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New Books Include these Software Packages Microsoft Project Trial Edition Crystal Ball Trial Edition from Oracle

More Information For more information about Microsoft Project, go to: http://www.microsoft.com/project

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Technical Support Wiley technical support for Microsoft Project

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Online Resources for Students http://www.wiley.com/college/meredith

• Web Quizzes, PowerPoint Slides • Microsoft Project Manual • Appendix A: Probability and Statistics • Appendix B: Answers to Even-Numbered Problems • Appendix C: Technological Forecasting • Appendix D: Creativity and Idea Generation • Chapter 3 Appendix: Primer on Effective Time Management

Location of Materials for the Project Management Body of Knowledge (PMBOK) Areas Area 1: Project Integration Management: Sections 6.1, 6.4, 10.1 Area 2: Project Scope Management: Sections 4.3, 4.5, 6.1, 11.3, 11.4 Area 3: Project Time Management: Sections 7.1, 11.2, Chapters 6, 8, 9, 10, 11 Area 4: Project Cost Management: Section 10.3, Chapters 7, 9 Area 5: Project Quality Management: Chapters 6, 12 Area 6: Project Human Resource Management: Sections 4.6, 5.7, 5.8, Chapters 3, 4 Area 7: Project Communications Management: Sections 3.2, 3.4, 4.1, 4.2 Area 8: Project Risk Management: Sections 6.1, 6.5, 7.3, 12.2, Chapters 10, 11 Area 9: Project Procurement Management: Sections 2.6, 6.4 Area 10: Project Stakeholder Management: Sections 4.1, 4.5, Chapter 3

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Textbook TrialwareTextbook Trialware Free 180-day Trial of Crystal Ball Software. Compliments of the Crystal Ball Education Initiative

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N I N T H E D I T I O N

PROJECT MANAGEMENT A Managerial Approach

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N I N T H E D I T I O N

PROJECT MANAGEMENT A Managerial Approach

Jack R. Meredith Broyhill Distinguished Scholar and Chair in Operations

Wake Forest University

Samuel J. Mantel, Jr. (deceased) Previously the Joseph S. Stern Professor Emeritus of Operations Management

University of Cincinnati

Scott M. Shafer Associate Dean and Professor of Management

Wake Forest University

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DEDICATION

To the memory of Sam Mantel, Jr.: Scholar, author, mentor, friend.

J. R. M. and S.M.S

VICE PRESIDENT AND EXECUTIVE PUBLISHER George Hoffman EXECUTIVE EDITOR Lise Johnson PROJECT EDITOR Jennifer Manias ASSISTANT EDITOR Katherine Bull EDITORIAL ASSISTANT Amanda Dallas SENIOR PRODUCT DESIGNER Allison Morris SENIOR CONTENTMANAGER Dorothy Sinclair SENIOR PRODUCTION EDITOR Suzie Chapman MEDIA SPECIALIST Elena Santa Maria ASSISTANT MARKETING MANAGER Puja Katariwala MARKETING ASSISTANT Elisa Wong DESIGN DIRECTOR Harry Nolan DESIGNER Wendy Lai COVER DESIGN Wendy Lai SENIOR PHOTO EDITOR Lisa Gee PRODUCTION MANAGEMENT SERVICES Thomson Digital

This book was set in 10/12 pt STIX-Regular by Thomson Digital, India and printed and bound by Quad Graphics. The cover was printed by Quad Graphics.

This book is printed on acid free paper.∞ Copyright 2015, 2012, 2009 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978)750-8400, fax (978)750-4470 or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, (201)748-6011, fax (201)748-6008, or online at http://www.wiley.com/go/permissions.

Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year. These copies are licensed and may not be sold or transferred to a third party. Upon completion of the review period, please return the evaluation copy to Wiley. Return instructions and a free of charge return shipping label are available at www.wiley.com/go/returnlabel. Outside of the United States, please contact your local representative.

ISBN-13 9781118947029

ISBN-10 1118947029

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Preface

APPROACH

The use of projects and project management continues to grow in our society and its organizations. We are able to achieve goals through project organization that could be achieved only with the greatest of difficulty if organized in traditional ways. Though project management has existed since before the days of the great pyramids, its use has virtually exploded since the mid-1990s. Businesses regularly use project management to accomplish unique outcomes with limited resources under critical time constraints. In the service sector of the economy, the use of project management to achieve an organization’s goals is even more common. Advertising campaigns, voter registration drives, political campaigns, a family’s annual summer vacation, and even management seminars on the subject of project management are organized as projects. A relatively new growth area in the use of project management is the use of projects as a way of accomplishing organizational change. Indeed, there is a rapid increase in the number of firms that use projects as the preferred way of accomplishing almost everything they undertake.

As the field has grown, so has its literature. There are now professional books and booklets covering every imaginable aspect of project management: earned value calculations, team building, cost estimating, purchasing, project management software, scheduling, leadership, and so on. These are valuable for experienced project managers who can profit from advanced knowledge on specific topics. There are also handbooks—collections of articles written mainly by academics and consultants on selected topics of interest to project managers, somewhat akin to a summarized compilation of the books and booklets just noted.

When we wrote the first edition of this textbook in 1983, there weren’t any textbooks for those interested in learning project management, only professional books. Now, however, there are a few, each using a different approach to learning the subject. One approach has been to take a behavioral orientation toward the subject, since teamwork is a key characteristic of projects. Another approach is to cover the basics, or tools, of project management in a straightforward and crisp manner. A third approach is to take a functional perspective, usually either engineering or information systems, since so many projects are engineering or IS endeavors. The approach we have used takes a managerial perspective. That is, it addresses project management from the perspective of what the project manager will encounter, both chronologically during the “life cycle” of the project as well as practically, in the sense of what the project manager needs to know and why. With this approach we hope that our educated future project managers understand not only the behaviors, tools, and topics of project management but also the context so they can apply, or change, the behaviors and tools for each unique situation they face in their projects.

