PDBA ZG 523 PROJECT MANAGEMENT
II SEM 2020-2021
BITS Pilani
Pilani Campus
Dr. ARUN MAITY
BITS Pilani
Pilani Campus
MODULE 1: OVERVIEW OF PROJECT MANAGEMENT
Lecture No. 1
CHAPTER 1 OF T1
COURSE OBJECTIVES
CO-1
To introduce basic and modern concepts in
managing projects
CO-2
To introduce methods of doing market, technical
and financial analyses for the selection and
prioritization of projects
CO-3
To introduce techniques of project planning,
scheduling and managing risks, and allocation of
responsibilities
BITS Pilani, Pilani Campus
COURSE CONTENT
• Projects: Importance, Types, Life Cycle, Organization
Structure, Roles & Responsibilities of Project Manager
• Projects: Integration, Market & Demand Analysis,
Technical Analysis
• Projects: Time Value of Money, Financial Estimates and
Projections, Balance Sheet, Project Selection
• Project Planning, Scheduling and Control
• Project Risk Management
• Project Procurement and Contracts Management
• Project Audit & Closure, Project Quality Management
• International Project Management
BITS Pilani, Pilani Campus
Evaluation Components
• EC1 : QUIZ -1,2 : 10 Marks
• Experiential Learning : 15 Marks
• EC2: MID SEMESTER TEST : CLOSED BOOK: 30
Marks
• EC3: COMPREHENSIVE EXAMINATION : OPEN
BOOK: 45 Marks
BITS Pilani, Pilani Campus
TEXTBOOK
• Clifford F. Grey, Erik W. Larson, Gautam V. Desai
“Project Management The Managerial Process” McGraw
Hill Education(India) Private Limited, New Delhi, Sixth
Edition, 2014
• Prasanna Chandra, Projects: Planning, Analysis,
Selection, Financing. Implementation & Review, McGraw
Hill Education (India) Private Limited, New Delhi, 8th Ed.,
2014.
BITS Pilani, Pilani Campus
REFERENCES
• Kerzner, Harold, Project Management: A Systems
Approach to Planning, Scheduling and Controlling, Wiley
Student Edition 10th Ed., 2013
• Tony Kennedy, “Pharmaceutical Project Management”
CRC Press, Second Edition, 2008
• Kim J Pries and John M Quigley, “Project Management
of Complex and Embedded Systems” CRC Press, 2011.
BITS Pilani, Pilani Campus
LEARNING OUTCOMES
LO-1
The student will be able to apply modern management
concepts and principles of project management in project
driven as well as in non-project driven organizations
L0-2
The students will be able perform technical, financial and
market analyses for new projects
L0-3
The student will be able to prepare projected cash flow
statement and balance sheet of projects
L0-4
The student will be able to plan and schedule activities of
projects,
assign
responsibilities
and
prepare
communication plans
LO-5
The student will be able to Identify Project BITS
Risks
and
Pilani, Pilani Campus
1. 0 INTRODUCTION TO
PROJECT MANAGEMENT
• Evolution And Application
• Project: Types, Characteristics and Elements
• Project Organization
• Project Management : Importance, Functions
• Role of Project Manager & Project team
• Interpersonal Skills
BITS Pilani, Pilani Campus
1.1. EVOLUTION AND
APPLICATION
• Developed in the late 1950’s to aid planning and
Scheduling of Large Projects
• Construction Industry
• Automakers – Toyota, Nissan, BMW
• Electronics
• Information Technology
• Steel
• Fertilizer
• Oil and Gas
• Pharmaceutical
BITS Pilani, Pilani Campus
1.2 WHAT IS PROJECT?
• A Project is a Complex , Non Routine, One-time Effort
Limited By Time, Budget, Resources And Performance
Specifications Designed To Meet Customers’ Needs
• EXAMPLES
•
•
•
•
•
•
•
Introduction of a new kind of detergent in the Indian market
Enhancing the production capacity of a steel plant from 2.5 MT to 4 MT.
Reducing the downtime of the machines from 3% to 1%.
Improving the Quality of Product from existing 95% to 98%.
Erection and Commissioning of a 300 MW Gas Power Plant
Preparation of documents for takeover of a Firm
Implementing World Class Quality in an Automotive Industry
BITS Pilani, Pilani Campus
1.3 SECTORS & TYPES
• Different Sectors: Public Sector, Private Sector, Service
Sector, Joint Sector
• Industrial
• Software
• Service
• Infrastructure
• Construction
• Expansion
• Modernization
BITS Pilani, Pilani Campus
•
•
•
•
Maintenance: Capital Repairs, Major Overhauling
Plant Shutdown and Turnaround
Diversification
Integration
•
•
•
Forward Integration
Backward Integration
Vertical Integration
• Acquisition
• Rehabilitation
• Research and Development
BITS Pilani, Pilani Campus
1.4 CHARACTERISTICS
•
CHARACTERISTICS
• A Project Consists of series of activities and tasks that
– Have a specific objective to be completed within
certain specifications and performance requirements
– Have definite Start and End dates
– Have Funding Limits
– Consume Resources
– Meet and Exceed Customers’ Needs
– Involvement
of
several
departments
and
professionals
– Doing something that has never been done earlier
BITS Pilani, Pilani Campus
1.5 ELEMENTS
•
•
•
•
•
•
•
•
•
•
Identification of Project
Prioritization Of Project
Selection of Project
Scope Of Work
Work Breakdown Structure
Risk Management
Cost And Time Estimate
Procurement
Allocation Of Resources
Execution Of Jobs
BITS Pilani, Pilani Campus
•
•
•
•
•
•
•
•
•
Subcontracting
Performance Evaluation and Monitoring
Feedback
Control
Commissioning
Final Handing Over To The Client
Project Closure
Evaluation Of Project Manager And Team
Retrospective
BITS Pilani, Pilani Campus
1.6 NEED
 Project: Fulfilling the needs and requirements of the
customer
Successful Project are Path breaker for Future Projects
 Stakeholders: Meeting the needs of stakeholders
 Organization: Meeting the strategic needs of the
organization
 Individuals: Meets the goals and aspirations of Project
manager and project team members
BITS Pilani, Pilani Campus
1.7 PROJECT ORGANIZATION
 PROJECT DRIVEN ORGANIZATION
• All work is characterized through projects with each
project as a separate cost center having its own profit
and loss statement
 NON PROJECT DRIVEN ORGANIZATION
• Projects exist merely to support the product lines or
functional lines
• Profit and loss are measured on vertical or horizontal
lines
• Priority resources are assigned to revenue producing
functional line activities rather than the projects
BITS Pilani, Pilani Campus
1.7.1 LIMITATIONS OF NON-PROJECT
DRIVEN ORGANIZATIONS
• Projects may be few and far between
• Not all projects have the same project management
requirements
• Executives do not have sufficient time to manage
projects
• Projects tend to be delayed because approvals most
often follow vertical chain of command
• Project staffing is on a local basis
• Heavy dependence upon subcontractors and outside
agencies for project management expertise
BITS Pilani, Pilani Campus
1.8 PROJECT MANAGEMENT
APPROACH
 DRIVING FORCES






Capital Projects
Customer Expectations
Competitiveness
Executive Understanding
New Project Development
Efficiency And Effectiveness
 BENEFITS






Accomplish work In less time with fewer people
Increases Profitability
Enhanced Quality
Better Control Of Scope Changes
Customer Focused
Good Decision Making & Reduced Power Struggle
BITS Pilani, Pilani Campus
1.9 Understanding Need and
Importance of Project Management
•
•
•
•
•
•
•
•
Ability To Plan, Implement And Manage Activities
Result-oriented Management Styles
Compression Of Product Life Cycles
Global Competition
Knowledge Explosion
Corporate Downsizing
Increased Customer Focus
Multi-project Environment
BITS Pilani, Pilani Campus
1.9.1 Compression of Product
Life Cycle
• Shortening of Product Life Cycle
• Time to market for new products with short life cycles
• A six month project delay can result in 33% loss in
product revenue share
• Speed : As competitive advantage
BITS Pilani, Pilani Campus
1.9.2 Knowledge Explosion
• Growth in knowledge has increased the complexity of
projects
• Increased complexity : materials, specifications, codes,
aesthetics, equipment, specialists
• Product complexity increased the need of divergent
technologies
BITS Pilani, Pilani Campus
1.9.3 Triple Bottom Line
 Planet, People and Profit
•
•
•
•
•
•
Stringent environmental norms
Reduce carbon imprint
Utilize renewable resources
Flexibility, Innovation, Speed
Continuous Improvement
Sustainability
BITS Pilani, Pilani Campus
1.9.4 Corporate Downsizing
• Downsizing or Rightsizing
• Sticking to core competencies
• Flatter organization structure
• Outsource significant segments of project work
BITS Pilani, Pilani Campus
1.9.5 Increased Customer
Focus
• Increased competition
• Customer satisfaction
• Customized products and services
• Close working relationships between provider and
receiver
BITS Pilani, Pilani Campus
1.9.6 Small Projects represent
Big problems
• Small projects carry the same or more risk as do large
projects
• Little impact on bottom line
• Small projects add up to large sum of money
• Need of multi-project environment
BITS Pilani, Pilani Campus
1.10 FUNCTIONS OF
PROJECT MANAGEMENT
• Project Management Involves
– Project Planning
– Project Scheduling
– Project Monitoring & Control
• Project Planning
– Definition Of Work Requirements
– Definition Of Quantity Of Work
– Definition Of Resources Needed
BITS Pilani, Pilani Campus
• Project Scheduling
–
–
–
–
–
List Of Activities To Be Completed
Activity Relationships
Gantt Charts
Critical, Non-critical Activities, Milestones
Resource Loading, Leveling, Allocation
• Project Monitoring & Control
–
–
–
–
–
Tracking Progress
Comparing Planned Vs. Actual
Analyzing Impact
Making Adjustments
Time, Cost, Quality Control
BITS Pilani, Pilani Campus
1.11 PROJECT LIFE CYCLE
• Project Life Cycle recognizes that projects have limited
span
• Predictable changes in level of effort and focus over the
life of the project
• Stages:
•
•
•
•
Defining Stage
Planning Stage
Executing Stage
Delivery / Closing Stage
BITS Pilani, Pilani Campus
BITS Pilani, Pilani Campus
1.12 PRODUCT LIFE CYCLE
NEW PRODUCT INTRODUCTION
•
•
•
•
•
•
Research and Development
Market Introduction
Growth
Maturity
Deterioration
Death
BITS Pilani, Pilani Campus
BITS Pilani, Pilani Campus
1.13 ROLE OF PROJECT
MANAGER
• Provide direction, coordination and integration to the
project team
• Manage temporary, non-repetitive activities to complete
A fixed life project
• Meet the challenges of each phase of the project life
cycle
• Manage the tension between customer expectations and
what is feasible or reasonable
• Work with vendors, suppliers, subcontractors
BITS Pilani, Pilani Campus
• Responsible for performance
• Ensure appropriate trade-offs between time, cost and
performance requirements
• Inducing the right people at the right time
• To address right issues and make right decisions
BITS Pilani, Pilani Campus
1.13.1 CATEGORIES OF
INTERACTIONS
• Superiors or Bosses
• Colleagues or Peers
• Subordinates or Juniors
• Dealing with each category requires definite skills which
have to be mastered if one is to rise in the organizational
hierarchy
BITS Pilani, Pilani Campus
1.13.2 INTERACTION WITH
SUPERIORS
• Boss is always the boss, though he may not be always
right
– There may be serious differences of opinion with the boss, but
ultimately, the will or opinion or decision of the boss will prevail
– Boss is more accountable than the subordinates and will have to
answer the consequences of his decisions and actions
BITS Pilani, Pilani Campus
• Rather than be a “Yes Man” and agree with everything
the boss says, the subordinate must definitely express
his views and opinions for the consideration of the boss
• If the boss chooses to ignore suggestions or overrule
decisions taken by the subordinate, he does so at his
own discretion and risk
BITS Pilani, Pilani Campus
• Certain bosses who flatly refuses to accept any
suggestions coming from the subordinates, even though
his suggestions are basically sound and would be
interest of the organization
• Such individuals suffer from a sense of insecurity and
are afraid that implementation of the suggestions would
highlight their own shortcomings and bring credit to the
subordinates at their own expense
BITS Pilani, Pilani Campus
• What the boss forgets is that credit for achievement or
good performance first goes to the boss for his ability to
get work done
• The subordinate only gets a part of the credit received by
the boss
BITS Pilani, Pilani Campus
1.13.3 BOSS HAS GREATER
ACCESS TO INFORMATION
• By virtue of position in the organization, the boss has
greater access to vital information affecting the wellbeing of the organization
• Some of the decisions may appear to be ill-conceived or
wrong, however it is more likely that a particular decision
may be based on certain information not available to the
subordinate
BITS Pilani, Pilani Campus
1.13.4 BOSS IS MORE BUSY
• Responsibilities of the boss are considerably greater
than those of the subordinates
• The time at his disposal for dealing with particular
problem is naturally less than the time available with the
subordinate
• Therefore it is the duty of subordinate to do his
homework well, work out options in any given situation
and then put them for consideration and final decision
with his own recommendation
BITS Pilani, Pilani Campus
1.13.5 BOSS IS UNDER
GREATER PRESSURE
• By virtue of his position and responsibility, boss is under
greater pressure to meet targets and deadlines
• Some pressure is bound to get transferred down to lower
levels resulting in FIRING
• Firing is a part of the game and has to be accepted as
such
• One must not be too sensitive to such firings and must
develop a somewhat thick skin in such matters
BITS Pilani, Pilani Campus
• On the other hand, the skin should not be so thick that
firing has no effect at all
• On occasion, unpleasant talk may appear to be entirely
unreasonable
• Outcome of firing of the juniors, who, in turn, may take it
to out on their wives and children
BITS Pilani, Pilani Campus
1.13.6 INTERACTION WITH
COLLEAGUES
• Individuals who are more or less at the same level in the
hierarchy
• Engineers performing shift duty and reporting to
Manager
• Department heads reporting to the Production Manager
• Functional Heads reporting to Unit Head
• Project Engineers reporting to Project Managers
• Project Managers reporting of Head, Projects
BITS Pilani, Pilani Campus
• Feeling of cordiality, cooperation, mutual trust and
atmosphere of healthy competition
• This is easier said than done
• Politics is an integral feature of any organization, as
each individual tries to catch the eye of the boss and
advance his own cause for promotion
BITS Pilani, Pilani Campus
• If the competition leads to confrontation and undermining
the position of others, working is bound to suffer
• Personal equations can lead to formation of groups that
adversely affect organizational working
BITS Pilani, Pilani Campus
1.13.7 INTERACTION WITH
SUBORDINATES
• An engineer in a supervisory position or a manager is
responsible not only for his own actions, but also for the
actions of all those working under his direction
• Delegation: A successful manager once said, “I never do
anything which I can get done by a subordinate”
• This is an excellent way to motivate subordinates and at
the same time freeing the boss from routine matters and
giving him time to concentrate on important issues
BITS Pilani, Pilani Campus
• Delegation does not imply that the boss is absolved of
responsibility for that actions of his subordinates, he should
keep a watchful eye over their activities and issue necessary
direction.
