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Key Concepts in Project Management

Managing Projects require extensive experience and knowledge of Project Management concepts. Project Management is vast area of study. These are some of the key concepts in Project management to get you started.

Project Work Vs Operational Work

A project is a temporary work taken to create a unique product, service or result. Let us elaborate it on further.

Project is temporary and has clear starting and ending time frame. This time frame could range from few days to few years. Resources get assigned to the project at start or during the project and are released on or before the Project Close. Project is closed when objectives are achieved or when terminated early because of non viability. Project is unique as every project has unique objectives. There can be similarities though.

Operational Work on the other hand is permanent and repetitive in nature. Resources are assigned to Operations on permanent basis. For Example, Developing a software application to Process Bills is a Project. Processing Bills every month is Operational Work.

Organizational Structure: Functional vs. Matrix vs. Projectized

Organization Structure can have huge influence on project management. From Project Management perspective, Structure can be Functional, Matrix or Projectized.
  1. Functional Structure: The organization is structured into function areas such as Manufacturing, Procurement, Sales, Billing etc. All projects occur into one functional area, as work or information is needed from another functional area, a request is made to the area head who would assign somebody from his team. In this case, resources juggle between operational and project work.
  2. Projectized Structure: In this case, everybody is assigned to a project. After completion of project, resources will be assigned to another project.
  3. Matrix Structure: Matrixorganizationisthe combination ofFunctionalandProjectized structure.
    1. Strong Matrix: Power rests with Project Manager. This is more close to Projectized structure.
    2. Weak Matrix: Power rests with Functional Manager. This is more close to Functional structure.
    3. Balanced Matrix: Power is shared. This is a combination of both Functional and Projectized. Resources would have two managers – Project Manager and Functional Managers. After Project Completion, resources go back to Functional department.
Composite Organization – Generally, Organizations will have combination of different structure for different projects.  This term is sometimes confused with structure.

Project Management vs. Program Management vs. Portfolio Management

Project Management is the application of Tools and Techniques to meet Project Objectives. Project Management requires balancing key project constraints such as Scope, Schedule, Cost, Quality, Risk, Resources. Constraints are interdependent and changing one constraint impacts other constraints.

Program group together many related projects to better manage interdependent Projects.

Portfolio consist many projects and programs to better manage and align organization's objectives. Projects in Portfolio might not be related or interdependent.

Role of Project Management Office (PMO) in Organization

Project Management Office is the centralized department in a company for Project Management. Responsibilities and authority of PMO might vary. PMO might be a support department providing knowledge, Tools and support required for projects or PMO might have complete authority on all projects.
  • PMO might help gather Project lessons learned, create projects document templates and other process documents and make these available to future projects.
  • PMO might manage dependencies between projects and might help manage conflicts between projects such as resource demands.
  • PMO might provide guidance specifically to New Project Mangers.
  • PMO might look for opportunities by overseeing multiple projects and how they are aligned to Business Objectives and Strategic Goals.
  • PMO might terminate projects or provide guidance for project termination. For example, there might be another project planned or running, which might make current project unnecessary. For example, if a project is going to replace current accounting system, Upgrade Project for current Accounting system may not be necessary.

Project Selection Method

Project selection methods are used to pick projects with maximum value to the organization. These methods can be categorized into 2 categories.
  1. Benefit measurement methods: These methods compare possible projects and choose best projects. Example includes Murder Board, Peer Review, Scoring models, Economic models (PV, NPV,IRR, Payback period, Benefit Cost Ratio etc).
    • Present Value (PV) – Present Value of future Cash flows. Higher the better.
    • Net Present Value (NPV) – Present value of future Cash inflows minus present value of future cash outflows. Higher the better.
    • Internal rate of return (IRR) – Rate at which Future cash inflow is equal to future cash outflows. Higher the better.
    • Pay back period – The time at which all the investment will be recovered. Earlier the better.
    • Benefit Cost ratio – Higher the better.
  2. Constrained Optimization methods: These methods perform mathematical calculations using various constraints and parameters to produce probability and outcome to choose projects. Examples include Linear programming, Integer Programming, Dynamic Programming, Multi-object programming.
Few more terms Project Managers should know
  • Economic Value Added (EVA) – Value added to organization by the project
  • Opportunity Cost – Profit lost when choosing one project over another.
  • Sunk Cost – Cost already incurred. This should not be taken into account while taking decision.
  • Law of Diminishing return – After a point, adding more resources will not have proportional benefit.
  • Working Capital – Current assets minus current liabilities.
  • Depreciation – Assets loose value over useful life.

