Project Management, 3rd - PDF Free Download (2024)

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6.6 Controlling projects 6.7 Summary Project management in practice:Balfour Beatty introduce critical chain project management 7

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Cost and quality planning 7.1 Cost planning process 7.2 Cost-estimating techniques 7.3 Cost build-up 7.4 Cost management: budgets 7.5 The quality planning process 7.6 Quality conformance planning Quality performance planning 7.8 Relevant areas of the bodies of knowledge 7.9 Summary Project management in practice: Adopting a standard for project planning - useful discipline or unnecessary constraint? Plan analysis and risk management 8.1 Analysing time plans 8.2 Analysing cost plans 8.3 Analysing quality plans 8.4 Risk management 8.5 -Risk quantification techniques 8.6 Relevant areas of the bodies of knowledge Summary Project management in practice:It's a risky business Appendix 8.1 PERT factor tables ' Appendix 8.2 Present value o f f 1

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PHASE THREE; DELIVER THE PROJECT Project organisation: structures a n d t e a m s

9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 9.11

The role of teams The pure project organisation Matrix management Structure selection Mixed organisational structures and coordination Teamwork Life-cycles of teams Managing personalities in teams Effective teamwork Managing the team - running effective meetings Managing the team - working with geographically remote people and groups 9.12 Relevant areas of the bodies of knowledge 9.13 Summary

221) 222

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Project management in practice: Matrix management at Cardiff Bay Development Corporation Proj ect management in practice : Semco 10

M a n a g e m e n t a n d leadership m project environments 10.1 The role of leadership and management in projects 10.2 Individual skills and attitudes 10.3 Individual motivation 10.4 Structural implications for project managers 10.5 Cultural implications for project managers 10.6 Management style 10.7 The development of management thinking 10.8 The development of new management paradigms 10.9 Relevant areas of the bodies of knowledge 10.10 Summary Project management in practice: Doesn't time fly? Control of projects 11.1 Control systems 11.2 Control of major constraints - quality 11.3 Control of major constraints - cost and time 11.4 Visual control 11.5 Last Planner 11.6 Technical performance monitoring 11.7 The role of Project Management Information Systems (PMIS) 11.8 Change control 11.9 Control of the work of development projects - intellectual property 11.10 Relevant areas of the bodies of knowledge 11.11 Summary

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Project management in practice: The Lifter project Supply chain issues 12.1 Introduction to supply chain management 12.2 Purchasing 12.3 Contracts 12.4 From buying to relationship management 12.5 Modern techniques in supply chain management 12.6 Relevant areas of the bodies of knowledge 12.7 Summary Project management in practice: Project parmering of British Airports Authority (BAA) 13

problem-solving and decision-making 13.1 The problem framework 13.2 Modelling systems for decision-making 13.3 Handling uncertainty in decision-making

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318 322 324

13.4 Mathematical modelling techniques 13.5 Problem-solving tools 13.6 Cause-effect-cause analysis 13.7 Decision trees 13.8 Simple decision frameworks 13.9 Decision-support systems 13.10 The importance of the follow-up actions 13.11 Relevant areas of the bodies of knowledge 13.12 Summary Project management in practice: The use of cause-effect-cause analysis PHASE FOUR: DEVELOP THE PROCESS (DO IT 14

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Project completion and review 14.1 Project completion and handover 14.2 Structuring improvement activities 14.3 Learning before doing - the role of external knowledge 14.4 Learning by doing - the role of audit and review 14.5 Carrying out reviews • 14.6 Justifying it all - evaluate the cost of quality 14.7 Relevant areas of the bodies of knowledge 14.8 Summary Project management in practice: IT all goes pear-shaped at VCS Improving project performance 15.1 Project management maturity 15.2 Major influences on process change (1) -business process re-engineering 15.3 Major influences on process change ( 2 ) - benchmarking 15.4 Major influences on process change ( 3 ) - lean project management 15.5 Making it happen - the three pillars of change 15.6 Future challenges for project management 15.7 Summary Project management in practice: New product development at Toyota Forklift Truck - the X300 project

344 330 _U J 353 356 333:

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Appendix Relevant standards A.l ISO 9000 A.2 PRINCE2 A.3 ISO 14000 Project management in practice: Implementing BS-EN-IS0 9000 in a health service environment Project management in practice: To PRINCE or not to PRINCE?

394 394 399 402

Index

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Since writing t h e second edition t h e profile of project management in the business world has increased unbelievably. Organisations and individuals that had previously considered project management as s o m e t h i n g of interest to construction or engineering managers only suddenly realised t h a t there was p o t e n t i a l here. Reflecting this, project management is developing i n business and management education at a significant rate, alongside its traditional habitat of engineering, construction and IT. Its acceptance as a core business process has had ramifications for all concerned and the subject has to meet the challenge of this change. In t h e interests of 'beginning w i t h the end in mind', and just in case you were in any doubt, this is a textbook. This positions it somewhere between the practitioner guide (the short how-to book) and t h e h a n d b o o k - m o n u m e n t a l t o m e s that try to cover everything. Its predominant role is therefore to accompany a programme of study, and to provide an overview of areas of management knowledge relevant to t h e field. I have also attempted to provide some insight into the usage and applicability of t h e ideas discussed, as well as signposts to further sources of information. It is therefore not intended to be comprehensive on every particular aspect, current and emerging, of project management. Whether you are studying project management as part of a course or for personal development, I wish you well w i t h it. If you are looking for a subject w i t h scope for change, take the challenge - get involved and help make the changes. If you are looking for a career, again take t h e challenge. It is likely to be the most rewarding path you could choose.

If you are reading this t o check that I have acknowledged your input, I hope you are not disappointed! Thanks to many students and managers w h o have been on m y courses and taken the time t o provide feedback on their learning experiences. Socrates used t h e principle that if you want t o really find out whether your knowledge base is sound, y o u should teach it. I can honestly say that writing a book takes that testing to another level - i t is far more difficult t o do a U-turn from what you have said in a book! Other deserveds are Professor Tony Davies of EEDS - t h e EU project w a s fun; Professor Nigel Slack of Warwick Business School for inspiration; my colleagues at Kasetsart University for r e m i n d i n g me t o include more diagrams: Neil Butterill o f i&J M u n n Ltd; colleagues at Bath for t h e i r c o n t r i b u t i o n s o f ideas, i n c l u d i n g a l l t h e operations m a n a g e m e n t g r o u p (Professor Steve Brown, Professor Richard Lamming, Dr Paul Cousins, Dr Kate Blackmon) a n d Dr Jerry Busby from t h e D e p a r t m e n t of Mechanical Engineering; former colleagues at Cardiff Business School, especially Professor Mick Silver (top PhD supervisor) and Dr Nick Rich (great discussions) and Professor Dan Jones(thanks again for t h e foreword): Trevor Rose for helping me t o understand what old people t h i n k of project management: members of t h e Project M a n a g e m e n t D e v e l o p m e n t Group for s t a r t i n g w h a t could be a great driver in t h e d e v e l o p m e n t of project management knowledge, especially Margaret Greenwood and Professor Ralph Levene: many people w h o have bothered t o keep me in t h e loop as t o what is happening in project management teaching in their part of the world. Three reviewers have given phenomenal i n p u t t o each batch of chapters as they were completed: Dr Paul Walley of Warwick Business School, Prof. J.M. Robertson of Cranfield University, and Bob Saunders of Open University. Their comments were challenging and always supported by positive suggestions. For these, I am incredibly grateful as I am for all comments on t h e book. The development team, for as long as it stayed in place, were great. Penelope Woolf and Stuart Hay for backing t h e development, Patrick, Claire etc, for their chivvying and chasing and insightful comments. Lastly, I want t o acknowledge t h e input of my family. We t h a n k God for our t w o completely w o n d e r f u l children, n e w a d d i t i o n s since t h e last edition. Having t o say 'not at t h e moment' t o t h e request of 'Daddy, come a n d look' taxes their patience, and such a s u b s t a n t i a l rewrite has t a k e n me away from t h e m for more t i m e t h a n I care t o remember. Kara has been my project manager t h r o u g h this, as well as my

Acknowledgements I xv

in-house communications expert, counsellor, and coach. Her knowledge, love and red pen have been incredible. All mistakes are of course mine.

Dr Hawey Maylor Bam, UK December 2001

Project Management is no longer about managing t h e sequence of steps required to complete t h e project on time. It is about systematically incorporating the voice of t h e customer, creating a d i s c i p l i n e d way of prioritising effort and resolving trade-offs, w o r k i n g concurrently on all aspects of t h e project in m u l t i - f u n c t i o n a l teams, and much more. It involves much closer links between project teams and downstream activities, e.g. in new product development, integration w i t h manufacturing, logistics and after-sales support - i n this case 80% of t h e costs are determined before they take over! There are huge o p p o r t u n i t i e s for e l i m i n a t i n g w a s t e d t i m e a n d effort in a l m o s t every project. In manufacturing. Toyota estimate that only 5% of activities actually add value, 3 5 % are necessary b u t d o n o t add value, w h i l s t t h e r e m a i n i n g 6 0 % is pure waste - ' muda' in Japanese! By halving t h e effort in designing a new car, they show this muda can be reduced by good project management. Every project manager in t h e future has not only t o manage their own project but to seek ways of eliminating t h e muda in their systems so they can do more for less, and more quickly next time! Perhaps t h e biggest opportunities, however, can be found in t h i n k i n g beyond the management of individual projects to standardising and streamlining t h e project management process itself. Although each project presents its own challenges, t h e ability to launch new products quickly, on t i m e and w i t h no errors, is what leads t o sustained business growth. Getting t h e projectmanagement process right should be a key strategic priority for every firm. This book takes a fresh look at t h e new techniques used by best-practice companies t o improve their project management performance. It shows h o w t h e disciplines used by Toyota and t h e Deming approach t o management can be applied to any kind of project in any industry. Students w i l l find t h e mixture of academic debate a n d practical case-studies helpful and teachers w i l l welcome t h e discussion questions after each chapter. Professor D.T. Jones, Director, Lean Enterprise Research Centre, Cardiff Business School, University of Wales, Cardiff.

In 1993, t h e London Ambulance service launched its computer-aided despatch system. It failed. People died and a £1.5 million project was written off. A 1 9 9 6 survey by the University of Sheffield showed that of t h e projects that they had polled, 80 per cent had run late. The total cost of IT project overruns alone is put at several billion US d o l l a r s in t h e USA alone. This p e r f o r m a n c e is n o t Limited to t h e IS/IT sector. Recent evidence suggests that t h e vast majority of projects, from t h e simplest to the most complex, in all sorts of organisations run late, overbudget or both. The Channel Tunnel - 31 miles of tunnel linking the UK and mainland Europe - was several years late and £5 billion over budget. Is there a problem w i t h projects and their management? There is significant evidence t o suggest t h a t there is. Even t h e British S t a n d a r d s Institute a c k n o w l e d g e s that: Research suggests that t h e overall track record of British organisations in managi n g projects, i n c l u d i n g take-overs, leaves m u c h t o be desired. The delivery of results on time, w i t h i n predetermined cost and o f t h e requisite standard w i t h i n set safetyand quality criteria is less frequent than it should be. (BS 6079: 2000) This is not just a British problem. Also, is it less frequent t h a n it should be? A conservative estimate of t h e problem p u t s t h e m a g n i t u d e at in excess of 8 0 per cent of projects not delivering what was required of t h e m i n one or more substantive way. Projects are important for individuals, organisations and economies. For t h e individual, project management can provide one of the most challenging career paths. For organisations, there is t h e opportunity to derive competitive advantage from their projects. For nations, t h e performance of projects w i l l have an i m p a c t on t h e i r economies. With t h i s level of importance and t h e level of problems being faced comes' t h e opportunity for a rethink of t h e way t h a t w e run projects. The issue for the modern project manager, which is reflected in this text, is the need for a holistic approach to project management. That is, we must considerthe project to be more than t h e product of a technical activity. Our consideration must include human issues and recognise t h a t projects often have a sizable creative element. This creative element requires a d i f f e r e n t approach. It is described as t h e p r o d u c t of order and chaos. Managing t h e chaos w i t h o u t s t i f l i n g t h e creative nature of t h e process is a major challenge for t h e p r o j e c t manager.

2 I Introduction

The subject of project management is changing fast and the economic importance of the area is finally being recognised. This has led to many changes in the methods and scope of the subject. There is also increasing recognition cf the excitement and challenges associated with the profession of project manager in many different contexts. The challenge for students of the subject is to grow with the body of knowledge and recognise the potential that exists for individuals and organisations in this area. i ^ ^ H H H H M H M H H I j l ^ ^ ^ ^ ^ H H B H H H H H H M I

Learning Objectives 1.1 Introduction and objectives of this book 1.2 Definition of a project 1.3 An historical perspective on project management 1.4 Current issues in project management 1.5 The relationshipbetween project management and general management 1.6 The project management knowledge base 1.7 Introduction to the following chapters 1.8 Summary Project management in practice-. Three project managers with distinctly different roles Project management in practice: The Big Dig Key terms Review questions and further exercises References Furthe r information Notes

By the time you have completed this chapter, you should be able to: » Define a project, : role cf project managers; * Recognise the new opportunities and constraints that exist for the subject of project management; * Describe the evolution cf the subject of project management; Identify the current issues faced by project management practitioners and researchers; * Start to incorporate the existing bodies cf knowledge into your studies and projects.

i.1

Introduction and Objectives of this Book An increasing number of organisations are recognising that they are 'project-based', that is, the majority of their value-adding work is carried out through projects.

