mba module1

PR-A2-engb 1/2012 (1006)

Project Management

Professor Alexander Roberts

Dr William Wallace

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Project Management

Professor Alexander Roberts PhD, MBA, FCCA, FCIS, MCIBS. Director, Centre for Strategy Development and Implementation Professor Roberts is Professorial Fellow of Edinburgh Business School (EBS), the Graduate School of Business at Heriot-Watt University. Professor Roberts lectures, researches and consults for major organisations on strategy development and implementation. The practical relevance of his work is underpinned by 15 years in senior manage-ment, including 10 years at executive director level within multinational subsidiaries of American and European based businesses. He gained his PhD at London Business School in 1997. He has extensive executive and postgraduate management development experience.

Professor Roberts founded and leads the new Centre for Strategy Development and Implementation (CSDI) at Edinburgh Business School. The centre provides executive courses, research and consulting services to assist organisations develop appropriate strategic directions and put them into action effectively. Professor Roberts also founded and heads the Doctorate in Business Administration (DBA) in Strategic Focus programme.

Professor Roberts is an executive director of EBS. He is also chairman of the EBS CSDI DBA research committee, steering group and various specific course development steering committees. He is also author of the forthcoming MBA/DBA distance learning text in Making Strategies Work and is joint author of the texts in Project Management, Strategic Risk Management and Mergers and Acquisitions.

Dr William Wallace BSc (Hons), MSc, PhD, MCIOB, MAPM. Senior Teaching Fellow, Centre for Strategy Development and Implementation.Dr Wallace is Senior Teaching Fellow of Edinburgh Business School (EBS), the Graduate School of Business at Heriot-Watt University. Dr Wallace chairs the MBA/DBA courses in Project Management and Strategic Risk Management and assists Professor Roberts in the development of the EBS CSDI and EBS CSDI DBA programme.

Dr Wallace has an extensive range of academic and industrial experience. The work for both his first degree and masters degree (Loughborough 1983) established a broad project management academic framework. He subsequent-ly developed and refined this framework through research as a Heriot-Watt scholarship doctoral student. This research led to the award of his PhD in design project management (Heriot-Watt 1987). Dr Wallace subsequently worked as a professional project manager with private and public sector employers before returning to academia in 1995, where he led the Heriot-Watt MSc in Construction Project Management programme from 1995 until 2001. Dr Wallace served as a member of the Heriot-Watt Faculty Board of Engineering from 1997 to 2001 and on the University External Studies Committee 1998 to 2001.

With Professor Roberts and others, Dr Wallace is joint author of the EBS texts in Project Management, Strategic Risk Management, and Mergers and Acquisitions.

First Published in Great Britain in 2002.

Roberts, Wallace 2002, 2003, 2004

The rights of Professor Alexander Roberts and Dr William Wallace to be identified as Authors of this Work has been asserted in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publishers. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior consent of the Publishers.

Project Management Edinburgh Business School v

Contents

Preface ix List of Abbreviations xi Module 1 Introduction 1/1

1.1 What Is a Project? 1/2 1.2 What Is Project Management? 1/7 1.3 Characteristics of Project Management 1/15 1.4 Potential Benefits and Challenges of Project Management 1/21 1.5 The History of Project Management 1/23 1.6 Project Management Today 1/24 Learning Summary 1/25 Review Questions 1/29

Module 2 Individual and Team Issues 2/1 2.1 Introduction 2/1 2.2 The Project Manager 2/3 2.3 The Project Team 2/26 2.4 Project Team Staffing Profile and Operation 2/32 2.5 Project Team Evolution 2/41 2.6 Project Team Motivation 2/47 2.7 Project Team Communications 2/51 2.8 Project Team Stress 2/56 2.9 Conflict Identification and Resolution 2/60 Learning Summary 2/65 Review Questions 2/69 Mini-Case Study 2/76

Module 3 Project Risk Management 3/1 3.1 Introduction 3/1 3.2 Background to Risk 3/2 3.3 Risk Handling 3/9 3.4 Types of Risk 3/17 3.5 Risk Conditions and Decision making 3/22 3.6 The Concept of Risk Management 3/30 3.7 Risk, Contracts and Procurement 3/49 Learning Summary 3/60

Contents

vi Edinburgh Business School Project Management

Review Questions 3/65 Mini-Case Study 3/71

Module 4 Project Management Organisational Structures and Standards 4/1 4.1 Introduction 4/2 4.2 Organisational Theory and Structures 4/4 4.3 Examples of Organisational Structures 4/46 4.4 Project Management Standards 4/52 Learning Summary 4/63 Review Questions 4/69 Mini-Case Study 4/73

Module 5 Project Time Planning and Control 5/1 5.1 The Concept of Project Time Planning and Control 5/2 5.2 The Process of Project Time Planning 5/10 5.3 Project Replanning 5/55 5.4 Trade-off Analysis 5/68 5.5 Resource Scheduling 5/80 5.6 Project Planning Software 5/90 Learning Summary 5/98 Review Questions 5/103 Mini-Case Study 5/111

Module 6 Project Cost Planning and Control 6/1 6.1 Introduction 6/1 6.2 Project Cost Planning and Control Systems 6/2 6.3 The Project Cost Control System 6/24 Learning Summary 6/101 Review Questions 6/107 Mini-Case Study 6/112

Module 7 Project Quality Management 7/1 7.1 Introduction 7/1 7.2 Quality Management as a Concept 7/2 7.3 The Quality Gurus 7/18 7.4 The Quality Management ‘Six Pack’ 7/32 7.5 Total Quality Management 7/56 7.6 Configuration Management 7/64

Contents

Project Management Edinburgh Business School vii

7.7 Concurrent Engineering and Time-Based Competition 7/74 Learning Summary 7/85 Review Questions 7/90 Mini-Case Study 7/97

Module 8 Case Study 8/1 8.1 Aims and Objectives of the Case Study 8/1 8.2 Introduction (Module 1) 8/2 8.3 Individual and Team Issues (Module 2) 8/9 8.4 Risk Management (Module 3) 8/16 8.5 Case Study First Supplement 8/20 Case study first supplement 21 June 8/20 8.6 Organisational Structures (Module 4) 8/25 8.7 Case Study Second Supplement 8/27 Case study second supplement 28 June 8/27 8.8 Time Planning and Control (Module 5) 8/31 8.9 Cost Planning and Control (Module 6) 8/38 8.10 Quality Management (Module 7) 8/50

Appendix 1 Practice Final Examinations A1/1

Final Practice Examination 1 1/2 Final Practice Examination 2 1/6

Appendix 2 Answers to Review Questions A2/1

Module 1 2/1 Module 2 2/3 Module 3 2/9 Module 4 2/14 Module 5 2/18 Module 6 2/23 Module 7 2/27

Index I/1

Project Management Edinburgh Business School ix

Preface

Project management has come a long way from its origins in engineering and construction. It is now used for a wide range of applications and is one of the most highly valued management tools. A review of job advertisements in the press reveals that project managers are amongst the most highly paid. By the end of this Preface you will gain some idea of why they should be so highly valued.

In a world of rapid change, organisations that can identify the need for change, design the changes needed, and implement these more effectively and efficiently than others are more likely to survive and prosper. Those that cannot do this are likely to perish. The Centre for Strategy Development and Implementation (CSDI) at Edinburgh Business School, Heriot-Watt University, came into being to address these issues.

The core of the Centre's work lies in four interrelated areas as shown in The Strategic Focus Wheel™.

The Strategic Focus Wheel™

™ A. Roberts and A. MacLennan 2002

The wheel is used to focus the efforts and resources of organisations on delivering their intended strategic objectives and has four core elements.

Strategic Planning concerns identifying the options available to an organisation and selecting the most appropriate. If strategic planning is done poorly, then even the best implementation capability is unlikely to compensate for this.

Making Strategies Work is a process for connecting the high-level strategic plan to the day-to-day activities that are critical to its delivery.

Project Management of Change ensures completeness and control over physical realisation of the chosen strategy. Project management is the subject of this text.

Strategic Planning

MakingStrategies

Work

Project Managementof Change

StrategicRisk

Management

StrategyFocus Wheel �

Preface

x Edinburgh Business School Project Management

Strategic Risk Management (SRM) identifies, monitors and manages the risk profile of the organisation. Major changes in this profile can result in the need to revise or change the elements above and, in particular, to devise new strategic plans. Alternatively, the changes may be due to the implementation of a new strategy. SRM covers three areas: strategic risk, the possibility of ending up in a position that was not intended, or of ending up in the position that was intended but that is no longer a desirable position because the strategy should have been changed; change risk, dealing with the risks associ-ated with projects required to change the organisation in pursuit of a new strategic thrust (where project management is one tool for managing such risks); and, last but not least, operational risk, covering the risks inherent in the day-to-day operation of the organisation.

We chose project management as the key tool for managing change and associated risks because of its proven usefulness in a vast range of change situations. This is equally true whether designing and erecting a new building (changing materials, labour and other resources into a finished building), designing and implementing new systems (such as human resource management or financial systems), or designing and implementing a new strategy for a whole organisation.

