Project Management A Systems Approach to Planning,

Scheduling, and Controlling - 12th Edition

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 To
my wife,
Jo Ellyn,
for her more than thirty years
of unending love, devotion,
and encouragement to continue
my writing of project
management books
Contents

Preface­­   xix

1 Overview 1

1.0 Introduction  1
1.1 Understanding Project Management   2
1.2 Defining Project Success   6
1.3 Trade-Offs and Competing Constraints   7
1.4 The Entry-Level Project Manager   9
1.5 The Talent Triangle   10
1.6 Technology-Based Projects  10
1.7 The Project Manager–Line Manager Interface   11
1.8 Defining the Project Manager’s Role   13
1.9 Defining the Functional Manager’s Role   15
1.10 Defining the Functional Employee’s Role   17
1.11 Defining the Executive’s Role   17
1.12 Working with Executives   17
1.13 Committee Sponsorship/Governance  19
1.14 The Project Manager as the Planning Agent   20
1.15 Project Champions  21
1.16 Project-Driven versus Non–Project-Driven Organizations   22
1.17 Marketing in the Project-Driven Organization   24
1.18 Classification of Projects   25
1.19 Location of the Project Manager   26
1.20 Differing Views of Project Management   27
1.21 Public-Sector Project Management   28
1.22 International Project Management   31
1.23 Concurrent Engineering: A Project Management Approach   32
1.24 Added Value  32
1.25 Studying Tips for the Pmi® Project Management Certification Exam   33
Problems  36

vii
viii Contents

Case Study
Williams Machine Tool Company   37

2 Project Management Growth: Concepts and Definitions 39

2.0 Introduction  39
2.1 The Evolution of Project Management: 1945–2017   39
2.2 Resistance to Change   43
2.3 Systems, Programs, and Projects: A Definition   45
2.4 Product versus Project Management: A Definition   47
2.5 Maturity and Excellence: A Definition   49
2.6 Informal Project Management: A Definition   50
2.7 The Many Faces of Success   52
2.8 The Many Faces of Failure   54
2.9 Causes of Project Failure   57
2.10 Degrees of Success and Failure   59
2.11 The Stage-Gate Process   60
2.12 Project Life Cycles   61
2.13 Gate Review Meetings (Project Closure)   65
2.14 Engagement Project Management   66
2.15 Project Management Methodologies: A Definition   67
2.16 From Enterprise Project Management Methodologies to Frameworks   69
2.17 Methodologies Can Fail   70
2.18 Organizational Change Management and Corporate Cultures   71
2.19 Benefits Harvesting and Cultural Change   76
2.20 Agile and Adaptive Project Management Cultures   77
2.21 Project Management Intellectual Property   77
2.22 Systems Thinking  79
2.23 Studying Tips for the Pmi® Project Management Certification Exam   82

Problems  85

Case Study
Creating a Methodology   86

3 Organizational Structures 89

3.0 Introduction  89
3.1 Organizational Work Flow  90
3.2 Traditional (Classical) Organization   91
3.3 Pure Product (Projectized) Organization   93
3.4 Matrix Organizational Form   95
3.5 Modification of Matrix Structures   99
3.6 The Strong, Weak, or Balanced Matrix   101
Contents ix

3.7 Project Management Offices   101

3.8 Selecting the Organizational Form   103
3.9 Strategic Business Unit (SBU) Project Management   106
3.10 Transitional Management  107
3.11 Seven Fallacies that Delay Project Management Maturity   109
3.12 Studying Tips for the Pmi® Project Management Certification Exam   111
Problems  113

4 Organizing and Staffing the Project Office and Team 115

4.0 Introduction  115
4.1 The Staffing Environment   116
4.2 Selecting the Project Manager: an Executive Decision   117
4.3 Skill Requirements for Project and Program Managers   121
4.4 Special Cases in Project Manager Selection   125
4.5 Today’s Project Managers   126
4.6 Duties and Job Descriptions   127
4.7 The Organizational Staffing Process   128
4.8 The Project Office   131
4.9 The Functional Team  133
4.10 The Project Organizational Chart   133
4.11 Selecting the Project Management Implementation Team   136
4.12 Mistakes Made by Inexperienced Project Managers   139
4.13 Studying Tips for the Pmi® Project Management Certification Exam   140
Problems  142

5 Management Functions 145

5.0 Introduction  145
5.1 Controlling  146
5.2 Directing  146
5.3 Project Authority  148
5.4 Interpersonal Influences  152
5.5 Barriers to Project Team Development   154
5.6 Suggestions for Handling the Newly Formed Team   157
5.7 Team Building as an Ongoing Process   158
5.8 Leadership in a Project Environment   159
5.9 Value-Based Project Leadership   160
5.10 Transformational Project Management Leadership   163
5.11 Organizational Impact  163
5.12 Employee–Manager Problems  165
5.13 General Management Pitfalls   166
5.14 Time Management Pitfalls   167
x Contents

