houses
Line of balance charts
What is buffer?
•A buffer is additional time to complete a task.
•A buffer is a block of time which protects a
deliverable from being affected by delays
upstream. The Completion Buffer protects the
Project completion date.
Tutorial
Use the Matrix charts for allocating activities (jobs) to
the following people in a Farm Project for five days in
a week and each of them has two days as a holiday.
Note: each one will not do the same job during the
week.
People: Jack, Andy, Mike, William, George and Sam
Activities (Jobs): Irrigation, Trim trees, Guarding,
Plowing, and Livestock grazing.
1- Assigning people for jobs
2- Assigning Jobs for People ( prepare the table
by yourself)
1- Assigning people for jobs
Saturday Sunday
Jack
Andy
Mike
William
George
Sam
Monday Tuesday
Wednesday
Thursday
Friday
Sources:
-Lock, D. (2003), Project management, Eight Edition,
Hampshire, Gower.
-Maylor, H., (2010), Project Management, 4th edition,
Pearson Education Limited, Harlow, England.
- Schwalbe, K., (2005), Information Technology
Project Management, 4th edition, Course Technology
Inc.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 6
Time Planning Techniques
Lecturer: Revenio
Learning Objectives:
-Describe the principles of the critical chain
approach.
- Calculate the critical path method (CPM) and
(PERT)
-Demonstrate software in assist time management.
Critical Chain Project Management
Critical chain project management (CCPM): is a
method of planning and managing projects that
puts the main emphasis on the resources required
to execute project tasks.
Critical Path Method and Programme
Evaluation and Review Technique (PERT) are
powerful tools that help you to schedule and
manage complex projects.
Benefits of
Techniques:
using
CPM
and
PERT
-Identify task that must be completed on time for
the whole project to be completed on time.
-Identify which tasks can be delayed for a while if
resources need to be reallocated to catch up on
missed tasks.
- Help to identify the minimum length of time
needed to complete a project.
- Help to identify which project steps should
accelerate to complete the project within the
available time. This helps you to minimize cost
while still achieving your objective.
Critical Path Method (CPM)
•CPM is a network diagramming technique used
to predict total project duration.
•A critical path for a project is the series of
activities that determines the earliest time by
which the project can be completed.
•The critical path is the longest path
•Slack or float is the amount of time an activity
can be delayed without delaying a succeeding
activity or the project finish date.
Calculating the Critical Path
- Develop a good network diagram.
- Add the duration estimates for all activities
on each path through the network diagram.
- The longest path is the critical path.
- If one or more of the activities on the
critical path takes longer than planned, the
whole project schedule will slip unless the
project manager takes corrective action.
Example:
Using Critical Path Analysis to Make
Schedule Trade-offs:
- Free slack or free float is the amount of time an
activity can be delayed without delaying the early
start of any immediately following activities.
- Total slack or total float is the amount of time
an activity can be delayed from its early start
without delaying the planned project finish date.
- A forward pass through the network diagram
determines the early start and finish dates.
- A backward pass determines the late start and
finish dates.
Early and Late Start and Finish Dates:
Program Evaluation and Review Technique
(PERT)
•PERT is a network analysis technique used to
estimate project duration
•when there is a high degree of uncertainty about
the individual activity duration estimates.
•PERT uses probabilistic time estimates
•Duration estimates based on using optimistic,
most likely, and pessimistic estimates of activity
durations, or a three-point estimate.
PERT Formula
Example:
Find the PERT weighted average
Where:
Optimistic time= 8 days
Most likely time = 10 days
Pessimistic time = 24 days
- The calculation is repeated on all
activities in the network, and used to
predict the probability of completing the
project within the scheduled time.
- PERT will produce a critical path in
the same way as any other network
analysis method
Using Software to Assist in Time
Management
- Software for facilitating communication
helps people exchange schedule-related
information.
- Decision support models help analyze
trade-offs that can be made.
- Project management software can help in
various time management areas.
Tutorial
-Calculating Early and Late Start and Finish Dates for
Project X:
Solution: Network for calculating ES, LS, EF and LF
Table
Task Name Start
A
B
C
D
E
F
G
H
I
J
Finish
Late start
Late finish
Free slack
Total slack
Sources:
-Lock, D., (2003), Project management, Eight Edition,
Hampshire, Gower.
-Field, M., and Keller, L., (2001). Project Management ,
The Open University, Thomson Learning, London.
-Maylor, H. (2010) Project Management , 4th edition,
Pearson Education Limited, Harlow, England.
- Schwalbe, K. (2005), Information Technology Project
Management, 4th edition, Course Technology Inc.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture / Week 7
The Cost
Lecturer: Dr. Revenio
Learning Objectives:
-Identify elements of cost
construction of cost plans.
and
process
for
-Recognize methods for the development of a
business case.
- Identify causes of failure in cost and benefit
analysis.
Cost and benefit planning
The challenges for the business case include the
estimation of costs and the identification of
benefits.
-
Basics of a cost planning process
- Changes in cost over time as a result of currency
fluctuations, inflation and base material costs.
-Relationship between cost, price and profit in the
project.
The role of costing:
Price = cost + Profit
Cost = price – profit
Profit = price – cost
Approaches to costing:
Two basic approaches to the preparation of
costing information:
1- Ground- up costing:
- Costs set by the project>>> project
manager collates estimates.
2- Top - down costing:
- Costs fixed externally to project>>> project
manager allocates budgets to sub-projects.
