Macon inc case study answers

Read the case study "Communication Failures" starting on page 499 and answer the questions on page 501.

Contents

Preface

Chapter 1: Overview

1.0 Introduction

1.1 Understanding Project Management

1.2 Defining Project Success

1.3 Success, Trade-Offs, and Competing Constraints

1.4 The Project Manager–Line Manager Interface

1.5 Defining the Project Manager’s Role

1.6 Defining the Functional Manager’s Role

1.7 Defining the Functional Employee’s Role

1.8 Defining the Executive’s Role

1.9 Working with Executives

1.10 Committee Sponsorship/Governance

1.11 The Project Manager as the Planning Agent

1.12 Project Champions

1.13 The Downside of Project Management

1.14 Project-Driven versus Non–Project-Driven Organizations

1.15 Marketing in the Project-Driven Organization

1.16 Classification of Projects

1.17 Location of the Project Manager

1.18 Differing Views of Project Management

1.19 Public-Sector Project Management

1.20 International Project Management

1.21 Concurrent Engineering: A Project Management Approach

1.22 Added Value

1.23 Studying Tips for the PMI® Project Management Certification Exam

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Answers

Problems

Chapter 2: Project Management Growth: Concepts and Definitions

2.0 Introduction

2.1 General Systems Management

2.2 Project Management: 1945–1960

2.3 Project Management: 1960–1985

2.4 Project Management: 1985–2012

2.5 Resistance to Change

2.6 Systems, Programs, and Projects: A Definition

2.7 Product versus Project Management: A Definition

2.8 Maturity and Excellence: A Definition

2.9 Informal Project Management: A Definition

2.10 The Many Faces of Success

2.11 The Many Faces of Failure

2.12 The Stage-Gate Process

2.13 Project Life Cycles

2.14 Gate Review Meetings (Project Closure)

2.15 Engagement Project Management

2.16 Project Management Methodologies: A Definition

2.17 Enterprise Project Management Methodologies

2.18 Methodologies Can Fail

2.19 Organizational Change Management and Corporate Cultures

2.20 Project Management Intellectual Property

2.21 Systems Thinking

2.22 Studying Tips for the PMI® Project Management Certification Exam

Answers

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Problems

Chapter 3: Organizational Structures

3.0 Introduction

3.1 Organizational Work Flow

3.2 Traditional (Classical) Organization

3.3 Developing Work Integration Positions

3.4 Line-Staff Organization (Project Coordinator)

3.5 Pure Product (Projectized) Organization

3.6 Matrix Organizational Form

3.7 Modification of Matrix Structures

3.8 The Strong, Weak, or Balanced Matrix

3.9 Center for Project Management Expertise

3.10 Matrix Layering

3.11 Selecting the Organizational Form

3.12 Structuring the Small Company

3.13 Strategic Business Unit (SBU) Project Management

3.14 Transitional Management

3.15 Barriers to Implementing Project Management in Emerging Markets

3.16 Seven Fallacies that Delay Project Management Maturity

3.17 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 4: Organizing and Staffing The Project Office and Team

4.0 Introduction

4.1 The Staffing Environment

4.2 Selecting the Project Manager: An Executive Decision

4.3 Skill Requirements for Project and Program Managers

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4.4 Special Cases in Project Manager Selection

4.5 Selecting the Wrong Project Manager

4.6 Next Generation Project Managers

4.7 Duties and Job Descriptions

4.8 The Organizational Staffing Process

4.9 The Project Office

4.10 The Functional Team

4.11 The Project Organizational Chart

4.12 Special Problems

4.13 Selecting the Project Management Implementation Team

4.14 Mistakes Made by Inexperienced Project Managers

4.15 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 5: Management Functions

5.0 Introduction

5.1 Controlling

5.2 Directing

5.3 Project Authority

5.4 Interpersonal Influences

5.5 Barriers to Project Team Development

5.6 Suggestions for Handling the Newly Formed Team

5.7 Team Building as an Ongoing Process

5.8 Dysfunctions of a Team

5.9 Leadership in a Project Environment

5.10 Life-Cycle Leadership

5.11 Value-Based Project Leadership

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5.12 Organizational Impact

5.13 Employee–Manager Problems

5.14 Management Pitfalls

5.15 Communications

5.16 Project Review Meetings

5.17 Project Management Bottlenecks

5.18 Cross-Cutting Skills

5.19 Active Listening

5.20 Project Problem-Solving

5.21 Brainstorming

5.22 Project Decision-Making

5.23 Predicting the Outcome of a Decision

5.24 Facilitation

5.25 Handling Negative Team Dynamics

5.26 Communication Traps

5.27 Proverbs and Laws

5.28 Human Behavior Education

5.29 Management Policies and Procedures

5.30 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 6: Management Of your time and Stress