Introduction I 3

These organisations are not limited to the traditional project-based organisations of the heavy engineering, construction, IT and consultancy sectors. They are a whole host of blue-chip firms (including Xerox, Hewlett-Packard, Intel, Motorola), smaller firms as well as local and national government agencies all over the world. Suddenly individuals and organisations who had previously taken little interest in the subject are clamouring to know more. This is a significant change and one that has many repercussions for the subject of project management. In addition, as a result of the influence that many world-class finns are having on this subject we are in a period of rapid evolution of the practices and processes of project management. Organisations are devoting significant effort to improving their project performance, which does have a major economic benefit for the organisation. As projects in most sectors become more important to those organisations, so too do the project managers. We have seen the development of parallel career paths for managers - allowing them to be promoted either through their line activity (sales, marketing, finance, human resources) or through their excellence in managing projects. This provides a real incentive for individuals to take this route seriously and change their own methods and views of the subject. For many years, project management has been referred to as the accidental profession - where people have not selected it, but ended up doing it anyway. Today, we may have the choice - to accept the challenge of being an excellent project manager and become a true 'project management professional'. Therefore, project management is important for both organisations and individuals, and this importance is increasingly being recognised. To further this, the objectives of this book are: • to demonstrate the importance of project management as a management specialism in its own right, and the potential positive contribution that it can make to organisations; • to provide a source of ideas and a guide to new approaches that can be used by individuals and organisations in the execution of their work; • to demonstrate the progression from strategy formulation to execution of the project and subsequent activities; • to provide a set of tools and techniques applicable by the project manager at different stages in the life of the project; • to consider the role of the project manager in the organisation and management of people; • to highlight examples of world-class performance in project management and to take lessons from these; • to provide a path for the individual to seek self-improvement in their project management expertise, through the study of both good and poor performance (through recognising where mistakes were made and avoiding these in future) from case studies. The final objective of the book is to recognise project management as one of the most challenging and creative tasks that a person can undertake. In this respect, it can even be, yes, fun. The opportunity for an individual to make their mark on the project is immense. For many project managers the following quotation is typical:

The great thing about being the project manager is that I get leverage on all my ideas. I think of one way that a problem can be overcome, and the team add to it in ways that I never could have imagined on my own. Before we can discuss the area further, it is important that some definitions are established, as these are by no means universal, and time after time we see that one person's project is another's ongoing activity!

When is a project not a project? When it doesn't meet the following criteria. Definitions include: • any non-repetitive activity; • a low-volume, high-variety activity; • 'a temporary endeavour undertaken to create a unique product or service' (PMI, 2000); • any activity with a start and a finish; 'A unique set of co-ordinated activities, with definite starting and finishing points, undertaken by an individual or organisation to meet specific performance objectives within defined schedule, cost and performance parameters' (BS 6079: 2000). The first of these is a very constrained view (see below) and does not describe well the true nature of projects. The idea of assessing volume and variety of activities comes from the study of operations management (see Brown et al., 2001). This definition is worth exploring further as it concentrates on the activity rather than the outcome. This is a process view of projects and will be a recurrent theme throughout this book. Furthermore, it will be shown that the definition of what constitutes 'a project' has changed in the recent past. The relationship between volume and variety is shown in Fig. 1.1. As you can see in the figure, there is generally an inverse relationship between volume and variety.

Volume 'Paint by numbers'

\ x

/ yi

, As... but... /

/ First-timers

Variety

Figure i . i Volume versus variety and projects

Introduction I 5

For example, McDonald's is a high-volume, low-variety business - they provide a high volume of products that are (depressingly) the same wherever in the world you go (very low variety). A management consultant, on the other hand, operates at the other end of the scale - providing a low volume of services, carried out according to the needs of each client, having a high variety. The traditional project management area is low-volume, high-variety processes, where the notion of uniqueness prevailed. These are indicated on the figure as firsttimers. Examples of these are the first moon landing and the development of the first computer. It is noticeable with the wider adoption of project management that individuals and organisatious are running projects, often over time periods as short as a few weeks or months, and that these are being carried out on a regular basis as part of ordinary business activity. Here, the end product may be different, but the process by which it is delivered is often repeated over time. Two scenarios are identified here. The first is where there is some similarity to previous work, in terms of either the process followed or the product being delivered. These are referred to in Fig. 1.1 as 'as . . . but. . . s', that is, as the job we did last time, but with the following differences. The second of these is where there is a high degree of commonality in both process and outcome. These are tenned painting by numbers projects1 because the process and the outcome are well known. The project team has the task of following the path to the required outcome. Projects such as carrying out a financial audit of a company will be project-based, but the processes and the outcomes (a set of reports and accounts) are well known in advance. Marketing research projects are similarly painting by numbers projects in many instances. While it is a characteristic of projects that there will be a degree of uniqueness, the removal of focus from the product and onto the process means that there is considerable scope for ongoing improvement - particularly if the organisation adopts the 4-D model of projects shown later in this chapter. It is for this reason that the definition is also rather limited, as again it focuses on the uniqueness rather than the consistent elements of process. There is an ongoing discussion as to what actually constitutes a project. For the purpose of this book, the widest view of what constitutes a project will be taken -encompassing all three of the categories of projects from Figure 1.1. Having a defined start and finish is undoubtedly a characteristic of projects, though it is insufficient to define them on its own. It is a useful discipline though, as it is often seen that projects do not have a defined start point, they just emerge from other activities. Organisations also often appear reluctant to put a finish date on projects, resulting in activities that continue to consume time and resources. For individuals, this is also vital - personal projects are often started with no notion of when they will be completed. They then add to an already full to-do list, causing stress and frustration. Not starting further projects without some sort of selection process (see Chapter 3) and then putting deadlines on these is a good discipline, therefore, for both individuals and organisations. The last definition is more of a wish-list for many project managers than a de-facto definition. As shown in Fig. 1.1, there is a significant group of projects that do not have these characteristics. at least at the outset. While they may develop them over time, it would be wrong to exclude them from our consideration of projects.

The above definitions have provided a range of characteristics of projects and these will be developed in section 1.5 when the characteristics of project management are compared with general management. It can also be seen that there is no completely consistent agreement as to what is a project and what is not. Some characteristics about which there is agreement include: • there are constraints (usually centred around time and resources, but also including all aspects of the process and the outcome); • projects are a process - in many cases a core business process for organisations; • the particular goal in mind shows that it is a focused activity and often this is change. Organisations carry out many different types of change through projects, and are a major area for application of the principles and practices of project management. defined a project, we can now consider the evolution of the subject area, leading to the current issues for project management, in both practitioner and academic environments.

In theory, we should be able to learn from how humans have managed projects since the start of civilisation. This should be an enlightening area for study, but is one that appears to have yielded little of practical use for project managers today. For one, the constraints are hardly the same today as they were. One very successful civilisation - the Roman Empire - did not have the same resource constraints that project managers face today. As one historian pointed out, if they wanted any more resources to complete their projects, they simply had to go and conquer the region that had those resources and take them. Maybe this is more reminiscent of industrial practice today than we credit. . . In addition, timescales and expectations were much less. Construction of some of Europe's great churches was accomplished over periods of many decades, or often over hundreds of years. Today, the expectation is that it will be ready tomorrow. In addition, we do have a 'survivor bias' for projects carried out by them - we do not find so much evidence of their failures as of their successes. Recently, the nature of project management has changed. It has ceased to be dominated by the construction industry, where much of the case material under this heading is based, and is now applicable in all organisations. Project management is now an advanced and specialised branch of management in its own right. As a result, the nature of project management has had to change. It is no longer simply an extension of a technical specialism (e.g. engineering or marketing), but requires a full structure to take a project from strategy to action. In addition, the hard systems approach, which treated the project as a mechanical activity, has been shown to be flawed. A further elaboration of the development of the subject is shown in Table 1.1.

Introduciion ! y

Table î . i Historical development cf project management Stage

Era

1 2

Pre-1950s 1950s

3

1990s

Characteristics No generally accepted or defined methods 'One best way' approach, based on numerical methods established in the USA for managing large-scale projects A contingent approach based on strategy

# Obviously, small- and large-scale projects were undertaken before the 1950s. Individuals managed events and other situations. For example, the Pyramids were constructed, wars were fought, and products were developed. However, project management in the way that we would understand it today did not exist until the 1950s. During the 1950s, formal tools and techniques were developed to help manage large, complex projects that were uncertain or risky. The chemical manufacturer Du Pont developed Critical Path Analysis (CPA- see Chapter 5)for scheduling maintenance shutdowns at the company's production facilities. At the same time, the defence contractor RAND Corp. created Programme Evaluation and Review Technique (PERT)for planning missile development. These tools focused almost exclusively on the project planning phase, and there were no close rivals for their use. The methods have survived and became 'the way it is done', despite never apparently having been the subject of any trial that questioned their usefulness. The principles of these will be the subject of the discussion in Chapter 6. As well as project planning and control, the role of projects is today being reconsidered. A strategic approach is taken to the design of the project process, rather than the highly reactive approach that has been prevalent until recently. Conventional methods developed to manage large-scale direct-value-adding projects with timescales of years such as heavy engineering are too cumbersome when projects require short timescales to exploit market openings quickly, in particular in an information-based economy. The third stage of project management emphasises the strategic role of projects, especially those processes that the project manager must put in place to deliver the end objective'of the project and satisfy the needs of all the project's customers. In this new approach, project managers become project integrators, responsible for integrating the required resources, knowledge, and processes from the project's beginning to end. This third stage has also been greatly influenced by the changes that have occurred in the context in which modern projects operate. In particular, the ready availability of technology (especially communications technology) has led to the emergence of virtual teams as a means of running projects. Similarly, there has been considerable development of powerful project planning and software and the computer processing power t o support it. Both of these have the potential to change the way that we work in projects. . This consideration of the evolution of the subject brings us to the issues that practitioners and academics are facing today.

There is only one consistent feature cf modern business and that is change. Organisations are constantly required to change what they do and how they do it. The most successful commercial organisations are those that have become best at changing. World-class performance is seen to be possible through the development of excellent management, one significant part of which is the management of projects Jiawever, working against this is a number of issues, which are exemplified by the following quotations: 1 2 3 4 5 6

'Ready, fire, aim.' 'It's all in my head.' 'We work in a nanosecond environment, we don't have time to do this stuff.' 'Project management - we have a procedure for that.' 'It's all just common sense, isn't it?' 'We've done this lots of times before. It never worked then, why should it this time?' 7 'It won't w.ork here!'

"Ready, fire, aim' 'Ready, fire, aim' is the fate of many projects. Here the project is started with no clear objectives. The motto is 'shoot first - whatever you hit, call it the target'. There are still some corners of the commercial world that tolerate this approach to managing projects, but in general, this is noi associated with any great success. As will be seen in subsequent chapters, this approach may work fine for the early stages of a project or where the benefit is in carrying out the process of the project, rather than in achieving any particular outcome. In most organisations today, this is being replaced with a highly structured system of justifications that any project must go . through. However, if you do work in this environment, setting your own targets at the end of the project is the easiest method for the project manager, without a doubt!

'It's ait in my head' The second represents the approach that is taken to many projects. The project manager will set out with all the information in his or her head. This may work well where the project is very small, but the lack of any system will soon start to tell on the individual and the results if there are any problems or if the scale of the project escalates. Here, the application of the structures and systems will greatly help, enabling better-grounded decisions to be made and avoiding many problems to which this approach will inevitably lead. It remains a challenge for many individuals and organisations to move away from this usually random approach to managing projects. This links to the next point.

Introduction I 9

We work in a nanosecond environment, we don't have time to do this stuff" This was a regular quotation from managers in fast-moving e-commerce firms. Given the demise of so many of these, one can only speculate on the impact that the unwillingness to deal with anything as messy and un-hip as good project management had on those businesses. There may be changes to the basic practices of project managers that are required under such circ*mstances, but this is more of adaptation rather than radical re-invention. This scenario is in sharp contrast to the next one.

'Project management - we have a procedure Fcr that' Having a procedure or a documented set of processes for projects provides a highly structured approach that is favoured in some industries. Indeed, there are many where the slavish dedication to highly restrictive methods is necessary as part of the requirements of customers (military procurement and areas where safety considerations are paramount are two such areas). The result is high levels of documentation " (the procedures manual for projects at one international bank ran to several thousand pages) and considerable bureaucracy associated with it. Decision-making can be very slow and the overhead costs associated with such systems significant. This represents the other end of the formalisation scale from the previous scenarios; it is a challenge for project managers to deal with this high degree of formalisation, and yet try to engender creativity into the project and the people working on it. It is a constant theme among project management professionals just how much formalisation is required in systems. While some will have the levels specified by the requirements of the project, the vast majority, particularly for smaller projects, require an approach that is more appropriate to the particular situation.

I t ' s all just common sense, isn't Well yes, but that depends on what you mean by common sense. If you mean 'the obvious after it has been explained', 2 then possibly. However, this statement usually just shows that things about which little or nothing is known appear obvious as exemplified by the bar-room philosopher with easy answers to life, the universe and everything, if only they would listen . . . This is a great challenge for project management today. The past 50 years of the subject will be shown to have provided a substantial knowledge base for project managers t o use. The art is in knowing the relevant parts of that base and tailoring that knowledge to the particular environment.

'We've done this tots of times before. It never worked then, why should it this time?' Here we see the experienced project worker showing the exasperation that comes with the application of many different approaches, only to be regularly confronted with the same results -projects running late, overbudget or delivering less than was

t o I Introduction

required of them. This is not at all uncommon, because the real causes of failure are rarely addressed by organisations. The failures deserve more careful study - they are a significant opportunity for learning and are generally very costly - to individuals, the organisation or both.