5.15 Management Policies and Procedures   171

5.16 Human Behavior Education   171
5.17 Studying Tips for the Pmi® Project Management Certification Exam   174
Problems  177

Case Studies
The Trophy Project  178
McRoy Aerospace  180
The Poor Worker  182
The Prima Donna   182
The Reluctant Workers  184
Leadership Effectiveness (A)   185
Leadership Effectiveness (B)   189
Motivational Questionnaire  195

6 Communications Management 203

6.0 Introduction  203
6.1 Modeling the Communications Environment   203
6.2 The Project Manager as a Communicator   208
6.3 Project Review Meetings   212
6.4 Project Management Bottlenecks   212
6.5 Active Listening  213
6.6 Communication Traps  214
6.7 Project Problem Solving   215
6.8 Brainstorming  223
6.9 Predicting the Outcome of a Decision   224
6.10 Facilitation  226
6.11 Studying Tips for the Pmi® Project Management Certification Exam   228
Problems  230

Case Studies
Communication Failures  231
The Team Meeting  234

7 Conflicts 237

7.0 Introduction  237
7.1 The Conflict Environment   238
7.2 Types of Conflicts   239
7.3 Conflict Resolution  240
7.4 The Management of Conflicts   241
7.5 Conflict Resolution Modes   242
Contents xi

7.6 Understanding Superior, Subordinate, and Functional Conflicts   244

7.7 Studying Tips for the Pmi® Project Management Certification Exam   246
Problems  248

Case Studies
Facilities Scheduling at Mayer Manufacturing   248
Telestar International  250
Handling Conflict in Project Management   251

8 Special Topics 257

8.0 Introduction  257
8.1 Performance Measurement  257
8.2 Financial Compensation and Rewards   262
8.3 Effective Project Management in the Small Business Organization   270
8.4 Mega Projects  271
8.5 Morality, Ethics, and the Corporate Culture   273
8.6 Professional Responsibilities  275
8.7 Internal and External Partnerships   278
8.8 Training and Education   279
8.9 Integrated Product/Project Teams  281
8.10 Virtual Project Teams  283
8.11 Managing Innovation Projects   284
8.12 Agile Project Management   287
8.13 Studying Tips for the Pmi® Project Management Certification Exam   289
Problems  295

Case Study
Is It Fraud?   295

9 The Variables for Success 299

9.0 Introduction  299
9.1 Predicting Project Success   299
9.2 Project Management Effectiveness   302
9.3 Expectations  303
9.4 Lessons Learned  305
9.5 Understanding Best Practices   306
9.6 Studying Tips for the Pmi® Project Management Certification Exam   312
Problems  313

Case Study
Radiance International  313
xii Contents

10 Working with Executives 317

10.0 Introduction  317
10.1 The Project Sponsor   317
10.2 Handling Disagreements with the Sponsor   327
10.3 The Collective Belief   327
10.4 The Exit Champion   328
10.5 The In-House Representatives   329
10.6 Stakeholder Relations Management   329
10.7 Project Portfolio Management   335
10.8 Politics  337
10.9 Studying Tips for the Pmi® Project Management Certification Exam   338

Problems  339

Case Studies
The Prioritization of Projects   340
The Irresponsible Sponsors   341
Selling Executives on Project Management   342

11 Planning 345

11.0 Introduction  345
11.1 Business Case  346
11.2 Validating the Assumptions  348
11.3 Validating the Objectives   351
11.4 General Planning  352
11.5 Life-Cycle Phases  355
11.6 Life-Cycle Milestones  356
11.7 Kickoff Meetings  358
11.8 Understanding Participants’ Roles   360
11.9 Establishing Project Objectives   360
11.10 The Statement of Work   361
11.11 Project Specifications  363
11.12 Data Item Milestone Schedules   364
11.13 Work Breakdown Structure   365
11.14 Wbs Decomposition Problems   370
11.15 Work Breakdown Structure Dictionary   372
11.16 Project Selection  373
11.17 The Role of the Executive in Planning   377
11.18 Management Cost and Control System   378
11.19 Work Planning Authorization  379
11.20 Why Do Plans Fail?   380
11.21 Stopping Projects  381
11.22 Handling Project Phaseouts and Transfers   381
Contents xiii

11.23 Detailed Schedules and Charts   383

11.24 Master Production Scheduling   385
11.25 Project Plan  386
11.26 The Project Charter   391
11.27 Project Baselines  392
11.28 Verification and Validation  395
11.29 Management Control  396
11.30 Configuration Management  397
11.31 Enterprise Project Management Methodologies   398
11.32 Project Audits  399
11.33 Studying Tips for the Pmi® Project Management Certification Exam   400
Problems  404

