Project Management

UNIT-I

Meaning of Project –
Most of the organizations are required to perform various tasks as a routine. Each task is unique with a
specific purpose of need. The projects are different in size and type.
A project is a combination of inter-related activities with well-defined objectives to be completed in a
specific time period. The activities are to be performed in a specified sequence or order and require
resources such as money, materials, facilities and space.

Definitions –
“A project is a temporary Endeavour undertaken to create a unique product or service.”
- Institute of project Management

Characteristics of Project Management

1. Temporary: Projects are temporary in nature. Every project has a beginning and end. The word
‘temporary’ here may refer to an hour, a day or a year. Operational work is an ongoing effort which is
executed to sustain the business. But projects are not ongoing efforts. A project is considered to end when
the project’s objectives have been achieved or the project is completed or discontinued. Only projects are
temporary in characteristic and not the project’s outcomes. It will not generally be applied to the product,
service or result created by the project. Projects also may often have intended and unintended social,
economic and environmental impacts that long last.

2. Definite Beginning and Completion: Project is said to be complete when the project’s objectives have
been achieved. When it is clear that the project objectives will not or cannot be met the need for the project
no longer exists and the project is terminated. Thus, projects are not ongoing efforts. Thus, every project
has a definite beginning and end.

3. Definite Objective/Scope and Unique: All the projects have their own defined scopes/objectives for
which they are carried out. Every project is undertaken to create a unique product, service, or result. E.g.,
Hundreds of house buildings may have been built by a builder, but each individual building is unique in
itself like they have different owner, different design, different structure, different location, different sub-
contractors, and so on. Thus, each house building is to be considered as a Project and each Project
produces unique outcome.

4. Defined Time and Resources: As the projects have definite beginning and end, they are to be carried
out within the time and resources constraints. Each project will have defined time and resources for its
execution.

5. Multiple Talents: As projects involve many interrelated tasks done by many specialists, the involvement
of people from several departments is very much essential. Thus, the use of multiple talents from various
departments (sometimes from different organizations and across multiple geographies) becomes the key
for successful project management. For example, take the construction of house building; the expertise of
very many professionals and skills of various people from various fields like architect, engineers,
carpenters, painters, plumber, electrician, interior decorator, etc, are being coordinated to complete the
house project.

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CASE STUDY:
https://biz.libretexts.org/Bookshelves/Management/Project_Management%3A_Navigating_the_Com
plexity_with_a_Systematic_Approach_(Oguz)/01%3A_Introduction_to_Project_Management/1.03%3
A_Project_Characteristics

What are Project Constraints?

Project Constraints can be anything that restricts the team output and affect the delivery process and final
output of the project. The execution of the project can be affected at different stages and it can cause
issues with the process, portfolio, and program in the project.
There are numerous project management constraints, and some have even dedicated more time to
research them and create thorough lists. Here, we will deal with some of the most common ones that can
pop up in all fields and professions. After all, finishing things up successfully, in time, and with limited
resources is something everyone deals with many times during their careers.

Six project constraint :

1. Quality : Quality is one of six major constraints of every project, as depicted in the classic triple
constraint triangle, which also includes scope, time, and cost:

Quality sits slightly apart from the other three project constraints appearing inside the triangle because it is
almost always affected by any change to the other three. At the same time, changing quality expectations
will most certainly impact the project’s time, scope, and cost.

Most importantly, all project constraints within the classic triangle are interrelated, so a strain on one will
affect one or more of the others. Here’s a quality project constraint example:

• If you are unable to meet a sudden rise in cost, the project scope may shrink and the quality may
decline
• If the project scope extends due to scope creep, you may not have the time or resources to deliver
the promised quality
• If delivery time is cut or rushed, project costs may rise and quality will very likely decline

2. Time : One of the most important stakeholder considerations, project time (how long it will take to
deliver), is a vital measure of project success. Your task is to estimate project time as accurately as
possible, which requires a blend of research and experience.

If you’re a newer project manager, you’ll rely more heavily on past projects for precedent, and use their
data to give you a sense of appropriate scheduling for your project.

Look over completed projects’ closing documents and schedules to gain a sense of how long certain work
packages typically take. And be sure to study any project constraints surrounding time management.

If you’re a more experienced project manager, rely on both research and your past performance and
wisdom when estimating time ranges — including potential delays, change requests, risks, and
uncertainties. Overall, your job is to provide stakeholders with the most accurate range possible in order to
avoid surprises or making unrealistic promises.

When considering time constraints of a project, you may want to consider:

• The project timeline

• The number of hours worked on each stage of the project
• Use of internal calendars and the goals set for each team member
• Use of time for planning and strategy building
• The number of project phases included within the plan.

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For instance, if there is a delay in the delivery of critical materials for build, then the project timeline may
need to be adjusted, which will impact the cost and possibly the scale of the whole project. A level of
flexibility is required to maintain success within a project.

3. Cost: Equally important to stakeholders is how much a project will cost. As with time constraints of a
project, your budget estimates need to be presented in a range. Some key research will lead you to
accurate numbers.

Be sure to estimate:

• Market rates — give costs for all for goods and services you need, as well as vendor bids and
ranges.
• Hourly costs — how much is your time worth? Provide clear estimates for this.
• Overall budget — consider costs from labor, material, factory, equipment, administrative, software,
contractors and more.

To do this, you should look at costs and budgets for similar past projects inside and outside your
organization.

Cost management will be an ongoing project management task. You’ll want to stick very closely to your
proposed budget, while keeping an open mind about changes that may affect costs.

However, sometimes a sharp rise in costs can unexpectedly impact on a project, such as within
Construction. In turn, a sharp rise in costs will introduce further project management constraints, such as
the time line of the project and the scale of the project. Both of which may need to be reduced to ensure the
project remains within budget.

4. Scope: Since a project scope is not an estimate but a guaranteed set of deliverables, it’s difficult to
imagine creating a range for this project constraint. However, you can consider that stakeholders
may be invested in scope risk and scope tolerance ranges.

