Exam preparation - Personal notes made in preperation for the exam, based off lecture material PDF

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Personal notes made in preperation for the exam, based off lecture material and further reading into the module...

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Exam preparation Project is defined as a temporary activity which is unique, non-routine and undertaken to meet specific customer needs or desired outcome. (UK Association of project management) (Larson & Gray, 2018). Based on my placement experience of working at a professional buying organisation, (PBO), an example of this is the development of a new framework by a professional buying organisation to provide apprenticeships to the public sector. A programme is a group of related projects that continue over an extended period of time in order to achieve a common goal or objective. (Larson & Gray, 2018). Based on my experience working in a PBO, an example of this would be a group of complementary frameworks relating to HR ranging from temporary work to executive positions, allowing a professional buying organisation to cover the needs of many customers in the HR sector. A project portfolio is a group of project/programmes which an organisation selects to balance project type, risk and ranking in terms of selection criteria. (Larson and Gray, 2018). Based on my experience working in a PBO, an example of this would be having a range of frameworks at different stages of their life; some frameworks would be developed to meet new customer needs, others would be in place generating revenue and other would be coming to the end of their life where it is decided if they should be retendered or not. Having a balance of these frameworks/projects mitigates risks of failure as there are others the PBO can fall back on. The project life cycle is the different stages that occur during a particular project. These stages include defining, planning, execution and closing. Defining includes forming the project specification, objectives, and team members, and delegating major responsibilities. Planning involves the development of the work breakdown structure, schedules, and time and budget estimates. Execution involves the action of deliverables in the project, keeping by time, cost and specification requirements indicated in the previous stage, whilst also implementing any changes. Closing involves the final steps of a project and its delivery to the customers. Project management challenges Projects manage a number of different people from different backgrounds and possible ways of working. This can potentially create conflict between team members and impact the progress of the project. Team members also have to struggle between balancing their normal day to day activities with their new project tasks. It’s the project managers task to ensure that these challenges are mitigated and that the project tasks are completed with as little disruption as possible. This involves a careful balance between the technical dimensions of a project and the sociocultural dimensions of a project. Technical elements involve the planning and scheduling of the project such as to ensure all members of the team have an adequate workload that ensure that they can still perform their main duties Sociocultural elements involve creating a temporary social system that ensures that team members talents are utilised to benefit the project as much as possible and that conflicts can be solved diplomatically. Major mistakes caused by not understanding the role of projects in accomplishing strategy Aligning projects with strategic goals of the organisation is imperative to its success. By misunderstanding the importance of the project this can lead to a number of major mistakes such as

focusing on issues with low strategic priority, focusing on the immediate customer rather than the market as a whole and overemphasising the importance of new technology that does not fit the strategic goal of the organisation or meet customer needs. The impact of this is the poor utilisation of an organisation’s resources (People, money, equipment and core competencies) that could have been used to benefit the company. Problems of a lack of project priority system linked to strategy By implementing projects without a strong project priority system linked to strategy you can create the following problems The implementation gap: the lack consensus between the goals set by senior managers and those set by lower level management closer to the project. The lack of consensus between people creates confusion and can lead to a waste of resources due to the project going in a different direction than first intended. Organisation politics: politics within an organisation can have a significant influence on which project receives more funding and resources especially if the strategic importance of the project is not well explained. Therefore, the importance of the project is more defined on whom is involved and their organisational power. Resource conflicts and multitasking: as most projects are carried out simultaneously to other projects, projects can become interdependent and share resources, this can lead to resource conflicts and the multitasking of project work by team members. This can cause severe delays to projects and therefore impact their strategic success. Having a clear definition on the strategic role of projects will enable managers to see which projects hold more strategic importance and allocate resources accordingly. Classification of a project Compliance projects are regulatory projects that are needed to be done such as the implantation of GDPR. Operational projects support operations and aim to improve production efficiencies and quality. Strategic projects support long term goals and the mission directly, this could be the development of a new product or service. Characteristics of SMART objectives 1) 2) 3) 4) 5)

Specific – be specific in targeting an objective Measurable – establish a measurable indicator of progress Achievable/assignable – assignable to one person for completion Relevant/realistic – state what can be realistically done with available resources Time related – state when the objective can be achieved

Payback method The length of time the original investment has recouped by the project, shorter the payback the better. Payback Period = Project cost / annual cash flow

Drawbacks: -

does not consider profitability does not consider time value of money difficult to use when cash flows change less meaningful for longer periods of time

Discounted cashflows (Net present value) 1) considers time value of money, all values considered in today’s terms. 2) Includes all inflows and outflows, not just the ones through the payback point 3) Used where the timespan extends over more than one financial year/period

A 0

Initial cash investment (since it is outflow, its value is negative)

