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Dr. Chen, Special Topic: Project Management Chapter 6: Project Activity and Risk Planning (Chapter 5 in Chinese Edition) Jason C. H. Chen, Ph.D. Professor.

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Presentation on theme: "Dr. Chen, Special Topic: Project Management Chapter 6: Project Activity and Risk Planning (Chapter 5 in Chinese Edition) Jason C. H. Chen, Ph.D. Professor."— Presentation transcript:

1 Dr. Chen, Special Topic: Project Management Chapter 6: Project Activity and Risk Planning (Chapter 5 in Chinese Edition) Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99258 chen@jepson.gonzaga.edu

2 Dr. Chen, Special Topic: Project Management Part II Project Planning

3 Dr. Chen, Special Topic: Project Management Project Management

4 Dr. Chen, Special Topic: Project Management 4 Why do Projects Fail? Studies have shown that the following factors contribute significantly to project failure: Improper focus of the project management system Wrong level of detail Lack of understanding about project management tools; too much reliance on project management software Too many people Poor communication Rewarding the wrong actions

5 Dr. Chen, Special Topic: Project Management Project Triangle (Project Management Trade-offs) Time Cost Scope The objective of the PM is to define project’s scope realistically and ultimately deliver quality of product/service on time, on budget and within scope. The center of project triangle is QUALITY

6 Dr. Chen, Special Topic: Project Management 6 Why Planning? Reasons for Planning To eliminate or reduce uncertainty To improve efficiency of the operation To obtain a better understanding of the objectives To provide a basis for monitoring and controlling work

7 Dr. Chen, Special Topic: Project Management 7 MOST MANAGERS DO NOT LIKE PLANNING DUE TO THE FOLLOWING:  It takes time.  You have to think.  It involves paper work.  You are bound to systematic procedures.  You are committed to achieve a specific result within a specified time period.

8 Dr. Chen, Special Topic: Project Management 8 Effective Planning An effective plan will be:  Explicit stated in detail, leaving nothing merely implied.  Intelligible - it must be understood and be comprehensible.  Flexible - capable of accepting change.  Controllable - capable of being monitored for control purposes.

9 Dr. Chen, Special Topic: Project Management DEFINITION OF A PROJECT LIFE CYCLE CONCEPTUAL PHASE DETAILED PLANNING PHASE FEASIBILITY AND PRELIMINARY PLANNING PHASE IMPLEMENTATION PHASE CONVERSION OR TERMINATION PHASE Resources Utilized RESOURCES TIME PMO PMO: Project Management Office

10 Dr. Chen, Special Topic: Project Management 10 The Line Manager(s) ? The Project Manager ? Both Parties ? *Who plans the project? *Who executes the project? *Who is responsible for monitoring work and controlling work? *Who is responsible for providing feedback regarding the planning and execution phases of a project? PLANNING QUESTIONS OFTEN ASKED

11 Dr. Chen, Special Topic: Project Management 11 Project Manager vs. Line Manager A Project Manager manages the work taken up by a single project whereas the Line Manager will be managing the work taken up by a line of projects. The Line manager will interact/liase with the Project Managers who manage the projects that fall in his line. Usually projects in organizations are aligned based on the line of business, catered to, by the project. Hence, they will have a Line Manager who manages all those projects.

12 Dr. Chen, Special Topic: Project Management 12 Project Manager’s Responsibility Project Manager will define: –Goals and objectives –Major milestones –Requirements –Ground rules and assumptions –Time, cost, and performance constraints –Operating procedures –Administrative policy –Reporting requirements

13 Dr. Chen, Special Topic: Project Management 13 Line Manager’s Responsibility Line manager will define: –Detailed task descriptions to implement objectives, requirements, and milestones –Detailed schedules and manpower allocations to support budget and schedule –Identification of areas of risk, uncertainty, and conflict