6.0 Introduction

6.1 Understanding Time Management

6.2 Time Robbers

6.3 Time Management Forms

6.4 Effective Time Management

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6.5 Stress and Burnout

6.6 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 7: Conflicts

7.0 Introduction

7.1 Objectives

7.2 The Conflict Environment

7.3 Types of Conflicts

7.4 Conflict Resolution

7.5 Understanding Superior, Subordinate, and Functional Conflicts

7.6 The Management of Conflicts

7.7 Conflict Resolution Modes

7.8 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 8: Special Topics

8.0 Introduction

8.1 Performance Measurement

8.2 Financial Compensation and Rewards

8.3 Critical Issues with Rewarding Project Teams

8.4 Effective Project Management in the Small Business Organization

8.5 Mega Projects

8.6 Morality, Ethics, and the Corporate Culture

8.7 Professional Responsibilities

8.8 Internal Partnerships

8.9 External Partnerships

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8.10 Training and Education

8.11 Integrated Product/Project Teams

8.12 Virtual Project Teams

8.13 Breakthrough Projects

8.14 Managing Innovation Projects

8.15 Agile Project Management

8.16 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 9: The Variables for Success

9.0 Introduction

9.1 Predicting Project Success

9.2 Project Management Effectiveness

9.3 Expectations

9.4 Lessons Learned

9.5 Understanding Best Practices

9.6 Best Practices versus Proven Practices

9.7 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 10: Working with Executives

10.0 Introduction

10.1 The Project Sponsor

10.2 Handling Disagreements with the Sponsor

10.3 The Collective Belief

10.4 The Exit Champion

10.5 The In-House Representatives

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10.6 Stakeholder Relations Management

10.7 Politics

10.8 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 11: Planning

11.0 Introduction

11.1 Validating the Assumptions

11.2 Validating the Objectives

11.3 General Planning

11.4 Life-Cycle Phases

11.5 Proposal Preparation

11.6 Kickoff Meetings

11.7 Understanding Participants’ Roles

11.8 Project Planning

11.9 The Statement of Work

11.10 Project Specifications

11.11 Milestone Schedules

11.12 Work Breakdown Structure

11.13 WBS Decomposition Problems

11.14 Work Breakdown Structure Dictionary

11.15 Role of the Executive in Project Selection

11.16 Role of the Executive in Planning

11.17 The Planning Cycle

11.18 Work Planning Authorization

11.19 Why Do Plans Fail?

11.20 Stopping Projects

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11.21 Handling Project Phaseouts and Transfers

11.22 Detailed Schedules and Charts

11.23 Master Production Scheduling

11.24 Project Plan

11.25 Total Project Planning

11.26 The Project Charter

11.27 Project Baselines

11.28 Verification and Validation

11.29 Requirements Traceability Matrix

11.30 Management Control

11.31 The Project Manager–Line Manager Interface

11.32 Fast-Tracking

11.33 Configuration Management

11.34 Enterprise Project Management Methodologies

11.35 Project Audits

11.36 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 12: Network Scheduling Techniques

12.0 Introduction

12.1 Network Fundamentals

12.2 Graphical Evaluation and Review Technique (GERT)

12.3 Dependencies

12.4 Slack Time

12.5 Network Replanning

12.6 Estimating Activity Time

12.7 Estimating Total Project Time

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12.8 Total PERT/CPM Planning

12.9 Crash Times

12.10 PERT/CPM Problem Areas

12.11 Alternative PERT/CPM Models

12.12 Precedence Networks

12.13 Lag

12.14 Scheduling Problems

12.15 The Myths of Schedule Compression

12.16 Understanding Project Management Software

12.17 Software Features Offered

12.18 Software Classification

12.19 Implementation Problems

12.20 Critical Chain

12.21 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 13: Project Graphics

13.0 Introduction

13.1 Customer Reporting

13.2 Bar (Gantt) Chart

13.3 Other Conventional Presentation Techniques

13.4 Logic Diagrams/Networks

13.5 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 14: Pricing and Estimating

14.0 Introduction

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14.1 Global Pricing Strategies

