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LMA8X05 – PROJECT MANAGEMENT

1 August 2022

Project Activity and Risk Planning

Initial Project Coordination

and the Project Charter
• Early meetings are used to decide on participating in
the project
• Used to “flesh out” the nature of the project
• Outcomes include:
• Technical scope
• Areas of responsibility
• Delivery dates or budgets
• Risk management group

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Project Charter Elements

Purpose Objectives Overview Schedules

Risk
management Evaluation
Resources Stakeholders methods
plans

The Project Plan

• The process for managing change

• A plan for communicating with and managing stakeholders
• Specifying the process for setting key characteristics of the project
deliverable (technically referred to as configuration management)
• Establishing the cost baseline for the project and developing a
plan to manage project costs
• Developing a plan for managing the human resources assigned
to the project
• Developing a plan for continuously monitoring and improving
project work processes

The Project Plan

• Developing guidelines for procuring project materials and

resources
• Defining the project’s scope and establishing practices to manage
the project’s scope
• Developing the Work Breakdown Structure
• Developing practices to manage the quality of the project
deliverables
• Defining how project requirements will be managed
• Establishing practices for managing risk
• Establishing the schedule baseline and developing a plan to
manage the project’s schedule
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A Whole-Brain Approach to Project

Planning

• Project managers typically use left side of brain- logical and

analytical

• Should also use right side – creative

• A whole-brained approach is mind mapping

It is a visual approach that mirrors how human

brain records & stores information

It helps tap the creative helps increase

potential of the entire quantity and quality of
project team ideas

Mind
Mapping Team members find it enjoyable

Advantages
Helps generate enthusiasm

Helps obtain buy-in from team members

Final Mind Map

for Full-Time
MBA

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What is to be done

When it is to be started and finished

The WBS: A Who is going to do it

Key Some activities must be done sequentially

Element Some activities may be done simultaneously

Many things must happen when and how they are

supposed to happen

Each detail is uncertain and subjected to risk

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The Work Breakdown Structure (WBS)

• A hierarchical planning process

• Breaks tasks down into successively finer levels of detail

• Continues until all meaningful tasks or work packages have been

identified

• These make tracking the work easier

• Need separate budget/schedule for each task or work package

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WBS: An Example

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List List the task breakdown in successive levels

Identify Identify data for each work package

Review
Steps to
Review work package information

Create a Cost Cost the work packages

WBS Schedule Schedule the work packages

Examine Continually examine actual resource use

Examine Continually examine schedule

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Human Resources
• Useful to create a table that shows staff needed to execute WBS tasks

• One approach is a organizational breakdown structure

• Organizational units responsible for each WBS element
• Who must approve changes of scope
• Who must be notified of progress

• WBS and OBS may not be identical

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Another approach is the

Responsible, Accountable,
Consult, Inform (RACI) matrix

The
Responsibility Shows critical interfaces

(RACI) Matrix

Keeps track of who must

approve and who must be
notified

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Sample RACI Matrix

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Project Risk Management

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Project Risk Management

• Projects are risky, uncertainty is high

• Project manager must manage this risk
• This is called “risk management”
• Risk varies widely between projects
• Risk varies widely between organizations
• Risk management should be built on the results of prior projects
• Increased interest in risk management

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Risk management planning

Risk identification

Qualitative risk analysis

Subprocesses
of Risk Quantitative risk analysis
Management Risk response planning

Risk monitoring and control

The risk management register

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Need to know the risk involved before

selecting a project

Risk management plan must be

carried out before the project can be
Risk formally selected

Management
Planning At first, focus is on Track and
estimate project
externalities survival

Project risks take shape during

planning

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Risk Identification

• Risk is dependent on technology and environmental factors

• Delphi method is useful for identifying project risks

• Other methods include brainstorming, nominal group techniques, checklists, attribute listing, and
EWS.

• May also use cause-effect diagrams, flow charts, influence charts, SWOT analysis

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Qualitative Risk Analysis

• Purpose is to prioritize risks

• A sense of the impact is also needed

• Each objective should be scaled and weighted

• Construct a risk matrix

• Same approach can be used for opportunities

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Risk Matrix

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Quantitative Risk Analysis

• More precise than qualitative

• Typically more accurate

• Three techniques:
• Failure Mode and Effect Analysis
• Decision Tree Analysis
• Simulation

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Failure Mode and Effect Analysis

1 2 3 4 5 6
List ways a Evaluate severity Estimate Estimate the Find the risk Consider ways to
project can fail likelihood inability to detect priority number reduce the S, L,
(RPN) (RPN = S and D for each
x L x D) cause of failure

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A FMEA Example

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Decision Tree Analysis

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Risk Response Planning

• Threats
• Avoid
• Transfer
• Mitigate
• Accept

• Opportunities
• Exploit
• Share
• Enhance
• Accept

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The Risk Management Register

