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Project Management

Project Management ­MGMT627
Broad Contents
Project driven versus non­project driven organizations
Project management methodologies
Systems, programs, and projects
Categories of projects
Product versus Project Management
Maturity and excellence
Informal Project Management
Organizational structures
Selecting the organizational form
Project driven versus Non ­ project driven organizations:
On the micro level, virtually all organizations are marketing, engineering, or manufacturing
driven. But on the macro level, organizations are either project- or non­project driven. In a
project driven organization, such as construction or aerospace, all work is characterized through
projects, with each project as a separate cost center having its own profit-and-loss statement.
The total profit to the corporation is simply the summation of the profits on all projects. In a
project driven organization, everything centers on the projects. In the non­project driven
organization, such as low technology manufacturing, profit and loss is measured on vertical or
functional lines. In this type of organization, projects exist merely to support the product lines
or functional lines. Priority resources are assigned to the revenue-producing functional line
activities rather than the projects.
Project management in a non­project driven organization is generally more difficult for these
Projects may be few and far between.
Not all projects have the same project management requirements, and therefore, they cannot
be managed identically. This difficulty results from poor understanding of project
management and a reluctance of companies to invest in proper training.
Executives do not have sufficient time to manage projects themselves, yet refuse to delegate
Projects tend to be delayed because approvals most often follow the vertical chain of
command. As a result, project work stays too long in functional departments.
Because project staffing is on a "local" basis, only a portion of the organization understands
project management and sees the system in action.
There exists heavy dependence on subcontractors and outside agencies for project
management expertise.
Non­project driven organizations may also have a steady stream of projects, all of which are
usually designed to enhance manufacturing operations. Some projects may be customer-
requested, such as:
 The introduction of statistical dimensioning concepts to improve process control.
 The introduction of process changes to enhance the final product.
 The introduction of process change concepts to enhance product reliability.
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If these changes are not identified as specific projects, the result can be:
 Poorly defined responsibility areas within the organization.
 Poor communications, both internal and external to the organization.
 Slow implementation.
 Lack of a cost tracking system for implementation.
 Poorly defined performance criteria.
Figure 4.1 below shows the tip-of-the-iceberg syndrome, which can occur in all types of
organizations but is most common in non­project driven organizations.
Figure 4.1: The tip-of-the-iceberg syndrome for matrix implementations.
On the surface, all we see is a lack of authority for the project manager. But beneath the surface
we see the causes; there is excessive meddling due to lack of understanding of project
management, which, in turn, resulted from an inability to recognize the need for proper training.
In the previous sections we stated that project management could be handled on either a formal
or an informal basis. Informal project management most often appears in non­project driven
organizations. It is doubtful that informal project management would work in a project driven
organization where the project manager has profit and loss responsibility.
In reality, most firms that believed that they were non­project driven were actually hybrids.
Hybrid organizations are typically non­project driven firms with one or two divisions that are
project driven.
Historically, hybrids have functioned as though they were non­project driven, as shown in
Figure 4.2, but today they are functioning like project driven firms.
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Figure 4.2: Project driven versus non-project driven organizations
Project Management Methodologies:
Earlier there were no allies or alternative management techniques that were promoting the use
of project management. The recession of 1989­1993 finally saw the growth of project
management in the non­project driven sector. This recession was characterized by layoffs in the
white collar/management ranks. Allies for project management were appearing and emphasis
was being placed upon long-term solutions to problems. Project management was now here to
stay. The allies for project management began surfacing in 1985 and continued throughout the
recession of 1989­1993.
1985: Companies recognized that they must compete on the basis of quality as well as cost.
There existed a new appreciation for Total Quality Management (TQM). Companies
began using the principles of project management for the implementation of TQM. The first
ally for project management surfaced with the "marriage" of project management and TQM.
1990: During the recession of 1989­1993, companies recognized the importance of
schedule compression and being the first to market. Advocates of concurrent engineering
began promoting the use of project management to obtain better scheduling techniques.
Another ally for project management was born.
Figure 4.3: From hybrid to project-driven.
