Project Management: A Systems Approach to Planning, Scheduling, and Controlling

Project Management: A Systems Approach to Planning, Scheduling, and Controlling Kerzner, H ISBN-13: 9781118022276 Table of Contents Prefacex xi 1 OVERVIEW 1 1.0 Introduction 1 1.1 Understanding Project Management 2 1.2 Defining Project Success 7 1.3 The Project Manager Line Manager Interface 8 1.4 Defining the Project Manager s Role 12 1.5 Defining the Functional Manager s Role 14 1.6 Defining the Functional Employee s Role 17 1.7 Defining the Executive s Role 17 1.8 Working with Executives 18 1.9 The Project Manager as the Planning Agent 19 1.10 Project Champions 20 1.11 The Downside of Project Management 21 1.12 Project-Driven versus Non Project-Driven Organizations 22 1.13 Marketing in the Project-Driven Organization 24 1.14 Classification of Projects 26 1.15 Location of the Project Manager 27 1.16 Differing Views of Project Management 29 1.17 Concurrent Engineering: A Project Management Approach 30 1.18 Studying Tips for the PMI Project Management Certification Exam 30 Problems 33 Case Study Williams Machine Tool Company 35 2 PROJECT MANAGEMENT GROWTH: CONCEPTS AND DEFINITIONS 37 2.0 Introduction 37 2.1 General Systems Management 38 2.2 Project Management: 1945 1960 38 2.3 Project Management: 1960 1985 39 2.4 Project Management: 1985 2009 45 2.5 Resistance to Change 50 2.6 Systems, Programs, and Projects: A Definition 54

2.7 Product versus Project Management: A Definition 57 2.8 Maturity and Excellence: A Definition 58 2.9 Informal Project Management: A Definition 59 2.10 The Many Faces of Success 60 2.11 The Many Faces of Failure 63 2.12 The Stage-Gate Process 66 2.13 Project Life Cycles 68 2.14 Gate Review Meetings (Project Closure) 74 2.15 Project Management Methodologies: A Definition 74 2.16 Organizational Change Management and Corporate Cultures 76 2.17 Project Management Intellectual Property 81 2.18 Systems Thinking 82 2.19 Studying Tips for the PMI Project Management Certification Exam 85 Problems 88 3 ORGANIZATIONAL STRUCTURES 91 3.0 Introduction 91 3.1 Organizational Work Flow 94 3.2 Traditional (Classical) Organization 95 3.3 Developing Work Integration Positions 98 3.4 Line Staff Organization (Project Coordinator) 102 3.5 Pure Product (Projectized) Organization 103 3.6 Matrix Organizational Form 106 3.7 Modification of Matrix Structures 113 3.8 The Strong, Weak, Balanced Matrix 117 3.9 Center for Project Management Expertise 117 3.10 Matrix Layering 118 3.11 Selecting the Organizational Form 119 3.12 Structuring the Small Company 125 3.13 Strategic Business Unit (SBU) Project Management 128 3.14 Transitional Management 129 3.15 Studying Tips for the PMI Project Management Certification Exam 131 Problems 133 Case Study Jones and Shephard Accountants, Inc. 138 4 ORGANIZING AND STAFFING THE PROJECT OFFICE ANDTEAM 141 4.0 Introduction 141 4.1 The Staffing Environment 142 4.2 Selecting the Project Manager: An Executive Decision 144 4.3 Skill Requirements for Project and Program Managers 148

