EQOE - Fundamental of Project Management

EQOE I FUNDAMENTALS OF PROJECT MANAGEMENT
Noraini Hamzah Dr. Christy P. Gomez
Project Directors:
Prof. Dr. Mansor Fadzil Prof. Dr. Mohd Kidin Shahran Open University Malaysia Noraini Hamzah Universiti Kebangsaan Malaysia Dr. Christy P. Gomez KUiTTHO
Module Writers:
Editor:
Dr. Christy P. Gomez KUiTTHO Noraini Hamzah Universiti Kebangsaan Malaysia Centre for Instructional Design and Technology (CIDT) Open University Malaysia Meteor Doc. Sdn. Bhd. Lot 47-48, Jalan SR 1/9, Seksyen 9, Jalan Serdang Raya, Taman Serdang Raya, 43300 Seri Kembangan, Selangor Darul Ehsan
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First Printing, September 2006 Second Printing, November 2007 Third Printing, February 2009 Copyright UNITEM Sdn. Bhd., September 2006, November 2007, February 2009 EQOE I All rights reserved. No part of this work may be reproduced in any form or by any means without the written permission of the President, Open University Malaysia (OUM). Version February 2009
Table of Contents
Course Guide Topic 1 Introduction to the Fundamentals of Project Managament 1.1 Project Characteristics 1.2 The Project Life Cycle 1.3 What Is Project Management? 1.4 Fundamentals of the Management Process 1.4.1 Planning 1.4.2 Leading 1.4.3 Organising 1.4.4 Controlling 1.5 Integrated Project Management System Summary Test 1 Test 2 References Starting the Organisation Goals, Organisation and People 2.1 Setting Missions and Goals 2.2 Organisation 2.3 Building Blocks of Organisations/ Principles for Organisational Design 2.4 Organisation Types 2.4.1 The Functional Organisation 2.4.2 The Division Organisation 2.4.3 The Matrix 2.4.4 Networks 2.4.5 The Virtual Organisation Summary Test 1 Test 2 References Developing a Project Plan 3.1 Get to Know Planning and Scheduling 3.1.1 What is Planning and Scheduling? 3.1.2 Why Do We Need Planning and Scheduling? 3.1.3 Where Should We Use Planning and Scheduling? 3.1.4 Who are Involved? 3.1.5 When is Planning Needed? 3.1.6 How to do Planning? vii ix 1 2 4 8 9 10 12 12 13 15 16 17 17 18 19 20 23 24 27 27 29 31 33 34 36 37 37 37 38 39 39 41 42 44 44 45
Topic 2
Topic 3
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TABLE OF CONTENTS
Gantt Chart (Formerly Known As Bar Chart) Basic Network Programme Developing Critical Path Method (CPM) Using Precedence Network 3.4.1 Terms and Definitions 3.4.2 The CPM Analysis Explained through Examples 3.5 Updating the Network Summary Test 1 Test 2 References Topic 4 Managing Projects Teams 4.1 Leadership 4.1.1 Leadership Style 4.2 Communication 4.3 Motivation 4.4 Delegation 4.4.1 Delegation of Authority and Responsibility 4.4.2 Task Delegation 4.5 Managing Participation, Working In Teams and Conflict 4.5.1 Team Management 4.5.2 Conflicts on Projects 4.6 Managing Change Summary Test 1 Test 2 References Risk 5.1 Risk and Project 5.1.1 International Project 5.1.2 Risk 5.2 Risk Management 5.2.1 Why is Risk Management Needed? 5.3 Risk Management Process 5.3.1 Risk Identification 5.3.2 Risk Analysis 5.3.3 Risk Response 5.3.4 Risk Review Summary Test 1 Test 2 References
3.2 3.3 3.4
46 48 50 51 53 56 60 62 62 63 64 65 67 70 73 75 76 77 79 80 82 83 85 86 87 88 89 90 90 91 93 94 95 95 96 98 99 100 100 101 101
Topic 5
COURSE GUIDE
INTRODUCTION
Fundamentals of Project Management is a preparatory course for open entry learners who intend to pursue postgraduate programme in Masters in Project Management (MPM). This course provides learners with fundamental knowledge in the area of project management.
COURSE OBJECTIVES
By the end of this course, you should be able to: 1. 2. 3. 4. 5. understand the concept and fundamental of project management holistically; describe the interaction between importance of organisation structure to determine the project success; develop and update a project plan using CPM method; understand the skills required to be an effective project manager; and identify and handle risk that may occur.
COURSE SYNOPSIS
This module has 4 major phases: 1. 2. 3. 4. Conceptual understanding of project management. Basic knowledge in engineering economic and costing. Pre-work before project (i.e. setting up organisation, planning, resource levelling). During project (i.e. updating, monitoring and controlling).
This module is divided into 8 topics as follows: Topic 1: Introduction to the Fundamentals of Project Management Topic 1 discusses the fundamentals of project management, definition of project, phases involved in project life cycle, the key management functions (i.e.: planning, leading, organising and controlling) and the adoption of PLOC in integrated project management system. Topic 2: Starting the Organisation - Goals, Organisation and People Topic 2 provides the guidelines on how to develop good goals and objectives. This topic also explains the organisational structure available and its strength and weakness by using it.
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COURSE GUIDE
Topic 3: Developing a Project Plan Topic 3 describes the steps in developing a project plan by using the simplest method of Gantt chart to the harder method of Critical Path Method (CPM). This topic also demonstrates on how to update the planning chart accordingly. Topic 4: Managing Project Teams Topic 4 addresses the key aspects of management that are often considered as soft issues. The soft skills are needed to become effective projects managers. Topic 5: Risk Topic 5 identifies the meaning of risk and steps on how to manage it.
REFERENCES
As the topic of Project Management is a basic managerial knowledge, no single text book is sufficient to equip you for this course. The following are recommended although you are also strongly recommended to access materials available in the internet. Just search under Project Management, Organisation, Planning Network, Cost Estimating, Good Managerial Skills and the like. In addition, you are recommended to access the OUM Library website and look under the above topics. 1. 2. 3. 4. 5. 6. 7. 8. 9. Project Management Institute. (1996). A guide to the project management body of knowledge. PMI. The Association of Project Managers. (1996). Body of Knowledge. APM. British Standards Institute. (1996). BS 6079: Guide to Project Management. BSI. Turner, R. (1992). The handbook of project based management. McGraw Hill. Rustain, A.M. & Estes, W.E. (1995). What every engineer should know about project management. Marcel Dekker. Wearne, S. H. (1973). Principles of engineering organization. Edward Arnold. Chang, C. M. (2005). Engineering management challenges in the new millennium. Prentice Hall. Frank Woods. (2005). Business Accounting 1. (10th ed.). Prentice Hall. Popescu, C. M., & Charoenngam, C. (1995). Project planning, scheduling, and control in construction: An encyclopedia of term and applications. New York: Wiley
COURSE GUIDE
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10. 11. 12.
Smith, N.J., Merna, T. & Jobling, P. (1999). Managing risk in construction projects. Blackwell Science. Moodley, K. (2001). Notes from Strategic Management. Institution of Civil Engineers, RAMP: risk analysis and management for projects; Institution of Civil Engineers and the Faculty and Institute of Actuaries, Thomas Telford Limited, 1998. Dale H. Besterfield (1998). Quality Control. Prentice Hall.
EVALUATION
Refer to the CAPL website htpp://capl.oum.edu.my for evaluation method for this course
Topic Introduction to
the Fundamentals of Project Managament
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1.
2. 3. 4. 5. 6.
Describe the nature of projects; Understand the project life cycle; Define project management; Describe the management process and the concepts involved; Explain the characteristics of PLOC as consisting of key aspects of the management process; and Explain the adoption of PLOC in integrated project management system.
INTRODUCTION
As a future project manager, it is integral that you are acquainted firstly with the fundamentals of project management. Let us see how this topic can benefit you in managing projects effectively and successfully. Topic 1 gives you an overview of the fundamentals of Project Management. This will enable you to achieve an understanding of the basic definitions involved in project management and the general features of a project. This topic also discusses and identifies the phases involved in project life cycle. You will come across a detailed explanation of the concepts of management and project management, which are essentially the core
TOPIC 1
INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT
of this topic. The basic management process involving planning, leading, organising and controlling (PLOC) is emphasised. Finally, the adoption of PLOC in integrated project management system is explained.
1.1
PROJECT CHARACTERISTICS
A number of professional bodies and organisations have sought to define the term project, some of which are presented as follows:
Table 1.1: Some Definitions of Project Professional Bodies/Organisations The Project Management Institute (PMI), USA The UK Association of Project Managers The British Standards Institute Definition a temporary endeavour undertaken to create a unique product or service. a discreet undertaking with defined objectives often including time, cost and quality (performance) goals. a unique set of co-ordinated activities, with definite starting and finishing points, undertaken by an individual or organisation to meet specific objectives with defined schedule cost and performance parameters. an endeavour in which human, material and financial resources are organised in a novel way to undertake unique constraints of cost and time, so as to achieve beneficial change defined by quantitative and qualitative objectives.
Turner (1992)
From the above definitions, we may conclude that a project has the following characteristics:
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Figure 1.1: Characteristics of Project
ACTIVITY 1.1
Hence, what is a project? Explain this in your own words.
A project is a process to achieve a specific objective and every project objective should be established at the initial stage of the project. The uniqueness of a project comes together with its objectives. For example, a companys objective is to construct the tallest twin tower building in the world. This will then make it unique, which is a non-routine activity to carry out the specified objective. To complete the objectives, the project should bear in mind the following aspects: A time limit stating when the project should start and when the project should be completed. Time duration is crucial for project managers to plan the work schedule. In addition, project managers also need to consider the resources needed, for example human resources, as well as materials and financial resources that are required for completing the schedule. Unlike most organisational work that is divided according to functional specialty, a project typically requires
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the combined efforts of a variety of specialists. Often, engineers, marketing professionals, quality control specialists, and key specialists from other engineering disciplines work closely together under the guidance of a project manager to complete a project. All projects are subject to uncertainty during the delivery process. In consequence to this uncertainty, risks may be generated from factors external to the project (e.g. political change, market demand) or internally from the project activities (e.g. effects of delays due to defects, human resource constraints). The nature of risk is that it can have both positive and negative effects on the project which are termed as upside and downside risks.
EXERCISE 1.1
List down the SIX characteristics of a project. Using your own words, explain each of the characteristics.
1.2
THE PROJECT LIFE CYCLE
Another way of illustrating the unique nature of project work is in terms of the project having a definite life cycle. Because the project has a beginning and an end, it is said to have a life cycle. A number of writers have sought to define this life cycle in terms of a set of discrete phases through which the project passes. For example, Rustain and Estes (1995) define a life cycle as commencing with a concept phase and concluding with a post accomplishment phase as shown in Figure 1.2, in which four intermediate stages are identified: (a) Defining or Proposal Preparation Stage The starting point begins the moment the project is given the go-ahead. Project intensity (effort) as shown in Figure 1.3, starts slowly, builds to a peak, and then declines to delivery of the project to the customer. In the defining stage, specifications and project objectives are defined. Teams and the roles and responsibilities for each member are established in this stage. Planning Stage The level of intensity increases in the planning stage. Plans are developed to determine 4Ws, namely: (i) What the project will consist of; (ii) When it will be scheduled; (iii) Whom it will benefit;
(b)
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(iv) What quality level should be maintained; and (v) What the budget will be.
Figure 1.2: Idealised project life cycle
Figure 1.2: Level of activity intensity for an ideal project life cycle Source: Clifford F. Gray & Erik W. Larson. (2006). Project Management the Managerial Process. (3rd ed.) McGraw Hill. pg. 6
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(c)
Executing Stage Next, a major portion of the project work takes place at the executing stage. Both physical and mental resources are needed at the executing stage to produce a physical product. At this stage, control becomes crucial in terms of time, cost and quality. Delivering Stage The final stage is the delivering stage, which includes the two main activities of delivering the project product to the customer and redeploying project resources.
(d)
In respect to the nature and scale of activity changing at each stage, Wearne (1973) defines the life cycle as shown in Figure 1.4. He adds that whilst there are discrete stages, there may be time delays between each stage or, indeed the stages may overlap. The economic purpose of these stages is to contribute to a useful result, so that each stage should not be considered for itself but as work to enable the next to proceed.
Figure 1.4: Cycle stages of work for a project
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EXERCISE 1.2
Draw the Level of Activity Intensity diagram for an ideal project life cycle and briefly describe each of the activities.
All life cycle models have a common theme that each succeeding phase is more concrete than the preceding one, as the project matures from an overall concept to a set of task that in their totality accomplish the project. This point is emphasised by consideration of the typical work content of each project stage. Let us take civil engineering project as an example. Table 1.2 illustrates an example of project stages and typical activities in civil projects.
Table 1.1: Project Stages and Typical Activities in Civil Engineering Projects Project Stages Appraisal Activities Assess alternative strategies for meeting needs Establish technical and economic feasibility Derive master plan Statement of project objectives Conceptual design and associated cost estimates Design review Arrange project funding Sanction Detailed design Design review Contract strategy report and definition of contract packages Detailed cost estimates Procurement/ tendering Contract award Site construction Offsite construction and fabrication Installation Quality control Expediting Construction management Contract administration Engineering and performance tests Acceptance Organisation and operation and maintenance Project review
Definition
Design
Construction
Commissioning Operation
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ACTIVITY 1.2
Give an example of project stages and the activities based on your own field of expertise. Does it have the same stages as the example above? Why?
1.3
WHAT IS PROJECT MANAGEMENT?
The definition of project management stems from the definition of a project and implies some form of control over the planned process of explicit change.
The following are several definitions that can give you some description about project management.
Table 1.3: Some Definitions of Project Management Professional Bodies/Organisations PMI, USA Definition the art of directing and coordinating human and material resources through the life of a project by using modern management techniques to achieve predetermined goals of scope, cost, time, quality and participant satisfaction the planning, organising, monitoring and controlling of all aspects of a project and the motivation of all involved to achieve the project objectives safely and within agreed time, cost and performance criteria the planning, monitoring and controlling of all aspects of a project and the motivation of all those involved to achieve the project objectives on time, cost, quality and performance
UK Association of Project Managers
The British Standards Institute
The common theme is that project management is the management of change, but explicitly planned change; such that from initial concept, the change is directed towards the unique creation of a functioning system. In contrast, general or operations management also involves the management of change, but their purpose is to minimise and control the effects of change in an already constructed system. Therefore, project management directs all the elements that are necessary to reach the project objectives, and minimise the elements that will hinder the development of the project.
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We can be conclude that project management requires the application of knowledge, skills, tools and techniques to manage project activities in order to meet or exceed stakeholders needs and expectations. It involves balancing competing demands for meeting the requirements of: Scope, time, cost and quality. Stakeholders with different needs and expectations. Identified requirements and unidentified requirements. Risk.
And it should not, of course, be forgotten that projects are managed with and through people.
EXERCISE 1.3
In your own words, define what project management means.
1.4
FUNDAMENTALS OF THE MANAGEMENT PROCESS
From the above definitions of project management, we can say that managers give direction to their organisations, provide leadership and decide how to use organisational resources to accomplish goals. Such descriptions give you some idea of what managers do. In addition to those tasks, managers today must deal with conflict resolution, create trust in an atmosphere where trust has been badly shaken and help create balance between work lives and family lives. Managers must also effectively and efficiently use organisational resources such as employees, financial, information, machineries, buildings, equipments, supplies, etc. to meet project objectives. Managers are often required to look at the big picture and their decisions make a major difference in organisations.
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Figure 1.5: Process of Management
Figure 1.5 depicts the process of management being practised by managers in any organisation regardless whether they are profit oriented or non-profit oriented. As is evident from the figure, there are basic concepts or functions that you should remember in management process, namely: Planning Leading Organising Controlling PLOC
1.4.1
Planning
Planning is the first and arguably the most important step in any project. It includes anticipating trends and determining the best strategies and tactics to achieve organisational goals and objectives. The need for good planning may be self-evident, but in practice, it is often difficult to anticipate all the areas in which forethought is essential. There are four forms of planning for project management, as shown in Figure 1.6.
Figure 1.6: Planning for Project Management Source: Nickels, McHugh & McHugh. (2005) Understanding Business. (7th ed.). McGraw Hill. pg 217.
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(a)
Strategic Planning In strategic planning stage, broad and long range goal setting for the construction project is done by the top managers (e.g. the president and the vice president of the organisation). This stage provides the foundation for the policies, procedures and strategies for obtaining and using resources to achieve those goals. Tactical Planning The tactical planning stage is where the specific short-range objectives or identification for the project will be set by the lower-level managers (e.g. project managers) to accommodate the plans of the top manager. Examples under this planning stage are handling of human resources, project execution, what equipment is needed, costing estimates etc. Operational Planning Meanwhile, all work standards and schedules for the project will be set during the operational planning stage. Gantt charts can be used herein to represent the timing of tasks required to complete a project. Contingency Planning Contingency planning on the other hand, is the preparation of backup plans in the event that the primary plans fail.
(b)
(c)
(d)
Planning is a key management function because the other functions depend heavily on having a good plan. Good planning for any project, even for managers who have successfully completed previous projects, requires a large number of decisions on questions, such as the ones shown in Figure 1.7.
Figure 1.7: Questions to consider in planning
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This kind of planning is one of the most intellectually challenging of the project tasks and may be time-consuming, but at least the planner has the tools to bring together an expert group of staff and consultants and create an effective framework within which they can work together.
EXERCISE 1.4
List FOUR types of planning. From the list, choose one type that you had been involved before, either in your family lives or work lives and describe the activities that you performed.
1.4.2
Leading
Leading means creating a vision for the organisation and communicating, guiding, training, coaching and motivating others to work effectively to achieve the organisations goal and objectives. Leaders must have vision, are able to set a good example, as well as attract and retain good people. Managers and leaders are two different entities. Managers derive their authority from occupying higher positions within the organisation. Leaders on the other hand, have the power of influence over people. Their power is attained by earning employees respect and admiration. However, some leadership skills can be learnt. Managers with good leadership qualities are the most valuable to their employers.
1.4.3
Organising
The process of organising includes designing the structure of the organisation and creating conditions and systems in which everyone and everything works together to achieve the organisational goal and objectives. Briefly, it is the arrangement of resources in a systematic manner to fit with the project plan.
EXERCISE 1.5
What is the difference between leaders and managers?
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1.4.4
Controlling
Controlling a project is by means of establishing clear standards to determine whether an organisation is progressing towards its goals and objectives, rewarding people for doing a good job and taking corrective action if they are not. Basically, it means measuring whether what actually occurs, meets the organisations goals. (a) Controlling the Time This is the timing and sequence of all tasks to be performed in the project work. Scheduling gives a detailed picture of the step-by-step progress and problems encountered, with a clear indication of the status and its effect on future progress. It tracks and analyses the project by some period (months, weeks or days) and by function to ensure the project is progressing as planned, by measuring actual work done versus the schedule. Schedule slippage is commonplace and should be a major concern of project managers. Slippage occurs one day at a time and project managers need to be ever alert to keep slippage from accumulating to an unacceptable level. Slippage can be caused by complacency or lack of credibility, incorrect or missing information, lack of understanding, incompetence and conditions beyond ones control, such as too much work to do. (b) Controlling the Cost Cost of the project refers to the total cost of tasks undertaken to produce the desired outcomes. However, cost control is the managerial task of keeping the cost of the project within the budget. Developing the project budget generally means calculating labour costs, any required equipment and materials costs, and budgets for staffing training, retraining, project management task and control functions, and space requirements for each task and subtask. Controlling the Quality Every project is supposed to achieve desired outcomes with minimum defects. Quality is conformance with requirements and meeting or exceeding customers expectations. Project managers must determine what level of human performance is required to achieve the quality desired for the specific deliverable. Written acceptance criteria for deliverables should be developed to keep cost and schedule in line because they help clarify when tasks are completed. Milestones and deliverables can be used to access the quality of end product at several points during the life cycle of the project, and to
(c)
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ensure satisfaction with the work being performed. The project management team partition or divide the project into manageable phases using milestones. At least one deliverable will signal the completion of each milestone. The project management team will document the milestones and the associated deliverables in the work plan. A thorough understanding of a projects deliverables is the key to effective project management. The lack of good project management principles can cause inefficiencies, delays, and higher costs. The Project Manager is constantly concerned with three aspects of the project, namely: Is the project delivering what it promised to deliver or more? Is it making delivery at or below the promised cost? Is it making delivery at or before the promised time?
These three aspects are referred to as the basic components that need to be focused on concurrently in order to achieve Total Quality Control (TQC) as shown in Figure 1.8.
Figure 1.8: The Triangle of TQC
EXERCISE 1.6
Describe the process of management using your understanding of Project Management as practiced in your particular field of work. Comment briefly on the level of integration of the key aspects of the management process.
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ACTIVITY 1.3
In your opinion, can PLOC be used/adopted in Integrated Project Management System?
1.5
INTEGRATED PROJECT MANAGEMENT SYSTEM
The four functions of PLOC are the heart of management, so, lets explore them in more detail on how they can be integrated in the project management system. In project management, aspects of quality, cost, time, information and risk should be properly controlled or otherwise the project will face major problems. Therefore, an integrated project management system is the best solution. This system is one in which all of the parts are interrelated. A change in a part will influence the whole. Figure 1.9 explains how the integrated project management system works by adopting the fundamentals of PLOC. The integrated management of projects focuses on two areas: aligning the projects with the strategic plan; and the integration of the management process of actual projects.
In the planning phase, mission, objectives and strategies of the project are set to meet the needs of customers or stakeholders. Development of mission, objectives and project strategies depend on the external and internal environmental factors. External refers to political, social, economical and technological factors. Internal factors can be classified as strengths and weaknesses, such as management, facilities, core competencies and financial condition of the organisation. Next is the organising phase in which the focus is on structure and mechanisms for the arrangement of resources in a systematic manner to fit the project plan and put things or actions according to priorities. During this phase, the manager should possess good leadership skills to implement plans and strategies drafted in the planning phase. Strategies are typically implemented throughout the duration of the project. Prioritising and balancing between system and environment are crucial in this phase to ensure that the projects run smoothly in the future. Once the projects start to be implemented, controlling the project will be the main focus for achieving the organisational goals and objectives.
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Figure 1.9: Integrated Project Management System
This topic is summarised as follows: The six basic features of a project are: It has specific objectives. Unique in some way. Has a definite start and finish. The commitment of resources, human, material and financial. Management of diversity. Management of risk and uncertainty.
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Ideally, project consists of four work stages, which start from defining stage, followed by planning stage, then executing stage and finally delivering stage. Each of the stages has different levels of activity intensity depending upon duration of the project. Project management is conceptually about managing an organisation using internal and external resources to achieve the organisational goals and objectives. Four management functions in the management process are planning, leading, organising and controlling (PLOC) and amongst all, planning is the heart of the management process. PLOC is the framework of an integrated project management system.
(Answer ALL the questions in 15 minutes) 1. 2. 3. 4. 5. List the SIX (6) characteristics of a project Sketch the ideal project life cycle. Define project management. Provide a flow diagram for the management process. Represent the integrated project management system by means of a diagram.
(Answer ALL the questions in 30 minutes) 1. 2. What is the difference between strategic, tactical and operational planning? Other than risk and expectation of stakeholders, time, cost and quality are the most important aspects that need to be balanced. Using the triangle of TQC, explain how time, cost and quality are interrelated. What is the difference between internal and external factors and explain how these factors can influence project strategies in the planning stage.
3.
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TOPIC 1
British Standards Institute. (1996). BS 6079: Guide to Project Management. BSI. Project Management Institute. (1996). A guide to the project management body of knowledge. PMI. Rustain, A.M. & Estes, W.E. (1995). What every engineer should know about project management. Marcel Dekker. The Association of Project Managers. (1996). Body of Knowledge. APM. Turner, R. (1992). The handbook of project based management. McGraw Hill. Wearne, S. H. (1973). Principles of engineering organization. Edward Arnold.
Topic Starting The
Organisation Goals, Organisation and People
LEARNING OUTCOMES
By the end of this topic, you should be able to: 1. 2. 3. 4. 5. Identify factors that need to be considered in setting out the missions and goals; Develop missions and goals for a company; Explain the principles involved in structuring organisations; Describe and differentiate the various models of organisational structure; and Explain the strengths and weaknesses of each organisational structural model.
INTRODUCTION
We have looked at how engineering projects evolve and develop. No project operates in isolation and there is always interaction among the promoters team both external and internal, specialists and suppliers. The projects missions and goals need to be established beforehand and an appropriate organisation has to be developed in order to function within the project environment and with external parties so as to fulfill its goals and missions. This topic is concerned with the manner in which projects and interacting organisations are structured as well as the establishment of goals and project missions.
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TOPIC 2
STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE
2.1
SETTING MISSIONS AND GOALS