• Earn the respect of subordinates
– It is easy to get work done if subordinates hold the boss in esteem and
respect
– Sound knowledge and thorough understanding of plant or process are
vitally important
– Boss should be capable of doing at least 80% of the work done by each
one of its subordinates
– 20% of his own work should be such that none of his subordinates can
do so effectively
BITS Pilani, Pilani Campus
• Issue clear instructions
– Instructions have no meaning if they are vague and likely to be
misinterpreted
– Some managers are in the habit of deliberately leaving
instructions vague and then pulling juniors for not acting one way
or the other
• Descend to the level of subordinates
– Boss must express himself in a language which the subordinates
can understand
BITS Pilani, Pilani Campus
1.13.8 DEFINE JURISDICTION
• Areas wherein the subordinate is free to take his
own decisions according to established norms
and guidelines
• Boss will not be troubled with low level decisions
• Subordinate must have clear idea about
– what he can do without informing the boss at all
– what he can do first and inform later
– what he can do only after getting approval
BITS Pilani, Pilani Campus
1.13.9 CATEGORIZE
SUBORDINATES
1. Those who work on their own initiative
2. Those who work only after receiving directives or
guidelines
3. Those who do not work even after receiving directives
and guidelines
BITS Pilani, Pilani Campus
1.13.10 SUBORDINATE PROBLEMS ARE
ULTIMATELY BOSSES’ PROBLEMS
• Any deficiency in working have to be removed by
concerted effort
• Boss cannot get away by saying that these problems
have to be tackled by junior staff alone
• Boss has to get involved and issue necessary directions
to solve the problems
• It is the boss who will have to answer for the working of
all sections under his charge
BITS Pilani, Pilani Campus
1.13.11 STRIVE TO BECOME
REDUNDANT
• Every supervisor or manager must strive to make himself
redundant and superfluous
• Effort must be made to evolve systems and procedures,
so that working is not affected in the absence of
supervisor / manager
BITS Pilani, Pilani Campus
1.13.12 TRAIN SUPERVISOR TO
TAKE YOUR PLACE
• Advancement is easy if there is someone who can
assume charge of the vacated position
• Manager should train his subordinates adequately, not
only to reduce his workload but also to facilitate his own
advancement at the appropriate time
BITS Pilani, Pilani Campus
•
Some managers are unduly secretive and habitually conceal
documents and information from subordinates
•
Many organizations force their employee to avail due leave and do
not permit leave accumulation to a certain level
– Excellent practice and serves to motivate and train subordinates
for higher responsibilities
– Simultaneously, the boss returns refreshed after leave to do
greater justice to his responsibilities
BITS Pilani, Pilani Campus
1.13.13. BE FAIR AND
APPEAR TO BE FAIR
• Justice must not only be done but seen to be done
• Boss must be fair, but also appear to be fair to his
subordinates
• All subordinates should be treated on merits as far as
distribution of assignments and prospects for
advancement are concerned
BITS Pilani, Pilani Campus
• It is natural to develop liking or dislike for various
subordinates
• One must not get carried away by subjective criteria
• Friendship and personal relations with subordinates
should not act as obstacles to advancement
• The recommended person should reduce the workload
of the boss and make his life easier
BITS Pilani, Pilani Campus
1.14. PROJECT MANAGEMENT:
MANUFACTURING
• Conceptualization of a Product
• Feasibility Study
• Market Survey: Cost, Product Functionality and
Comparative Manufacturer Reliability
• Cost Estimation
• Technology Assessment
• Product Design And Development: Adaptability,
Maintainability And Reliability
• Financing
• Process Planning
BITS Pilani, Pilani Campus
•
•
•
•
•
•
•
•
Quality Specifications
Personnel Assignment And Training
Operations Planning
Facilities Layout
System Integration
Production Scheduling
Production Run
Product Shipment
BITS Pilani, Pilani Campus
1.15 PROJECT MANAGEMENT:
Automotive Industry
Development process
•
•
•
•
•
Concept Initiation / Approval
Program Approval
Prototype
Pilot
Launch
Phases of Advanced Product Quality Planning
•
•
•
•
•
•
Planning
Product Design and Development
Process Design and Development
Product and Process Validation
Production
Feedback assessment and corrective actions
BITS Pilani, Pilani Campus
1.16 Department of Defense
FORMAL DESIGN REVIEWS: MIL-STD-1521B
• System Requirements Review
• System Design Review
• Software Specification Review
• Preliminary Design Review
• Critical Design Review
• Test Readiness Review
• Functional Configuration Audit
• Physical Configuration Audit
• Formal Qualification Review
• Production Readiness Review
BITS Pilani, Pilani Campus
1.17 IEEE-1220: PROJECT
MGMT.
•
•
•
•
•
•
•
System Definition
Subsystem Definition
Preliminary Design
Detailed Design
Fabrication, Assembly, Integration And Test
Production
Customer Support
BITS Pilani, Pilani Campus
1.18. ELECTRONICS
INDUSTRY: EIA 632
• Assessment Of Opportunities
• Investment Decisions
• Systems Concept Development
• Subsystems Design And Pre-deployment
• Deployments, Operations, Support And Disposal
BITS Pilani, Pilani Campus
1.19. NEED: DRUG
DEVELOPMENT
• How are projects brought to market quickly?
• How do we decide which projects are likely winners or
losers?
• How can we avoid wasted expenditure on projects?
• What can be done to get best return on projects that
make it to the market?
• How do we organize ourselves to develop drugs
effectively?
BITS Pilani, Pilani Campus
1.19.1 DRUG DEVELOPMENT
PHASES
• PRECLINICAL PHASE: A drug merits into human clinical
testing
• PHASE 1: A drug merits progression into patent trials
• PHASE 2: To characterize dose response relationship for
efficacy and safety
• PHASE 3: To provide pivotal trial evidence for efficacy
and safety in chronic dosing
BITS Pilani, Pilani Campus
• REGISTRATION : To secure registration approval for the
intended product label
• LIFE CYCLE MANAGEMENT: To maximize the
commercial return for the product
BITS Pilani, Pilani Campus
1.19.2 GOOD STRATEGIES
• Understand the inherent risks and risk management
strategies in product development
• Profitable to flourish in future
• Return on investment
• Time to market
BITS Pilani, Pilani Campus
1.19.3 EXAMPLES:
Pharmaceutical Industry
• Major players were companies operating in industrial
chemicals, retail healthcare, or foods
• Glaxo’s original interests in baby food and other nonpharmaceutical products, but now has rebuilt its
business around pharmaceuticals with considerable
success.
• Bayer and Hoechst funded r& d intensive pharmaceutical
operations through the cash generated by other
business
BITS Pilani, Pilani Campus
1.19.4 Challenges
• Inefficiency of R & D process became evident and new
regulations introduced to promote safety result in further
escalation of costs and increased timescales
• Increasing competition with similar products reaching the
market meant significantly higher sales and marketing
costs
• Improving the efficiency and effectiveness of R & D
process is an increasingly important objective of most
companies
BITS Pilani, Pilani Campus
• Portfolio Management Is A Subject Of Effectiveness Picking The Winners
• Project Management Is More About Efficiency Or
Ensuring That The Selected Products Are Developed
Economically.
BITS Pilani, Pilani Campus
1.19.5 BENEFITS
• Provides a structure for decision making when multiple
projects are competing for common limited resources
• Allows common methods to be used for comparing the
attractiveness of projects
• Creates a group of projects that has the potential to meet
their overall objectives of business.
• Minimizes investment in projects that are judged unlikely
to achieve the technical profile required for commercial
success
• Portfolio management : A dynamic process
BITS Pilani, Pilani Campus
BITS Pilani, Pilani Campus
1.20 PROJECT INTEGRATION
MANAGEMENT
• Focuses all project effort toward the strategic plan of the
organization
• Reinforces mastery of project management and interpersonal skills
• May require re-engineering of business management
process
– Integration of projects with strategic plan of the organization
– Integration within the process of managing actual projects
BITS Pilani, Pilani Campus
1.20.1 ALIGNMENT OF PROJECTS
WITH ORGANIZATIONAL STRATEGY
• Need: Strategic plans are made by one group of
managers, projects selected by other and implemented
by another
• Independent decisions lead to conflicts, confusion etc.
