Presentation on theme: "School of Business Administration"— Presentation transcript:
1School of Business Administration Chapter 6: Project Activity and Risk Planning (Chapter 5 in Chinese Edition)Jason C. H. Chen, Ph.D.Professor of MISSchool of Business AdministrationGonzaga UniversitySpokane, WA 99258
4Why 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
5Project Triangle (Project Management Trade-offs) TimeCostThe center of project triangle isQUALITYFigure 11.2 Project Triangle (Project Management Trade-offs) – mbus626ScopeThe 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.
6Why Planning? Reasons for Planning To eliminate or reduce uncertaintyTo improve efficiency of the operationTo obtain a better understanding of the objectivesTo provide a basis for monitoring and controlling work
7MOST 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.
8Effective 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.
9DEFINITION OF A PROJECT LIFE CYCLE CONCEPTUALPHASEFEASIBILITY ANDPRELIMINARY PLANNING PHASEDETAILED PLANNING PHASEIMPLEMENTATIONPHASECONVERSIONOR TERMINATION PHASEResourcesUtilizedRESOURCESTIMEPMOPMOPMO: Project Management Office
10PLANNING QUESTIONS OFTEN ASKED 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?The Line Manager(s) ?The Project Manager ?Both Parties ?
11Project 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.Cater: provide, serveLine management is a business term to describe the administration of activities that contribute directly to the output of products or services. In a corporate hierarchy, a "line manager" holds authority in a vertical 'line' (chain of command), and/or over a particular product line. He or she is charged with meeting corporate objectives in a specific functional area or line of business.
12Project Manager’s Responsibility Project Manager will define:Goals and objectivesMajor milestonesRequirementsGround rules and assumptionsTime, cost, and performance constraintsOperating proceduresAdministrative policyReporting requirements
13Line Manager’s Responsibility Line manager will define:Detailed task descriptions to implement objectives, requirements, and milestonesDetailed schedules and manpower allocations to support budget and scheduleIdentification of areas of risk, uncertainty, and conflict
146.1 Initial Project Coordination and the Project Charter Early meetings are used to decide on participating in the projectUsed to “flesh out” the nature of the projectOutcomes include:Technical scopeAreas of responsibilityDelivery dates or budgetsRisk management groupFlesh out: expand, elaborate, amplify
15Outside ClientsWhen it is for outside clients, specifications cannot be changed without the client’s permissionClient may place budget constraints on the projectMay be competing against other firms
16Project Charter Elements PurposeObjectivesOverviewSchedulesResourcesPersonnelRisk management plansEvaluation methods
186.2 Starting the Project Plan: The Work Breakdown Structure (WBS) A hierarchical planning processBreaks tasks down into successively finer levels of detailContinues until all meaningful tasks or work packages have been identifiedThese make tracking the work easierNeed separate budget/schedule for each task or work package
19Hierarchical Planning Major tasks are listedEach major task is broken down into detailThis continues until all the activities to be completed are listedNeed to know which activities “depend on” other activities
20A Form to Assist Hierarchical Planning Figure 6-2
22A Visual WBSFigure 6-3 WBS with account numbers shown
23Career DayFigure 6-4 Partial WBS for college “Career Day”
24The WBS What is to be done When it is to be started and finished Who is going to do itSome activities must be done sequentiallySome activities may be done simultaneouslyMany things must happen when and how they are supposed to happenEach detail is uncertain and subjected to risk
25PURPOSE OF WBSIt is to STRUCTURE an ASSIGNED PROJECT into VARIOUS ACTIVITIES in ORDER that:Detailed planning can be performedCosts and budgets can be establishedObjectives can be linked to available resources in a logical mannerSpecific authority and responsibility can be assigned
26Most common type: Six-Level Indentured Structure WORK BREAKDOWN STRUCTURE (WBS)LEVELDESCRIPTION1Total Program2Project(s)3Task(s)4Subtask(s)5Work Package(s)6Level of EffortMost common type: Six-Level Indentured Structure
27WBS: SIX-LEVEL STRUCTURE THE WBS BREAKS WORK DOWN INTO SMALLER ACTIVITIES THUS REDUCING THE RISK THAT ANY MAJOR OR MINOR ITEM WILL BE OMITTEDWBS: SIX-LEVEL STRUCTURELEVELSRESPONSIBILITY123456Usually 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.