However, project management can do more than just act as a stage in the strategic focus cycle. It can also be used as a tool for managing each of the individual stages. In practice, the strategic planning process can itself be run as a project. The process can be broken down into a series of elements or work packages that must be completed. For example, internal and external environmental analysis might form two work packages. In total, the packages form what is called a work breakdown structure, i.e. an ordered description of the work that must be done. Responsibilities are then assigned to the people who will carry out the work on each package, and the relevant working relationships between the people are established. This is the function of an organisational breakdown structure. The execution of the elements will need to be sequenced because some elements will depend on others being completed first. This is the function of scheduling, and PERT and Gantt charts become critical. Other elements in the process can also be covered by project management techniques. These techniques can be similarly applied to making strategies work and strategic risk management.

Project management has come a long way from its origins in engineering and construc-tion. It has become indispensable. Project managers now work in all industries and in all functions within organisations. For example, some of the most highly paid project managers now work in IT-related work in financial services, a long way from project management's building and construction origins.

Project Management Edinburgh Business School xi

List of Abbreviations

ABC activity-based costing ACWP actual cost of the works performed ADR alternative dispute resolution AGAP all goes according to plan ANSI American National Standards Institute APM Association for Project Management ATWP actual time for work performed BAC budget at completion BC budgeted cost BCWP budgeted cost of the works performed BCWS budgeted cost of the works specified or scheduled CAC cost accounting code CAD computer-assisted design CAVN cost account variation notice CCRB change control and review board CCTA Central Computer Telecommunications Agency CD compact disc CDES computerised database estimating system CFM cross-functional management CMS configuration management system CPM critical path method CSAR configuration status accounting and reporting CSDI Centre for Strategy Development and Implementation CCS change control section CV cost variance CVI cost variance index DAM daily application management DBA Doctorate in Business Administration DMS draft master schedule EAC estimate at completion ECTC estimated cost to complete EEC estimated effect at completion EET earliest event time EFT earliest finish time EMV expected monetary value ERE effective risk exploitation ERP enterprise resource planning EST earliest start time ETC estimate to complete


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EVA earned value analysis GERT graphical evaluation and review technique HSE Health and Safety Executive IBS information breakdown structure ILS integrated logistics support IMCS implementation monitoring and control system IMS interface management system IPMA International Project Management Association ISO International Organisation for Standardisation IT information technology JCT Joint Contracts Tribunal JIT just-in-time LAI local authority inspector LCC life cycle costing LET latest event time MBR market business risk MFR market financial risk MRP material requirements planning NPZ no-problem zone OBS organisational breakdown structure PC personal computer PCCS project cost and control system PCS project central server PERT program evaluation and review technique PLE project logic evaluation PMI Project Management Institute PMS project master schedule POER post-occupancy evaluation and review PRINCE2 PRoject management IN a Controlled Environment, version 2 PSR programme status report PVAR project variance analysis reporting PWO project works order QAP quality assurance plan QAR quality assurance review QBS quality breakdown structure QSR quality status report RFD resource fluctuation driver RICS Royal Institute of Chartered Surveyors SLA service-level agreement SMM standard method of measurement SOW statement of work SPP strategic project plan SSR safety status report


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STWP scheduled time for work performed SV schedule variance SVI schedule variance index SWOT strengths, weaknesses, opportunities and threats TBC time-based competition TDS top-down strategy TOC train operating company TQM total quality management TRM task responsibility matrix TSRM total strategic risk management VAC variance at completion VO variation order WBS work breakdown structure WHIF what if WP works performed WS works scheduled

Project Management Edinburgh Business School 1/1

Module 1

Introduction Contents

1.1 What Is a Project? .............................................................................................. 1/2 1.2 What Is Project Management? ......................................................................... 1/7 1.3 Characteristics of Project Management ........................................................ 1/15 1.4 Potential Benefits and Challenges of Project Management ......................... 1/21 1.5 The History of Project Management ............................................................. 1/23 1.6 Project Management Today ............................................................................ 1/24 Learning Summary ...................................................................................................... 1/25 Review Questions......................................................................................................... 1/29

Learning Objectives

This module introduces the main concepts and philosophies of project management. These areas are then explored in greater depth, and additional ideas introduced, in the remaining modules.

By the time you have finished this module you should be familiar with:

the concept of project management; how project management differs from traditional management and the different

organisation structures employed; the potential benefits and challenges of using a project management approach; the history and origins of project management.

A project is a one-off process with a single definable end-result or product. Some exam-ples include building a house, introducing new human resources practices, and developing new IT systems. It is difficult to provide an example of a ‘typical’ project because project management techniques are now applied so widely that listing their possible applications would take a volume as large as this text! In addition, new uses are being found regularly. One reason for this growth in popularity is that project management is a very practical tool when used for change management purposes. The ever-increasing rate of change in the environments in which organisations operate requires them to transform themselves regularly if they are to survive and have the possibility of prosperity. Hence the continued growth in interest in project management.

Much of project management is concerned with planning and controlling the three key variables associated with projects. These variables are time, cost, and quality. They are interrelated and a change in any single variable frequently has a significant impact on the others.

Since project management is concerned with managing change, within the constraints of the three key variables of time, cost and quality, organisational structures for managing projects can be expected to differ from traditional organisational structures, which were

Module 1 / Introduction

1/2 Edinburgh Business School Project Management

developed to help managers manage in more stable environments. Organisation structures for managing projects are examined and contrasted with more traditional management organisation structures. Projects have a finite life cycle, i.e. definite starting and completion points, and it follows that any project team or organisation structure set up to manage a project will have a finite life cycle.

Project management is a truly unique international and multidisciplinary profession. This characteristic has led to the development of international generic standards and is managed by a new kind of professional who operates in a different way from traditional functional managers. After studying this module, you should be able to define those main differences and understand their advantages and disadvantages compared with traditional approaches.

The module also gives a brief review of how project management evolved from more traditional management structures in response to changing industrial and economic conditions. A major influence has been the tendency for projects to become larger and more complex. As a result, the penalties for failure and the rewards for success have changed significantly.

1.1 What Is a Project?

1.1.1 Introduction

The first stage in developing an understanding of project management is to define what a project is and, by contrasting with other production systems, what a project is not.

At any moment in time organisations will be attempting to achieve a wide range of goals and objectives – for example, the sale of goods and services, improving customer relation-ships, improving staff motivation, or developing new products. The range of categories for which goals and objectives may be set is infinite. In order to achieve these, some form of production system must be employed. A production system takes resource inputs and passes them through a transformation process that changes them into the desired outputs. For example, consider a simplified manufacturing organisation. The resource inputs consist of materials, labour, equipment, services and so on. The production process then transforms these into outputs of goods and services that the end customer or client buys. This general production system model of inputs, transformation and outputs is true whether the end product/service is packaged food, motor cars, consulting reports, a new building, employee training programmes, or many other things.

1.1.2 Projects and Other Production Systems

Production systems can be classified into three broad categories based on their main method of production, as follows:

mass production; batch production; project (non-repetitive) production.

Some industries, such as construction and defence, are dominated by the project form. Other industries, such as chemical production and production of consumer goods, use mainly mass or batch production methods. However, even businesses where the norm is mass or batch production will use projects for certain activities. This concept will be covered later in the module.



Mass production systems are based around the production of large numbers of repetitive items. A typical example would be a production line for the manufacture of vehicles. The process runs continually. All the operatives and their tools are arranged within the production system and the whole process is carefully researched and developed to operate at maximum efficiency. The primary characteristics of such a system are that it is capital-intensive and highly mechanis-tic, and relatively little active management intervention or control is needed once the system is set up and operating satisfactorily. This system is clearly most appropriate for the large scale production of repetitive units, where there is little chance of change to the input requirements and where consumer demand for the end product is likely to be relatively constant.

By way of contrast, batch production is used where there is unlikely to be continual high de-mand for a given product and where some modifications will be needed at intervals. A typical example is a wallpaper factory, where production runs of certain types and patterns of wallpaper are produced sufficient to supply all distribution outlets for some months ahead. At that point, the system is shut down, re-tooled and reconfigured, and the process started up again to produce the next batch. The characteristics of a batch system are that it is less mechanistic than a mass production system and the need for management intervention and control is greater. As a result, batch systems tend to be organised around functional groupings. The wallpaper factory might have a colour mixing section, a processing section, a quality-control section, a packaging section, etc. Each section tools up and operates its part of the operation in essentially the same way for each batch run, but the individual manufacturing requirements differ slightly.

Project production is used for one-off, non-repetitive items. As a result of this, there is no previous learning curve on which to rely; and high levels of complex management planning and control may be required.

Time Out _______________________________________________________ Think about it: combined batch, mass and project production systems.

One example would be a small company that makes paint for a major retailer. At present, it makes the paint on a batch basis. As it receives an order from the retailer, it makes up so many thousands of litres of paint and transports them to the retailer.