For example, you may list a set of deliverables that could be created if budget and schedule allow, a wish
list that your stakeholders can choose from if there’s money and time left over after mandatory deliverables
are completed.

For instance, if your project involves IT that you are upgrading or implementing and your project scope is
expanded due to new software that your competitors have implemented that now must become part of your
project scope, you will have to increase both the project cost and timeline.

Likewise, you may indicate which deliverables on the scope can be omitted or cancelled, if time or cost
grow too constrained. If, for example, a few must-have deliverables end up consuming too much of your
budget, your stakeholders can tell you which of the remaining deliverables they will allow to be dropped so
that time and budget constraints of the project can still be met.

5. Risks: Here, we usually think of threats — the things that might go wrong when we plan for risks. A
project manager must be able to reasonably foresee failures at every step of a project, and prepare
for them accordingly.

This can involve playing out what-if scenarios and formulating contingency plans.

For example, what if:

• a supplier fails to deliver?

• we lose any number of resources due to illness or transfer?
• the market takes a huge swing?
• our competitor launches a similar product at the same time?
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When managing risks as a project constraint, you must find the zone of risk tolerance in your organization
and stakeholders, which means determining a tolerable range of responses within appropriate limits.

For example, if a supplier fails, you will seek out another within X price, Y delivery time, and Z quality. By
establishing a zone of tolerance, your stakeholders will be able to determine how much risk they are willing
to take on in order to reap the proposed benefits of the project.

Another way to look at risk is through the unexpected opportunities that may arise. Seizing a new
opportunity will naturally involve risk, so it’s helpful to show your stakeholders scenarios and determine their
window of tolerance on this end of the spectrum as well.

If, say, an opportunity arises to capture a larger market share, will stakeholders be willing to raise their
investment amount? What would be the limits of their increase?

6. Benefits: The projected benefits of any project should be clearly spelled out in a business
case during the very early stages of project planning. To put it simply, a project’s value must be
determined early and fully agreed upon before launch.

Therefore, your business case should articulate the project’s justification and what set of measures will be
used to assess its benefits to the organization.

These measures include:

• Time — measuring the project’s benefits over time.

• Changes in conditions — any number of changes can alter a project’s benefits.
• Benefit threshold — what is the threshold and what are the project constraints that could impact
the benefits.

The Triple Constraints of Project Management: Time, Scope, and Cost

Time, scope, and cost are the three triple constraints of project management. A project manager can adjust
the constraints to accommodate changes to the project plan. Read on to discover how time, scope, and
cost interplay in project management.
What is the triple constraint triangle?
The triple constraint triangle of project management is the visualization of a triangle, with sides formed by
time, scope, and cost. These three factors are the constraints that project managers juggle in order to keep
a project running as expected.

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Time: Time is how long the project will take. It’s important for project managers to make sure the team
finishes the project before a deadline. A project manager must figure out how long a project will take to
complete and ensure they have enough people working on the job to complete it in time.
Scope: The scope of the work refers to the deliverables of the project or the end result of the work. The
scope should be clearly defined before beginning work and closely monitored throughout the project. Scope
creep, or the project getting bigger or changing without proper protocol, can throw the constraint triangle off
balance.
Cost: The cost is the budget of the project. Clients and project managers agree on a budget prior to
beginning the project, and keeping a project on budget will be one measure of success.
When a project is met with one of the constraints, the project manager uses the triple constraint model to
compensate and bring the project back into line. Time, scope, and cost interlink in such a way that if one
shifts, the others must as well.

How time, scope, and cost are linked

When one of the triple constraints goes off track, the project manager may need to adjust. Here are some
common ways that a project manager might adjust to keep the project on track.
Over budget : When a project goes over budget, it’s on track to spend more money than the client
agreed to pay. Budget is the cost constraint, which means that scope or time must shift to accommodate.

Shifting scope means lowering the expected deliverables and completing less work, which also requires
less time to complete and therefore costs less. Another option is to find another way to cut time, such as
completing the work with less labor or tools. In that case, the scope would remain the same, and only time
and cost would adjust.
Scope creep: Scope creep happens when the expected deliverables get bigger and bigger as the project
goes on without following proper procedures, such as making change requests. When scope expands, a
project manager can adjust time and cost to compensate.

If the scope gets bigger, the project manager can ask for more budget to increase the labor, tools, and
material needed to complete the project. With enough additional funding, the project manager might avoid
pushing the schedule back. Otherwise, it’s likely a bigger project will require a longer timeline to complete.
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Over schedule : When a project runs over schedule, a project manager might shift cost or scope to get
the project done on time.

By adding money to the project, the project manager could access better tools or pay the labor costs of a
bigger workforce to get the project done. Alternatively, they could meet with the client to reduce the scope
of the project.

Examples of the triple constraints of project management

To understand these concepts in the real world, let’s examine some examples of triple constraints and how
they affect project management:
Construction deadline : A construction company is building a new office complex for a client. The client
requested to move into the building a month earlier than originally scheduled. The project manager might
accommodate this request by increasing the budget and bringing in a larger crew to finish the project faster.
Or, they might prioritize certain areas of the building to finish early so the client can move in while
construction continues, which would be an example of rearranging the scope to fit the new requirements.
Marketing scope creep : A marketing team is preparing a package of marketing materials for a client
ahead of a new product launch. The client requests five additional pages of material. The client doesn’t
want to push back the product launch, so the time constraint has to remain the same. The project manager
and the client will have to agree to either increase the budget and use more labor hours and resources or
they will have to remove other materials to make room for the new additions.

