Project Management

Unit 1 Project Identification and Selection

Introduction
A Project is a temporary endeavour undertaken to create a unique good, service or a result.
• Projects are complex, one-time processes.
• Projects are limited by budget, schedule, and resources.
• Projects are developed to resolve a clear goal or set of goals.
• Projects are customer-focused.

Project Characteristics
• Projects are ad hoc endeavours with a clear life cycle.
• Projects are building blocks in the design and execution of organizational strategies.
• Projects are responsible for the newest and most improved products, services, and
organizational processes.
• Projects provide a philosophy and strategy for the management of change.
• Project management entails crossing functional and organizational boundaries.
• Traditional management functions of planning, organizing, motivation, directing, and
control apply to project management.
• Principal outcomes of a project are the satisfaction of customer requirements within the
constraints of technical, cost, and schedule objectives.
• Projects are terminated upon successful completion of performance objectives.

Project Features
• Objectives: A project has a fixed set of objectives. Once the objectives have been
achieved, the project ceases to exist.

• Life Span: A project cannot continue endlessly. It has to come to an end. What represents
the end would normally be spell out in the set of objectives.

• Single entity: A project is one entity and is normally entrusted to one responsibility centre
while the participants in the project arc many.

• Team-work: A project calls for team-work. The team again is constituted of members
belonging to different disciplines, organisations and even countries.

• Life-cycle: A project has a life cycle reflected by growth, maturity and decay. It has
naturally a learning component.
 • Uniqueness: No two projects are exactly similar even if Die plants are exactly identical or
are merely duplicated. The location, the infra-structure, the agencies and the people
make each project unique.

• Change: A project sees many changes throughout its life while some of these changes
may not have any major impact; then- can be some changes which will change the entire
character of course of the project.

• Successive principle: What is going to happen during the life cycle of a project is not fully
known at any stage. The details get finalised successively with the passage of time. More
is known about a project when it enters the construction phase than what was known
say, during the detailed engineering phase.

• Made to order: A project is always made to the order of its customer. The customer
stipulates various requirements and puts constraints within which the project must be
executed.

Classification of Projects

Classification of Projects
On the basis Industrial Non-Industrial
of Activity Activity Activity
On the basis Normal Crash
of Time
On the basis Private Public
of Ownership
On the basis National International
of location
On the basis New Product Expansion Diversification
of Need
On the basis
of Capital Small Medium Large
Invested
Objectives of the Project
• Project scope: This describes the reach and scale of the project. A project scope varies
depending on the amount of people involved and the scale of the impact of its outcomes.
Projects can be big or small depending on the scope.

• Timeframe: A project’s timeframe is defined from its initiation or conception until result
evaluation. A project’s timeframe can also be divided into smaller blocks which in
themselves have their own timeframe.

• Organization: The organization of a project refers to how tasks and activities are
organized and prioritized. The project workflow is calculated in each individual project to
reach objectives. Project management and planning tool uses technologies such as PERT
and CPM to calculate the workflow of each project and find its most optimized work path
along with various types of project management tools.

• Communication: What are the types of project that require communication?

Communication is the cornerstone of every project. Among different types of projects,
communication, its frequency and its format can vary. However, without effective
communication a project will fail. This allow for optimization of communication through
online real-time chat between team members & project managers.
• Cost: Projects can be expensive or relatively cheap depending on their overall cost. This
allows you to plan your costs along with any cost updates input by your team in real-time.

• Stakeholder Management: Projects can vary depending on the number of stakeholders

involved. Sometimes, the only stakeholders involved in a project is the team and project
manager, but more often than not, there are a wider group of stakeholders involved. The
more stakeholders, the more complex the management of their expectations and
communication.

• Task assignation: Within the different types of projects in project management, there are
many different tasks and activities. Projects can vary depending on how these tasks are
assigned to team members- whether they will be completed by individual members or
groups and how responsibilities will be defined.

• Quality of results: Results of projects vary among the different types of projects. They can
vary depending on each client’s requests.
Project Initiation
Project Identification

Generation and Development of Ideas

Pre-feasibility Study

Selection of Project after Pre-feasibility Study

Feasibility Studies

Getting the Organization’s Commitment and Authorization to Commence

Step I. Project Identification Process

Identifying a new worthwhile project is a complex problem. It involves careful study from many
different angles. A wide variety of sources should be tapped to identify them.
• Analyse the performance of existing industries.
• Examine the inputs and outputs of various industries.
• Review imports & exports.
• Study plan outlays and governmental guidelines.
• Look at the suggestions of Financial institutions and developmental agencies.
• Investigate local materials and resources.
• Analyse economic and social trends.
• Study New Technological Developments.
• Draw clues from consumption abroad.
• Explore the possibility of reviving Sick Units.
• Identify unfulfilled psychological needs.
• Attend Trade fairs.
• Stimulate creativity for generating new Product Ideas.

Tools for Project Identification

There are three more popular tools for identifying promising investment opportunities:
• Porter Model
• Life Cycle Approach
• Experience Curve
Porter’s Five Forces Model (Driving Industry Competition)

Life Cycle
Expenditure Curve
The concept behind the Experience Curve is that the more experience a business has in producing
a particular product, the lower its costs. It shows how the cost per unit behaves with respect to
the accumulated volume of production. Cost per unit will decline with the increase in volume of
production due to
• Learning effects
• Technological improvements
• Economies of scale

The logic behind the Experience Curve is this:

• As businesses grow, they gain experience...
• That experience may provide an advantage over the competition...
• The “experience effect” of lower unit costs is likely to be particularly strong for large,
successful businesses (market leaders)

If the Experience Curve concept is valid, then it has some significant implications for growth
strategy:
• Business with the most experience should have a significant cost advantage.
• Business with the highest market share likely to have the most / best experience.

Therefore:
• Experience is a key barrier to entry.
• Firms should try to maximise market share.
• External growth (e.g. takeovers) might be the best way to do this if a business can acquire
firms with strong experience.
Step II. Generation of Ideas
SWOT analysis facilitates the generation of ideas. To do that two-step process is required:
• Corporate appraisal: A realistic appraisal of corporate strengths and weakness is essential
for identifying investment opportunities which can be profitably exploited. The key area
to be included in this part are:
Marketing and Distribution: Market image, product line, market share,
distribution network, customer loyalty, market and distribution costs.
Production & Operations: Condition and capacity of plant, Availability of raw
material, Degree of vertical integration, locational advantages, cost structure.
Research & Development
Corporate resources and Personnel: Corporate image, clout with governmental
and regulatory agencies, dynamism of top management, competence and
commitment of employees, state of industrial relations.
Finance and accounting: Financial leverage, cost of capital, Tax situation,
Relations with shareholders, Accounting and control System, cash flow and
liquidity.

• Monitoring the environment: Key sectors of environment appraisal are:

Economic sector: State of economy, growth of economy, cyclical fluctuations,
linkage with the world economy, trade surplus, Balance of Payment.
Government sector: Industrial policy, Tax framework, EXIM policy.
Technological sector: New tech. and access to existing technology.
Socio-demographic sector: Population, income distribution, education profile,
employment of women, Consumption and investment.
Competition sector: degree of competition, entry barriers, marketing policies.
Supplier sector: availability of raw material, coat of energy and money.

Step III. Pre-Feasibility Study

A long list of ideas is now with the project manager. Some kind of preliminary screening s required
to eliminate ideas which prima facie are not promising. For this following aspect may be looked
into:
• Compatibility with promoter
• Consistency with governmental priorities
• Availability of inputs
• Adequacy of market
• Reasonableness of cost
• Acceptability of risk level
Step IV. Selection of Project after Pre-feasibility Study
After evaluating a large number of project ideas regularly, it is easy to be translated into project
rating index. The steps are as follows:
• Identify factors relevant for project rating.
• Assign weights to these factors.
• Rate the project proposal on various factors, using a suitable rating scale.
• For each factor multiply the factor rating with the factor weight to get the factor score.
• Add all the factor scores to get the overall project rating index.

Step V. Feasibility Studies

When a Project is selected on the basis of higher rating then a complete feasibility study or
project appraisal is required before putting the final proposal of project before the competent
authority. Appraisal of a proposed project includes the following analyses :
• Economic analysis: Under economic analysis the aspects highlighted include:
Growth of Economy and the state of industry.
Level of capacity utilization.
Estimated demand &Anticipated sales.
Government Policies related to trade.

• Financial analysis: Under financial analysis the aspects highlighted include:

Cost of capital
Means of finance and Cost of production
Working capital requirement and its financing
Estimates of working results
Break-even point
Projected cash flow and Projected balance sheet

• Market analysis: Under market analysis the aspects highlighted include:

Situational Analysis & Specification of Objectives
Collection of Secondary Information
Conduct of Market Survey
Demand Forecasting
Market Planning

• Technical analysis: Under Technological analysis the aspects highlighted include:

Availability of Land and site
Availability of Water Power, transport, communication facilities.
 Availability of servicing facilities like machine shop, electric repair shop etc.
Coping with anti-pollution law
Availability of work force
Availability of required raw material as per quantity and quality.

• Managerial competence: Management ability or competence plays an important role in

making an enterprise a success. In the absence of Managerial Competence, the project
which are otherwise feasible may fail. On the contrary, even a poor project may become
a successful one with good managerial ability. Hence, while doing project appraisal, the
managerial competence or talent of the promoter should be taken into consideration.

• Ecological analysis: In recent years, environmental concerns have assumed great deal of
significance. Ecological analysis should also be done particularly for major projects which
have significant implication like power plant and irrigation schemes, and environmental
pollution industries like bulk-drugs, chemical and leather processing. The key factors
considered for ecological analysis are :
Environmental damage
Restoration measure

Project Break-Even Point

It is a technique for finding a point at which a project will cover its costs or break even. It is often
used to make an initial decision on whether to proceed with a project. Breakeven analysis is also
a technique of financial control in the sense that further analyses may be necessary as conditions
change.

For example, an initial breakeven analysis may have indicated that sales of 80,000 units would
be needed for a division to breakeven. Midway through the project, however, material costs
could rise, anticipated demand could change, or price for the product could drop.

Any or all of these changes would alter the breakeven point. This in turn would signal to the
organization that it might wish to cancel the project to minimize losses. Hence, breakeven
analysis can be used initially for decision-making and later for control.

Break-Even Chart
The objective of most private firms is to make profits or at least to avoid losses. All business firms
need to know at what point their sales revenue or income will permit them to meet all their
obligations - fixed and variable. This point is called the breakeven point. They are also interested
in knowing at what point income from sales will exceed expenses, thus yielding a profit.
Break-even analysis, also known as cost-volume-profit analysis, is a useful tool that permits firms
to visualize more clearly the revenue-cost relationship at different levels of output. It is based on
certain concepts used in preparing a variable budget. The objective of break-even analysis is to
show diagrammatically revenues and costs to determine at what volume a company’s total costs
equal total revenues, leaving neither profit nor loss.

Managerial Implications
The following points highlight the top ten managerial uses of break-even analysis. the managerial
uses are:
• Safety Margin: The break-even chart helps the management to know at a glance the
profits generated at the various levels of sales. The safety margin refers to the extent to
which the firm can afford a decline before it starts incurring losses. The formula to
determine the sales safety margin is:
Safety Margin = (Sales – BEP)/Sales x 100

• Target Profit: The break-even analysis can be utilized for the purpose of calculating the
volume of sales necessary to achieve a target profit. When a firm has some target profit,
this analysis will help in finding out the extent of increase in sales by using the following
formula:
Target Sales Volume = Fixed Cost + Target Profit/Contribution Margin Per Unit.
• Change in Price: The management is often faced with a problem of whether to reduce
prices or not. Before taking a decision on this question, the management will have to
consider a profit. A reduction in price leads to a reduction in the contribution margin. This
means that the volume of sales will have to be increased even to maintain the previous
level of profit. The higher the reduction in the contribution margin, the higher is the
increase in sales needed to ensure the previous profit. The formula for determining the
new volume of sales to maintain the same profit, given a reduction in price, will be:
Sales Volume = Total Fixed Cost + Total Profit/New Selling Price – Average Variable Cost

• Decision on Choice of Technique of Production: A firm has to decide about the most
economical production process both at the planning and expansion stages. There are
many techniques available to produce a product. These techniques will differ in terms of
capacity and costs. The breakeven analysis is the most simple and helpful in the case of
decision on a choice of technique of production. For example, for low levels of output,
some conventional methods may be most probable as they require minimum fixed cost.
For high levels of output, only automatic machines may be most profitable. By showing
the cost of different alternative techniques at different levels of output, the break-even
analysis helps the decision of the choice among these techniques.

