Review Questions for Unit 1

Chapter -1
End of Chapter Review Questions
1. Define a project. What are five characteristics which help differentiate projects
from other functions carried out in the daily operations of the organization?
A project is a complex, non routine, one-time effort limited by time, budget, resource,
and specifications. Differentiating characteristics of projects from routine, repetitive
daily work are below:
a.
b.
c.
d.
e.

A defined life span

A well-defined objective
Typically involves people from several disciplines
A project life cycle
Specific time, cost, and performance requirements.

2. What are some of the key environmental forces that have changed the way
projects are managed? What has been the effect of these forces on the
management of projects?
Some environmental forces that have changed the way we manage projects are the
product life cycle, knowledge growth, global competition, organization
downsizing, technology changes, time-to-market. The impact of these forces is
more projects per organization, project teams responsible for implementing projects,
accountability, changing organization structures, need for rapid completion of
projects, linking projects to organization strategy and customers, prioritizing projects
to conserve organization resources, alliances with external organizations, etc.
3. Why is the implementation of projects important to strategic planning and the
project manager?
Strategic plans are implemented primarily through projectse.g., a new product,
a new information system, a new plant for a new product. The project manager is the
key person responsible for completing the project on time, on budget, and within
specifications so the projects customer is satisfied. If the project is not linked to
the strategic plan of the organization, resources devoted to the project are wasted
and a customer need is not met. This lack of connectivity occurs more in practice
than most would believe.
4. The technical and sociocultural dimensions of project management are two sides
to the same coin. Explain.

The technical system and sociocultural dimensions of project management are two
sides of the same coin because successful project managers are skillful in both
areas. The point is successful project managers need to be very comfortable and
skillful in both areas.
5. What is the impact of governance to managing an individual project? Why is
this approach important in todays environment?
Governance signals to the project manager that decisions at a higher level can impact
management of an individual project. Reviews (called Gating) during project
implementation assess current performance and priorities and decide to continue, halt,
hold, or revised the project.
Governance is most frequently used to balance resources and risk over all
organizational resources. It is also used to enforce or alter priorities and to ensure
project align with organizational strategies and goals. In todays fast-paced world
priorities can change quickly and can impact in process projects.
Additional Q & A
1. Define Project Management

Nov/Dec 2014

Project Management is the process of managing a group of ongoing, inter-dependent,

related projects in a coordinated way to achieve strategic objectives. In other words, it
is the application of knowledge, skills, tools & techniques to project activities to
successfully managing a project. The knowledge, skills, tools & techniques
associated with good management practices, the desired results or outputs from them
and the necessary data or other inputs for using these techniques are collectively
identified as project management process. These processes can be classified to groups
according to project life cycle stage with which they are associated.
2. Write down the objectives of project team.
(or) What are the goals of Project Management?

Nov/Dec 2014

Effective objectives in project management are specific. A specific objective increases

the chances of leading to a specific outcome. Therefore objectives shouldn't be vague,
such as "to improve customer relations," because they are not measurable. Objectives
should show how successful a project has been, for example "to reduce customer
complaints by 50%" would be a good objective. The measure can be, in some cases, a
simple yes or no answer, for example, "did we reduce the number of customer
complaints by 50%?" Objectives need to be SMART Specific, Measurable,
Assignable, Realistic & Time related.
Project objectives can often be set under five headings:
1. Performance and Quality
The end result of a project must fit the purpose for which it was intended.

