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TRANSCRIPT
Source: Project Management in Practice, 5th Edition, Mantel, Meredith, Shafer, Sutton, Wiley, 2014.
Project Management: A Systems Approach to Planning, Scheduling, and Controlling, 10th Edition, Harold Kerzner, Wiley, 2009.
Unit 7
Scheduling, Allocating Resources, Monitoring and Controlling, Evaluating
and Terminating the Project
1
Project Scheduling
Project planning, budgeting, and scheduling is interdependent on each other.
Project scheduling is the discipline of organizing and time‐phasing the activities required to complete the objectives of an effort.
Project schedule is the project plan in an altered format for monitoring and controlling project activities.
2
PERT and CPM
Both PERT and CPM were developed in the late 1950s
Program Evaluation and Review Technique (PERT)
• by U.S. Navy, Booz‐Allen Hamilton, and Lockheed Aircraft
• used probabilistic activity durations
Critical Path Method (CPM)
• by Dupont De Nemours Inc.
• used deterministic activity durations
Both employed networks to schedule and display task sequences.
While theyuse slightly different ways in drawing the networks, anything one can do with PERT, could also do with CPM and vice versa.
3
The Language of PERT/CPM
Activity• a task or set of tasks
• uses resources and time
Event• an identifiable state resulting from completion of one or more activities
• consumes no resources or time
• predecessor activities must be completed before an event can be achieved.
4
The Language of PERT/CPM continued
Milestones• identifiable and noteworthy events that mark significant progress
Network• a diagram of nodes (activities or events) and arrows (directional arcs) that illustrate the technological relationships of activities
• usually drawn with a “Start” node on the left and a “Finish” node on the right.
Path• a series of connected activities between any two events
5
The Language of PERT/CPM concluded
Critical Path
• the set of activities on a path (from the project’s start event to its finish event) that, if delayed, will delay the completion date of the project
Critical Time
• the time required to complete all activities on the critical path
6
Building the Network
It’s necessary to know the predecessor/successor relationship (technological dependences) in building the network
Two ways of displaying a project network
• Activities on Arrows (AOA) network … in which the activities are shown as arrows and events as nodes, usually associated with PERT.
• Activities on Nodes (AON) network … in which each task (activity) is shown as a node and the technological relationship is shown by the arrows, usually associated with CPM. (will use in this course)
7
Example –Table 7‐1 A Sample Set of Project Activities and Precedencies
Task Predecessor
a --
b --
c a
d b
e b
f c, d
g e
8
AON Network Stage 1
9
Start with task a and b, because they have no predecessors
AON Network ‐ Stage 2
10
Next, connect task c with a (its predecessor), and d, e with b(their predecessor).
AON Network ‐ Complete
11
Next, connect task f with c, d (its predecessors), and g with e(its predecessor). Since there is no other tasks, f and g are connected to the “finish” node.
Example ‐Table 7‐2 A Sample Problem for Finding the Critical Path and Critical Time
Activity Predecessor Duration
a -- 5 days
b -- 4
c a 3
d a 4
e a 6
f b, c 4
g d 5
h d, e 6
i f 6
j g, h 4
12
As AON is easier to deal with, will be using AON notations mostly (adopted by most project management software.)
Example ‐Figure 7‐1 Stage 1 of a Sample Network
13
Start with task a and b, also noted their durations. Next, connect task c, d, e with a (their predecessor).
Example ‐Figure 7‐2 A Complete Network
14
Connect tasks g and h with task d; h with task e; j with task g, h; and i with task f. Since there is no other tasks, i and j are connected to the “finish” node.
Example ‐Figure 7‐3 Information Contents in an AON Node
15
For task a, its ES is day 0, EF is (0 + 5) = 5.
Task c, d, e cannot start before a is completed on day 5, their ESs. Adding their respective durations to their ESs, give their EFs.
Example ‐ES, EF calculation (forward pass)
16
Task f cannot start until both b and c are completed, giving its ES = 8 and EF = 12.
Task g cannot start until d is completed, giving its ES = 9 and EF = 14. Task h cannot start until both d and e are completed, giving its ES = 11 and EF = 17.