1991­1992: Executives realized that project management works best if
decision-making and authority are decentralized. They further recognized
that control could still be achieved at the top by functioning as project sponsors.
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1993: As the recession of 1989­1993 came to an end, companies began "re-engineering"
the organization, which really amounted to elimination of organizational "fat." The
organization was now a "lean and mean" machine. People were asked to do more work in
less time and with fewer people; executives recognized that being able to do this was a
benefit of project management.
Figure 4.4: New processes supporting project management.
1994: Companies recognized that a good project cost control system (i.e., horizontal
accounting) allows for improved estimating and a firmer grasp of the real cost of doing
work and developing products.
1995: Companies recognized that very few projects were completed within the framework
of the original objectives without scope changes. Methodologies were created for effective
change management.
1996: Companies recognized that risk management involves more than padding an estimate
or a schedule. Risk management plans were now included in the project plans.
1997-1998: The recognition of project management as a professional career path mandates
the consolidation of project management knowledge and a centrally located project
management group.
Figure 4.5: Integrated Processes (Past, present, and future)
1999: Companies that recognized the importance of concurrent engineering and rapid
product development found that it was best to have dedicated resources for the duration of
the project. The cost of over management may be negligible compared to risks of under
management. More and more organizations could be expected to use collocated teams all
housed together.
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2000: Mergers and acquisitions were creating more multinational companies. It was
believed that multinational project management will become the major challenge for the
next decade.
The reason for the early resistance to project management was that the necessity for project
management was customer-driven rather than internally driven, despite the existence of allies.
Project management was being implemented, at least partially, simply to placate customer
demands. By 1995, however, project management had become internally driven and a necessity
for survival. Project management benchmarking was commonplace, and companies recognized
the importance of achieving excellence in project management.
As project management continues to grow and mature, more allies will appear. In the twenty-
first century, second and third world nations will come to recognize the benefits and importance
of project management. Worldwide standards for project management will occur.
Systems, Programs, and Projects:
In the preceding sections the word "systems" has been used rather loosely. The exact
definition of a system depends on the users, environment, and ultimate goal. Modern
business practitioners define a system as:
A group of elements, either human or nonhuman, that is organized and arranged in
such a way that the elements can act as a whole toward achieving some common
goal, objective, or end.
Systems are collections of interacting subsystems that either span or interconnect all
schools of management. Systems, if properly organized, can provide a synergistic
output. Systems are characterized by their boundaries or interface conditions. For
example, if the business firm system were completely isolated from the environmental
system, then a close system would exist, in which case management would have
complete control over all system components. If the business system does in fact react
with the environment, then the system is referred to as open. All social systems, for
example, are categorized as open systems. Open systems must have permeable
Programs can be explained as the necessary first-level elements of a system. Two
representative definitions of programs are given below:
Air Force Definition: The integrated, time-phased tasks necessary to accomplish a
particular purpose.
NASA Definition: A relative series of undertakings that continue over a period of
time (normally years) and that are designed to accomplish a broad, scientific or
technical goal in the NASA long range plan (lunar and planetary exploration,
manned spacecraft systems). Programs can be regarded as subsystems. However,
programs are generally defined as time-phased efforts, whereas systems exist on a
continuous basis.
Projects are also time-phased efforts (much shorter than programs) and are the first
level of breakdown of a program. A typical definition would be:
NASA/Air Force Definition: A project is within a program as an undertaking that
has a scheduled beginning and end, and that normally involves some primary
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purpose. The majority of the industrial sector, on the other hand, prefers to describe
efforts as projects, headed by a project manager. Whether we call our undertaking
project management or program management is inconsequential because the same
policies, procedures, and guidelines that regulate programs most often apply to
projects also. For the remainder of this text, programs and projects will be discussed
interchangeably. However, the reader should be aware that projects are normally
the first-level subdivision of a program.
Categories of Projects:
Once a group of tasks is selected and considered to be a project, the next step is to define the
kinds of project units. There are four categories of projects:
1. Individual projects: These are short-duration projects normally assigned to a single
individual who may be acting as both a project manager and a functional manager.