What if the retailer expands and suddenly wants more paint? The small paint company might see an opportunity and decide to invest in a new mass-production system that will produce paint continuously (although at variable rates) in order to meet the new in-creased demand from the retailer. This represents a strategic switch from batch to mass production.

In this case, the original production system was based on batch manufacturing. As demand increases, a decision is made to switch to mass production. As far as the company is concerned, the switch from batch to mass requires the installation of new equipment and processes. The design, procurement and installation of this new equipment and the associated processes would be managed as a project. The company will appoint or commission a manager – the project manager – to be responsible for the project.

Questions: Can you identify another example of a system that has mass, batch and project

phases or characteristics? What would be an example of a system that only ever has a project phase? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________



A project is an instrument for achieving one-off changes. For example, a project to build a house by changing the various resource inputs (bricks, cement, labourers skills, etc.) into a house. When the house is complete, the project is complete. Another example is a training project to enhance people's skills. In both cases, the changes are intended to be permanent. This one-off nature is the most prominent feature of a project.

Typical projects that can be found in mass or batch-production-dominated organisations are usually targeted at improving the organisation's competitive position by improving its effectiveness or efficiency. For example, the end result of a project to develop a new product should increase the effectiveness of sales and marketing efforts. Projects such as changing the layout of manufacturing or other facilities, or improving the skills of people, should lead to permanent increases in the productivity or efficiency of these resources.

1.1.2.1 Projects Versus Programmes

Before considering what a project is in more detail, it is useful to contrast a ‘project’ with a ‘programme’. Frequently, the terms ‘programme management’ and ‘project management’ are used interchangeably. Technically, a programme is a set of identifiable projects aimed at achieving some goal or objective. Typically, a programme will be of longer duration than any individual project within it. Some programmes might not have any specified end date and will run until a decision is taken to stop or replace them – for example, a government programme to reduce pollution in the environment. Over several years, various projects will be undertaken, completed and evaluated; the government will learn from these and new projects will be initiated. This practice will continue until – if ever – the government's goals and objectives are achieved. Each of the specific projects will be undertaken under the overall umbrella of the pollution reduction programme. Another example is a customer service improvement programme, which would also contain several projects within it.

1.1.3 Characteristics of Projects

A project can generally be defined by its characteristics where the following apply.

It involves a single, definable purpose, product or result. An example is a project to repair impact damage to an aircraft. Once the impact damage is repaired, the project is complete.

It usually has defined constraints or targets in terms of cost, schedule (time), and performance requirements. An example is a time limit. The aircraft with the impact dam-age might have to be repaired within a specific time frame or lose several hours in its flying schedule. If at all possible, the repair should be completed within this time frame.

It uses skills and talents from multiple professions and organisations. Projects often involve advanced technology and rely on task interdependencies that may intro-duce new and unique problems. Task and skill requirements vary from project to project. Repairing aircraft damage might involve mechanical engineers, aeronautical engineers, safety inspectors, and representatives from the aircraft manufacturer. These people may work together on the repair as a multidisciplinary team.

It is unique. A project is generally a one-off activity that is never repeated exactly. Generally, one piece of impact damage will be unique. The extent of the damage will depend on what hit, where it hit, how it hit, how fast it was going, and so on.



It is somewhat unfamiliar. It may encompass new technology and hence possess significant elements of uncertainty and risk. Failure of the project might jeopardise the organisation or its goals.

It is a temporary activity. It is undertaken to accomplish a goal within a given period of time; once the goal is achieved, the project ceases to exist. This applies to the organisa-tional structure created to deliver it, as well as to the project itself. Once the aircraft repair is complete, the repair team goes back to the terminal buildings and either remains on duty or goes home. Next time the team is needed, it could consist of different people working on a different aircraft under different conditions.

It is part of the process involved in working to achieve a goal. During the process, a project passes through several distinct phases; as a result, tasks, people, organisational structure; and resources change as the project moves from one phase to the next. Pro-jects usually have clear start and finish points. In the case of the aircraft repair, there will be an inspection, an appraisal, a solution, implementation, finalisation and testing.

It is part of an interlinked process. Projects are very rarely carried out in isolation. There is usually some interlinking between different projects that are being run by any particular organisation.

It is generally of secondary importance to the organisation. Projects are generally not the primary objective of the organisation. There are exceptions such as pure research and development organisations and companies that are established purely to plan and execute a single project. Generally the organisation is concerned with defined functional objectives and the project is subsidiary to these.

It is relatively complex. Projects involve multidisciplinary teams and have defined aims and objectives. In organisational terms they therefore tend to be relatively complex as compared to the standard functional processes that operate within the organisation.

Time Out _______________________________________________________ Think about it: project characteristics when installing a new server.

The installation of a new server for the IT requirements in an office is one example of a project. It involves a single, definable purpose, which is to set up a new server-based network for the office. It uses the skills of a number of different people, from individual company users to external specialist IT consultants. Different people will write the software, configure the hardware, install the system, and test and commission it. As with many projects, the team itself is multidisciplinary. Installing the server and commission-ing it is a unique process for the IT consultants, in that every office is different and the demands of any particular client will be specific to that client. The project will always be somewhat unfamiliar because new hardware and software are coming on to the market all the time, and hence the resulting system requirements will be constantly changing.

The installation team is also temporary. It works together on the server installation. As soon as the installation is complete and the system is commissioned, the team ceases to exist and each individual either moves on to new installation projects or moves back into his or her standard functional role. The installation may be interlinked in that it may take place in conjunction with hardware or software upgrades. Most IT managers would take advantage of a server upgrade to carry out other network improvement works such as replacing PCs or upgrading software.



Questions: Where might the installation of a new server not be regarded as a project? How could project objectives (installation of the new server) be accurately co-

ordinated with organisational objectives (general software and hardware upgrade)? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

From the project characteristics highlighted above, it is clear that projects require a unique form of management. Hence the concept of project management evolved in order to plan, co-ordinate and control the many complex and often diverse activities involved in projects.

Until recently, projects and project management were considered to be limited to the construction and engineering industries. Today project management is being applied across all industry sectors. Organisations in the banking sector are as likely to be running a programme of interlinked projects as an organisation building power stations, and the recruitment adverts for project management posts are more likely to be looking for IT specialists than engineers. The growing popularity of project management tools and techniques is, in part, attributable to the development of easy-to-use computer-based project management tools.

Project management is, in essence, the general management of an organisation. Good project management therefore requires the effective application of a wide range of general management skills in order to achieve the desired goals. Skills that senior corporate execu-tives use daily in directing whole organisations are equally relevant to project management, and include:

financial awareness; marketing appreciation; technical knowledge; planning skills; strategic awareness; quality management.

Project management covers the whole range of functional management areas. Skills are often required in all of these areas to secure project success.

Almost universally, the traditional organisation has been structured as a pyramidal hierar-chy with vertical manager–subordinate relationships and departments along functional, geographic or product lines. Authority and formal communication flow down from the top. Departments tend to be highly specialised and operate independently. Traditional organisa-tions become very efficient in what they do and are well suited to a stable environment. They are fairly rigid and therefore less suitable to the unstable and dynamic environments that characterise project situations.

Project teams are set up to undertake projects of every type. They may deal with single projects where all resources are dedicated to achieving the objective of that project, or they may be responsible for multiple projects where resources have to be managed across projects.

Projects can be of many sizes, ranging from large multinational projects such as building the Channel Tunnel connecting the UK to France and requiring millions of person hours to complete, down to more simple projects such as organising a social event or company newspaper.



Projects may be external, where they are carried out for a client outside the organisation. These are normally defined by a binding contract and are usually a main revenue source for the organisation. Projects may also be internal, where they are generally set up to improve the operations of the organisation and the client would be an internal project sponsor.

Finally, projects are either undertaken to deliver hardware or software. Hardware projects are those where there is a tangible physical result, such as a new building. Software projects are those where the end result is a system or process, rather than a physical item. An example is a new operational or administrative system for an office.

1.2 What Is Project Management?

1.2.1 Introduction

This section considers project management as a discipline, and it develops an appreciation of how project management can exist in basic internal and external forms.

1.2.2 Definition of Project Management

The characteristics of a project have been considered above. It is now possible to develop a definition for project management. Given the relative youth of project management as a discipline, it is not surprising to find that project management has numerous definitions.

Typical examples are:

The process of planning and executing a piece of work from inception to completion to achieve safe achievement of objectives on time, within cost limits and to the specified standards of quality.

And:

The organising, planning, directing, co-ordinating and controlling of all project resources from inception to completion to achieve project objectives on time, within cost, and to required quality standards.

Most authors agree that project management is about achieving time, cost and quality targets, within the context of overall strategic and tactical client requirements, by using project resources. There is also general agreement that project management is concerned with the life cycle of the project: planning and controlling the project from inception to completion. Project resources are resources that are wholly or partly allocated to the project and under the control of the project manager. They are allocated for a specific time, usually from within the standard functional structures that make up the organisation.