F

Cash flow in time period t (negative for

t

outflows) k

the discount rate (desired rate-of-return)

t

the number of years of life -

If positive, NVP meets the minimum desired rate of return If negative, NVP does not meet minimum requirements and the project is rejected Higher the discount rate, the lower the NPV

Internal Rate of Return (IRR) The discount rate (k) that causes the NPV to equal zero, the higher the IRR the better. •

In Excel “=IRR(Series,Guess)”

Non-financial strategic criteria -

To capture larger market share To make it difficult for competitors to enter market To develop an enabler product, which by its introduction will increase sales in more profitable products To develop core technology that will be used in next-generation products To reduce dependency on unreliable suppliers To restore corporate image or enhance brand recognition To demonstrate its commitment to corporate citizenship and support for community development To prevent government intervention and regulation

Multi-criteria selection models -

Checklist model  Uses a list of questions to review potential projects and to determine their acceptance or rejection

Fails to answer the relative importance or value of a potential project and does not allow for comparison with other potential projects Multi-weighted scoring model  Uses several weighted qualitative or quantitative selection criteria to evaluate project proposals  Allows for comparison with other potential projects 

-

Risk considerations in project selection -

Both costs and benefits are uncertain Can make estimates about the probability of outcomes Uncertainty regarding timing, what will be accomplished and side effects.

Balancing the portfolio for risks and type of projects 1) Bread and butter projects are relatively easy projects that produce moderate commercial value. They typical improvements to current products and services to better customer needs. Examples include software upgrades of apple iPhone. 2) Pearls are low risk development projects but with high commercial value. They represent revolutionary commercial advances to current products and services. 3) Oysters are high risk projects with high commercial value. They involve technological breakthroughs such as new products and services. 4) White Elephants are projects that showed promise in the past but due to changes in the external environment, are no longer viable A work breakdown structure is a hierarchical method that subdivides the work and the project into smaller details. Consists of levels of deliverables, sub-deliverables and work packages. Project management triangle (Iron triangle)

Time

Quality

Cost

Scope

Increased scope = increased time + increased cost Tight Time = increased costs + reduced scope Tight Budget = increased time + reduced scope The roles of project management triangle PMT helps project managers -

Understand the complexity of the project and the inter-relationship between the constraints

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Analyse the goals of the project and choose project priorities (identify the fixed constraints, pick any two of good, cheap and fast) Manage changes to scope, time or cost during the project. (understanding the consequences of change, understand the available choices, make informed decisions)

Project priority matrix

Constrain: original parameter is fixed. Project must meet the completion date, specifications and scope of the project Enhance: given the scope of the project, which criterion should be optimised? In the case of time and cost, this usually means taking advantage of opportunities to reduce costs or shorten the schedule Accept: for which criterion is it tolerable to not meet the original parameters? Top-down versus bottom-up estimating Top-down estimates: derived from senior management and derive their estimates from analogy, group consensus or mathematical relationship. Derived from someone who uses experience and/or information to determine the project duration and total cost. However these estimates are sometimes made by top managers who have very little knowledge of the component activities used to complete the project. Main disadvantage of top-down is that the time and cost for specific tasks are not considered and by grouping tasks together it leaves the project open to errors of omission. Bottom-up estimate: performed by people who are doing the work, based on estimates of elements in the work breakdown structure. Detailed estimates of work packages usually made by those most familiar with the task

Preferred approach in estimating projects -

Make rough top-down estimate Develop the WBS/OBS Make bottom-up estimates Develop schedules and budgets Reconcile differences between top-down and bottom-up estimates

Top-down approaches 1) Consensus method  This method uses the pooled experience of senior/middle managers to estimate the total project duration and cost.  This typically involves a meeting where experts discuss, argue and ultimately reach a decision as to their best guess estimate.  In the conceptual stage of the project 2) Parametric method  Often use in the concept or need phase of a project  Uses ratios to estimate initial project duration and cost 3) Apportion method  Is used when projects closely follow past projects in features and costs  This method is common in projects that are relatively standard but have some small variation or customisation.  Given an estimated total cost, apportion costs to deliverables in the WBS – given average cost percentages for past projects 4) Function point method  Software development projects are estimated using macro variables called function points (number of inputs, outputs and data files)  These variables are adjusted for a complexity factor and added  The total adjusted count provides the basis for estimating the labour effort and cost for a project 5) Learning curves  The improvement from repetition general results in a reduction of labour hours  From empirical evidence across all industries, the pattern of this improvement has been quantified in the learning curve



Y x =Kx n x = number of times the task has been carried out Y x = time taken to carry out the task the x th time K = time taken to carry out the task the first time n=¿ logb/log2 where b is the learning rate

