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Week 10: Project Cost Management (2) Human Resource Quality Communication.

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1 Week 10: Project Cost Management (2) Human Resource Quality Communication

2 Cost Estimation Tools and Techniques 3 basic tools and techniques for cost estimates: –analogous or top-down: use the actual cost of a previous, similar project as the basis for the new estimate –bottom-up: estimate individual work items and sum them to get a total estimate –parametric: use project characteristics in a mathematical model to estimate costs

3 Constructive Cost Model (COCOMO) Barry Boehm helped develop the COCOMO models for estimating software development costs Parameters include source lines of code or function points COCOMO II is a computerized model available on the Web Boehm suggests that only parametric models do not suffer from the limits of human decision-making See “Diktat Proyek Manajemen (7.7)” / “Slides 7-3” Homeworks from week 9 ??? –Individuals –Groups (optional)

4 Typical Problems with IT Cost Estimates Developing an estimate for a large software project is a complex task requiring a significant amount of effort. Remember that estimates are done at various stages of the project Many people doing estimates have little experience doing them. Try to provide training and mentoring People have a bias toward underestimation. Review estimates and ask important questions to make sure estimates are not biased Management wants a number for a bid, not a real estimate. Project managers must negotiate with project sponsors to create realistic cost estimates

5 Business Systems Replacement Project Cost Estimate Overview

6 Business Systems Replacement Project Cash Flow Analysis

7 Cost Budgeting Cost budgeting involves allocating the project cost estimate to individual work items and providing a cost baseline For example, in the Business Systems Replacement project, there was a total purchased cost estimate for FY97 of $600,000 and another $1.2 million for Information Services and Technology These amounts were allocated to appropriate budgets as shown in Table 7-6

8 Business Systems Replacement Project Budget Estimates for FY97 and Explanations

9 Cost Control Project cost control includes –monitoring cost performance –ensuring that only appropriate project changes are included in a revised cost baseline –informing project stakeholders of authorized changes to the project that will affect costs Earned value management is an important tool for cost control

10 Earned Value Management (EVM) EVM is a project performance measurement technique that integrates scope, time, and cost data Given a baseline (original plan plus approved changes), you can determine how well the project is meeting its goals You must enter actual information periodically to use EVM. Next figure shows a sample form for collecting information

11 Cost Control Input Form for Business Systems Replacement Project (use software tools)

12 Earned Value Management Terms The planned value (PV), formerly called the budgeted cost of work scheduled (BCWS), also called the budget, is that portion of the approved total cost estimate planned to be spent on an activity during a given period Actual cost (AC), formerly called actual cost of work performed (ACWP), is the total of direct and indirect costs incurred in accomplishing work on an activity during a given period The earned value (EV), formerly called the budgeted cost of work performed (BCWP), is an estimate of the value of the physical work actually completed

13 Earned Value Calculations

14 Earned Value Formulas Earned Value = BCWP = Budgeted Cost Work Performed Actual Cost = ACWP = Actual Cost Work Performed BCWS = Budgeted Cost Work Scheduled

15 Rules of Thumb for Earned Value Numbers Negative numbers for cost and schedule variance indicate problems in those areas. The project is costing more than planned or taking longer than planned CPI and SPI less than 100% indicate problems

16 Earned Value Calculations for a One-Year Project After Five Months (see example file.xls)

17 Earned Value Chart

18 Project Portfolio Management Many organizations collect and control an entire suite of projects or investments as one set of interrelated activities in a portfolio Five levels for project portfolio management –Put all your projects in one database –Prioritize the projects in your database –Divide your projects into two or three budgets based on type of investment –Automate the repository –Apply modern portfolio theory, including risk-return tools that map project risk on a curve

19 Using Software to Assist in Cost Management Spreadsheets are a common tool for resource planning, cost estimating, cost budgeting, and cost control Many companies use more sophisticated and centralized financial applications software for cost information Project management software has many cost- related features

20 Sample Enterprise Project Management Screen

21 Group Task Estimate the cost of your project depends on your detailed WBS (code implementation).

22 Latihan: Cost Controlling (1) Proyek A dengan estimasi durasi 8 bulan dan total anggaran Rp. 80 juta. Setelah 2 bulan, proyek dikontrol. Manajer proyek mengatakan proyek berjalan dengan anggaran di bawah rencana, hanya 15 juta yang baru dikeluarkan dan 25% kegiatan telah selesai. Proyek B dengan estimasi durasi 8 bulan dan total anggaran Rp. 80 juta. Setelah 2 bulan proyek dikontrol. Manajer proyek mengatakan proyek berjalan dengan anggaran 5 juta lebih dari rencana, dengan penyelesaian 20%. Asumsi: biaya proyek terbagi secara merata pada periode pengerjaan.

23 Latihan: Cost Controlling (2) 1.Kesimpulan apa yang dapat diambil dari data- data yang Anda terima pada kasus di atas ? 2.Hitunglah variabel-variabel yang diperlukan untuk mengevaluasi jalannya proyek ! 3.Kesimpulan apa yang dapat Anda lihat setelah proyek dievaluasi dengan variabel-variabel kontrol biaya ?