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This managerial perspective, we believe, addresses the basic nature of managing all types of projects—public, business, engineering, information systems, and so on—as well as the specific techniques and insights required to carry out this unique way of getting things done. It also deals with the problems of selecting projects, initiating and planning them, executing and controlling them, and finally evaluating and terminating them. It discusses the demands made on the project manager and the nature of the manager’s interaction with the rest of the parent organization. And the book covers the difficult problems associated with conducting a project using people and organizations that represent different cultures and may be separated by considerable distances. Finally, it even covers the issues arising when the decision is made to terminate a project.

The book is primarily intended for use as a college textbook for teaching project management at the advanced undergraduate or master’s level. The book is also intended for current and prospective project managers who wish to share our insights and ideas about the field. We have drawn freely on our personal experiences working with project managers and on the experience of friends and colleagues who have spent much of their working lives serving as project managers in what they like to call the “real world.” Thus, in contrast to the books described earlier about project management, this book teaches students how to do project management. As well as being a text that is equally appropriate for classes on the management of service, product, or engineering projects, we have found that information systems (IS) students in our classes find the material particularly helpful for managing their IS projects. Thus, we have included some coverage of material concerning information systems and how IS projects differ from and are similar to regular business projects.

ORGANIZATION AND CONTENT

Given this managerial perspective, we have arranged the book to use the project life cycle as the primary organizational guideline. In this ninth edition we have kept the previous organization which demarks more clearly the activities that occur before the launch of the project, setting up those activities that have to do with the context (or initiation) of the project in the first part of the book, and those that have to do with the planning for the project in the second part. Actually executing the project to completion constitutes the third part of the book. Each part consists of four chapters, which seems to be a comfortable and easy framework for the reader.

Following an introductory chapter that comments on the role and importance of projects in our society and discusses project management as a potential career for aspiring managers, the book covers the context, events, and issues arising during the management of projects in the order in which they usually occur in the life of a project. Part I, Project Initiation concerns the context of the project, which is crucial for the project manager to understand if he or she is to be successful in executing the project. It begins with a description of how projects are selected for implementation, frequently based on their tie to the organization’s strategy and goals. Part I also covers the many roles and responsibilities of the project manager, the skills the project manager needs for handling conflict, and the various ways of setting up the project within the organization’s reporting structure (including how different ways of organizing projects tend to create different problems for project managers and their teams).

Part II, Project Planning then moves into the planning processes starting with the major tools used in project activity and risk planning. This is followed by project budgeting, project scheduling, and finally, resource allocation among the activities. Part III, Project Execution finally gets into the action, beginning with monitoring the activities, largely through information systems, and then controlling them to assure that the results meet expectations. Evaluating and possibly auditing the project at its major milestones or phase-gates is another, though separate, control action that senior management often employs, and last, the project must be terminated.

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We have relegated the discussion of two important aspects of projects that usually occur very early in the project life cycle—creativity/idea generation and technological forecasting—to the book’s Web site. Although few project managers engage in either of these tasks (typically being appointed to project leadership after these activities have taken place), we believe that a knowledge of these subjects will make the project manager more effective.

In writing this text we assume that all readers have taken an elementary course in management or have had equivalent experience, and are familiar with some basic principles of probability and statistics. (Appendix A on the Web site (http://www.wiley.com/college/meredith) can serve as an initial tutorial on the subject or as a refresher for rusty knowledge.)

Any approach chosen to organize knowledge carries with it an implication of neatness and order that rarely occurs in reality. We are quite aware that projects almost never proceed in an orderly, linear way through the stages and events we describe here. The need to deal with change and uncertainty is a constant task for the project manager. We have tried to reflect this in repeated references to the organizational, interpersonal, economic, and technical glitches that create crises in the life cycle of every project, and thus in the life of every project manager.

Finally, although we use a life-cycle approach to organization, the chapters include material concerning the major areas of the Project Management Body of Knowledge (PMBOK) as defined by the Project Management Institute. (See Bibliography for Chapter 1.) Anyone wishing to prepare for PMI certification (see Chapter 1) in some of these areas may have to go beyond the information covered in this text.

PEDAGOGY

Because this book is primarily a textbook, we have included numerous pedagogical aids to foster this purpose. As in earlier editions, short summaries appear at the end of the text of each chapter, followed byglossariesdefiningkey terms and concepts introduced in the chapter. End-of-chaptermaterials also include review questions and problems revisiting the materials covered in the chapter. The answers (though not the detailed solutions) to the even-numbered problems are on the book’sWeb site. There are also sets of conceptual discussion questions intended to broaden the students’ perspectives and to force them to think beyond the chapter materials to its implications. To keep our attitude in perspective, we occasionally offer Dilbert cartoons appropriate to the topic under discussion. Finally, there are questions covering the many Project Management in Practice application examples located throughout the chapters, which have now been moved directly into the PMIP boxes.

As in the past, we include incidents for discussion, which are brief “caselettes” oriented primarily toward the specific subjects covered in the chapter, but sometimes materials and concepts covered in earlier chapters. We also offer a continuing integrative class project for those users who prefer a running case throughout the chapters that builds on the chapter materials as students progress through the book. And at the very end of each chapter we typically offer a reading and/or a case, with potential discussion questions at the end of each.

WHAT’S NEW In this edition, we have made many updates, additions, and changes.

• First, Scott Shafer has joined the team, bringing a wealth of knowledge about simulation, team processes, and PMBOK standards to the book.

• One of the major changes to the supplements has been the replacement and addition (Chapters 3, 4, 5, 7, 8, 9, 10, and 11) of many cases and readings, particularly with shorter, more timely readings.

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• Similarly, we have added or replaced quite a few of the Project Management in Practice examples. And, as mentioned, we have moved the PMIP questions from the end of the chapter directly into the boxes so the intent of the example is clear to the student when reading it.