2. Staff projects: These are projects that can be accomplished by one organizational unit, say a
3. Special projects: Very often special projects occur that require certain primary functions
and/or authority to be assigned temporarily to other individuals or units. This works best for
short-duration projects. Long-term projects can lead to severe conflicts under this
4. Matrix or Aggregate projects: These require input from a large number of functional units
and usually control vast resources. Each of these categories of projects can require different
responsibilities, job descriptions, policies, and procedures. Project management may now be
defined as the process of achieving project objectives through the traditional organizational
structure and over the specialties of the individuals concerned. Project management is
applicable for any ad hoc (unique, one-time, one-of-a-kind) undertaking concerned with a
specific end objective. In order to complete a task, a project manager must:
Set objectives
Establish plans
Organize resources
Provide staffing
Set up controls
Issue directives
Motivate personnel
Apply innovation for alternative actions
Remain flexible
The type of project will often dictate which of these functions a project manager will be
required to perform.
Product versus Project Management:
For all practical purposes, there is no basic difference between program management and
project management. Project management and product management are similar, with one major
exception: the project manager focuses on the end date of his project, whereas the product
manager is not willing to admit that his product line will ever end. The product manager wants
his product to be as long-lived and profitable as possible. Even when the demand for the
product diminishes, the product manager will always look for spin-offs to keep his product
alive. When the project is in the Research and Development (R & D) phase, a project manager
is involved. Once the product is developed and introduced into the marketplace, control is taken
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over by the product manager. In some situations, the project manager can become the product
manager. Both product and project management can, and do, exist concurrently within
Maturity and Excellence:
Some people think that maturity and excellence in project management are the same.
Unfortunately, this is not the case. Consider the following definition:
Maturity in project management is the implementation of a standard methodology and
accompanying processes, in such a way that ensures a high likelihood of repeated
This definition is supported by the life-cycle phases. Maturity implies that the proper foundation
of tools, techniques, processes, and even culture, exists. When projects come to an end, there is
usually a debriefing with senior management to discuss how well the methodology was used
and to recommend changes. This debriefing looks at ''key performance indicators," and allows
the organization to maximize what it does right and to correct what it did wrong.
The definition of excellence can be stated as:
Organizations excellence creates an environment in which there exists a continuous stream of
successfully managed projects and where success is measured by what is in the best interest of
both the company and the project (i.e. the customer)
Excellence goes well beyond maturity. You must have maturity to achieve excellence. It may
take two years or more to reach some initial levels of maturity. Excellence, if achievable at all,
may take an additional five years or more.
Informal Project Management:
Companies today are managing projects more on an informal basis than on a formal one.
Informal project management does have some degree of formality but emphasizes managing the
project with a minimum amount of paperwork. A reasonable amount of formality still exists.
Furthermore, informal project management is based upon guidelines rather than the policies and
procedures that are the basis for formal project management. This was shown previously to be a
characteristic of a good project management methodology. Informal project management
Effective communications
Effective cooperation
Effective teamwork
These four elements are absolutely essential for informal project management to work
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Figure 4.6: Evolution of policies, procedures, and guidelines.
Not all companies have the luxury of using informal project management. Customers often have
a strong voice in whether formal or informal project management will be used.
Organizational Structures:
During the past thirty years there has been a so-called hidden revolution in the introduction and
development of new organizational structures. Management has come to realize that
organizations must be dynamic in nature; that is, they must be capable of rapid restructuring, if
environmental conditions so dictate. These environmental factors evolved from the increasing
competitiveness of the market, changes in technology, and a requirement for better control of
resources for multiproduct firms. More than thirty years ago, Wallace identified four major
factors that caused the onset of the organizational revolution:
 The technology revolution (complexity and variety of products, new materials and
processes, and the effects of massive research).
 Competition and the profit squeeze (saturated markets, inflation of wage and material costs,
and production efficiency).
 The high cost of marketing.
 The unpredictability of consumer demands (due to high income, wide range of choices
available, and shifting tastes).
