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An Introduction to

Project Management, Fourth Edition

Cover Photo: Dan Schwalbe

©2012 Kathy Schwalbe, LLC ISBN-10: 0982800339 ISBN-13: 978-098-0-982003-3-1 eBook ISBN: 978-1-63001-985-3

ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the author. Materials from Kathy Schwalbe’s Information Technology Project Management, Sixth Edition, are used with permission from Cengage Learning. Microsoft and the Office logo are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. All screenshots from Microsoft products are used with permission from Microsoft. Information and screenshots from AtTask are used with permission from AtTask, Inc. Information and screenshots from MindView Business are used with permission from MatchWare. Some of the product names and company names used in this book have been used for identification purposes only and may be trademarks or registered trademarks of their respective manufacturers and sellers.

The material that is reprinted from the PMBOK® Guide, Fifth Edition (©2013 Project Management Institute, Inc., all rights reserved) is used with permission of the Project Management Institute, Inc., 14 Campus Boulevard, Newtown Square, PA 19073- 3299, USA. Phone: (610)356-4600. PMI, PMP, and PMBOK are registered marks of the Project Management Institute, Inc. Published by Kathy Schwalbe, LLC in Minneapolis, MN, July 2012. Minor corrections made in February 2013. Book stores should email schwalbe@augsburg.edu to place orders. Also available from www.amazon.com. Free companion Web site: www.intropm.com Visit www.kathyschwalbe.com for more information on this and other books by Kathy Schwalbe.

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BRIEF TABLE OF CONTENTS Chapter 1 An Introduction to Project, Program, and Portfolio Management Chapter 2 Project, Program, and Portfolio Selection Chapter 3 Initiating Projects Chapter 4 Planning Projects, Part I (Project Integration, Scope, Time, and Cost Management) Chapter 5 Planning Projects, Part II (Project Quality, Human Resource, Communications, Stakeholder, Risk, and Procurement Management) Chapter 6 Executing Projects Chapter 7 Monitoring and Controlling Projects Chapter 8 Closing Projects Chapter 9 Best Practices in Project Management Appendix A Brief Guide to Microsoft Project 2010 Appendix B Brief Guide to AtTask Appendix C Resources Glossary

DETAILED TABLE OF CONTENTS Chapter 1: An Introduction To Project, Program, And Portfolio Management Introduction What Is A Project?

Examples Of Projects Project Attributes Project Constraints

What Is Project Management? Project Stakeholders Project Management Process Groups And Knowledge Areas Project Management Tools And Techniques Project Success

Program And Project Portfolio Management Programs Project Portfolio Management

The Project Management Profession Suggested Skills For Project, Program, And Portfolio Managers Importance Of Leadership Skills Project Management Certification Ethics In Project Management Project Management Software

Chapter Summary Quick Quiz

Quick Quiz Anwers Discussion Questions Exercises Team Projects Key Terms End Notes Chapter 2: Project, Program, And Portfolio Selection Aligning Projects With Business Strategy

Strategic Planning SWOT Analysis

Four-Stage Planning Process For Project Selection

Methods For Selecting Projects Focusing On Competitive Strategy And Broad Organizational Needs Performing Financial Projections

Net Present Value Analysis Return On Investment Payback Analysis Using A Weighted Scoring Model

Implementing A Balanced Scorecard Addressing Problems, Opportunities, And Directives Project Time Frame Project Priority

Program Selection Focusing On Coordination And Benefits Approaches To Creating Programs

Project Portfolio Selection Sample Approach For Creating A Project Portfolio Five Levels Of Project Portfolio Management

Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Key Terms End Notes Chapter 3: Initiating Projects Project Management Process Groups

Mapping The Process Groups To The Knowledge Areas Developing A Project Management Methodology The Importance Of Top Management Commitment The Need For Organizational Standards

PreInitiating And Initiating Global Construction’s Just-In-Time Training Project PreInitiating Processes And Outputs

Contents Of A Business Case Sample Business Case

Initiating Processes And Outputs Identifying Stakeholders Sample Stakeholder Register And Stakeholder Analysis Creating A Project Charter Contents Of A Project Charter Sample Project Charter Holding A Project KickOff Meeting Sample KickOff Meeting Agenda

Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Team Projects Key Terms End Notes Chapter 4: Planning Projects, Part 1 Introduction Project Planning Should Guide Project Execution Summary Of Planning Processes And Outputs Project Integration Management

Team Contracts Sample Team Contract Project Management Plans Sample Project Management Plan

Project Scope Management Planning Scope Management Develop A Scope Management Plan And Requirements Management Plan Sample Requirements Management Plan Collecting Requirements Sample Requirements Traceability Matrix Defining Scope Sample Scope Statement Creating The Work Breakdown Structure Approaches To Developing Work Breakdown Structures