14.2 Types of Estimates

14.3 Pricing Process

14.4 Organizational Input Requirements

14.5 Labor Distributions

14.6 Overhead Rates

14.7 Materials/Support Costs

14.8 Pricing Out the Work

14.9 Smoothing Out Department Man-Hours

14.10 The Pricing Review Procedure

14.11 Systems Pricing

14.12 Developing the Supporting/Backup Costs

14.13 The Low-Bidder Dilemma

14.14 Special Problems

14.15 Estimating Pitfalls

14.16 Estimating High-Risk Projects

14.17 Project Risks

14.18 The Disaster of Applying the 10 Percent Solution to Project Estimates

14.19 Life-Cycle Costing (LCC)

14.20 Logistics Support

14.21 Economic Project Selection Criteria: Capital Budgeting

14.22 Payback Period

14.23 The Time Value of Money

14.24 Net Present Value (NPV)

14.25 Internal Rate of Return (IRR)

14.26 Comparing IRR, NPV, and Payback

14.27 Risk Analysis

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14.28 Capital Rationing

14.29 Project Financing

14.30 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 15: Cost Control

15.0 Introduction

15.1 Understanding Control

15.2 The Operating Cycle

15.3 Cost Account Codes

15.4 Budgets

15.5 The Earned Value Measurement System (EVMS)

15.6 Variance and Earned Value

15.7 The Cost Baseline

15.8 Justifying the Costs

15.9 The Cost Overrun Dilemma

15.10 Recording Material Costs Using Earned Value Measurement

15.11 The Material Accounting Criterion

15.12 Material Variances: Price and Usage

15.13 Summary Variances

15.14 Status Reporting

15.15 Cost Control Problems

15.16 Project Management Information Systems

15.17 Enterprise Resource Planning

15.18 Project Metrics

15.19 Key Performance Indicators

15.20 Value-Based Metrics

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15.21 Dashboards and Scorecards

15.22 Business Intelligence

15.23 Infographics

15.24 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 16: Trade-Off Analysis in a Project Environment

16.0 Introduction

16.1 Methodology for Trade-Off Analysis

16.2 Contracts: Their Influence on Projects

16.3 Industry Trade-Off Preferences

16.4 Conclusion

16.5 Studying Tips for the PMI® Project Management Certification Exam

Answers

Chapter 17: Risk Management

17.0 Introduction

17.1 Definition of Risk

17.2 Tolerance for Risk

17.3 Definition of Risk Management

17.4 Certainty, Risk, and Uncertainty

17.5 Risk Management Process

17.6 Plan Risk Management (11.1)

17.7 Risk Identification (11.2)

17.8 Risk Analysis (11.3, 11.4)

17.9 Qualitative Risk Analysis (11.3)

17.10 Quantitative Risk Analysis (11.4)

17.11 Probability Distributions and the Monte Carlo Process

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17.12 Plan Risk Response (11.5)

17.13 Monitor and Control Risks (11.6)

17.14 Some Implementation Considerations

17.15 The Use of Lessons Learned

17.16 Dependencies Between Risks

17.17 The Impact of Risk Handling Measures

17.18 Risk and Concurrent Engineering

17.19 Studying Tips for the PMI® Project Management Certification Exam

Answers

Problems

Chapter 18: Learning Curves

18.0 Introduction

18.1 General Theory

18.2 The Learning Curve Concept

18.3 Graphic Representation

18.4 Key Words Associated with Learning Curves

18.5 The Cumulative Average Curve

18.6 Sources of Experience

18.7 Developing Slope Measures

18.8 Unit Costs and Use of Midpoints

18.9 Selection of Learning Curves

18.10 Follow-On Orders

18.11 Manufacturing Breaks

18.12 Learning Curve Limitations

18.13 Prices and Experience

18.14 Competitive Weapon

18.15 Studying Tips for the PMI® Project Management Certification Exam

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Answers

Problems

Chapter 19: Contract Management

19.0 Introduction

19.1 Procurement

19.2 Plan Procurements

19.3 Conducting the Procurements

19.4 Conduct Procurements: Request Seller Responses

19.5 Conduct Procurements: Select Sellers

19.6 Types of Contracts

19.7 Incentive Contracts

19.8 Contract Type versus Risk

19.9 Contract Administration

19.10 Contract Closure

19.11 Using a Checklist

19.12 Proposal-Contractual Interaction

19.13 Summary

19.14 Studying Tips for the PMI® Project Management Certification Exam

Answers

Chapter 20: Quality Management

20.0 Introduction

20.1 Definition of Quality

20.2 The Quality Movement

20.3 Comparison of the Quality Pioneers

20.4 The Taguchi Approach

20.5 The Malcolm Baldrige National Quality Award

20.6 ISO 9000

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20.7 Quality Management Concepts

