Activity 11:

Assume that you have the following decision-making options: (1) make the decision on your own with available information, (2) consult others before making a decision, and (3) call a meeting and reach a consensus, seeking to arrive at a final decision everyone can agree on. Which approach would you use to make each of the following decisions and why?

1. You are the project leader for Casino Night on campus, a charitable event organized by your group to raise money for the homeless. The event was a big success, garnering a net profit of $3,500. Before the event your team researched nearby organizations that support the homeless and to whom the money could be given. You narrowed the choices to the “Chunk of Coal House” and “St. Mary’s Soup Kitchen.” Eventually your group decided that the funds be given to Chunk of Coal. You are about to write a check to its director when you read in the local newspaper that the Chunk of Coal House has terminated operations. What should you do with the money?
2. You are a golf course designer hired by Trysting Tree Golf Club to renovate their golf course. You have worked closely with the board of directors of the club to develop a new layout that is both challenging and aesthetically pleasing. Everyone is excited about the changes. The project is nearly 75 percent complete when you encounter problems on the 13th hole. The 13th hole at Trysting Tree is a 125-yard par three in which golfers have to hit their tee shots over a lake to a modulated green. During the construction of the new tee box, workers discovered that an underground spring runs beneath the box to the lake. You inspected the site and agreed with the construction supervisor that this could create serious problems, especially during the rainy winter months. After surveying the area, you believe the only viable option would be to extend the hole to 170 yards and create elevated tees on the adjacent hillside.
3. You are the leader of a new product development project. Your team has worked hard on developing a third-generation product that incorporates new technology and meets customer demands. The project is roughly 50 percent complete. You have just received a report from the marketing department detailing a similar product that is about to be released by a competitor. The product appears to utilize radical new design principles that expand the functionality of the product. This poses a serious threat to the success of your project. Top management is considering canceling your project and starting over again. They want you to make a recommendation.v

   page i

   page ii

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   page v

   Project Management

   The Managerial Process Eighth Edition

    

   Erik W. Larson

   Clifford F. Gray

   Oregon State University

    

    

    

    

    

   page vi

   PROJECT MANAGEMENT: THE MANAGERIAL PROCESS, EIGHTH EDITION

   Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2021 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2018, 2014, and 2011. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

   Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

   This book is printed on acid-free paper.

   1 2 3 4 5 6 7 8 9 LWI 24 23 22 21 20 19

   ISBN 978-1-260-23886-0 (bound edition) MHID 1-260-23886-5 (bound edition) ISBN 978-1-260-73615-1 (loose-leaf edition) MHID 1-260-73615-6 (loose-leaf edition)

   Portfolio Manager: Noelle Bathurst Product Developer Manager: Michele Janicek Executive Marketing Manager: Harper Christopher Lead Content Project Manager: Sandy Wille Senior Content Project Manager: Angela Norris Senior Buyer: Sandy Ludovissy Design: Egzon Shaqiri Content Licensing Specialist: Beth Cray Cover Image: Gina Pricope/Getty Images Compositor: SPi Global

   All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

   Library of Congress Cataloging-in-Publication Data

   Names: Gray, Clifford F., author. | Larson, Erik W., 1952- author. Title: Project management : the managerial process / Erik W. Larson,  Clifford F. Gray, Oregon State University. Description: Eighth edition. | New York, NY : McGraw-Hill Education, [2021]  | Clifford F. Gray appears as the first named author in earlier  editions. | Includes bibliographical references and index. | Summary:  “Our motivation in writing this text continues to be to provide a  realistic, socio-technical view of project management. In the past,  textbooks on project management focused almost exclusively on the tools  and processes used to manage projects and not the human dimension”–  Provided by publisher.

    

    

   Identifiers: LCCN 2019028390 (print) | LCCN 2019028391 (ebook) |  ISBN 9781260238860 (paperback) | ISBN 1260238865 (paperback) |  ISBN 9781260242379 (ebook) Subjects: LCSH: Project management. | Time management. | Risk management. Classification: LCC HD69.P75 G72 2021 (print) | LCC HD69.P75 (ebook) |  DDC 658.4/04–dc23 LC record available at https://lccn.loc.gov/2019028390 LC ebook record available at https://lccn.loc.gov/2019028391

    

   The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

    