Using Guidelines The Analogy Approach The Top-Down Approach The BottomUp Approach Mind Mapping

Sample WBS Creating The WBS Dictionary Sample WBS Dictionary Entry

Project Time Management Planning Schedule Management Defining Activities Creating The Activity List And Attributes Sample Activity List And Attributes Creating A Milestone List Sample Milestone List Sequencing Activities Project Schedule Network Diagrams Estimating Activity Resources Sample Activity Resource Requirements Estimating Activity Duration Sample Activity Duration Estimates Developing The Project Schedule Critical Path Analysis

Calculating The Critical Path Growing Grass Can Be On The Critical Path Using Critical Path Analysis To Make Schedule Trade-Offs Importance Of Updating Critical Path Data

Critical Chain Scheduling Sample Project Schedule

Project Cost Management Planning Cost Management Estimating Costs Cost Estimation Tools And Techniques Sample Cost Estimate Cost Budgeting Sample Cost Baseline

Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Team Projects Key Terms End Notes Chapter 5: Planning Projects, Part 2 Introduction Summary Of Planning Processes And Outputs Project Quality Management

Planning Quality Management Sample Quality Management Plan Quality Metrics Sample Project Dashboard And Quality Metrics Description Quality Checklists Sample Quality Checklist

Project Human Resource Management Project Organizational Charts Sample Project Organizational Chart Responsibility Assignment Matrices Sample Responsibility Assignment Matrix Resource Histograms Sample Resource Histogram Staffing Management Plans Sample Staffing Management Plan

Project Communications Management Communications Management Plans Sample Communications Management Plan Project Web Sites Sample Project Web Site

Project Stakeholder Management Project Risk Management

Planning Risk Management Sample Risk Management Plan

Identifying Risks Performing Qualitative Risk Analysis Sample Probability/Impact Matrix Performing Quantitative Risk Analysis Planning Risk Responses Risk Registers Sample Risk Register Risk-Related Contract Decisions Sample Risk-Related Contract Decisions

Project Procurement Management Make-Or-Buy Decisions Sample Make-Or-Buy Decision Procurement Management Plans Types Of Contracts Sample Procurement Management Plan Procurements Documents: Requests For Proposals Or Quotes Sample Requests For Proposal Contract Statements Of Work Sample Contract Statement Of Work Source Selection Criteria And The Supplier Evaluation Matrices Sample Supplier Evaluation Matrix

Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Team Projects Key Terms End Notes Chapter 6: Executing Projects Introduction Summary Of Executing Processes And Outputs Project Integration Management

Deliverables Sample Deliverables Work Performance Data

Sample Work Performance Data Change Requests Sample Change Request Implemented Solutions To Problems Sample Implemented Solutions To Problems

Issues With Competence And Motivation Poor Conflict Management

Project Quality Management Quality Assurance Techniques Sample Quality Assurance Technique: Cause And Effect Diagram

Project Human Resource Management Motivation

Maslow’s Hierarchy Of Needs Herzberg’s Motivation-Hygiene Theory Mcclelland’s Acquired-Needs Theory Mcgregor’s Theory X And Theory Y Thamhain And Wilemon’s Influence Bases Covey’s Effectiveness Research

Acquiring The Project Team And Making Project Staff Assignments Resource Loading And Leveling Sample Project Staff Assignments Developing The Project Team And Assessing Team Performance Training Team-Building Activities Reward And Recognition Systems Sample Team Performance Assessment Managing The Project Team General Advice On Managing Teams

Project Communications Management Important Project Communications Concepts

Formal And Informal Communications Nonverbal Communications Using The Appropriate Communications Medium

Understanding Individual And Group Communication Needs The Impact Of Team Size On Project Communications

Project Communications And Updating Business Processes Sample Updates To Business Processes

Project Stakeholder Management Managing Stakeholder Engagement Sample Issue Log Sample Issue Log

Project Procurement Management Conducting Procurements Sample Qualified Seller List Sample Agreement Or Contract

Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Team Projects Key Terms End Notes Chapter 7: Monitoring and Controlling Projects Introduction Summary Of Monitoring And Controlling Processes And Outputs Project Integration Management

Monitoring And Controlling Project Work Forecasting With Earned Value Management Sample Forecast Using An Earned Value Chart

Integrated Change Control Project Scope Management

Validating Scope Sample Of Accepted And Unaccepted Deliverables Controlling Scope