• Make or Buy Decision: Firms often have the option of making certain components or for
purchasing them from outside the concern. Break-even analysis can enable the firm to
decide whether to make or buy.
BEP = Fixed Cost/Purchase Price – Variable Cost

• Plant Expansion Decisions: The break-even analysis may be adopted to reveal the effect
of an actual or proposed change in operation condition. This may be illustrated by
showing the impact of a proposed plant on expansion on costs, volume and profits.
Through the break-even analysis, it would be possible to examine the various implications
of this proposal.
BEP at present capacity = Fixed Cost/Margin Contribution %

• Plant Shut Down Decisions: In the shut-down decisions, a distinction should be made
between out of pocket and sunk costs. Out of pocket costs include all the variable costs
plus the fixed cost which do not vary with output. Sunk fixed costs are the expenditures
previously made but from which benefits still remain to be obtained e.g., depreciation.

• Advertising and Promotion Mix Decisions: The main objective of advertisement is to

stimulate or increase sales to all customers—former, present and future. If there is keen
 competition, the firm has to undertake vigorous campaign of advertisement. The
management has to examine those marketing activities that stimulate consumer
purchasing and dealer effectiveness.

Difference Between Process and Project Management

Process Management Project Management
• Repeat process or product. • New process or product
• Several objectives • One objective
• Ongoing • One-shot-limited life
• People are homogenous • More heterogeneous
• Well-established systems • Integrated system efforts
• Greater certainty • Greater uncertainty
• Part line organization • Outside of line organization
• Established practices • Violates established practice
• Supports status quo • Upsets status quo
Unit 2 Project Planning and Resource Consideration
Project Planning
Project planning is at the heart of the project life cycle and tells everyone involved where you’re
going and how you’re going to get there. The planning phase is when the project plans are
documented, the project deliverables and requirements are defined, and the project schedule is
created. It involves creating a set of plans to help guide your team through the implementation
and closure phases of the project.

The plans created during this phase will help you manage time, cost, quality, changes, risk, and
related issues. They will also help you control staff and external suppliers to ensure that you
deliver the project on time, within budget, and within schedule.

The Purpose of the Project Planning phase is to:

• Establish business requirements.
• Establish cost, schedule, list of deliverables, and delivery dates.
• Establish resources plans.
• Obtain management approval and proceed to the next phase.

Need for Project Planning

• Improve communication with clients: The most important part of successfully
completing a project is communication with your client. By keeping in constant contact,
you can better understand your client’s wishes and execute the task accordingly. And with
milestones written into plan, client can always give input if it is going in wrong direction.

• Increase the transparency of your own work: The client likely wants to be informed
about every step, particularly with projects which the client has little to no knowledge of
– for example, an engineer who needs a logo designed. This is where a project plan comes
in handy. Milestones can be helpful in explaining the small processes of your work, and
sometimes project delays can seem less dramatic when you already have a plan in place.

• You become more organized: Particularly as a freelancer or self-employed person, you

might have to handle several orders at the same time. If you do not consider the
processing times for a project, you can easily underestimate them and end up missing a
deadline at all. With a plan, one will always know amount of time needed for each task
and how many projects you can handle at same time.
 • Focus on the project goal: Details are important. One should, however, be careful not to
lose in them. With every step-in plan, one should ask yourself if it is relevant to the end
product. Every milestone should bring closer to the finished product, not further away.
By including every task in plan, one can stay focused on the end goal – a successful project.

Project Life Cycle

The project life cycle describes the stages a project goes through as it progresses from start to
finish. A well-defined life cycle brings order and structure to the project.

The Project Life Cycle refers to the four-step process that is followed by nearly all project
managers when moving through stages of project completion. This is the standard project life
cycle most people are familiar with. The Project Life Cycle provides a framework for managing
any type of project within a business. Leaders in project management have conducted research
to determine the best process by which to run projects.

A standard project typically has the following four major phases: initiation, planning,
implementation, and closure. Taken together, these phases represent the path a project takes
from the beginning to its end and are generally referred to as the “project life cycle”.

• Initiation Phase: During the first of these phases, the initiation phase, the project
objective or need is identified; this can be a business problem or opportunity. An
appropriate response to the need is documented in a business case with recommended
solution options. A feasibility study is conducted to investigate whether each option
addresses the project objective and a final recommended solution is determined. Issues
of feasibility and justification are addressed.

• Planning Phase: The next phase, the planning phase, is where the project solution is
further developed in as much detail as possible and the steps necessary to meet the
project’s objective are planned. In this step, the team identifies all of the work to be done.
The project’s tasks and resource requirements are identified, along with the strategy for
producing them. This is also referred to as “scope management.” A project plan is created
outlining the activities, tasks, dependencies, and timeframes. The project manager
coordinates the preparation of a project budget by providing cost estimates for the labor,
equipment, and materials costs.
• Implementation (Execution) Phase: During the third phase, the implementation phase,
the project plan is put into motion and the work of the project is performed. It is
important to maintain control and communicate as needed during implementation.
Progress is continuously monitored, and appropriate adjustments are made and recorded
as variances from the original plan. In any project, a project manager spends most of the
time in this step. During project implementation, people are carrying out the tasks, and
progress information is being reported through regular team meetings. The project
manager uses this information to maintain control over the direction of the project by
comparing the progress reports with the project plan to measure the performance of the
project activities and take corrective action as needed.

• Closing (Transfer) Phase: During the final closure, or completion phase, the emphasis is
on releasing the final deliverables to the customer, handing over project documentation
to the business, terminating supplier contracts, releasing project resources, and
communicating the closure of the project to all stakeholders. The last remaining step is to
conduct lessons-learned studies to examine what went well and what didn’t. Through this
type of analysis, the wisdom of experience is transferred back to the project organization,
which will help future project teams.
Roles and Responsibility of Project Manager
The basic roles and responsibilities of a project manager could be grouped under the following
twelve heads:
• Defining and maintaining the integrity of a project.
• Development of project execution plan.
• Organization for execution of the plan.
• Setting of targets and development of systems and procedures for.
• Accomplishment of project objectives and targets.
• Negotiation for commitments.
• Direction, coordination and control of project activities; 8. Contract management.
• Non-human resource management including fiscal matters.
• Problem-solving.
• Man management.
• Satisfaction of customer, Government and the public.
• Achievement of project objectives, cash surplus and higher productivity.

Project Planning Process

Resource Consideration/Planning in Projects
Resource planning is a process of allocating tasks to human and non-human resources in a way
that would maximize the efficiency of the resources. Resource planning can also be a process of
allocating tasks to human and non-human resources in order to get an overview of resource
availability and capacity.

Estimating the Resources

The goal of activity resource estimating is to assign resources to each activity in the activity list.
There are five tools and techniques for estimating activity resources.
• Expert judgment means bringing in experts who have done this sort of work before and
getting their opinions on what resources are needed.

• Alternative analysis means considering several different options for how you assign
resources. This includes varying the number of resources as well as the kind of resources
you use. Many times, there’s more than one way to accomplish an activity and alternative
analysis helps decide among the possibilities.

• Published estimating data is something that project managers in a lot of industries use
to help them figure out how many resources they need. They rely on articles, books,
journals, and periodicals that collect, analyze, and publish data from other people’s
projects.

• Project management software such as Microsoft Project will often have features
designed to help project managers estimate resource needs and constraints and find the
best combination of assignments for the project.

• Bottom-up estimating means breaking down complex activities into pieces and working
out the resource assignments for each piece. It is a process of estimating individual
activity resource need or cost and then adding these up together to come up with a total
estimate. Bottom-up estimating is a very accurate means of estimating, provided the
estimates at the schedule activity level are accurate. However, it takes a considerable
amount of time to perform bottom-up estimating because every activity must be assessed
and estimated accurately to be included in the bottom-up calculation. The smaller and
more detailed the activity, the greater the accuracy and cost of this technique.
Advantages of Resource Consideration
• Higher Efficiency: Resource constraints can cause an organization to operate more
efficiently, according to the MIT Sloan Management Review. For example, a small
company faced with financial restrictions may, instead of hiring four contractors for
technical support, hire two who can accomplish the work for the same amount of money.
Projects can also be overly complex in nature. Hence, management may be forced to
modify assignments, so people can accomplish each task more easily.

• Encourage Innovation: Project managers facing resource constraints may be forced to

become more innovative, creative and resourceful. They may use motivation techniques
to get people to complete tasks and assignments more quickly, for example. Some project
managers may employ software applications to expedite certain processes, such as
handling mailings or scheduling meetings. Small companies faced with material
constraints may find substitutes that work just as well.

• Streamlined Project Planning: When you know you're working within a specific time
frame, with a certain dollar amount or with a limited number of staffers, you can
streamline your project planning to ensure lean operations and limited waste. Staffers
recognize there is no wiggle room with regard to meeting deadlines, working in a team
environment and being attentive to the parameters of the project and the customer’s
expectations. Staffers may be more focused on the project knowing they must be creative
& judicious in their decision-making to ensure project elements are completed correctly.

• Smart Resource Allocation: Constrained resources prompt savvy human resources

management and savvy comparison shopping for outside expenditures. If you have the
right staffers together for the project, you can also provide them with some degree of
autonomy. Staffers who are forced to make the most of their limited resources gain
valuable experience in working within strict budget parameters, which can be beneficial
in future projects where there is greater flexibility in terms of budget and timetable.

Disadvantages of Resource Consideration

• Inability to Complete All Steps: Sometimes, certain aspects of projects won't be
completed because of resource constraints. The project manager may start by eliminating
the least important procedures to bring the project to fruition. For example, engineers
may instruct production workers to eliminate one inconsequential step from the mixing
process for a packaged dessert being tested in the market. Engineers can later figure out
how to meet production demands with the additional mixing step.
 • Delays: Small companies faced with project resource constraints may inevitably be
delayed in meeting deadlines. The deadlines or due dates may have been unrealistic from
the start, considering the lack of certain resources. However, the pressing issue for the
project team is how they can minimize the delay. Project managers may hire temporary
workers to help with clerical or simpler tasks, if the added expense stays within the
budget's parameters.

• No Change of Direction: When resources are limited, there is little or no room for major
changes in project direction. Project activity that veers away from critical, sequential
steps must be quickly and accurately readjusted to ensure timely delivery. Unanticipated
cost overruns, client-requested changes, supplier delays and missed deadlines all have
the potential to derail projects and put them over budget. This is especially troublesome
in a small business where it's difficult to absorb additional costs, particularly if they're
related to internal miscalculations.

• Limited Margin for Error: Constrained budgets leave little margin for error in project
planning. For example, an order of brochures printed without a company logo can result
in reprinting costs, rush delivery fees and missed client deadlines. If any project team
member misses a beat in a resource-constrained project, it has the potential to create a
domino effect that leads to errors or costly delays. Turning around a substandard or
delayed project has the potential to negatively impact the company's reputation and
result in future business loss.

Resource Allocation
Resource allocation is the process of assigning and managing assets in a manner that supports
an organization's strategic goals. Resource allocation includes managing tangible assets such as
hardware to make the best use of softer assets such as human capital. Resource allocation
involves balancing competing needs and priorities and determining the most effective course of
action in order to maximize the effective use of limited resources and gain the best return on
investment.

Resource Allocation Framework

The resource allocation framework of the firm, which shapes, guides, and circumscribes
individual project decisions, addresses two key issues:
• What should be the strategic posture of the firm?
• What pattern of resource allocation sub serves the chosen strategic posture?
It is divided into following section:
• Key criteria: The objective of maximising the wealth of shareholders is reflected, at the
operational level, in three key criteria:
Profitability: It reflects the relationship between profit and investment. While
there are numerous ways of measuring profitability, return on equity is most
widely used method. It is defined: Profitability = Profit after tax/Net Worth
Risk: It reflects variability. How much do individual outcomes deviate from the
expected value? A simple measure of variability is the range of possible outcomes,
which is simply the difference between the highest and net outcomes.
Growth: This is manifested in the increase of revenue, assets, net worth, profits,
dividends, and so on. To reflect the growth of a variable, the measure commonly
employed is the compound rate of growth.