I t won't

here!' Lastly, the challenge is for new methods that have been developed in other areas of business to find how they might be applied with benefit to the project environment. These must overcome this often-heard rejection of anything new as it was 'not invented here, therefore it cannot be of any relevance to us'. The pressure for change in most organisations is such that ideas need to be brought in from wherever possible and adapted for projects and then the particular application. Examples of changes that are having an impact on the project environment include taking operations initiatives (including Lean and Agile) and applying the principles to the project environment (see Chapter 15).As was commented in the previous section, there is no longer just one best way to run a project. Now there are many possible options, and it is this choice of processes that will be discussed in subsequent chapters. One final issue should be shelved very quickly. Many managers have not recognised that they are project managers, despite the statistic from those who study such things that the average manager now spends upwards of 50 per cent of their time on projects or project-related issues. Their line responsibilities (finance, marketing, design) involve them in a variety of day-to-day activities plus longer-term projects. The skills and techniques used in the line-management function will differ from those required in projects, as we shall see. The more enlightened organisations will provide a basic skills grounding in the best ways to run projects, and help, coach and mentor individuals in recognising and developing their project roles. The subject of project management needs to move on. The incorporation of a substantial strategy element in this text reflects the need for the subject to change its reactive nature and move to the situation where it aspires to be a source of competitive advantage. This advantage has been amply demonstrated in the operations management area, and the contribution of operations to the success of major businesses such as Toyota has become legendary. Unless the strategy is right, even the best management practice in the execution of projects is wasted. It has become evident that project managers have been woefully ill equipped to take this strategic role. This text takes a much wider view of project management to prepare for a discussion, much of which can rightly be placed at the highest levels of organisations. A further issue that was raised in the opening of this chapter is that of the ongoing extent of project failure. This presents a significant opportunity to organisations to improve their performance, through improving the way that both operational projects (those that directly earn revenue) and change projects (those that change the way that the organisation or an individual works) are managed. One issue that has already been raised in this section is that many project managers fail to recognise that this is indeed a major part of their role. In order to help recognise this element and where the differences exist between project and general management, the following section will develop this theme.

1,5

The Relationship between Project Management anH Apnpral

Manaoomt>n(

Figure 1.2 shows a conventional management hierarchy with the lines on the diagram representing lines of reporting or responsibility. At the head of each of the major functions within an organisation there will be functional or line managers. These managers have the responsibility for the people who work under them in their'departments. The project manager may have a line management role as well, but is responsible for projects that may run across several functions. The figure shows the project manager being responsible for people drawn from every function in their activities in relation to that project. The project manager's role differs from that of the line manager in the nature of the task being carried out. Table 1.2 gives the major differences. As Fig. 1.3 shows, the split between tasks that can be considered as maintenance (maintainingthe status quo) and innovation is changing. In the figure, the trend is for the line AB to move downwards - increasingthe degree of innovation activities required

Project manager

Figure 1.2 Project organisational structure (for project cf medium complexity) Table 1.2 Project versus general management General management

Project management

• •

• responsible for overseeing change • lines of authority 'fuzzy' • ever-changing set of tasks • responsibility for cross-functional activities • operates within structures which exist for the life of the project • predominantly concerned with innovation • main task is the resolution of conflict • success determined by achievement of stated end-goals • contains intrinsic uncertainties

• • • • • • •

responsible for managing the status quo authority defined by management structure consistent set of casks responsibility limited to their own function works in 'permanent' organisational structures tasks described as 'maintenance' main task is optimisation success determined by achievement of interim targets limited set of variables

Innovation

A

Project management

Line management

B Maintenance

Figure 1.3 Innovation/maintenance activities in Line and project management from line managers. The result of this is a change in the role of line managers and a reduction in the difference in the roles of line and project managers. Indeed, as already stated, this blurring of project management into general management provides for considerable confusion. Reference back to the definitions of projects will show those activities that are and are not project-based. The box below illustrates this.

The role of the environmental health office includes visiting food premises (restaurants,cafes, school canteens and mobile catering outlets) to determine whether the practices that they are following in the preparation, storage and serving of food constitute any danger to public health. They have considerable powers (includingclosure of the premises) where deficiencies are identified. The manager of the area-was convinced that he was a project manager - each of these visits lasted for several hours and was, therefore, an activity with a start and a finish. QED, it was a project. Except that these are not projects. The process that was followed each time (arrange visit, visit, report and follow-up) was the same (low-variety process), and each inspector was visiting one or two premises a day (medium volume). This was operations rather than project management. It was, however, only one part of his role. Where there was a public health issue raised (such as an outbreak of a particular disease), this was indeed a project. These were fortunately rare events and each one had its own characteristics. They also had to be preplanned, so that no time was wasted when they did occur. Other projects included regular initiatives to highlight particular aspects of public health - such as an autumn campaign of promoting influenza vaccination. The role of this manager was therefore split between the general management associated with the ongoing activities and the project management of both initiatives and reactions to 'crises'. He was advised to look to operations management as a subject to help with the management of the day-to-day tasks, but to build a relevant knowledge-base and set of practices for the project that he ran.

The above case is not unique and there are many managers who face this multiple role - part general management and part project management. Others are full-time project managers. Further discussion of these roles is contained in the Project Management in Practice section at the end of this chapter. For now, a consideration of 'what we know' about project management follows - vital if we are to avoid reinventing the wheel each time a project is undertaken.

1.6

The Project Management Knowledge Base There is a vast amount written about project management. There is also a great deal of knowledge about 'what works where' in any particular scenario. As we will see in Chapter 14, however, this is not always readily accessible just when you need it. Even the so-called handbooks of project management cannot be this comprehensive - there are too manv scenarios and too many potential variables. The books on project management range from the short pocketbook approach to project management (see Further Information at the end of this chapter) to the generalist text (such as this one), to collections of academic work that form the handbooks. Alongside all these are myriad special-interest books and articles. While the handbooks try to be comprehensive, there are many short self-help books that will claim to 'make you an expert in a week'. It is interesting that we insist that other management professions (e.g. accountants and lawyers) spend years training for their profession, but when it comes to project management, people will often be put in the position of managing a project with little or no training or education in the subject. The pocketbooks do provide a first level of awareness-raising of some of the issues for the aspirant project manager, and are often useful checklists for the first-time manager. Indeed, it often surprising how far people go with little more than the rough guidelines contained in such books. Project management as a profession is almost unique in having institutions concerned with its development who promote what they term their Body of Knowledge. This is certainly not the case in other management areas, finance, marketing, purchasing, human resources and operations. Project management has no less than three relevant bodies of knowledge, all very different in their purpose and content.' For the purpose of this book, we will be referring throughout to the APM and PMI bodies of knowledge, showing the areas that are pertinent to each of the major topics covered here. This provides a further point of reference for those studying the area, whether this is for personal study as part of a course or in preparation for the relevant professional examinations (see Web addresses in the Further Information section at the end of this chapter). These will be expanded as part of the discussion on structures in the following chapter. A further development of this knowledge base comes through specific standards for processes. Standards may be particular to the organisation as discussed above, or follow a generic standard, such as PRINCE2. Further discussion of PRINCE2 is included in the Appendix at the end of this book.

14 1 Introduction

1.7

Introduction to the Following Chapters This chapter has provided an overview of the nature of projects and their importance. They are important to individuals as a means of carrying out their work and with an increasingly recognised career path as project management professionals. Organisations can benefit too from having the capability to deliver excellence in this area. There does appear to be a problem, however, with projects and their management, with evidence of widespread failure to achieve project objectives, regardless of size, scope or sector in which the project is being run. Some of this must be down to the history of the subject, with a reliance on 'one best way,' regardless of its reliability or applicability. Other aspects include the failure of many individuals and organisations to recognise that they are involved with project management, and to take the subject, and all it has to offer, seriously. The subject is moving on from this at a significant pace, with the bodies of knowledge that were outlined here providing a grounding from which organisations and individuals can develop their own knowledge bases. The above discussion provides the rationale as to why this subject is worth studying and books like this are needed. The following maps out the following chapters and outlines the contents of each. The chapters broadly fit into the 4-D model shown in Fig. 1.4. The starting point for any consideration of project management is the structures and frameworks that can be applied to the process to assist in forming our thinking on the subject. This is vital, as even moderately complex projects will swamp you unless you have a system to deal with them. From the frameworks described in Chapter 2, the first of the major inputs to the project - through the strategy process - w i l l be unpacked in Chapter 3. Having set the strategy, the next step is to develop the ideas for both project outcome and process. This is done in Chapter 4. This concludes the definition stage of the project life-cycle. Having determined to continue with the project, the next stage in the life-cycle is designing of project process in some detail. Time planning is considered in Chapter 5, cost and quality in Chapter 7. This shows the benefits of the 'project management approach' and includes some of the techniques for describing both the technical (the hard elements) and human (the soft elements) of projects. Chapter 6 presents a

Chapters j 6 4 D21 Design the project process

hapters JP }&1S

M

D4\ Develop the process

Chapters 5-8 Chapters

9-13

D3: Deliver

the project

! 14 The 4-0 model and the chapters of this book

IntroductionI31

relatively novel approach - that of the theory of constraints approach to planning the critical chain. The chapter will argue that this is one way that tackles some of the fundamental problems with current approaches to projects. Having constructed plans or models of the activities to be undertaken, many projects then start. This misses one of the key opportunities that project managers have for reflection on their plans and to avoid problems in the future. Chapter 8 therefore presents strategies and techniques for analysing the plans and models that have been generated - in particular with respect to risk analysis. This includes the subject of justification of project budgets. While a full discussion of financial justification process and practice is outside the scope of this text, some appreciation is required of the issues to be considered. Financial discussions should not be the domain solely of accountants. Following the theme of analysing plans, the high level of failure of projects has led to a re-evaluation of the tools and techniques of project management. The third element of the project model is the delivery phase, or 'Do it!' and this is the subject of the next batch of chapters. In bringing together the resourcesto execute the plans, the project manager has to be in a position to make objective decisions about structure, i.e. the arrangement of people and groups, relative to lines of authority and responsibility. This is the subject of Chapter 9, which includes a discussion of how teams work on projects and an introduction to the contribution that individual personalities will make. Chapter 10 continues the theme of the management of people, with a discussion of management and leadership in the project environment. Chapter 11 considers the information that will be needed in medium- to largescale projects in order to maintain a degree of control over the ongoing activities. It is, after all, of little practical use to find at the end of the project that all tasks have run late, that the budget was overspent and the 'customer' or other influential parties were dissatisfied with the outcome. The delicate balance of ensuring that the project stays on track without overburdening it with bureaucratic controls will be discussed, with the objective of maximising the visibility of project progress. Chapter 12 looks at the increasing role of supply chains in our projects. As more projects are run as joint ventures, and the trend to outsource major parts of projects becomes a facet of organisational life, it is vital for the modern project manager to have a grasp of the impact such ventures will have on the practices that will need to be adopted for the project. Decisions should be made on the basis of good information. What constitutes 'good information'? In addition, what should a project manager do with that information? Approaches to problem-solving and decision-making are discussed in Chapter 13. This issue concludes the management of the execution phase of the project. If the objective of continuous improvement is to be met, however, this is not where the activities of the project manager end. The continual improvement of the process through two cycles - ' learning by doing' and 'learning before doing' are considered in Chapter 14 on project close-out and review. Some of the main influences on the project management process are then discussed and a future agenda proposed in Chapter 15. These include the quality revolution, the desire to make project processes leaner, business process re-engineering and benchmarking. In addition, the means by which these are applied are discussed. Finally, the question 'What next? is debated in the context of developing the subject of project management.

i 6 I introduction

The Appendix covers issues that are relevant to many project managers across all phases of the project - those related to standards. This is a major constraint for many, and some knowledge of these and their purpose is useful. The key standards that are considered include those related to general processes (including ISO 9000 and BS 6079)and one that is very specific about how projects and the supporting organisation should be structured - PRINCE2.

Summary

i l ^

Projects are important issues to both individuals and organisations. There are some key questions to be answered if we are to understand the meaning and potential of the subject and profession of project management and the activity of managing projects today. The first is: what is it? For some people, the image that is conjured up is of large-scale construction projects - the many buildings for the millennium or major events such as the Sydney Olympics. The second is: what is the role of management in this? For many, project management is often associated with its basic tools and techniques or a particular software package. These views are limiting and do not do justice to the range or scope of project management today. To counter the first point, project management is a live subject - going on around us all the time, and not just in organisations that undertake large-scale projects. On the second point, rather than just being a limited set of tools and techniques, it is also a true profession, with a growing recognition of its contribution to all walks of working life. The role of project management covers the entire spectrum of management knowledge, making it a broad-based study, not confined to tools and techniques or technical issues. On a business level, there are projects ongoing in every organisation. These are vital as they are the execution of all the visions, missions and strategies of that organisation. There are many books and distinguished articles written on strategy, but relatively little on how to deliver it. On a personal level, we all have a number of projects ongoing - pursuing a course of study, buying a house or organising a holiday. The level of complexity differs, the underlying principle of delivering the result at a given point in time is the same. At a commercial level, the effectiveness of the project management process will determine whether or not those projects play a role in providing a source of competitive advantage (or even continued existence) for an organisation. But this is not usually the case, as the opening of the chapter showed. There is a problem with projects and their management, as demonstrated by the large percentage of projects that run late, cost more than was expected, or fail to deliver what was required of them. The first step on the way to understanding projects was their definition. This showed that there was a considerable diversity in the characteristics of projects, and that these require different approaches to their management. After we identified the nature of projects, the next discussion was to see how we arrived at the current state of the subject. Having emerged from the 'one best way' era of project management, we are faced with a large number of challenges, not least in terms of where the subject is going now. This is both helped and constrained by the current knowledge

introductioi'!' si-

base, with high-profile bodies of knowledge being at the core of the professional discipline. The arrangement of this book is based around the four stages of the project lifecycle, with the first part of this being the structures that project managers can apply to their projects. As already discussed, these ideas are often very simple in principle, their application requires considerablecreativity to adapt them to the particular circ*mstance in which you find yourself. That is the challenge of project management.