Project Time Management Sample Work Performance Information

Project Cost Management Project Quality Management

Sample Quality-Control Tools Project Communications Management

Reporting Performance Sample Performance Report

Project Stakeholder Management Project Risk Management

Sample Risk Register Updates Project Procurement Management

Suggestions For Controlling Procurements Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Team Projects Key Terms End Notes Chapter 8: Closing Projects Introduction Summary Of Closing Outputs Project Integration Management

Sample Customer Acceptance/Project Completion Form Sample Final Report Sample Transition Plan Sample Lessons-Learned Report Project CloseOut Meeting And Knowledge Transfer

Project Procurement Management Sample Written Notice Of A Closed Contract

Advice On Closing Projects Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Team Projects Key Terms

End Notes Chapter 9: Best Practices in Project Management Introduction Defining Project Management Best Practices

The Project Management Institute’s Definition Of Best Practices Ultimate Business Library Best Practices

Best Practices Of Individual Project Managers Project Management Maturity

Capability Maturity Model Integration Project Management Maturity Models Research On Project Management Maturity Ibbs’ The Value Of Project Management Research Thomas And Mullaly Research On Project Management Value Crawford And Cook-Davies Study On Best Industry Outcomes Pricewaterhouse Coopers’ Study On Boosting Business Performance

Summary Of Best Practices Mentioned In This Text Final Advice On Project Management Chapter Summary Quick Quiz

Quick Quiz Answers Discussion Questions Exercises Team Projects Key Terms End Notes Appendix A: Brief Guide to Microsoft Project 2010 Introduction Project Management Software Reviews Basic Features Of Project Management Software What’s New In Project 2010 Using Project 2010

Before You Begin Overview Of Project 2010

Starting Project 2010 And Understanding The Main Screen Elements

Using Project Help And The Project Web Site Exploring Project 2010 Using An Existing File

Project 2010 Views Project 2010 Reports Project 2010 Filters

Creating A New File And Entering Tasks In A Work Breakdown Structure

Creating A New Project File Creating A Work Breakdown Structure Hierarchy Creating Summary Tasks Numbering Tasks Saving Project Files Without A Baseline

Developing The Schedule Calendars Entering Task Durations

Manual And Automatic Scheduling Duration Units And Guidelines For Entering Durations

Entering Task Durations Establishing Task Dependencies Gantt Charts, Network Diagrams, And Critical Path Analysis

Project Cost And Resource Management Entering Fixed And Variable Cost Estimates

Entering Fixed Costs In The Cost Table Entering Resource Information And Cost Estimates Using The New Team Planner Feature

Entering Baseline Plans, Actual Costs, And Actual Times Viewing Earned Value Management Data Integrating Project 2010 With Other Applications

Common Reports Creating Hyperlinks To Other Files

Discussion Questions Exercises End Notes Appendix B: Brief Guide to AtTask Introduction Using AtTask For Portfolio Management

Project Portfolio Management Process Accessing And Reviewing A Sample Portfolio Before You Begin Starting AtTask Optimizing Portfolios

Getting Help In The New AtTask Creating A New Project In AtTask

Discussion Questions Exercises End Notes Appendix C: Resources Introduction Companion Web Sites

For Students For Instructors

Template Files Case Studies

Case Study 1: Real Projects Individual Homework: Project Proposal (100 Points) Individual Homework: Self Assessment (100 Points) Syllabus Description Of Team Projects

Case Study 2: New Business Venture Part 1: Initiating Part 2: Planning Part 3: Executing Part 4: Monitoring And Controlling Part 5: Closing

Case 3: Fixer Upper Part 1: Initiating Part 2: Planning Part 3: Executing Part 4: Monitoring And Controlling Part 5: Closing

Simulation Software MindView Business Software Project Management Certifications

Glossary

PREFACE The recent recession has made organizations appreciate the need for good project, program, and portfolio management skills more than ever. Many organizations, including corporations, government agencies, non-profit organizations, colleges, and universities have responded to this need by establishing courses and programs in project management. Hundreds of books are now available on this topic.

After publishing the first two editions of this book, my publisher, Course Technology, now a branch of Cengage Learning, decided not to update it. They publish other books with higher sales, including my Information Technology Project Management book, soon in its seventh edition. I personally use this text, An Introduction to Project Management, in my project management courses at Augsburg College because most of my students are not IT or CSC majors. Over 40,000 copies of all editions have been sold worldwide as of early 2012. I plan to keep updating and using this text for years to come. I thank Cengage Learning for giving me the rights to self-publish the third and fourth editions and permission to use some of the content from my other book.