Work breakdown structure (WBS)
- Developing the work breakdown structure
(WBS) for a project is therefore a necessary
step in the chain of project management
activities.
Work Breakdown Structure (WBS)
Total Project
First level of project breakdown
Hospital
Housing
School
Shops
Power generation
Mining complex
Part of second level of project breakdown (Mining Complex)
Workshop and stores
Messing and wash house
Winder house
Concentrator
Refinery
Mine office
Part of third level of project breakdown (concentrator)
Ore bins
Piping and pumps
Main building
Flotation cells
Tailing disposal
Cranes
And so on
Elements of cost:
- Time
- Materials
- Capital equipment
- Indirect expenses
- Overheads
- Contingency
Estimating techniques:
Some techniques used in estimating cost
-Parametric estimating : considerable
experience of a particular type of project, the
project is broken down into a unit that can be
readily estimated
-As…but…s : are where you or your organization
has experience of doing similar job previously.
- Forecast: when there is a degree of uncertainty.
Example:
A course coordinator wishes to advertise the
course but needs to know how much will have
to be charged in order to make profit:
The programme requires a consultant to do
three day’s training which costs £250 per day,
supported administrator time cost £ 90 per
day, administrative time arranging for course (
eight days at £ 90 per day), materials (variable
cost) us £ 60 per delegates (15 delegates),
overhead rate is 60 per cent.
Financial Appraisal for Projects:
-Consider the potential rewards of carrying out a
project against the predicted costs.
1- Payback analysis
- The payback period: is the number of years it is
expected to take to recover the original Project or
Investment form the net cash flows resulting from
a capital investment project
- The payback method of investment appraisal is
to accept a project if it’s payback period is equal to
or less than a predetermined target value.
Example:
Consider an investment project with the cash flows in the
following table:
Year
0
1
2
3
4
Cash flow
(450)
100
200
100
100
(£)
Cumulative cash flows
Year
Cash flow
Cumulative cash flow
(£)
(£)
0
(450)
(450)
1
100
(350)
2
200
(150)
3
100
(50)
4
100
50
The advantages of the payback method
- Simple and easy to apply
- Straightforward to understand as a concept
- Take into account of risk (Implicitly assumes that
shorter payback period is superior to a longer one)
The disadvantages of the payback method
- Ignores the time value of money
- Ignores the size and the timing cash flows within
the payback period.
- Ignores all cash flows outside the payback period
and does not consider the project as whole.
2- Net Present Value (NPV):
-The NPV method uses discounted cash
flows to evaluate capital investment projects
-Uses cost of capital or target rate of return
to discount all cash inflows and outflows of
their present values, then compares them
- A positive NPV indicates that an investment
project is expected to give a return in excess
of the cost of capital and lead to increase in
shareholder wealth.
Net Present Value (NPV) equation
Project A: has a positive NPV of £355,000
Project B:has a positive NPV of £619,500
Project C:has a positive NPV of £211,900
So, project B should be undertaken, since it has
the highest NPV and will lead to the largest
increase in shareholder wealth.
Advantages of NPV Method
-Takes account of the time value of money
-Uses cash flows rather than accounting profit
-Takes account of both the amount and timing
of project cash flows, and takes account of all
relevant cash flows over the life of an
investment project.
Disadvantage of NPV Method
-It is difficult to estimate the values of cash
inflows and outflows over the life of a project.
-It’s possible to accept all projects with a
positive NPV in a perfect capital market (no
restriction on the amount of finance available).
-The cost of capital of a company may be
difficult to estimate
-Discount rate is not straightforward
- The cost of capital change over the life of the
project.
3- The Internal rate of return (IRR)
method
•IRR is the cost of capital or required rate of
return which, when used to discount the cash
flows of a project, produces a net present
value of zero.
•The internal rate of return decision rule is to
accept all independent investment projects
with an IRR greater than the company’s cost of
capital or target rate of return.
Where:
: is the initial investment
: the project cash flows occurring
in years 1,2,…, n
: is the cost of capital or required rate
of return.
Example:
A company is evaluating three investment
projects, whose expected cash flows are given
in the following table, calculate the internal rate
of return of each project, if the company’s cost
of capital is 10 per cent, which project should be
selected?
Period
Project A (£000) Project B (£000) Project C (£000)
0
(5000)
(5000)
(5000)
1
1100
800
2000
2
1100
900
2000
3
1100
1200
2000
4
1100
1400
100
5
1100
1600
100
6
1100
1300
100
7
1100
1100
100
Project A:
NPV = 355 when r = 10%
To fine IRR , NPV = zero
990 + 893 + 804 + 725 + 653 + 588 + 530 - 5000 =183
Try r* =12% ,so
982 + 876 + 782 + 699 + 624 + 557 + 497 - 5000 = 17
So IRR = 12 per cent, any number more than 12% the
NPV will be negative.
-The internal rate of return of project B is
approximately 13.9 percent.
-he internal rate of return of project C is
approximately 12.3 per cent.
- The decision on project selection:
All three projects have an IRR greater than the
company’s cost of capital 10 percent , so all are
acceptable if there is no restriction on available
capital
4- The return on capital employed method
(ROCE) or return on investment (ROI):
- A decision rule: to accept an investment
project if its return on capital employed is
greater than a target or hurdle rate of
return set by the investing company.
(project with higher return on capital
employed should be accepted).