20.8 The Cost of Quality

20.9 The Seven Quality Control Tools

20.10 Process Capability (CP)

20.11 Acceptance Sampling

20.12 Implementing Six Sigma

20.13 Lean Six Sigma and DMAIC

20.14 Quality Leadership

20.15 Responsibility for Quality

20.16 Quality Circles

20.17 Just-In-Time Manufacturing (JIT)

20.18 Total Quality Management (TQM)

20.19 Studying Tips for the PMI® Project Management Certification Exam

Answers

Chapter 21: Modern Developments in Project Management

21.0 Introduction

21.1 The Project Management Maturity Model (PMMM)

21.2 Developing Effective Procedural Documentation

21.3 Project Management Methodologies

21.4 Continuous Improvement

21.5 Capacity Planning

21.6 Competency Models

21.7 Managing Multiple Projects

21.8 End-of-Phase Review Meetings

Chapter 22: The Business of Scope Changes

22.0 Introduction

22.1 Need for Business Knowledge

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22.2 Timing of Scope Changes

22.3 Business Need for a Scope Change

22.4 Rationale for Not Approving a Scope Change

Chapter 23: The Project Office

23.0 Introduction

23.1 Present-Day Project Office

23.2 Implementation Risks

23.3 Types of Project Offices

23.4 Networking Project Management Offices

23.5 Project Management Information Systems

23.6 Dissemination of Information

23.7 Mentoring

23.8 Development of Standards and Templates

23.9 Project Management Benchmarking

23.10 Business Case Development

23.11 Customized Training (Related to Project Management)

23.12 Managing Stakeholder Relations

23.13 Continuous Improvement

23.14 Capacity Planning

23.15 Risks of Using a Project Office

23.16 Project Portfolio Management

Chapter 24: Managing Crisis Projects

24.0 Introduction

24.1 Understanding Crisis Management

24.2 Ford versus Firestone

24.3 The Air France Concorde Crash

24.4 Intel and the Pentium Chip

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24.5 The Russian Submarine Kursk

24.6 The Tylenol Poisonings

24.7 Nestlé’s Marketing of Infant Formula

24.8 The Space Shuttle Challenger Disaster

24.9 The Space Shuttle Columbia Disaster

24.10 Victims Versus Villains

24.11 Life-Cycle Phases

24.12 Project Management Implications

Chapter 25: Future of Project Management

25.0 Changing Times

25.1 Complex Projects

25.2 Complexity Theory

25.3 Scope Creep

25.4 Project Health Checks

25.5 Managing Troubled Projects

Chapter 26: The Rise, Fall, and Resurrection of Iridium: A Project Management Perspective

26.0 Introduction

26.1 Naming the Project “Iridium”

26.2 Obtaining Executive Support

26.3 Launching the Venture

26.4 The Iridium System

26.5 The Terrestrial and Space-Based Network

26.6 Project Initiation: Developing the Business Case

26.7 The “Hidden” Business Case

26.8 Risk Management

26.9 The Collective Belief

26.10 The Exit Champion

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26.11 Iridium’s Infancy Years

26.12 Debt Financing

26.13 The M-Star Project

26.14 A New CEO

26.15 Satellite Launches

26.16 An Initial Public Offering (IPO)

26.17 Signing Up Customers

26.18 Iridium’s Rapid Ascent

26.19 Iridium’s Rapid Descent

26.20 The Iridium “Flu”

26.21 Searching for a White Knight

26.22 The Definition of Failure (October, 1999)

26.23 The Satellite Deorbiting Plan

26.24 Iridium is Rescued for $25 Million

26.25 Iridium Begins to Grow

26.26 Shareholder Lawsuits

26.27 The Bankruptcy Court Ruling

26.28 Autopsy

26.29 Financial Impact of the Bankruptcy

26.30 What Really Went Wrong?

26.31 Lessons Learned

26.32 Conclusion

Epilogue (2011)

Appendix A. Solutions to the Project Management Conflict Exercise

Appendix B. Solution to Leadership Exercise

Appendix C. Dorale Products Case Studies

Appendix D. Solutions to the Dorale Products Case Studies

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Appendix E. Alignment of the PMBOK® Guide to the Text

Author Index

Subject Index

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Dr. Kerzner’s 16 Points to Project Management Maturity