How to manage the triple constraint

Once you understand the importance of the triple constraints on a project, the next step is to learn the best
practices for how to manage them. Here are some tips to help you use the triple constraint triangle as a tool
for success:
• Understand non-negotiables: Depending on the project and client, some constraints will be more
flexible than others. For example, budget might be negotiable while time and scope are not. By
understanding what’s more important to your client, you are more likely to successfully deliver on
their expectations.
• Be aware of other factors: In some products, factors like the quality of the final product will be an
important constraint as well. Be flexible to a more adapted model of project constraints for whatever
your project needs are.
• Communicate with stakeholders: Managing projects takes skill, and clear communication at every
step of the way helps project managers manage expectations and get the buy-in they need from
stakeholders.

The Fast, Cheap & Good Myth

In a competitive environment, it’s common to feel pressure to deliver something comprehensive as cheaply
(and quickly!) as possible.

While that is possible in some scenarios, the project management triangle reminds us that, most of the
time, projects cannot be simultaneously cheap, good, and fast. We have to know our priorities to help the
clients and stakeholders decide “what’s gotta give”.

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Identifying & Managing the Risk in project management
Effective project managers share a key characteristic – they actively identify and manage risks. Let's look at
seven tools and techniques to identify risks in projects and programs.

Many project managers begin enthusiastically. They assemble their teams, identify a lots of risks, and
document them in an Excel spreadsheet. However, these risks frequently go unaddressed thereafter.

The consequence? Risks remain unrecognized and unmanaged. Threats evolve into expensive problems,
and teams overlook valuable opportunities. Moreover, project teams fall short of meeting their project goals.

Project managers have a variety of methods at their disposal for identifying risks, and often, a combination
of these techniques is most effective. For instance, a project team might use a checklist in one meeting and
review assumptions in another. Here are seven risk identification techniques:

7 Ways to Identify Project Risks

Project managers have a variety of methods at their disposal for identifying risks, and often, a combination
of these techniques is most effective. For instance, a project team might use a checklist in one meeting and
review assumptions in another. Here are seven of my favorite risk identification techniques:

1. Interviews. Choose key stakeholders, plan the interviews, formulate specific questions, and document
the outcomes.
2. Brainstorming. While I won't delve into the rules of brainstorming here, one tip is to prepare your
questions ahead of time. For example:
• Project objectives: What are the key risks related to [specific project objectives like schedule, budget,
quality, or scope]?
• Project tasks: What are the primary risks associated with [specific tasks such as requirements, coding,
testing, training, implementation]?
3. Checklists. Check if your organization has a common risk checklist. If not, consider creating one.
Update this list after each project to include significant risks encountered, but remember that no
checklist is exhaustive.

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 4. Assumption Analysis. An assumption as something considered true without proof. These are
potential risk sources. Ask stakeholders about their project assumptions, document these, and identify
related risks.
5. Cause and Effect Diagrams. Cause and Effect diagrams are powerful. Project managers can use this
simple method to help identify causes--facts that give rise to risks. And if we address the causes, we
can reduce or eliminate the risks.
6. Nominal Group Technique (NGT). Many project managers are not familiar with the NGT technique. It
is brainstorming on steroids. Input is collected and prioritized. The output of NGT is a prioritized list of
risks.
7. Affinity Diagram. This creative exercise involves brainstorming risks, writing each on a sticky note,
and then grouping these notes into categories. Each category is then titled, helping to organize and
understand the risks better.

How to manage project risk

You will want to understand a typical risk management process and risk mitigation strategies. The risk
management process will help you plan for and anticipate risks and mitigation strategies will give you tools
to deal with them if they do happen.

Risk management process

The risk management process, or lifecycle, is a structured way of tackling risks that can happen in your
project. Though you will find some slight variation, the risk management process or lifecycle, generally
follows the following steps. This process can be used for both positive and negative risks.

1. Identify : The first step to getting a grasp on potential risks is to know what they are. In this step, you
will identify risks that might affect your project by making a list (or spreadsheet) of risks that might
arise. Use your own project management expertise and consult similar past projects to see what challenges
you might expect. You will also want to have stakeholders, team members, and subject matter experts
generate ideas with you; they may have insight into the field that you have overlooked.

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2. Analyse : In this stage, you will list the probability of each risk occurring, as well as the potential impact
each risk will have on your project. You could begin putting this information in a risk register—a chart
that lays out each risk, followed by information like priority level and mitigation plans. You can record
both qualitative and quantitative information.

3. Evaluate : In this stage, you will assign priority to risks by using the probability and impact of each
risk to determine their risk levels. This means assigning each risk a high, medium, or low priority based
on the factors you have determined. Evaluating your risks gives your team the chance to see where to
focus their energy in mitigating risk.

4. Treat : Come up with a plan to mitigate each risk. We will go into how you can treat risks in more
detail below. Record these plans in your risk register as well.

5. Monitor : In the last step, set up a process to monitor each risk as your project begins. You can do
this by assigning team members to keep an eye on specific risks and mitigate them. This makes sure you
will have a constant sense of where the risks are and how likely they are to happen, so you will be ready to
tackle them if they do occur.

Risk mitigation: The process of dealing with risks

The risk management process lays out a path for you to deal with risks before they happen. But what are
the actual ways you can mitigate them? Avoid, accept, reduce and transfer are four common ways to
mitigate risk. Deciding which step to use for each risk is not an exact science, and you will have to use your
judgement and expertise to determine which is best. Here is some more detail and guidance on each
mitigation tactic.

1. Avoid : Not all risks can be avoided, but it can be a good idea to try to keep it at bay, when you can.
Avoid a risk if there is a high chance that a risk will happen. Has a partner vendor gained a reputation for
providing low-quality work? Try to find a different one. Are you event-planning during the rainy
season? Move the event indoors or to a sunnier season.

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2. Accept : However, accepting risks at times, can make sense if they have a low chance of happening
and will have low impact on your project. Ultimately if the risk does happen, it should not derail your project.
Say you have ordered sunflower arrangements for a wedding reception, but the florist says there is a
small chance they will not have enough and will have to replace some with tulips. Since the
probability of risk is low and having tulips instead of sunflowers will not upend the wedding, you might
accept the risk instead of troubling yourself to find a new florist.