2. Budget
The project must be completed without exceeding the authorised expenditure.
3. Time to Completion
Actual progress has to match or beat planned progress. All significant stages of the
project must take place no later than their specified dates, to result in total completion
because late completion of a project is not very likely to please the project purchaser
or the sponsor.
4. Keep Customers Happy
To ensure that your project sponsor, customer and other stakeholders are happy at the
end of your project, you need to manage their expectations carefully. Make sure you
always keep them properly informed of progress.
5. Keep Team Members Happy
Staff satisfaction is critical to your project's success. So keep your team happy by
rewarding and recognizing them for their successes. Assign them work that
complements their strengths and conduct team building exercises to boost morale.
With a happy, motivated team, you can achieve anything.
3. Discuss the stages of Project life cycle in detail

Nov/Dec 2014

Note: Please understand each stage/element listed above to be able to explain if

needed in Part B type of question

4. Describe the roles and responsibilities of Project manager

(or) Explain the role of Project Management?

Nov/Dec 2014

Project Manager manages temporary, non-repetitive activities and frequently acts

independently of the formal organization.
Marshals resources for the project.
Is linked directly to the customer interface.
Provides direction, coordination and integration to the project team.
Is responsible for performance and success of the project.
Must induce the right people at the right time to address the right issues and make the
right decisions.
Oversee project selection.
Monitor aggregate resource levels and skills.
Encourage use of best practices.
Balance projects in the portfolio in order to represent a risk level appropriate
to the organization.
Improve communication among all stakeholders.
Create a total organization perspective that goes beyond silo thinking.
Improve overall management of projects over time.
The role of the project manager encompasses many activities including:

Planning and Defining Scope

Activity Planning and Sequencing
Resource Planning
Developing Schedules
Time Estimating
Cost Estimating
Developing a Budget
Documentation
Creating Charts and Schedules
Risk Analysis
Managing Risks and Issues
Monitoring and Reporting Progress
Team Leadership
Strategic Influencing
Business Partnering

Good project managers balance their attention to both dimensions namely technical and
sociocultural aspects of project management.

5. Distinguish between Project and Program

Program is applied to a group of related projects managed in a coordinated way to
obtain benefits and control, which are not available if managing them individually.
Program may include elements of related work outside the scope of the discrete
projects in a program. In other words, the program would need to set up a number of
projects which would be managed in a coordinated way and which would share
critical resources for optimized usage.
For example, golden quadrangle corridors connecting four metro cities in India is a
program; the highways connecting two specific metro cities would be a specific
project.
6. Distinguish between Product Life Cycle & Project Life Cycle
Project life covers the project span, that is time during which a specific product, result
or service is created by the project. The project creates the product, result or service
and hands it over to operation.
The operation then uses the projects product and maintains it till products
utility is exhausted. Thus, product life cycle is the whole life of the product
whereas project life cycle constitutes only a small part of it. So, it is fair to say
the project life cycle is a sub-set of the product life cycle.
Project life cycle typically shows overlapping stages wherein it can co-exist
for example Planning & Exceuting activities can overlap whereas product at
any time exists only in one of the stages of its life cycle, namely Introduction,
Growth, Maturity or Decline.

Chapter -2
End of Chapter Review Questions
1. Describe the major components of the strategic management process.
The strategic management process involves assessing what we are, what we want to
become, and how we are going to get there. The major generic components of the
process include the following:
a.
b.
c.
d.
e.

Defining the mission of the organization

Analysis of the external and internal environments
Setting objectives
Formulating strategies to reach objectives
Implementing strategies through projects.

2. Explain the role projects play in the strategic management process.

Strategy is implemented primarily through projects. Successful implementation of
projects means reaching the goals of the organization and thus meeting the needs of
its customers. Projects that do not contribute to the strategic plan waste critical
organization resources.
3. How are projects linked to the strategic plan?
Projects are linked to the strategic plan because projects represent how a strategy is to
be implemented. Since some projects are more important than others, the best way to
maximize the organizations scarce resources is through a priority scheme which
allocates resources to a portfolio of projects which balance risk and contribute the
most to the strategic plan.
4. The portfolio of projects is typically represented by compliance, strategic, and
operations projects. What impact can this classification have on project
selection?
By carefully aligning your project proposal with one classification, you may increase
the chances of it being selected. Remember, senior management typically allots
budgets for each category independent of actual project selection. Knowledge of
funds available, risk portfolio, senior management bias, etc. may cause some to
attempt to move their project proposal to a different classification to improve the
chances of the project being selected.
5. Why does the priority system described in this chapter require that it be open
and published? Does the process encourage bottom-up initiation of projects?
Does it discourage some projects? Why?

