Chapter 1: Introduction to Project Management

Chapter 1: Introduction to Project Management
Information Technology Project Management, Fifth Edition

Learning Objectives Understand the growing need for better project management, especially for information technology projects Explain what a project is, provide examples of information technology projects, list various attributes of projects, and describe the triple constraint of projects Describe project management and discuss key elements of the project management framework, including project stakeholders, the project management knowledge areas, common tools and techniques, and project success Information Technology Project Management, Fifth Edition, Copyright 2007

Learning Objectives (continued)
Discuss the relationship between project, program, and portfolio management and the contributions they each make to enterprise success Understand the role of the project manager by describing what project managers do, what skills they need, and what the career field is like for information technology project managers Describe the project management profession, including its history, the role of professional organizations like the Project Management Institute, the importance of certification and ethics, and the advancement of project management software Information Technology Project Management, Fifth Edition, Copyright 2007

Introduction Many organizations today have a new or renewed interest in project management Computer hardware, software, networks, and the use of interdisciplinary and global work teams have radically changed the work environment The U.S. spends $2.3 trillion on projects every year, or one-quarter of its gross domestic product, and the world as a whole spends nearly $10 trillion of its $40.7 gross product on projects of all kinds Information Technology Project Management, Fifth Edition, Copyright 2007

Project Management Statistics
Worldwide IT spending totaled more than $1.8 trillion in 2005, a 6 percent increase from 2004, and spending is projected to grow 8 percent in and 4 percent in 2007 In 2005, the total compensation for the average senior project manager was $99,183 per year in the United States, $94,646 in Australia, and $106,374 in the United Kingdom The number of people earning their Project Management Professional (PMP) certification increased by more than 70 percent from 2004 to 2005, with more than 200,000 PMPs worldwide by the end of August, 2006 Information Technology Project Management, Fifth Edition, Copyright 2007

Motivation for Studying Information Technology (IT) Project Management
IT Projects have a terrible track record, as described in the “What Went Wrong?” section A 1995 Standish Group study (CHAOS) found that only 16.2% of IT projects were successful in meeting scope, time, and cost goals Over 31% of IT projects were canceled before completion, costing over $81 billion in the U.S. alone Information Technology Project Management, Fifth Edition, Copyright 2007

Advantages of Using Formal Project Management
Better control of financial, physical, and human resources Improved customer relations Shorter development times Lower costs Higher quality and increased reliability Higher profit margins Improved productivity Better internal coordination Higher worker morale (less stress) Information Technology Project Management, Fifth Edition, Copyright 2007

What Is a Project? A project is “a temporary endeavor undertaken to create a unique product, service, or result” (PMBOK® Guide, Third Edition, 2004, p. 5) Operations is work done to sustain the business Projects end when their objectives have been reached or the project has been terminated Projects can be large or small and take a short or long time to complete Information Technology Project Management, Fifth Edition, Copyright 2007

Examples of IT Projects
A help desk or technical worker replaces ten laptops for a small department A small software development team adds a new feature to an internal software application for the finance department A college campus upgrades its technology infrastructure to provide wireless Internet access across the whole campus A cross-functional task force in a company decides what Voice-over-Internet-Protocol (VoIP) system to purchase and how it will be implemented Information Technology Project Management, Fifth Edition, Copyright 2007

Top Ten Technology Projects in 2006
VoIP Outsourcing Data networking Customer relationship management Collaboration Supply chain management Desktop upgrades Application performance management Business analytics Compliance tracking Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot: Where IT Matters
In 2006, Baseline Magazine published “Where I.T. Matters: How 10 Technologies Transformed 10 Industries” as a retort to Nicholas Carr’s ideas (author of “IT Doesn’t Matter”) VoIP has transformed the telecommunications industry and broadband Internet access Global Positioning Systems (GPS) has changed the farming industry Digital supply chain has changed the entertainment industry’s distribution system Information Technology Project Management, Fifth Edition, Copyright 2007

Project Attributes A project: Has a unique purpose Is temporary
Is developed using progressive elaboration Requires resources, often from various areas Should have a primary customer or sponsor The project sponsor usually provides the direction and funding for the project Involves uncertainty Information Technology Project Management, Fifth Edition, Copyright 2007

Project and Program Managers
Project managers work with project sponsors, a project team, and other people involved in a project to meet project goals Program: group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually (PMBOK® Guide, Third Edition, 2004, p. 16) Program managers oversee programs and often act as bosses for project managers Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 1-1: The Triple Constraint of Project Management
Successful project management means meeting all three goals (scope, time, and cost) – and satisfying the project’s sponsor! Information Technology Project Management, Fifth Edition, Copyright 2007

What is Project Management?
Project management is “the application of knowledge, skills, tools and techniques to project activities to meet project requirements” (PMBOK® Guide, Third Edition, 2004, p. 8) Project managers strive to meet the triple constraint by balancing project scope, time, and cost goals Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 1-2: Project Management Framework
Information Technology Project Management, Fifth Edition, Copyright 2007

Project Stakeholders Stakeholders are the people involved in or affected by project activities Stakeholders include: The project sponsor The project manager The project team Support staff Customers Users Suppliers Opponents to the project Information Technology Project Management, Fifth Edition, Copyright 2007

Nine Project Management Knowledge Areas
Knowledge areas describe the key competencies that project managers must develop Four core knowledge areas lead to specific project objectives (scope, time, cost, and quality) Four facilitating knowledge areas are the means through which the project objectives are achieved (human resources, communication, risk, and procurement management One knowledge area (project integration management) affects and is affected by all of the other knowledge areas All knowledge areas are important! Information Technology Project Management, Fifth Edition, Copyright 2007

Project Management Tools and Techniques
Project management tools and techniques assist project managers and their teams in various aspects of project management Some specific ones include: Project charter, scope statement, and WBS (scope) Gantt charts, network diagrams, critical path analysis, and critical chain scheduling (time) Cost estimates and earned value management (cost) See Table 1-1 for many more Information Technology Project Management, Fifth Edition, Copyright 2007

Super Tools “Super tools” are those tools that have high use and high potential for improving project success, such as: Software for task scheduling (such as project management software) Scope statements Requirements analyses Lessons-learned reports Tools already extensively used that have been found to improve project importance include: Progress reports Kick-off meetings Gantt charts Change requests Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Right? Improved Project Performance
The Standish Group’s CHAOS studies show improvements in IT projects in the past decade Information Technology Project Management, Fifth Edition, Copyright 2007

Why the Improvements? "The reasons for the increase in successful projects vary. First, the average cost of a project has been more than cut in half. Better tools have been created to monitor and control progress and better skilled project managers with better management processes are being used. The fact that there are processes is significant in itself.”* *The Standish Group, "CHAOS 2001: A Recipe for Success" (2001). Information Technology Project Management, Fifth Edition, Copyright 2007

Project Success There are several ways to define project success
The project met scope, time, and cost goals The project satisfied the customer/sponsor The results of the project met its main objective, such as making or saving a certain amount of money, providing a good return on investment, or simply making the sponsors happy Information Technology Project Management, Fifth Edition, Copyright 2007

Table 1-2: What Helps Projects Succeed?*
1. Executive support 2. User involvement 3. Experienced project manager 4. Clear business objectives 5. Minimized scope 6. Standard software infrastructure 7. Firm basic requirements 8. Formal methodology 9. Reliable estimates 10. Other criteria, such as small milestones, proper planning, competent staff, and ownership *The Standish Group, “Extreme CHAOS,” (2001). Information Technology Project Management, Fifth Edition, Copyright 2007

What the Winners Do Recent research findings show that companies that excel in project delivery capability: Use an integrated project management toolbox (use standard/advanced PM tools and lots of templates) Grow project leaders, emphasizing business and soft skills Develop a streamlined project delivery process Measure project health using metrics, like customer satisfaction or return on investment Information Technology Project Management, Fifth Edition, Copyright 2007

Program and Project Portfolio Management
A program is “a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually” (PMBOK® Guide, Third Edition, 2004, p. 16) A program manager provides leadership and direction for the project managers heading the projects within the program Examples of common programs in the IT field: infrastructure, applications development, and user support Information Technology Project Management, Fifth Edition, Copyright 2007

Project Portfolio Management
As part of project portfolio management, organizations group and manage projects and programs as a portfolio of investments that contribute to the entire enterprise’s success Portfolio managers help their organizations make wise investment decisions by helping to select and analyze projects from a strategic perspective Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 1-3: Project Management Compared to Project Portfolio Management

Best Practice A best practice is “an optimal way recognized by industry to achieve a stated goal or objective”* Robert Butrick suggests that organizations need to follow basic principles of project management, including these two mentioned earlier in this chapter Make sure your projects are driven by your strategy; be able to demonstrate how each project you undertake fits your business strategy, and screen out unwanted projects as soon as possible Engage your stakeholders; ignoring stakeholders often leads to project failure Be sure to engage stakeholders at all stages of a project, and encourage teamwork and commitment at all times *Project Management Institute, Inc., Organizational Project Management Maturity Model (OPM3) Knowledge Foundation (2003), p. 13. Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 1-4: Sample Project Portfolio Approach

Figure 1-5: Sample Project Portfolio Management Screen Showing Project Health

Suggested Skills for Project Managers
Project managers need a wide variety of skills They should: Be comfortable with change Understand the organizations they work in and with Be able to lead teams to accomplish project goals Information Technology Project Management, Fifth Edition, Copyright 2007

The Role of the Project Manager
Job descriptions vary, but most include responsibilities like planning, scheduling, coordinating, and working with people to achieve project goals Remember that 97% of successful projects were led by experienced project managers, who can often help influence success factors Information Technology Project Management, Fifth Edition, Copyright 2007

Suggested Skills for Project Managers
The Project Management Body of Knowledge Application area knowledge, standards, and regulations Project environment knowledge General management knowledge and skills Soft skills or human relations skills Information Technology Project Management, Fifth Edition, Copyright 2007

Table 1-3: Ten Most Important Skills and Competencies for Project Managers
1. People skills 2. Leadership 3. Listening 4. Integrity, ethical behavior, consistent 5. Strong at building trust 6. Verbal communication 7. Strong at building teams 8. Conflict resolution, conflict management 9. Critical thinking, problem solving 10. Understands, balances priorities Information Technology Project Management, Fifth Edition, Copyright 2007

Different Skills Needed in Different Situations
Large projects: leadership, relevant prior experience, planning, people skills, verbal communication, and team-building skills are most important High uncertainty projects: risk management, expectation management, leadership, people skills, and planning skills are most important Very novel projects: leadership, people skills, having vision and goals, self-confidence, expectations management, and listening skills are most important Information Technology Project Management, Fifth Edition, Copyright 2007

Importance of Leadership Skills
Effective project managers provide leadership by example A leader focuses on long-term goals and big- picture objectives while inspiring people to reach those goals A manager deals with the day-to-day details of meeting specific goals Project managers often take on the role of both leader and manager Information Technology Project Management, Fifth Edition, Copyright 2007

Careers for IT Project Managers
In a 2006 survey by CIO.com, IT executives ranked project/program management the skills that would be the most in demand in the next two to five years Information Technology Project Management, Fifth Edition, Copyright 2007

Table 1-4: Top IT Skills (partial list)
SKILL PERCENTAGE OF RESPONDENTS Project/program management 60% Business process management 55% Business analysis 53% Application development 52% Database management 49% Security % Enterprise architect 41% Strategist/internal consultant 40% Information Technology Project Management, Fifth Edition, Copyright 2007

The Project Management Profession
The profession of project management is growing at a very rapid pace It is helpful to understand the history of the field, the role of professional societies like the Project Management Institute, and the growth in project management software Information Technology Project Management, Fifth Edition, Copyright 2007

History of Project Management
Some people argue that building the Egyptian pyramids was a project, as was building the Great Wall of China Most people consider the Manhattan Project to be the first project to use “modern” project management This three-year, $2 billion (in 1946 dollars) project had a separate project manager and a technical manager Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 1-6: Sample Gantt Chart Created with Project 2007

Figure 1-7: Sample Network Diagram in Microsoft Project

The Project Management Institute
The Project Management Institute (PMI) is an international professional society for project managers founded in 1969 PMI has continued to attract and retain members, reporting 225,432 members worldwide by 12/31/06 There are specific interest groups in many areas like engineering, financial services, health care, IT, etc. Project management research and certification programs continue to grow Information Technology Project Management, Fifth Edition, Copyright 2007

Project Management Certification
PMI provides certification as a Project Management Professional (PMP) A PMP has documented sufficient project experience, has agreed to follow a code of ethics, and has passed the PMP exam The number of people earning PMP certification is increasing quickly PMI and other organizations are offering new certification programs (see Appendix B) Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 1-8: Growth in PMP Certification, 1993-2006

Ethics in Project Management
Ethics, loosely defined, is a set of principles that guide our decision making based on personal values of what is “right” and “wrong” Project managers often face ethical dilemmas In order to earn PMP certification, applicants must agree to PMI’s Code of Ethics and Professional Conduct Several questions on the PMP exam are related to professional responsibility, including ethics Information Technology Project Management, Fifth Edition, Copyright 2007

Project Management Software
There are hundreds of different products to assist in performing project management Three main categories of tools Low-end tools: handle single or smaller projects well, cost under $200 per user Midrange tools: handle multiple projects and users, cost $ per user, Project 2007 most popular High-end tools: also called enterprise project management software, often licensed on a per-user basis, like VPMi Enterprise Online ( see front cover for trial version information See the Project Management Center Web site or Top Ten Reviews for links to many companies that provide project management software Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary A project is a temporary endeavor undertaken to create a unique product, service, or result Project management is the application of knowledge, skills, tools, and techniques to project activities to meet project requirements A program is a group of related projects managed in a coordinated way; project portfolio management involves organizing and managing projects and programs as a portfolio of investments Project managers play a key role in helping projects and organizations succeed The project management profession continues to grow and mature Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 2: The Project Management and Information Technology Context

Learning Objectives Describe the systems view of project management and how it applies to information technology projects Understand organizations, including the four frames, organizational structures, and organizational culture Explain why stakeholder management and top management commitment are critical for a project’s success Information Technology Project Management, Fifth Edition, Copyright 2007

Understand the concept of a project phase and the project life cycle and distinguish between project development and product development Discuss the unique attributes and diverse nature of information technology projects Information Technology Project Management, Fifth Edition, Copyright 2007

Projects Cannot Be Run in Isolation
Projects must operate in a broad organizational environment Project managers need to use systems thinking Taking a holistic view of carrying out projects within the context of the organization Senior managers must make sure projects continue to support current business needs Information Technology Project Management, Fifth Edition, Copyright 2007

A Systems View of Project Management
A systems approach emerged in the 1950s to describe a more analytical approach to management and problem solving Three parts include: Systems philosophy: an overall model for thinking about things as systems Systems analysis: problem-solving approach Systems management: address business, technological, and organizational issues before making changes to systems Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot The Press Association Ltd, the largest news agency in the United Kingdom, hired a consulting firm to help turn things around after management noticed its profit margins were sliding The consultants suggested using a holistic view and a top-down strategy to make sure projects supported key business goals They also suggested releasing short-term results to accrue benefits on an incremental basis and reviewing projects on a regular basis to ensure strategic alignment Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 2-1: Three Sphere Model for Systems Management
56 Information Technology Project Management, Fifth Edition, Copyright 2007