4.4 Special Cases in Project Manager Selection 154 4.5 Selecting the Wrong Project Manager 154 4.6 Next Generation Project Managers 158 4.7 Duties and Job Descriptions 159 4.8 The Organizational Staffing Process 163 4.9 The Project Office 169 4.10 The Functional Team 174 4.11 The Project Organizational Chart 175 4.12 Special Problems 178 4.13 Selecting the Project Management Implementation Team 180 4.14 Studying Tips for the PMI Project Management Certification Exam 183 Problems 185 5 MANAGEMENT FUNCTIONS 191 5.0 Introduction 191 5.1 Controlling 193 5.2 Directing 193 5.3 Project Authority 198 5.4 Interpersonal Influences 206 5.5 Barriers to Project Team Development 209 5.6 Suggestions for Handling the Newly Formed Team 212 5.7 Team Building as an Ongoing Process 216 5.8 Dysfunctions of a Team 217 5.9 Leadership in a Project Environment 220 5.10 Life-Cycle Leadership 221 5.11 Organizational Impact 225 5.12 Employee Manager Problems 227 5.13 Management Pitfalls 230 5.14 Communications 233 5.15 Project Review Meetings 242 5.16 Project Management Bottlenecks 243 5.17 Communication Traps 244 5.18 Proverbs and Laws 245 5.19 Human Behavior Education 248 5.20 Management Policies and Procedures 249 5.21 Studying Tips for the PMI Project Management Certification Exam 249 Problems 254 Case Studies The Trophy Project 264 Leadership Effectiveness (A) 266

Leadership Effectiveness (B )271 Motivational Questionnaire 277 6 MANAGEMENT OF?YOUR?TIME AND STRESS 285 6.0 Introduction 285 6.1 Understanding Time Management 286 6.2 Time Robbers 286 6.3 Time Management Forms 288 6.4 Effective Time Management 289 6.5 Stress and Burnout 290 6.6 Studying Tips for the PMI Project Management Certification Exam 292 Problems 293 Case Study The Reluctant Workers 294 7 CONFLICTS 295 7.0 Introduction 295 7.1 Objectives 296 7.2 The Conflict Environment 297 7.3 Conflict Resolution 300 7.4 Understanding Superior, Subordinate, and Functional Conflicts 301 7.5 The Management of Conflicts 303 7.6 Conflict Resolution Modes 304 7.7 Studying Tips for the PMI Project Management Certification Exam 306 Problems 308 Case Studies Facilities Scheduling at Mayer Manufacturing 311 Telestar International 312 Handling Conflict in Project Management 313 8 SPECIAL TOPICS 319 8.0 Introduction 319 8.1 Performance Measurement 320 8.2 Financial Compensation and Rewards 327 8.3 Critical Issues with Rewarding Project Teams 333 8.4 Effective Project Management in the Small Business Organization 336 8.5 Mega Projects 338 8.6 Morality, Ethics, and the Corporate Culture 339 8.7 Professional Responsibilities 342 8.8 Internal Partnerships 345 8.9 External Partnerships 346

8.10 Training and Education 348 8.11 Integrated Product/Project Teams 350 8.12 Virtual Project Teams 352 8.13 Breakthrough Projects 354 8.14 Studying Tips for the PMI Project Management Certification Exam 355 Problems 361 9 THE VARIABLES FOR SUCCESS 365 9.0 Introduction 365 9.1 Predicting Project Success 366 9.2 Project Management Effectiveness 370 9.3 Expectations 371 9.4 Lessons Learned 372 9.5 Understanding Best Practices 373 9.6 Studying Tips for the PMI Project Management Certification Exam 380 Problems 381 10 WORKING WITH EXECUTIVES 383 10.0 Introduction 383 10.1 The Project Sponsor 384 10.2 Handling Disagreements with the Sponsor 393 10.3 The Collective Belief 394 10.4 The Exit Champion 395 10.5 The In-House Representatives 396 10.6 Studying Tips for the PMI Project Management Certification Exam 397 Problems 398 Case Study Corwin Corporation 401 11 PLANNING 411 11.0 Introduction 411 11.1 Validating the Assumptions 414 11.2 General Planning 415 11.3 Life-Cycle Phases 418 11.4 Proposal Preparation 421 11.5 Kickoff Meetings 421 11.6 Understanding Participants Roles 424 11.7 Project Planning 424 11.8 The Statement of Work 426 11.9 Project Specifications 431 11.10 Milestone Schedules 433 11.11 Work Breakdown Structure 434

