Chapter 8
Managing Projects
© David O’Sullivan
8-1
Reflections
 What is creativity?
 List and explain five graphic-based tools
that can be used for generating ideas.
 Where do ideas come from?
 Explain the mind mapping tool.
 How are failure modes scored in the failure
mode effects analysistechnique?
 Detail a simple form for capturing critical
data for an idea.
 Explain the importance of lead users in
generating new ideas.
8-2
Activities
[Discussion of selected student
‘Activities’ from previous chapter]
8-3
Learning Targets
 Outline the key stages of a project life cycle
 Understand the types of investments necessary for
projects
 Explain the importance of risk management in
projects
 Construct a simple cost–benefit analysis for a project
 Understand a number of tools for managing projects
 Understand the six stages of the buyer experience
life cycle
 Detail a simple form for capturing critical data for a
project
8-4
Projects and Portfolios
 Project Management
 Managing an individual project
 Managing project resources
 Achieving project goals
 Portfolio Management
 Managing a group of projects
 Managing organisational resources
 Achieving organisational goals
8-5
Semantics
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Projects
Initiatives
Actions
Tasks
 Portfolios
 Programs
 Initiatives
8-6
Projects
 A unique, nonpermanent, goal-centered
activity with a predefined life cycle,
constrained by cost and resource
availability
 Sample projects related to innovation:
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Installing a new piece of production equipment
Developing a new technology or science
Restructuring a department
Installing a new computer system
Developing a preventive maintenance program
Building a new plant
Developing a new product or service
8-7
Project Characteristics

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Goal Centered
Resources
Life Cycle
Unique
Budgets
Responsibilities
8-8
Project Planning
 A project can represent a large
investment of time, money, and
resources
 Planning a project effectively can:
 Maximize contribution to goals
 Fundamental to the financial
considerations
 Crucial to scheduling of resources and
the control of progress and costs
8-9
Structured Approach
Scope of work
Schedule
Cost
Project Planning Elements

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Workpackages
Tasks
Deliverables
Gates and milestones
Resources
8-11
Work Breakdown Structure
WBS
OBS
CBS
Cost
account
WP
WP
WP
WP
WP
Scope of work
Schedule
Cost estimate
Sample Work package
8-13
Sample Deliverables
8-14
Project Scheduling
 A schedule is the conversion of a project
action plan into an operating timetable
 Scheduling of people, equipment,
information and their interrelationship
 Fundamental basis for
 Understanding project complexity
 Monitoring and controlling project activity
and budget
 Tool for the management of projects.
8-15
Worker-Month Allocation
8-16
Gantt Charts
8-17
Project Control
 Once operational, control of the
project is necessary to:
 Measure progress
 Identify deviations
 Take corrective action (when needed)
 Continuous cycles of planning,
implementation, and reviewing
take place throughout the project
lifecycle
8-18
Risks
 Identification
 Which risks are likely to affect the project
 Quantification
 Probability and consequences of risks
 Mitigation
 Methods for the reduction and control of risks
 Control
 Documenting the lessons learned
8-19
The Three Dimensions of Risk
Level of
detail
Contextual risk
Time
Strategic risk
Operational risk
Type of
risk
Pre
study
Planning
Execution
Commissioning
Close
out
Project
phases
Communication Risk
Conversation Example
Conversation
Attribution
Norwegian: How
long will it take to
finish this report?
Norwegian: I asked him to participate.
Venezuelan: His behaviour makes no sense.
He is the boss. Why doesn’t he tell me?
Venezuelan: I do
not know. How long
should it take?
Norwegian: He refuses to take
responsibility.
Venezuelan: I asked him for an order.
Norwegian: You
are in the best
position to analyse
time requirements
Norwegian: I press him to take responsibility
for his own actions.
Venezuelan:
10 days.
Norwegian: He lacks the ability to estimate
time; 10 days is totally inadequate
Venezuelan: What nonsense! I better give
him an answer.
Social Risk

