Risk Management on a Satellite Development Project 8

Table of Contents

Satellite Development

Read the case titled: “Risk Management on a Satellite Development Project” found in Chapter 10.

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Write a six to eight (6-8) page paper in which you:

Satellite Development
  1. Suggest the issues that could have developed had the team not had a risk plan. Determine the major impacts of risk that the team needs to understand for the project to be successful.
  2. Justify the value of risk plan considering the time, effort, cost, and resources it took to develop such a plan. If you were the project manager, recommend the approach that you would take to ensure the project met the critical path identified.
  3. Assess how to determine the level of risk management appropriate for a project.
  4. Imagine the team working on the satellite development project was a virtual team in which team members were unable to meet in person. Explain the expected impact on the project, and suggest two (2) ways the team could maintain its current goal in both planning and execution.
  5. Use at least four (4) quality academic (peer-reviewed) resources in this assignment.

 Your assignment must:

Satellite Development
  • Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
  • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

Chapter 10 start on page 268 and you have to scroll to the end of chapter for the case study.

Contemporary Project Management Timothy J. Kloppenborg Th ird Edition

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Contemporary Project M anagem

ent K


Th ird Edition

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Contemporary Project Management, 3e includes both time-tested and cutting-edge project management techniques that are invaluable to you as a student or practitioner. Check out some of the features of this text:

• Agile Approach to Project Planning and Management. The text fully integrates the agile approach and uses a margin icon and alternate font color to emphasize the difference between agile and traditional project management methods.

• PMBOK ® Guide Approach. This edition covers all knowledge areas and processes from the fi fth edition of the PMBOK® Guide and now includes ten PMBOK® Guide-type questions at the end of each chapter. All glossary defi nitions also refl ect the fi fth edition of the PMBOK® Guide.

• Real Project Management Examples. Each chapter contains examples from practitioners at actual companies in the U.S. and abroad.

• Actual Projects as Learning Vehicles. At the end of each chapter, there is an example project with a list of deliverables. Microsoft® Word and Excel templates for many project management techniques are also available on the textbook companion site.

• Full Integration of Microsoft® Project Professional 2013. Using screen captures, the text shows step-by-step instructions for automating project management techniques and processes in Microsoft® Project 2013.

Contemporary Project Management Timothy J. Kloppenborg

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MS Project 2013 Instructions in Contemporary Project Management 3e

Chapter MS Project

4 Introduction to MS Project 2013

Toolbars, ribbons, and window panes

Initialize MS Project for Use

Auto schedule, start date, identifying information, summary row

Create Milestone Schedule

Key milestones, projected finish dates, information

6 Set up Work Breakdown Structure (WBS)

Understand WBS definitions and displays, enter summaries, create the outline, Insert row number column, Hide/show desired amount of detail

7 Set up Schedule in MS Project

Define organization’s holidays, turn off change highlighting, understand types of project data

Build Logical Network Diagram

Enter tasks and milestones, define dependencies, understand network

diagram presentation, verify accuracy

Understand Critical Path

Assign duration estimates, identify critical path

Display and Print Schedules

8 Define Resources

Resource views, max units, resource calendars

Assigning Resources

In split view enter work, select resource, modify assignments

Identify Over allocated Resources

Resource usage and Detailed Gantt views together

Dealing with Over Allocations

Manual leveling and judgment

9 Develop Bottom-up Project Budget

Assignment costs, activity costs, various cost perspectives

Develop Summary Project Budget

11 Baseline Project Plan

14 Report Progress

How MS Project recalculates based upon actual performance, current and future impacts of variances, define the performance update process (what, when, and how)

Update the Project Schedule

Acquire performance data, set and display status date, Enter duration-

based performance data, reschedule remaining work, revise estimates

15 Close Project

Complete schedule, archive schedule, capture and publish lessons learned

PMBOK® Guide 5e Coverage in Contemporary Project Management 3e The numbers refer to the text page where the process is defined.

Project management (PM) processes and knowledge areas 9 Project life cycle 6-8, 62-64 Projects and strategic planning 28-31 Organizational influences 54-61 Portfolio and program management 31-34 Stakeholders 65-74

PMBOK® Guide 5th ed. Coverage

Knowledge Areas

Initiating Process Group Planning Process Group

Executing Process Group

Monitoring & Controlling Process Group

Closing Process Group

Project Integration Management

Develop Project charter 84-99

Develop Project Management Plan 116-118, 306-308

Direct and Manage Project Work 383-384

Monitor and Control Project Work 385-386 Perform Integrated Change Control 158-160, 386-387

Close Project or Phase 425-430

Project Scope Management

Plan Scope Management 146 Collect Requirements 146-148 Define Scope 148-150 Create WBS 150-158

Validate Scope 422 Control Scope 400-401

Project Time Management

Plan Schedule Management 172 Define Activities 175-176 Sequence Activities 176-181 Estimate Activity Resources 211-212 Estimate Activity Durations 181-184 Develop Schedule 184-192

Control Schedule 172, 401-405

Project Cost Management

Plan Cost Management 246 Estimate Costs 246-256 Determine Budget 256-259

Control Costs 259, 401-405

Project Quality Management

Plan Quality Management 302-306

Perform Quality Assurance 392-393

Control Quality 306, 393-400

Project Human Resources Management

Plan Human Resource Management 212-216

Aquire Project Team 348-350 Develop Project Team 350-364 Manage Project Team 364-367

Project Communications Management

Plan Communications Management 126-130

Manage Communications 388-391

Control Communications 391

Project Risk Management

PlanRiskManagement 270-275 Identify Risks 95, 275-277 Perform Qualitative Risk Analysis 95-96, 277-280 Perform Quantitative Risk Analysis 280 Plan Risk Responses 96, 281-283

Control Risks 387-388

Project Procurement Management

Plan Procurement Management 324-327, 331-333

Conduct Procurements 327-331

Control Procurments 334

Close Procurements 424-425

Project Stakeholder Management

Identify Stakeholders 97, 119-123

Plan Stakeholder Management 124-126

Manage Stakeholder Engagement 123-124, 367-368

Control Stakeholder Engagement 368-369

Source: Adapted from A Guide to the Project Management Body of Knowledge (PMBOK® Guide), 5th ed. (Newtown Square, PA: Project Management Institute, Inc., 2013): 43.

Contemporary Project Management Organize / Plan / Perform



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Contemporary Project Management: Organize / Plan / Perform, Third Edition

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Brief Contents Project Deliverables xiii Preface xv About the Author xxii

PART 1 Organizing Projects

1 Introduction to Project Management 2

2 Project Selection and Prioritization 26

3 Organizational Capability: Structure, Culture, and Roles 52

4 Chartering Projects 82

PART 2 Planning Projects

5 Stakeholder Analysis and Communication Planning 114

6 Scope Planning 144

7 Scheduling Projects 170

8 Resourcing Projects 208

9 Budgeting Projects 244

10 Project Risk Planning 268

11 Project Quality Planning and Project Kickoff 290

PART 3 Performing Projects

12 Project Supply Chain Management 320

13 Leading and Managing Project Teams 346

14 Determining Project Progress and Results 380

15 Finishing the Project and Realizing the Benefits 420

Appendix A PMP® and CAPM® Exam Prep Suggestions 439 Appendix B Strengths Themes as Used in Project Management (available on the

textbook companion site) Glossary Terms from the PMBOK® Guide 443 Index 451



Project Deliverables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xv About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxii

PART 1 Organizing Projects

CHAPTER 1 Introduction to Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.1 What Is a Project? 4

1.2 History of Project Management 4

1.3 How Can Project Work Be Described? 5 1.3a Projects versus Operations 5 / 1.3b Soft Skills and Hard Skills 5 / 1.3c Authority

and Responsibility 6 / 1.3d Project Life Cycle 6

1.4 Understanding Projects 8 1.4a Project Management Institute 8 / 1.4b Project Management Body of Knowledge

(PMBOK®) 9 / 1.4c Selecting and Prioritizing Projects 10 / 1.4d Project Goals and Constraints 10 / 1.4e Defining Project Success and Failure 11 / 1.4f Using Microsoft Project to Help Plan and Measure Projects 12 / 1.4g Types of Projects 12 / 1.4h Scalability of Project Tools 14

1.5 Project Roles 14 1.5a Project Executive-Level Roles 14 / 1.5b Project Management-Level Roles 14 /

1.5c Scrum Master 15 / 1.5d Project Associate-Level Roles 15

1.6 Overview of the Book 15 1.6a Part 1: Organizing and Initiating Projects 15 / 1.6b Part 2: Planning Projects 17 /

1.6c Part 3: Performing Projects 18

Summary 19

Key Terms from the PMBOK® Guide 19 Chapter Review Questions 20

Discussion Questions 20

PMBOK® Guide Questions 20 Example Project Instructions 21

References 22

Endnotes 22

Project Management in Action: Using Appreciative Inquiry to Understand Project Management 24

CHAPTER 2 Project Selection and Prioritization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

2.1 Strategic Planning Process 28 2.1a Strategic Analysis 28 / 2.1b Guiding Principles 28 / 2.1c Strategic Objectives 31 /

2.1d Flow-Down Objectives 31

2.2 Portfolio Management 31 2.2a Portfolios 32 / 2.2b Programs 32 / 2.2c Projects and Subprojects 33 /

2.2d Assessing an Organization’s Ability to Perform Projects 34 / 2.2e Identifying


Potential Projects 35 / 2.2f Methods for Selecting Projects 36 / 2.2g Using a Cost-Benefit Analysis Model to Select Projects 36 / 2.2h Using a ScoringModel to Select Projects 38 / 2.2i Prioritizing Projects 40 / 2.2j Resourcing Projects 41

2.3 Securing Projects 41 2.3a Identify Potential Project Opportunities 42 / 2.3b Determine Which Opportunities to

Pursue 42 / 2.3c Prepare and Submit a Project Proposal 43 / 2.3d Negotiate to Secure the Project 44

Summary 44

Key Terms from the PMBOK® Guide 45 Chapter Review Questions 45

Discussion Questions 45

PMBOK® Guide Questions 46 Exercises 46

Example Project Instructions 47

References 47

Endnotes 48

Project Management in Action: Prioritizing Projects at D. D. Williamson 49

CHAPTER 3 Organizational Capability: Structure, Culture, and Roles . . . . . . . . . . . . . . . . . . . . . 52

3.1 Types of Organizational Structures 54 3.1a Functional 54 / 3.1b Projectized 55 / 3.1c Matrix 56

3.2 Organizational Culture and Its Impact on Projects 59 3.2a Culture of the Parent Organization 60 / 3.2b Project Cultural Norms 61

3.3 Project Life Cycles 62 3.3a Define-Measure-Analyze-lmprove-Control (DMAIC) Model 62 / 3.3b Research and

Development (R&D) Project Life Cycle Model 62 / 3.3c Construction Project Life Cycle Model 63 / 3.3d Agile Project Life Cycle Model 63

3.4 Agile Project Management 64

3.5 Project Executive Roles 65 3.5a Steering Team 65 / 3.5b Sponsor 66 / 3.5c Customer 67 / 3.5d Chief Projects

Officer/Project Management Office 69

3.6 Project Management Roles 69 3.6a Functional Manager 69 / 3.6b Project Manager 70 / 3.6c Scrum Master 72 /

3.6d Facilitator 72

3.7 Project Team Roles 73 3.7a Core Team Members 73 / 3.7b Subject Matter Experts 74

Summary 74

Key Terms from the PMBOK® Guide 75 Chapter Review Questions 75

Discussion Questions 76

PMBOK® Guide Questions 76 Exercises 77

Example Project Instructions 77

References 77

Endnotes 78

Project Management in Action: Project Leadership Roles at TriHealth 79

Contents v

CHAPTER 4 Chartering Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

4.1 What Is a Project Charter? 84

4.2 Why Is a Project Charter Used? 85

4.3 When Is a Charter Needed? 85

4.4 Typical Elements in a Project Charter 87 4.4a Title 87 / 4.4b Scope Overview 87 / 4.4c Business Case 88 /

4.4d Background 88 / 4.4e Milestone Schedule with Acceptance Criteria 88 / 4.4f Risks, Assumptions, and Constraints 89 / 4.4g Resource Estimates 90 / 4.4h Stakeholder List 90 / 4.4i Team Operating Principles 90 / 4.4j Lessons Learned 91 / 4.4k Signatures and Commitment 91

4.5 Constructing a Project Charter 91 4.5a Scope Overview and Business Case Instructions 91 / 4.5b Background

Instructions 92 / 4.5c Milestone Schedule with Acceptance Criteria Instructions 92 / 4.5d Risks, Assumptions, and Constraints Instructions 95 / 4.5e Resources Needed Instructions 96 / 4.5f Stakeholder List Instructions 97 / 4.5g Team Operating Principles Instructions 97 / 4.5h Lessons Learned Instructions 98 / 4.5i Signatures and Commitment Instructions 98

4.6 Ratifying the Project Charter 99

Satellite Development

4.7 Starting a Project using Microsoft Project 99 4.7a MS Project 2013 Introduction 99 / 4.7b Initialize Microsoft Project 2013 for General

Use 101 / 4.7c Initialize a Project 102 / 4.7d Construct a Milestone Schedule 104

Summary 105

Key Terms from the PMBOK® Guide 105 Chapter Review Questions 105

Discussion Questions 105

PMBOK® Guide Questions 106 Exercises 107

Example Project 107

References 107

Endnotes 108

Project Management in Action: Information Systems Enhancement Project Charter 108

PART 2 Planning Projects

CHAPTER 5 Stakeholder Analysis and Communication Planning . . . . . . . . . . . . . . . . . . . . . . . . . 114

5.1 Develop the Project Management Plan 116

5.2 Identify Stakeholders 119 5.2a Find Stakeholders 119 / 5.2b Analyze Stakeholders 120 / 5.2c Document

Stakeholders 121

5.3 Build Relationships 123 5.3a Relationship Building within the Core Team 124 / 5.3b Relationship Building with

All Other Stakeholders 124

5.4 Plan Communications Management 126 5.4a Purposes of a Project Communications Plan 126 / 5.4b Communications Plan

Considerations 126 / 5.4c Communications Matrix 128 / 5.4d Knowledge Management 129

vi Contents

5.5 Project Meeting Management 130 5.5a Improving Project Meetings 130 / 5.5b Issues Management 132

5.6 Communications Needs of Global and Virtual Project Teams 134 5.6a Virtual Teams 134 / 5.6b Cultural Differences 135 / 5.6c Countries and Project

Communication Preferences 135

5.7 Communications Technologies 136 5.7a Current Technology Types 136

Summary 137

Key Terms from the PMBOK® Guide 137 Chapter Review Questions 137

Discussion Questions 138

PMBOK® Guide Questions 138 Example Project 139

References 139

Endnotes 140

Project Management in Action: Project Communication Planning for a Distributed Project 141

CHAPTER 6 Scope Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

6.1 Plan Scope Management 146

6.2 Collect Requirements 146 6.2a Gather Stakeholder Input 147

6.3 Define Scope 148 6.3a Reasons to Define Scope 148 / 6.3b How to Define Scope 149 / 6.3c How to

Define Scope in Agile Projects 150

6.4 Work Breakdown Structure (WBS) 150 6.4a What Is the WBS? 151 / 6.4b Why Use a WBS? 151 / 6.4c WBS Formats 152 /

6.4d Work Packages 154 / 6.4e How to Construct a WBS 155

6.5 Establish Change Control 158

6.6 Using MS Project for Work Breakdown Structures (WBS) 160 6.6a Set Up the WBS 161

Summary 165

Key Terms from the PMBOK® Guide 166 Chapter Review Questions 166

Discussion Questions 166

Exercises 167

PMBOK® Guide Questions 167 Example Project 168

References 168

Endnotes 168

Project Management in Action: Work Breakdown Structure Template 169

CHAPTER 7 Scheduling Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

7.1 Plan Schedule Management 172

7.2 Purposes of a Project Schedule 173

7.3 Historical Development of Project Schedules 173

Contents vii

7.4 How Project Schedules Are Limited and Created 174

7.5 Define Activities 175

7.6 Sequence Activities 176 7.6a Leads and Lags 179 / 7.6b Alternative Dependencies 180

7.7 Estimate Activity Duration 181 7.7a Problems and Remedies in Duration Estimating 182 / 7.7b Learning Curves 182

7.8 Develop Project Schedules 184 7.8a Two-Pass Method 185 / 7.8b Enumeration Method 189

7.9 Uncertainty in Project Schedules 190 7.9a Program Evaluation and Review Technique 190 / 7.9b Monte Carlo Simulation 191

7.10 Show the Project Schedule on a Gantt Chart 192

7.11 Using Microsoft Project for Critical Path Schedules 193 7.11a Set Up the Project Schedule 194 / 7.11b Build the Logical Network Diagram 196 /

7.11c Understand the Critical Path 199 / 7.11d Display and Print Schedules with MS Project 199

Summary 199

Key Terms from the PMBOK® Guide 200 Chapter Review Questions 200

Discussion Questions 201

Exercises 201

PMBOK® Guide Questions 202 Example Project 203

References 203

Endnotes 204

Project Management in Action: Bank Project Schedule 205

CHAPTER 8 Resourcing Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

8.1 Abilities Needed when Resourcing Projects 210 8.1a The Science and Art of Resourcing Projects 210 / 8.1b Considerations when

Resourcing Projects 210 / 8.1c Activity- versus Resource-Dominated Schedules 211

8.2 Estimate Resource Needs 211

8.3 Plan Human Resource Management 212 8.3a Identify Potential Resources 212 / 8.3b Determine Resource Availability 213 /

8.3c Decide Timing Issues when Resourcing Projects 214

8.4 Project Team Composition Issues 215 8.4a Cross-Functional Teams 215 / 8.4b Co-Located Teams 215 / 8.4c Virtual

Teams 215 / 8.4d Outsourcing 215

8.5 Assign a Resource to Each Activity 216 8.5a Show Resource Responsibilities on RACI Chart 216 / 8.5b Show Resource

Assignments on Gantt Chart 216 / 8.5c Summarize Resource Responsibilities by Time Period with Histogram 218

8.6 Dealing with Resource Overloads 219 8.6a Methods of Resolving Resource Overloads 219

8.7 Compress the Project Schedule 222 8.7a Actions to Reduce the Critical Path 222 / 8.7b Crashing 223 / 8.7c Fast

Tracking 226

viii Contents

8.8 Alternative Scheduling Methods 227 8.8a Critical Chain Project Management (CCPM) 227 / 8.8b Reverse Phase

Schedules 228 / 8.8c Rolling Wave Planning 228 / 8.8d Agile Project Planning 229 / 8.8e Auto/Manual Scheduling 229

8.9 Using MS Project for Resource Allocation 229 8.9a Step 1: Defining Resources 229 / 8.9b Setting Up a Resource Calendar 231 /

8.9c Step 2: Assigning Resources 231 / 8.9d Step 3: Finding Overallocated Resources 233 / 8.9e Step 4: Dealing with Overallocations 235