1. Adopt a project management methodology and use it consistently.

2. Implement a philosophy that drives the company toward project management maturity and communicate it to everyone.

3. Commit to developing effective plans at the beginning of each project.

4. Minimize scope changes by committing to realistic objectives.

5. Recognize that cost and schedule management are inseparable.

6. Select the right person as the project manager.

7. Provide executives with project sponsor information, not project management information.

8. Strengthen involvement and support of line management.

9. Focus on deliverables rather than resources.

10. Cultivate effective communication, cooperation, and trust to achieve rapid project management maturity.

11. Share recognition for project success with the entire project team and line management.

12. Eliminate nonproductive meetings.

13. Focus on identifying and solving problems early, quickly, and cost effectively.

14. Measure progress periodically.

15. Use project management software as a tool—not as a substitute for effective planning or interpersonal skills.

16. Institute an all-employee training program with periodic updates based upon documented lessons learned.

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Library of Congress Cataloging-in-Publication Data: Kerzner, Harold.

Project management : a systems approach to planning, scheduling, and controlling / Harold Kerzner, Ph. D. Senior Executive Director for Project Management, the International Institute for Learning, New York, New York. — Eleventh edition.

pages cm

Includes bibliographical references and index.

24

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ISBN 978-1-118-02227-6 (cloth); ISBN 978-1-118-41585-6 (ebk); ISBN 978-1- 118-41855-0 (ebk); ISBN 978-1-118-43357-7 (ebk); ISBN 978-1-118-48322-0

(ebk); ISBN 978-1-118-48323-7 (ebk) 1. Project management. 2. Project management—Case studies. I. Title.

HD69.P75K47 2013

658.4’04—dc23

2012026239

25

To

Dr. Herman Krier,

my Friend and Guru,

who taught me well the

meaning of the word “persistence”

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Preface Project management has evolved from a management philosophy restricted to a few functional areas and regarded as something nice to have to an enterprise project management system affecting every functional unit of the company. Simply stated, project management has evolved into a business process rather than merely a project management process. More and more companies are now regarding project management as being mandatory for the survival of the firm. Organizations that were opponents of project management are now advocates. Management educators of the past, who preached that project management could not work and would be just another fad, are now staunch supporters. Project management is here to stay. Colleges and universities are now offering graduate degrees in project management.

The text discusses the principles of project management. Students who are interested in advanced topics, such as some of the material in Chapters 21 to 25 of this text, may wish to read one of my other texts, Advanced Project Management: Best Practices in Implementation (New York: Wiley, 2004) and Project Management Best Practices: Achieving Global Excellence, 2nd edition (Hoboken, NJ: Wiley and IIL Publishers, 2010). John Wiley & Sons and the International Institute for Learning also introduced a four-book series on project management best practices, authored by Frank Saladis, Carl Belack, and Harold Kerzner.

This book is addressed not only to those undergraduate and graduate students who wish to improve upon their project management skills but also to those functional managers and upper-level executives who serve as project sponsors and must provide continuous support for projects. During the past several years, management’s knowledge and understanding of project management has matured to the point where almost every company is using project management in one form or another. These companies have come to the realization that project management and productivity are related and that we are now managing our business as though it is a series of projects. Project management coursework is now consuming more of training budgets than ever before.

General reference is provided in the text to engineers. However, the reader should not consider project management as strictly engineering-related. The engineering examples are the result of the fact that project management first appeared in the engineering disciplines, and we should be willing to learn from their mistakes. Project management now resides in every profession, including information systems, health care, consulting, pharmaceutical, banks, and

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government agencies. The text can be used for both undergraduate and graduate courses in business,

information systems, and engineering. The structure of the text is based upon my belief that project management is much more behavioral than quantitative since projects are managed by people rather than tools. The first five chapters are part of the basic core of knowledge necessary to understand project management. Chapters 6 through 8 deal with the support functions of managing your time effectively, conflicts, and other special topics. Chapters 9 and 10 describe factors for predicting success and management support. It may seem strange that ten chapters on organizational behavior and structuring are needed prior to the “hard-core” chapters of planning, scheduling, and controlling. These first ten chapters are needed to understand the cultural environment for all projects and systems. These chapters are necessary for the reader to understand the difficulties in achieving cross-functional cooperation on projects where team members are working on multiple projects concurrently and why the people involved, all of whom may have different backgrounds, cannot simply be forged into a cohesive work unit without friction. Chapters 11 through 20 are more of the quantitative chapters on planning, scheduling, cost control, estimating, contracting (and procurement), and quality. The next five chapters are advanced topics and future trends. Chapter 26 is a capstone case study that can be related to almost all of the chapters in the text.