Understanding Organizations
Structural frame: Focuses on roles and responsibilities, coordination and control. Organization charts help define this frame. Human resources frame: Focuses on providing harmony between needs of the organization and needs of people. Political frame: Assumes organizations are coalitions composed of varied individuals and interest groups. Conflict and power are key issues. Symbolic frame: Focuses on symbols and meanings related to events. Culture is important. Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? Many enterprise resource planning (ERP) projects fail due to organizational issues, not technical issues. For example, Sobey’s Canadian grocery store chain abandoned its two-year, $90 million ERP system due to organizational problems. As Dalhousie University Associate Professor Sunny Marche states, “The problem of building an integrated system that can accommodate different people is a very serious challenge. You can’t divorce technology from the sociocultural issues. They have an equal role.” Sobey’s ERP system shut down for five days and employees were scrambling to stock potentially empty shelves in several stores for weeks. The system failure cost Sobey’s more than $90 million and caused shareholders to take an 82-cent after-tax hit per share.* *Hoare, Eva. “Software hardships,” The Herald, Halifax, Nova Scotia (2001). 58 Information Technology Project Management, Fifth Edition, Copyright 2007

Organizational Structures
Three basic organization structures Functional: functional managers report to the CEO Project: program managers report to the CEO Matrix: middle ground between functional and project structures; personnel often report to two or more bosses; structure can be weak, balanced, or strong matrix Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 2-2: Functional, Project, and Matrix Organizational Structures

Table 2-1: Organizational Structure Influences on Projects

Organizational Culture
Organizational culture is a set of shared assumptions, values, and behaviors that characterize the functioning of an organization Many experts believe the underlying causes of many companies’ problems are not the structure or staff, but the culture Information Technology Project Management, Fifth Edition, Copyright 2007

Ten Characteristics of Organizational Culture
Member identity* Group emphasis* People focus Unit integration* Control Risk tolerance* Reward criteria* Conflict tolerance* Means-ends orientation Open-systems focus* *Project work is most successful in an organizational culture where these items are strong/high and other items are balanced 63 Information Technology Project Management, Fifth Edition, Copyright 2007

Stakeholder Management
Project managers must take time to identify, understand, and manage relationships with all project stakeholders Using the four frames of organizations can help meet stakeholder needs and expectations Senior executives/top management are very important stakeholders Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practice IT governance addresses the authority and control for key IT activities in organizations, including IT infrastructure, IT use, and project management A lack of IT governance can be dangerous, as evidenced by three well-publicized IT project failures in Australia (Sydney Water’s customer relationship management system, the Royal Melbourne Institute of Technology’s academic management system, and One.Tel’s billing system) Information Technology Project Management, Fifth Edition, Copyright 2007

Need for Organizational Commitment to Information Technology (IT)
If the organization has a negative attitude toward IT, it will be difficult for an IT project to succeed Having a Chief Information Officer (CIO) at a high level in the organization helps IT projects Assigning non-IT people to IT projects also encourages more commitment Information Technology Project Management, Fifth Edition, Copyright 2007

Need for Organizational Standards
Standards and guidelines help project managers be more effective Senior management can encourage: The use of standard forms and software for project management The development and use of guidelines for writing project plans or providing status information The creation of a project management office or center of excellence Information Technology Project Management, Fifth Edition, Copyright 2007

Project Phases and the Project Life Cycle
A project life cycle is a collection of project phases that defines: What work will be performed in each phase What deliverables will be produced and when Who is involved in each phase How management will control and approve work produced in each phase A deliverable is a product or service produced or provided as part of a project Information Technology Project Management, Fifth Edition, Copyright 2007

More on Project Phases In early phases of a project life cycle:
Resource needs are usually lowest The level of uncertainty (risk) is highest Project stakeholders have the greatest opportunity to influence the project In middle phases of a project life cycle: The certainty of completing a project improves More resources are needed The final phase of a project life cycle focuses on: Ensuring that project requirements were met The sponsor approves completion of the project Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 2-3: Phases of the Traditional Project Life Cycle

Product Life Cycles Products also have life cycles
The Systems Development Life Cycle (SDLC) is a framework for describing the phases involved in developing and maintaining information systems Systems development projects can follow: Predictive life cycle: the scope of the project can be clearly articulated and the schedule and cost can be predicted Adaptive Software Development (ASD) life cycle: requirements cannot be clearly expressed, projects are mission driven and component based, using time-based cycles to meet target dates Information Technology Project Management, Fifth Edition, Copyright 2007

Predictive Life Cycle Models
Waterfall model: has well-defined, linear stages of systems development and support Spiral model: shows that software is developed using an iterative or spiral approach rather than a linear approach Incremental build model: provides for progressive development of operational software Prototyping model: used for developing prototypes to clarify user requirements Rapid Application Development (RAD) model: used to produce systems quickly without sacrificing quality Information Technology Project Management, Fifth Edition, Copyright 2007

The Importance of Project Phases and Management Reviews
A project should successfully pass through each of the project phases in order to continue on to the next Management reviews, also called phase exits or kill points, should occur after each phase to evaluate the project’s progress, likely success, and continued compatibility with organizational goals Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Right? "The real improvement that I saw was in our ability toin the words of Thomas Edisonknow when to stop beating a dead horse.…Edison's key to success was that he failed fairly often; but as he said, he could recognize a dead horse before it started to smell...In information technology we ride dead horsesfailing projectsa long time before we give up. But what we are seeing now is that we are able to get off them; able to reduce cost overrun and time overrun. That's where the major impact came on the success rate.”* Many organizations, like Huntington Bancshares, Inc., use an executive steering committee to help keep projects on track. *Cabanis, Jeannette, "'A Major Impact': The Standish Group's Jim Johnson On Project Management and IT Project Success," PM Network, PMI, Sep.1998, p. 7 74 Information Technology Project Management, Fifth Edition, Copyright 2007

The Context of IT Projects
IT projects can be very diverse in terms of size, complexity, products produced, application area, and resource requirements IT project team members often have diverse backgrounds and skill sets IT projects use diverse technologies that change rapidly; even within one technology area, people must be highly specialized Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project managers need to take a systems approach when working on projects Organizations have four different frames: structural, human resources, political, and symbolic The structure and culture of an organization have strong implications for project managers Projects should successfully pass through each phase of the project life cycle Project managers need to consider several factors due to the unique context of information technology projects Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 3: The Project Management Process Groups: A Case Study

Learning Objectives Describe the five project management (PM) process groups, the typical level of activity for each, and the interactions among them Understand how the PM process groups relate to the PM knowledge areas Discuss how organizations develop information technology PM methodologies to meet their needs Information Technology Project Management, Fifth Edition, Copyright 2007

Review a case study of an organization applying the PM process groups to manage an information technology project, and understand the contribution that effective project initiation, project planning, project execution, project monitoring and controlling, and project closing make to project success Information Technology Project Management, Fifth Edition, Copyright 2007

Project Management Process Groups
A process is a series of actions directed toward a particular result Project management can be viewed as a number of interlinked processes The project management process groups include: Initiating processes Planning processes Executing processes Monitoring and controlling processes Closing processes Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 3-1: Level of Activity and Overlap of Process Groups Over Time

What Went Wrong? Philip A. Pell, PMP, commented on how the U.S. IRS needed to improve its project management process. “Pure and simple, good, methodology-centric, predictable, and repeatable project management is the SINGLE greatest factor in the success (or in this case failure) of any project… The project manager is ultimately responsible for the success or failure of the project.”* In 2006, the IRS lost over $320 million due to a botched fraud- detection system project *Comments posted on CIO Magazine Web site on article “For the IRS, There’s No EZ Fix,” (April 1, 2004). 82 Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot Just as information technology projects need to follow the project management process groups, so do other projects, such as the production of a movie. Processes involved in making movies might include screenwriting (initiating), producing (planning), acting and directing (executing), editing (monitoring and controlling), and releasing the movie to theaters (closing). Many people enjoy watching the extra features on a DVD that describe how these processes lead to the creation of a movie… This acted “…not as promotional filler but as a serious and meticulously detailed examination of the entire filmmaking process.”* Project managers in any field know how important it is to follow a good process. *Jacks, Brian, “Lord of the Rings: The Two Towers Extended Edition (New Line)”, Underground Online (accessed from August 4, 2004). Information Technology Project Management, Fifth Edition, Copyright 2007

Mapping the Process Groups to the Knowledge Areas
You can map the main activities of each PM process group into the nine knowledge areas using the PMBOK® Guide 2004 Note that there are activities from each knowledge area under the planning and monitoring and controlling process groups All initiating activities are part of the project integration management knowledge area Information Technology Project Management, Fifth Edition, Copyright 2007

Table 3-1: Relationships Among Process Groups and Knowledge Areas (PMBOK® Guide 2004, p. 69)

Table 3-1: Relationships Among Process Groups and Knowledge Areas (continued)
PMBOK® Guide Third Edition, 2004, p. 69 86 Information Technology Project Management, Fifth Edition, Copyright 2007

Developing an IT Project Management Methodology
Just as projects are unique, so are approaches to project management Many organizations develop their own project management methodologies, especially for IT projects; a methodology describes how things should be done Blue Cross Blue Shield of Michigan used the PMBOK as a guide in developing their IT project management methodology Six Sigma projects and the Rational Unified Process (RUP) framework use project management methodologies Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Right? Jordan Telecom (JT), Jordan’s only telecom operator, introduced new customized project management processes to improve efficiency and reduce costs in its Information Technology department…JT created three lines of processes based on the size of the project: high, medium, or low. ..Rula Ammuri, JT’s Chief Information Officer, believes this new methodology will result in a percent increase in productivity.”* *Al-Tamimi, Fairooz, “Jordanian Company Uses PMI Methods to ‘Go Global,’ Improve Productivity,” PMI Today (August 2004). 88 Information Technology Project Management, Fifth Edition, Copyright 2007

Case Study: JWD Consulting’s Project Management Intranet Site
This case study provides an example of what’s involved in initiating, planning, executing, controlling, and closing an IT project You can download templates for creating your own project management documents from the companion Web site for this text Note: This case study provides a big picture view of managing a project; later chapters provide detailed information on each knowledge area Information Technology Project Management, Fifth Edition, Copyright 2007

Project Initiation Initiating a project includes recognizing and starting a new project or project phase Some organizations use a pre-initiation phase, while others include items like developing a business case as part of initiation The main goal is to formally select and start off projects Key outputs include: Assigning the project manager Identifying key stakeholders Completing a business case Completing a project charter and getting signatures on it Information Technology Project Management, Fifth Edition, Copyright 2007

Project Initiation Documents
Business case: see pp Charter: see pp Note: Every organization has its own variations of what documents are required for project initiation It’s important to identify the need for projects, who the stakeholders are, and what the main goals are for the project Information Technology Project Management, Fifth Edition, Copyright 2007

Project Planning The main purpose of project planning is to guide execution Every knowledge area includes planning information (see Table 3-5 on pp ) Key outputs included in the JWD project include: A team contract A project scope statement A work breakdown structure (WBS) A project schedule, in the form of a Gantt chart with all dependencies and resources entered A list of prioritized risks (part of a risk register) See sample documents on pp Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 3-4: JWD Consulting Intranet Site Project Baseline Gantt Chart

Table 3-8: List of Prioritized Risks

Project Executing Usually takes the most time and resources to perform project execution Project managers must use their leadership skills to handle the many challenges that occur during project execution Table 3-9 on pp lists the executing processes and outputs; many project sponsors and customers focus on deliverables related to providing the products, services, or results desired from the project A milestone report (example on pp ) can help focus on completing major milestones Information Technology Project Management, Fifth Edition, Copyright 2007

Table 3-10: Part of Milestone Report

Best Practice One way to learn about best practices in project management is by studying recipients of PMI’s Project of the Year award The Quartier international de Montreal (QIM), Montreal’s international district, was a 66-acre urban revitalization project in the heart of downtown Montreal This $90 million, five-year project turned a once unpopular area into a thriving section of the city with a booming real estate market, and generated $770 million in related construction Information Technology Project Management, Fifth Edition, Copyright 2007

Project Monitoring and Controlling
Involves measuring progress toward project objectives, monitoring deviation from the plan, and taking correction actions Affects all other process groups and occurs during all phases of the project life cycle Outputs include performance reports, requested changes, and updates to various plans Information Technology Project Management, Fifth Edition, Copyright 2007

Project Closing Involves gaining stakeholder and customer acceptance of the final products and services Even if projects are not completed, they should be closed out to learn from the past Outputs include project archives and lessons learned, part of organizational process assets Most projects also include a final report and presentation to the sponsor/senior management Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary The five project management process groups are initiating, planning, executing, monitoring and controlling, and closing You can map the main activities of each process group to the nine knowledge areas Some organizations develop their own information technology project management methodologies The JWD Consulting case study provides an example of using the process groups and shows several important project documents Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 4: Project Integration Management

Learning Objectives Describe an overall framework for project integration management as it relates to the other PM knowledge areas and the project life cycle Explain the strategic planning process and apply different project selection methods Explain the importance of creating a project charter to formally initiate projects Discuss the process of creating a preliminary project scope statement Information Technology Project Management, Fifth Edition, Copyright 2007

Describe project management plan development, including content, using guidelines and templates for developing plans, and performing a stakeholder analysis to help manage relationships Explain project execution, its relationship to project planning, the factors related to successful results, and tools and techniques to assist in project execution Describe the process of monitoring and controlling project work Information Technology Project Management, Fifth Edition, Copyright 2007

Understand the integrated change control process, planning for and managing changes on information technology projects, and developing and using a change control system Explain the importance of developing and following good procedures for closing projects Describe how software can assist in project integration management Information Technology Project Management, Fifth Edition, Copyright 2007

The Key to Overall Project Success: Good Project Integration Management
Project managers must coordinate all of the other knowledge areas throughout a project’s life cycle Many new project managers have trouble looking at the “big picture” and want to focus on too many details (See opening case for a real example) Project integration management is not the same thing as software integration Information Technology Project Management, Fifth Edition, Copyright 2007

Project Integration Management Processes
Develop the project charter: working with stakeholders to create the document that formally authorizes a project—the charter Develop the preliminary project scope statement: working with stakeholders, especially users of the project’s products, services, or results, to develop the high-level scope requirements and create a preliminary project scope statement Develop the project management plan: coordinating all planning efforts to create a consistent, coherent document—the project management plan Information Technology Project Management, Fifth Edition, Copyright 2007

Project Integration Management Processes (continued)
Direct and manage project execution: carrying out the project management plan by performing the activities included in it Monitor and control the project work: overseeing project work to meet the performance objectives of the project Perform integrated change control: coordinating changes that affect the project’s deliverables and organizational process assets Close the project: finalizing all project activities to formally close the project Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-1: Project Integration Management Summary

What Went Wrong? The Airbus A380 megajet project was two years behind schedule in Oct , causing Airbus’ parent company to face an expected loss of $6.1 billion over the next four years The project suffered from severe integration management problems, or “integration disintegration... Early this year, when pre-assembled bundles containing hundreds of miles of cabin wiring were delivered from a German factory to the assembly line in France, workers discovered that the bundles, called harnesses, didn't fit properly into the plane. Assembly slowed to a near-standstill, as workers tried to pull the bundles apart and re-thread them through the fuselage. Now Airbus will have to go back to the drawing board and redesign the wiring system.”* *Matlack, Carol. “First, Blame the Software,” BusinessWeek Online (October 5, 2006). Information Technology Project Management, Fifth Edition, Copyright 2007

Strategic Planning and Project Selection
Strategic planning involves determining long-term objectives, predicting future trends, and projecting the need for new products and services Organizations often perform a SWOT analysis Analyzing Strengths, Weaknesses, Opportunities, and Threats As part of strategic planning, organizations: Identify potential projects Use realistic methods to select which projects to work on Formalize project initiation by issuing a project charter Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-2: Information Technology Planning Process

Best Practice Only one in seven product concepts comes to fruition
Companies like Proctor & Gamble, Johnson and Johnson, Hewlett Packard, and Sony are consistently successful in New Product Development (NPD) because they use a disciplined, systematic approach to NPD projects based on best practices Four important forces behind NPD success include the following: A product innovation and technology strategy for the business Resource commitment and focusing on the right projects, or solid portfolio management An effective, flexible and streamlined idea-to-launch process The right climate and culture for innovation, true cross-functional teams, and senior management commitment to NPD Information Technology Project Management, Fifth Edition, Copyright 2007

