17

Project
Management

McGraw-Hill/Irwin

Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

Discuss the behavioral aspects of projects

in terms of project personnel and the
project manager.
Discuss the nature and importance of a
work breakdown structure in project
management.
Give a general description of PERT/CPM
techniques.
Construct simple network diagrams.
17-2

Learning Objectives

List the kinds of information that a PERT or

CPM analysis can provide.
Analyze networks with deterministic times.
Analyze networks with probabilistic times.
Describe activity crashing and solve
typical problems.

17-3

Projects
JAN

FEB

MAR

APR

MAY

JUN

Build A
A Done
Build B
B Done

Build C
C Done

Build D

On time!

Ship

Unique, one-time operations designed to

accomplish a specific set of objectives in a
limited time frame.
17-4

Project Management
How is it different?
Limited time frame
Narrow focus, specific objectives
Less bureaucratic

Why is it used?
Special needs
Pressures for new or improves products or
services

17-5

Project Management
What are the Key Metrics
Time
Cost
Performance objectives

What are the Key Success Factors?

Top-down commitment
Having a capable project manager
Having time to plan
Careful tracking and control
Good communications
17-6

Project Management
What are the Major Administrative Issues?
Executive responsibilities
Project selection
Project manager selection
Organizational structure

Organizational alternatives
Manage within functional unit
Assign a coordinator
Use a matrix organization with a project leader

17-7

Project Management
What are the tools?

Work breakdown structure

Network diagram
Gantt charts
Risk management

17-8

Planning and Scheduling

Gantt Chart

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Locate new
facilities

Interview staff
Hire and train staff
Select and order
furniture
Remodel and install
phones
Move in/startup

17-9

Key Decisions
Deciding which projects to implement
Selecting a project manager
Selecting a project team
Planning and designing the project
Managing and controlling project
resources
Deciding if and when a project should be
terminated
17-10

Project Manager
Responsible for:
Work
Human Resources
Communications

Quality
Time
Costs

17-11

Ethical Issues
Temptation to understate costs
Withhold information
Misleading status reports
Falsifying records
Comprising workers safety
Approving substandard work

17-12

Project Life Cycle

Concept

Planning
Execution

Management

Feasibility

Termination

17-13

Work Breakdown Structure

Figure 17.2
Project X

Level 1

Level 2
Level 3

Level 4

17-14

PERT and CPM

PERT:
CPM:

Program Evaluation and

Review Technique
Critical Path Method

Graphically displays project activities

Estimates how long the project will take
Indicates most critical activities
Show where delays will not affect project

17-15

The Network Diagram

Network (precedence) diagram diagram of
project activities that shows sequential
relationships by the use of arrows and nodes.
Activity-on-arrow (AOA) a network diagram
convention in which arrows designate activities.
Activity-on-node (AON) a network diagram
convention in which nodes designate activities.

Activities steps in the project that consume

resources and/or time.
Events the starting and finishing of activities,
designated by nodes in the AOA convention. 17-16

The Network Diagram (contd)

Path
Sequence of activities that leads from the starting
node to the finishing node

Critical path
The longest path; determines expected project
duration

Critical activities
Activities on the critical path

Slack
Allowable slippage for path; the difference the
length of path and the length of critical path
17-17

Project Network Activity on

Arrow
Figure 17.4
AOA
Locate
facilities

Order
furniture

4
Furniture
setup

2
Remodel

6
Move
in

Interview

Hire and
train

17-18

Project Network Activity on

Node
Figure 17.4
Order
furniture

AON

Locate
facilities

Furniture
setup

Move
in

Remodel

Interview

Hire and
train

17-19

Network Conventions
a
c

a
a

c
b

Dummy
activity

17-20

Time Estimates
Deterministic
Time estimates that are fairly certain

Probabilistic
Estimates of times that allow for variation

17-21

Example 1
Figure 17.5
Deterministic
time estimates
8 weeks

6 weeks

4
3 weeks

2
11 weeks

Move
in

1 week
4 weeks
9 weeks

17-22

Example 1 Solution
Critical Path

Path

Length

Slack

(weeks)

1-2-3-4-5-6
1-2-5-6
1-3-5-6

18
20
14

2
0
6

17-23

Computing Algorithm
Network activities

ES: early start

EF: early finish
LS: late start
LF: late finish

Used to determine
Expected project duration
Slack time
Critical path

17-24

Probabilistic Time Estimates

Optimistic time
Time required under optimal conditions

Pessimistic time
Time required under worst conditions

Most likely time

Most probable length of time that will be
required

17-25

Probabilistic Estimates
Figure 17.8
Beta Distribution

to

Activity
start

Optimistic
time

tm

te

Most likely
time (mode)

tp

Pessimistic
time

17-26

Expected Time
te

t
+
4t
+t
o
m
p
=
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time

17-27

Variance
2

2
(t

t
)
= p o
36

2 = variance
to = optimistic time
tp = pessimistic time

17-28

Example 5
Optimistic
time

Most likely
time

Pessimistic
time

2-4-6
b
3-4-5
d

3-5-7
e

5-7-9
f

4-6-8
h
17-29

Example 5 Time Estimates

Tabc = 10.0
Tdef = 16.0
Tghi = 13.50

4.00
b
4.00
d

5.0
e

7.0
f

6.0
h

17-30

Path Probabilities
Z =

Specified time Path mean

Path standard deviation

Z indicates how many standard deviations

of the path distribution the specified tine
is beyond the expected path duration.

17-31

Example 6
17
Weeks
1.00
a-b-c
Weeks

10.0

d-e-f

16.0

Weeks

1.00
g-h-i

13.5

Weeks

17-32

Time-cost Trade-offs: Crashing

Crash shortening activity duration
Procedure for crashing
Crash the project one period at a time

Only an activity on the critical path

Crash the least expensive activity
Multiple critical paths: find the sum of
crashing the least expensive activity on
each critical path

17-33

Time-Cost Trade-Offs: Crashing

Figure 17.11
Total
cost

Expected indirect costs

Shorten

CRASH

Cumulative
cost of
crashing

Shorten

Optimum

17-34

Example 7

2
f

4
d

17-35

Advantages of PERT
Forces managers to organize

Provides graphic display of activities

Identifies
4

Critical activities

Slack activities

2
1

17-36

Limitations of PERT
Important activities may be omitted
Precedence relationships may not be
correct
Estimates may include
a fudge factor

May focus solely

on critical path

4
2

142 weeks
3
17-37

Goldratts Critical Chain

Goldratts insight on project management
Time estimates are often pessimistic
Activities finished ahead of schedule often go
unreported
With multiple projects, resources needed for one
project may be in use on another

17-38

Project Management Software

Computer aided design (CAD)

Groupware (Lotus Notes)
CA Super Project
Harvard Total Manager
MS Project
Sure Track Project Manager
Time Line

17-39

Advantages of PM Software
Imposes a methodology
Provides logical planning structure
Enhances team communication
Flag constraint violations

Automatic report formats

Multiple levels of reports
Enables what-if scenarios
Generates various chart types
17-40

Project Risk Management

Risk: occurrence of events that have
undesirable consequences
Delays
Increased costs
Inability to meet specifications
Project termination

17-41

Risk Management
Identify potential risks

Analyze and assess risks

Work to minimize occurrence of risk
Establish contingency plans

17-42

Summary
Projects are a unique set of activities
Projects go through life cycles
PERT and CPM are two common
techniques

Network diagrams
Project management software available

17-43