An open, published priority system ensures projects are selected on the basis of their
contribution to the organization. If the priority system is not open, squeaky wheels,
strong people, and key departments all get their projects selected for the wrong
reasons. Bottom-up is encouraged because every organization member can self
evaluate their project idea against priorities and so can everyone else in the
organization. To some, this approach may look intimidating but rarely is in practice;
however, it does discourage projects that clearly will not make positive, significant
contributions to the organization vision.
6. Why should an organization not rely only on ROI to select projects?
Financial criteria, like ROI alone, will not ensure that selected projects contribute to
the mission and strategy of a firm. Other considerations such as developing new
technology, public image, brand loyalty, ethical position, and maintaining core
competencies should be considered. Furthermore, it is difficult or next to impossible
to assess ROI for many important projects (e.g., Y2K projects). While ROI is likely
to be a key consideration for many organizations, multiple screening criteria are
recommended for selecting and prioritizing projects.
7. Discuss the pros and cons of the checklist versus the weighted factor methods of
selecting projects.
Checklist Model

Flexible

Applies over a wide range of different types of projects, divisions, and

locations

Impossible to rigorously compare and rank project by priority

Politics, power, and manipulation of project selection is very possible.

Weighted Factor Model

Allows comparison and ranking of potential projects

Open system

Allows for self evaluation of proposed project

Power and politic games are exposed.

Exercise Numericals (Refer Page No: 81 & 82)
2. Two new software projects are proposed to a young, start-up company. The
Alpha project will cost $150,000 to develop and is expected to have annual net
cash flow of $40,000. The Beta project will cost $200,000 to develop and is
expected to have annual net cash flow of $50,000. The company is very
concerned about their cash flow. Using the payback period, which project is
better from a cash flow standpoint? Why?
Payback = Investment / Annual Savings

Project Alpha: $150,000 / $40,000 = 3.75 years

Project Beta: $200,000 / $50,000 = 4.0 years
Project Alpha is the better payback.
3. A five-year project has a projected net cash flow of $15,000, $25,000, $30,000,
$20,000, and $15,000 in the next five years. It will cost $50,000 to implement the
project. If the required rate of return is 20 percent, conduct a discounted cash
flow calculation to determine the NPV.

A
1
2
3
4
5
6
7
8
9
10

Year 3

Year 4

Year 5

Exercise 2.3
Net Present Value Example
Project 2.3
Year 0
Investment
-$50,000
Cash Inflows
Required Rate of Return 20%
Present Values
NPV =
$12,895

Year 1

Year 2

$15,000 $25,000 $30,000 $20,000

$15,000

12,500
17,361 17,361
9,645
Formula: =C6+NPV(B8,D7:H7)

6,028

Since the NPV is positive, accept project.

4. You work for the 3T company, which expects to earn at least 18 percent on its
investments. You have to choose between two similar projects. Your analysts
predict that inflation rate will be a stable 3 percent over the next 7 years. Below
is the cash flow information for each project. Which of the two projects would
you fund if the decision is based only on financial information? Why?