What makes this book different from other project management books? First of all, people actually enjoy reading it. I get emails every week from readers like you who appreciate my straightforward, organized writing style. They like the way that I explain concepts and then provide realistic examples to help them learn to apply those concepts. Since I use this text in my own classes, I get a lot of feedback from students and see firsthand what works and does not work in a classroom setting. Several people have commented that they like the cartoons, Jeopardy games on the companion Web site, and my honest, sometimes humorous style. Project management can be a boring subject, but I think it’s one of the most exciting topics and careers, especially if you want to change the world for the better.

This text addresses the need for people in all majors and industries to understand and apply good project, program, and portfolio management. It includes many realworld examples in the “What Went Right,” “What Went Wrong,” “Media Snapshot,” and “Best Practice” segments. People like to read about real projects to learn from the successes and failures of others. They also realize that there are projects in all aspects of life, from remodeling a house to running a political campaign to developing a new software application. The fourth edition also includes a new feature called “Video Highlights.” Many people like to watch videos for learning and entertainment, so I have added some to this edition.

I’m most excited about the fact that this book provides comprehensive samples of applying various tools and techniques to a realistic project. Many people learn best by example, so I’ve provided detailed examples of applying project management to a project everyone can relate to. I have never come across a textbook that presents project management concepts and then brings them to life in a fully developed sample project. I also provide template files for creating the sample documents. I believe this approach helps many people truly understand and apply good project management.

NEW TO THE FOURTH EDITION Building on the success of the previous editions, An Introduction to Project Management, Fourth Edition introduces a uniquely effective combination of features. The main changes to the third edition include the following:

The text is updated to reflect changes in the latest PMBOK® Guide, Fifth Edition, published by PMI in 2013. I used the February 17, 2012 exposure draft in writing this edition.

A new feature called Video Highlights provides examples of online videos students can watch to see examples of real projects, software, and concepts related to project management. Exercises related to these videos are also provided.

There are new examples and expanded coverage of creating a work breakdown structure (WBS), including use of MindView Business software. This software makes it easy to create a mind map of a WBS and then use that to create a Gantt chart. A link is provided for access to a special 60-day trial of this software for users of this book at www.matchware.com/intropm. Appendix B, Brief Guide to AtTask, has been updated to include the latest information on using this best-selling online project management software. It emphasizes using portfolio management features.

Appendix C, Resources, includes a new running case based on a real “fixer upper” project. Some older cases as well as additional new ones are available on the instructor site. There is also more information about using MindView Business and project management simulation software tools.

Updated examples and references are provided throughout the text, and user feedback is incorporated.

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APPROACH This text provides up-to-date information on how good project, program, and portfolio management can help you achieve organizational as well as individual success. Distinct features of this text include its:

relationship to the Project Management Body of Knowledge

instructions on using Microsoft Project 2010 and AtTask software

use of MindView Business software and special 60-day free trial

comprehensive samples of applying tools and techniques to a realistic project

inclusion of templates and seamless integration of various software applications

robust and free companion Web site

PMBOK® Guide Framework The Project Management Institute (PMI) created the Guide to the Project Management Body of Knowledge (the PMBOK® Guide) as a framework for understanding project management. The PMBOK® Guide is, however, just that—a guide. This text uses the PMBOK® Guide, Fifth Edition as a foundation, but goes beyond it by providing more details, highlighting additional topics, and providing a realworld context for project, program, and portfolio management.

Instructions for using Microsoft Project 2010 and AtTask Appendix A of the text includes basic information on project management software and detailed, step-by-step instructions on using the number one standalone product, Microsoft Project 2010. You do not need to buy a separate book to learn how to use Project 2010 effectively. Appendix B includes instructions on using AtTask,

a leading online project management tool.

Examples of using MindView Business software and special 60- day free trial Many people like to create mind maps to perform a SWOT analysis, create a WBS, and perform other creative activities. This text includes examples of using MindView Business software by MatchWare, Inc. and access to a special 60-day free trial of this software.

Comprehensive Samples of Applying Tools and Techniques to a Realistic Project After explaining basic concepts, tools, and techniques, this text shows the reader how an organization selected, initiated, planned, executed, monitored and controlled, and closed a realistic project, called the Just-In-Time Training project. It provides over 50 sample project management deliverables such as a business case, stakeholder register, project charter, project management plan, work breakdown structure, Gantt chart, cost baseline, Pareto chart, resource histogram, performance report, risk register, contract, lessons-learned report, and so on for this project. You can also access the template files used to create them from the free companion Web site for this text or from the author’s personal Web site. As one reviewer stated:

It comprehensively communicates what it really takes to manage a large project, including required deliverables, work products, and documentation. I haven’t seen either a text or documentation in industry which communicates this subject this comprehensively or this accurately. (Gilbert S. Leonard, Adjunct Professor and retired project manager, Exxon Mobil Corporation)

Provides Templates and Seamless Integration of Various Software Applications You do not have to reinvent the wheel when it comes to much of the documentation required for managing projects. This text uses over 50 free template files for creating various documents,

spreadsheets, diagrams, and charts. Various software applications are used throughout the text in a seamless fashion. I purposely created the templates in a simple format. Feel free to modify them to meet your needs.