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   page vii

   About the Authors

   Erik W. Larson ERIK W. LARSON is professor emeritus of project management at the College of Business, Oregon State University. He teaches executive, graduate, and undergraduate courses on project management and leadership. His research and consulting activities focus on project management. He has published numerous articles on matrix management, product development, and project partnering. He has been honored with teaching awards from both the Oregon State University MBA program and the University of Oregon Executive MBA program. He has been a member of the Project Management Institute since 1984. In 1995 he worked as a Fulbright scholar with faculty at the Krakow Academy of Economics on modernizing Polish business education. He was a visiting professor at Chulalongkorn University in Bangkok, Thailand, and at Baden-Wuerttemberg Cooperative State University in Bad Mergentheim, Germany. He received a B.A. in psychology from Claremont McKenna College and a Ph.D. in management from State University of New York at Buffalo. He is a certified Project Management Professional (PMP) and Scrum master.

   Clifford F. Gray CLIFFORD F. GRAY is professor emeritus of management at the College of Business, Oregon State University. He has personally taught more than 100 executive development seminars and workshops. Cliff has been a member of the Project Management Institute since 1976 and was one of the founders of the Portland, Oregon, chapter. He was a visiting professor at Kasetsart University in Bangkok, Thailand, in 2005. He was the president of Project Management International, Inc. (a training and consulting firm specializing in project management) 1977–2005. He received his B.A. in economics and management from Millikin University, M.B.A. from Indiana University, and doctorate in operations management from the College of Business, University of Oregon. He is a certified Scrum master.

    

    

   page viii

   “Man’s mind, once stretched by a new idea, never regains its original dimensions.”

   Oliver Wendell Holmes, Jr.

   To my family, who have always encircled me with love and encouragement—my parents (Samuel and Charlotte), my wife (Mary), my sons and their wives (Kevin and Dawn, Robert and Sally), and their children (Ryan, Carly, Connor and Lauren).

   C.F.G.

   “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” Bernard Shaw, Man and Superman

   To Ann, whose love and support have brought out the best in me. To our girls Mary, Rachel, and Tor-Tor for the joy and pride they give me. And to our grandkids, Mr. B, Livvy, Jasper Jones!, Baby Ya Ya, Juniper Berry, and Callie, whose future depends upon effective project management. Finally, to my muse, Neil—walk on!

   E.W.L

    

    

   page ix

   Preface

   Our motivation in writing this text continues to be to provide a realistic, socio-technical view of project management. In the past, textbooks on project management focused almost exclusively on the tools and processes used to manage projects and not the human dimension. This baffled us, since people, not tools, complete projects! While we firmly believe that mastering tools and processes is essential to successful project management, we also believe that the effectiveness of these tools and methods is shaped and determined by the prevailing culture of the organization and interpersonal dynamics of the people involved. Thus, we try to provide a holistic view that focuses on both the technical and social dimensions and how they interact to determine the fate of projects.

   Audience

   This text is written for a wide audience. It covers concepts and skills that are used by managers to propose, plan, secure resources, budget, and lead project teams to successful completions of their projects. The text should prove useful to students and prospective project managers in helping them understand why organizations have developed a formal project management process to gain a competitive advantage. Readers will find the concepts and techniques discussed in enough detail to be immediately useful in new-project situations. Practicing project managers will find the text to be a valuable guide and reference when dealing with typical problems that arise in the course of a project. Managers will also find the text useful in understanding the role of projects in the missions of their organizations. Analysts will find the text useful in helping to explain the data needed for project implementation as well as the operations of inherited or purchased software.

   Members of the Project Management Institute will find the text is well structured to meet the needs of those wishing to prepare for PMP (Project Management Professional) or CAPM (Certified Associate in Project Management) certification exams. The text has in-depth coverage of the most critical topics found in PMI’s Project Management Body of Knowledge (PMBOK). People at all levels in the organization assigned to work on projects will find the text useful not only in providing them with a rationale for the use of project management processes but also because of the insights they will gain into how to enhance their contributions to project success.

   Our emphasis is not only on how the management process works but also, and more importantly, on why it works. The concepts, principles, and techniques are universally

    

    

   page x

   applicable. That is, the text does not specialize by industry type or project scope. Instead, the text is written for the individual who will be required to manage a variety of projects in a variety of organizational settings. In the case of some small projects, a few of the steps of the techniques can be omitted, but the conceptual framework applies to all organizations in which projects are important to survival. The approach can be used in pure project organizations such as construction, research organizations, and engineering consultancy firms. At the same time, this approach will benefit organizations that carry out many small projects while the daily effort of delivering products or services continues.