Bottom-up approaches 1) Template method  If the project is similar to past projects, the cost from past projects can be used as a starting point for the new project  Differences in the new project can be noted, past ties and costs adjusted to reflect these differences  Enables the firm to develop a potential schedule, and costs in a very short time span  Development of such templates in a database can quickly reduce estimate errors 2) Parametric procedures applied to specific task  Just as parametric techniques such as cost per square can be the source of top-down estimates, the same can be applied to specific tasks  E.g. 36 different computer workstations needed to be converted  On average, 1 person could convert 3 workstations per day  Therefore the task of converting the 36 workstations would take 3 technicians 4 days 3) Range estimating  It works best when work packages have significant uncertainty associated with the time of cost to complete  Requires 3 estimates; low, average and high  The low to high estimates will give a range as to where the estimate will fall  Having a group to determine the low and high cost/duration usually gives the best results due to their experience Project cost duration graph 1) Find total direct costs for selected project durations 2) Find total indirect costs for selected project durations 3) Sum direct and indirect costs for these selected durations Central concern is determining which activities to shorten. Typically, managers need to find activities with the smallest increase in cost per unit of time. Rationale for selecting critical activities depends on identifying the activities normal and crash times. Normal time for an activity represents low-cost, realistic, efficient methods for completing the activity in normal conditions The shortest possible time an activity can realistically be completed in is called its crash time. The direct cost of completing an activity in its crash time is known as the crash cost.

The slope between normal and crash is known as the cost slope. It assumes that cost per time unit reduces at a constant rate. Cost slope = crash cost – normal cost / normal time – crash time. Assumptions include -

Cost-time relationship is linear Normal time assumes low cost, efficient methods to complete activity Crash time represents a limit – the greatest time reduction possible under realistic conditions Slope represents cost per unit of time All accelerations must occur within the normal and crash times

The less steep the cost slope, the less it costs to shorten one time period.

Project management structures Dedicated project team Teams operate as separate units under the leadership of a full-time project manager In a projectized organisation where projects are the dominant form of business, functional departments are responsible for providing support for its teams Advantages -

Simple Fast Cohesive, sharing of a common goal improves motivation Cross-functional integration, optimise the total project rather own part

Disadvantage -

Expensive, a new PM role, duplicated people Internal strife, conflict between the project team and the remainder of the organisation Difficult post-project transition, difficult to transit back due to absence and need to catch up

Maxis structure Matrix management is a hybrid organisational form in which a horizontal project management structure is overlaid on the normal functional hierarchy. In a matrix system, there are usually two chains of command; one along functional lines and the other along project lines. Project participants report simultaneously to both functional and project managers Division of project manager and functional manager responsibilities in a matrix structure Project manager -

What has to be done? When should the task be done? How much money is available to do the task?

-

How well has the total project been done?

Functional manager -

How will it be done? How will the project involvement impact normal functional activities? How well has the functional input been integrated?

Different matrix forms Weak form: similar to functional but with a PM, who only facilitate/assist the project, but most decisions are made by functional managers. The authority of the functional manager predominates and the project manager has indirect authority Balanced: classical form of matrix, the project manager sets the overall plan and the functional manager determines how the work will be done Strong: functional manager plays minor role and PM makes most of the decisions. The project manager has broader control and functional departments at as subcontractors to the project Advantages -

Efficient, resource utilisation is optimised Strong project focus, the role of the project manager helps Easier post-project transition Flexible

Disadvantages -

Dysfunctional conflict, between project managers and functional managers Infighting, for resources between projects (managers) Stressful Slow, agreement must be reached between multiple groups

The risk management process Risk management should begin with trying to compile a list of all the possible risks that could affect the project. Groups ae more effective at brainstorming potential risks. Organisations use risk breakdown structures (RBS) in conjunction with WBS to help management teams identify and eventually analyse risk Step 1 Risk identification: analyse the project to identify sources of risk Generate a list of possible risks through brainstorming, problem identification and risk profiling Most common project risks -

Business case becomes obsolete or is undermined Project purpose and need is not well defined Project design and deliverable definition is incomplete Project schedule is not clearly defined or understood No control over staff priorities Consultant or contractor delays Scope creep Customer refuses to approve deliverables/ milestones or delays approval

Step 2 Risk assessment: assesses risk in terms of Severity of impact, Likelihood of occurring and Controllability Scenario analysis for event probability and impact, risk assessment matrix, failure mode and effects analysis. Step 3 Risk response development: develop a strategy to reduce possible damage, develop contingency plans 1) 2) 3) 4)

Mitigating risk Avoiding risk Transferring risk Retaining risk

Contingency planning: an alternative plan that will be used if a possible unforeseen risk event actually occurs. A plan of actions that will reduce or mitigate the negative impact of a risk event Risk of not having a contingency plan: -

Having no plan may slow managerial response Decision made under pressure can be potentially dangerous and costly

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