Traditional planning and control techniques consider time, cost, and quality planning and control. However, traditional approaches often consider them as separate entities that are planned and monitored using different systems. For example, traditional cost planning and reporting systems do not necessarily link directly into the relevant resource scheduling systems. In addition, reports have traditionally been prepared by different consultants, who are responsible for different aspects of project delivery. Project Management seeks to address these problems by integrating the individual areas under the overall control of the project manager. Monitoring and reporting activities are spread out among different specialists with different and often conflicting viewpoints that give rise to confusion among those responsible for delivering the project.

Another facet of project management involves choosing the optimum position in relation to the success criteria. This concept is shown diagrammatically in Figure 1.1.



Figure 1.1 The typical project-management time–cost–quality continuum

Generally the facets of time, cost and quality can be represented as a three-way continu-um. For example, position A Figure 1.1 might represent a low-quality, low-time, low-cost option. This option could be the preferred project success criterion of the client at the start of the project. As the project develops, the client might want to increase quality – perhaps because of the number of delays that are being caused by defective works or abortive design. There may be several ways by which this can be achieved. More time can be spent on design and this will increase cost; or more resources can be employed, with a resulting increase in costs but maintenance of the time schedule. There will always be some kind of link between quality and cost, and quality and time, so a change in the position of the project on the quality axis will also reposition it along the cost and time axes. The point that represents the project success criterion will therefore move along all three axes relative to each other, not simply along one axis. In Figure 1.1, the required increase in quality is leading to increases in the time required and in the overall cost. This is represented by the move from A to B.

If a project has cost as its priority – for example, building to a fixed price – cost objec-tives would take precedence over quality and time objectives. It is important at the start of the project to prioritise between cost, time and quality and to specify where each sits in relation to the others. By doing this, it will be easier and quicker to make the difficult decisions that may be required during the pressure of the project execution phase.

The need for integrated planning and control procedures, together with a recent corre-sponding success of project management, is caused by the changing nature of industrial projects over the past fifty years. Generally, as industry has evolved, it has become more complex. Technological processes have become more complex and this has been coupled with more and more complicated organisational and administrative procedures. Technology and organisational processes, like plants and animals, tend to evolve over time into ever more complex and sophisticated structures.

Quality increaseQuality

Costincrease

Time

Timeincrease

Cost

A

B

B1



This effect is further enhanced by the increasing rate of technological evolution. Tech-nology is determined by human invention, and it can therefore evolve as rapidly as the human thought process. It is not limited to physiological evolution or to the metaphysical interactions and developments that necessitate a finite rate of development. The result has been an explosion in technological innovation and an increasing use of more and more complex and sophisticated technology. Increasing technological complexity demands increasingly complex support, administration, organisational and control techniques.

Moreover, as societies become ever more sophisticated and complex, the links and inter-dependencies between different sections of industry and commerce become more pronounced. Expansion and evolution in one area produces a demand for corresponding expansion and development in other sectors. For example, an expansion in the commercial sector generates a demand for expansion in the communications sector, as commerce depends on communications.

This increase in complexity and multiple objectives has been a driving force behind the development of project management. The project manager is concerned with time, cost and quality variables, but he or she also has to be able to view these within the context of the whole operating system. Today, projects come in all shapes and sizes, from high-capital-expenditure large construction projects to lower-cost cultural change management projects within companies. They come in many different degrees of complexity, from launching a space mission to designing and printing a company newsletter, and across all projects they require the commitment of a wide range of resources and the application of a wide and varied range of skills by the project manager.

Project management is therefore about deciding the various success and failure criteria of a project and then organising and running the project as a single entity so that all the success criteria are met. This process involves setting up and managing a project team that may consist of a number of different individuals with different specialisations. The project manager must weld this group of individuals into a team and then drive the team to perform successfully. The team itself, like the project, will only last a certain time. Once the project is completed the project team will probably be disbanded or be moved on to the next project.

Time Out _______________________________________________________ Think about it: the development of system complexity and resulting need for effective project management telephone systems.

Only forty years ago, telephone systems comprised a national network of exchanges linked by metal connecting wires. This system was based on the telephone networks that were first developed in the late nineteenth and early twentieth centuries. The telephone exchanges were manned by operators who directed calls manually. As society developed and commercial and industrial demands on the system escalated, the telephone system was forced into a process of evolution.

This evolution was assisted to some extent by a corresponding development in new technology in radio and other communication media. Commercial radio telephones appeared in the 1960s, followed by mass networks involving electronically controlled exchanges. The first mobile handsets appeared in the 1980s, although these still required large batteries.



Today, there is a multiplicity of different telecommunication options. Users can still use cable-linked systems, but these tend to use high-capacity optical fibre rather than metallic conductors. Increasingly, telephone calls are transmitted by radio. International calls can be made by satellite. Most people in the developed world now have mobile phones that are operated through a series of competing cellular networks. There are large-scale commercial battles and take-overs involving large telephone companies, and the major players have become corporate giants. The whole telephone system is infinitely more complex than the 1960s system. It is also far more powerful and flexible.

These remarkable changes have all been market-driven. Companies have invested in them because the potential benefits have been clearly demonstrable. Market-driven forces for change require multiple time, cost and quality objectives to change. Users want better handsets at reasonable prices, delivered more quickly than the opposition. This in turn generates a need for advanced project-management practice in the rapidly expanding telephone and communications markets. Today, the largest single member-ship of the Association for Project Management is Information Technology, and the telephone network and equipment companies use some of the most advanced project-management techniques in the world. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

1.2.3 The Basic Project Management Structures

Although numerous different organisational structures are possible, usually occurring because of particular project characteristics such as size and complexity, a useful distinction can be made between internal and external project-management structures.

1.2.3.1 Internal Project Management

The most common form of project management is the formation of a project team operating within an existing organisational structure. This format is commonly known as internal, or non-executive, project management. The various organisational forms for project management are considered in more detail in Module 5. This section introduces the idea of project teams operating within functional units in advance of the main discussion in that module.

Most firms are organised around functional groups that specialise in particular areas. A typical structure would have separate sections such as sales and marketing, finance and accounting, and operations. Each section or group makes a specialised contribution to the whole. A typical functional structure is shown in Figure 1.2. This kind of structure can be found in large functionally driven organisations, such as universities, government depart-ments, local authorities, large companies and the military.



Figure 1.2 Typical functional arrangement

Note: some sections omitted for clarity.

The disadvantage of this structure is that people tend to become compartmentalised and work rigidly on functional tasks. In order to make more efficient use of resources, project teams can be set up to operate across these functional boundaries. A typical project team operating across functional boundaries is shown in Figure 1.3.

Figure 1.3 Typical project team operating across functional boundaries

Note: some sections omitted for clarity.

Board of directors

Managing Director

ITDirector

MarketingDirector

OperationsDirector

FinancialDirector

HRDirector

Advertising

Sales

Packaging

Promotions

Payments

Salaries

Invoicing

Cost control

Updates

Support

Board of directors

Managing Director

ProgramManager

MarketingDirector

OperationsDirector

FinancialDirector

ITDirector

Projectmanager

Projectmanager

Marketinginput

Marketinginput

Operationsinput

Operationsinput

Financialinput

Financialinput

IT input

IT input



In this structure, the project manager takes (or is allocated) individuals from their normal functional units and reallocates them to one or more projects. Each person therefore, now has functional and project responsibilities. One example is an IT specialist working on a project to ensure common standards are applied throughout all of the organisation's IT systems. The specialist might work normally for the IT section but, for part of the time, also be responsible for working with the standards manager to make sure that all systems are covered within the time available.

Projects operating across functional structures offer good flexibility in the use of people. Staff are primarily employed to perform a functional task but are temporarily assigned to projects that require their particular expertise. In addition, individual experts can be effectively used across a number of projects. If there is a broad base of expertise within a functional department, it can be employed on different projects with relative ease. The internal system also has the advantage that specialist knowledge can easily be built up and shared within the function. Continuity of expertise, procedures and administration is maintained within the function despite any personnel changes that may occur.

The main characteristics of the system are as follows:

A single designated person, namely the project manager, is responsible for managing the project organisation.

The project manager acts (to some extent) independently and outside the normal functional authority structure.

The project manager has equal authority to the functional managers over shared (project and functional) resources.

The project manager acts as a single leader and brings together the efforts of the various functional and project resources in order to achieve the project objectives.

Projects generally require a number of different functional specialists to work together. The work is therefore often carried out by a range of different functional specialists working as a multidisciplinary group under the leadership of the project manager.

The project manager is responsible for integrating this multidisciplinary group into a multidisciplinary project team.

The project manager has to negotiate with individual functional managers for the use of shared project-functional resources. Functional resources often remain under the direct control of the functional manager.

The project focuses on delivering the project objectives in relation to time, cost and quality. The functional managers have to concentrate on maintaining an ongoing pool of functional resources to support the primary goals of the organisation. As a result there is the potential for conflict between functional and project managers over shared resources. This arises particularly in terms of the quality of people that functional managers will release onto projects and the time for which they are required by the project.