On unsatisfied customers
BITS Pilani, Pilani Campus
1.20.2 CHARACTERISTICS
• All the parts are inter-related. A change in one of the
parts will influence the whole
• Vision, mission, objectives and strategies need to be
prepared
considering
internal
and
external
environmental factors
• External factors: political, social, economic and
technological
• Internal
factors:
management,
facilities,
core
competencies, financial conditions
BITS Pilani, Pilani Campus
• Implementing strategies through projects
• Selecting proposals that make largest and most
balanced contribution to the objectives and strategies
• Prioritizing projects so that resources are allocated to the
right projects
BITS Pilani, Pilani Campus
1.20.3 INTEGRATION WITHIN THE PROCESS
OF MANAGING ACTUAL PROJECTS
• Technical side of the management process
– Planning, scheduling, controlling
• Socio-cultural side of the project management process
– Shaping a project culture that stimulates teamwork and high
levels of personal motivation
– Problem solving approach
– Effective communication sessions with stakeholders
BITS Pilani, Pilani Campus
PROJECT MANAGEMENT
II SEM 2020-21
BITS Pilani
Pilani Campus
Dr. ARUN MAITY
BITS Pilani
Pilani Campus
ORGANIZATION STRATEGY & PROJECT
PORTFOLIO MANAGEMENT
LECTURE 2 CHAPTER 2 OF T1
TOPICS
• NEED FOR STRATEGY
• ROLE OF PROJECT MANAGER
• STRATEGIC MANAGEMENT PROCESS
• PROJECT PORTFOLIO MANAGEMENT
• PROJECT SELECTION MODEL
• MANAGING PORTFOLIO SYSTEM
BITS Pilani, Pilani Campus
NEED TO UNDERSTAND
ORGANIZATION STRATEGY
• Identify a project’s priority and link with organizational
strategy
• Effective utilization of resources:
equipment and core competencies
people,
money,
• Clear organization process, best use of scare resources
and improved communication across projects using a
process that is open and transparent
BITS Pilani, Pilani Campus
PROJECT MANAGER’S NEED TO
UNDERSTAND ORGANIZATION STRATEGY
• To make appropriate decisions and adjustments
• Modify design of product to enhance performance
• Product leader through innovation or
• Achieve operational experience through low cost reduction
• Response to delays : Will authorize overtime if firm places on
premium on getting to the market first or accept the delay if
speed is not essential.
•
To understand their organization’s strategy so that they can be
effective advocates
BITS Pilani, Pilani Campus
ROLE OF PROJECT
MANAGER
• Understand organization’s mission
otherwise project manager will tend to
and
strategy
– Focusing on problems or solutions that have low priority
strategically
– Focusing on the immediate customer rather than the whole
market place and value chain
– Overemphasizing technology
– Solve every customer issue with product/ service
– Engaging in perfection for jobs which are not in priority
• Demonstrate senior management how the project
contributes firm’s mission
• Explain team members and other stake holders :
objectives and priorities
BITS Pilani, Pilani Campus
STRATEGIC MANAGEMENT
PROCESS
• Review and define the organization mission
• Set long term goals and objectives
• Analyze and formulate strategies to reach objectives
• Implementation of strategies through projects
BITS Pilani, Pilani Campus
MISSION STATEMENT
• Mission gives the general purpose of the organization.
• Goals give global targets within the mission.
• Objectives give specific targets to goals.
• Objectives give rise to formulation of strategies to reach
objectives
• Strategies require actions and tasks to be implemented.
BITS Pilani, Pilani Campus
• Mission statements identify the scope of the organization
in terms of its product and service
• Every one in the organization should be aware of
mission
• It includes organization philosophy, key technologies,
public image and contribution to society
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EXAMPLES
• Provide hospital design services
• Provide voice/data design services
• Provide information technology services
• Increase share holder value
• Provide high value products to our customers
BITS Pilani, Pilani Campus
LONG RANGE OBJECTIVES
• Objectives translate mission into specific, concrete,
measurable terms
• Objectives cover markets, products, innovation,
productivity, quality, finance, profitability, employees and
consumers
• Smart Goals (specific, measurable, assignable, realistic
and time bound)
BITS Pilani, Pilani Campus
• Specific : Be specific in targeting an objective
• Measurable: Establish a measurable indicators of
progress
• Assignable: Make the objective assignable to one person
for completion
• Realistic: State what can realistically be done with
available resources
• Time Related: State when the objective can be achieved
BITS Pilani, Pilani Campus
ANALYZE AND FORMULATE
STRATEGIES TO REACH OBJECTIVES
• Determining and evaluating alternatives that support
objectives
• Select the best alternative
• Assessment of internal and external environments
• SWOT analysis
• Objectives or tasks assigned to divisions, departments or
individuals
BITS Pilani, Pilani Campus
IMPLEMENTING STRATEGIES
THROUGH PROJECTS
• Implementation requires action and completing tasks
• Allocation of resources: Funds, people, technological
skills, management talents and equipment
• Requires formal and informal organization
complements and supports strategies and projects
• Planning and control
• Motivating project contributors
• Prioritizing projects
that
BITS Pilani, Pilani Campus
NEED FOR PROJECT PORTFOLIO
MANAGEMENT SYSTEM
IMPLEMENTATION GAP
– Conflicts frequently occur amongst functional
managers and cause lack of trust
– Frequent meetings are called to establish or renegotiate priorities
– People frequently shift from one project to another
– People are working on multiple projects and feel inefficient
– Resources are not adequate
BITS Pilani, Pilani Campus
ORGANIZATION POLITICS
• Politics exist in every organization
• Influences funding and high priority
• Project selection may not be on facts and sound
reasoning but on persuasiveness and power of people
advocating projects
• Top management should develop a system for identifying
and selecting projects that reduce the impact of internal
politics and fosters the selection of the best projects.
BITS Pilani, Pilani Campus
• Sacred Cow: Projects that powerful, high ranking official
advocates
• New Baby: Obsession with project
• Sponsored project : Selection and implementation of
product innovative projects
BITS Pilani, Pilani Campus
RESOURCE CONFLICTS AND
MULTI-TASKING
• Problem of share and scheduling resources across
projects
• Multitasking involves starting and stopping work on one
task to go and work on another project and then return to
work on original task
• People feeling inefficient
BITS Pilani, Pilani Campus
ADVANTAGES
•
•
•
•
Builds discipline into project selection process
Links project selection to strategic metrics
Prioritize project proposals
Allocate resources to projects that align with strategic
direction
• Balances risk across all projects
• Improves communication and supports agreement on
project goals
• Justifies killing projects that do not support organization
strategy
BITS Pilani, Pilani Campus
PORTFOLIO MANAGEMENT
SYSTEM
• Ensure projects aligned with strategic goals and
prioritized appropriately
• Design of portfolio management system
– Classification of the project
– Sources of proposals
– Evaluating proposals
BITS Pilani, Pilani Campus
CLASSIFICATION OF THE
PROJECT
 Compliance and Emergency: “Must Do Projects” to
meet regulatory conditions required to operate in a
region
 Operational : To support current operations e.g.
reduce downtime, improve efficiency, enhance quality
etc.
 Strategic: directly supports long run mission e.g. New
product development, Research & Development
projects etc.
BITS Pilani, Pilani Campus
SOURCES OF PROPOSALS
• Encourage and keep solicitation open to all sources:
- internal sources
- External sources
• Solicit ideas for projects when the knowledge
requirements are not available in the organization
• Request for proposal (RFP)
• Bid to design and build a new operating room that uses latest
technology
BITS Pilani, Pilani Campus
EVALUATION OF
PROPOSALS
• Ranking proposals
• Assess the value of the proposed project to the
organization and for future backup
• Evaluation form to prioritize and select new projects
• Impact of project on meeting a particular objective
BITS Pilani, Pilani Campus
PORTFOLIO MANAGEMENT
PROCESS
• PROJECT PORTFOLIO IDENTIFICATION
• Identification of programs and projects for meeting business goals
• Done by using standard processes supported by standard templates
• Initial cost-benefit analysis to support the evaluation process
• PROJECT PORTFOLIO SELECTION
• Analysis on the ideas and initiatives identified
• Detailed analysis so as evaluate the financial return on investment,
resources and budget needed
• Identify skill development programs and training to execute selected
projects
• Complexity Vs. Business Value
• Multitasking resources can result in schedule slippages, lower
productivity and project conflicts which can lower profits and missed
objectives
BITS Pilani, Pilani Campus
• Project Portfolio Initiation
• Generation of Project charter
• Annual Project Budgets are consolidated
• Alignment of the project with business goals
• Project Portfolio Execution
• Portfolio follows the standard procedures of performance
management, status reporting
• Communication Plan
• Risk management across the portfolio
BITS Pilani, Pilani Campus
PORTFOLIO MANAGEMENT
TOOLS
• Project Prioritization Methods
– Checklist Method:
• A set of criteria is defined against which all projects
are evaluated. A project may only proceed when it
satisfies all criteria
• It is simple and quick.
– Paired Comparisons
• Compare each project against all others, one at a
time with the most favorable project scoring 1 and
the other scoring 0.
• Projects then be ordered, based on total scores
BITS Pilani, Pilani Campus
• Dynamic Rank - Ordered Lists
– A set of criteria Is defined on the basis of which projects are
ranked
– For each project, the average criteria ranking is calculated and
used to rank it overall
• Weighted Scoring Models
• Financial Measures
BITS Pilani, Pilani Campus
OPTIMIZING THE PORTFOLIO
• Objective : Maximize the value of the launched products
– Few products with high average value
– Large number of products with a lower average value
– Reducing expenditure on projects through efficiency measures
or concentrating on low risk products
BITS Pilani, Pilani Campus
OPTIMIZING THE PORTFOLIO
BY TIME
• Analyze:
– Potential launches over time
– Number of launches x probability of their occurrences
– Monte carlo simulation: reasonable range of possible outcomes
(possible future launches)
BITS Pilani, Pilani Campus
OPTIMIZING THE PORTFOLIO
BY RISK
• Test key attributes of a product as early as possible
• Generate information that reduces future uncertainty
• Force early failure
• Minimize the damage from negative outcomes
• Maximize the return from positive outcomes
BITS Pilani, Pilani Campus
LINKING TO STRATEGY
• Linking Portfolio Management To Strategy
– In top - down approach, resources are allocated to areas of the
portfolio and projects are then prioritized within these
– Define the allocation split between early stage and late stage
development projects and then prioritize these separately
– In bottom – up approach, projects are considered in detail and
prioritized at this level
– The strategic fit of projects is addressed by including criteria for
strategic fitness into the project scoring models
BITS Pilani, Pilani Campus
CRITERIA FOR PROJECT
SELECTION
• Financial Models: Preferred Method To Evaluate Projects
– PAY BACK PERIOD (In Years) : ESTIMATED PROJECT COSTS
/ ANNUAL SAVINGS
– RETURN ON INVESTMENT (In %)
– NET PRESENT VALUE (NPV) : Uses Time Value Of Money,
Cash Flows And Profitability
• Non-financial Criteria: Strategic, Less Tangible, Restore
Corporate Image, Enhance Brand Recognition
BITS Pilani, Pilani Campus
TWO MULTI-CRITERIA
SELECTION MODELS
Checklist Model:
– List Of Questions To Review Potential Projects
– Determine Acceptance Or Rejection
– Flexibility in selecting different projects with some variations in
questions
– Fails to answer the relative importance or value of potential
project
– Fails to allow comparison with other potential projects
– Room for power play, politics, manipulation
BITS Pilani, Pilani Campus
EXAMPLE
CRITERION
WEIGHTAGE (0-3)
A. STAY WITH CORE COMPETENCIES
2.0
B. STRATEGIC FIT
3.0
C. URGENCY
2.0
D. 25% OF SALES FROM NEW PRODUCTS 2.5
E. REDUCE DEFECTS TO LESS THAN 1%
1.0
F. IMPROVE CUSTOMER LOYALTY
1.0
G. ROI OF 18% +
3.0
BITS Pilani, Pilani Campus
CONTRIBUTION VALUES TO EACH
CRITERION FOR EACH PROJECT
PROJECT
1
2
3
4
A
1
3
3
1
B C
8 2
3 2
0 10
10 5
D E F G WT. TOTAL
6 0 6 5
66
0 0 5 1
27
0 0 6 0
32
10 0 8 9
102
• Highest Priority : Project 4, Then Project 1
• Project Screened Out : Project 2 And 3, If Criterion Is
Weighted Total Should Be More Than 50
BITS Pilani, Pilani Campus
APPLYING A SELECTION
MODEL
• Project classification: Project’s fit to organization’s
strategy
• Selecting a model: Multiple criteria to select the project
• Best use of human and capital resources to maximize
return on investment in the long run
• Researching new technologies, public image, ethical
position, protection of environment, core competencies,
strategic fit
BITS Pilani, Pilani Campus
MANAGING PORTFOLIO
SYSTEM
• Senior Management Input
– Guidance in establishing selection criteria
– Balance available resources with different types of
projects
• Priority Team Responsibilities
– Responsible for publishing the priority of every project
– Periodic priority review keeping organization focus
BITS Pilani, Pilani Campus
ASSESSING PROJECT
PORTFOLIO
DAVID AND JIM MATHESON SCHEME
BREAD AND BUTTER :
•
Improvements to current products and services
•
Easy to accomplish
•
Produce modest commercial value
LOW RISK AND LOW PAY-OFFS
Example:
Software Upgrades
Manufacturing Cost Reduction
BITS Pilani, Pilani Campus
BREAD AND BUTTER
PROJECTS
• These are easy-to-do projects that will produce relatively
low value if successful.
