Summary Pinto, Project management -- Achieving competitive advantage

Summary Pinto, Project management -- Achieving competitive advantage

Chapter 1 – Introduction: Why Project Management

Introduction

Projects are one of the principal means by which we change our world. Project management has become a critical component of successful business operations in worldwide organizations.

1.1 What is a project

A process refers to ongoing, day-to-day activities in which an organization engages while producing goods or services. Processes use existing systems, properties, and capabilities in a continuous, fairly repetitive manner. Projects, on the other hand, take place outside the normal, process-oriented world of the firm.

A project is a unique venture with a beginning and end, conducted by people to meet established goals within parameters of cost, schedule, and quality.

Projects are goal-oriented, involve the coordinated undertaking of interrelated activities, are of finite duration, and are all, to a degree, unique.

A project can be considered to be any series of activities and tasks that: Have a specific objective to be completed within certain specifications. Have defined start and end dates. Have funding limits (if applicable). Consume human and nonhuman resources (i.e., money, people, equipment). Are multifunctional (i.e., cut across several functional lines).

Organized work toward a predefined goal or objective that requires resources and effort, a unique (and therefore risky) venture having a budget and schedule.

In the PMBoK guide, a project is defined as “a temporary endeavor undertaken to create a unique product or service”.

Projects are complex, one-time processes. Projects are limited by budget, schedule, and resources. Projects are developed to resolve a clear goal(deliverables) or set of goals. Projects are customer focused.

Projects are characterized by the following properties: Projects are ad hoc endeavors with a clear life circle. Projects are building blocks in the design and execution of organizational strategies. Projects are responsible for the newest and most improved products, services, and organizational processes. Projects provide a philosophy and strategy for the management of change. Project management entails crossing functional and organizational boundaries. The traditional management functions of planning, organizing, motivation, directing, and control apply to project management. The principal outcomes of a project are the satisfaction of customer requirements within the constraints of technical, cost, and schedule objectives. Projects are terminated upon successful completion of performance objectives.

Process orientation is the need to perform work as efficiently as possible in an ongoing manner. Projects, because they are discrete activities, violate the idea of repetition. They are temporary activities that operate outside formal channels.

Note a recurring theme: projects operate in radical ways that consistently violate the standard, process-based view of organizations.

Although project management is becoming popular, it is not easy to assimilate into the conventional processes of most firms.

1.2 Why are projects important?

David Cleland, a noted project management researcher, suggests that many of these reasons arise from the very pressures that organizations find themselves facing.

-Shortened product life cycles. Narrow product launch windows. Increasingly complex and technical products. Emergence of global markets. An economic period marked by low inflation.

1.3 Project life cycles

A project life cycle refers to the stages in a project’s development. Life cycles are important because they demonstrate the logic that governs a project. A simplified model of the project life cycle divides it into four distinct phases:
                Conceptualization refers to the development of the initial goal and technical specifications for a project. Planning is the stage in which all detailed specifications, schematics, schedules, and other plans are developed. During execution, the actual “work” of the project is performed, the system developed, or the product created and fabricated. Termination occurs when the completed project is transferred to the customer, its resources reassigned, and the project formally closed out.

These stages are the waypoints at which the project team can evaluate both its performance and the project’s overall status. Remember, however, that the life cycle is relevant only after the project has actually begun. The life cycle is signaled by the actual kickoff of project development, the development of plans and schedules, the performance of necessary work, and the completion of the project and reassignment of personnel. Thus as we plan the project’s life cycle, we also acquire important information regarding the resources that we will need. The life cycle model, then, serves the twofold function of project timing (schedule) and project requirements (resources), allowing team members to better focus on what and when resources are needed. The project life cycle is also a useful means of visualizing the activities required and challenges to be face during the life of a project. As you can see, five components of a project may change over the course of its life cycle: Client interest, Project stake, Resources, Creativity, and Uncertainty. Balancing the requirements of these elements across the project life cycle is just one of the many demands placed upon a project team.

1.4 Determinants of project success

Generally speaking, any definition of project success must take into consideration the elements that define the very nature of a project: that is, time (schedule adherence), budget, functionality/quality, and customer satisfaction. At one time, managers normally applied three criteria of project success: Time, Cost, and Performance. This so-called triple constraint was once the standard by which project performance was routinely assessed. Today, a fourth criterion has been added to these three: Client acceptance.

The final arbiter of project success is not the firm’s accountants, but rather the market place.

Four relevant dimensions of success: Project efficiency, Impact on the customer, Business success, and Future potential.

Chapter 2 – The Organizational Context

Introduction

Within any organization, successful project management is contextual: the organization itself matters. The key challenge is discovering how project management may best be employed, regardless of the structure the company has adopted.

2.1 Projects and organizational strategy

Strategic management is the science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. Strategic management consists of the following elements: Developing vision statements and mission statements. Formulating, implementing, and evaluating. Making cross-functional decisions. Achieving objectives. Book of Proverbs: “Where there is no vision, the people perish” (Prov. 29:18). Project management work is a natural environment in which to operationalize strategic plans.

Projects have been called the “stepping-stones” of corporate strategy. This idea implies that an organization’s overall strategic vision is the driving force behind its project development. Projects are the building blocks of strategies; they put an action-oriented face on the strategic edifice. Projects are the “operational reality” behind strategic vision. Supporting the base of the pyramid are strategies, goals, and programs. Here the firm’s strategies are stated in terms of a three-phase approach: (1) concentrate on achieving objectives through existing markets and product lines, (2) focus on new market opportunities in foreign or restricted markets, and (3) pursue new products in existing markets. (Figure 2.2, page 56)

Even the most basic activities of the company are conducted in support of the firm’s strategic elements. To break this down, the Image Assessment Program (IAP) is made up of several supporting projects, including: 1.Customer Survey Project 2.Corporate Philanthropy Project 3.Quality Assessment Project 4.Employee Relations Project. All these projects promote the Image Assessment Program, which in turn is just one supporting program in a series designed to achieve strategic goals. Projects, as the building blocks of strategy, are typically initiated through the corporation’s strategic purposes, deriving from a clear and logical sequencing of vision, objectives, strategies, and goals.