• Elementary investment strategies: The building blocks of the corporate resource

allocation strategy are the following elementary investment strategies:
Replacement and modernisation
Capacity expansion
Vertical integration
Concentric diversification
Conglomerate diversification
Divestment

• Portfolio planning tools: To guide the process of strategic planning and resource
allocation, several portfolio planning tools have been developed. Two such tools highly
relevant in this context are:
BCG Product Portfolio Matrix
General Electric’s Stoplight Matrix

• Strategic position and action evaluation: SPACE is an approach to hammer out an

appropriate strategic posture for a firm arid its individual business. An extension of the
two-dimensional portfolio analysis, SPACE involves a consideration of four dimensions:
Company’s competitive advantage
Company’s financial strength
Industry strength
Environmental stability
Critical Factors Affecting Resource Allocation
• Change in Timeline or Project Scope
• Resource Availability
• Project Dependencies
• Uncertain Timing of Deliverables
• Urgency Compared with Other Projects

How to Spot Risks and Address them in Resource Allocation

The best-laid plans at the beginning of a project will likely need to change, and that, of course,
will affect resource allocation. Some of the factors that can shift allocated resources include:
• Client reviews: Clients may take longer in their reviews than allocated in the project plan,
which may mean projects take longer to complete. Sometimes that can mean a planned
resource will no longer be available. A project manager should “always have contingency
plans in place,” Kelly says, “including backup people to tap if necessary.”

• Delay in creating elements of a project: With certain deliverables, especially those that
require technical functionality, there’s no way to say that developing a certain app will
take precisely X hours of development time. Only when the developers begin to build the
app and test it will they and the project manager realize how long it will take.

• Personal emergencies: If a resource that has been allocated has a medical emergency and
will be out unexpectedly, a backup resource will need to be allocated.

• Competing projects: As noted above, bigger and more prominent projects often take
precedence. “Project managers aren’t always told what people are working on,” says
Henning, “so they may plan on a resource that suddenly needs to be reallocated to the
bigger product launch project.”

Resource Allocation Tips for Managers

• Know your Scope
• Identify resources
• Don’t delay or postpone action (Procrastinate)
• Track time
• Use of tools
• Don’t over allocate
• Be realistic
• Know your resources
Scheduling
Scheduling is the process of arranging, controlling and optimizing work and workloads in a
production process. Companies use backward and forward scheduling to allocate plant and
machinery resources, plan human resources, plan production processes and purchase materials.

Project scheduling is a mechanism to communicate what tasks need to get done and which
organizational resources will be allocated to complete those tasks in what timeframe. A project
schedule is a document collecting all the work needed to deliver the project on time.

How to Schedule a Project (Process)

• Define Activities: What are the activities that you have to do in the project? By using a
Work Breakdown Structure (WBS) and a deliverables diagram, you can begin to take these
activities and organize them by mapping out the tasks necessary to complete them in an
order than makes sense.

• Do Estimates: Now that you have the activities defined and broken down into tasks, you
next have to determine the time and effort it will take to complete them. This is an
essential piece of the equation in order to calculate the correct schedule.

• Determine Dependencies: Tasks are not an island, and often one cannot be started until
the other is completed. That’s called a task dependency, and your schedule is going to
have to reflect these linked tasks. One way to do this is by putting a bit of slack in your
schedule to accommodate these related tasks.

• Assign Resources: The last step to finalizing your planned schedule is to decide on what
resources you are going to need to get those tasks done on time. You’re going to have to
assemble a team, and their time will need to be scheduled just like the tasks.

Importance of Project Scheduling

• Financial: Project scheduling impacts the overall finances of a project. Time constraints
require project managers to schedule resources effectively. This is particularly true when
resources must have highly specialized skills and knowledge in order to complete a task
or when costly materials are required. Completing a project in a short time frame typically
costs more because additional resources or expedited materials are needed. With
accurate project scheduling, realistic estimates and accurate projections prevent last-
minute orders that drive up costs.
 • Documentation: Creating a comprehensive work breakdown structure allows you to
create a chart, such as a Gantt chart, that lists the project tasks, shows dependencies and
defines milestones. Management consultant Henry Gantt designed this type of chart to
show a graphic schedule of planned work. Its role in business projects is to record and
report progress toward project completion.

• Management: Effective project managers conduct regular meetings to get status reports.
They use project scheduling meetings to check in with their team members and prevent
costly misunderstandings. These regular meetings ensure that work flows from one
process to the next and that each team member knows that he needs to do to contribute
the project’s overall success.

• Quality: Project scheduling ensures one task gets completed in a quality manner before
the next task in the process begins. By assuring that quality measures meet expectations
at every step of the way, you ensure that managers and team members address problems
as they arise and don't wait until the end. No major issues should appear upon completion
because you’ve established quality controls from the very beginning of the scheduling
process.

Project Cost Management, Estimation and Budget

Creating a project budget is an extremely crucial part of any project management. Various things
are taken in consideration while calculating budget for project like labor costs, necessary
equipment acquisition, material costs, etc.

Project Cost Management: Project Cost Management is the process of planning and controlling
the project cost effectively. It defines what costs are required for each deliverable. The cost of
the project can be estimated from various process sources like:
• Creating WBS
• Develop Schedule
• Plan human resources
• Identifying risks

The inputs of cost management include,

• Project management plan and Project charter
• Enterprise environmental factors
• Organizational process assets

While, the output of this is Cost Management Plan.

Project Cost Estimation: The Project Cost Estimation is the process of approximating the total
expenditure of the project. The accuracy of the cost estimation depends on the accuracy and
details of the project scope, which is the scope baseline. The scope will also define any constraints
like date, resources or budget. The risk register will help to estimate types of costs, the expenses
made behind the contingent action and the expenses made to cope with risks. To estimate the
cost of project you have to categorize various cost types into categories like
• Labor cost
• Equipment cost
• Cost of supplies
• Travel cost
• Training cost and Overhead cost, etc.

Techniques used to estimate project cost formally used are:

• Analogous Estimating: This estimating technique is based on expert judgments and
information based on similar previous projects. Where previously done similar project,
cost is considered with plus or minus of 20% for existing project.
• Parametric estimating: Past data or record is used to estimate cost for current project.
• Bottom-up estimating: Once you have defined the scope of the project, it is the most
reliable form of technique. In this technique, based on WBS, you estimate the cost for
each resource or deliverables.

Problems associated with Cost Estimation of a project are:

• Low initial estimates
• Unexpected technical difficulties
• Lack of definition
• Specification changes
• External factors

Project Budget Planning: The main purpose of this activity is to allocate and authorize the
monetary resources required to complete the project. The main output for determining the
budget includes cost performance baseline. It not only specifies what cost will be incurred but
also when costs will be incurred. The inputs for determining budget includes
• Activity cost estimates
• Basis for estimates
• Scope baseline and Project Schedule
• Resource calendars and Contracts
• Organizational process assets
The output of this process is
• Cost performance baseline
• Project funding requirements
• Project document updates

The project budgeting is performed in parallel with the project scheduling process. It is highly
dependent on three component –
• Cost estimation
• Task durations
• Allocated resources

During project budgeting, project manager communicates with different people responsible for
managing the work efforts as well as estimating project costs. He will use various project
prospects like work breakdown structure of the project, the cost estimates, historical data and
records, resource information, and policies. Without risk assessment, the budgeting process is
not completed. Risk assessing process considers factors like time shortage, availability of
resources, development team experience, the technology used, etc. The risk assessment can be
an amount between 25 and 30 percent of the overall project cost.

Project Scheduling / Network Techniques in Project Management

Project scheduling is a mechanism to communicate what tasks need to get done and which
organizational resources will be allocated to complete those tasks in what timeframe. A project
schedule is a document collecting all the work needed to deliver the project on time.

Few Project Scheduling Techniques are:

• Project Network Diagram: Any schematic display of the logical relationships of project
activities.
• Path: A sequence of activities defined by the project network logic.
• Event: A point when an activity is either started or completed.
• Node: One of the defining points of a network; a junction point joined to some or all of
the other dependency lines (paths).
• Predecessors: Those activities that must be completed prior to initiation of a later activity
in the network.
• Successors: Activities that cannot be started until previous activities have been
completed. These activities follow predecessor tasks.
• Early start (ES) date: The earliest possible date the uncompleted portions of an activity
can start.
 • Late start (LS) date: The latest possible date that an activity may begin without delaying
a specified milestone.
• Forward pass: Network calculations to determine earliest start/earliest finish for an
activity through working forward through each activity in network.
• Backward pass: Network calculations to determine late start/late finish for uncompleted
tasks through working backward through each activity in network.
• Merge activity: An activity with two or more immediate predecessors.
• Burst activity: An activity with two or more immediate successors.
• Float: The amount of time an activity may be delayed from its early start without delaying
the finish of the project.
• Critical path: The path through project network with the longest duration.
• Critical Path Method: A network analysis technique used to determine the amount of
schedule flexibility on logical network paths in project schedule network and to determine
minimum project duration.
• Resource-limited schedule: Start and finish dates reflect expected resource availability.

Technique 1. PERT
PERT stands for Program Evaluation Review Technique. PERT is a project management planning
tool used to calculate the amount of time it will take to realistically finish a project. PERT charts
are tools used to plan tasks within a project - making it easier to schedule and coordinate team
members accomplishing the work. PERT charts were created in the 1950s to help manage the
creation of weapons and defense projects for the US Navy.

With PERT, you create three different time estimates for the project: you estimate the shortest
possible amount time each task will take, the most probable amount of time, and the longest
amount of time tasks might take if things don't go as planned. PERT is calculated backward from
a fixed end date since contractor deadlines typically cannot be moved.

Steps in PERT and CPM Planning Process

• Identify the specific activities and milestones: The project manager should identify and
list the specific activities and milestones of a project. Activities are the tasks required to
complete the project. Milestones are the events marking the start and end of one or more
activity.

• Determine the proper sequence of the activities: The identified tasks of a project should
be planned in sequence to determine the activities to be performed. Tabulate the
sequenced activities to be performed for estimating the duration of the activities.
• Construct a network diagram: Draw a network diagram representing the serial and
parallel activities, using activities sequence information.

• Estimate the time required for each activity: The features of the PERT for estimating the
time required for each activity chart are:
Optimistic Time (O): Shortest time in which an activity can be completed.
Most likely Time (M): Completion time having highest probability.
Pessimistic Time (P): Longest time an activity might require.
Expected Time (TE): (O + 4M + P)
6
Activity Variance (S): (P – O)/6)2

• Determine the critical path: Critical path is determined by adding the times for the
activities in each sequence and determining the longest path in the project. Critical path
determines the Earlier Start Time (EST) and Latest Completion Time (LCT) using the
expected time for the relevant activity.

• Update the PERT chart as the project processes: According to the project processes,
update the PERT chart reflecting the new situations of the project process.
Benefits of PERT
• Expected project completion time.
• Probability of completion before specified date.
• Critical Path activates that directly impact the completion time.
• The activity that have slack time and that can lend resources to critical path.
• Activity start and end date.

Limitations of PERT
• (subjective Analysis) The PERT method requires the identification of the activities of a
new project and the arrangement of the activities in time sequence. As a result, the data
collection and analysis process is subjective in nature, which can result in a PERT chart
that does not accurately estimate time or cost.
• (Time Focus) The PERT method is a time network analysis that determines labor, material
and capital equipment requirements for individual project activities. Cost estimates are
developed for each activity in the network. The charts specify time required to complete
each project activity and the activities that must be completed to meet the project
completion date.
• (Resource Intensive) A PERT analysis requires a detailed study of project activities and
comments from many people from different organizations. In addition, PERT is a
complicated method that’s performed over an extended time. The labor-intensive nature
of the PERT method makes PERT charts expensive to support.

CPM
The Critical Path Method (CPM) is a step-by-step methodology, technique or algorithm for
planning projects with numerous activities that involve complex, interdependent interactions.
CPM is an important tool for project management because it identifies critical and non-critical
tasks to prevent conflicts and bottlenecks. CPM is often applied to the analysis of a project
network logic diagram to produce maximum practical efficiency.
Benefits of CPM
• The method visualizes projects in a clear graphical form.
• It defines the most important tasks.
• Saves time and helps in the management of deadlines.
• Helps to compare the planned with the real status.
• Identifies all critical activities that need attention.
• Makes dependencies clear and transparent.