11.12 WBS Decomposition Problems 440 11.13 Role of the Executive in Project Selection 444 11.14 Role of the Executive in Planning 449 11.15 The Planning Cycle 449 11.16 Work Planning Authorization 450 11.17 Why Do Plans Fail? 451 11.18 Stopping Projects 452 11.19 Handling Project Phaseouts and Transfers 453 11.20 Detailed Schedules and Charts 454 11.21 Master Production Scheduling 457 11.22 Project Plan 459 11.23 Total Project Planning 464 11.24 The Project Charter 468 11.25 Management Control 469 11.26 The Project Manager Line Manager Interface 472 11.27 Fast-Tracking 474 11.28 Configuration Management 475 11.29 Enterprise Project Management Methodologies 476 11.30 Project Audits 479 11.31 Studying Tips for the PMI Project Management Certification Exam 480 Problems 483 12 NETWORK SCHEDULING TECHNIQUES 493 12.0 Introduction 493 12.1 Network Fundamentals 495 12.2 Graphical Evaluation and Review Technique (GERT) 500 12.3 Dependencies 501 12.4 Slack Time 502 12.5 Network Replanning 508 12.6 Estimating Activity Time 512 12.7 Estimating Total Project Time 513 12.8 Total PERT/CPM Planning 514 12.9 Crash Times 516 12.10 PERT/CPM Problem Areas 519 12.11 Alternative PERT/CPM Models 522 12.12 Precedence Networks 523 12.13 Lag 526 12.14 Scheduling Problems 528 12.15 The Myths of Schedule Compression 528 12.16 Understanding Project Management Software 530

12.17 Software Features Offered 530 12.18 Software Classification 532 12.19 Implementation Problems 533 12.20 Critical Chain 534 12.21 Studying Tips for the PMI Project Management Certification Exam 536 Problems 539 Case Study Crosby Manufacturing Corporation 552 13 PROJECT GRAPHICS 555 13.0 Introduction 555 13.1 Customer Reporting 556 13.2 Bar (Gantt) Chart 557 13.3 Other Conventional Presentation Techniques 564 13.4 Logic Diagrams/Networks 567 13.5 Studying Tips for the PMI Project Management Certification Exam 568 Problems 569 14 PRICING AND ESTIMATING 571 14.0 Introduction 571 14.1 Global Pricing Strategies 572 14.2 Types of Estimates 573 14.3 Pricing Process 576 14.4 Organizational Input Requirements 578 14.5 Labor Distributions 580 14.6 Overhead Rates 584 14.7 Materials/Support Costs 586 14.8 Pricing Out the Work 589 14.9 Smoothing Out Department Man-Hours 590 14.10 The Pricing Review Procedure 592 14.11 Systems Pricing 594 14.12 Developing the Supporting/Backup Costs 595 14.13 The Low-Bidder Dilemma 599 14.14 Special Problems 599 14.15 Estimating Pitfalls 600 14.16 Estimating High-Risk Projects 601 14.17 Project Risks 602 14.18 The Disaster of Applying the 10 Percent Solution to Project Estimates 605 14.19 Life-Cycle Costing (LCC) 606 14.20 Logistics Support 613 14.21 Economic Project Selection Criteria: Capital Budgeting 614

14.22 Payback Period 614 14.23 The Time Value of Money 615 14.24 Net Present Value (NPV) 616 14.25 Internal Rate of Return (IRR) 617 14.26 Comparing IRR, NPV, and Payback 618 14.27 Risk Analysis 618 14.28 Capital Rationing 619 14.29 Project Financing 620 14.30 Studying Tips for the PMI Project Management Certification Exam 622 Problems 624 15 COST CONTROL 629 15.0 Introduction 629 15.1 Understanding Control 633 15.2 The Operating Cycle 636 15.3 Cost Account Codes 637 15.4 Budgets 644 15.5 The Earned Value Measurement System (EVMS) 645 15.6 Variance and Earned Value 647 15.7 The Cost Baseline 666 15.8 Justifying the Costs 668 15.9 The Cost Overrun Dilemma 671 15.10 Recording Material Costs Using Earned Value Measurement 672 15.11 The Material Accounting Criterion 675 15.12 Material Variances: Price and Usage 676 15.13 Summary Variances 677 15.14 Status Reporting 678 15.15 Cost Control Problems 685 15.16 Studying Tips for the PMI Project Management Certification Exam 686 Problems 689 Case Studies The Bathtub Period 708 Franklin Electronics 709 Trouble in Paradise 711 16 TRADE-OFF ANALYSIS IN A PROJECT ENVIRONMENT 715 16.0 Introduction 715 16.1 Methodology for Trade-off Analysis 718 16.2 Contracts: Their Influence on Projects 735 16.3 Industry Trade-off Preferences 736 16.4 Conclusion 739