3. Reduce : Reducing risk means changing elements in your plan to minimise the risk’s probability of
happening or potential impact on your project. Medium and high risks are good candidates to try and
reduce. Reducing usually requires some effort or investment. For example, a project manager could hire
new team members if the team is falling behind on work.

This might also mean including risk reduction tactics in your project plan. Time buffers for complex or time-
sensitive tasks can allow you some flexibility if work starts to fall behind. Having a contingency budget
can help absorb unexpected costs if they arise.

4. Transfer: Transferring risks entails shifting the risk to another party outside of your project. This
can mean obtaining an insurance policy or outsourcing parts of the work to a third party. The risk might still
occur, but the direct impact on your project will be absorbed by somebody outside of your project.

Tools to manage risk

Tools can provide you structure for your team’s thoughts and efforts and serve as a point of reference
throughout a project. Here are a few you might consider using in your risk management process.
• Risk management plan: A risk management plan is generally a living document that contains all
information related to risk in your project. This can contain an executive summary, your risk register,
mitigation plans, risk owners, and any other information pertaining to risk. Project managers may
update the document as the project progresses and needs fluctuate.
• Risk register: A risk register is a chart that contains all the risks associated with a project, as well
as their priority levels, mitigation plans, and other important details. A risk register might also be
called a risk matrix. You can find project management software that can help you compile risk
registers or else create your own in a spreadsheet.

Here is what a risk register might look like as a project team prepares a company offsite.

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Project initiation: The first step to successful project management

What is project initiation?

Project initiation is the first step in starting a new project. During the project initiation phase, you establish
why you’re doing the project and what business value it will deliver—then use that information to
secure buy-in from key stakeholders.

The model divides a project’s lifecycle into these five stages:

• Project initiation: Broadly define your project and secure buy-in.
• Project planning: Create detailed goals and a project roadmap.
• Project execution: Launch your project using information from the first two steps.
• Project performance: Measure effectiveness using key performance indicators (KPIs).

Project initiation vs. project planning

During the project initiation phase, you define your project at a high level in order to demonstrate its
business value. Once you secure buy-in from key stakeholders and prove that your project is feasible, you
then move on to the project planning phase. That’s when you define your specific objectives, deliverables,
and project roadmap in more detail. Think of it this way—you want to provide enough information to secure
approval during the initiation phase, then spend time ironing out project planning details after you get the
green light.

Why does the project initiation phase matter?

Starting a new project is exciting, but it’s important to make sure your initiative will actually add value before
jumping into the planning phase. That’s where project initiation comes in—it offers a structured
approach to demonstrate your project’s business case and prove that the work you’ll do is feasible.
Project initiation also ensures that you loop in stakeholders early on, so you can secure essential
resources, gain visibility for your project, and prevent costly roadblocks down the road.

The project initiation process: 4 steps to get started

Here’s how to approach this first phase of project management and lay a solid foundation for your new
project.

1. Create a project charter or business case

In this first step, you demonstrate why your project is necessary and what benefit it will bring. You
can do this with either a project charter or a business case. These two documents follow the same
fundamental idea, since they’re both used to outline key project details and pitch your initiative to

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stakeholders. The main difference between them is scope—you can use a project charter for smaller
initiatives, and a business case for larger projects that require significant resources. For example, you
might create a project charter for a redesign of your company homepage, and a business case for a
company-wide rebrand.
Regardless of whether you use a project charter or a business case, this is your chance to demonstrate
how your project will add business value and why you need specific resources like budget, equipment, or
team members. Here’s a rough template of what these two documents typically include:
Project charter
A project charter demonstrates why your project is important, what it will entail, and who will work on it—all
through the following elements:
• Why: The project’s goals and purpose
• What: The scope of the project, including an outline of your project budget
• Who: Key stakeholders, project sponsors, and project team members

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Business case
A business case includes all the components of a project charter, along with these additional elements:
• A comprehensive financial analysis, including an estimate of the return on investment (ROI) your
project will bring
• An analysis of project risks and a risk management plan
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 • An action plan that includes how decisions will be made

2. Identify key stakeholders and pitch your project

Next up, determine who needs to sign off on your project charter or business case. This includes key
stakeholders who have a say in the outcome of your project—for example, executive leaders,
project sponsors, or cross-functional teams that you’re requesting budget or resources from. If
you’re not sure who your key stakeholders are, ask yourself the following questions:
• Who needs to approve my project?
• Who will provide resources for my project?
• Who can influence my project?
You can also create a project stakeholder analysis to ensure you’re not overlooking any important players.
This methodology involves dividing stakeholders into four main groups: those with high influence and high
interest, high influence and low interest, low influence and high interest, and low influence and low interest.
Anyone in the first bucket (high influence and high interest) is likely a key stakeholder that should
approve your project during the initiation phase.

Aside from key stakeholders, now is also a good time to identify other individuals who may be impacted by
or interested in your project. While these people don’t need to officially approve your initiative, it might be
helpful to give them an early heads-up, especially if this project will impact their work. They may also be
able to provide additional support in the form of insight or resources.
Getting stakeholder buy-in during the initiation phase not only helps you secure approval, support,
and resources—it also increases project visibility and prevents costly roadblocks later on in the
project life cycle.

3. Run a feasibility study

At this point you’ve pitched your project, demonstrating that it adds value and fits with your company’s
overall strategic plan. Now, it’s time to run a feasibility study to confirm your project is possible with the
resources you have at your disposal.
Simply put, a feasibility study evaluates whether your project could be successful. It answers the
following questions:
1. Does my team have the required resources to complete this project?
2. Will there be enough return on investment (ROI) to make this project worth pursuing?
If you can answer yes to both questions, you have a solid rationale to move forward with your
project. If your feasibility study concludes that you don’t have enough budget or resources, you’ve

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created a strong case to go back to stakeholders and request more. And if your project’s ROI isn’t up
to snuff, you can use that data to tweak your project plan—or pursue a different opportunity entirely.
Does every project need a feasibility study?
Feasibility studies are typically used for larger projects that require significant company resources. You
might not need to run a feasibility study for smaller projects with minimal long-term impact. You can also
skip this step if you’ve managed a similar project in the past, your competitors are already succeeding
with a similar initiative, or you’ve run a similar feasibility study within the past three years. Keep in
mind that a feasibility study takes time and resources to complete, so make sure it’s really necessary before
you dive in.