Methods for Selecting Projects
There are usually more projects than available time and resources to implement them Methods for selecting projects include: Focusing on broad organizational needs Categorizing information technology projects Performing net present value or other financial analyses Using a weighted scoring model Implementing a balanced scorecard Information Technology Project Management, Fifth Edition, Copyright 2007

Focusing on Broad Organizational Needs
It is often difficult to provide strong justification for many IT projects, but everyone agrees they have a high value “It is better to measure gold roughly than to count pennies precisely” Three important criteria for projects: There is a need for the project There are funds available There’s a strong will to make the project succeed Information Technology Project Management, Fifth Edition, Copyright 2007

Categorizing IT Projects
One categorization is whether the project addresses: A problem An opportunity A directive Another categorization is how long it will take to do and when it is needed Another is the overall priority of the project Information Technology Project Management, Fifth Edition, Copyright 2007

Financial Analysis of Projects
Financial considerations are often an important consideration in selecting projects Three primary methods for determining the projected financial value of projects Net present value (NPV) analysis Return on investment (ROI) Payback analysis Information Technology Project Management, Fifth Edition, Copyright 2007

Net Present Value Analysis
Net present value (NPV) analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time Projects with a positive NPV should be considered if financial value is a key criterion The higher the NPV, the better Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-3: Net Present Value Example
Note that totals are equal, but NPVs are not because of the time value of money 119 Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-4: JWD Consulting NPV Example
Multiply by the discount factor each year, then take cum. benefits – costs to get NPV Note: See the template called business_case_financials.xls 120 Information Technology Project Management, Fifth Edition, Copyright 2007

NPV Calculations Determine estimated costs and benefits for the life of the project and the products it produces Determine the discount rate (check with your organization on what to use) Calculate the NPV (see text for details) Note: Some organizations consider the investment year as year 0, while others start in year 1; some people enter costs as negative numbers, while others do not Check with your organization for their preferences Information Technology Project Management, Fifth Edition, Copyright 2007

Return on Investment Return on investment (ROI) is calculated by subtracting the project costs from the benefits and then dividing by the costs ROI = (total discounted benefits - total discounted costs) / discounted costs The higher the ROI, the better Many organizations have a required rate of return or minimum acceptable rate of return on investment for projects Internal rate of return (IRR) can by calculated by finding the discount rate that makes the NPV equal to zero Information Technology Project Management, Fifth Edition, Copyright 2007

Payback Analysis Another important financial consideration is payback analysis The payback period is the amount of time it will take to recoup, in the form of net cash inflows, the total dollars invested in a project Payback occurs when the net cumulative discounted benefits equals the costs Many organizations want IT projects to have a fairly short payback period Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-5: Charting the Payback Period

Weighted Scoring Model
A weighted scoring model is a tool that provides a systematic process for selecting projects based on many criteria Identify criteria important to the project selection process Assign weights (percentages) to each criterion so they add up to 100% Assign scores to each criterion for each project Multiply the scores by the weights and get the total weighted scores The higher the weighted score, the better Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-6: Sample Weighted Scoring Model for Project Selection

Implementing a Balanced Scorecard
Drs. Robert Kaplan and David Norton developed this approach to help select and manage projects that align with business strategy A balanced scorecard: Is a methodology that converts an organization’s value drivers, such as customer service, innovation, operational efficiency, and financial performance, to a series of defined metrics See for more information Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-7: Balanced Scorecard Example
Defense Finance and Accounting Service, “DFAS Strategic Plan,” Nov 2001 ( ), p. 13. Information Technology Project Management, Fifth Edition, Copyright 2007

Project Charters After deciding what project to work on, it is important to let the rest of the organization know A project charter is a document that formally recognizes the existence of a project and provides direction on the project’s objectives and management Key project stakeholders should sign a project charter to acknowledge agreement on the need and intent of the project; a signed charter is a key output of project integration management Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 4-6: Project Integration Management Overview
PMBOK® Guide Third Edition, 2004, p. 79. 130 Information Technology Project Management, Fifth Edition, Copyright 2007

Preliminary Scope Statements
A scope statement is a document used to develop and confirm a common understanding of the project scope It’s important for preventing scope creep The tendency for project scope to keep getting bigger It’s good practice to develop a preliminary or initial scope statement during project initiation and a more detailed scope statement as the project progresses Information Technology Project Management, Fifth Edition, Copyright 2007

Project Management Plans
A project management plan is a document used to coordinate all project planning documents and help guide a project’s execution and control Plans created in the other knowledge areas are subsidiary parts of the overall project management plan Information Technology Project Management, Fifth Edition, Copyright 2007

Common Elements of a Project Management Plan
Introduction or overview of the project Description of how the project is organized Management and technical processes used on the project Work to be done, schedule, and budget information Information Technology Project Management, Fifth Edition, Copyright 2007

Table 4-1: Sample Contents for a Software Project Management Plan (SPMP)

What the Winners Do “The winners clearly spell out what needs to be done in a project, by whom, when, and how. For this they use an integrated toolbox, including PM tools, methods, and techniques…If a scheduling template is developed and used over and over, it becomes a repeatable action that leads to higher productivity and lower uncertainty. Sure, using scheduling templates is neither a breakthrough nor a feat. But laggards exhibited almost no use of the templates. Rather, in constructing schedules their project managers started with a clean sheet, a clear waste of time.”* *Milosevic, Dragan and Ozbay. “Delivering Projects: What the Winners Do.” Proceedings of the Project Management Institute Annual Seminars & Symposium (November 2001). Information Technology Project Management, Fifth Edition, Copyright 2007

Stakeholder Analysis A stakeholder analysis documents important (often sensitive) information about stakeholders such as: Stakeholders’ names and organizations Roles on the project Unique facts about stakeholders Level of influence and interest in the project Suggestions for managing relationships Information Technology Project Management, Fifth Edition, Copyright 2007

Table 4-2: Sample Stakeholder Analysis

Project Execution Project execution involves managing and performing the work described in the project management plan The majority of time and money is usually spent on execution The application area of the project directly affects project execution because the products of the project are produced during execution Information Technology Project Management, Fifth Edition, Copyright 2007

Coordinating Planning and Execution
Project planning and execution are intertwined and inseparable activities Those who will do the work should help to plan the work Project managers must solicit input from the team to develop realistic plans Information Technology Project Management, Fifth Edition, Copyright 2007

Providing Leadership and a Supportive Culture
Project managers must lead by example to demonstrate the importance of creating and then following good project plans Organizational culture can help project execution by: Providing guidelines and templates Tracking performance based on plans Project managers may still need to break the rules to meet project goals, and senior managers must support those actions Information Technology Project Management, Fifth Edition, Copyright 2007

Important Skills for Project Execution
General management skills like leadership, communication, and political skills Product, business, and application area skills and knowledge Use of specialized tools and techniques Information Technology Project Management, Fifth Edition, Copyright 2007

Project Execution Tools and Techniques
Project management methodology: many experienced project managers believe the most effective way to improve project management is to follow a methodology that describes not only what to do in managing a project, but how to do it Project management information systems: there are hundreds of project management software products available on the market today, and many organizations are moving toward powerful enterprise project management systems that are accessible via the Internet See the “What Went Right?” example of Kuala Lumpur’s Integrated Transport Information System on p. 161 Information Technology Project Management, Fifth Edition, Copyright 2007

Monitoring and Controlling Project Work
Changes are inevitable on most projects, so it’s important to develop and follow a process to monitor and control changes Monitoring project work includes collecting, measuring, and disseminating performance information Two important outputs of monitoring and controlling project work include recommended corrective and preventive actions Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot The 2002 Olympic Winter Games and Paralympics took five years to plan and cost more than $1.9 billion. PMI awarded the Salt Lake Organizing Committee (SLOC) the Project of the Year award for delivering world-class games. Four years before the Games began, the SLOC used a Primavera software-based system with a cascading color-coded WBS to integrate planning… The SLOC also used an Executive Roadmap, a one-page list of the top 100 Games-wide activities, to keep executives apprised of progress. Activities were tied to detailed project information within each department’s schedule. A 90-day highlighter showed which managers were accountable for each integrated activity. Fraser Bullock, SLOC Chief Operating Officer and Chief, said, “We knew when we were on and off schedule and where we had to apply additional resources. The interrelation of the functions meant they could not run in isolation—it was a smoothly running machine.”* *Foti, Ross, “The Best Winter Olympics, Period,” PM Network (January 2004) 23. 144 Information Technology Project Management, Fifth Edition, Copyright 2007

Integrated Change Control
Three main objectives are: Influencing the factors that create changes to ensure that changes are beneficial Determining that a change has occurred Managing actual changes as they occur A baseline is the approved project management plan plus approved changes Information Technology Project Management, Fifth Edition, Copyright 2007

Change Control on Information Technology Projects
Former view: the project team should strive to do exactly what was planned on time and within budget Problem: stakeholders rarely agreed up-front on the project scope, and time and cost estimates were inaccurate Modern view: project management is a process of constant communication and negotiation Solution: changes are often beneficial, and the project team should plan for them Information Technology Project Management, Fifth Edition, Copyright 2007

Change Control System A formal, documented process that describes when and how official project documents and work may be changed Describes who is authorized to make changes and how to make them Information Technology Project Management, Fifth Edition, Copyright 2007

Change Control Board (CCB)
A formal group of people responsible for approving or rejecting changes on a project CCBs provide guidelines for preparing change requests, evaluate change requests, and manage the implementation of approved changes Includes stakeholders from the entire organization Information Technology Project Management, Fifth Edition, Copyright 2007

Making Timely Changes Some CCBs only meet occasionally, so it may take too long for changes to occur Some organizations have policies in place for time-sensitive changes “48-hour policy” allows project team members to make decisions, then they have 48 hours to reverse the decision pending senior management approval Delegate changes to the lowest level possible, but keep everyone informed of changes Information Technology Project Management, Fifth Edition, Copyright 2007

Configuration Management
Ensures that the descriptions of the project’s products are correct and complete Involves identifying and controlling the functional and physical design characteristics of products and their support documentation Configuration management specialists identify and document configuration requirements, control changes, record and report changes, and audit the products to verify conformance to requirements See for more information Information Technology Project Management, Fifth Edition, Copyright 2007

Table 4-3: Suggestions for Performing Integrated Change Control

Closing Projects To close a project, you must finalize all activities and transfer the completed or cancelled work to the appropriate people Main outputs include: Administrative closure procedures Contract closure procedures Final products, services, or results Organizational process asset updates Information Technology Project Management, Fifth Edition, Copyright 2007

Using Software to Assist in Project Integration Management
Several types of software can be used to assist in project integration management Documents can be created with word-processing software Presentations are created with presentation software Tracking can be done with spreadsheets or databases Communication software like and Web authoring tools facilitate communications Project management software can pull everything together and show detailed and summarized information Business Service Management (BSM) tools track the execution of business process flows Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project integration management includes:
Developing a project charter Developing a preliminary project scope statement Developing a project management plan Directing and managing project execution Monitoring and controlling project work Performing integrated change control Closing the project Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 5: Project Scope Management

Learning Objectives Understand the elements that make good project scope management important Explain the scope planning process and describe the contents of a scope management plan Describe the process for developing a project scope statement using the project charter and preliminary scope statement Discuss the scope definition process and work involved in constructing a work breakdown structure using the analogy, top-down, bottom-up, and mind-mapping approaches Information Technology Project Management, Fifth Edition, Copyright 2007

Explain the importance of scope verification and how it relates to scope definition and control Understand the importance of scope control and approaches for preventing scope-related problems on information technology projects Describe how software can assist in project scope management Information Technology Project Management, Fifth Edition, Copyright 2007

What is Project Scope Management?
Scope refers to all the work involved in creating the products of the project and the processes used to create them A deliverable is a product produced as part of a project, such as hardware or software, planning documents, or meeting minutes Project scope management includes the processes involved in defining and controlling what is or is not included in a project Information Technology Project Management, Fifth Edition, Copyright 2007

Project Scope Management Processes
Scope planning: deciding how the scope will be defined, verified, and controlled Scope definition: reviewing the project charter and preliminary scope statement and adding more information as requirements are developed and change requests are approved Creating the WBS: subdividing the major project deliverables into smaller, more manageable components Scope verification: formalizing acceptance of the project scope Scope control: controlling changes to project scope Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 5-1: Project Scope Management Summary

Scope Planning and the Scope Management Plan
The scope management plan is a document that includes descriptions of how the team will prepare the project scope statement, create the WBS, verify completion of the project deliverables, and control requests for changes to the project scope Key inputs include the project charter, preliminary scope statement, and project management plan Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Right? Many financial service companies use customer relationship management (CRM) systems to improve their understanding of and responsiveness to customers A senior management team at the Canadian money management company Dynamic Mutual Funds (DMF) launched an enterprise-wide, national program to build and manage its customer relationships They needed a faster and more organized, highly participative approach, so they proposed a new seven-step concept called project scope design DMF won an eCustomer World Golden Award for world-class innovation Information Technology Project Management, Fifth Edition, Copyright 2007

Table 5-1: Sample Scope Management Plan

Table 5-2: Sample Project Charter

Scope Definition and the Project Scope Statement
The preliminary scope statement, project charter, organizational process assets, and approved change requests provide a basis for creating the project scope statement As time progresses, the scope of a project should become more clear and specific Information Technology Project Management, Fifth Edition, Copyright 2007

Table 5-3: Further Defining Project Scope

Media Snapshot Many people enjoy watching television shows like Changing Rooms or Trading Spaces, where participants have two days and $1,000 to update a room in their neighbor’s house. Since the time and cost are set, it’s the scope that has the most flexibility. Designers on these shows often have to change initial scope goals due to budget or time constraints. Although most homeowners are very happy with work done on the show, some are obviously disappointed. Unlike most projects where the project team works closely with the customer, homeowners have little say in what gets done and cannot inspect the work along the way… What happens when the homeowners don’t like the work that’s been done? The FAQ section of tlc.com says, “Everyone on our show is told upfront that there’s a chance they won’t like the final design of the room. Each applicant signs a release acknowledging that the show is not responsible for redecorating a room that isn’t to the owner’s taste.” Too bad you can’t get sponsors for most projects to sign a similar release form. It would make project scope management much easier! Information Technology Project Management, Fifth Edition, Copyright 2007

Creating the Work Breakdown Structure (WBS)
A WBS is a deliverable-oriented grouping of the work involved in a project that defines the total scope of the project WBS is a foundation document that provides the basis for planning and managing project schedules, costs, resources, and changes Decomposition is subdividing project deliverables into smaller pieces A work package is a task at the lowest level of the WBS Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 5-2: Sample Intranet WBS Organized by Product

Figure 5-3: Sample Intranet WBS Organized by Phase

Table 5-4: Intranet WBS in Tabular Form
1.0 Concept 1.1 Evaluate current systems 1.2 Define Requirements 1.2.1 Define user requirements 1.2.2 Define content requirements 1.2.3 Define system requirements 1.2.4 Define server owner requirements 1.3 Define specific functionality 1.4 Define risks and risk management approach 1.5 Develop project plan 1.6 Brief Web development team 2.0 Web Site Design 3.0 Web Site Development 4.0 Roll Out 5.0 Support Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 5-4: Intranet WBS and Gantt Chart in Microsoft Project

Figure 5-5: Intranet Gantt Chart Organized by Project Management Process Groups

Table 5-5: Executing Tasks for JWD Consulting’s WBS

Approaches to Developing WBSs
Using guidelines: some organizations, like the DOD, provide guidelines for preparing WBSs The analogy approach: review WBSs of similar projects and tailor to your project The top-down approach: start with the largest items of the project and break them down The bottom-up approach: start with the specific tasks and roll them up Mind-mapping approach: mind mapping is a technique that uses branches radiating out from a core idea to structure thoughts and ideas Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 5-6: Sample Mind-Mapping Approach for Creating a WBS