A project may be subject to two lines of authority. A project individual may report directly to both the project manager and the relevant functional manager.

Decision making, accountability, rewards and potential benefits are shared among the members of the project team and the functional units.

The project structure is temporary and lasts only until the project is completed. The functional units are generally permanent. Project team members generally return to their respective functional units once the project is complete.



Projects can originate from any level within the organisation. The marketing department might initiate a product development project while the IT department might initiate a systems upgrade project.

Project structures generally require the assistance of the standard support functions such as human resources, finance and IT. They do not generally operate as entirely self con-tained sections.

Since projects involve the efforts of different units from within and outside the organisa-tion, reliance on the functional chain of command for authority and communication is inefficient and causes disruption and delay of work. To get the job done efficiently, manag-ers and workers in different units and at different levels need to associate directly with each other. Even in traditional organisations, the formal lines of authority are frequently bypassed by informal lines, which cut through the formal rules and procedures to expedite work more effectively.

In project organisations, the virtue of these informal lines is recognised and formalised through the creation of a horizontal hierarchy to augment the vertical hierarchy. This hybrid organisation enables people in different functional areas to be formed into highly integrated project teams.

Time Out _______________________________________________________ Think about it: using existing university functional specialisations to develop a new course in Marine Resource Project Management.

A university might have courses already running both in Marine Resource Management and in Project Management. University market researchers might find that there is significant demand for a new course that combines the two existing courses into Marine Resource Project Management. The existing departments of Project Management and Offshore Engineering could combine to develop the new course. The existing heads of department are functional managers, and the project team members will be specialist lecturers from these departments. The Project Manager is the new course leader for the course, reporting directly to senior university management, probably at faculty board level.

The staff costs would be charged to the project cost centre. Any time working for the functional departments would be charged to the functional cost centre.

Once in operation, the system would effectively operate as a batch production system.

Questions: What would be the obvious advantages and disadvantages of such an arrangement? What would be the potential dangers to the functional departments under such an

arrangement? How could these dangers be mitigated from an organisational viewpoint? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Given their temporary nature, an organisation working on projects must be flexible, so that it can alter structure and resources to meet the shifting requirements of different projects.



In the role of project manager, a single person is given project responsibility and is held accountable for project success. This emphasis on project goals versus functional goals is a major feature distinguishing project and functional management roles. Project managers often depend on people who report directly to other managers on an ongoing basis but are assigned to them as required. Thus the task of project management is more complicated and diverse than in other management areas.

1.2.3.2 External Project Management

External project management is where an external project manager is appointed on a consultancy basis and acts as an external agent on behalf of the client. The external project manager appoints other external consultants to form an external project team. The team then works under the control of the external project manager to deliver the project within the success criteria as defined by the client. This arrangement is shown in Figure 1.4.

The main characteristics of an external project management structure are the following:

The external project manager acts as an agent on behalf of the client. The consultancy contract is a form of agency agreement.

The external system is more flexible than the internal system. External consultants can be hired as required as a function of workload demand.

Instructions and communications between the external consultants and the client have to cross the organisational boundary. This boundary acts as an interface and represents a barrier to effective communication.

Team allegiance tends to be lower in external structures. The objectives of the external consultants do not correspond to the objectives of the client, and the external consult-ants owe no allegiance to the client organisation.

The external project manager has direct control over the project team. For this reason, external arrangements are sometimes referred to as external project management.

In an external structure, the functional structure of the organisation has no direct relevance to or impact on the project.

Because of the greater proportion of external organisations, there is a greater require-ment for risk transfer and contractual control in an external project management structure.

There is no in-built knowledge of the firm. This can sometimes be a disadvantage.



Figure 1.4 Typical external project management arrangement

Internal and external systems are considered in more detail in Module 4.

1.3 Characteristics of Project Management

1.3.1 Introduction

Modern project management has a number of characteristics that differentiate it from traditional management approaches. It is international in that there are standards that are set by an international agency. Project management has relevance and applicability across most industries. Project management is unique in that it uses both international and industry-specific benchmarks. It is also unique in that project management professionals provide advice in relation to the full life cycle of a project, from inception to completion.

Some important elements are examined under the headings of:

multiple objectives; international co-operation and standards;

External projectmanager

Externalconsultants

External suppliers External contractorsExternal

subcontractors

Resource Resource

Resource Resource

Interface manager

Functional team Functional team

Senior management

Functionalmanager

Functionalmanager



multi-industry/multi-disciplinary practitioners; generic benchmarks; specific provisions; project life cycles.

1.3.2 Multiple Objectives

Project management is concerned with several objectives at once. The objectives typically fall under the headings of time, cost and quality. Project management decisions that affect any one of these variables will usually impact on the others. Project success and failure criteria are usually set by the client or executives of the parent organisation at the outset. Some projects may have to be built as quickly as possible; some may have to be completed as cheaply as possible, or others to a particular minimum quality standard. In altering any one of these, the project manager will affect the other two. Project management decisions are therefore generally made under conditions of direct functionality.

The relative importance of each of the project success and failure criteria will determine the required levels of performance for each variable over the course of the project. This consideration can apply in both a tactical and in a strategic sense. For example the various cost and quality options can be generated for a company that manufactures TV sets. These options can be represented as a cost quality function. This function is usually known as a cost–quality curve because of the distinctive shape of diagrams that map quality–cost relation-ships. An example is shown in Figure 1.5.

Figure 1.5 Typical cost–quality curve

There may be several different options for cost and quality, such as manufacturing a TV set for £250 with a maximum of 3 per cent defects, at £400 with a maximum of 2 per cent defects, or £500 with a maximum of 1 per cent defects. The point on the curve where the manufacturer wishes to be, will depend on a number of factors, including:

market price of TVs; guarantees and warranties in place; cost of replacements; true cost of defective workmanship.

Manufacturing cost per unit

99%

98%

97%

£500£400£250

Defect-freerate



The company might choose to manufacture TV sets with a maximum of 3 per cent defects. This accepted level of defects may allow them to sell at a very competitive unit price. However, the sets might have a higher level of defects, and this characteristic can have a number of consequences. It may be possible to indemnify the purchaser by issuing a guarantee or warranty with each set. However, this procedure may have a high eventual cost because a large number of guarantees will be exercised. Additionally, there may be a high true cost in that the reputation of the company may suffer and future sales may be lost. Thus, the true cost may be far higher than the additional cost of reducing the level of defects during production.

Project management is concerned with ensuring that the chosen project-success criteria are met within the changing constraints of the three way time–cost–quality continuum. Project management recognises that there is more than one success criterion. There is no point in completing on time and on cost if the quality of the finished product is lower than specified by the client; for example, there is little point in building a house to cost and on time if it is so poorly built that it will fall down shortly afterwards. For each of the variables of time, cost and quality, there should be a minimum acceptable condition. Project Manage-ment is concerned with meeting these minimum criteria.

In most projects, there will be changes as the project progresses. This will impact on one or more of the variables, and trade-offs might need to be made between them. For example, if the quality criterion is increased, either the time required and/or the cost will change.

Time Out _______________________________________________________ Think about it: varying cost and quality for a new football grandstand.

A football club might decide to employ a contractor to build a new grandstand. The club might initially state that the stand must cost no more than £3 million, and commission designers and employ contractors on that basis. At this point, cost might be the most important success criterion.

Other events might then occur that change the relative importance of cost in relation to other project success criteria. There may be very bad weather conditions that delay the construction of the stand itself by three months. At some point the club might realise that the bad weather has caused such delays that it will no longer be able to open the stand by the start of the next football season.

This delayed opening could have significant effects, well beyond the immediate cost viability of the new stand. For example, a delay might result in the loss of ticket sales over the first five home games of the next season. This could amount to £1 million. Under these circumstances, it might be worth spending an extra £0.3 million to speed up the construction process in order to avoid losing the £1 million. In this case, capital cost was the initial success criterion. However, a change in a time-based variable subsequently promoted time to being the primary success criterion because of the linked effects of a time extension on other (environmental) variables. These environ-mental variables relate to the financial performance of the club as a whole. They are outside the project environment but nevertheless affect it directly.



Questions: In what type of projects might weather be a determining factor on whether or not

the project is completed on time? What other examples are there of wholly external factors that can determine

whether or not the project is completed on time, yet are wholly outside the control of the project manager?

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

1.3.3 International Co-operation and Standards

Project Management is international. As a profession, it is unique in that its codes of practice and body of knowledge are based on international rather than national practice. This approach is in contrast to most other types of professional service. The legal systems in any two countries are likely to be very different and it is unlikely that a lawyer who is qualified to practise in one country would be able to practise successfully in another country, even if the various legal governing bodies were to permit this. Similar restrictions apply in other professions, including banking and most forms of engineering.