Summary 236

Key Terms from the PMBOK® Guide 237 Chapter Review Questions 237

Discussion Questions 237

Exercises 238

PMBOK® Guide Questions 238 Example Project 239

References 239

Endnotes 240

Project Management in Action: Managing Software Development with Agile Methods and Scrum 240

CHAPTER 9 Budgeting Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

9.1 Plan Cost Management 246

9.2 Estimate Cost 246 9.2a Types of Cost 247 / 9.2b Accuracy and Timing of Cost Estimates 250 /

9.2c Methods of Estimating Costs 251 / 9.2d Project Cost Estimating Issues 253

9.3 Determine Budget 256 9.3a Aggregating Costs 257 / 9.3b Analyzing Reserve Needs 258 / 9.3c Determining

Cash Flow 258

9.4 Establishing Cost Control 259

9.5 Using MS Project for Project Budgets 260 9.5a Develop Bottom-Up Project Budget 260 / 9.5b Develop Summary Project

Budget 261

Summary 263

Key Terms from the PMBOK® Guide 263 Chapter Review Questions 263

Discussion Questions 263

Exercises 264

PMBOK® Guide Questions 264 Example Project 265

References 265

Endnotes 266

Project Management in Action: The Value of Budget Optimization 266

CHAPTER 10 Project Risk Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268

10.1 Plan Risk Management 270 10.1a Roles and Responsibilities 272 / 10.1b Categories and Definitions 272

Contents ix

10.2 Identify Risks 275 10.2a Information Gathering 275 / 10.2b Reviews 275 / 10.2c Understanding

Relationships 276 / 10.2d Risk Register 276

10.3 Risk Analysis 277 10.3a Perform Qualitative Risk Analysis 277 / 10.3b Perform Quantitative Risk

Analysis 280 / 10.3c Risk Register Updates 280

10.4 Plan Risk Responses 281 10.4a Strategies for Responding to Risks 281 / 10.4b Risk Register Updates 283

Summary 284

Key Terms from the PMBOK® Guide 284 Chapter Review Questions 284

Discussion Questions 285

Exercises 285

PMBOK® Guide Questions 285 Example Project 286

References 287

Endnotes 287

Project Management in Action: Risk Management on a Satellite Development Project 288

CHAPTER 11 Project Quality Planning and Project Kickoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

Quality and Risk 291

11.1 Development of Contemporary Quality Concepts 292 11.1a Quality Gurus 292 / 11.1b Total Quality Management/Malcolm Baldrige 293 /

11.1c ISO 9001:2008 293 / 11.1d Lean Six Sigma 295

11.2 Core Project Quality Concepts 296 11.2a Stakeholder Satisfaction 296 / 11.2b Process Management 297 / 11.2c Fact-Based

Management 299 / 11.2d Empowered Performance 301 / 11.2e Summary of Core Concepts 302

11.3 Plan Quality Management 302 11.3a Quality Policy 303 / 11.3b Quality Management Plan Contents 305 /

11.3c Quality Baseline 305 / 11.3d Process Improvement Plan 305 / 11.3e Quality Assurance 305 / 11.3f Control Quality 306

11.4 Project Quality Tools 306

11.5 Develop Project Management Plan 306 11.5a Resolve Conflicts 307 / 11.5b Establish Configuration Management 308 /

11.5c Apply Sanity Tests to All Project Plans 308

11.6 Kickoff Project 308 11.6a Preconditions to Meeting Success 309 / 11.6b Meeting Activities 309

11.7 Baseline and Communicate Project Management Plan 309

11.8 Using MS Project for Project Baselines 311 11.8a Baseline the Project Plan 311 / 11.8b First Time Baseline 312 / 11.8c Subsequent

Baselines 312

Summary 312

Key Terms from the PMBOK® Guide 313 Chapter Review Questions 313

Discussion Questions 314

Exercises 314

PMBOK® Guide Questions 314

x Contents

Example Project 315

References 316

Endnotes 316

Project Management in Action: Quality Planning at GTC 317

PART 3 Performing Projects

CHAPTER 12 Project Supply Chain Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

12.1 Introduction to Project Supply Chain Management 322 12.1a SCM Components 323 / 12.1b SCM Factors 323 / 12.1c SCM Decisions 324 /

12.1d Project Procurement Management Processes 324

12.2 Plan Procurement Management 324 12.2a Outputs of Planning 325 / 12.2b Make-or-Buy Decisions 325

12.3 Conduct Procurements 327 12.3a Sources for Potential Suppliers 327 / 12.3b Information for Potential Suppliers 327 /

12.3c Approaches Used When Evaluating Prospective Suppliers 328 / 12.3d Supplier Selection 329

12.4 Contract Types 331 12.4a Fixed-Price Contracts 331 / 12.4b Cost-Reimbursable Contracts 332 /

12.4c Time and Material (T&M) Contracts 333

12.5 Control Procurements 334

12.6 Improving Project Supply Chains 334 12.6a Project Partnering and Collaboration 334 / 12.6b Third Parties 338 / 12.6c Lean

Purchasing 338 / 12.6d Sourcing 338 / 12.6e Logistics 339 / 12.6f Information 339

Summary 339

Key Terms from the PMBOK® Guide 340 Chapter Review Questions 340

Discussion Questions 340

PMBOK® Guide Questions 341 Exercises 341

Example Project 342

References 342

Endnotes 343

Project Management in Action: Implications for Project Management in a Networked Organization Model 343

CHAPTER 13 Leading and Managing Project Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346

13.1 Acquire Project Team 348 13.1a Preassignment of Project Team Members 348 / 13.1b Negotiation for Project Team

Members 349 / 13.1c On-Boarding Project Team Members 350

13.2 Develop Project Team 350 13.2a Stages of Project Team Development 351 / 13.2b Characteristics of High-Performing

Project Teams 353 / 13.2c Assessing Individual Member Capability 355 / 13.2d Assessing Project Team Capability 355 / 13.2e Building Individual and Project Team Capability 358 / 13.2f Establishing Project Team Ground Rules 360

Contents xi

13.3 Manage Project Team 364 13.3a Project Manager Power and Leadership 364 / 13.3b Assessing Performance of

Individuals and Project Teams 366 / 13.3c Project Team Management Outcomes 366

13.4 Manage and Control Stakeholder Engagement 367

13.5 Managing Project Conflicts 369 13.5a Sources of Project Conflict 369 / 13.5b Conflict Resolution Process and Styles 370 /

13.5c Negotiation 371

Summary 372

Key Terms from the PMBOK® Guide 373 Chapter Review Questions 373

Discussion Questions 374

PMBOK® Guide Questions 374 Example Project 375

References 375

Endnotes 376

Project Management in Action: Centralizing Planning and Control in a Large Company After Many Acquisitions 377

CHAPTER 14 Determining Project Progress and Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380

14.1 Project Balanced Scorecard Approach 382

14.2 Internal Project Issues 383 14.2a Direct and Manage Project Work 383 / 14.2b Monitor and Control Project

Work 385 / 14.2c Monitoring and Controlling Project Risk 387 / 14.2d Manage Communications 388 / 14.2e Control Communications 391

14.3 Customer Issues 392 14.3a Perform Quality Assurance 392 / 14.3b Control Quality 393

14.4 Financial Issues 400 14.4a Control Scope 400 / 14.4b Control Schedule and Costs 401 / 14.4c Earned Value

Management for Controlling Schedule and Costs 401

14.5 Using MS Project to Monitor and Control Projects 405 14.5a What Makes a Schedule Useful? 405 / 14.5b How MS Project Recalculates the

Schedule Based on Reported Actuals 405 / 14.5c Current and Future Impacts of Time and Cost Variance 406 / 14.5d Define the Performance Update Process 406 / 14.5e Steps to Update the Project Schedule 406

14.6 Replanning if Necessary 410

Summary 411

Key Terms from the PMBOK® Guide 412 Chapter Review Questions 412

Discussion Questions 412

PMBOK® Guide Questions 413 Exercises 414

Example Project 415

References 415

Endnotes 416

Project Management in Action: Controlling, Monitoring, and Reporting Projects at a Major Medical Center 416

xii Contents

CHAPTER 15 Finishing the Project and Realizing the Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420

15.1 Validate Scope 422

15.2 Close Procurements 424 15.2a Terminate Projects Early 424

15.3 Close Project 425 15.3a Write Transition Plan 425 / 15.3b Knowledge Management 426 / 15.3c Create

the Closeout Report 430

15.4 Post-Project Activities 430 15.4a Reassign Workers 430 / 15.4b Celebrate Success and Reward Participants 430 /

15.4c Provide Ongoing Support 431 / 15.4d Ensure Project Benefits Are Realized 431

15.5 Using MS Project for Project Closure 431

Summary 432

Key Terms from the PMBOK® Guide 432 Chapter Review Questions 432

Discussion Questions 433

PMBOK® Guide Questions 433 Exercises 434

Example Project 434

References 434

Endnotes 435

Project Management in Action: The Power of Lessons Learned 436

Appendix A PMP® and CAPM® Exam Prep Suggestions . . . . . . . . . . . . . . . . . . . . . . . 439 Appendix B Strengths Themes as Used in Project Management (available on the

textbook companion site) Glossary Terms from the PMBOK® Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451


Project Customer Tradeoff Matrix 1

Project Success Definition 1

Project SWOT Analysis 2

Project Elevator Pitch 2

Project Selection/Prioritization 2

Project Resource Assignment 2

Project Source Selection 2

Project Charter 4

Stakeholder Prioritization 5

Stakeholder Register 5

Project Communications Matrix 5

Project Meeting Agenda 5

Project Meeting Minutes 5

Contents xiii


Project Issues Log 5

Project Meeting Evaluation 5

Project Requirements Traceability Matrix 6

Project Scope Statement 6

Work Breakdown Structure 6

Change Request 6

Activity List 7

Network-Based Schedule 7

Gantt Chart Schedule 7

Project RACI Chart 8

Resource Histogram for Resolving Overloads 8

Project Crashing 8

Project Budget Aggregation 9

Project Risk Register 10

Project SIPOC 11

Project Quality Plan 11

Project Supplier Selection 12

Project Member Assessment 13

Project Team Assessment 13

Project Progress Report 14

Earned Value Analysis 14

Project Customer Feedback 15

xiv Contents


While project managers today still need to use many techniques that have stood the test of twenty to fifty years, they increasingly also need to understand the business need for a project, sort through multiple conflicting stakeholder demands, and know how to deal with rapid change, a myriad of communication issues, global and virtual project teams, modern approaches to quality improvement, and many other issues that are more chal- lenging than in projects of previous times.

Contemporary project management utilizes the tried-and-true project management techniques along with modern improvements such as the most current versions of Microsoft® Project Professional 2013 and the fifth edition of the Guide to the Project Management Body of Knowledge (PMBOK® Guide). Contemporary project management also uses many tools and understandings that come from modern approaches to quality and communications, expanded role definitions, leadership principles, human strengths, agile planning and execution, and many other sources. Contemporary project manage- ment is scalable, using simple versions of important techniques on small projects and more involved versions on more complex projects.

Distinctive Approach This book covers the topics of contemporary project management. It was also developed using contemporary project management methods. For example, when considering the topic of dealing with multiple stakeholders, every chapter was reviewed by students, practitioners, and academics. This allowed student learning, practitioner realism, and ac- ademic research and teaching perspectives to be simultaneously considered.

The practical examples and practitioner reviewers came from many industries and from many sizes and types of projects to promote the scalability and universality of con- temporary project management techniques.

New to This Edition

• Agile approach. The agile approach to project planning and management in which planning and implementing are done incrementally is introduced in Chapter 1. Throughout the book when the agile approach is different from the traditional, a margin icon and alternate color print are used to emphasize the difference. In this book’s contemporary approach to project management in practice, agile and tradi- tional are both used extensively.

• Updated to reflect the fifth edition of the PMBOK® Guide. All fifth edition PMBOK® Guide knowledge areas and processes are specifically included. The end of each chapter now contains ten PMBOK® Guide-type questions that are typical of what would be seen on PMP® and CAPM® exams. Appendix A gives study suggestions for the CAPM® and PMP® exams.

• New examples throughout the text. Each chapter starts with a motivating example for why the student would want to read the chapter and ends with an example of how a company actually used some tools and/or concepts from the chapter. There are many smaller examples throughout each chapter that illustrate specific points. Many of these are new examples from around the world and from many different industries such as the Fiesta® San Antonio Commission (Texas) and an IT rollout


within a system of regional schools in Germany (Chapter 5); the rollout of a project management tool to a South African banking group (Chapter 7); the Panama Canal expansion (Chapter 10); the determination of supplier ratings at General Tool Company in Ohio (Chapter 11); and the control, monitoring, and reporting of projects at Cincinnati Children’s Hospital Medical Center (Chapter 14).

• Microsoft® Project Professional 2013 fully integrated into the fabric of eight chapters. Though techniques are demonstrated in a by-hand fashion, a demonstra- tion of how to automate them using Microsoft® Project Professional 2013 is shown in a step-by-step manner with numerous screen captures. On all screen captures, critical path activities are shown in contrasting color for emphasis.

• Project deliverables. A list of project deliverables that can be used for students assignments are included after the expanded table of contents. Many instructors may choose some but not all of these depending on class organization.

• Templates. Electronic templates for many of the techniques (student deliverables) are available on the textbook companion website. These Microsoft® Word and Excel documents can be downloaded and filled in for ease of student learning and for consistency of instructor grading.

Distinctive Features • PMBOK® Guide approach. This consistency with the established standard gives

students a significant leg up if they decide to become certified Project Management Professionals (PMPs®) or Certified Associates in Project Management (CAPMs®). All glossary definitions are from the PMBOK® Guide.

• Actual project as learning vehicle. One section at the end of each chapter lists deliverables for students to create (in teams or individually) for a real project. These assignments have been refined over the last decade while working with the local PMI® chapter, which provides a panel of PMP® judges to evaluate projects from a practical point of view. Students are encouraged to keep clean copies of all deliver- ables so they can demonstrate their project skills in job interviews. A listing of these deliverables is included after the detailed table of contents.

• Student oriented, measurable learning objectives. Each chapter begins with a listing of the most important points students should learn and identifies the PMBOK® topics covered in the chapter. The chapter material, end-of-chapter questions and problems, PowerPoint® slides, and test questions have all been updated to correlate to specific objectives.

• Blend of classical and modern methods. Proven methods developed over the past half century are combined with exciting new methods that are emerging from both industry and research.

• Executive, managerial, and associate roles. This book covers the responsibilities of many individuals who can have an impact on projects so aspiring project managers can understand not only their own roles, but also those of people with whom they need to deal.

• Balanced scorecard approach. Many factors are included in how project success is measured and how project results are determined. An adaptation of the balanced scorecard helps students understand how these fit together.

• Integrated example project. An example project has been developed to demonstrate many of the techniques throughout the book. That way students can see how the various project planning and control tools develop and work together.

xvi Preface

Organization of Topics The book is divided into three major parts. Part 1, Organizing Projects, deals with both the environment in which projects are conducted and getting a project officially approved.

• Chapter 1 introduces contemporary project management by first tracing the history of project management, then discussing what makes a project different from an ongoing operation. Various frameworks that help one understand projects—such as the PMBOK® Guide—are introduced, as well as the executive-, managerial-, and associate-level roles.

• Chapter 2 discusses how projects support and are an outgrowth of strategic plan- ning, how a portfolio of projects is selected and prioritized, how a client company selects a contractor company to conduct a project, and how a contractor company secures project opportunities from client companies.

• Chapter 3 deals with organizational capability issues of structure, life cycle, culture, and roles. The choices parent organizations make in each of these provide both opportunities and limitations to how projects can be conducted.

• Chapter 4 presents project charters in a step-by-step fashion. Short, powerful char- ters help all key participants to develop a common understanding of all key project issues and components at a high level and then to formally commit to the project. Charters have become nearly universal in initiating projects in recent years. Micro- soft® Project Professional 2013 is used to show milestone schedules within charters.

Part 2, Planning Projects, deals with all aspects of project planning as defined in the PMBOK® Guide. • Chapter 5 introduces methods for understanding and prioritizing various stake-

holder demands and for building constructive relationships with stakeholders. Since many projects are less successful than desired due to poor communications, detailed communication planning techniques are introduced along with meeting management.

• Chapter 6 helps students understand how to determine the amount of work the project entails. Specifically covered are methods for determining the scope of both the project work and outputs, the work breakdown structure (WBS) that is used to ensure nothing is left out, and how the WBS is portrayed using Microsoft® Project Professional 2013.

• Chapter 7 is the first scheduling chapter. It shows how to schedule activities by identifying, sequencing, and estimating the durations for each activity. Then critical path project schedules are developed, methods are shown for dealing with uncer- tainty in time estimates, Gantt charts are introduced for easier communications, and Microsoft® Project Professional 2013 is used to automate the schedule development and communications.

• Chapter 8 is the second scheduling chapter. Once the critical path schedule is de- termined, staff management plans are developed, project team composition issues are considered, resources are assigned to activities, and resource overloads are iden- tified and handled. Schedule compression techniques of crashing and fast tracking are demonstrated and multiple alternative scheduling techniques including Agile are introduced. Resource scheduling is demonstrated with Microsoft® Project Profes- sional 2013.

• Chapter 9 deals with project budgeting. Estimating cost, budgeting cost, and establishing cost controls are demonstrated. Microsoft® Project Professional 2013 is used for developing both bottom-up and summary project budgets.

Preface xvii

• Chapter 10 demonstrates project risk planning. It includes risk management plan- ning methods for identifying risks, establishing a risk register, qualitatively analyzing risks for probability and impact, quantitatively analyzing risks if needed, and decid- ing how to respond to each risk with contingency plans for major risks and aware- ness for minor risks.

• Chapter 11 starts by covering project quality planning. This includes explaining the development of modern quality concepts and how they distill into core project quality demands. Then the chapter covers how to develop a project quality plan and how to utilize the simple project quality tools. It then ties all of the planning chap- ters together with discussions of a project kick-off meeting, a baselined project plan, and the ways Microsoft® Project Professional 2013 can be used to establish and maintain the baseline.

Part 3, Performing Projects, discusses the various aspects that must be managed simultaneously while the project is being conducted.

• Chapter 12 deals with project supply chain management issues. Some of these issues, such as developing the procurement management plan, qualifying and selecting vendors, and determining the type of contract to use are planning issues, but for simplicity they are covered in one chapter with sections on how to conduct and control procurements and to improve the project supply chain.

• Chapter 13 deals with leading and managing both the project team and stakeholders. It includes acquiring and developing the project team, assessing both potential and actual performance of team members and the team as a whole, various types of power a project manager can use, and how to deal productively with project conflict.

• Chapter 14 is concerned with determining project results. This chapter starts with a balanced scorecard approach to controlling projects. Internal project issues covered include risk, change, and communication. Quality is the customer issue. Financial issues are scope, cost, and schedule, including how to use Microsoft® Project Pro- fessional 2013 for control.