Example:
A company is considering the purchase of a new machine
and has found two which meet its specification. Each
machine has an expected life of five years. Machine 1
would generate annual cash flows (receipts less
payments) of £210,000 and would cost £570,000. Its scrap
value at the end of five years would be £70,000. Machine
2 would generate annual cash flows of £510,000 and
would cost £1,616,000. The scrap value of this machine at
the end of five years would be £301,000. The company
uses the straight-line method depreciation.
Calculate the return on capital employed for both Machine
1 and Machine 2 and state which machine you would
recommend, giving reasons.
For Machine 1
£
Total cash profit =210,000 × 5 =
1,050,000
Total depreciation = 570,000 - 70,000 = 500,000
Total accounting profit =
550,000
Average annual accounting profit = £110,000 per year
550,000 /5 =
Average
investment
=
(570,000
+ £320,000
70,000) /2 =
Return on capital employed = 100 × 34.4 per cent
(110,000/320,000) =
For Machine 2
£
Total cash profit =510,000 × 5 =
2,550,000
Total depreciation = 1,616,000 - 301,000 = 1,315,000
Total accounting profit =
Average
annual
1,235,000
accounting
profit
= £247,000 per year
1,235,000 /5 =
Average
investment
=
(1,616,000
+ £958,500
301,000) /2 =
Return on capital employed = 100 × 25.8 per cent
(247,000/958,500) =
** Machine 1 should be chosen, as it has a higher return on capital
employed than Machine 2.
Advantages of the return on capital
employed method
- Gives a value in percentage terms, a
familiar measure of return, which can be
compared with existing ROCE of a company.
- The primary ratio used by financial analysts
in assessing company performance.
- Simple method to apply and can be used to
compare mutually exclusive projects
- Consider all cash flows arising during the
life of an investment project.
Disadvantages of the return on capital
employed method
- It is not based on cash, but uses accounting
profit which is open to manipulation and is not
linked to the fundamental objective of
maximizing shareholder wealth. Because this
method uses average profits, it also ignores the
timing of profits.
- It does not consider the time value of money
and so gives equal weight to profits whenever it
occurs.
- Failed to take into account the length of the
project life.
Tutorial
- The expected cash flows of three projects are
given below. The cost of capital is 10 per cent.
1- Calculate the payback period, net present
value.
2- Show the ranking of the projects by each of
the two methods and compare your findings.
Period
Project A (£) Project B (£) Project C (£)
0
(5000)
(5000)
(5000)
1
900
700
2000
2
900
800
2000
3
900
900
2000
4
900
1000
1000
5
900
1100
6
900
1200
7
900
1300
8
900
1400
9
900
1500
10
900
1600
Sources:
-Field, M., and Keller, L., (2001). Project Management ,
The Open University, Thomson Learning, London.
-Maylor, H. (2010) Project Management, 4th edition,
Pearson Education, Harlow, England.
- Watson, D., & Head, A., (2004) Corporate Finance,
Principles & Practice, 3th edition, FT Prentice Hall.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 8
Quality Management / Risk Management
Lecturer: Dr. Revenio
Learning Objectives:
-Identify various definitions of quality product an
service
-Recognize a process for managing basic level of
quality achievement through the concept of the
quality bridge
- Identify the
performance.
benefits
of
improving
quality
The concept of quality and quality
management:
-The definition of quality did matter .
-There are many definitions of quality.
-The effectiveness of the quality management is
determined by the combination of two views:
Internal approach and External approach
1- Internal approach: (managing the
project team)( team -focused)
- Quality is conformance to internal
procedures
- Quality is not making any mistakes
and maximizing internal efficiency
- Quality is “fitness of purpose”
- Quality is “technical excellence”
2- External approach: (managing the
communications and touch –points
between the project organization and the
external stakeholders) (communication –
focused)
- Quality is a set of expectations and
perceptions, which project managers have
a role in managing
- Quality costs and must be part of the
business case.
-The effectiveness of the quality management is
determined by the combination of these two views
( the bridge)
- The Bridge (the external stakeholders)
- Quality is the stake holder’s opinion of the
totality of goods and service provision.
- Quality comprises objective and subjective
elements of both expectations of what the project
will do and how it will be done.
- Quality is what that stakeholder perceives has
been done and how.
The two approaches comprise the definitions from
a number of different approaches to quality:
Perspectives on quality management
Perspective
Mathematical
Systemstructural
Definition
Description of approach
supported
Conformance to The management of quality is limited to the
specification
assurance of the ‘goodness’ of a mechanical
product or process. Activities are based on
statistical tools. Such as Statistical Process
Control.
Conformance to This is encapsulated in the approach of the
procedure
bureaucratic quality system as used as the
basis for the ISO 9000 model of quality
management. The achievement of a level of
quality relies on the development and
following of a hierarchical set of procedural
documents.
ControlContinuously meeting In
this
approach,
employees
and
organizationa customer
customers are viewed as key determinants
l
requirements
of project quality. This is particularly useful
where there are high levels of contact with
particular external stakeholder groups
during the project.
Economic
Cost of (un)quality
Holistic
Continuously meeting The Total Quality approach- relies on a
customer requirement change in the entire way the operation
at lowest cost
approaches its project processes, from
senior management to the front-of-house
staff.
Quality
as The additional responsiveness that can
competitive
come from successfully pursuing product
advantage
and process improvement is treated as part
of the competitive strategy of the firm.