An organization’s strategic management is the first important contextual element in its project management approaches.

2.2 Stakeholder management

Stakeholder analysis is a useful tool for demonstrating some of the seemingly irresolvable conflicts that occur through the planned creation and introduction of any new project. Project Stakeholders are defined as all individuals or groups who have an active stake in the project and can potentially impact, either positively or negatively, its development. Project stakeholder analysis, then, consists of formulating strategies to identify and, if necessary, manage for positive results the impact of stakeholders on the project. In managing projects, we are challenged to find ways to balance a host of demands and still maintain supportive and constructive relationships with each important stakeholder group.

Intervenor groups are defined as groups external to the project but possessing the power to effectively intervene and disrupt the project’s development. Among the set of project stakeholders that project managers must consider are: Internal: Top management, Accountant, Other functional managers, and Project team members. External: Clients, Competitors, Suppliers, and Environmental, Political, Consumer, and other Intervenor groups.

The entire discipline of supply-chain management is predicated on the ability to streamline logistics processes by effectively managing the project’s supply chain. To be able to manage the project, to make the necessary decisions, and to communicate with the customer, the project manager has to stay on top of the cost of the project at all times. An efficient cost control and reporting mechanism is vital. Project managers must understand that their projects’ success depends upon the commitment and productivity of each member of the project team.

Project managers and their companies need to recognize the importance of stakeholder groups and proactively manage with their concerns in mind. Block offers a useful framework of the political process that has fine application to stakeholder management. In his framework, Block suggests six steps: 1.Assess the environment 2.Identify the goals of the principal actors 3.Assess your own capabilities 4.Define the problem 5.Develop solutions 6.Test and refine the solutions.

Fisher and Ury have noted that the positions various parties adopt are almost invariably based on need. Project teams must look for hidden agendas in goal assessment. It is common for departments and stakeholder groups to exert a set of overt goals that are relevant, but often illusionary. In testing and refining solutions, the project manager and team should realize that solution implementation is an iterative process. An alternative, simplified stakeholder management process consists of planning, organizing, directing, motivating, and controlling the resources necessary to deal with the various internal and external stakeholder groups. Cleland (Figure 2.4, page 62) notes that the various stakeholder management functional are interlocked and repetitive; that is, this cycle is recurring.

2.3 Organizational structure

A span of control determines the number of subordinates directly reporting to each supervisor.

2.6 Organizational culture

One of the unique characteristics of organizations is the manner in which each develops its own outlook, operating policies and procedures, patterns of thinking, attitudes, and norms of behavior.

Organizational culture is by one of the original writers defined as “the solution to external and internal problems that has worked consistently for a group and that is therefore taught to new members as the correct way to perceive, think about, and feel in relation to these problems.”

In other settings, such as anthropology, a culture is seen as the collective or shared learning of a group, and it influences how that group is likely to respond in different situations.

Elements of culture: Unwritten, Rules of behavior, Held by some subset of the organization, and Taught to all new members.

An organization may contain a number of different cultures, operating in different locations or at different levels.

Researchers have examined some of the powerful forces that can influence how a company’s culture emerges. Among the key factors that affect the development of a culture are: technology, environment, geographical location, reward systems, rules and procedures, key organizational members, and critical incidents. Critical incidents express culture because they demonstrate for all workers exactly what it takes to succeed in an organization. In other words, critical incidents are a public expression of what rules really operate, regardless of what the company formally espouses.

Culture can affect project management in at least four ways: Departmental interaction, Employee commitment to goals, Project planning, and Performance evaluation.

Escalation of commitment occurs when, in spite of evidence identifying a project as failing, no longer necessary, or beset by huge technical or other difficulties, organizations continue to support it past the point an objective viewpoint would suggest that it should be terminated.

Organizational culture must be managed, constantly assessed, and when necessary, changed in ways that promote project management rather than discouraging its efficient practice. The context within which we manage our projects is a key determinant in the likelihood of their success or failure. Three critical contextual factors are the organization’s strategy, structure, and culture.

Chapter 3 – Project Selection and Portfolio Management

Introduction

A project portfolio is the set of projects that an organization is undertaking at any given time.

When a firm is pursuing multiple projects, the challenges of strategic decision making, resource management, scheduling, and operational control are magnified.

3.1 Project selection

Priority systems are guidelines for balancing the opportunities and costs entailed by each alternative.

Guidelines are selection models that permit them to save time and money while maximizing the likelihood of success. Souder identifies five important issues that managers should consider when evaluating screening models: 1.Realism 2.Capability 3.Flexibility 4.Ease of use 5.Cost

Project selection models come in two general classes: numeric and nonnumeric. Numeric models seek to use numbers as inputs for the decision process involved in selecting projects. The key is to remember that most selection processes for project screening involve a combination of subjective and objective data assessment and decision making. Nonnumeric models, on the other hand, do not employ numbers at decision inputs, relying instead on other data.

The list of factors that can be considered when evaluating project alternatives is enormous. In general terms, we may look at risk and commercial factors, internal operating issues, and other factors. In fact, if we apply Pareto’s 80/20 principle, which states that a few issues (20%) are vital and many (80%) are trivial, it may be fairly argued that for many projects, less than 20% of all possible decision criteria account for over 80% of the decision of whether or not to pursue the project. This being said, we should also reflect on two final points regarding the use of any decision-making approach to project selection. First, the most complete model in the world is still only a partial reflection of organizational reality. Second, embedded in every decision model are both objective and subjective factors. It is worthwhile acknowledging that there exists a place for both subjective and objective inputs and decisions in any useful screening model.

3.2 Approaches to project screening and selection

A project-screening model that generates useful information for project choices in a timely and useful fashion at an acceptable cost can serve as a valuable tool in helping an organization make optimal choices among numerous alternatives.

1. The simplest method of project screening and selection is developing a checklist, or a list of criteria that pertain to our choice of projects, and then applying them to different possible projects. In deciding among several new product development opportunities, a firm must weigh a variety of issues, including the following: Cost of development, Potential return on investment, Riskiness of the new venture, Stability of the development process, Governmental or stakeholder interference, and Product durability and future market potential.