• Chapter 15 deals with how to end a project—either early or on time. Included are validating to ensure all scope is complete, formally closing procurements and the project, knowledge management, and ensuring the project participants are rewarded and the clients have the support they need to realize intended benefits when using the project deliverables.

Instructor Resources To access the instructor resources go to www.cengage.com/login, log in with your faculty account username and password, and use ISBN 9781285433356 to search for and to add instructor resources to your account. Key support materials—instructor’s manual with solutions, test bank, data set solutions, regular and exhibit-only Power- Point® presentations—provide instructors with a comprehensive capability for customizing their classroom experience. All student resources are also available on the instructor companion site.

• Instructor’s Manual with Solutions. Prepared by Tim Kloppenborg and based on his years of experience facilitating the student learning experience in his own project management classes (undergraduate, MBA, hybrid, and continuing education on six continents), each chapter of the instructor’s manual includes an overview of learning objectives, detailed chapter outlines, teaching recommendations, and many detailed suggestions for implementing community-based projects into your project management class. Solutions are also provided for all of the end-of-chapter content.

xviii Preface

• Microsoft® Word Test Bank. Prepared for this edition by Joyce D. Brown, PMP® and Thomas F. McCabe, PMP® of the University of Connecticut, this compre- hensive test bank builds upon the original test bank created by Kevin Grant of the University of Texas at San Antonio. The test bank is organized around each chapter’s learning objectives. All test questions are consistent with the PMBOK®. Every test item is labeled according to its difficulty level and the major topical heading within the textbook that it relates to, allowing instructors to quickly construct effective tests that emphasize the concepts most significant for their courses. The test bank includes true/false, multiple choice, essay, and quantitative problems for each chapter. All question content is now tagged according to Tier I (Business Program Interdisciplinary Learning Outcomes), Bloom’s Taxonomy, and difficulty level.

• Cognero™ Test Bank. Cengage Learning Testing Powered by Cognero™ is a flexi- ble, online system that allows you to author, edit, and manage test bank content from multiple Cengage Learning solutions; create multiple test versions in an instant; deliver tests from your LMS, your classroom, or wherever you want. The Cognero™ test bank contains the same questions that are in the Microsoft® Word test bank.

• PowerPoint Presentation. Prepared by Deborah Tesch of Xavier University, the PowerPoint presentations provide comprehensive coverage of each chapter’s essential concepts in a clean, concise format. Key exhibits from the textbook are also included as an exhibit-only presentation to enhance in-class illustration and discussion of important concepts. Instructors can easily customize the PowerPoint presentation to better fit the needs of their classroom.

Student Resources Students can access the following resources by going to www.cengagebrain.com and searching 9781285433356

• Student Data Sets. The data sets contain Excel data that is used in the completion of select end-of-chapter problems. There are also templates in Word and Excel for completing various project planning and control tools.

• Other Project Management Resources. Additional material on the website includes definitions of strengths written from a project management perspective as assessed by Gallup’s StrengthsFinder assessment and classic examples that were used in previous editions of this text.

Acknowledgments A book-writing project depends on many people. Through the last three decades of project work I have been privileged to learn from thousands of people including students, faculty members, co-trainers, co-consultants, co-judges, clients, research partners, and others. Hundreds of individuals who have provided help in research and developing teaching methods are members of the Southwest Ohio and Miami Valley chapters of the Project Management Institute and of the Cincinnati and Louisville sections of the Center for Quality of Management. Many individuals have provided wonderful examples and those who wish to be acknowledged are named with their contributions.

I also want to acknowledge the wonderful help of various professionals at Cengage Learning including Clara Goosman (Product Manager), Kendra Brown (Content Devel- oper), and Chris Valentine (Media Developer). I also want to thank Charles McCormick,

Preface xix

Jr., retired Senior Acquisitions Editor, for his extensive help and guidance on the first and second editions of Contemporary Project Management.

Other individuals who have provided significant content are Lynn Frock, PMP®, of Lynn Frock and Company, who provided the Microsoft® Project material, Debbie Tesch of Xavier University, who provided the PowerPoint slides, Joyce D. Brown, PMP® and Thomas F. McCabe, PMP® of University of Connecticut, who revised the test bank and provided addi- tional PMBOK® questions to each chapter, and Kathryn N. Wells, Independent Consultant, CAPM® who provided the Chapter Review and Discussion Questions.

Special thanks are also due to all of the people whose feedback and suggestions have shaped this edition of Contemporary Project Management as well as the previous two editions:

Carol Abbott, Fusion Alliance, Inc.

Stephen Allen, Truman State University

Vittal Anantatmula, Western Carolina University

Loretta Beavers, Southwest Virginia Community College

Shari Bleure, Skyline Chili

Reynold Byers, Arizona State University

John Cain, Viox Services

Robert Clarkson, Davenport University

Nancy Cornell, Northeastern University

Steve Creason, Metropolitan State University

Jacob J. Dell, University of Texas at San Antonio

Scott Dellana, East Carolina University

Maling Ebrahimpour, Roger Williams University

Jeff Flynn, ILSCO Corporation

Jim Ford, University of Delaware

Lynn Frock, Lynn Frock & Company

Lei Fu, Hefei University of Technology

Patricia Galdeen, Lourdes University

Kathleen Gallon, Christ Hospital

Paul Gentine, Bethany College

Kevin P. Grant, University of Texas–San Antonio

Joseph Griffin, Northeastern University

Raye Guye, ILSCO Corporation

William M. Hayden Jr., University at Buffalo

Sarai Hedges, University of Cincinnati

Marco Hernandez, Dantes Canadian

Bill Holt, North Seattle Community College

Sonya Hsu, University of Louisiana Lafayette

Paul Hudec, Milwaukee School of Engineering

Anil B. Jambekar, Michigan Technological University

Dana Johnson, Michigan Technological University

Robert Judge, San Diego State University

xx Preface

David L. Keeney, Stevens Institute of Technology

George Kenyon, Lamar University

Naomi Kinney, MultiLingual Learning Services

Paul Kling, Duke Energy

Matthew Korpusik, Six Sigma Black Belt

Sal Kukalis, California State University—Long Beach

Young Hoon Kwak, George Washington University

Laurence J. Laning, Procter & Gamble

Dick Larkin, Central Washington University

Lydia Lavigne, Ball Aerospace

James Leaman, Eastern Mennonite University

Claudia Levi, Edmonds Community College

Marvette Limon, University of Houston Downtown

John S. Loucks, St. Edward’s University

Diane Lucas, Penn State University– DuBois Campus

S. G. Marlow, California State Polytechnic University

Daniel S. Marrone, SUNY Farmingdale State College

Chris McCale, Regis University

Abe Meilich, Walden University

Bruce Miller, Xavier Leadership Center

Ali Mir, William Paterson University

William Moylan, Eastern Michigan University

Warren Opfer, Life Science Services International

Peerasit Patanakul, Stevens Institute of Technology

Joseph Petrick, Wright State University

Kenneth R. Pflieger, Potomac College

Charles K. Pickar, Johns Hopkins University

Chris Rawlings, Bob Jones University

Natalee Regal, Procter & Gamble

Pedro Reyes, Baylor University

Linda Ridlon, Center for Quality of Management, Division of GOAL/QPC

David Schmitz, Milwaukee School of Engineering

Sheryl R. Schoenacher, SUNY Farmingdale State College

Jan Sepate, Kimberly Clark

Patrick Sepate, Summitqwest Inc.

William R. Sherrard, San Diego State University

Brian M. Smith, Eastern University

Kimberlee D. Snyder, Winona State University

Siti Arshad-Snyder, Clarkson College

Rachana Thariani, Atos-Origin

Nate Tucker, Lee University

Guy Turner, Castellini Company

Jayashree Venkatraman, Microsoft Corporation

Nathan Washington, Southwest Tennessee Community College

Kathryn N. Wells

And I especially want to thank my family members for their love and support: Bet, Kate Noel, Nick, and Andy.

—Timothy J. Kloppenborg

Preface xxi

About the Author

Timothy J. Kloppenborg is a Castellini Distinguished Professor of Management at Williams College of Business, Xavier University. He previously held faculty positions at University of North Carolina Charlotte and Air Force Institute of Technology and has worked temporarily at Southern Cross University and Tecnológico de Monterrey. He has over 100 publications including Strategic Leadership of Portfolio and Project Manage- ment, Project Leadership and Managing Project Quality. His articles have appeared in Project Management Journal, Journal of Management Education, Journal of General Management, SAM Advanced Management Journal, Information Systems Education Jour- nal, Journal of Managerial Issues, Quality Progress, Management Research News, and Journal of Small Business Strategy. Tim has been active with Project Management Insti- tute for 30 years and a PMP® since 1991. He is a retired U.S. Air Force Reserve officer who served in transportation, procurement, and quality assurance. Dr. Kloppenborg has worked with over 150 volunteer organizations, many directly and others through super- vising student projects. He has hands-on and consulting project management experience on six continents in construction, information systems, research and development, and quality improvement projects with organizations such Duke Energy, Ernst and Young LLP, Greater Cincinnati Water Works, Kroger, Procter and Gamble, TriHealth, and Texas Children’s Hospital. Dr. Kloppenborg has developed and delivered innovative cor- porate training, undergraduate, MBA, and Executive MBA classes in project manage- ment, leadership, teamwork, and quality improvement and he teaches PMP Prep classes. He holds a B.S. in business administration from Benedictine College, an MBA from Western Illinois University, and a Ph.D. in Operations Management from Univer- sity of Cincinnati.


PART1 ORGANIZING PROJECTS organize / plan / perform

Chapter 1 Introduction to Project Management

Chapter 2 Project Selection and Prioritization

Chapter 3 Organizational Capability: Structure, Culture, and Roles

Chapter 4 Chartering Projects


CHA P T E R 1 Introduction to Project Management

I have returned from a successful climb of Mt. Aconcagua in Argentina; at 22,841 feet, it is the highest peak in the world outside of the Himalayas. While there, seven other climbers died; we not only survived, but our experience was so positive that we have partnered to climb together again.

During the three decades that I’ve been climbing mountains, I’ve also been managing projects. An element has emerged as essential for success in both of these activities: the element of discipline. By discipline, I am referring to doing what I already know needs to be done. Without this attribute, even the most knowledgeable and experienced will have difficulty avoiding failure.

The deaths on Aconcagua are an extreme example of the consequences associated with a lack of discipline. The unfortunate climbers, who knew that the predicted storms would produce very hazardous conditions, decided to attempt the summit instead of waiting. They did not have the discipline that


After completing this chapter, you should be able to:

• Define a project in your own words, using characteristics that are common to most projects, and describe reasons why more organizations are using project management.

• Describe major activities and deliverables at each project life cycle stage.

• List and define the ten knowledge areas and five process groups of the project management body of knowledge (PMBOK®).

• Delineate measures of project success and failure, and reasons for both.

• Contrast predictive or plan-driven and adaptive or change- driven project life cycle approaches.

• Identify project roles and distinguish key responsibilities for each.

© Pr es sm

as te r/S

hu tte rs to ck .c om



• Project management introduction

• Project life cycle

• Stakeholders

• Project management processes

we demonstrated to act on our earlier decision to curtail summit attempts after the agreed-to turn-around time or in severe weather.

I’ve experienced similar circumstances in project management. Often I have found myself under pressure to cast aside or shortcut project management practices that I have come to rely on. For me, these practices have become the pillars of my own project management discipline. One of these pillars, planning, seems to be particularly susceptible to challenge. Managing projects at the Central Intelligence Agency for three decades, I adjusted to the annual cycle for obtaining funding. This cycle occasionally involved being given relatively short notice near the end of the year that funds unspent by some other department were up for grabs to whoever could quickly make a convincing business case. While some may interpret this as a circumstance requiring shortcutting the necessary amount of planning in order to capture some of the briefly available funds, I understood that my discipline required me to find a way to do the needed planning and to act quickly. I understood that to do otherwise would likely propel me toward becoming one of the two-thirds of the projects identified by the Standish Group in their 2009 CHAOS report as not successful. I understood that the top 2 percent of project managers, referred to as Alpha Project Managers in a 2006 book of the same name, spend twice as much time planning as the other 98 percent of project managers. The approach that I took allowed me to maintain the discipline for my planning pillar. I preplanned a couple of projects and had them ready at the end of the year to be submitted should a momentary funding opportunity arise.

A key to success in project management, as well as in mountain climbing, is to identify the pillars that will be practiced with discipline. This book offers an excellent set of project management methods from which we can identify those pillars that we will decide to practice with the required levels of discipline. I believe that project management is about applying common sense with uncommon discipline.

Michael O’Brochta, PMP, founder of Zozer Inc. and previously senior project manager at the Central Intelligence Agency


PMBOK® Guide

1-1 What Is a Project? Frequently, a business is faced with making a change, such as improving an existing work process, constructing a building, installing a new computer system, merging with another company, moving to a new location, developing a new product, entering a new market, and so on. These changes are best planned and managed as projects. So, what is a project?

A project is “a temporary endeavor undertaken to create a unique product, service, or result.”1 A project requires an organized set of work efforts that are planned in a level of detail that is progressively elaborated upon as more information is discovered. Projects are subject to limitations of time and resources such as money and people. Projects should follow a planned and organized approach with a defined beginning and ending. Project plans and goals become more specific as early work is completed. The output often is a collection of a primary deliverable along with sup- porting deliverables such as a house as the primary deliverable and warrantees and instructions for use as supporting deliverables. Each project typically has a unique combination of stakeholders—“an individual, group, or organization who may affect, be affected by, or perceive itself to be affected by a decision, activity, or outcome of a project.”2 Projects often require a variety of people to work together for a limited time, and all participants need to understand that completing the project will require effort in addition to their other assigned work.

Project management is “the application of knowledge, skills, tools and techniques to project activities to meet project requirements.”3 This includes work processes that initi- ate, plan, execute, control, and close work. During these processes, tradeoffs must be made among the following factors:

• Scope (size) • Schedule • Quality (acceptability of the results) • Resources • Cost • Risks4

When project managers successfully make these tradeoffs, the project results meet the agreed upon requirements, are useful to the customers, and promote the organization. Project management includes both administrative tasks for planning, documenting, and controlling work and leadership tasks for visioning, motivating, and promoting work associates. Project management knowledge, skills, and methods can be applied and modified for most projects regardless of size or application.

1-2 History of Project Management Projects of all sizes have been undertaken throughout history. Early construction projects included the ancient pyramids, medieval cathedrals, and Indian cities and pueblos. Other large early projects involved waging wars and building empires. In the development of the United States, projects included laying railroads, developing farms, and building cities. Many smaller projects have consisted of building houses and starting businesses. Throughout most of history, projects were conducted, but there was very little systematic planning and control. Some early projects were accomplished at great human and financial cost. Others took exceedingly long periods of time to complete.

Project management eventually emerged as a formal discipline to be studied and prac- ticed. In the 1950s and 1960s, techniques for planning and controlling schedules and costs were developed, primarily on huge aerospace and construction projects. During this time, project management primarily involved determining project schedules based

4 Part 1 Organizing Projects

on understanding the order in which work activities had to be completed. Many large manufacturing, research and development, government, and construction projects used and refined management techniques. In the 1980s and 1990s, several software companies offered ever more powerful and easier ways to plan and control project costs and sche- dules. Risk management techniques that were originally developed on complex projects have increasingly been applied in a simplified form to less complex projects.

In the last few years, people have realized more and more that communication and leadership play major roles in project success. Rapid growth and changes in the informa- tion technology and telecommunications industries especially have fueled massive growth in the use of project management in the 1990s and early 2000s. People engaged in banking, insurance, retailing, hospital administration, and many other service industries are now turning to project management to help them plan and manage efforts to meet their unique demands. Project planning and management techniques that were originally developed for large, complex projects can be modified and used to better plan and manage smaller pro- jects. Now project management is commonly used on projects of many sizes and types in a wide variety of manufacturing, government, service, and nonprofit organizations.

The use of project management has grown quite rapidly and is likely to continue growing. With increased international competition, customers demand to have their pro- ducts and services developed and delivered better, faster, and cheaper. Because project management techniques are designed to manage scope, quality, cost, and schedule, they are ideally suited to this purpose.

1-3 How Can Project Work Be Described? Project work can be described in the following ways:

• Projects are temporary and unique while other work, commonly called operations, is more continuous.

• Project managers need certain “soft skills” and “hard skills” to be effective. • Project managers frequently have more responsibility than authority. • Projects go through predictable stages called a life cycle.

1-3a Projects versus Operations All work can be described as fitting into one of two types: projects or operations. Projects as stated above are temporary, and no two are identical. Some projects may be extremely different from any other work an organization has performed up to that time, such as planning a merger with another company. Other projects may have both routine and unique aspects such as building a house. Operations, on the other hand, consist of the ongoing work needed to ensure that an organization continues to function effectively. Operations managers can often use checklists to guide much of their work. Project man- agers can use project management methods to help determine what to do, but they rarely have checklists that identify all of the activities they need to accomplish. Some work may be difficult to classify as totally project or totally operations. However, if project manage- ment methods and concepts help one to better plan and manage work, it does not really matter how the work is classified.

1-3b Soft Skills and Hard Skills To effectively manage and lead in a project environment, a person needs to develop both “soft” and “hard” skills. Soft skills include communication and leadership activ- ities. Hard skills can include risk analysis, quality control, scheduling, budgeting, and

Chapter 1 Introduction to Project Management 5

so forth. Soft and hard skills go hand in hand. Some people have a stronger natural ability and a better comfort level in one or the other, but to be successful as a proj- ect manager a person needs to develop both along the judgment about when each is needed. A wise project manager may purposefully recruit an assistant that excels in his area of weakness. Training, experience, and mentoring can also be instrumental in developing necessary skills.

1-3c Authority and Responsibility A project manager will frequently be held accountable for work that she cannot or- der people to perform. Projects are most effectively managed with one person being assigned accountability. However, that person often needs to negotiate with a func- tional manager, who is “someone with management authority over an organizational unit… the manager of any group that actually makes a product or performs a service.”5 Functional managers negotiate for workers to perform the project work in a timely fashion. Since the workers know their regular manager often has other tasks for them and will be their primary rater, they are tempted to concentrate first on the work that will earn rewards. Hence, a project manager needs to develop strong com- munication and leadership skills in order to persuade subordinates to focus on the project when other work also beckons.

1-3d Project Life Cycle All projects go through predictable stages called a project life cycle. A project life cycle is “the series of phases that a project goes through from its initiation to its closure.”6 An organization’s control needs are to be assured that the work of the project is proceeding in a satisfactory manner and that the results are likely to serve its customer’s intended pur- pose. The project customer is the person or organization that will use the project’s product, service, or result. Customers can be internal to the organization (that is, part of the com- pany that is performing the project) or external to the organization. Many different project life cycle models are used for different types of projects, such as information systems, improvement, research and development, and construction. The variations these pose will be explored in Chapter 3. In this book we will use the following project stages (as seen in the chapter opener Project Life Cycle diagram for all of the following chapters.):

• Selecting and initiating—starts when an idea for a project first emerges and the project is selected and planned at a high level, and ends when key participants commit to it in broad terms.