• You need to invest in many of these projects to support
ongoing business needs.
• However, they seldom support high-impact innovation.
Consider culling them.
BITS Pilani, Pilani Campus
PEARLS
•
•
Low risk development projects with high commercial
payoffs
Revolutionary commercial advances using proven
technology
LOW RISK AND HIGH PAY-OFFS
Examples: Next Generation Integrated Circuit Chip
Surface Imaging to Locate Oil and Gas
BITS Pilani, Pilani Campus
PEARLS
• These are the relatively easy projects with big returns
that the board wants.
• Pearls usually come from oysters that have proven out.
Unfortunately, not all oysters produce pearls, which is
why you need to include a reasonable number of oysters
(high risk/high value) projects in your innovation portfolio.
BITS Pilani, Pilani Campus
OYSTER PROJECTS
High Risk and High Value Projects
•
Technological breakthroughs with tremendous
commercial potential
Examples: Embryonic DNA Treatments
New kind of Metal Alloys
BITS Pilani, Pilani Campus
• These are risky projects
• They are hard to do but have potential to produce gamechanging returns.
• Model companies—those who excel in innovation—will
have a sufficient number of oysters in their portfolios to
produce a few pearls.
BITS Pilani, Pilani Campus
White Elephants Projects
WHITE ELEPHANTS:
•
Projects that at one time showed promise but are no
longer viable
Examples: Products for a saturated market
BITS Pilani, Pilani Campus
White Elephant Projects
• These are projects that are hard to do and if successful,
produce relatively low return on the investment.
•
Remove them from your portfolio to free resources to
apply to more valuable opportunities.
BITS Pilani, Pilani Campus
BITS Pilani, Pilani Campus
High Complexity
Dropped
Low Complexity
To be selected
Preferred
Low Business Value
High Business Value
BITS Pilani, Pilani Campus
Organization: Structure
and Culture
(Ch. 3 – T1)
BITS Pilani
Pilani Campus
M K Hamirwasia
WILPD
BITS Pilani
Pilani Campus
PDBA ZG523 Project Management
Lecture No. 3
Lecture Outline
 Project Management Structures

Organizing Projects within the Functional Organization


Organizing Projects as Dedicated Teams
Organizing Projects within a Matrix Arrangement
•
Different Matrix Forms
 The Right Project Management Structure

Organization Considerations

Project Considerations
 Organizational Culture
 Implications of Organizational Culture for Organizing
Projects
 Case 3.1
BITS Pilani, Pilani Campus
Different Project Management
Structures in Organizations
• Traditional Functional Organization
• Dedicated Project Teams
• Matrix Structure
BITS Pilani, Pilani Campus
TRADITIONAL FUNCTIONAL
ORGANIZATION STRUCTURE
• Organizing Projects Within the Existing Functional
Hierarchy
• Different Segments of Projects are Delegated to
Respective Functional Units
• Coordination Through General Management Channels
• Based on the Nature of The Project, one Functional Area
Takes the Lead Role
BITS Pilani, Pilani Campus
ADVANTAGES
• No Disturbance: Projects are Completed Within the
Basic Functional Structure of the Parent Organization
Without any Change in Structure and Operation of the
Organization
• Flexibility: Flexibility in the Use of Staff. Work can be
Assigned Temporarily. Staff can be Switched Amongst
Different Projects
• In-depth Expertise: If the Scope of the Project is Narrow,
Functional Areas can have In-depth Study and
Knowledge
BITS Pilani, Pilani Campus
ADVANTAGES
• Easy Post-project Transition: Normal Career Paths
Within Functional Divisions are Maintained; Specialists
can Advance Their Professional Growth and
Advancement
BITS Pilani, Pilani Campus
DISADVANTAGES
• Lack Of Focus: Each Functional Unit has its own Core
Routine Work and Targets. Project Responsibilities are
Pushed Aside
• Poor Integration: Functional Specialists may be
Concerned Only with Their Segment of the Project and
Not With What is Best for the Total Project
BITS Pilani, Pilani Campus
DISADVANTAGES
• Slow: Takes Longer Time to Complete the Projects, Lack
of Horizontal, Direct Communication Among Functional
Groups. Contributes to Rework
• Lack of Ownership: Motivation is Weak. Lack of
Ownership Discourages Strong Commitment to Projectrelated Activities
BITS Pilani, Pilani Campus
DEDICATED PROJECT TEAM
STRUCTURE
• Creation of Independent Project Teams
• Project Manager Heads the Group of Specialists Who
Work Full Time on the Project
• Team is Physically Separated From the Parent
Organization and Given Marching Orders to Complete
the Project
BITS Pilani, Pilani Campus
ADVANTAGES
• Simple: Functional Organization Remains Intact With
Project Team Operating Independently
• Fast: Projects Tend to Get Done More Quickly,
Response Time is Quicker as Decisions are Made Within
the Team
• Cohesive: High Level of Motivation and Cohesiveness
Emerge Within Project Team as they have Common
Goal and Personal Responsibility in Completing the
Project
• Cross Functional Interaction: Specialists From Different
Areas Work Together to Optimize the Project
BITS Pilani, Pilani Campus
DISADVANTAGES
• Expensive: Duplication of Efforts Across Projects and a
Loss of Economies of Scale
• Internal Strife: Dedicated Project Teams Take on an
Entity of Their Own and a Disease Known as Projectitis
(We-they Syndrome)
• Limited Technological Expertise: Creating SelfContained Teams Inhibits Maximum Technological
Expertise
• Difficult Post-project Transition: Assigning Full-time
Personnel to a Project Creates the Dilemma of What to
do With Personnel When the Project is Completed
BITS Pilani, Pilani Campus
A MATRIX ARRANGEMENT
• Hybrid Organizational Form in Which a Horizontal
Project Management Structure is Overlaid on the Normal
Functional Hierarchy
• Two Chains of Command:
– Functional Lines
– Project Lines
• Project Participants Report to Both Functional and
Project Managers
BITS Pilani, Pilani Campus
The Matrix Structure
• Optimal Utilization of Resources by having Individuals
Work on Multiple Projects as well as Perform Normal
Functional Duties
• Achieve Greater Integration by Creating and Legitimizing
the Authority of a Project Manager
BITS Pilani, Pilani Campus
DIFFERENT MATRIX FORMS
• Weak Matrix: Balance of Authority Strongly
Favours the Functional Managers
• Balanced Matrix:
Arrangement
Traditional
Matrix
• Strong Matrix: Balance of Authority
Strongly Favors the Project Managers
BITS Pilani, Pilani Campus
WEAK MATRIX
• Functional Managers are Responsible for Managing
Their Segment of the Project
• Project Manager Acts as a Staff Assistant Who Draws
the Schedules and Checklists, Collects Information on
Status of Work and Facilitates Project Completion
• Functional Managers Call Most of the Shots and Decide
Who Does What and When the Work is Completed
• Likely to Improve Technical Quality as well as Provide
Better System for Managing Conflict Across Projects
• Functional Control is Often Maintained at the Expense of
Poor Project Integration
BITS Pilani, Pilani Campus
BALANCED MATRIX
• Project Manager is Responsible for
–
Defining What Needs to be Accomplished
– Establishes the Overall Plan for Completing the Project
– Integrates the Contribution of Different Disciplines
– Sets Schedules and Monitors Progress
• Functional Managers are Concerned with How it will be
Accomplished
– Assigning Personnel and Executing Their Segment of the Project
According to Standards and Schedules Set by the Project Manager
BITS Pilani, Pilani Campus
STRONG MATRIX
• Creates the Feel of a Project Team Within a Matrix
Environment
• The Project Manager Controls Most Aspects of the
Project Including Scope Trade-offs and Assignment of
Functional Personnel
• Project Manager Controls When and What Specialists
Do and has Final Say on the Major Project Decisions
• Functional Manager is Consulted on a Need Basis
BITS Pilani, Pilani Campus
Advantages and Disadvantages
of the Matrix Form
• Likely to Enhance Project Integration
• Diminish Internal Power Struggles
• Improve Control of Project Activities and Costs
• Technical Quality may Suffer
• Projectitis may Emerge
BITS Pilani, Pilani Campus
STRENGTHS OF MATRIX
MANAGEMENT
• Efficient: Resources can be Shared Across Multiple
Projects
• Strong Project Focus: Designated Project Manager
Responsible
for
Coordinating
and
Integrating
Contributions of Different Units
• Easier Post-project Transition: Specialists Maintain Ties
With Functional Groups So That They can Return After
Project Completion
• Flexible: Flixible Utilization of Resources and Expertise
Within the Firm
BITS Pilani, Pilani Campus
WEAKNESSES
• Dysfunctional Conflict: Conflict Between Project and
Functional Managers
• Infighting: Competition for Scarce Resources
• Stressful: Project Participants have Two Bosses: One
Project Manager and Another Functional Manager
• Slow: Decision Making can be Affected as Agreements
have to be Forged Across Multiple Functional Groups,
esp. True for the Balanced Matrix
BITS Pilani, Pilani Campus
THE RIGHT PROJECT
MANAGEMENT STRUCTURE
• ORGANIZATION CONSIDERATIONS
• PROJECT CONSIDERATIONS
BITS Pilani, Pilani Campus
ORGANIZATION
CONSIDERATIONS
• Percentage of Core Work Involving Projects!
• If Over 75% of the Work Involves Projects, Then an
Organization Should Consider a Fully Projectized
Structure
• If an Organization has Both Standard Products and
Projects, Then a Matrix Organization will be more
Appropriate
• If an Organization has Very Few Projects, Then a Less
Formal Arrangement is Required. Dedicated Teams
Could be Created on an As-Needed Basis, and the
Organization Could Outsource Project Work
BITS Pilani, Pilani Campus
ORGANIZATION
CONSIDERATIONS
• Resource Availability!
• If Resources Need to be Shared Amongst Multiple
Projects, Then Matrix Type is Preferred
• If Critical Personnel can not be Tied up on Individual
Projects, Then Matrix Type is Preferred
• When Resources are Not Available Internally, Then
Create a Dedicated Project Team But Outsource
Project Work
BITS Pilani, Pilani Campus
PROJECT CONSIDERATIONS
•
•
•
•
Size Of Project
Strategic Importance
Novelty and Need for Innovation
Need for Integration (No. of Departments
Involved)
• Environmental Complexity
• Budget and Time Constraints
• Stability of Resource Requirements
BITS Pilani, Pilani Campus
Project Considerations
• Higher the Levels of These Factors, More Autonomy and
Authority the Project Manager and Team Need to be
Successful
•
Dedicated Project Teams Should be Used for Urgent
Projects in Which the Nature of the Work Requires
People Working Steadily From Beginning to End
• Creation of a Flexible Management System That
Organizes Projects According to Requirements
BITS Pilani, Pilani Campus
PROJECT TYPES
• Advanced Development Projects - High Risk Projects:
Involve Creation of a Breakthrough Product or Process
• Platform Projects - Medium Risk Projects: Involve
System Upgrades That Yield New Products and
Processes
• Incremental Projects - Low Risk Projects: Involve Minor
Adjustments in Existing Products and Processes
BITS Pilani, Pilani Campus
ORGANIZATION CULTURE
• Refers to a System of Shared Norms, Beliefs,
Values and Assumptions which Binds People
Together Thereby Creating Shared Meanings
• Culture Reflects the Personality of the
Organization and is similar to an Individual’s
Personality
BITS Pilani, Pilani Campus
CHARACTERISTICS
• Member Identity: The Degree to Which Employees
Identify With the Organization as a Whole Rather Than
With Their Type of Job or Field of Professional Expertise
• Team Emphasis: The Degree to Which Work Activities
are Organized Around Groups Rather Than Individuals
• Management Focus: The Degree to Which Management
Decisions Take Into Account the Effects of Outcomes on
People Within the Organization
• Unit Integration: The Degree to Which Units Within the
Organization are Encouraged to Operate in a
Coordinated or Interdependent Manner
BITS Pilani, Pilani Campus
Characteristics
• Control: The Degree to Which Rules, Policies and Direct
Supervision are Used to Oversee and Control Employee
Behavior
• Risk Tolerance: The Degree to Which Employees are
Encouraged to be Aggressive, Innovative, and Risk
Seeking
• Reward Criteria: The Degree to Which Rewards Such as
Promotion and Salary Increases are Allocated According
to Employee Performance Rather Than Seniority,
Favoritism or Other Nonperformance Factors
BITS Pilani, Pilani Campus
Characteristics
• Conflict Tolerance: The Degree to Which Employees are
Encouraged to Air Conflicts and Criticisms Openly
• Means Versus End Orientation: The Degree to Which
Management Focuses on Outcomes Rather Than on
Techniques and Processes Used to Achieve the Results
• Open-System Focus: The Degree to Which the Orgn.