   Content

   In this and other editions we continue to try to resist the forces that engender scope creep and focus only on essential tools and concepts that are being used in the real world. We have been guided by feedback from reviewers, practitioners, teachers, and students. Some changes are minor and incremental, designed to clarify and reduce confusion. Other changes are significant. They represent new developments in the field or better ways of teaching project management principles. Below are major changes to the eighth edition.

   All material has been reviewed and revised based on the latest edition of Project Management Body of Knowledge (PMBOK), Sixth Edition, 2017. Discussion questions for most Snapshots from Practice are now at the end of each chapter. Many of the Snapshots from Practice have been expanded to more fully cover the examples. Agile Project Management is introduced in Chapter 1 and discussed when appropriate in subsequent chapters, with Chapter 15 providing a more complete coverage of the methodology. A new set of exercises have been developed for Chapter 5. New student exercises and cases have been added to chapters. The Snapshot from Practice boxes feature a number of new examples of project management in action. The Instructor’s Manual contains a listing of current YouTube videos that correspond to key concepts and Snapshots from Practice.

   Overall the text addresses the major questions and challenges the authors have encountered over their 60 combined years of teaching project management and consulting with practicing project managers in domestic and foreign environments. These questions include the following: How should projects be prioritized? What factors contribute to project failure or success? How do project managers orchestrate the complex network of relationships involving vendors, subcontractors, project team members, senior management,

    

    

   page xi

   functional managers, and customers that affect project success? What project management system can be set up to gain some measure of control? How are projects managed when the customers are not sure what they want? How do project managers work with people from foreign cultures?

   Project managers must deal with all these concerns to be effective. All of these issues and problems represent linkages to a socio-technical project management perspective. The chapter content of the text has been placed within an overall framework that integrates these topics in a holistic manner. Cases and snapshots are included from the experiences of practicing managers. The future for project managers is exciting. Careers will be built on successfully managing projects.

   Student Learning Aids

   Student resources include study outlines, online quizzes, PowerPoint slides, videos, Microsoft Project Video Tutorials, and web links. These can be found in Connect.

   Acknowledgments

   We would like to thank Scott Bailey for building the end-of-chapter exercises for Connect; Pinyarat Sirisomboonsuk for revising the PowerPoint slides; Ronny Richardson for updating the Instructor’s Manual; Angelo Serra for updating the Test Bank; and Pinyarat Sirisomboonsuk for providing new Snapshot from Practice questions.

   Next, it is important to note that the text includes contributions from numerous students, colleagues, friends, and managers gleaned from professional conversations. We want them to know we sincerely appreciate their counsel and suggestions. Almost every exercise, case, and example in the text is drawn from a real-world project. Special thanks to managers who graciously shared their current project as ideas for exercises, subjects for cases, and examples for the text. John A. Drexler, Jim Moran, John Sloan, Pat Taylor, and John Wold, whose work is printed, are gratefully acknowledged. Special gratitude is due Robert Breitbarth of Interact Management, who shared invaluable insights on prioritizing projects. University students and managers deserve special accolades for identifying problems with earlier drafts of the text and exercises.

   We are indebted to the reviewers of past editions who shared our commitment to elevating the instruction of project management. We thank you for your many thoughtful suggestions and for making our book better. Of course, we accept responsibility for the final version of the text. Paul S. Allen, Rice University

    

    

   Victor Allen, Lawrence Technological University Kwasi Amoako-Gyampah, University of North Carolina–Greensboro Gregory Anderson, Weber State University Mark Angolia, East Carolina University Brian M. Ashford, North Carolina State University Dana Bachman, Colorado Christian University Robin Bagent, College of Southern Idaho Scott Bailey, Troy University Nabil Bedewi, Georgetown University Anandhi Bharadwaj, Emory University James Blair, Washington University–St. Louis Mary Jean Blink, Mount St. Joseph University S. Narayan Bodapati, Southern Illinois University at Edwardsville Warren J. Boe, University of Iowa Thomas Calderon, University of Akron Alan Cannon, University of Texas–Arlington Susan Cholette, San Francisco State Denis F. Cioffi, George Washington University Robert Cope, Southeastern Louisiana University Kenneth DaRin, Clarkson University Ron Darnell, Amberton University Burton Dean, San Jose State University Joseph D. DeVoss, DeVry University David Duby, Liberty University Michael Ensby, Clarkson University Charles Franz, University of Missouri, Columbia Larry Frazier, City University of Seattle Raouf Ghattas, DeVry University Edward J. Glantz, Pennsylvania State University Michael Godfrey, University of Wisconsin–Oshkosh Jay Goldberg, Marquette University Robert Groff, Westwood College Raffael Guidone, New York City College of Technology Brian Gurney, Montana State University–Billings Owen P. Hall, Pepperdine University Chaodong Han, Towson University Bruce C. Hartman, University of Arizona

