Impact of organizational structures in managing a project

The availability of resources is a critical factor in project management, as it determines the conduct of a project and non-availability is a constraint which is difficult to overcome. Another factor as stated by PMBOK (2008), is the ability for the organization to influence the conduct of a project, therefore to mitigate the risk of facing the above constraints, its is vital to identify the organizational structures.

Madura (2007), depicts that an organizational structure identifies responsibilities for each job role and the relationship among the positions and describes how each responsibility fit together to have a positive impact  on the efficiency of an organization.  

Structures adopted and implemented by organizations, differ from each other due to the following factors;

• Span of Control
• Organizational Height
• Use of line versus staff positions

The different types of organizational structures identified by PMBOK (2008) are as follows.

Table 1 : Organizational Structure

The organizational structures and the influences on the projects are as follows;

Figure 20 : Organizational structure influences on projects (Source: PMBOK 2008)

References

Madura, J., 2007. Introduction to Business. Canada: Thomson South-western.

PMBOK, 2008. A Guide to the Project Management Body of Knowledge. 4th ed. Newtown Square: Project Management Institute, Inc

Important Project Documents

Project Charter

Project charter as depicted in PMBOK (2008), is a document issued by the project initiator or sponsor that formally authorizes the existence of a project, and provides the project manager with the authority to apply organizational resources to project activities.

However, in certain case, the project manager is involved in developing the project charter, this is when the project roles are applied before the initiation of the project. In this case, the development of the project charter falls in to the area of Project Integration Management.

Phases of Project Initiation 

Figure 18 : Phases of Project Initiation

For the initiation the project, the idea of the project, strategies, plans, feasibility studies are inputs and the outputs would be goal statement, terms of reference and deliverable list. and at the end of the four phases, the project charter is developed.

As stated by Schwalbe (2006), project charter is a short document which formally recognizes the existence of a project and it provides a summary of project's objectives and  management. The contents of the project charter depend on the type and the nature of the project.

A typical project charter, as listed by Schwalbe (2006), is as follows;

• Project Title 
• Project Start and End Date
• The key Objectives
• Scope Statement
• Deliverable
• Roles and responsibilities
• Completion criteria
• Approach
• Risks and Benefits
• Assumptions and Limitations
• Dependencies

A template of a sample project charter is as below;

Figure 18 : Project Charter Template (  Source : http://www.swiftlightsoftware.com/project-charter/project-charter.html )

Project Scope Statement

The project scope document, states what is to be accomplished and what is the deliverable of the project. As stated by Schwalbe (2006) good scope definition is critical to the success of a project as it helps to improve the accuracy of time, cost and resource estimates, and defines a baseline for performance measurement and project control.

A scope document contains details such as the product characteristics and requirements, summarizes the deliverables, and describes project success criteria.

Any uncontrolled changes or continuous growth in a project scope is referred to as the "project creep" and giving customer something that was not asked for, something that was not in the scope and often something that the customer may not really need is referred to as " Gold-Plating". This is often happened in software development and even though the customer can be delighted, gold-plating would consume time and cost which should have been saved for the requirements of the project which are within the scope.

Work Breakdown Structure

The WBS, is created within the Project Scope Management knowledge area. Haugan (2002), states that WBS is an outline of the work, where the work is the sum of many activities that make up a project. It is further elaborated that WBS can be developed in a four-step process as listed below;

1. Specifying the project objectives and focusing on the products, services or results to be provided to the customer.
2. Identifying specifically the products, services or results (deliverables or end items) to be provided to the customer.
3. Identifying the work areas in the project to make sure that 100% of the work is covered to identify areas that cut across the deliverables, represent intermediate outputs or complement the deliverables.
4. Subdividing each of the items in step 2 and 3 into successive, logical sub categories until the complexity and money value of elements.

As explained the configuration and the content of the WBS and  the specific work packages vary from one project to another depending on the size and complexity of the project, on the organizational structure, phase of the project, degree  of uncertainty and risk involved and the time available for planning.

Two approaches that can be adopted in developing a WBS are;

1. Top down Approach (High-Level WBS) - The development of the WBS would be faster as the project manager understands the tasks, breaks it in to manageable components and assign resources based on his understanding. Even though this is fast, it is not accurate, as the Project manager can either refer to past data or can assume in assigning. The easiest way to identify this approach is the breakdown on work is written as "nouns"
2. Bottom up Approach (Low-Level WBS) - The WBS is developed by the project team where every member's ideas are taken in. The process of the development is time consuming however results in an accurate outcome at the end. Unlike the top down approach, this approach describes the tasks using "verbs".

Some of the tools and techniques that can be used in developing a WBS are;

• Mind mapping (decomposition of the work in to work packages or deliverables or activities and assigning  resources to them.)