A checklist approach to the evaluation of project opportunities is a fairly simple device for recording opinions and encouraging discussion. Thus, checklists may best be used in a consensus-group setting, as a method for initiating conversation, stimulating discussion and the exchange of opinions, and highlighting the group’s priorities. Checklist screening models also fail to resolve trade-off issues.

2. In the simplified scoring model, each criterion is ranked according to its relative importance. Our choice of projects will thus reflect our desire to maximize the impact of certain criteria on our decision. Although adding a scoring component to our simple checklist complicates our decision, it also gives us a more precise screening model – one that more closely reflects our desire to emphasize certain criteria over others. The simple scoring model consists of the following steps: Assign importance weights to each criterion, Assign score values to each criterion in terms of its rating (High=3, Medium=2,Low=1), Multiply importance weights by scores to arrive at a weighted score for each criterion, and Add the weighted scores to arrive at an overall project score.

The simple scoring model has some useful advantages as a project selection device. First, it is easy to use it to tie critical strategic goals for the company to various project alternatives. Second, the simple scoring model is easy to comprehend and use. With a checklist of key criteria, evaluation options, and attendant scores, top managers can quickly grasp how to employ this technique.

The simple scoring model illustrated here is an abbreviated and unsophisticated version of the weighted-scoring approach. In general, scoring models try to impose some structure on the decision-making process while, at the same time, combining multiple criteria. Most scoring models, however, share some important limitations. A scale from 1 to 3 may be intuitively appealing and easy to apply and understand, but it is not very accurate. Critics of scoring models argue that their ease of use may blind novice users to the sometimes-false assumptions that underlie them. From a managerial perspective, another drawback of scoring models is the fact that they depend on the relevance of the selected criteria and the accuracy of the weight given them. In other words, they do not ensure that there is a reasonable link between the selected and weighted criteria and the business objectives that prompted the project in the first place.

3. –

4. Profile models allow managers to plot risk/return options for various alternatives and then select the project that maximizes return while staying within a certain range of minimum acceptable risk. The profile model makes use of a concept most widely associated with financial management and investment analysis – the efficient frontier. In project management, the efficient frontier is the set of project portfolio options that offers either a maximum return for every given level of risk or the minimum risk for every level of return. One advantage of the profile model is that it offers another alternative to compare project alternatives, this time in terms of the risk/return trade-off. Profile models also have disadvantages: 1. They limit decision criteria to just two – risk and return 2. In order to be evaluated in terms of an efficient frontier, some value must be attached to risk.

3.3 Financial models

Another important series of models relies on financial analysis to make project selection decisions. Financial models are all predicated on the time value of money principle. The time value of money suggests that money earned today is worth more than money we expect to earn in the future. There are two reasons why we would expect future money to be worth less: (1) the impact of inflation, and (2) the inability to invest the money. The intent of project payback period is to estimate the amount of time that will be necessary to recoup the investment in a project; that is, how long it will take for the project to pay back its initial budget and begin to generate positive cash flow for the company. In determining payback period for a project, we must employ a discounted cash flow analysis, based on the principal of the time value of money. The goal of the discounted cash flow (DCF) method is to estimate cash outlays and expected cash inflows resulting from investment in a project.

…We then apply to this calculation a discount rate based on the firm’s cost of capital. The value of that rate is weighted across each source of capital to which the firm has access (typically, debt and equity markets). In this way we weight the cost of capital, which can be calculated as follows:

Kfirm= (wd)(kd)(1-t) + (we)(ke)     The weighted cost of capital is the percentage of capital derived from either debt (wd) or equity (we) times the percentage costs of debt and equity (kd and ke, respectively).

There is a standard formula for payback calculations: Payback period = investment/annual cash savings. The key is to determine how long it will take the firm to reach the breakeven point on a new project. Breakeven point represents the amount of time necessary to recover the initial investment of capital in the project.

The net present value (NPV) method, projects the change in the firm’s value if a project is undertaken. The simplified formula for NPV is as follows: NPV(project)=I0+SFt/(1+r+pt)^t

Where: Ft=the net cash flow for period t, r=the required rate of return I=initial cash investment (cash outlay at time 0) pt=inflation rate during period t.

Net present value is one of the most common project selection methods in use today. Its principal advantage is that it allows firms to link project alternatives to financial performance, better ensuring that the projects a company does choose to invest its resources in are likely to generate profit. Among the disadvantages is the difficulty in using NPV to make accurate long-term predictions.

(RRR) = Required rate of return.

Under the discounted payback method, the time period we are interested in is the length of time until the sum of the discounted cash flows is equal to the initial investment. The advantage of the discounted payback method is that it allows us to make a more “intelligent” determination of the length of time needed to satisfy the initial project investment. That is, while simple payback is useful for accounting purposes, discounted payback is actually more representative of financial realities that all organizations must consider when pursuing projects. The effects of inflation and future investment opportunities do matter with individual investment decisions and so, should also matter when evaluating project opportunities.

Internal rate of return (IRR) is an alternative method for evaluating the expected outlays and income associated with a new project investment opportunity. IRR asks the simple question: What rate of return will this project earn?  Under this model, the project must meet some required “hurdle” rate applied to all projects under consideration. Without detailing the mathematics of the process, we will say only that IRR is the discount rate that equates the present values of a project’s revenue and expense streams. If a project has a life of time t, the IRR is defined as: IO = S (ACF^t)/(1+IRR)^t Where ACF^t= the annual after-tax cash flow for time period t

IO= the initial cash outlay

n= the project’s expected life

IRR= the project’s internal rate of return

IRR is found through a straightforward process, although it requires tables representing present value of an annuity in order to determine the project’s rate of return. Alternatively, many pocket calculators can determine IRR quickly. Without such tables or access to a calculator, it is necessary to employ an iterative process to identify the approximate IRR for the project.