14 Dr. Chen, Special Topic: Project Management 14 6.1 Initial Project Coordination and the Project Charter Early meetings are used to decide on participating in the project Used to “flesh out” the nature of the project Outcomes include: –Technical scope –Areas of responsibility –Delivery dates or budgets –Risk management group

15 Dr. Chen, Special Topic: Project Management 15 Outside Clients When it is for outside clients, specifications cannot be changed without the client’s permission Client may place budget constraints on the project May be competing against other firms

16 Dr. Chen, Special Topic: Project Management 16 Project Charter Elements Purpose Objectives Overview Schedules Resources Personnel Risk management plans Evaluation methods

17 Dr. Chen, Special Topic: Project Management 17 Systems Integration Performance Effectiveness Cost

18 Dr. Chen, Special Topic: Project Management 18 6.2 Starting the Project Plan: The Work Breakdown Structure (WBS) A hierarchical planning process Breaks tasks down into successively finer levels of detail Continues until all meaningful tasks or work packages have been identified These make tracking the work easier Need separate budget/schedule for each task or work package

19 Dr. Chen, Special Topic: Project Management 19 Hierarchical Planning Major tasks are listed Each major task is broken down into detail This continues until all the activities to be completed are listed Need to know which activities “depend on” other activities

20 Dr. Chen, Special Topic: Project Management A Form to Assist Hierarchical Planning Figure 6-2

21 Dr. Chen, Special Topic: Project Management 21 Work Breakdown Structure (WBS)

22 Dr. Chen, Special Topic: Project Management A Visual WBS Figure 6-3 WBS with account numbers shown

23 Dr. Chen, Special Topic: Project Management Career Day Figure 6-4 Partial WBS for college “Career Day”

24 Dr. Chen, Special Topic: Project Management 24 The WBS What is to be done When it is to be started and finished Who is going to do it Some activities must be done sequentially Some activities may be done simultaneously Many things must happen when and how they are supposed to happen Each detail is uncertain and subjected to risk

25 Dr. Chen, Special Topic: Project Management 25 PURPOSE OF WBS Detailed planning can be performed Costs and budgets can be established Objectives can be linked to available resources in a logical manner Specific authority and responsibility can be assigned It is to STRUCTURE an ASSIGNED PROJECT into VARIOUS ACTIVITIES in ORDER that:

26 Dr. Chen, Special Topic: Project Management Most common type: Six-Level Indentured Structure LEVELDESCRIPTION 1Total Program 2Project(s) 3Task(s) 4Subtask(s) 5Work Package(s) 6Level of Effort WORK BREAKDOWN STRUCTURE (WBS)

27 Dr. Chen, Special Topic: Project Management THE WBS BREAKS WORK DOWN INTO SMALLER ACTIVITIES THUS REDUCING THE RISK THAT ANY MAJOR OR MINOR ITEM WILL BE OMITTED WBS: SIX-LEVEL STRUCTURE Usually specified by the client and managed the project manager. Generated by contractor for in-house control and managed by the functional manager(s). Planning accuracy is dependent on the WBS level selected. The lower the level the greater is the planning accuracy but the higher the management cost. LEVELS RESPONSIBILITY 1 2 3 4 5 6

28 Dr. Chen, Special Topic: Project Management WBS Controls WORK BREAKDOWN STRUCTURE WORK BREAKDOWN STRUCTURE MGT. COORDIN. MGT. COORDIN. ORGANIZ. CHARTS ORGANIZ. CHARTS COSTS ACCOUNT- ABILITY ACCOUNT- ABILITY DECISION TREES DECISION TREES SCHEDULES

29 Dr. Chen, Special Topic: Project Management 29 6.3 Human Resources: The RACI Matrix and Agile Projects Useful to create a table that shows staff needed to execute WBS tasks One approach is a organizational breakdown structure (OBS) –Organizational units responsible for each WBS element –Who must approve changes of scope –Who must be notified of progress WBS and OBS may not be identical