4. Assemble your team and tools

Now that your project is approved and its feasibility proven, you can finally start to assemble your team,
workspace, and tools. Here are some pointers to get you started:
• A good team can go a long way in making your project a success, and it can take time to find
people with the right experiences and skills. It’s a good idea to start this process as soon as
possible once your project is confirmed—especially if you need to hire new employees or onboard
contractors. And depending on your company’s procedures, you may need to file a request in
advance to reassign existing employees to your project.
• Consider how you want to organize your team structure. For example, do you want a simple
hierarchical structure with team members reporting into single team leads—or does it make more
sense to divide your team by geographical region?
• Where you work can influence how you work. If you’re planning to manage your project
remotely, make sure you have the right infrastructure set up to manage a virtual team. And if your
team will work onsite, keep in mind that you may need to request office space well in advance of
your project kick-off meeting.
• Choose the right tools. Consider how your team will work together on daily tasks—for example, will
you use email, Google docs, or more robust project management software? You may want to
consider a tool like Asana, which allows you to centralize team communication in one place, assign
tasks with clear owners and due dates, and easily organize projects in a way that's tailor-made for
your team.

What is project design?

A project design is a process of outlining all of a project's stages and creating a project plan. It includes
strategizing, developing ideas, gathering resources and creating processes to achieve goals and keep
within a budget and deadline. Project managers could add flowcharts, sketches, photo impressions and
prototypes to help fully outline the project.

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Often, project managers present the project plan they designed to senior stakeholders and investors to get
final approval before beginning the project. In many cases, project managers create more than one plan for
each project so stakeholders can choose which one they think would work best for the project. Using
project design is a method project managers use to ensure everyone's ideas, goals and timelines align
before the project even starts.

Project Design Process: How to Design a Project Step-By-Step

Project design differs based on your industry and project type. However, design phases usually have the
same structure and include similar elements. Some project managers use specific project management
software to mock up a project design, while others may use different approaches. Here are steps to follow
when creating a project design:
1. Determine the vision
In a project design, the vision describes the reason for the project and lists the ideal outcomes. The vision
can also give a summary of how you intend to reach the outcomes. This part of the project design
document gets stakeholders' attention and generates interest in the project. Keep your vision statement to
a short paragraph that's easy for stakeholders to scan. You can include more details on the project later in
your plan.
2. Address why this project matters
This part of your plan addresses why this project matters. For example, completing a project might fix an
issue or create a new product for consumers. Give details on how a certain problem affects your company
or how you expect the product to benefit consumers. Try to use specific numbers if possible to give
stakeholders a more specific idea of the need.
3. Describe the required resources
Required resources include the people or elements required to solve the problem or meet the need. This
may include staff, software or equipment to aid in the completion of the project. Be specific when listing
resources, since many project elements, like budget and strategy, depend on them. A good method to use
when listing your resources is answering the five W's:
• Who: Describe who you need for the project. Identify the number of people and their duties
necessary to complete the project.
• What: List what the project is for and what you plan to use to complete it. Define the materials,
equipment and tools necessary to work on the project.
• When: Explain when you plan on starting and ending the project. Provide an estimated timeline for
the project.
• Where: Determine where you plan to work on the project. Provide the location and its facilities.
• Why: Explain why you're doing the project. This helps identify any gaps or problems and why the
project addresses these issues.
4. Outline the project goals
Create a goal statement that explains how you plan to reach each milestone of the project. Establish goals
by applying the SMART method, which means a goal is specific, measurable, achievable, realistic and
time-relevant. Creating SMART goals can also give a detailed guide to reference throughout your project.

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5. Include a detailed strategy
A strategy is a basis for developing project tasks and responsibilities. The strategy focuses on the vision,
resources, goals and resolution of the project design. Here are some tips to consider when choosing a
strategy for your project:
• Compare past experiences with similar projects.
• Review lessons learned from those projects.
• Use best practices by applying them to the current project.
• Consider how you plan to resolve the problem.
• Identify the goals of your project design.
• Create a strategy with a clear path to obtain your goals.
• Define the design of your project with phases, activities, steps and tasks of the strategy.
6. Create a contingency plan
You may encounter challenges or unforeseen setbacks during your project, so it's helpful to have
a contingency plan. Having an alternative strategy provides a corrective action plan so you can respond to
potential risks.
While each situation differs, the challenges you may encounter include low staffing rates, a deficiency of
employee skills or high turnover. Other risks include a lack of funds, equipment or office space. While you
may not be able to account for every challenge, try to identify the most probable ones and form contingency
plans for them.
7. Design a budget
Design a budget outline with the financial resources you need for the project. The budget helps
stakeholders determine if it's financially reasonable to complete the project. Typically, it's required for
project managers to stay within the budget you create in the project design phase, so it's important to be as
accurate as possible.
8. Present the project proposal
Once you finish the project design, present it to stakeholders and investors. The proposal allows you to
explain the benefits associated with each phase of the design. Having a thorough project design shows
investors you're committed to the improvement of your organization. Once you get approval for your design,
it's time to plan your project.
In your project proposal, you might include visual elements to engage the stakeholders or communicate
complex information. You can use a variety of visualization techniques in your project proposal, including:
• Road maps: A roadmap is a graph that shows a high-level overview of the goals and deliverables
for the project.
• Timelines: A timeline details the deadlines for certain tasks and includes specific dates for the
beginning and end of the project.
• Charts: A chart depicts certain statistics, such as budgetary allocations.
• Prototypes: A prototype is an example of a product to show before actual production begins.

