pmbok_5th_initiating process group -

Initiating

Process Group

Project Management Processes PMBOK 5th edition

Hossam Maghrabi, PMP

Initiating Process Group Project Boundaries

Initiating Process Group

The key purposes of this Process Group is define a new project or a new phase of

an existing project by obtaining authorization to start the project or phase through

the following steps,

1. Select a project to be initiated (Outside Project Boundaries).

2. The initial scope is defined and initial financial resources are committed.

3. Internal and external stakeholders who will interact and influence the overall. outcome

of the project are identified.

4. If not already assigned, the project manager will be selected.

5. This information is captured in the project charter and stakeholder register.

6. When the project charter is approved, the project becomes officially authorized.

– Initiating processes may be performed at the organizational, program, or portfolio level

and therefore, would be outside of the project’s level of control.

Initiating Process GroupProject Selection Methods

Current situation The organization have an internal business needs or external influences.

So the organization have to create a needs analysis, feasibility study,

business case or description of the situation to take a go/no-go

decision regarding the project initiation.

Selection Methods (Profitability Measures)

– Comparative Approach (Decision models) such as:

B/C Ratio,

PV, NPV,IRR and

payback period.

– Mathematical Approach (Calculation methods) such as:

Linear programming

Non linear programming

Project Selection MethodsComparative Approach

Benefit Cost Ratio (BCR)

The ratio of financial benefits to costs to produce the

product of the project.

BCR = (PV of Revenues)/(PV of Costs)

BCR > 1 means the revenues (benefits) outweigh the

costs.

BCR < 1 means the revenues (benefits) are less than the

costs.

The higher the BCR the better.


Cash Flow Analysis Techniques,– Discounted Cash flows: The concept here is money in

the future is worth less than money received today.

– Present Value is based on the “time value of money”, it

is a way to take time out of the equation and evaluate

how much a project is worth right now.

– Example : If a project is expected to produce 3 annual payments of

$100,000 then PV (how much those payments are worth right now) is

going to be less then 300,000


Present Value Calculation,– You don’t need to remember the formula, but you need to understand the

concept.

Present Value = Future Value / (1+i)ⁿ

i = Interest Rate

n = Number of Periods

– The higher the Present Value, the better.

– e.g. Present value of receiving $300,000 in three years considering an interest

rate of 10%

PV = 300,000 / (1+0.1)³ = $230,769,23


Internal Rate of Return,

– It’s a finance term used to express the project returns as an

interest rate

– If you “invest” in the project, what is your equivalent rate (IRR) ?

Conceptually an organization has a choice whether to invest in a project, or

put that same money in a bank account.

– Obviously, the higher the IRR, the better.

– Again, you will not be asked to calculate this measure, but you need

to understand the concept.


Payback Period,

– Length of time it takes to recoup funds invested in the project.

– This method compares the initial investment to the cash inflows expected over

the life of the product, service or results

– Obviously with all other things being equal, shorter payback periods are

generally better for an organization.


Opportunity Cost,– The cost of selecting a project over another project. i.e. the lost

opportunity cost.

– Opportunity cost asks: What is the cost of the other

opportunities we missed by investing our money in this

project?

– Example

– Project A – NPV : $100,000

– Project B – NPV : $250,000

– Opportunity Cost of selecting Project B is $ 100,000


(Example),– Make one value in each column that shows the most

desirable value , given the information provided:

Project Selection MethodsMathematical Approach

It provides a way to calculate the value of the projects

also called constraint optimization methods such as:

– Linear programming

– Non linear programming

For the exam all you need to understand about mathematical

models is that they use linear, dynamic, integer, multi-

objective programming in the form of algorithms to solve a

particular problem

Initiating Process Group& Knowledge Areas

Initiating Process Group& Integration Management Knowledge Area

Integration Management Knowledge Area

Project Integration Management includes the processes and activities to

identify, define, combine, unify, and coordinate the various processes and

project management activities within the Project Management Process

Groups.

It includes making choices about resource allocation, making trade-offs among

competing objectives and alternatives, and managing the interdependencies

among the project management Knowledge Areas.

It’s necessary in situations where individual processes interact.

For example,

A cost estimate needed for a contingency plan involves integrating the processes in the

Project Cost, Time, and Risk Management Knowledge Areas.

The integrative nature of projects and project management can be understood by

thinking of other types of activities performed while completing a project.

For Example Develop, review, analyze, and understand the scope. This includes the project and

product requirements, criteria, assumptions, constraints, and other influences related to a

project, and how each will be managed or addressed within the project;

Initiating Process GroupDevelop Project Charter

Current situation

Project statement of work, Business case or Agreements have been

developed outside the project.

An entity external to the project such as a sponsor, program or project

management office (PMO) staff person, or a portfolio governing body

chairperson or authorized representative decided to go with the new

project and will sponsor it.

The organization need to validates the alignment of the project with the

strategy and ongoing work of the organization. Also, it must be have A well-defined project and project boundaries,

A way for senior management to formally accept and commit to the project,

A formal record of the project.

Develop Project CharterData Flow Diagram

It is recommended that the

project manager participate

in the development of the

project charter to obtain a

foundational understanding

of the project requirements.

This understanding will better

allow for efficient resources

allocation to project

activities.

Develop Project Charter: Inputs

1. Project Statement of Work(SOW)

Is a narrative description of products, services, or results to be delivered by a

roject.

The SOW references the following,

Business need, based on a market demand, technological advance, legal requirement,

government regulation, or environmental consideration. (Typically, the business need

and the cost-benefit analysis are contained in the business case to justify the project.)

Product scope description. It also document the relationship between the products,

services, or results being created and the business need that the project will address.