24 The Importance of Human Resource Management People determine the success and failure of organizations and projects Recent statistics about IT workforce: –The total number of U.S. IT workers was more than 10.1 million in December 2002, up from 9.9 million in January 2002 –IT managers predict they will need to hire an additional 1.2 million workers in the near future –Hiring by non-IT companies outpaces hiring by IT companies by a ratio of 12:1

25 What is Project Human Resource Management? Project human resource management includes the processes required to make the most effective use of the people involved with a project. Processes include –Organizational planning –Staff acquisition –Team development

26 Keys to Managing People Psychologists and management theorists have devoted much research and thought to the field of managing people at work Important areas related to project management include –motivation (intrinsic and extrinsic) –influence and power –effectiveness

27 Abraham Maslow’s Hierarchy of Needs

28 McGregor’s Theory X and Theory Y Douglas McGregor popularized the human relations approach to management in the 1960s Theory X: assumes workers dislike and avoid work, so managers must use coercion, threats, and various control schemes to get workers to meet objectives Theory Y: assumes individuals consider work as natural as play or rest and enjoy the satisfaction of esteem and self-actualization needs Theory Z: introduced in 1981 by William Ouchi and is based on the Japanese approach to motivating workers, emphasizing trust, quality, collective decision making, and cultural values

29 Thamhain and Wilemon’s Ways to Have Influence on Projects 1. Authority: the legitimate hierarchical right to issue orders 2. Assignment: the project manager's perceived ability to influence a worker's later work assignments 3. Budget: the project manager's perceived ability to authorize others' use of discretionary funds 4. Promotion: the ability to improve a worker's position 5. Money: the ability to increase a worker's pay and benefits 6. Penalty: the project manager's ability to cause punishment 7. Work challenge: the ability to assign work that capitalizes on a worker's enjoyment of doing a particular task 8. Expertise: the project manager's perceived special knowledge that others deem important 9. Friendship: the ability to establish friendly personal relationships between the project manager and others

30 Organizational Planning Organizational planning involves identifying, documenting, and assigning project roles, responsibilities, and reporting relationships Outputs and processes include –project organizational charts –work definition and assignment process –responsibility assignment matrixes –resource histograms

31 Sample Organizational Chart for a Large IT Project

32 Work Definition and Assignment Process

33 Sample Responsibility Assignment Matrix (RAM)

34 Staff Acquisition Staffing plans and good hiring procedures are important in staff acquisition, as are incentives for recruiting and retention Some companies give their employees one dollar for every hour a new person they helped hire works Some organizations allow people to work from home as an incentive Research shows that people leave their jobs because they don’t make a difference, don’t get proper recognition, aren’t learning anything new, don’t like their coworkers, and want to earn more money

35 Resource Leveling Resource leveling is a technique for resolving resource conflicts by delaying tasks The main purpose of resource leveling is to create a smoother distribution of resource usage and reduce overallocation

36 Resource Leveling Example

37 Team Development It takes teamwork to successfully complete most projects Training can help people understand themselves, each other, and how to work better in teams Team building activities include –physical challenges –psychological preference indicator tools

38 Social Styles

39 Individual Task Identify what is the type of your co-workers in your project ? Is he / she appropriate to the job descriptions ?

40 What Is Quality? The International Organization for Standardization (ISO) defines quality as the totality of characteristics of an entity that bear on its ability to satisfy stated or implied needs Other experts define quality based on –conformance to requirements: meeting written specifications –fitness for use: ensuring a product can be used as it was intended

41 Project Quality Management Processes Quality planning: identifying which quality standards are relevant to the project and how to satisfy them Quality assurance: evaluating overall project performance to ensure the project will satisfy the relevant quality standards Quality control: monitoring specific project results to ensure that they comply with the relevant quality standards while identifying ways to improve overall quality

42 Quality Planning It is important to design in quality and communicate important factors that directly contribute to meeting the customer’s requirements Design of experiments helps identify which variables have the most influence on the overall outcome of a process Many scope aspects of IT projects affect quality like functionality, features, system outputs, performance, reliability, and maintainability (ISO 9126)

43 Quality Assurance Quality assurance includes all the activities related to satisfying the relevant quality standards for a project Another goal of quality assurance is continuous quality improvement Benchmarking can be used to generate ideas for quality improvements Quality audits help identify lessons learned that can improve performance on current or future projects

44 Quality Control The main outputs of quality control are –acceptance decisions –rework –process adjustments Some tools and techniques include –Pareto analysis –statistical sampling –Six Sigma –quality control charts

45 Pareto Analysis Pareto analysis involves identifying the vital few contributors that account for the most quality problems in a system Also called the 80-20 rule, meaning that 80% of problems are often due to 20% of the causes Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources Pareto diagrams are histograms that help identify and prioritize problem areas

46 Figure 8-1. Sample Pareto Diagram

47 Testing Many IT professionals think of testing as a stage that comes near the end of IT product development Testing should be done during almost every phase of the IT product development life cycle

48 Testing Tasks in the Software Development Life Cycle

49 Types of Tests A unit test is done to test each individual component (often a program) to ensure it is as defect free as possible Integration testing occurs between unit and system testing to test functionally grouped components System testing tests the entire system as one entity User acceptance testing is an independent test performed by the end user prior to accepting the delivered system

50 Group Task Identify the ISO 9126 (available in the course web and dictat 10.6), what kind of Software Qualities will be tested in your project?

51 Project Communications Management Processes Communications planning: determining the information and communications needs of the stakeholders Information distribution: making needed information available in a timely manner Performance reporting: collecting and disseminating performance information Administrative closure: generating, gathering, and disseminating information to formalize phase or project completion

52 Sample Stakeholder Analysis for Project Communications

53 Media Choice Table

54 The Impact of the Number of People on Communications Channels

55 Performance Reporting Performance reporting keeps stakeholders informed about how resources are being used to achieve project objectives –Status reports describe where the project stands at a specific point in time –Progress reports describe what the project team has accomplished during a certain period of time –Project forecasting predicts future project status and progress based on past information and trends –Status review meetings often include performance reporting

56 Administrative Closure A project or phase of a project requires closure Administrative closure produces –project archives –formal acceptance –lessons learned

57 Sample Template for a Monthly Progress Report

58 Sample Template for a Letter of Agreement for a Class Project

59 Final Project Documentation Items

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