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Project Design Example
Project managers use project management tools such as Gantt charts to structure their project designs.
Here’s a simple project design example that shows how the project design ideas are added to this project
planning tool.
For this project design example, let’s take a look at a construction project. As you can see in the image
below, during the project design phase, project managers can use Gantt charts to add the major tasks and
deliverables as well as build the work breakdown structure of a project to outline the phases of the project
execution.

Project Manager’s Gantt charts have two major parts. On the left side, there’s a spreadsheet that allows
project managers to enter information that’ll be used to automatically generate a project timeline on the
right side. This timeline won’t only show the project tasks but also milestones, task dependencies and due
dates for project deliverables.

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What Project Manager Can Do to Help Your Project Design

Designing a project takes a lot of work, but using project management tools facilitates the process of
creating an outline that details these various parts of the project. Besides using Gantt charts to organize
your project design ideas into a project timeline, you can also use kanban boards to manage workflow
using Project Manager.

Plan Workflows With Kanban Boards

Project Manager has a kanban feature that was created to visualize workflows. The project design phase
involves collaboration among members of the project management team who will need to share files and
communicate in real-time, which can be achieved with Project Manager’s kanban boards that let project
teams better communicate and structure the project design.

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It’s easy to see how this process can serve you throughout the project design and as you collect more
documents to define your project. Then, during execution, you can use ProjectManager’s real-time
dashboards to keep track of the project’s progress.

Track Projects With Real-Time Dashboards

ProjectManager’s real-time dashboards help project managers keep track of project costs, timelines and
progress once the project design becomes a reality. These powerful dashboards can be used to track
multiple projects in a portfolio. There are six key metrics that automatically update as changes are made
across the software, making it easy to stay on track throughout your project or portfolio.

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E-Business Systems Introduction –
e-Business is the use of the Internet and other networks and information technologies to support e-
commerce, enterprise communications and collaboration, and Web-enabled business processes, both
within a networked enterprise and with its customers and business partners. - E-business includes e-
commerce, which involves the buying and selling and marketing and servicing of products, services, and
information over the Internet and other networks.

Organizations developing e-business solutions consider business modeling as a central part of their
projects. They use model-based technologies to develop both rapidly and in a controlled manner. The
business and the business tools that support it are regarded as an integrated whole, and delivering the right
solution requires a much tighter integration of business process definition and system development than
has been needed in the past. Many more stakeholders are involved in the development of the business
tools. Since the business tools run the business, almost everyone is touched by it in some way; changes to
business processes require changes to the business tools. As an example, a CEO or marketing director
could now be involved in defining the e-business and its business tools, whereas previously you would
typically involve some level of "business domain expert" who may know how business is run but who is not
empowered to make any decisions about how to change it.

An e-business development effort is more than just automating existing processes; it forces some reflection
on the nature of the business and the way it is run. Business modeling and system definition are not only of
interest for people in the Information Technology department, it is of concern for everyone involved in
business development. A project to develop a new business tool involves people from all parts of the
organization, from executives with the power to make decisions, to grass roots and users who feel the
consequences of those decisions.

The business tools built under the umbrella of e-business development can be categorized as follows:

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 • Customer to business (C2B)-applications that allow you to order goods over the Internet, such
as electronic books stores.
• Business to business (B2B)-application that automate a supply chain across two companies.
• Business to customer (B2C)-application that provide information to otherwise passive
customers, such as distributing news letters.
• Customer to customer (C2C)-applications that allow customers to share and exchange
information with little information from the service provider, such a auctions

Characteristics of e-business Development

An e-business development project has many characteristics in common with the development of any
complex information system. These characteristics typically include:

• Externally imposed rules and regulations, often of high complexity, such as business rules.
• High complexity in data structures.
• Customer focus.
• Pressed time schedules.
• Performance and reliability of the final system is a primary concern.

Typical differences in an e-business development project are:

• More emphasis on business modeling.

• More emphasis on user-interface design.
• Use of e-business enabling technologies to define the architecture.
• A greater focus on performance testing.

UNIT-II
Techniques of project appraisal
Project Evaluation helps the organization improve its projects management skills on future projects. It helps
to know whether the project is moving according to plan or not. It brings into light the project’s strengths and
weaknesses. It gives the management a good idea of how the project is progressing. Thus, project
evaluation measures the success of a project.
These can be classified into two broad categories as follows:

• Non-Discounting Techniques or Traditional Methods: - It does not take into consideration the
time value of money. Important traditional methods may be discussed as follows:

(A) Pay Back Method: It is cash-based technique. It is a period over which the investment would be paid
back. It is a breakeven point of the project, where the accumulated returns equal investment. It is also
called ‘pay-out’ or ‘pay-off’ period or ‘recoupment’ or ‘replacement period’.

1. When Annual Cash Inflows Are Equal: - When cash inflows/ benefits are even or equal pay back
period is calculated as follows: -

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Example: A farmer has invested about Rs. 20000/- in constructing a fish pond and gets annual net
return of Rs.5000/- (difference between annual income and expenditure). The pay back period
for the project is 4 years (20000/ 5000).

2. When Annual Cash Inflows Are Unequal: when cash inflows/ benefits are not equal pay back
period is calculated in the form of cumulative cash inflows as follows: -

Example: The investment and expected cash inflows of a project over its 8-year period life is given below:

Required: Compute the payback period of the project. Would the project be acceptable if the maximum
desired payback period is 7 years?

Solution: As the expected cash flows is uneven (different cash flows in different periods), the traditional
payback formula cannot be used to compute payback period of this project. The payback period for this
project would be computed by tracking the unrecovered investment year by year.

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Payback period = years before full recovery + (Unrecovered investment at start of the year/Cash flow
during the year)
= 5 + (3,000/6,000)
= 5 + 0.5
= 5.5 years or 5 years and *6 months

*0.5 × 12

The entire investment is expected to be recovered by the middle of sixth year. The payback period of this
project is, therefore, 5.5 years or 5 years and six moths.