Contract Types in Procurement

Procurement can generally be categorized between Fixed Price and Cost Reimbursable. Below are the key contract types and examples of these contracts.

Fixed Price Contracts

  • Fixed Price Plus Incentive Fee (FPIF) – 10000$ is paid plus for every month the work finished earlier than schedule 1000$ will be paid
  • Fixed Price plus Award fee (FPAF) – 10000$ plus every month performance exceeds planned value 1000$ is awarded with the max award of 10000$
  • Fixed Price Economic Price Adjustment – 10000$/ year plus a price will increase based on Consumer Price Index.
  • Purchase Order – generally used for commodities
  • Time and Material – 100$ /hr plus cost
Cost Reimbursable Contracts
  • Cost Contract – Seller receives no profit. Used by non profit organization
  • Cost Plus Fees (CPF) or Cost plus Percentage of Cost (CPPC) – Cost plus 10% as fees
  • Cost Plus Fixed fee (CPFF) – Cost plus 10000$ in fees
  • Cost Plus Incentive Fee (CPIF) – Cost plus variable fee. Original estimate is done (target cost) and target fee is determined. The seller gets percentage of saving if actual cost is less than target cost based on Seller/Buyer ratio.
  • Cost Plus Award Fee (CPAF) – Cost plus fee plus award based on performance.

Project Stakeholders: Roles and Responsibilities

Stakeholder is everybody who is involved in the project or whose work or interest might be affected by Project.

Stakeholders may have varied level of interest, involvement, and influence on the project. It is extremely important to identify all the stakeholders and manage them as Stakeholders can have negative and positive influence on the project. The stakeholders can include Customer, End Users, Sponsor, Program manager, Portfolio Manager, PMO, Project manager, Project Team, Functional Managers, Operation Managers, Sellers, Vendors, Legal department.
  • Customers/End Users – These are people who will be using the Project output.
  • Sponsor – Sponsor is the person or a Group, who generally provide financial support and act as the advocate of the project. Sponsors act as escalation path for the issues that Project Manager can not handle. Sponsor provides key input to the scope and project charter. Charter is then signed by Senior Management.
  • Portfolio Manager – Portfolio Manager might increase or decrease the priority of the project and might be involved in the selection of project by looking at ROI.
  • Program Manager – Provides support and oversight to the project.
  • Project Management Office – Might provide support and guidance to Project Management team.
  • Project Manager – Key person responsible for achieving Project objectives by managing key constraints.
  • Project Team – All team members involved in the project including Project Manager, Project management team members, and Other team members.
  • Functional managers - Provides functional resources for functional expertise in the project.
  • Operational Manager – Includes key Business area in the organization. After closing, Project outcome is handed over to Operational Manager.
  • Sellers/Vendors – Provides external service or expertise to the project.

What is Project Charter

A project charter is a document with high level scope, main stakeholders, objectives, risks, project manager authority etc. This is a signed document that formally authorizes a project.

Project Charter would normally include
  • Business Case
  • Project Manager authority
  • Main Stakeholders and their function, role, influence etc.
  • Measurable goals
  • Key Project constraints and priorities (scope, time, cost, quality etc)
  • Scope of the project
  • Requirements
  • Assumptions
  • High level risks
  • High level deliverable and milestones
  • High level cost and schedule estimates
  • Key Success Factors
Key points to remember
  • Project Charter should not be changed often. So it should be generic and should contain high level goals, objectives, scope etc.
  • Project Charter must be signed by someone external to project and with appropriate authority such as Sponsor, PMO etc.
  • Project must not start before signed Project Charter.

What is Project Management Plan

Project Plan or Project Management Plan or PM Plan is a key document that combines and integrates all other project management knowledge area planning documents. PM plan is the basis of Project Execution and Monitoring/Controlling.

