IS5540 Project Management & Quality IS5540 Project Management & Quality AssuranceAssurance

Week 3 - Project Integration ManagementWeek 3 - Project Integration Management

Schwalbe: Information Technology Project Management, Schwalbe: Information Technology Project Management, Chapter 4Chapter 4

Adapted by Janet Yu, Frank LoAdapted by Janet Yu, Frank Lo

Story of Airbus

The Airbus A380 megajet project was two years behind schedule in Oct. 2006 – expected loss of $6.1 billion over the next four years

Reason: integration management problems Before 2000, Airbus was a loose consortium of aerospace

companies in several countries In 2000, decided to go-ahead with the A380 project & transformed

into an “integrated” company However, Design Center in Germany used an earlier version a

design software; the assembly plant used the latest version Design specs cannot flow Result: Pre-assembled bundles (from Germany) containing some

cabin wiring didn’t fit properly into the plane (assembly in France)

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*Matlack, Carol. “First, Blame the Software,” BusinessWeek Online (October 5, 2006).

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Learning Objectives Understand the importance of project

integration management and the processes involved

Learn how to apply different project selection methods to project selection

Describe in detailthe Project Charterthe Project Management PlanChange Control

PMI Framework: 9 Knowledge Areas

Integration

ScopeTime Cost

Quality

PeopleCommunication

Risk

Procurement

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Why Project Integration Management

The key to overall project successProject managers must coordinate all of the

other knowledge areas throughout a project’s life cycle

Many new project managers have trouble looking at the “big picture” and want to focus on too many details

So you know why Integration Management is so important ?!

Now more details ……

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Project Integration Management Processes

Develop the project charter: working with stakeholders to create the document that formally authorizes a project—the charter

Develop the project management plan: coordinating all planning efforts to create a consistent, coherent document—the project management plan

Direct and manage project execution: carrying out the project management plan by performing the activities included in it

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Project Integration Management Processes (continued)

Monitor and control the project work: overseeing project work to meet the performance objectives of the project

Perform integrated change control: coordinating changes

Close the project: finalizing all project activities to formally close the project

Before We Have a Project….Project Selection Methods….

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Strategic Planning and Project Selection

Strategic planning involves determining long-term objectives, predicting future trends, and projecting the need for new products and services

As part of strategic planning, organizations:1. Identify potential projects2. Use realistic methods to select which projects to work

on3. Formalize project initiation by issuing a project

charter

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Methods for Selecting Projects There are usually more projects than available

time and resources to implement them Methods for selecting projects include:

1. Performing net present value (NPV) or other financial analyses

2. Using a weighted scoring model3. Implementing a balanced scorecard

But for some projects, they may be selected because of a directive from management or Government

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Financial Analysis of Projects

Financial considerations are often an important consideration in selecting projects

Four primary methods for determining the projected financial value of projectsNet present value (NPV) analysisReturn on investment (ROI)Internal Rate of Return (IRR)Payback analysis

Discounted Cash FlowMoney in the future is worth less than money

received todayThe future value (FV) is calculated as

FV = PV(1+i)n where i is the interest rate, PV the present value, n the no. of periods

PV = FV/(1+i)n

Example: FV of $2000 is $2315.25 if i = 5%, n = 3

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Net Present Value Analysis

Net present value (NPV) analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time

= Total discounted benefits – Total discounted costs

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Choose A Project to Invest

NPV of Project A = 87K; NPV of Project B = 57K ??NPV of Project A = -87K; NPV of Project B = 57K ??NPV of Project A = -87K; NPV of Project B = -57K ??

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Net Present Value Analysis

The higher the NPV, the betterProjects with a positive NPV should

be considered if financial value is a key criterion

Figure 4-4: JWD Consulting NPV Example

Multiplyby thediscountfactor eachyear, then take cum.benefits –costs toget NPV

Note: See the template called business_case_financials.xls

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Return on Investment (ROI)

ROI = (total discounted benefits - total discounted costs) / discounted costs

The higher the ROI, the better

Internal Rate of Return (IRR)Rate at which the total discounted benefits

and total discounted costs are equalThe discount rate when NPV = 0Difficult to calculateThe higher the better

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Payback Analysis

The payback period is the amount of time it will take to recoup, in the form of net cash inflows, the total dollars invested in a project

Time when NPV = 0The shorter the better

Figure 4-5: Charting the Payback Period

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Figure 4-4: JWD Consulting NPV Example

Multiplyby thediscountfactor eachyear, then take cum.benefits –costs toget NPV

Note: See the template called business_case_financials.xls

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Weighted Scoring Model A weighted scoring model is a tool that provides

a systematic process for selecting projects based on many criteria

1. Identify criteria important to the project selection process

2. Assign weights (percentages) to each criterion so they add up to 100%

3. Assign scores to each criterion for each project4. Multiply the scores by the weights and get the total

weighted scores The higher the weighted score, the better

Figure 4-6: Sample Weighted Scoring Model for Project Selection

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Implementing a Balanced ScorecardTo help select and manage projects that align with

business strategyA balanced scorecard:

Is a methodology that converts an organization’s value drivers to a series of defined metrics. Examples of such drivers are

customer serviceInnovationoperational efficiencyfinancial performance

See www.balancedscorecard.org for more information

Quick Quiz

Project A Project B Choose

NPV $87K $57K

ROI 50% 40%

IRR 12% 15%

Payback Period 15 months 12 months

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Project Charter ….

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Project ChartersAfter deciding what project to work on, it is

important to let the rest of the organization know, especially the key stakeholders

A project charter is a document that formally recognizes the existence of a project and provides direction on the project’s objectives and management

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Sample Project CharterProject Title and Description

What is the project ? Brief background and purpose

Project Manager Assigned and Authority LevelWho is given authority to lead the project. Can he/she determine budget, schedule, staffing etc??

Business NeedWhy is the project being done?

Project Justification Business case

Resources Pre-assignedStakeholders (and their requirements)

Requirements related to both project and product

Product Description/DeliverablesList of the deliverables and their descriptions

Constraints and AssumptionsSigned and Approved By

Has to be a person from senior management

Another Sample Project Charter

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Project Management Plan ….

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Project Management PlansA project management plan is your plan on how to

manage the project, e.g. How do you define the scope? How to deal with changes? How to do estimation? How to identify risks? How to communicate with stakeholders?

Plans created in the other knowledge areas are subsidiary parts of the overall project management plan, like

Scope Management Plan Staffing Management Plan Etc.

Integrated Change Control….

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Change Control SystemThe Project Management Plan provides the

baseline for identifying and controlling project changes

A baseline is the approved project management plan plus approved changesUsed for comparing with actual

A formal, documented process that describes when and how official project documents and work may be changed

Describes who is authorized to make changes and how to make them

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Change Control Board (CCB)A formal group of people responsible for

approving or rejecting changes on a projectCCBs provide guidelines for preparing change

requests, evaluate change requests, and manage the implementation of approved changes

Includes stakeholders from the entire organization

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Configuration ManagementPart of change managementEnsures that the descriptions of the project’s

products are correct and complete, including their support documentation

Configuration management specialistsidentify and document configuration requirementscontrol changesrecord and report changesaudit the products to verify conformance to

requirements

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RevisionProject Selection Methods

NPVROIIRRPayback periodWeighted Scoring ModelBalanced Scorecard

Project CharterProject Management Plan Integrated Change Control

BaselineCCBConfiguration Management