Three project managers with distinctly different roles a rile site manager of a housing development 1 am in charge of the construction of the buildings you see around you [he gestured with his hand to the mixture of partially and fully completed properties] and of making sure they go from this stage [he indicates a pile of drawings and building schedules] to the point where we can hand them over to the sales people to sell. Most of the work is supervisory, ensuring that orders are placed and materials arrive on time, people turn up, do the job properly and get paid for it at the end of the week. There are always arguments between the various tradespeople to resolve and problems just get dumped on the desk. Some of the toughest problems come with the people you have to work with. Some of them will do anything to try to get one over on you - they'll tell you a job is finished when you can see it is only half done. Unless you go and check it yourself you're in trouble. Also, they don't give a damn for my schedule. How do you get a roofer, at four o'clock in the afternoon when it is raining rather heavily [not the words actually used] when you know he has a long drive home, to get back on the roof and finish the job he is doing so that other jobs which rely on this being completed can start at eight o'clock the following morning? It wouldn't be the first time we had to block his car in with a pallet of bricks to stop him leaving.' 2 implementing:Total Quality Management - the quality director 'The quality director was appointed with the brief to introduce Total Quality Management (TQM)to the company. It was his responsibility to put the proposal as to how it could be done, and then to carry it out. As he described at the outset of the project "[this] is one of the most complex projects that we could undertake at this time". The complexity came because the project would hopefully change the way that everyone in the company thought and worked [i.e. both attitude and procedures]. This would have to be done through consultation, training and the demonstration through piloting small-scale improvement activities, that the move towards TQ was worthwhile. The initial phase as part of the proposal process was to carry out a company-wide quality audit to determine attitudes, knowledge and current practice. The results paved the way for the carrying out of targeted efforts where needed most. The first phase of execution was to take the board of directors

i B i I m f eduction

of the company on awareness training - showing them how working under a TQ environment would benefit them, and what changes would be needed. The next ,level of management were then trained and so on down the hierarchy until the middle management level. These managers then trained their own people - a process known as "cascading". The project to introduce the new philosophy to the company took several years, and has now moved on to become an accepted way of working. The quality director was initially involved in the management of the introduction process, where the employees and suppliers needed to be convinced that this was a good route for the company to take. His role then became one of project sponsor of a variety of improvement projects, which may be considered as subprojects of the main one.' . .

3 Project manager in Financial management system Implementation 'The main roles of the job include: • organisation - from the design of the system to determining support issues and providing training; • anticipation of future requirements of the system; monitoring of progress of the implementation; • communication and information - providing progress reports to local team members and national common-interest groups; • audit - ensuring the housekeeping, procedures and system security are in order. The initial system design work involved coordinating with external system designers, the providers of the software and the in-house IT group. Our local area network (LAN)needed upgrading to run the new system. Other organisational issues were the role that consultants would play in the system design and training of users and the allocation of the budget between activities. Anticipation was required as the requirements of the system would change over its life. For example, higher-level monthly indicators of financial performance would need to be provided where they had not been needed before. In addition, a management accounting system would he required to provide budgetary controls. The monitoring system we used for the project was PRINCE. This provided a basic set of planning tools, and we filled in the blanks on the planning sheets. A team was set up to monitor progress against the plan. Training was one area where I was personally involved with the users, showing them how to use the system. People are very frightened of technology and do not always grasp immediately ideas you think are very simple. This is where the greatest attribute of the project manager was needed in plenty - patience.'

Case discussion 1 Identify the title which might be given to the project management role in each case. Describe the role of the project manager in each of the cases. 3 Describe the desirable characteristics of each project manager using the set of skills and attributes as a starting point.

The Big Dig

•

Any project that involves tunnelling is risky. Any project that involved tunnelling under a city whilst trying to keep that city fully operational, is very risky. When that city is Boston in the USA, it is in a risk category all of its own. This does not, however, excuse the financial performance of this project, the results of which are exceptional and even make the performance of previous 'stars of disaster' such as the Channel Tunnel, look good. Duringthe 1950s, the Commonwealth of Massachusetts commissioned new roads as part of a national road-building frenzy that took; place at that time. The result was a partly elevated freeway that cut the city off from its old harbour and over time coped increasingly less well with the volumes of traffic that were trying to use it. For many years, the project had been the subject of much politicking and had been rejected by a number of national administrations. In 1993, it was given the go-ahead. At this time the budget was $US2.6 billion, an enormous sum of money for an I-mile tunnel, but given the technical complexity of the task, this was considered acceptable. Gradually the costs rose, until in 1998, the estimated final cost was $10.4 billion. By mid-2000 this had risen to $13 billion and by mid-2001 to over $15 billion. It was still considered a technical success, but both politically and economically, it was a disaster. In project management terms it is also a disaster - a 500 per cent-plus overrun on budget can only be described as 'talented'. How did such a financial disaster occur? The first is a feature of many large 'political' projects - that the 'real cost' would not be politically acceptable. The original budget was deliberately deflated to make the project happen. The second is technical risk - that of the tunnelling process. The ground through which the tunnelling is being carried out is reclaimed land that was originally under the sea. The tunnelling process being used was also new, presenting a degree of technical novelty.

Case discussion 1 How might the project be considered a technical success but an economic, political and project management disaster? 2 Suggest how the 500 per cent-plus overrun might have come about.

project change general management first-timers painting by numbers failure life-cycle model

4-D management maintenance innovation and creativity as . . . b u t . . . volume and variety body of knowledge

1 Carry out a search using a library or a good Internet search engine to find more examples of project failure. From your search, are there any common themes in the failures? What are the costs of these in each case? How widespread would you say that the problem of failure was? 2 The Sydney 2000 Olympics were considered to be a great success by most people. Carry out a search of the news of the time and the relevant websites to identify the characteristics of the project management that led to the success. Compare with the example of 'The Big Dig' given above and the results of your own researches in the answer to 1. 3 Explain the differences between project and general management. In what you are doing at the moment which parts are project and which are ongoing? 4 What are the benefits and problems with the 'one best way' approach to project management? 5 Select a sector of interest. For this sector, identify the likely pressures on project managers and the implications for them as a result of these. 6 Find examples of projects that fit into each of the categories of project - firsttimers, as . . . but. . . s, and painting by numbers. Briefly discuss how the category would influence how you would expect to manage the particular project. 7 'A project manager should not have other managerial responsibilities.' Discuss.

APM (2000)Project Management Body of Knowledge, Dixon, M. (ed.), Association for Project Management, High Wycombe. BS 6079 Part 1: 2000, Guide to Project Management, British Standards Institute, Milton

Keynes (www.bsonline.org). Brown, S., Blackmon, K., Cousins, P. and Maylor, H. (2001 )'operations Management: Policy, Practice and Performance Improvement, Butterworth-Heinemann, Oxford. Deming, W.E. (1986) Out of the Crisis - Quality Productivity and Competitive Position, MIT Center for Advanced Engineering Study, Cambridge, MA. Maylor, H. (2001) 'Beyond the Gantt Chart: Project Management Moving On', European

Management Journal, Vol. 19, No. 1, pp. 92-100. Obeng, E. (1994) All Change! The Project Leader's Secret Handbook, Financial Times Management, London. PMI (2000) A Guide to the Proj ect Management Body of Knowledge, PMI, Upper Darby, PA. Turner, J.R. (1994) 'Project Management: Future Developments for the Short and Medium Term', International journal of Project Management, Vol. 12, No. l , p p . 3-4. Turner, J.R. (2000)'Editorial: The Global Body of Knowledge. . . \ International journal of

Project Management, Vol. 18, No. 1, PP-

Inirockiction i 21

Womack, J., Jones, D. and Roos, J. (1990)The Machine That Changed The World, Rawson Associates, New York.

Badiru, AB. (1993), Managing Industrial Development Projects, VanNostrand Reinhold, New York. Bradley, K. (1993) PRINCE: A Practical Handbook, Computer Weekly/ButterworthHeinemann, Oxford. Brown, M. (1998) Successful Project Management in a Week, 2nd edition, Institute of Management/Hodder & Stoughton, Abingdon. Brown, S., Blackmon, K, Cousins, P. and Maylor, H. (2001) Operations Management: Policy, Practice and Performance Improvement, Butterworth-Heinemann, Oxford. Buttrick, R. (2000)The Project Workout, 2nd edition, Financial Times Management, London. Collins, A and Bicknell, D. (1998) Crash: Ten Easy Ways to Avoid Computer Disaster, Simon & Schuster, New York. Frame, J.D. (1995), Managing Projects in Organizations: How to make the best use of time, techniques and people, Jossey-Bass, San Francisco, CA. Gido, J. and Clements, J.P. ( 1999)SuccessfulProject Management, ITP, Ohio. Gray, C.F. and Larson, E.W. (2000) Project Management: The Managerial Process, Singapore. Field, L. and Keller, L. ( 1998)Project Management, Open University Press, Milton Keynes. Holmes, A. (200\)Faiisafe IS Project Delivery, Gower, Aldershot. Kerzner,H. ( 1992)Project Management, 4th edition. Van Nostrand Reinhold, New York. Kleim, R.L. and Rudlin, I.S. (1993)The Noah Project: The Secrets of Practical Project Management, Gower, Aldershot. Lock, D. (2000) Project Management, 7th edition, Gower, Aldershot. Meredith, J.R. and Mantel, S.J. (2000) Project Management: A Managerial Approach, 4th edition, Wiley, New York. Peters, T. (1999) The Project 50, Alfred Knopf, New York. PMI (1996,2000) A Guide to the Project Management Body of Knowledge, PMI, Upper Darby, PA (partsare downloadable free from www.pmi.org). Turner, J.R. (1999)'Editorial: Project Management: A Profession Based on Knowledge or Faith?' International Journal of Project Management, Vol. 17, No. 6, pp. 329-330. Verzuh, E. ( 1999) The Fast Forward MBA in Project Management, Wiley, Chichester. Young, T.L. ( 1998) The Handbook of Project Management: A practical guide to effective policies and procedures, Kogan Page, London. www.pmi.org - for information about the Project Management Institute in the USA and referral to national sites of interest (including UK). For information about the Association for Project Management (UK) see www.apm.org.uk or contact The Association of Project Management 150, West Wycombe Road,

High Wycombe, HP12 3AE,

PRINCE2 - www.prince2.com - some description of the processes associated with PRINCE2. Journals Project Management Journal (publishedfour times a year by PMI) International Journal of Project Management (published by Elsevier) PM Network -monthly publication of PMI Project- monthly publication of APM Project Management Today- professional journal Notes 1 Eddie Obeng (1994)coined this term for use in project management. 2 I am indebted to Keith Sutton of Chelmsford Technical Collegefor this definition. 3 Turner (2000)provides a comparison of these three.

So, where do we start? The answer is that before w e can undertake any activities on a project the thinking behind it must be right. This involves placing the project and its consideration in t h e right structures. The purpose of structures and frameworks is to provide a means t o t h i n k about projects a n d structures t o help w i t h their delivery. This is t h e first stage in gaining understanding of w h a t can be highly complex undertakings and vitally prevent t h e inevitable reinventing of various wheels that takes place, particularly during t h e early stages of a project. The chapter starts w i t h a basic model of a project as a whole. This is then broken into t h e four main phases of the project life-cycle. The issues that a project manager w i l l have t o deal w i t h in each phase are t h e n considered using t h e 7-S framework. How each of these issues is d e v e l o p e d is d e t e r m i n e d by t h e project e n v i r o n m e n t (one aspect of w h i c h is t h e project complexity) and these are t h e next t w o issues considered. It will be shown that t h e nature of the project management task is determined by t h i s complexity. Important developments in recent years include t h e provision o f d o c u m e n t e d 'bodies of knowledge' by p r o f e s s i o n a l institutes. These are outlined and points of reference w i t h this book are identified.

Learning Objectives 2.1 The project m o d e l 2 2 T h e f o u r phases of project management 2 3 T h e 7-S o f project management 2 4 T h e project environment 2.5 T h e complexity o f projects 2.6 T h e structures of t h e b o d i e s o f k n o w l e d g e 2.7 Summary Project management in practice: Structures f o r an i m p r o v e m e n t p r o j e c t - t h e Permanent W a y C o m p a n y Project management in practice: Structuring a personal project

Key terms Review questions and further exercises References Further information Notes

By the time you have completed chapter, you should be able lo: 1 Apply basic models to help understand the project process; Determine the inputs, constraints, outputs and mechanisms for a project; Recognise the phases a project and the different activities carried out in each phase; identify the major issues facing project managers; Provide a basic measure the complexity of a project and show its implications for the management task; • Recognise the PMi and APM bodies cf knowledge and their implications for project managers.

Having a model to base our thinking around is the first step in gaining an understanding of the processes of projects and the accompanying managing that we will suggest should be taking place. For many years, the most basic model of any operating system has been the input-output model.' This applies well here as the basic unit of analysis of project activities. The project is viewed as a conversion or transformation of some form of input into an output, under a set of constraints and utilising a set of mechanisms to make the project happen. As Fig. 2.1 shows, the inputs are some form of want or need which is satisfied through the process. The project will take place under a set of controls or constraints - those elements generally from outside the project which either provide the basis for any assumptions or limit the project. The mechanisms are those resources that make the transformation process possible.

inputs The desire to develop a new bagless vacuum cleaner was the starting point for James Dyson's massively successful product range. The project did not start with any Normalisation, just a want or need to develop a product that would not suffer from the drawbacks associated with a paper bag being the fdter for particles passing through a vacuum cleaner. 1 For many organisations, this need will be encapsulated into a brief - a document describing the nature of the work to be undertaken, before the resources will be released to do even the most preliminary work. For the project manager, there will be both explicitly stated requirements (original needs) and those that emerge during the course of the project due to the customer's changing needs or perceptions (emergent needs). Such emergent needs cause considerable angst to the project manager, and need to be managed (seethe discussion on scope management in Chapter 4 and change control /configuration management in Chapter 11).

Structures and frameworks ! 25

Constraints The brief will also set out the constraints, which principally focus on time, cost and quality, but will also have a wider range of issues for the project manager to reconcile with the wants or needs. The main constraints are: • time - all projects by definition have a time constraint. In practice, it is often found to be the most challenging to meet; • cost - the value and timing of financial resources required to carry out the project work; • quality - the standards by which both the product (the output of the process) and the process itself will be judged. In addition to these three, the following constraints can prove limiting on the project: • legal - this may not be explicitly stated but there will be legal constraints, e.g. a building may not be constructed unless the planning permission for it has been obtained; • ethical - a major area for many organisations today, particularly those where the ethics of their organisational policies has been questioned in the past (e.g. Shell and Nike); • environmental - the deluge of environmental legislation that has been generated by governments has changed the role of environmental control from a subsidiary issue to one which is at the forefront of management thinking in many sectors; logic - the need for certain activities to have been completed before a project can start; • activation - actions to show when a project or activity can begin; • indirect effects - it is practically impossible for any change to take place in isolation. There will be ripple effects, which will need to be taken into account at the outset.