If the IRR is greater than or equal to the company’s required rate of return, the project is worth funding. The advantage of using IRR analysis lies in its ability to compare alternative projects from the perspective of expected return on investment (ROI). Projects having higher IRR are generally superior to those having lower IRR. IRR does, however, have some disadvantages. First, it is not the rate of return for a project. In fact, IRR equals the project’s rate of return only when project-generated cash inflows can be reinvested in new projects at similar rates of return. If the firm can reinvest revenues only on lower-return projects, the “real” return on the project is something less than the calculated IRR. Several other problems with IRR make NPV a more robust determinant of project viability:1. IRR and NPV calculations typically agree only when projects are independent of each other. If projects are not mutually exclusive, IRR and NPV may rank them differently. The reason is that NPV employs a weighted average cost of capital discount rate that reflects potential reinvestment while IRR does not. 2. If cash flows are not normal, IRR may arrive at multiple solutions.

Chapter 4 – Leadership and the Project Manager

Introduction

Leadership is often recognized by its accomplishments. While there are many definitions of leadership, one useful definition that we will employ in this chapter is that leadership is the ability to inspire confidence and support among the people who are needed to achieve organizational goals. For the project manager, leadership is the process by which he or she influences the project team to get the job done! True leadership from the project manager has been shown time and again to be one of the most important characteristics in successful project management. Project management has been viewed as one of the most “leader intensive” undertakings that occur within organizations.

4.1 Leaders vs. managers

In project management, successful team leaders are often those who were best able to create the partnership attitude between themselves and their teams. As Peter Block notes, the idea of leadership as partnership is critical to project management because it highlights the important manner in which all leaders are ultimately dependent upon their teams to achieve project goals. Four things are necessary to promote the partnership idea between the project manager and the team:

Exchange of purpose, A right to say no, Joint accountability, and Absolute honesty.

Leadership involves inspiring, motivating, influencing, and changing behaviors of others in pursuit of a common goal. Table 4.1, page 130.

Successful project managers are successful project leaders.

4.2 How the project manager leads

Project resources refer to all personnel and material resources necessary to successfully accomplish project objectives. Many projects are underfunded in the concept stage. This lack of resource support can occur for several reasons, including: 1.The project’s goals are deliberately vague 2.The project lacks a top management sponsor 3.The project requirements were deliberately understated 4.So many projects may be under development that there is simply not enough money to go around 5.An attitude of distrust between top management and project managers.

The key point to remember is that recognizing and responding to resource needs is a critical function of project leadership.

Another common tactic (besides hiring new temporary personnel) project managers use in the face of resource shortfalls is to rely on negotiation or political tactics to influence top management to provide additional support. Again, leadership is best demonstrated by the skills a project manager uses to maintain the viability of the project.

In considering how to motivate individuals on our project teams, it is important to recognize that motivation ultimately comes from within each of us; it cannot be stimulated solely by an external presence. Underlying motivation is typically something that the team member desires. Successful project managers must recognize that one vital element in their job description is the ability to recognize talent, recruit it to the project team, begin to mold a team of interactive and collaborative workers, and apply motivational techniques as necessary. Successful project managers must operate on the boundaries. Leaders are able to make the often daily transition from keeping an eye on the big picture to dealing with immediate, smaller problems that occur almost on a regular basis.

There is an old saying in project management regarding the importance of communication with your company’s top management: “If they know nothing of what you are doing, they assume you are doing nothing.” We must take serious steps to identify relevant stakeholders and establish and maintain communications with them, not sporadically but continually, throughout the project’s development. Communicating also serves other valuable purposes. Project managers have been described as “mini billboards,” the most visible evidence of the status of their project.

Project managers must recognize the importance of communication and become adept at it.

Meetings serve a number of purposes for the project team, including these: 1.They define the project and the major team players 2.They provide an opportunity to revise, update, and add to all participants’ knowledge base, including facts, perceptions, experience, judgments, and other information pertinent to the project 3.They assist team members in understanding how their individual efforts fit into the overall whole of the project as well as how they can each contribute to project success 4.They help all stakeholders increase their commitment to the project through participation in the management process 5.They provide a collective opportunity to discuss the project and decide on individual work assignments 6.They provide visibility for the project manager’s role in managing the project. 

As a result of the wide variety of uses meeting serve, the ability of project managers to become adept at running them in an efficient and productive manner is critical.

Two forms of leadership behaviors are critical for effectively running project meetings. The first type of behavior is task oriented; that is, it is intended to emphasize behaviors that contribute to completing project assignments, planning and scheduling activities and resources, and providing the necessary support and technical assistance. Task-oriented behavior seeks to get the job done. At the same time, effective project leaders are also concerned about group maintenance behavior. 

Group maintenance behavior consists of supportive activities, including showing confidence and trust, acting friendly and supportive, working with subordinates to understand their problems, and recognizing their accomplishments. Table 4.2, page 133.

The project manager is the key to achieving effective task behaviors, particularly through a clear sense of timing and pacing. Group maintenance behaviors are just as critical as those related to task and must be addressed as part of a successful meeting strategy. Taken together, task and group maintenance goals allow the project manager to gain the maximum benefit from meetings, which are so critical for project communication and form a constant demand on the project manager’s time.

Table 4.3, page 134.

4.3 Traits of effective project leaders

A set of factors that most effective project leaders shared in common: oral communication skills, influencing skills, intellectual capabilities, the ability to handle stress, and diverse management skills, including planning, delegation, and decision making. Five characteristics closely associated with effective project team leaders: Credibility, Creative problem-solver, Tolerance for ambiguity, Flexible management style, and Effective communication skills. Seven essential project manager abilities: 1.Organizing under conflict 2.Experience 3.Decision making 4.Productive creativity 5.Organizing with cooperation 6.Cooperative leadership 7.Integrative thinking.

Effective project managers must be good communicators. Project leaders must possess the flexibility to respond to uncertain or ambiguous situations with a minimum of stress. Strong project leaders work well with and through their project team. Good project leaders are skilled at various influence tactics.

One key to understanding leadership behavior is to focus on what leaders do rather than who they are.

Time orientation refers to the temporal context or space to which an individual is oriented. The ability of project managers to engage in temporal alignment with the tasks they face is an important skill that they need to develop.

Tables 4.5 and 4.6, page 138.

For better or worse, successful project managers need to recognize the importance of operating on a perspective that includes past, present, and future time orientations.