Example ‐ES, EF calculation (forward pass)
17
Example ‐ES, EF calculation (forward pass)
Task j cannot start until both g and h are completed, giving its ES = 17 and EF = 21.
Task i cannot start until f is completed, giving its ES = 12 and EF = 18. The shortest time for completion is the longest path through the network, in this case, a-e-h-j, and the critical time is 21 days.
18
Example –Figure 7‐4 The Critical Path and Time for Sample Project
19
Example ‐LS, LF calculation (backward pass)
Task j and i must be completed by day 21, giving their LFs = 21, where the LS for j = 21-4 = 17, and LS for i = 21-6 = 15.
Task g and h could have their LFs = 17, and LS for g = 17-5 = 12, and LS for h = 17-6 = 11.
20
Example ‐LS, LF calculation (backward pass)
Task f must be completed by day 15, giving its LF = 15, where the LS for f = 15-4 = 11.Task b has thus its LF = 11, and LS = 11-4 = 7.
Task d, e, c have their LFs = 11, and LSs = 7, 5, and 8 respectively.Task a has its LF = 5, and LS = 0
21
Calculating Activity Slack
Latest Start Time (LS) – Earliest Start Time (ES) = Slack
Latest Finish time (LF) – Earliest Finish time (EF) = Slack
Example –
Activity a, e, h, and j, all on the critical path, has no slack.
Activity i has a slack = 15 – 12 = 3 days,
Activity f has a slack = 11 – 8 = 3 days,
Activity g has a slack = 12 – 9 = 3 days,
Activity d has a slack = 7 – 5 = 2 days,
Activity c has a slack = 8 – 5 = 3 days, and
Activity b has a slack = 7 – 0 = 7 days,
22
Building the Network with MSP
23See Example 1 in supplemental Material
Building the Network with MSP
24See Example 1 in supplemental material
Building the Network with MSPView Total Slack & Free Slack
25
Total slack = LF – EF = LS – ES. For task b, total slack = 7 – 0 = 7
Free Slack = the time an activity can be delayed without affecting the start time of any successor activity. For task b, free slack = ES of (f) – EF (b) = 8 – 4 = 4
Calculating Probabilistic Activity Times
Assume that all possible durations for some tasks could be represented by the beta distribution as shown in figure 5‐13
The expected time (TE) is based on three time estimates
• pessimistic (a) – the actual duration of the task will be a or lower less than 1 percent of the time
• most likely (m) – the mode of the distribution
• optimistic (b) – the actual duration of the task will be b or higher less than 1 percent of the time
26
6
)4(TE
bma
Figure 7‐4 The Beta Distribution of all Possible Times for an Activity
27
The Beta Distribution
The Beta Distribution
28
By approximation,
The general formula for the probability density function of the beta distribution defined on the interval (a, b) parameterized by two positive shape parameters, α and β is
where p and q are the shape parameters, a and b are the lower and upper bounds, respectively, of the distribution, and B(p,q) is the beta function. The beta function has the formula
Mathematical Expectations,
6
)(6
)4(
ab
bma
With = (b-a)/6, it assumes that the range between a and b will cover 99.7% of all durations.
The Probabilistic NetworkAn Example
29
Table 7‐3 A Sample Set of Project Activities with Uncertain Durations
Opt. Norm. Pess. TE Var.
Activity Pred a m b (a + 4m + b)/6 ((b ‐ a)/6)2
A ‐ 8 10 16 10 4/6 1.78
B a 11 12 14 12 1/6 .25
C b 7 12 19 12 2/6 4.00
D b 6 6 6 6 .00
E b 10 14 20 14 2/6 2.78
F c,d 6 10 10 9 2/6 .44
G d 5 10 17 10 2/6 4.00
H e,g 4 8 11 7 5/6 1.36
The Probabilistic NetworkAn Example
30
Figure 7‐5 An AON network from Table 5‐4.
The Probabilistic NetworkAn Example
31
The critical path is a-b-d-g-h
The critical time is 47 days
Some concerns -
o Since 47 days is the mean, it means that the project has a 50% chance to complete before 47 days and 50% chance to be more than 47 days.
o The critical path may not be a-b-d-g-h if an activity on another path might have a longer duration (for example a-b-c-f, if activity c or f or both got delayed.)