Project management is different in that a global approach has been established and is governed by an international standards association. This international professional body is the International Project Management Association (IPMA). This body administers an international approach to project management and co-ordinates the activities of specific international professional associations, such as the Association for Project Management (APM) in the UK and the Project Management Institute (PMI) in the USA. The IPMA ensures that the codes of practice and bodies of knowledge of the various national project management associations adhere to one standard as closely as possible, allowing only for essential cultural and economic differences.

Specific country standards are therefore controlled, to some extent, by international standards that are set and regulated by the global body.

1.3.4 Multi-Industry/Multidisciplinary Practitioners

The concepts and practices of project management are not specific to any one industry. The time, cost and quality planning-and-control techniques used in project management are as applicable to agriculture as to process engineering.

In addition, a wide range of disciplines uses project management. The three largest mem-bership groups within the APM are information technology (IT) followed by process engineering and then construction. It is very unusual for any professional body to be made up of individual members from such a wide range of professional backgrounds.

1.3.5 Generic Benchmarks

Traditionally, there was no standardisation of practice for professional project management consultants. There have been the professional bodies and their codes of conduct, but there was never any real attempt to standardise how projects are set up and managed, what cost control systems should be used, and so on. This changed significantly during the last ten years of the 20th century. For example, British Standard BS6079 is the current UK standard for project management practice. It is generic and is applicable across all industries. ISO10006 is the European code of practice for project management of the design process. It is again generic and is applicable across all industries.



There are a number of industry-specific standards for project management practice. For example, PRINCE2 is an attempt at producing standardised project management practice within controlled environment industries and UK government. Sometimes large companies have combined to develop industry specific responses to the various generic standards. On other occasions, very large companies have developed company-specific responses. Examples would be the British Telecom and Construction Industry Council codes of practice. While these specific codes are less general than the generic codes, they are con-sistent with them.

1.3.6 Specific Provisions

Many organisations use fully trained project management professionals to run projects, rather than designers or others acting as managers. Project Management specialists provide combined time, cost and quality control, using national and international standards of professional practice.

Traditionally, project managers were selected from functional specialists within an organi-sation. The project manager could have been a specialist designer (as in the case of engineers or architects) or a specialist cost consultant (as in the case of accountants or surveyors). In many cases, the people leading and managing projects were designers or other types of specialist who assumed the role of manager for the duration of the project.

The modern concept of project management includes the professional project manager. Increasingly, this type of professional person is a specialist manager who is educated and trained in project management and who has relevant industrial experience in project management rather than in design or in some other specialisation. This transition has been matched by a worldwide proliferation of project management courses offered by universities, and in specialist short courses offered by specialist management-training and consultancy firms.

1.3.7 Project Life Cycle

Traditionally, consultants advised on, and managed, only one or two sections of an overall project life cycle. As a result, there was a lack of co-ordination between the different life cycle phases. This is important because decisions in earlier stages of the project life cycle impact on the choices available at later stages. For example, decisions taken in the design phases have a direct effect on decisions that can be made in the operational phase. Similarly, decisions on material choice affect choices on disposal in the decommissioning or recycling phases.

Another example is the choice of materials for items such as car bodies. Aluminium might be a lot more expensive than steel in terms of capital cost, but in terms of mainte-nance costs it could be far more cost-effective because it does not rust. Depending on the design and assembly of the other car components, the use of aluminium for the body might significantly extend the life span of the car.

In general, there are a number of recognised life cycle phases for projects. The project manager is responsible for giving clients advice that covers the complete life cycle. For example, the project manager should give professional advice on both capital costs and ongoing costs relating to any decision on choices of material. Traditional approaches have used consultants to give advice on design and/or manufacture only, with no significant consideration of longer-term cost implications. Project management as a discipline attempts to correct this by giving professional advice based on the whole picture.



Typical life cycle phases include the following:

Inception. In the inception phase, the client decides to develop a project. The inception phase could have been developed years earlier as part of the overall corporate strategic plan of the particular company concerned; alternatively, it could be a new requirement based on changes such as consumer demand or technology. In the inception phase, the client assembles a basic proposal for the work that is required.

Feasibility. In the feasibility stage, the project team seeks to establish the validity of the proposal from all relevant perspectives. These perspectives can be financial, time-dependent, technological and, in some cases, political. The feasibility phase may include extensive market research, in order to evaluate likely consumer or market demand for the end product and/or service. The end result of the feasibility phase is a statement of the viability of the proposal in relation to the variables that have been evaluated.

Prototype. In some industries, it is common to develop some kind of prototype that can be fully tested and evaluated prior to full production. The prototype could be tested and refined for significant periods of time before the final design is put into full production. An obvious example would be the design of a new aeroplane, where significant and lengthy prototype evaluation is often necessary before the design can be converted into full production.

Full design development. Once a prototype (if appropriate) has been adjusted and all feedback has been put back into the design system, full production design can com-mence. In most cases, this involves developing detailed production information. This typically involves the preparation of full production drawings that show all aspects of the design, together with a full specification that defines the required standards of manufac-ture and assembly for each component.

Tendering and contractual arrangements. Some organisations manufacture all aspects in house. More commonly, manufacturers have their own production facilities but buy in a lot of manufactured components from external suppliers. An example of this would be Ford cars. Ford employs its own designers and assemblers and puts the cars together on its own production lines, but a significant proportion of the compo-nents are bought directly from external suppliers. Other organisations award the whole manufacturing process to external companies and organise things through external con-sultants. A typical example of this would be the award of a contract for the manufacture of a new ship for the British Royal Navy. The Navy would award a contract to an exter-nal naval architect to design it, and another to an external shipbuilder to build it. External works are usually secured through some kind of competitive tender. A tender is a price given by a contractor in return for doing a piece of work that is clearly detailed and de-scribed. The tendering process is usually competitive in that several contractors are invited to submit competitive and confidential tenders for the same piece of work. Gen-erally, the lowest-priced tender that meets the specification wins the contract.

Manufacturing. The product is assembled during the manufacturing process. This phase could, for instance, be a single one-off process for a building, or a repetitive pro-cess for manufactured components.



Commissioning. The commissioning phase involves all aspects of switching the system on. This act may be simple in some systems, and far more complex in others. It may take several months to commission a new submarine fully. This may involve weeks of power trials while the boat is in dock, followed by extensive surface and dive trials. Each stage may involve many manoeuvres and simulations, followed by numerous calculations and adjustments. The submarine would only be accepted by the Navy once the contractor has completed all the required commissioning trials.

Operation. In the operational phase the system is actively used for the purpose for which it was originally intended. For some systems, this could be the longest part of the project life cycle, while for other systems this may not be the case. Examples of systems with a long operational life span would be new buildings. These may be designed with an operational life span of sixty years or more. At the other extreme, the Saturn V moon rockets were developed as one-shot systems; even though the design and construction process took years, the whole rocket and capsule was only used once and the operational life span was only a few days.

Decommissioning. Decommissioning is the process by which a system is switched off. Again, this act can be simple in some cases and much more complex in others. An old car can be decommissioned at once simply by switching off the engine and leaving it with a recycler. Other systems, such as those that involve toxic processes or nuclear contamination, cannot simply be switched off. The very process of switching off might involve the long-term removal of fuel rods and maintenance of cooling systems for a considerable period of time. Even after the reactor is turned off, it is still radioactive; decommissioning the reactor and all the other contaminated systems may take many decades with current technology.

Removal and recycling. The last phase is removal, and recycling. Legislation in many countries is becoming increasingly onerous in relation to the environmental impact of recycling. In future, legislation and environmental concerns will cause more and more products and systems to be designed for ease and completeness of recycling. Ever larger numbers of manufactured goods are being assembled with recycling and reclamation in mind. Increasingly, packaging is being manufactured from recycled materials and/or other materials that can be recycled.

Project management is concerned with advice on the above phases so that the client can make informed decisions during design and manufacture on matters that may incur a cost penalty in future. There seems little doubt that some of the older UK nuclear power plants would not have been designed as they were if full consideration of eventual decommission-ing and recovery had taken place.

1.4 Potential Benefits and Challenges of Project Management

1.4.1 Introduction

Project management is a relatively new approach to managing projects. It is international, interdisciplinary and concerned with the whole life cycle of a project. It uses a trained management specialist to organise the time, cost and quality objectives of a project and to ensure that they are achieved. This section considers specific advantages and disadvantages associated with the project management approach.



1.4.2 Potential Benefits of Project Management

Many benefits have been claimed by organisations employing project management practices. These include:

increased concentration on a specific objective; more efficient use of company resources; increased accountability; potential for healthy competition between functional and project units; reduced disruption of functional operations; enhanced visibility of strategy implementation; consideration of life-cycle costs; increased product development and release speed; improved formal and informal communications; control of simultaneous multiple objectives; improved security of project related information; improved team spirit and cohesion; improved innovation through the use of multidisciplinary decision making; opportunities to develop in-house interdisciplinary and multidisciplinary teams, individu-

al and management skills.

1.4.3 Potential Challenges to Project Management

Organisations that are regularly involved in projects face some major challenges in relation to their people. Some of these are listed below.

Key staff may be taken from the functional units. This may have a corresponding detrimental effect on functional performance.