Chapter 5 – Scope Management

Introduction

A project’s scope is everything about a project – work content as well as expected outcomes.

Scope management is the function of controlling a project in terms of its goals and objectives through the processes of conceptual development, full definition, execution, and termination. It provides the foundation upon which all project work is based and is, therefore, the culmination of predevelopment planning. In the most general sense, project planning seeks to define what needs to be done by whom, and by what date, in order to fulfill assigned responsibility.

The six main activities (all key to comprehensive planning and project development) are: 1.Conceptual development 2.The scope statement 3.Work authorization 4.Scope reporting 5.Control systems 6.Project closeout. Table 5.1, page 157.

The goal of scope management is maximum efficiency through the formation and execution of plans or systems that leave as little as possible to chance.

5.1 Conceptual development

Conceptual development is the process that addresses project objectives by finding the best ways to meet them. Key steps in information development are: Problem or need statement, Information gathering, Constraints, Alternative analysis, and Project objectives.

Conceptual development begins with the process of reducing the project’s overall complexity to a more basic level. In reality, the optimal project solution begins with creating a reasonable and complete problem statement to establish the nature of the project, its purpose, and a set of concrete goals.

The Statement of Work (SOW) is a detailed narrative description of the work required for a project. The purpose of the SOW is to give the project organization and the project manager specific guidance on both work requirements as well as the types of end results sought once the project is completed.

A statement of work is an important component of conceptual development as it identifies a need within the firm or an opportunity from an outside source. Some elements in an effective SOW include: 1.Introduction and background 2.Technical description of the project 3.Timeline and milestones A statement of Work can contain the following components: 1.Background 2.Task 1 3.Objective 4.Approach 5.Input source. The Statement of Work is important because it typically serves as the summary of the conceptual development phase of the project plan.

The scope statement, the heart of scope management, reflects a project team’s best efforts at creating the documentation and approval of all important project parameters prior to proceeding to the development phase. Key steps in the scope statement include: Establishing the project goal criteria, Developing the management plan for the project, Establishing a Work Breakdown Structure, and Creating a scope baseline. Deliverables are formally defined as “any measurable, tangible, verifiable outcome, result, or item that must be produced to complete a project or part of a project.” The Work Breakdown Structure (WBS) divides the project into its component substeps in order to begin establishing critical interrelationships among activities. The scope baseline is a document that provides a summary description of each component of the project’s goal, including basic budget and schedule information for each activity.

According to the Project Management Body of Knowledge (PMBoK), a Work Breakdown Structure (WBS) is “a deliverable-oriented grouping of project elements which organizes and defines the total scope of the project. Each descending level represents an increasingly detailed definition of a project component. Project components may be products or services.” To rephrase the PMBoK definition, the Work Breakdown Structure is a process that sets a project’s scope by breaking down its overall mission into a cohesive set of synchronous, increasingly specific tasks.

It is sometimes necessary to differentiate between a subdeliverable, as identified in the hierarchical breakdown above, and work packages that are used to support and complete the subdeliverables. Typically, we think of subdeliverables as “rolled-up” summaries of the outcomes of two or more work packages. Unlike work packages, subdeliverables do not have a duration of their own, do not consume resources, nor do they have direct assignable costs. Any resources or costs attached to a subdeliverable are simply the summary of all work packages that support it.

An additional benefit of the process of creating a comprehensive WBS for a project is the ability to organize the work needed to be performed into cost control accounts that are assignable to various units within the company that are engaged in performing project activities. The outcome of organizing this material is the Organization Breakdown Structure (OBS). In short, the OBS allows companies to define the work to be accomplished and assign it to the owners of the work packages. The benefit of using an OBS is that it allows for better initial linking of project activities and their budgets, either at a departmental level or even more directly, on an individual-by-individual basis.

To identify team personnel who will be directly responsible for each task in the project’s development, a Responsibility Assignment Matrix (RAM) is developed. (The RAM is sometimes referred to as a linear responsibility chart.) This tool provides a clear linkage among all project team members and combats the danger of a potential communication vacuum in which project team members perform their own tasks without updating others on the project team. A RAM allows project managers to establish a method for coordinating the work activities of team members, realizing the efficiencies that take place as all team members provide support, notification, or approval for each other’s project responsibilities. In developing a project’s RAM, managers must consider the relationships between the project team and the rest of the organization as well as those within the project team. Thus, a detailed Ram can help project managers negotiate with functional managers for resources, particularly through detailing the necessity of including various team members on the project.

Milestones are defined as a significant event in the project.

5.3 Work authorization

Work authorization is the step that reflects the formal “go ahead” given to the project to commence once the scope definition, planning documents, management plans, and other contractual documents have been prepared and approved. Numerous components of contractual obligations between project organizations and clients can exist, but most contractual documentation possess some key identifiable features: Contractual requirements, Valid consideration, and Contracted terms.

From the perspective of the project organization, the more common contracts range from lump sum or turnkey contracts, in which the project organization assumes all responsibility for successful performance, to cost-plus contracts, which fix the company’s profit for a project in advance.

The key point about work authorization is grounded in the nature of stated terms for project development. The manager must draw up contracts that clearly stipulate the work agreed to, the nature of the project development process, steps to resolve disputes, and clearly identified criteria for successfully completing the project.

5.4 Scope reporting

Scope reporting fulfills this function by determining the types of information that will be regularly reported, who will receive copies of this information, and how this information will be acquired and disseminated. What types of information are available and what may be appropriately reported? Clearly, the answer is that a wide variety of forms of project reports can be tracked and itemized. Among the more common types of project parameter information that may be included in these reports are: Cost status (S curves, Earned value, Variance or exception reports), Schedule status, and Technical performance status.