Figure 5-7: Resulting WBS in Chart Form

The WBS Dictionary and Scope Baseline
Many WBS tasks are vague and must be explained more so people know what to do and can estimate how long it will take and what it will cost to do the work A WBS dictionary is a document that describes detailed information about each WBS item The approved project scope statement and its WBS and WBS dictionary form the scope baseline, which is used to measure performance in meeting project scope goals Information Technology Project Management, Fifth Edition, Copyright 2007

Advice for Creating a WBS and WBS Dictionary*
A unit of work should appear at only one place in the WBS The work content of a WBS item is the sum of the WBS items below it A WBS item is the responsibility of only one individual, even though many people may be working on it The WBS must be consistent with the way in which work is actually going to be performed; it should serve the project team first, and other purposes only if practical *Cleland, David I. Project Management: Strategic Design and Implementation, 1994 Information Technology Project Management, Fifth Edition, Copyright 2007

Advice for Creating a WBS and WBS Dictionary (continued)*
Project team members should be involved in developing the WBS to ensure consistency and buy-in Each WBS item must be documented in a WBS dictionary to ensure accurate understanding of the scope of work included and not included in that item The WBS must be a flexible tool to accommodate inevitable changes while properly maintaining control of the work content in the project according to the scope statement *Cleland, David I. Project Management: Strategic Design and Implementation, 1994 Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? A project scope that is too broad and grandiose can cause severe problems Scope creep and an overemphasis on technology for technology’s sake resulted in the bankruptcy of a large pharmaceutical firm, Texas-based FoxMeyer Drug In 2001, McDonald’s fast-food chain initiated a project to create an intranet that would connect its headquarters with all of its restaurants to provide detailed operational information in real time; after spending $170 million on consultants and initial implementation planning, McDonald’s realized that the project was too much to handle and terminated it Information Technology Project Management, Fifth Edition, Copyright 2007

Scope Verification It is very difficult to create a good scope statement and WBS for a project It is even more difficult to verify project scope and minimize scope changes Scope verification involves formal acceptance of the completed project scope by the stakeholders Acceptance is often achieved by a customer inspection and then sign-off on key deliverables Information Technology Project Management, Fifth Edition, Copyright 2007

Scope Control Scope control involves controlling changes to the project scope Goals of scope control are to: Influence the factors that cause scope changes Assure changes are processed according to procedures developed as part of integrated change control Manage changes when they occur Variance is the difference between planned and actual performance Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practices for Avoiding Scope Problems
1. Keep the scope realistic: Don’t make projects so large that they can’t be completed; break large projects down into a series of smaller ones 2. Involve users in project scope management: Assign key users to the project team and give them ownership of requirements definition and scope verification 3. Use off-the-shelf hardware and software whenever possible: Many IT people enjoy using the latest and greatest technology, but business needs, not technology trends, must take priority 4. Follow good project management processes: As described in this chapter and others, there are well-defined processes for managing project scope and others aspects of projects Information Technology Project Management, Fifth Edition, Copyright 2007

Suggestions for Improving User Input
Develop a good project selection process and insist that sponsors are from the user organization Have users on the project team in important roles Have regular meetings with defined agendas, and have users sign off on key deliverables presented at meetings Deliver something to users and sponsors on a regular basis Don’t promise to deliver when you know you can’t Co-locate users with developers Information Technology Project Management, Fifth Edition, Copyright 2007

Suggestions for Reducing Incomplete and Changing Requirements
Develop and follow a requirements management process Use techniques such as prototyping, use case modeling, and JAD to get more user involvement Put requirements in writing and keep them current Create a requirements management database for documenting and controlling requirements Information Technology Project Management, Fifth Edition, Copyright 2007

Suggestions for Reducing Incomplete and Changing Requirements (continued)
Provide adequate testing and conduct testing throughout the project life cycle Review changes from a systems perspective Emphasize completion dates to help focus on what’s most important Allocate resources specifically for handling change requests/enhancements like NWA did with ResNet Information Technology Project Management, Fifth Edition, Copyright 2007

Using Software to Assist in Project Scope Management
Word-processing software helps create several scope-related documents Spreadsheets help to perform financial calculations and weighed scoring models, and develop charts and graphs Communication software like and the Web help clarify and communicate scope information Project management software helps in creating a WBS, the basis for tasks on a Gantt chart Specialized software is available to assist in project scope management Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project scope management includes the processes required to ensure that the project addresses all the work required, and only the work required, to complete the project successfully Main processes include: Scope planning Scope definition Creating the WBS Scope verification Scope control Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 7: Project Cost Management

Learning Objectives Understand the importance of project cost management Explain basic project cost management principles, concepts, and terms Discuss different types of cost estimates and methods for preparing them Information Technology Project Management, Fifth Edition, Copyright 2007

Understand the processes involved in cost budgeting and preparing a cost estimate, and budget for an information technology project Understand the benefits of earned value management and project portfolio management to assist in cost control Describe how project management software can assist in project cost management Information Technology Project Management, Fifth Edition, Copyright 2007

The Importance of Project Cost Management
IT projects have a poor track record for meeting budget goals The CHAOS studies found the average cost overrun (the additional percentage or dollar amount by which actual costs exceed estimates) ranged from 180 percent in 1994 to 43 percent in 2002; other studies found overruns to be percent Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? The U.S. Internal Revenue Service (IRS) continues to provide examples of how not to manage costs A series of project failures in the 1990s cost taxpayers more than $50 billion a year In 2004, CIO Magazine reported problems with the IRS’s $8 billion modernization project In 2006, the IRS was in the news for a botched upgrade to its fraud-detection software, costing $318 million in fraudulent refunds that didn’t get caught The United Kingdom’s National Health Service IT modernization program was called the greatest IT disaster in history by a London columnist, with an estimated $26 billion overrun Information Technology Project Management, Fifth Edition, Copyright 2007

What is Cost and Project Cost Management?
Cost is a resource sacrificed or foregone to achieve a specific objective or something given up in exchange Costs are usually measured in monetary units like dollars Project cost management includes the processes required to ensure that the project is completed within an approved budget Information Technology Project Management, Fifth Edition, Copyright 2007

Project Cost Management Processes
Cost estimating: developing an approximation or estimate of the costs of the resources needed to complete a project Cost budgeting: allocating the overall cost estimate to individual work items to establish a baseline for measuring performance Cost control: controlling changes to the project budget Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 7-1: Project Cost Management Summary

Basic Principles of Cost Management
Most members of an executive board better understand and are more interested in financial terms than IT terms, so IT project managers must speak their language Profits are revenues minus expenditures Profit margin is the ratio of revenues to profits Life cycle costing considers the total cost of ownership, or development plus support costs, for a project Cash flow analysis determines the estimated annual costs and benefits for a project and the resulting annual cash flow Information Technology Project Management, Fifth Edition, Copyright 2007

Table 7-1: Cost of Software Defects

What Went Right? A leading telecommunications company estimated the cost of a software bug or defect at three stages: after coding, after manual inspection, and after beta release The costs to correct the defect increased with each stage from $2,000 to $10,000 to $100,000 The company estimated that when it released one million lines of new code, it had an average of 440 defects in the early stage, 250 in the middle stage, and 125 in the late stage, costing more than $15 million They decided to implement an automated inspection process, which reduced costs for fixing bugs by more than $11 million Information Technology Project Management, Fifth Edition, Copyright 2007

Basic Principles of Cost Management
Tangible costs or benefits are those costs or benefits that an organization can easily measure in dollars Intangible costs or benefits are costs or benefits that are difficult to measure in monetary terms Direct costs are costs that can be directly related to producing the products and services of the project Indirect costs are costs that are not directly related to the products or services of the project, but are indirectly related to performing the project Sunk cost is money that has been spent in the past; when deciding what projects to invest in or continue, you should not include sunk costs Information Technology Project Management, Fifth Edition, Copyright 2007

Basic Principles of Cost Management (continued)
Learning curve theory states that when many items are produced repetitively, the unit cost of those items decreases in a regular pattern as more units are produced Reserves are dollars included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict Contingency reserves allow for future situations that may be partially planned for (sometimes called known unknowns) and are included in the project cost baseline Management reserves allow for future situations that are unpredictable (sometimes called unknown unknowns) Information Technology Project Management, Fifth Edition, Copyright 2007

Cost Estimating Project managers must take cost estimates seriously if they want to complete projects within budget constraints It’s important to know the types of cost estimates, how to prepare cost estimates, and typical problems associated with IT cost estimates Information Technology Project Management, Fifth Edition, Copyright 2007

Table 7-2: Types of Cost Estimates

Cost Management Plan A cost management plan is a document that describes how the organization will manage cost variance on the project A large percentage of total project costs are often labor costs, so project managers must develop and track estimates for labor Information Technology Project Management, Fifth Edition, Copyright 2007

Table 7-3: Maximum Departmental Headcounts by Year

Cost Estimation Tools and Techniques
Basic tools and techniques for cost estimates Analogous or top-down estimates: use the actual cost of a previous, similar project as the basis for estimating the cost of the current project Bottom-up estimates: involve estimating individual work items or activities and summing them to get a project total Parametric modeling: uses project characteristics (parameters) in a mathematical model to estimate project costs Information Technology Project Management, Fifth Edition, Copyright 2007

Typical Problems with IT Cost Estimates
Estimates are done too quickly Lack of estimating experience Human beings are biased toward underestimation Management desires accuracy Information Technology Project Management, Fifth Edition, Copyright 2007

Sample Cost Estimate See pp for a detailed example of creating a cost estimate for the Surveyor Pro project described in the opening case Before creating an estimate, know what it will be used for, gather as much information as possible, and clarify the ground rules and assumptions for the estimate If possible, estimate costs by major WBS categories Create a cost model to make it easy to make changes to and document the estimate Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 7-2: Surveyor Pro Project Cost Estimate

Figure 7-3: Surveyor Pro Software Development Estimate

Cost Budgeting Cost budgeting involves allocating the project cost estimate to individual work items over time The WBS is a required input to the cost budgeting process since it defines the work items An important goal is to produce a cost baseline A time-phased budget that project managers use to measure and monitor cost performance Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 7-4: Surveyor Pro Project Cost Baseline
*Numbers are rounded, so some totals appear to be off. Information Technology Project Management, Fifth Edition, Copyright 2007

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 Many organizations around the globe have problems with cost control Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot Australia: problems with the installation of an ERP system at Crane Group Ltd. led to an estimated cost overrun of $11.5 million India: as many as 274 projects currently under implementation in the Central sector are suffering serious cost and time overruns Pakistan: Pakistan has sustained a cost overrun of Rs billion (over $30 million U.S. dollars) in the execution of the 66.5 megawatt Jagran Hydropower Project in the Neelum Valley United States: Northern California lawmakers were outraged over Governor Arnold Schwarzenegger's announcement that commuters should have to pay construction costs on Bay Area bridges…Maybe it takes the Terminator to help control costs! Information Technology Project Management, Fifth Edition, Copyright 2007

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 More and more organizations around the world are using EVM to help control project costs Information Technology Project Management, Fifth Edition, Copyright 2007

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 EV is based on the original planned costs for the project or activity and the rate at which the team is completing work on the project or activity to date Information Technology Project Management, Fifth Edition, Copyright 2007

Rate of Performance Rate of performance (RP) is the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity Brenda Taylor, Senior Project Manager in South Africa, suggests this term and approach for estimating earned value For example, suppose the server installation was halfway completed by the end of week 1; the rate of performance would be 50% because by the end of week 1, the planned schedule reflects that the task should be 100% complete and only 50% of that work has been completed Information Technology Project Management, Fifth Edition, Copyright 2007

Table 7-4 Earned Value Calculations for One Activity After Week One

Table 7-5: Earned Value Formulas

Rules of Thumb for Earned Value Numbers
Negative numbers for cost and schedule variance indicate problems in those areas CPI and SPI less than 100% indicate problems Problems mean the project is costing more than planned (over budget) or taking longer than planned (behind schedule) The CPI can be used to calculate the estimate at completion (EAC)—an estimate of what it will cost to complete the project based on performance to date; the budget at completion (BAC) is the original total budget for the project Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 7-5: Earned Value Chart for Project after Five Months

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 Information Technology Project Management, Fifth Edition, Copyright 2007

Benefits of Portfolio Management
Schlumberger saved $3 million in one year by organizing 120 information technology projects into a portfolio META Group research shows that: Organizations that evaluate information technology projects by what their business impacts are and what their potential business values will be implement projects that result in 25 percent more improvement to the bottom line Business executives state that using project portfolio management allows managers to make decisions faster and with more confidence Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practice A global survey released by Borland Software in 2006 suggests that many organizations are still at a low level of maturity in terms of how they define project goals, allocate resources, and measure overall success of their information technology portfolios Some of the findings include the following: Only 22 percent of survey respondents reported that their organization either effectively or very effectively uses a project plan for managing projects Only 17 percent have either rigorous or very rigorous processes for project plans, which include developing a baseline and estimating schedule, cost, and business impact of projects Only 20 percent agreed their organizations monitor portfolio progress and coordinate across interdependent projects Information Technology Project Management, Fifth Edition, Copyright 2007

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, especially enterprise PM software Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project cost management is a traditionally weak area of IT projects, and project managers must work to improve their ability to deliver projects within approved budgets Main processes include: Cost estimating Cost budgeting Cost control Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 8: Project Quality Management

Learning Objectives Understand the importance of project quality management for information technology products and services Define project quality management and understand how quality relates to various aspects of information technology projects Describe quality planning and its relationship to project scope management Discuss the importance of quality assurance Explain the main outputs of the quality control process Information Technology Project Management, Fifth Edition, Copyright 2007

Understand the tools and techniques for quality control, such as Pareto analysis, statistical sampling, Six Sigma, quality control charts, and testing Summarize the contributions of noteworthy quality experts to modern quality management Describe how leadership, the cost of quality, organizational influences, expectations, cultural differences, and maturity models relate to improving quality in information technology projects Discuss how software can assist in project quality management Information Technology Project Management, Fifth Edition, Copyright 2007

The Importance of Project Quality Management
Many people joke about the poor quality of IT products (see cars and computers joke on pp ) People seem to accept systems being down occasionally or needing to reboot their PCs But quality is very important in many IT projects Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? In 1986, two hospital patients died after receiving fatal doses of radiation from a Therac 25 machine after a software problem caused the machine to ignore calibration data Britain’s Coast Guard was unable to use its computers for several hours in May 2004 after being hit by the Sasser virus, which knocked out the electronic mapping systems, , and other computer functions, forcing workers to revert to pen, paper, and radios More than 100 incidents of lost or stolen financial information were reported over the past year, including personal information of 1.2 federal employees, 200,000 online trading customers, and 33,000 Air Force officers Information Technology Project Management, Fifth Edition, Copyright 2007

What Is Project Quality?
The International Organization for Standardization (ISO) defines quality as “the degree to which a set of inherent characteristics fulfills requirements” (ISO9000:2000) Other experts define quality based on: Conformance to requirements: the project’s processes and products meet written specifications Fitness for use: a product can be used as it was intended Information Technology Project Management, Fifth Edition, Copyright 2007

What Is Project Quality Management?
Project quality management ensures that the project will satisfy the needs for which it was undertaken Processes include: Quality planning: identifying which quality standards are relevant to the project and how to satisfy them Quality assurance: periodically 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 Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-1: Project Quality Management Summary

Quality Planning Implies the ability to anticipate situations and prepare actions to bring about the desired outcome Important to prevent defects by: Selecting proper materials Training and indoctrinating people in quality Planning a process that ensures the appropriate outcome Information Technology Project Management, Fifth Edition, Copyright 2007

Design of Experiments Design of experiments is a quality planning technique that helps identify which variables have the most influence on the overall outcome of a process Also applies to project management issues, such as cost and schedule trade-offs Involves documenting important factors that directly contribute to meeting customer requirements Information Technology Project Management, Fifth Edition, Copyright 2007