• We have enhanced the Continuing Integrative Class Project exercises at the rear of the chapters.

• We have also put a major effort into aligning the book with the fifth edition (2013) of PMBOK in multiple ways.

• We have added a new online Appendix for Chapter 3 on Time Management for the project manager.

• We have added a substantial amount in Chapters 1, 3, 4 (a new section), and 6 on the important role of stakeholders in the project. Also in Chapter 4 we have expanded the discussion on dealing with conflict.

• In Chapters 3, 11, and 13 we address some of the ethical as well as practical issues in working with sponsors and clients who need to be informed when the project is not expected to meet its strategic goals, or wish to change the scope of the project.

• In Chapter 3, we discuss in detail the importance of emotional intelligence to the project manager and have also added a discussion on the stages of team development.

• In Chapter 5, we added a considerable amount concerning the results of new research on the Project Management Office.

• We added a subsection in Chapter 6 on the whole-brain approach to project planning through the mind-mapping technique. We also added some material on requirements planning in Chapter 6 using the Requirements Traceability Matrix and what elements are expected in a project plan according to PMBOK.

• In Chapter 6, we also added a lot more on risk management, and then in Chapter 7 illustrated the simulation of both time and costs to better identify all the risks for a project. In Chapter 1, we now include risk management as the second major task of the project manager, in addition to making the usual time, cost, and scope trade-offs.

• Chapter 8 contains a new section on incorporating costs into the simulation analysis and the discussion of Goldratt’s Critical Chain was expanded in Chapter 9.

• Finally, we added more material in a number of different areas concerning strategic projects, especially for organizational change, real options, project portfolio management, team development, clues for the project manager on dealing with complex projects, leadership skills, dealing with conflict, agile project management, sensitivity analysis for risk determination, the reserve analysis technique, the critical chain, clues to dysfunctions in the project control process, burnup and burndown charts, phase-gate processes, and relevant factors in project failures and successes.

As before, a student version of Crystal Ball, an Excel add-in, again comes with the book. This software makes simulation reasonably straightforward and not particularly complicated. The use of simulation as a technique for risk analysis is demonstrated in several ways in different chapters. (Because relatively few students are familiar with simulation software, step-by-step instructions are included in the text.)

Microsoft Project has become the dominant application software in the field, outselling its closest competitor about 4 to 1. Our coverage of software tends, therefore, to be centered on Microsoft Project (and on Crystal Ball), but includes a brief discussion of the many “add-ons” that are now available to supplement Microsoft Project and its competitors. Because the various

xii PREFACE

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versions of Microsoft Project are quite similar in the way that they perform most of the basic tasks of project management, we generally do not differentiate between the versions, referring to any and all simply as Microsoft Project (MSP). We have also added some exercises to the end-of-chapter material that can utilize computer software. Similar materials are also available on the Web site.

One option available to educational institutions adopting this Wiley textbook is a free 3-year membership to the MSDN Academic Alliance. The MSDN AA is designed to provide the easiest and most inexpensive way for academic departments to make the latest Microsoft software available in labs, classrooms, and on student PCs.

Microsoft Project 2013 software is available through this Wiley and Microsoft publishing partnership, free of charge with the adoption of any qualified Wiley textbook. Each copy of Microsoft Project is the full version of the software, with no time limitations, and can be used indefinitely for educational purposes. Contact your Wiley sales rep for details. For more informa- tion about the MSDN AA program, go to http://msdn.microsoft.com/academic/.

There is, of course, the danger that human nature, operating in its normal discreet mode, will shift the task of learning project management to that of learning project management software. Projects have often failed because the project manager started managing the software instead of the project. Instructors need to be aware of the problem and must caution students not to fall into this trap.

ONLINE SUPPLEMENTS

The Instructor’s Resource Guide on the Web site www.wiley.com/college/meredith provides additional assistance to the project management instructor. In addition to the answers/solutions to the problems, questions, readings, and cases, this edition includes teaching tips, a computerized test bank, additional cases, and PowerPoint slides. All of these valuable resources are available online (http://www.wiley.com/college/meredith). In addition, the student Web site contains Web quizzes, PowerPoint slides, Appendix A: Probability and Statistics, Appendix B: Answers to Even-Numbered Problems, Appendix C: Technological Forecasting, Appendix D: Creativity and Idea Generation, Chapter 3 Appendix: Primer on Effective Time Management, and a Microsoft Project Manual.

ACKNOWLEDGMENTS

We owe a debt of gratitude to all those who have helped us with this book. First, we thank the managers and students who helped us solidify our ideas about proper methods for managing projects and proper ways of teaching the subject. Second, we thank the project teams and leaders in all of our project management classes. Third, we thank the adopters and reviewers of the many editions of this book, many who contacted us personally to convey improvements and corrections. Last, we thank the staff at Wiley for their help in the production of this book, and Suzie Chapman and Namit Grover/Thomson Digital in particular.

Special thanks are due to those who have significantly influenced our thinking about project management or supplied materials to help us write this book: Jeffrey Camm, James Evans, Martin Levy, John McKinney, and William Meyers, all of the Univ. of Cincinnati; S. J. Mantel III, PMP; Jeffrey Pinto, Pennsylvania State Univ. at Erie; StephenWearne, Univ. of Manchester; and the Staff of the Project Management Institute.