    

    

   page xii

   Mark Huber, University of Georgia Richard Irving, York University Marshall Issen, Clarkson University

   Robert T. Jones, DePaul University Susan Kendall, Arapahoe Community College George Kenyon, Lamar University Robert Key, University of Phoenix Elias Konwufine, Keiser University Dennis Krumwiede, Idaho State University Rafael Landaeta, Old Dominion University Eldon Larsen, Marshall University Eric T. Larson, Rutgers University Philip Lee, Lone Star College–University Park Charles Lesko, East Carolina University Richard L. Luebbe, Miami University of Ohio Linh Luong, City University of Seattle Steve Machon, DeVry University–Tinley Park Andrew Manikas, University of Louisville William Matthews, William Patterson University Lacey McNeely, Oregon State University Carol Miller, Community College of Denver William Moylan, Lawrence Technological College of Business Ravi Narayanaswamy, University of South Carolina–Aiken Muhammad Obeidat, Southern Polytechnic State University Edward Pascal, University of Ottawa James H. Patterson, Indiana University Steve Peng, California State University–East Bay Nicholas C. Petruzzi, University of Illinois–Urbana/Champaign Abirami Radhakrishnan, Morgan State University Emad Rahim, Bellevue University Tom Robbins, East Carolina University Art Rogers, City University Linda Rose, Westwood College Pauline Schilpzand, Oregon State University Teresa Shaft, University of Oklahoma

    

    

   Russell T. Shaver, Kennesaw State University William R. Sherrard, San Diego State University Erin Sims, DeVry University–Pomona Donald Smith, Texas A&M University Kenneth Solheim, DeVry University–Federal Way Christy Strbiak, U.S. Air Force Academy Peter Sutanto, Prairie View A&M University Jon Tomlinson, University of Northwestern Ohio Oya Tukel, Cleveland State University David A. Vaughan, City University Mahmoud Watad, William Paterson University Fen Wang, Central Washington University Cynthia Wessel, Lindenwood University Larry R. White, Eastern Illinois University Ronald W. Witzel, Keller Graduate School of Management G. Peter Zhang, Georgia State University

   In addition, we would like to thank our colleagues in the College of Business at Oregon State University for their support and help in completing this project. In particular, we recognize Lacey McNeely, Prem Mathew, and Jeewon Chou for their helpful advice and suggestions. We also wish to thank the many students who helped us at different stages of this project, most notably Neil Young, Saajan Patel, Katherine Knox, Dat Nguyen, and David Dempsey. Mary Gray deserves special credit for editing and working under tight deadlines on earlier editions. Special thanks go to Pinyarat (“Minkster”) Sirisomboonsuk for her help in preparing the last five editions.

   Finally, we want to extend our thanks to all the people at McGraw-Hill Education for their efforts and support. First, we would like to thank Noelle Bathurst and Sarah Wood, for providing editorial direction, guidance, and management of the book’s development for the eighth edition. And we would also like to thank Sandy Wille, Sandy Ludovissy, Egzon Shaqiri, Beth Cray, and Angela Norris for managing the final production, design, supplement, and media phases of the eighth edition.

   Erik W. Larson

   Clifford F. Gray

    

    

   page xiii

   Guided Tour

   Established Learning Objectives Learning objectives are listed both at the beginning of each chapter and are called out as marginal elements throughout the narrative in each chapter.

   End-of-Chapter Content Both static and algorithmic end-of-chapter content, including Review Questions and Exercises, are assignable in Connect.

   SmartBook The SmartBook has been updated with new highlights and probes for optimal student learning.

   Snapshots The Snapshot from Practice boxes have been updated to include a number of new examples of project management in action. New discussion questions based on the Snapshots have been added to the end-of-chapter material and are assignable in Connect.