28WBS Controls SCHEDULES DECISION TREES MGT. COORDIN. ORGANIZ. CHARTS WORKBREAKDOWNSTRUCTUREORGANIZ.CHARTSACCOUNT-ABILITYCOSTS
296.3 Human Resources: The RACI Matrix and Agile Projects Useful to create a table that shows staff needed to execute WBS tasksOne approach is a organizational breakdown structure (OBS)Organizational units responsible for each WBS elementWho must approve changes of scopeWho must be notified of progressWBS and OBS may not be identical
30The Responsibility (RACI) Matrix Another approach is the Responsible, Accountable, Consult, Inform (RACI) matrixAlso known as a responsibility matrix, a linear responsibility chart, an assignment matrix, a responsibility assignment matrixShows critical interfacesKeeps track of who must approve what and who must be notifiedWhen it comes to leadership, responsibility is the before-the-fact mindset of taking ownership for the results of a project or job. To be responsible, you must first acknowledge that action must be taken on a particular issue.Accountability is the after-the-fact ownership of the results of your project. It is the commitment to honestly explain why things were done a particular way.Example: If you ever find yourself in court answering questions about why an employee was injured under your leadership, you are being held accountable.
31Sample RACI Matrix Figure 6-7 When it comes to leadership, responsibility is the before-the-fact mindset of taking ownership for the results of a project or job. To be responsible, you must first acknowledge that action must be taken on a particular issue.Accountability is the after-the-fact ownership of the results of your project. It is the commitment to honestly explain why things were done a particular way.Example: If you ever find yourself in court answering questions about why an employee was injured under your leadership, you are being held accountable.Figure 6-7
32COBIT® 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? *When we think about COBIT and IT governance at the most fundamental level, there are four questions that every leader asks him or herself when it comes to IT initiatives:Is my IT organization doing the right things?Are we doing them the right way?Are we getting them done well?Are we getting the benefits?Using the maturity models developed for each of COBIT’s 34 IT processes, management can identify:• The actual performance of the enterprise—Where the enterprise istoday• The current status of the industry—The comparison• The enterprise’s target for improvement—Where the enterprise wantsto be• The required growth path between ‘as-is’ and ‘to-be’* 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
33COBIT® Defined Responsibilities for Each Process – A Model for Information Ethics RACI ChartA RACI chart identifies who is Responsible, Accountable, Consulted and/or Informed.FunctionsActivitiesLink business goals to IT goals.CIA/RIdentify critical dependencies and current performance.RBuild an IT strategic plan.ABuild IT tactical plans.Analyse programme portfolios and manage project and service portfolios.COBIT also provides information on what processes should be delegated and to whom they should be delegated. This helps to ensure that IT processes are being managed at the appropriate level within an enterprise. The ‘RACI’ Chart is defined for each process and indicates who is responsible, accountable, consulted or should be informed about specific tasks within a given process.The roles in the RACI chart are categorized for all processes as:• Chief executive officer (CEO); • Chief financial officer (CFO)• Business executives; • Chief information officer (CIO)• Business process owner; • Head operations• Chief architect; • Head development• Head IT administration (for large enterprises, the head of functions suchas human resources, budgeting and internal control)• The project management officer (PMO) or function• Compliance, audit, risk and security (groups with control responsibilitiesbut not operational IT responsibilities)When it comes to leadership, responsibility is the before-the-fact mindset of taking ownership for the results of a project or job. To be responsible, you must first acknowledge that action must be taken on a particular issue.Accountability is the after-the-fact ownership of the results of your project. It is the commitment to honestly explain why things were done a particular way.Example: If you ever find yourself in court answering questions about why an employee was injured under your leadership, you are being held accountable.
34Project 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)PrototypingRapid applications development (RAD)Joint applications development (JAD)34
35Agile Project Planning and Management When scope cannot be determined in advance, traditional planning does not workAgile project management was developed to deal with this problem in ITSmall teams are located at a single siteEntire team collaboratesTeam deals with one requirement at-a-time with the scope frozen
36Project Planning: Basic Four-Stage Model StrategicProjectPlanningProjectRequirementsanalysisResourceallocationProjectPlanningGenericActivity
37Phases in the SDLC (Waterfall Approach) SDLC Revisited Project Identificationand SelectionProject Initiationand PlanningAnalysisAnalysisLogical DesignPhysical DesignImplementationMajor features will be summarized in the next slides.Maintenance