Strategic
The financial costs and benefits of quality
management are assessed against the
costs of failure.
Manufacturing and service approaches to quality
Manufacturing
Definition Product-based- a
precise
and
measurable set
of
characteristics
Attributes Performance,
conformance
features,
reliability,
durability,
serviceability,
perceived quality
and aesthetics.
Service
Based
on
stakeholders’
expectations
and perceptions
Access,
communication,
competence,
courtesy, credibility, reliability,
responsiveness,
Security
tangibles,
understanding/knowing
the customer
-Quality conformance planning== quality
assurance : has been used to ensure the
minimum standards are maintained in a
wide array of activities.
- Project Manual: means to planning for
achieving what you have set out to do in
quality terms, demonstrating that you have
planned to achieve what you set out to do
in quality terms. (Its about bringing all
project information – including that about
time and cost- into one place.
Quality Performance Planning:
-Tangible and intangible qualities
- Intangible elements:
* Responsiveness
* Communication
* Competence/ professionalism
* Courtesy
* Accessibility
- Project manager need to consider which
elements of the project are core and which are
peripheral.
- The table below shows the elements of the
process and outcomes form the project and how
the expectations and perceptions can be
managed to each case:
Management of expectations and perceptions
Process
Outcomes
Expectations Provide
samples
of Determine
actual
process
documentation; requirements, do not overuse of accreditations of promise
processes (e.g. ISO 9000)
Perceptions
Provide regular reports of
progress; build on issues
important
to
the
stakeholders (e.g. through
senior
management
involvement in the project)
Promote positive aspects
of outcomecues; in
some cases, use ‘selective
over-delivery’
Communication planning:
- A common technique for communication
management centers on the use of table to
identify the nature of the communication
(what will be told to whom and in what
format)
Communication plan
Stakeholder
Communic Timing
ation
Format
Distribu Person
tion
responsible
Project
sponsor
Monthly
Short
report
E-mail
Short
budget
E- mail Administrator
1- page
report
E-mail
and
notice
board
Accounts
department
Client
department
Week1
each
month
Monthly 2 weeks
spend
before
schedule start of
month
Monthly Week 1
each
month
Project
manager
Liaison officer
Towards quality improvement
- Quality performance has both direct and
indirect effects on the financial performance of
the organization
- Quality costs include elements of prevention,
appraisal and failure.
Category
Characteristic being measured Examples
Prevention
The costs of ensuring that the
required level of quality of
service is met
Measuring what level of
quality of service is provided
Appraisal
failure
The costs of getting it wrong
and putting it right-can be
categorized as either internal
or external failure.
Planning
Risk management
Stakeholder management
Stakeholder surveys
Random inspection/checks
Performance date gathering
and analysis
Internal failure: mishaps or
errors that are resolved
without the customer ever
seeing them.
External failure: occurs in the
interaction with the
customer, may result in
loss/withdrawal of business
of rectification/rescue being
required.
Management of failure:
The stages in the management failure:
1- Identify that something has gone wrong
2- Contain the situation- accept that there
is a problem, prevent further damage or
escalation of the problem.
3- Put in place recovery actions to regain
the customer’s confidence.
4- Ensure that practices are changed so
that this incident does not occur again.
Risk Management
What is risk?
- Risk: the possibility of suffering harm or loss
-Risk: the uncertainty inherent in plans and the
possibility of something happening (i.e. a contingency)
that can affect the prospects of achieving business or
project goals.
Some particular aspects to consider :
-Time: critical path (uncertainty)
- Cost : estimates have uncertainty
- Quality: assurance of all process??
- Health and safety: risks to people or things of
activities
- Legal: level of risk to the legal or financial standing
- Identifying and listing the possible
risks
Brainstorming: is an effective technique
for considering many aspects of risks.
Qualitative approach:
- The majority of risk management activity
is based on qualitative data.
- Probability – likelihood
- Failure mode and effect analysis
(FMEA):
Quantitative approach:
-Quantitative analysis methods attempt to
assign numerical values to risks and their
possible effects.
For example: one organization needed 80 per
cent certainty of delivery with the specified time
as a policy requirement for a project to go
ahead. The project manager had to present
plans that met this basic criterion. Such an ’80
per cent certainty’ is arrived at through the use
of a variety of differed techniques.
Some risk quantification techniques are:
1- Expected value
2- Sensitivity analysis
3- Monte Carlo analysis
4- PERT
Tutorial
Case Study:
Total Quality Management Practices in
Large Construction Companies: A Case of
Oman
Sources:
-Field, M., and Keller, L., (2001). Project Management ,
The Open University, Thomson Learning, London.
-Maylor, H., (2010), Project Management, 4th edition,
Pearson Education, Harlow, England.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 9
Phase 3: Do It
Project Structure and Teams/ Project
Leadership
Lecturer: Dr. Revenio
Learning Objectives:
-Recognize the role of teams in achieving project
objectives
-Understand the impact that the choice of structure
will have anon the achievement of project
objectives.
- Identify the differing roles of leadership and
management in the project environment.
Project Structure and Teams
-A strategic issue is how the project management
structure fits in with the structure of the
organization as a whole.
-The gathering together of individuals with the
aim of making them a cohesive whole and
ensuring the benefit of all stakeholders is a
fundamental role of most project managers.
-The distinction between the terms ‘team’ and
‘group’ is made to indicate the differences is
operating characteristics of each. A group is
simply a collection of people. A team meets the
following criteria:
•The output of group is greater than the sum of the
outputs of the individuals.