SELF-CHECK 2.1
What is your goal as a student in Open University Malaysia (OUM)?
At the heart of organisational management is the accomplishment of goals. Any activity we undertake involves achieving goals. A simple picnic has as its goals the provision of relaxation and rest, while the Channel Tunnel has the goal of contributing to a fast and efficient transport route to Europe. The task of the manager starts with setting and establishing goals. Setting of goals can consist of a quantitative/numerical approach, for instance with regard to the quality of a product or the level of service or reliability. Setting goals in isolation are doomed to failure. Any goal that does not take the possible impact on society or the environment into account is bound to suffer an adverse reaction. Roads that damage key environmental features, refrigerators that produce CFCs and nuclear testing all suffer negative reactions because they do not relate adequately to society or the natural environment. The role of the manager is to ensure that goals have been developed with the external environment in mind and to relate the activity of the firm to this environment. All managers set their goals on the following basis:
Figure 2.1: Basis for all managers to set their goals
The direction that an organisation sets itself is dependent on the goals it sets for itself. The process of setting these goals is not simple. The key question is often,
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are the goals appropriate for the organisation? This question can only be answered when the complete process of strategic evaluation has been completed. Even before we start the process of strategic evaluation, there are a number of influences on the organisation that has an impact on the objectives of the organisation. The example of influences on the organisation goals are: culture; tradition; leadership and management style; structure and system of the organisation; the nature of the business (the market situation, the technology, the products or service); and stakeholders.
Together, all these factors provide a recipe or web that will eventually influence the formation of the organisation goals.
ACTIVITY 2.1
From your point of view, how can culture and tradition influence the organisations goals?
It is common practice for organisations to have formally stated goals. These objectives are set by top management in conjunction with specific shareholders. It is the expectations and aspirations of this group that provides the focus for the organisation strategy. In some cases, the objectives are developed from constraints set by stakeholders. All objectives have two clear features: They express the desired ends to be achieved. They express the formal aims of the organisation.
The objectives clearly provide a direction for the organisation to take. It sets a target for the organisation to try and achieve, be it tangible or intangible. It also sets the focus for all future action.
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ACTIVITY 2.2
Try to provide an example of a mission statement for a computer manufacturing organisation. You can use your organisations mission statement or adapt it if necessary.
Objective may take a number of different forms.
Mission
The mission of an organisation is a generalised type of objective. It is a visionary projection of the key ideas of the organization. The mission statement is open and less specific but tries to provide the general direction the organisation is heading in. Example of mission statement for Audi cars = Vorsprung durch Teknik meaning advantage through technology.
Corporate Objectives
They tend to be more specific and relate to the overall performance of the organisation. These may be expressed either qualitatively or quantitatively. Quantitative in terms of growth, sales, productivity, etc. Qualitative in terms of performance, technological advances, social welfare, etc. Objectives often represent the formal statement of stakeholder expectation. For example the senior manager sets, A 10% growth in the next six months.
Unit Objectives
These objective relate to individual business units within the organisation. Each unit should develop its own goals. These goals provide an immediate focus for the unit. These goals must not however conflict with the parent organisation goals. Corporate goals always remain superior. Unit goals focus on production and immediate productivity.
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EXERCISE 2.1
Now, imagine that you are a senior partner of a new hand phone company in Malaysia and also head of marketing. Create your own companys mission, corporate objectives and marketing unit objectives.
2.2
ORGANISATION
SELF-CHECK 2.2
Now it is clear that the establishment of a project organisation involves planning, setting of mission and goals to achieve the project objectives. So what do you think will be the project managers next step in order to achieve the project objectives, assuming all necessary activities have been identified? Once the organisations mission and goals are clear, the work necessary to achieve those goals must be divided up in the most productive way possible, which is by organising the people. Projects consume large amount of resources, are often complex, unique and vary in scale. It is therefore essential to adopt a systematic approach to managing these activities. At the heart of all managerial activity is the creation of an organisation to execute the managerial objectives and to establish how the people within it relate and coordinate with each other. Organisation is about creating a control and communication system that allows management to achieve its objectives. It puts in place a structure that defines roles, hierarchies, communication, coordination and control mechanisms.
For example as in the following two situations in Figure 2.2, interacting with either type of organisation will have an impact on how the project organisation is developed.
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Figure 2.2: Larger vs smaller organisation
The design of the project organisation has to serve two masters: Flexibility, speed and dynamism. Processes, planning and procedures.
This should allow it to interact with existing organisation but also fulfil its own goals.
2.3
BUILDING BLOCKS OF ORGANISATIONS / PRINCIPLES FOR ORGANISATIONAL DESIGN
There is no universal system of organisation that suits all circumstances. Modern attitudes to organisation design refer to the contingency approach, which suggests that the most appropriate form of organisation is contingent on the influences on the organisation. As you know, project organisations are temporary in nature but often have to interact with permanent external and internal organisations. The manner in which these interactions take place will have an influence on what the project organisation can achieve. Therefore, several organisational principles need to be complied with, in order to have a strong foundation for the organisation. They are: (a) Hierarchy of Authority Every organisation large or small is influenced by its approach to the system of authority. This is commonly referred to as the hierarchy of the organisation. Hierarchy relates to the number of levels of authority and control, and where decisions are made. The hierarchy is influenced by the senior managements attitude towards control. The closer the control or supervision of subordinates, the greater the number of levels in the organisation. Since one person cannot keep track of thousands of workers, the top level manager needs many lower-level managers to help. This is
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what we call a chain of command. Chain of command is the line of authority that moves from the top of the hierarchy to the lowest level, which is best illustrated in typical hierarchical organisation charts as provided in Figure 2.3.
Figure 2.3: An example of typical hierarchical organisation chart
(b)
Role Definition The next principle in organisation design is how the roles of the members of the organisation are defined. As discussed earlier, at the end of section 2.2, a rigid system of role definition and responsibility creates a sense of stability. Meaning that there is a place for everyone and everyone knows their place. Bureaucracy was founded on the principle of having this sense of order. This approach on the other hand may stifle flexibility, creativity and prompt decision making. More recent approaches to role definition tend to set more flexible parameters for the participants of the organisation. Roles are defined to allow for more autonomy and scope for individual innovation. The less rigid approach to role definition allows hierarchy to be broken down and places more faith in the people in organisations. Clear Communication Channels All workers should be able to reach others in the organisation quickly and easily. An organisation that does not communicate effectively will face difficulties. Communication should occur up and down hierarchies as well as between units at a horizontal level. The emphasis on the need for communication should be built into the early thinking in the organisation design. This pre-planned approach is becoming more important as organisations become more temporary and use more external sources for achieving goals.
(c)
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(d)
Good Level of Coordination The design of organisations should also serve a coordinating function. Traditionally organisation design tended to use division of work as means of creating structures. This is a sound approach where projects and products are simple and high level of coordination is not required. However, if you are involved in an organisation that has complex projects and products, the need for organisation design to help facilitate coordination is essential. There is a move towards creating multidisciplinary teams and cross-functional groups that interact more freely and are not constrained by specialist boundaries. In these situations, good coordination has to be designed into the organisation. Degree of Centralisation The amount of decision-making powers varies depending on the size and complexity of the project. For small size organisations, it is possible to centralise all decision-making power to the top level manger. On the other hand, for the large size organisation, some decision-making power should be delegated to the lower level managers and specially trained employees on both major and minor issues.
(e)
EXERCISE 2.2
In point form, explain the organisational principles that you need to comply with.
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2.4
ORGANISATION TYPES
SELF-CHECK 2.3
Before we proceed with the following section, think of the organisational structures that you are familiar with and list them down.
Although we have considered dimensions of organisation design, there are a number of generic organisation designs that exist. These organisation forms have been developed over time and are present in engineering organisations that operate today. We are concerned about the factors that underlie their creation, strengths, weakness and how they might influence projects that interact with them.
2.4.1
The Functional Organisation
In engineering, jobs have become more specialised. Specialisation is an extension of the principles of division of work and specialists tend to group together and form teams, units, sections and departments. In its simplest form, grouping of specialists give rise to the functional structure as illustrated in Figure 2.4:
Figure 2.4: Functional organisation structure Source: Larson, G. (2006). Project management: The managerial process. (3rd ed., pp. 57). McGraw Hill.
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Functional organisations arise out the principle of division of work, and are built on specialist skills. These organisations are dominated by specialists. Expertise and information are contained within each specialist function, group or department. Projects operating within a functional environment are reliant on the cooperation of specialist functions and communication with other departments. According to C.M. Chang (2005), companies that favour this kind of organisational structure include: Manufacturing operations, process industries and other organisations with limited product diversity or high relative stability of workflow. Start-up companies. Companies with narrow product range, having a simple marketing pattern and few production sites. Companies following the lead of their competitors.
The advantages and disadvantages of functional organisations are listed in Table 2.1.
Table 2.1: Advantages and Disadvantages of Functional Organisations Advantages May produce high level of a quality product because all the expertise are in the team. Disadvantages Different specialist departments often guard their own expertise. They have their own objectives and normally are not good at integrating with other experts. This will lead to lack of common interests. Lack of communication and understanding amongst specialists from different departments. Individual specialist interests are promoted ahead of project goals and the potential to disrupt the project cycle is more likely. Decision making is based on ensuring functional performance. Projects operating in a functional environment require project managers to concentrate on integrating activities and communication with specialists.
Makes the management by departmental level easier since each manager is expert in only a narrow range of skill and specialisation. Allows the use of current technologies and state-of-the-art equipment.
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2.4.2
The Division Organisation
Some companies try to overcome the particular problems of functional organisations by creating organisational structures that have more focus and facilitate communication between specialists. Such organisations design their structure by focusing on the specialist nature of the work or project rather than on individual expertise. This form of structure is known as the divisional structure as illustrated in Figure 2.5 (a) (c).
Figure 2.5 (a): Divisional organisation structure (Discipline based)
Figure 2.5 (b): Divisional organisation structure (Region based)
Figure 2.5 (c): Divisional organisation structure (Product based)
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Divisional organisations are predominantly found in large companies. The aim of the divisional form of structure is not to replicate specialist characteristics, but to focus on a final product through its specialist type, size, location, customer, etc. Normally, based on the focus, there are 3 types: (a) Discipline Based Favoured by universities, governmental laboratories and other R&D organisations (Figure 2.5 (a)). Region Based Favoured by large companies that may produce and market their product to different customers in geographically dispersed locations (Figure 2.5 (b)). Product Based Favoured by companies which have different products that might require different production, sales and business strategies to achieve success in the marketplace (Figure 2.5 (c)).
(b)
(c)
The advantages and disadvantages are listed in Table 2.2.

