Copyright 2013 John Wiley & Sons, Inc. Chapter 6: Managing Process Improvement Projects

6-2 Overview

6-3 Décor Cabinets Décor Cabinets adopted a goal of 100 percent on time delivery –Long-term customer loyalty –Enhance profitability Having clear objective helped them assemble a project portfolio focused on that goal Meant declining some seemingly profitable project ideas

6-4 Mississippi Power and Hurricane Katrina Primary and secondary storm center knocked out Third location had no electricity or running water Within days, had 11,000 repairmen Needed housing, beds, food, water, 5,000 trucks, 140,000 gallons of fuel a day, 8,000 tetanus shots and much more Directing was a massive project

6-5 “Big Dig” Boston’s “Big Dig” highway/tunnel project is one of the largest, most complex, and technologically challenging highway projects Original cost estimate was $3 billion Final cost was over $14 billion 1.Major underestimate of initial scope 2.Lack of cost control Estimated benefit is $500 million per year Expected to have a 78 year payback

6-6 Introduction Project management concerned with managing organizational activities Often used to integrate and coordinate diverse activities Projects are special types of processes

6-7 Defining a Project Projects are a special type of process Projects are a set of activities that, taken together, produce a valued output Each project is unique with a clear beginning and end They are performed infrequently and ad hoc, with a clear specification of the desired objective Limited budget Extremely important to the organization

6-8 Project Management  What is a project?  A series of related jobs, usually directed toward some major output and requiring a significant period of time to perform.  What is project management?  Planning, directing, and controlling resources (people, equipment, material, etc.) to meet the technical, cost, and time constraints of the project.  Why is project management important?  At the highest levels of an organization, management often involves juggling a portfolio of projects. 4-8

6-9 Examples of Projects Constructing highways, bridges, tunnels and dams Building ships, planes, rockets, or a doghouse Erecting skyscrapers, steel mills, and homes Locating and laying out amusement parks, camping grounds, and refuges Organizing conferences and conventions Managing R&D projects Running political campaigns, war operations, and advertising campaigns

6-10 Reasons for Growth in Project Operations 1.More Sophisticated Technology 2.Better-Educated Citizens 3.More Leisure Time 4.Increased Accountability 5.Higher Productivity 6.Faster Response to Customers 7.Greater customization for customers

6-11 Planning the Project Planning is probably the single most important element in the success of the project Will discuss: –Project portfolio –Project team –Actual project planning tools

6-12 The Project Portfolio Long-term purpose of projects is to achieve the organization’s goals Accomplished through the project portfolio –Also know as the aggregate project plan It is vital to consider the interactions among various projects Must manage projects as a set

6-13 Four Categories of Project 1.Derivative projects –Seek to make incremental improvements in the output and/or process 2.Breakthrough projects –Seek the development of a new generation of outputs 3.Platform projects –Fall between derivative and breakthrough projects 4.R&D projects –Entail working with basic technology to develop new knowledge

6-14 The Aggregate Project Plan Figure 6.1

6-15 An Example of Aggregate Project Plan Figure 6.2

6-16 Types of Development Projects Type of Project Degree of Change 4-16

6-17 Project Structure A self-contained team works full-time on the project. Pure Project 4-17

6-18 Pure Project Structure The project manager has full authority Team members report to one boss Shortened communication lines Team pride, motivation, and commitment are high Advantages Duplication of resources Organizational goals and policies are ignored Lack of technology transfer Team members have no functional area "home" Disadvantages 4-18

6-19 Project Structure A self-contained team works full-time on the project. Pure Project Responsibility for the project lies within one functional area of the firm. Employees from that area work on the project, usually only part-time. Functional Project 4-19

6-20 Functional Project Structure A team member can work on several projects Technical expertise maintained in functional area Functional area is “home” after project completed Critical mass of specialized knowledge Advantages Aspects of the project that are not directly related to the functional area get short-changed Motivation of team members is often weak Needs of the client are secondary and are responded to slowly Disadvantages 4-20