Monitors and Responds to Changes in the External
Environment
BITS Pilani, Pilani Campus
IDENTIFYING CULTURAL
CHARACTERISTICS
• Study the Physical Characteristics of the Organization
– External Architecture, Offices, Uniform Of Employees
• Read About the Organization
– Annual Report, Mission Statements, Press Releases, Internal
News Letters
– Concern for People, Concern for Results and the Bottom Line
• Observe How People Interact Within the Organization
– Pace, Rituals, Values, Beliefs
– Meetings, Conversation
• Interpret Stories
Organization
and
Folklore
Surrounding
the
BITS Pilani, Pilani Campus
Implications of Organizational
Culture for Organizing Projects
• There are strong relationships among project
management structure, organizational culture and
successful project management
• Greater project authority and time are required to
complete projects that encounter a strong, negative
cultural current
• Conversely, less formal authority and fewer dedicated
resources are needed to complete projects in which the
cultural currents generate behaviour and cooperation
essential to project success
BITS Pilani, Pilani Campus
Implications of Organizational
Culture for Organizing Projects
BITS Pilani, Pilani Campus
Case 3.1
Moss and McAdams Accounting Firm
1. If you were Palmer at the end of the case, how would
you respond?
2. What, if anything, could Palmer have done to avoid
losing Olds?
3. What advantages and disadvantages of a matrix type
organization are apparent from this case?
4. What could the management at M&M do to more
effectively manage situations like this?
BITS Pilani, Pilani Campus
Organization: Structure & Culture
Second Semester 2020-21
Thank You!
BITS Pilani, Pilani Campus
Organization: Structure
and Culture
(Ch. 3 – T1)
BITS Pilani
Pilani Campus
M K Hamirwasia
WILPD
BITS Pilani
Pilani Campus
PDBA ZG523
Project Management
Lecture No. 4
Lecture Outline
 Project Management Structures

Organizing Projects within the Functional Organization


Organizing Projects as Dedicated Teams
Organizing Projects within a Matrix Arrangement
•
Different Matrix Forms
 The Right Project Management Structure

Organization Considerations

Project Considerations
 Organizational Culture
 Implications of Organizational Culture for Organizing
Projects
 Case 3.1
BITS Pilani, Pilani Campus
THE RIGHT PROJECT
MANAGEMENT STRUCTURE
• ORGANIZATION CONSIDERATIONS
• PROJECT CONSIDERATIONS
BITS Pilani, Pilani Campus
ORGANIZATION
CONSIDERATIONS
• Percentage of Core Work Involving Projects!
• If Over 75% of the Work Involves Projects, Then an
Organization Should Consider a Fully Projectized
Structure
• If an Organization has Both Standard Products and
Projects, Then a Matrix Organization will be more
Appropriate
• If an Organization has Very Few Projects, Then a Less
Formal Arrangement is Required. Dedicated Teams
Could be Created on an As-Needed Basis, and the
Organization Could Outsource Project Work
BITS Pilani, Pilani Campus
ORGANIZATION
CONSIDERATIONS
• Resource Availability!
• If Resources Need to be Shared Amongst Multiple
Projects, Then Matrix Type is Preferred
• If Critical Personnel can not be Tied up on Individual
Projects, Then Matrix Type is Preferred
• When Resources are Not Available Internally, Then
Create a Dedicated Project Team But Outsource
Project Work
BITS Pilani, Pilani Campus
PROJECT CONSIDERATIONS
•
•
•
•
Size Of Project
Strategic Importance
Novelty and Need for Innovation
Need for Integration (No. of Departments
Involved)
• Environmental Complexity
• Budget and Time Constraints
• Stability of Resource Requirements
BITS Pilani, Pilani Campus
Project Considerations
• Higher the Levels of These Factors, More Autonomy and
Authority the Project Manager and Team Need to be
Successful
•
Dedicated Project Teams Should be Used for Urgent
Projects in Which the Nature of the Work Requires
People Working Steadily From Beginning to End
• Creation of a Flexible Management System That
Organizes Projects According to Requirements
BITS Pilani, Pilani Campus
PROJECT TYPES
• Advanced Development Projects - High Risk Projects:
Involve Creation of a Breakthrough Product or Process
• Platform Projects - Medium Risk Projects: Involve
System Upgrades That Yield New Products and
Processes
• Incremental Projects - Low Risk Projects: Involve Minor
Adjustments in Existing Products and Processes
BITS Pilani, Pilani Campus
ORGANIZATION CULTURE
• Refers to a System of Shared Norms, Beliefs,
Values and Assumptions which Binds People
Together Thereby Creating Shared Meanings
• Culture Reflects the Personality of the
Organization and is similar to an Individual’s
Personality
BITS Pilani, Pilani Campus
CHARACTERISTICS
• Member Identity: The Degree to Which Employees
Identify With the Organization as a Whole Rather Than
With Their Type of Job or Field of Professional Expertise
• Team Emphasis: The Degree to Which Work Activities
are Organized Around Groups Rather Than Individuals
• Management Focus: The Degree to Which Management
Decisions Take Into Account the Effects of Outcomes on
People Within the Organization
• Unit Integration: The Degree to Which Units Within the
Organization are Encouraged to Operate in a
Coordinated or Interdependent Manner
BITS Pilani, Pilani Campus
Characteristics
• Control: The Degree to Which Rules, Policies and Direct
Supervision are Used to Oversee and Control Employee
Behavior
• Risk Tolerance: The Degree to Which Employees are
Encouraged to be Aggressive, Innovative, and Risk
Seeking
• Reward Criteria: The Degree to Which Rewards Such as
Promotion and Salary Increases are Allocated According
to Employee Performance Rather Than Seniority,
Favoritism or Other Nonperformance Factors
BITS Pilani, Pilani Campus
Characteristics
• Conflict Tolerance: The Degree to Which Employees are
Encouraged to Air Conflicts and Criticisms Openly
• Means Versus End Orientation: The Degree to Which
Management Focuses on Outcomes Rather Than on
Techniques and Processes Used to Achieve the Results
• Open-System Focus: The Degree to Which the Orgn.
Monitors and Responds to Changes in the External
Environment
BITS Pilani, Pilani Campus
IDENTIFYING CULTURAL
CHARACTERISTICS
• Study the Physical Characteristics of the Organization
– External Architecture, Offices, Uniform Of Employees
• Read About the Organization
– Annual Report, Mission Statements, Press Releases, Internal
News Letters
– Concern for People, Concern for Results and the Bottom Line
• Observe How People Interact Within the Organization
– Pace, Rituals, Values, Beliefs
– Meetings, Conversation
• Interpret Stories
Organization
and
Folklore
Surrounding
the
BITS Pilani, Pilani Campus
Implications of Organizational
Culture for Organizing Projects
• There are strong relationships among project
management structure, organizational culture and
successful project management
• Greater project authority and time are required to
complete projects that encounter a strong, negative
cultural current
• Conversely, less formal authority and fewer dedicated
resources are needed to complete projects in which the
cultural currents generate behaviour and cooperation
essential to project success
BITS Pilani, Pilani Campus
Implications of Organizational
Culture for Organizing Projects
BITS Pilani, Pilani Campus
Case 3.1
Moss and McAdams Accounting Firm
1. If you were Palmer at the end of the case, how would
you respond?
2. What, if anything, could Palmer have done to avoid
losing Olds?
3. What advantages and disadvantages of a matrix type
organization are apparent from this case?
4. What could the management at M&M do to more
effectively manage situations like this?
BITS Pilani, Pilani Campus
Organization
Strategy and Project
Selection
BITS Pilani
Pilani Campus
(Ch. 2 – T1)
M K Hamirwasia
WILPD
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
CRITERIA FOR PROJECT
SELECTION
Financial Models: Preferred Method To Evaluate Projects
– PAY BACK PERIOD (in Years) : ESTIMATED PROJECT COST / ANNUAL
SAVINGS
– RETURN ON INVESTMENT (in %)
– NET PRESENT VALUE (NPV) : Uses Time Value of Money, Cash Flows and
Profitability
Non-financial Criteria: Long-term Survival (developing and
maintaining core competencies); Less Tangible Criteria Restore Corporate Image, Enhance Brand Recognition,
CSR initiatives
BITS Pilani, Pilani Campus
L-4
Second Semester 2020-21
Thank You!
BITS Pilani, Pilani Campus
Project Selection
(Ch. 2 – T1)
BITS Pilani
Pilani Campus
M K Hamirwasia
WILPD
BITS Pilani
Pilani Campus
PDBA ZG523
Project Management
Lecture No. 5
Recap (Organization Strategy)
o Importance of Strategic Planning
o Why Project Managers Need to Understand Strategy
o Four Activities of the Strategic Management Process
o The Need for a Project Portfolio Management System
BITS Pilani, Pilani Campus
CRITERIA FOR PROJECT
SELECTION
• Financial Criteria: Preferred Method To Evaluate
Projects
– PAY BACK PERIOD (in Years) : ESTIMATED PROJECT COST /
ANNUAL SAVINGS
– RETURN ON INVESTMENT (in %)
– NET PRESENT VALUE (NPV) : Uses Time Value of Money,
Cash Flows and Profitability
• Non-financial
Criteria:
Long-term
Survival
(developing and maintaining core competencies)
Less Tangible Criteria - Restore Corporate Image, Enhance
Brand Recognition, CSR initiatives
BITS Pilani, Pilani Campus
TWO MULTI-CRITERIA SELECTION
MODELS (Non-Financial Criteria)
• Checklist Models
– List of Questions to Review Potential Projects
– Determine Acceptance or Rejection
– Flexibility in Selecting Different Projects With Some Variations in
Questions
– Fails to Answer the Relative Importance or Value of Potential
Projects
– Fails to Allow Comparison With Other Potential Projects
– Room for Power Play, Politics, Manipulation
• Multi-Weighted Scoring Models
BITS Pilani, Pilani Campus
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
EXAMPLE
CRITERION
WEIGHTAGE
A. STAY WITH CORE COMPETENCIES
2.0
B. STRATEGIC FIT
3.0
C. URGENCY
2.0
D. 25% OF SALES FROM NEW PRODUCTS 2.5
E. REDUCE DEFECTS TO LESS THAN 1% 1.0
F. IMPROVE CUSTOMER LOYALTY
1.0
G. ROI OF 18% +
3.0
BITS Pilani, Pilani Campus
CONTRIBUTION VALUES TO EACH
CRITERION FOR EACH PROJECT
Weightage
PROJECT
1
2
3
4
2
A
1
3
3
1
3 2 2.5 1 1
B C
D E F
8 2
6 0 6
3 2
0 0 5
0 10
0 0 6
10 5 10 0 8
3
G
5
1
0
9
WT. TOTAL
66
27
32
102
• Highest Priority: Project 4, then Project 1.
• Projects Screened Out : Projects 2 and 3,
If criterion is; weighted total should be > 50.
BITS Pilani, Pilani Campus
Project Selection Methods
Based on Financial Criteria
• Discounting Criteria
– Net Present Value (NPV)
– Benefit Cost Ratio (BCR)
– Internal Rate of Return Method
• Non-discounting Criteria
– Return on Investment (ROI)
– Payback Period
BITS Pilani, Pilani Campus
NET PRESENT VALUE (NPV)
• NPV is the Sum of the Present Values of all the Cash
Flows – Positive as well as Negative - that are expected
to occur over the Life of the Project.