•A greater range of options can be considered by
exploiting differences in individual thought
processes.
•Decision- making by the team is likely to be better
The purpose of studying the role of
teamwork in the project environment is:
•To help the project manager in the design and
selection of the workgroup.
•To enable the monitoring of the degree to which
the team is functioning effectively.
•To provide feedback to the team to help improve
effectiveness.
•More openness to taking risks, as the risk is
shared between the team rather than carried by
one individual.
•Higher overall level of motivation, as there is an
inherent responsibility to others in the team and a
desire not to let them down.
•Better support for the individuals with the team,
who are more likely to be included in a greater
range of activates than they would normally be
exposed to, but without their having to work
alone.
- Use Organizational Breakdown Structure (OBS)
to break down the big team to smaller.
Lifecycle of the teams:
1- Collection
2- Entrenchment
3- Resolution / accommodation
4- Synergy
5- Decline
6- Break-up
Requirements of team structure:
Category Likely
phase
of Characteristics of team structure
project lifecycle
Creative
Planning
Need to have a high degree of autonomy in order to
explore
the
widest
range
of
possibilities
and
alternatives.
Needs to be independent of systems and procedures
and requires independent thinkers and people who are
self-starters.
Tactical
Doing
Need a well-defined plan, hence unambiguous role
definitions and clarity of objectives for the individual
members.
The team members should have loyalty and a sense of
urgency.
Problem- Doing
solving
(when Will focus on problem resolution rather than any
problems arise)
predetermined conclusions- these must be eliminated.
The desirable characteristics of the people involved are
that they are intelligent and have people sensitivity.
Selecting the best structure for a
project:
-The selection for the project is an important
issue facing the project manager.
- The choice should refer to the critical
objectives of each project that an organization
in undertaking.
The relationship between structure and objectives
for the project:
Functional
Lightweight
Heavyweight
Project
organization
project
project
organization
organization
organization
Example of
Minor change to
Implementing
Major
Large
usage
existing product
change to work
innovation
construction
organization
project
projects
Quality
Speed and
Speed highest
maintained
quality
through dedicated
specialization
(improvement)
resources;
possible within
through use of
organization
functions, possible
relatively
design dependent
to “hide” project
“stable”
only on project
costs
organization as
strategy.
e.g. IT system
Advantages Quality through
depth of
a base
Disadvantages Relatively slow
as an process
Some cost
Advese
Can incur
disadvantage
reaction form
significant
due to
line managers;
additional cost
additional
additional
due to the
coordination
coordination
relative
expense of the
and
expense of
matrix.
administration
contractors;
costs.
quality may not
improve over
time; instability
for staff
Issues for the
Integration of
Two bosses
project
functions within problem
manager
the organization
Two bosses
Management of
problem
knowledge
- When a project has a high degree of
organizational complexity, project
managers are being required to use
mixed organizational structures and
additional coordination mechanisms to
help make the structures effective.
The role of leadership and management
in projects:
- Leadership involves the influencing of others
through the personality or actions of the
individual.
- The skills and attributes of a good project
manager will be determined by personality,
experience, and both formal and informal
education and training.
- For leader, time is a non-replenishable resource
and must be managed accordingly.
-The modern project manager has a
responsibility both to the organization and to the
team members to ensure that they are provide
with a high level of motivation.
Hierarchy of needs (Maslow’s hierarchy of
needs)
The development of new management
paradigms:
-The role of the successful project manager
will be to date with changes in management
thinking, but to take an intelligent approach
as to which changes will add value.
- Any new idea should be:
1- Adopted only after careful consideration
2- Purged of unnecessary buzzwords and
clichés.
3- Judged by their practical consequences
4- Tied to the here and now
5- Rooted in genuine problems
6- Adapted to suit particular people and
circumstances
7- Adaptable to changing and unforeseen
circumstances
8- Tested and refined through active
experimentation
9- Discarded when they are no longer
useful.
Tutorial
Conjecture a hierarchy of need for project by
using the following Maslow’s model
Self-actualization
Our need to actualize our potential as
humans. Because each of us is unique,
this need expresses itself uniquely for
each individual.
Esteem
Our needs for achievement, adequacy,
recognition, status, appreciation, and
mastery.
Belongingness and love
Our needs to give and receive affection,
to relate to other people, family, and
friends.
Safety
Our needs for security, stability, and
freedom from fear and anxiety.
Physiological
Our fundamental needs for food, water,
sleep, touch, shelter, and exercise.
Delivery actualization………………………………
………………………………………………………
………………………………………………………
………………………………………………………
………………………………………………………
Esteem……………………………………………..
………………………………………………………
………………………………………………………
………………………………………………………
………………………………………………………
Business purpose……………………………….
………………………………………………………
………………………………………………………
………………………………………………………
……………………………………………………….
Stability…………………………………………….
………………………………………………………
………………………………………………………
………………………………………………………
………………………………………………………
Resources…………………………………………
………………………………………………………
………………………………………………………
………………………………………………………
………………………………………………………
Sources:
-Field, M., and Keller, L., (2001). Project Management,
The Open University, Thomson Learning, London.
- Maylor, H., (2010), Project Management, 4th edition,
Pearson Education, Harlow, England.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 10
Phase 3: Do It (2)
Control / Supply Chain Issues
Lecturer: Dr. Revenio
Learning Objectives:
-Identify the elements of a control system appropriate
to a particular project.