Much has been written about how to identify and interpret those signs that indicate that a new
organizational form may be necessary. According to Grinnell and Apple, there are five general
indications that the traditional structure may not be adequate for managing projects:
 Management is satisfied with its technical skills, but projects are not meeting time, cost, and
other project requirements.
 There is a high commitment to getting project work done, but great fluctuations in how well
performance specifications are met.
 Highly talented specialists involved in the project feel exploited and misused.
 Particular technical groups or individuals constantly blame each other for failure to meet
specifications or delivery dates.
 Projects are on time and to specifications, but groups and individuals are not satisfied with
the achievement.
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Figure 4.7: Functional Organization
Figure 4.8: Project Organization
Figure 4.9: Weak Matrix Organization
Figure 4.10: Balanced Matrix Organization
Figure 4.11: Strong Matrix Organization
Figure 4.12: Composite Organization
Unfortunately, many companies do not realize the necessity for organizational change until it is
too late. Management continually looks externally (i.e., to the environment) rather than
internally for solutions to problems. A typical example would be that new product costs are
continually rising while the product life cycle may be decreasing. Should emphasis be placed on
lowering costs or developing new products?
For each of the organizational structures described in the following sections, advantages and
disadvantages are listed. Many of the disadvantages stem from possible conflicts arising from
problems in authority, responsibility, and accountability. The reader should identify these
conflicts as such.
Traditional (Classical) Organization:
The traditional management structure has survived for more than two centuries.
However, recent business developments, such as the rapid rate of change in technology
and position in the marketplace, as well as increased stockholder demands, have created
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strains on existing organizational forms. Fifty years ago companies could survive with
only one or perhaps two product lines. The classical management organization was
found to be satisfactory for control, and conflicts were at a minimum.
However, with the passing of time, companies found that survival depended on multiple
product lines (that is diversification) and vigorous integration of technology into the
existing organization. As organizations grew and matured, managers found that
company activities were not being integrated effectively, and that new conflicts were
arising in the well-established formal and informal channels.
Managers began searching for more innovative organizational forms that would
alleviate the integration and conflict problems. The advantages and disadvantages of
this type of organizations are listed in tables 4.1 and 4.2 respectively.
Table 4.1: Advantages of the traditional/classical organization
Table 4.2: Disadvantages of the traditional/classical organization
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Line­Staff Organization (Project Coordinator):
It soon became obvious that control of a project must be given to personnel whose first
loyalty is directed toward the completion of the project. For this purpose, the project
management position must be separated from any controlling influence of the
functional managers. Two possible situations can exist with this form of line­staff
project control. In the first situation, the project manager serves only as the focal point
for activity control, that is, a center for information. The prime responsibility of the
project manager is to keep the division manager informed of the status of the project
and to attempt to "influence" managers into completing activities on time.
The amount of authority given to the project manager posed serious problems. Almost
all upper level and division managers were from the classical management schools and
therefore maintained serious reservations about how much authority to relinquish.
Many of these managers considered it a demotion if they had to give up any of their
long-established powers.
Pure Product (Projectized) Organization:
The pure product organization develops as a division within a division. As long as there
exists a continuous flow of projects, work is stable and conflicts are at a minimum. The
major advantage of this organizational flow is that one individual, the program
manager, maintains complete line authority over the entire project. Not only does he
assign work, but he also conducts merit reviews. Because each individual reports to
only one person, strong communication channels develop that result in a very rapid
reaction time.
In pure product organizations, long lead times became a thing of the past. Trade-off
studies could be conducted as fast as time would permit without the need to look at the
impact on other projects (unless, of course, identical facilities or equipment were
required). Functional managers were able to maintain qualified staffs for new product
development without sharing personnel with other programs and projects.
The responsibilities attributed to the project manager were entirely new. First of all, his
authority was now granted by the vice president and general manager. The program
manager handled all conflicts, both those within his organization and those involving
other projects. Interface management was conducted at the program manager level.