Includes a Free Companion Web Site (www.intropm.com) A companion Web site provides you with a one-stop location to access informative links and tools to enhance your learning. This site will be a valuable resource as you access links mentioned in the text, take online quizzes, play Jeopardy games, and download templates and files for Project 2010. Instructors can access a protected instructor site, which includes the same information plus copyrighted lecture slides, solution files, sample syllabi, and other information. Instructors can also share information on how they use this text in their classes

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ORGANIZATION AND CONTENT An Introduction to Project Management, Fourth Edition, is organized into nine chapters and three appendices. The first two chapters introduce project, program, and portfolio management and discuss different approaches for their selection. You’ll read about Global Construction, Inc. and how they decided to pursue the Just- In-Time Training project. The next six chapters follow the five process groups of project management: initiating, planning (broken down into two chapters), executing, monitoring and controlling, and closing. These six chapters apply various tools and techniques in each of these process groups to the Just-In-Time Training project. Chapter nine describes more information and research on best practices. Appendix A provides general information on project management software and a step-by-step guide to using Microsoft Project 2010. Appendix B includes information on using AtTask, and Appendix C provides resources information, such as a summary of information on the companion Web site, a list of templates, running case studies, advice on using simulation software, and resources to help you learn more about project management certification.

PEDAGOGICAL FEATURES Several pedagogical features are included in this text to enhance presentation of the materials so that you can more easily understand the concepts and apply them. Throughout the text, emphasis is placed on applying concepts to up-to-date, realworld project management.

Learning Objectives, Chapter Summaries, Quick Quizzes, Discussion Questions, Exercises, Team Projects, and Case Studies Learning Objectives, Chapter Summaries, Quick Quizzes, Discussion Questions, Exercises, Team Projects, and Case Studies are designed to function as integrated study tools. Learning Objectives reflect what you should be able to accomplish after completing each chapter. Chapter Summaries highlight key concepts you should master. The Quick Quizzes help reinforce your understanding of important concepts in each chapter. The Discussion Questions help guide critical thinking about those key concepts. Exercises provide opportunities to practice important techniques, as do the Team Projects. The Case Studies in Appendix C provide a robust means to apply what you have learned from the text to realistic case studies, similar to the example used throughout the text.

Opening Case and Case Wrap-Up To set the stage, each chapter begins with an opening case related to the materials in that chapter. These scenarios spark interest and introduce important concepts in a realworld context. As project management concepts and techniques are discussed, they are applied to the opening case and other similar scenarios. Each chapter then closes with a Case Wrap-Up—some problems are overcome and some problems require more effort—to further illustrate the real world of project management.

What Went Right? and What Went Wrong? Failures, as much as successes, can be valuable learning

experiences. Carl Hixson, a program manager at Oracle and adjunct instructor who uses this text, said he loves the anonymous quote, “We need to learn from people’s mistakes because we’ll never have time to make them all ourselves.” Each chapter of the text includes one or more examples of real projects that went right as well as examples of projects that went wrong. These examples further illustrate the importance of mastering key concepts in each chapter.

Media Snapshots, Best Practice, and Video Highlights The world is full of projects. Several television shows, movies, newspapers, Web sites, and other media highlight project results, good and bad. Relating project management concepts to all types of projects, as highlighted in the media, will help you understand and see the importance of this growing field. Why not get people excited about studying project management by showing them how to recognize project management concepts in popular television shows, movies, or other media? It is also important to study best practices so readers can learn how to implement project management in an optimum way. Many students also enjoy watching videos to enhance their understanding of topics, so each chapter includes summaries and links to relevant videos.

Cartoons Each chapter includes a cartoon used with permission from the popular Web site xkcd.com. These cartoons use humor to illustrate concepts from the text.

Key Terms The field of project management includes many unique terms that are vital to creating a common language and understanding of the field. Key terms are displayed in boldface and are defined the first time they appear. Definitions of key terms are provided in alphabetical order at the end of each chapter and in a glossary at the end of the text.

Application Software Learning becomes much more dynamic with handson practice using the top project management software tools in the industry,

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Microsoft Project 2010 AtTask, MindView Business, as well as other tools, such as spreadsheet software. Each chapter offers you many opportunities to get handson experience and build new software skills by applying concepts to problems posed for them. In this way, the text accommodates both those who learn by reading and those who learn by doing.