    

    

   New and Updated Cases Included at the end of each chapter are between one and five cases that demonstrate key ideas from the text and help students understand how project management comes into play in the real world. Cases have been reviewed and updated across the eighth edition.

   Instructor and Student Resources Instructors and students can access all of the supplementary resources for the eighth edition within Connect or directly at www.mhhe.com/larson8e.

    

   http://www.mhhe.com/larson8e

    

   page xiv

   Note to Student

   You will find the content of this text highly practical, relevant, and current. The concepts discussed are relatively simple and intuitive. As you study each chapter we suggest you try to grasp not only how things work but also why things work. You are encouraged to use the text as a handbook as you move through the three levels of competency:

   I know.

   I can do.

   I can adapt to new situations.

   The field of project management is growing in importance and at an exponential rate. It is nearly impossible to imagine a future management career that does not include management of projects. Resumes of managers will soon be primarily a description of their participation in and contributions to projects.

   Good luck on your journey through the text and on your future projects.

   Chapter-by-Chapter Revisions for the Eighth Edition

   Chapter 1: Modern Project Management

   New Snapshot: Project Management in Action 2019. New Snapshot: London Calling: Seattle Seahawks versus Oakland Raiders. New case: A Day in the Life—2019. New section on Agile Project Management.

   Chapter 2: Organization Strategy and Project Selection

   Chapter text refined and streamlined. New section describing the phase gate model for selecting projects.

   Chapter 3: Organization: Structure and Culture

   New section on project management offices (PMOs). New Snapshot: 2018 PMO of the Year.

   Chapter 4: Defining the Project

    

    

   page xv

   Consistent with PMBOK 6th edition, the scope checklist includes product scope description, justification/business case, and acceptance criteria. Discussion of scope creep expanded. New case: Celebration of Color 5K.

   Chapter 5: Estimating Project Times and Costs

   Snapshot from Practice on reducing estimating errors incorporated in the text. Snapshot from Practice: London 2012 Olympics expanded. A new set of six exercises.

   Chapter 6: Developing a Project Schedule

   Chapter 6 retitled Developing a Project Schedule to better reflect content. New case: Ventura Baseball Stadium.

   Chapter 7: Managing Risk

   New Snapshot: Terminal Five—London Heathrow Airport. Consistent with PMBOK 6e, “escalate” added to risk and opportunity responses and “budget” reserves replaced by “contingency” reserves.

   Chapter 8 Scheduling Resources and Costs

   Two new exercises. New case: Tham Luang Cave Rescue.

   Chapter 9: Reducing Project Duration

   Snapshot 9.1: Smartphone Wars updated. New case: Ventura Baseball Stadium (B).

   Chapter 10: Being an Effective Project Manager

   Effective Communicator has replaced Skillful Politician as one of the 8 traits associated with being an effective project manager. Research Highlight 10.1: Give and Take expanded.

   Chapter 11: Managing Project Teams

   A new review question and exercises added.

   Chapter 12: Outsourcing: Managing Interorganizational Relations

    

    

   page xvi

   Snapshot 12.4: U.S. Department of Defense Value Engineering Awards updated. New exercise added.

   Chapter 13 Progress and Performance Measurement and Evaluation

   Expanded discussion of the need for earned value management. New case: Ventura Stadium Status Report.

   Chapter 14: Project Closure

   New case: Halo for Heroes II.

   Chapter 15: Agile Project Management

   Chapter revised to include discussions of Extreme programming, Kanban, and hybrid models. New Snapshot: League of Legends. New case: Graham Nash.

   Chapter 16: International Projects

   Snapshots from Practice: The Filming of Apocalypse Now and River of Doubt expanded. New case: Mr. Wui Goes to America.

   MCGRAW-HILL CUSTOMER CARE CONTACT INFORMATION At McGraw-Hill, we understand that getting the most from new technology can be challenging. That’s why our services don’t stop after you purchase our products. You can e- mail our Product Specialists 24 hours a day to get product-training online. Or you can search our knowledge bank of Frequently Asked Questions on our support website. For Customer Support, call 800-331-5094 or visit www.mhhe.com/support. One of our Technical Support Analysts will be able to assist you in a timely fashion.

    

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   page xvii

   1.

   2.

   3.

   4.

   5.

   6.

   7.

   8.

   9.