Upper-level management was now able to spend more time on executive decision
making than on conflict arbitration. Advantages and disadvantages of Projectized
organizations are listed in tables 4.3 and 4.4 respectively.
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Table 4.3: Advantages of the Projectized organization
Table 4.4: Disadvantages of the Projectized organization
Matrix Organizational Form:
The matrix organizational form is an attempt to combine the advantages of the pure
functional structure and the product organizational structure. This form is ideally suited
for companies, such as construction, that are "project-driven." Each project manager
reports directly to the vice president and general manager. Since each project represents
a potential profit center, the power and authority used by the project manager come
directly from the general manager. The project manager has total responsibility and
accountability for project success.
The functional departments, on the other hand, have functional responsibility to
maintain technical excellence on the project. Each functional unit is headed by a
department manager whose prime responsibility is to ensure that a unified technical
base is maintained and that all available information can be exchanged for each project.
Department managers must also keep their people aware of the latest technical
accomplishments in the industry.
Project management is a "coordinative" function, whereas matrix management is a
collaborative function division of project management. In the coordinative or project
organization, work is generally assigned to specific people or units who "do their own
thing." In the collaborative or matrix organization, information sharing may be
mandatory, and several people may be required for the same piece of work. In a project
organization, authority for decision making and direction rests with the project leader,
whereas in a matrix it rests with the team.
Certain ground rules exist for matrix development. These are:
Participants must spend full time on the project; this ensures a degree of loyalty.
Horizontal as well as vertical channels must exist for making commitments.
There must be quick and effective methods for conflict resolution.
There must be good communication channels and free access between managers.
All managers must have input into the planning process.
Both horizontally and vertically oriented managers must be willing to negotiate for
The horizontal line must be permitted to operate as a separate entity except for
administrative purposes.
These ground rules simply state some of the ideal conditions that matrix structures
should possess. Each ground rule brings with it advantages and disadvantages that are
described in tables 4.5 and 4.6 respectively.
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Table 4.5: Advantages of the Matrix organization
Table 4.6: Disadvantages of the Matrix organization Modification of Matrix Structures:
The matrix structure can take many forms, but there are basically three common varieties. Each
type represents a different degree of authority attributed to the program manager and indirectly
identifies the relative size of the company. This type of arrangement works best for small
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companies that have a minimum number of projects and assume that the general manager has
sufficient time to coordinate activities between his project managers. In this type of
arrangement, all conflicts between projects are hierarchically referred to the general manager for
As companies grew in size and the number of projects, the general manager found it
increasingly difficult to act as the focal point for all projects. A new position was created, that
of director of programs, or manager of programs or projects. The director of programs was
responsible for all program management. This freed the general manager from the daily routine
of having to monitor all programs himself.
The desired span of control, of course, will vary from company to company and must take the
following into account:
 The demands imposed on the organization by task complexity
 Available technology
 The external environment
 The needs of the organizational membership
 The types of customers and/or products
These variables influence the internal functioning of the company. Executives must realize that
there is no one best way to organize under all conditions. This includes the span of control.
Selecting the Organizational Form:
Project management has matured as an outgrowth of the need to develop and produce complex
and/or large projects in the shortest possible time, within anticipated cost, with required
reliability and performance, and (when applicable) to realize a profit. Granted that modern
organizations have become so complex that traditional organizational structures and
relationships no longer allow for effective management, how can executives determine which
organizational form is best, especially since some projects last for only a few weeks or months
while others may take years?
To answer such a question, we must first determine whether the necessary characteristics exist
to warrant a project management organizational form. Generally speaking, the project
management approach can be effectively applied to a one-time undertaking that is:
Definable in terms of a specific goal
Infrequent, unique, or unfamiliar to the present organization
Complex with respect to interdependence of detailed tasks
Critical to the company
Once a group of tasks is selected and considered to be a project, the next step is to define the
kinds of projects. These include individual, staff, special, and matrix or aggregate projects.
Unfortunately, many companies do not have a clear definition of what a project is. As a result,
large project teams are often constructed for small projects when they could be handled more
quickly and effectively by some other structural form.