We owe a massive debt of gratitude to the reviewers for this and previous editions: Steve Allen, Truman State Univ.; Kwasi Amoako-Gyampah, Univ. of North Carolina at Greensboro; Nicholas Aquilano, Univ. of Arizona; Bob Ash, Indiana Univ., Southeast; Bud Baker, Wright State Univ.; Robert J. Berger, Univ. of Maryland; Robert Bergman, Univ. of Houston; William Brauer, Bemidji

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State Univ.; Maj. Mark D. Camdle, Air Force Inst. of Tech.; Howard Chamberlin, Texas A&M Univ.; Chin-Sheng Chen, Florida International Univ.; Susan Cholette, San Francisco Univ.; Denis Cioffi, George Washington Univ.; -Desmond Cook, Ohio State Univ.; the late Larry Crowley, Auburn Univ.; Catherine Crummett, James Madison Univ.; Edward Davis, Univ. of Virginia; -Burton Dean, San Jose State Univ.; Michael H. Ensby, Clarkson Univ.; Abel -Fernandez, Univ. of the Pacific; Bertie M. Geer, Northern Kentucky Univ.; Richard E. Gunther, California State Univ., -Northridge; -William Hayden, Jr., SUNY, Buffalo; Jane E. Humble, Arizona State Univ.; -Richard H. Irving, York Univ.; Roderick V. James, DeVry Univ.; Homayoun Kahmooshi, George -Washington Univ.; David L. Keeney, Stevens Inst. of Tech.; Ted Klastorin, Univ. of Washington; David Kukulka, Buffalo State Univ.; Young Hoon Kway, George Washington Univ.; William Leban, DeVry Univ.; Ardeshir Lohrasbi, Univ. of Illinois, Springfield; Bil Matthews, William Patterson University; Sara McComb, Univ. of Massachusetts, Amherst; Abe Meilich, Walden Univ.; Mary Meixell, Quinnipiac Univ.; Jaindeep Motwani, Grand Valley State Univ.; Barin Nag, Towson Univ.; John E. Nicolay, Jr., Univ. of Minnesota; David L. Overbye, DeVry Univ.; Pat Penfield, Syracuse Univ.; Ed Pohl, Univ. of Arkansas; Michael Poli, Stevens Inst. of Tech.; Amit Raturi, Univ. of Cincinnati; David J. Robb, Univ. of Calgary; Arthur C. Rogers, City Univ., Washington; David Russo, Univ. of Texas, Dallas; Boong-Yeol Ryoo, Florida International Univ.; Thomas Schuppe, Milwaukee School of Engineering; Ruth -Seiple, Univ. of Cincinnati; John Shanfi, DeVry Inst. of Tech., Irving, TX; Wade Shaw, Florida Inst. of Tech.; Richard V. Sheng, DeVry Inst. of Tech., SanMarino, CA; Bill Sherrard, San Diego State Univ.; Joyce T. Shirazi, Univ. of Maryland, Univ. College; Chris Simber, Stevens Inst. of Tech.; Gene Simons, Rensselaer Polytech. Inst.; Kimberlee Snyder, Winona State Univ.; Herbert Spirer, Univ. of -Connecticut; Eric Sprouls, Univ. of Southern Indiana; Peter Strunk, Univ. of Cincinnati; Samuel Taylor, Univ. of Wyoming; Tony Trippe, Rochester Inst. of Tech.; Jerome Weist, Univ. of Utah; William G. Wells, Jr., The GeorgeWashington Univ.; SusanWilliams, Northern Arizona State Univ.; JamesWillman, Univ. of Bridgeport, and Charles I. Zigelman, San Diego State Univ.

Jack Meredith Broyhill Distinguished Scholar and Chair in

Operations Wake Forest University, P.O. Box 7659 Winston-Salem, NC 27109 meredijr@wfu.edu http://business.wfu.edu/directory/jack-meredith

Scott M. Shafer Associate Dean and Professor of Management Wake Forest University, P.O. Box 7659 Winston-Salem, NC 27109 shafersm@wfu.edu http://business.wfu.edu/directory/scott-m-shafer/

xiv PREFACE

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Contents

CHAPTER 1 Projects in Contemporary Organizations 1

1.1 The Definition of a “Project” 1 1.2 Why Project Management? 9 1.3 The Project Life Cycle 16 1.4 The Structure of this Text 21

PROJECT MANAGEMENT IN PRACTICE A Unique Method for Traveler-Tracking at Copenhagen Airport 5 The Smart-Grid Revolution Starts in Boulder, Colorado 6 The Olympic Torch Relay Project 8 Turning London’s Waste Dump into the 2012 Olympics Stadium 19

PART I: PROJECT INITIATION 28

CHAPTER 2 Strategic Management and Project Selection 29

2.1 Project Management Maturity 31 2.2 Project Selection Criteria and Models 32 2.3 Types of Project Selection Models 35 2.4 Risk Considerations in Project Selection 51 2.5 Project Portfolio Management (PPM) 52 2.6 Project Bids and RFPs (Requests for Proposals) 63

PROJECT MANAGEMENT IN PRACTICE Taipei 101: Refitted as World’s Tallest Sustainable Building 38 Using a Project Portfolio to Achieve 100% On-Time Delivery

at Decor Cabinet Company 54 Implementing Strategy through Projects at Blue Cross/Blue Shield 56

CASE: Pan-Europa Foods S.A. 71 READING: From Experience: Linking Projects to Strategy 79

CHAPTER 3 The Project Manager 89

3.1 Project Management and the Project Manager 91 3.2 Special Demands on the Project Manager 96 3.3 Attributes of Effective Project Managers 107

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3.4 Problems of Cultural Differences 113 PROJECT MANAGEMENT IN PRACTICE The Project Management Career Path at AT&T 95 A Surprise “Director of Storm Logistics” for Katrina 98 Shanghai Unlucky with Passengers 103 The Wreckmaster at a New York Subway Accident 105 Growing Stress at Twitter 113 Success at Energo by Integrating Two Diverse Cultures 116

CASE: The National Jazz Hall of Fame 124 READING: Juggling Act 130 Chapter 3 Appendix: Primer on Effective Time Management (online)

CHAPTER 4 Managing Conflict and the Art of Negotiation 133

4.1 Identifying and Analyzing Stakeholders 136 4.2 Conflict and the Project Life Cycle 137 4.3 Dealing with Conflict 144 4.4 The Nature of Negotiation 145 4.5 Partnering, Chartering, and Scope Change 146 4.6 Some Requirements and Principles of Negotiation 150