The Probabilistic NetworkAn Example – MSP View
32See Example 2 in supplemental material
The Probabilistic NetworkAn Example – MSP Network View
33
See Example 2 in supplemental material
The Probability of Completing the Project on Time
))(
.(Pr).(Pr
D
ZDx
where
D = the desired project completion time
= the sum of TE activities on the path being investigated
= the sum of variances of the activities on the path
= the standard deviation
34
Critical time = 47 days, to complete the project by this time requires that all paths in the project’s network be completed by the specified time.
The probability that the a‐b‐d‐g‐h path will be completed on or before a desired day, D, is
The Probability of Completing the Project on Time
8643.0)1.1.(Pr)718.2
)4750(.(Pr)
)(.(Pr
ZZ
DZ
Do the same for paths a‐b‐c‐f, a‐b‐e‐h, and a‐b‐d‐f, obtained the probabilities as 0.985, 0.978, and 1.000.
The Probability of Completing the Project in 50 days is thus
0.864 x 0.985 x 0.978 x 1.000 = 0.832 or 83.2%
35
Based on Table 7‐3,
= 10 4/6 + 12 1/6 + 6 + 10 2/6 + 7 5/6 = 47
=1.78 + 0.25 + 0 + 4.00 + 1.36 = 7.39
=2.718
If D = 50 days, the probability that the a-b-d-g-h path will be completed on or before a desired day, D
(Use Normal table)
The Probability of Completing the Project on Time
36
Based on Table 7‐3,
= 10 4/6 + 12 1/6 + 6 + 10 2/6 + 7 5/6 = 47
=1.78 + 0.25 + 0 + 4.00 + 1.36 = 7.39
=2.718
If D = 50 days, the probability that the a-b-d-g-h path will be completed on or before a desired day, D,
Find Pr. (x < 50) = 0.8651
(Use Minitab)
The Probability of Completing the Project on TimeSelecting Risk and Finding D
Once P is determined, D can be found.
Example – Find the days that path a‐b‐d‐g‐h (critical path) could be completed with a 95% probability.
37
daysDDD
ZD
Z
5.51645.1718.2
)47(645.1
)(
95.0)645.1.(Pr95.0))(
.(Pr
(use normal table)
pD
ZDx
))(
.(Pr).(Pr
The Probability of Completing the Project on TimeSelecting Risk and Finding D
Once P is determined, D can be found.
Example – Find the days that path a‐b‐d‐g‐h (critical path) could be completed with a 95% probability.
38
pD
ZDx
))(
.(Pr).(Pr
(use Minitab)
Pr. (x < D) = 0.95 => D = 51.47 days
Simulation of the Probabilistic NetworkAn Example ‐
39
Based on the sample Set from Table 7‐3. (see Example 2 in Excel)
Simulation of the Probabilistic NetworkAn Example ‐
40
Based on the sample Set from Table 7‐3. (see Example 2 in Excel)
Simulation of the Probabilistic NetworkAn Example ‐
41
Based on the sample set from Table 7‐3. TE =47 days(see Example 2 in Excel)
Statistics:Forecast
valuesTrials 1,000Base Case 46.00Mean 47.69Median 47.55Mode ---Standard Deviation 2.65Variance 7.02Skewness 0.1752Kurtosis 2.76Coeff. of Variability 0.0556Minimum 40.30Maximum 55.89Range Width 15.59Mean Std. Error 0.08
Forecast: Project Completion Time (cont'd)
Percentiles: Forecast values
0% 40.30
10% 44.3120% 45.39
30% 46.27
40% 46.89
50% 47.54
60% 48.2370% 49.09
80% 49.99
90% 51.13
100% 55.89
End of Forecasts
The Probability of Completing the Project on Time
42
Based on Table 7‐3,
= 10 4/6 + 12 1/6 + 6 + 10 2/6 + 7 5/6 = 47
=1.78 + 0.25 + 0 + 4.00 + 1.36 = 7.39, =2.718
If D = 50 days, the probability that the a-b-d-g-h path will be completed on or before a desired day, D,
Pr. (x < 50) = 0.8651
(Use Minitab) (Use Crystal Ball)
Pr. (x < 50) = 0.7907
The Probability of Completing the Project on TimeSelecting Risk and Finding D
Once P is determined, D can be found.