Limitations of CPM
• CPM operates on the assumption that there is a precise known time that each activity in
the project will take. But, it may not be true in real practice.
• CPM time estimates are not based on statistical analysis.
• It cannot be used as a controlling device for the simple reason that any change introduced
will change the entire structure of network. In other words, CPM cannot be used as a
dynamic controlling device.

Options for Reducing the Critical Path

• Eliminate tasks on the critical path.
• Re-plan serial paths to be in parallel.
• Overlap sequential tasks.
• Shorten the duration on critical path tasks.
• Shorten early tasks.
• Shorten longest tasks.
• Shorten easiest tasks.
• Shorten tasks that cost the least to speed up.

Float Times
Float, sometimes called slack, is the amount of time an activity, network path, or project can be
delayed from the early start without changing the completion date of the project.

Total float is the difference between the finish date of the last activity on the critical path and
the project completion date. Any delay in an activity on the critical path would reduce the amount
of total float available on the project.
Formula LS-ES or LF-EF.
A project can also have negative float, which means the calculated completion date of the last
activity is later than the targeted completion date established at the beginning of the project.

If activities that are not on the critical path have a difference between their early start date and
their late start date, those activities can be delayed without affecting the project completion
date. The float on those activities is called free float.
Formula ES (of successor) - ES of current activity - 1

What does this diagram depict?

• There are 3 paths ACE, BCE & BDE. ACE will be the critical path with total float 0 and the
critical path length 18.
• Activities A, C & E will be having even free float 0.
• Total float for B is 1 (LF-EF OR LS-ES) & activity D is 6.
• Out of B & D which activity can have free float? Activity B is not satisfying free float
definition. I.e. B can be delayed w.r.t C (6-4-1=1) but not w.r.t D (5-4-1=0).
• Free float for activity D = 14-7-1 = 6. This activity satisfies the definition along with point
4 and also there is no dependency/constraint which can hinder activity D having flexibility.

Crashing of Activities
Crashing is the technique to use when fast tracking has not saved enough time on the schedule.
It is a technique in which resources are added to the project for the least cost possible. Cost and
schedule tradeoffs are analyzed to determine how to obtain the greatest amount of compression
for the least incremental cost.

Primary methods for crashing

• Improving existing resource’s productivity.
• Changing work methods
• Compromise quality and/or reduce project scope
• Institute fast-tracking and Work overtime
• Increasing the quantity of resources
7 Reasons to Crash Schedule
• To get the greatest schedule compression.
• When the part of the project jeopardises progress.
• When meeting a fixed deadline.
• When work is delayed.
• When team is needed on other work.
• When other resource need training.

Crash Process
• Determine activity fixed and variable costs.
• The crash point is the fully expedited activity.
• Optimize time-cost trade-offs.
• Shorten activities on the critical path.
• Cease crashing when:
the target completion time is reached.
the crashing cost exceeds the penalty cost.

• Normal Cost (Nc): It is the lowest cost of completing an activity in the minimum time,
employing normal means, i.e., not using overtime or other special resources.
• Normal Time (NT): It is the minimum time required to achieve the normal cost.
• Crash Cost (Co): It is the least cost of completing an activity by employing all possible
means like overtime, additional machinery, proper materials, etc.
• Crash Time (CT): It is the absolute minimum time associated with the crash cost.
Contraction of Network for Cost Optimization
A number of costs are associated with a project. A direct cost is one which involves cost of
equipment, machinery, workers and other resources. An indirect cost includes overhead charges,
depreciation, taxes, administrative costs, etc. Another cost may be market loss and penalty cost.
Individual cost curves are plotted and a total cost curve is constructed by adding all the individual
cost curves. The total cost curve takes a U-shape and the lowest point of the curve when
projected on X and Y axis gives the value of Optimum Time and Optimum Cost respectively.

Table 10.9 gives the value of total direct costs under normal and (various) compression
conditions. These values have been plotted in Fig. 10.10 as curve (a).

The indirect cost varies linearly with time and takes a straight-line shape. Assuming, indirect
charges at the rate of Rs. 50 per day, the value of indirect costs has been marked in Table 10.9;
and the indirect cost curve (b) has been plotted in Fig. 10.10. Curves (a) and (b) are then added
to give the total cost curve (c). The bottom-most point of the curve (c) when projected on x- and
y-axis gives the values of optimum time (13 days) and Optimum Cost (Rs. 1440) respectively as
marked in Fig. 10.10.
Contraction of Network for Updating
Hardly any project can be claimed as perfectly planned. There are bound to be unforeseen delays
and difficulties which may be due to delay in supply of raw materials, labour turnover, breakdown
of key machinery, or non-availability of skilled workers. Under other circumstances the situations
may improve too. The arrow diagram should always be kept up-to-date by incorporating changes
occurring due to re-planning. Thus, updated network diagram warns against the effects the
unforeseen problems will create if nothing is done. Moreover, the updated arrow diagram can
suggest the ways and means to overcome the new problems.

Network updating may be defined as any adjustment to the arrow diagram which becomes
necessary owing to departure from the project schedule laid down earlier. It is the process of
incorporating in the network the changes which have occurred due to re-planning and
rescheduling. Updating can be undertaken at regular time intervals depending upon the progress
of the project. The frequency of updating is more in case of small projects as compared to large
projects, because little problems here and there can easily delay a small project. Large projects
also need updating, but generally near their completion stage.

The technique of network updating has been explained below:

The original arrow diagram is reported in Fig. 10.11 and the critical path 1-5-6-7 is marked.
Assuming that 9 days are over (marked by YY), and progress of the project as evaluated is given
below:
• Activities 1-2, 2-3, 1-3, 3-4, and 4-5 are complete,
• Activity 1-5 is still in process and needs 3 more days to complete.

Assume that at the end of 9th day, two more workers join the team and it is estimated that
activity 1-5 will take only 1 more day to complete. The activity 5-6 will also be completed in 2
days instead of 3. This is how the situation changes and necessitates updating of network, which
is carried out as under.
• Activities 1-2, 2-3, 1-3, 3-4, and 4-5 take 1, 3, 5, 3, and 1, days respectively to complete.
• Activities 1-5, 5-6 and 6-7 will take 10, 2 and 1 days respectively to complete.

Arrow diagram of Fig. 10.11 is then modified and reported in Fig. 10.12 and the project can now
be completed in 13 days instead of 16 days estimated earlier.

The critical path is 1-5-6-7. If activity 1-5 could be finished in 8 days (instead of 12) the critical
path would have changed. In that case the critical path (i.e., longest path) would be 1-3-4-5-6-7.
So, updating under certain circumstances may change the critical path also.
Unit 3 Organizational Structure and Quality Issues
Concept of Organizational Structure
Organizational structure helps a company assign a hierarchy that defines roles, responsibility,
and supervision. It’s the plan that outlines who reports to whom and who is responsible for what.
It’s usually recorded and shared as an organizational chart that includes job titles and the
reporting structure.

Structure Types
Organizational structures typically use one of two approaches:
• A centralized structure gives most of the authority and decision-making power to the
team at the top.
• A decentralized structure distributes authority and decision-making power at lower
levels, which might include departments, groups, or business units.

Types of Organizational Structure

A company can be organized in a number of ways. It might be built around divisions, functions,
geography, or with a matrix approach:
• A functional structure is based on job functions often labeled as departments – finance,
purchasing, etc.

In a functional organization, every employee is positioned within only one function and
has one manager they report to, the Functional Manager. The Functional Manager assigns
and manages the employees work and handles administrative tasks such as employee
compensation.
 Advantages of Functional Organizational Structure
Easier management of specialist.
Team members report to only one supervisor.
Similar resources are centralized.
Clearly defined career paths in the area of specialization.

Disadvantages of Functional Organizational Structure

No career path in project management.
The project manger has little or no authority.
People place more emphasis on their functional specialty to detriment of project.

• Project-based organizations are structured around projects and not functions. This type
of structure is also called a projectized organizational structure.

In a project-based organization most of the organization's resources are involved in

project work. Project Managers have high levels of independence and authority for the
project and control the project resources.

Advantages of Project Organizational Structure

Efficient project organization.
Loyalty towards project.
More effective communication than functional.
 Disadvantages of Project Organizational Structure
No home when project is finished.
Lack of professional in discipline.
Duplication of facilities and job functions.
Less efficient use of resources.

• With a matrix structure, the company is organized around teams assembled for specific
tasks. Team members usually report to more than one person – the team leader, and the
supervisor for the team member’s functional area.

The key challenge with a matrix organization is that every employee has two (or more)
managers they report to, their Functional Manager and the Project Manager. If they are
working on multiple projects, they may have even more managers to report to. There are
three types of matrix organizations:
Weak Matrix
Balanced Matrix
Strong Matrix

Advantages of Matrix Organizational Structure

Decentralized decision making.
Strong product/project co-ordination.
Improved environmental monitoring.
Fast response to change.
Flexible use of resources.
Efficient use of support systems.
 Disadvantages of Matrix Organizational Structure
High administration cost.
Potential confusion over authority and responsibility.
High prospects of conflict.
Overemphasis on group decision making.
Excessive focus on internal relations.

Relationship Between Project Leader and Line Manager

Project manager and line manager interface refers to working relationship between project
manager and line manager to get project activities accomplished within constraint of limited
time, allocated cost and specified quality performance.

Project manager is fully responsible to achieve the project objectives within the parameters
(constraints) of time, cost and quality standard.

Project manager needs all types of human and non-human resources like money, man-power,
materials, equipment, information and technology etc. for the successful completion of a project
through smooth operation of project activities. But project manager does not control the
resources directly accepted the project budget. The resources are collected by line managers,
they are often called as resource manager. They assign directly to resources to projects. Project
managers control only those resources which are temporarily loaned by line managers. S/he
reminds the line managers that there are also time and cost constraints of the project. This is the
starting point for better resource control. Therefore, project manager must negotiate with all line
mangers for pooling require resources on time.

Project manager always requires interfacing with the line mangers for the following major
purposes.
• To get needed resources from functional department on time.
• To get good support of line managers while negotiating with various parties in connection
with project work.
• To achieve harmonization between project works and line department's work.
• To get technical and managerial assistance.
• To solve the project related problems.

The effective project management and project success is highly dependent on working
relationship between project manager and line manager. So, there must be better coordination,
reporting, communication and negotiation between them for good working relationship.
Moreover, to promote good working relationship, project manager should help a proper
understanding of:
• Quantitative tools and techniques for planning, scheduling and controlling work.
• Organization structure, own job description.
• Open communication with line managers including effective coordination.
• Organizational behavior to tackle the problems of dual reporting system.

Leadership Style of Project Managers

Leadership styles are not one size fits all. It’s an ability of project manager to know that which
leadership style is essential to become a more effective.
• Coercive: This style would be rarely used by project managers and would be more
apparent during crisis situations especially when a project deadline was looming and in
danger of being missed. Although this style would have a negative impact, it’s important
to understand the context where it could be required.

• Authoritative: This style would be quite common but not overused by project managers
in day-to-day operations. Arguably, more application of this style would deliver better
results from project teams without causing adverse effects as this style generally has a
positive impact in the organization.

• Affiliative: This is a very common management style used by project managers and may
be overused where an authoritative style would be more appropriate, and again has a
positive impact on the project team.

• Democratic: This is a style that is frequently used by project managers and not just for
smaller decisions on a day-to-day basis but also larger ones e.g. defining a project’s Scope
Statement. An example of this is where each team member in a Project Management
Office (PMO) contributes towards defining and measuring the objectives of the PMO. This
style has a very a positive impact on the project team.

• Pacesetting: This style would also be a common style for project managers, especially
when a project is coming up to key milestones. Although this style generally has a negative
impact on the project team, there are merits and contexts to when it could be applied
with positive results.

• Coaching: This style of project management enables the encouragement of team

members to develop their own capacity and capability as project contributors and again
has a positive impact on the project team.
Conflict Resolution
Conflict is a process that begins when you perceive that someone has frustrated or is about to
frustrate a major concern of yours.