38Systems Definition/Investigation (Feasibility Study) What are new from the last slide?EconomicFeasibilityOperationalFeasibilityCan we afford it?Will it be accepted?ScheduleFeasibilityTechnicalFeasibilityiTeaching Tip: Consider redisplaying slide 5 “Traditional Systems Development Life Cycle”, before beginning discussion of this lecture slide.As pointed out earlier, all application development methodologies share certain common activities. During the remainder of this lecture we will discuss these activities. We will begin by discussing systems investigation.The Investigation Phase begins the preliminary study of the proposed information system solution to meet the E-Business needs. Its focus is to seek to answer the questions: What are our opportunities, what are our priorities, and can IS be used to address these needs?Because the process of application development can be costly both in time and resources, the system investigation phase begins with a Feasibility Study. The goal of feasibility studies is to evaluate alternative systems and to propose the most feasible and desirable systems. Feasibility is assessed across four major categories:Organizational Feasibility. This focuses on how well a proposed information system supports the objectives of the organization.Technical Feasibility. This ascertains whether reliable hardware and software capable of meeting the needs of the proposed system can be acquired or developed.Operational Feasibility. This refers to the willingness and ability of the management, employees, customers, suppliers, and others to operate, use, and support a proposed system.Economic Feasibility. This is concerned with whether the proposed IS benefits are greater than its costs. This area is particularly concerned with financial affordability -- whether the firm can pay to develop the system. A cost/benefit analysis is used to weigh the total costs a new system is likely to incur against the total anticipated benefits to be gained. This includes determining tangible costs (such as hardware and software purchases and employee salaries) and intangible costs such as effects on employee morale and disruptions in productivity during the installation of the new system. Benefits too can be either tangible (such as reduced inventory and carrying costs) or intangible (higher customer satisfaction).Economic feasibility study – (cost-benefit analysis) – identifies the financial benefits and costs associated with the systems development projectOperational feasibility study – examines the likelihood that the project will attain its desired objectivesTechnical feasibility study – determines the organization’s ability to build and integrate the proposed systemSchedule feasibility study – assesses the likelihood that all potential time frames and completion dates will be metLegal and contractual feasibility study – examines all potential legal and contractual ramifications of the proposed systemWhich type of feasibility study would be appropriate for each of the following:Implementation of a new payroll systemImplementation of a new CRM systemImplementation of a new module to an existing CRM systemImplementation of a new ERP systemImplementation of a additional functionality to an existing KM systemWill it be completed bythe deadline?Does the ITcapability exist?OrganizationalFeasibilityLegal andContractual Feasibility(Is it a good fit –objective of the organizationIs the proposedsystem legally?
39Systems Development Life Cycle SDLC typically consists of seven phasesInitiation of the projectThe requirements definition phaseThe functional design phaseThe system is actually builtVerification phaseThe “cut over” where the new system is put in operation and all links are established. Possible conversion methodsParallelDirectPhased in/outpilotThe maintenance and review phaseWhich one is the best approach?Sabre mini case39
40System Conversion Approaches (4Ps) PilotImplement entire system in limited portion of businessMRV uses system for selected customers.Advantage: limits exposure to business if system failsPhasedSystem is installed in phases or modules.Each piece is installed and tested.ParallelComplete new and old systems run simultaneouslyVery safe, but expensivePlunge (or direct)High risk if new system fails, no old system to fall back onOnly used if new system is not vital to company operation
41Installation Conversion Methods: 4 Ps Cut-over timeOld SystemNew SystemParallelOld SystemNew SystemPilotWhen the development of a system will replace or improve a current system, a conversion process will be needed. Conversion methods are used for managing system change and managing both the cost and risk associated with a failure of the new system..Four major forms of system conversion are common:Parallel. This involves operating both the old and the new system at the same time for some period until the project development team and end user management agree to switch over completely to the new system. This is the least risky approach but the most costly, since resources must be used to keep both the new and old system operational.Pilot. Here one department or often an off-site office gives the new system a trial run to see how it works and to catch any problems before the system is implemented company-wide. This is a less costly approach. Risk of failure is isolated to the department or office which receives the new system.Phased. Here the new system is implemented gradually throughout the organization according to some diffusion plan, such as department by department, section by section, or even floor by floor. This approach exposes the organization to more risk, but is less costly.Plunge. This "cold turkey" approach ends use of the old system and begins use of the new system all at once. This approach has the highest risk, but is the least costly to implement. Can be considered for non-critical applications, or application improvements that are marginal.Old SystemNew SystemPhasedOld SystemNew SystemPlunge/DirectName a major advantage and disadvantage of “Parallel” and Plunge”?
436.4 Interface Coordination Through Integration Management Managing a project requires a great deal of coordinationProjects typically draw from many parts of the organization as well as outsidersAll of these must be coordinatedThe RACI matrix helps the project manager accomplish this
44Integration Management Coordinating the work and timing of different groupsInterface coordination is the process of managing this work across multiple groupsUsing multidisciplinary teams to plan the projectRequires structureI.D.E.A projectQ: What do you have at Ming-Chi regarding “Integration”?
45Managing Projects by Phases and Phase-Gates Break objectives into shorter term sub-objectivesProject life cycle is used for breaking a project up into component phasesFocus on specific, short-term outputLots of feedback between disciplines
46Homework: Incidents for Discussion WBS (p. 265) Ringold’s Pool and Patio SupplyTasks to do:1. Create a WBS like Figure 6-3 or Figure 6-42. Then, answer the following two questionsa) Is John Jr.’s WBS projection reasonable?b) What aspects of the decision will John Sr. consider?