Strategic plan. The strategic plan documents the organization’s strategic vision, goals,

and objectives and may contain a high-level mission statement (All projects should be

aligned with their organization’s strategic plan).

For internal projects, the project initiator or sponsor provides SOW based on business needs,

product, or service requirements. For external projects, the SOW be received from the customer as

part of a bid document, (e.g., a request for proposal, request for information, or request for bid) or

as part of a contract.

Develop Project Charter: Inputs

2. Business Case It used for decision making by managers or executives above the project level to

determine whether or not the project is worth the required investment.

The project manager is responsible for ensuring that the project effectively and

efficiently meets the goals of the organization and those requirements of a broad

set of stakeholders, as defined in the business case.

Periodic review of the business case by the sponsoring organization confirm that

the project is still aligned with the business case.

3. Agreements are used to define initial intentions for a project. Agreements may take the form of contracts, memorandums of understanding

(MOUs), service level agreements (SLA), letter of agreements, letters of intent,

verbal agreements, email, or other written agreements.

4. Enterprise Environmental Factors (EEF).

5. Organizational Process Assets (OPA).

Develop Project Charter: Tools & Techniques (T&T)

1. Expert Judgment, To assess the inputs used to develop the

project charter

2. Facilitation Techniques, Like Brainstorming, conflict resolution,

problem solving, and meeting management to used by facilitators to

help teams and individuals accomplish project activities.

General Notes:1. A project manager is identified and assigned as early in the project as is

feasible, preferably while the project charter is being developed and always

prior to the start of planning.

2. The two techniques above have broad application within project

management processes.

Develop Project Charter: Outputs

Project Charter

It is the document issued by the project initiator or sponsor.

It formally authorizes the existence of a project.

It provides the project manager with the authority to apply

organizational resources to project activities.

Notes,

A project charter establish internal agreements within an

organization to assure proper delivery under the contract.

A project charter is not considered to be a contract, because there

is no consideration or money promised or exchanged in its

creation.

Develop Project Charter: Outputs

Project Charter documents the following project’s information ,

– Project purpose or justification(business needs),

– Measurable project objectives and related success criteria,

– High-level requirements,

– Assumptions and constraints,

– High-level project description and boundaries,

– High-level risks,

– Summary milestone schedule,

– Summary budget,

– Stakeholder list,

– Project approval requirements

(i.e., what constitutes project success, who decides the project is successful, and who signs off

on the project),

– Assigned project manager, responsibility, and authority level,

– Name and authority of the sponsor or other person(s) authorizing the project charter.

Initiating Process Group& Stakeholder Management Knowledge Area

Project stakeholders are individuals, groups, or organizations who may affect,

be affected by, or perceive themselves to be affected by a decision, activity, or

outcome of a project.

Project Stakeholder Management includes the processes required to

1. Identify the people, groups, or organizations that could impact or be impacted by the

project,

2. Analyze stakeholder expectations and their impact on the project,

3. Develop appropriate management strategies for effectively engaging stakeholders in

project decisions and execution.

Initiating Process GroupIdentify Stakeholders

Current situation

Project charter have been developed, the project aurhorized and the

project manager identfied.

Every project will have stakeholders who are impacted by or can impact

the project in a positive or negative way. While some stakeholders may

have a limited ability to influence the project, others may have

significant influence on the project and its expected outcomes.

The ability of the project manager to correctly identify and manage

these stakeholders in an appropriate manner can mean the difference

between success and failure.

General Notes:1. Stakeholder satisfaction should be managed as a key project objective.

Identify Stakeholders

It is critical for project success to

identify the stakeholders early in

the project or phase and to

analyze their levels of interest,

their individual expectations, as

well as their importance and

influence.

The initial assessment of the

stakeholders should be reviewed

and updated regularly.

Identify Stakeholders: Inputs

1. Project Charter, It provide information about internal and external

parties related with the project and affected by the result or the

execution of the project

2. Procurement Documents, If a project is the result of a procurement

activity or is based on an established contract, the parties in that

contract are key project stakeholders.

3. Enterprise Environmental Factors (EEF).

4. Organizational Process Assets (OPA).

The buyer structures procurement documents to facilitate an accurate

and complete response from each prospective seller and to facilitate

easy evaluation of the responses.

1. Stakeholder Analysis1. Identify all potential project stakeholders and

relevant information

2. Analyze the potential impact or support each

stakeholder could generate, and classify them

using one of the following models,

Power/interest grid, (Authority & Concern)

Power/influence, (Authority & their active

involvement )

Influence/impact, (Involvement & ability to effect

changes)

Salience model, (power, urgency &

legitimacy)

3. Prioritize the stakeholders to ensure the efficient

use of effort to communicate and manage their

expectations.

4. Assess how key stakeholders are likely to react

or respond in various situations.

Identify Stakeholders: Tools & Techniques (T&T)

Identify Stakeholders: Tools & Techniques (T&T)

2. Expert Judgment Expert judgment can be obtained through individual consultations (one-on-one

meetings, interviews, etc.) or through a panel format (focus groups, surveys,

etc.). Example of expert,

Identified key stakeholders;

Project managers who have worked on projects in the same area (directly or through

lessons learned);

Subject matter experts (SMEs) in the business or project area;

Industry groups and consultants; and

3. Meetings, Profile analysis meetings are project meetings designed to develop

an understanding of major project stakeholders, and they can be used to exchange

and analyze information about roles, interests, knowledge, and the overall position of

each stakeholder facing the project.

Identify Stakeholders: Outputs

1. Stakeholder Register,The stakeholder register should be consulted and updated on a regular basis, as

stakeholders may change—or new ones identified—throughout the life cycle of the project.

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Leadership & Management