12 Network Scheduling Techniques 409

12.0 Introduction  409
12.1 Network Fundamentals  411
12.2 Graphical Evaluation and Review Technique (GERT)   416
12.3 Dependencies  417
12.4 Slack Time  417
12.5 Network Replanning  423
12.6 Estimating Activity Time  428
12.7 Estimating Total Project Time   429
12.8 Total Pert/Cpm Planning  430
12.9 Crash Times  431
12.10 Pert/Cpm Problem Areas  436
12.11 Alternative Pert/Cpm Models  436
12.12 Precedence Networks  437
12.13 Lag  440
12.14 Scheduling Problems  441
12.15 The Myths of Schedule Compression   441
12.16 Project Management Software   442
12.17 Studying Tips for the Pmi® Project Management Certification Exam   445
Problems  448

Case Study
The Invisible Sponsor   451

13 Pricing and Estimating 453

13.0 Introduction  453
13.1 Global Pricing Strategies   453
13.2 Types of Estimates   455
13.3 Pricing Process  458
xiv Contents

13.4 Organizational Input Requirements   460

13.5 Labor Distributions  462
13.6 Overhead Rates  463
13.7 Materials/Support Costs  465
13.8 Pricing Out the Work   466
13.9 Smoothing Out Department Man-Hours   469
13.10 The Pricing Review Procedure   471
13.11 Systems Pricing  472
13.12 Developing the Supporting/Backup Costs   474
13.13 The Low-Bidder Dilemma   474
13.14 Special Problems  477
13.15 Estimating Pitfalls  478
13.16 Estimating High-Risk Projects   479
13.17 Project Risks  480
13.18 The Disaster of Applying the 10 Percent Solution to Project ­Estimates   483
13.19 Life-Cycle Costing (LCC)   484
13.20 Logistics Support  486
13.21 Economic Project Selection Criteria: Capital Budgeting   488
13.22 Payback Period  488
13.23 The Time Value of Money and Discounted Cash Flow (DCF)   489
13.24 Net Present Value (NPV)   490
13.25 Internal Rate of Return (IRR)   490
13.26 Comparing Irr, Npv, and Payback   491
13.27 Risk Analysis  492
13.28 Capital Rationing  492
13.29 Project Financing  494
13.30 Studying Tips for the Pmi® Project Management Certification Exam   496

Problems  498

Case Study
The Estimating Problem   499

14 Cost Control 501

14.0 Introduction   501

14.1 Understanding Control  503
14.2 The Operating Cycle   506
14.3 Cost Account Codes  506
14.4 Budgets  511
14.5 The Earned Value Measurement System (EVMS)   512
14.6 Variance and Earned Value   513
14.7 The Cost Baseline   529
14.8 Justifying the Costs   531
14.9 The Cost Overrun Dilemma   532
Contents xv

14.10 Recording Material Costs Using Earned Value Measurement   534

14.11 Material Variances: Price and Usage   535
14.12 Summary Variances  536
14.13 Status Reporting  537
14.14 Cost Control Problems   537
14.15 Studying Tips for the Pmi® Project Management Certification Exam   539
Problems  542

Case Studies
The Bathtub Period   544
Franklin Electronics  545

15 Metrics 549

15.0 Introduction  549
15.1 Project Management Information Systems   549
15.2 Enterprise Resource Planning   550
15.3 Project Metrics  550
15.4 Key Performance Indicators (KPIS)   555
15.5 Value-Based Metrics  561
15.6 Dashboards and Scorecards   566
15.7 Business Intelligence  569
15.8 Studying Tips for the Pmi® Project Management Certification Exam   570
Problems  573

16 Trade-off Analysis in a Project Environment 575

16.0 Introduction  575
16.1 Methodology for Trade-Off Analysis  578
16.2 Contracts: Their Influence on Projects   593
16.3 Industry Trade-Off Preferences  594
16.4 Project Manager’s Control of Trade-Offs   597
16.5 Studying Tips for the Pmi® Project Management Certification Exam   597
Problems  598

17 Risk Management 599

17.0 Introduction  599
17.1 Definition of Risk   601
17.2 Tolerance for Risk   603
17.3 Definition of Risk Management   604
17.4 Certainty, Risk, and Uncertainty   604
17.5 Risk Management Process   610
xvi Contents