Example – Find the days that path a‐b‐d‐g‐h (critical path) could be completed with a 95% probability.
43
pD
ZDx
))(
.(Pr).(Pr
(use Minitab) (Use Crystal Ball)Pr. (x < D) = 0.95 => D = 51.47 days Pr. (x < D) = 0.95 => D = 52.4 days
Traditional Statistics Versus Simulations
Similarity
• both procedures assume that task durations are statistically independent and the paths are independent
Difference
• a simulation can circumvent the assumption of statistical independence by including the activity or path dependencies as part of the model
• A simulation can help facilitate the task of selecting appropriate distributions to be used in the model
44
Expediting a Project – Crashing a ProjectThe Critical Path Method
When a project must be completed in much less time than its expected duration, it is a “crash project”
• Normal Project
– Normal duration estimates
– Normal costs
• Crash Project
– Crash duration estimates
– Crash costs
– Crash cost per day
45
Crashing a ProjectActivity Slope
The activity slope or cost per day is:
46
timenormal - crash time
cost normal -cost crash
Two key principles:• Focus on the critical path(s) when trying to shorten the duration of a project
• When shortening a project’s duration, select the least expensive way to do it
Crashing a Project ‐ An Example of a Normal/Crash Project
* Partial crashing allowed** Partial crashing not allowed
47
Crashing a Project ‐ A PERT/CPM Example of AOA Network
48
Choose an activity on the critical path to shorten with the minimum cost, chose a.
If a is shortened to 2 days, additional cost = $40. Next target, b or e or both
If b is shortened to 1 day, additional cost = $40+ $60=$100
If b remains at 2 days, e is shortened to 1 day, d has also to be shortened by 1 day, additional cost = $40+$70 + $30 = $140. ($200 from normal)
Shorten both b and e to 1 day, and d to 2 days, additional cost = $40+$60+ $70 + $30x2 = $230
Crashing a Project CPM Crash Cost‐duration History
49
$120
$160
$220
$260
$390
$350
Final Thoughts on Project Scheduling
The software could do the arithmetic but the analyst must enter the appropriate information and ask for the appropriate analysis.
Parkinson “work tends to fill the time allowed, and activities lose their slacks”
“student syndrome” – given more time, many simply postpone starting the work.
Goldratt “delays resulting from task finishing late are not often offset by the potential gains from those finished early”
50
Allocating Resources
Projects compete with one another for resources in two different ways
• non‐consumed when used(e.g., equipment, technical specialist; who gets it first and who must wait.)
• consumed when used(e.g., materials; those has to wait may suffer a schedule delay.)
Activities on the same project may compete for resources
Goal of resource allocation is to optimize use of limited supply
Allocations requires making trade‐offs to help the project to meet its most important goals (time, budget, and scope)
• time constrained … completion by a fixed time; resources could vary
• resource constrained … limited budget or resource; time could vary
51
Resource Allocation
Allocating physical and human resources to projects.
Concerns how we allocate specific, limited resources to specific activities when there are competing demands for the same limited resources.
52
Resource Loading
Resource loading refers to the amounts of specific resources that are scheduled for use on specific activities or projects at specific time
It is usually presented in the form of a list or table
53
Project Plan and Gantt Chart for Production of a Short Documentary Film
54Figure 7-7 Project plan and Gantt chart for producing a short documentary film(see Example5_1)
Project Plan and Gantt Chart for Production of a Short Documentary Film
55Figure 7-8 Project plan and Gantt chart for producing a short documentary film(see Example5_2)
Project Plan and Gantt Chart for Production of a Short Documentary Film
56Figure 7-9 Project plan and Gantt chart for producing a short documentary film(see Example5_2)
Project Plan and Gantt Chart for Production of a Short Documentary Film
57Figure 7-10 Project plan and Gantt chart for producing a short documentary film(see Example5_3)
Adjusting the predecessors -
Resource Leveling
Resource leveling is a way to fix resource overallocation.