   10.

   11.

   12.

   13.

   14.

   15.

   16.

   One

   Two

   Brief Contents Preface ix

   Modern Project Management 2

   Organization Strategy and Project Selection 28

   Organization: Structure and Culture 68

   Defining the Project 104

   Estimating Project Times and Costs 134

   Developing a Project Schedule 168

   Managing Risk 212

   Scheduling Resources and Costs 258

   Reducing Project Duration 318

   Being an Effective Project Manager 354

   Managing Project Teams 390

   Outsourcing: Managing Interorganizational Relations 434

   Progress and Performance Measurement and Evaluation 474

   Project Closure 532

   Agile Project Management 562

   International Projects 590

   APPENDIX

   Solutions to Selected Exercises 626

   Computer Project Exercises 639

    

    

   GLOSSARY 656 ACRONYMS 663 PROJECT MANAGEMENT EQUATIONS 664 CROSS REFERENCE OF PROJECT MANAGEMENT 665 SOCIO-TECHNICAL APPROACH TO PROJECT MANAGEMENT 666 INDEX 667

    

    

   1.1

   1.2

   1.3

   1.4

   2.1

   2.2

   2.3

   2.4

   page xviii

   Contents

   Preface ix

   Chapter 1 Modern Project Management 2

   What Is a Project? 6 What a Project Is Not 7 Program versus Project 7 The Project Life Cycle 9 The Project Manager 10 Being Part of a Project Team 11

   Agile Project Management 12

   Current Drivers of Project Management 15 Compression of the Product Life Cycle 15 Knowledge Explosion 15 Triple Bottom Line (Planet, People, Profit) 15 Increased Customer Focus 15 Small Projects Represent Big Problems 16

   Project Management Today: A Socio-Technical Approach 17

   Summary 18

   Chapter 2 Organization Strategy and Project Selection 28

   Why Project Managers Need to Understand Strategy 30

   The Strategic Management Process: An Overview 31 Four Activities of the Strategic Management Process 31

   The Need for a Project Priority System 36 Problem 1: The Implementation Gap 36 Problem 2: Organization Politics 37 Problem 3: Resource Conflicts and Multitasking 38

   Project Classification 38

    

    

   2.5

   2.6

   2.7

   2.8

   3.1

   3.2

   3.3

   3.4

   3.5

   4.1

   Phase Gate Model 39

   Selection Criteria 41 Financial Criteria 41 Nonfinancial Criteria 43 Two Multi-Criteria Selection Models 43

   Applying a Selection Model 46 Project Classification 46 Sources and Solicitation of Project Proposals 47 Ranking Proposals and Selection of Projects 49

   Managing the Portfolio System 52 Senior Management Input 52 Governance Team Responsibilities 52 Balancing the Portfolio for Risks and Types of Projects 52

   Summary 54

   Chapter 3 Organization: Structure and Culture 68

   Project Management Structures 70 Organizing Projects within the Functional Organization 70 Organizing Projects as Dedicated Teams 73 Organizing Projects within a Matrix Arrangement 77 Different Matrix Forms 78

   Project Management Office (PMO) 81

   What Is the Right Project Management Structure? 83 Organization Considerations 83 Project Considerations 83

   Organizational Culture 84 What Is Organizational Culture? 85 Identifying Cultural Characteristics 87

   Implications of Organizational Culture for Organizing Projects 89

   Summary 92

   Chapter 4 Defining the Project 104

   Step 1: Defining the Project Scope 106 Employing a Project Scope Checklist 107

    

    

   4.2

   4.3

   4.4

   4.5

   4.6

   4.7

   4.8

   5.1

   5.2

   5.3

   5.4

   5.5

   5.6

   page xix

   Step 2: Establishing Project Priorities 111

   Step 3: Creating the Work Breakdown Structure 113 Major Groupings in a WBS 113 How a WBS Helps the Project Manager 113 A Simple WBS Development 114

   Step 4: Integrating the WBS with the Organization 118

   Step 5: Coding the WBS for the Information System 118

   Process Breakdown Structure 121

   Responsibility Matrices 122

   Project Communication Plan 124

   Summary 126

   Chapter 5 Estimating Project Times and Costs 134

   Factors Influencing the Quality of Estimates 136 Planning Horizon 136 Project Complexity 136 People 136 Project Structure and Organization 137 Padding Estimates 137 Organizational Culture 137 Other Factors 137