30 Dr. Chen, Special Topic: Project Management 30 The Responsibility (RACI) Matrix Another approach is the Responsible, Accountable, Consult, Inform (RACI) matrix –Also known as a responsibility matrix, a linear responsibility chart, an assignment matrix, a responsibility assignment matrix Shows critical interfaces Keeps track of who must approve what and who must be notified

31 Dr. Chen, Special Topic: Project Management Sample RACI Matrix Figure 6-7

32 Dr. Chen, Special Topic: Project Management  2009 ISACA All Rights reserved. 32 C OBI T ® Answers Key Business Questions – A Model for Information Ethics Is my information technology organization doing the right things? Are we doing them the right way? Are we getting them done well? Are we getting the benefits? * * Based on the “Four Ares” as described by John Thorp in his book The Information Paradox, written jointly with Fujitsu, first published in 1998 and revised in 2003

33 Dr. Chen, Special Topic: Project Management COBIT ® Defined Responsibilities for Each Process – A Model for Information Ethics Link business goals to IT goals. CI A/ R IC Identify critical dependencies and current performance. CCR A/ R CCCCCC Build an IT strategic plan. ACCRICCCCIC Build IT tactical plans. CIACCCCCRI Analyse programme portfolios and manage project and service portfolios. CIIARRCRCCI RACI Chart Activities Functions A RACI chart identifies who is Responsible, Accountable, Consulted and/or Informed.

34 Dr. Chen, Special Topic: Project Management Project Development Methodologies The choice of development methodologies and managerial influences distinguish IT projects from other projects. There are four main methodologies IT professionals use to manage the technology projects: –Systems Development Life Cycle (SDLC) –Prototyping –Rapid applications development (RAD) –Joint applications development (JAD)

35 Dr. Chen, Special Topic: Project Management 35 Agile Project Planning and Management When scope cannot be determined in advance, traditional planning does not work Agile project management was developed to deal with this problem in IT Small teams are located at a single site Entire team collaborates Team deals with one requirement at-a-time with the scope frozen

36 Dr. Chen, Special Topic: Project Management Project Planning: Basic Four-Stage Model Strategic Project Planning Generic Activity Project Requirements analysis Project Planning Resource allocation

37 Dr. Chen, Special Topic: Project Management Phases in the SDLC (Waterfall Approach) SDLC Revisited Project Identification and Selection Project Initiation and Planning Analysis Physical Design Implementation Maintenance Logical Design Analysis Major features will be summarized in the next slides.

38 Dr. Chen, Special Topic: Project Management Systems Definition/Investigation (Feasibility Study) Operational Feasibility Schedule Feasibility Economic Feasibility Technical Feasibility Can we afford it?Will it be accepted? Does the IT capability exist? Will it be completed by the deadline? Legal and Contractual Feasibility Is the proposed system legally? Organizational Feasibility (Is it a good fit – objective of the organization 38 What are new from the last slide?

39 Dr. Chen, Special Topic: Project Management Systems Development Life Cycle SDLC typically consists of seven phases 1.Initiation of the project 2.The requirements definition phase 3.The functional design phase 4.The system is actually built 5.Verification phase 6.The “cut over” where the new system is put in operation and all links are established. Possible conversion methods a)Parallel b)Direct c)Phased in/out d)pilot 7.The maintenance and review phase Which one is the best approach? Sabre mini case

40 Dr. Chen, Special Topic: Project Management 40 System Conversion Approaches (4Ps) 1. Pilot Implement entire system in limited portion of business MRV uses system for selected customers. Advantage: limits exposure to business if system fails 2. Phased System is installed in phases or modules. Each piece is installed and tested. 3. Parallel Complete new and old systems run simultaneously Very safe, but expensive 4. Plunge (or direct) High risk if new system fails, no old system to fall back on Only used if new system is not vital to company operation 10-40

41 Dr. Chen, Special Topic: Project Management Installation Conversion Methods: 4 Ps Old System New System Old System New System Old System New System Old System New System Parallel Pilot Phased Plunge/ Direct Cut-over time Name a major advantage and disadvantage of “Parallel” and Plunge”?