Conflict resolution is a way for two or more parties to find a peaceful solution to a disagreement
among them. The disagreement may be personal, financial, political, or emotional. When a
dispute arises, often the best course of action is negotiation to resolve the disagreement.

Conflict management is the process of limiting the negative aspects of conflict while increasing
the positive aspects of conflict. The aim of conflict management is to enhance learning and group
outcomes, including effectiveness or performance in an organizational setting.

Sources of Conflict
Organizational Sources Interpersonal Sources
Reward System Faulty Attributions
Scarce Resources Faulty Communication
Uncertainty Personal Grudges and Prejudices
Differentiation

How can you use it to settle disputes in your workplace?

A number of common cognitive and emotional traps, many of them unconscious, can exacerbate
conflict and contribute to the need for conflict resolution:
• Self-serving fairness interpretations: Rather than deciding what’s fair from a position of
neutrality, we interpret what would be most fair to us, then justify this preference on the
bases of fairness. For example, department heads are likely to each think they deserve
the lion’s share of the annual budget. Disagreements about what’s fairlead to clashes.

• Overconfidence: We tend to be overconfident in our judgments, a tendency that leads us

to unrealistic expectations. Disputants are likely to be overconfident about their odds of
winning a lawsuit, for instance, an error that can lead them to shun a negotiated
settlement that would save them time and money.

• Escalation of commitment: Whether negotiators are dealing with a labor strike, a merger,
or an argument with a colleague, they are likely to irrationally escalate their commitment
to their chosen course of action, long after it has proven useful. We desperately try to
recoup our past investments in a dispute (such as money spent on legal fees), failing to
recognize that such “sunk costs” should play no role in our decisions about the future.
 • Conflict avoidance: Because negative emotions cause us discomfort and distress, we may
try to tamp them down, hoping that our feelings will dissipate with time. In fact, conflict
tends to become more entrenched, and parties have a greater need for conflict resolution
when they avoid dealing with their strong emotions.

• Negotiation: In conflict resolution, you can and should draw on the same principles of
collaborative negotiation that you use in deal making. For example, you should aim to
explore the interests underlying parties’ positions, such as a desire to resolve a dispute
without attracting negative publicity or to repair a damaged business relationship. In
addition, determine your best alternative to a negotiated agreement, what you will do if
you fail to reach an agreement, such as finding a new partner or filing a lawsuit.

• Mediation: In mediation, disputants enlist a trained, neutral third party to help them
come to a consensus. Rather than imposing a solution, a professional mediator
encourages disputants to explore the interests underlying their positions. Working with
parties both together and separately, mediators seek to help them discover a resolution
that is sustainable, voluntary, and nonbinding.

• Arbitration: In arbitration, which can resemble a court trial, a neutral third party serves
as a judge who makes decisions to end the dispute. The arbitrator listens to the arguments
and evidence presented by each side, then renders a binding and often confidential
decision. Although disputants typically cannot appeal an arbitrator’s decision, they can
negotiate most aspects of the arbitration process, including whether lawyers will be
present and which standards of evidence will be used.

• Litigation: In civil litigation, a defendant and a plaintiff face off before either a judge or a
judge and jury, who weigh the evidence and make a ruling. Information presented in
hearings and trials usually enters the public record. Lawyers typically dominate litigation,
which often ends in a negotiated settlement during the pretrial period.

The Five Steps to Conflict Resolution

Step 1: Identify the source of the conflict. The more information you have about the cause of
the conflict, the more easily you can help to resolve it. To get the information you need, use a
series of questions to identify the cause, like, “When did you feel upset?” “Do you see a
relationship between that and this incident?” “How did this incident begin?”
Step 2: Look beyond the incident. Often, it is not the situation but the perspective on the
situation that causes anger to fester and ultimately leads to a shouting match or other visible—
and disruptive—evidence of a conflict.

Step 3: Request solutions. After getting each party’s viewpoint on the conflict, the next step is
to get each to identify how the situation could be changed. Again, question the parties to solicit
their ideas: “How can you make things better between you?”

Step 4: Identify solutions both disputants can support. You are listening for the most acceptable
course of action. Point out the merits of various ideas, not only from each other’s perspective,
but in terms of the benefits to the organization. (For instance, you might point to the need for
greater cooperation and collaboration to effectively address team issues and departmental
problems.)

Step 5: Agreement. The mediator needs to get the two parties to shake hands and agree to one
of the alternatives identified in Step 4. Some mediators go as far as to write up a contract in which
actions and time frames are specified. However, it might be sufficient to meet with the individuals
and have them answer these questions: “What action plans will you both put in place to prevent
conflicts from arising in the future?” and “What will you do if problems arise in the future?”

Team Management
Team management refers to the various activities which bind a team together by bringing the team
members closer to achieve the set targets. For the team members, their team must be their priority and
everything else should take a back seat. They should be very focused on their goals.

Importance of Team Management for an Organization

• Effective Team Building: One of the benefits of team management is that it promotes
teamwork building in the workplace. Having the right person, doing the right job
according to their personality traits and educational background is important for the
whole team. When employees complement each other, it is easier to avoid gaps in team
member’s skill sets and communication. By fully utilizing the unique abilities of individual
employees, the team manager is able to easily delegate projects to team members.

• Productivity Booster: The importance of team management also shows by the increase
in employee performance and organizational productivity. It is obvious that one brain
cannot bring out the same results strong team can. Both in terms of time and quality.
When each employee has clear responsibilities and deliverables, they are able to better
focus on their tasks.
 • Promotes Learning: Among the benefits of teamwork for an organization is the
opportunity for everyone to learn and explore new perspectives. For example, new
employees will surely gain knowledge from more experienced workers in the long run.
Moreover, when different people with various talents cooperate with each other, they
get to exchange skills that they didn’t have beforehand. Teamwork, unlike working alone
on a project, allows the members to also discuss new ideas and challenge the old ones.

• Employee Satisfaction: One equally significant point towards understanding the

importance of team management is increased employee satisfaction. When individuals
come together to form a strong team, they also learn to rely on each other and thus,
bond. This bonding creates a positive ambiance in the workplace, which is essential for
their productivity as well as their psychological well-being. Good team management aims
also at reducing unnecessary conflicts among team members.

• Increased Performance: Inevitably, we reach the conclusion that teamwork is a key driver
for increased performance. An organization has to meet targets on time and without
teamwork, this is extremely difficult to achieve. Individuals alone, cannot easily make
decisions single-handedly or carry out tasks. It might seem counter-intuitive, but
individuals do thrive through a team. Employees who work in a team have higher
fulfillment and performance levels.

Team Development Stages

Tips for Effective Team Management
Leading a team can be inspiring, rewarding and exhausting. Busy working environments can leave
little time for team leaders to check-in with team members and ensure they’re feeling happy,
creative and on track. But with these 6 simple and effective team management tips, there’s an
alternative.
• Be transparent
• Keep communicating
• Provide value feedback
• Encourage collaboration
• Trust your team to do their job
• Prevent team burn-out

Diversity Management
Diversity management refers to organizational actions that aim to promote greater inclusion of
employees from different backgrounds into an organization’s structure through specific policies
and programs. Organizations are adopting diversity management strategies as a response to the
growing diversity of the workforce around the world.

Types of Diversity Management

The following are the two types of diversity management:
• Intranational diversity management: Intranational diversity management refers to
managing a workforce that comprises citizens or immigrants in a single national context.
The diversity programs focus on providing employment opportunities to minority groups
or recent immigrants. For example, a French company may implement policies and
programs with the aim of improving sensitivity and providing employment to minority
ethnic groups in the country.

• Cross-national diversity management: Cross-national, or international, diversity

management refers to managing a workforce that comprises citizens from different
countries. It may also involve immigrants from different countries who are seeking
employment. An example is a US-based company with branches in Canada, Korea, and
China. The company will establish diversity programs and policies that apply in its US
headquarters as well as in its overseas offices. The main challenge of cross-national
diversity management is that the parent company must consider the legislative and
cultural laws in the host countries it operates in, depending on where the employees live.
Characteristics of Diversity Management
• Voluntary: Unlike legislation that is implemented through sanctions, diversity
management is a voluntary organizational action. It is self-initiated by organizations with
a workforce from different ethnicities, religions, nationalities, and demographics. There
is no legislation to coerce or government incentives to encourage organizations to
implement diversity management programs and policies.

• Provides tangible benefits: Unlike in the past when diversity management was viewed as
a legal constraint, companies use the diversity strategy to tap into the potential of all
employees and give the company a competitive advantage in its industry. It allows each
employee, regardless of his/her color, religion, ethnicity, or origin to bring their talents
and skills to the organization. A diverse workforce enables the organization to better
serve clients from all over the world since diverse employees can understand their needs
better.

• Broad definition: While legislation and affirmative action target a specific group, diversity
management uses a broad definition since the metrics for diversity are unlimited. The
broad definition makes diversity programs more inclusive and having less potential for
rejection by the members of the majority group or privileged sections of the society.

• Best Practices of Diversity Management: Organizations can implement these best

practices to maintain a competitive business advantage and also capitalize on the
potential of its diverse workforce. The following are the best practices that an
organization can implement:

• Commitment from top management: Workforce diversity can succeed if it is adopted by

a shared vision with the company’s top management. The senior executives of an
organization are responsible for policy formulation, and they can promote or kill
workplace diversity depending on the policies they make. When the senior management
fails to show commitment to implementing the diversity strategies, the diversity plan
becomes severely limited.

• Identify new talent pools: In an organization where more people are leaving the
workforce than are being hired, management must immediately employ fresh talents.
Most companies prefer the traditional new-employee sources like competitor
organizations and graduate schools to recruit the best talent. Companies should look
beyond the traditional new-hire sources and explore other talent pools, such as veterans
exiting the military, minority groups, and talents from other regions or countries.
Change Management
Change Management is a systematic approach to dealing with the transition or transformation
of an organization’s goals, processes or technologies. The purpose of change management is to
implement strategies for effecting change, controlling change and helping people to adapt to
change. Such strategies include having a structured procedure for requesting a change, as well
as mechanisms for responding to requests and following them up.

Change management is an umbrella term that covers all types of processes implemented to
prepare and support organizational change. These range from methodologies applied to
resources, business processes, budget allocations and other operational aspects of a project.
Change management in the context of project management often refers to a change control
process when working on a project. That is, the process of changes in scope to a project are
formally introduced and approved as a change management system.

Types of Change Management

• Individual Change Management: People are the root of all change. One can change
systems and procedures, but if we don’t address the human in the room, then we’re not
changing anything. To get people to change, one must know it’s subject. What do they
need to hear to become open to change? How and when should training be offered to
help them with the transition? The tools of this trade are psychological; even
neuroscience can help with finding the right angle to steer a person from one behavior to
another more productive one.

• Organizational Change Management: While the people on your team are the core target
to effect change, there are also larger, more organizational issues you must address if you
want to create real change in a project. To do so requires first identifying the groups that
require change and how they must change. Then, create a plan that addresses these
components of the project, which includes making everyone aware of the change, leading
that change through coaching or some other method like training, and then driving that
change in congress with the management of the whole project.

• Enterprise Change Management: Taking a step up from the organizational change is to

address the entire enterprise. It’s basically taking change management writ large to
encompass all aspects of an organization, meaning roles, structure, process, projects,
leadership, etc. By approaching change on the macro-level you’re more likely to
implement change on the micro-level, as a strategic engagement with change has been
applied to the very workings of the organization. It creates a nimbler organization, able
to stay flexible and adapt quickly to changes as they occur.
Change Management Process

Tip for Effective Change Management Process

• Identify what will be improved.
• Present a solid business case to stakeholders.
• Plan for the change.
• Provide resources and use data for evaluation
• Communication
• Monitor and manage resistance

Project Quality Management

Project Quality Management includes the processes required to ensure that the project will
satisfy the needs for which it was undertaken. It includes "all activities of the overall management
function that determine the quality policy, objectives, and responsibilities and implements them
by means such as:
• Quality Planning: Identifying which quality standards are relevant to the project and
determining how to satisfy them. The plan will include these specifics as well as metrics
for measuring the quality while managing the project. This should include a quality
checklist to collect and organize the marks you need to hit during the project.