Table 2.2: Advantages and Disadvantages of Divisional Organisation Structure Advantages Projects are easier to facilitate within a division as all the components within the organisation are geared to meeting the divisions goal. Promote innovative pursuits in individual disciplines because the entire focus of activity is on the division and decision making is based on divisional requirements only. Encourages management development of employees. Focuses on end products or geographical regions. Disadvantages Projects are vulnerable where they are required to operate between the boundaries of divisions as inter division rivalry might arise. Poor communication and inefficient information exchange may exist.
Requires project managers to be aware of divisional and corporate priorities and how they may impact projects. High costs due to layers, need for autonomy or duplicated facilities.
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EXERCISE 2.3
What are the relative advantages and disadvantages of the functional and division approaches to managing projects?
2.4.3
The Matrix
The third predominant organisation form that has arisen developed out of the problems with integrating projects into existing organisations. Projects by their very nature are temporary and are difficult to integrate with permanent organisation design. This problem is further exacerbated in organisations that tend to manage largely by projects, which usually involves performing a balancing act between permanent specialist functions and temporary project structures.
Figure 2.6: Matrix organisation structure
The matrix structure in Figure 2.6 attempts to resolve this problem by imposing a temporary project structure (project based control) across the permanent specialisation (functional control). The idea is to move groups of specialists to
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projects as they are needed. Projects fall under the control of project managers resulting in the situation that specialists are responsible to two managers; which also means, a project manager can borrow people or staff from different departments to help them. For example Employee A is required to report to both Vice President of manufacturing as well as to Project Manager 2. However, this type of organisation also has the advantages and disadvantages as listed in Table 2.3.
Table 2.3: Advantages and Disadvantages of Matrix Organisation Structure Advantages Flexibility in system. Encourages inter-organisational cooperation & teamwork. More efficient use of resources. Allows project manager to focus on schedule and cost and functional managers on quality/marketing/expertise. Balanced work load. Disadvantages Careful role definition and a clear authority framework to prevent conflict. Tendency of dual reporting caused by communication problems. Confusion in loyalty. Severe conflicts among managers.
Requires good interpersonal skills & cooperation among managers and employees.
Excellent for employee development (to achieve exposure and interactions).
ACTIVITY 2.3
In your opinion, is the matrix organisation structure suitable for a completely new company?
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2.4.4
Networks
ACTIVITY 2.4
There is a trend in engineering companies to concentrate on their core businesses or activities that they have greatest competency in. Some projects cannot be sourced entirely from internal resources and external resource inputs are needed. How are externally sourced projects structured?
The basic elements of designing an organisation, such as role definition and hierarchy, still remain an essential part of structuring an external project. The structural form that emerges is a network organisation as shown in Figure 2.7, which places the project manager at the centre of the network. This formal relationship consists of a firm that is engaged or bound through contracts in long term relationships with external suppliers who bring expertise into the parent company. Their roles and responsibilities are defined by the contracts. The main responsibilities for the project manager is to plan, monitor and control these relationships. The key to operating under this structural form is the power that is vested in the project manager. This power will be largely derived from the nature of the contracts set up between the project sponsor and the external specialists.
Figure 2.7: Networks organisation structure
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Table 2.4: Advantages and Disadvantages of Networks Organisation Structure Advantages Allows project manager authority within the project. to exercise Disadvantages Potential loss of control over the project. For example the core firm depends on other firms that they do not have direct authority over. Interpersonal conflicts can arise since the different participants do not share the same values and priorities.
Flexible and gives organisation opportunity to work beyond their resources. They are no longer constrained by their own resources but can go further by combining their resources with other specialist companies. High level of expertise and technology can be brought to bear on the project.
Requires project manager to have excellent managing skills because partners linked by these networks may be from companies with a different culture and business background and divergent value systems and perspectives.
2.4.5
The Virtual Organisation
The virtual organisation is a new form of working involving different combinations of contractual and locational variables. This creates a working environment that is more fluid and flexible. The organisation is difficult to characterise in terms of work patterns, organisation structure, boundaries and physical form. They are temporary organisations which produce results without having form in the sense of traditional organisations. The virtual organisation defines roles in terms of the task at the moment, rather than the role anchored by the organisations and codified job description. Time, space, the tasks and shifting group membership are the primary definers of responsibility. The virtual organisation is taking network organisation a step further. They are a network of people and activity that is brought together to fulfil particular tasks without the bounds of traditional organisational form. The virtual organisation is an exchange network and will continue to develop as an organisation form as we improve communication technology.
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Table 2.5: Advantages and Disadvantages of Virtual Organisation Structure Advantages Maximise the use of people and knowledge rather than investing in the costs of permanent organisations. Increase the quality of product since more specialists and experts are involved. Disadvantages Relies excessively on effectiveness communication technology. of
Traditional project managers often have trouble adapting to the speed of change since this is a very new and different concept compared to traditional forms. Tough to manage because people are moved in and out of the organisation as and when they are needed.
Simple and organisation.
flexible
structure
of
EXERCISE 2.
Imagine you have a manufacturing company. Your company manufactures automobile jacks, hubcaps and a variety of fittings. These products are sold as replacement parts through chain auto-supply stores. Your business is growing with production facilities located in rented buildings over various parts of the city. The number of production staff is also expanding constantly. As a president, you want to expand your company into the brass fittings business. However, you realise after this latest expansion is accomplished, that your company should consolidate to make its production operations more efficient. Which organisation structure do you think would be best adopted in order to accommodate its current needs of business expansion and also lay the foundation for anticipated consolidation thereafter? What information is needed to set forth such an organisational structure? What are the crucial variables that should be considered in the design of such an organisation?
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This topic is summarised as follows: Factors that influence the organisation goals are culture, tradition, leadership and management style, structure and system of the organisation, the nature of the business (the market situation, the technology, the products or service) and stakeholders. Good goals and objectives must be able to clearly express the: desired ends to be achieved; and formal aims of the organisation.
Organisation is about creating a control and communication system that allows management to achieve its objectives by putting in place a structure that defines roles, hierarchies, communication, coordination and control mechanisms. At least 5 basic organisational principles need to be complied in order to have a strong foundation of organisation and they are: Hierarchy of authority. Role definition. Clear communication channels. Good level of coordination. Degree of centralisation.
Types of organisation structure that are commonly used in engineering organisations are: Functional Division Matrix Networks Virtual
Each of the organisational structure listed above, has its own characteristics, strengths and weaknesses that differentiate them form one another. The management of organisations requires a systematic approach to create a sense of order and control. Therefore, an appropriate selection of the organisational structure will to a great extent, determine the success of the company.
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(Answer ALL the questions in 15 minutes) 1. List out what factors should be taken into consideration in setting out missions and goals of a company. Elaborate on any of the 2 factors. Why do we need to have an organisation? List down 5 principles that need to be complied to for building an organisation. Elaborate on any 2 principles. List down 5 types of organisational structure that are commonly used in engineering organisations. List down 5 advantages and 5 disadvantages of using a matrix organisation.
2. 3.
4.
5.
(Answer ALL the questions in 30 minutes) 1. Imagine that you are a producer of athletic sports shoes and your firm has been asked to join a virtual network. What might you do to minimise the potential problems of being involved with a virtual corporation? You may start your answer by defining a virtual corporation and listing the potential problems. Also, list the benefits of being part of such a system. Explain why the writer says The virtual organisation is taking network
2.
organisation a step further.
Chang, C. M. (2005). Engineering management challenges in the new millennium. Prentice Hall. Larson, G. (2006). Project management: The managerial process. (3rd ed.) pp. 57. McGraw Hill.
Topic
Developing A Project Plan
LEARNING OUTCOMES
By the end of this topic, you should be able to: 1. 2. 3. 4. 5. 6. Distinguish the difference between planning and scheduling; Discuss the importance of planning; Perform Gantt chart diagram; Differentiate Arrow network and Node network; Demonstrate Critical Path Method (CPM) analysis with a proper node diagram drawing; and Update CPM accordingly.
INTRODUCTION
Planning is not an aimless and part time activity. It is compulsary; a must for everyone, be it for their worklife or personal life. It drives people to achieve their goals and obtain success in whatever they are want to do.
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DEVELOPING A PROJECT PLAN
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3.1
GET TO KNOW PLANNING AND SCHEDULING