Scope Aspects of IT Projects
Functionality is the degree to which a system performs its intended function Features are the system’s special characteristics that appeal to users System outputs are the screens and reports the system generates Performance addresses how well a product or service performs the customer’s intended use Reliability is the ability of a product or service to perform as expected under normal conditions Maintainability addresses the ease of performing maintenance on a product Information Technology Project Management, Fifth Edition, Copyright 2007

Who’s Responsible for the Quality of Projects?
Project managers are ultimately responsible for quality management on their projects Several organizations and references can help project managers and their teams understand quality International Organization for Standardization ( IEEE ( Information Technology Project Management, Fifth Edition, Copyright 2007

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 generates ideas for quality improvements by comparing specific project practices or product characteristics to those of other projects or products within or outside the performing organization A quality audit is a structured review of specific quality management activities that help identify lessons learned that could improve performance on current or future projects Information Technology Project Management, Fifth Edition, Copyright 2007

Quality Control The main outputs of quality control are:
Acceptance decisions Rework Process adjustments There are Seven Basic Tools of Quality that help in performing quality control Information Technology Project Management, Fifth Edition, Copyright 2007

Cause-and-Effect Diagrams
Cause-and-effect diagrams trace complaints about quality problems back to the responsible production operations They help you find the root cause of a problem Also known as fishbone or Ishikawa diagrams Can also use the 5 whys technique where you repeat the question “Why” (five is a good rule of thumb) to peel away the layers of symptoms that can lead to the root cause Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-2: Sample Cause-and-Effect Diagram

Quality Control Charts
A control chart is a graphic display of data that illustrates the results of a process over time The main use of control charts is to prevent defects, rather than to detect or reject them Quality control charts allow you to determine whether a process is in control or out of control When a process is in control, any variations in the results of the process are created by random events; processes that are in control do not need to be adjusted When a process is out of control, variations in the results of the process are caused by nonrandom events; you need to identify the causes of those nonrandom events and adjust the process to correct or eliminate them Information Technology Project Management, Fifth Edition, Copyright 2007

The Seven Run Rule You can use quality control charts and the seven run rule to look for patterns in data The seven run rule states that if seven data points in a row are all below the mean, above the mean, or are all increasing or decreasing, then the process needs to be examined for nonrandom problems Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-3: Sample Quality Control Chart

Run Chart A run chart displays the history and pattern of variation of a process over time It is a line chart that shows data points plotted in the order in which they occur Can be used to perform trend analysis to forecast future outcomes based on historical patterns Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-4: Sample Run Chart

Scatter Diagram A scatter diagram helps to show if there is a relationship between two variables The closer data points are to a diagonal line, the more closely the two variables are related Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-5: Sample Scatter Diagram

Histograms A histogram is a bar graph of a distribution of variables
Each bar represents an attribute or characteristic of a problem or situation, and the height of the bar represents its frequency Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-6: Sample Histogram

Pareto Charts A Pareto chart is a histogram that can help you identify and prioritize problem areas Pareto analysis is also called the rule, meaning that 80 percent of problems are often due to 20 percent of the causes Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-7: Sample Pareto Diagram

Flowcharts Flowcharts are graphic displays of the logic and flow of processes that help you analyze how problems occur and how processes can be improved They show activities, decision points, and the order of how information is processed Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-8: Sample Flowchart

Statistical Sampling Statistical sampling involves choosing part of a population of interest for inspection The size of a sample depends on how representative you want the sample to be Sample size formula: Sample size = .25 X (certainty factor/acceptable error)2 Be sure to consult with an expert when using statistical analysis Information Technology Project Management, Fifth Edition, Copyright 2007

Table 8-1: Commonly Used Certainty Factors

Six Sigma Six Sigma is “a comprehensive and flexible system for achieving, sustaining, and maximizing business success. Six Sigma is uniquely driven by close understanding of customer needs, disciplined use of facts, data, and statistical analysis, and diligent attention to managing, improving, and reinventing business processes.”* *Pande, Peter S., Robert P. Neuman, and Roland R. Cavanagh, The Six Sigma Way, New York: McGraw-Hill, 2000, p. xi. Information Technology Project Management, Fifth Edition, Copyright 2007

Basic Information on Six Sigma
The target for perfection is the achievement of no more than 3.4 defects per million opportunities The principles can apply to a wide variety of processes Six Sigma projects normally follow a five-phase improvement process called DMAIC Information Technology Project Management, Fifth Edition, Copyright 2007

DMAIC DMAIC is a systematic, closed-loop process for continued improvement that is scientific and fact based DMAIC stands for: Define: Define the problem/opportunity, process, and customer requirements Measure: Define measures, then collect, compile, and display data Analyze: Scrutinize process details to find improvement opportunities Improve: Generate solutions and ideas for improving the problem Control: Track and verify the stability of the improvements and the predictability of the solution Information Technology Project Management, Fifth Edition, Copyright 2007

How Is Six Sigma Quality Control Unique?
It requires an organization-wide commitment Training follows the “Belt” system Six Sigma organizations have the ability and willingness to adopt contrary objectives, such as reducing errors and getting things done faster It is an operating philosophy that is customer-focused and strives to drive out waste, raise levels of quality, and improve financial performance at breakthrough levels Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Right? Motorola, Inc. pioneered the adoption of Six Sigma in the 1980s and saved about $14 billion Allied Signal/Honeywell saved more than $600 million a year by reducing the costs of reworking defects and improving aircraft engine design processes General Electric uses Six Sigma to focus on achieving customer satisfaction Information Technology Project Management, Fifth Edition, Copyright 2007

Six Sigma and Project Management
Joseph M. Juran stated, “All improvement takes place project by project, and in no other way”* It’s important to select projects carefully and apply higher quality where it makes sense; companies that use Six Sigma do not always boost their stock values As Mikel Harry puts it, “I could genetically engineer a Six Sigma goat, but if a rodeo is the marketplace, people are still going to buy a Four Sigma horse.”** Six Sigma projects must focus on a quality problem or gap between the current and desired performance and not have a clearly understood problem or a predetermined solution *“What You Need to Know About Six Sigma,” Productivity Digest (December 2001), p. 38. **Clifford, Lee, “Why You Can Safely Ignore Six Sigma,” Fortune (January 22, 2001), p. 140. Information Technology Project Management, Fifth Edition, Copyright 2007

Six Sigma Projects Use Project Management
The training for Six Sigma includes many project management concepts, tools, and techniques For example, Six Sigma projects often use business cases, project charters, schedules, budgets, and so on Six Sigma projects are done in teams; the project manager is often called the team leader, and the sponsor is called the champion Information Technology Project Management, Fifth Edition, Copyright 2007

Six Sigma and Statistics
The term sigma means standard deviation Standard deviation measures how much variation exists in a distribution of data Standard deviation is a key factor in determining the acceptable number of defective units found in a population Six Sigma projects strive for no more than 3.4 defects per million opportunities, yet this number is confusing to many statisticians Information Technology Project Management, Fifth Edition, Copyright 2007

Six Sigma Uses a Conversion Table
Using a normal curve, if a process is at six sigma, there would be no more than two defective units per billion produced Six Sigma uses a scoring system that accounts for time, an important factor in determining process variations Yield represents the number of units handled correctly through the process steps A defect is any instance where the product or service fails to meet customer requirements There can be several opportunities to have a defect Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-9: Normal Distribution and Standard Deviation

Table 8-3: Sigma Conversion Table

Six 9s of Quality Six 9s of quality is a measure of quality control equal to 1 fault in 1 million opportunities In the telecommunications industry, it means percent service availability or 30 seconds of down time a year This level of quality has also been stated as the target goal for the number of errors in a communications circuit, system failures, or errors in lines of code Information Technology Project Management, Fifth Edition, Copyright 2007

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 Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 8-4: Testing Tasks in the Software Development Life Cycle

Types of Tests Unit testing tests 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 end users prior to accepting the delivered system Information Technology Project Management, Fifth Edition, Copyright 2007

Testing Alone Is Not Enough
Watts S. Humphrey, a renowned expert on software quality, defines a software defect as anything that must be changed before delivery of the program Testing does not sufficiently prevent software defects because: The number of ways to test a complex system is huge Users will continue to invent new ways to use a system that its developers never considered Humphrey suggests that people rethink the software development process to provide no potential defects when you enter system testing; developers must be responsible for providing error-free code at each stage of testing Information Technology Project Management, Fifth Edition, Copyright 2007

Modern Quality Management
Requires customer satisfaction Prefers prevention to inspection Recognizes management responsibility for quality Noteworthy quality experts include Deming, Juran, Crosby, Ishikawa, Taguchi, and Feigenbaum Information Technology Project Management, Fifth Edition, Copyright 2007

Quality Experts Deming was famous for his work in rebuilding Japan and his 14 Points for Management Juran wrote the Quality Control Handbook and ten steps to quality improvement Crosby wrote Quality is Free and suggested that organizations strive for zero defects Ishikawa developed the concepts of quality circles and fishbone diagrams Taguchi developed methods for optimizing the process of engineering experimentation Feigenbaum developed the concept of total quality control Information Technology Project Management, Fifth Edition, Copyright 2007

Malcolm Baldrige Award
The Malcolm Baldrige National Quality Award originated in 1987 to recognize companies that have achieved a level of world-class competition through quality management Given by the President of the United States to U.S. businesses Three awards each year in different categories Manufacturing Service Small business Education and health care Information Technology Project Management, Fifth Edition, Copyright 2007

ISO Standards See www.iso.org for more information
ISO 9000 is a quality system standard that: Is a three-part, continuous cycle of planning, controlling, and documenting quality in an organization Provides minimum requirements needed for an organization to meet its quality certification standards Helps organizations around the world reduce costs and improve customer satisfaction See for more information Information Technology Project Management, Fifth Edition, Copyright 2007

Improving Information Technology Project Quality
Several suggestions for improving quality for IT projects include: Establish leadership that promotes quality Understand the cost of quality Focus on organizational influences and workplace factors that affect quality Follow maturity models Information Technology Project Management, Fifth Edition, Copyright 2007

Leadership As Joseph M. Juran said in 1945, “It is most important that top management be quality-minded. In the absence of sincere manifestation of interest at the top, little will happen below.”* A large percentage of quality problems are associated with management, not technical issues *American Society for Quality (ASQ), ( Information Technology Project Management, Fifth Edition, Copyright 2007

The Cost of Quality The cost of quality is the cost of conformance plus the cost of nonconformance Conformance means delivering products that meet requirements and fitness for use Cost of nonconformance means taking responsibility for failures or not meeting quality expectations A 2002 study reported that software bugs cost the U.S. economy $59.6 billion each year and that one-third of the bugs could be eliminated by an improved testing infrastructure Information Technology Project Management, Fifth Edition, Copyright 2007

Five Cost Categories Related to Quality
Prevention cost: cost of planning and executing a project so it is error-free or within an acceptable error range Appraisal cost: cost of evaluating processes and their outputs to ensure quality Internal failure cost: cost incurred to correct an identified defect before the customer receives the product External failure cost: cost that relates to all errors not detected and corrected before delivery to the customer Measurement and test equipment costs: capital cost of equipment used to perform prevention and appraisal activities Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot A 2004 study by Nucleus Research Inc. estimated that spam would cost large companies nearly $2,000 per employee in lost productivity in alone, despite investments in software to block spam Spam currently accounts for more than 70 percent of total volume worldwide In just one month (August 2003), at least 50 new Internet viruses surfaced, and losses related to computer viruses cost North American companies about $3.5 billion Businesses have suffered at least $65 billion in lost productivity because of computer viruses since 1997 Information Technology Project Management, Fifth Edition, Copyright 2007

Organizational Influences, Workplace Factors, and Quality
Study by DeMarco and Lister showed that organizational issues had a much greater influence on programmer productivity than the technical environment or programming languages Programmer productivity varied by a factor of one to ten across organizations, but only by 21 percent within the same organization Study found no correlation between productivity and programming language, years of experience, or salary A dedicated workspace and a quiet work environment were key factors to improving programmer productivity Information Technology Project Management, Fifth Edition, Copyright 2007

Expectations and Cultural Differences in Quality
Project managers must understand and manage stakeholder expectations Expectations also vary by: Organization’s culture Geographic regions Information Technology Project Management, Fifth Edition, Copyright 2007

Maturity Models Maturity models are frameworks for helping organizations improve their processes and systems The Software Quality Function Deployment Model focuses on defining user requirements and planning software projects The Software Engineering Institute’s Capability Maturity Model Integration is a process improvement approach that provides organizations with the essential elements of effective processes Information Technology Project Management, Fifth Edition, Copyright 2007

CMMI Levels CMMI levels, from lowest to highest, are:
Incomplete Performed Managed Defined Quantitatively Managed Optimizing Companies may not get to bid on government projects unless they have a CMMI Level 3 Information Technology Project Management, Fifth Edition, Copyright 2007

PMI’s Maturity Model PMI released the Organizational Project Management Maturity Model (OPM3) in December 2003 Model is based on market research surveys sent to more than 30,000 project management professionals, and incorporates 180 best practices and more than 2,400 capabilities, outcomes, and key performance indicators Addresses standards for excellence in project, program, and portfolio management best practices and explains the capabilities necessary to achieve those best practices Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practice OPM3 provides the following example to illustrate a best practice, capability, outcome, and key performance indicator: Best practice: establish internal project management communities Capability: facilitate project management activities Outcome: local initiatives, meaning the organization develops pockets of consensus around areas of special interest Key performance indicator: community addresses local issues Information Technology Project Management, Fifth Edition, Copyright 2007

Using Software to Assist in Project Quality Management
Spreadsheet and charting software helps create Pareto diagrams, fishbone diagrams, and so on Statistical software packages help perform statistical analysis Specialized software products help manage Six Sigma projects or create quality control charts Project management software helps create Gantt charts and other tools to help plan and track work related to quality management Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project quality management ensures that the project will satisfy the needs for which it was undertaken Main processes include: Quality planning Quality assurance Quality control Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 9: Project Human Resource Management

Learning Objectives Explain the importance of good human resource management on projects, including the current state and future implications of the global IT workforce Define project human resource management and understand its processes Summarize key concepts for managing people by understanding the theories of Abraham Maslow, Frederick Herzberg, David McClelland, and Douglas McGregor on motivation, H. J. Thamhain and D. L. Wilemon on influencing workers, and Stephen Covey on how people and teams can become more effective Information Technology Project Management, Fifth Edition, Copyright 2007

Discuss human resource planning and be able to create a project organizational chart, responsibility assignment matrix, and resource histogram Understand important issues involved in project staff acquisition and explain the concepts of resource assignments, resource loading, and resource leveling Assist in team development with training, team-building activities, and reward systems Explain and apply several tools and techniques to help manage a project team and summarize general advice on managing teams Describe how project management software can assist in project human resource management Information Technology Project Management, Fifth Edition, Copyright 2007

The Importance of Human Resource Management
Many corporate executives have said, “People are our most important asset” People determine the success and failure of organizations and projects Information Technology Project Management, Fifth Edition, Copyright 2007

The Global IT Workforce
Although there have been ups and downs in the IT labor market, there will always be a need for good IT workers The Digital Planet 2006 study estimated that the global marketplace for information and communications technology (ICT) would top $3 trillion in 2006 and reach almost $4 trillion by 2009 Information Technology Project Management, Fifth Edition, Copyright 2007

More Digital Planet Report Findings
Communications products and services represented the largest single category of ICT spending in 2006 with $1.57 trillion, but software was the fastest growing category, up year to year by 9.9 percent ICT spending per employee was up almost 40 percent between 2001 and 2006 In spending by country, the top ten ICT spending countries remained fixed in rank between 2001 and 2005 In descending order, these are the United States, Japan, Germany, United Kingdom, France, China, Italy, Canada, Brazil, and Korea China’s ICT annual growth rates exceeded 20 percent every year between 2001 and 2006 Information Technology Project Management, Fifth Edition, Copyright 2007

