Project Management - Edinburgh Business School
ProjectManagementDr William WallacePR-A3-engb 1/2014 (1006)
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Project ManagementDr William Wallace BSc (Hons), MSc, PhD.DBA Programme Director and Senior Teaching Fellow, Edinburgh Business School (EBS), the GraduateSchool of Business at Heriot-Watt University.Dr William Wallace holds degrees from Leeds Metropolitan University (1981), Loughborough University(1983) and Heriot-Watt University (1987). He joined Edinburgh Business School in 2000 after 10 years’project management experience in the UK public and private sectors. Dr Wallace is author of the EBSDBA texts Project Management and Alliances and Partnerships. He is joint author of Strategic Risk Management and Mergers and Acquisitions. He is also either author or joint author of the EBS DBA textsIntroduction to Business Research 1–3. He is Chair of the EBS DBA Research Committee and has successfully mentored and supervised numerous EBS DBA students.
First Published in Great Britain in 2002.Roberts, Wallace 2002, 2003, 2004, 2014The rights of Professor Alexander Roberts and Dr William Wallace to be identified as Authors of thisWork has been asserted in accordance with the Copyright, Designs and Patents Act 1988.All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwisewithout the prior written permission of the Publishers. This book may not be lent, resold, hired out orotherwise disposed of by way of trade in any form of binding or cover other than that in which it ispublished, without the prior consent of the Publishers.
ContentsPrefaceixList of AbbreviationsxiModule 1Introduction1.1What Is This Course All About?1.2What Is a Project?1.3What Is Project Management?1.4Project Management Characteristics1.5Potential Benefits and Challenges of Project Management1.6The History of Project Management1.7Project Management TodayLearning SummaryReview QuestionsThought GeneratorsModule 2Individual and Team Issues2.1Introduction2.2The Project Manager2.3The Project Team2.4Project Team Staffing Profile and Operation2.5The Project Team Lifecycle2.6Project Team Motivation2.7Project Team Communications2.8Project Team Stress2.9Conflict Identification and ResolutionLearning SummaryReview QuestionsThought GeneratorsModule 3Project Risk Management3.13.23.33.43.53.6IntroductionBackground to RiskThe Human Cognitive ProcessRisk Handling and ControlTypes of RiskRisk Conditions and Decision MakingProject Management Edinburgh Business /13/23/103/153/203/34v
Contents3.7The Concept of Risk Management3.8Risk, Contracts and ProcurementLearning SummaryReview QuestionsThought GeneratorsModule 43/433/743/883/903/96Project Management Organisational Structures and Standards4.1Introduction4.2The Concept of the Organisational Breakdown Structure4.3Organisational Theory and Structures4.4Examples of Organisational Structures4.5Project Management StandardsLearning SummaryReview QuestionsThought GeneratorsModule 5Project Time Planning and ControlProject Cost Planning and 1Introduction6.2Project Cost Planning and Control as a Concept6.3Project Cost Planning6.4Project Cost ControlLearning SummaryReview QuestionsThought Generatorsvi4/14/24/34/754/814/934/944/995/15.1The Concept of Project Time Planning and Control5.2The Process of Project Time Planning5.3Scheduling5.4Project Replanning5.5Trade-off Analysis5.6Resource SchedulingLearning SummaryReview QuestionsThought GeneratorsModule 64/16/16/26/176/666/1196/1216/126Edinburgh Business School Project Management
ContentsModule 7Project Quality Management7.1Introduction7.2Quality Management as a Concept7.3The Quality Gurus7.4The Quality Management ‘Six Pack’7.5Total Quality Management and Business Excellence7.6Some Quality Management Tools and TechniquesLearning SummaryReview QuestionsThought GeneratorsModule 8Case Study8.18.28.38.48.58.68.78.88.98.10Aims and Objectives of the Case StudyIntroduction (Module 1)Individual and Team Issues (Module 2)Risk Management (Module 3)Case Study First Supplement 21 JuneOrganisational Structures (Module 4)Case Study Second Supplement 28 JuneTime Planning and Control (Module 5)Cost Planning and Control (Module 6)Quality Management (Module 8/108/178/218/278/308/348/538/66Practice Final ExaminationsA1/1Practice Final Examination 1Practice Final Examination 2A1/6A1/9Appendix 2Formula Sheet for Project ManagementA2/1Appendix 3Answers to Review QuestionsA3/1Module 1Module 2Module 3Module 4Module 5Module 6Module 7A3/1A3/4A3/8A3/11A3/16A3/20A3/24Appendix 1IndexProject Management Edinburgh Business SchoolI/1vii
PrefaceProject management has evolved from its formative stages in the 1940s to become aleading international and interdisciplinary application. The relevant professionalbodies (the International Project Management Association and Project ManagementInstitute) operate globally and across most areas of industry and commerce. Projectmanagement practices and procedures operate across a wide range of applications,from agricultural projects in Africa to complex engineering projects in Australia.Project management is, perhaps, the world’s first truly international area of professional practice.The growth of project management as an international discipline has been drivenby the growth in the complexity of projects around the world.People have always developed projects. In their simplest form projects are oneoff or unique. They have a single aim and a series of separate definable objectives.They have a finite lifespan and they are usually intended to bring about change.They are usually relatively complex and (because they involve change) they are oftenrelatively risky. Most people are familiar with projects in their everyday lives. Anobvious example is building an extension on a house. A less obvious example,perhaps, is a marriage. If you think about it, getting married meets all