SELF-CHECK 3.1
What do you think is the mechanism which may help you to know ahead the status of your project, whether it is on time, delayed or even making money?
This is a quote by British author, Rudyard Kipling, which goes:
Source: http://www.kipling.org.uk/pix/kipind1.jpg
Therefore, let us start our journey in this topic by answering the first question, WHAT?
3.1.1
What is Planning and Scheduling?
Lets take a look at what planning and scheduling are all about, which are further elaborated in Figure 3.1, Figure 3.2 and Figure 3.3 respectively.
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Figure 3.1: Planning
Figure 3.2: Scheduling
Figure 3.3: Planning vs scheduling
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3.1.2
Why Do We Need Planning and Scheduling?
Now, lets look at the reasons why we need planning and scheduling in carrying out a project. Figure 3.4 illustrates the seven reasons for doing so.
Figure 3.4: Reasons for Planning and Scheduling
On the other hand, planning also has its advantages as well as disadvantages, as shown in Table 3.1.
Table 3.1: Advantages and Disadvantages of Planning Advantages Helps managers to be future-oriented. Enhances decision coordination. Emphasises organisational objectives. Disadvantages An overemphasis on planning can take up too much managerial time.
In short, it is essential to remember the primary reason for planning, as shown in Figure 3.5.
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Figure 3.5: Planning as the foundation for organising, influencing, and controlling a projects success
3.1.3
Where Should We Use Planning and Scheduling?
Planning are required at all stages of a project (appraisal, sanction, construction etc.), as shown in Figure 3.6. However, for this particular topic, we are going to discuss specifically on scheduled oriented planning as shown in Figure 3.7.
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Figure 3.6: Elements of planning in project management
Figure 3.7: Flow of discussion
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3.1.4
Who are Involved?
Planning is required by all parties namely clients, project managers and contractors. However, in the context of project planning, only a directly related person will closely be involved, as shown in Figure 3.8.
Figure 3.8: Parties involved in planning
ACTIVITY 3.1
Discuss why we need planning and scheduling.
3.1.5

When is Planning Needed?
Management planning starts as early as starting up an organisation. On the other hand, project planning starts when the organisation has committed to get involved in projects. Project planning develops based upon all the available experience and creative ideas.
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On the other hand, scheduling can be started when a planning is done or still in discussion.
3.1.6

How to do Planning?
There are two basic techniques for constructing a planning programme, namely: Bar Chart. Network diagrams.
However, the following are the basic steps or guidelines that have to be used for both methods. (a) (b) are the backbone of planning, while (e) (i) is for scheduling and monitoring. (a) Determine the Work Activities Restrict the number of activities for the simplicity of the project schedule. Break the project down into small activities (WBS). Determine Activity Durations Duration = Total quantity/Crew productivity. Determine Logical Relationships A logical relationship exists between two activities when the start of one activity (or finish) depends physically on the finish (or start) of another activity. Resource constraint. Other constraint such as approval from owner. Draw the Logic Network Review and Analyse the Schedule Wrong relationship. Missing relationship. Redundant relationship. Logic loop. Implement the Schedule Monitor and Control the Schedule Revise the Database and Record Feedback Implement Resource Allocation and Leveling To link schedule with estimating and accounting. To improve efficiency of resources used.
(b) (c)
(d) (e)
(f) (g) (h) (i)
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3.2
GANTT CHART (FORMERLY KNOWN AS BAR CHART)

SELF-CHECK 3.2
Imagine that you are a director. In a short while, you are going to chair a meeting. One of the meetings agenda is a presentation from your PM regarding a highway Project at Tanah Rata, Cameron Highlands. The PM has been asked to estimate the project time line and details of duration for each activities involved. As a director with a tight schedule, how would you prefer the PM to present his work. Would you prefer it in a table form? Or written report form? Or in a form that is easy to read and understand and allows for changes to be made in future?
Popescu and Charoenngam, 1995, describe a bar chart as a graphic
representation of project activities shown in a time-scaled bar line with no links shown between activities.
Soon, it was called as Gantt Charts - named after the inventor, Henry L. Gantt in 1917. It has become the preferred information media of senior managers, who usually find that the information portrayed in PERT charts is overly detailed. Gantt charts are simple to understand and easy to change; however, they only provide a vague description of how the whole project is reacting as a system. This means that Gantt charts serve as a good tool for representing a sequence of activities, and is particularly useful for production of weekly work schedules or monthly target programmes. It can also be used for summarising information from more complex networks. On the other hand, complex relationships with multiple dependencies are difficult to model. Example 1
Activity 1. 2. 3. 4. 5. Design Fabrication Foundations Installation Commission Duration (weeks) 6 9 5 7 4
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Gantt Chart Programme
Using the Gantt Chart Programme, we can read: Overall duration The Critical Path Float for Activity 3 Activity 3 Earliest Start Activity 3 Earliest Finish Activity 3 Latest Start Activity 3 Latest Finish = = = = = = = 26 weeks 1,2,4,5 4 weeks week 6 week 11 week 10 week 15
ACTIVITY 3.2
Now, try the following problem by using Gantt Chart Programme
Activity 1. 2. 3. 4. 5. 6. Design Fabrication Foundations Cure Foundations Installation Commission Duration (weeks) 6 9 5 4 7 4 Immediately preceding activity (IPA)* Design- allow 2 weeks overlap Design- allow 1 weeks overlap Foundations Fabrication, Cure Foundations Installation
* IPA = Dependency
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3.3
BASIC NETWORK PROGRAMME
Network is a logical and chronological graphic representation of the activities (and events) composing a project.
Lets take a look at Table 3.2 which elaborates on Arrow and Node networks.
Table 3.2: Arrow and Node Networks Arrow Networks 1. Also called Arrow Diagramming Method (ADM), Activity on Arrow (AOA) network, I-J Method. Components: Arrow and node. Nodes represent events: an event is a point in time when an activity starts or ends. Arrow represents the activity and linkages. Ex: 10 5. 6. Node Networks 1. Also called Activity On Node (AON) Networks. Sometimes also called the precedence diagram method. 2. Components: Arrow and node. 3. Nodes represent activities & details of time. 4. Arrow represents logical linkages.
2. 3.
4.
20
5. No dummy activities. 6. Easier to use.
Reading: activities as time start - time end (eg. A as 10 20) Problem: Some situation will create an identity problem. To solve this problem, use dummy activity.
7. In practice, the AON has come to dominate most projects as well as become a basic foundation in developing CPM.
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Example 2 This example shows the functions of arrow and node for both networks.
ID A B C D E ACTIVITY Design Fabrication Foundations Installation Commission IPA* A A B C, D
Solution: (a) Using Arrow Networks (Assume the duration is 10 weeks for each activity)
(b)
Using Node Networks
ACTIVITY 3.3
Now, your turn. Draw the arrow and node networks for the project given below. Again, assume the duration for each activity is 10 weeks.
ID A B C D E ACTIVITY Design Fabrication Foundations Installation Commission IPA* A A B B, C
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3.4
DEVELOPING CRITICAL PATH METHOD (CPM) USING PRECEDENCE NETWORK
Precedence network are the basis elements in building CPM. It is represented by node (box) and arrow. The node can take many forms but recently, the node represented as a rectangle (box) as shown in Figure 3.9, has dominated. The dependencies among activities are represented by the arrow between the rectangle. Activity nodes are linked (logically) by lines called dependencies. As shown in Figure 3.9, the dependencies show that activity C cannot start until activity A is complete.
Figure 3.9: Activities are represented by rectangle
Some simple rules for compiling Precedence Networks need to be followed, namely: (a) (b) (c) (d) (e) (f) Start and finish with a single activity. Plot activities horizontally along paper, (and link activities in logical sequence). Determine dependency of each activity on other activities and link as necessary (link from end of one activity to start of the next activity). All activities should start at the earliest time possible. Once dependencies are complete, insert the activity duration. Examine the potential for overlap of activities as this will reduce overall programme duration.
There are a few ways on how you can draw the network diagram, but some recommendations for proper node diagram drawing that I want to share with you are illustrated in Table 3.3.
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Table 3.3: Proper Node Diagram Drawing
3.4.1
Terms and Definitions
Every field has its jargon that allows you to understand what the writer wants to say. Here are some terms used in building CPM network. Terms and Definitions (a) (b) (c) Early/ Late Start (ES)/ (LS) Early/ Late Finish (EF)/ (LF)
The earliest/ latest date when activity can start and finish
Forward Pass = process of navigating through a network from start to finish and calculating the early dates for each activity and the completion date of the project. Backward Pass = process of navigating through a network from finish to start and calculating the late dates for all activities. Critical Path = the continuous chain of critical activities from the start to end of the project. The path that has no float.
(d) (e)
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(f)
Float
Leeway float Total float (TF)
= =
For certain activity. Measure of the amount of time adjustment for an activity without effecting the overall duration of the project. Difference between the earliest and latest starts or finishes for an activity. Can be calculated as:
TF = LS - ES or; TF = LF - EF
Free float (FF)
= =
Float that successor.
will
not
delay
its
Difference between the earliest finish time of an activity and the earliest start time of the succeeding activity.
FFi = min(ESi+1) EFi
Interfering float (Int. F)
Float that will delay its successor but not the entire project; (rarely used). Float which is not shared or affected by any other activity; (rarely used).
Independent float (Ind. F) =
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3.4.2
Example 3
The CPM Analysis Explained through Examples
Example 3 shows the building of CPM and the logic network. From the following table, draw the logic network and perform the CPM calculations.
ID A B C D E Activity Design Fabrication Foundations Installation Commission Duration (weeks) 6 9 5 7 4 Immediately preceding activity (IPA) Design Design Fabrication, Foundations Installation
Solution: Step 1: Determine the work activity and the duration and draw the logic network.
Step 2:
Determine the expected completion dates using forward pass.
Lesson: The forward pass starts with the first project activity up to the last project activity. As you go through the end (your last activity), you add the activity duration. Forward pass may refer to Earliest times in your network.
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Step 3:
Identify the critical path (bold arrow) and the float for all activities using backward pass.
Lesson: The backward pass starts with the last project activity down to the first project activity. As you go through bawkward (to your first activity), you substract the activity duration. Backward pass may reffering to Latest times in your network. If the duration of the activites are overlapping, write the overlapping in positive value (eg. 4). But if there is a float or gap, write it in a negative value (Eg. 4) as shown in the example above. Step 4: Tabulate the result. Boldface activities are critical.
ID A B C D E Duration (weeks) 6 9 5 7 4 ES 0 6 6 15 22 EF 6 15 11 22 26 LS 0 6 10 15 22 LF 6 15 15 22 26 TF 0 0 4 0 0
ACTIVITY 3.4
Now, you try. From the following table, draw the logic network and perform the CPM calculations.
ID A B C D E Activity Design Fabrication Foundations Installation Commission Duration (weeks) 6 9 5 7 4 A A B, C D Fabrication can overlap with A by 2 weeks Foundation can overlap with A by 2 weeks Fabrication, Foundation, Installation cannot start until 2 weeks after Foundations is complete Installation IPA Notes
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Example 4 Example 4 shows the free float calculation from CPM. From the following table, draw the CPM network and calculate the free float if available.
ID A B C D E F Activity Design Fabrication Foundations Cure Foundation Installation Commission Duration (weeks) 6 10 5 4 7 4 Design Design Foundations Fabrication, Foundation & Cure Foundations Installation Immediately preceding activity (IPA)
Step 1:
Draw the CPM.
Step 2:
Calculate the free float. Free float is the difference between the earliest finish time of an activity and the earliest start time of the succeeding activity given by formula:
FFi = min(ESi+1) EFi
For activity D;
FFD
(Case one-to-one activity) = min(ESD+1) EFD = 16 15 = 1 week (Case one-to-more than one activity) = min(ESC+1) EFC = min (16, 11) 11 = 0 week
For activity C;
FFC
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Step 3:
Tabulate the result. Boldface activities are critical.