• Environments that may impact projects

• Assumptions made

• Risks identified

• List of categories and key words

• Estimates on risk, states of project’s environment, or on project assumptions

• Minutes

• Actual outcomes

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Risk Register - Example

No Description Business Impact Probability Impact Mitigation Measures % of Control Residual Risk Responsible Date raised Deadline
Person
22 Train the Trainer The system will not be used by the users if the 5 10 - Inform executives, project sponsor and the 5 7 Nhlanhla 26/06/2006
knowledge is not transferred from the super-users to Internal Audit Khumalo
the normal users.
It will also have an impact on the business continuity
and the inherint risk
6 User Proficiency The user proficiency will impact the way they use the 5 8 JCP users must be trained and/or re-trained 10 6 Leonard 07/04/2006 06/07/2006
system. It will also have an impact on the duration of before the commencement of the project Radzuma
the UAT's and testing. training on the 03/07/2006
17 New System The use of the new GP system will put additional 8 6 - Communication to GM's 20 6 Mark Truter 07/04/2006 06/07/2006
strain on the users. The initial months will be used - Involve marketing to do organisational
for familiarising themselves with the system. change control
Financial results might be issued late. - Grape vine
1 Network Connectivity The users will experience loss of communication to 5 6 - JCP to provide mitigation details. 10 5 Leonard 07/04/2006 06/07/2006
the server as well as slow response. This will impact - Site visits will be done to test network Radzuma
the perception of GP Dynamics 9.0 that it is a slow speed Carl Marnewick
system and does not resolve the current network
issues. This risk runs in conjunction with risks #2 and
#21.

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Budgeting: Estimating Costs and Risks

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Budgeting

• A plan for the costs of project resources

• A budget implies constraints

• Thus, it implies that managers will not get everything they want or
need

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Budgeting

• The budget for an activity also implies management support for

that activity

• Higher the budget, relative to cost, higher the managerial support

• The budget is also a control mechanism

• Many organizations have controls in place that prohibit exceeding
the budget
• Comparisons are against the budget

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Estimating Project Budgets

• On most projects
• Material + Labor + Equipment + Capital + Overhead + Profits =
Bid

• In other words
• Resources + Profits = Bid

• So we are left with the task of forecasting resources

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Estimating Project Budgets

• Like any forecast, this includes some uncertainty

• There is uncertainty regarding usage and price

• Especially true for material and labour

• The more standardized the project and components, the lower the
uncertainty

• The more experienced the cost estimator, the lower the

uncertainty
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Estimating Budgets is Difficult

• There may not be as much historical data or none at all

• Even with similar projects, there may be significant differences

• Many people have input to the budget

• Multiple people have some control over the budget

• There is more “flexibility” regarding the estimates of inputs (material and labour)

• The accounting system may not be set up to track project data

• Usage of labour and material is very lumpy over time

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Types of Budgeting

TOP-DOWN BOTTOM-UP NEGOTIATED

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Top-Down Budgeting

• Top managers estimate/decide on the overall budget for the

project

• These trickle down through the organization where the estimates

are broken down into greater detail at each lower level

• Sometimes viewed as zero-sum game

• The process continues to the bottom level

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Top-Down Budgeting

• Advantages
• Overall project budgets can be set/controlled very accurately
• Management has more control over budgets
• Small tasks need not be identified individually

• Disadvantages
• More difficult to get buy in
• Leads to low level competition for larger shares of budget

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Bottom-Up Budgeting

• Project is broken down into work packages

• Low level managers price out each work package

• Overhead and profits are added to develop the budget

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Reserve Analysis

CONTINGENCY MANAGEMENT
RESERVE RESERVE

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Work Element Costing

• Labour rates include overhead and personal time

• Direct costs usually do not include overhead

• General and administrative (G&A) charge

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Estimation Examples

• Assume a work element is estimated to require 25 hours of labour by a truck driver.

• The specific truck driver is paid R17.50/hr.

• Overhead charges to the project are 84% of direct labour charges

25 hr × R17.50 × 1.84 = R805.00

• Assume 12% personal time

1.12 × 25 hr × R17.50 × 1.84 = R901.60

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Project
Budget by
Task &
Month

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Improving The Process of Cost

Estimation

• Inputs from a lot of areas are required to estimate a project

• May have a professional cost estimator to do the job

• Project manager will work closely with cost estimator when

planning a project

• We are primarily interested in estimating direct costs

• Indirect costs are not a major concern

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Human performance usually

improves when a task is
repeated

Learning This happens by a fixed

percent each time the
Curves production doubles

Percentage is called the

learning rate

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Making Better Estimates

• Projects are known for being over budget

• It is unlikely that this is due to deliberate underestimating

• There are two types of errors

• Random
• Bias

• There is nothing we can do about random errors

• Tend to cancel each other

• Eliminate systematic errors

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Due 15 August 2022

1. Complete class test 2

2. Use the project that your team has selected

• Provide a brief description of your project
• Create a WBS for the project
Ø Each high-level WBS should consist of 3-5 WBS items
• Create a risk register (10 items)
Ø Make use of qualitative analysis to determine the impact of each risk

• Create a budget for the project

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