Project and functional managers may attempt to compete for resources and this can have detrimental effects on the company as a whole.

Project team members may find themselves receiving conflicting orders from their functional and project managers.

Powerful functional manager may be able to use their authority to deprive the project of necessary resources.

In order to ensure parity of authority and control between functional and project managers, a need arises for an additional level of authority. The project sponsor ensures that the functional and project managers have equal authority over project team re-sources and that no destructive competition occurs.

Functional managers may be less flexible than project managers and may feel pressurised as a result of project demands.

Staff need to develop a different attitude. They have to develop a more flexible approach and become used to working in a multifunctional environment.

Project staff who have been working on a project for a long period of time may have problems in re-adjusting to functional working.



1.5 The History of Project Management No one individual or industry is responsible for the concept of project management. Often it is attributed to the early space programmes of the 1960s, but its origins go back much further. Elements of project management probably first came to light in the great construction works of history, such as the Pyramids, the Great Wall of China and the Roman roads and aqueducts. These techniques have been improved and developed over time. What is common to all construction works through history is that they all require special organisations, workforces, facilities and resources for the single purpose of completing the job or the project.

Over the centuries, professionals generally bonded together to form groups and associa-tions. This has traditionally been for the benefit and development of their profession or trade. In Europe, this tendency was characterised by the formation of associations called guilds and leagues in medieval times, leading up to the livery companies and other institu-tions in the nineteenth century. In all cases, the underlying motivation was that of protecting financial interests, although a by-product was the establishment of rules and standards for practice, qualifications and membership.

The industrial revolution changed the requirements of industry. There was a switch away from a need for craftsmen towards a need for supervisors who could manage both the people and the new technologies. The old medieval institutions responded by establishing standards for their members conveying education, knowledge and competence. Governments and educational establishments also responded to this, so that formalised educational qualifications and standards began to appear. Later, the institutions and educational bodies began working more closely together in order to improve the relevance of the educational qualifications.

What we call ‘traditional’ management practices evolved during the Industrial Revolution and beyond. They were found to work well for standard products in batch or mass produc-tion, but were less efficient in managing the production of non-standard products. In the early 1900s, manufacturing managers could see that some of the tools and techniques effectively used in the construction industry could be adapted to suit the planning and controlling demands of manufacturing industries, particularly in large-scale, product-development activities. At about the same time, planning techniques were developing and during the early 1900s the Gantt chart was introduced. Around 1950, the first network diagrams for industrial processes were introduced. These are two of the most widely used tools of project management today.

Project management in its current form emanated from the atomic bomb development programme by the US military at Los Alamos, in the 1940s. This was the first really complex, high-technology project operated by mankind. The level of complexity and large number of activities involved created the requirement for new management and control practices if the project was to be completed on time and to the required standard.

By the mid-1950s, the size and complexity of many projects had increased so much that the well developed techniques of the first half of the twentieth century were unable to cope. The US defence industry was finding it difficult to control the cost and time schedules of its large-scale weapons systems projects: some very large cost and time overruns occurred. To address these problems two new network-based systems were developed almost simultane-ously, by the US Navy and the DuPont Corporation. In 1957, DuPont created the critical path method (CPM), and in 1958 the US Navy launched the program evaluation and review technique (PERT). Both methods originated exclusively for planning, scheduling and controlling large projects with numerous interrelated work activities. About ten years later, both methods



were combined with computer simulation techniques into a method called graphical evaluation and review technique (GERT) to allow a more realistic analysis of schedules.

By the mid 1960s, developments in computer technology provided improved capabilities for storing the vast amount of information generated on large projects. Network methods were improved to integrate project costing and project scheduling. These techniques became more widely used in the late 1960s when the federal government in the USA mandated the use of network scheduling/costing methods, first with the US Department of Defense and NASA contracts, then later with other large-scale projects such as nuclear power plants.

The discipline of project management thrived in this environment and the Project Man-agement Institute in the US and the Association for Project Management (APM) in the UK were formally instituted in the late 1960s. Throughout the 1960s, additional methods were developed to help project managers. Some enabled managers to specify the type and quantity of resources needed for each activity, and to plan for and allocate resources across a number of projects simultaneously. Although the concept had been around for a while, it was not until the 1970s that planning and costing based on an ‘earned value’ concept came into widespread use. This concept led to performance measurement systems that kept track not only of funds spent but also related these expenditures to the value of the work that was completed. This led to much more reliable forecasting of what a project would cost at completion and when it would be completed.

The APM produced its Body of Knowledge in 1988, and assisted greatly in the preparation of British Standard BS6079 in 1996 and European International Standard ISO10006 in 1997. These documents are British and European standards for project management practice and in many ways mark the frontiers of the development of the discipline as a profession today.

Prior to the 1980s, project planning and tracking systems were available only for large mainframe computers. Most of the systems were very expensive. The cost and organisation needed to operate the systems restricted their usage to only the largest projects. This changed in the 1980s with the advent of the relatively inexpensive microcomputer. Today, a wide variety of high-quality project management software programmes is readily available. Low-cost software has made it possible to apply sophisticated planning, scheduling, cost analysis, resource planning and performance analysis to projects of all sizes.

1.6 Project Management Today Project management is now used by numerous different disciplines and has evolved into an integral management component for a wide range of industries. Increasingly, large organisa-tions are setting up their own project management development sections. This has been accompanied by a proliferation of professional project management consultancies. In many sectors, especially construction, the relative growth in the design professions such as architecture and structural engineering has been relatively static, while the popularity of construction project management has soared.

Project management has evolved into a global generic profession. Provided that the correct international standards are observed, project managers all over the world speak the same project ‘language’. There is no reason why a project manager in charge of a forestry project in France should not be able to look at the contract documentation and project records of a UK construction project and be able to understand 90 per cent of the infor-mation that is presented there.



Project management techniques today allow previously unheard-of opportunities for evaluation and comparison. For example, the use of a Strategic Project Plan (SPP) allows accurate and standard recording and reporting of all aspects of a project's development. This practice of standardisation includes design, execution, implementation and use. This standardisation allows comparisons to be made that would not previously have been possible. For example, a good SPP allows immediate and direct comparison of the perfor-mance of design consultants. SPPs are increasingly being used as an assessment technique to assist in deciding which project management consultancy to employ.

Project management as a profession is proving very successful. The UK and US profes-sional bodies for project management are growing faster than any other comparable professional bodies in either country. Some of the more traditional professional bodies are recognising the impact of project management and are setting up their own divisions to offer specialisations in the subject. Hence we have the Royal Institute of Chartered Surveyors (RICS), which is concerned with training and standards for the professional surveyor, establishing a project management specialisation within one of its professional divisions. In doing so, the RICS has accepted that project management as a profession is infringing on the activities of its members to such an extent that the threat has to be addressed. The RICS has chosen to do this by setting up its own surveyors’ version of project management. A number of other professional bodies have done something similar.

Learning Summary

What is a Project?

Along with mass production and batch production, a project is one type of standard production system.

Projects are characterised by having one-off and unique objectives and characteristics.

What is Project Management?

Project management involves devising, managing and controlling the process required to achieve safe completion of a project on time, within cost and to the required standards of quality.

Traditional planning and control techniques consider time, cost and quality planning and control, but project management seeks to consider and evaluate each one concurrently.

Generally, as industry has evolved, it has become more complex. This has resulted in more and more complex projects, which created a need for more effective ways to man-age them.

The project manager's role has evolved to be able to view a project's time, cost and quality variables within the context of the whole operating system.

In most cases, the objective of the project team is to meet the success criteria for the project and then to disband. Few other aspects of enterprises have such requirements.

Project management operates largely within existing organisations. Projects operating within functional structures offer good flexibility in the use of people.

Staff are primarily employed to perform a functional task, but are temporarily assigned to a project that requires their particular expertise.



In addition, individual experts can be used effectively on a number of projects. If there is a broad base of expertise within a functional department, it can be employed on different projects with relative ease.

The ‘within function’ structure also has the advantage that specialist knowledge can be easily shared within the function and utilised effectively by the project team. Continuity of expertise, procedures and administration is maintained within the function, despite any personnel changes that might occur.

The project manager heads the project organisation and operates independently of the normal chain of command.

The project manager is the single focal point for bringing together all efforts in pursuit of the project objectives.

The project manager is responsible for integrating people from different functional disciplines who are working on the project.

The project manager negotiates directly with functional managers for support. Function-al managers usually remain responsible for individual work tasks and personnel within the project, while the project manager is responsible for integrating and overseeing the start and completion of activities.

The project focuses on delivering a particular product or service at a certain time and cost, and to a particular quality standard. In contrast, functional units must maintain an ongoing pool of resources to support their organisation's goals. As a result, conflict may occur between functional and project interests.

Decision making, accountability, outcomes and rewards are shared among members of the project team and the functional units.

Though the project organisation is temporary, the functional units from which it is formed may be permanent. When a project ends, the project organisation is disbanded and people return to their functional units or are assigned to new projects.