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Figure 4.13: Project Organizational Structure Influences on Projects
All structural forms have their advantages and disadvantages, but the project management
approach appears to be the best possible alternative.
The basic factors that influence the selection of a project organizational form are:
 Project size
 Project length
 Experience with project management organization
 Philosophy and visibility of upper-level management
 Project location
 Available resources
 Unique aspects of the project
This last item requires further comment. Project management (especially with a matrix) usually
works best for the control of human resources and thus, may be more applicable to labor-
intensive projects rather than capital-intensive projects. Labor-intensive organizations have
formal project management, whereas capital-intensive organizations may use informal project
Four fundamental parameters must be analyzed when considering implementation of a project
organizational form:
 Integrating devices
 Authority structure
 Influence distribution
 Information system
Table of Contents:
  1. INTRODUCTION TO PROJECT MANAGEMENT:Broad Contents, Functions of Management
  2. CONCEPTS, DEFINITIONS AND NATURE OF PROJECTS:Why Projects are initiated?, Project Participants
  5. PROJECT LIFE CYCLES:Conceptual Phase, Implementation Phase, Engineering Project
  6. THE PROJECT MANAGER:Team Building Skills, Conflict Resolution Skills, Organizing
  7. THE PROJECT MANAGER (CONTD.):Project Champions, Project Authority Breakdown
  9. PROJECT FEASIBILITY (CONTD.):Scope of Feasibility Analysis, Project Impacts
  10. PROJECT FEASIBILITY (CONTD.):Operations and Production, Sales and Marketing
  11. PROJECT SELECTION:Modeling, The Operating Necessity, The Competitive Necessity
  12. PROJECT SELECTION (CONTD.):Payback Period, Internal Rate of Return (IRR)
  13. PROJECT PROPOSAL:Preparation for Future Proposal, Proposal Effort
  14. PROJECT PROPOSAL (CONTD.):Background on the Opportunity, Costs, Resources Required
  15. PROJECT PLANNING:Planning of Execution, Operations, Installation and Use
  16. PROJECT PLANNING (CONTD.):Outside Clients, Quality Control Planning
  17. PROJECT PLANNING (CONTD.):Elements of a Project Plan, Potential Problems
  18. PROJECT PLANNING (CONTD.):Sorting Out Project, Project Mission, Categories of Planning
  19. PROJECT PLANNING (CONTD.):Identifying Strategic Project Variables, Competitive Resources
  20. PROJECT PLANNING (CONTD.):Responsibilities of Key Players, Line manager will define
  21. PROJECT PLANNING (CONTD.):The Statement of Work (Sow)
  22. WORK BREAKDOWN STRUCTURE:Characteristics of Work Package
  24. SCHEDULES AND CHARTS:Master Production Scheduling, Program Plan
  25. TOTAL PROJECT PLANNING:Management Control, Project Fast-Tracking
  26. PROJECT SCOPE MANAGEMENT:Why is Scope Important?, Scope Management Plan
  27. PROJECT SCOPE MANAGEMENT:Project Scope Definition, Scope Change Control
  28. NETWORK SCHEDULING TECHNIQUES:Historical Evolution of Networks, Dummy Activities
  29. NETWORK SCHEDULING TECHNIQUES:Slack Time Calculation, Network Re-planning
  34. QUALITY IN PROJECT MANAGEMENT:Value-Based Perspective, Customer-Driven Quality
  35. QUALITY IN PROJECT MANAGEMENT (CONTD.):Total Quality Management
  38. QUALITY IMPROVEMENT TOOLS:Data Tables, Identify the problem, Random method
  39. PROJECT EFFECTIVENESS THROUGH ENHANCED PRODUCTIVITY:Messages of Productivity, Productivity Improvement
  40. COST MANAGEMENT AND CONTROL IN PROJECTS:Project benefits, Understanding Control
  42. PROJECT MANAGEMENT THROUGH LEADERSHIP:The Tasks of Leadership, The Job of a Leader
  44. PROJECT RISK MANAGEMENT:Components of Risk, Categories of Risk, Risk Planning