NPV = ∑ Ct / (1 + r ) n – Investment
for the period t=1 to t=n
where Ct = cash flow at the end of year t
n = life of the project
r = discount rate
• It is the Net Benefit over and above the Compensation
for Time and Risk.
BITS Pilani, Pilani Campus
NPV
• Accept the Project if the NPV
is Positive
• Reject the Project if the NPV is
Negative
BITS Pilani, Pilani Campus
CALCULATING THE COST OF
CAPITAL
• Weighted Average Cost of Capital
• It is the Weighted Average Cost of Various Sources of
Finance for the Enterprise
Example:
Cost Of Equity = 16%
Proportion = 50%
Cost Of Preference = 12% Proportion= 40%
Cost Of Debt = 8%
Proportion = 10%
Cost Of Capital = (16x0.5) + (12x0.4) + (8x0.1)=13.6 % per
annum
BITS Pilani, Pilani Campus
EXAMPLE 1
YEAR
0
1
2
3
4
5
Discounting Rate = r = 10%
* Initial Investment (outflow)
CASH FLOW
(-1,000,000)*
200,000
200,000
300,000
300,000
350,000
BITS Pilani, Pilani Campus
Organization Strategy and
Project Selection
NPV = - 1,000,000 + 200,000 + 200,000 +
(1.10)0
(1.10)1
(1.10)2
(Initial Investment)
300,000 + 300,000 + 350,000
(1.10)3
(1.10)4
(1.10)5
[(-1000000) + (181818.18 + 165289.2562 + 225394.44
+ 204904.04 + 217322.46)]
= - Rs. 5271.26
BITS Pilani, Pilani Campus
BENEFIT COST RATIO
BENEFIT COST RATIO (BCR) = (PVB) / I
PVB = PRESENT VALUE OF BENEFITS
I = INITIAL INVESTMENT
NET BENEFIT COST RATIO (NBCR) = BCR – 1 (NPV / I)
BCR
>1
=1
<1
NBCR
>0
=0
<0
RULE
ACCEPT
INDIFFERENT
REJECT
BITS Pilani, Pilani Campus
EXAMPLE 2
INITIAL INVESTMENT (I) : 100,000
Year
Cashflow
YEAR 1
25,000
YEAR 2
40,000
YEAR 3
40,000 {25000 / (1.12)1}
{40000 / (1.12)3}
YEAR 4
50,000
{40000 / (1.12)2}
BCR = PVB / I r = 12%
{50000 / (1.12)4}
PVB = 22,321.43+31,887.76+28,471.21+31,775.90
= 1,14,456.30
BCR = PVB / I = 114456.30 / 100000 = 1.14456 = 1.145
NBCR = BCR – 1 = 0.145 {(114456.30–100000)/100000}
BITS Pilani, Pilani Campus
IRR Method
IRR is defined as that value of discount rate, which would
make the NPV of the project equal to zero.
If the value of IRR is higher than a certain rate specified by
the Organization (often called “hurdle rate”), the project
is accepted and if it is lower, the project is rejected.
The hurdle rate is usually based on the WACC.
BITS Pilani, Pilani Campus
Non-discounting Methods
1. RETURN ON INVESTMENT
INVESTMENT = 1MILLION (10 Lacs)
PROFIT BEFORE INTEREST AND TAXES = 2,00,000
ROI = 2,00,000/10,00,000 * 100 = 20%
1. Average Return on Investment Method
2. Accounting Rate of Return Method
BITS Pilani, Pilani Campus
Non-discounting Methods
2. PAYBACK PERIOD
• Length Of Time Required To Recover The Initial Cash
Outlay On The Project
• Shorter The Payback Period, More Desirable Is The
Project
Advantages
• It Is Simple Both In Concept And Application
• It Favors Projects Which Generate Substantial Cash
Inflows In Earlier Years And Discriminates Against
Projects Which Bring Cash Inflows In Later Years
• It Is Useful When Company Is Pressed With Problems
Of Liquidity
BITS Pilani, Pilani Campus
LIMITATIONS
• It Fails To Consider The Time Value
Of Money
• It Ignores Cash Flows Beyond The
Payback Period
• It Is A Measure Of Project’s Capital
Recovery, Not Profitability
BITS Pilani, Pilani Campus
DISCOUNTED PAYBACK
PERIOD
• It Takes Into Account Time Value Of Money
• Cash Flows Are Converted To Their Present
Values By Applying Discounting Factors
• Find The Cumulative Net Cash Flow After
Discounting Till We Get Positive Value
• The Corresponding Period Shows The
Discounted Payback Period
BITS Pilani, Pilani Campus
EXAMPLE 3: DISCOUNTED
PAYBACK PERIOD
YEAR
CASH FLOW PRESENT VALUE CUM.
0
-10000
-10000
-10000
1
3000
2727
-7273
2
3000
2479
-4794
3
4000
3005
-1789
4
4000
2732
943
5
5000
3105
6
2000
1129
Assuming r = 10% Discounted Payback Period = 3.6548
years (Gives the actual / real picture of recovery)
Undiscounted Payback Period = 3 years
BITS Pilani, Pilani Campus
Exercise
1. A five-year project has a projected net cash flow of
$15,000, $25,000, $30,000, $20,000, and $15,000 in the
next five years. It will cost $50,000 to implement the
project. If the required rate of return is 20 percent,
conduct a discounted cash flow calculation to determine
the NPV.
BITS Pilani, Pilani Campus
NPV Calculation
BITS Pilani, Pilani Campus
Exercise
2. You work for the 3T Company, which expects to earn at
least 18 percent on its investments. You have to choose
between two similar projects. Below is the cash
information for each project. Your analysts predict that
inflation rate will be a stable 3 percent over the next 7
years. Which of the two projects would you fund if the
decision is based only on financial information? Why?
BITS Pilani, Pilani Campus
Exercise
Omega
Year
Inflow
Y0
0
Y1
0
Y2
150,000
Y3
220,000
Y4
215,000
Y5
205,000
Y6
197,000
Y7
100,000
Total 1,087,000
Outflow
$225,000
190,000
0
30,000
0
30,000
0
30,000
505,000
Netflow
-225,000
-190,000
150,000
190,000
215,000
175,000
197,000
70,000
582,000
BITS Pilani, Pilani Campus
Exercise
Alpha
Year
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Total
Inflow
0
50,000
150,000
250,000
250,000
200,000
180,000
120,000
1,200,000
Outflow
$300,000
100,000
0
50,000
0
50,000
0
30,000
530,000
Netflow
-300,000
-50,000
150,000
200,000
250,000
150,000
180,000
90,000
670,000
BITS Pilani, Pilani Campus
NPV Calculation
BITS Pilani, Pilani Campus
NPV Calculation
BITS Pilani, Pilani Campus
Exercise
3. You are the head of the project selection team at Broken
Arrow records. Your team is considering three different
recording projects. Based on past history, Broken Arrow
expects at least a rate of return of 20 percent. Your
financial advisors predict inflation to remain at 2 percent
into the foreseeable future.
Given the following information for each project,
which one should be Broken Arrow’s first priority? Should
Broken Arrow fund any other project(s)? If so, what
should be the order of preference based on return on
investment?
BITS Pilani, Pilani Campus
Exercise
Recording Project: Time Fades Away
Year
0
1
2
3
4
5
Investment
$600,000
Revenue Stream
0
600,000
75,000
20,000
15,000
10,000
BITS Pilani, Pilani Campus
Exercise
Recording Project: On the Beach
Year
0
1
2
3
4
5
Investment
$400,000
Revenue Stream
0
400,000
100,000
25,000
20,000
10,000
BITS Pilani, Pilani Campus
Exercise
Recording Project: Tonight’s the Night
Year
0
1
2
3
4
5
Investment
$200,000
Revenue Stream
0
200,000
125,000
75,000
20,000
10,000
BITS Pilani, Pilani Campus
NPV Calculation
BITS Pilani, Pilani Campus
NPV Calculation
BITS Pilani, Pilani Campus
Pay Back Period
Project X has an initial investment of 10,50,000 and projected cash
inflows of 2,37,500 for 5 years.
Project Y has an initial investment of 8,00,000 and projected cash
inflows of 1,80,000 for 5 years.
Payback period (in years) = Estimated Project Cost/Annual Savings
The payback period for Project X is 4.42105 years and for Project Y is
4.44444 years.
Both the projects are acceptable as they return the initial investment in
less than 5 years.
ROI is reciprocal of Payback.
ROI: Project X = (237500/1050000) ×100 = 22.62 %
Project Y = (180000/800000) × 100 = 22.50 %
Management Criteria: Accept, if Payback Period is less than 5 years
and ROI is more than 15% (desired rate of return). Project X is
slightly more favourable.
BITS Pilani, Pilani Campus
Discounted Pay Back Period
Project X (undiscounted payback period is 4.42 years)
If you were to consider the payback period after
considering the discounted values, assuming r to be 15
percent.
Year
Outflow
Discounted value of cash inflow
0
10,50,000
----1
206521.74
2
179584.12
3
156160.11
4
135791.40
5
118079.47
Total
796136.84
BITS Pilani, Pilani Campus
Discounted Pay Back Period
Project X
Year
0
1
2
3
4
5
6
7
8
Total
Outflow
10,50,000
Discounted value of cash inflow
----206521.74
179584.12
156160.11
135791.40
118079.47
102677.80
89285.05
77639.17
1065738.86 (7.797282 years)
BITS Pilani, Pilani Campus
Discounted Pay Back Period Project Y
(undiscounted payback period is 4.44 years)
Year
0
1
2
3
4
5
6
7
8
Total
Outflow
8,00,000
Discounted value of cash inflow
----156521.74
136105.86
118352.92
102915.58
89491.81
77818.96
67668.67
58842.32
807717.87 (7.8688 years)
BITS Pilani, Pilani Campus
Project Selection
Thank You!
BITS Pilani, Pilani Campus
Defining the Project
(Ch. 4 – T1)
BITS Pilani
Pilani Campus
M K Hamirwasia
WILPD
BITS Pilani
Pilani Campus
PDBA ZG523
Project Management
Lecture No. 6
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
IRR Example
Calculate the Internal Rate of Return (IRR) for a project
having the following cash flows:
Year
Cash flow (Rs.)
0
(200,000)
1
50,000
2
60,000
3
70,000
4
80,000
The cash flow for the year 0 is initial investment and hence
an outflow. The cash flows for the years 1, 2, 3 & 4 are
net cash inflows. Using trial and error method, get the
answer in terms of the value of r between two values e.g.
the value of r lies between 8-9 percent.
BITS Pilani, Pilani Campus
IRR EXample
BITS Pilani, Pilani Campus
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Outline
•
•
•
•
•
•
•
•
Defining the Project Scope
Establishing Project Priorities
Creating the Work Breakdown Structure
Integrating the WBS with the Organization
Coding the WBS for the Information System
Process Breakdown Structure
Responsibility Matrices
Project Communication Plan
BITS Pilani, Pilani Campus
STEP 1: DEFINING THE
PROJECT SCOPE
• Defining the Project Scope sets the Stage for Developing
a Project Plan
• Project Scope is a Definition of the End Result or
Mission of the Project in Specific, Tangible and
Measurable Terms
• The Primary Purpose is to Define the Deliverables for
the End User and to Focus Project Plans
• Approx 50% of the Planning Problems relate to Unclear
Definition of the Scope and Goals
• The Scope Doc Directs Focus on the Project Purpose
throughout the Life Cycle of the Project for the Customer
and Project Participants
BITS Pilani, Pilani Campus
Defining the Project Scope
• The Scope should be developed under the Direction of
the PM, Customer, and other Significant Stakeholders
• The PM is responsible for ensuring that there is
agreement with the owner on project objectives,
deliverables at every stage of the project, tech
requirements and so forth
• The Project Scope Definition is a Doc that will be
published and used by the owner and participants for
planning and measuring project success
• Scope describes what you expect to deliver to your
Customer when the Project is complete
• The Project Scope should define the results to be
achieved in specific, tangible and measurable terms
BITS Pilani, Pilani Campus
Employing a Project Scope
Checklist
We can use a checklist to make sure that scope definition
is complete:
1.
2.
3.
4.
5.
6.