Conclusion: The project is acceptable because payback period promised by the project is shorter than the
maximum desired payback period of the management.

Advantages of Pay Back Method

• It is simple to understand and easy to apply.

• It is very important for cash forecasting, budgeting and cash flow analysis.

• It minimizes the possibility of losses through obsolescence.

• It takes into account liquidity.
• It is easier for projects yielding returns in initial years

Disadvantages of pay back method

• It ignores the time value of money.

• It completely ignores cash inflows after the payback period.
• This method does not measure profitability of projects.
• It insists only on recovery of the cost of the project.
• It does not measure the rate of return.

• It may become misleading because it is based on a single factor.

(B)Average Rate of Return Method (ARR)

• It represents the ratio of the average annual profits to the average investment in the project. It is
based on accounting profits and not cash flows. This is also known as Accounting Rate of Return
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 Method or Return on Investment Method or Unadjusted Rate of Return Method. ARR is found out by
dividing average income by the average investment. It is calculated with the help of the following
formula:

Decision Rule (Or Selection Criterion) : The higher the ARR, the better the project. If the projects are
mutually exclusive, the project with highest rate of return is selected. If the calculated ARR is equal to or
more than the company’s target rate of return, the project will be accepted. If the calculated ARR is less
than the company’s target rate of return, the project will be totally rejected.

Example: If the annual profit for a project over the life of the investment averages to Rs. 20,000,
and the average investment value in a given year is Rs. 100,000, Which proposal should be
selected ?
Solution: 20000 / 100000 = 20% is the ARR
There are two different projects a company is considering for investment and a decision has to be
made based on which project yields better ARR. Following are the details:

Description Proposal I Proposal II

Estimated average annual profit from the

RS. 40,000 Rs. 30,000
projects (A)

Average Investment Value (B) Rs. 140,000 Rs. 100,000

Estimated ARR (A/B) 29% 30%

When a decision has to be made only based on the accounting rate of return: The proposal II has
30% ARR and yields a better result to the company. Hence Proposal II should be selected.

Advantages of ARR
• It is simple to understand and easy to apply.
• It takes into consideration earnings over the entire life of the project.
• It considers profitability of the investment.

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 • Projects of different character can be compared.
• Rate of return may be readily calculated with the help of accounting data.
Disadvantages of ARR
• This method does not give any importance to the time value of money.
• It does not differentiate between the size of the investment required for each project
• It is based upon accounting profits, instead of cash flow.
• It considers only the rate of return and not the life of the project.
• It ignores the fact that profit can be reinvested.

Discounting Techniques or Modern Methods: - It take into consideration the time value of money.
Important modern methods may be discussed as follows:
(A) Net Present Value Method (NPV): -
NPV method involves discounting future cash flows to present values. The cash outflow (i.e., initial
investment whose present value is the same) is deducted from the sum of the present values of future cash
inflows (returns or benefits). The balance amount is NPV which may be either positive or negative. If the
NPV is positive, it means that the actual rate of return is more than the discount rate and it contributes to
the wealth of the shareholders. A negative NPV indicates that the project is not even covering the cost of
capital. It means that the actual rate of return is less than the discount rate.
Decision Rule (Or Selection Criterion) : If the NPV is greater than 0, the project is accepted. Otherwise
the project is rejected.

Formula for NPV

Example: Nice Ltd have option to start a new project with invest Rs 10,00,000. The investment is said to
bring an inflow of Rs. 1,00,000 in first year, 2,50,000 in the second year, 3,50,000 in third year, 2,65,000 in
fourth year and 4,15,000 in fifth year. Assuming the discount rate to be 9%. Let us calculate NPV using the
formula.

Year Flow Present value Computation

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 0 -10,00,000 -10,00,000 –

1,00,000 /
1 1,00,000 91,743
(1.09)1

2,50,000 /
2 2,50,000 2,10,419
(1.09)2

3,50,000 /
3 3,50,000 2,70,264
(1.09)3

2,65,000 /
4 2,65,000 1,87,732
(1.09)4

415000 /
5 4,15,000 2,69,721
(1.09)5
Here, the cash inflow of Rs. 1,00,000 at the end of the first year is discounted at the rate of 9% and the
present value is calculated as Rs. 91,743. The cash inflow of Rs, 2,50,000 at the end of the year 2 is
discounted and the present value is calculated as Rs. 2,10,429 and so on.
The total sum of present value of cash inflows for all the 5 years is Rs. 10,29,879. The initial investment is
Rs. 10,00,000. Hence, the NPV is Rs. 29879.
Since the NPV is positive the investment is profitable and hence Nice Ltd can go ahead with the
acceptance of project.

Advantages of NPV
• It takes into account the time value of money.
• It focuses attention on the objective of maximization of the wealth of the project.
• It considers the cash flow stream over the entire life of the project.
• It is highly useful in case of mutually exclusive projects.
• This method is most suitable when cash inflows are not uniform.
• This method is generally preferred by economists
Disadvantages of NPV
• It involves complicated calculations.
• It is difficult to select the discount rate.
• This method is not suitable in case of projects involving different amounts of investment.
• The relative desirability of project will change with a change in the discount rate.
• Not suitable in case of two projects having different useful lives.

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 (B) Internal Rate of Return (IRR): -
In IRR, discounting at different discount rates until we reach the rate at which the present value of cash
inflows to present value of cash outflows (investment). Thus, internal rate of return is the rate at which total
present value of future cash flows is equal to initial investment. In other words, it is the rate at which NPV is
zero. This rate is called the internal rate because it exclusively depends on the initial outlay and cash
proceeds associated with the project and not by any other rate outside the investment.
Calculation of IRR
NPV indicates the present value of the cash flows of a project at a particular discount rate. IRR attempts to
ascertain the interest rate at which the present value of cash inflow is made equal to the initial investment is
a time adjusted rate of return which equates present value of cash flows with original cash outflow can be
calculated through the following steps.
1. Obtain the annuity table factor using formula
F = Investment of the project/Annual cash inflow
1.Locate the factor in the annuity table, corresponding to the number of years of the project, to obtain the
discount percentage intervals.
2. Ascertain the exact discount percentage using interpolation

Decision Rule (Or Selection Criterion): - The calculated IRR is compared with the desired minimum rate
of return. If the IRR is greater than the desired minimum rate of return, the project is accepted and if it is
less than the desired minimum rate of return, then the project is rejected.