SUPPLEMENTS The following supplemental materials are available when this text is used in a classroom setting. All of the teaching tools available with this text are provided to the instructor on a secure Web site. Instructors must contact me at schwalbe@augsburg.edu to gain access.

Instructor’s Manual: The Instructor’s Manual that accompanies this textbook includes additional instructional material to assist in class preparation, including suggestions for lecture topics and additional discussion questions.

PowerPoint Presentations: The instructor site for this text includes lecture slides for each chapter created with Microsoft PowerPoint. These slides provide a teaching aid for classroom presentation, and they can be made available to students on the organization’s secure network for online review or they can be printed for classroom distribution. Instructors can modify slides or add their own slides for additional topics they introduce to the class. Remember that these slides are copyrighted materials.

Solution Files: Solutions to end-of-chapter questions can be found on the instructor site.

Text Banks: In addition to the Quick Quiz questions in the text and interactive quizzes available from www.intropm.com, the secure instructor site includes hundreds of additional test questions in various formats.

Student Online Companion: As mentioned earlier, the free student site includes links to sites mentioned in the text, template files, interactive quizzes, Jeopardy games, and other helpful resources.

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ACKNOWLEDGEMENTS I thank my many colleagues and experts in the field who contributed information to this book. I especially thank Don R. James, PMP, Adjunct Professor, Lone Star College in Houston, Texas; James Stewart from American University in Maryland; Ray Roche from the Canberra Institute of Technology in Australia; and Cindy LeRouge from St. Louis University for providing a detailed review and edit of this edition. One of my former students, Cheryl Bloberger, agreed to do the final proofreading of this text. I thank Ty Kiisel, Doug Anderson, and Josh Custer at AtTask and Ulrik Merrild from MatchWare Inc. for providing me with an evaluation copy of their software and helping to make it easier for readers of this book to use a free trial. I also thank Randall Munroe, creator of xkcd.com, for allowing me to use his great comics.

I want to thank my students and colleagues at Augsburg College, the University of Minnesota, and corporate classes for providing input. I received many valuable comments from them on ways to improve my materials and courses. I am also grateful for the examples students and instructors around the world provide and the questions they ask in classes or via email. I learn new aspects of project management and teaching by interacting with students, faculty, and staff.

Most of all, I am grateful to my family. Without their support, I never could have written this book. My wonderful husband, Dan, was very patient and supportive, as always. His expertise as a lead software developer for ComSquared Systems comes in handy, too. Our three children, Anne, Bobby, and Scott, continue to be very supportive of their mom’s work. Our children all understand the main reason why I write—I have a passion for educating future leaders of the world, including them.

As always, I am eager to receive your feedback on this book. Please send all feedback to me at schwalbe@augsburg.edu

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Kathy Schwalbe, Ph.D., PMP

Professor, Department of Business Administration

Augsburg College

ABOUT THE AUTHOR Kathy Schwalbe is a Professor in the Department of Business Administration at Augsburg College in Minneapolis, where she primarily teaches courses in project management and problem solving for business. She has also taught systems analysis and design, information systems projects, and electronic commerce. Kathy was an adjunct faculty member at the University of Minnesota, where she taught a graduate-level course in project management in the engineering department. She also provides training and consulting services to several organizations and speaks at numerous conferences. Kathy’s first job out of college was as a project manager in the Air Force. She worked for 10 years in industry before entering academia in 1991. She was an Air Force officer, project manager, systems analyst, senior engineer, and information technology consultant. Kathy is an active member of PMI, having served as the Student Chapter Liaison for the Minnesota chapter, VP of Education for the Minnesota chapter, Editor of the ISSIG Review, Director of Communications for PMI’s Information Systems Specific Interest Group, member of PMI’s test-writing team, and writer for the community posts. Kathy earned her Ph.D. in Higher Education at the University of Minnesota, her MBA at Northeastern University’s High Technology MBA program, and her B.S. in mathematics at the University of Notre Dame. She was named Educator of the Year in 2011 by the Association of Information Technology Professionals (AITP) Education Special Interest Group (EDSIG). Kathy lives in Minnesota with her husband. They enjoy being empty-nesters after raising three children. Visit her personal Web site at www.kathyschwalbe.com and the text site at www.intropm.com.

