PMP Certification Study Notes 1 –

Terms and Concepts

UPDATED for the new PMP® Exam thru 2020. Happy learning!
Introduction: This article provides Aspirants taking the exam in 2018 with a
list of important terms from the latest PMBOK® Guide 6th Edition. The
definitions of the project management terms (often according to PMI’s
definition) are included here for y0ur easy reference. PMP® aspirants need to
learn these well in order to successfully to understand the latter sections of
the PMBOK® Guide as well as to pass the PMP® exam. (Note: The most
important terms are highlighted in bold.)
This series of PMP® study notes is impossible without the contribution of many
Aspirants. Without their feedback and input, I cannot continually improve and
enhance the study notes to cover the updates in PMBOK® Guide 6th edition. I am so
grateful that my study notes are useful to Aspirants.
Article Highlights
• 1 Important PMP® Terms and Concepts (covering Section 1, 2 and 3 of the PMBOK® Guide 6th
Edition)
 o 1.1 Project

o 1.2 Project Management

o 1.3 Role of the Project Manager

o 1.4 Organization System

o 1.5 Project Life Cycle vs Project Management Life Cycle vs Product Life Cycle

o 1.6 Other Important Project Management Terms

• 2 Further PMP® Study Resources

Important PMP® Terms and Concepts

(covering Section 1, 2 and 3 of the PMBOK®
Guide 6th Edition)
Project
Project – a temporary endeavor to create a unique product, service or
result (or enhancement of existing services/products (e.g v.2 development
is a project) ) — may be collectively termed as deliverable — (vs
ongoing operations which manage processes in transforming resources
into output) sometimes may involve handing over the deliverable to the
operation teams for continuous operation
Project drives changes in the organization and often is a means to create
business values and to achieve organizational goals — the net
quantifiable benefit derived from a business endeavour which can be
tangible or intangible.
Projects operate in an environment that may have favourable or
unfavourable impacts on them. Two major categories are:
Organization Process Assets is a major input in all planning
process, which may be kept at PMO, directly related to project
management, including Processes and Procedures (including
templates (e.g. WBS, schedule network diagrams,
etc.), procedures for issuing work authorizations, guidelines,
performance measurements) and Organizational Knowledge
Repositories
 Enterprise Environment Factors (often are constraints) are
influences not under control of the project team that will affect the
project, either intra-organization and extra-organization, e.g.
organizational culture, organization structure, existing human
resources, work authorization system, PMIS, market conditions,
legal requirements, technology
EEF are inputs for all initiating, most planning process, not much in
the executing/controlling process, none in closing process
Projects often involve more risks and uncertainties than operations and
thus require more planning
The following factors influence the operation of the organization which
may lead to the need for projects:
Regulatory/legal/social requirements changes
Stakeholders needs/requests
Changes in technology/business
Improvements, rectification and enhancements to
processes/products/services
A project can be subdivided into phases, each phase is a collection of
logically related project activities that result in the completion of
deliverable(s). Towards the end of each phase is a “Phase Gate” which
determines whether the project will go on or not.
Process – a package of inputs, tools and outputs, there are 49
processes defined by PMI. Processes are grouped in the PMBOK® Guide
into 5 Process Groups (NOTE: Process groups are not the same as
project phases).
Portfolio > Program > Project
Program – a group of coordinated projects, taking operations into
account, maybe with common goals, achieving benefits not realized
by running projects individually, if only the client/technologies/resource
are the same, then the projects should be managed individually
instead of a program
 Portfolio – a group of programs and/or projects to achieve
organizational strategic goals within the organization with a view to
maximizing the value to the organization
Actively coordinating and managing portfolios, programs and projects
through organizational project management (OPM) best position the
organization to achieve strategic business goals.
Use of portfolio/program/project management to bridge the gap between
organizational strategy and business value realization
Project Management
Project Management – the application of (all appropriate) knowledge,
skills, tools & techniques and whatsoever to manage project activities with
a view to meet the project requirements and achieve
customer satisfaction
The most important task is to align stakeholder expectations with the
project requirements, around 90% of the PM’s work is related
to communication with stakeholders
PMBOK® Guide is a framework/standard but not methodology (agile,
scrum, PRINCE3, etc.) — A framework allows flexibilities while a
methodology would require the use of a predefined system of practices,
techniques, procedures and rules.
Project management emphasizes tailoring — selecting the appropriate
project management processes, inputs, tools, techniques, outputs and
life cycle phases according to the unique nature of each individual
project.
Competing constraints: time, cost, scope, quality, risk, resources
Project Management Business Documents
Project Business Case — documents the economic feasibility vs
benefits of the project and is used for authorization of project
management activities.
Project Benefits Management Plan —describes how and when the
benefits of the deliverables of the project will bring and describes how
to measure the benefits (also including the alignment with organization