The project can be broken down in to manageable components, when the components reach its level where it cannot be further broke down, the component becomes a "work Package" or an "activity", this is where the resource allocation is done for. Below diagram illustrates a decomposed diagram for a project.

Figure 19 : Decomposed Diagram of a Project

The rules to remember in decomposing a project would be;

1. Eliminate element sharing
2. 100% coverage of work
3. Mutually Exclusive
4. Work should clearly define the scope through the WBS dictionary

• Brain Storming
• SCAMPER - The tool that is for brain storming, ID generation. SCAMPER is a mnemonic that stands for Substitute, Combine, Adapt, Modify, Put to another use, Eliminate and Reverse.

References 

Haugan, G.T., 2002. Effective Work Breakdown Structures. Management Concepts Inc.

PMBOK, 2008. A Guide to the Project Management Body of Knowledge. 4th ed. Newtown Square: Project Management Institute, Inc

Schwalbe, K., 2006. Introduction to Project Management. Bob Woodbury.

9 Knowledge Areas in Brief

A brief description on the 9 knowledge areas which is adopted from the PMBOK(2008), are depicted below.

Project Integration Management

Project integration management includes the processes, activities needed to identify, define,  combine, unify and coordinate the various process management activities within the project management process groups.

 PMBOK (2008)

The knowledge area emphasis on in making choices about resource allocation, competing objectives and alternatives. The need for this knowledge area arises when the isolated individual areas needs to combine to gain an output or to reach a decision.  An overview of project integration management can be mapped as below.

Figure 08 : Project Integration Management Overview

Project Scope Management

Project Scope Management includes the process required to ensure that the project includes all work required, and only the work required, to complete the project successfully

  PMBOK (2008)

The primary concern of scope management is is to define and control what should be included in to and what should be excluded from the project. An overview of the project scope management is as follows;

Figure 09 : Project Scope Management Overview

Project Time Management

Project time management includes the processes required to manage timely completion of the project.

  PMBOK (2008)

Project time management plays a major role in determining the project success. The scope defined is broken down in to manageable components as work packages or activities whereby the time required per each activity and the flow of activity progress can be analyzed. Depending on the activity type and its scope the time can be managed using several tools and techniques such as the Gantt chart and pert chart. The time management is critical as the time that exceeds can lead to an increase in cost, where by the triple constraint would fail to manage, results the failure in the project. An overview of the project time management is as follows;

Figure 10 : Project Time Management Overview

Project Cost Management

Project cost Management includes the processes involved in estimating, budgeting, and controlling costs so that the project can be completed within the approved budget

 PMBOK(2008)

 

This area is also as equally important as the failure to finish a project within the budgeted cost, would result in project failure. The cost of a project can be estimated through parametric modeling or non-parametric modeling using tools and techniques such Historical Cost, expert Judgment or PERT. Financial statements such as cash flow statements, accounting reports and budgets are prepared at this knowledge area. An overview of project cost management is as below;

Figure 11 : Project Cost Management Overview

Project Quality Management

Project Quality Management includes the processes and activities of the performing organization that determine quality policies, objectives, and responsibilities so that the project will satisfy the needs for which it was undertaken.

 PMBOK(2008)

Another critical factor in determining the success of a project is quality management. It addresses the management of the projects as well as the product/outcome of the project.  The quality is the degree to which a set of inherent characteristics fulfill requirements.  The areas is to be mainly focused upon customer satisfaction, prevention over inspection, continuous improvement, and management responsibility. The overview of project quality management is mapped below;

Figure 12 : Project Quality Management Overview

Project Human Resource Management

Project Human Resource Management includes the processes that organize, manage, and lead the project team

PMBOK (2008)

A project team comprises of people assigned to different roles and responsibilities. Managing the human resources in a way that the workforce is utilized to its maximum and in a proper manner is the main functionality of human resource management. This management includes aspects of influencing the project team and ensuring professional and ethical behavioral in addition, organizational planning, staff acquisition, team development and handling conflicts also falls within the area of management.

The role a project manager can plan in managing the human resources are illustrated by the diagram below, where depending on the importance of the activity or the person, the role differs.

Figure 13 : PM Roles in Handling HR

In the above diagram, the roles played by the project manager depend on the factors listed below;

• Team Composition - Knowledge, experience and qualifications of team members
• Risk involved in tasks - Low, Moderate, High
• Dependency of tasks for project success -  Low, Moderate, High

The overview of project human resource management is mapped below;

Figure 14 : Project Human Resource Management Overview

Project Communications Management

Project Communications Management includes the processes required to ensure timely and appropriate generation, collection, distribution, storage, retrieval, and ultimate disposition of project information.