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Chapter 1

An Introduction to Project, Program, and Portfolio Management

LEARNING OBJECTIVES After reading this chapter, you will be able to:

Understand the growing need for better project, program, and portfolio management Explain what a project is, provide examples of projects, list various attributes of projects, and describe project constraints Describe project management and discuss key elements of the project management framework, including project stakeholders, the project management knowledge areas, common tools and techniques, and project success factors Discuss the relationship between project, program, and portfolio management and their contribution to enterprise success Describe the project management profession, including suggested skills for project, program, and portfolio managers, the role of professional organizations like the Project Management Institute, the importance of certification and ethics, and the growth of project and portfolio management software

OPENING CASE Doug Milis, the Chief Executive Officer (CEO) of Global Construction, Inc., was summarizing annual corporate highlights to the board of directors. Like many other large construction companies, they had a very difficult year. They had to scale down operations and let some employees go. When one of the board members asked what he was most proud of that year, Doug thought for a few seconds, and then replied,

“Excellent question, Gabe. Honestly, I think the main reason we survived this year was because we are truly a project-based organization. We have dramatically improved our ability to quickly select and implement projects that help our company succeed and cancel or redirect other projects. All of our projects align with our business strategies, and we have consistent processes in place for getting things done. We can also respond quickly to market changes, unlike many of our competitors. Marie Scott, our Director of the Project Management Office (PMO), has done an outstanding job in making this happen. And believe me, it was not easy. It’s never easy to implement changes across an entire company. But with this new capability to manage projects across the organization, I am very confident that we will have continued success in years to come.” INTRODUCTION Many people and organizations today have a new or renewed interest in project management. In the past, project management primarily focused on providing schedule and resource data to top management in just a few industries, such as the military and construction industries. Today’s project management involves much more, and people in every industry and every country manage projects. New technologies have become a significant factor in many businesses, and the use of interdisciplinary and global work teams has radically changed the work environment.

The facts below demonstrate the significance of project management:

In 2011, the average annual salary (excluding bonuses, in U.S. dollars) for someone in the project management profession was $160,409 in Switzerland (the highest-paid country), $139,497 in Australia, $105,000 in the United States, and $23,207 in China (the lowest-paid country). This survey was based on self- reported data from more than 30,000 practitioners in 29 countries.1 CareerBuilder.com found that 44% of U.S. employers listed project management as a skill they looked for in new college graduates, behind only communication and technical skills.2 Employers throughout the world, especially in Australia and Canada, echo the same request. Project management certification continues to be one of the most popular certifications throughout the world. The U.S. spends $2.3 trillion on projects every year, and the world as a whole spends nearly $10 trillion on projects of all kinds. Projects, therefore, account for about one fourth of the U.S. and the world’s gross domestic product.3 The Apprentice, a popular reality television show, portrays the important role project managers play in business. Each week of the show, teams select a project manager to lead them in accomplishing that week’s project. The project manager is held partly responsible for the team's success or failure. Whether you are trying to make money by selling lemonade, running a golf tournament, or developing a new product, project managers play a vital role to business success. Project management is also a vital skill for personal success. Managing a family budget, planning a wedding, remodeling a house, completing a college degree, and many other personal projects can benefit from good project management.

What Went Wrong? In 1995, the Standish Group published an often-quoted study entitled “CHAOS”. This prestigious consulting firm surveyed 365 information technology (IT) executive managers in the United States who managed more than 8,380 IT application projects. As the title

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of the study suggests, the projects were in a state of chaos. United States companies spent more than $250 billion each year in the early 1990s on approximately 175,000 IT application development projects. Examples of these projects included creating a new database for a state department of motor vehicles, developing a new system for car rental and hotel reservations, and implementing a client-server architecture for the banking industry. Their study reported that the overall success rate of IT projects was only 16.2 percent. The surveyors defined success as meeting project goals on time and on budget.

The study also found that more than 31 percent of IT projects were canceled before completion, costing U.S. companies and government agencies more than $81 billion. The authors of this study were adamant about the need for better project management in the IT industry. They explained, “Software development projects are in chaos, and we can no longer imitate the three monkeys—hear no failures, see no failures, speak no failures.” 4

In a more recent study, PricewaterhouseCoopers surveyed 200 companies from 30 different countries about their project management maturity and found that over half of all projects fail. They also found that only 2.5 percent of corporations consistently meet their targets for scope, time, and cost goals for all types of projects.5

Although several researchers question the methodology of the CHAOS studies, their popularity has prompted organizations throughout the world to examine their practices in managing projects. Managers are recognizing that to be successful, they need to be conversant with and use modern project management techniques. People from all types of disciplines—science, liberal arts, education, business, etc.—can benefit from basic project management principles. Individuals are realizing that to remain competitive, they must develop skills to effectively manage the professional and personal projects they undertake. They also realize that many of the concepts of project management, especially interpersonal skills, will help them as they work with people on a day-to-day basis.