Example: You have a $100,000 investment for a project. The expected return on the project in its useful
life is $125,000. The useful life of the project is five years. The cash inflow is expected to be uniform. Find
out the IRR. The minimum required rate of return is 10%. Should the invest in new project? Use the internal
rate of return method to derive the conclusion. The annuity table is shown below.

Solution : Here, the cash flow is uniform. Considering the cash inflows and cash outflows, we have the
following table. As we have $125,000 over a period of five years, for each year the cash inflow will be
$25,000. Note that cash inflows are mentioned as positive, whereas cash outflows (investment) are
negative.

Project investment = $100,000 and Annual net cash flow = $25,000

Hence, Annuity Discount Factor = Project Investment/Annual Net Cash flow
= $100,000/$25,000
= 100/25 = 4, which is close to 3.9927.

For the annuity discount factor of 3.9927, looking up the table shown in the question, the rate comes out to
be at 8 percent.
Hence IRR for the project is 8%.
The IRR is less than the desired minimum rate of return, then the project is rejected.
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Advantages of IRR
1. This method considers all the cash flows over the entire life of the project.
2. Cost of capital need not be calculated.
3. IRR gives a true picture of the profitability of the project even in the absence of cost of capital.
4. Projects having different degrees of risk can easily be compared.
5. It takes into account the time value of money.

Disadvantages of IRR
1. It is difficult to understand and use in practice because it involves tedious and complicated calculation.
2. Sometimes it may yield negative rate or multiple rates which is rather confusing.
3. It is applicable mainly in large projects.
4. It yields results inconsistent with the NPV method if projects differ in their expected life span, investment
timing of cash flows.

What Is a Business Case?

A business case is a project management document that explains how the benefits of a project overweigh
its costs and why it should be executed. Business cases are prepared during the project initiation phase
and their purpose is to include all the project’s objectives, costs and benefits to convince stakeholders of its
value.

A business case is an important project document to prove to your client, customer or stakeholder that the
project proposal you’re pitching is a sound investment. Below, we illustrate the steps to writing one that will
sway them.

The need for a business case is that it collects the financial appraisal, proposal, strategy and marketing
plan in one document and offers a full look at how the project will benefit the organization. Once your
business case is approved by the project stakeholders, you can begin the project planning phase.

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Business Case Template

Key Elements of a Business Case

One of the key steps to starting a business case is to have a business case checklist. The following is a
detailed outline to follow when developing your business case. You can choose which of these elements
are the most relevant to your project stakeholders and add them to our business case template.
1. Executive Summary
The executive summary is a short version of each section of your business case. It’s used to give
stakeholders a quick overview of your project.
2. Project Definition
This section is meant to provide general information about your projects, such as the business objectives
that will be achieved and the project plan outline.
3. Vision, Goals and Objectives
First, you have to figure out what you’re trying to do and what is the problem you want to solve. You’ll need
to define your project vision, goals and objectives. This will help you shape your project scope and identify
project deliverables.

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4. Project Scope
The project scope determines all the tasks and deliverables that will be executed in your project to reach
your business objectives.
5. Background Information
Here you can provide a context for your project, explaining the problem that it’s meant to solve, and how it
aligns with your organization’s vision and strategic plan.
6. Success Criteria and Stakeholder Requirements
Depending on what kind of project you’re working on, the quality requirements will differ, but they are critical
to the project’s success. Collect all of them, figure out what determines if you’ve successfully met them and
report on the results.
7. Project Plan
It’s time to create the project plan. Figure out the tasks you’ll have to take to get the project done. You can
use a work breakdown structure template to make sure you are through. Once you have all the tasks
collected, estimate how long it will take to complete each one.
8. Project Budget
Your budget is an estimate of everything in your project plan and what it will cost to complete the project
over the scheduled time allotted.
9. Project Schedule
Make a timeline for the project by estimating how long it will take to get each task completed. For a more
impactful project schedule, use a tool to make a Gantt chart, and print it out. This will provide that extra
flourish of data visualization and skill that Excel sheets lack.
10. Project Governance
Project governance refers to all the project management rules and procedures that apply to your project.
For example, it defines the roles and responsibilities of the project team members and the framework for
decision-making.
11. Communication Plan
Have milestones for check-ins and status updates, as well as determine how stakeholders will stay aware
of the progress over the project life cycle.
12. Progress Reports
Have a plan in place to monitor and track your progress during the project to compare planned to actual
progress. There are project tracking tools that can help you monitor progress and performance.
13. Financial Appraisal
This is a very important section of your business case because this is where you explain how the financial
benefits outweigh the project costs. Compare the financial costs and benefits of your project. You can do
this by doing a sensitivity analysis and a cost-benefit analysis.
14. Market Assessment
Research your market, competitors and industry, to find opportunities and threats
15. Competitor Analysis
Identify direct and indirect competitors and do an assessment of their products, strengths, competitive
advantages and their business strategy.

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16. SWOT Analysis
A SWOT analysis helps you identify your organization’s strengths, weaknesses, opportunities and threats.
The strengths and weaknesses are internal, while the opportunities and threats are external.
17. Marketing Strategy
Describe your product, distribution channels, pricing, target customers among other aspects of your
marketing plan or strategy.
18. Risk Assessment
There are many risk categories that can impact your project. The first step to mitigating them is to identify
and analyze the risks associated with your project activities.

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