42 Dr. Chen, Special Topic: Project Management 42 Skip the following ppts

43 Dr. Chen, Special Topic: Project Management 43 6.4 Interface Coordination Through Integration Management Managing a project requires a great deal of coordination Projects typically draw from many parts of the organization as well as outsiders All of these must be coordinated The RACI matrix helps the project manager accomplish this

44 Dr. Chen, Special Topic: Project Management 44 Integration Management Coordinating the work and timing of different groups Interface coordination is the process of managing this work across multiple groups Using multidisciplinary teams to plan the project –Requires structure Q: What do you have at Ming-Chi regarding “Integration”?

45 Dr. Chen, Special Topic: Project Management 45 Managing Projects by Phases and Phase- Gates Break objectives into shorter term sub- objectives Project life cycle is used for breaking a project up into component phases Focus on specific, short-term output Lots of feedback between disciplines

46 Dr. Chen, Special Topic: Project Management 46 Homework: Incidents for Discussion WBS (p. 265) Ringold’s Pool and Patio Supply Tasks to do: 1. Create a WBS like Figure 6-3 or Figure 6-4 2. Then, answer the following two questions –a) Is John Jr.’s WBS projection reasonable? –b) What aspects of the decision will John Sr. consider?

47 Dr. Chen, Special Topic: Project Management 47 Incidents for Discussion (p. 265) WBS (continued) Ringold’s Pool and Patio Supply Question: 1. Is John Jr.’s WBS projection reasonable? 2. What aspects of the decision will John Sr. consider?

48 Dr. Chen, Special Topic: Project Management 48 Answer for Ringold’s Pool and Patio Supply This is a good opportunity to engage the class in a discussion of the importance of involving the team in developing plans and schedules. One way to do this is to engage the class in collectively creating the upper level or two of a WBS for the project. Chances are they will come up with several items that Junior missed in his, demonstrating the danger of working alone.

49 Dr. Chen, Special Topic: Project Management 49 Answer for Ringold’s Pool and Patio Supply John Sr. is asking a reasonable question, but his son is giving him a defective answer. Even though Junior’s WBS looks very precise, it would be dangerous to base any decision on it. Since, it has not been validated by anyone who has actual experience in installing pools, there is no way of knowing if the estimates are reasonable, or even if it has accounted for all the work. Junior has made no effort to evaluate the requirements of the job. For example, he doesn’t list in his WBS anything related to permitting, electrical or plumbing. In addition to these concerns, John Sr. must consider several business issues including whether his company has the staff, skills, and equipment to take on this new area. He needs to consider whether this expansion matches his long-term goals for the business.

50 Dr. Chen, Special Topic: Project Management 50 6.5 PROJECT RISK MANAGEMENT

51 Dr. Chen, Special Topic: Project Management 51 Risk Management: Basic Concepts Risk management focuses on: – Known unknowns – Proactive management The alternative to proactive management is reactive management, also called crisis management. –This requires significantly more resources and takes longer for problems to surface

52 Dr. Chen, Special Topic: Project Management 52 RISK MANAGEMENT Risk Management focuses on the Future. Risk and Information are inversely related. Historically, we focused our attentions on schedule and cost risk management. Today, our primary emphasis on technological risk management: –CAN WE DESIGN IT AND BUILD IT? –WHAT IS THE RISK OF OBSOLESCENCE?

53 Dr. Chen, Special Topic: Project Management 53 Risk Management Projects are risky, uncertainty is high Project manager must manage this risk This is called “risk management” Risk varies widely between projects Risk also varies widely between organizations Risk management should be built on the results of prior projects

54 Dr. Chen, Special Topic: Project Management 54 Sub-processes to Risk Management 1.Risk management planning 2.Risk identification 3.Qualitative risk analysis 4.Quantitative risk analysis 5.Risk response planning 6.Risk monitoring and control 7.The risk management register –Creating a permanent register of identified risks, methods used to mitigate or resolve them, and the results of all risk management activities.