   Estimating Guidelines for Times, Costs, and Resources 138

   Top-Down versus Bottom-Up Estimating 139

   Methods for Estimating Project Times and Costs 142 Top-Down Approaches for Estimating Project Times and Costs 142 Bottom-Up Approaches for Estimating Project Times and Costs 146 A Hybrid: Phase Estimating 147

   Level of Detail 149

   Types of Costs 150 Direct Costs 151 Direct Project Overhead Costs 151 General and Administrative (G&A) Overhead Costs 151

    

    

   5.7

   5.8

   5.9

   6.1

   6.2

   6.3

   6.4

   6.5

   6.6

   6.7

   6.8

   6.9

   Refining Estimates 152

   Creating a Database for Estimating 154

   Mega Projects: A Special Case 155

   Summary 158 Appendix 5.1: Learning Curves for Estimating 164

   Chapter 6 Developing a Project Schedule 168

   Developing the Project Network 169

   From Work Package to Network 170

   Constructing a Project Network 172 Terminology 172 Basic Rules to Follow in Developing Project Networks 172

   Activity-on-Node (AON) Fundamentals 173

   Network Computation Process 176 Forward Pass—Earliest Times 177 Backward Pass—Latest Times 179 Determining Slack (or Float) 180

   Using the Forward and Backward Pass Information 183

   Level of Detail for Activities 184

   Practical Considerations 184 Network Logic Errors 184 Activity Numbering 184 Use of Computers to Develop Networks 185 Calendar Dates 185 Multiple Starts and Multiple Projects 185

   Extended Network Techniques to Come Closer to Reality 188 Laddering 188 Use of Lags to Reduce Schedule Detail and Project Duration 188 An Example Using Lag Relationships—the Forward and Backward Pass 192 Hammock Activities 193

   Summary 194

   Chapter 7 Managing Risk 212

    

    

   7.1

   7.2

   7.3

   7.4

   7.5

   7.6

   7.7

   7.8

   7.9

   8.1

   8.2

   8.3

   8.4

   page xx

   Risk Management Process 214

   Step 1: Risk Identification 216

   Step 2: Risk Assessment 219 Probability Analysis 222

   Step 3: Risk Response Development 223 Mitigating Risk 223 Avoiding Risk 225 Transferring Risk 225 Escalating Risk 225 Retaining Risk 225

   Contingency Planning 226 Technical Risks 227 Schedule Risks 229 Cost Risks 229 Funding Risks 229

   Opportunity Management 230

   Contingency Funding and Time Buffers 231 Contingency Reserves 231 Management Reserves 232 Time Buffers 232

   Step 4: Risk Response Control 233

   Change Control Management 234

   Summary 237 Appendix 7.1: PERT and PERT Simulation 248

   Chapter 8 Scheduling Resources and Costs 258

   Overview of the Resource Scheduling Problem 260

   Types of Resource Constraints 262

   Classification of a Scheduling Problem 263

   Resource Allocation Methods 263 Assumptions 263 Time-Constrained Projects: Smoothing Resource Demand 264 Resource-Constrained Projects 265

    

    

   8.5

   8.6

   8.7

   8.8

   8.9

   8.10

   9.1

   9.2

   9.3

   9.4

   9.5

   9.6

   Computer Demonstration of Resource-Constrained Scheduling 270 The Impacts of Resource-Constrained Scheduling 274

   Splitting Activities 277

   Benefits of Scheduling Resources 278

   Assigning Project Work 279

   Multiproject Resource Schedules 280

   Using the Resource Schedule to Develop a Project Cost Baseline 281 Why a Time-Phased Budget Baseline Is Needed 281 Creating a Time-Phased Budget 282

   Summary 287 Appendix 8.1: The Critical-Chain Approach 308

   Chapter 9 Reducing Project Duration 318

   Rationale for Reducing Project Duration 320

   Options for Accelerating Project Completion 321 Options When Resources Are Not Constrained 322 Options When Resources Are Constrained 324

   Project Cost-Duration Graph 327 Explanation of Project Costs 327

   Constructing a Project Cost-Duration Graph 328 Determining the Activities to Shorten 328 A Simplified Example 330

   Practical Considerations 332 Using the Project Cost-Duration Graph 332 Crash Times 333 Linearity Assumption 333 Choice of Activities to Crash Revisited 333 Time Reduction Decisions and Sensitivity 334