Outputs Figure 2.1 describes the output as a 'satisfied need'. This will usually be in the form of: • converted information, e.g. a set of specifications for a new product; • a tangible product, e.g. a building; • changed people, e.g. through a training project, the participants have received new knowledge and so are part of the transformation process as well as being a product of it. The outputs may be tangible or intangible and this affects the criteria by which they are judged.

Structures and frameworks!42 Constraints: - financial - l egal -ethical - environmental -logic - activation -time -quality - i n d i r e q t effects

Input: want/need

pro ect

Y

^ ^ ^

Output: satisfied need

Mechanisms: -people

- knowledgeand expertise -capital - t o o l s and techniques -technology

Figure aa The project as a conversion process

Mechanisms The means or mechanisms by which the output is achieved are as follows: • people - those involved both directly and indirectly in the project; • knowledge and expertise - brought to the project by the participants and outside recruited help (e.g. consultants) of both technical specialisms and management processes; • financial resources; • tools and techniques - the methods for organising the potential work with the available resources; • technology - the available physical assets that will be performing part or all of the conversion process. From this Inputs, Outputs, Constraints and Mechanisms (ICOM) model one of the major roles of project managers becomes apparent. They are required to be the integrator of the elements of the project - the need or want with the available mechanisms or resources under the conditions imposed by the constraints. This is a key skill of the project manager. The nature of this task will change during the life of a project, and this will be described in the following section.

22

The Four Phases of Project Management Improve constantly and forever every activity in the company, to improve quality and productivity and thus constantly decrease costs. (Deming, 1986)

Structures and frameworks ! 43

Figure 2.2 H e d g e h o g synds ome

Two parties to a contract, a county council and a construction contractor, ended up taking their claims 3 and counter-claims to court following the construction of a new leisure centre. Seven years later, the same two parties were in court again, to settle their claims and counter-claims, following the construction of an almost identical facility and very similar claims being made. How did this happen? Why had the parties not learned from their earlier, expensive mistakes? The only people with an interest in this kind of process are the lawyers. This is depressingly common in many organisations, particularly those that use a large proportion of contract staff (who leave once the project is completed) and will be termed the hedeghog syndrome, as shown in Fig. 2.2. We see this problem regularly on our roads, where the unsuspecting hedgehog encounters a car and the result is fairly predictable. Worse, as long as there are hedgehogs, roads and cars, we will continue to find our little flat friends. Why then, don't hedgehogs learn from this? The reason is that there is no feedback to hedgehog-kind of the knowledge that the road is a dangerous place for them to be, so that they can amend their behaviour accordingly. All too often the same applies to projects - the same mistakes are repeated over and over again. Unless there is an opportunity to develop the project processes and provide the feedback to the organisation, the knowledge is lost. Organisations such as Hewlett-Packard, on the other hand, use previous projects and their reviews as the starting point for new projects. Their focus on the lessons from both good and bad experiences means that there is some path for continuous improvement in projects. The process that is followed in carrying out projects has four identifiable phases. The last of these is the point where we ensure that the learning points from a project are carried forward to future projects. The four phases were shown in Chapter 1, and are repeated here in Fig. 2.3: Di: Define the project

H

The brief D2: Design the project process s

Da\ Develop the process

^IMHHi

The proposal/PID

D3: Deliver the project

Figure 2, j Four phases of project life-cycle

28:

'frameworks

Table 2.1 The four phases of project management Phase

Key issues

Fundamental questions

Define the project

Project and organisational strategy, goal definition

What is to be done? Why is it to be done?

Design the project process

Modelling and planning, estimating, resource analysis, conflict resolution and justification

How will it be done? Who will be involved in each part? When can it start and finish?

Deliver the project (doit!)

Organisation, control, leadership, decision-making and problem-solving

How should the project be managed on a day-to-day basis?

Develop the process

Assessment cf process and outcomes of the project, evaluation, changes for the future

How can the process be continually improved?

The four phases are described in more detail in Table 2.1, but before continuing there are two points worth noting. The first is that projects are terminated prior to completion for all sorts of reasons. For instance, a project to move a bank to a new premises was scrapped as a result of an economic downturn. The project was going well but the additional costs and facilities were suddenly deemed unnecessary. The second is that there are often many stages in each of these main phases. Indeed for large projects, the project life-cycle can be replicated within each phase, as each of them becomes a mini-project in its own right. This cycles-within-cycles is common to many other project processes. Such an approach does represent the reality of many projects well, as they are more akin to cycles of activities rather than the linear progression indicated by Fig. 2.3. The real world is rarely so well defined! The 4-D can be described as follows: • Define the project - this is the time when it is determined what the project is about, its reasons for existence and the intentions that it intends to progress. It is a time to explore the possibilities, find alternatives to the problems presented; • Design the process - construct models to show how the needs will be developed, evaluate these to determine the optimum process for the task and minimise risk; • Do I t ? o r Deliver the project - carry out the project in line with the models or plans generated above; • Develop the project process - improve the products and processes in the light cf the experience gained from the project. There is no 'most important phase' - t h e y represent a chain of activities. Like a chain, ongoing project performance will only be as good as the weakest part of

St rue aires arid framework!. I 2 9

Time

Figure 2.4 Graph showing how level or activity varies with time

Time

Figure 2.5 Graph of cumulative expenditure against time

the process. The last phase has a significant input to the performance of subsequent projects, in addition to elements of it determining the performance of the current project. There are a number of tasks and issues to be addressed in each phase. This provides a degree of complexity for the project manager and is one reason that there are few truly excellent examples of project management available. Taking the analogy of the project as a chain, it is important that there is general competence across the phases. This is preferable to there being excellence in one area, with other areas falling down." The generic life-cycle for a project involves consideration of how the level of activity varies with time. This is illustrated in Fig. 2.4 and shows how the level of activity is relatively low during the early phases, increases through the doing phase when the major volume of work is done, and decreases through the development phase. This pattern is reflected in the graph of cumulative expenditure against time (Fig. 2.5). Outgoings are generally low in the early stages but grow rapidly during the execution phase. The graph also demonstrates why the develop it phase is so vital - by the time the majority of the doing phase is completed, the probability is that in excess of 98 per cent of the total project expenditure will have been incurred.

Structures and frameworks!46

Table 2.2 Development of the project life-cycle Stage in project life-cycle

Activity

Description

Define the project

Conceptualisation Analysis

Generate explicit statement of needs Identify what has to be provided to meet those needs - is it likely to be feasible?

Design the project process

Proposal

Show how those needs will be met through the project activities Prepare and evaluate financial costs and benefits from the project Point at which go-ahead is agreed by project sponsor

Justification Agreement

Deliver the project (doit!)

Start-up Execution Completion

Handover Develop the process

Review Feedback

Gather resources, assemble project teams Carry out defined activities Time/money constraint reached or activity series completed Output of project passed to client/user Identify the outcomes for all stakeholders Put in place improvements to procedures, fill gaps in knowledge, document lessons for the future

The last phase is the time when the project team themselves can benefit from the process and ensure that lessons (good and bad) are applied in the future. The excuse is often used that organisations cannot review projects because there is no budget for the review work. Given that mistakes are observed to occur repeatedly (hedgehog syndrome), organisations seem perfectly prepared to pay when things inevitably go wrong. This last phase is therefore an investment in future performance, just as spending money on a new piece of equipment would be. It is discussed further in Chapter 14. The life-cycle may be further broken down as shown in Table 2.2. Key additional features include some explicit analysis of the idea during the definition stage, and the focus on a business case being prepared for the project right from the outset. This is expanded during the justification activities of the second-stage processes. This is still generic, however, and the practice of phasing the project is best illustrated by an application. Table 2.3 shows how a new management information system was supplied to a hospital through a software company with the description of how the project was broken down and the activities that were undertaken in each phase. Table 2.3 illustrates the early structuring that took place within the project. This had a number of plus-points for both the hospital and the IT firm, not least in the clarity that the phasing presented to each side. At a high level, the activities could be tracked to see progress (orlack of it).

Structures and frameworks ] 3 1

•V: ble 2.3 Supply of a management Information system to a hospital project Sub-phase of project

Activities

D l - Conceptualisation

Software house receives an outline from the MIS department of the hospital; various pieces of information and points of clarification are requested.

Dl -Analysis

The concept is converted into the terminology of the software house (everyorganisation has its own set of jargon). An initial feasibility check is carried out to see what could be achieved at what cost. Objectives are set for the system to he developed and the interfaces with other systems studied. The analysis phase was completed by an appraisal of the capability of the company to provide what was being asked for by the client.

-Proposal

The proposal document is submitted for approval by the client's MIS department in terms of whether or not it would meet the requirements set out in the initial request. The client organisation is offered the opportunity to visit the software house's premises and existing clients to view their systems.

D2 - Justification

There are two parts to this process. First, the software house carries out an financial analysis to show whether or not it is feasible for them to undertake the project. Second, the MIS people at the hospital need to provide evidence that the new system will provide a return. This has to be agreed by the financial managers.

D2 - Agreement

After the justification has been prepared by both sides, the formal act of preparation and signing of contracts can take place. This is the basis of the agreement between supplier and customer. The terms and conditions will have to go through each of the party's legal advisers (see Chapter 12).

D3 - Start-up

The software house starts to gather resources as soon as the contract looks likely to go ahead. Formal commitments are not made until the deal is formally signed. A project manager within the company is allocated to provide a single point of contact for the customer. The project team is gathered, external programmers hired and resources (development computers, pre-written software) procured. The project elements are allocated to individuals and specifications written for what each of the elements must achieve.

D3 -Execution

The project team starts work on the system - this is a mixture of importing existing code, modifying other parts and writing totally new elements. At the completion of each section of the work the modules are tested to ensure integration. Gradually the system is pieced together, and debugged. The client is involved in the process, with modules being demonstrated as they are completed, so that amendments are made at the time rather than at the end of the entire process.

Structures a n d frameworks!32

Table 2.5 (cont'd) Sub-phase of project

Activities

D3 - Completion

Towards the end of the development the units being tested are getting larger and more complex. The in-house specialist staff are kept on and the programmers who were hired in continue to other jobs. The major task to be completed at this stage is the documentation of the system.

D3 - Handover

Hie software is transported to the user's site and installed on the machines. The software specialists are on hand to see that any problems can be resolved quickly. Staff are trained in the usage cf the system and the MIS staff on its maintenance and support. Ongoing support is to be provided by the software house.

D4 -Review

The way in which each of the modules was developed is documented to provide a rich picture of the process. Mistakes and good practice are identified and customer perceptions cf the system canvassed. The results to the company in financial terms are compared with the proposal.

D4 -Feedback

Where deficiencies were highlighted, e.g. in the documentation of the system, the company put in place new procedures and practices that would ensure (a)that the problem for the customer was resolved in this case and (b)that it did not occur in subsequent projects.

The four phases each have different characteristics and different management requirements. Some points are of note here. The first is that many project managers will not be involved in the early stages and will be handed a brief for the project after the initial definition work has been done by another party. There are many reasons why this causes problems, not least because the project manager cannot be involved in problem avoidance measures at the early stage (see Fast-track Projects in section 5.9). Before we are ready to give the project any detailed consideration a further structure is needed. This prevents the project manager becoming lost in the morass of issues to be considered in each phase -particularly in more complex projects. The following 7-S framework allows segregation of the issues.

2.3

The 7~S of Project Management The 7-S framework provides a comprehensive set of issues that need to be considered. It also allows classification of tasks within the remit of the project manager, which reduces the complexity of the role. In addition, classifying issues in this manner ensures that the project manager will know where to look to find sources of

Structures and f r a m e w o r k s ! 3 3

Table 2.4 The 7-5 of project management Element

Description

Strategy

The high-level requirements of the project and the means to achieve them

Structure

The organisationalarrangement that will be used to carry out the project

Systems

The methods for work to be designed, monitored and controlled

Staff

The selection, recruitment, management and leadership of those working on the project

Skills

The managerial and technical tools available to the project.manager and the staff

Style/culture The underlying way cf working and inter-relating within the work team or oiganisation Stakeholders Individuals and groups who have an interest in the project process or outcome

help if novel situations arise. Knowing that interpersonal problems in a team are aggravated by the style/culture that a project manager promotes provides a means for finding solutions to the problems. The 7-S framework of management issues was promoted by McKinsey and Co., management consultants. Their original 7-S is amended for the project environment, with a description of each of the elements, as shown in Table 2.4. Rather than being simply an outcome or a statement, strategy is a process. It involves a high-level consideration of objectives, which can be seen as points of principle rather than activity-level details. Success starts with a rational strategy process, which then guides and informs the decisions made in all areas of the project. The element of strategy will be discussed further in Chapter 3, along with the means by which organisational strategy is pursued through activities, including projects. Structure is the arrangement of human resources relative to lines of command and control. A key question for the project manager concerns the nature of this structure. For example, should the project team be a dedicated, full-time team, or one where staff are 'borrowed' from other parts of the organisation or other organisations, only as and when needed?This is elaborated in Chapter 9. Systems are 'the way we work'. Both formal and informal systems will need to be designed or at least recognised for key tasks, including communication and quality assurance. Formal systems can be demonstrated through statements of procedure simply put, 'under these conditions, we carry out this action'. Informal systems, particularly for information transfer, are far less easy to describe and control. It is normal, however, for these to be the main mode of communication within groups. A theme within the systems element is the focus of the systems on 'process'. That is, ensuring that all activities carried out are contributing to the end objective of the project in a constructive manner. Systems are a recurring theme throughout this text.

Structures and frameworks!34

Staff need to be selected, recruited and then managed. How they respond to their treatment will have a large impact on the success or otherwise of the project. Yet this element has traditionally been neglected by texts on project management. The role of the manager in the element of staffing is discussed in Chapter 10, in addition to a consideration of the skills they require. Style/culture is part of the 'soft' side of management. Indeed, it cannot be managed in the short term in the same way that the finances of a project, for example, can be managed. This element will also be discussed in Chapter 10, in particular with reference to the cross-cultural nature of many projects. Stakeholders are an important consideration for project managers. Their importance has only recently been realised and methods for the management of expectations and perceptions developed. Issues concerned with stakeholders are considered further in Chapters 4 and 7. Having considered the framework for consideration of issues by managers, some current issues for project managers are now discussed.