16.5 Studying Tips for the PMI Project Management Certification Exam 739 17 RISK MANAGEMENT 741 17.0 Introduction 741 17.1 Definition of Risk 743 17.2 Tolerance for Risk 745 17.3 Definition of Risk Management 746 17.4 Certainty, Risk, and Uncertainty 747 17.5 Risk Management Process 753 17.6 Plan Risk Management 753 17.7 Risk Identification 755 17.8 Risk Analysis 761 17.9 Qualitative Risk Analysis 766 17.10 Quantitative Risk Analysis 771 17.11 Probability Distributions and the Monte Carlo Process 772 17.12 Plan Risk Response 782 17.13 Monitoring and Control Risks 788 17.14 Some Implementation Considerations 788 17.15 The Use of Lessons Learned 790 17.16 Dependencies between Risks 793 17.17 The Impact of Risk Handling Measures 798 17.18 Risk and Concurrent Engineering 801 17.19 Studying Tips for the PMI Project Management Certification Exam 804 Problems 808 Case Studies Teloxy Engineering (A) 815 Teloxy Engineering (B) 815 18 LEARNING CURVES 817 18.0 Introduction 817 18.1 General Theory 818 18.2 The Learning Curve Concept 818 18.3 Graphic Representation 820 18.4 Key Words Associated with Learning Curves 822 18.5 The Cumulative Average Curve 822 18.6 Sources of Experience 824 18.7 Developing Slope Measures 827 18.8 Unit Costs and Use of Midpoint 828 18.9 Selection of Learning Curves 829 18.10 Follow-on Orders 830

18.11 Manufacturing Breaks 830 18.12 Learning Curve Limitations 832 18.13 Prices and Experience 832 18.14 Competitive Weapon 835 18.15 Studying Tips for the PMI Project Management Certification Exam 835 Problems 836 19 CONTRACT MANAGEMENT 839 19.0 Introduction 839 19.1 Procurement 840 19.2 Plan Procurement 842 19.3 Conducting the Procurements 845 19.4 Conduct Procurements: Request Seller Responses 847 19.5 Conduct Procurements: Select Sellers 847 19.6 Types of Contracts 851 19.7 Incentive Contracts 855 19.8 Contract Type versus Risk 858 19.9 Contract Administration Cycle 859 19.10 Contract Closure 862 19.11 Using a Checklist 863 19.12 Proposal-Contractual Interaction 864 19.13 Summary 867 19.14 Studying Tips for the PMI Project Management Certification Exam 868 20 QUALITY MANAGEMENT 873 20.0 Introduction 874 20.1 Definition of Quality 875 20.2 The Quality Movement 877 20.3 Comparison of the Quality Pioneers 880 20.4 The Taguchi Approach 881 20.5 The Malcolm Baldrige National Quality Award 884 20.6 ISO 9000 885 20.7 Quality Management Concepts 887 20.8 The Cost of Quality 890 20.9 The Seven Quality Control Tools 893 20.10 Process Capability (CP) 910 20.11 Acceptance Sampling 912 20.12 Implementing Six Sigma 912 20.13 Lean Six Sigma and DMAIC 914 20.14 Quality Leadership 915 20.15 Responsibility for Quality 916