   What If Cost, Not Time, Is the Issue? 335 Reduce Project Scope 336 Have Owner Take on More Responsibility 336 Outsource Project Activities or Even the Entire Project 336 Brainstorm Cost Savings Options 336

   Summary 337

    

    

   10.1

   10.2

   10.3

   10.4

   10.5

   10.6

   10.7

   11.1

   11.2

   11.3

   11.4

   Chapter 10 Being an Effective Project Manager 354

   Managing versus Leading a Project 356

   Engaging Project Stakeholders 357

   Influence as Exchange 361 Task-Related Currencies 362 Position-Related Currencies 363 Inspiration-Related Currencies 363 Relationship-Related Currencies 363 Personal-Related Currencies 364

   Social Network Building 364 Mapping Stakeholder Dependencies 364 Management by Wandering Around (MBWA) 366 Managing Upward Relations 367 Leading by Example 369

   Ethics and Project Management 372

   Building Trust: The Key to Exercising Influence 373

   Qualities of an Effective Project Manager 375

   Summary 378

   Chapter 11 Managing Project Teams 390

   The Five-Stage Team Development Model 393

   Situational Factors Affecting Team Development 395

   Building High-Performance Project Teams 397 Recruiting Project Members 397 Conducting Project Meetings 399 Establishing Team Norms 401 Establishing a Team Identity 403 Creating a Shared Vision 404 Managing Project Reward Systems 406 Orchestrating the Decision-Making Process 408 Managing Conflict within the Project 410 Rejuvenating the Project Team 413

   Managing Virtual Project Teams 415

    

    

   11.5

   12.1

   12.2

   12.3

   12.4

   12.5

   13.1

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Atlanta‐based Southern Company , a leading utility provider in the southeast United States, is valued by its 4.4 million electricity customers for its excellent service, and it ranks as Fortune magazine ’ s “most admired” company in its industry. That means quality is important in everything the company does. When David Traynor, the company ’ s business excellence manage, was charged with implementing a new enterprise change management (ECM) suite, 55 he knew its key users, employees in the IT department, would scrutinize the new system and be very critical if anything didn’t work exactly as it should. The projected investment for the ECM was in the seven figures range, but the business case was straightforward. The justification was based on the savings in time and costs from reduced meetings and the ability to devote more attention to risky projects. The IT department was handling over 7,000 change requests a year, each of which required a time‐consuming approval process no matter how small or routine it was. Each change request needed to be approved at one of the three hour long review committee meetings that were held each week. Some frustrated employees were even starting to circumvent the approval process. Clearly, something had to be done. But even though the ECM suite had clear benefits, the IT department was not eager to work on a system that didn’t promise to be very exciting. Further, installing the ECM suite promised to markedly change the way the IT folks performed their work. “They had to log all their changes, gain approval, take all these steps that they weren’t being tasked with before,” said Traynor. The department selected BMC ’s Remedy software suite after spending 6 months designing the new process. Next came 10 months of customizing the systems and 7 months to build them. The first ECM phase was rolled out in August 2010.

Surprisingly, the new system produced even more change requests than before—almost 3,000 additional ones each year. Traynor reasoned that before the ECM was switched on, a lot of changes must have been processed without any review. That

was problematic given that about 8 of 10 requested projects have at least some level of risk, and 100% require resources to complete. Now the change advisory board meets monthly (rather than three times weekly) and deals only with emergency changes and high‐risk changes that could affect critical sites or many users. Routine change requests are preapproved using standard formats.

Traynor hadn’t spent much time getting buy in from the IT department during the first phase of the ECM project. He now believes he should have started the ECM communication and training effort much sooner in the first phase. The second

phase of the implementation, the incident and problem management system, was done differently. Traynor appointed “ambassadors” from each IT unit as before, but this time they participated from the very first day of the second phase.

Traynor encouraged them to talk with the IT employees in their unit so the employees were not playing catch‐up as they had been in the first phase. Rather, the ambassadors were actively involved in designing system changes: “They ’ ve put their fingerprints on it. . . . We get a lot of mileage from [the ambassadors].” Traynor wants them to learn the ECM and play a major role in training and testing the system . He adds, “The hope is that [they] . . . become the go‐to person after we go live.”

Q.) Assess Southern ’s ECM system on the four dimensions of project success. How successful do you think this project is?

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