The changes that were made in the eleventh edition include:

A new section on success, trade-offs, and competing constraints A new section on added value A new section on business intelligence A new section on project governance An updated section on processes supporting project management An updated section on the types of project closure A new section on engagement project management A new section on barriers to implementing project management in emerging markets A new section on fallacies in implementing project management A new section on enterprise project management systems A new section on How Project Management Methodologies Can Fail A new section on the future of project management A new section on managing complex projects A new section on managing scope creep A new section on project health checks A new section on how to recover a troubled project

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A new section on managing public projects A new section on managing international projects A new section on project politics A new section on twenty common mistakes in project management A new section on managing innovation projects A new section on the differences between best practices and proven practices An updated section on project sponsorship An updated section on culture, teamwork, and trust A New Section on stakeholder relations management A new section on value-based leadership An updated section on validating project assumptions A new section on validating project objectives A new section on the WBS dictionary A new section on validation and verification A new section on project management baselines A new section on the traceability matrix An expansion on WBS core attributes An expansion on using the WBS and WBS dictionary for verification A new section on project management metrics A new section on key performance indicators A new section on value metrics A new section on project management dashboards A new section on portfolio management A new section on complexity theory A new section on project management information systems A new section on enterprise resource planning A new section on project problem solving A new section on brainstorming A new section on project decision-making A new section on determining the impact of a decision A new section on active listening A new section on agile project management A capstone case study which can be used as a review of the entire PMBOK® Guide, 5th edition, domain areas

The text contains more than 25 case studies, more than 125 multiple-choice questions, and nearly 400 discussion questions. There is also a separate book of cases (Project Management Case Studies, fourth edition) that provides additional real-world examples.

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This text, the PMBOK® Guide, and the book of cases are ideal as self-study tools for the Project Management Institute’s PMP® Certification exam. Because of this, there are tables of cross references on each chapter’s opening page in the textbook detailing the sections from the book of cases and the Guide to the Project Management Body of Knowledge (PMBOK® Guide) that apply to that chapter’s content. The left-hand margin of the pages in the text has side bars that identify the cross-listing of the material on that page to the appropriate section(s) of the PMBOK® Guide. At the end of most of the chapters is a section on study tips for the PMP® exam, including more than 125 multiple-choice questions.

This textbook is currently used in the college market, in the reference market, and for studying for the PMP® Certification exam. Therefore, to satisfy the needs of all markets, a compromise had to be reached on how much of the text would be aligned to the PMBOK® Guide and how much new material would be included without doubling the size of the text. Some colleges and universities use the textbook to teach project management fundamentals without reference to the PMBOK® Guide. The text does not contain all of the material necessary to support each section of the PMBOK® Guide. Therefore, to study for the PMP® Certification exam, the PMBOK® Guide must also be used together with this text. The text covers material for almost all of the PMBOK® Guide knowledge areas but not necessarily in the depth that appears in the PMBOK® Guide.

An instructor’s manual is available only to college and university faculty members by contacting your local Wiley sales representative or by visiting the Wiley website at www.wiley.com/kerzner. This website includes not only the instructor’s manual but also 500 PowerPoint slides that follow the content of the book and help organize and execute classroom instruction and group learning. Access to the instructor’s material can be provided only through John Wiley & Sons, not the author.

One-, two-, and three-day seminars on project management and the PMP® Certification Training using the text are offered by contacting Lori MIlhaven, Executive Vice President, the International Institute for Learning, at 800-325-1533, extension 5121 (email address: lori.milhaven@iil.com).

The problems and case studies at the ends of the chapters cover a variety of industries. Almost all of the case studies are real-world situations taken from my consulting practice. Feedback from my colleagues who are using the text has

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http://www.wiley.com/kerzner
mailto:lori.milhaven@iil.com
provided me with fruitful criticism, most of which has been incorporated into the tenth edition.

The majority of the articles on project management that have become classics have been referenced in the textbook throughout the first eleven chapters. These articles were the basis for many of the modern developments in project management and are therefore identified throughout the text.

Many colleagues provided valuable criticism. In particular, I am indebted to those industrial/government training managers whose dedication and commitment to quality project management education and training have led to valuable changes in this and previous editions. In particular, I wish to thank Frank Saladis, PMP®, Senior Consultant and Trainer with the International Institute for Learning, for his constructive comments, recommendations, and assistance with the mapping of the text to the PMBOK® Guide as well as recommended changes to many of the chapters. I am indebted to Dr. Edmund Conrow, PMP®, for a decade of assistance with the preparation of the risk management chapters in all of my texts. I am also indebted to Dr. Rene Rendon for his review and recommendations for changes to the chapter on contract management.