PROJECT MANAGEMENT IN PRACTICE Quickly Building a Kindergarten through Negotiation 135 Stakeholder Involvement at Nemours Children’s Hospital 138 A Consensus Feasibility Study for Montreal’s Archipel Dam 144 Negotiation in Action—The Quad Sensor Project 153

READING: Power of Persuasion 157

CHAPTER 5 The Project in the Organizational Structure 161

5.1 Projects in a Functional Organization 163 5.2 Projects in a Projectized Organization 166 5.3 Projects in a Matrixed Organization 168 5.4 Projects in Composite Organizational Structures 174 5.5 Selecting a Project Form 175 5.6 The Project Management Office (PMO) 176 5.7 The Project Team 184 5.8 Human Factors and the Project Team 186

PROJECT MANAGEMENT IN PRACTICE Reorganizing for Project Management at Prevost Car 166 Software Firm Yunio Avoids Complex Technologies 173 Trinatronic, Inc. 177 A Project Management Office Success for the Transportation Security

Administration 180 The Empire Uses Floating Multidisciplinary Teams 186 South African Repair Success through Teamwork 188

CASE: Acorn Industries 196 READING: Four Steps to a Stronger PMO 200

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PART II: PROJECT PLANNING 203

CHAPTER 6 Project Activity and Risk Planning 204

6.1 Initial Project Coordination and the Project Charter 206 6.2 The WBS: A Key Element of the Project Plan 215 6.3 Human Resources: The RACI Matrix and Agile Projects 224 6.4 Interface Coordination through Integration Management 228 6.5 Project Risk Management 231

PROJECT MANAGEMENT IN PRACTICE Beagle 2 Mars Probe a Planning Failure 205 Child Support Software a Victim of Scope Creep 211 Using Agile to Integrate Two Gas Pipeline Systems 227 Trying to Install a Wind Farm in the Middle of the North Sea 229 An Acquisition Failure Questions Recommended Practice 230 Risk Analysis vs. Budget/Schedule Requirements in Australia 233 Ignoring Risk Contrasted with Recognizing Risk in Two Industries 240 Facebook Risks Interruption to Move a Terabyte 245

CASE: Heublein: Planning a Project Management and Control System 253 READING: Planning for Crises in Project Management 262

CHAPTER 7 Budgeting: Estimating Costs and Risks 269

7.1 Estimating Project Budgets 270 7.2 Improving the Process of Cost Estimating 284 7.3 Risk Estimation 293

PROJECT MANAGEMENT IN PRACTICE Pathfinder Mission to Mars—on a Shoestring 271 Convention Security: Project Success through Budget Recovery 274 Managing Costs at Massachusetts’ Neighborhood Health Plan 277 Habitat for Humanity Wins a Big One 281 The Emanon Aircraft Corporation 290 Simulating the Failure of California’s Levees 294

CASE: Concrete Masonry Corporation 308 READING: Three Perceptions of Project Cost 313

CHAPTER 8 Scheduling 320

8.1 Background 320 8.2 Network Techniques: PERT and CPM 321 8.3 Risk Analysis using Simulation with Crystal Ball 351 8.4 Using these Tools 361

PROJECT MANAGEMENT IN PRACTICE Massachusetts’ Instant Bridges 321 Election Returns within Three Hours 329

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Hosting the Annual Project Management Institute Symposium 349 Designing and Delivering a Rush Vehicle for War 360

CASE: Nutristar 372 READING: Without Further Delay 374

CHAPTER 9 Resource Allocation 378

9.1 Critical Path Method—Crashing a Project 378 9.2 The Resource Allocation Problem 386 9.3 Resource Loading 389 9.4 Resource Leveling 391 9.5 Constrained Resource Scheduling 397 9.6 Multiproject Scheduling and Resource Allocation 402 9.7 Goldratt’s Critical Chain 406

PROJECT MANAGEMENT IN PRACTICE Expediting Los Angeles Freeway Repairs after the Earthquake 379 Thirty Days to Rescue 387 Benefits of Resource Constraining at Pennsylvania Electric 401 Architectural Associates, Inc. 412

CASE: D. U. Singer Hospital Products Corp. 419 READING: Let the Games Begin—Now 422

PART III: PROJECT EXECUTION 424

CHAPTER 10 Monitoring and Information Systems 425

10.1 The Planning-Monitoring-Controlling Cycle 426 10.2 Information Needs and Reporting 434 10.3 Earned Value Analysis 439 10.4 Computerized PMIS (Project Management Information Systems) 452

PROJECT MANAGEMENT IN PRACTICE Using Project Management Software to Schedule the Olympic Games 427 Drug Counseling Program 434 Using Earned Value to Monitor Governmental Archiving and

Records Costs 444 Success through Earned Value at Texas Instruments 451

CASE: The Project Manager/Customer Interface 460 READING: Raise the Red Flags 463

CHAPTER 11 Project Control 466

11.1 The Fundamental Purposes of Control 470 11.2 Three Types of Control Processes 471 11.3 The Design of Control Systems 480 11.4 Control of Change and Scope Creep 486 11.5 Control: A Primary Function of Management 491

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PROJECT MANAGEMENT IN PRACTICE Regaining Control of Nuclear Fusion 468 Extensive Controls for San Francisco’s Metro Turnback Project 472 Tracking Scope Creep: a Project Manager Responds 483 Major Scope Creep in Boston’s “Big Dig” 488 Better Control of Development Projects at Johnson Controls 490

CASE: Peerless Laser Processors 500 READING: Ford Motor Co.: Electrical/Electronic Systems Engineering 504

CHAPTER 12 Project Auditing 510

12.1 Purposes of Evaluation—Goals of the System 511 12.2 The Project Audit 513 12.3 The Project Audit Life Cycle 519 12.4 Some Essentials of an Audit/Evaluation 522 12.5 Measurement 525