Input Tools Output

Quality Policy Benefits cost analysis Quality Managerial Plan
Product Description Benchmarking Operational Definition
Scope Management Flow Chart Checklist
Standard and Regulations Design of Experiments Inputs to other process
Other process outputs
 • Quality Assurance: Evaluating overall project performance on a regular basis to provide
confidence that the project will satisfy the relevant quality standards. Quality assurance,
according to the American Society for Quality (ASQ) is “the planned and systemic activities
implemented in a quality system so that quality requirements for a product or service will
be fulfilled.” Use quality assurance to make sure your processes are in fact working
towards making the project deliverables meet quality requirements. Two ways to
accomplish this is by using a process checklist and a project audit.

Input Tools Output

Quality Management Plan Quality Planning technique Quality improvement
Results of Quality Control Quality audit
Operational Definition

• Quality Control: Monitoring specific project results to determine if they comply with
relevant quality standards and identifying ways to eliminate causes of unsatisfactory
performance. Every process needs a policeman, so to speak, to make sure that the rules
are being following and that the expected quality is being met. Some ways to ensure that
the required quality of the deliverables is being achieved is through peer reviews and
testing. It’s essential to check the quality of the deliverables during the project
management process in order to adjust the deliverables if they’re not meeting the
standards that have been set.

Input Tools Output

Work result Inspection Quality improvement
Quality Management Plan Control charts Acceptance decision
Operation definition Pareto diagrams Rework
Checklists Statistical sampling Completed checklist
Flow chart & Trend analysis Process adjustment

Project Quality Management Concept

• Customer Satisfaction: Without customer satisfaction there can be no quality. Even if a
deliverable meets all aspects of what the customer or stakeholder has required but is
done so where the process itself was not to satisfactory, then there’s a problem. Of
course, the deliverable must meet with agreed upon requirements or else the project has
failed because the product of the project and the management of the project didn’t meet
with the expectations of the customer or stakeholder.
 • Prevention over Inspection: Quality doesn’t come free. The Cost of Quality (COQ) is the
money spent dealing with issues during the project, and then after the project, to fix any
failures. These are broken up into two categories: cost of conformance and cost of
nonconformance. The cost of conformance can be considered a preventive cost. These
costs are primarily related to training, the documentation process, equipment needed,
and the time required to get the quality done right.

• Continuous Improvement: This concept of quality project management can be found in

Six Sigma and Total Quality Management (TQM) and is featured dominantly in the
Prevention Over Inspection concept. This concept is, as explained in its title, an ongoing
effort to address improvements of the deliverables over time. Whether through small,
incremental changes or through large ones, the opportunity to identify and address
change is always present.

Importance of Project Quality Management

• Sets the Standards: Quality planning determines the scope of what’s going to be
measured, what metrics will determine whether the project is successful, and how those
will be satisfied, from beginning to end. Usually, the scope depends on the specific
deliverables and processes the project manager is responsible for. Quality assurance
systems should be defined and implemented, whether that consists of audits, product
testing, peer review or other measures.

• SMART Benchmarks: Except for very short-term projects, quality plans should include
benchmarks. These points of reference identify the progress of a project against
expectations generated from previous projects, industry standards or other
measurements, and measure progress periodically from the initial development stages to
the final product.

• Delegates Responsibility: A quality plan should detail not only what the benchmarks are,
but who’s responsible for meeting them and which stakeholder has the authority to
confirm standards are being met. This accountability helps mitigate the risks that a project
won’t satisfy the client, finish on budget or stick to the schedule. A quality checklist that
stays with the project manager can be used to serve as a reference.

• Controls Costs: A central reason for quality planning is its impact on costs. Conducting a
cost-benefit analysis determines how much each incremental improvement affects the
bottom line, so an informed decision can be made when separating must-haves from nice-
to-haves in project design.
Quality Concepts
• Quality: Quality is a perceptual, conditional, and somewhat subjective attribute and may
be understood differently by different people. Consumers may focus on the specification
quality of a product/service, or how it compares to competitors in the marketplace.

• Quality Control: Monitoring specific project results to determine if they comply with
relevant quality standards and identifying ways to eliminate causes of unsatisfactory
performance. Every process needs a policeman, so to speak, to make sure that the rules
are being following and that the expected quality is being met. Some ways to ensure that
the required quality of the deliverables is being achieved is through peer reviews and
testing. It’s essential to check the quality of the deliverables during the project
management process in order to adjust the deliverables if they’re not meeting the
standards that have been set.

• Quality Assurance: Evaluating overall project performance on a regular basis to provide

confidence that the project will satisfy the relevant quality standards. Quality assurance,
according to the American Society for Quality (ASQ) is “the planned and systemic activities
implemented in a quality system so that quality requirements for a product or service will
be fulfilled.” Use quality assurance to make sure your processes are in fact working
towards making the project deliverables meet quality requirements. Two ways to
accomplish this is by using a process checklist and a project audit.

• Quality Management: Quality management is the act of overseeing all activities and
tasks needed to maintain a desired level of excellence. This includes the determination of
a quality policy, creating and implementing quality planning and assurance, and quality
control and quality improvement.

• Total Quality Management: Total quality management (TQM) describes a management

approach to long-term success through customer satisfaction. In a TQM effort, all
members of an organization participate in improving processes, products, services, and
the culture in which they work. Principles of TQM are:
Customer-Focused
Total Employee Involvement
Process-Centred
Integration System
Continual Improvement
Fact-Based Decision Making
Communications
 • ISO System: It help organizations improve their performance by specifying repeatable
steps that organizations consciously implement to achieve their goals and objectives, and
to create an organizational culture that reflexively engages in a continuous cycle of self-
evaluation, correction and improvement of operations and processes through heightened
employee awareness and management leadership and commitment. The benefits of an
effective management system to an organization include:
More efficient use of resources and improved financial performance.
Improved risk management and protection of people and the environment.
Increased capability to deliver consistent and improved services and products,
thereby increasing value to customers and all other stakeholders.

Value Engineering Process

Value Engineering is described in the Value Standard and Body of Knowledge published by SAVE
International, the Society for Value Engineering, as “the application of a value methodology to a
planned or conceptual project or service to achieve value improvement.” While a project may
be originated solely to identify and derive value, every project exists to provide value to its
stakeholders. Value engineering provides methodologies and processes to systematically analyze
functions and value of a product.

The following are common themes to both Project Management and Value Engineering:
• Product Analysis: Value Engineering focuses heavily on product analysis and product
decomposition in order to analyze value. Project Management uses product analysis to
decompose product and project scope during the initiation and planning processes.
• Problem Analysis and Resolution: Both Value Engineering and Project Management use
various techniques to analyze and solve problems. Projects are normally initiated because
of some business problem. Problems also surface during the product and project scoping
processes.
• Creativity: Solving project problems and finding value require the application of various
creativity techniques. The creativity tools, techniques and processes developed for Value
Engineering can be applied to multiple situations throughout the project life cycle.
• Soft Skills: To be effective in project management or value engineering, soft skills for the
leaders leading these efforts are essential.

Benefits of Value Engineering

• Value to Sponsors and Stakeholders: By embracing the Value Engineering process, the
Project Manager and project team can demonstrate value early in the project process.
 • Enhanced Professionalism: Additional expertise, especially in analysing, determining and
providing value enhances the Project Manager’s image and leadership power.
• Predictable results: Using proven techniques help lead to predictable results.
• Repeatable successes: The ability to provide success project by project through proven
techniques enhances the team and organization image and credibility.
• Enhanced business value: Project managers and teams that not only deliver what’s
expected but also deliver additional business value are in high demand.
• Clear project vision and focus: By using the pre-project techniques and processes, project
managers gain stakeholder buy-in and confidence early.
• Leadership: The processes inherent in the Value Engineering approach help strengthen
leadership and team building skills.
• Creativity, innovation and problem solving: Value engineering tools and techniques
enhance the Project Manager’s and project team’s performance and agility.

Process of Value Engineering

• Functional Analysis
• Standardization of Components and Parts
• Alternatives of Functions
• Value-cost Analysis
• Re-engineering Areas of Value Engineering
• Improvements in product designs
• Changes in materials’ specifications
• Modification in process methods
• Decision to make or buy a component

Challenges of Project Manager & solutions that Value Engineering provides

Project Manager Challenges Value Engineering Solution
Making transition from practitioner to business partner Pre-workshop activities
Ability to properly define expectations Function analysis technique
Determining value of project for prioritization The value study cycle
Maximizing return on investment for project sponsor Development & presentation phase
Maximizing resource to accomplish project objectives Post-workshop activities
Minimizing cost while maximizing value The value study cycle
Minimizing risk Pre-workshop activities
Unit 4 Project Risk Management, Performance Management and Control
Project Risk
Project risk is an uncertain event or condition that, if it occurs, has an effect on at least one
project objective. Risk management focuses on identifying and assessing the risks to the project
and managing those risks to minimize the impact on the project.

Types of Project Risk

• Cost risk, typically escalation of project costs due to poor cost estimating accuracy and
scope creep.
• Scope Risk: Defining what is required is not always easy. However, so as to ensure that
scope risk is minimized, the deliverables, the objectives, the project charter, and of
course, the scope needs to be clearly defined. All risks, be they quantifiable or not, needs
to recognize.
• Schedule risk, the risk that activities will take longer than expected. Slippages in schedule
typically increase costs and, also, delay the receipt of project benefits, with a possible loss
of competitive advantage.
• Performance risk, the risk that the project will fail to produce results consistent with
project specifications.
• Governance risk relates to board and management performance with regard to ethics,
community stewardship, and company reputation.
• Strategic risks result from errors in strategy, such as choosing a technology that can’t be
made to work.
• Operational risk includes risks from poor implementation and process problems such as
procurement, production, and distribution.
• Market risks include competition, foreign exchange, commodity markets, and interest
rate risk, as well as liquidity and credit risks.
• Legal risks arise from legal and regulatory obligations, including contract risks and
litigation brought against the organization.
• Risks associated with external hazards, including storms, floods, and earthquakes;
vandalism, sabotage, and terrorism; labor strikes; and civil unrest.

Project Risk Management

Project Risk Management the art and science of identifying, analysing and responding to risk
factors throughout the life of a project and in the best interest of its objectives.

Managers can plan their strategy based on four steps of risk management which prevails in an
organization. Following are the steps to manage risks effectively in an organization:
• Risk Identification: Risk identification is the process of listing potential project risks and
their characteristics. The results of risk identification are normally documented in a risk
register, which includes a list of identified risks along with their sources, potential risk
responses, and risk categories. This information is used for risk analysis, which in turn will
support creating risk responses. Identified risks can also be represented in a risk
breakdown structure, a hierarchical structure used to categorize potential project risks
by source. These could be resolved through structured or unstructured brainstorming or
strategies. Risks, such as operational or business risks will be handled by the relevant
teams. The risks that often impact a project are supplier risk, resource risk and budget
risk. Supplier risk would refer to risks that can occur in case the supplier is not meeting
the timeline to supply the resources required.

• Risk Quantification: Risks can be evaluated based on quantity. Project managers need to
analyze the likely chances of a risk occurring with the help of a matrix.

Using the matrix, the project manager can categorize the risk into four categories as Low,
Medium, High and Critical. The probability of occurrence and the impact on the project
are the two parameters used for placing the risk in the matrix categories. As an example,
if a risk occurrence is low (probability = 2) and it has the highest impact (impact = 4), the
risk can be categorized as 'High'.

• Risk Response: When it comes to risk management, it depends on the project manager
to choose strategies that will reduce the risk to minimal. Project managers can choose
between the four risk response strategies, which are outlined below.
Risks can be avoided
Pass on the risk
Take corrective measures to reduce the impact of risks
Acknowledge the risk
 • Risk Monitoring and Control: Risks can be monitored on a continuous basis to check if
any change is made. New risks can be identified through the constant monitoring and
assessing mechanisms.

Role of Risk Management in overall Project Management

To ensure your project’s success, define how you will handle potential risks, so you can identify,
mitigate or avoid problems when you need to do. Successful project managers recognize that risk
management is important, because achieving a project’s goals depends on planning, preparation,
results and evaluation that contribute to achieving strategic goals.
• Planning for Success: Risk management plans contribute to project success by
establishing a list of internal and external risks. This plan typically includes the identified
risks, probability of occurrence, potential impact and proposed actions. Low risk events
usually have little or no impact on cost, schedule or performance. Moderate risk causes
some increase in cost, disruption of schedule or degradation of performance. High risk
events are likely to cause a significant increase in the budget, disruption of the schedule
or performance problems.

