OPMA 5364
Project Management
Part 1
Projects and Project Goals
Topic Outline: Projects and Project Goals
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Why organize an activity or job as a project
Project goals and performance tradeoffs
Examples of projects and goals
Project life cycles
How are projects selected
Organizational structures and projects
Project selection exercise
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What are Projects?
A temporary endeavor undertaken to create a
unique product, service or result (PMI-PMBOK)
Specific, timely, usually multidisciplinary, and
always conflict ridden (Mantel et al.)
Series of activities or tasks, specific objectives,
defined start and end dates, funding limits,
consumes resources, multifunctional (Kerzner)
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Why Projects?
Why organize an activity or job as a project?
• It allows you to better structure and organize the
tasks that need to be performed
• Well developed approaches and tools are
available for managing projects
• Easy-to-use software is available for scheduling
and budgeting projects
• Experience has shown that the work/job can be
done faster, cheaper, and better when managed
as a project
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Project Performance Goals
• Outcomes/Quality (deliverables and quality)
– exactly what needs to be accomplished at
what quality level
• Time
– doing it quickly or on schedule
• Cost
– doing it cheaply or on budget
Unfortunately, tradeoffs among these goals exist
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Project Goal Tradeoffs
Outcomes/Quality
Desired
Outcome/Quality
All Goals
Met
Cost
Budget limit
Time
Due Date
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Project Performance Goals
Which goal is more important: time, cost, or
outcomes?
Who decides which goal is more important?
Why is it important for the Project Manager (PM) to
know which goal is more important?
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Examples of Projects and Goals
• What are examples of non-project activities?
• What are some examples of projects you’ve
worked on?
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What were the desired deliverables/outcomes?
What was the project time frame?
What was the biggest challenge during the project?
Which goals were more important?
Were all goals fully met?
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Project Life Cycles
The pace of project progress throughout the
project
There are many patterns that project life cycles
can follow, but the following chart depicts a fairly
common pattern:
– slow start
– quick momentum
– slow finish
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A Common Project Life Cycle
100
% Project completion
Slow finish
Quick momentum
Slow start
0
Time
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A Common Project Life Cycle
• Slow Start
–
–
–
–
manager is selected
team is assembled
initial resources are allocated
work program is organized
• Quick Momentum
– work progresses
– momentum builds
• Slow Finish
– many loose ends to tie up
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A Different Project Life Cycle
% Project completion
100
0
Time
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Resources & Project Life Cycle
Planning
Execution
Wrap-up
Resources
Concept
Required Resources
Start
Finish
Time
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Implications of Project Life Cycles
• Project life cycle shape will affect the timing of
resource and funding needs
• Understanding the general project life cycle may
help the stakeholders better understand and
accept the current status of the project
• Understanding the general project life cycle may
also help the PM make better goal tradeoff
decisions at particular times during the project
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Selecting Projects
Who decides which projects will be undertaken by
an organization?
What are some examples of criteria that might be
used in selecting projects?
Why should the PM be made aware of why a
project was selected?
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Some Nonnumeric Selection Methods
• Sacred Cow (president’s pet project)
– Do you want to keep your job?
– Examples
• Operating/Competitive Necessity
– You must do this project to stay in business
– Examples
• Comparative Benefits
– Examine +/- of each potential project
– Examples
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Factor Scoring Method
Example: 3 projects; 4 factors; 1-5 scale (5=best)
Factor
ProjectA
Cost
2
Risk
4
Suitable
4
Skills
2
Total Score: 12
ProjectB
4
3
2
2
11
ProjectC
3
1
5
5
14
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Weighted Factor Scoring Method
Example: 3 projects; 4 factors; 1-5 scale (5=best)
Factor Wt. ProjectA
Cost
.4
2
Risk
.3
4
Suitable .1
4
Skills
.2
2
Wtd. Score:
2.8
ProjectB
4
3
2
2
3.1
ProjectC
3
1
5
5
3.0
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Some Numeric Selection Methods
Common Financial Assessment Methods
– Payback Period
• Simple to use and easy to understand
• Ignores returns beyond payback period and
time value of money
– Discounted Cash Flow (NPV)
• Considers time value of money and all returns
• Favors short-term projects
• Ignores all non-monetary factors except risk
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Payback Period Example
Expected project costs are $700,000
Expected returns are $200,000 per year
Payback period = 700,000 ÷ 200,000 = 3.5 years
Revenues would cover investment costs in 3.5 yrs.