ID A B C D E F Duration (weeks) 6 10 5 4 7 4 ES 0 6 6 11 16 23 EF 6 16 11 15 23 27 LS 0 6 7 12 16 23 LF 6 16 12 16 23 27 TF 0 0 1 1 0 0 FF 0 0 0 1 0 0
3.5
UPDATING THE NETWORK
The programme network is a live document and should be regularly updated throughout the project to determine: (a) (b) Overall performance of the project i.e. anticipated completion date. If delays are occuring, use the network to investigate means of recovering lost time. (c) (d) Reduce durations by increasing resource. Re-sequencing of operations. Increased overlap of activities.
Reassessment of project criticality i.e advance/delay in activities may have moved the critical path within the network. Monitor effect of delays to protect commercial position claims, EoT, etc.
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Popescu and Charoenngam (1995) defined updating schedule as a revised
schedule reflecting project information at a given data date regarding completed activities, in-progress activities and changes in the logic, cost and resources requires and allocated at any activity level.
It must reflect actual work and involves incorporating approved changes into the baseline schedule. Is a schedule prepared by the contractor, usually before the start of the project. Used for performance comparison. If approved by the owner, baseline schedule usually becomes a part of the contract documents. Also called a target schedule. Used by the general contractor who will execute the work, the owner whose work is being executed; PMC to monitor; sub-contactor unofficially. BS are a prediction. It is prepared on the basis of expectations and previous experiences. Thus, it is advisable to keep an accurate recode record? of previous work to use for future estimation. BS must be reasonable and realistic. Must consider work and weather conditions; size and complexity of the project; local codes and regulations; the location of and access to the project site; the labour market; materials and equipment availability, price and delivery and other issues. BS have strong linkages with Baseline Budget.
DATA DATE Date date as- of date status date. Is the date as of which all progress on a project is reported. Data date current date time now because the word current or now is moving with time and is not tied to a specific time or date.
Frequency of updating is either monthly or biweekly or weekly, or according to another time interval. However, most common frequencies are weekly and biweekly. Waiting too long to update may eliminate the effectiveness of updating, encourage procrastination and not well documented. Conversely, too short may be costly in terms of time consumption and overhead and reporting costs.
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Example 5 Example 5 shows schedule updating.