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

Power
Individualism
Masculinity
Uncertainty Avoidance
8-23
Power Distance
SMALL POWER DISTANCE
LARGE POWER DISTANCE
Inequalities should be minimized
Inequalities expected and desired
Parents treat children as equals
Parents teach children obedience
Organizational hierarchies viewed as
inequality of roles, established for
convenience
Organizational hierarchies reflect
existential inequality between higher-ups
and lower-downs
Decentralization is popular
Centralization is popular
Narrow salary range between top and
bottom of organizations
Wide salary range between top and
bottom of organizations
The ideal boss is a resourceful democrat
The ideal boss is a benevolent autocrat
Privileges and status symbols are frowned Privileges and status symbols for
upon (or under communicated)
managers are popular and expected
Individualism
INDIVIDUALISM
COLLECTIVISM
Children learn to think in terms of “I”
Children learn to think in terms of “we”
Speaking one’s mind
Maintaining harmony
Employee-employer relationship a contract
Employee-employer relation like family
Management is management of individuals
Management is management of groups
Tasks prevail over relationships
Relationships prevail over tasks
Masculinity
MASCULINTY
FEMININITY
Sympathy for the strong
Sympathy for the weak
Money and things are important
People and relationships important
Live in order to work
Work in order to live
Men should be assertive, ambitious and
tough
Everybody is supposed to be modest
Stress on equity, competition and
performance among colleagues
Stress on equality, solidarity and quality of
life.
Uncertainty Avoidance
WEAK UNCERTAINTY AVOIDANCE
STRONG UNCERTAINTY AVOIDANCE
Lenient rules for children on what is dirty and
taboo
Tight rules for children on what is dirty and
taboo
Uncertainty is a normal feature of life
Uncertainty is seen as a threat which must be
fought
Low stress, high well-being
High stress, anxiety
Aggression and emotion should not be shown
Aggression and emotions may be ventilated
at proper occasions
Managers and teachers may say “I don’t
know”
Managers and teachers are supposed to
have all the answers
Comfortable feeling when “lazy”. Hardworking only when required
Emotional need to be busy; inner urge to
work hard
Quantitative Techniques
 Payback
 Return on investment (ROI)
 Net present value (NPV)
 Disadvantage with all quantitative
techniques in project assessment is
that the figures used often are
estimates at best and can be
incorrect
8-28
Payback
 Net annual cash flow (NACF)
revenues derived from investment
(IC) should pay back investment over
a certain payback period (n)
IC
n
NACF
8-29
Example
 Machine costs €85,000 and generates
revenues of €55,000 per year for 7
years. It costs €30,000 to operate
machine. At the end of year 7 machine
is scrapped.
NACF = 55,000-30,000=25,000
IC = 85,000
n = 85,000/25,000 = 3.4 years
8-30
Payback
 Capital
 Recurrent Costs
 Recurrent Revenues
 Additional Revenues
 Cost Avoidance
 Cost Savings
 Payback=(Capital-Costs)/Revenues
8-31
Estimate Classification
Type
Accuracy Purpose
Proposal
± 50 %
Appraisal viability to start feasibility study
Budget
± 20 %
Appraisal viability to start systems design
Sanction
± 10 %
Appraisal viability to approve project
Control
±5%
Measure progress, assign resources
Tender
±2%
Prepare tender
Earned Value Management
Volume (MHs)
BCWS
Resource
variance
ACWP
Volume
variance
BCWP
Time
T
t
BCWS: Budgeted Cost of Work Scheduled
BCWP: Budgeted Cost of Work Performed
ACWP: Actual Cost of Work Performance
Cost Variance
Qualitative techniques
 Fit with organizational goals and objectives
 Fit with competitive necessity for
sustainability
 Fit with existing product or service range
 Fit with available resources
 Fit with existing competencies
 Fit with desired future competencies
 Fit relative to competitor direction
 Fit relative to risk quotient
 Fit with other innovation projects, ongoing
or planned
8-34
Qualitative Techniques
Criteria
Weight
Score
W.Score
Fit with mission
5
3
15
Impact on objectives
10
4
40
Impact on indicators
10
2
20
Fit with competencies
7
5
35
Fit with skills
5
5
25
Level of Risk
10
4
40
Total Score
175
8-35
Project Innovation
8-36
Portfolio and Project
Management
Portfolio
Management
Goals
Statements
Requirements
Strategies
Measures
Projects
Specification
Ranking
Schedules
Deployment
Results
Status
Scorecard
Trends
Innovatio
ns
Stimuli
Creations
Problems
Ideas
Team
s
Individual
s
Teams
Skills
Learning
Review
Project
Management
Project Tools

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Concurrent engineering
Quality function deployment (QFD)
Buyer utility mapping
Rapid prototyping
8-38
House of Quality
8-39
Buyer Utility Map
8-40
Summary
 Outline the key stages of a project life cycle
 Understand the types of investments necessary for
projects
 Explain the importance of risk management in
projects
 Construct a simple cost–benefit analysis for a project
 Understand a number of tools for managing projects
 Understand the six stages of the buyer experience
life cycle
 Detail a simple form for capturing critical data for a
project
8-41
Activities
8-42
Search Online
 http://www.ted.com
 Saul Griffith: Hardware solutions to
everyday problems (video)
 Johnny Lee: Creating tech marvels out of
a $40 Wii Remote ...
 What's Next in Tech
8-43