– overallocation: The result of assigning more tasks to a resource than the resource can accomplish in the working time available.
– leveling: Resolving resource conflicts or overallocations by delaying or splitting certain tasks. When Project levels a resource, its selected assignments are distributed and rescheduled.
58
Resource Leveling
Generally, resources are leveled in two ways:
By delaying a task until the assigned resource has time to work on it. – (delay: The amount of time between the scheduled start of a task and the
time when work should actually begin on the task; it is often used to resolve resource overallocations. There are two types of delay: assignment delay and leveling delay.)
By splitting a task so that part of a task is done when planned and the rest of it is done later when the assigned resource has time. – (split task: A task whose schedule is interrupted. For example, a two‐day task
that does not require contiguous work might be split so that the first day of work is scheduled for Monday, and the second day is scheduled for Thursday.)
• You can delay or split tasks yourself, or you can have Microsoft Office Project do it for you, using the Resource Leveling feature
59
Resource Leveled Report for Scriptwriter Showing All Activities
60
Figure 7-11 Resource leveled report for scriptwriter (RESOURCE>Level Resource>Select Resource to Level or Level All. MSP moved task “Propose Shoots” to two places to level the resource. see Example5_4)
When we leveled resources in the case of the overworked scriptwriter, MSP simply used the available activity slack to reschedule task “Propose Shoots” and the project completion date was not altered since there was enough slack.
Graphic Resource Leveled Report for Scriptwriter
61
Figure 7-12 Graphic Resource leveled report for scriptwriter (RESOURCE>Resource Graph)
Monitoring and Controlling
Monitoring is the collection, recording, and reporting of project information
Controlling uses the monitored data to bring actual performance into agreement with the plan
Monitoring and Controlling are the opposite sides of project selection (which dictates what to monitor) and planning (which identifies the elements to be controlled)
62
Plan‐Monitor‐Control Cycle
It is important to spend time up front designing the planning‐monitoring‐controlling process.
The fundamental items to be planned, monitored, and controlled are time, cost, and scope so that the project stays on schedule, budget, and specifications.
The plan–monitor‐control cycle constitutes a “closed loop” process
There is often a temptation to minimize the planning–monitoring–controlling effort so that “real work” can be done (doing something…)
63
Project Authorization and Expenditure Control System Information Flow in a “Plan‐Monitor‐Control” Cycle
64Figure 7 ‐ 13
Designing the Monitoring System
Identify special characteristics of scope, cost, and time that need to be controlled• specific performance characteristics should be set for each level of detail in the project
Real‐time data must be identified (i.e., collected) to measure achievement against the plan regarding what is being done, when, and the level of resource usage …• mechanisms to collect this data must be designed
Avoid the tendency to focus on easily collected data• Collect not only the “hard”, “objective” data but also the
“soft”, “subjective” data such as comments, conversations, etc.
65
Common Errors in Setting up the Monitoring System
Monitoring on easy measures instead of relevant measures
Monitoring activities instead of results
Monitoring inputs as surrogates for outputs
Monitoring measures that don’t change from one period to the next.
66
Data Collection Formats
Once the type of data to be monitored is determined, the next question is how to collect them
Frequency counts – defects per 1,000 of productsRaw numbers – dollar spent, hours consumed in
comparison to planned amount
Subjective numeric ratings – ranking of performance, priority, etc.
Indicators and surrogates – humidity and temperature as surrogate measures to “comfort” felt by workers
Verbal characterizations – verbal description of certain variables in the project such as the cooperation among team members.
67
Data Analysis
Following the collection of the data, it is necessary to analyze or process the data using
Aggregation techniques
Fitting statistical distributions
Curve fitting
68
Number of Bugs per Unit of Test Time During Test of Software
69Figure 7 – 14 (curve fitting)
Percent of Specified Performance Met During Successive Repeated Trials
70Figure 7 – 15 (curve fitting)
Ratio of Actual Material Cost to Estimated Material Cost
71Figure 7 – 16 (trend analysis)
Other Data Analysis Tools
• Fishbone (Cause and Effect) Diagrams
• Histograms
• Pareto Analysis
• Scatter Plots
• Run Charts
• Control Charts
72
Reporting
After the data have been collected and analyzed, they need to be reported.