U.S. IT Workforce U.S. IT employment grew nearly 4 percent in 2005
Seven IS-related occupations will be among the top 30 fastest-growing occupations in the U.S. between now and 2012 Sarbanes-Oxley has caused the need for closer scrutiny of IT projects Hiring managers say interpersonal skills are the most important soft skill for IT workers Information Technology Project Management, Fifth Edition, Copyright 2007

Implications for the Future of IT Human Resource Management
Proactive organizations are addressing workforce needs by: Improving benefits Redefining work hours and incentives Finding future workers Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot Here’s the dirty little secret: U.S. productivity is No. 1 in the world when productivity is measured as gross domestic product per worker, but our lead vanishes when productivity is measured as GDP per hour worked Europeans take an average of six to seven weeks of paid annual leave, compared with just 12 days in the United States; twice as many American as European workers put in more than 48 hours per week Sociologists have shown that many Americans, especially men, would like to have more family or leisure time; recent surveys show that many Americans are willing to sacrifice up to a quarter of their salaries in return for more time off Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? A 2006 report by The Conference Board, Corporate Voices for Working Families, Partnership for 21st Century Skills, and the Society for Human Resource Management suggests that entry-level workers in the U.S. are ill-prepared for the workplace Four-year college graduates were listed as deficient in the following three skills: Written Communications % Writing in English % Leadership % Information Technology Project Management, Fifth Edition, Copyright 2007

What is Project Human Resource Management?
Making the most effective use of the people involved with a project Processes include: Human resource planning: identifying and documenting project roles, responsibilities, and reporting relationships Acquiring the project team: getting the needed personnel assigned to and working on the project Developing the project team: building individual and group skills to enhance project performance Managing the project team: tracking team member performance, motivating team members, providing timely feedback, resolving issues and conflicts, and coordinating changes to help enhance project performance Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-1: Project Human Resource Management Summary

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 theories Influence and power Effectiveness Information Technology Project Management, Fifth Edition, Copyright 2007

Intrinsic and Extrinsic Motivation
Intrinsic motivation causes people to participate in an activity for their own enjoyment Extrinsic motivation causes people to do something for a reward or to avoid a penalty For example, some children take piano lessons for intrinsic motivation (they enjoy it) while others take them for extrinsic motivation (to get a reward or avoid punishment) Information Technology Project Management, Fifth Edition, Copyright 2007

Maslow’s Hierarchy of Needs
Abraham Maslow argued that humans possess unique qualities that enable them to make independent choices, thus giving them control of their destiny Maslow developed a hierarchy of needs that states that people’s behaviors are guided or motivated by a sequence of needs Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-2: Maslow’s Hierarchy of Needs

Herzberg’s Motivational and Hygiene Factors
Frederick Herzberg wrote several famous books and articles about worker motivation; he distinguished between: Motivational factors: achievement, recognition, the work itself, responsibility, advancement, and growth, which produce job satisfaction Hygiene factors: cause dissatisfaction if not present, but do not motivate workers to do more; examples include larger salaries, more supervision, and a more attractive work environment Information Technology Project Management, Fifth Edition, Copyright 2007

Table 9-1: Examples of Herzberg’s Hygiene Factors and Motivators

McClelland’s Acquired-Needs Theory
Specific needs are acquired or learned over time and shaped by life experiences, including: Achievement (nAch): achievers like challenging projects with achievable goals and lots of feedback Affiliation (nAff): people with high nAff desire harmonious relationships and need to feel accepted by others, so managers should try to create a cooperative work environment for them Power (nPow): people with a need for power desire either personal power (not good) or institutional power (good for the organization); provide institutional power seekers with management opportunities Information Technology Project Management, Fifth Edition, Copyright 2007

McGregor’s Theory X and 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 Information Technology Project Management, Fifth Edition, Copyright 2007

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 Information Technology Project Management, Fifth Edition, Copyright 2007

Thamhain and Wilemon’s Ways to Have Influence on Projects (continued)
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 Information Technology Project Management, Fifth Edition, Copyright 2007

Ways to Influence that Help and Hurt Projects
Projects are more likely to succeed when project managers exert influence with: Expertise Work challenge Projects are more likely to fail when project managers rely too heavily on: Authority Money Penalty Information Technology Project Management, Fifth Edition, Copyright 2007

Power Power is the potential ability to influence behavior to get people to do things they would not otherwise do Types of power include: Coercive Legitimate Expert Reward Referent Information Technology Project Management, Fifth Edition, Copyright 2007

Covey and Improving Effectiveness
Project managers can apply Covey’s 7 habits to improve effectiveness on projects Be proactive Begin with the end in mind Put first things first Think win/win Seek first to understand, then to be understood Synergize Sharpen the saw Information Technology Project Management, Fifth Edition, Copyright 2007

Empathic Listening and Rapport
Good project managers are empathic listeners; they listen with the intent to understand Before you can communicate with others, you have to have rapport – a relation of harmony, conformity, accord, or affinity Mirroring is the matching of certain behaviors of the other person, a technique to help establish rapport IT professionals need to develop empathic listening and other people skills to improve relationships with users and other stakeholders Information Technology Project Management, Fifth Edition, Copyright 2007

Human Resource Planning
Involves identifying and documenting project roles, responsibilities, and reporting relationships Outputs include: Project organizational charts Staffing management plan Responsibility assignment matrixes Resource histograms Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-3: Sample Organizational Chart for a Large IT Project

Figure 9-4: Work Definition and Assignment Process

Responsibility Assignment Matrices
A responsibility assignment matrix (RAM) is a matrix that maps the work of the project as described in the WBS to the people responsible for performing the work as described in the OBS Can be created in different ways to meet unique project needs Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-5: Sample Responsibility Assignment Matrix (RAM)

Figure 9-6: RAM Showing Stakeholder Roles

Table 9-2: Sample RACI Chart
R = responsibility, only one R per task A = accountability C = consultation I = informed Information Technology Project Management, Fifth Edition, Copyright 2007

Staffing Management Plans and Resource Histograms
A staffing management plan describes when and how people will be added to and taken off the project team A resource histogram is a column chart that shows the number of resources assigned to a project over time Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-7: Sample Resource Histogram

What Went Right? In addition to providing technical training for IT personnel, several companies have made significant investments in project management training to provide career paths for project managers Hewlett Packard employed only six registered PMPs in 1997, but by August 2004, it employed more than 1,500 PMPs and was adding 500 more per year While most consulting firms offer a single path to a leadership position, IBM has four to allow their people to succeed by focusing on their strengths and interests in one or more disciplines Information Technology Project Management, Fifth Edition, Copyright 2007

Acquiring the Project Team
Acquiring qualified people for teams is crucial The project manager who is the smartest person on the team has done a poor job of recruiting! It’s important to assign the appropriate type and number of people to work on projects at the appropriate times Information Technology Project Management, Fifth Edition, Copyright 2007

Resource Assignment Staffing plans and good hiring procedures are important, 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 In CIO’s “2006 Midyear Staffing Update” report, IT leaders ranked finding, hiring, and retaining workers with the needed skill sets among their top staffing concerns Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practice Best practices can be applied to include the best places for people to work For example, Fortune Magazine lists the “100 Best Companies to Work For” in the United States every year, with Google taking the honors in 2007 Working Mothers Magazine lists the best companies in the U.S. for women based on benefits for working families Timesonline ( provides the Sunday Times list of the 100 Best Companies to Work For, a key benchmark against which UK companies can judge their Best Practice performance as employers Information Technology Project Management, Fifth Edition, Copyright 2007

Resource Loading Resource loading refers to the amount of individual resources an existing schedule requires during specific time periods Helps project managers develop a general understanding of the demands a project will make on the organization’s resources and individual people’s schedules Overallocation means more resources than are available are assigned to perform work at a given time Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-8: Sample Histogram Showing an Overallocated Individual

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 Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-9: Resource Leveling Example

Benefits of Resource Leveling
When resources are used on a more constant basis, they require less management It may enable project managers to use a just-in-time inventory type of policy for using subcontractors or other expensive resources It results in fewer problems for project personnel and accounting department It often improves morale Information Technology Project Management, Fifth Edition, Copyright 2007

Developing the Project Team
The main goal of team development is to help people work together more effectively to improve project performance It takes teamwork to successfully complete most projects Information Technology Project Management, Fifth Edition, Copyright 2007

Tuckman Model of Team Development
Forming Storming Norming Performing Adjourning Information Technology Project Management, Fifth Edition, Copyright 2007

Training 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 Information Technology Project Management, Fifth Edition, Copyright 2007

Meyers-Briggs Type Indicator (MBTI)
MBTI is a popular tool for determining personality preferences and helping teammates understand each other Four dimensions include: Extrovert/Introvert (E/I) Sensation/Intuition (S/N) Thinking/Feeling (T/F) Judgment/Perception (J/P) NTs or rationals are attracted to technology fields IT people vary most from the general population in not being extroverted or sensing Information Technology Project Management, Fifth Edition, Copyright 2007

Social Styles Profile People are perceived as behaving primarily in one of four zones, based on their assertiveness and responsiveness: Drivers Expressives Analyticals Amiables People on opposite corners (drivers and amiables, analyticals and expressives) may have difficulties getting along Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-10: Social Styles

DISC Profiles Also uses a four-dimensional model of normal behavior
Dominance Influence Steadiness Compliance People in opposite quadrants can have problems understanding each other Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 9-11: The DISC Profile

Reward and Recognition Systems
Team-based reward and recognition systems can promote teamwork Focus on rewarding teams for achieving specific goals Allow time for team members to mentor and help each other to meet project goals and develop human resources Information Technology Project Management, Fifth Edition, Copyright 2007

Managing the Project Team
Project managers must lead their teams in performing various project activities After assessing team performance and related information, the project manager must decide: If changes should be requested to the project If corrective or preventive actions should be recommended If updates are needed to the project management plan or organizational process assets Information Technology Project Management, Fifth Edition, Copyright 2007

Tools and Techniques for Managing Project Teams
Observation and conversation Project performance appraisals Conflict management Issue logs Information Technology Project Management, Fifth Edition, Copyright 2007

General Advice on Teams
Be patient and kind with your team Fix the problem instead of blaming people Establish regular, effective meetings Allow time for teams to go through the basic team-building stages Limit the size of work teams to three to seven members Information Technology Project Management, Fifth Edition, Copyright 2007

Five Dysfunctions of a Team
Patrick Lencioni, author of several books on teams, says that “Teamwork remains the one sustainable competitive advantage that has been largely untapped”* The five dysfunctions of teams are: Absence of trust Fear of conflict Lack of commitment Avoidance of accountability Inattention to results *Lencioni, Patrick, “Overcoming the Five Dysfunctions of a Team,” Jossey-Bass: San Francisco, CA (2005), p. 3. Information Technology Project Management, Fifth Edition, Copyright 2007

General Advice on Teams (continued)
Plan some social activities to help project team members and other stakeholders get to know each other better Stress team identity Nurture team members and encourage them to help each other Take additional actions to work with virtual team members Information Technology Project Management, Fifth Edition, Copyright 2007

Using Software to Assist in Human Resource Management
Software can help in producing RAMS and resource histograms Project management software includes several features related to human resource management such as: Assigning resources Identifying potential resource shortages or underutilization Leveling resources Information Technology Project Management, Fifth Edition, Copyright 2007

Project Resource Management Involves Much More Than Using Software
Project managers must: Treat people with consideration and respect Understand what motivates them Communicate carefully with them Focus on your goal of enabling project team members to deliver their best work Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project human resource management includes the processes required to make the most effective use of the people involved with a project Main processes include: Human resource planning Acquiring the project team Developing the project team Managing the project team Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 10: Project Communications Management

Learning Objectives Understand the importance of good communications in projects Explain the elements of project communications planning, including how to create a communications management plan and perform a stakeholder communications analysis Describe various methods for distributing project information and the advantages and disadvantages of each, discuss the importance of addressing individual communication needs, and calculate the number of communications channels in a project Information Technology Project Management, Fifth Edition, Copyright 2007

Understand how the main outputs of performance reporting help stakeholders stay informed about project resources Recognize the importance of good communications management for stakeholder relationships and for resolving issues List various methods for improving project communications, such as managing conflicts, running effective meetings, using and other technologies effectively, and using templates Describe how software can enhance project communications management Information Technology Project Management, Fifth Edition, Copyright 2007

Importance of Good Communications
The greatest threat to many projects is a failure to communicate Our culture does not portray IT professionals as being good communicators Research shows that IT professionals must be able to communicate effectively to succeed in their positions Strong verbal skills are a key factor in career advancement for IT professionals Information Technology Project Management, Fifth Edition, Copyright 2007

Project Communications Management Processes
Communications planning: determining the information and communications needs of the stakeholders Information distribution: making needed information available to project stakeholders in a timely manner Performance reporting: collecting and disseminating performance information, including status reports, progress measurement, and forecasting Managing stakeholders: managing communications to satisfy the needs and expectations of project stakeholders and to resolve issues Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 10-1: Project Communications Management Summary

Communications Planning
Every project should include some type of communications management plan, a document that guides project communications Creating a stakeholder analysis for project communications also aids in communications planning Information Technology Project Management, Fifth Edition, Copyright 2007

Communications Management Plan Contents
Stakeholder communications requirements Information to be communicated, including format, content, and level of detail The people who will receive the information and who will produce it Suggested methods or technologies for conveying the information Information Technology Project Management, Fifth Edition, Copyright 2007

Communications Management Plan Contents (continued)
Frequency of communication Escalation procedures for resolving issues Revision procedures for updating the communications management plan A glossary of common terminology Information Technology Project Management, Fifth Edition, Copyright 2007

Table 10-1: Sample Stakeholder Analysis for Project Communications

Information Distribution
Getting the right information to the right people at the right time and in a useful format is just as important as developing the information in the first place Important considerations include: Using technology to enhance information distribution Formal and informal methods for distributing information Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? Telecommunications throughout Asia were severely disrupted on December 26, 2006, after earthquakes off Taiwan damaged undersea cables, slowing Internet services and hindering financial transactions, particularly in the currency market International telephone traffic was restricted from some countries, and Internet access slowed to a crawl Information Technology Project Management, Fifth Edition, Copyright 2007

Distributing Information in an Effective and Timely Manner
Don’t bury crucial information Don’t be afraid to report bad information Oral communication via meetings and informal talks helps bring important information—good and bad—out into the open Information Technology Project Management, Fifth Edition, Copyright 2007

Importance of Face-to-Face Communication
Research says that in a face-to-face interaction: 58 percent of communication is through body language 35 percent of communication is through how the words are said 7 percent of communication is through the content or words that are spoken Pay attention to more than just the actual words someone is saying A person’s tone of voice and body language say a lot about how he or she really feels Information Technology Project Management, Fifth Edition, Copyright 2007

Encouraging More Face-to-Face Interactions
Short, frequent meetings are often very effective in IT projects Stand-up meetings force people to focus on what they really need to communicate Some companies have policies preventing the use of between certain hours or even entire days of the week Information Technology Project Management, Fifth Edition, Copyright 2007

Table 10-2: Media Choice Table

What Went Right? Collaboration is a key driver of overall performance of companies around the world Of all the collaboration technologies that were studied, three were more commonly present in high-performing companies than in low-performing ones: Web conferencing, audio conferencing, and meeting-scheduler technologies “This study reveals a powerful new metric business leaders can use to more successfully manage their companies and achieve competitive advantage,” said Brian Cotton, a vice president at Frost & Sullivan* The study also showed that there are regional differences in how people in various countries prefer to communicate with one another *Frost & Sullivan, “New Research Reveals Collaboration Is a Key Driver of Business Performance Around the World,” Microsoft PressPass (June 5, 2006). Information Technology Project Management, Fifth Edition, Copyright 2007