47Incidents for Discussion (p. 265) WBS (continued) Ringold’s Pool and Patio SupplyQuestion:1. Is John Jr.’s WBS projection reasonable?2. What aspects of the decision will John Sr. consider?
48Answer 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.
49Answer 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.
51Risk Management: Basic Concepts Risk management focuses on:Known unknownsProactive managementThe alternative to proactive management is reactive management, also called crisis management.This requires significantly more resources and takes longer for problems to surface
52RISK 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?
53Risk Management Projects are risky, uncertainty is high Project manager must manage this riskThis is called “risk management”Risk varies widely between projectsRisk also varies widely between organizationsRisk management should be built on the results of prior projects
54Sub-processes to Risk Management Risk management planningRisk identificationQualitative risk analysisQuantitative risk analysisRisk response planningRisk monitoring and controlThe risk management registerCreating a permanent register of identified risks, methods used to mitigate or resolve them, and the results of all risk management activities.
55Risk Management Planning Need to know the risk involved before selecting a projectRisk management plan must be carried out before the project can be formally selectedAt first, focus is on externalitiesTrack and estimate project survivalProject risks take shape during planningOften handled by project office
56Risk IdentificationRisk is dependent on technology and environmental factorsDelphi method is useful for identifying project risksOther methods include brainstorming, nominal group techniques, checklists, and attribute listingMay also use cause-effect diagrams, flow charts, influence charts, SWOT analysis
57Qualitative Risk Analysis Purpose is to prioritize risksA sense of the impact is also neededEach objective should be scaled and weightedConstruct a risk matrixSame approach can be used for opportunities
58Risk MatrixThere are “five” threats with “three” categories (critical, monitor, ignore) in this example.Figure 6-12
59Quantitative Risk Analysis: Failure Mode and Effect Analysis (FMEA) List ways a project can failEvaluate severity (S)with “1” “no effect”, “10” is “very severe”Estimate likelihood of cause of failure (L)“1” is absolutely “uncertain”, “10” almost certainEstimate the inability to detect (D)“1” detectability is almost certain and “10” failure is not be detected in time to avoidFind the risk priority number (RPN) (RPN = S L D)Consider ways to reduce the S, L, and D for each cause of failuresince the lower numbers of S,L,D the BETTER for reducing the cause of failure (i.e., the LESS risk)
60A FMEA Example Q: Which one is with the “biggest” threat? Why? Answer: #2 (Can’t acquire tech knowledge)Table 6-1
61Decision Tree Analysis Q: 1. Why EMV is 8.0 for Stocks (a2)?2. Why EMV is 8.4 for this scenario?Figure 6-13 Decision Tree based on expected monetary value (EMV)
63Risk Monitoring and Control Monitoring covered in detail in Chapter 10Control covered in Chapter 11
64The 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 projectsAssumptions madeRisks identifiedList of categories and key wordsEstimates on risk, states of project’s environment, or on project assumptionsMinutesActual outcomes
66Change ManagementYOU 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”)
67Unmanaged vs. Managed Changes Where TIME is investedHow ENERGY is investedWhich RESOURCES are usedBack-endReworkEnforcementComplianceSupervisionSenior Management and key players onlyUnmanaged ChangeFront-endEducationCommunicationPlanningImprovementsValue-AddedStakeholdersSuppliersCustomersManaged Change
68Implementation /Conversion Cost of CorrectionsDefinitionPreliminary PlanningDetailed PlanningExecutionImplementation /Conversion$1$5$25$100$1000
69Integrated Processes for The 21st Century Project ManagementConcurrentEngineeringTotal QualityManagementChangeManagementRiskManagement
70Video VIDEO. Understanding_Project_Mgt_Benefits (11m) FMEA (FMEA Services from Concept to Completion-Dynamic Positioning (6m)
71In class Exercise and HW Problem #1 (p.263)Construct a risk matrix (see Figure 6-12)Problem #2 (p.264)FMEA analysisProblem #5 (p.264)Decision Tree (which one is the best option)Start to read and prepare case study 1: Southwest Airlines
72Problem #1 (p.263) Construct a risk matrix (see Figure 6-12)
74Problem 1:Problem 1:Probability 76Threat 25Threat 14Threat 43Threat 321ImpactLegend:CriticalMonitorIgnoreThreat 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.
76ThreatSeverity (S)(Impact)Likelihood (L)(Probability)Inability to detect (D)RPN#135460#26130#336#47168Problem 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.
77Problem #5 (p.264) Decision Tree (which one is the best option) RevenueExpenseProfitProblem 5:a1, a3 decision = (0.7 $3,000) + (0.3 $2,000) – $500 = $2,200YOUR TURN to compute a1,a4; a2,a5 and a2,a6 decisionsa1, 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=$800$1,660$2,260Which one is the best option?Based on this analysis, the best option isa2, a6.