Routine performance reports• project status reports• time/cost reports• variance reports
Special or exception reports• report at milestones or scope changes or problems.• Report for special decisions or unexpected situations• Report results of a special study
Not all stakeholders need to receive same information
Impact of electronic media • More data are available for collections, and more updating is
possible, could lead to an overload of reporting
73
Conventions Used to Estimate Progress on Tasks
50‐50• task is listed as 50% complete when initiated and the remaining 50% added when task is completed
100%• the task is 100% complete when finished … and zero percent before that
• projects will always appear to be “behind schedule”
Ratio of cost (or time) expended to cost (or time) budgeted
» neither is an accurate estimator of percentage completion
74
Earned Value Analysis
It is important to derive a measure of the overall project progress in terms of performance, budget, and schedule. This measure is “earned value”
The earned value (EV) of a task or project is the budgeted cost of the work actually done• it is calculated by multiplying the budgeted cost of the task by
the percentage completion of the task
The percent of a task’s budget actually spent is not good indicator of percent completion –Why? (Cost might not be charged until the completion of certain tasks so it won’t reflect the percent of completion.)
75
Earned Value Analysis
• Variances on the earned value chart follow two primary guidelines:– 1. A negative means there is a deviation from plan—not good
– 2. The cost variances are calculated as the earned value minus some other measure
• EV ‐ Earned Value: budgeted cost of work performed (BCWP)
• AC ‐ actual cost of work performed
• PV ‐ Planned Value: budgeted cost of work scheduled (BCWS)
• ST ‐ scheduled time for work performed
• AT ‐ actual time of work performed
76
Variance
Cost/Spending Variance• earned value (EV) – actual cost (AC)
Schedule Variance• earned value (EV) – planned value (PV)
CPI (Cost Performance Index)• earned value (EV)/actual cost (AC)
SPI (Schedule Performance Index)• earned value (EV)/planned cost (PV)
77
Earned Value Analysis
Earned Value Analysis
• Variances are also formulated as ratios rather than
differences
– Cost Performance Index (CPI) = EV/AC
– Schedule Performance Index (SPI) = EV/PV
– Time Performance Index (TPI) = ST/AT
• Use of ratios is particularly helpful when comparing
the performance of several projects
78
Additional Items of Interest
Estimated remaining cost to completion• estimated cost to completion (ETC) = budget at completion (BAC) – earned value (EV) divided by cost performance index (CPI)
Estimated total cost at completion• estimated at completion (EAC) = estimated cost to completion ( ETC) + actual cost (AC)
79
Earned Value Analysis
The Earned Value Chart
80Figure 7 – 17 (a project significantly behind schedule and considerably over budget.)
The Earned Value Chart
• If the earned value chart shows a cost overrun or
performance under‐run, the project manager must
figure out what to do to get the system back on target
• Options may include borrowing resources, or holding a meeting of project team members to suggest solutions, or notifying the client that the project may be late or over budget
81
Earned Value Analysis
Example ‐
Planned $1500 to complete work package.
Scheduled to have been finished today.
Actual expenditure to date is $1350.
Estimate work is 2/3 complete.
What are cost and schedule variances?