ACTIVITY A B C D E F G IPA* A A A B B, C C, D DURATION 2 7 10 4 6 5 8 ACTIVITY H I J K L M IPA D F, G F E, J G, H F, H I,K,L,M DURATION 9 12 5 5 6 4 3
Using the schedule from the table above, you receive the following report 10 days after the project has started: Activities A and D are complete (actual start and finish dates are given). Activity B started on day 5. Remaining duration = 2 days. Activity C started on day 2. Some problems were encountered. Remaining duration = 4days. The duration for activity F was adjusted to 8 days. Activity J has been cancelled. The duration for new activity P is 4 days; IPA + E; ISA (immediately succeeding activity) = K
Q: Update the network. Solution: Step1: Draw the CPM.
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Step 2:
Updating the schedule.
Step 3: The updated schedule.
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ACTIVITY 3.5
Now, you try. From the following table, draw the logic network and perform the CPM calculations.
ID A B C D E Activity Design Fabrication Foundations Installation Commission Duration (weeks) 6 9 5 7 4 A A B, C D IPA Notes Fabrication can overlap with A by 2 weeks Foundation can overlap with A by 2 weeks Fabrication, Foundation, Installation cannot start until 2 weeks after Foundations is complete Installation
Update the network based on the following: 1. 2. Project is now at week 8. Design is complete.
This topic is summarised as follows: With planning project managers can: Monitor and schedule the works progress. Solve any technical and non-technical problems that may arise. Report the physical progress of the project.
With scheduling, we could convert a general or outline plan for a project into a time-based graphic presentation given information on available resources and time constraint. Steps to planning: Determine the work activities. Determine activity durations. Determine logical relationships. Draw the logic network.
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Network analysis is used to evaluate programmes with complex or multiple relationships. It imposes logic discipline or the planner. Two basic techniques for constructing a planning programme: Bar Chart (also called Gantt Chart) - Simple to understand and easy to change. Network diagram (also called precedence network) - Is a logical and chronological graphic representation of the activities.
Two types of basic network are arrow network and node network. CPM are the enhancement of precedence network. Each of the box in precedence networks nodes has its key definition as shown in Figure 3.9.
Figure 3.9: Activities are represented by rectangle
There are several types of float in planning network but the two most important float that you need to know are: Total float (TF) = Measure of the amount of time adjustment for an activity start time of the succeeding activity without affecting the overall duration of the project. Can be calculated as: TF = LS ES or;
TF = LF - EF
Free float (FF) = Float that will not delay its successor. Can be calculated as: FFi = min(ESi+1) EFi
Updating project is important to see: Overall performance of the project i.e. anticipated completion date.
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If delays are occuring, use the network to investigate means of recovering lost time. Reassessment of project criticality i.e advance/delay in activities may have moved the critical path within the network. Monitor effect of delays to protect commercial position claims, EoT, etc.
1. 2. 3. 4.
What are the differences between planning and scheduling? Describe what are the steps required to perform a project schedule. Explain what are the disadvantages of Arrow network that made it lose credits, as compared to Node network. Explain how forward pass and backward pass work in CPM.
1.
Using the following information and the network information from the table, determine which fabrication firm should be selected. Notes:Once commissioned, the plant can generate revenue at RM 5,000/ week. (a) (b) (c) Fabrication firm A offers to complete the work in a period of 7 weeks at a price of RM30,000. Fabrication firm B offers to complete the work in a period of 9 weeks at a price of RM25,000. Fabrication firm C offers to complete the work in a period of 6 weeks at a price of RM32,000.
Activity Design Fabrication Foundations Installation Duration (weeks) 6 9 5 7 A A B, C IPA Fabrication can overlap with A by 2 weeks Foundation can overlap with A by 2 weeks Fabrication, Foundation, Installation cannot start until 2 weeks after Foundations is complete Installation Notes
ID A B C D
Commission
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2.
From the following table, draw the logic network and perform the CPM calculations.
ACTIVITY A B C D E IPA* A A A B DURATION 2 6 10 4 7 ACTIVITY F G H I IPA* B, C C, D E, F G, H DURATION 5 3 5 2
Popescu, C. M., & Charoenngam, C. (1995). Project planning, scheduling, and control in construction: an encyclopedia of term and applications. New York: Wiley.
Topic
Managing Projects Teams
LEARNING OUTCOMES
By the end of this topic, you should be able to: 1. 2. 3. 4. Identify the different leadership styles that are applicable in a project environment; Explain what constitutes effective communication for successful completion of a project; Describe the different approaches to understand peoples needs in order to motivate them to be committed members of a team; Appreciate the importance of delegating authority and responsibility and be able to retain control of a project through effective delegation of work; Explain the importance of teambuilding; Outline a strategy for conflict management; and Distinguish the importance of managing change at the early stages of a project.
5. 6. 7.
INTRODUCTION
The sub-topics in this section address the key aspects of management that are often considered as soft issues. However, in modern project management, more importance is attached to managing the personnel as a vital resource and is considered to be the most critical work necessary for successful management of projects. Project teams must be assembled to accomplish the work necessary to complete projects, and as such team members are vital to the success of the project. It is clear that project managers play an important role in developing high-performance project teams. They: recruit members; conduct meetings;
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establish a team identity; create a common sense of purpose or a shared vision; create and manage a reward system that encourages teamwork; orchestrate decision making; resolve conflicts that arise within the team; and lead team-building sessions (see Figure 4.1).
Figure 4.1: Creating a High-Performance Project Team
In Topic 1 we looked at how engineering projects consist of a definite lifecycle with the following stages: defining or proposal preparation stage; planning stage; executing stage; and delivering stage.
This section is concerned with the manner in which projects are managed. Each of the above stages need to be managed by the project team, and for any team, there must be a leader to guide the overall efforts.
4.1
LEADERSHIP
SELF-CHECK 4.1
Before you go on reading about leadership, lets ponder on this scenario. What do you think would be the situation within the Liverpool football team if one day before an important final game, the manager decides to leave?
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Organisations and groups have been led by people called leaders, since the development of organised society. These leaders often have varying leadership styles to fit with the objectives and expectations of the groups or organisations they lead, and their leadership can be considered to be of varying degrees of effectiveness depending on the specific objectives and expectations of their organisation or group. A project leader is clearly one who leads a project team during the project life cycle and accomplishes the project objective on time and within budget. There are many definitions of leadership, and there is no one universally accepted definition. Within a project setting, Leadership is a social
influence process in which the leader seeks the participation of individuals in an effort to obtain organizational objectives (Kezsbom and Edward, 2001).
Leadership is composed of several complex elements, the three most common being: The person leading. The people being led. The situation (i.e. the project environment).
ACTIVITY 4.1
List two very different situations that have a prominent leadership and state the three most common elements of each leadership.
Project leadership requires involvement and empowerment of the project team. The project manager (PM) should involve individuals in decisions affecting them and should empower them to make decisions within their areas of responsibility. The PM should establish clear guidelines, and if appropriate, any limits, e.g. decisions taken should not result in budget or schedule overruns.
Which Leadership style is
Better
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An important part of leadership is the style with which the leader carries out the role.
4.1.1
(a)
Leadership Style
In general, there are two leadership styles: people-centred which is oriented towards relationships - described as democratic, permissive, consensus-seeking, participative, follower oriented, and considerate; and task-centred which is oriented towards productivity described as structured, task-dominated, restrictive, directive, autocratic, and socially distant.
(b)
Generally, task-oriented leadership style is usually undertaken to enhance productivity and often is dominant during the execution stage of the project. On the other hand, people-oriented leadership tends to enhance group cohesiveness and often is more widely practiced during the definition and planning stages of the project. Project managers are often selected or not selected because of their leadership styles. The most common reason for not selecting an individual is his/her inability to balance the technical and managerial project functions. A typical example of this scenario is that of Project Manager Khairi Simon who has very basic technical expertise in the productivity of plant and equipment used in the manufacturing of steel fabricated components for the construction industry. However, in attempting to improve the productivity, he generally tends to focus on the improvement of the non-technical (administrative) project functions.
EXERCISE 4.1
Try to identify two other characteristics of the above situation of a project manager not being able to balance the technical and managerial project functions. However, in modern project management practice, the leadership style of leaders is moving towards a greater emphasis on relationships and even the practice of situational leadership. Hersey and Blanchard (1979) developed a model for analysing leadership in a project management environment. Their life-cycle theory of leadership is based on the idea that leadership styles must change according to the readiness of the employees, with readiness defined as job-related experience, willingness to
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accept job responsibility, and desire to achieve. This is a form of situational leadership style. As shown in Figure 4.2, the subordinates enter the organisation in quadrant S1, which is high task and low relationship behaviour. In this quadrant, the leadership style is almost pure task-oriented behaviour and is an autocratic approach, where the leaders main concern is the accomplishment of the objective, often with very little concern for the employees or their feelings. The leader is very forceful and relies heavily on his/her own abilities and judgement. Other peoples opinions may be of no concern. In the initial stage there is anxiety, tension, and confusion among new employees.
Figure 4.2: A Systems Approach Source: Paul Hersey, Situational Selling (Escondido, California: Center for Leadership Studies, 1985). p.35. Reproduced by permission of the Center for Leadership Studies
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In quadrant S2, employees begin to understand their tasks and the leader tries to develop strong behavioural relationships. The development of trust and understanding between the leader and subordinates becomes a driving force for the strong behavioural relationships. This emphasis on behavioural relationship develops further in quadrant S3 with the leader more focused now on gaining the respect of the team members, hence there is more delegation of authority and responsibility, participative management and group decision-making. In quadrant S4, the project members are experienced in the job, confident about their own abilities, and trusted to handle the work themselves. Hence, the leader demonstrates low task and low relationship behaviour as the project members mature into a high degree of readiness. This model implies that effective leadership in project management must be dynamic and flexible rather than static and rigid. Effective leaders are neither pure task or relationship oriented, but maintain a balance between them. However, in time of crisis, a leader may be required to demonstrate a pure behavioural (relationship) style or a pure task style. Reflection of Experience Based on Hersey and Blanchards model, can you provide an analysis of a project managers style of leadership, based on your personal experience?
Management is considered to be a more broadly based activity including functions other than leading. Leaders are the ones who do the right thing in order to be effective, i.e. select the objectives, goals, and strategies and managers are involved in doing things right, for the ultimate purpose of maintaining efficiency, i.e. building the project team and making it work. This is a useful way of looking at the differences between leadership and managership. Some of the key leadership competencies of a project manager (PM) are: The PM should understand the technology involved in the project. A blend of interpersonal skills to build the project team and making it work through a culture of loyalty, commitment, respect, dedication and trust. An understanding of the management process. An ability to see the systems context and strategic context of the project. Ability to make and implement decisions within the project context. An innate ability to produce results.
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EXERCISE 4.2
Provide a list of five characteristics of leadership and five characteristics of managership that can help clarify the difference between leadership role and managerial role of project managers.
4.2
COMMUNICATION
SELF-CHECK 4.2
One of the most frequent sources of errors and misunderstandings in the management of a project and working with people is miscommunication. Can you quote some of your own experiences of miscommunication in the management of a project that affected the desired level of project outcomes? Communication is the process by which information is exchanged between individuals through a common system of symbols, signs, or behaviour. Communication is a two-way process: between the sender and the receiver(s). Hence, it is important to consider the receiver not just as a passive recipient. Proper communication is vital to the success of a project.
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Most failures in communication can be traced to misunderstandings of the symbols that play an important part in the process of human communication. This is mainly due to inadequacies in creating, transmitting, and receiving these symbols, both written and spoken. In most companies, executives are bombarded with information communicated to them through frequent meetings and dozens of weekly status reports provided by every functional area of the business. It is an undisputed fact that the quality and frequency of information moving down the organisational chart is less consistent. Lack of quality assurance and control in engineering documentation creates the opportunity for errors by those who use the documentation in their work. However, in the engineering disciplines a great amount of communication within project teams involves symbols that are more precise in their meaning compared to the management disciplines. Basically a project is linked together by its system of communications. The role of the project manager (PM) is similar to that of the central server in the local area network of a computer system. The PM is responsible for the continuous and comprehensive flow of information to and from team members, whilst focusing on communicating information and decisions that may influence the project teams work. The project manager needs to maintain communication links with all project stakeholders. However, certain stakeholders require direct and ongoing communication, they are: Customers (owners, users). Project team members. General managers. Functional managers. Regulatory agencies. Subcontractors.
Effective project communications ensure that the right information gets to the right person at the right time in a cost-effective manner. Communication that is effective consists of: An exchange of information. A verbal or written message. An act or instance of transmitting information. A technique for expressing ideas effectively. A process by which meanings are exchanged between individuals through a common system of symbols.
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Most project managers communicate laterally, whereas line managers communicate vertically downward to subordinates. Much of the day-to-day work on a project is accomplished by informal exchanges of information among team members. Most project managers prefer to communicate verbally and informally, one reason also being that formal communication can be costly. Project communications includes distributing and channelling information on decisions made, work authorisations, negotiations, and project reports. Project managers in excellent companies believe that they spend as much as 90 percent of their time on internal interpersonal communication with members of their team. Figure 4.3 illustrates the communication channels used by a typical project manager.
Figure 4.3: Communication channels used by Project Manager
Project team members need to be proactive in initiating timely communication with other team members and the project manager. Communications management is the formal or informal process of conducting or supervising the exchange of information either upward, downward, laterally or diagonally. Communications management is vital for effective project performance. Project members need to know and understand the action that is to be carried out on a project. It is important to consider the following basic concepts of communication theory and practice: Be as specific and clear as possible about the information to be conveyed. Know who the receiver is and what are the receivers expectations. Design and develop the message with the receiver in mind, keeping in mind the receivers role in the project.
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EXERCISE 4.3
The means and channels of information that exist on projects are numerous. Based on your experience of working in projects, can you name a few of these.
4.3
MOTIVATION
Each member of a project team provides an expertise that is needed to accomplish a project. Often they are from various disciplines, and can be reporting to individual department supervisors. Hence, the project manager as a leader of a team has to motivate people using effective methods other than resorting to the traditional methods of promotion in title or salary. Additionally, it is undeniable that money is the best motivator, however there are other factors that influence motivation. The capable project manager understands what motivates team members and creates a supportive environment in which individuals work as part of a highperforming team. The project manager must be careful not to create situations that cause individuals to become discouraged and demotivated. Consider the following example. On, Monday, the site supervisor, Dave excitedly offers notification to the project manager that although there was a breakdown in the filtration mechanism of the oil refinery, it had been resolved within ten minutes by using an alternative part for the broken lever arm. However, the project manager looked annoyed and exclaimed, You must not allow this problem to occur again, either that, or you will have to worry about your bonus this year. If it were not for my leadership, I dont know if we will ever get anything done in this refinery! The project manager can foster motivation through recognition of the project team as a whole and of individual members, and this should be done throughout the project, not just at the end of the project. People want to feel that they are making a contribution to the project and need to be recognised. Motivating project members so that they feel secure on the job is not easy, especially since a project has a finite lifetime. The guidelines for proper motivation by a project manager are: Adopt a positive attitude. Do not criticise management. Do not make promises that cannot be kept. Circulate customer reports. Give each person the attention he requires.
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Give assignments that provide challenges. Clearly defining performance expectations. Giving proper criticism as well as credit. Giving honest appraisals. Providing a good working atmosphere. Developing a team attitude. Providing a proper direction.
A. H. Maslow developed a theory of motivation called the hierarchy of needs (see Fig. 4.4). This theory has been used by managers and educators in order to understand why people behave the way they do, how to motivate them and how to secure their commitment. According to Maslow, humans have a hierarchy of needs, and it is this quest to satisfy these needs that motivates people. It is assumed that as the lower levels of need are satisfied, it is only natural for a person to become motivated to achieve the next higher level. The needs begin with basic physiological needs of comfort and basic survival, such as food clothing and shelter. Once this need is satisfied, it is the next level of need, which is safety and security, and subsequently that of higher levels regarding social needs, including belonging, ego, and finally self-fulfilment.
Figure 4.4: Maslows Hierarchy of Needs
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Using this theory, then the project manager will have to identify, based on the individuals view, as to what stage of need do they believe themselves to have achieved, keeping in mind that the needs of people can change. For example, the personal financial problems within a family can change the needs of an individual. Having identified the needs, the PM can determine an appropriate method of motivation utilising good people skills to undertake such an attempt. Project managers must understand human behaviour in order to motivate people towards successful accomplishment of project objectives. Douglas McGregor proposed that workers can be categorised according to two theories. Theory X, assumes that the average worker is fundamentally lazy and requires supervision, and that these type of workers: Dislike work and avoid work whenever possible. Need to be threatened with punishment in order to induce them to perform adequately. Avoids increased responsibility preferring to be directed.
The manager who accepts this view of the average worker, normally exercises authoritarian-type control and allows little participation in decision making. However, for Theory Y average worker, it is assumed that he/she: Wants to be active, whilst finding physical and mental work to be satisfying. Achieves greatest results through willing participation, without direction and control being provided.
Seeks opportunity for personal improvement and self-respect. The manager who accepts this view, normally advocates participation and management-employee relationship.
4.4
DELEGATION
Delegation involves empowering the project team to achieve the project objective. Delegation implies more than just assigning tasks to specific members of the project team. It includes giving team members the responsibility to accomplish job objectives and the authority to make decisions and take actions to achieve the expected results. Thus, when a project manager delegates work, it is often to be accompanied with the necessary results to be achieved in terms of work scope, tangible results or products to be delivered, the necessary budget, and the necessary time frame to accomplish the delegated piece of work. Project managers consider authority and funding to be very important in gaining project support.
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4.4.1
Delegation of Authority and Responsibility
Some projects are directed by project managers who have only monitoring authority. These project managers are called influence project managers. Authority is the key to the project management process. However, the PM as well as project team members may have a great level of delegated authority but very little power. The project manager manages across functional and organisational lines in order to bring together activities required to accomplish the project objectives. Project authority is the key to unifying all organisational activities for accomplishing the project. The amount of authority granted to the PM varies according to the: (a) (b) (c) Project size. Management philosophy. Management view of potential conflicts with functional managers.
Several key factors can affect the delegation of authority and responsibility, both from upper-level management to project management and from project management to functional management. These key factors include: The maturity of the project management function. The life cycle of the project. The size, nature and business base of the company. The size and nature of the project. The capabilities of management at all levels. Authority is the right of an individual to make the necessary decisions required to achieve his/her objectives or responsibilities. Project managers often possess a great deal of delegated authority but very little formal power. Hence, they need to get jobs done through the use of interpersonal influences.
ACTIVITY 4.2
In performing the role of the project manager, can you think of a few categories of interpersonal influences that can be useful in getting the job done on a project?
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There are five main interpersonal influences. They are: Legitimate power. Reward power. Penalty power. Expert power. Referent power.
EXERCISE 4.4
Explain what the above five main interpersonal influences mean.
4.4.2
Task Delegation
Delegation is necessary for effective project management. Delegation involves selecting the project team members who are best qualified to perform each task and then empowering them to do it. Delegation does provide an opportunity to give challenging assignments to individuals in order to develop their existing expertise and skills. Although personnel who are delegated with specific work/task are often allowed to plan their own methods for accomplishing the desired results and exercise control over the resources needed to do the work, ultimately the project manager is responsible for achieving the project results. Effective delegation requires effective communication skills. It is important that the task is clearly defined and the expected or desired results outlined clearly, rather than just say, Rachel, you work on the initial design. Delegation requires that individuals be accountable or achieving the expected results. Effective delegation will ensure that empowered individuals accept their accountability. To support team members in controlling their work efforts, the PM needs to maintain a project management information and control system. The following are some common barriers to effective delegation.
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ACTIVITY 4.3
Can you suggest can be done to overcome them. The project manager has a personal interest in the task or thinks he/she can do it better or faster. Suggetion: The project manager lacks confidence in the capability of others to do the work. Suggestion: The project manager is afraid that he/she will lose control of the work and not know what is going on. Suggestion: Team members fear criticism for mistakes or lack self-confidence. Suggestion: [Answers: Gido and Clements, p. 307/8]
Figure 4.5 shows various degrees of delegation.
Figure 4.5: Degree of Delegation Source: Gido & Clements. (2003). Successful Project Management. Thomson South Western, pp. 309.
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Use the checklist in Table 4.1 to rate your effectiveness at delegation.