Understanding Group and Individual Communication Needs
People are not interchangeable parts As illustrated in Brooks’ book The Mythical Man-Month, you cannot assume that a task originally scheduled to take two months of one person’s time can be done in one month by two people Nine women cannot produce a baby in one month! Information Technology Project Management, Fifth Edition, Copyright 2007

Personal Preferences Affect Communication Needs
Introverts like more private communications, while extroverts like to discuss things in public Intuitive people like to understand the big picture, while sensing people need step-by-step details Thinkers want to know the logic behind decisions, while feeling people want to know how something affects them personally Judging people are driven to meet deadlines, while perceiving people need more help in developing and following plans Information Technology Project Management, Fifth Edition, Copyright 2007

Other Communication Considerations
Rarely does the receiver interpret a message exactly as the sender intended Geographic location and cultural background affect the complexity of project communications Different working hours Language barriers Different cultural norms Information Technology Project Management, Fifth Edition, Copyright 2007

Setting the Stage for Communicating Bad News
Dear Mom and Dad, or should I say Grandma & Grandpa, Yes, I am pregnant. No, I’m not married yet since Larry, my boyfriend, is out of a job. Larry’s employers just don’t seem to appreciate the skills he has learned since he quit high school. Larry looks much younger than you, Dad, even though he is three years older. I’m quitting college and getting a job so we can get an apartment before the baby is born. I found a beautiful apartment above a 24-hour auto repair garage with good insulation so the exhaust fumes and noise won’t bother us. I’m very happy. I thought you would be too. Love, Ashley P.S. There is no Larry. I’m not pregnant. I’m not getting married. I’m not quitting school, but I am getting a “D” in Chemistry. I just wanted you to have some perspective. Information Technology Project Management, Fifth Edition, Copyright 2007

Determining the Number of Communications Channels
As the number of people involved increases, the complexity of communications increases because there are more communications channels or pathways through which people can communicate Number of communications channels = n(n-1) 2 where n is the number of people involved Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 10-2: The Impact of the Number of People on Communications Channels

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 Forecasts predict future project status and progress based on past information and trends Information Technology Project Management, Fifth Edition, Copyright 2007

Managing Stakeholders
Project managers must understand and work with various stakeholders Need to devise a way to identify and resolve issues Two important tools include: Expectations management matrix Issue log Information Technology Project Management, Fifth Edition, Copyright 2007

Table 10-3: Expectations Management Matrix

Suggestions for Improving Project Communications
Manage conflicts effectively Develop better communication skills Run effective meetings Use and other technologies effectively Use templates for project communications Information Technology Project Management, Fifth Edition, Copyright 2007

Conflict Handling Modes
Confrontation: directly face a conflict using a problem-solving approach Compromise: use a give-and-take approach Smoothing: de-emphasize areas of difference and emphasize areas of agreement Forcing: the win-lose approach Withdrawal: retreat or withdraw from an actual or potential disagreement Information Technology Project Management, Fifth Edition, Copyright 2007

Conflict Can Be Good Conflict often produces important results, such as new ideas, better alternatives, and motivation to work harder and more collaboratively Groupthink: conformance to the values or ethical standards of a group; groupthink can develop if there are no conflicting viewpoints Research suggests that task-related conflict often improves team performance, but emotional conflict often depresses team performance Information Technology Project Management, Fifth Edition, Copyright 2007

Developing Better Communication Skills
Companies and formal degree programs for IT professionals often neglect the importance of speaking, writing, and listening skills As organizations become more global, they realize they must invest in ways to improve communication with people from different countries and cultures It takes leadership to improve communication Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? Communications technology, such as using and searching the Web, should help improve project communications, but it can also cause conflict How? Cyberslackers are people who should be working, but instead spend their time online doing non-work-related activities, such as annoying friends or coworkers by sending unimportant s A recent study by Websense suggested that employees are using the Web more and more for personal reasons, and it is costing U.S. companies $178 billion annually, or $5,000 per employee In 2000, Internet security company Surfcontrol estimated that every employee in Australia was taking the equivalent of a two-week “cyber- holiday” each year, costing the nation $22.5 billion annually Information Technology Project Management, Fifth Edition, Copyright 2007

Running Effective Meetings
Determine if a meeting can be avoided Define the purpose and intended outcome of the meeting Determine who should attend the meeting Provide an agenda to participants before the meeting Prepare handouts and visual aids, and make logistical arrangements ahead of time Run the meeting professionally Build relationships Information Technology Project Management, Fifth Edition, Copyright 2007

Using E-Mail, Instant Messaging, and Collaborative Tools Effectively
Make sure that , instant messaging, or collaborative tools are an appropriate medium for what you want to communicate Be sure to send information to the right people Use meaningful subject lines and limit the content of s to one main subject, and be as clear and concise as possible Be sure to authorize the right people to share and edit your collaborative documents Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practice In June 2006, CIO magazine surveyed information technology executives on their best practices for managing innovation in business When asked what technologies they plan to implement or leverage in the coming year: 54 percent of respondents reported handheld PCs/PDAs as the most important hardware 56 percent cited Web services as the most important software 53 percent cited wireless technologies as the most important Internet technology All three of these technologies will help organizations improve communications by allowing workers to communicate any time and anywhere Information Technology Project Management, Fifth Edition, Copyright 2007

Using Templates for Project Communications
Many technical people are afraid to ask for help Providing examples and templates for project communications saves time and money Organizations can develop their own templates, use some provided by outside organizations, or use samples from textbooks Recall that research shows that companies that excel in project management make effective use of templates Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 10-3: Sample Template for a Project Description

Table 10-5: Sample Template for a Monthly Progress Report

Table 10-6: Final Project Documentation Items

Lessons Learned Reports
The project manager and project team members should each prepare a lessons-learned report A reflective statement that documents important things an individual learned from working on the project The project manager often combines information from all of the lessons-learned reports into a project summary report See template and sample in chapter 3 Information Technology Project Management, Fifth Edition, Copyright 2007

Project Archives It is also important to organize and prepare project archives Project archives are a complete set of organized project records that provide an accurate history of the project These archives can provide valuable information for future projects as well Information Technology Project Management, Fifth Edition, Copyright 2007

Project Web Sites Many project teams create a project Web site to store important product documents and other information Can create the site using various types of software, such as enterprise project management software Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 10-4: Microsoft Office Enterprise Project Management (EPM) Solution

Using Software to Assist in Project Communications
There are many software tools to aid in project communications Today, many people telecommute or work remotely at least part-time Project management software includes new capabilities to enhance virtual communications New tools, such as instant messaging and blogs, can enhance project communications Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary The goal of project communications management is to ensure timely and appropriate generation, collection, dissemination, storage, and disposition of project information Main processes include: Communications planning Information distribution Performance reporting Managing stakeholders Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 11: Project Risk Management

Learning Objectives Understand what risk is and the importance of good project risk management Discuss the elements involved in risk management planning and the contents of a risk management plan List common sources of risks in information technology projects Information Technology Project Management, Fifth Edition, Copyright 2007

Describe the risk identification process, tools and techniques to help identify project risks, and the main output of risk identification: a risk register Discuss the qualitative risk analysis process and explain how to calculate risk factors, create probability/impact matrixes, and apply the Top Ten Risk Item Tracking technique to rank risks Information Technology Project Management, Fifth Edition, Copyright 2007

Explain the quantitative risk analysis process and how to apply decision trees, simulation, and sensitivity analysis to quantify risks Provide examples of using different risk response planning strategies to address both negative and positive risks Discuss what is involved in risk monitoring and control Describe how software can assist in project risk management Information Technology Project Management, Fifth Edition, Copyright 2007

The Importance of Project Risk Management
Project risk management is the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives Risk management is often overlooked in projects, but it can help improve project success by helping select good projects, determining project scope, and developing realistic estimates Information Technology Project Management, Fifth Edition, Copyright 2007

Research Shows Need to Improve Project Risk Management
Study by Ibbs and Kwak shows risk has the lowest maturity rating of all knowledge areas A similar survey was completed with software development companies in Mauritius, South Africa in 2003, and risk management also had the lowest maturity KLCI study shows the benefits of following good software risk management practices Information Technology Project Management, Fifth Edition, Copyright 2007

Table 11-1: Project Management Maturity by Industry Group and Knowledge Area*
KEY: 1 = LOWEST MATURITY RATING 5 = HIGHEST MATURITY RATING Knowledge Area Engineering/ Construction Telecommunications Information Systems Hi-Tech Manufacturing Scope 3.52 3.45 3.25 3.37 Time 3.55 3.41 3.03 3.50 Cost 3.74 3.22 3.20 3.97 Quality 2.91 2.88 3.26 Human Resources 3.18 2.93 Communications 3.53 3.21 3.48 Risk 2.87 2.75 2.76 Procurement 3.33 3.01 3.33 *Ibbs, C. William and Young Hoon Kwak. “Assessing Project Management Maturity,” Project Management Journal (March 2000). Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-1: Benefits from Software Risk Management Practices*
*Kulik, Peter and Catherine Weber, “Software Risk Management Practices – 2001,” KLCI Research Group (August 2001). Information Technology Project Management, Fifth Edition, Copyright 2007

Negative Risk A dictionary definition of risk is “the possibility of loss or injury” Negative risk involves understanding potential problems that might occur in the project and how they might impede project success Negative risk management is like a form of insurance; it is an investment Information Technology Project Management, Fifth Edition, Copyright 2007

Risk Can Be Positive Positive risks are risks that result in good things happening; sometimes called opportunities A general definition of project risk is an uncertainty that can have a negative or positive effect on meeting project objectives The goal of project risk management is to minimize potential negative risks while maximizing potential positive risks Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practice Some organizations make the mistake of only addressing tactical and negative risks when performing project risk management David Hillson ( suggests overcoming this problem by widening the scope of risk management to encompass both strategic risks and upside opportunities, which he refers to as integrated risk management Information Technology Project Management, Fifth Edition, Copyright 2007

Risk Utility Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff Utility rises at a decreasing rate for people who are risk-averse Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake The risk-neutral approach achieves a balance between risk and payoff Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-2: Risk Utility Function and Risk Preference

Project Risk Management Processes
Risk management planning: deciding how to approach and plan the risk management activities for the project Risk identification: determining which risks are likely to affect a project and documenting the characteristics of each Qualitative risk analysis: prioritizing risks based on their probability and impact of occurrence Information Technology Project Management, Fifth Edition, Copyright 2007

Project Risk Management Processes (continued)
Quantitative risk analysis: numerically estimating the effects of risks on project objectives Risk response planning: taking steps to enhance opportunities and reduce threats to meeting project objectives Risk monitoring and control: monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-3: Project Risk Management Summary

Risk Management Planning
The main output of risk management planning is a risk management plan—a plan that documents the procedures for managing risk throughout a project The project team should review project documents and understand the organization’s and the sponsor’s approaches to risk The level of detail will vary with the needs of the project Information Technology Project Management, Fifth Edition, Copyright 2007

Table 11-2: Topics Addressed in a Risk Management Plan
Methodology Roles and responsibilities Budget and schedule Risk categories Risk probability and impact Risk documentation Information Technology Project Management, Fifth Edition, Copyright 2007

Contingency and Fallback Plans, Contingency Reserves
Contingency plans are predefined actions that the project team will take if an identified risk event occurs Fallback plans are developed for risks that have a high impact on meeting project objectives, and are put into effect if attempts to reduce the risk are not effective Contingency reserves or allowances are provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level Information Technology Project Management, Fifth Edition, Copyright 2007

Common Sources of Risk in Information Technology Projects
Several studies show that IT projects share some common sources of risk The Standish Group developed an IT success potential scoring sheet based on potential risks Other broad categories of risk help identify potential risks Information Technology Project Management, Fifth Edition, Copyright 2007

Table 11-3: Information Technology Success Potential Scoring Sheet

Broad Categories of Risk
Market risk Financial risk Technology risk People risk Structure/process risk Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? KPMG, a large consulting firm, published a study in that found that 55 percent of runaway projects—projects that have significant cost or schedule overruns—did no risk management at all; 38 percent did some (but half did not use their risk findings after the project was underway); and 7 percent did not know whether they did risk management or not The timing of risk management is also an important consideration Information Technology Project Management, Fifth Edition, Copyright 2007

Risk Breakdown Structure
A risk breakdown structure is a hierarchy of potential risk categories for a project Similar to a work breakdown structure but used to identify and categorize risks Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-4: Sample Risk Breakdown Structure

Table 11-4: Potential Negative Risk Conditions Associated With Each Knowledge Area

Risk Identification Risk identification is the process of understanding what potential events might hurt or enhance a particular project Risk identification tools and techniques include: Brainstorming The Delphi Technique Interviewing SWOT analysis Information Technology Project Management, Fifth Edition, Copyright 2007

Brainstorming Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment An experienced facilitator should run the brainstorming session Be careful not to overuse or misuse brainstorming Psychology literature shows that individuals produce a greater number of ideas working alone than they do through brainstorming in small, face-to-face groups Group effects often inhibit idea generation Information Technology Project Management, Fifth Edition, Copyright 2007

Delphi Technique The Delphi Technique is used to derive a consensus among a panel of experts who make predictions about future developments Provides independent and anonymous input regarding future events Uses repeated rounds of questioning and written responses and avoids the biasing effects possible in oral methods, such as brainstorming Information Technology Project Management, Fifth Edition, Copyright 2007

Interviewing Interviewing is a fact-finding technique for collecting information in face-to-face, phone, , or instant- messaging discussions Interviewing people with similar project experience is an important tool for identifying potential risks Information Technology Project Management, Fifth Edition, Copyright 2007

SWOT Analysis SWOT analysis (strengths, weaknesses, opportunities, and threats) can also be used during risk identification Helps identify the broad negative and positive risks that apply to a project Information Technology Project Management, Fifth Edition, Copyright 2007

Risk Register The main output of the risk identification process is a list of identified risks and other information needed to begin creating a risk register A risk register is: A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format A tool for documenting potential risk events and related information Risk events refer to specific, uncertain events that may occur to the detriment or enhancement of the project Information Technology Project Management, Fifth Edition, Copyright 2007

Risk Register Contents
An identification number for each risk event A rank for each risk event The name of each risk event A description of each risk event The category under which each risk event falls The root cause of each risk Information Technology Project Management, Fifth Edition, Copyright 2007

Risk Register Contents (continued)
Triggers for each risk; triggers are indicators or symptoms of actual risk events Potential responses to each risk The risk owner or person who will own or take responsibility for each risk The probability and impact of each risk occurring The status of each risk Information Technology Project Management, Fifth Edition, Copyright 2007

Table 11-5: Sample Risk Register

Qualitative Risk Analysis
Assess the likelihood and impact of identified risks to determine their magnitude and priority Risk quantification tools and techniques include: Probability/impact matrixes The Top Ten Risk Item Tracking Expert judgment Information Technology Project Management, Fifth Edition, Copyright 2007

Probability/Impact Matrix
A probability/impact matrix or chart lists the relative probability of a risk occurring on one side of a matrix or axis on a chart and the relative impact of the risk occurring on the other List the risks and then label each one as high, medium, or low in terms of its probability of occurrence and its impact if it did occur Can also calculate risk factors Numbers that represent the overall risk of specific events based on their probability of occurring and the consequences to the project if they do occur Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-5: Sample Probability/Impact Matrix

Figure 11-6: Chart Showing High-, Medium-, and Low-Risk Technologies

Top Ten Risk Item Tracking
Top Ten Risk Item Tracking is a qualitative risk analysis tool that helps to identify risks and maintain an awareness of risks throughout the life of a project Establish a periodic review of the top ten project risk items List the current ranking, previous ranking, number of times the risk appears on the list over a period of time, and a summary of progress made in resolving the risk item Information Technology Project Management, Fifth Edition, Copyright 2007