82
Example ‐
Cost variance = EV – AC= $1500(2/3) ‐ $1350= $1000 ‐ $1350= ‐$350
Schedule variance = EV – PV= $1500(2/3) ‐ $1500= ‐$500
83
Earned Value Analysis
• negative variance is undesirable
Two Simple Rules for Variances
1. A negative variance is bad and a positive variance is good
2. The spending and schedule variances are calculated as the earned value minus some other measure
84
Example ‐
CPI (cost performance index)
= EV/AC
=($1500/(2/3) / $1350)
= 1000/1350
= 0.74
SPI (schedule performance index)
= EV/PV
= ($1500(2/3))/$1500
= $1000/$1500
= 0.67
• Value less than 1 is undesirable
• Allow comparisons been made at different point in, or across different projects. 85
Earned Value Analysis
Example ‐
• Estimate to complete ETC = (BAC‐EV)/CPI
=(1500‐1000)/.74 = $676
• Estimate at completion EAC = ETC + AC
= $676 + $1350 = $2026
* Estimated additional cost to complete the project is $676, added to the actual cost to date $1,350, gives a total task to completion of $2,026, $526 above the $1,500 cost planned
86
Earned Value Analysis
Various Variances Visually
Figure 7-18
a: Positive schedule variance, negative spending variance
b: Negative schedule variance, negative spending variance
c: Negative schedule variance, positive spending variance
87
EV
Project Control
• Control, the act of reducing differences between the plan and actuality
• It is the final element in the planning‐monitoring‐controlling cycle
• It is to no avail if actions are not taken when reality deviates significantly from what was planned
• Control is a difficult task– It involves human behavior– Problems are rarely clear cut so the need for change and redirection is also fuzzy
88
Purposes of Control
1. Stewardship of organizational assets
– Physical asset control
– Human resources management
– Financial control through the use of accounting tools
2. Regulation of results through the alteration of activities
– This step involves taking action when reality deviates from plan
– It includes both mechanistic and human elements
89
Purposes of a Control System
• Primary purpose is to correct errors– Not to identify and punish the guilty
– Managers must realize that the past cannot be changed
• Control the investment, subject to diminishing returns
• Consider impact on creativity and innovation
• The control system should employ the lowest degree of hassle consistent with accomplishing its goals
90
Primary Mechanisms by which Project Manager Exerts Control
1. Process reviews• An analysis of the process of reaching the project
objectives
2. Personnel assignment• Control can also be exercised through personnel
assignments based on past productivity
3. Resource allocation• Resources are usually allocated to the more productive
or important tasks and this can significantly influence the attainment of project results
91
Common Mistakes
• Emphasizing short‐run results at the expense of long‐run objectives
• Excessive control directed to specific objectives can result in sacrificing other project objectives
• Across‐the‐board cuts in resource allocations tend to reward those who have already overspent or over hired while penalizing the frugal and efficient
• Focusing on certain items for control can distract the attention of team members from other, equally important items
92
Control System Components
• Sensor– Its purpose is to measure any aspect that one wishes to control
• Standard– The control system must have a standard of items to measure against
• Comparator– Compares the output of the sensor with the standard
• Decision maker– To decide if the difference between what is measured and the
standard is large enough to warrant attention.
• Effector– If some action is required to reduced the difference, the effector must
then take action
93
Tools for Control
• Some already covered
– Variance analysis
– Trend projections
– Earned value
• Critical ratio
– Indicates when a task is becoming unacceptable
• When the ratio drops below one– CR = (actual progress/scheduled progress) (budgeted cost/actual cost)
94
Critical Ratio Calculations
Table 7-4
95
* 1 or above is good. Unacceptable when dropped below 1
Project Evaluation
Appraises the progress and performance of the project relative to • the goals and objectives set for it during the selection process
and • the initial or revised plan• other similar projects
Projects should be evaluated at key points in the project life cycle, not just an after‐the‐fact analysis.
Provide feedback to senior management for decision and control purposes• Decision purpose is to improve the selection process• Control Purpose is to improve process of carrying out projects
Post‐Project evaluation could help the organization improve its project management skills on future projects.
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Evaluation Criteria
Original criteria for selecting and funding the project• such as profitability, acquiring new competencies, getting into
a new market segment.
Success to‐date – measured by four dimensions
• Efficiency in meeting the budget and schedule
• Customer impact/satisfaction• Business/direct success ‐ such as the level of commercial success for
external projects and reduced throughput time for internal projects
• Future potential – such as establish a presence in a new market, develop a new technology
For non‐routine projects,
Contribution to organization’s goals
Contribution to team member objectives
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Measurement of a Project’s Performance
Measuring performance against planned budgets and schedules
• relatively straightforward
Measurement of actual expenditure and earned values
• more complicated, each group wants credits for revenues but wants the costs assigned elsewhere.
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Project Auditing
Project audit is a thorough examination of the management of a
project, its methodology and procedures, its records, properties,
inventories, budgets, expenditures, progress, and so on. The
project audit is not a financial audit, but is far broader in scope
and may deal with the whole or any part of the project.