• Planning—starts after the initial commitment, includes detailed planning, and ends when all stakeholders accept the entire detailed plan.

• Executing—starts when the plan is accepted, and includes authorizing, executing, monitoring, and controlling work until the customer accepts the project deliverables.

• Closing and realizing—includes all activities after customer acceptance to ensure project is completed, lessons are learned, resources are reassigned, contributions are recognized, and benefits are realized.

The pace of work and amount of money spent may vary considerably from one life cycle stage to another. Often, the selecting is performed periodically for all projects at a division or corporate level, and then initiating is rather quick—just enough to ensure that a project makes sense and key participants will commit to it. The planning stage can become rather detailed and will normally require quite a bit more work. The execution stage or stages are the time when the majority of the hands-on project tasks are accomplished. This tends to be a time of considerable work. Closing is a time when loose

6 Part 1 Organizing Projects

ends are tied up and the work level decreases significantly, but realizing benefits from the project occurs over time, may be measured months after project completion, and may be done by people other than those who performed the project. See Exhibit 1.1 for a predic- tive or plan-driven project life cycle and Exhibit 1.2 for an adaptive or change-driven proj- ect life cycle. The primary difference is that in the first, the product is well-understood and all planning precedes all executing, while in the second, early results lead into planning later work. The extreme of predictive is sometimes called waterfall and the extreme of adaptive is sometimes called agile. Agile will be defined in Chapter 3, but throughout the book a margin icon will indicate ideas from agile, and the text will be in color.



Other Approvals

Closing & Realizing

Administrative Closure

Benefits Measures

Level of Effort


Stage Ending Gates

Selecting & Initiating






Project Result

Progress Reports



Other Approvals

Closing & Realizing

Administrative Closure

Benefits Measures

Level of Effort


Stage Ending Gates

Selecting & Initiating



Planning Executing

Planning Executing

· · ·

Interim Result

Interim Result

Project Result


Chapter 1 Introduction to Project Management 7

Three other points should be made concerning the project life cycle. First, most com- panies with well-developed project management systems insist that a project must pass an approval of some kind to move from one stage to the next.7 In both exhibits, the approval to move from selecting and initiating to planning, for instance, is the approval of a charter. Second, in many industries, the project life cycle is highly formal- ized and very specific. For example, in information systems, the executing stage is often described as two stages: writing code and testing code. In the construction industry, the executing stage is often described as the three stages of design, erection, and finish- ing. Many companies even have their own project life cycle model, such as the one Midland Insurance Company has developed for quality improvement projects as shown in Exhibit 1.3. This book will present examples of company-specific life cycle models, but for clarity will use the predictive or plan-driven model shown in Exhibit 1.1 when describing concepts except when we discuss agile with the adaptive or change-driven model. Third, in addition to stage-ending approvals, frequently projects are measured at additional points such as selection, progress reporting, and benefits realization, as shown in Exhibit 1.1.

1-4 Understanding Projects Several frameworks that can help a person better understand project management are described below: the Project Management Institute (PMI); the Project Management Body of Knowledge (PMBOK® Guide); methods of selecting and prioritizing projects, project goals and constraints; project success and failure; use of Microsoft Project to help plan and measure projects, and various ways to classify projects.

1-4a Project Management Institute Project management has professional organizations just as do many other professions and industry groups. The biggest of these by far is the Project Management Institute.

It was founded in 1969, grew at a modest pace until the early 1990s, and has grown quite rapidly since. As of March 2013, PMI had well over 650,000 members and creden- tial holders in 185 countries. PMI publishes and regularly updates A Guide to the Project Management Body of Knowledge (PMBOK® Guide). All of the definitions in this book come from the PMBOK® Guide, fifth edition.8 PMI has established a professional certification entitled Project Management Professional (PMP). To be certified as a PMP,



InitiationInitiation PlanningPlanning ExecutionExecution Close -OutClose Out

1) Define Problem

2) Factually Describe Situation

3) Analyze Causes

4) Solution Planning and Implementation

5) Evaluation of Effects

6) Sustain Results

7) Share Results

Source: Martin J. Novakov, American Modern Insurance Group.

8 Part 1 Organizing Projects

a person needs to have the required experience and education, pass an examination on the PMBOK® Guide, and sign and be bound by a code of professional conduct. PMI has also established a second certification—Certified Associate in Project Management (CAPM)—that is geared toward junior people working on projects before they are eligi- ble to become PMPs. PMI also has established additional credentials, practice standards, and extensions of the PMBOK® Guide in areas such as program management, agile, risk, scheduling, resource estimating, work breakdown structures, construction, and government.9

1-4b Project Management Body of Knowledge (PMBOK®) The Project Management Body of Knowledge consists of a project life cycle (see earlier “Project Life Cycle” section), 5 process groups, and 10 knowledge areas. A project man- agement process group is “a logical grouping of the project management inputs, tools and techniques, and outputs.”10 The five process groups, paraphrased from the PMBOK® Guide, are as follows:

1. Initiating—“define a project or a new phase by obtaining authorization” 2. Planning—“establish the project scope, refine objectives and define actions to attain

objectives” 3. Executing—“complete the work defined to satisfy project specifications” 4. Monitoring and controlling—“track, review, and regulate progress and perfor-

mance, identify changes required, and initiate changes” 5. Closing—“finalize all activities to formally close project or phase”11

The 10 knowledge areas, paraphrased from the PMBOK® Guide, are as follows:

1. Integration management—“processes and activities to identify, define, combine, unify, and coordinate the various processes and project management activities”12

2. Scope management—“processes to ensure that the project includes all the work required, and only the work required, to complete the project successfully”13

3. Time management—“processes to manage timely completion of the project”14

4. Cost management—“processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be com- pleted within the approved budget”15

5. Quality management—“processes and activities of the performing organization that determine quality policies, objectives, and responsibilities so that the project will satisfy the needs for which it was undertaken”16

6. Human resources management—“processes that organize, manage, and lead the project team”17

7. Communications management—“processes to ensure timely and appropriate planning, collection, creation, distribution, storage, retrieval, management, control, monitoring, and ultimate disposition of project information”18

8. Risk management—“processes of conducting risk management planning, identifi- cation, analysis, response planning, and control… to increase the likelihood and impact of positive events and decrease the likelihood and impact of negative events in the project”19

9. Procurement management—“processes to purchase or acquire products, services, or results from outside the project team”20

10. Stakeholder management—“processes to identify the people, groups, or organiza- tions, that could impact or be impacted by the project, analyze their expectations and impact, and develop strategies for engaging them and managing conflicting interests”21

Chapter 1 Introduction to Project Management 9

1-4c Selecting and Prioritizing Projects During the selecting and initiating stage of a project, one of the first tasks leaders must do is to identify potential projects. Ideally, this is accomplished in a systematic manner— not just by chance. Some opportunities will present themselves. Other good opportu- nities need to be discovered. All parts of the organization should be involved. For exam- ple, salespeople can uncover opportunities through open discussions with existing and potential customers. Operations staff members may identify potential productivity- enhancing projects. Everyone in the firm should be aware of industry trends and use this knowledge to identify potential projects.

Once identified, organizations need to prioritize among the potential projects. The best way to do this is to determine which projects align best with the major goals of the firm. The executives in charge of selecting projects need to ensure overall organiza- tional priorities are understood, communicated, and accepted. Once this common under- standing is in place, it is easier to prioritize among the potential projects. The degree of formality used in selecting projects varies widely. Regardless of the company’s size and the level of formality used, the prioritization efforts should include asking the following questions:

• What value does each potential project bring to the organization? • Are the demands of performing each project understood? • Are the resources needed to perform the project available? • Is there enthusiastic support both from the external customers and from one or

more internal champions? • Which projects will best help the organization achieve its goals?

1-4d Project Goals and Constraints All projects should be undertaken to accomplish specific goals. Those goals can be described both by scope—“the sum of the products, services, and results to be provided as a project”22 and by quality—“the degree to which a set of inherent characteristics ful- fills requirements.”23 Taken together, scope and quality are often called performance and should result in outputs that customers can be satisfied with as they use them to effec- tively do their job. From a client perspective, projects generally have time and cost con- straints. Thus, a project manager needs to be concerned with achieving desired scope and quality, subject to constraints of time and cost. If the project were to proceed exactly according to plan, it would be on time, on budget, with the agreed upon scope and the agreed upon quality.



Cost Pay up to $5,000 extra if it saves 10 days

Schedule Save up to 10 days

Quality Must meet

Scope Must meet

Source: Adapted from Timothy J. Kloppenborg and Joseph A. Petrick, Managing Project Qualify (Vienna, VA: Management Concepts, 2002): 46.

10 Part 1 Organizing Projects

However, many things can happen as a project is conducted. Obstacles or challenges that may limit the ability to perform often arise, as well as opportunities to exceed original expec- tations. A project manager needs to understand which of these four goals and constraints (scope, quality, time, budget) should take precedence and which can be sacrificed. The project manager needs to help the customer articulate how much he wants to enhance achievement of one of these four dimensions. The customer must also state which dimension he is willing to sacrifice, by how much, and under what circumstances to receive better achievement of the other one. For example, on a research and development project, a customer may be willing to pay an extra $5,000 to finish the project 10 days early. On a church construction project, a customer may be willing to give up five extra light switches in exchange for greater confidence that the light system will work properly. Understanding the customer’s desires in this manner enables a project manager to make good project decisions. A project manager can use a project customer tradeoff matrix such as the one in Exhibit 1.4 to reflect the research and development project tradeoffs discussed above.

From an internal perspective a project manager also needs to consider two more con- straints: the amount of resources available and the decision maker’s risk tolerance. From an agile perspective, resources (including cost) and schedule are considered fixed and what can vary is value to the customer.

1-4e Defining Project Success and Failure Project success is creating deliverables that include all of the agreed-upon features (meet scope goals). The outputs should satisfy all specifications and please the project’s custo- mers. The customers need to be able to use the outputs effectively as they do their work (meet quality goals). The project should be completed on schedule and on budget (meet time and cost constraints).

Project success also includes other considerations. A successful project is one that is com- pleted without heroics—that is, people should not burn themselves out to complete the proj- ect. Those people who work on the project should learn new skills and/or refine existing skills. Organizational learning should take place and be captured for future projects. Finally, the performing organization should reap business-level benefits such as development of new products, increased market share, increased profitability, decreased cost, and so on. A con- temporary and complete view of project success is shown in Exhibit 1.5.

Project failure can be described as not meeting the success criteria listed in Exhibit 1.5. Many projects are fully successful in some ways but less successful in others. The goal of excellent project management is to reach high levels of success on all mea- sures on all projects. Serious project failure—when some of the success criteria are



• Meeting Agreements —Cost, schedule, and specifications met

• Customer’s Success —Needs met, deliverables used, customer satisfied

• Performing Organization’s Success —Market share, new products, new technology

• Project Team’s Success —Loyalty, development, satisfaction

Source: Adapted from Timothy J. Kloppenborg, Debbie Tesch, and Ravi Chinta, “21st Century Project Success Measures: Evolution, Interpretation, and Direction,” Proceedings, PMI Research and Education Conference 2012 (Limerick, Ireland, July 2012).

Chapter 1 Introduction to Project Management 11

missed by a large amount and/or when several of the success criteria are missed—can be attributed to numerous causes. In each chapter of this text, more specific possible failure causes will be covered, along with how to avoid them, but some basic causes of failure are as follows:

• Not enough resources are available for project completion. • Not enough time has been given to the project. • Project expectations are unclear. • Changes in the scope are not understood or agreed upon by all parties involved. • Stakeholders disagree regarding expectations for the project. • Adequate project planning is not used.

1-4f Using Microsoft Project to Help Plan and Measure Projects A useful tool to capture and conveniently display a variety of important project data is Microsoft® (MS) Project. MS Project is demonstrated in a step-by-step fashion using screen shots from a single integrated project throughout the book.

1-4g Types of Projects Four ways to classify projects that help people understand the unique needs of each are by industry, size, understanding of project scope, and application.

CLASSIFYING BY INDUSTRY Projects can be classified in a variety of ways. One method is by industry, which is useful in that projects in different industries often have unique requirements. Several industry-specific project life cycle models are in use, and various trade groups and special interest groups can provide guidance. For example, PMI had 39 specific communities of practice as of March 1, 2013, as shown in Exhibit 1.6. These groups allow project managers worldwide to share and learn


Aerospace and Defense Global Diversity New Practitioners

Agile Global Sustainability Organizational Project Management

Automation Systems Government Pharmaceutical

Change Management Healthcare Program Management Office

China Project Management Human Resource Project Management Project Management Quality

Construction Industry Information Systems Project Risk Management

Consulting Innovation and New Product Development Requirements Management

Earned Value Management International Development Retail

eBusiness IT and Telecom Scheduling

Energy, Oil, Gas and Petrochemical Leadership in Project Management Service and Outsourcing

Entertainment Learning, Education, and Development Transportation

Ethics in Project Management Legal Project Management Troubled Projects

Financial Services Industry Marketing and Sales Utility Industry

Source: http://www.pmi.org/Get-Involved/Communities-of-Practice.aspx, accessed March 1, 2013.

12 Part 1 Organizing Projects

together. Many of those groups are devoted to specific challenges faced by project managers in a particular industry.

CLASSIFYING BY SIZE Another method of classifying projects is by size. Large projects often require more detailed planning and control. However, even the smallest projects still need to use planning and control—just in a more simplified manner. For example, construction of a multistory building in China would require a highly detailed construc- tion schedule, but even a much simpler construction project of building a one-car garage would also need to follow a schedule.

CLASSIFYING BY TIMING OF PROJECT SCOPE CLARITY A third method of classi- fying projects deals with how early in the project the project manager and team are likely to be able to determine with a high degree of certainty what the project scope will be. For example, it may be rather simple to calculate the cubic feet of concrete that are required to pour a parking lot and, therefore, how much work is involved. At the oppo- site end of the spectrum, when developing a new pharmaceutical, very little may be determined in the project until the results of some early experiments are reported. Only at that time is it possible to begin estimating cost and determining the schedule with confidence. The planning becomes iterative, with more detail as it becomes available. In the first case, predictive or plan-driven project techniques may work well. In the second case, adaptive or change-driven methods to iteratively determine the scope and plan for risks may be more important.

CLASSIFYING BY APPLICATION For the purpose of this book, we will discuss many types of projects, such as those dealing with organizational change, quality and pro- ductivity improvement, research and development (R&D), information systems (IS), and construction. Many of these projects include extensive cross-functional work, which adds to the challenge. Remember, all projects require planning and con- trol. Part of the art of project management is determining when to use certain tech- niques, how much detail to use, and how to tailor the techniques to the needs of a specific project.

A large construction project, like this multistory building in China, requires a highly detailed construction schedule.

© Ch in a Ph ot os /G et ty Im ag es

Chapter 1 Introduction to Project Management 13

1-4h Scalability of Project Tools Projects range tremendously in size and complexity. In considering construction projects, think of the range from building a simple carport to building an office tower. In both cases, one would need to determine the wants and needs of the customer(s), understand the amount of work involved, determine a budget and schedule, decide what workers are available and who will do which tasks, and then manage the construction until the owner accepts the project results. It should be easy to see that while both projects require plan- ning and control, the level of detail for the carport is a tiny fraction of that for the office tower. In this book, we first demonstrate concepts and techniques at a middle level and then use a variety of project examples to demonstrate how to scale the complexity of the techniques up or down.

1-5 Project Roles To successfully initiate, plan, and execute projects, a variety of executive, management, and associate roles must be accomplished, as shown in Exhibit 1.7. In a large organiza- tion, a person often fills only one of these roles; sometimes, more than one person fills a particular role. In small organizations, the same person may fill more than one role. The names of the roles also vary by organization. The work of each role must be accom- plished by someone. Project managers are successful when they build strong working relationships with the individuals who execute each of these roles.

1-5a Project Executive-Level Roles The four project executive-level roles are the steering team, sponsor, customer, and the chief projects officer. A steering or leadership team for an organization is often the top leader (CEO or other officer) and his or her direct reports. From a project standpoint, the important role for this team is to select, prioritize, and resource projects in accor- dance with the organization’s strategic planning and to ensure that accurate progress is reported and necessary adjustments are made.

The second executive-level project role is that of sponsor. PMI’s official definition of a sponsor is “the person or group that provides resources and support for the project and is accountable for enabling success.”25 This textbook expands the sponsor’s role to include taking an active role in chartering the project, reviewing progress reports, playing a behind-the-scenes role in mentoring, and assisting the project manager throughout the project life.

The third executive-level project role is that of the senior customer representative. This person ensures that the needs and wants of the various constituents in the customer’s orga- nization are identified and prioritized and that project progress and decisions continually support the customer’s desires. In agile projects, the customer representative role is contin- uous and active. The chief projects officer’s role is sometimes called a project management office (PMO), which is defined as “an organizational structure that standardizes the project related governance processes and facilitates the sharing of resources, methodologies, tools and techniques.”24 The PMO can range from supporting project managers, to controlling them by requiring compliance to directive in actually managing projects.

1-5b Project Management-Level Roles The most obvious management-level role is the project manager. The project manager is “the person assigned by the performing organization to lead the team that is responsible for achieving the project objectives.”63 The project manager is normally directly account- able for the project results, schedule, and budget. This person is the main communicator,


14 Part 1 Organizing Projects

is responsible for the planning and execution of the project, and works on the project from start to finish. The project manager often must get things done through the power of influence since his or her formal power may be limited.

Another key management role is the functional manager. Functional managers are the department heads—the ongoing managers of the organization. They normally determine how the work of the project is to be accomplished, often supervise that work, and often negotiate with the project manager regarding which workers are assigned to the project.

The third managerial role is that of facilitator. If the project is complex and/or con- troversial, it sometimes makes sense to have another person help the project manager with the process of running meetings and making decisions.

1-5c Scrum Master In agile projects, a new title is introduced—the scrum master. In effect, this is a project manager who serves and leads in a collaborative, facilitating manner.

1-5d Project Associate-Level Roles The project management team is composed of “members who are directly involved in project management activities.”27 In this book, these individuals are called core team members. The core team, with the project manager, does most of the planning and makes most of the project-level decisions.

The temporary members that are brought on board are called subject matter experts. These people are used on an as-needed basis.

1-6 Overview of the Book Contemporary project management blends traditional, plan-driven and contemporary, agile approaches. It is integrative, iterative, and collaborative. Project management is in- tegrative since it consists of the 10 knowledge areas and the 5 process groups described in the PMBOK® Guide, and one must integrate all of them into one coherent and ethical whole. Project management is iterative in that one starts by planning at a high level and then repeats the planning in greater detail as more information becomes available and the date for the work performance approaches. Project managers need to balance plan- ning, control, and agility. Project management is collaborative since there are many sta- keholders to be satisfied and a team of workers with various skills and ideas who need to work together to plan and complete the project. With these thoughts of integration, iter- ation, and collaboration in mind, this book has three major parts: Organizing and Initi- ating Projects, Planning Projects, and Performing Projects.