Organizations claim that using project management provides advantages, such as:

Better control of financial, physical, and human resources Improved customer relations Shorter development times Lower costs Higher quality and increased reliability Higher profit margins Improved productivity Better internal coordination Higher worker morale

In addition to project management, organizations are embracing program and portfolio management to address enterprise-level needs. This chapter introduces projects and project management, describes the differences between project, program, and portfolio management, discusses the role of the project, program, and portfolio manager, and provides important background information on these growing professions.

WHAT IS A PROJECT? To discuss project management, it is important to understand the concept of a project. A project is “a temporary endeavor undertaken to create a unique product, service, or result.”6 Operations, on the other hand, is work done in organizations to sustain the business. Projects are different from operations in that they end when their objectives have been reached or the project has been terminated.

Examples of Projects Projects can be large or small and involve one person or thousands of people. They can be done in one day or take years to complete. Examples of projects include the following:

A young couple hires a firm to design and build them a new house. A retail store manager works with employees to display a new clothing line. A college campus upgrades its technology infrastructure to

provide wireless Internet access. A construction company designs and constructs a new office building for a client. A school implements new government standards for tracking student achievement. A group of musicians starts a company to help children develop their musical talents. A pharmaceutical company launches a new drug. A television network develops a system to allow viewers to vote for contestants and provide other feedback on programs. The automobile industry develops standards to streamline procurement. A government group develops a program to track child immunizations.

Video Highlights The Project Management Institute (PMI) recognizes outstanding performance in project management by announcing a Project of the Year award winner. Their Web site lists winners since 1989, and videos summarize the award-winning projects since 2009. You can watch videos of the following projects:

2011: Prairie Waters Project, Aurora, Colorado, USA submitted by City of Aurora -Aurora Water & CH2M Hill, Inc. 2010: National Ignition Facility Project, Livermore, California, USA submitted by Lawrence Livermore National Laboratory 2009: Newmont TS Power Plant Project, Nevada, USA submitted by Fluor Enterprises, Inc. and Newmont Nevada Energy Investment, Ltd.

You can also learn about the history of project management by watching a series of videos on youtube.com by Mark Kozak- Holland, author of a book on the subject. See www.intropm.com for links to video highlights. Project Attributes As you can see, projects come in all shapes and sizes. The following attributes help to define a project further:

A project has a unique purpose. Every project should have a well-defined objective. For example, many people hire firms to design and build a new house, but each house, like each person, is unique. A project is temporary. A project has a definite beginning and a definite end. For a home construction project, owners usually have a date in mind when they’d like to move into their new home. A project is developed using progressive elaboration or in an iterative fashion. Projects are often defined broadly when they begin, and as time passes, the specific details of the project become more clear. For example, there are many decisions that must be made in planning and building a new house. It works

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best to draft preliminary plans for owners to approve before more detailed plans are developed. A project requires resources, often from various areas. Resources include people, hardware, software, or other assets. Many different types of people, skill sets, and resources are needed to build a home. A project should have a primary customer or sponsor. Most projects have many interested parties or stakeholders, but someone must take the primary role of sponsorship. The project sponsor usually provides the direction and funding for the project. A project involves uncertainty. Because every project is unique, it is sometimes difficult to define the project’s objectives clearly, estimate exactly how long it will take to complete, or determine how much it will cost. External factors also cause uncertainty, such as a supplier going out of business or a project team member needing unplanned time off. Uncertainty is one of the main reasons project management is so challenging, because uncertainty invokes risk.

It should not be difficult to explain the goals or purpose of a project. As described in the next chapter, it is important to work on projects for the right reasons. Unlike the characters in the comic in Figure 1-1, you should not work on projects just because you think they are cool; projects should add value to individuals or organizations in a cost-effective manner.

Figure 1-1. Not so practical projects (www.xkcd.com) A good project manager contributes to a project’s success.

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Project managers work with the project sponsors, the project team, and the other people involved in a project to define, communicate, and meet project goals.

Project Constraints Every project is constrained in different ways. Some project managers focus on scope, time, and cost constraints. These limitations are sometimes referred to in project management as the triple constraint. To create a successful project, project managers must consider scope, time, and cost and balance these three often- competing goals. They must consider the following:

Scope: What work will be done as part of the project? What unique product, service, or result does the customer or sponsor expect from the project? Time: How long should it take to complete the project? What is the project’s schedule? Cost: What should it cost to complete the project? What is the project’s budget? What resources are needed?

Other people focus on the quadruple constraint, which adds quality as a fourth constraint.

Quality: How good does the quality of the products or services need to be? What do we need to do to satisfy the customer?

The PMBOK® Guide, Fifth Edition suggests these four constraints plus risk and resources, but states that there may be others as well, depending on the project.