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Discounted Cash Flow
Net Present Value
n
NPV( project )   I0  
Ft
t


1

k
t 1
where
I0 = initial cash investment
Ft = net cash inflow in period t
k = required rate of return or hurdle rate
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Discounted Cash Flow
Initial cost = $700,000; 4-year annual cash flow =
$200,000; required rate of return = 15%
NPV = -700,000 + 200,000/(1.15)1
+ 200,000/(1.15)2 + 200,000/(1.15)3
+ 200,000/(1.15)4
NPV = -700,000 + 173,913 + 151,229 + 131,503
+ 114,351
NPV = $-129,004
Should they do this project?
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Mix of Projects
The mix of projects undertaken should support the
firm’s corporate strategy.
• Derivative projects—small improvements
• Platform projects—develop new line of
products using existing technology
• Breakthrough projects—new generation of
products using new technology
• R&D projects—develop new knowledge
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Organizational Structures
Organizational structure describes the
management reporting relationships in the org.
Organization charts show these relationships.
How do projects fit within an organization?
• Traditional functional organization
• Functional project organization
• Pure project organization
• Matrix project organization
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Traditional Functional Organization
Company
President
Marketing
Vice President
Engineering
Vice President
Human
Resources
Vice President
Finance &
Administration
Vice President
Manufacturing
Vice President
Procurement
Vice President
Customer
Service
Manager
Systems
Engineering
Manager
Fabrication
Manager
Purchasing
Manager
Domestic
Sales
Manager
Electronics
Engineering
Manager
Assembly
Manager
Receiving &
Inspection
Manager
International
Sales
Manager
Software
Engineering
Manager
Testing
Manager
Mechanical
Engineering
Manager
Production
Scheduling
Manager
Technical
Documentation
Manager
Shipping
Manager
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Functional Project Organization
• Project organized and controlled within a
functional unit or department
• Usually for smaller projects with a narrower
focus
• What are the advantages of this structure?
• What are the disadvantages?
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Functional Project Organization
Company
President
Marketing
Vice President
Engineering
Vice President
Human
Resources
Vice President
Finance &
Administration
Vice President
Manufacturing
Vice President
Procurement
Vice President
Customer
Service
Manager
Systems
Engineering
Manager
Fabrication
Manager
Purchasing
Manager
Domestic
Sales
Manager
Electronics
Engineering
Manager
Assembly
Manager
Receiving &
Inspection
Manager
International
Sales
Manager
Software
Engineering
Manager
Testing
Manager
Engineering
Project A
Shipping
Manager
Engineering
Project B
Manufacturing
Project 1
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Pure Project Organization
• Each project is organized as a separate
division reporting to senior management
• Effective for large projects, not small. Why?
• Each project owns its resources/personnel
• Each project may not have much depth of
technical expertise, but it should have
breadth
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Pure Project Organization
Company
President
Project A
Project Manager
Project B
Project Manager
Marketing
Vice President
Engineering
Manager
Engineering
Manager
Manufacturing
Manager
Manufacturing
Manager
Procurement
Manager
Procurement
Manager
Consultants
Subcontractors
Human
Resources
Vice President
Finance &
Administration
Vice President
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Vice President
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Matrix Project Organization
• Most common organizational structure
• Has many advantages of functional project and
pure project structures
• Project team members have two bosses
• Team members may be assigned part-time to
project and may have less loyalty to the project
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Matrix Project Organization
President
Program
Manager
Manufacturing
Marketing
Finance
R&D
Personnel
Project 1
3
1 1/2
1/2
4
1/2
Project 2
1
4
1/4
1 1/2
1/4
Project 3
0
1/2
3
1/2
1
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Project Selection Exercise
Quality Fleet Ads case
• Divide into small groups
• Read case (5 min.)
• Assignment: (25 min.)
– Discuss the advantages of each project
– Discuss the cost and budget implications
– Rank the projects from most important to least
– Which set of projects do you recommend?
– What is your proposed budget?
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