17.6 Plan Risk Management   611

17.7 Risk Identification  612
17.8 Risk Analysis  613
17.9 Qualitative Risk Analysis  615
17.10 Quantitative Risk Analysis  616
17.11 Plan Risk Response   619
17.12 Monitor and Control Risks   621
17.13 Some Implementation Considerations   622
17.14 The Use of Lessons Learned   623
17.15 Dependencies between Risks   624
17.16 The Impact of Risk Handling Measures   628
17.17 Risk and Concurrent Engineering   631
17.18 Studying Tips for the Pmi® Project Management Certification Exam   633
Problems  637

Case Studies
Teloxy Engineering (A)   640
Teloxy Engineering (B)   640
The Risk Management Department   641

18 Learning Curves 643

18.0 Introduction  643
18.1 General Theory  643
18.2 The Learning Curve Concept   644
18.3 Graphic Representation  646
18.4 Key Words Associated with Learning Curves   647
18.5 The Cumulative Average Curve   648
18.6 Sources of Experience   649
18.7 Developing Slope Measures   653
18.8 Unit Costs and Use of Midpoints   654
18.9 Selection of Learning Curves   654
18.10 Follow-On Orders  655
18.11 Manufacturing Breaks  656
18.12 Learning Curve Limitations   656
18.13 Competitive Weapon  657
18.14 Studying Tips for the Pmi® Project Management Certification Exam   658
Problems  659

19 Contract Management 661

19.0 Introduction  661
19.1 Procurement  662
19.2 Plan Procurements  664
Contents xvii

19.3 Conducting the Procurements   667

19.4 Conduct Procurements: Request Seller Responses   668
19.5 Conduct Procurements: Select Sellers   669
19.6 Types of Contracts   673
19.7 Incentive Contracts  678
19.8 Contract Type versus Risk   680
19.9 Contract Administration  680
19.10 Contract Closure  683
19.11 Using a Checklist   684
19.12 Proposal-Contractual Interaction  684
19.13 Studying Tips for the Pmi® Project Management Certification Exam   686
Problems  691

Case Studies
To Bid or Not to Bid   692
The Management Reserve   693

20 Quality Management 697

20.0 Introduction  697
20.1 Definition of Quality   698
20.2 The Quality Movement   699
20.2 Quality Management Concepts   703
20.3 The Cost of Quality   707
20.4 The Seven Quality Control Tools   709
20.5 Acceptance Sampling  721
20.6 Implementing Six Sigma   722
20.7 Quality Leadership  723
20.8 Responsibility for Quality   724
20.9 Quality Circles  725
20.10 Total Quality Management (Tqm)  725
20.11 Studying Tips for the Pmi® Project Management Certification Exam   728
Problems  731

21 Modern Developments in Project Management 733

21.0 Introduction  733
21.1 The Project Management Maturity Model (PMMM)   733
21.2 Developing Effective Procedural Documentation   737
21.3 Project Management Methodologies   741
21.4 Continuous Improvement  742
21.5 Capacity Planning  743
21.6 Competency Models  745
21.7 Managing Multiple Projects   747
xviii Contents

21.8 The Business of Scope Changes   748

21.9 End-of-Phase Review Meetings   752

Case Study
Honicker Corporation  753
Kemko Manufacturing  755

Appendix A: Solution to Leadership Exercise   759

Appendix B: Solutions to the Project Management Conflict Exercise   765
Appendix C: Dorale Products Case Studies   771
Appendix D: Solutions to the Dorale Products Case Studies   783
Appendix E: Alignment of the PMBOK® Guide to the Text    789

Index  795

PMBOK is a registered mark of the Project Management Institute, Inc.

Preface

Project management has evolved from a management philosophy restricted to a

few functional areas and regarded as something nice to have to an enterprise pro-
ject management system affecting every functional unit of the company. Simply
stated, project management has evolved into a business process rather than merely
a project management process. More and more companies are now regarding pro-
ject management as being mandatory for the survival of the firm. Organizations
that were opponents of project management are now advocates. Management edu-
cators of the past, who preached that project management could not work and
would be just another fad, are now staunch supporters. Project management is
here to stay. Colleges and universities are now offering undergraduate and gradu-
ate degrees in project management.
This book is addressed not only to those undergraduate and graduate students
who wish to improve upon their project management skills but also to those func-
tional managers and upper-level executives who serve as project sponsors and
must provide continuous support for projects. During the past several years, man-
agement’s knowledge and understanding of project management has matured to
the point where almost every company is using project management in one form
or another. These companies have come to the realization that project manage-
ment and productivity are related, and that we are now managing our business as
though it is a series of projects. Project management coursework is now consum-
ing more of training budgets than ever before.
General reference is provided in the text to engineers. However, the reader
should not consider project management as strictly engineering-related. The
engineering examples are the result of the fact that project management first
appeared in the engineering disciplines, and we should be willing to learn from
their mistakes. Project management now resides in every profession, including

xix