strategies, assumptions and risks)
 Project Charter — authorizes the project and names the project
manager
Project Management Plan — how the project will be performed and
managed – documents assumptions & decisions, helps
communication between stakeholders, goals, costs & time scheduling
(milestones), project management system and subsidiary
management plans and documents
Project Success Measures — project success is now more inclined to
be measured by considering the achievement of project objectives as
documented in this document
Role of the Project Manager
Project Manager: an individual assigned by the organization to lead the
team and is responsible for achieving project objectives
is the leader of the project irrespective of the authority
should consider every process to determine if they are needed for
individual projects (tailoring)
the exact role of project manager is to be tailored to suit the needs of
individual organizations and projects
may report to the functional manager, program manager, PMO
manager, operation manager, senior management, etc., maybe part-
time or devoted
identifies and documents conflicts of project objectives with
organization strategy as early as possible
Skills required of project managers:
Technical project management — process tailoring, planning,
managing schedule/cost/resources/risk
Leadership — communication (within team and with stakeholders),
team building, motivation, influencing, coaching, trust building, conflict
management, negotiation
Strategic and business management — be aware of the high-level
strategies of the organization and effectively implement
decisions/actions that align with strategic goals (Organization Strategy
may be expressed through mission and vision)
 Project Manager must balance the constraints and tradeoffs, effectively
communicate the info (including bad news) to the sponsor for informed
decisions
Project Manager needs to involve project team members in the planning
process
Project Manager needs to perform integration at process level, cognitive
level and context level
Project Team includes Project Manager, project management staff, project
staff, PMO, SME (subject matter experts can be outsourced), customer
representative (with authority), sellers, business partners, etc., maybe
virtual or collocated
Senior management must be consulted for changes to high-level
constraints
Leadership vs Management:
Lead: guide through interactive discussion from one point to another
Manage: direct a person to perform a set of expected behaviour
Leadership styles:
Laissez-faire
Transactional
Servant leader
Transformational
Charismatic
Interactional
Organization System
The organizational system determines the power, influence, competence,
leadership and political capabilities of the people who can act within the
system. e.g.
Management Elements — general management principles/rules of the
organization, e.g. disciplinary action, division of skills, authorization
model/practices, communication channels
Organizational Governance Frameworks — framework/processes
describing how authority within the organization is exercised
Organizational Structure Types
 Organic or Simple
Virtual
Projectized (project manager has the ultimate authority over the
project, team members are often collocated)
Matrix (Strong, Balanced, Week)
Functional
Composite/Hybrid – a combination of different types, depending
on the actual need
PMO
Tight Matrix = co-location, nothing to do with the organization type (not
necessarily a matrix org.)
Functional organizations => the project manager has little authority, often
called project expeditor (no authority) or coordinator (little authority),
project coordination among functional managers
Matrix organization => multiple bosses and more complex
Project Management Office (PMO) – standardizes governance, provides
training, shares tools, templates, resources, etc. across
all projects/programs/portfolios
3 forms: supportive, controlling and directive (lead the project as PM)
functions: training, resource coordination, methodology, document
repository, project management oversight, standards, career
management of PMs
may function as a stakeholder / key decision maker (e.g. to terminate
the projects)
control shared resources/interdependence across projects at the
enterprise level
play a decisive role in project governance
Project Life Cycle vs Project Management Life
Cycle vs Product Life Cycle
Project Life Cycle: includes: initiating, planning and organizing, carrying
out/executing work, closing the project. Project life cycles are independent
of a product life cycle.
 Within a project life cycle, there can be one or more phases of the
development of the product, service, or result (a.k.a. development life
cycles) with the following models:
Predictive [plan driven/waterfall] – scope, time and cost determined
early in the lifecycle, may also employ rolling wave planning
Iterative – repeat the phases as understanding of the project increases
until the exit criteria are met, similar to the rolling wave planning, high-
level objectives, either sequential/overlapping phase,
scope/time/resources for each phase may be different
Incremental – features/scope are added to each incremental cycle
Adaptive [change driven/agile] – for projects with high levels of
change, risk and/or uncertainty, each iterative is very short (2-4
weeks), work is decomposed into product backlog, each with a
production-level product, scrum is one of the most effective agile
methods, stakeholders are involved throughout the process, time and
resources are fixed, allow low change cost/keep stakeholder
influence high
Hybrid
The life cycle chosen must be suitable for the intended deliverable and
flexible enough to deal changes.
each project phase within the product lifecycle may include all the five
project management process groups
Product life cycle: development > production > adoption & growth >
maturity > decline > end of life