6-21 Project Structure A self-contained team works full-time on the project. Pure Project Responsibility for the project lies within one functional area of the firm. Employees from that area work on the project, usually only part-time. Functional Project A blend of pure and functional project structures – people from different functional areas work on the project, possibly only part- time. Matrix Project 4-21

6-22 Matrix Project Structure Better communications between functional areas Project manager held responsible for success Duplication of resources is minimized Functional “home” for team members Policies of the parent organization are followed Advantages Too many bosses Depends on project manager’s negotiating skills Potential for sub-optimization Disadvantages 4-22

6-23 The Project Life Cycle Project progress is rarely uniform Tend to be either stretched or exponential With stretched, the project starts slow but gathers speed during implementation With exponential, there is continuous activity but no output until everything comes together

6-24 Two Project Life Cycles (a) Stretched-S and (b) Exponential Figure 6.3

6-25 Projects in the Organizational Structure In a functional organization, projects are frequently housed in the department with a major interest in its success –More generic projects might report to a vice president Some organizations are structured by projects –Called projectized organizations Some firms use a matrix structure to get the benefits of both structures

6-26 Organizing the Project Team A team is required to run a project Some team members report directly to the project manager –Those having long-term relationship with project –Those needing to communicate closely with project manager –Those with necessary skills Not common for project manager to have reward authority

6-27 Four Major Attributes for Project Managers 1.Credibility 2.Sensitivity –To both politics and personalities 3.Leadership, ethics, and managerial style 4.Ability to handle stress

6-28 Project Plans Initiation of a project should include the development of a project charter –Also known as the project plan Elements form the basis for more detailed planning –Budgets –Schedules –Work plan –General management

6-29 Elements of Project Charter Overview –A short summary of what the client expects from the project Goals, or scope –Contains a more detailed statement of the general goals Business case –Describes the justification for the project General approach –Describes both the managerial and the technical approaches

6-30 Elements of Project Charter (Continued) Contractual Aspects –Includes a complete list and description of all reporting requirements, customer-supplied resources, liaison arrangements, and so on Schedule and milestones –This outlines the schedule and lists milestone events Resources –The project budget and cost

6-31 Elements of Project Charter (Continued) Personnel –The project team, approvers, and other involved departments Risk management plan –This covers potential problems that could affect the project Evaluation method –Every project should be evaluated against standards

6-32 Three Project Objectives Figure 6.4

6-33 Scheduling the Project Schedule based on activities that must be conducted to achieve the project goals The Length of time each activity requires Order in which they must be completed

6-34 Terminology Activity –One of the project operations Event –Completion of an activity Network –Set of all project activities shown graphically

6-35 Terminology (Continued) Path –A series of connected activities from start to end Critical path –Any path that delayed will delay project Critical activities –The activities on the critical path

6-36 Project Scheduling with Certain Activity Times Inputs –List of the activities that must be completed –Activity completion times –Activity precedence relationships Outputs –Graphical representation of entire project –Time to complete –Critical path or paths with critical activities –Slack time –Early and late start/end times

6-37 Data for a Mortgage Refinancing Project Figure 6.1

6-38 Network Diagram for Process Improvement Project Figure 6.8

6-39 Network-Planning Models A project is made up of a sequence of activities that form a network representing a project. The path taking longest time through this network of activities is called the “critical path.” The critical path provides a wide range of scheduling information useful in managing a project. Critical path method (CPM) helps to identify the critical path(s) in the project networks. 4-39

6-40 Critical Path Method (CPM) Identify each activity to be done and estimate how long it will take. Determine the required sequence and construct a network diagram. Determine the critical path. Determine the early start/finish and late start/finish schedule. 4-40

6-41 Example 4.1 – Identify Activities and Construct Network A(21) C(7) B(5)D(2) F(8) E(5) G(2) 4-41

6-42 Determine Early Start/Early Finish and Late Start/Late Finish Schedule A(21) C(7) B(5)D(2) F(8) E(5) G(2) Critical Path 1: ACFG Critical Path 2: ABDFG 4-42