Table 11-6: Example of Top Ten Risk Item Tracking

Watch List A watch list is a list of risks that are low priority, but are still identified as potential risks Qualitative analysis can also identify risks that should be evaluated on a quantitative basis Information Technology Project Management, Fifth Edition, Copyright 2007

Quantitative Risk Analysis
Often follows qualitative risk analysis, but both can be done together Large, complex projects involving leading edge technologies often require extensive quantitative risk analysis Main techniques include: Decision tree analysis Simulation Sensitivity analysis Information Technology Project Management, Fifth Edition, Copyright 2007

Decision Trees and Expected Monetary Value (EMV)
A decision tree is a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain Estimated monetary value (EMV) is the product of a risk event probability and the risk event’s monetary value You can draw a decision tree to help find the EMV Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-7: Expected Monetary Value (EMV) Example

Simulation Simulation uses a representation or model of a system to analyze the expected behavior or performance of the system Monte Carlo analysis simulates a model’s outcome many times to provide a statistical distribution of the calculated results To use a Monte Carlo simulation, you must have three estimates (most likely, pessimistic, and optimistic) plus an estimate of the likelihood of the estimate being between the most likely and optimistic values Information Technology Project Management, Fifth Edition, Copyright 2007

Steps of a Monte Carlo Analysis
Assess the range for the variables being considered Determine the probability distribution of each variable For each variable, select a random value based on the probability distribution Run a deterministic analysis or one pass through the model Repeat steps 3 and 4 many times to obtain the probability distribution of the model’s results Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-8: Sample Monte Carlo Simulation Results for Project Schedule

What Went Right? A large aerospace company used Monte Carlo simulation to help quantify risks on several advanced-design engineering projects, such as the National Aerospace Plan (NASP) The results of the simulation were used to determine how the company would invest its internal research and development funds Although the NASP project was terminated, the resulting research has helped develop more advanced materials and propulsion systems used on many modern aircraft Information Technology Project Management, Fifth Edition, Copyright 2007

Sensitivity Analysis Sensitivity analysis is a technique used to show the effects of changing one or more variables on an outcome For example, many people use it to determine what the monthly payments for a loan will be given different interest rates or periods of the loan, or for determining break-even points based on different assumptions Spreadsheet software, such as Excel, is a common tool for performing sensitivity analysis Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 11-9: Sample Sensitivity Analysis for Determining Break-Even Point

Risk Response Planning
After identifying and quantifying risks, you must decide how to respond to them Four main response strategies for negative risks: Risk avoidance Risk acceptance Risk transference Risk mitigation Information Technology Project Management, Fifth Edition, Copyright 2007

Table 11-7: General Risk Mitigation Strategies for Technical, Cost, and Schedule Risks

Response Strategies for Positive Risks
Risk exploitation Risk sharing Risk enhancement Risk acceptance Information Technology Project Management, Fifth Edition, Copyright 2007

Residual and Secondary Risks
It’s also important to identify residual and secondary risks Residual risks are risks that remain after all of the response strategies have been implemented Secondary risks are a direct result of implementing a risk response Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot A highly publicized example of a risk response to corporate financial scandals, such as those affecting Enron, Arthur Andersen, and WorldCom, was legal action The Sarbanes-Oxley Act is considered the most significant change to federal securities laws in the United States since the New Deal This Act has caused many organizations to initiate projects and other actions to avoid litigation Information Technology Project Management, Fifth Edition, Copyright 2007

Risk Monitoring and Control
Involves executing the risk management process to respond to risk events Workarounds are unplanned responses to risk events that must be done when there are no contingency plans Main outputs of risk monitoring and control are: Requested changes Recommended corrective and preventive actions Updates to the risk register, project management plan, and organizational process assets Information Technology Project Management, Fifth Edition, Copyright 2007

Using Software to Assist in Project Risk Management
Risk registers can be created in a simple Word or Excel file or as part of a database More sophisticated risk management software, such as Monte Carlo simulation tools, help in analyzing project risks The PMI Risk Specific Interest Group’s Web site at has a detailed list of software products to assist in risk management Information Technology Project Management, Fifth Edition, Copyright 2007

Results of Good Project Risk Management
Unlike crisis management, good project risk management often goes unnoticed Well-run projects appear to be almost effortless, but a lot of work goes into running a project well Project managers should strive to make their jobs look easy to reflect the results of well-run projects Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project risk management is the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives Main processes include: Risk management planning Risk identification Qualitative risk analysis Quantitative risk analysis Risk response planning Risk monitoring and control Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 12: Project Procurement Management

Learning Objectives Understand the importance of project procurement management and the increasing use of outsourcing for information technology projects Describe the work involved in planning purchases and acquisitions for projects, the contents of a procurement management plan and contract statement of work, and calculations involved in a make-or-buy analysis Discuss what is involved in planning contracting, including the creation of various procurement documents and evaluation criteria for sellers Information Technology Project Management, Fifth Edition, Copyright 2007

Understand the process of requesting seller responses and the difference between proposals and bids Describe the seller selection process and recognize different approaches for evaluating proposals or selecting suppliers Discuss the importance of good contract administration Describe the contract closure process Discuss types of software available to assist in project procurement management Information Technology Project Management, Fifth Edition, Copyright 2007

Importance of Project Procurement Management
Procurement means acquiring goods and/or services from an outside source Other terms include purchasing and outsourcing Experts predict that global spending on computer software and services will continue to grow People continue to debate whether offshore outsourcing helps their own country or not Information Technology Project Management, Fifth Edition, Copyright 2007

Debates on Outsourcing
Some companies, such as Wal-Mart, prefer to do no outsourcing at all, while others do a lot of outsourcing Most organizations do some form of outsourcing to meet their IT needs and spend most money within their own country The U.S. temporary workforce continues to grow as people work for temporary job agencies so they can more easily move from company to company Information Technology Project Management, Fifth Edition, Copyright 2007

Why Outsource? To reduce both fixed and recurrent costs
To allow the client organization to focus on its core business To access skills and technologies To provide flexibility To increase accountability Information Technology Project Management, Fifth Edition, Copyright 2007

Contracts A contract is a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them Contracts can clarify responsibilities and sharpen focus on key deliverables of a project Because contracts are legally binding, there is more accountability for delivering the work as stated in the contract A recent trend in outsourcing is the increasing size of contracts Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Wrong? Companies often change their minds about procurement; for example, JPMorgan Chase announced a seven-year, $5 billion deal to outsource much of its data processing to IBM, but they revoked the contract less than two years into its existence because the procurement plan no longer fit their business strategy The Australian Computer Society says sending work offshore may lower the number of students entering IT courses, deplete the number of skilled IT professionals, and diminish the nation’s strategic technology capability Procurement can also cause security problems, including the protection of intellectual property, integrity of data, and the reliability of infrastructure in offshore locations Information Technology Project Management, Fifth Edition, Copyright 2007

Project Procurement Management Processes
Project procurement management: acquiring goods and services for a project from outside the performing organization Processes include: Planning purchases and acquisitions: determining what to procure, when, and how Planning contracting: describing requirements for the products or services desired from the procurement and identifying potential sources or sellers (contractors, suppliers, or providers who provide goods and services to other organizations) Information Technology Project Management, Fifth Edition, Copyright 2007

Project Procurement Management Processes (continued)
Requesting seller responses: obtaining information, quotes, bids, offers, or proposals from sellers, as appropriate Selecting sellers: choosing from among potential suppliers through a process of evaluating potential sellers and negotiating the contract Administering the contract: managing the relationship with the selected seller Closing the contract: completing and settling each contract, including resolving any open items Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 12-1: Project Procurement Management Summary

Planning Purchases and Acquisitions
Identifying which project needs can best be met by using products or services outside the organization If there is no need to buy any products or services from outside the organization, then there is no need to perform any of the other procurement management processes Information Technology Project Management, Fifth Edition, Copyright 2007

What Went Right? Several organizations, such as The Boots Company PLC in England, outsource their IT services to save money compared with the cost of running the systems themselves Carefully planning procurement can also save millions of dollars, as the U.S. Air Force did by using a unit pricing strategy for a large office automation project Information Technology Project Management, Fifth Edition, Copyright 2007

Tools and Techniques for Planning Purchases and Acquisitions
Make-or-buy analysis: general management technique used to determine whether an organization should make or perform a particular product or service inside the organization or buy from someone else Often involves financial analysis Experts, both internal and external, can provide valuable inputs in procurement decisions Information Technology Project Management, Fifth Edition, Copyright 2007

Make-or-Buy Example Assume you can lease an item you need for a project for $800/day; to purchase the item, the cost is $12,000 plus a daily operational cost of $400/day How long will it take for the purchase cost to be the same as the lease cost? Information Technology Project Management, Fifth Edition, Copyright 2007

Make-or Buy Solution Set up an equation so both options, purchase and lease, are equal In this example, use the following equation; let d be the number of days to use the item: $12,000 + $400d = $800d Subtracting $400d from both sides, you get: $12,000 = $400d Dividing both sides by $400, you get: d = 30 If you need the item for more than 30 days, it is more economical to purchase it Information Technology Project Management, Fifth Edition, Copyright 2007

Types of Contracts Different types of contracts can be used in different situations Fixed price or lump sum contracts: involve a fixed total price for a well-defined product or service Cost reimbursable contracts: involve payment to the seller for direct and indirect costs Time and material contracts: hybrid of both fixed price and cost reimbursable contracts, often used by consultants Unit price contracts: require the buyer to pay the seller a predetermined amount per unit of service A single contract can actually include all four of these categories, if it makes sense for that particular procurement Information Technology Project Management, Fifth Edition, Copyright 2007

Point of Total Assumption
The Point of Total Assumption (PTA) is the cost at which the contractor assumes total responsibility for each additional dollar of contract cost Contractors do not want to reach the point of total assumption because it hurts them financially, so they have an incentive to prevent cost overruns The PTA is calculated with the following formula: PTA = (ceiling price – target price)/government share + target cost Information Technology Project Management, Fifth Edition, Copyright 2007

Cost Reimbursable Contracts
Cost plus incentive fee (CPIF): the buyer pays the supplier for allowable performance costs plus a predetermined fee and an incentive bonus Cost plus fixed fee (CPFF): the buyer pays the supplier for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs Cost plus percentage of costs (CPPC): the buyer pays the supplier for allowable performance costs plus a predetermined percentage based on total costs Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 12-2: Contract Types Versus Risk

Contract Clauses Contracts should include specific clauses to take into account issues unique to the project Can require various educational or work experience for different pay rights A termination clause is a contract clause that allows the buyer or supplier to end the contract Information Technology Project Management, Fifth Edition, Copyright 2007

Procurement Management Plan
Describes how the procurement processes will be managed, from developing documentation for making outside purchases or acquisitions to contract closure Content varies based on project needs Information Technology Project Management, Fifth Edition, Copyright 2007

Contract Statement of Work (SOW)
A statement of work is a description of the work required for the procurement If a SOW is used as part of a contract to describe only the work required for that particular contract, it is called a contract statement of work A SOW is a type of scope statement A good SOW gives bidders a better understanding of the buyer’s expectations Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 12-3: Statement of Work (SOW) Template

Planning Contracting Involves preparing several documents needed for potential sellers to prepare their responses and determining the evaluation criteria for the contract award Request for Proposals: used to solicit proposals from prospective sellers A proposal is a document prepared by a seller when there are different approaches for meeting buyer needs Requests for Quotes: used to solicit quotes or bids from prospective suppliers A bid, also called a tender or quote (short for quotation), is a document prepared by sellers providing pricing for standard items that have been clearly defined by the buyer Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 12-4: Request for Proposal (RFP) Template

Evaluation Criteria It’s important to prepare some form of evaluation criteria, preferably before issuing a formal RFP or RFQ Beware of proposals that look good on paper; be sure to evaluate factors, such as past performance and management approach Can require a technical presentation as part of a proposal Information Technology Project Management, Fifth Edition, Copyright 2007

Requesting Seller Responses
Deciding whom to ask to do the work, sending appropriate documentation to potential sellers, and obtaining proposals or bids Organizations can advertise to procure goods and services in several ways Approaching the preferred vendor Approaching several potential vendors Advertising to anyone interested A bidders’ conference can help clarify the buyer’s expectations Information Technology Project Management, Fifth Edition, Copyright 2007

Selecting Sellers Also called source selection Involves:
Evaluating proposals or bids from sellers Choosing the best one Negotiating the contract Awarding the contract Information Technology Project Management, Fifth Edition, Copyright 2007

Figure 12-5: Sample Proposal Evaluation Sheet

Seller Selection Process
Organizations often do an initial evaluation of all proposals and bids and then develop a short list of potential sellers for further evaluation Sellers on the short list often prepare a best and final offer (BAFO) Final output is a contract signed by the buyer and the selected seller Information Technology Project Management, Fifth Edition, Copyright 2007

Media Snapshot Information technology has made a tremendous impact on how organizations and individuals select sellers The Interactive Advertising Bureau and PricewaterhouseCoopers reported that U.S. Internet advertising revenues for the first half of 2006 were almost $8 billion, a new record and a 37 percent increase over the first half of 2005 Google and Yahoo! charge advertisers each time a user clicks on that advertiser’s site Other companies, like DoubleClick, Inc., provide digital marketing technology services Information Technology Project Management, Fifth Edition, Copyright 2007

Administering the Contract
Ensures that the seller’s performance meets contractual requirements Contracts are legal relationships, so it is important that legal and contracting professionals be involved in writing and administering contracts It is critical that project managers and team members watch for constructive change orders, which are oral or written acts or omissions by someone with actual or apparent authority that can be construed to have the same effect as a written change order Information Technology Project Management, Fifth Edition, Copyright 2007

Suggestions for Change Control in Contracts
Changes to any part of the project need to be reviewed, approved, and documented by the same people in the same way that the original part of the plan was approved Evaluation of any change should include an impact analysis; how will the change affect the scope, time, cost, and quality of the goods or services being provided? Changes must be documented in writing; project team members should also document all important meetings and telephone phone calls Information Technology Project Management, Fifth Edition, Copyright 2007

Suggestions for Change Control in Contracts (continued)
Project managers and teams should stay closely involved to make sure the new system will meet business needs and work in an operational environment Have backup plans Use tools and techniques, such as a contract change control system, buyer-conducted performance reviews, inspections and audits, and so on Information Technology Project Management, Fifth Edition, Copyright 2007

Best Practice Accenture developed a list of best practices from experienced outsourcers throughout the world: Build in Broad Business Outcomes Early and Often Hire a Partner, Not Just a Provider It’s More Than a Contract, It’s a Business Relationship Leverage Gain-Sharing Use Active Governance Assign a Dedicated Executive Focus Relentlessly on Primary Objectives Information Technology Project Management, Fifth Edition, Copyright 2007

Closing the Contract Involves completing and settling contracts and resolving any open items The project team should: Determine if all work was completed correctly and satisfactorily Update records to reflect final results Archive information for future use The contract itself should include requirements for formal acceptance and closure Information Technology Project Management, Fifth Edition, Copyright 2007

Tools to Assist in Contract Closure
Procurement audits identify lessons learned in the procurement process A records management system provides the ability to easily organize, find, and archive procurement-related documents Information Technology Project Management, Fifth Edition, Copyright 2007

Using Software to Assist in Project Procurement Management
Word-processing software helps write proposals and contracts, spreadsheets help evaluate suppliers, databases help track suppliers, and presentation software helps present procurement-related information E-procurement software does many procurement functions electronically Organizations also use other Internet tools to find information on suppliers or auction goods and services Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter Summary Project procurement management involves acquiring goods and services for a project from outside the performing organization Processes include: Planning purchases and acquisitions Planning contracting Requesting seller responses Selecting sellers Administering contracts Closing contracts Information Technology Project Management, Fifth Edition, Copyright 2007

Chapter 1: Introduction to Project Management

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