Table 4.1: Rating Effectiveness at Delegation
4.5
MANAGING PARTICIPATION, WORKING IN TEAMS AND CONFLICT

SELF-CHECK 4.3
Why are so many people disappointed with the results of their projects? Being a member of a project team should be an enriching and satisfying growth experience for each individual. Successful team management requires the team to be an integral unit of the organisation. Working with project teams requires the project manager to cross many boundaries in the organisational structure to develop the project team into a cohesive group that is still very much part of the whole organisation. The project manager must learn to combine administrative and behavioural knowledge to work well with people. Project managers should
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have good people skills and create a conducive environment for team members to feel motivated. One additional task of a PM is to resolve conflicts between team members besides organising, coordinating, and directing the project.
ACTIVITY 4.4
Now, try to think of any other additional tasks or responsibilities of a project manager.
Another important responsibility of a project manager is decision making. During team meetings, numerous decisions must be made. There are situations when decisions can be made solely by the project manager (with input from one or two relevant team members), however there are situations that need the involvement of the entire team. It is necessary for the PM to establish a process for decision making that is effective based on the type of decisions to be made. For example, decision making in order to work out the best way to generate ideas needs to be different to decision making in order to choose from alternative designs or decisions for solving a problem with a definite solution. Socialising among team members supports team building. The better team members get to know one another, the more team building is enhanced. Effective team members help to create a positive, constructive project environment in which there is no room for divisiveness. Effective team members participate and communicate. Effective team members plan, control, and feel accountable for their individual work efforts.
4.5.1
Team Management
Project teams are made up of all necessary participants in order to achieve the objectives of the project, this will include at times external consultants. Team members report either part-time or full-time to their project manager. Managing project teams is a fundamental skill within the area of human resource management. The Project Management Institute defines human resource management as the art and science of directing and coordinating human resources throughout the life of a project, by using administrative and behavioural knowledge to achieve predetermined project objectives of scope, cost, time, quality and participant satisfaction. The role of each team member must be clearly defined. Each individual team members needs must be understood in order to enable the PM to encourage team participation. Team members careers must be given priority, and this requires effective communication and feedback. Open and honest
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communication is vital to instill integrity and support amongst the team members, whilst the creation of an environment of understanding and teamwork is important for creating a sense of trust. For any temporary management structure to be effective, there must exist a rational balance of power between functional and project management. The following barriers to team building in project environment have been identified by Thamhain and Wilemon (1979). They are: Differing outlooks, priorities, and interests team members have professional objectives and interests that differ from project objectives. Role conflicts these can result due to ambiguity over scope of work and task responsibility. Project objectives/outcomes not clear this makes it difficult to define roles and responsibilities, leading to conflict and power struggles. Dynamic project environments many projects operate in a continual state of change with regard to internal requirements, such as project scope, resources and objectives or external, such as regulatory changes or client demands. Competition over team leadership this often occurs at the early stages of a project as a covert challenge to project leaders ability. Lack of team definition and structure especially in dynamic, organisationally unstructured work environments, the poorly defined responsibility and reporting structures often impair teamwork. Team personnel selection the feeling of unfair treatment during staffing of a project, often due to the lack of input by project manager who is focused on recruiting the best, whilst functional managers who undertake the responsibility often rely on what is available. Credibility of project leader amongst team members or other managers this can result from poor managerial skills, poor technical judgements, or lack of experience. Lack of team member commitment differing professional interests, the feeling of insecurity, unclear nature of rewards and severe interpersonal conflicts can lead to a lack of commitment. Communication problems This is one of the critical barriers to team development. This exists at four levels. They are: Problems of communication among team members. Between the project leader and team members. Between the project team and top management.
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Between the project leaders and the client.
Lack of senior management support Often, PMs find senior management support and commitment to be unclear and often fluctuating as the project proceeds through its lifecycle. This effect can trickle down easily to team members leading to low level of commitment and enthusiasm amongst team members.
ACTIVITY 4.5
Discuss with a partner and list down briefly how you could eliminate or minimise the above barriers to effective team building .
4.5.2
Conflicts on Projects
Conflict on projects is inevitable. Differences of opinion are to be expected. The aim of a PM should not be to suppress conflicts, as it can provide an opportunity to gain new information, consider alternatives, develop better solutions to problems, enhance team building, and learn. However, conflicts should be managed. To manage conflicts the PM must use techniques to deal with disagreements, both technical and personal in nature. Withdrawal or giving up is a poor way of managing conflicts. Withdrawing only temporarily delays the inevitable future re-emergence of the problem. Smoothing is a more active technique. However, soothing only serves to appease one or more parties without providing long-lasting solutions. Compromising is one other approach that involves a bargaining approach between parties concerned to reach an acceptable agreement. However, these trade-offs do not result in a definite solution, leaving opportunities for a reoccurrence of the conflicts. Using a confronting and problem solving approach for resolving conflicts requires an open dialogue to identify the root problems and a joint effort requiring active participation of all parties to use problemsolving techniques to objectively resolve the conflict. However, in some situations it may be necessary for the project manager to exercise his/her authority to force a resolution to a conflict. This final approach can affect the teams future performance as it can create resentment towards the PM. A consensus approach can also be used which is to be led by the PM. But this requires a great deal of effort in undertaking the normal discussions in clarifying all the facts of the alternatives that have to be considered to arrive at one mutually agreed best solution. A voting, trading or averaging method is used.
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4.6
MANAGING CHANGE
It is often said that there is one thing that you can be sure of in any project, and that is CHANGE. Every project is susceptible to change. The source of change may be owner, designer, contactor or installer. However, a project manager should manage and control changes in order to minimise any negative impact on the successful achievement of the project objective. It is not the trivial changes that are important, but those that affect work scope, budget, or schedule. For example, deciding a change in the colour of a building before painting commences is a trivial change; however deciding to increase the number of storeys of an apartment block after having completed the design and piling works is a major change. Generally, the later in the project stage that changes are identified, the greater their effect on accomplishing the project objective, especially if work already completed needs to be undone. If changes are made much earlier in the project, it would be much easier to accommodate changes and it would be less costly. Additionally, the management of changes can be more effective if the changes can be predicted in advance.
Figure 4.6: Importance of Clear Project Definition during the Early Phases of a Construction Project Source: Adapted from Oberlender, p. 39
EXERCISE 4.5
Explain briefly what you understand by the representation in Figure 4.6 above.
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In the case of construction, one approach to managing change during construction is to request a list of anticipated change-orders on a monthly basis. The PM then works with the relevant stakeholders (mainly workers) anticipating the change, to evaluate the need for the change and the value of it. There must be a thorough evaluation of every aspect of a change, because a change in any part of a project of affects other parts of a project. This effect is sometimes not clear early on in the project, and can affect the cost greatly at later stages. This sort of change that occurs later in the project due to earlier changes are termed as rippleeffect changes. At the start of a project, procedures need to be established regarding how changes will be documented and authorised. Whenever a customer or client request changes, the PM should ensure that the appropriate project team members estimate the effects on the project cost and schedule, after which approval from the customer or client should be obtained before proceeding.
ACTIVITY 4.6
From your experience of having worked in project teams in your particular field of work, what do you consider as the appropriate level of delegation in making changes that a project manager should empower his/her team members to undertake on their own without requiring his/her approval? The most difficult type of change to manage is with regard to the use of project results, which requires the users to change the way they perform their work. One example, is that of converting from manual to computerised systems. Hence, to facilitate implementation of change, and gaining commitment to change where users are concerned it is important to have open communication and having a climate of trust besides convincing the parties concerned that they need a new system. The most difficult projects to manage are those that involve the management of change. There are four basic inputs needed to develop a project management methodology for change management. They are: Identification of the most common reasons for change in project management. Identification of the ways to overcome the resistance to change. Application of the principles of change management to ensure that the desired project management environment will be created and sustained.
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Most changes fall into three broad categories: (a) (b) (c) Scope changes in the form of design or additions represent big changes. Implementation of contingency plans, when risk events occur, represent changes in baseline costs and schedules. Improvement changes suggested by project team members.
Because changes are inevitable, a well-defined change review and control process should be set up early in the project planning cycle. Change control systems involve reporting, controlling, and recording changes to the project baseline. In practice, most change control systems are designed to accomplish the following: Identify proposed changes. List expected effects of proposed change(s) on schedule and budget. Review, evaluate, and approve or disapprove changes formally. Negotiate and resolve conflicts of change, conditions, and cost. Communicate changes to parties affected. Assign responsibility for implementing change. Adjust master schedule and budget. Track all changes that are to be implemented.
This topic is summarised as follows: There are many definitions of leadership, and there is no one universally accepted definition. Project leadership requires involvement and empowerment of the project team. In general, there are two types of leadership styles: People-centred; and Task-centred.
In modern project management practice, the leadership style of leaders is moving towards a greater emphasis on relationships and even the practice of situational leadership. Communication is the process by which information is exchanged between individuals through a common system of symbols, signs, or behaviour. Basically, a project is linked together by its system of communications.
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Communications management is the formal or informal process of conducting or supervising the exchange of information either upward, downward, laterally or diagonally. Delegation implies more than just assigning tasks to specific members of the project team. It includes giving team members the responsibility to accomplish job objectives and the authority to make decisions and take actions to achieve the expected results. Project managers often possess a great deal of delegated authority but very little formal power. Hence, they need to get jobs done through the use of interpersonal influences. There are five main interpersonal influences. They are: Legitimate power. Reward power. Penalty power. Expert power. Referent power.
Amongst the various tasks of a PM, one members. The project manager must learn to combine administrative and behavioural knowledge to work well with people. For any temporary management structure to be effective, there must exist a rational balance of power between functional and project management. If changes are made much earlier in the important task is to resolve conflicts between team project, it would be much easier to accommodate changes and it would be less costly.
(Answer ALL questions in 15 minutes) 1. It is clear that project managers play an important role in developing highperformance project teams. List eight tasks that contribute to this role. Why do we need to have good leadership on a project team? What does effective communication consists of?
2. 3.
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4. 5.
List down 5 elements of project communications? Motivating project members so that they feel secure on the job is not easy. List down 8 guidelines for providing proper motivation.
(Answer All the questions in 30 minutes) 1. Imagine that you are a project manager for a software business solutions company, and your company has won the tender for installing a credit card accounts management system that allows for flexible service limit operations management. Your team comprises two programmers, two system analysts and three system designers. However, one of the system analysts is presently working on two other projects which are due for commissioning within a week, and the system designers are sub-contracted from a strategic partnership arrangement with an Indian Multinational Company. The installation and testing has to be carried out within one-anda-half weeks. Describe the approach or methodology you would employ in: (i) (ii) Managing change with respect to the users. Keeping the team highly motivated as the installation has to be carried out during out of working hours during the weekend, and there is little compensation for the odd hours as the work has been designated simply in terms of man-hours.
(iii) Providing effective leadership and team management as the system designers are only able to communicate effectively through just one of their colleagues and are unhappy as they find work being delegated in an ad-hoc manner. 2. Explain what is meant by a change control system. Provide a description of the impact of undertaking change at advanced stages of a project.
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Cleland, D. I. & Ireland, L. R. (2002). Project Management: Strategic Design and Implementation. (4th ed.). McGraw-Hill. Hersey, P. & Blanchard, K. (1979). Management of Organizational Behaviour. Prentice-Hall. Kezsbom, D. S. & Edward, K. A. (2001). The New Dynamic Project Management: Winning Through the Competitive Advantage. (2nd ed.). John Wiley. Oberlender, G. D. (2000) Project Management for Engineering and Construction. (2nd ed.), McGraw-Hill.
Topic Risk
LEARNING OUTCOMES
By the end of this topic, you should be able to: 1. 2. 3. 4. 5. Explain risk in your own words; Discuss the importance of managing risk; Describe the risk management process; Identify risk associated with your work; and Explain actions that can be taken to response to the risk.
INTRODUCTION
Puan Haliza, Im sorry, your cat needs an operation. The fish is stuck in his throat and it might be very risky if we just simply pull it out manually. Said the Vet to Mrs. Haliza about her beloved cat.
Risk exists wherever the future is unknown. Because the unpleasant effects of risk have troublesome/ discomfort humankind since the beginning of time, individuals, groups and societies have developed various ways for managing risk. Because no one knows the future exactly, everyone is a risk manager.
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5.1
RISK AND PROJECT