55 Dr. Chen, Special Topic: Project Management 55 Risk Management Planning Need to know the risk involved before selecting a project Risk management plan must be carried out before the project can be formally selected At first, focus is on externalities –Track and estimate project survival Project risks take shape during planning Often handled by project office

56 Dr. Chen, Special Topic: Project Management 56 Risk Identification Risk is dependent on technology and environmental factors Delphi method is useful for identifying project risks Other methods include brainstorming, nominal group techniques, checklists, and attribute listing May also use cause-effect diagrams, flow charts, influence charts, SWOT analysis

57 Dr. Chen, Special Topic: Project Management 57 Qualitative Risk Analysis Purpose is to prioritize risks A sense of the impact is also needed Each objective should be scaled and weighted Construct a risk matrix Same approach can be used for opportunities

58 Dr. Chen, Special Topic: Project Management Risk Matrix Figure 6-12 There are “five” threats with “three” categories (critical, monitor, ignore) in this example.

59 Dr. Chen, Special Topic: Project Management 59 Quantitative Risk Analysis: Failure Mode and Effect Analysis (FMEA) 1.List ways a project can fail 2.Evaluate severity (S) with “1” “no effect”, “10” is “very severe” 3.Estimate likelihood of cause of failure (L) “1” is absolutely “uncertain”, “10” almost certain 4.Estimate the inability to detect (D) “1” detectability is almost certain and “10” failure is not be detected in time to avoid 5.Find the risk priority number (RPN) (RPN = S  L  D) 6.Consider ways to reduce the S, L, and D for each cause of failure since the lower numbers of S,L,D the BETTER for reducing the cause of failure (i.e., the LESS risk)

60 Dr. Chen, Special Topic: Project Management A FMEA Example Table 6-1 Q: Which one is with the “biggest” threat? Why? Answer: #2 (Can’t acquire tech knowledge)

61 Dr. Chen, Special Topic: Project Management Decision Tree Analysis Figure 6-13 Decision Tree based on expected monetary value (EMV) Q: 1. Why EMV is 8.0 for Stocks (a2)? 2. Why EMV is 8.4 for this scenario?

62 Dr. Chen, Special Topic: Project Management Risk Response Planning Threats –Avoid –Transfer –Mitigate –Accept Opportunities –Exploit –Share –Enhance –Accept

63 Dr. Chen, Special Topic: Project Management 63 Risk Monitoring and Control Monitoring covered in detail in Chapter 10 Control covered in Chapter 11

64 Dr. Chen, Special Topic: Project Management 64 The Risk Management Register Purpose: The risk management system should maintain an up-to-date data register to ensure against particular risk(s). Environments that may impact projects Assumptions made Risks identified List of categories and key words Estimates on risk, states of project’s environment, or on project assumptions Minutes Actual outcomes

65 Dr. Chen, Special Topic: Project Management Managing Scope Changes

66 Dr. Chen, Special Topic: Project Management 66 Change Management YOU CANNOT MANAGE YOUR CUSTOMER WITHOUT MANAGEMENT OF YOUR PROJECT MANAGEMENT PROCESS. WHEN YOUR CUSTOMER INITIATES A CHANGE REQUEST, YOU MUST BE ABLE TO PREDICT IMMEDIATELY THE IMPACT ON SCHEDULE, COST AND TECHNICAL PERFORMANCE. (why not “SCOPE”)