5.5 Control systems

Control systems are vital to ensure that any changes to the project baseline are conducted in a systematic and thorough manner. Project managers can use a number of types of project control systems to track the status of their projects, including the following: Configuration control, Design control, Trend monitoring, Document control, Acquisition control, and Specification control. One of the most important pieces of advice for project managers and teams is to establish and maintain a reasonable level of control (including clear lines of authority) at the start of a project. Perhaps surprisingly, reasonable here means avoiding the urge to overdevelop and overcontrol. The Project Management Body of Knowledge (PMBoK) defines configuration management as “a system of procedures that monitors emerging project scope against the scope baseline. It requires documentation and management approval on any change to the baseline.” A baseline is defined as the project’s scope fixed at a specific point in time. The baseline, therefore, is viewed as the project’s configuration. Configuration management relates to the fact that projects usually consist of component parts, all contributing to the project’s functionality. However, because this process often requires several iterations, adjustments, and corrections to get the project right, in practical terms, configuration management is the systematic management and control of project change.

Configuration management works toward formalizing the change process as much as possible as early in the project’s life as possible, rather than leaving needed downstream changes to be done in an uncoordinated manner. The need to make project changes or specification adjustments, it has been suggested, comes about for one of several reasons: Initial planning errors, either technological or human. Additional knowledge of project or environmental conditions. Uncontrollable mandates. Client requests.

5.6 Project closeout

Effective scope management also includes appropriate planning for a project’s termination. The project closeout step requires project managers to consider the types of records and reports they and their clients will require at the completion of the project. Closeout information can be important: (1) in the case of contractual disputes after the project has been completed (2) as a useful training tool for postproject analysis of either successes or failures; and (3) to facilitate project auditing tasks by showing the flow of expenses in and out of various project accounts. Closeout documentation a project leader may decide to track includes the following: Historical records, Postproject analysis, and Financial closeout.

One of the most important lessons for successful project managers is to “start with the end in mind.”

A project’s goals are just a dream until they are written down.

Chapter 6 – Project Team Building, Conflict, and Negotiation

Introduction

Team building and conflict management are two of the most important people skills that project managers can cultivate, but they are also two of the most difficult undertakings.

6.1 Building the project team

The first stage in project team development is to conduct a realistic assessment of the types of skills the team members will need in order to complement each other and perform their project duties as effectively as possible. Once a reasonable assessment of the required project skills has been completed, a complementary assessment of the availability of personnel with the requisite skills is necessary. The third step in the process of building the project team involves opening communication with likely candidates for the team and assessing their level of interest in joining the project. Among the issues to be decided are: 1.How long are the team member’s services required? 2.Who should choose the person to be assigned to the project? 3.What happens when special circumstances arise?

In the event that negotiations with functional managers are not fruitful, the project manager is faced with three basic alternatives: Try to negotiate for partial assistance, Adjust project schedules and priorities accordingly, and notify top management of the consequences.

When the project has been staffed and approved, the final step is assembling the project team. This involves developing a skills inventory matrix that identifies the skills needed for the project against the skills we have acquired and a responsibility matrix using the Responsibility Activity Matrix (RAM) methodology.

6.2 Characteristics of effective project teams

Successful teams share common underlying features, including a clear sense of mission, an understanding of team interdependencies, cohesiveness, a high level of trust, a shared sense of enthusiasm, and a results orientation.

A key determinant of project success is a clear project mission. Research has demonstrated that a clearly understood project mission is the number one predictor of success as the project is being developed. Two important issues are clear: First, project teams perform well when there is a clear sense of purpose or objectives for their project; second, the more widely shared and understood those goals, the better for project performance.

Interdependency refers to the degree of joint activity among team members that is required in order to complete a project. Differentiation (begrip kennen). Understanding interdependencies refers to the degree of knowledge that team members have and the importance they attach to the interrelatedness of their efforts.

Cohesiveness, at its most basic level, simply refers to the degree of mutual attraction that team members hold for one another and their task. It is the strength of desire all members have to remain a team.

Trust means different things to different people. For a project team, trust can best be understood as the team’s comfort level with each individual member. Given that comfort level, trust is manifested in the team’s ability and willingness to squarely address differences of opinion, values, and attitudes and deal with them accordingly. Trust is the common denominator without which ideas of group cohesion and appreciation become moot. Before positive results can come from disagreement, we have to develop trust. There are a number of ways in which project team members begin to trust one another. First, it is important for the project manager to create a “What happens here, stays here” mentality in which team members are not worried that their views will be divulged or confidences betrayed. Second, trust develops over time. Third, trust is an “all or nothing” issue. Finally, trust occurs on several levels. There is trust as it relates to professional interaction and the expectation of another person’s competence. Further, trust occurs on an integrity level. Finally, trust exists on an emotional level based on intuition. Hence, it is important to recognize that trust among team members is complex, does take time to develop, is dependent on past history, and can occur on several levels, each of which is important to developing a high-performing team.

Enthusiasm is the key to creating the energy and spirit that drives effective project efforts. One method for generating team enthusiasm is to promote the idea of efficacy, the belief that if we work toward certain goals they are attainable. Enthusiasm is the catalyst for directing positive, high energy toward the project while committing to its goals. Project managers, therefore, are best able to promote a sense of enthusiasm within the project team when they create an environment that is: Challenging, Supportive, and Personally rewarding.

Results orientation suggests that each member of the project team is committed to achieving the project’s goals. The project manager can influence team performance in many ways, but it is through constantly emphasizing the importance of task performance and project outcomes that all team members are united toward the same orientation. The benefit of a results orientations is that it serves to continually rally team members toward the important or significant issues, allowing them to avoid squandering time and resources on problems that may only be peripheral to the major project goals.

6.3 Reasons why teams fail

There are a number of reasons why teams operate at less than optimum performance:

                Poorly developed or unclear goals-> unclear goals permit multiple interpretations, unclear goals impede the willingness of team members to work together, unclear goals increase conflict.

                Poorly defined project team roles and interdependencies.

                Lack of project team motivation-> the project is perceived as unnecessary, the project may have low priority

                Poor communication

                Poor leadership

                Turnover among project team members

                Dysfunctional behavior

Team interdependencies is a state where team members’ activities coordinate with and complement other team members’ work.

6.4 Stages in group development

The process of group development is a dynamic one. Groups go through several maturation stages. Table 6.1, page 195.

1. Forming          Forming consists of the process or approaches used in order to mold a collection of individuals into a coherent project team. This stage has sometimes been referred to as the “floundering” stage, because team members are unsure about the project’s goals, may not know other team members, and are confused about their own assignments. In these early meetings, the role of the team leader is to create structure and set the tone for future cooperation and positive member attitudes.