1-6a Part 1: Organizing and Initiating Projects Part 1 consists of four chapters that deal with organizing for and initiating projects.



Steering team Project manager Core team member

Chief projects officer Functional manager Subject matter expert

Sponsor Facilitator

Senior customer representative


Chapter 1 Introduction to Project Management 15

CHAPTER 2 covers project selection and prioritization. This includes both internal pro- jects, which should be selected in a manner consistent with the strategic planning of the organization, and external projects. It also explains how to respond to requests for proposals.

CHAPTER 3 focuses on organizational structure, organizational culture, project life cycle, and project management roles of the parent organization. The organizational structure section describes ways an organization can be configured and the advantages and disadvantages of each in regard to managing projects. Next covered is the culture of the parent organization and the impact it has on the ability to effectively plan and manage projects. The industry and type of project often encourage managers to select or customize a project life cycle model. The roles covered include executive-, managerial-, and associate-level responsibilities that must be performed. The demands of each role are explained, along with suggestions for how to select and develop people to effectively fill each role, considering both the role and the unique abilities and inter- ests of each person.

CHAPTER 4 discusses chartering projects. The project charter is “a document issued by the project initiator or sponsor that formally authorizes the existence of a project, and provides the project manager with the authority to apply organizational resources to project activities.”28 The charter can further be considered an agreement by which the project sponsor and project manager (and often the project core team) agree at a high level what the project is, why it is important, key milestone points in the schedule, major risks, and possibly a few other items. It allows the project manager and core team to understand and agree to what is expected of them. Finally, Microsoft Proj- ect, a tool that facilitates effective project planning, controlling, and communicating, is introduced. Microsoft Project is utilized in eight chapters to demonstrate how to auto- mate various project planning and control techniques. The examples and illustrations in this book use Microsoft Project 2013. If a person is using an earlier version of Microsoft Project, there are slight differences. If a person is using a competing project scheduling package, the intent remains the same, but the mechanics of how to create certain docu- ments may differ.


Other Approvals

Closing & Realizing

Administrative Closure

Benefits Measures

Level of Effort


Stage Ending Gates

Selecting & Initiating






Project Result

Progress Reports

16 Part 1 Organizing Projects

1-6b Part 2: Planning Projects Part 2 includes seven chapters dealing with various aspects of project planning.

CHAPTER 5 begins by identifying the various project stakeholders, their wants and needs, and how to prioritize decisions among them. Chapter 5 also includes communica- tions planning for the project because poor communication can doom an otherwise well- planned and well-managed project. The information needs of each stakeholder group should be included in the communications plan.

CHAPTER 6 shows how to determine the project scope and outline it in the work breakdown structure (WBS). The WBS is “a hierarchical decomposition of the total scope of work to be carried out by the project team to accomplish the project objectives and create the required deliverables.”29 The WBS is a document that progressively breaks the project down into its components so that each piece can be described as a deliverable for which one person can plan, estimate the costs, estimate the time, assign resources, manage, and be held accountable for the results. This is a critical document since it is the foundation for most of the other planning and control. The chapter ends with instructions on putting a WBS into Microsoft Project.

CHAPTER 7 deals with scheduling projects. The project schedule “presents linked activities with planned dates, durations, milestones and resources.”30 This chapter starts with a background on project scheduling and then covers construction of schedules by defining activities, determining the order in which they need to be accomplished, esti- mating the duration for each, and then calculating the schedule. Chapter 7 also includes instructions on how to interpret a project schedule; clearly communicate it using a bar chart called a Gantt chart; and use Microsoft Project to construct, interpret, and commu- nicate project schedules.

CHAPTER 8 demonstrates how to schedule resources on projects: determining the need for workers, understanding who is available, and assigning people. All of the techniques of resourcing projects are integrated with the behavioral aspects of how to deal effectively and ethically with the people involved. Resource needs are shown on a Gantt chart de- veloped in Chapter 7, the responsibilities are shown as they change over time, conflicts and overloads are identified, and methods for resolving conflicts are introduced. Alterna- tive approaches for creating and compressing schedules are shown. Many of the techni- ques in this chapter are also shown with MS Project.

CHAPTER 9 A project budget, the subject of this chapter, is dependent on both the schedule and the resource needs developed in the previous two chapters. The budget is “the approved estimate for the project or any work breakdown structure component or any schedule activity.”31 Cost planning, estimating, budgeting, establishing cost control, and using MS Project for project budgets are all included.

CHAPTER 10 starts with establishing a risk management plan. It covers methods for identifying potential risks and for determining which risks are big enough to justify specific plans for either preventing the risk event from happening or dealing effec- tively with risk events that do happen. Finally, in risk response planning, strategies for dealing with both positive risks (opportunities) and negative risks (threats) are discussed.

CHAPTER 11 begins with a discussion of how modern project quality concepts have evolved. Then it deals with core project quality demands of stakeholder satisfaction, empowered performance, fact-based management, and process management. The third

Chapter 1 Introduction to Project Management 17

chapter topic is developing the project quality plan. Next, the chapter describes various quality improvement tools for projects.

Since this is the last planning chapter, it concludes with a method of integrating the various sections developed in the previous chapters into a single, coherent project plan. Conflicts that are discovered should be resolved, judgment needs to be applied to ensure that the overall plan really makes sense, and one or more kickoff meetings are normally held to inform all of the project stakeholders and to solicit their enthu- siastic acceptance of the plan. At this point, the project schedule and budget can be baselined in MS Project. While bits of the project that might have caused delays if they were not started early may already be in progress, the formal kickoff is the sig- nal that the project is underway!

1-6c Part 3: Performing Projects Part 3 includes four chapters that deal with performing the project.

CHAPTER 12 begins by introducing relevant supply chain concepts such as a supply chain view of projects, the components that form a supply chain, factors to consider when dealing with a supply chain, and methods of improving the performance of a supply chain. Make-or-buy analysis and contract types lead the reader through pro- curement planning. Identifying and selecting sellers lead into managing contracts to assure receipt of promised supplies and services according to contractual terms. The chapter ends with advantages and requirements of effective project partnering.

CHAPTER 13 describes how to carry out the project work with a project team in order to accomplish the project objectives. The project manager needs to simultaneously cham- pion the needs of the project, the team, and the parent organization. The project man- ager manages the people side of the project by effectively using the stages of project team development, assessing and building the team members’ capability, supervising their work, managing and improving their decision making, and helping them maintain enthusiasm and effective time management. Project managers guide their team in managing and controlling stakeholder engagement.

CHAPTER 14 While the project work is being performed, the project manager needs to determine that the desired results are achieved—the subject of this chapter. Monitor and control project work is defined as “the process of tracking, reviewing, and reporting the progress to meet the performance objectives defined in the project management plan.”32

This starts with gathering performance data already identified during project initiating and planning. The actual performance data are then compared to the desired perfor- mance data so that both corrective and preventive actions can be used to ensure that the amount and quality of the project work meet expectations. MS Project can be used for this progress reporting and for making adjustments. Earned value analysis is used to determine exactly how actual cost and schedule progress are compared with planned progress. Overcoming obstacles, managing changes, resolving conflicts, reprioritizing work, and creating a transition plan all lead up to customer acceptance of the project deliverables.

CHAPTER 15 deals with finishing projects and realizing benefits. Close project or phase is defined as “the process of finalizing all activities across all of the project process groups to formally close a project or phase.”30 This chapter includes a section on terminating projects early, in case either the project is not doing well or conditions have changed and the project results are no longer needed, and a section on timely termination of successful projects. Topics include how to secure customer feedback and use it along with the team’s

18 Part 1 Organizing Projects

experiences to create lessons learned for the organization; reassign workers and reward those participants who deserve recognition; celebrate success; perform a variety of closure activities; and provide ongoing support for the organization that is using the results of the project. Finally, after the project deliverables have been used for some time, an assessment should determine if the promised benefits are being realized.

Summary A project is an organized set of work efforts undertaken to produce a unique output subject to limitations of time and resources such as money and people. Since the world is changing more rapidly than in the past, many people spend an increasing amount of their working time on projects. Project management includes work processes that initiate, plan, execute, monitor and control, and close project work. During these processes, tradeoffs must be made among the scope, quality, cost, and schedule, so that the project results meet the agreed-upon requirements, are useful to the customers, and promote the organization.

All projects, regardless of size, complexity, or appli- cation, need to be planned and managed. While the level of detail and specific methods vary widely, all need to follow generally accepted methods. PMI is a large professional organization devoted to promoting and standardizing project management understanding and methods. One of PMFs standards, A Guide to the Project Management Body of Knowledge (PMBOK® Guide), is composed of 5 process groups: initiating,

planning, executing, monitoring and controlling, and closing; along with 10 knowledge areas: integration, scope, time, cost, quality, human resources, communi- cations, risk, procurement, and stakeholders.

To successfully initiate, plan, and execute projects, two more things are needed. One is to understand what proj- ect success is and what drives it, along with what project failure is and its major causes. The other is an under- standing of the various executive-, managerial-, and associate-level roles in project management. This book is organized to be useful to students who will enter a variety of industries and be assigned to projects of all sizes and levels of complexity. Students will learn how to understand and effectively manage each of these process groups and knowledge areas. Microsoft Project 2013 is used in eight chapters to illustrate how to automate vari- ous planning, scheduling, resourcing, budgeting, and controlling activities. All definitions used are from the PMBOK Guide, fifth edition. This book follows a chrono- logical approach throughout a project’s life cycle, empha- sizing knowledge and skills that lead to project success.

Key Terms from the PMBOK® Guide The glossary in this book exclusively uses terms as defined in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) project, 4 stakeholders, 4 project management, 4 functional manager, 6 project life cycle, 6 project management process group, 9 initiating processes, 9 planning processes, 9 executing processes, 9 monitoring and controlling processes, 9 closing processes, 9 integration management, 9 scope management, 9 time management, 9 cost management, 9 quality management, 9

human resources management, 9 communications management, 9 risk management, 9 procurement management, 9 stakeholder management, 9 scope, 10 quality, 10 project management office (PMO), 14 sponsor, 14 project manager, 14 project management team, 15 project charter, 16 work breakdown structure (WBS), 17 project schedule, 17 budget, 17 monitor and control project work, 18 close project or phase, 18

Chapter 1 Introduction to Project Management 19

Chapter Review Questions 1. What is a project? 2. What is project management? 3. How are projects different from ongoing

operations? 4. What types of constraints are common to most

projects? 5. Which deliverable authorizes the project team to

move from Selecting & Initiating to Planning? 6. At what stage of a project life cycle are the

majority of the “hands-on” tasks completed? 7. During which stage of the project life cycle are

loose ends tied up? 8. What are the five process groups of project

management? 9. Which process group defines a new project or

phase by obtaining authorization?

10. What are the 10 project management knowledge areas?

11. What two project dimensions are components of project performance?

12. How do you define project success? 13. How do you define project failure? 14. List four common causes of project failure. 15. What are three common ways of classifying

projects? 16. What is predictive or plan-driven planning, and

when should it be used? 17. What is adaptive or change-driven planning and

when should it be used? 18. What makes someone a project stakeholder? 19. What are the three project executive-level roles? 20. List and describe each of the managerial and

associate roles.

Discussion Questions 1. Using an example of your own, describe a project

in terms that are common to most projects. 2. Why are more organizations using project man-

agement? If you were an executive, how would you justify your decision to use project manage- ment to the board of trustees?

3. Explain how to scale up or down the complexity of project planning and management tools and what effect, if any, this might have on the project life cycle.

4. List and describe several issues that pertain to each stage of the project life cycle.

5. Put the five project management process groups in order from the one that generally requires the least work to the one that requires the most.

6. Name the 10 project management knowledge areas, and briefly summarize each.

7. Discuss how a project could be successful in terms of some measures yet unsuccessful by others.

8. What does project failure mean? What are some examples?

9. Compare and contrast advantages and disad- vantages of predictive/plan-driven and adaptive/change-driven project life cycle approaches.

10. You are given a project to manage. How do you decide whether to use a predictive or adaptive approach?

11. Contrast project managers and functional managers.

12. List as many project roles as you can, and iden- tify what each one is responsible for in terms of the project.

PMBOK® Guide Questions The purpose of these questions is to help visualize the type of questions on PMP and CAPM exams.

1. Which project role provides resources or support for the project, promotes and protects the project at higher levels of management, and takes an active role in the project from the chartering stage through project closure? a. functional manager b. project manager c. project team member d. project sponsor

2. Which PMBOK® Guide Knowledge Area includes those processes required to ensure that the proj- ect includes all the work required, and only the work required, to complete the project successfully? a. cost management b. scope management c. risk management d. quality management

20 Part 1 Organizing Projects

3. In order to be successful, the project team must be able to assess the needs of stakeholders and manage their expectations through effective communications. At the same time they must balance competing demands between project scope, schedule, budget, risk, quality, and resources, which are also known as project _____? a. plan elements b. deliverables c. constraints d. targets

4. In which project management process group would you find those processes that establish the scope of effort for the project, refine the project objectives, and define the course of action to achieve the objectives? a. initiating process group b. planning process group c. executing process group d. monitoring and controlling process group

5. Projects pass through a series of phases as they move from initiation to project closure. The names and number of these phases can vary significantly depending on the organization, the type of application, industry, or technology employed. These phases create the framework for the project, and are referred to collectively as the: a. project life cycle b. project management information system (PMIS) c. product life cycle d. quality methodology

6. Based on PMI’s definition, which of these is a good example of a project? a. manufacturing a standard commodity b. following policies and procedures for procur-

ing an item c. designing and launching a new website d. using a checklist to perform quality control

7. The responsibilities of a project management of- fice (PMO) and the degree of control that it provides can cover a broad spectrum. All of these

are examples of types of PMO structures within organizations except: a. controlling—require compliance through

various means b. selective—review business cases and select and

prioritize projects to be initiated c. supportive—perform a consultative role

through training, templates, and best practices d. directive—provide a high degree of control by

directly managing the projects 8. When would a predictive project life cycle be the

preferred approach? a. when the high-level vision has been developed,

but the product scope is not well defined b. when the environment is changing rapidly c. when the product to be delivered is well

understood d. when the product will be created through a

series of repeated cycles 9. To be effective, a project manager needs

to possess all of the following competencies except: a. personal effectiveness—attitudes, core person-

ality traits, leadership b. authority—power or right granted by the

organization c. performance—what project managers can

accomplish while applying their project man- agement knowledge

d. knowledge of project management—under- standing of project management tools and techniques

10. In Adaptive Life Cycles (change—driven or agile methods) ________. a. the overall scope of the project is fixed,

and the time and cost are developed incrementally

b. the overall cost is fixed, and the project scope and schedule are developed iteratively

c. the time and cost are fixed, but the scope is developed iteratively

d. change control is very important

Example Project Instructions This book is designed to give your professors the option to have you practice the concepts and techni- ques from each chapter on a real project. Often, the project chosen will be for a nonprofit group of some kind such as a United Way agency, a church, or a school. The project could, however, be for a company

or a part of the university. For traditional classes, the example project can often be one that several stu- dents will be assigned to work on as a team. For online classes, it may be more practical to have each student work on a separate project at his or her place of employment.

Chapter 1 Introduction to Project Management 21

Each chapter provides suggested assignments to practice project management skills on the real or potential project you are using. Depending on the emphasis your professor chooses, you may need to per- form some, most, or all of these assignments. At a min- imum, your professor will probably assign the charter, work breakdown structure, and schedule.

In any case, each chapter after this prompts you to perform various activities to plan and execute the proj- ect. At some point in the first couple of weeks, your professor will probably invite at least one representative from each organization to your class to introduce their project and to meet you. We will call these per- sons sponsors and define their role more fully in Chapter 3. Since this first chapter is a broad introduc-

tion to project management, your task for the Chapter 1 sample project is to familiarize yourself with your new student team, your sponsor, your sponsor’s organiza- tion, and the overall direction of your project. Your professor may ask you to answer certain specific and/or open-ended questions concerning your newly assigned project.

Subsequent chapters give you more in-depth tools to acclimatize you to your project, the organization you will be working for, and the various stakeholders who have an interest in the project. For example, in the next chapter, you learn how project selection flows from an organization’s strategic planning, and you should seek to learn why this project was chosen and how it sup- ports the strategic goals of the organization.

References A Guide to the Project Management Body of Knowledge

(PMBOK® Guide), 5th ed. (Newtown Square, PA: Project Management Institute, 2013).

Cooper, Robert G., “Winning at New Products: Pathways to Profitable Innovation,” Proceedings, PMI Research Conference 2006 (Montreal, July 2006).

Crowe, Andy, Alpha Project Managers: What the Top 2% Know That Everyone Else Does Not (Atlanta: Velociteach, 2006).

Kloppenborg, Timothy J., and Warren A. Opfer, “The Current State of Project Management Research: Trends, Interpretations, and Predictions,” Project Management Journal 33 (2) (June 2002): 5–18.

Kloppenborg, Timothy J., Debbie Tesch, and King, Broderick, “21st Century Project Success Measures: Evolution, Interpretation, and Direction,” Proceed- ings, PMI Research and Education Conference 2012 (Dublin, Ireland, July 2012).

Muller, R., and R. Turner, “The Influence of Project Managers on Project Success Criteria by Type of Project,” European Management Journal 25 (4) (2007): 298–309.

PMI Community of Practice Listing, http://www.pmi .org/Getlnvolved/Pages/Communities-of-Practice .aspx, accessed March 1, 2013.

Shenhar, A. J., and D. Dvir, Reinventing Project Manage- ment (Boston: Harvard Business School Press, 2007).

Endnotes 1. PMBOK® Guide 553. 2. PMBOK® Guide 563. 3. PMBOK® Guide 554. 4. PMBOK® Guide 6. 5. PMBOK® Guide 541. 6. PMBOK® Guide 554. 7. Robert G. Cooper, “Winning at New Products:

Pathways to Profitable Innovation,” Proceedings, 2006).

8. Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK® Guide), 5th ed. (Newtown Square, PA: Project Management Institute, 2013). Copyright and all rights reserved. Material from this publication has been reproduced with permission of PMI.

9. www.pmi.org/about0us.aspx, accessed March 1, 2013.

10. PMBOK® Guide 554. 11. PMBOK® Guide 49. 12. PMBOK® Guide 63. 13. PMBOK® Guide 105. 14. PMBOK® Guide 141. 15. PMBOK® Guide 193. 16. PMBOK® Guide 227. 17. PMBOK® Guide 255. 18. PMBOK® Guide 287. 19. PMBOK® Guide 309. 20. PMBOK® Guide 355. 21. PMBOK® Guide 391. 22. PMBOK® Guide 562.