Omega
Year
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Total
A

Inflow
0
0
$150,000
220,000
215,000
205,000
197,000
100,000
1,087,000
B

1
2
3
4
5 Project
Omega
6 Required
Rate of
Return
7 Investment
8 Cash Inflows
9 NPV =
10
11 Project
Alpha
12 Required
Rate of
Return
13 Investment

Outflow
$225,000
190,000
0
30,000
0
30,000
0
30,000
505,000
C

Netflow
-225,000
-190,000
150,000
190,000
215,000
175,000
197,000
70,000
582,000
D
E

Alpha
Year
Y0
Y1
Y2
Y3
Y4
Y5
Y6
Y7
Total
F

Inflow
Outflow
Netflow
0 $300,000
-300,000
$50,000
100,000
-50,000
150,000
0
150,000
250,000
50,000
200,000
250,000
0
250,000
200,000
50,000
150,000
180,000
0
180,000
120,000
30,000
90,000
1,200,000
530,000
670,000
G
H
I
J

Exercise 4a
Net Present Value Example Comparing Two Projects
Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

18%
$225,000
- $150,000 $190,000 $215,000 $175,000 $197,000 $70,000
$190,000
$119,689 Formula Project Omega: =C7+NPV(B6,D8:J8)
Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

18%
$300,000

14 Cash Inflows
-$50,000 $150,000 $200,000 $250,000 $150,000 $180,000 $90,000
15 NPV =
$176,525 Formula Project Alpha: =C13+NPV(B12,D14:J14)
16
17 NPV comparison: Accept both Omega and Alpha; or select Alpha that has the highest NPV of
$176,525
18
19
Exercise 4b
20
Net Present Value Example Comparing Two Projects (with inflation)
21
22 Project
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Omega
23 Required
21%
Rate of
Return
24 Investment
$225,000
25 Cash Inflows
- $150,000 $190,000 $215,000 $175,000 $197,000 $70,000

26 NPV =
27
28 Project
Alpha
29 Required
Rate of
Return
30 Investment

$190,000
$76,650 Formula Project Omega: =C24+NPV(B23,D25:J25)
Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

21%
$300,000

31 Cash Inflows
-$50,000 $150,000 $200,000 $250,000 $150,000 $180,000 $90,000
32 NPV =
$129,536 Formula Project Alpha: =C30+NPV(B29,D31:J31)
33
34 NPV comparison: Accept both Omega and Alpha; or select Alpha that has the highest NPV of
$129,536

5. You are the head of the project selection team at SIMSOX. Your team is
considering three different projects. Based on past history, SIMSOX expects at
least a rate of return of 20 percent. Your financial advisors predict inflation to
remain at 3 percent into the foreseeable future. Given the following information
for each project, which one should be SIMSOX first priority? Should SIMSOX
fund any of the other projects? If so, what should be the order of priority based
on return on investment?
The only project SIMSOX should consider is Voyagers. Each of the other two
projects would not satisfy the high rate of return SIMSOX expects from its projects.
Project: Dust Devils
Year
Inflows
Outflows
Net flow
NPV
0
500,000
(500,000)
(500,000)
1
50,000
50,000
40,650
2
250,000
250,000
165,246
3
350,000
350,000
188,084
Total:
$(106,020)
Project: Ospry
Year
Inflows
Outflows
Net flow
NPV
0
250,000
(250,000)
(250,000)
1
75,000
75,000
60,976
2
75,000
75,000
49,574
3
75,000
75,000
40,304
4
50,000
50,000
21,845
Total:
$(77,301)
Project: Voyagers
Year
Inflows
0
1
15,000
2
25,000
3
50,000
4
50,000

Outflows
75,000

Net flow
(75,000)
15,000
25,000
50,000
50,000

NPV
(75,000)
12,195
16,525
26,869
21,845

150,000

150,000
Total:

53,280
$55,714

Additional Q & A
1. Describe Project Selection/Screening Methods & Project Portfolio process.
Term Portfolio is applied to a collection of projects and programs that are grouped
together for pursuing objectives focused on some specific business strategy.
Design of a project portfolio system:
A. Project Classification
Deciding how well a strategic or operations project fits the organizations
strategy. Classification of a project in terms of Compliance (must do),
Operational & Strategic project
B. Selecting a Model

Selection criteria depending upon classification

o Financial models: payback, net present value (NPV)
o Non-financial models: projects of strategic importance to the
firm.
Applying Multi-Weighted Scoring Models to evaluate and align projects
closer with the organizations strategic goals.
Reduces the number of wasteful projects
Helps identify proper goals for projects
Helps everyone involved how and why a project is selected

C. Sources and Solicitation of Project Proposals

Within the organization

Request for proposal (RFP) from external sources (contractors and
vendors)

D. Ranking Proposals and Selection of Projects

Prioritizing requires discipline, accountability, responsibility, constraints,

reduced flexibility, and loss of power.