Other Important Project Management Terms
The Configuration Management Knowledge Bases contain baselines of
all organization standards
Lessons Learned – focus on the deviances from plan (baseline) to
actual results and how to solve these discrepancies
The work authorization system (WAS) is a system used during project
integration management to make sure that the right work gets done at the
right time
PMIS includes configuration system and change control system
Never accept a change request to trim down one element of the triple
constraint without changing the rest.
Sponsor – provides resources/support to project, lead the process
through initiation (charter/scope statement) through formally authorized,
later involved in authorizing scope/budget change/review
Customer – NOT necessarily provide the financial resources, may be
external to the organization, final acceptance of the product
Business Partners – certification body, training, support, etc.
Project Statement of Work (SOW): describes the business need, high-
level scope of deliverables and strategic plan of the organization, created
by the sponsor/initiator/buyer
Project Charter is not a contract
Project Management Plan is NOT a project schedule
Project Management System: includes a list of project management
processes, level of implementation (what actions to take in the
management processes), description of tools and techniques, resources,
procedures, change control system [forms with tracking systems,
approval levels]
Requirement Traceability Matrix (RTM) – a matrix connecting
deliverables to requirements and their sources (for managing scope)
Work Breakdown Structure (WBS) – a hierarchal chart of decomposing
deliverables into work packages
Activity List – a full list of all activities with indication of relationship to the
work packages
Activity Attributes – further information (duration, start date, end date,
etc.) of all the activities in the list (for scheduling)
Roles and Responsibilities (RAR) – a document listing all the roles and
description of their responsibilities in the project (often by category)
Responsibility Assignment Matrix (RAM) – a matrix connecting people
to work packages/activities, e.g. the RACI matrix (responsible,
accountable, consult, inform), usually only one person is accountable for
each activity
Resources Breakdown Structure (RBS) – a hierarchical chart listing all
the resources by categories, e.g. marketing, design, etc.
Risk Breakdown Structure (RBS) – a hierarchical chart listing all risks by
categories
Project Management Data and Information
Work Performance Data – raw data collected
Work Performance Info – analyzed in context and integrated data,
e.g. some forecasts
Work Performance Reports – work performance information
compiled in report format
Sunk costs – money already spent, not to be considered whether to
terminate a project, similar to committed cost (often through contracts)
Direct costs, indirect (shared) costs, Fixed costs, Variable costs
Law of diminishing returns – beyond a point, the more input, the less
return
Working capital – assets minus liability, what the company has to invest
in the projects
Payback period – a time to earn back capital investment
Benefit-cost ratio (BCR) – an indicator, used in the formal discipline of
cost-benefit analysis, that attempts to summarize the overall value for
money of a project
Depreciation – straight-line depreciation vs accelerated depreciation (the
amount of depreciation taken each year is higher during the earlier years
of an asset’s life)
Under double declining balance, the asset is depreciated twice as fast
as under straight line. Using the example above, 10% of the cost is
depreciated each year using a straight line. Doubling the rate would mean
that 20% would be depreciated each year, so the asset would be fully
depreciated in 5 years, rather than 10.
Under sum-of-the-years-digits, the asset is depreciated faster than the
straight line but not as fast as declining balance. As an example of how
this method works, let’s say an asset’s useful life is 5 years. Adding up the
digits would be 5+4+3+2+1 or a total of 15. The first year, 5/15 is
 expensed; the next year 4/15 is expensed, and so on. So if the asset’s
cost is $1000, 5/15, or $333.34 would be expensed the first year, $266.67
the second year, and so on.
Economic value added – the value of the project brought minus the cost
of project (including opportunity costs) e.g. for a project cost of $100, the
estimated return for 1st year is $5, assuming the same money can be
invested to gain 8% per year, then the EVA is $5 – $100 * 8% = -$3
Net present value (NPV) – the sum of the present values (PVs) of the
individual cash flows of the same entity
Present value (PV) – or called present discounted value, is a future
amount of money that has been discounted to reflect its current value, as
if it existed today (i.e. with inflation, etc.)
Future value (FV) – is the value of an asset at a specific date
Internal Rate of Return (IRR) – The inherent discount rate or investment
yield rate produced by the project’s deliverables over a pre-defined period
of time.
Forecast (future) vs Status Report (current status) vs Progress Report
(what have been done/delivered)
Journey to Abilene (Abilene’s Paradox) – committee decisions can
have a paradox outcome, the joint decision is not welcome by either party
(because of fear of raising objections)
when something unusual happens, always refer to the PM Plan/Charter
for instruction on how to proceed; if not found, ask for direction from the
management
unresolved issues will lead to conflicts

Further PMP® Study Resources

47+ Commonly Confused PMP® Term Pairs with detailed
explanations (updated for the new PMP® Exam) — there are many
PMP® term pairs that look very similar but are quite different in meaning.
The PMP® Exam questions may test Aspirants’ understanding of these
terms and how to distinguish between them.