Subsidiary Plan based on Knowledge areas include
  • Scope Management Plan
  • Schedule Management Plan
  • Cost Management Plan
  • Communication Management Plan
  • Staffing Management Plan
  • Quality Management Plan
  • Risk Management Plan
  • Procurement Management Plan.
Other than these other Plans may be included such as Requirement Management Plan, Change Management Plan, Configuration Management Plan, Process Improvement Plan.
  • Requirement Management Plan – to identify, manage, control requirements
  • Change Management Plan – to identify, manage and control changes. This includes procedures, form and approvals required to request and approve change. Change Control Board is sometimes formed that handles review and approval of changes to baseline and plan. The tools and software used to track and control changes are also clearly identified in the plan.
  • Configuration management plan – to control and manage configurations. Tools, procedures, forms and required documentation are included in the plan.
  • Process Improvement Plan – How processes will be improved during the project. This will include review process for potential improvements, frequency of reviews etc.
PM Plan also includes Baselines for measurement.
  • Schedule Baseline
  • Cost Performance Baseline
  • Scope Baseline
Planning is iterative process. Once PM Plan is completed, it will be reviewed by Sponsor, Stakeholders, team and signed off. Kick Off meeting will be called to formally announce completion of planning and start of project execution.

How to collect Project requirements

There are various techniques that can be used for collecting project requirements.
  1. Interviews – Interviewing stakeholders, Subject Matter experts etc to collect information and identify requirements
  2. Focus Groups – Create a group of qualified stakeholders and SMEs and collect requirements thru moderated workshop.
  3. Facilitated Workshops – Creating a group of cross functional stakeholders and collect requirements thru facilitated workshops.
  4. Group Creativity Techniques -
    • Brainstorming – Collecting ideas
    • Nominal Group Technique – Ideas collected thru Brainstorming go thru a voting process for prioritization and further discussion.
    • The Delphi Technique – Selected experts answer questionnaire to provide further feedback on collected requirements. The responses are only available to moderator for anonymity.
    • Idea/Mind Mapping – Requirements collected are organized into a single map to show commonality and differences, and to generate new ideas.
    • Affinity diagram – Requirements are sorted into groups for further focused discussions.
  5. Group Decision Making –Alternativesare assessed to decide on the best course of action.
    • Unanimity – Everyone agrees
    • Majority – More that 50% agree.
    • Plurality – Largest group agree.
    • Dictatorship – One individual decides.
  6. Questionnaire and Surveys – helps with large audience. Specifically advantageous in generating statistical analysis.
  7. Observations – or Job shadowing is used to observe behaviour of end users to uncover hidden requirements
  8. Prototypes – Mock-up is created early to receive feedback and uncover requirements and issues.

What is Work Breakdown Structure (WBS)

Work Breakdown Structure is tree structure division and subdivision of work required to achieve complete project scope.

Key Concepts

  • Work Package - The work is divided until a manageable level is reached. This end point is called Work Package. Cost, duration, resources can be be accurately defined at Work Package level.
  • Control Accounts – Control accounts are another point in the hierarchy where management wants to receive updates. Multiple Work packages are assigned to one Control account. However, only one Control Account can be assigned to Work package.
  • 100% Rule – WBS should include 100% of the project scope.
  • Mutually exclusive – WBS elements should be mutually exclusive to avoid overlapping of work and hence duplication of efforts.
  • Planned Outcomes – WBS should represent deliverable not the activities to achieve it.
When Should you stop decomposing WBS further?
A question generally arises what should be level of detail at work package level. Here are few guidelines
  • 80 Hour Rule – The activities required to produce work package should not exceed 80 hours.
  • Reporting Period Rule - The activities required for work package should not cross reporting period for the project (weekly, monthly etc).
  • Use Common Sense – Do it if it make sense
Few points to keep in mind
  • Work Package can be realistically estimated
  • Work Package can not be broken down further in practical sense.
  • Work package produces measurable deliverable.
  • Work package can be outsourced or contracted out.

How to plan quality

Here are the techniques for planning quality.
  • Cost Benefit Analysis – The benefit achieved by spending on quality.
  • Cost Of Quality – The total cost incurred by not preventing failures. This include rework by project team, warranty, lost business etc.
  • Control Charts – helps identify if process is within limits or has predictable issues. Specifications limits, Control Limits and mean is drawn. If point above or below control limits or if there are 7 consecutive points above or below mean, it is investigated further for prevention steps. Control limits are generally +/- 3σ.
  • Benchmarking – looking at other projects for best practices.
  • Design of Experiment – Statistical method of Finding optimized number and type of tests. Variables are systematically changed rather than one at a time.
  • Statistical Sampling – Randomly choosing samples for testing.
  • Flow-charting – A quality process chart showing when to perform test and what to do on outcomes etc.
  • Quality Management Practices – such as CMMI, Six Sigma etc.
  • Other techniques such as Brainstorming, Affinity Diagram, Force Field Analysis, Nominal Group techniques, matrix diagram, prioritization matrix.


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