PROJECT MANAGEMENT IN PRACTICE Lessons from Auditing 110 Client/Server and Open Systems Projects 514 Auditing a Troubled Project at Atlantic States Chemical Laboratories 520

CASE: Theater High Altitude Area Defense (THAAD): Five Failures and Counting (B) 530 READING: An Assessment of Postproject Reviews 533

CHAPTER 13 Project Termination 540

13.1 The Varieties of Project Termination 540 13.2 When to Terminate a Project 544 13.3 The Termination Process 549 13.4 The Final Report—A Project History 556 13.5 Afterword 558

PROJECT MANAGEMENT IN PRACTICE Nucor’s Approach to Termination by Addition 543 Twelve Hospital Handoff Projects 545 Terminating the Superconducting Super Collider Project 550 When you have to Kill a Project 556

Author Index 563

Subject Index 567

Please visit http://www.wiley.com/college/meredith for Appendices.

Appendix A: Probability and Statistics (online)

Appendix B: Answers to Even-Numbered Problems (online)

Appendix C: Technological Forecasting (online)

Appendix D: Creativity and Idea Generation (online)

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http://www.wiley.com/college/meredith
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C H A P T E R

1 Projects in Contemporary

Organizations

The past several decades have been marked by rapid growth in the use of project management as a means by which organizations achieve their objectives. In the past, most projects were external to the organization—building a new skyscraper, designing a commercial ad campaign, launching a rocket—but the growth in the use of projects lately has primarily been in the area of projects internal to organizations: developing a new product, opening a new branch, implementing a new enterprise software system, improving the services provided to customers, and achieving strategic objectives. As exhilarating as outside projects are, successfully executing internal projects is even more satisfying in that the organization has substantially improved its ability to execute more efficiently, effectively, or quickly, resulting in an agency or business that can even better contribute to society while simultaneously enhancing its own competitive strength. Fundamentally, project management provides an organization with powerful tools that improve its ability to plan, implement, and control its activities as well as the ways in which it utilizes its people and resources.

In this introductory chapter to project management, we begin by defining precisely what a project is. Both the objectives and characteristics of projects are also discussed to help further define them. Next, we address the emergence of project management, the forces that have fostered project management, and recent trends in project management. Following this, we describe the project life cycle. Finally, the chapter concludes with an overview of the structure of the remainder of the text.

1.1 THE DEFINITION OF A “PROJECT” Formally, a project may be defined as “A temporary endeavor undertaken to create a unique product, service, or result” (PMBOK, Project Management Institute, 2013, p. 417). Consistent with this definition, there is a rich variety of projects to be found in our society. Although somemay argue that the construction of the Tower of Babel or the Egyptian pyramidswere some of the first “projects,” it is probable that cavemen formed a project to gather the raw material for mammoth stew. It is certainly true that the construction of Boulder Dam and Edison’s invention of the light bulb were projects by any sensible definition.Modern projectmanagement, however, is usually said to have begunwith the Manhattan Project. In its early days, project management was used mainly for very large, complex research and development (R & D) projects like the development of the Atlas Intercontinental Ballistic Missile and similar military weapon systems. Massive construction programs were also organized as projects, including the construction of dams, ships, refineries, and freeways.

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As the techniques of project management were developed, mostly by the military, the use of project organization began to spread. Private construction firms found that organizing work on the basis of projects or a project–based organization was helpful on smaller projects, such as the building of a warehouse or an apartment complex. Automotive companies used project organization to develop new automobile models. Both General Electric and Pratt & Whitney used project organization to develop new jet aircraft engines for airlines, as well as the Air Force. Project management has even been used to develop new models of shoes and ships. More recently, the use of project management by international organizations, and especially organizations producing services rather than products, has grown rapidly. Advertising campaigns, global mergers, and capital acquisitions are often handled as projects, and the methods have spread to the nonprofit sector. Weddings, scout-o-ramas, fund drives, election campaigns, parties, and recitals have all made use of project management. Most striking has been the widespread adoption of project management techniques for the development of computer software.

To add to our vocabulary, in discussions of project management it is sometimes useful to make a distinction between terms such as project, program, task, and work packages. The military, the source of most of these terms, generally uses the term program to refer to an exceptionally large, long-range objective that is broken down into a set of projects. These projects are divided further into tasks, which are, in turn, split into work packages that are themselves composed of work units. Of course, exceptions to this hierarchical nomenclature abound. For example, the Manhattan Project was a huge “program,” but a “task force” was created to investigate the many potential futures of a large steel company. In the broadest sense, a project is a specific, finite task to be accomplished. Whether large- or small-scale or whether long- or short-run is not particularly relevant. What is relevant is that the project be seen as a unit. There are, however, some objectives that all projects share and some attributes that characterize projects.

Three Project Objectives: The “Triple Constraint”

While multimillion-dollar, 5-year projects capture public attention, the overwhelming majority of all projects are comparatively small—though nonetheless important to doer and user alike. They involve outcomes, or deliverables, such as a new floor for a professional basketball arena, a new insurance policy to protect against a specific casualty loss, a new Web site, a new casing for a four- wheel-drive minivan transmission, a new industrial floor cleanser, the installation of a new method for peer review of patient care in a hospital, even the development of new software to help manage projects. The list could be extended almost without limit. These undertakings have much in common with their larger counterparts. Importantly, they have the same general objectives— specified deliverables (also commonly known as scope*), a specific deadline (time), and budget (cost). We refer to these as “direct” project objectives or goals.

There is a tendency to think of a project solely in terms of its outcome—that is, its scope. But the time at which the outcome is available is itself a part of the outcome, as is the cost entailed in achieving the outcome. The completion of a building on time and on budget is quite a different outcome from the completion of the same physical structure a year late or 20 percent over budget, or both.