22 Part 1 Organizing Projects

23. PMBOK® Guide 556. 24. PMBOK® Guide 554. 25. PMBOK® Guide 563. 26. PMBOK® Guide 555. 27. PMBOK® Guide 555. 28. PMBOK® Guide 553.

29. PMBOK® Guide 567. 30. PMBOK® Guide 555. 31. PMBOK® Guide 530. 32. PMBOK® Guide 546 . 33. PMBOK® Guide 531.


Using Appreciative Inquiry to Understand Project Management

Each project creates a unique product, service, or result that certain stakeholders desire. Project success requires understanding stakeholder requirements, clarifying project expectations, and agreeing upon project scope. As such, it is imperative to identify relevant stakeholders and to have a constructive engagement with them. One tool that is helpful for allowing such engagement and for navigating through complexities is Appreciative Inquiry (Al).

What Is Appreciative Inquiry? The principles: Appreciative inquiry is a positive philosophy for changewhereinwhole systems convene to inquire for change (Cooperrider 2003). Al recognizes the power of the whole and builds on conversational learning that emergesout of thewhole. It operates on thebelief that human systemsmove in the direction of their shared image and idea of the future, and that change is based on intentional and positive inquiry into what has worked best in the past. In this sense, Al suggests that human organizing and change is a relational process of inquiry that is grounded in affirmationandappreciation. Typically, the process works its way through the four phases of Discovery, Dream, Design, and Delivery (Conklin, 2009).

Implications of Al on Defining Project Scope Project success partially depends upon identifying key stakeholders: eliciting their true wants and needs to determine project scope; and keeping them appropriately engaged throughout the entire project. The early involvement is critical because it lays out clear goals and boundaries of project scope. However, eliciting accurate responses may be difficult, especially since many projects may be planned and conducted in an atmosphere of uncertainty. The ongoing involvement helps to ensure stakeholders know what they will get from the project and will be pleased.

Appreciative inquiry is a tool that may assist project stakeholders to navigate through their inquiries via positive conversations. For example, a typical process may look like this:

Discovery (What has been?): This phase inquires into and discovers the positive capacity of a group, organization, or community. People are encouraged to use stories to describe their strengths, assets, peak experiences, and successes to understand the unique conditions that made their moments of excellence possible. In this step, stakeholders reflect on the past to recollect instances when they believed they could clearly articulate their true needs and wants; and when their needs and wants were folded into the project scope. Through story- telling, they collectively discover the process of project selection and prioritization, and articulate a gauge of project success. As they discuss, they start generating a dense web of understanding—an understanding and an appreciation of all their capacities that make moments of excellence possible. Agile projects use a similar method of story telling to understand user requirements and ultimately define project scope.

Dreaming (What could be?): Building on the moments of excellence of the participants, this phase

Delivery: What will


Discovery: What has


Design: What

should be?

Dream: What

could be?

Source: Adapted from Conklin, 2009.

Chapter 1 Introduction to Project Management 23

encourages the participants to imagine what would happen if their moments of excellence were to become a norm. Participants dream for the ideal conditions and build hope and possibility of an ideal future. As people share their stories, the focus of the process now shifts to dreaming a perfect, desirable state for the stakeholders. Through this journey, the goal should be to enable the participants to build positive energy around their strengths and also to dream about the direction in which they feel comfortable moving.

Designing (What should be?): This phase creates design principles that will help the participants realize their dream. Participants are encouraged to stretch their imagination to move the system from where it currently is to where the participants want it to be. At this stage, the participants should be encouraged to imagine a perfect world without any constraints. Therefore, if there were no resource constraints, what would the scope of the project look like.

Delivery (What will be?): In this phase, participants are encouraged to think of the various subsystems that should take the responsibility of the design phase to

“sustain the design from the dream that it discovered” (Cooperrider et al., 2003, p. 182). In this phase, various stakeholders are encouraged to decide what they will be committing themselves to.

Key Outcome Going through this entire process allows stakeholders to elicit and articulate their expectations from the project. Stakeholders also have a better understanding of how their needs and wants link to and lead them to a desirable future state. Finally, in order to sustain their dream, their commitment is clearly articulated. As stakeholders commit themselves to specific endeavors on the project, theywill implicitly revisit the opportunities and cost that lay ahead of them which allows stakeholders to draw a realistic boundary around their commitment to the project.

Projects are temporary and unique, and may have shifting boundaries over time. The process of engaging stakeholders via appreciative inquiry (AI) is an effective way to address the ambiguity and uncertainty in project management.

Source: Rashmi Assudani, Associate Professor and Chair, Department of Management and Entrepreneurship, Williams College of Business, Xavier University. Adapted from Conklin, T. A., “Creating Classrooms of Preference: An Exercise in Appreciative Inquiry.” Journal of Management Education 33 (6) (2009): 772–792. Cooperrider, D. L., D. Whitney, and J. M. Stavros, Appreciative Inquiry Handbook (Bedford Heights, OH: Lakeshore, 2003).

24 Part 1 Organizing Projects

CHA P T E R 2 Project Selection and Prioritization

How does a truly global company with fewer than 200 associates achieve noteworthy results and market leadership? Certainly strong and talented people are a key part of the answer. A good set of leadership and management tools and processes, and the discipline to use them, is another key. A small, privately held company in Louisville, Kentucky, has been fortunate to use both talent and process to achieve success by any measure. That company is D. D. Williamson.

D. D. Williamson was founded in 1865 and today is a global leader in non- artificial colors. Operating nine facilities in six countries and supplying many of the best-known food and beverage companies around the world, D. D. Williamson has more complexity to manage than most companies, regardless of their size.


After completing this chapter, you should be able to:

• Explain in your own words the strategic planning and portfolio management processes.

• Compare strengths and weaknesses of using financial and scoring models to select projects.

• Describe how to select, prioritize, and resource projects as an outgrowth of strategic planning.

• Given organizational priorities and several projects, demonstrate how to select and prioritize projects using a scoring model.

• From a contractor’s viewpoint, describe how to secure projects.

© w av eb re ak m ed ia /S hu tte rs to ck .c om



• Portfolio management

• Program management

• Projects and strategic planning

• Source selection criteria

• Statement of work

• Business case

D. D. Williamson identified the need to improve project management as a key strategy to achieve the vision. Our weakness was twofold—we had too many projects, and the projects that were active were sometimes late, over budget, and not achieving the desired results. We began by creating a prioritization matrix to select 16 “critical projects” that would have senior leadership sponsors and be assigned trained and capable project managers to improve our execution.

The prioritization matrix was a great initial step to narrow our focus and improve our results—overall project completion improved. However, 16 projects meant that the scope and impact of projects still had wide variation. Smaller, simpler projects were likely to be executed brilliantly and improve our total percentage of “on time and on target” projects, but if the project that was late or over budget was very high impact, we were still leaving opportunities for growth and profitability on the table.

We next improved our prioritization process, selecting no more than five “Vision Impact Projects” (VIPs) that would get high-level focus and attention—monitoring and asking for corrective measures in weekly senior management meetings, tracking online in our project management system for our Continuous Improvement Manager, and tunneling time and resources to help when projects get off course.

The results are dramatic—large and complicated projects are getting the attention and resources and are achieving our strategic target of “on time, on budget and on target” regularly. Our successes have positioned D. D. Williamson to continue to do what we do best—serve customers effectively, grow our business, and return strong financial results to ensure a solid future for the business.

Elaine Gravatte, Chief People Officer and North American President, D. D. Williamson

PMBOK® Guide


Phase: Selecting

Approval: CharterSelection Kickoff Project BenefitsAdministrative Closure

Planning Executing Closing RealizingInitiating

RealizedResultTo Proceed

2-1 Strategic Planning Process One of the tasks of a company’s senior leadership is to set the firm’s strategic direction. Some of this direction setting occurs when an organization is young or is being revamped, but some needs to occur repeatedly. Exhibit 2.1 depicts the steps in strategic planning and how portfolio management should be an integral part.

2-1a Strategic Analysis The first part of setting strategic direction is to analyze both the external and internal environments and determine how they will enhance or limit the organization’s ability to perform. This strategic analysis is often called strengths, weaknesses, opportunities, and threats (SWOT). The internal analysis (elements within the project team’s control) consists of asking what strengths and weaknesses the organization possesses in itself. The external analysis (elements over which the project team has little or no control) consists of asking what opportunities and threats are posed by competitors, suppliers, customers, regulatory agencies, technologies, and so on. The leaders of an organization often need to be humble and open to ideas that are unpleasant when conducting this analysis. Per- formed correctly, a strategic analysis can be very illuminating and can suggest direction for an organization. An example of SWOT analysis for the Built Green Home at Sunca- dia is shown in Exhibit 2.2. (The Built Green Home at Suncadia, Washington, was devel- oped using advanced sustainability concepts and a large degree of stakeholder involvement. A more detailed description of this house appears in Chapter 5.)

2-1b Guiding Principles Once the SWOT analysis is complete, the organization’s leadership should establish guid- ing principles such as the vision and mission. Some organizations break this step into more parts by adding separate statements concerning purpose and/or values. Often, these


Flow-Down Objectives

Strategic Objectives

Strategic Analysis

Guiding Principles: Vision & Mission

Portfolio Alignment

28 Part 1 Organizing Projects

sections are included in the mission. For simplicity’s sake, they will be treated as part of the mission in this book. It is more important to understand the intent of each portion and achieve it rather than worry about the exact format or names of individual portions.

VISION The vision “must convey a larger sense of organizational purpose.”1 It should be both inspiring and guiding, describing the organization as it can be in the future, but stated in the present tense. A clear and compelling vision will help all members and all stakeholders of an organization understand and desire to achieve it. Visions often require extra effort to achieve but are considered to be worth the effort. Visions are often multi-year goals that, once achieved, suggest the need for a new vision.

One of the visions most often cited, because it was so clear and compelling, was President John F. Kennedy’s goal of placing a man on the moon before the end of the 1960s. Kennedy set this goal after Russia launched Sputnik and the United States found itself behind in the space race. His vision was very effective in mobilizing people to achieve it.

A more recent example was in 2009 when hundreds of community leaders in Cleve- land, Ohio, decided to use a systems approach to guide many interrelated social and economic efforts in their region. The vision they stated is “Cleveland and other cities throughout Northeast Ohio should be green cities on a blue lake….”2 They use this vision to guide regional leaders as they choose where to invest their time and resources in bettering the region and life for its residents.

Increasingly companies are incorporating the triple bottom line into their vision state- ments. This approach emphasizes the social, environmental, and economic health of all of the company’s stakeholders rather than a narrow emphasis only on the economic return for shareholders. This stated desire to be a good corporate citizen with a long-term view of the world can motivate efforts that achieve both economic return for shareholders and other positive benefits for many other stakeholders.



Green building has a buzz Green building has not reached mainstream

Seattle has a strong green building community Limited project resources community

support Distance away from Seattle

Strong community support Green building is perceived to be costly

Growth in green building projects that demonstrate value

High cost of green projects

Need to provide numbers on green building value

Committed developer and builder


Uniqueness of product


Existing thinking on green building and its niche focus

Community surrounding house Building schedule

Lack of data on green building (wealth) value Community (location)


Source: Brenda Nunes, developer, BuiltGreen Home at Suncadia.

Chapter 2 Project Selection and Prioritization 29

MISSION STATEMENT The vision should lead into the mission statement, which is a way to achieve the vision. The mission statement includes the “organization’s core purpose, core values, beliefs, culture, primary business, and primary customers.”3 Several of these sections may flow together in the mission statement and, sometimes, an overall statement is formed with expanded definitions of portions for illustration. The rationale for including each section (either as one unified statement or as separate statements) is as follows:

• By including the organization’s purpose, the mission statement communicates why the organization exists.

• By including the organization’s core values, a mission statement communicates how decisions will be made and the way people will be treated. True organizational values describe deeply held views concerning how everyone should act—especially when adhering to those values is difficult.

• By including beliefs, a mission statement communicates the ideals for which its lea- ders and members are expected to stand. Beliefs are deeply held and slow to change, so it is quite useful to recognize them, as they can either help or hinder an organi- zation’s attempt to achieve its vision.

• By including the organization’s culture, the mission statement instructs members to act in the desired manner.

• By including the primary business areas, everyone will know in what business the organization wishes to engage.

• By identifying the primary customers, everyone will understand which groups of people need to be satisfied and who is counting on the organization. The mission needs to be specific enough in describing the business areas and customers to set direction, but not so specific that the organization lacks imagination. An example of a vision and mission statement from Cincinnati Children’s Hospital Medical Center is shown in Exhibit 2.3.


Vision Cincinnati Children’s Hospital Medical Center will be the leader in improving child health. Mission Statement Cincinnati Children’s will improve child health and transform delivery of care through fully integrated, globally recognized research, education and innovation. For patients from our community, the nation and the world, the care we provide will achieve the best: • Medical and quality of life outcomes • Patient and family experiences and • Value today and in the future.

Source: Cincinnati Children’s Hospital Medical Center, http://www.cincinnatichildrens.org/about/mission/, accessed May 22, 2013.

30 Part 1 Organizing Projects

2-1c Strategic Objectives With the strategic analysis, mission, and vision in place, leaders turn to setting strategic objectives, which should be means of achieving the mission and vision. For most organi- zations, this strategic alignment of objective setting occurs annually, but some organiza- tions may review objectives and make minor revisions at three- or six-month intervals. While the planning is normally performed annually, many of the strategic objectives identified will take well over one year to achieve. The objectives describe both short- and long-term results that are desired along with measures to determine achievement. Orga- nizations that embrace a triple bottom line in their guiding values will have objectives promoting each bottom line, and projects that are selected will contribute toward each. These objectives should provide focus on decisions regarding which projects to select and how to prioritize them, since they are an expression of the organizational focus. Many writers have stated that for objectives to be effective, they should be “SMART—that is specific, measurable, achievable, results-based, and time-specific.”4 An example of strate- gic objectives from The Internet Society is shown in Exhibit 2.4.

2-1d Flow-Down Objectives Once an organization’s strategic objectives are identified, they must be enforced. Some objectives may be implemented by work in ongoing operations. However, projects tend to be the primary method for implementing many objectives. If the organization is rela- tively small, leaders may proceed directly to selecting projects at this point. Larger orga- nizations may elect a different route. If the organization is so large that it is impractical for the overall leaders to make all project selection decisions, they might delegate those decisions to various divisions or functions with the stipulation that the decisions should be aligned with all of the organization’s strategic planning that has taken place to this point. Regardless of whether the organization is small and the top leaders make all proj- ect selection decisions or whether the organization is large and some of the decisions are cascaded one or more levels down, several methods of project selection may be used.

2-2 Portfolio Management Companies that use a strategic project selection process to carefully align projects with their organizational goals will find they tend to be more successful at completing their projects and deriving the expected benefits from them. Portfolio management “aligns with organi- zational strategies by selecting the right projects, prioritizing work, and providing needed resources.”5 “The goal of portfolio management is to achieve the maximum benefit toward the strategic goals of the company. To accomplish this, executives need to identify, select, prioritize, resource, and govern an appropriate portfolio of projects and other work.”6

Governing will be covered in Chapter 14, and all other portfolio management topics will be


1. Foster an open, innovative, and trusted Internet worldwide. 2. Advance policies and strategies that strengthen the Internet’s growth and evolution. 3. Enable a vibrant organization and vital global community to enhance the Internet’s future. 4. Empower people to achieve human potential through unencumbered Internet use.

Source: http://www.internetsociety.org/who-we-are/mission, accessed May 22, 2013.

Chapter 2 Project Selection and Prioritization 31

covered here. Project success at these companies is measured by how much the project con- tributes to the organization’s objectives (business needs) as well as the traditional measures of staying within budget and schedule and achieving the specific technical goals promised at the start of the project so as to obtain a desired return on investment.

For ease of understanding how various work is related, many organizations utilize an approach of classifying portfolios, programs, projects, and subprojects. Not all companies use all four classifications, but understanding how they are related helps one see where any particular portion of work fits in the organization.

2-2a Portfolios Organizations require many work activities to be performed, including both ongoing operational work and temporary project work. Large organizations often have many pro- jects underway at the same time. A portfolio is “projects, programs, subportfolios, and operations managed as a group to achieve strategic business objectives.”7 Project portfo- lios are similar to financial portfolios. In a financial portfolio, efforts are made to diver- sify investments as a means of limiting risk. However, every investment is selected with the hope that it will yield a positive return. The returns on each investment are evaluated individually, and the entire portfolio is evaluated as a whole.

Each project in the portfolio should have a direct impact on the organization. Put another way, an organization’s leaders should identify the organization’s future direction through strategic planning. Then multiple possible initiatives (or projects) can be identi- fied that might help further the organization’s goals. The leaders need to sort through the various possible projects and prioritize them. Projects with the highest priority should be undertaken first. Organizations typically try to have a sense of balance in their portfolios. That is, an organization includes in its portfolio:

• Some large and some small projects • Some high-risk, high-reward projects, and some low-risk projects • Some projects that can be completed quickly and some that take substantial time to


2-2b Programs A program is “a group of related projects, subprograms, and program activities managed in a coordinated way to obtain benefits not available from managing them individually.”8

Programs often last as long as the organization lasts, even though specific projects within a program are of limited duration. For example, the U.S. Air Force has an engine pro- curement program. As long as the Air Force intends to fly aircraft, it will need to acquire engines. Within the engine program are many individual projects. Some of these projects are for basic research, some are for development of engines, and others are for purchas- ing engines. Each project has a project manager, and the entire program has a program manager. While the project managers are primarily concerned with the tradeoffs of cost, schedule, scope, and quality on their individual projects, the program manager is con- cerned with making tradeoffs between projects for the maximum benefit of the entire program. To avoid confusion, programs deal with a specific group of related projects, while a portfolio deals with all of an organization’s projects. A portfolio can include mul- tiple programs as well as multiple projects.

While the leadership group of a company may make portfolio decisions and delegate the program management decisions to a program manager, both portfolios and programs are managed at a level above the typical project manager. For practical purposes, project managers should attempt to understand how both portfolio and program decisions impact their projects and then spend most of their efforts focused on their project.

32 Part 1 Organizing Projects

2-2c Projects and Subprojects Just as a program is made up of multiple projects, a large project may be composed of multiple subprojects. A subproject is “a smaller portion of the overall project created when a project is subdivided into more manageable components or pieces.”9 If the proj- ect is quite large, individuals may be assigned as subproject managers and asked to man- age their subproject as a project. Some of those subproject managers may even work for another company. The project manager needs to coordinate the various subprojects and make decisions that are best for the overall project. Sometimes this may require that a particular subproject be sacrificed for the greater project good. The relationships among a portfolio, programs, projects, and subprojects are illustrated in Exhibit 2.5.