PMBOK (2008)

A project with ineffective communication would not be a success as communication is the key to carry out an activity or a task. Communication is involved before the project begins as it is important in identifying stakeholder requirements, interpreting the work to the team. As mentioned, effective communication builds a bridge between diverse stakeholders involved in a project. The overview of project communications management is illustrated below;

Figure 15 : Project Communications Management Overview

Project Risk Management

Project Risk Management includes the processes of conducting risk management planning, identification,analysis, response planning, and monitoring and control on a project.

 PMBOK (2008)

As stated, the main objective of managing the risks of a project is to increase the probability and impact of positive events and decrease the probability and impact of negative events. Project risk is always an assessment of the future which is uncertain however can effect in an unexpected manner. The better the analysis of risk, the better the management of the project would be.

The overview of project risk management is shown in the below diagram.

Figure 16 :  Project Risk Management Overview

Project Procurement Management

Project Procurement Management includes the processes necessary to purchase or acquire products,services, or results needed from outside the project team.

PMBOK(2008)

Procurement involves in purchasing and in contract management and change control processes required to develop and administrator contracts and change control processes and in administrating contractual obligations placed on the project by the project team by the contact.

The overview of Project Risk Management is as below;

Figure 17 : Project Procurement Management Overview

   

Reference

PMBOK, 2008. A Guide to the Project Management Body of Knowledge. 4th ed. Newtown Square: Project Management Institute, Inc

Project Management and its 9 Knowledge Areas

Project Management

In order to carryout a project to reach its goal or the required outcome, the project should be managed in a proper manner where the triple constraint, the scope/ Quality, time and cost is met and not exceeded.

In reality, the plan of a project is usually a straight line, however the real project progress would not be straight, at some points the project progress would under achieve or over achieve. What is important is to reach the goal at the end meeting the time, cost and the scope/quality.

Figure 06 : Planned Vs Actual Project Progress

The number of activities done within a particular period of time, is referred to as "Progressive Elaboration"

The concept that can be adopted in being inline with the triple constraint is the use of project management.

Project Management is the application of knowledge, skills, tools and techniques to project activities to meet the project requirements. 

PMBOK (2008)

Project management concept differs from other management concepts due to its focu on a finite project, where as other management focus on ongoing operations and project managment uses adhoc resources in meeting its goal.

As stated in PMBOK (2008), managing a project includes identifying requirements, addressing to stakeholder requirements and balancing the project competing requirements.

 It is further elaborated that project management is accomplished through the appropriate application and integration of logically grouped management processes, comprising the five process groups.

• Initiating
• Planning
• Executing
• Monitoring and control
• Closing

The time line and activity level of the process phases are shown below.

Figure 07 : IPECC  Phase Diagram

 9 Knowledge Areas

As described in PMBOK (2008), project management can be of 42 management processes which can be mapped in to 5 process groups and 9 knowledge areas. The 9 knowledge areas describes the key competencies.

• Four core knowledge areas lead to specific project objectives. (Scope, Time, Cost, Quality)
• Four Facilitating knowledge areas in which through the means project objectives can be achieved (Human Resources, Communication, Risk, Procurement)
• One knowledge areas which integrates all (Integration)

The 9 knowledge areas are as below;

1. Project Integration Management
2. Project Scope Management
3. Project Time Management
4. Project Cost Management
5. Project Quality Management
6. Project Human Resource Management
7. Project Communications Management
8. Project Risk Management
9. Project Procurement Management

Each of these knowledge areas will be further described.

Reference

PMBOK, 2008. A Guide to the Project Management Body of Knowledge. 4th ed. Newtown Square: Project Management Institute, Inc

Project Investment Appraisal

Before walking towards the concept of project management, It is vital to first choose a project which is viable to be carried out. The importance of analyzing the viability is due to the large sums of investments made by companies and through sponsorship for the initiation and implementation of a project.

A project that would result in a less cash flow generation or that would take unacceptable time periods to return the investments are not viable to be initiated as the cost incurred maoy not be worth it in comparison with time value of money or if it may not be recovered in a profitable manner.

To mitigate the risk of the loss of investment, various financial calculations and techniques are introduced. Calculations done to check the viability of the projects is usually called as "Project Option Analysis" and is commonly known as "Investment Appraisal"

The techniques used to appraise investments are as follows ;

•  Discounted cash flows (DCF) 
•  Return on capital employed (ROCE)
•  Cash Flow Return on Investment (CFROI)
•  Adjusted Present Value (APV) 
•  Economic Value Added (EVA)
•  Internal Rate return (IRR)
•  Payback period
•  Net present Value (NPV)
•  Accounting rate of return (ARR)
•  Decision Tree Analysis (DTS)
• Present Value Factor (PV)

 Each of these technique has its own advantages and disadvantages. 