2,4 The Project Environment There is the view that 'work can be done almost anywhere'. The Mazda MX5 (Miata)car, for example, was designed in California, financed in Tokyo and New York, tested in the UK, assembled in Michigan and Mexico using components designed in America and made in Japan. Shipbuilding - a predominantly projectbased environment - has faced competition coming from parts of the world that 20 years ago had little or no capability in this area. Traditional not-for-profitorganisations (includingmany health services)are now required to meet performance targets and individual activities are being subjected to previously unthinkable commercial constraints. Within the expanding European Union and World Trade Organization, trade barriers have fallen and the number of international collaborative ventures has increased. Projects have become more complex as: • generally the simplest ideas have been exploited first - it is becoming more difficult but more vital to be innovative; • businesses are becoming more complex - it is less likely for a company to provide a commodity, product or service but to provide a 'package' which meets an entire need rather than just part of that need; • projects are moving towards turnkey contracts - where the end-user does none of the interfacing between the different parts of the system but deals with a single supplier in the provision of an entire system. In addition: • effective quality management has been shown to be the basis of many organisations obtaining a competitive advantage. Your quality system carrying a recognised certification (such as BS-EN-IS0 9000) is a requirement for supplying

it'

and

135

goods or services into many markets - not just aerospace and defence where the standards originated. The change in the competitive environment in which the majority of organoperate has necessitated a major rethink of the way in which projects are managed. The effects of the changes on projects and their managers include the following: • Time has become a major source of competitive advantage, whether it be in the construction of a road or the development of a new product. • Human resource management has moved from considering that members of a project team should be treated as anonymous cogs in the machine to the idea that individual creativity can be harnessed. The concept is often heard expressed in the form 'with every pair of hands you get a free brain'. • Rates of change in technology and methods have increased - not only is the change continuing, hut the speed at which changes are occurring is increasing. • Organisations are having to become customer focused and exceed rather than just meet customer requirements. Customer expectations of the way products and services are delivered are increasing all the time. • There is a trend towards integration and openness between customers and suppliers. Company information that would previously have been closely guarded secrets is often shared in a move towards partnership rather than adversarial relationships. • The most fundamental change in management has occurred through the investigation of the Toyota production system. Toyota was seen to have achieved significantcompetitive advantage in the automotive market through its management philosophy and the application of associated tools and techniques. The principles have been taken and applied in many unrelated business areas with considerable benefits. • The service sector has been the biggest growth area in the past ten years. The economy of the majority of European Union countries has had to cease its dependence on manufacturing and rely on the growth of the service sector to provide employment and economic growth. A further pressure on the project environment is the search for competitiveness. Many firms have gone a long way in improving their repetitive operations. As a result, the opportunities for improvement in performance that are available in these systems without significant investment are declining. Projects are therefore a major source of competitiveness that many organisations have yet to realise. The project environment may be summarised by the four Cs. These are: • • • •

complexity; completeness; competitiveness; customer focus.

These are shown in Fig. 2.6. The first, complexity, is elaborated in the following section.

Structures a n d frameworks!36

2.5 The Complexity of Projects Not all tools, techniques and management ideas are universally applicable - the project that takes one person a week to complete clearly has very different managerial requirements from the multi-site, high-budget project. In order to provide meaningful consideration of the function of management in such a variety of settings, a classification of the complexity will be applied. In general, there will be a high correlation between the level of complexity of a project and the amount of resources required to manage it. The level of complexity of an activity is a function of three features: • organisational complexity - the number of people, departments, organisations, countries, languages, cultures and time zones involved; • resource complexity - the volume of resources involved often assessed through the budget of the project; • technical complexity - the level of innovation involved in the product or the project process, or novelty of interfaces between different parts of that process or product.

Structures and frameworks ! 37

Organisational complexity

Figure 2.7 Defining project complexity

This complexity model is shown in Fig. 2.7. As the overall complexity increases, so will the difficulty of the management task to ensure that the goals of the project are reached. Therefore the degree of systematisation of the project will have to increase tq enable people to deal with the complexity. Project plans will need to be explicitly stated in writing and formal procedures for evaluation and justification of the project derived. This bureaucracy is neither appropriate nor necessary for the less complex projects, where the additional resources required to formalise matters would more than outweigh any benefits from the additional activities. Many firms have complex systems for handling projects and the question is often put - how do you decide the level of formalisationthat is appropriate to the project? A highly formalised system for a very simple project is likely to cause unnecessary work and, most importantly, becomes discredited by the people who have to use it. The alternative is to use some overall complexity measure and determine the system from there. Whilst some organisations use the project value as the main measure of scale, this has been shown to be only one aspect of the complexity for managers - the resource complexity. Using the three factors defined above can be highly effective in discerning the scale of the management task. Ranking each of them out of ten with the overall complexity being the product of these three provides a measure that, with calibration over time, can provide a useful 'rule of thumb.' The measure is expressed as:

[organisational complexityj x [resource complexity] x [technical complexityj Table 2.5 describes three projects, each of very different complexities, and the ratings that were applied to each by the project teams. The complexity of project 1 is clearly very low. For 2, although the scale of the project is larger than 3, it is a simpler project. There are certain to be challenges faced, but the management task is greatest in project 3 (reflectingthe 180 complexity

Structures and frameworks!38

Table 2,5 Complexity calculations Factor

Project 1 Review of company operations

Project 2 Engineering design project

Project 3 Closing down site and relocating personnel and equipment

Organisational complexity

There is a little organisational complexity, but as the review is being carried out by one function, this is limited - say 3/10

This is very limited in organisational complexity. It is being carried out almost exclusively by one function within the company - the engineering designers. Whilst they will have to work with the client on limited aspens of the design the complexity is comparable to project 1 - s a y 3/10

The parties involved in this project include all the technical specialists that are being moved. They work for different departments. The equipment must be moved by specialists. The move is being staggered and there has to be extensive preparation of a new facility, involvingcoordination with other firms - say 6/10

Resource complexity

There is no formal budget for this project the people working on it are doing so in addition to their normal work. This is low - s ay 2/10

The value to the organisation of the contract is over £500 000. Resource complexity on this measure is therefore reasonably high - say 7/10

The total budget for the relocation is £250 000. Resource complexity is therefore moderate - say 5/10

Technical complexity

There is little new about this review, the people have done it before and the process is well established - say 2/10

This is standard design work with no new interfaces and standards well established. The complexity is low say 4/10

There are many novel aspects of the move, not least for the organisation. The interfaces between the human aspects (such as ensuring that the new working conditions were greatly improved from the old ones), and the technical aspects (moving equipment that was never intended to be moved) mean that this has some complexity say 6/10

Overall complexity

3 x 2 x 2 = 12

3 x 7 x 4 = 84

6 x 5 x 6 = 180

measure c o m p a r e d with 84 f o r project 2). This result gives us an indication that the m a n a g e m e n t resource requirement will be highest in project 3, and t h a t this should be included in the consideration of the workload of the project m a n a g e r a t the start of the project. T h e m e t h o d is n o t intended t o be scientific, but it has b e e n s h o w n t o be very effective a t the outset of a project t o determine the nature of the m a n a g e m e n t task and the workload t h a t the project w o u l d place o n the project manager. As stated a b o v e , individuals can calibrate these measures over time and w i t h experience of

. and frameworks ! 39

their usage will develop means appropriate to that organisation of determining the systems and the management that should accompany any particular project. They may also add or change the rating system. For instance, one organisation wanted to be able to take into account the additional management effort that would be expended on high-visibility projects (for instance those with a new client) or those that had particular strategic importance. For these, points were added to the organisational complexity scale to reflect the additional effort that would be required. Having provided a model for the project, broken that into phases, looked at the issues in each phase, how these are affected by the environment and finally considered how to determine the nature of the management task, the following section shows the relevant areas of the two main bodies of knowledge to this subject of structuring.

The Structures of the Bodies of Knowledge The two bodies of knowledge are included as they are used by many organisations as the basis for their own project management systems and thereby, the skills base of their people. They do not intend to be totally comprehensive about everything that is known about project management; rather they provide some guidance to some of the common ground between projects. For the PMI version, the guide is relatively extensive compared with the APM version, but neither is intended to be a text or a standard for operation. Another aspect as a result of their derivation is that they tend to be focused on aspects of first-time projects (see Chapter 1) rather than the vast majority of project management activity that takes place in as . . . but . . . s and painting-by-numbers projects. They also assume that the relationship between the party carrying out the project and the 'customer' is contractual. For some sectors this is still the case. In others, such arrangements have been replaced. Many projects are also not 'direct revenue earners' instead being change projects (reorganisinga firm, a merger or acquisition, or an individual undertaking a course of study, for instance). As a result of these factors, the application of the bodies of knowledge is not universal, and large areas are discounted by organisations as being too cumbersome or simply inappropriate. Such a decision should be regularly reviewed, however, in the light of the knowledge that individuals and organisations acquire from their experiences with projects, and this is not to dismiss the utility of either. Given that both are associated with professional qualifications, the contribution of these to the subject area is significant. Yet it is still not as significant as it could be given the extent of project-based activities. Whilst the membership of both APM and PMI has soared in recent years, the vast majority of firms are ignorant of this knowledge base. Again, this is not to discredit what is here, but instead this represents an opportunity for those organisations and their project managers. Wider application of the principles included in the bodies of knowledge, if linked to the 4-D cycle and a promotion of learning from projects, presents the possibility that the principles can be developed to cover a wider array of projects in the future. This section presents two tables (2.6 and 2.7), each containing an overview of the bodies of knowledge. These provide points of reference to the approach and identify some of the areas of overlap with the content of this text.

!

frameworks

Table 2.6 The APM body of knowledge Section

Title

Issues

1

General

The definition referred to is BS 6079, and the basic model of projects is the same as described earlier in this chapter - the ICOMs model. Programmes and portfolios of projects are introduced and differentiated.

2

Strategic

The definition of strategic is totally differentfrom the consideration that we will use in this text. Strategic in the APM sense is the integrating framework, rather than matters of strategy. The topics covered include the project success criteria (and linkage with Key Performance Indicators - KPIs), the discussion of what constitutes a plan, value, risk and quality control, heath, safety and environmental considerations. These are important issues, but hardly strategic.

3

Control

measuring, monitoring and taking corrective action are all usually included in the control cycle.. . The heart of a planning and monitoring system is prediction and trend analysis, based on reliable performance information.' The areas included are work content, scope and scope change management, time and cost control, resource management, earned value and information management.

4

Technical

This area is unusual in providing the interface between project management and the technical aspects of the project. It does assume that there is a significant technical aspect to the project and the terminology is that of the engineering sector. There are overlaps with other areas of the body of knowledge, including This refers to product changes, as opposed to process changes, that are referred to elsewhere in terms of change management.

5

Commercial

This provides a useful reminder of the raison d'être of a large proportion of projects - that of generating a financial return. It considers the interfaces with other commercial functions, including marketing and sales, finance, procurement (see comments above on PMI) and legal.

6

Organisational

This organisational applies to the organisational structures that people work in as well as to the organisation of project activities. The structures include the definition of the basic organisational roles with respect to a project, including the sponsor, programme and project managers and the role of the support office. The phasing of activities suggested is consistent with the work covered in Chapter 4 of this text.

7

People

Structures and frameworks ! 41

Table 2.7 The FMI body of knowledge Chapter

Title

Summary

1

The Project Management. Framework

This sets out the purpose of the guide and the definitions of projects and project management. Like Chapter 1 of this book it also considers the relationship with other management disciplines.

2

The Project Management Context

This outlines a proj ect life-cycle that broadly maps to the 4-D model. The context of projects and the key skills required of projects managers are also considered.

3

Project Management Processes

The guide identifies 39 processes within the five groups of initiating, planning, executing, controlling and closing activities. These are mapped to nine key areas of the body of knowledge- the subjects of the next nine chapters.

Project Integration Management

Integration management refers to bringing together the different aspects of a project in a coordinated way. This key project management skill of integration was discussed earlier in this book, but PMI define it very specifically as involving planning, executing the plan, and change control.

Project Scope Management

The scope of the project is defined in terms of a written statement of what is to be included in the project and what is specifically excluded. The main scoping work is carried out in the first two phases of the proj ect, and PMI include a specific element of scope verification as a check on what is being agreed. Scope change control is also identified as a specific item, separate but linked to other . aspects of change control.

6

Project Time Management

As the guide states, 'Project Time Management includes the processes required to ensure timely completion of the project.' Activities identified during scope management processes are compiled into an activity list, sequenced and times assighed to each activity. This then leads to the schedule for these activities the times at which each must be completed to ensure the project as a whole finishes on time. As will be discussed in Chapter 6 of this text, such processes are subject to some interesting human behaviour that results in these processes having questionable value if left as defined here.

7

Project Cost Management

Similar to the process for time management, each of the activities is associated with a cost. This becomes the budget for each activity and there will need to be control measures to ensure that deviations from 'the plan' as a result of project problems and customer changes are 'managed.' Measures including earned value (see Chapter 11 in this book) are suggested.

8

Project Quality Management

The focus on the carrying out of planning, assurance and control is comparable in many ways to the intention of ISO 9000 - that of providing conformance. As for the other two key measures - time and cost - in this text it is considered that conformance is only the minimum requirement of a project, and that the current commercial environment for many organisations requires performance above and beyond these minimum standards.

4 2 I Struct tires and frameworks

Table 2.7

(cont'd)

...

JL......

Chapter

Title

Summary

9

Project Human Resource Management

The main areas here are planning the organisational structure in which people will work, documenting their roles and reporting relationships, identifying the necessary individuals and developing the team. This is a highly formalised approach but contains many aspects of current good practice, identifying such challenges for the project manager as performance appraisal of teams and individuals, and managing health and safety.

10

Project Communications Management

There are four aspects to this area: communications planning, information distribution, performance reporting and administrative closure. The guide provides a set of practices that are applicable to most projects, but are often neglected.