2. Storming        Storming refers to the natural reactions members have to the initial ground rules. Members begin to test the limits and constraints placed on their behavior. Storming is a conflict-laden stage in which the preliminary leadership patterns, reporting relationships, and norms of work and interpersonal behavior are challenged and perhaps, reestablished. Storming is a very natural phase through which all groups go.

3. Norming         A norm is an unwritten rule of behavior. Norming behavior in a group implies that the team members are establishing mutually agreed-upon practices and attitudes. Research has shown that it is during the norming stage that the cohesiveness of the group grows to its highest level. The norming stage establishes the healthy basis upon which the actual work of the team will commence.

4. Performing    During the performing stage the actual work of the project team is done. It is only when the first three phases have been properly dealt with that the team will have reached the level of maturity and confidence to effectively perform their duties. As long as strong task-oriented group norms were established early in the team development and conflict was resolved, the performing stage is one of high morale and strong performance.

5. Adjourning    Adjourning recognizes the fact that projects and their teams do not last forever. At some point, the project has been completed and the team is disbanded to return to their other functional duties within the organization. It is important to remember that during the final stages of the implementation process, group members are likely to be exhibiting some concern about their future assignments and/or new duties. Project managers need to be sensitive to the real concerns felt by these team members and, where possible, help smooth the transition from the old team to new assignments.

Punctuated equilibrium proposes that rather than evolution occurring as a steady state of gradual change, real natural change comes about through long periods of stasis, interrupted by some cataclysmic event that propels upward, evolutionary adjustment. This same phenomenon frequently occurs in the field of group dynamics. Gersick’s work suggests that the timing of group process changes is quite consistent across teams and situations. Most teams, she discovered, develop a set of operating norms very quickly, at the time of the first team meeting and on the basis of limited interaction and knowledge of one another or the project mission. These norms, which are often less than optimal, tend to guide group behavior and performance for a substantial period of the project’s life. Gersick found that groups will continue to operate as a result of these norms until some trigger event occurs, almost precisely at the halfway point between the initial meeting and the project deadline. Punctuated equilibrium has some very important implications for project team leaders. 

First, it suggests that initial impressions are often lasting, as early behaviors and norms quickly solidify and become the controlling force behind the team’s behavior. Second, the model suggests that groups collectively experience a form of “midlife crisis” in running their project, because a lack of concrete results, coupled with escalating interpersonal tensions, tends to build to a state of dissatisfaction that finally overflows midway through the development process. Finally, Gersick’s research found that group members tended to feel increased frustration because they lacked a real sense of where the project stood at any point in time Hence, project managers who wish to avoid the more damaging effects of midlife project transitions need to recognize that the more they plan for interim milestones and other indications of progress, the more they can mitigate the adverse effects of project team blowups.

6.7 Conflict management

Conflict is a process that begins when you perceive that someone has frustrated or is about to frustrate a major concern of yours. There are two important elements in this definition. First, it suggests that conflict is not a state, but a process. As such, it contains a dynamic aspect that is very important. Conflicts evolve. Further, the one-time causes of a conflict may change over time; that is, the reasons why two individuals or groups developed a conflict initially may no longer have any validity. However, because the conflict process is dynamic and evolving, once a conflict has occurred, the reasons behind it may no longer matter. The process of conflict has important ramifications that we will explore in greater detail. The second important element in the definition is that conflict is perceptual in nature. In other words, it does not ultimately matter whether or not one party has truly wronged another party. The important thing is that the one party perceives that state or event to have occurred. That perception is enough because for the first party, perception of frustration defines reality. In general, most types of conflict fit within one of three categories, although it is also common for some conflicts to involve aspects of more than one category.

Goal-oriented conflict is associated with disagreements regarding results, project scope outcomes, performance specifications and criteria, and project priorities and objectives. Administrative conflict arises through management hierarchy, organizational structure, or company philosophy. Interpersonal conflict occurs with personality differences between project team members and important project stakeholders. At least three schools of thought exist about how conflicts should be perceived and addressed. Traditional view, Behavioral or contemporary school of thought, and interactionist view.

Many of the sources of conflict arise out of the project management situation itself. That is, the very characteristics of projects that make them unique contribute some important triggers for conflict to erupt among project stakeholders.

Some of the most common causes of organizational conflict are reward systems, scarce resources, uncertainty, and differentiation. Reward systems are competitive processes some organizations have set up that pit one group or functional department against another. Scarce resources are a natural cause of conflict as individuals and departments compete for the resources they believe are necessary to do their jobs well. Because organizations are characterized by scarce resources sought by many different groups, the struggle to gain these resources is a prime source of organizational conflict. Uncertainty over lines of authority essentially asks the tongue-in-cheek question, “Who’s in charge around here?” Differentiation reflects the fact that different functional departments develop their own mind sets, attitudes, time frames, and value systems, which can conflict with those of other departments. The more profound the differentiation within an organization, the greater the likelihood of individuals and groups dividing up into “us” versus “them” encampments, which continue to promote and provoke conflict.

Faulty attributions refer to our misconceptions of the reasons behind another’s behavior. Many individuals do not have the ego strength to acknowledge and accept objective disagreement, preferring to couch their frustration in personal terms. Faulty communication is a second and very common interpersonal cause of conflict. Faulty communication implies the potential for two mistakes: communicating in ways that are ambiguous and lead to different interpretations, thus causing a resulting conflict, and unintentionally communicating in ways that annoy or anger other parties. Personal grudges and prejudices are another main cause of interpersonal conflict. Conflicts over schedules and project priorities tend to be the most common and intense sources of disagreement. Interestingly, Posner’s research found that cost and budget issues played a much larger role in triggering conflict than did the earlier work of Thamhain and Wilemon. The significant changes in the rank ordering of sources of conflict and their intensity may be due to shifts in priorities or practices of project management over time, making issues of cost of greater concern and conflict.

We can choose to manage conflict in terms of five alternatives: Mediate the conflict, Arbitrate the conflict, Control the conflict, Accept the conflict, and Eliminate the conflict.