• Communicating with Stakeholders: To ensure that projects run smoothly, effective

project managers communicate their plan to the project sponsors, stakeholders and team
members. This sets expectations to people who provide funding and are affected by the
outcomes. It ensures that the project runs smoothly so one step proceeds to the next
without disruption. By identifying, avoiding and dealing with potential risks in advance,
you ensure that your employees can respond effectively when challenges emerge.

• Maximizes Results and Meet Deadlines: By defining risk management processes for your
company, you make success more likely by minimizing and eliminating negative risks, so
projects can be finished on time. This enables you to meet your budget and fulfill targeted
objectives. When you don’t have risk management strategies in place, your projects get
exposed to problems and become vulnerable. Effective risk management strategies allow
your company to maximize profits and minimize expenses on activities that don’t produce
a return on investment. Through detailed analysis, effective leaders prioritize ongoing
work based on the results produced, despite the odds.

• Be Proactive Not Reactive: Having a risk management plan in place allow you to be
proactive and take steps to mitigate possible harms before they arise, instead of
constantly firefighting. The project team can take the risk that have been identified and
convert them to actionable steps that will reduce likelihood. Those steps then become
contingency plans that hopefully can be aside.
 • Evaluates the Entire Project: To evaluate your project’s success so you can use the best
practices on your next project, assess the impact of your activities on mitigating exposure
to problems and exploiting opportunities that capitalize on your company’s strengths. For
example, if you develop and deliver a training program that creates awareness about
internet security, including phishing, viruses and identity theft, measure the number of
help desk calls received about these problems. If they go down, you can reasonably
assume your risk management initiatives have contributed to success. If not, revise your
training program.

Steps in Risk Management

Step 1: Identify the Risk You and your team uncover, recognize and describe risks that might
affect your project or its outcomes. There are a number of techniques you can use to find project
risks. During this step you start to prepare your Project Risk Register.

Step 2: Analyze the risk Once risks are identified you determine the likelihood and consequence
of each risk. You develop an understanding of the nature of the risk and its potential to affect
project goals and objectives. This information is also input to your Project Risk Register.

Step 3: Evaluate or Rank the Risk You evaluate or rank the risk by determining the risk
magnitude, which is the combination of likelihood and consequence. You make decisions about
whether the risk is acceptable or whether it is serious enough to warrant treatment. These risk
rankings are also added to your Project Risk Register.
Step 4: Treat the Risk This is also referred to as Risk Response Planning. During this step you
assess your highest ranked risks and set out a plan to treat or modify these risks to achieve
acceptable risk levels. How can you minimize the probability of the negative risks as well as
enhancing the opportunities? You create risk mitigation strategies, preventive plans and
contingency plans in this step. And you add the risk treatment measures for the highest ranking
or most serious risks to your Project Risk Register.

Step 5: Monitor and Review the risk This is the step where you take your Project Risk Register
and use it to monitor, track and review risks.

Risk Identification
Risk identification is the process of listing potential project risks and their characteristics. The
results of risk identification are normally documented in a risk register, which includes a list of
identified risks along with their sources, potential risk responses, and risk categories. This
information is used for risk analysis, which in turn will support creating risk responses. Identified
risks can also be represented in a risk breakdown structure, a hierarchical structure used to
categorize potential project risks by source. These could be resolved through structured or
unstructured brainstorming or strategies. Risks, such as operational or business risks will be
handled by the relevant teams. The risks that often impact a project are supplier risk, resource
risk and budget risk. Supplier risk would refer to risks that can occur in case the supplier is not
meeting the timeline to supply the resources required.

Techniques to Identify Risks

• Interviews. Select key stakeholders. Plan the interviews. Define specific questions.
Document the results of the interview.

• Brainstorming. I will not go through the rules of brainstorming here. However, I would
offer this suggestion. Plan your brainstorming questions in advance. Here are questions I
like to use:
Project objectives. What are the most significant risks related to?
Project tasks. What are the most significant risks related to?

• Checklists. See if your company has a list of the most common risks. If not, you may want
to create such a list. After each project, conduct a post review where you capture the
most significant risks. This list may be used for subsequent projects. Warning –
checklists are great, but no checklist contains all the risks.
 • Assumption Analysis. The Project Management Body of Knowledge (PMBOK) defines an
assumption as “factors that are considered to be true, real, or certain without proof or
demonstration.” Assumptions are sources of risks. Project managers should ask
stakeholders, “What assumptions do you have concerning this project?” Document these
assumptions and associated risks.

• 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. If we
address the causes, we can reduce or eliminate the risks.

• 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.

• Affinity Diagram. This technique is a fun, creative, and beneficial exercise. Participants
are asked to brainstorm risks. I ask participants to write each risk on a sticky note. Then
participants sort the risks into groups or categories. Each group is given a title.

Risk Analysis
Risk analysis is the process of identifying and analyzing potential issues that could negatively
impact key business initiatives or critical projects in order to help organizations avoid or mitigate
those risks.

Benefits of Risk Analysis

Risk analysis can help an organization improve its security in a number of ways. Depending on
the type and extent of the risk analysis, organizations can use the results to help:
• Identify, rate and compare the overall impact of risks to the organization, in terms of both
financial and organizational impacts.
• Identify gaps in security and determine the next steps to eliminate the weaknesses and
strengthen security.
• Enhance communication & decision-making processes as they relate to info security.
• Improve security policies and procedures and develop cost-effective methods for
implementing these information security policies and procedures.
• Put security controls in place to mitigate the most important risks.
• Increase employee awareness about security measures and risks by highlighting best
practices during the risk analysis process.
• Understand the financial impacts of potential security risks.
Steps in Risk Analysis Process
The risk analysis process usually follows these basic steps:
• Conduct a risk assessment survey: This first step, getting input from management and
department heads, is critical to the risk assessment process. The risk assessment survey
is a way to begin documenting specific risks or threats within each department.

• Identify the risks: The reason for performing risk assessment is to evaluate an IT system
or other aspect of the organization and then ask: What are the risks to the software,
hardware, data and IT employees? What are the possible adverse events that could occur,
such as human error, fire, flooding or earthquakes? What is the potential that the integrity
of the system will be compromised or that it won’t be available?

• Analyze the risks: Once the risks are identified, the risk analysis process should determine
the likelihood that each risk will occur, as well as the consequences linked to each risk and
how they might affect the objectives of a project.

• Develop a risk management plan: Based on an analysis of which assets are valuable and
which threats will probably affect those assets negatively, the risk analysis should produce
control recommendations that can be used to mitigate, transfer, accept or avoid the risk.

• Implement the risk management plan: The ultimate goal of risk assessment is to
implement measures to remove or reduce the risks. Starting with the highest-priority risk,
resolve or at least mitigate each risk so it’s no longer a threat.

• Monitor the risks: The ongoing process of identifying, treating and managing risks should
be an important part of any risk analysis process.

Risk Analysis Technique

• Sensitivity Analysis: Sensitivity analysis seeks to place a value on the effect of change of
a single variable within a project by analyzing that effect on the project plan. It is the
simplest form of risk analysis. Uncertainty and risk are reflected by defining a likely range
of variation for each component of the original base case estimate. In practice such an
analysis which have a high impact on cost, time or economic return.

• Decision Theory: Is a technique for assisting in reaching decisions under uncertainty and
risk. All decisions are based to some extent on uncertain forecasts. Decision Theory points
to the best possible course whether or not the forecasts are accurate.
 • Probability Analysis: Probability analysis overcomes the limitations of sensitivity analysis
by specifying a probability distribution for each variable, and then considering situations
where any or all of these variables can be changed at the same time. Defining the
probability of occurrence of any specific variable may be quite difficult, particularly as
political or commercial environments can change quite rapidly.

• Delphi Method: The basic concept is to derive a consensus using a panel of experts to
arrive at a convergent solution to a specific problem. This is particularly useful in arriving
at probability assessments relating to future events where the risk impacts are large and
critical. The first and vital step is to select a panel of individuals who have experience in
the area at issue. For best results, the panel members should not know each other identity
and the process should be conducted with each at separate locations. The responses,
together with opinions and justifications, are evaluated and statistical feedback is
furnished to each panel member in the next iteration. The process is continued until
group responses converge to specific solution.

• Decision Tree Analysis: A feature of project work is that a number of options are typically
available in the course of reaching the final results. An advantage of decision tree analysis
is that it forces consideration of the probability of each outcome. Thus, the likelihood of
failure is quantified, and some value is place on each decision. This form of risk analysis is
usually applied to cost and time considerations, both in choosing between different early
investment decisions, and later in considering major changes with uncertain outcomes
during project implementation.

• Utility Theory: Utility theory endeavors to formalize management’s attitude towards risk,
an approach that is appropriate to decision tree analysis for the calculation of expected
values, and also for the assessment of results from sensitivity and probability analyses.
However, in practical project work Utility Theory tends to be viewed as rather theoretical.

Reducing Risks
Project risks needs to mention that all projects have risks; the very nature of a project is not
"business-as-usual" – it is something new and different – and that will always pose some measure
of risk. What is important is to accept that there will be risks but recognise that they need to be
managed in such a way that they are minimised. Projects where risks are actively managed and
controlled are more likely to be a success. Managing risks effectively has a number of aims:
• To prevent risks happening, where possible, that pose a threat to delivering a successful
project outcome.
• To mitigate risks that cannot be avoided by planning the most appropriate response.
 • To act upon risks that might present positive opportunities. This is viewing risk from a
different perspective, one that does not always assume risks are bad for a project.

Activities designed to reduce project risks are an integral part of project management but one of
the biggest hurdles to overcome in managing risks is identifying what those risks are. Sometimes
it is impossible to know in advance about certain types of risks, for instance if the project involves
cutting-edge technology then the risks might be entirely unknown. But there are also some risks
that are common in many projects or risks that certain people may be aware of, but they are not
communicated to the project manager or team.

One way, therefore, to reduce risks is to seek out as much information as possible that might
identify a risk. This can be done through tried and tested methods such as brain-storming, story
boarding or interviewing individuals from all parts of the affected business. Once you have
documented the identifiable risks you will then be in a much better position to prevent them or
mitigate them and if you manage those well then, any unforeseen risks are likely to have a lesser
impact on the overall project.

Steps to Reduce Risk

• Documenting: Document each risk in detail, including the potential effect and possible
response to mitigate the risk, then assign a team member to each risk.

• Prioritizing: Prioritization of risks should use a combination of how likely the risk is to
occur and the effect on the schedule or budget. Cleary certain risks may be very unlikely
to occur but could have an extremely serious effect on budget and/or schedule or even
on your ability to complete the project. Others may be very likely to occur but require no
more than dipping into a contingency fund to resolve the issue.

• Avoiding: The detailed, prioritized list of all the known risks needs to be communicated
to the team members, stakeholders and anyone else involved in the project. By doing this
you will enable your team to work towards avoiding these risks, if a team is not made
aware of what could go wrong then they will not work towards avoiding it.

• Mitigating: Before any potential risks have occurred, it will benefit the process to consider
what the best solution to the problem would be, should it occur. You can also decide for
each individual risk whether to try and implement the solution, if resources allow, or
simply accept there is a problem but defer any solution to a later date possibly after the
final product has been delivered depending on the severity of the problem.
Impact of Poor Project Risk Management
• Poor User Adoption: User adoption refers to the process of getting your team members
to actually follow a process, use the tools you have mandated and stick to the
methodology. If they don’t do this, you’ll have poor results because your colleagues are
not working to a standard, best practice way of managing risk.

• Unrealized Benefits: Risks can kill a project’s benefits overnight, or they could be slowly
eaten away through inefficient management practices. When your team isn’t working
efficiently, every additional admin task adds cost and time to your project, which in turn
has an impact on how quickly your benefits can be delivered – if they are delivered at all.

• Late-running Projects: Unforeseen risks can significantly slow down a project because it
takes time to understand them, analyse them and prepare management plans to monitor,
act on and track them. Delays can also happen when risk management activities take
longer than you expected, and they push out other activities on the project schedule.