-Identify the role of the supply chain in project
management and its importance in ensuring project
success.
- Describe the nature of the supply chain relationships
and contracts that can exist.
Control
Many projects do run late, over budget or fail to
deliver to customer/stakeholder requirements.
How did this happen?
It’s happened very gradually with days
being lost and money spent, not in
one large block but in small amounts,
these amounts gradually add up and
over the life of most projects will
provide significant problems.
How to deal with this problem??
-The only way is by having systems that will
detect such occurrences and allow the project
manager the opportunity to instigate correction
actions to bring the project back to track.
-Control takes place during execution phase of
the project but it should be given careful
consideration during the planning phase.
- Provide control at different levels with the
project that relies on simple and easily
understood measures that reflect the objectives
of the project.
The basic requirements for a control
system:
1- Defining system characteristics of importance
2- Defining limits to their variation
3- Measurement of these characteristics
4- Making progress visible
5- Feedback to the team of performance
6- Instituting corrective action where required
Techniques of control:
The techniques with focus initially on the key
issues of quality, cost and time.
Quality:
-The project manager has two roles in the
management and control of quality.
conformance and performance
-One of the recognizable standards for a
quality system is ISO 9000
- Measuring expectations and perceptions
is vital for control.
Cost and time:
- Controlling cost and time requires a
considerable input from the project manager in
the establishment and execution of process.
- The role of the project manager in cost
control maybe stated as:
•Setting up the cost control system in conjunction
with the needs and recommendations of the
financial function.
•Allocating responsibilities for administration and
analysis of financial data.
•Ensuring costs are allocated properly (usually
against project codes).
•Ensuring costs are incurred in the genuine
pursuit of project activities.
•Ensuring contractors’ payments are authorized.
•Checking other projects are not using your
budget.
-Cost can be monitored through the
application of the “earned value” concept.
Earned value management: The
concept of earned value is explained,
with the requirement for project
managers to report cost to completion at
various stages during the project.
-future forecasts of the outcome of the project
activities
-Project Management Information Systems
(PMIS) provide the means for achieving the
measure-record-analyze-act system for ensuring
minimization of waste in the control system.
-Change control is needed to check that the
effects of changes.
- Control using critical chain.
Limits of control:
1- The concept of control
2- The nature of the baseline
3- The nature of the system being controlled
4- The limits of measurement and assessment
5- Control as a paradox
6- Control as a negative idea
•want to be “ in control” but may resist the idea
of “ being controlled”
Supply Chain Issues:
-The value of goods and services purchased
can make up a major proportion of the
project budget.
-The role of purchasing in organizations has
changed to incorporate the management of
both supplies and customers with the
objective of maximizing the performance of
the project.
Scope of influence of purchasing, materials management and
supply chain management.
2nd –tier
suppliers
1st –tier
suppliers
Project
organization
Traditional purchasing
function
Material management function
Supply chain management
1st –tier
customer
s
2nd –tier
customer
s
- Many decisions to be made and issues to be
understood with regard to purchasing in
projects as:
1- The nature of the organization that can carry
out the purchasing role
2- The purchasing objectives
3- The nature and role of contracts established.
Purchasing and project strategy:
-The objectives of the purchasing activities
should be consistent with those of the
project.
- The objective for the project to be broadly
stated as having time, cost or quality as the
primary objectives.
- In purchasing terms the strategy is
converted into the “five rights”, these are
independent characteristics of a supplier or
contractor depending on their ability to
deliver.
•The right quantity
•The right quality
•At the right price
•At the right time and place, and be…..
•The right supplier.
Contracts:
-The role of contracts in many industries
has changed
-The process by which contracts are
awarded depends on the nature of the task
being contracted. The relationship between
the purchaser and supplier and the relative
size of each.
Some contract types:
- Fixed price
- Time and materials
- Target cost
- Revenue share.
- Cost- plus
Modern approaches to supply chain
management:
- There have been big changes in the
nature of the relationship between buyers
and suppliers.
Three basic classification of relationship
between buyers and suppliers:
- Traditional adversarial
- Partnership
- Relationship management
Modern techniques in supply chain
management:
-Open- book accounting:
•Too little profit-----the customer may suggest
ways to reduce costs.
•Too much profit----- the customer will be looking
for price reduction
- Vendor-managed inventory:
Tutorial
- Consider the way that you make purchase for
yourself. How do you decide from whom to buy? Are
there examples of your personal purchasing where
you have frequented a particular business and
formed a partnership-type relationship?
- You have been offered tickets to your favorite
entertainment event of the year by a major potential
supplier. The offer includes full corporate hospitality
treatment. Should you accept this offer?
Sources:
-Field, M., and Keller, L., (2001). Project Management ,
The Open University, Thomson Learning, London.
- Maylor, H. (2010), Project Management, 4th edition,
Pearson Education, Harlow, England.
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 11
Phase 3: Do It (3)
Problem – solving and Decision – making
Lecturer: Dr. Revenio
Learning Objectives:
-Provide a structure for the identification , definition
and solution of problems
-Identifying appropriate tools which can be brought to
bear at different stages of the problem-solving
process.
- Show the implications of some of the changes in
modern management thinking in the area of decision
–making
Problem–solving and Decision – making
Problem: the gap between an actual
situation or the perception of it and the
required oar expected situation.
Problem- solving is a core management
skill but, assumed to be an inbred attribute
rater than an acquired skill.