According to rdi.usa.com (2012), the four most commonly used techniques for appraising capital investment projects are ;

1. Payback Period
2. Accounting Rate of Return
3. Net Present Value
4. Internal Rate of Return

Two of the techniques learnt are as below;

Payback Period Analysis

Payback period is often used as a "First screening method". As stated in  rdi.usa.com, payback method is a calculation that is easy and simple to understand and favours projects that recover investments as quickly as possible. The calculation would be useful in projects where the investment return is needed quickly. The calculation is as follows;

Figure 04 : Payback Period Calculation

According to the calculations, the longer the payback period, higher the investment risk is and longer the capital is tied up. The shorter the better.

Financial.kaplan.co.uk (2012), lists down the advantages and disadvantages of Payback period as follows;

Advantages

• Focus on early payback where liquidity can be enhanced
• Quick and simple calculations
• Easily understood concept 

Disadvantages

• Ignores the timing of cash flows
• Ignores the time value of money
• May lead to excessive investment in short-term projects
• Unable to distinguish between projects with the same payback period.

Net Present Value 

As depicted by Pogue (2010), the use of NPV method provides a solution in monetary terms. The calculations are consistent with the objective of maximizing the shareholder wealth, as positive NPV should yield an equivalent increase in shareholder wealth. In the calculation, all cash flows related to the project are calculated in to present values.

Figure 05 : NPV Calculation

I     = Investment

CF = Cash Flow

r     = Rate of return

n    = Number of Years

If the NPV is;

NPV > 0     = Project Viable (Accept)

NPV < 0     = Project Not Viable (Reject)

NPV = 0     = Project Viable (Accept)

As per Financial.kaplan.co.uk (2012) and Pogue (2010), The advantages and disadvantages of Using NPV to analysis project viability are;

Advantages 

• Considers the time value of money
• Considers all cash flows
• Provides a clear, unambiguous decisions

Disadvantages

• Requirement of an estimate on discount rate and investment
• Difficult to interpret as the value is  shown in monetary terms and not in percentages
• Do not allow flexibility after the project decision

References

financial.kaplan.co.uk, 2012. Investment Appraisal Techniques. [Online] Available at: http://financial.kaplan.co.uk/Documents/ICAEW/MI_Ch3_p.pdf [Accessed 8 August 2012].

Pogue, M., 2010. Corporate Investment Decisions : Principals and Practice. New York: Business Expert Press.

rdi-usa.com, 2012. Investment Appraisal. [Online] Available at: http://www.rdi-usa.com/pdf/BABusinessManagement.PDF [Accessed 05 August 2012].

A Project and its Life Cycle

A project

The best and the most simple way to define the term project  is;

"A project is a temporary endeavor undertaken to create a unique product, service or result. "

  (PMBOK , 2008)

A more descriptive definition for a project is stated in project management book by field and Keller (1998), quoted from APM (1993);

The simplest form of a project is a discrete undertaking with defined objectives often including time, cost and quality performance goals. All the projects evolve through a similar life cycle sequence during which there should be recognized start and finish points. In addition the project  objectives maybe defined in a number of ways and the project goals are defined and the project is finite.

 Based on the above definitions, the understanding that can be derived is that a project is a planned set of activities that  drives towards to accomplish a goal or a set of goals through a planned timeline with the use of limited resources.


Project Life Cycle

As explained at the lecture, a project life cycle  is followed by a product life cycle, and at the end of every product life cycle there is a project life cycle, that is due to the stage of maturity in the prduct life cycle where  introducing a product requires a project, and when the product reaches its maturity, in order to compete in the market, another project to introduce a new product would take place.

As depicted by Egan (2006), the project life cycle is often confused with the project management life cycle. Project life cycle refers to the development phases while project management life cycle is on Initiate, Plan, Execute, control and close.

Figure 03: A Project Life Cycle

It is further elaborated, that the phases that a project would go through changes with the nature of the project and is tailored to suit the needs of individual projects.  Therefore the phases shown in figure 03, might change  from one project to another.

Factors that triggers a project

The need for a project can arise through market demand, a business need, based on a client request, due to a technological development, a legal requirement or a social need.


The success Vs The Failure of a project

It is understood that the success of a project cannot be guaranteed, only the process of it can be guaranteed. A project that fails to meet either of the following would eventually fail;

Figure 02 : The project Triangle (Triple Constraint)

The only way to guarantee on the success of a project by meeting the scope, time, cost an quality is through effective project management.



References

Egan, B.D., 2006. An Introduction to PMI's Project Life Cycle. White Paper.

Field, M. & Keller, L., 1998. Project Management. The open university.

PMBOK, 2008. A Guide to the Project Management Body of Knowledge. 4th ed. Newtown Square: Project Management Institute, Inc.