67 Dr. Chen, Special Topic: Project Management Unmanaged vs. Managed Changes Unmanaged Change Where TIME is invested How ENERGY is invested Which RESOURCES are used Managed Change  Back-end  Front-end  Rework  Enforcement  Compliance  Supervision  Rework  Enforcement  Compliance  Supervision  Education  Communication  Planning  Improvements  Value-Added  Education  Communication  Planning  Improvements  Value-Added  Senior Management and key players only  Stakeholders  Suppliers  Customers  Stakeholders  Suppliers  Customers

68 Dr. Chen, Special Topic: Project Management Definition Cost of Corrections $1 Preliminary Planning $5 $25 $100 $1000 Detailed Planning Execution Implementation /Conversion

69 Dr. Chen, Special Topic: Project Management Integrated Processes for The 21st Century Project Management Concurrent Engineering Concurrent Engineering Total Quality Management Total Quality Management Risk Management Risk Management Change Management Change Management

70 Dr. Chen, Special Topic: Project Management 70 Video VIDEO. Understanding_Project_Mgt_Benefits (11m) FMEA (FMEA Services from Concept to Completion-Dynamic Positioning (6m)

71 Dr. Chen, Special Topic: Project Management 71 In class Exercise and HW Problem #1 (p.263) –Construct a risk matrix (see Figure 6-12) Problem #2 (p.264) –FMEA analysis Problem #5 (p.264) –Decision Tree (which one is the best option) Start to read and prepare case study 1: Southwest Airlines

72 Dr. Chen, Special Topic: Project Management 72 Problem #1 (p.263) Construct a risk matrix (see Figure 6-12)

73 Dr. Chen, Special Topic: Project Management Problem 1:Problem 1: Probability 7 6 Threat 2 5 Threat 1 4 Threat 4 3 Threat 3 2 1 1234567 Impact Critical Monitor Ignore Legend:

74 Dr. Chen, Special Topic: Project Management Problem 1:Problem 1: Probability 7 6 Threat 2 5 Threat 1 4 Threat 4 3 Threat 3 2 1 1234567 Impact Critical Monitor Ignore Legend: Threat 1: The threat of costs being excessive could occur. Actually, the probability is somewhat high. This can be transferred to an outsourcing provider to help reduce this threat. Threat 2: The likelihood of the users resisting changes could cause major problems. This is somewhat likely to happen, but can be avoided if they are given an alternative and consulted in advance. Threat 3: The project may run longer than expected. This isn’t highly likely, but this can be transferred by outsourcing the project. Threat 4: The changes may reduce the quality of care in the hospital. The probability is satisfactory because the improvements brought about by the new system may not be significant. If the quality decreases, the impact could be fairly significant, thus the hospital may need to mitigate this threat by including more users in the planning.

75 Dr. Chen, Special Topic: Project Management 75 Problem #2 (p.264) FMEA analysis (RPN)

76 Dr. Chen, Special Topic: Project Management ThreatSeverity (S) (Impact) Likelihood (L) (Probability) Inability to detect (D) RPN #135460 #256130 #343336 #4746168 Problem 2: The main thing that changes when using this approach is that threat #2 drops significantly from “critical” to possibly “ignore.” This is mostly due to the lack of inability to detect. Threat #2 is somewhat severe and the likelihood is great, but since the threat is relatively easy to detect, it can be mitigated early and possibly even removed. Thus, this is a much more realistic evaluation of the threats than just creating a risk matrix.

77 Dr. Chen, Special Topic: Project Management 77 Problem #5 (p.264) Decision Tree (which one is the best option) Problem 5: a1, a3 decision = (0.7  $3,000) + (0.3  $2,000) – $500 = $2,200 YOUR TURN to compute a1,a4; a2,a5 and a2,a6 decisions a1, a4 decision = (0.7  $1,000) + (0.3  $2,000) – $500 = a2, a5 decision = (0.4  $2,150) + (0.6  $3,000) – $1,000= a2, a6 decision = (0.4  $2,150)+ (0.6  $4,000) – $1,000= Which one is the best option? Based on this analysis, the best option is a2, a6. $800 $1,660 $2,260 RevenueExpense Profit


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