the basicproject criteria mentioned above. The degree of risk involved is perhaps the mostvariable criterion!There are numerous cases of major projects from thousands of years ago. Theancient Egyptian pyramids were built around 4000 years ago and the Roman roadnetwork across Europe and North Africa dates back around 2000 years. If theancient Egyptians and Romans had such huge projects why did they not needformal project management tools and techniques? The answer revolves aroundcomplexity. The pyramids and Roman roads were big but essentially simple. ThePharaohs and Emperors had plenty of time, lots of money and unlimited slavelabour.In more recent times people have still developed major projects but these projects have become far more complex. A modern engineering project such asbuilding a new suspension bridge typically has to be completed within a range ofconstraints that did not apply to the ancient Egyptians or Romans. Such a projectusually has a strictly imposed cost limit and has to be completed by a specified date.It may have to be designed and built in compliance with numerous environmentaland health and safety constraints. There may be certain political and geographicalfactors that apply, together with other external forces such as changes in nationaland global economies.These variable constraints all act to impose tighter and more limiting performance standards, all of which limit what project managers call the range ofacceptable outcomes – the target area that satisfies all the various constraintsimposed on the project designers and builders. As the target becomes smaller theProject Management Edinburgh Business Schoolix
Prefacetolerance and margin of error limits decrease and the need for more rigorous projectmanagement increases.The rapid and global growth in project management therefore has been driven bya corresponding rapid and global growth in the complexity of projects. Everywhereprojects have had to be completed within more and more restrictive time, cost andperformance constraints, so there has been an ever-increasing demand for the kindof people who can operate under such demanding circumstances – project managers.This course is an introduction to Project Management for Edinburgh BusinessSchool MBA students. It does not aim to turn readers into fully fledged projectmanagers who can go away and run major projects. It rather attempts to introducethe concept of project management and give an insight into some of the varioustools and techniques used by project managers on real projects. MBA graduates arealmost certain to be involved in projects in their professional life in one form oranother, whether it is managing the design and installation of a new IT system orlaunching a new confectionary product. This course attempts to develop an understanding of how to apply basic project management tools and techniques in suchapplications.W A WallaceEdinburgh Business SchoolSeptember 2012xEdinburgh Business School Project Management
List of TEMVESTETTCEVEVAGERTHSEIMCSactual costactual cost of the works performedalternative dispute resolutionall goes as plannedactivity on arrowactivity on nodeAssociation for Project Managementbudget at completionbudgeted costbudgeted cost of the works performedbudgeted cost of the works specified or scheduledBody of Knowledgecost account codecomputer-assisted designchange control and review boardchange control sectionCentral Computer Telecommunications Agencycomputerised database estimating systemconcurrent engineeringconfiguration management systemcritical path methodcost variancecost variance indexdraft master scheduleestimate at completionestimated cost to completeearliest event timeearliest finish timeequivalent monetary valueearliest start timeestimated time to completeearned valueearned value analysisgraphical evaluation and review techniqueHealth and Safety Executiveimplementation monitoring and control systemProject Management Edinburgh Business Schoolxi
List of mation/interface management systemInternational Project Management AssociationInternational Organization for StandardizationJoint Contracts Tribunallocal authority inspectorlifecycle costinglatest event timelatest finish timelet it belatest start timemultiple critical pathorganisational breakdown structureproject cost planning and control systemproject central serverprogram evaluation and review techniqueprofessional indemnity insuranceproject logic evaluationProject Management InstituteProject Management Professionalproject master schedulepost-occupancy evaluation and reviewPRojects IN Controlled Environments, version 2planned valueproject variance analysis reportingquality assurance planquality assurance reviewquality breakdown structurequality varianceresource fluctuation driverRoyal Institute of Chartered Surveyorsrisk interdependency fieldstatus accounting and reportingservice-level agreementstandard method of measurementstatement of workstrategic project planschedule varianceschedule variance indexstrengths, weaknesses, opportunities and threatstime at completionEdinburgh Business School Project Management
List of ed competitiontrain operating companytotal quality managementtask responsibility matrixteam responsibility planvariance at completionwork breakdown structurewhat happens if?works performedworks scheduledProject Management Edinburgh Business Schoolxiii