20.16 Quality Circles 916 20.17 Just-in-Time Manufacturing (JIT) 917 20.18 Total Quality Management (TQM) 919 20.19 Studying Tips for the PMI Project Management Certification Exam 923 21 Modern developments project Management 927 21.0 Introduction 927 21.1 The Project Management Maturity Model (PMMM) 928 21.2 Developing Effective Procedural Documentation 932 21.3 Project Management Methodologies 936 21.4 Continuous Improvement 937 21.5 Capacity Planning 942 21.6 Competency Models 943 21.7 Managing Multiple Projects 945 21.8 End-of-Phase Review Meetings 947 22 THE BUSINESS OF SCOPE CHANGES 949 22.0 Introduction 949 22.1 Need for Business Knowledge 951 22.2 Timing of Scope Changes 952 22.3 Business Need for a Scope Change 953 22.4 Rationale for Not Approving a Scope Change 954 23 THE?PROJECT?OFFICE 955 23.0 Introduction 955 23.1 Present-Day Project Office 956 23.2 Implementation Risks 957 23.3 Types of Project Offices 958 23.4 Networking Project Management Offices 959 23.5 Project Management Information Systems 959 23.6 Dissemination of Information 961 23.7 Mentoring 962 23.8 Development of Standards and Templates 963 23.9 Project Management Benchmarking 963 23.10 Business Case Development 964 23.11 Customized Training (Related to Project Management) 965 23.12 Managing Stakeholders 966 23.13 Continuous Improvement 967 23.14 Capacity Planning 967 23.15 Risks of Using a Project Office 968 24 Managing Crisis Projects 971 24.0 Introduction 971

24.1 Understanding Crisis Management 971 24.2 Ford versus Firetone 973 24.3 The Air France Concorde Crash 974 24.4 Intel and the Pentium Chip 975 24.5 The Russian Submarine Kursk 975 24.6 The Tylenol Poisonings 976 24.7 Nestlé s Marketing of Infant Formula 979 24.8 The Space Shuttle Challenger Disaster 981 24.9 The Space Shuttle Columbia Disaster 982 24.10 Victims versus Villains 983 24.11 Life-Cycle Phases 984 24.12 Project Management Implications 985 25 The Rise, Fall, and Resurrection of Iridium: A Project Management Perspective 987 25.0 Introduction 987 25.1 Naming the Project Iridium 989 25.2 Obtaining Executive Support 990 25.3 Launching the Venture 990 25.4 The Iridium System 992 25.5 The Terrestial and Space-Based Network 992 25.6 Project Initiation: Developing the Business Case 993 25.7 The Hidden Business Case 995 25.8 Risk Management 995 25.9 The Collective Belief 997 25.10 The Exit Champion 997 25.11 Iridium s Infancy Years 999 25.12 Debt Financing 1001 25.13 The M-Star Project 1002 25.14 A New CEO 1003 25.15 Satellite Launches 1003 25.16 An Initial Public Offering (IPO) 1004 25.17 Signing up Customers 1004 25.18 Iridium s Rapid Ascent 1005 25.19 Iridium s Rapid Descent 1007 25.20 The Iridium Flu 1012 25.21 Searching for a White Knight 1012 25.22 The Definition of Failure (October, 1999) 1012 25.23 The Satellite Deorbiting Plan 1013 25.24 Iridium Is Rescued for $25 Million 1014 25.25 Epilogue 1015

25.26 Shareholder Lawsuits 1015 25.27 The Bankruptcy Court Ruling 1016 25.28 Autopsy 1016 25.29 Financial Impact of the Bankruptcy 1018 25.30 What Really Went Wrong? 1018 25.31 Lessons Learned 1020 25.32 Conclusion 1023 Appendix A. Solutions to the Project Management Conflict Exercise 1025 Appendix B. Solution to Leadership Exercise 1031 Appendix C. Dorale Products Case Studies 1037 Appendix D. Solution to the Dorale Products Case Studies Answers 1049 Appendix E. Crosslisting of PMBOK to the Text 1055 Author Index 1061 Subject Index