Project Objective
Deliverables
Milestones
Technical Requirements
Limits and Exclusions
Reviews with Customer
BITS Pilani, Pilani Campus
1. PROJECT OBJECTIVE
• Define the Overall Objective to meet Customer’s Needs
• The Project Objective answers the Questions of What,
When and How Much
BITS Pilani, Pilani Campus
2. DELIVERABLES
• Define major Deliverables – the expected measurable
Outputs over the Life of the Project
–
–
–
–
List of specifications
S/w Coding and a technical manual
The Prototype
Final Tests and approved s/w
BITS Pilani, Pilani Campus
3. MILESTONES
• A Significant Event in a Project that occurs at a Point in
Time
• The milestone schedule shows only major segments of
work: it represents rough-cut estimates of Time, Cost
and Resources for the Project
• Milestones should be important Control Points in the
Project and easy to recognize for all Project Participants
BITS Pilani, Pilani Campus
4. TECHNICAL
REQUIREMENTS
• To Ensure Proper Performance
– Speed
– Mileage
– Capacity
• Technical requirements
specifications.
define
the
performance
BITS Pilani, Pilani Campus
5. Limits and Exclusions
• The limits of scope should be defined lest it should result
in false expectations and spending time and resources
on the wrong problem
Eg. Maintenance and Repair will be done only up to one month after Final
Inspection
• Exclusions further define the boundary of the project
by stating what is not included.
Eg. A house will be built, but no landscaping or security devices added
BITS Pilani, Pilani Campus
6. REVIEWS with CUSTOMER
•
•
•
•
Review with customer – internal or external
Understanding and Agreement of Expectations
Is the customer getting what he desires in deliverables?
Does the project definition identify key accomplishments,
cost, schedule and quality requirements?
• Are issues regarding limits and exclusions covered?
Clarity in all these matters is necessary to avoid claims or
misunderstanding.
BITS Pilani, Pilani Campus
Defining the Project Scope
• Scope Definition should be as brief as possible but
complete; one or two pages are typical for small projects.
• A few Companies engaged in contracted work refer to
scope statements as “Statements Of Work” (SOW).
Other Organizations use the term Project Charter.
• A project charter refers to a written Doc issued by upper
mgmt that authorizes the PM to initiate and lead the
Project using Organizational resources for Project
activities
• Includes Risk Limits, Customer Needs, Spending Limits,
Team Composition as well as a brief scope description
BITS Pilani, Pilani Campus
SCOPE CREEP
• It is the tendency for the Project Scope to stretch over
time – usually by changing requirements, specifications
and priorities.
• A scope statement that is too broad is an invitation for
scope creep.
• It mostly means added costs and possible project
delays. Changes in requirements, specs and priorities
result in cost overruns and delays.
• However, if the project scope needs to change, then it is
necessary to have a sound change control process in
place that records the change and keeps a log of all
project changes.
BITS Pilani, Pilani Campus
Scope Statement
BITS Pilani, Pilani Campus
STEP 2: ESTABLISHING
PROJECT PRIORITIES
• Tradeoffs among Time, Cost and Performance
• Define and Understand the nature of the Priorities of the
Project
• Establish the relative importance of each criterion
Eg. If midway through the project, a trade-off must be made
b/w cost and expediting, which criterion has priority?
One technique useful for this purpose is completing a
priority matrix for the project to identify which criterion
is constrained, which should be enhanced, and which
can be accepted.
BITS Pilani, Pilani Campus
PRIORITY MATRIX
• Constrain: The original parameter is fixed. The project
must meet the Completion Date, Specifications and
Scope of the Project, or Budget.
• Enhance: In the context of time and cost, it means to
either reduce costs or shorten the schedule. Conversely,
with regard to performance, enhancing means adding
value to the Project.
• Accept: For which criterion is it tolerable not to meet the
original parameters?
BITS Pilani, Pilani Campus
Project Priority Matrix
BITS Pilani, Pilani Campus
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
STEP 3: CREATING THE WORK
BREAKDOWN STRUCTURE
A Work Breakdown Structure (WBS) is used for breaking
down a project into easily manageable components, or
bites.
Company owners and project managers use the Work
Breakdown Structure (WBS) to make complex projects
more manageable.
The WBS is designed to help break down a project into
manageable chunks that can be effectively estimated
and supervised.
BITS Pilani, Pilani Campus
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
WBS
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WBS
BITS Pilani, Pilani Campus
WBS
BITS Pilani, Pilani Campus
WBS
BITS Pilani, Pilani Campus
Constructing a Work Breakdown Structure
To start out, the project manager and subject matter
experts determine the main deliverables for the project.
Once this is completed, they start decomposing the
deliverables they have identified, breaking them down to
successively smaller chunks of work.
"How small?" you may ask. That varies with project type
and management style, but some sort of predetermined
“rule" should govern the size and scope of the smallest
chunks of work. There could be a two weeks rule, where
nothing is broken down any smaller than it would take
two weeks to complete.
You can also use the 8/80 rule, where no chunk would take
less than 8 hours or longer than 80 hours to complete.
BITS Pilani, Pilani Campus
Format
Regarding the format for WBS design, some people create
tables or lists for their work breakdown structures, but
most use graphics to display the project components as
a hierarchical tree structure or diagram.
BITS Pilani, Pilani Campus
What is a Work Breakdown Structure Diagram?
A WBS diagram expresses the project scope in simple
graphic terms. The diagram starts with a single box or
other graphic at the top to represent the entire project.
The project is then divided into main, or disparate,
components, with related activities (or elements) listed
under them. Generally, the upper components are the
deliverables and the lower level elements are the
activities that create the deliverables.
BITS Pilani, Pilani Campus
WBS Checklist
This is a checklist to use when reviewing the quality of a
Work Breakdown Structure.
• Does it define 100% of the work that will be produced by
the project?
• Does each element represent a deliverable?
• Does it use a coding structure so that each element has
a unique ID that shows its place in the hierarchy e.g. 1.1,
1.2, 1.1.1, 1.1.2?
• Will project stakeholders be able to understand the
project scope from the WBS?
• Does it capture all external and internal deliverables
including project management deliverables?
BITS Pilani, Pilani Campus
WBS Checklist
• Does each level represent 100% of the work required to
deliver the parent level?
• Is the decomposition sufficient that the tasks required to
deliver each work package can easily be identified?
• Is it in the format that gives a clear graphical, textual or
tabular breakdown of the project scope?
• Is a hierarchical structure used?
• Does it have at least two levels with at least one level of
decomposition?
• Was it created by those who will be performing the work?
• Is it being regularly updated as project changes are
approved?
BITS Pilani, Pilani Campus
WBS Checklist
• Can you identify one person who is accountable for each
work package?
• Can you clearly define the acceptance criteria for each
work package?
• Does it allow you to estimate costs accurately?
• Does the WBS have logical summary elements that can
be used in tracking progress and performance?
• Does the WBS provide sufficient detail to create an
Organizational Breakdown Structure and Resource
Assignment Matrix?
• Is there an alignment between the WBS and project
accounting structures?
BITS Pilani, Pilani Campus
WBS Checklist
• Is the WBS sufficient to support reporting at a team,
project, program and portfolio level?
• Does the WBS align with the size and complexity of the
project?
• Is it sufficiently detailed to support planning and control,
but not so detailed as to become cumbersome?
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WBS
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Simple WBS Example
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Bicycle WBS
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How WBS Helps the PM
• The hierarchical structure facilitates evaluation of cost,
time and performance at all levels in the organization
over the life of the project.
• The WBS also provides mgmt with info appropriate to
each level. Eg. Top mgmt deals with major deliverables,
while first-line supervisors deal with smaller sub
deliverables and work packages.
• Each item in the WBS needs a time and cost estimate.
The WBS also serves as a framework for tracking cost
and work performance.
BITS Pilani, Pilani Campus
How WBS Helps the PM
• As the WBS is developed, organizational units and
individuals are assigned responsibility for executing work
packages. This integrates the work and the organization.
This process is sometimes called the organization
breakdown structure (OBS).
• The WBS can also be used to define communication
channels and assist in understanding and coordinating
many parts of the project.
• The structure shows the work and organizational units
responsible and suggests where written communication
should be directed.
• Problems can be quickly addressed because the
structure integrates work and responsibility.
BITS Pilani, Pilani Campus
WBS Development
• At the top is the project end item.
• This is broken into major deliverables.
• Define sub deliverables necessary to accomplish the
larger deliverables.
• Each sub deliverable includes work packages that will be
completed by an assigned organizational unit.
• A sub deliverable includes outcomes of more than one
work package from perhaps 2 or 3 departments.
• The lowest level of the WBS is called a work package.
Work packages are short-duration tasks that have a
definite start and stop point, consume resources, and
represent cost. Each work package is a control point.
BITS Pilani, Pilani Campus
WORK PACKAGE
• A work package manager is responsible for seeing that
the package is completed on time, within budget, and
according to technical specifications.
Thus, the work package is the basic unit used for planning,
scheduling and controlling the project.
Each work package in the WBS
1. Defines work (what).
2. Identifies time to complete a work package (how long).
3. Identifies a time-phased budget to complete a work
package (cost).
4. Identifies resources needed to complete a work package
(how much).
BITS Pilani, Pilani Campus
WBS Development
5. Identifies a single person responsible for units of work
(who).
6. Identifies monitoring points for measuring progress (how
well).
• Every effort should be made to develop a WBS that is
output oriented.
BITS Pilani, Pilani Campus
WBS
BITS Pilani, Pilani Campus
STEP 4: INTEGRATING the
WBS with the ORGANIZATION
• The WBS is used to link the organizational units
responsible for performing the work. The outcome of this
process is the OBS. The OBS depicts how the firm has
organized to discharge work responsibility.
• The purpose of the OBS are to provide a framework to
summarize organization unit work performance, identify
organization units responsible for work packages, and tie
the organizational unit to cost control accounts.
• The intersection of work packages and the
organizational unit creates a project control point (cost
account) that integrates work and responsibility.
BITS Pilani, Pilani Campus
Integrating WBS and OBS
BITS Pilani, Pilani Campus
STEP 5: CODING the WBS for
the INFORMATION SYSTEM
• Codes (numeric indentation) are used to define levels
and elements in the WBS, organization elements, work
packages, and budget and cost information.
• Each successive indentation represents a lower element
or work package.
• Ultimately, the numeric scheme reaches down to the
work package level, and all tasks and elements in the
structure have an identification code.
• The cost account is the focal point because all budgets,
work assignments, time, cost, and technical performance
come together at this point.
• On large projects, a WBS is further supported with a
WBS dictionary.
BITS Pilani, Pilani Campus
Process Breakdown Structure
• For a project that involves extensive development work,
the project is organized around phases and not
deliverables.
• It is difficult to apply WBS to process-oriented projects in
which the final outcome is a product of a series of steps
or phases.
• The project evolves over time with each phase affecting
the next phase.
• IS projects fall in this category. Process projects are
driven by performance requirements, not by
plans/blueprints. This is referred to as the PBS.
• Deliverables are defined as outputs required to move to
the next phase.
BITS Pilani, Pilani Campus
RESPONSIBILITY MATRICES
• Small projects can be managed with RM.
• In its simplest form, an RM consists of a chart listing all
the project activities and the participants responsible for
each activity.
• RMs provide a means for all participants in a project to
view their responsibilities and agree on their
assignments.
• They also help clarify the extent or type of authority
exercised by each participant in performing an activity in
which two or more parties have overlapping involvement.
BITS Pilani, Pilani Campus
Responsibility Matrix
BITS Pilani, Pilani Campus
PROJECT COMMUNICATION
PLAN
• It is usually created by the PM and/or the Project Team
in the early stage of Project Planning.
• Communication is key to coordinating and tracking
Project Schedules, Issues and Action Items
• It maps out the flow of information to different
stakeholders and becomes an integral part of the overall
project plan.
• The purpose of a PCP is to express what, who, how and
when information will be transmitted to project
stakeholders so schedules, issues and action itens can
be tracked.
BITS Pilani, Pilani Campus
Project Communication Plan
PCPs address the following core questions:
• What Information Needs to be Collected and When?
• Who will Receive the Information?
• What Methods will be used to Gather and Store
Information?
• What are the limits, if any, on who has access to certain
kinds of information?
• When will the information be communicated?
• How will it be communicated?