*The term “scope” is typically used when differentiating between what is included and what is excluded in something, but in project management the term has come to mean the specified deliverables. The Project Management Institute’s Project Management Body of Knowledge (“PMBOK”) defines Scope as: “The sum of the products, services, and results to be provided as a project.”We will refer to the PMBOK guide frequently throughout this book and use the icon seen here in the margin to draw the student’s attention to this important reference (see the PMI reference in the chapter bibliography). If particular PMBOK figures, tables, sections, or chapters are relevant to the discussion, we note this under the icon as, for example, 3.2, which means Chapter 3, Section 2.

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Indeed, even the concept of scope is perhaps more complex than is apparent. In particular, it is important to recognize that the expectations of the client are an inherent part of the project specifications. To consider the client’s desires as different from the project specifications is to court conflict between client and project team. All too often projects begin with the client specifying a desired outcome. Then the project team designs and implements the project. Then the client views the result of the team’s ideas. In following this approach, differences between the client’s expectations and the project team’s designs commonly develop as a project proceeds. As a result, meeting the client’s desires may not be well reflected by the initially specified scope of the project. The expectations of client and project team therefore need to be continuously realigned and integrated throughout the entire project, but they frequently are not. As a result, we believe in making an effort upfront and throughout the project to ensure the nebulous elements of the client’s evolving expectations and desires are identified and aligned with the “specified” scope stated in the project proposal.

The three direct project objectives are shown in Figure 1-1, with the specified project objectives on the axes. This illustration implies that there is some “function” that relates them, one to another— and so there is! Although the functions vary from project to project, and from time to time for a given project, we will refer to these relationships, or trade-offs, throughout this book. The two primary tasks of the project manager (the “PM”) are to manage these trade-offs and to anticipate and address risks to the project. In addition to the direct project goals, organizations often have a unique set of ancillary project objectives/goals that are often unarticulated but nevertheless important to the success of the project. Ancillary goals include improving the organization’s project management competency and methods, developing individuals’ managerial experience through project man- agement, gaining a foothold in a new market, and similar goals. In a more basic sense, those with a stake in the project (the project manager, project team, senior management, the client, and other project stakeholders) have an interest in making the project a success. Shenhar et al. (1997) have concluded that project success has four dimensions: (1) project efficiency, (2) impact on the customer, (3) the business impact on the organization, and (4) opening new opportunities for the future. The first two are clearly part of what we have defined as the project’s direct objectives; the latter two are typical of what are frequently unspecified ancillary goals.

One other crucial, but unstated, trade-off that a PM must consider is the health of the project team as well as the rest of the organization. The PM cannot burn out the team in an attempt to

Required results

Budget limit

Due date

Performance Target

Time (“schedule”)

Cost

Scope

Figure 1-1 Direct project goals—scope, cost, time.

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achieve the direct objectives, nor destroy the organization’s functional departments in an attempt to meet the project’s goals. Another factor in making project trade-offs is the project’s environ- ment, that is, those things or persons outside the project, and often outside the sponsoring organization, that affect the project or are affected by it. Examples of this environment might be antipollution groups, trade unions, competitive firms, and the like. We will deal with these issues in more detail in Chapter 12.

From the early days of project management, the direct project objectives of time, cost, and scope (as generally agreed to by the client and the organization actually doing the project) have been accepted as the primary determinants of project success or failure. In the past 25 years or so, other direct and ancillary objectives have been suggested. These did not replace the traditional time, cost, and scope, but were added as also relevant. For the most part, however, Chapters 1 through 11 will focus mainly on the traditional direct objectives.

Characteristics of Projects

There are three characteristics that all projects share and a number of other characteristics that are common to projects but not universal. We begin our discussion with the three universal character- istics and then direct our attention to several of the common characteristics.

The first universal characteristic of projects is that every project is unique. Though the desired end results may have been achieved elsewhere, every project has some unique elements. No two construction or R & D projects are precisely alike. Though it is clear that construction projects are usually more routine than R & D projects, some degree of customization is a characteristic of projects. In addition to the presence of risk, as noted earlier, this characteristic means that projects, by their nature, cannot be completely reduced to routine. The PM’s importance is emphasized because, as a devotee of management by exception, the PM will find there are a great many exceptions to manage by.

The second universal characteristic is that a project is a one-time occurrence with a well- defined and specific set of desired end results. (We discuss poorly defined, or “quasi-” projects a bit later.) These end results are referred to as the “scope,” or sometimes required “performance,” of the project. The project can be divided into subtasks that must be accomplished in order to achieve the project goals. The project is complex enough that the subtasks require careful coordination and control in terms of timing, precedence, cost, and scope. Often, the project itself must be coordinated with other projects being carried out by the same parent organization.

The third universal characteristic of projects is that they have a finite duration. There is a clear date when the project is launched and a corresponding due date or deadline. Furthermore, like organic entities and their growth curve, projects have life cycles. Often starting with a slow beginning and progressing to a buildup of size, then peaking, beginning a decline, and finally must be terminated by some due date. (Also, like organic entities, they often resist termination.) Some projects end by being phased into the normal, ongoing operations of the parent organization. The life cycle is discussed further in Section 1.3 where an important exception to the usual description of the growth curve is mentioned. There are several different ways in which to view project life cycles. These will be discussed in more detail later.

Interdependencies

While not universally true, projects often interact with other projects being carried out simulta- neously by their parent organization. Typically, these interactions take the form of competition for scarce resources between projects, and much of Chapter 9 is devoted to dealing with these issues. While such inter-project interactions are common, projects always interact with the parent organization’s standard, ongoing operations. Although the functional departments of an

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organization (marketing, finance, manufacturing, and the like) interact with one another in regular, patterned ways, the patterns of interaction between projects and these departments tend to be changeable. Marketing may be involved at the beginning and end of a project, but not in the middle. Manufacturing may have major involvement throughout. Finance is often involved at the beginning and accounting (the controller) at the end, as well as at periodic reporting times. The PM must keep all these interactions clear and maintain the appropriate interrelationships with all external groups.