Because projects are frequently performed in a fast-paced environment, it is helpful if they can be guided by organizational priorities. Some of the most typical reasons for project failure are:

• Not enough resources • Not enough time • Unclear expectations • Changes to the project • Disagreement about expectations

The first step in overcoming these problems is to carefully align potential projects with the parent organization’s goals. While many companies are motivated to align projects with organizational goals for these benefits, an additional reason for companies that sell to the government is that the Federal CIO Roadmap “ensures IT projects align to agency mission and business need.”10 This was introduced in the Sarbanes-Oxley requirements. All publicly traded companies must now follow certain guidelines that require some sort of financial decision model to be made in deciding to do a project.

When managers assess the organization’s ability to perform projects and then iden- tify, select, prioritize, resource, and govern a portfolio of projects and other work that they believe will help the organization achieve its strategic goals, they are performing portfolio management. While the majority of the portfolio management activities may be conducted by a team of senior executives, project managers should understand how


Company Portfolio

Program Alpha Program Beta

Project A1

Project A2

Project 3

Subproject 3.1

Subproject 3.2

Chapter 2 Project Selection and Prioritization 33

their specific projects are aligned with the organization’s objectives since they will need to either make or provide input on many decisions.

When companies consider their entire portfolio of work, they sometimes envision projects as means of developing knowledge that can be capitalized upon in ongoing work processes to provide profit, as shown in Exhibit 2.6.

In times when the economy is poor, many companies straggle to get enough business. In such an environment, some firms might accept almost any work they can get. Even during bleak economic times, however, one should be careful how internal projects are selected, since selecting one project limits resources (money, people, etc.) available to other projects. During good or bad economic times, people should take the same care with external projects—ensure that they are consistent with the organization’s goals.

2-2d Assessing an Organization’s Ability to Perform Projects Assessing an organization’s strengths and weaknesses is an essential part of aligning projects with the organization; if an organization does not have the right capabilities, a project that may otherwise support organizational goals may be too difficult to successfully complete. Some questions to ask regarding a firm’s ability to support projects are as follows:

• Do we have a teamwork attitude, free and open communication, creativity, and empowered decision making?

• Do we have a clearly defined project management process? • Do our associates have the right attitudes, skills, and competencies to use the project

management process? • Are our leaders at each level willing to take appropriate personal risk? • Does senior leadership establish a strong leadership foundation? • Do individuals and teams exhibit leadership at their respective levels? • Do we monitor and understand our external environment?


Kn to $SKn to $SLittle Kn Reliable Kn Knowledge ContinuumKnowledge Continuum

Examples: Basic R&D; Customer Research; M&A Due Diligence

Examples: Competitive Strategy; Product Development; Market Entry; Channel Strategy

In cr

em en

ta l P

ro ce

ss Im

pr ov

em en


Option Execution Projects

Radical Process


Implementation Projects

Knowledge Building Projects

Options Development

Projects Inbound Logistics


Outbound Logistics

Sales and Marketing

Customer Service



Human Resources


Projects PortfolioNew Kn

Current Kn

Both projects and processes are intertwined to create sustainable value.

Source: Chinta, Ravi and Timothy J. Kloppenborg, Projects and Processes for Sustainable Organizational Growth, SAM Advanced Management Journal 75 (3) (Spring 2010), p. 24.

34 Part 1 Organizing Projects

2-2e Identifying Potential Projects The second part of aligning projects with the firm’s goals is to identify potential projects. These potential projects can be in response to a market demand, strategic opportunity, social need, environmental consideration, customer request, legal requirement, or tech- nological advance.11 Ideally, this is accomplished in a systematic manner—not just by chance. Some opportunities will present themselves to the organization. Other good opportunities will need to be discovered. All parts of the organization should be involved. This means people at all levels, from front-line workers to senior executives, and people from all functional areas need to help identify potential projects. For example, sales- people can uncover many opportunities by maintaining open discussions with existing and potential customers, and operations staff may identify potential productivity-enhancing pro- jects. Everyone in the firm should be aware of industry trends. Many industries have trade journals such as Elevator World or Aviation Week and Space Technology that can be read regularly for potential project ideas. One reasonable goal is to identify approximately twice as many potential projects as the organization has time and resources to perform. Under close examination, some potential projects may not be a good fit. Any company that accepts practically every potential project will probably waste some of its resources on pro- jects that do not support its organizational goals.

Once potential projects are identified, the next step is to develop a brief description of each. The leadership team that will select and prioritize projects needs to understand the nature of the projects they are considering. While the level of documentation different firms require varies greatly, a bare minimum can be called the elevator pitch. This is when a person meets another waiting for an elevator and asks, “I hear you are on XYZ Project. What is it all about?” The responder may have only a brief time to give a reply before the elevator arrives and must be prepared to answer quickly with simple state- ments about the project work and why it is important to the organization. The work is often summarized in a brief statement of work, which is a “narrative description of pro- ducts, services, or results to be provided by the project.”12 Why the project is important is often summarized as a business case, which “describes the necessary information from a business standpoint to determine if the project is worth the required investment.”13

The business case generally includes both why the project is needed and, if the firm uses financial justification as part of project selection, an estimate of costs and benefits. Armed with this elevator pitch, the series of processes that collectively are used to select, prioritize, and initiate projects begins as shown in Exhibit 2.7. The rectangles represent


Elevator Pitch

Select & Prioritize Projects (Ch. 2)

Develop Project Charter (Ch. 4)

Identify Stakeholders (Ch. 5)

Plan Stakeholder Management & Communications Management (Ch. 5)

Draft Scope Overview & Business Case, Project Priority

Signed Project Charter

Stakeholder Register Stakeholders

Management Plan & Communication Management Plan

Chapter 2 Project Selection and Prioritization 35

work processes, and the documents represent inputs into and deliverables out of the work processes. Some of this work will be described in Chapters 4 and 5.

2-2f Methods for Selecting Projects The people in charge of selecting projects need to ensure overall organizational priorities are understood, agreed upon, and communicated. Once this common understanding is in place, it is much easier to prioritize potential projects. The degree of formality used in selecting projects varies widely. In a small company, it can be straightforward. The prioritization should include asking questions such as these:

• What value does each potential project bring to the organization? • Are the demands of performing each project understood? • Are the resources needed to perform the project available? • Is there enthusiastic support both from external customers and from one or more

internal champions? • Which projects will best help the organization achieve its goals?

There are several different methods of systematically selecting projects. The methods include both financial and scoring models. The primary reason for including financial analysis—either to make the project selection decisions directly or to at least assist in the decision making—is that, from management’s perspective, projects are investments. Therefore, proper selection should yield a portfolio of projects that collectively contribute to organizational success.

Three different approaches are commonly used to ensure both financial and non- financial factors are considered when selecting projects. First, some organizations use financial analysis as the primary means of determining which projects are selected, and management merely tempers this with informal inclusion of nonfinancial factors. Second, some organizations use financial models as screening devices to qualify pro- jects or even just to offer perspective; qualified projects then go through a selection process using a scoring model. Third, at still other organizations, financial justifica- tion is one factor used in a multifactor scoring model. The common thread in all three of these approaches is that both financial and nonfinancial factors are considered when selecting projects. Let us consider both financial and scoring models. Financial models will be covered in concept, but the calculations will not be shown since they are explained in depth in most required finance courses. Scoring models will be covered in both concept and calculation since many students might not have them in another course.

2-2g Using a Cost-Benefit Analysis Model to Select Projects Cost-benefit analysis is “a financial analysis tool used to determine the benefits provided by a project against its costs.”14 These models compare expected project costs to expected project benefits. Several models can be used in making project selection decisions.

NET PRESENT VALUE (NPV) Net present value (NPV) is the most widely accepted model and will be covered first. When using net present value, the analyst first discounts the expected future value of both the project costs and benefits, recognizing that a dollar in the future is worth less than a dollar today. Then the analyst subtracts the stream of discounted project costs from the stream of discounted project benefits. The result is the net present value of the potential project. If the net present value is positive, then the organization can expect to make money from the project. Higher net present values pre- dict higher profits. See the summary in Exhibit 2.8.

36 Part 1 Organizing Projects

BENEFIT-COST RATIO (BCR) A second financial model sometimes used is benefit-cost ratio (BCR). The ratio is obtained by dividing the cash flow by the initial cash outlay. A ratio above 1.0 means the project expects to make a profit, and a higher ratio than 1.0 is better.

INTERNAL RATE OF RETURN (IRR) The third financial model is internal rate of return (IRR). In this model, the analyst calculates the percentage return expected on the project investment. A ratio above the current cost of capital is considered positive, and a higher expected return is more favorable.

PAYBACK PERIOD (PP) The fourth financial model that is sometimes used is the pay- back period (PP). In this analysis, a person calculates how many years would be required to pay back the initial project investment. The organization would normally have a stated period that projects should be paid back within, and shorter payback periods are more desirable.

ADVANTAGES AND DISADVANTAGES OF EACH METHOD Financial models are useful in ensuring that selected projects make sense from a cost and return perspective. Several models have weaknesses that need to be understood before they are used. For example, payback period models do not consider the amount of profit that may be gen- erated after the costs are paid. Thus, two projects with a similar payback period could look equal, but if one has substantially higher revenue after the payback period, it would clearly be superior. BCR would not be acceptable unless all costs and benefits were cal- culated in present dollars (in which case it is similar to NPV except it is a ratio of ben- efits to cost instead of the difference between revenue and cost). IRR and BCRs have problems if used for choosing between mutually exclusive projects because they can favor smaller projects that create less total value for the firm but have high percentage returns. For example, a huge project with a medium rate of return would create a lot of value for a firm but might not be picked over a smaller project with a higher return if only one can be chosen. Additionally, it is sometimes quite difficult to calculate an IRR if a project has nonconventional cash flows. For the most part, the finance field recommends using net present value. The other measures can be calculated to provide perspective on whether a project passes a minimum financial return threshold or to communicate with people who might not understand NPV.






Calculation PV revenue – PV cost Cash flow/Project investment

Percentage return on project investment

Project costs/Annual cash flows

Neutral Result NPV = $0 Ratio = 1.0 IRR = Cost of capital Payback period = Accepted length

If used to screen pro- jects or to select pro- jects outright

NPV > Acceptable amount

Ratio > Acceptable amount

IRR > Acceptable amount Payback period < Acceptable length

If used to compare projects

Higher NPV better Higher ratio better Higher IRR better Shorter payback period better

Chapter 2 Project Selection and Prioritization 37

However, none of the financial models ensure alignment with an organization’s strategic goals. Therefore, financial analysis, while very useful, is normally not enough.

2-2h Using a Scoring Model to Select Projects In addition to ensuring that selected projects make sense financially, other criteria often need to be considered. A tool called a scoring model helps to select and prioritize potential pro- jects. It is useful whenever there are multiple projects and several criteria to be considered.

IDENTIFYING POTENTIAL CRITERIA These criteria should include how well each potential project fits with the organization’s strategic planning. The criteria may also include such items as risk, timing, resources needed, and so on. A normal practice is for the company’s leadership team to jointly determine what criteria will be used to select projects. A list of questions executives may use to develop their list of criteria is shown in Exhibit 2.9.

DETERMINING MANDATORY CRITERIA Once the leadership team agrees on a list of criteria that are important, the next step is to determine whether any of the criteria are mandatory. That is, are there any situations that dictate a project must be chosen regard- less of any other considerations? Examples of this include government mandates and clear safety or security situations. This list of “must do” projects should be kept as small as possible since these projects automatically get selected and can crowd out other worthwhile projects.

WEIGHTING CRITERIA Next, the leadership team determines the relative importance or weight of each decision criteria. While more complex methods of determining criteria weights and project evaluations have been used in the past, many firms now use the sim- ple methods described here for determining criteria weights. See Exhibit 2.10 for an example of project evaluations. First, executives determine which criterion is most important and give that a weight of 10. Then they ask how important in comparison each of the other criteria is. For example, if the executives in a consumer products com- pany thought development of new products was most important, it would be assigned a weight of 10. If the customer relations factor was deemed almost as important as new product development, maybe it would be assigned 8. If the factors of supplier relations and probability of project success were each deemed to be half as important as new product development, each would be assigned 5. Perhaps other criteria such as cost


• How well does this project fit with at least one organizational objective? • How many customers are there for the expected results? • How competitively can the company price the project results? • What unique advantages will this project provide? • Does the company have the resources needed? • What is the probability of success? • Are the data needed to perform the project available or easily collected? • Do the key stakeholders agree that the project is needed? • What is the expected return on investment? • How sustainable will the project results be? • How does this project promote (or hinder) our corporate social responsibility? • What risks are there if we do not perform this project?

38 Part 1 Organizing Projects

reduction, safely, and so forth were also considered but determined to not be as impor- tant. The resulting criteria with weights are shown in Exhibit 2.10 in the top row of the selection and prioritization matrix. Most organizations will decide to use about three to five criteria. Lesser-rated criteria can be used as tie breakers if needed.

EVALUATING PROJECTS BASED ON CRITERIA Now the leadership team evaluates each project on each criterion. The most efficient and accurate method is to concentrate on one criterion at a time, going down each column in turn. An easy method for this is to rate each project on that particular criterion with scores ranging from 1 (potential project has very little or even negative impact on this criterion) to 5 (project has excel- lent impact on this criterion). The upper left portion of each cell in the matrix can dis- play the rating, representing how well that project satisfies that criterion.

Once a project has been rated on a particular criterion, that rating should be multi- plied by the weight assigned to that criterion and displayed as the weighted score in the main body of each cell. The total for each project should be added across the row. The highest-scoring projects would ordinarily be selected. If several projects have close scores (virtual ties), other criteria or discussion can be used to break the tie. For example, in Exhibit 2.11, there is a virtual tie between Projects A and B.

SENSITIVITY ANALYSES Scoring models allow leadership teams to perform sensitivity analyses—that is, to examine what would happen to the decision if factors affecting it were to change. Selection criteria may be added or altered. Participants may decide that some criteria are more important than others and weight them accordingly. Missing cri- teria or new alternatives can be added and the decision revisited. For example, if the executive team evaluating the projects in Exhibit 2.11 had a bad experience with an unsuccessful project and decided to reevaluate their decisions with success probability now weighted a 9 for very important, the new project selection and priority matrix would be calculated as shown in Exhibit 2.12.

Decision makers can ensure that they use very solid ratings for each potential project. For example, if one criterion was the number of customers, the marketing department could interview some potential customers to gauge their level of interest.

A company might want to select several projects. If so, the scores from the selection matrix could serve as one method of prioritizing the projects.


Project A

Project B

Project C

Project D

Weighted Total Score

New Products

Customer Relations

Supplier RelationsProject\Criteria

& Weight

Success Probability


Chapter 2 Project Selection and Prioritization 39

2-2i Prioritizing Projects Once all projects have been selected, they will need to be prioritized—that is, the deci- sion makers will need to determine which ones will get assigned resources and be sched- uled to begin first. If a company selects a number of projects for a year (or even for a fiscal quarter), it cannot expect to start all of them at the same time. The scoring models are useful in providing input into the starting order of projects. Most leadership teams will consider the weighted scores of each project as a starting point in assigning resources to projects and determining their start dates. The leadership team members, however, also generally discuss other issues such as:

• The urgency of each project • The cost of delaying the expected benefits from various projects • Practical details concerning the timing


Project A

Project B

Project C

Project D

Total New

Products Customer Relations

Supplier RelationsProject\Criteria

& Weight

Success Probability


























Source: Chris Bridges.


Project A

Project B

Project C

Project D

Total New

Products Customer Relations

Supplier RelationsProject\Criteria

& Weight

Success Probability


























40 Part 1 Organizing Projects

For example, an important process improvement project may be far less disruptive to perform when the factory is shut down for routine maintenance. One more discussion frequently occurs in the prioritizing process—if there is a conflict between resource needs for two projects, which one gets the needed resources first? Often, this is left to the proj- ect sponsors to iron out; for especially important projects, it may be formally decided by the leadership team. In that way, the probability of the critical project being held up by a misunderstanding is greatly decreased.

Exhibit 2.13 shows how the Alternative Breaks (AB) planning committee at a univer- sity ranked spring break projects. This exhibit shows four of the twenty-six projects that were selected for trips. This book will include multiple examples of the AB project to illustrate how various project planning tools work together. Each trip is a small project while the combination of all twenty-six trips form the overall project.

2-2j Resourcing Projects Once all projects have been prioritized, it is time to assign resources to each. Resources can include key personnel such as sponsors, project managers, core teammembers, and subject mat- ter experts. It can also include money, space, and equipment that may be in short supply. The easiest way is to use a resource assignment matrix and begin by assigning resources to the high- est priority projects. Once an individual resource is no longer available, the organization is limited in the number of projects that it can take on during a particular time. Assigning resources like this requires a prioritized project list such as shown in Exhibit 2.12, a list of resources and how much of each is available, and an estimate of how much of each key resource each project will need. For simplicity’s sake, companies often plan for a fiscal quarter. Exhibit 2.14 shows the same four projects and choices of project managers, team members, and money for each. Note, while there is enough project manager time to start all four projects, there is not enough teammember time nor enough cash. Therefore, only three projects can be started.

2-3 Securing Projects The discussion above pertains to projects that are internal to an organization. This sec- tion deals with projects a company (called the client) wants performed, but for which it may hire external resources (called contractors) to execute significant parts or all of the work. External projects can be viewed either from the perspective of the client company that wants the project to be executed or from the perspective of the contractor company that wants to perform the work. Client companies may first put prospective external





9 10 6 5 Total

New York Vegan Farm 5 45

4 40

3 18

4 20


West Virginia Sustainability 4 36

3 30

4 24

5 25


Chicago Halfway House 2 18

4 40

4 24

4 20


El Salvador Cultural Immersion 1 9

5 50

5 30

1 5


Chapter 2 Project Selection and Prioritization 41

projects through a selection and prioritization process as described above and, if selected, then decide whether to perform the work internally (make) or hire the project to be per- formed by others (buy). If the decision is to buy, then the client company needs to plan and conduct the procurement.

Contractor companies need to identify potential project opportunities, determine which they will pursue, submit proposals, and be prepared to either bid or negotiate to secure the work. We consider the client company’s perspective in Chapter 12, Project Supply Chain Management. We consider the contractor’s perspective next.

2-3a Identify Potential Project Opportunities Contractors seeking external projects to perform should pursue this in a fashion similar to that of any company considering internal projects, as described earlier in this chapter in the portfolio alignment section on identifying potential projects. Additionally, since they need to look externally, contractor companies should have representatives at trade shows, professional conferences, and anywhere information on the intentions of poten- tial customers and competitors may surface. Contractor companies should also actively practice customer relationship management by establishing and nurturing personal con- tacts at various levels and functions. Contractor companies can also practice customer relationship management by linking information systems to the extent practical so as to identify any useful information concerning potential future projects and improve man- agement of current projects.