Module 1IntroductionContents1.1What Is This Course All About? .1/11.2What Is a Project? .1/81.3What Is Project Management? . 1/161.4Project Management Characteristics . 1/271.5Potential Benefits and Challenges of Project Management. 1/361.6The History of Project Management . 1/371.7Project Management Today . 1/40Learning Summary . 1/41Review Questions . 1/42Thought Generators . 1/46Learning ObjectivesThis module introduces some of the main concepts and approaches that are centralto project management.By the time you have completed Module 1 you should understand: what is meant by a project;the concept of project management;how project management can be structured within an organisation;the potential benefits and challenges of using a project management approach;the history and origins of project management;the current state of project management as an international discipline.1.1What Is This Course All About?1.1.1What Does a Project Manager Do?Project managers are a bit like Navy pilots.Navy pilots have to fly aeroplanes on and off of aircraft carriers. The planesthemselves are extremely expensive and the pilot has to be very careful not to crash.The plane has to take off and land from an aircraft carrier which has a very smallflight deck. In addition, the aircraft carrier is usually moving through the sea,pitching up and down with the swell and making frequent and significant courseadjustments depending on changes in wind direction. The flight deck itself is oftencrowded with naval personnel and other aircraft, which may be taking off or landingat almost the same time.Project Management Edinburgh Business School1/1
Module 1 / IntroductionWhen landing an aircraft under such circumstances the pilot has to think in advance, develop a plan and then execute it, making adjustments to stay on course ashe or she goes along. The pilot has to ensure that the aircraft is descending at theright speed and rate of descent, and that the line of approach is correct, constantlyreferring to the navigation and flight instruments and making continual adjustments,thinking ahead, to make sure the plane lands safely. The ultimate objective is to landthe aircraft on the flight deck, which is the ‘target’ as far as the pilot is concerned.A project manager does something similar to the Navy pilot. The plane represents the ‘position’ of the project at any one time and the carrier flight deckrepresents the ‘target outcome’ of the project at completion. These two terms andtheir applications in this context are considered in more detail below.The position of the project means the current performance of the work in relation to whatever variables are used to determine performance. Typical measures ofperformance are time, cost and quality, and there could be others such as risk, safetyand so on.If we were to try to summarise the sequence of actions needed to land the plane,it could be done as shown below.1. Work out where the carrier is.2. Set up a navigation line to get the plane from where it is now to the carrier.3. As the plane approaches the carrier, measure actual position and rate of descentagainst the navigation line.4. Compare actual position to required position.5. Correct for speed, altitude and bearing as required.6. Follow the navigation line in and land safely.A project manager would recognise this basic sequence of six stages but woulduse different terminology, which might be as shown below.1. Establish success criteria for the work.2. Develop plans to achieve the success criteria.3. As the work progresses, measure current performance in relation to the successcriteria.4. Compare current performance with desired performance.5. Where necessary, set up a plan for corrective action.6. Implement the corrective action and achieve an acceptable outcome.This simple six-stage process is the basis of project management. If you can learnto do these six things you can call yourself a project manager, and if you can dothem well your abilities as a professionally qualified project manager will be in highdemand and rewarded accordingly.1.1.2How Does the Project Manager Do It?Consider each stage very briefly in turn:1. Establish success criteria for the work.In most applications the obvious success criteria for any piece of work includetime, cost and quality. You want to finish the job on time, within cost and towhatever quality standards have been set.1/2Edinburgh Business School Project Management
Module 1 / IntroductionThe classic way to represent the relationship between these criteria is with a triangle, as shown in Figure 1.1. This is sometimes referred to as the ‘time–cost–performance triangle’ or the ‘triple objectives triangle’. Where the project concerns a product, ‘quality’ may be substituted for ‘performance’. It is important toappreciate that the time–cost–quality/performance triangle in various formatsand arrangements appears throughout the project management literature. It is anoversimplification but it is easy to understand.TimeCostPerformanceFigure 1.1The concept of multiple objectivesIn Figure 1.2 the shaded area represents the range of acceptable outcomes: outcomes that are below the cost limit, below the time limit and above theminimum quality limit. The project manager has established success criteria forthe work and now has a target (the shaded area) to aim at.Project Management Edinburgh Business School1/3
Module 1 / IntroductionT maxCostC maxTimeXPerformanceQ minFigure 1.2Typical range of acceptable outcomes2. Develop plans to achieve the success criteria.Now that the project manager has a target area to aim at, he or she developsplans to get the work within that target zone. The project manager develops costplans, time plans and quality plans that define the work and actions required tomeet each of the success criteria. These planning processes are covered in Module 5, Module 6 and Module 7 respectively. The p
Dr William Wallace holds degrees from Leeds Metropolitan University (1981), Loughborough University (1983) and Heriot-Watt University (1987). He joined Edinburgh Business School in 2000 after 10 years’ project management experience in the UK public and private sectors. Dr Wallace is author of the EBS DBA texts Project Management and Alliances and Partnerships. He is joint author of Strategic .
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