To the management team and employees of the International Institute for Learning, thank you all for 20 years of never-ending encouragement, support, and assistance with all of my project management research and writings.

Harold Kerzner

The International Institute for Learning

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Overview

Related Case Studies (from Kerzner/Project Management Case Studies, 4th Edition)

Related Workbook Exercises (from Kerzner/Project Management Workbook and PMP ®/CAPM® Exam Study Guide, 11th Edition)

PMBOK® Guide, 5th Edition, Reference Section for the PMP® Certification Exam

Kombs Engineering Williams Machine Tool Company* Hyten Corporation Macon, Inc. Continental Computer Corporation Jackson Industries

Multiple Choice Exam Integration Management Scope Management Human Resource Management

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1.0 INTRODUCTION Executives will be facing increasingly complex challenges during the next decade. These challenges will be the result of high escalation factors for salaries and raw materials, increased union demands, pressure from stockholders, and the possibility of long-term high inflation accompanied by a mild recession and a lack of borrowing power with financial institutions. These environmental conditions have existed before, but not to the degree that they do today.

In the past, executives have attempted to ease the impact of these environmental conditions by embarking on massive cost-reduction programs. The usual results of these programs have been early retirement, layoffs, and a reduction in manpower through attrition. As jobs become vacant, executives pressure line managers to accomplish the same amount of work with fewer resources, either by improving efficiency or by upgrading performance requirements to a higher position on the learning curve. Because people costs are more inflationary than the cost of equipment or facilities, executives are funding more and more capital equipment projects in an attempt to increase or improve productivity without increasing labor.

Unfortunately, executives are somewhat limited in how far they can go to reduce manpower without running a high risk to corporate profitability. Capital equipment projects are not always the answer. Thus, executives have been forced to look elsewhere for the solutions to their problems.

Almost all of today’s executives are in agreement that the solution to the majority of corporate problems involves obtaining better control and use of existing corporate resources, looking internally rather than externally for the solution. As part of the attempt to achieve an internal solution, executives are taking a hard look at the ways corporate activities are managed. Project management is one of the techniques under consideration.

The project management approach is relatively modern. It is characterized by methods of restructuring management and adapting special management techniques, with the purpose of obtaining better control and use of existing resources. Forty years ago project management was confined to U.S. Department of Defense contractors and construction companies. Today, the concept behind project management is being applied in such diverse industries and organizations as defense, construction, pharmaceuticals, chemicals, banking, hospitals, accounting, advertising, law, state and local governments, and the United Nations.

The rapid rate of change in both technology and the marketplace has created enormous strains on existing organizational forms. The traditional structure is highly bureaucratic, and experience has shown that it cannot respond rapidly

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enough to a changing environment. Thus, the traditional structure must be replaced by project management, or other temporary management structures that are highly organic and can respond very rapidly as situations develop inside and outside the company.

Project management has long been discussed by corporate executives and academics as one of several workable possibilities for organizational forms of the future that could integrate complex efforts and reduce bureaucracy. The acceptance of project management has not been easy, however. Many executives are not willing to accept change and are inflexible when it comes to adapting to a different environment. The project management approach requires a departure from the traditional business organizational form, which is basically vertical and which emphasizes a strong superior–subordinate relationship.

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1.1 UNDERSTANDING PROJECT MANAGEMENT

In order to understand project management, one must begin with the definition of a project. A project can be considered to be any series of activities and tasks that:

PMBOK® Guide, 5th Edition 1.2 What Is a Project?

1.3 What Is Project Management?

Have a specific objective to be completed within certain specifications Have defined start and end dates Have funding limits (if applicable) Consume human and nonhuman resources (i.e., money, people, equipment) Are multifunctional (i.e., cut across several functional lines)

Project management, on the other hand, involves five process groups as identified in the PMBOK® Guide, namely:

Project initiation Selection of the best project given resource limits Recognizing the benefits of the project Preparation of the documents to sanction the project Assigning of the project manager

Project planning Definition of the work requirements Definition of the quality and quantity of work Definition of the resources needed Scheduling the activities Evaluation of the various risks

Project execution Negotiating for the project team members Directing and managing the work Working with the team members to help them improve

Project monitoring and control

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Tracking progress Comparing actual outcome to predicted outcome Analyzing variances and impacts Making adjustments