SELF-CHECK 5.1
Major projects, particularly those involving international organisations, pose complex problems for the project manager and by their scale are inherently very risky. However, as major projects also require significant financial investment, they must have a very low risk of failure to remain viable. In your opinion, what should the project manager do? By looking at the first sentence of the topic, major project, particularly those involving international organisation, pose complex problem for the project manager and by their scale are inherently very risky, we first need to understand what is international project which bring the involvement of the international organisation and also what is the definition of risk which will describe the phase of inherently very risky.
5.1.1
International Project
When we talk about major project and involvement of the international organisation, we normally describe what is international construction. International construction is approaching business in another country or as a motivation for the organisation to expand internationally and to increase sales and profits. New market and consumer in international arenas represent the potential for the creation of greater profits. Success in international construction depends partly on marketing. Marketing is essentially assessment and meeting a demand for product and services, and ways to ensure optimum use of existing capital equipment and skills. A few decades ago, limited technical skills, concentration of purchasing power and transport difficulties were key regulators of demand and production. But in many industrial countries, the essential demand for all types of construction has now been met. Advancing technology, rising discretionary incomes and easier communications give rise to new market condition. However, international construction and organisation can bring a very good opportunity to the industrial development and can also be a threat as well.
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5.1.2
Risk
SELF-CHECK 5.2
To explain what is risk, let us consider this situation. When you purchase consumer or manufactured goods from the retailer, you are able to view the goods prior to purchase to ensure that they meet your requirements. In other words, you are able to view the finished product prior to making your investment. Do you think you have such an opportunity if you want to invest you money in a project?
Unfortunately that kind of situation is not possible in projects where your or clients are required to make the investment prior to receipt of the product. Accordingly, projects are subject to uncertainty and consequent risk during the project delivery process. Risk can have a number of different meanings based on how you interpret it. Consider the following statements: There is a risk of There is an 80% risk of rain today There is a risk of getting wet if it rains today There is a real risk to motorists from the weather which is forecast for today.
Each of these statements is using risk in a different sense. For a layman, risk is commonly used as a synonym for hazard, danger and threat. In Managing Risk In Construction Project written by Nigel Smith, 1999, it says that, from John Adams point of view, risk and uncertainty have a strong link. Risk and uncertainty have assumed the role of technical term in the risk and safety literature since 1921, when Frank Knight pronounced in his classic work. For him, if you dont know for sure what will happen, but you know the odds, that is risk and if you dont even know the odds, that is uncertainty. Uncertainty as defined by Knight is inescapable. It is the realm not of calculation but of judgement. There are problems where the odds are known or knowable with a bit more research, but they are trivial in comparison with the problems posed by uncertainty.
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Figure 5.1: The effort of delayed completion on the predicted project investment curve
The Study Group views risk as a probability that a particular adverse event occurs during a state period of time, or result from a particular challenge. However, a number of authors stated that uncertainty should be considered as separate from risk because the two terms are distinctly different. The term risk originated from the French word risque. Risk as predicted on the basis of statistical probability. In most cases, project risk can be identified from the experience gained when working on the similar project. On the other hand, uncertainty can be regarded as the chance occurrence of some event where the probability distribution is genuinely not known. The term risk and uncertainty if used rigorously, have these different meanings but in terms of construction projects, the distinction drawn between uncertainty and risk is of little significance and the two terms will be used interchangeably.
Figure 5.2: The effect of market uncertainty on the predicted project investment curve
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Accordingly, project management requires the quantification and management of risks, a process referred to as risk management. Here the potential effects of uncertainty are quantified in terms of the effect on the project outcome and plans are made for the course of action to be taken if the risk materialises. Figures 5.1 and 5.2 provide examples of the effects of uncertainty on the project outcome.
ACTIVITY 5.1
From your own understanding, define what is risk.
5.2
RISK MANAGEMENT
SELF-CHECK 5.3
Imagine that you want to build a bird table for the garden in the hope that it will enable you to see many birds from your window. You dont know that the suitable timber may be difficult to obtain; you are not sure if it may cost you more than expected, you dont know your neighbours will complain about the birds or in turn, they will offer to build it for you? You never know until it happens. There are so many uncertainties and how will you handle it? Risk management refers to processes and structures that are directed towards the effective management of potential opportunities and adverse effects. It is an ongoing process applied to all aspects of your operations. A good project risk management within an organisation has the following characteristics: Project risk management activities starts at the initiation of the project; risk management plans are developed and the actions continue throughout the project lifecycle. Project risk management shown is not isolated; on the other hand, it is integrated with other management functions as show in Figure 5.3. All project stakeholders are actively involved in implementing risk management.
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Figure 5.3: Risk integrated in project management functions
5.2.1
Why is Risk Management Needed?
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5.3
RISK MANAGEMENT PROCESS
The major components of the risk management process are illustrated in Figure 5.4. Each step will be discussed in more detail in the remainder of the topic.
Figure 5.4: Risk Management Process
5.3.1
Risk Identification
Risk management process starts firstly with identification of risk. Risk identification determines what might happen that could affect the objectives or outcomes of the project and how those things might happen. The risk differs considerably in nature. They can arise before, during and after the project. Some are quite likely but others are extremely unlikely. Some are trivial in their effect, while others if they occurred would spell the end of the project. Some are independent but many are dependent on others. So to minimise
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the risk, we need to identify the risk sources and categorise them. Risk is divided into three categories (RAMP, 1998): Known risk. Known unknowns. Unknown unknowns.
Known risk includes minor variations in productivity and swing in material costs. These occur frequently and are an inevitable feature of all construction projects. Known unknowns are the risk events whose occurrence is predictable. Either their probability of occurrence or their likely effect is known. Unknown unknowns are those events whose probabilities of occurrence and effect are not predictable by even the most experienced staff. This is critical and usually called as force majeure. If this situation happens, they need to identify the risk carefully and analyse intensively. A number of techniques are available to identify risk, but brainstorming is a preferred method because of its flexibility and capability, when appropriately structured, of generating a wide and diverse range of risk. However, in most cases risk can be identified from experience gained when working on similar projects.
ACTIVITY 5.2
Using the bird table for your garden case, identify what are the risks that might occur.
5.3.2
Risk Analysis
Secondly is analysing risk in the risk management process order. This step is important because it provides an understanding and awareness of the impact of risk on decision problems. Each project requires a risk analysis that suits the needs of the parties involved. There are a number of factors that should be considered when choosing an appropriate risk analysis technique, namely: Type and size of project. The information available. Cost of analysis. Time provided for analysis. Experience and expertise of the analysis.
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This analysis needs to be done by evaluating both the likelihood of the risk being realised, and of the impact if the risk is realised. A categorisation of high/ medium / low in respect of each may be sufficient, and should be the minimum level of categorisation this results in a 3x3 risk matrix as illustrated in Figure 5.5. Colour (Traffic Lights) can be used to further clarify the significance of risks.
Figure 5.5: Risk 3x3 Severity Matrix
A more detailed analytical scale may be appropriate, especially if clear quantitative evaluation can be applied to the particular risk - 5x5 matrices are often used, with impact and likelihood on a scale of:
Impact 1. insignificant 2. minor 3. moderate 4. major 5. catastrophic Likelihood 1. rare 2. unlikely 3. possible 4. likely 5. almost
Truly, there is no absolute standard for the scale of risk matrices - the organisation should reach a judgement about the level of analysis that it finds most practicable for its circumstances. There are many quantitative techniques in analysing risk, such as: Elementary risk analysis, which is a single measurement or single process. Sensitivity analysis, which is very popular nowadays. It is looking at the variation of risk in term of the project variables and treated independently. Probability analysis, which is a combination of the first two previous analysis. It is computer-based analysis that is called Monte Carlo approach.
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The risk will be priortised once it have been analysed. The less acceptable the exposure in respect of a risk, the higher the priority which should be given to addressing it. Similarly to the highest priority risks (the key risks), it should be given regular attention at the highest level of the organisation, and should consequently be considered regularly by the managers. The specific risk priorities will change over time as specific risks are addressed and prioritisation consequently changes.
ACTIVITY 5.3
Using the bird table for your garden case, analyse the risk that you have listed.
5.3.3
Risk Response
After analysing has been done, we need to give a respond to the risk. Responses to risk can be classified as: Reduce the risk. Reduce the likelihood. Reduce the consequences. Transfer the risk. Avoid the risk. Accept the risk.
Reducing risk is usually the first alternative considered. There are basically two ways in reducing risk; either reducing the likelihood that the event will occur or/and reducing the impact that the adverse event would have on the project. Managers can also consider transferring the risk by passing it to another party. This transfer does not change the risk. The risk will remain but will be handled by a different party. For example, the client transferring the risk to contractor or designer; contractor to sub-contractor; and client, contractor, sub-contractor or designer to insurer. Or managers can choose to make one big decision by taking risk avoidance. Some risks will only be treatable, or containable to acceptable levels, by terminating the activity. Avoiding risk means changing the project plan to eliminate the risk. Although it is impossible to eliminate all risk events, but hopefully some specific risks may be avoided before you launch the project.
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And finally if the risks are so large (such as an earthquake or tsunami), to the extent that it is not feasible to consider transferring or reducing or avoid, you can just accept it. Generally there are two conditions that will make you choose this option. It is either because of the exposure may be tolerable without any further action needed to be taken; or even if it is not tolerable, ability to do anything about some risks may be limited, or the cost of taking any action may be worthless compared to potential benefit gained. This option, of course, may be supplemented by contingency planning for handling the impacts that will arise if the risk really happens.
5.3.4
Risk Review
Each response has a different impact in which we need to monitor the outcome. Continuous monitoring and review of risks ensures new risks are detected and managed, and that action plans are implemented and progressed effectively. Review processes are often implemented as part of the regular management meeting cycle, supplemented by major review at significant project phases and milestones. Monitoring and review activities link risk management to other management processes. They also facilitate better risk management and continuous improvement. The main input to this step is the risk watch list of the major risks that have been identified for risk treatment action. The outcomes are in the form of revisions to the risk register, and a list of new action items for risk treatment. Although we have found the solution or response, sometimes the risk might still occur in other conditions. The construction industry for example, cannot run from having risk. The most challenging one is dealing with financial risk because it involves many parties. For example, lender from government or private, sponsor, contractor, consultant and client. Why is financial risk so crucial? For an established company, they might finance their new project using their own cash resource. But if it involves an international project, it might not be sufficient. They require funding. As we discussed before, a project may face a number of risks, for example construction delay, cost overruns, interest rates, technological change and tight competition. This will make sponsors seek other sources of finance to limit his or her risk from the project. By seeking partners to develop a project, the sponsor does not only spread the risk of failure (and also the rewards of success) but also achieves the best balance of expertise and contribution.
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ACTIVITY 5.4
Describe the process of project risk management.
All small or major projects are subject to risk. Conceptually, risk refers to the probability that a particular adverse event occurs during a stated period of time. Risk also needs to be managed. The benefits of risk management generally are: project issues are clarified, understood and considered from the start; decision are supported by thorough analysis; and build-up of historical data to assist future risk management procedures.
Risk management process starts with: Risk identification- through brainstorming, identifies all the possible risks. Risk analysis- using qualitative (the matrix) or/ and quantitative method (sensitivity analysis, monte carlo analysis, etc.) to analyse the level of importance of the risk. Risk response give response to the risk by choosing either to reduce, or transfer or avoid or accept the risk. Risk review- monitor the implementation of the action taken towards the risk.
A highly critical risk that always needs to be highlighted is financial risk.
(Answer ALL questions in 15 minutes) 1. 2. 3. In your opinion, what is the difference between risk and uncertainty? Explain how risk is integrated with other management functions. List 5 the reasons why managing risk is important.
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4. 5.
List options available in responding to the risk. List methods available in analysing risk.
(Answer the question in 30 minutes) As a project manager, you have just been given the responsibility for the completion of the construction and commissioning of an on-shore process plant which has recently been bought from a company going into liquidation. Nothing has been done on site for the last three months and the original main contractor is now committed on another site. However, the original Dutch & German subcontract suppliers of M&E equipment have a local Agent. Your Directors have indicated that minimum time to make the plant operational is the primary objective. 1. 2. What would your first actions be and why? It is company policy for the Project Manager to prepare a Risk Assessment for each project. Explain how this should be done. Briefly outline the main risks associated with this project which should be retained by the company and those which should be transferred to the contractor. Give reasons for your choice.
Institution of Civil Engineers. (1998). RAMP: risk analysis and management for projects. Institution of Civil Engineers and the Faculty and Institute of Actuaries. Thomas Telford Limited. Kris Moodley. (2001). Notes from Strategic Management. Nigel J. S., Tony Merna & Paul Jobling. (1999). Managing Risk in Construction Projects. Blackwell Science.

EQOE - Fundamental of Project Management

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EQOE I FUNDAMENTALS OF PROJECT MANAGEMENT

Noraini Hamzah Dr. Christy P. Gomez

3.2 3.3 3.4

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10. 11. 12.

the Fundamentals of Project Managament

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Figure 1.1: Characteristics of Project

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

THE PROJECT LIFE CYCLE

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Figure 1.2: Idealised project life cycle

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Figure 1.4: Cycle stages of work for a project

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

WHAT IS PROJECT MANAGEMENT?

UK Association of Project Managers

The British Standards Institute

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

FUNDAMENTALS OF THE MANAGEMENT PROCESS

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Figure 1.5: Process of Management

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Figure 1.7: Questions to consider in planning

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Figure 1.8: The Triangle of TQC

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

INTEGRATED PROJECT MANAGEMENT SYSTEM

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Figure 1.9: Integrated Project Management System

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

INTRODUCTION TO THE FUNDAMENTALS OF PROJECT MANAGEMENT

Topic Starting The

Organisation Goals, Organisation and People

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

SETTING MISSIONS AND GOALS

Figure 2.1: Basis for all managers to set their goals

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

Objective may take a number of different forms.

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

Figure 2.2: Larger vs smaller organisation

BUILDING BLOCKS OF ORGANISATIONS / PRINCIPLES FOR ORGANISATIONAL DESIGN

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

Figure 2.3: An example of typical hierarchical organisation chart

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

The Functional Organisation

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

The Division Organisation

Figure 2.5 (a): Divisional organisation structure (Discipline based)

Figure 2.5 (b): Divisional organisation structure (Region based)

Figure 2.5 (c): Divisional organisation structure (Product based)

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

The advantages and disadvantages are listed in Table 2.2.

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE

Figure 2.6: Matrix organisation structure

STARTING THE ORGANISATION GOALS, ORGANISATION AND PEOPLE