The timing of the audit depends on the purpose
• Early audit tends to focus on technical issues, more
valuable to the project team
• Late audit tends to focus on budget and schedule, more
valuable to project management
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Project Auditing
An audit can be conducted at three levels:• General – a brief investigation of project essentials.• detailed – initiated if problems identified in general audit
• technical – looked at technical aspects
Typical Steps in a Project Audit• Familiarize audit team with the requirements of the project
• Conduct audit on site• Write up audit report• Distribute report
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Keys to Ensuring an Effective Audit
Audit team must
• have free access to all information relevant to the project
• have free access to anyone with knowledge of the project (except the customer)
• make sure the project team is aware of the audit
• avoid misunderstanding between audit team members and project personnel
• understand the politics of project team
• confirm all information ( wherever possible)
• understand that project team members rarely trust auditors
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The Audit Report
The audit report should be written with a professional and constructive tone and its content restricted to information and issues relevant to the project. It should contain the following sections:
Introduction• description of project including its goals and objectives
Current status• comparison of work completed and planned
Future project status• conclusions regarding project progress• recommendations for changes for subsequent projects
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The Audit Report, continued
Critical management issues• issues senior management should monitor
Risk analysis and risk management• Addresses the potential for project failure and monetary loss
• Major risks and their impacts shall be identified
Final comments• caveats, assumptions, limitations, and information applicable to other projects
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Project Termination
Determining whether or not to terminate a project
If sunk cost is irrelevant to current investment decisions, the extent to which the organization is willing to invest additional time and cost required to complete the project generally fall into two categories:
• the degree to which the project has met its goals and objectives, and
• the degree to which the project qualifies against a set of factors associated with success or failure
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Table 7 ‐4 Rank‐ordered Factors Considered in Terminating R&D projects
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No. of Companies Reporting
Factors the Factor as being Important
Technical • Low probability of achieving technical objectives or 34
commercializing results • Technical or manufacturing problems cannot be solved with 11
available R&D skills • Higher priority of other projects requiring R&D labor or funds 10
Economic• Low profitability or return on investment 23• Too costly to develop as individual product 18
Market • Low market potential 16• Change in competitive factors or market needs 10
Others • Too long a time required to achieve commercial results 6• Negative effects on other projects or products 3• Patent Problems 1
Fundamental Reasons for Project Failure
Most common reason for early termination is a technical or commercial failure, in addition, the reasons are:
Project was not required at the first place
Insufficient support from senior management
Naming the wrong project manager
Poor up‐front planning
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Determining Which Project should be Continued and Which should be Dropped
Wheatley suggested to ask these questions.
Which projects have a legal or strategic imperative?
Which projects are luxuries?
Which projects are likely to drive future revenue and growth?
Which projects best match our skill sets and strengths?
What are the risks to the business if we do not service the project’s deliverables?
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Types of Project Termination
Project Extinction• project activity suddenly stops because it has either been
successfully completed or has a high expectation of failure
Termination‐by‐addition• when an in‐house project is successfully completed and is
institutionalized as a new formal part of the organization
Termination‐by‐integration• the output of the project becomes a standard part of the
operating system of the sponsoring firm or the client
Termination‐by‐starvation• occurs when it is impolitic to terminate a project but its budget
can be squeezed until it is a project in name only
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The Termination Process
Decision should be made by a broad based committee of senior managers
Detail the criteria and explain the rationale for the committee’s decision.
Termination process should be included in the initial project plan
A termination manager (project undertaker) should be appointed
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The Termination Process
Personnel Reassignment – Most difficult
Functional Organization – people returned to their functional unit but many team members may get laid off if in large scale project.
Pure Project Organization – people may get reassigned to other project or get laid off if no longer needed.
Matrix Organization – people could return to their functional unit or get reassigned to other projects, least problematic.
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The Project Final Report
The project final report is a history of the project, addressing the following items:
Project performance• what was achieved and reasons for resulting performance
Administrative performance• review of how well administrative practices worked
Organizational structure• identify modifications to help future projects
Project teamwork
• Identify team members, and their performance
Project management techniques• recommendations for improvements in future projects
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The End!Thank You!
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