The project manager may employ either defusion or confrontation tactics in negotiating a solution. Defusion implies that the project manager is less concerned with the source of the conflict than with a mutually acceptable solution. Project managers have to learn to understand their own preferences when it comes to handling conflict. The key is flexibility. It is important not to lock into any particular conflict style nor favor one resolution tactic to the exclusion of all others. Each has its strengths and drawbacks and can be an important part of the project manager’s tool chest. Conflict often is evidence of team progress. We can send messages, intentional and unintentional, clear and mixed, to the rest of the project team by the manner in which we approach team building and conflict management.

6.8 Negotiation

Negotiation is a process that is predicated on a manager’s ability to use his influence productively. Negotiation skills are so important because much of a project manager’s life is taken up in bargaining sessions of one type or another. Indeed, stakeholder management can be viewed as the effective and constant mutual negotiation across multiple parties. Negotiation represents the art of influence taken to its highest level. Because effective negotiation is an imperative for successful project management, it is vital that project managers understand the role negotiation plays in their projects, how to become better negotiators, and some of the important elements in negotiation.

Anyone entering a negotiation needs to consider three questions: How much power do I have? What sort of time pressures are there? Do I trust my opponent? A realistic self-assessment concerning power and any limiting constraints is absolutely vital prior to sitting down to negotiate. One important reason is that it can show the negotiators where they are strong and, most importantly, what their weaknesses are.

One of the most influential books on negotiation in recent years is Getting to Yes, by Roger Fisher and William Ury. They offer excellent advice on “principled” negotiation, the art of getting agreement with the other party while maintaining a principled, win-win attitude. Among the suggestions they offer for developing an effective negotiating strategy are the following.

Separate the people from the problem. One of the most important ideas of negotiation is to remember that negotiators are people first. Consequently, in observing the saliency of the notion that negotiators are people first, we must seek ways in which we can keep people out of the problem itself. The more we can focus on the issues that separate us and pay less attention to the people behind the issues, the greater the likelihood of achieving a positive negotiated outcome. Put yourself in their shoes. An excellent starting point in negotiations is to discuss not only our own position but also our understanding of the other party’s position early in the negotiation process. When the other party hears a reasoned discussion of both positions, two important events occur: (1) it establishes a basis of trust because our opponent discovers that we are willing to openly discuss perceptions in the beginning, and (2) it reconstructs the negotiation as a win-win, rather than a winner-take-all, exercise. Don’t deduce their intentions from your fears. A common side effect of almost all negotiations, particularly early in the process, is to construct supporting stereotypes of the other side. 

Don’t blame them for your problems. In negotiations, it is almost always counterproductive to initiate a finger-pointing episode as we seek to attach blame for difficulties our project has encountered. It is far more effective to move beyond the desire to assign blame and search for win-win solutions. Recognize and understand emotion: theirs and yours. Although it is often easy to get emotional during the course of a negotiation, the impulse must be resisted as much as possible. It is common in a difficult, protracted negotiation to see emotions begin to come to the surface, often due to anger or frustration with the tactics or attitudes of the other party. Nevertheless, it is usually not a good idea to respond in an emotional way, even when the other party becomes emotional. Although emotions are a natural side effect of lengthy negotiations, we need to understand precisely what is making us unhappy, stressed, tense, or angry. Listen actively. Active listening means our direct involvement in the conversation with our opponent, even when the other party is actually speaking. A constructive negotiation can only proceed from the point of complete and objective information, not from preconceived notions or entrenched and intransigent positions. Build a working relationship. The idea of negotiating as though you are dealing with a party with whom you would like to maintain a long-term relationship is key to effective negotiations. The stronger the working relationship, the greater the level of trust likely to permeate its character.

Focus on interests, not positions. There is an important difference between the positions each party adopts and the interests that underscore and mold those positions. When we refer to “interests”, we mean the fundamental motivations that frame each party’s positions. As Fisher and Ury note, “Interests define the problem.” It is not the positions taken by each party that shapes the negotiation nearly as much as it is the interests that are the source of their fears, needs, and desires. Another reason for focusing on interests argues that negotiating from positions often leads to roadblocks as each party tries to discover their opponent’s position while concealing their own. In focusing on interests, on the other hand, we adopt a partnering mentality that acknowledges the legitimacy of both sides’ interests and seeks to find solutions that will be mutually satisfying.

Managers sometimes put up roadblocks for themselves, making it difficult to consider win-win options when negotiating. Managers can have premature judgment, Some managers search only for the best answer, Managers assume that there’s only a “fixed pie”, Thinking that “solving their problem is their problem” is another roadblock. The use of positive and inclusive brainstorming implies that once a negotiation process begins, during its earliest phase we seek to include the other party in a problem-solving session to identify alternative outcomes. The concept of broadening options is also a direct offshoot of the notion of brainstorming. Broadening our options requires us to be open to alternative positions and can be a natural result of focusing on interests rather than positions. Finally, a third technique for improving chances for win-win outcomes is to identify shared interests. A common negotiating approach employed by experienced bargainers is to sometimes table the larger items to a later point in the negotiation, focusing instead on minor or peripheral issues that offer a greater likelihood of reaching agreement.

One of the best methods for ensuring that a negotiation proceeds along substantive lines is to frame the discussion around objective criteria. Objective data and other measurable criteria often form the best basis for accurate negotiations. Develop fair standards and procedures. Fair standards and procedures require that both parties come together and negotiate from the same basic understanding of the terms and liabilities. In visualizing the need to become adept at team building, conflict management and negotiation, it is important to remember that the greatest challenges project managers typically face in running their projects are the myriad “people” challenges that result from the process of forming a diverse set of project members into a unified and collaborative team, whose goal is to pursue project success. Conflict can lead to positive outcomes; it can solidify team member commitment and motivation, and generate the energy to complete project activities. Channeling conflict in appropriate ways, however, requires a sure touch on the part of the project manager. Conflict is inevitable; it is not disastrous. Indeed, the degree to which a conflict disrupts a project’s development depends upon the project manager’s willingness to learn enough about conflict to deal with it effectively.