BITS Pilani, Pilani Campus
STEPS
Developing a communication plan that answers these
questions entails the following basic steps:
1. Stakeholder Analysis: Identify the target groups. Typical
groups could be customer, sponsor, project team, project
office.
2. Information Needs: Project Progress, Schedules, Task
Lists, Specifications, Project Status Reports, Changes In
Scope, Action Items, Deliverable Issues, Team Status
Meetings, Accepted Request Changes, Milestone
Reports.
BITS Pilani, Pilani Campus
Stakeholder Analysis
BITS Pilani, Pilani Campus
Project Communication Plan
3. Sources Of Information: Where does the Information
reside? How will it be collected?
4. Dissemination Modes: E-mail, Teleconferencing, etc.
Create Virtual Project Office to store Project Information.
5. Responsibility and Timing: Determine who will send out
the Information. Timing and frequency of distribution
appropriate to the information need to be established.
BITS Pilani, Pilani Campus
Defining the Project
Thank You!
M K Hamirwasia
+91 85868 14104
hamirwasiamk@pilani.bits-pilani.ac.in
BITS Pilani, Pilani Campus
Defining the Project
Mid Semester Review
Ch.
1
–
Ch.
4,
T1
BITS Pilani
Pilani Campus
M K Hamirwasia
WILPD
BITS Pilani
Pilani Campus
PDBA ZG523
Project Management
Lecture No. 7
BITS Pilani
Pilani Campus
Mid Semester Review
Syllabus for Mid Semester Test: L-1 to L-7
(Topics covered in the first 7 lectures)
Remaining Topics of Last
Lecture (L-8)
1. WBS
2. OBS
3. Coding the WBS
4. Process Breakdown Structure (PBS)
5. Responsibility Matrix (RM)
6. Project Communication Plan
(PCP)
BITS Pilani, Pilani Campus
STEP 3: CREATING THE WORK
BREAKDOWN STRUCTURE
A Work Breakdown Structure (WBS) is used for breaking
down a project into easily manageable components, or
bites.
Company owners and project managers use the Work
Breakdown Structure (WBS) to make complex projects
more manageable.
The WBS is designed to help break down a project into
manageable chunks that can be effectively estimated
and supervised.
BITS Pilani, Pilani Campus
WBS
BITS Pilani, Pilani Campus
Constructing a Work Breakdown Structure
To start out, the project manager and subject matter
experts determine the main deliverables for the project.
Once this is completed, they start decomposing the
deliverables they have identified, breaking them down to
successively smaller chunks of work.
"How small?" you may ask. That varies with project type
and management style, but some sort of predetermined
“rule" should govern the size and scope of the smallest
chunks of work. There could be a two weeks rule, where
nothing is broken down any smaller than it would take
two weeks to complete.
You can also use the 8/80 rule, where no chunk would take
less than 8 hours or longer than 80 hours to complete.
BITS Pilani, Pilani Campus
WBS
BITS Pilani, Pilani Campus
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Bicycle WBS
BITS Pilani, Pilani Campus
WORK PACKAGE
• A work package manager is responsible for seeing that
the package is completed on time, within budget, and
according to technical specifications.
Thus, the work package is the basic unit used for planning,
scheduling and controlling the project.
Each work package in the WBS
1. Defines work (what).
2. Identifies time to complete a work package (how long).
3. Identifies a time-phased budget to complete a work
package (cost).
4. Identifies resources needed to complete a work package
(how much).
BITS Pilani, Pilani Campus
WBS Development
5. Identifies a single person responsible for units of work
(who).
6. Identifies monitoring points for measuring progress (how
well).
• Every effort should be made to develop a WBS that is
output oriented.
BITS Pilani, Pilani Campus
WBS
BITS Pilani, Pilani Campus
STEP 4: INTEGRATING the
WBS with the ORGANIZATION
• The WBS is used to link the organizational units
responsible for performing the work. The outcome of this
process is the OBS. The OBS depicts how the firm has
organized to discharge work responsibility.
• The purpose of the OBS are to provide a framework to
summarize organization unit work performance, identify
organization units responsible for work packages, and tie
the organizational unit to cost control accounts.
• The intersection of work packages and the
organizational unit creates a project control point (cost
account) that integrates work and responsibility.
BITS Pilani, Pilani Campus
Integrating WBS and OBS
BITS Pilani, Pilani Campus
STEP 5: CODING the WBS for
the INFORMATION SYSTEM
• Codes (numeric indentation) are used to define levels
and elements in the WBS, organization elements, work
packages, and budget and cost information.
• Each successive indentation represents a lower element
or work package.
• Ultimately, the numeric scheme reaches down to the
work package level, and all tasks and elements in the
structure have an identification code.
• The cost account is the focal point because all budgets,
work assignments, time, cost, and technical performance
come together at this point.
• On large projects, a WBS is further supported with a
WBS dictionary.
BITS Pilani, Pilani Campus
Process Breakdown Structure
• For a project that involves extensive development work,
the project is organized around phases and not
deliverables.
• It is difficult to apply WBS to process-oriented projects in
which the final outcome is a product of a series of steps
or phases.
• The project evolves over time with each phase affecting
the next phase.
• IS projects fall in this category. Process projects are
driven by performance requirements, not by
plans/blueprints. This is referred to as the PBS.
• Deliverables are defined as outputs required to move to
the next phase.
BITS Pilani, Pilani Campus
RESPONSIBILITY MATRICES
• Small projects can be managed with RM.
• In its simplest form, an RM consists of a chart listing all
the project activities and the participants responsible for
each activity.
• RMs provide a means for all participants in a project to
view their responsibilities and agree on their
assignments.
• They also help clarify the extent or type of authority
exercised by each participant in performing an activity in
which two or more parties have overlapping involvement.
BITS Pilani, Pilani Campus
Responsibility Matrix
BITS Pilani, Pilani Campus
PROJECT COMMUNICATION
PLAN
• It is usually created by the PM and/or the Project Team
in the early stage of Project Planning.
• Communication is key to coordinating and tracking
Project Schedules, Issues and Action Items
• It maps out the flow of information to different
stakeholders and becomes an integral part of the overall
project plan.
• The purpose of a PCP is to express what, who, how and
when information will be transmitted to project
stakeholders so schedules, issues and action itens can
be tracked.
BITS Pilani, Pilani Campus
Project Communication Plan
PCPs address the following core questions:
• What Information Needs to be Collected and When?
• Who will Receive the Information?
• What Methods will be used to Gather and Store
Information?
• What are the limits, if any, on who has access to certain
kinds of information?
• When will the information be communicated?
• How will it be communicated?
BITS Pilani, Pilani Campus
STEPS
Developing a communication plan that answers these
questions entails the following basic steps:
1. Stakeholder Analysis: Identify the target groups. Typical
groups could be customer, sponsor, project team, project
office.
2. Information Needs: Project Progress, Schedules, Task
Lists, Specifications, Project Status Reports, Changes In
Scope, Action Items, Deliverable Issues, Team Status
Meetings, Accepted Request Changes, Milestone
Reports.
BITS Pilani, Pilani Campus
Stakeholder Analysis
BITS Pilani, Pilani Campus
Project Communication Plan
3. Sources Of Information: Where does the Information
reside? How will it be collected?
4. Dissemination Modes: E-mail, Teleconferencing, etc.
Create Virtual Project Office to store Project Information.
5. Responsibility and Timing: Determine who will send out
the Information. Timing and frequency of distribution
appropriate to the information need to be established.
BITS Pilani, Pilani Campus
Mid Semester Review
Syllabus for Mid Semester Test
Chapter 1
Chapter 2
Chapter 3
Chapter 4
T1 – Clifford F. Gray et. al.
BITS Pilani, Pilani Campus
Intro to Project Mgmt, Ch. 1
Key Terms & Key Takeaways
Project (Definition, characteristics)
Program
Portfolio of projects
The Project Life Cycle
Current Drivers of Project Management
Project Governance
Project Integration Management
Roles and Responsibilities of Project Manager
Project Management – both a science (technical side – planning,
scheduling, monitoring and controlling) and an art (socio-cultural
side – cooperative social network)
Differences between project and program
Differences between project and process
How a project is different from routine operations!
BITS Pilani, Pilani Campus
Ch. 1 – Overview of PM
Key Terms & Key Takeaways
Difference between Mission and Vision of an Organization
Difference between a group and a team
Product life cycle – how it differs from project life cycle
Project Management Processes – (a) Product oriented processes (eg.
Product oriented processes for civil construction would be – the
design of foundations/structure, preparing and placing reinforced
concrete etc.), (b) Project management oriented processes (eg.
Good management practices, tools and techniques used for project
initiation, planning, execution, monitoring, control and closure)
Enterprise Environmental Factors, Organizational Process
Assets
Project Charter (how it is different from a Project Scope Statement)
PM Process Groups (5)
PM Knowledge Areas (10)
BITS Pilani, Pilani Campus
Organization: Structure and Culture, Ch. 3
Key Terms & Key Takeaways
Functional Organization
Projectized Organization (Dedicated Project Team)
Matrix Organization: Weak Matrix, Balanced Matrix, Strong
Matrix
Project classification: Advanced development projects,
Platform projects and Incremental projects
Organizational Culture
Identifying Cultural Characteristics
Impact of culture on organizing projects
Factors other than culture having a bearing on the project
management structure
BITS Pilani, Pilani Campus
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Organization Strategy and Project Selection, Ch.2
Key Terms & Key Takeaways
The Strategic Management Process
SWOT Analysis
SMART Goals/Objectives
Cascading of objectives
The Implementation Gap
A “sacred cow” project
Compliance, Operational and Strategic projects
Financial and non-financial selection criteria
Undiscounted and discounted cash flows
ROI, Payback period
NPV (for constant and variable rate of return)
WACC, Benefits to Cost ratio, IRR
BITS Pilani, Pilani Campus
Financial Criteria, Ch. 2
Problems
NPV Calculations
BCR / Profitability Index
Net BCR
IRR Problems
Discounted and Undiscounted Payback Period Calculations
BITS Pilani, Pilani Campus
Financial Criteria - Problem
Project X has an initial investment of Rs. 20 million and projected
cash inflows of Rs. 50,00,000 for 5 years. Project Y has an initial
investment of Rs. 15 million and projected cash inflows of Rs.
49,00,000 for 5 years. Assume the discount rate to be 18 percent.
(a)Work out the NPV of the two projects and compare the results.
Which project should be approved? Why?
(b)Work out the Undiscounted and Discounted Pay Back Period
for the two projects. If the criterion is 5 years, which project
should be considered based on Discounted PBP?
(c)Work out the Benefit Cost Ratio (BCR) for the two projects.
Which project is acceptable? Why?
[5+5+5 = 15]
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Calculate the IRR for a project having the following cashflows:
Year
Cashflow (Rs.)
0
30,000
1
11,000
2
11,000
[5]
3
11,000
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
NPV calculation for timevarying discount rates
The discount rate may change over time for
the following reasons:
(a) The level of interest rates may change over time.
(b) The risk characteristics of the project may change over
time, resulting in changes in the cost of capital.
(c) The financing mix of the project may vary over time,
causing changes in the cost of capital.
BITS Pilani, Pilani Campus
NPV calculation for timevarying discount rates
Problem:
A 5-year project has a projected net cash flow of Rs.
150,000, Rs. 250,000, Rs. 300,000, Rs. 200,000 and Rs.
150,000 in the next 5 years. It will cost Rs. 500,000 to
implement the project. If the required rate of return is 14
percent for year 1, 15 percent for year 2, 16 percent for
year 3, 18 percent for year 4 and 20 percent for year 5,
conduct a discounted cash flow calculation to determine
the NPV.
BITS Pilani, Pilani Campus
Solution
BITS Pilani, Pilani Campus
Discounted and Undiscounted
PBP
BITS Pilani, Pilani Campus
Defining the Project, Ch. 4
Key Terms & Key Takeaways
Project scope
Project scope checklist
Deliverables and Milestones
Project Charter
Scope creep
Project Priority Matrix (Constrain, Enhance, Accept)
WBS, Work Package
Organizational Breakdown Structure (OBS)
Cost account
Process Breakdown Structure
Responsibility Matrix
Project Communication Plan
BITS Pilani, Pilani Campus
Mid Semester Review
All the Best!
BITS Pilani, Pilani Campus