• Overspent Budgets: Risk management costs money. However, the cost of dealing with
poor risk management if a risk materializes and becomes a real issue for your business, is
normally far, far more. Budget overruns happen when risks and the associated actions
related to managing them effectively aren’t budgeted for. Overspends are also common
when a risk isn’t identified at all – and then the project team has to find money from
somewhere to do something about it before the project falters.

• Unhappy Clients: Clients don’t want to be involved in something that is perceived to be

high risk. They need to know what you are doing to mitigate any potential threats and
that you’ve got a sensible Plan B in place.

• Project Failure: Ultimately, the worst-case scenario for failing to adequately manage risk
is that your project fails. It never completes or never delivers anything of value. The
objectives in the business case aren’t reached and you waste all that investment in time
and effort that has gone into your project to date.

Project Performance Measurement

Measuring performance of any activity or task is essentially done to identify whether it is adding
any value to your goal or not. This can be better understood by the example of arranging an
event or building a house.
In case of arranging an event, we manage logistics, contractors, and direct workers. Mostly, the
objective of an event arrangement is ‘attendee’s satisfaction’ in line with the budgeted price. To
achieve the desired goal, we keep a check on each aspect of the event, including verifying all
materials used, communicating regularly with contractors to get the best work done at the
estimated price and so on. While juggling with all this, we keep a tab on our planned budget, and
schedule and compare it with actuals.

For effective performance measurement following points must be considered:

• The measure should inherit from organization goals.
• Insight on how well the project has met its objectives.
• When detailed project planning is done at the beginning of planning phase, a baseline of
this plan should be saved so that you may compare planned vs actuals.
• Performance measurement tracking rhythms should be set either weekly or fortnightly
so that insight can be gained on the timely basis and corrective actions can be taken if
needed.
• Know the difference between measuring the performance of team versus project. When
team’s performance is measured, the impact of team’s performance on organization goal
is measured.

Project Performance Measurement Techniques

• ROI: Return on Investment (ROI) is a performance measure used to evaluate the efficiency
of an investment or compare the efficiency of a number of different investments. ROI
tries to directly measure the amount of return on a particular investment, relative to the
investment’s cost. The result is expressed as a percentage or a ratio.
Formula: ROI = (Current Value of Investment - Cost of Investment) / Cost of Investment

• Business financial impact: Business managers should understand not only how to make
profit, but also the financial effects of making profit. Profit does not simply mean an
increase in cash. Sales revenue and expenses affect several assets other than cash and
operating liabilities.

• Business performance measure impact: A project won’t be successful if the cost of doing
it was not sufficiently lower than the value of the impact. The size of this impact on a
business performance measure is a measure of a project’s success. It’s the size of the
difference between the level of performance before the project’s start time, and the level
after the project’s end time.
 • Milestones completed on-time: Completion of activity or project within the time frame
set by the manager of the organization.

• Milestones completed on-budget: Completion of activity or project within the budget

allotted for the completion by the manager of the organization.

• Stakeholder perception of value

• Stakeholder participation

Performance Measurement Matrix

Productivity
Productivity is defined as a total output per one unit of a total input. In control management,
productivity is a measure of how efficiently a process runs and how effectively it uses resources.
• Input: At the plant level, common input statistics are monetary units, weights or volumes
of raw or semi-finished materials, kilowatt hours of power, and worker hours. These are
tracked as sets of partial productivity, such as kilowatt-hours per ton or yield (weight of
output divided by weight of input), both of which are used in the chemical, refining, wood
pulp, and other process industries. Quality statistics like defect rates are tracked in the
same way. Summary reports are routinely issued to various departments and department
managers are held accountable for managing inputs in their respective areas.
 • Output: Output is simply the rate of which goods are being produced and readied for sale.
Managing production levels is part of the control process–management teams must
predict demand to avoid market saturation. Finding ways to streamline internal
operations to minimize cost, limit resource use, and optimize performance (quality) is the
control manager’s central responsibility. Productivity in producing outputs, in short, can
determine a control manager’s success or failure.

• Productivity and the Firm: Productivity growth is important to a firm because more real
income means the firm can meet its obligations to customers, suppliers, workers,
shareholders, and governments (taxes and regulation), and still remain competitive or
even improve its competitiveness in the marketplace.

Factors Affecting Productivity

Factors Description
Application Domain Knowledge of the application domain is essential development. Those who are
Experience experts and understand the domain are likely to be most productive.
Process Quality The development process used can have significant effect on productivity.
Project Size Larger the project size, more the time required for team communication. Less
time is available for development so individual productivity is reduced.
Technology Support Good support technology such as CASE Tools, supportive configuration system,
etc. can improve the productivity of a project greatly.
Working It also affects the productivity of the individual and project as a whole as staff
Environment with private working space contributes more as compared to others.

Strategies to Increase Productivity

• Track and limit your task: Productivity goes out the window when you’re not paying
attention to it. Just focusing on your work isn’t going to cut it. You can lose track of time,
get bogged down in minutia or you might complete your tasks on time, but without a
process to reign you in when you’re falling behind you’re working blind. That’s where task
tracking come in. Creating a system of managing your tasks, helps you so you can keep
concentrating on your work.

• Use technology: This is the modern world, and we have a lot of great tools that are
designed to help us improve productivity. We briefly noted above how software can be
part of one of part of your productivity strategies, but it can also be the main thrust of it,
too. For one thing, you can create task lists, which are a way to organize and
systematically address your work. This gives you one place in which to view what you
must do and when it’s due.
 • Remove distractions: Technology can be great, like all those fantastic tool features you
can use to control your work and boost your productivity. But technology is also like a
flame to the months of our distraction. We fly into it and get burned in the process. You
can’t turn back the clock, but there are things you can do. One off the first things you can
do to get a handle of your personal time management is turning off those darn
notifications. Not the ones that relate to the timeliness of your tasks, but the constant
ping of your computer and phone? The moment your notified of a new email, social post
or even an old-fashioned phone call, is the moment your pulled out of your task.

Project Performance Evaluation

Performance evaluation, which is also known as performance measurement or performance
review, as “a method by which performance of a project undertaken is documented and
evaluated or a systematic and periodic process that accesses a project’s productivity in relation
to certain pre-established criteria and organizational objectives”.

Ways to Evaluate a Project Success

• Schedule: Project management success is often determined by whether or not you kept
to the original timeline. Experienced project managers know how hard that is, but it’s a
little bit easier if you continually evaluate your progress as you go. You’ll update your
project schedule regularly. The schedule evaluation is something you can do more
formally at the end of the stage or phase, or as part of a monthly report to your senior
stakeholder group or Project Board.

• Quality: The end of a project phase is a good time for a quality review. You can check both
the quality of your project management practices following the change management
process every time and also the deliverables. A quality review can evaluate whether what
you are doing meets the standards set out in your quality plans. Best find out now before
the project goes too far, as it might be too late to do anything about it then.

• Cost: Many executives would rate cost management as one of their highest priorities on
a project, so evaluating how you the project is performing financially is crucial. Compare
your current actual spend to what you had budgeted at this point. If there are variances,
look to explain them. You’ll also want to look forward and re-forecast the budget to the
end of the project. Compare that to your original estimate too and make sure it is close
enough for your management team to feel that the work is on track. If your forecasts go
up too much it is a sign that your spending will be out of control by the end of the project
again, something it is better to know about now.
 • Stakeholder Satisfaction: Your team and stakeholders are essential in getting much of
the work done, so it’s worth checking in with them. Find out how they are feeling about
the project right now and what you could be doing differently. This is a difficult measure
to document statistically, although there’s nothing to stop you asking them for a rating
out of 10. Even if you are evaluating their satisfaction subjectively, it is still a useful
exercise. If you notice that stakeholders are not fully supportive, you can put plans in
place to engage them thoroughly to try to influence their behavior.

• Performance to Business Case: Finally, you’ll want to go back to the business case and
see what you originally agreed. How is your project shaping up? Check that the benefits
are still realistic and that the business problem this project was designed to solve does
still exist. It happens project teams work on initiatives that sound great but by the time
they are finished the business environment has moved on and the project is redundant.
No one bothered to check the business case during the project’s life cycle and so no one
realized that the work was no longer needed.

Benefits of Project Performance Measurement and Evaluation

• Every employee’s individual performance influences how effectively and efficiently
teams work for the completion of a project in an organization.
• It clarifies the project’s status in the organization. Stakeholders like to know where the
project stands regarding its performance & want to see what else it will do for company.
• Performance appraisal allows in providing feedback as well as identifying areas for
improvement. An employee can discuss and even create a developmental plan with the
manager.
• It provides a structured process for a project manager to approach the management for
discussions, identify problems, clarify expectations and plan for the future.
• The statistics can be used to monitor the success of the organization’s practices
regarding completion of the project.
• It is easy to identify the under-performing areas and decide whether want to continue
with the process hoping for improvement or changes required.

Challenges of Project Performance Measurement and Evaluation

• Evaluator inexperience
• Not linked to rewards
• Not focused on development
• Cannot measure risk associated with external environment
• Not everyone can understand the data
Controlling the Project Execution
Project execution is the phase in which the plan designed in the prior phases are put into action.
The purpose of project execution is to deliver the the project expected results. Typically, this is
the longest phase of the project management lifecycle, where most resources are applied.

During the project execution the execution team utilizes all the schedules , procedures and
templates that were prepared and anticipated during prior phases. Unanticipated events and
situations will inevitably be encountered, and the Project Manager and Project Team will have to
deal with.

The key elements of project execution is the ability of working effectively in the team and the
ability of remaining faithful to project scope while facing unpredicted events and difficulties.
Execution proceeds according to the plan, and its phases are different for each plan. However,
there are some typical process steps. In this manual we will proceed illustrating the project
execution according to the following process subdivision:
• Conduct Project Execution Kick-off event, where the Project Manager conducts a
meeting to formally begin the Project Execution and Control phase, orient new Project
Team members, and review the documentation and current status of the project.

• Manage Project Execution, where the Project Manager must manage every aspect of the
Project Plan to ensure that all the work of the project is being performed correctly and on
time.
Forming and managing the project team
Manage Project Implementation and Transition
Manage Issues
Manage Change Control Process
Manage Acceptance of Deliverables
Project Communication management
Manage Organizational and Behavioural Change

• Manage Cost, Scope, Schedule, and Quality, where Manager must manage changes to
Project Scope & Schedule, implement Quality Assurance & Control processes.
Manage Changes to Project Scope
Control the Project Schedule and Manage Schedule Changes
Implement Quality Assurance and Quality Control Processes according to the
Quality Standards Revised During Project Planning
Control and Manage Costs Established in the Project Budget Tasks
 • Monitor and Control Risks, where the Project Manager and Project Team utilize the Risk
Management Plan prepared in previous phases and develop and apply new response and
resolution strategies to unexpected eventualities.

• Gain Project Acceptance, where the Project Manager, Customer Decision-Makers and
Project Sponsor acknowledge that all outputs delivered have been tested, accepted and
approved, and that the products/services of project have been successfully transitioned
to the expected beneficiaries.

Project Control Process

The project control process compares actual performance versus the planned performance of
the project. A project manager uses a formula to determine if the work that has actually been
completed matches what was originally planned for completion at any given time. For example,
a project planned to have 50% of the work completed and budgeted to spend $100,000 by the
6-month mark. A project manager can calculate the actual amount of work completed and
budget spent versus what was planned.

The project control process will also identify and track new risks and issues. Tracking risks and
issues is important because either one, if not controlled, can quickly cause the project to
overspend or fall behind schedule. Project status reports are another method used to determine
if a project is under control. A project manager will meet with the project team regularly to gather
status report information from each work group involved in the project. Status reports are
another method a project manager can use to identify when the project may be experiencing
issues that require corrective action.

Project Control Tools

• Expert Judgment: The project manager will use their past experience, or expert judgment
to influence decisions on the current project. Often, the project manager will use the
entire project management team to help make decisions for the project.
• Analytical Tools: There are many analytical techniques the project manager can use to
identify the potential for variations in a project’s performance. Regression analysis, causal
analysis, and earned value management are just some of the analytic tools a project
manager uses to track a project’s performance.
• Meetings: Meetings can be face to face, virtual, formal, or informal, and can include
project team members, executives, and stakeholders. Meetings are useful to the project
control process because they create a method for project stakeholders to discuss issues
and concerns.