Project closure Verifying that all of the work has been accomplished Contractual closure of the contract Financial closure of the charge numbers Administrative closure of the papework

Successful project management can then be defined as having achieved the project objectives:

Within time Within cost At the desired performance/technology level While utilizing the assigned resources effectively and efficiently Accepted by the customer

The potential benefits from project management are:

Identification of functional responsibilities to ensure that all activities are accounted for, regardless of personnel turnover Minimizing the need for continuous reporting Identification of time limits for scheduling Identification of a methodology for trade-off analysis Measurement of accomplishment against plans Early identification of problems so that corrective action may follow Improved estimating capability for future planning Knowing when objectives cannot be met or will be exceeded

Unfortunately, the benefits cannot be achieved without overcoming obstacles such as:

Project complexity Customer’s special requirements and scope changes Organizational restructuring Project risks Changes in technology Forward planning and pricing

Project management can mean different things to different people. Quite often, people misunderstand the concept because they have ongoing projects within their

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company and feel that they are using project management to control these activities. In such a case, the following might be considered an appropriate definition:

Project management is the art of creating the illusion that any outcome is the result of a series of predetermined, deliberate acts when, in fact, it was dumb luck.

Although this might be the way that some companies are running their projects, this is not project management. Project management is designed to make better use of existing resources by getting work to flow horizontally as well as vertically within the company. This approach does not really destroy the vertical, bureaucratic flow of work but simply requires that line organizations talk to one another horizontally so work will be accomplished more smoothly throughout the organization. The vertical flow of work is still the responsibility of the line managers. The horizontal flow of work is the responsibility of the project managers, and their primary effort is to communicate and coordinate activities horizontally between the line organizations.

Figure 1–1 shows how many companies are structured. There are always “class or prestige” gaps between various levels of management. There are also functional gaps between working units of the organization. If we superimpose the management gaps on top of the functional gaps, we find that companies are made up of small operational islands that refuse to communicate with one another for fear that giving up information may strengthen their opponents. The project manager’s responsibility is to get these islands to communicate cross-functionally toward common goals and objectives.

FIGURE 1–1. Why are systems necessary?

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PMBOK® Guide, 5th Edition 1.7.2 Project Management Skills

The following would be an overview definition of project management:

Project management is the planning, organizing, directing, and controlling of company resources for a relatively short-term objective that has been established to complete specific goals and objectives. Furthermore, project management utilizes the systems approach to management by having functional personnel (the vertical hierarchy) assigned to a specific project (the horizontal hierarchy).

The above definition requires further comment. Classical management is usually considered to have five functions or principles:

PMBOK® Guide, 5th Edition 2.1.3 Organizational Structures

Planning Organizing Staffing Controlling Directing

You will notice that, in the above definition, the staffing function has been omitted. This was intentional because the project manager does not staff the project. Staffing is a line responsibility. The project manager has the right to request specific resources, but the final decision of what resources will be committed rests with the line managers.

We should also comment on what is meant by a “relatively” short-term project. Not all industries have the same definition for a short-term project. In engineering, the project might be for six months or two years; in construction, three to five years; in nuclear components, ten years; and in insurance, two weeks. Long-term projects, which consume resources full-time, are usually set up as a separate division (if large enough) or simply as a line organization.

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Figure 1–2 is a pictorial representation of project management. The objective of the figure is to show that project management is designed to manage or control company resources on a given activity, within time, within cost, and within performance. Time, cost, and performance are the constraints on the project. If the project is to be accomplished for an outside customer, then the project has a fourth constraint: good customer relations. The reader should immediately realize that it is possible to manage a project internally within time, cost, and performance and then alienate the customer to such a degree that no further business will be forthcoming. Executives often select project managers based on who the customer is and what kind of customer relations will be necessary.

FIGURE 1–2. Overview of project management.

Projects exist to produce deliverables. The person ultimately assigned as the project manager may very well be assigned based upon the size, nature, and scope of the deliverables. Deliverables are outputs, or the end result of either the completion of the project or the end of a life-cycle phase of the project. Deliverables are measurable, tangible outputs and can take such form as:

Hardware Deliverables: These are hardware items, such as a table, a prototype, or a piece of equipment. Software Deliverables: These items are similar to hardware deliverables but are usually paper products, such as reports, studies, handouts, or documentation. Some companies do not differentiate between hardware and software deliverables. Interim Deliverables: These items can be either hardware or software deliverables and progressively evolve as the project proceeds. An example might be a series of interim reports leading up to the final report.

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