2-3b Determine Which Opportunities to Pursue Just as all companies should decide which internal projects to select, as previously described in the methods for selecting projects, most contractor companies are best served by targeting the projects they wish to pursue. Some companies have a policy that they will bid on every potential project, knowing that if they do not bid, they will not be awarded the project. More companies find that if they target their opportunities, their “hit rate” or probability of securing the work on any given proposal increases. It







Maximum Availability 200 400 300 300 150 150 $30 million

Project List

Project B: PM 240, Team 200, $5M

240 200 $5M

Project A: PM 200, Team 150, $10M

200 150 $10M

Project C: PM 300, Team 150, $14M

300 150 $14M

Project D: PM 150, Team 180, $4M

Remaining Availability 0 160 0 100 0 0 $1M

42 Part 1 Organizing Projects

takes time and resources to put together a good proposal, so it makes sense to increase the acceptance rate by developing a bid/no-bid decision strategy.

Each company has strengths and weaknesses compared to its competitors. Hence, a quick SWOT analysis could be used to decide whether to pursue a potential project, just as a more involved version of SWOT analysis was described earlier and depicted in Exhibit 2.2. Decision makers can also ask how well a potential project will help achieve their objectives. If they determine a project will help achieve their objectives, the next considerations are the cost to pursue the work and the probability of successfully secur- ing the project given the likely competition. A company frequently considers risks both of pursuing and not pursuing a potential project. Finally, does the company have the capability to perform the work if it is awarded?

2-3c Prepare and Submit a Project Proposal When a firm prepares to submit a proposal, it is really conducting a small project with the primary deliverable of the project being a compelling and complete proposal. The contractor should understand the project’s source selection criteria, the “set of attributes desired by the buyer which a seller is required to meet or exceed to be selected for a contract.”14 While criteria will vary extensively from one project to another, generally a client will likely want to be convinced that the potential contractor is technically, managerially, financially, and operationally competent. Successful project managers try hard to convince potential clients that they are capable on all four dimensions. A short list of these factors is shown in Exhibit 2.15.

Many companies find that targeting their opportunities is a better use of their time and resources than bidding on every potential project.



Technical experience Management experience Financial capacity Production capacity

Needs understanding Project charter Life cycle cost Business size and type

Technical approach Planning and scheduling Cost basis and assumptions Past performance

Risk mitigation Project control Warranties References

© vg st ud io /S hu tte rs to ck .c om

Chapter 2 Project Selection and Prioritization 43

2-3d Negotiate to Secure the Project Once all proposals have been delivered and evaluated, the client company may elect to either award the project or enter into negotiations with one or more potential contrac- tors. On more routine projects, the contract may be awarded at this point. Further clar- ifications and negotiations may follow for complex projects.

A client company and a contractor company may negotiate the amount of money to be paid for a project. They may also negotiate the contractual terms, schedule, specific personnel to be assigned to work on the contract, quality standards, reporting mechan- isms, and various other items. A project manager may need to make arrangements with potential suppliers to secure the products and services needed to perform the project. All of these considerations will be covered in subsequent chapters.

Successful project managers understand that they need to prepare well for negotia- tions. This starts with a clear understanding of what is most important to their manage- ment. Often, it includes fact-finding with the client company to understand its needs and abilities. Armed with understanding of both perspectives, a project manager attempts to find a solution that allows the organization to secure the project work with enough profit potential and with the start of a good working relationship with the client. In the end, the client company will select the contractor(s) and award the contract(s).

Summary Project selection does not occur in isolation. Ideally, it begins with the organization’s strategic planning. This planning begins with a strategic analysis of the organiza- tion’s internal strengths and weaknesses as well as the external threats and opportunities it faces. The organiza- tion should then develop its guiding principles such as mission and vision statements. Most companies will have an annual planning session in which strategic objec- tives are developed. Larger organizations will continue this effort with one or more levels of planning in which the overall objectives are flowed down to determine objectives that are appropriate for each organizational level.

Once the strategic planning is accomplished, the organization’s leadership team engages in portfolio management. The first part is an open and honest assessment of the organization’s ability to perform pro- jects. The decision makers need to understand how many resources are available, the organization’s overall capabilities, and the capabilities of the individuals who will be assigned to projects. An ongoing portfolio man- agement activity is for everyone in the firm to identify possible opportunities that they feel might help the organization achieve its goals. Each potential project should be described at least by stating in a sentence or two what work is involved and how it would help the organization achieve one or more of its goals.

Once potential projects are identified and briefly described with statements of work and business cases, they should be put through a process to determine which will be selected and what their relative priori- ties are. Both financial and scoring models are fre- quently used to evaluate potential projects. Net present value is the preferred financial method, although others are sometimes used. Financial analy- sis tells the leadership team how much each potential project is worth from a benefits-versus-cost compari- son, but does not tell how each potential project may help to achieve the organization’s goals. Scoring mod- els can incorporate various goals and should also be used. Once a project list is selected, the projects need to be prioritized so some can start right away and others can start later.

Contractor companies need to be constantly on the lookout for potential project opportunities. Once potential projects are identified, companies need to decide which ones they pursue. Just as for internal projects, some external projects will be bet- ter at helping an organization reach its goals because they are a better fit. The contractor needs to prepare and submit proposals for desired projects and be prepared to follow up and often negotiate in order to secure them.

44 Part 1 Organizing Projects

Key Terms from the PMBOK® Guide portfolio management, 31 portfolio, 32 program, 32 subproject, 33

statement of work, 35 business case, 35 source selection criteria, 43

Chapter Review Questions 1. List and describe each step in the strategic plan-

ning process. 2. Name at least four things that a mission state-

ment should include. 3. What does the strategic analysis acronym SWOT

stand for? 4. What is the most widely accepted financial model

for selecting projects? 5. What are some advantages and disadvantages

of using a financial model for selecting projects?

6. What are some advantages and disadvantages of using a scoring model for selecting projects?

7. What are some common reasons for project failure?

8. Who should be involved in the second part of aligning projects with the firm’s goals, which is identifying potential projects?

9. If there is a conflict between resource needs for two projects, who decides which one gets the needed resources first?

10. In a project scoring model, why is each decision criteria given a weight?

11. What purpose do sensitivity analyses serve in using scoring models to choose projects?

12. If several projects have close scores as the result of a scoring model, what can be done to break the virtual tie?

13. Why might a contractor company perform a SWOT analysis prior to bidding on a potential project?

14. Why is it important for a contractor to under- stand the source selection criteria a client uses to decide to whom they will award a project?

15. Name five things that may be negotiated between a client company and a contractor company. 1.

Discussion Questions 1. How might the internal and external parts of a

SWOT analysis affect one another? 2. Describe the interaction between vision and

mission statements. 3. How is a company’s portfolio similar to and

different from a financial portfolio? 4. What is the best way for an organization to

prioritize among selected projects? Does it vary among organizations?

5. Describe three different ways decision makers might select projects while considering both financial and nonfinancial factors.

6. Why is aligning potential projects with the parent organization’s goals the first step in avoiding project failure?

7. Why is it a good practice for organizations to identify twice as many potential projects as they plan to implement?

8. Suppose you are purchasing a new car, and you decide to use a scoring model to decide among four options. What would be your top three cri- teria, and what would be each criterion’s relative weight?

9. Under what circumstances should a selected project take precedence over other selected projects?

10. If you are a contractor looking for project work, why might you decide not to pursue a particular project opportunity?

11. What are the four main areas of competency a client company is looking for in a project manager? How can you best demonstrate these competencies to a potential client?

Chapter 2 Project Selection and Prioritization 45

PMBOK® Guide Questions 1. A collection of projects, programs, and opera-

tions managed as a group to achieve strategic objectives is called a: a. process b. portfolio c. subprogram d. life cycle

2. Projects may be undertaken as a result of any of the following strategic reasons except: a. social need b. market demand c. executive discretion d. environmental considerations

3. A narrative description of products, services, or results to be delivered by the project is a: a. request for information b. business case c. project statement of work d. elevator pitch

4. Program management helps determine the optimal approach for managing interdependent projects in order to achieve benefits and control. Program management activities might include all of the following except: a. aligning organizational and strategic direction b. managing shared client relationships c. resolving issues and change management d. resolving resource constraints

5. A project statement of work (SOW) would use or include information from each of the following sources except: a. project charter b. strategic plan c. business need d. product scope description

6. All projects should be aligned with their organization’s strategic plan, which includes the organization’s vision, goals, and objectives. Which of these is the definition of a vision statement? a. Conveys a larger sense of organizational pur-

pose, and is both inspiring and guiding.

b. Describes short- and long-term results along with measures to determine if they have been achieved.

c. Includes the organization’s core purpose, core values, beliefs, culture, primary business, and primary customers.

d. Is SMART: specific, measurable, achievable, results-based, and time-specific.

7. Which group within the organization is respon- sible for integrating data and information from corporate strategic projects, and using corporate measurement systems to evaluate how strategic objectives are being fulfilled? a. Chief Information Officer b. Project Management Office c. Project Sponsors d. Operations Management

8. The document that includes the necessary infor- mation to determine whether a project is worth the required investment, and is used for decision making by upper management, is called the: a. project scope statement b. project charter c. business case d. case study

9. The author notes that contractors seeking external customers should also use a project selection/ portfolio alignment process. Once an external customer and contractor have reached a consen- sus on the initial intentions for the contracted work, their understanding is documented in: a. a statement of work (SOW) b. a business case c. an agreement d. a strategic alliance

10. A business case typically contains information regarding the business need and a financial analysis. Which financial model divides the cash flow by the initial cash outlay? a. Benefit-cost ratio (BCR) b. Internal rate of return (IRR) c. Net present value (NPV) d. Payback period (PP)

Exercises 1. Complete the following scoring model. Show all

your work. Tell which project you would pick first, second, third, and last. How confident are

you with each choice? If you lack confidence regarding any of your choices, what would you prefer to do about it?

46 Part 1 Organizing Projects

2. Complete the following scoring model. Show all your work. Tell which project you would pick first, second, third, and last. How confident are you with each choice? If you lack confidence regarding any of your choices, what would you prefer to do about it?

3. Pretend you are on the leadership team for a pharmaceutical company that is in a difficult financial situation due to patents that have died

on two of your most profitable drugs. Brainstorm a list of criteria by which you would select and prioritize projects. Weight the criteria.

4. Pretend you are on the leadership team of a manufacturing company that is currently chal- lenged by low-cost competition. Brainstorm a list of criteria by which you would select and prior- itize projects. Weight the criteria.

Example Project Instructions Your instructor will probably bring example projects to class and facilitate the assignment of students to the various project teams. Therefore, you will proba- bly not be involved in the project selection. However, one of the first things you should do when assigned to a project is to learn about the company or other organization that wants the project to be completed. Why did they select this project? Is it a “must do”

project or did it get picked over other competing projects? By understanding what makes the project so important, you will make better decisions and will be more motivated through the term. If your project is a “must do” project, explain why. If it is not a “must do” project, explain how it was selected. Explain where it fits in priority with other work of the organization.

References A Guide to the Project Management Body of Knowledge

(PMBOK® Guide), 5th ed. (Newtown Square, PA: Project Management Institute, 2013).

Barclay, Colane, and Kweku-Muata Osei-Bryson, “Toward a More Practical Approach to Evaluating Programs: The Multi-Objective Realization Approach,” Project Management Journal 40 (4) (December 2009): 74–93.

Brache, Alan P., and Sam Bodley-Scott, “Which Imperatives Should You Implement?” Harvard Man- agement Update, Article reprint no. U0904B (2009).

Cannella, Cara, “Sustainability: A Green Formula,” 2008 Leadership in Project Management 4: 34–40.

Caron, Franco, Mauro Fumagalli, and Alvaro Riga- monti, “Engineering and Contracting Projects: A Value at Risk Based Approach to Portfolio Balanc- ing,” International Journal of Project Management 25 (2007): 569–578.

Chinta, Ravi, and Timothy J. Kloppenborg, “Projects and Processes for Sustainable Organizational Growth,” SAM Advanced Management Journal 75 (2) (Spring 2010): 22–28.

Project A

Project B

Project C

Project D

Weighted Total Score

Criteria 1 Criteria 2 Criteria 3 Project\

Criteria & Weight 4610













Project A

Project B

Project C

Project D

Weighted Total Score

Criteria 1 Criteria 2 Criteria 3 Project\

Criteria & Weight 3710













Chapter 2 Project Selection and Prioritization 47

Cooper, Robert G., “Winning at New Products: Path- ways to Profitable Innovation,” Proceedings of PMl Research Conference 2006 (Newtown Square, PA: Project Management Institute, 2006).

Daft, Richard L., Management, 9th ed. (Mason, OH: South-Western Cengage Learning, 2010).

Eager, Amanda, “Designing a Best-in-Class Innovation Scoreboard,” Technology Management (January– February 2010): 11–13.

Evans, R. James and William M. Lindsay, Managing for Quality and Performance Excellence, 8th ed. (Mason, OH: South-Western Cengage Learning, 2011).

Kenny, John, “Effective Project Management for Stra- tegic Innovation and Change in an Organizational Context,” Project Management Journal 34 (1) (March 2003): 43–53.

Kloppenborg, Timothy J., Arthur Shriberg, and Jayashree Venkatraman, Project Leadership (Vienna, VA: Management Concepts, 2003).

Kloppenborg, Timothy J., and Laurence J. Laning, Strategic Leadership of Portfolio and Project Management (New York: Business Expert Press, 2012).

Labuschagne, Les, and Carl Marnewick, “A Structured Approach to Derive Projects from the Organiza- tional Vision,” Proceedings of PMI Research Conference 2006 (Newtown Square, PA: Project Management Institute, 2006).

Milosevic, Dragan Z., and Sabin Srivinnaboon, “A Theoretical Framework for Aligning Project Management with Business Strategy,” Project Management Journal 37 (3) (August 2006): 98–110.

Organizational Project Management Maturity Model Knowledge Foundation, 2nd ed. (Newtown Square, PA: Project Management Institute, 2008).

Reginato, Justin, and C. William Ibbs, “Employing Business Models for Making Project Go/No Go Decisions,” Proceedings of PMI Research Conference 2006 (Newtown Square, PA: Project Management Institute, 2006).

Senge, Peter, Bryan Smith, Nina Kruschwitz, Joe Laur, and Sara Schley, The Necessary Revolution: How Individuals and Organizations Are Working Together to Create a Sustainable World (New York: Broadway Books, 2008).

Smallwood, Deb, and Karen Furtado, “Strategy Meets the Right Projects at the Right Time,” Bank Systems & Technolgy 46 (4) (June–July 2009): 34.

The Standard for Portfolio Management, 2nd ed. (Newtown Square, PA: Project Management Institute, 2008).

Wheatley, Malcolm, “Beyond the Numbers” PMNet- work 23 (8) (August 2009): 38–43.

Zhang, Weiyong, Arthur V. Hill, Roger G. Schroeder, and Keyin W. Linderman, “Project Management Infrastructure: The Key to Operational Performance Improvement,” Operations Management Research 1 (1) (September 2008): 40–52.

http://en.wikipedia.org/wiki/Triple_bottom_line, accessed February 2, 2010.

http://www.gcbl.org/about, accessed March 12, 2013. http://www.bia.ca/vision.htm, accessed March 5, 2013. http://ocio.os.doc.gov/s/groups/public/@doc/@os/

@ocio/@oitpp/documents/content/prod01_00208 2.pdf, accessed March 6, 2013.

Endnotes 1. http://www.bia.ca/vision.htm, accessed March 5,

2013. 2. http://www.gcbl.org/about, accessed March 12,

2013. 3. Lussier, Robert N., and Christopher F. Achua, Lead-

ership: Theory, Application, Skill Development, 4th ed. (Mason, OH: Thomson South-Western, 2010): 425.

4. Ibid., 426. 5. PMBOK® Guide 7. 6. Kloppenborg, Timothy J., and Laurence J. Laning,

Strategic Leadership of Portfolio and Project Manage- ment (New York: Business Expert Press, 2012): 21.

7. PMBOK® Guide 551. 8. PMBOK® Guide 553. 9. PMBOK® Guide 564.

10. http://ocio.os.doc.gov/s/groups/public/@doc/@os/ @ocio/@oitpp/documents/content/ prod01_002082.pdf, accessed May 22, 2013.

11. PMBOK® Guide105. 12. PMBOK® Guide 68. 13. PMBOK® Guide 69. 14. PMBOK® Guide 535. 15. PMBOK® Guide 563.

48 Part 1 Organizing Projects


Prioritizing Projects at D. D. Williamson

One of the most difficult, yet most important, lessons we have learned at D. D. Williamson surrounds project prioritization. We took three years and two iterations of our prioritization process to finally settle on an approach that dramatically increased our success rate on critical projects (now called VIPs, or “Vision Impact Projects”).

Knowing that one of the keys to project management success is key management support, our first approach at prioritization was a process where our entire senior management team worked through a set of criteria and resource estimations to select a maximum of two projects per senior management sponsor—16 projects in total. Additionally, we hired a continuous improvement manager to serve as both our project office and a key resource for project facilitation. This was a great move forward (the year before we had been attempting to monitor well over 60 continuous improvement projects of varying importance). Our success rate improved to over 60 percent of projects finishing close to the expected dates, financial investment, and results.

What was the problem? The projects that were not moving forward tended to be the most critical—the heavy-investment “game changing” projects. A review of our results the next year determined we left significant money in opportunity “on the table” with projects that were behind and over budget!

This diagnosis led us to seek an additional process change. While the criteria rating was sound, the number of projects for a company our size was still too many to track robustly at a senior level and have resources to push for completion. Hence, we elevated a subset of projects to highest status—our “VIPs.” We simplified the criteria ratings—rating projects on the level of expected impact on corporate objectives, the cross-functional nature of the team, and the perceived likelihood that the project would encounter barriers which required senior level support to overcome.

The results? Much better success rates on the big projects, such as design and implementation of new equipment and expansion plans into new markets. But why?

The Global Operating Team (GOT) now has laser focus on the five VIPs, reviewing the project plans progress and next steps with our continuous improvement manager in every weekly meeting. If a project is going off plan, we see it quickly and can move to reallocate resources, provide negotiation help, or change priorities within and outside the organization to manage it back on track. Certainly, the unanticipated barriers still occur, but we can put the strength of the entire team toward removing them as soon as they happen.

A couple of fun side benefits—it is now a development opportunity for project managers to take on a VIP. With only four to six projects on the docket, they come with tremendous senior management interaction and focus. Additionally, we have moved our prioritization process into our functional groups, using matrices with criteria and resource estimations to prioritize customer and R&D projects with our sales, marketing, and science and innovation teams, as well as IT projects throughout the company. The prioritization process has become a foundation of our cross-functional success!

Following are excerpts from the spreadsheet D. D. Williamson used to select and prioritize our VIP projects last year. Exhibit 2.16 shows the five criteria used to prioritize the projects. Exhibit 2.17 shows how associate time when assigned to a project is not available for other projects. Note all executives agreed to spend up to 120 hours this quarter on projects and Brian is overallocated—meaning either he will need to do extra work, something needs to be assigned to another person, or one less project can be completed.

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