Projects also typically have limited budgets, both for personnel as well as other resources. Often the budget is implied rather than detailed, particularly concerning personnel, but it is strictly limited. The attempt to obtain additional resources (or any resources) frequently leads to the next attribute—conflict.

More than most managers, the PM lives in a world characterized by conflict. Projects com- pete with functional departments for resources and personnel. More serious, with the growing proliferation of projects, is the project-versus-project conflict for resources within multiproject organizations. The members of the project team are in almost constant conflict for the project’s resources and for leadership roles in solving project problems. The PM must be expert in conflict resolution, but we will see later that there are helpful types of conflict. The PM must recognize the difference.

Project Management in Practice A Unique Method for Traveler-Tracking at Copenhagen Airport

IT University of Copenhagen, Denmark was working with Copenhagen Airport to improve both the effi- ciency and effectiveness of the management of their airport through a new approach: traveler-tracking, but without invading people’s privacy. The 3-year project focused on a unique, low-cost approach—capturing the Bluetooth signals from passengers’ phones with two electronic readers that cost only $30 each. At the time, not everyone had a smartphone that emits sig- nals, of course, but about 7 percent of the passengers do, enough to provide a completely random sample for tracking. To ensure travelers’ privacy, a crucial stake- holder in this project, they collected only a portion of each signal and deleted the addresses. They also informed the public about the project on the airport’s website and on-site as well. To encourage positive traveler response to the project, they provided alerts to passengers willing to synchronize their Bluetooth to receive information regarding when their plane was boarding and a map to the gate.

Knowing when people were entering and leaving Security allowed the airport to balance the staff at Security so lines didn’t build up, thereby shortening the time passengers must wait, while also reducing

over- and under-staffing of screeners. In addition, the information allows them to also post wait times at the check-in gates. The data also lets the airport determine which shops and areas are getting the most traffic so they can shift usage of facility space to better serve the travelers and the friends and families accompanying them. And when construction and rerouting changes traffic flows, they can determine the impact on pas- sengers and take action to reduce the inconvenience.

Questions:

1. Are the triple constraints of this project clear?What are they?

2. What was unique about this project? What was the main conflict?

3. Why are the travelers themselves a stakeholder in this project, since most of them won’t even know they are being tracked?

4. How widespread do you think this technology will become? What uses will be garnered from it? Do any of them concern you?

Source: S. F. Gale, “Data on the Go,” PM Network, Vol. 24.

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Project Management in Practice The Smart-Grid Revolution Starts in Boulder, Colorado

Boulder’s utility company, Xcel Energy, decided that it was time to create a roadmap for a 3-year, $100 mil- lion “smart-grid” electrical system that would span the entire city. There were no standards, benchmarks, or tested procedures for converting a city from a con- ventional electric-grid system to a fully integrated smart one, though it was known that if customers can monitor the true cost of their energy, they will automatically reduce their usage, by up to 30 percent in some cases. Of course, the smart grid would also allow Xcel to reroute power around bottlenecked lines, detect power outages, identify service risks, cut its use of road crews, read customer meters remotely, reduce outages, and identify false alarms more quickly.

Xcel brought in a mass of partners on the project, such as Accenture consulting for engineering, energy industry consultants, leading technologists, business

leaders, IT experts, and of course, Boulder city man- agers, leaders, and user-citizens. The public and pri- vate partners were divided into eight teams, all led by a senior project manager working with a Project Man- agement Office. With all these different stakeholders, with different objectives and interests, it was crucial to have steady, reliable communication to keep everyone up to date and the project on track. Security and privacy were high-priority items on the project, and communication with the community was facilitated through town hall meetings, the local media, tours of project sites, and even a touring trailer allowing citi- zens to get a hands-on demonstration of the smart-grid technology. With the completion of the project, Xcel is now measuring its many benefits and expects it will take a year to collect and analyze all the data across all the seasons. The project partners have also created an industry consortium to establish industry standards for future, larger smart-grid projects. They now see Boulder as a living laboratory from which they can continue to learn and thereby successfully deploy smart grids across the entire country.

Questions:

1. Are the triple constraints of this project clear? List each of them.

2. Given the range of benefits listed for the new technology, what interdependencies and conflicts do you suspect smart grids will create for utilities?

3. A major portion of this project had to do with carefully managing all the stakeholders. List those mentioned in the article and divide them into the four groups mentioned above. Do any stakeholders fall into more than one of the groups?

4. What conflicts do you suspect might have occurred between all the different stakeholders in this project?

5. Why do you imagine Xcel agreed to invest $100 million in this risky experiment? What might have been their ancillary goals?

Source: S. F. Gale, “A Closer Look,” PM Network, Vol. 24.

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Conventional thinking suggests different stakeholders (e.g., clients, the parent organization, the project team, and the public) define success and failure in different ways. For example, the client wants changes and the parent organization wants profits. Likewise, the individuals working on projects are often responsible to two bosses at the same time: a functional manager and the project manager. Under such conditions conflict can arise when the two bosses have different priorities and objectives.

While the conventional view tends to regard conflict as a rather ubiquitous part of working on projects, more recently others have challenged this view. For example, John Mackey, cofounder and co-CEO of Whole Foods Market, suggests in his recent book Conscious Capitalism (2013) that satisfying stakeholder needs is not a zero-sum game where satisfying one stakeholder must come at the expense of another. Rather, Mackey suggests a better approach is to identify opportunities to satisfy all stakeholder needs simultaneously. One way to accomplish this is to identify ways to align the goals of all stakeholders with the purpose of the project. As was mentioned earlier, the primary role of the project manager is to manage the tradeoffs. However, as Mackeywarns, if we look for tradeoffs wewill always find tradeoffs. On the other hand, if we look for synergies across the stakeholder base, we can often find them too. The clear lesson for project managers is to not be too quick to assume tradeoffs exist among competing project objectives and stakeholder groups.