Projects can originate at different places in the organisation. Product development and related projects tend to originate from marketing, whereas technology applications origi-nate in research and development, and so on.

Project management sets into motion numerous other support functions, such as personnel evaluation, accounting, and information systems.

Given the temporary nature of a project, an organisation working on projects must be flexible so that it can alter structure and resources to meet the shifting requirements of different projects.

In a project system, the product is a one-off non-repetitive element. As a result of this, there is no learning curve and high levels of complex management planning and control are required.

The concept of project management has evolved in order to plan, co-ordinate and control the many complex and often diverse activities involved in modern-day commercial projects.

Project management is principally the general management of an organisation within an organisation. Good project management requires the effective application of all the general manager's skills to achieve the projects goals.

Project management employs the whole range of functional management areas, and skills are often required in each of these areas in order to secure project success.



Project teams are set up to undertake projects of every type. They may deal with single projects where all resources are dedicated to achieving the objective of that project, or they may be responsible for multiple projects where the resources have to be managed across projects.

Projects can be external where they are carried out for a client outside the organisation. These are normally defined by a binding contract and are usually a main revenue source for the organisation.

Projects can be internal where they are generally set up to improve the operations of the organisation and the client would be an internal client.

Characteristics of Project Management

Project management is unique in that it uses both international and specific industry benchmarks.

Project management is also unique in that it represents an entirely new profession that gives professional advice in relation to the full life cycle of a project, from inception to completion.

Project management assumes responsibility for optimising time, cost and quality performance for a project. Under the project management philosophy, it is not accepta-ble to consider any of these variables in isolation, because each of them has a bearing on the eventual performance of the others.

Project management is concerned with ensuring that the project success criteria are met. However, project management recognises that there is more than one success criterion. There is no point in completing on time and on cost if the quality of the finished product is lower than specified by the client.

For each of the variables of time, cost and quality, there should be a minimum acceptable condition. Project management is concerned with meeting or exceeding these minimum criteria in all cases.

Project management often involves using fully trained project management professionals to run projects, rather than designers or others acting as managers.

The modern concept of project management includes the evolution of the professional project manager.

Potential Benefits and Challenges of Project Management

Some of the obvious benefits of using a project management approach are that it makes more efficient use of company resources, it offers reduced disruption of routine opera-tional activities, and it offers greater motivation potential for people working in projects.

Project management also offers greater visibility of strategies and concepts within the organisation as a whole, the promotion of healthy competition between organisation projects, and full life cycle cost consideration at each stage.

Project management can provide clearer management, individual accountability and responsibility, a shorter time from development to market, clearer control of expendi-ture, and better use of resources.

Project management can also provide clearer communication on progress and input to strategic plans, improved control and security of classified and sensitive information, and improved team building and team spirit.



There are also challenges to using project management as an approach. In order for a project management system to work, key staff are taken from functional units for a pro-portion of their time. If not properly controlled, this could damage the performance of the functional unit.

Projects will inevitably compete, at least to some extent, for limited and finite organisa-tional resources.

Functional managers tend to be less visible and flexible than project managers. Increased staff flexibility is also required. Staff have to be re-deployed when the project

terminates. There may be problems with this if the functional staff have been working on the project to a large extent, and/or for a significant amount of time.

The History of Project Management

Modern project management has evolved from the basic principles established during the development of the Los Alamos project in the USA in 1944. The atomic bomb pro-ject was the first really complex, high-technology project operated by mankind, and the need for a new management approach was identified.

By the mid-1950s, the size and complexity of many projects had increased to such an extent that the well-developed management techniques of the first half of the twentieth century were unable to cope. The US defence industry was finding it difficult to control the costs and time schedules of its large-scale weapons systems projects, and some very large cost and time overruns occurred. The solution was to further develop the Los Alamos principles into what we now call project management.

The discipline was developed and led to the formation of the Project Management Institute in the USA and the Association for Project Management (APM) in the UK in the 1960s.

Throughout the 1960s, additional methods emerged to help project managers; but the next real milestone was the development of cheap and reliable computers in the early 1980s.

The APM produced its Body of Knowledge in 1988, and assisted greatly in the preparation of BS6079 in 1996 and ISO10006 in 1997. These reference works document British and European standards for project management practice and in many ways mark the fron-tiers of the development of the discipline as a profession today.

Project Management Today

Project management is now used by numerous different disciplines, and has evolved into an integral management component for a wide range of industries.

Project managers are increasingly being accepted as fundamental contributors to the operational process.

Project management today has evolved into an internationally important discipline. As a profession, it is growing rapidly in many countries.



Review Questions

True/False Questions

These questions are designed to allow you to evaluate your general understanding of the subjectareas quickly. You should attempt these questions as quickly as possible.

What is a Project?

1.1 All types of production systems involve projects. T or F?

1.2 Mass production systems comprise a series of individual projects. T or F?

1.3 A mass production system manager generally has more or less the same role and responsibilities as a project manager. T or F?

1.4 Project products tend to be largely repetitive and complex. T or F?

1.5 Knowledge transfer between projects is similar to knowledge transfer between batches. T or F?

1.6 A project generally has a single definable purpose, product or result. T or F?

1.7 A project is generally a temporary activity, concerned with the achievement of a specific goal. T or F?

1.8 Projects can exist both internally and externally to the parent organisation. T or F?


1.9 Project management is not concerned with the entire life cycle of the project. T or F?

1.10 Project management is concerned with multiple objectives. T or F?

1.11 The success of most projects can be evaluated in terms of time, cost and quality. T or F?

1.12 Project management has evolved primarily as a result of the increasing complexity of projects. T or F?

1.13 Project success and failure criteria are fixed at the outset of a project and cannot be changed once the project has started. T or F?

1.14 Project management and functional management are mutually exclusive and cannot exist in parallel within an organisation. T or F?



1.15 Research and development work would typically be best suited to a functional organisational structure. T or F?

1.16 Highly rigid functional organisations, such as the armed forces, cannot make effective use of internal project structures. T or F?

1.17 Project managers tend to have more power and status than functional managers. T or F?

1.18 Project managers tend to be selected from within the ranks of the organisation's functional managers. T or F?

1.19 Successful project managers always make the best functional managers. T or F?

1.20 External project management is more cost-effective than internal project management. T or F?

1.21 Changing success criteria can be managed using trade-off analysis. T or F?

1.22 The IPMA is the international steering body for global project management practice. T or F?

1.23 BS6079 is an EU standard for project management practice. T or F?

1.24 Life cycle phases vary in importance as a function of project type. T or F?


1.25 Project management as a discipline originated during the Roman road building programmes in the first century AD. T or F?

1.26 PERT and CPM methods of project planning and control first appeared as operational tools in the 1940s. T or F?


1.27 Project management is proliferating through a range of professional disciplines. T or F?

1.28 Project management is a tool for strategy implementation. T or F?



Multiple Choice Questions

These questions are designed to allow you to evaluate your knowledge and understanding of the subject areas in more detail. You should again go through the questions and try to answer them asquickly as possible.

What is a Project?

1.29 Which of the following is correct? Most projects have clear success criteria expressed in terms of A. time and cost. B. quality and cost. C. time and quality. D. time, cost and quality.

1.30 Which of the following is correct? A typical example of a mass production system is the manufacture of A. an office building. B. an automobile. C. office carpets. D. All three.

1.31 Which of the following is correct? A typical example of a batch production system is the manufacture of A. an office building. B. an automobile. C. office carpets. D. All three.

1.32 Which of the following is correct? A typical example of a project production system is the manufacture of A. an office building. B. an automobile. C. office carpets. D. All three.

1.33 Which of the following is correct? Internal project management systems typically involve projects running within A. other projects. B. matrix groupings. C. functional groups. D. All three.

1.34 Which of the following is correct? External project management systems typically involve A. only Internal team members. B. only external team members. C. both. D. neither.




1.35 Which of the following is correct? Project management involves the simultaneous control of time, cost and quality. Other obvious control criteria could be A. company strategy. B. dividend levels. C. human resources. D. safety.

1.36 Which of the following is correct? In general terms, project and functional objectives are likely to be A. wholly compatible. B. generally compatible. C. generally incompatible. D. wholly incompatible.

1.37 Which of the following is correct? In corporate terms, the success of the project in relation to the success of the function is likely to be A. more important. B. less important. C. equally important. D. variable.

1.38 Which of the following is correct? The global body for project management practice is A. APM. B. PMI. C. IPMA. D. BS6079.

1.39 What does BS6079 acts as? A. A global standard. B. A European standard. C. A British standard. D. Other.


1.40 Which of the following is correct? Project management evolved largely in response to increasing A. project complexity. B. project costs. C. project time scales. D. project team development.

1.41 Which of the following is correct? Project management evolved initially and primarily in A. the UK. B. the USA. C. Germany. D. Japan.




1.42 Which of the following is correct? Project management as a profession is A. in decline. B. static. C. growing slightly. D. growing rapidly.

mba module1

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