11

Project Risk Management

Having this as a separate chapter in its own right shows the early roots of this highly specialist area of project management. The six stages PMI identify to the risk management process are summarised in Chapter 8 of this book, as identification, quantification and ongoing response control. While most projects would undoubtedly benefit from the application of basic risk management practices, the PMI approach suggested here would be inappropriate for most projects.

12

Project Procurement Management

This area looks least at home in the current management environment. Many organisations do not even have procurement departments any more -having replaced these with more strategically aligned sourcing or supply chain management activities (see Chapter 12 in this text).

For other publications related to this body of knowledge, see www.pmi.org

As t h e tables show, the f o r m a t of the A P M d o c u m e n t is r a t h e r different f r o m t h a t cf the PMI, w i t h the t h e m e s arranged into sections, and specific sub-sections within each covering particular topics. T h e guide does far less by w a y of description or definition, instead acting as a p o i n t of referral with m a n y sections simply c o n taining lists of references t o other texts on the area.' The references are dominated by the construction a n d engineering industries, which limits the application of this w o r k significantly. There is also little indication of h o w t o determine 'what w o r k s where' f r o m this document. ';„

: . . . : • . . • ; • • , . • . . , ,

'

• ' v-^. W

•»'i • V Ï F - S r . f R .im,-,

W h e r e d o we s t a r t ? First - get the t h i n k i n g right. M o s t p r o j e c t s will benefit significantly f r o m a full consideration of the issues. M a n y will a p p e a r obvious o n the surface, even where they have been u n d e r t a k e n before. It is only t h r o u g h the application of the models and structures discussed t h a t the process will start o u t in

• •; •

Structures and frameworks ! 4 3

the right way. The first part of this consideration is that a project can be modelled through analysing the inputs, constraints, outputs and mechanisms {ICOMs). This provides the overall statement of need that will be met through the application of resources within the identified constraints. The next part of this opening activity is to break down the project into the four phases. As the Project Management in Practice at the end of this chapter will show, this is applicable for the smallest to the largest projects. This will also provide the highest level of the breakdown of the project that will be pursued in Chapter 4 and ensure that the repetition of problems (hedgehogsyndrome) is avoided in the future. There are many issues for the project manager to consider, and for ease these are summarised in the 7-S. This again provides a semi-comprehensivelist to assist in the development of the project process. The project environment was explored and again a checklist of issues presented in the 4-Cs. This led us to consider the scale of the management task for each project. This is defined by the project complexity. Reinventing the wheel was a feature of thinking associated with failure - as described at the start of this chapter. The recognition of the significant content of the bodies of knowledge is a step to finding the best practices for your projects.

Structures foi an improvement project - the Permanent Way Company The Permanent Way Company is a global player in the construction and maintenance of railway infrastructure - lines, signalling and communications systems. The work relies on the formation of teams to carry out projects and these are drawn from different divisions of the company. The divisions of the firm are based around the different relevant specialisms, mechanical, electrical, electronics and signalling, construction and surveying. Within each of the different divisions of the firm there are different specialisms - for instance, designers, cost engineers, marketing engineers and IT specialists. Most projects involve working across several divisions, often drawn from geographically diverse locations. As a result of major worldwide growth in the market for their services, the firm undertook a review of their processes. Key weaknesses identified included their ability to deliver projects on time. This was consistently the main complaint of their clients (usually national rail operators) who were becoming increasingly concerned with the ability of their suppliers to deliver. A new 'project system' had been put in place that stated the documentation requirements for large projects, but this had not been well implemented, and its use was very inconsistent within the firm. A Project Management improvement team was convened and tasked with improving the processes of the firm, with a nominal 12 months to see some results. The question that they faced at the first meeting was: where do we start? Everybody had their own ideas - we should start training people straightaway, we should employ a firm of consultants to find our needs, we should write a report to the board, we should adopt one of the bodies of knowledge and base our work around that. The meeting broke up with no agreement of the way forward, other than that another meeting should be held.

441

•

and frameworks

1 What are the inputs, outputs, constraints and mechanisms for the project? 2 Using the 4-D model of the project, identify the work that the team should be undertaking in each phase within the indicated timescale. Suggest an appropriate period for each phase of work. 3 Show how the 7-S would help identify the issues that needed to be tackled in each phase. 4 What is the complexity of this project? Try to estimate it on the scales suggested in this chapter. 5 How might the application of one of the bodies of knowledge help in this scenario. Use the web addresses provided to find out more about the bodies of knowledge to help you answer this question.

Structuring a personal project At various times during a course of study or during working life a project has to be undertaken. Consider the following scenario, then answer the questions below. You have been asked to prepare a report on the potential for the Internet in helping to manage projects. The report should he of no more than 3000 words. 1 Using the 4-D structure, describe the activities that you would undertake at each stage in the process. How might this help you to structure your work? 2 Evaluate the complexity of the project. W h a t are the implications for project management of your assessment of the complexity? Key Terms structures inputs, outputs, constraints and mechanisms continuous improvement hedgehog syndrome 4-D 4-C resourcecomplexity complexity bodies of knowledge

frameworks project life-cycle systems approach phases 7-S technical complexity complexity scale of management task

1 Identify a personal project that you have completed in the recent past - this may be a piece of coursework, a DIY project, etc. Consider the way in which the

Structures a n d frameworks ! 4 5

project was planned, carried out, the results analysed and then acted upon. What would you do differently if you were doing it all over again? 2 Taking the example of a personal project that you have recently completed (as for question 1), identify the inputs, outputs, constraints and mechanisms for the project. What is the importance of defining the nature of constraints on a project prior to starting work on it? 3 How would you describe the competitive environment of the following organisations? • • • •

automotive industry; construction industry; banking; further/higher education?

What constraints does this place on projects being carried out in such an environment? 4 Why is it necessary to define the complexity of a project? 5 Identify the likely complexity of the following projects: • the development of a new office block; • the development of a new office complex where a radical new design is proposed; • a project to put a new telescope in space by the European Space Agency; • implementing a robotised assembly line in a manufacturing company. 6 Why is it necessary to consider the continuous improvement of the processes by which projects are carried out? 7 Identify the criteria for success or failure of the projects that you discussed in question 1 and question 2. 8 Show how developing a new product, for example a new range of vehicle engines, could benefit through the analysis of previous development projects. 9 Write a commentary on the bodies of knowledge, and how they could relate to your own work environment both now and in the future. 10 Explore the possibilities for gaining professional qualification and recognition in project management, through both APM and PMI. How well would these fit with your own intentions regarding your profession?

APM (2000) Project Management Body of Knowledge, Dixon, M. (ed.), Association for Project Management, High Wycombe. Clark, KB. and Fujimoto, T. (1991 )Product Development Performance:Strategy, Organisation and Management in the World Automotive Industry, Harvard Business School Press, Boston, MA.

Structures a n d frameworks!62

Deining, W.E. (1986) Out of the Crisis - Quality Productivity and Competitive Position, MIT Center for Advanced Engineering Study. Cambridge, MA Dyson, J. (2000) Against the Odds, Taxere Publishing, London. PMI (2000)4 Guide to the Project Management Body of Knowledge, PMI, Upper Darby, PA Slack, N., Chambers, S. and Johnston, R. (2001)0perations Management, 3rd edition, Financial Times Prentice Hall, Harlow. Womack, J., Jones, D. and Roos, J. (1990) The Machine That Changed The World Rawson Associates, New York.

Caupin, G„ Knopfel, H., Morris, P.G.W., Motzel, E., Pannebacker, O. (eds)(1999)IPMA Competence Baseline, IPMA. Lidow, D. (1999) 'Duck Alignment Theory: Going Beyond Classic Project Management to Maximise Project Success', Projcct ManagementJournal, Vol. 30, Issue 4, pp. 8-14. Stewart, T.A (1995)'The Corporate Jungle Spawns a New Species', Fortune, 10 July, pp. 121-122.

Mates 1 A further discussion of the use of such models in operations management can be found in Slack et al. (2001). 2 For a further description of this development see Dyson (2000). 3 It is the usual practice in some industries to have a period of claims following a contract completion. In the case of a building, there may be additional work as a result of clients changing specifications during the project or where there were unknowns (for instance, ground conditions) that were the risk of the client, not the contractor. Where these cannot be resolved amicably, a regular occurrence is the trip to court at the end of the project. 4 This is supported by, among others, the findings of Clark and Fujimoto's study of excellence in the world automotive industry - see Clark and Fujimoto (1991).

The project is a vehicle for t h e execution of strategy - both organisational and personal. This implies that a high-level consideration of the role of projects is appropriate, particularly to demonstrate h o w they should fit w i t h other activities being undertaken simultaneously. Within the projects themselves, there is also a requirement for the consideration of strategy, as priorities will need to be managed as part of the ongoing decision-making processes of management. This strategic consideration has been missing from the subject of project management in the past, leaving the focus of attention on detail issues. While these do need to be addressed they should follow the priorities and issues raised by the process of strategy. Although increasing the number of issues to be considered by the manager at the outset of the project, this has been found to be consistent with high levels of performance both organisationally and personally.

Learning Objectives 3 . 1 W h y strategy? 1 3.2 Organisational strategy and projects 3.3 Project management as a strategic capability 3.4 Resource coordination 3.5 Project and organisational goals [ 3.6 Project performance measurement 1 3.7 Relevant areas of the bodies of knowledge 3.8 Summary I Project m a n a g e m e n t in practice: A new campus for the University of Rummidge Project m a n a g e m e n t in practice: Selecting a personal project Key terms Revietv questions a n d further exercises References I Further information 1 Notes

50 ! Phase; One - Define the project

By the time you have completed this chapter, you should beableto: • define the role of strategy in projects; recognise a process for the deployment of strategy; * demonstrate the role of programmes of projects and he possible roles of a project office; « identify the objectives and accompanying success measures for a project.

Why Strategy? Over g o per cent of defects belong to the system, not the individual. (Dr W. Edwards Deming)

Projects routinely fail and appear to be likely to continue doing so, unless something fundamental is changed about the way that we manage them. Deming's quote above states that the system is at fault for what he termed defects or, as applicable here, project failures. Surely then, this simply means project managers throwing up their hands and saying that this justifies what they have always known - that the failures were not their fault? In many cases they would be right, but this does not remove responsibility for doing something constructive about the situation. As will be discussed, the first issue that must be addressed is to gain recognition of the problems caused by the decisions or lack of decisions made at a high level in our organisations. The alternative to gaining this recognition of the problems, is to pursue one of the 'strategies' demonstrated by the following quotations: 'Our projects never fail. They regularly come out the wrong side of the win line, but they never fail.' (Senior manager, large consulting firm) 'Our projects never run late. Whenever it looks like we might run late, we adjust the baseline." (Projects manager, construction industry)

Discussion of project failures is not easy for the organisations concerned, but does provide substantial material for analysis. The first stage, however, beautifully avoided by the two individuals quoted above, is recognition that there is a problem with projects. The failure can then be the subject of analysis. So, with projects in general, what are the strategic issues that contribute to the failure of a project? An analysis is shown in Fig. 3.1. Figure 3.1 shows the end-effect at the top of the diagram - t h a t 'projects will continue to routinely fail' in the longer term as long as the two causes leading to failure still exist. These are that 'projects routinely fail now' (welldiscussed already) and there is 'no project capability development route', that is, there is no means to make the necessary changes. Looking further into these issues generates the causes behind each of the effects given here.'

Sirategy and project wai itigement I 51

Figure 3.1 Partial analysis of project failure

Working down the diagram, we come to causes numbered 1-4. These are the main themes that will be addressed through this chapter. They appear diverse in nature, but are all linked through the causes of failure analysis given above. 1 'Organisational strategy does not include role of projects in delivery of organisational objectives.' As stated in Chapter 1, projects are increasingly recognised by organisations as the means by which a significant proportion of their activities are carried out. This recognition is important, but with it comes the need to move to a more coordinated approach to working with projects. It has been

•

Define the project

demonstrated by many world-class organisations that considering organisational strategy as a linked series of projects is most effective and there is now significant evidence to support this. This linkage between the projects and the organisational goals, and between the projects themselves, requires a significant coordination effort on the part of management - particularly for large organisations. This will be demonstrated in the following section. 2 'Project management not viewed as a strategic capability.' As for the next two items, this is partially a consequence of point 1. There are many levels at which the project manager can influence an organisation. For too long, the subject of project management has focused on the tactical/operational level, ignoring its role in the development and deployment of strategy. This has resulted in projects being carried out in a reactive mode with many of the problems that the project will face being already built into the work. In addition, project managers are being brought into the process too late to have any input to the strategy process and so prevent problems or to use their knowledge of operational capability to maximise effectiveness of the project. This is a two-way problem. The first part of this is that project managers did not possess the necessary frameworks to discuss these issues. With many project managers constrained to only having Gantt charts (see Chapter 5) and schedules, there is little reason for this issue to be taken seriously at a senior level. Second and related to this, it was not seen that project management had the potential to deliver strategic capability. More on these issues in section 3.3. 3 'The organisation lacks a coordrnation mechanism for resources.' Many organare unable to provide a list of all the projects that are being undertaken and their resource requirements. The result is that there is a fundamental overoptimism about what can be achieved, and no rational basis for dealing with decisions such as 'should we undertake this project?' A secondary result of this is resource conflicts - where limited resources are the subject of contention between project managers. These can be resolved through the application of the structures shown in section 3.4. 4 'Project goals not in line with organisational goals.' Here the requirement is for coherence between the goals of the organisation and those of the project. The project manager will need a rational basis for making decisions about priorities and trade-offs. These will be covered in section 3.5. This list provides some of the explanation of the recurrent failure of projects to deliver what is expected of them, despite this being within the control of the organisations that run these projects. The nature of project management has changed and having project managers who understand the strategy process and who can make an input to it is a major step towards improvement of project performance.

Organisational Strategy and Projects

I M

After more than 30 years of evolution, from a planning methodology associated with PERT and CPM, Project Management has finally come of age. No longer simply

•

ami project management

:

-.3.

a middle management tool for planning, organising and controlling human and other resources, project management can now be regarded as an essential means cf turning strategic objectives into operational ventures. (Lord, 1993) This is a change from the previous traditional approach (as described in Chapter 2), and requires different characteristics of the project managers. One of these characteristics is an understanding of strategy and the potential of the strategy process.