-The nature of the problem determines the
point of departure for the manager can
categorized as:
•Requiring an immediate reaction
•Response to a crisis
•Emerging problem
•Response to an opportunity
•Strategy formulation
-The response solution for a problem
either instinctive ( such as to run away) or
ingrained through training (to remove the
source of potential danger)
-The
systematization
of
problem
resolution depends on identifying the
situation (programmed response)
Brainstorming:
-Brainstorming: Taking a group out of their
normal work situation to ponder a problem can
immensely beneficial to both the organization
and the group
- The dynamics of the brainstorming process
are aided by adherence to a few rules:
•Provide a basic structure or the task of
decision making.
•The benefit is from
the extraction and
combination of ideas form a variety of people
•Give people the opportunity to do some
pre-thinking on the problem
•At the start eh meeting an ice-breaking
exercise will help people to relax and
provide a “save environment” for the
generation of ideas
•All ideas must be written down
•Express ideas as the participant state
them
•Do not allow any criticism of ideas put
forward
•Do not permit one or a small group of
individuals to dominate the proceedings.
•Summarize and record the outcome of the
brainstorming session and then circulate it
to all those concerned.
Decision – making:
-Decision- making as a process is the
period involving the seeking of alternatives
through to the end of the comparative
evaluation stage.
- The nature of the decision-making
process depends on the system that the
decision concerns.
•Open system
•Closed system
Modeling systems for decision-making:
-Management Science
-Operational Research
- The model of the system may take on
one of many forms, including:
* A descriptive model
* A geometric model
* A mechanistic model
* Static predictive
* A dynamic predictive model
* Time contractions
* What-if
* Error avoidance/detection
- The use of mathematical models in
decision-making is widespread, ranging
from basic spreadsheet calculations to the
most advanced statistical techniques.
The use of
techniques:
mathematical
modeling
Techniques
Description
Simulation
Computer modeling of a scenario
Linear programming
Optimal allocation of restricted resources to maximize or
minimize a variable (such as price or cost)
Network analysis through CPM Obtaining the logic of both precedence relationships and
or PERT
the time requirements in a project environment through
graphical means
Queuing theory
Shows how a system reacts when faced with a random
(stochastic) customer who demands the services of that
system
Decision trees
Graphical method for describing the flow of decisions
depending on the possibilities available at each juncture.
May be pursued as a statement of possibilities of with
statistical analysis.
Problem- solving tools:
- The basic problem-solving tools of the
project manager include Pareto analysis
and Ishikawa/fishbone diagrams.
-Pareto analysis
-Ishikawa/fishbone diagrams
Ishikawa/fishbone diagrams
Cause – effect – cause analysis:
-Cause-effect- cause analysis is appropriate
where:
•A trained, literate and skillful facilitator is
available
•The group is open to consideration of new
problem-solving methods.
•IF - THEN
Decision trees:
-Decision tree is technique similar to the causeeffect-cause analysis.
Example:
A decision has to be made on whether to fund project X
or project Y , each has two possible outcomes. For X, it
has 75 per cent chance of yielding OMR 100,000 but a 25
per cent chance of yielding only OMR 20,000. For Y, it
has a 50 per cent of yielding OMR 200,000 and a 50
percent chance that there will be on yield. The decision
tree in the following figure illustrates the problem.
0.75
100,000
0.25
20,000
0.5
200,000
X
Y
0.5
0
Decision-support systems:
- Decision support systems (DSS):
there is sufficient knowledge existing
for the subject to be considered
complex, and therefore can be better
interpreted through the abilities of
computers to deal with large amount of
information.
-The knowledge must exist within the
system, and this is provided through the
contribution of experts in the relevant
subjects.
-The most basic form of DSS is a
database
-Expert System (artificial intelligence):
Expert
System
takes
the
expert
knowledge, usually gained from an
individual of a number of individuals over
a period of time.
Tutorial
-How might the tools outlined in this lecture reduce
the risk in decision making?
-What is the role of ‘brainstorming’ and how might it
be used to greatest effect?
Sources:
-Field, M., and Keller, L., (2001). Project Management ,
The Open University, Thomson Learning, London.
- Maylor, H. (2010), Project Management,4th edition,
Pearson Education, Harlow, England
Business Project Management
(BSB10194-5)
Level 5, Block 1
Lecture 12
Phase 4: Develop It
Project Completion and Review
Lecturer: Dr. Revenio
Learning Objectives:
-Identify the steps required to complete the project
and start the final phase- that of process
improvement.
-Recognize the mechanisms
process improvement.
for
learning
and
Project Completion and Review
-A certainty of the definition of a project is that it
will end in one way or another.
How do we end the project?
Two principles guide this:
•There must be a positive statement of closure
rather than simply allowing the project to fizzle
out.
•The knowledge gained by doing the project
must be captured.
-This is achieved through the review and
audit process, feeding back into both
project process knowledge and technical
knowledge
-payback from project ‘investment’.
-There are many reasons that work stops on
projects. For some, it is because of the
successful completion of project’s objectives.
Some are stopped by their sponsors, due to
changing needs or poor project performance,
and others due to lake of the necessary
resources to continue.
-Projects are prematurely terminated it is usual
for the staff to be dispersed with no provision for
review.