E. Managing the Portfolio

Senior management input

The priority team (project office) responsibilities

Project Screening matrix:

Project Screening Process:

2. What are the benefits of Project Portfolio Management?

a) Builds discipline into the project selection process.
b) Links project selection to strategic metrics.
c) Prioritizes project proposals across a common set of criteria, rather than on
politics or emotion.
d) Allocates resources to projects that align with strategic direction.
e) Balances risk across all projects.
f) Justifies killing projects that do not support strategy.
g) Improves communication and supports agreement on project goals
3. What is project formulation? What are the various steps involved in project
formulation?
Project Formulation is a concise, exact statement of a project to set the boundaries or
limits of work to be performed by the project. It is a formal document that gives a
distinctive identity of the project and precise meaning of project work to prevent
conflict, confusion, or overlap.
Project formulation can be also defined as one of the stages in the lifecycle of a
project. The formulation stage is also called Initiation, Conceptualization, Definition,
Pre-Project. This stage aims to:

Carefully identify and weight various components of project work

Analyze project feasibility and cost-effectiveness
Examine and approve project inputs and outputs
Identify stakeholders and their involvement and contribution
Define benefits and expectations
Estimate resources needed
Perform a preliminary analysis of risks
Make an outline of project schedule

Chapter -10
End of Chapter Review Questions
1. What is the difference between leading and managing a project?
Leading involves recognizing and communicating the need to change course and
direction of the project, aligning people to this new direction, and motivating the team
to overcome obstacles to achieve the new objectives. Managing is about formulating
plans and objectives, designing procedures to achieve those objectives, monitoring
progress, and taking corrective action. Managing is about putting out fires and
maintaining the course. Leading is about change, and altering the course of a project.
2. Why is a conductor of an orchestra an appropriate metaphor for being a project
manager? What aspects of project managing are not reflected by this
metaphor? Can you think of other metaphors that would be appropriate?
There are many parallels between conducting an orchestra and managing a project.
Conductors and project managers integrate the contributions of others. Each is
dependent upon the expertise and talents of others. They facilitate performance
rather than actually perform. Project managers orchestrate the completion of the

project by inducing participants to make the right decision at the right time. Both
control the pace and intensity of work by coordinating the involvement of players.
Finally each has a vision of performance that transcends the music score or project
plan.
The conductor metaphor works best in describing how a project manager interacts
with project members to complete the project. The metaphor fails to capture the
intricacies of dealing with all of the project stakeholders (government officials,
contractors, top management, customers) that impact the project.
Other metaphors that emerge from class discussions include: quarterback, steering
wheel, and ships captain.
3. What does the exchange model of influence suggest you do to build cooperative
relationships to complete a project?
According to the exchange model of influence, the primary way to gain cooperation is
to provide services and resources to others in exchange for future resources and
services (quid pro quo). The key is to find out what you can offer others that is of
value to them so that they will feel obligated to reciprocate. Here the notion of
influence currencies is useful in identifying different ways to gain cooperation from
others. A second key is building a positive bank account with those whom you are
dependent upon so that they are inclined to cooperate with you.
4. What differences would you expect to see between the kinds of influence
currencies that a project manager in a functional matrix would use and the
influence a project manager of a dedicated project team would use?
This question is designed to explore the impact that the project management structure
has on the ability of project managers to exercise influence over team members. The
key point is that the project manager of a dedicated team has more formal authority
over the participants and the project and, therefore, greater access to influence
currencies than the project manager in a functional matrix. For example, the
dedicated project manager is responsible for assigning project work, while functional
managers do so in a functional matrix. A dedicated project manager will have greater
access to position-related currencies. Since dedicated projects are used for high
priority projects, the dedicated project manager is likely to develop inspiration-related
currencies. Project managers in a functional matrix compensate for their lack of
formal authority by exercising informal influence through the use of relationships and
personal currencies.
5. Why is it important to build a relationship before you need it?
People are likely to be more cooperative if they know you, and you have developed a
personal relationship with them. When people view you as pleasant, credible, and
helpful based on past contact, they are more likely to be responsive to your requests