Documentation:
-The formal closure notice need only be a
very simple form
The purpose of documentation is:
•To provide evidence that the project has
been completed in a proper manner
•To give guidance to the customer on the
operation and maintenance of the item
provided
•To allow any future work on a similar
project to have a good starting point
Closing down the project systems:
-A formal notice of closure is issued in many
industries to inform other staff and support
systems that there are no further activities to be
carried out or charges to be made.
-In contract project activities , the legal termination
of activates occurs at the time when the customer
‘sign off’ the project
-It is often tempting for work to continue after this
has occurred and for the team to provide the
customer with ‘free’ consultancy. e.g. in
information technology.
-No organization can afford to:
•Cut off the customer completely at this
point and ruin the possibilities for future
business.
•Continue to provide services for which
they do not charge.
-Closing out the project involves the shut-down
of all project systems, ensuring all activities are
completed and preparing for the forthcoming
reviews.
-One of the tools which is of considerable benefit
to short-term improvement is an audit of the
management by the team.
-Getting stakeholder satisfaction in project
success is more of a challenge than it may
initially appear.
-Closing out the project involves the shut-down
of all project systems, ensuring all activities are
completed and preparing for the forthcoming
reviews.
-One of the tools which is of considerable benefit
to short-term improvement is an audit of the
management by the team.
-Getting stakeholder satisfaction in project
success is more of a challenge than it may
initially appear.
Reviews and Learning:
-Strategy provides the essential focus for
improvement activities and all our activities
should be geared towards these strategic
objectives.
-With focus of a clear strategy, the project
manager can carry out activities that will improve
the performance of future project processes on
these criteria. A useful structure is to separate
two elements:
- Learning before doing
- Learning by doing
Learning before doing- the role of
external knowledge:
-The main sources of external knowledge
are
•Training
•Education
•Consultants
Learning by doing- the role of audit and
review
-Carrying out audit and review some time after
the project has benefit as the results of the
actions and the way in which they were
undertaken become evident.
- The process of auditing and reviewing requires:
A reason to exist
* Time
* Information
* Recourses
* Creditability
Auditing process involves:
•Establishing the procedures – the formal
statement of intent as to how activities should be
carried out, whether financial, quality and
environmental.
•Checking documentation and other records of
practice to show that they have been followed.
•Presenting a report detailing the areas where
there are deficiencies or irregularities.
- An audit is often viewed as a negative process,
i.e. it is trying to catch people out.
The review process involves:
•Studying overall performance relative to
constraints.
•Identifying areas where the procedures
failed or have otherwise been shown to be
inadequate.
•Reporting on the areas and suggesting
improvements.
Review and Audit criteria:
Criteria
Audit
Review
Financial
Accounting systems
ROI, cost variance
Time
Conformance to plan
Customer satisfaction
Quality
Quality procedures
Customer perceptions
Human resources
Conformance to policy
Team spirit, motivation
Environmental
Conformance to policy
EI assessment
Planning
Conformance to plan
Cost, techniques used
Control
Systems for control
Basis for improvement
Carrying out reviews:
•Focus on process not individuals
•Use factual data wherever possible
•Allow rehearsal of alternatives
•Use tools and techniques of problem-solving
•Discourage glib classification
-The financial implications of many sorts of
failure in performance can be calculated
for the purpose of providing the business
case for performance improvement
activities.
-The costs are generally enormous and
can be expressed as a percentage of
turnovers.
-Quality costs are broken down into three
categories – prevention, appraisal and
failure.
Elements of quality cost
Category
Activities included
Prevention Quality planning, training and auditing, supplier development, costs of
maintaining a quality improvement programme or system, maintenance
of all testing equipment.
Appraisal
Any checking activities (and materials consumed during these), analysis
and reporting of quality data, auditing suppliers’ quality systems, storing
records of quality results.
Failure
Internal- any wasted activities, be they in the production of an artifact that
is scrap or the generation of a document that is not read, changing or
rectifying work already done because it was not right first time,
downgrading goods or services, problem-solving time.
External- replacement of faulty goods, having to return to a site to redo
tasks, complaints and consequent loss of goodwill and repeat business,
product and professional liability claims.
-Contribution of project managers will
come greater rewards.
-Continuously improving the own
processes should be the goal of every
project manager.
- The knowledge exists: find the
ways to apply it, mindful of
strategic requirements and in a
way that is open to evaluation. In
future, we will need to be able to
manage not only the improvement
process but also its speed. Now
there’s a challenge that may also
turn out to be great fun. Here’s
hoping.
Tutorial
Discuss the following case for Hewlett- Packard
In new product development it is traditional for the product to be
designed, then engineered, then passed to manufacturing for making.
The designers would be having battles with the engineers over the need
for design features to be preserved, and the engineers with the
manufacturing staff over what could and could not be made. HewlettPackard, as part of the kinking process between the different functions,
ensures that key staff who do the design work carry the project through.
Not just to the end of the project and its handover to manufacturing but
to three months into mass production of the designed items. This
provides ample opportunity for problems to emerge and for the designer
to witness the effects of their decisions on the end product. It is a case
of knowledge management of the highest order- people gain great
insight form this process and retain this for subsequent projects. As a
by-product of this, the networks of people they have worked alongside
during these extended handovers mean that there is far better
communication in the organization.
Sources:
-Field, M., and Keller, L., (2001). Project Management,
The Open University, Thomson Learning, London.
-Lock, D., (2003), Project management, 8th
Hampshire, Gower.
Edition,
- Maylor, H. (2010), Project Management, 4th edition,
Pearson Education, Harlow, England.