for help and less confrontational when problems arise. The key is building a positive
credit in the relationship that you can tap into when you need help.
6. Why is it critical to keep the project sponsor informed?
The project sponsor is a powerful ally who uses his/her influence to protect the
project when it comes under attack in higher circles of management. Project sponsors
need to be kept informed so that they can defend the project to the best of their
abilities.
7. Why is trust a function of both character and competence?
Character alone is not likely to engender trust. People must have confidence in the
other persons abilities and competence. For example, you are unlikely to follow
someone who has the best of intentions if he/she has a track record of failing to get
things done correctly. Conversely, one will not trust someone who is very competent
but has a doubtful character. For example, you are unlikely to follow someone who is
quite competent if you believe he/she is only looking out for what is best for him/her.
8. Which of the eight traits/skills associated with being an effective project manager
is the most important? The least important? Why?
This question is designed to generate discussion rather than a definitive answer.
The eight traits/skills for an effective project manager are as listed below:
1.
2.
3.
4.
5.
6.
7.
8.

Systems thinker
Personal integrity
Proactive
High emotional intelligence (EQ).
General business perspective
Effective time management
Skillful politician
Optimist

Most will pick either emotional intelligence, systems thinker, skillful politician, or
personal integrity. It is best to debate the choices, especially between skillful
politician and personal integrity. The key is to think about how these traits relate to
being an effective project manager. For example, personal integrity is important
because it leads to trust which facilitates more effective interaction. Alternatively,
being a skilled politician is necessary to deal with different stakeholders with
conflicting agendas. It is fair to conclude that while some traits may be more
important than others, all are important to being an effective project manager.
Additional Q & A

1. Explain the process of selection of Project team members.

Factors affecting recruiting/selecting team members

Importance of the project
For high-priority projects that are critical to the future of the
organisation, the project manager can choose whoever he/she
deems necessary
For less significant projects, the project manager will have to
persuade personnel from other areas within the organisation to join
the team
Management structure used to complete the project
In many matrix structures, the functional manager controls who is
assigned to the project; the project manager will have to work with
the functional manager to obtain necessary personnel.
How to recruit?
Ask for volunteers: Experienced project managers stress the importance of
asking for volunteers. Agreeing to work on the project is the first step
towards building personal commitment to the project.
Who to recruit?
1. Problem-solving ability: If the project is complex and fuzzy, then a
manager wants people who are good at working under uncertainty and
have strong problem identification and solving skills.
2. Availability: Sometimes, the most available people are not the ones
wanted by the team. Conversely, if members are already overcommitted,
they may not be able to offer much.
3. Technological expertise: To be wary of people who know too much about
a specific technology; hard time settling down and doing the work
4. Credibility: The credibility of the project is enhanced by the reputation of
the people involved in the project. Selecting a sufficient number of
winners lends confidence to the project.
5. Political connections: Managers are wise to select individuals who
already have a good working relationship with key stakeholders.
6. Ambition, initiative, and energy: These qualities make up for a lot of
shortcomings in other areas; not to be underestimated
7. Lesser Familiarity: On challenging, breakthrough projects, it is wise to
interject the team with experts who have little previous working
experience with others.