The . c e and definition of organisational strategy Before we get to strategy, there are other terms that need to be understood. The first is the vision of where an organisation is going. This has been well described as: We're standing on this hill here. The vision is that we want to be on that hill over there.' This implies that there is knowledge of our current position and a notion of where we want to be at a point in the future. Many organisations pay lip-service to this principle, but few manage to achieve this becoming the point of focus for all the resources of the organisation. Often the vision degenerates into generalities, with bland mission statements attempting to encompass the vision, such as the one seen proudly displayed in the reception office of a small firm: 'Our mission is to be the best producer in the worid cf high-technology solutions which delight our customers.' The firm was a small player in a large market, who survived by their ability to supply quickly to local markets. They did not need to be the 'best in the world' at everything - their market was well defined. The mission statement impressed no one - neither employees nor customers - and certainly did not provide a focus f o r the activities of the company. Other firms have provided the vision in highly quantitative terms, stating clear objectives of improving performance in terms of: • quality - e.g. we will improve customer satisfaction ratings by 20 per cent and customer retention rates by 40 per cent this year; • cost - e.g. we will reduce our unit costs by 3 per cent this year; • delivery - e.g. we will reduce the time from customer contact to fulfillment of orders by 2 weeks this year. These are clear targets, set within a predetermined time period, though not necessarily providing a motivating vision! This also does not provide any notion of what it is that the business is going to be doing differently in the future. One trucking firm, who were needing to go through a period of change as their customers reduced their numbers of suppliers, expressed this vision as: We will become the preferred suppliers of transport solutions to our three major existing customers and be capable of credibly bidding for further large accounts.'

54 i Phase One -

•

the project

This indicated that instead of just 'trucking' they would have to become providers of 'transport solutions' which incorporated greater logistics and inventory management capabilities. This presented the firm with a clear notion of 'where they were going'. The role of senior management in providing this vision includes setting objectives for the organisation. The strategy is concerned with providing a path for it to progress towards those objectives. Using the 'hill over there' analogy, the strategy is the route that needs to be taken to reach that place. Good strategy is considered as central to success in any organisation, providing the means to achieve the vision.

The strategy process Strategy is the outcome of a strategy process. Traditionally, strategy was considered to be a one-way process. Figure 3.2 shows the differences between this and the strategy processes of world-class organisations today.11 The traditional approach has been described above, with little guidance given to project managers. The alternative is the strategic approach where projects contribute in two ways to the organisational strategy. The first is through deployment of the strategy and the second is through contribution to that strategy. This is discussed further later in the chapter. Using a traditional approach, it is often found that rather than aiming to create competitive advantage through projects, project managers are forced into the mode of trying to 'minimise the negative potential' 4 of projects. In this mode the focus is on conformance regardless of the real needs of performance of the organisation (this is discussed further below), and an attitude of 'just don't mess up'. Strategy is the concern of senior management only and is implemented in a top-down manner, often regardless of the realities of what is possible at a project level. The strategic approach has a number of important differentiatingfeatures. These include the strong link between strategy and activities at the project level. Strategy formulation is still carried out by senior management in the organisation, but importantly, there are inputs from the project level. These concern:

Traditional Approach - w e a k link between project and organisational strategy, lack of :oordinatian between projects, inevitable @sourceconflicts, project managers'minimise iegative potential of projects'.

Strategic Approach - coherent, coordinated, focused, strategy-driven, contributingto strategy-forming and strategy deployment, strategic competence in project management provides source of competitive advantage.

Figure 3.2 Traditional versus strategic approaches

Strategy and project >

• • • •

f =

progress on existing work; current workloads and capacities; limitations of existing capabilities and potential new capabilities; ideas as to how new opportunities that have emerged from project activities can be developed.

The notion here is simple - by creating an involving process of two-way communication throughout the organisation, the strategy process becomes more consensual and people are aware of the realities of capabilities and limitations 'on the ground'. Projects become, as Lord described, the . . . essential means of turning strategic objectives into organisational ventures'. More than this, they will also contribute to developing future strategic objectives. Now we have the outline of the process that is needed to deal with problem 1, we return to the problems identified, and consider the second of these - 'project management not viewed as a strategic capability'.

Project Management as a Strategic Capability During a recent study of new product development practices in a wide range of firms, one of the issues addressed was 'Tell me how you manage projects'. Many responses were to the effect of If you mean "do we have a Gantt chart for every project?" The answer is no.' (Gantt charts will be described in Chapter 5.) It wasn't what was meant, but the fact that so many people during this study and in other discussions viewed the Gantt chart as representing 'project management' is indicative of a very limited approach to the subject. The Gantt chart alone is a blunt instrument and, as noted above, is likely to be of little interest to the board of a company. Indeed, for many it was the only tool that they had to carry out discussions about project management and as a result, it often appeared to show that 'if the only tool you have is a hammer, everything starts to look like a nail'. As other professions have made their way to the boardrooms of our organisations, so it is with project management. The development of the subjects of operations management and purchasing and supply management are good models here. Twenty years ago, there was little senior representation of either of these. Today, those organisations that do not have such representation are in the minority. Among the problems resulting from not viewing project management as a strategic capability are the two identified in Fig. 3.1. The first was 'the organisation does not promote or develop or promote project capabilities'. For many years, organisations have promoted people only through functional routes. Be a good accountant, you will be promoted within the finance function. Where does project management fit into this? In some project-based sectors such as construction there is often a well-defined route to board level for aspirant project managers. In other sectors, this is not in place and the skill set of working across functions goes unrecognised. This was identified in Chapter 1. This is not just poor for the individuals concerned it also results in a dearth of this vital resource. This is related to the second effect 'no project capability development route'.

56 ! Phase; One - Define the project

So, what would it mean to have a strategic capability in project management? There are two aspects to this for organisations. The first is the ability to deliver excellent results through projects - vital if this is your main means of earning revenue (see section 3.5). The second is that competitive advantage can be gained through it. It might be as a direct result of the capability, or indirectly, through being able to change the organisation to meet an emerging need. This issue of capability cannot be tackled alone, however. It needs to be done in the context of the following processes - those of coordination of resources and strategy deployment.

Resource Coordination 'The first t i m e w e assessed our t o t a l project load, w e f o u n d t h a t w e had scheduled three times as much work in one year as w e could reasonably handle. The results weren't very pleasant or productive.' (Programme manager - automotive supply firm)

The above scenario is very typical of many organisations that have no mechanism for determining their total workload. The alternative is to move to programme or portfolio management. A programme is a number of projects being undertaken with a particular element in common - sometimes a strategic objective (e.g. an environmental management programme), other times a particular client or group of clients (e.g. one IT firm has a programme developing solutions for the water industry) and others a particular technology (e.g. all the mobile communications firms have programmes for the development of products associated with the third generation of mobile communications devices). Portfolio management is very similar, except that there is less of a common theme to the projects, other than the resource set being used. Programme management is facilitated by two major devices: • an aggregate project plan; • a" project office.

The aggregate project plan The aggregate project plan is essential to keep control of the projects that the organisation is undertaking. Firms often have a good picture of their repetitive operations - t h e y have a high level of visibility and it is generally easy to see what is happening with them. Projects, on the other hand, with the exception of major construction projects, are less visible and require some overall picture to be maintained of precisely what is going on in the organisation. Aggregating or providing a concise statement of all project activities is the objective of the aggregate project plan. An aggregate project plan does the following: • assesses the contribution of each project to the organisational strategy; • determines using objective criteria what projects are to be undertaken;

Sti-ategy and project management I 57

• ranks the relative importance of the projects being carried out; • sets the timing of those projects; assesses the capability, resource and logic requirements of each project. Without this step, it can be observed that firms:

• •

• •

take on too many projects, resulting in overstretched resources and diluting the attention paid to the really important projects; fail to limit the scope of projects, allowing non-benefit-generating activities to carry on unchecked (seeChapter 4 for more on scope management); tend to expend resources on what Drucker (1955) referred to as 'investments in managerial ego' - projects that will yield little benefit but have an emotional attachment for the manager or director promoting them; have project goals that are out of line with organisational objectives; ignore key issues concerning projects until it is too late; lack balance between short-term (reactive) goals and long-term (strategic/ proactive) ones.

Having assessed the workload of project staff (which in many cases will include ongoing work in addition to project tasks), many firms are surprised to find just how overloaded their personnel are. Keeping track of the workload is an important contribution that programme management can make. The means for this is to keep a log of the available person-hours (number of people multiplied by the hours they are available in a time period) and to allocate these by project. There is frequently a tendency to underestimate the amount of time required for activities (particularly where there is some uncertainty regarding the outcome), resulting in an overcommitment of resources. Furthermore, there is no scope for any flexibility, which, as we will see both later in this chapter and in section 4.1 on innovation, is a key component of success for many projects. The capabilities or competencies required for the project portfolio should also be considered at this level. There may be key resources or people that are critical to the processes. In addition, many firms do not consider their key competencies, trying instead to do everything themselves. This is rarely a successful strategy particularly where technology is concerned. Where a requirement is outside the firm's set of core competencies, the requirements of external partners or contractors should be discussed. There is an additional consideration for the aggregate project plan. People rarely know the relative importance of the projects on which they are working or their contribution to organisational strategy. Furthermore, taking on too many projects causes stress for the people carrying them out. This is compounded by confusion about what is urgent and what is important. There should be only a restricted set of activities that any individuals undertake that are both urgent and important. It is the responsibility of the senior managementteam to ensure this. The above raises the fundamental question of just how many projects a firm can undertake at any one time. There is, of course, no universal answer. However, one firm, visited as part of a research project, had 72 development projects ongoing at the time, with one manager and eight staff. The result was an obvious confusion

58 ! Phase; One - Define the project

about the relative priorities of the projects, and a highly stressful work environment. Furthermore, the task for the manager was enormous. For instance, which projects should each person be working on at any one time? Inevitably, the projects worked on were those where the customers were screaming the loudest. The knock-on effect was that staff would start work on one project, and then be moved onto another as the priorities changed, to appease the latest angry customer. The effects of this are very stressful for the individual and highly unproductive for the organisation. They will be discussed further in Chapter 6. For the development organisation, a move away from the old system of 'whoever shouts loudest' to a clear system of priorities reduced the workload from 72 projects to 12. This sounds draconian, as many projects had to be put on-hold or abandoned completely. The positive effect was incredible - the firm successfully completed twice as many projects that year as it had ever done in the past with the same resources. In addition, the working conditions improved immeasurably and the workload and flow through the department became not only faster, but more predictable.' Having established the programme or portfolio of projects that the organisation will undertake in any given time period, the issue then comes of how to support these projects in their execution and ensure their continued contribution to organisational objectives. One increasingly popular means of achieving this is through the application of a project office.

The project office Many organisations, particularly from sectors that regularly run large-scale projects, use project offices to assist in all aspects of the management of project work. This is constituted as a function alongside other functions within the organisation. At one time, it was limited to large-scale engineering firms, but now the project office is a regular feature in companies including Vodafone, Computacenter and most of the high-street banks (though we are still more likely to find a project office in a large organisation than a small one). These firms have added this function, to run alongside other Functions in the business where much of their activity becomes project-focused. This additional function provides recognition of the importance of project activities, and in particular, the need for project management professionals to run projects. The relationship between the project and the project office is shown in Fig. 3.3. The office provides a central facility with the skills and knowledge of how to run processes. This can be drawn on by the project manager to help ensure that the project is given the best chance of success. The office can provide key project staff, often including the project manager, but also including project planners, accountants, staff to carry out review activities and consultants. Resources that may be under the control of the project office include any project planning software system that is used. The support role includes one of personal support to individuals, including training and mentoring (personal counselling and assistance), and sharing of experience where prohlems are encountered that have occurred elsewhere. The project office can also provide checks and controls on the project processes,

PROJECT OFFICE J • a • • • • a a

Skills Knowledge Pool of Staff Resources Support Documentation Checks & controls Mentoring

• • • •

Information about projects Knowledge gained from this project Staff project experience Overhead cost

U PROIECT PROCESS

Figure 3.3 Relationship between the project and the project office !

assisting in the establishment of checkpoints (see Chapter 4) and control measures (see Chapter 11). All this additional support to the project process does not come free and, it must be stated, is contrary to the current business pressures to de-layer and remove people not directly concerned with working on the project outcome. It is maintained by those organisations that do use this way of working that any downside element, including the increased overhead cost, is more that compensated for by the increased project success. Experience also showed that there was considerable benefit from having a consistent approach to running projects and the advice provided prevented problems such as teams overpromising on project deliverables or failing to properly analyse the risks associated with their work. The projects must, however, bear the overhead cost of running the office. Other contributions from the project to the office include the stream of knowledge and experience that the projects generate. The role of the office in this respect is marshalling and managing this knowledge. People who have been working on projects and show an interest in a project management career can use the project office as a way of moving to take a greater role in future projects. For example, a marketing person may enjoy the project environment more than the day-to-day activities of the marketing function and wish to become more involved with projects. The professionalisation of the role through the project office provides a route for such an individual to progress within the organisation. The following quotation summarises the discussion of the resource co-ordination function. 'Managing projects is, it is said, like juggling three balls - cost, quality and time. Programme Management (portfolio management, multi-project management) is like a organising a troupe of jugglers all juggling their three balls and swapping balls from time to time.' (Reiss, 1996)

The issue of 'juggling' cost, quality and time (and other objectives), is the subject of the next section.

6 e I Phase One

Define the project

Project and Organisational Goals There are many facets of the issue of relating project strategy to organisational strategy. The issues are shown in Fig. 3.4. The figure shows that projects can be broadly classified as either 'direct revenueearning' or 'organisational change'. The first category would include completing a consultancy assignment, a construction project or generally any work usually carried out for a third party for which you or your organisation is paid. The second category would include changes to an organisation's IT system, a merger or a new business start-up. These projects do not directly earn anything, though the intention is that there will be some benefit from them in the long run. Their cases do have some overlap, but the strategic aspects of each are essentially different. These will be considered in turn.

Strategy and direct revenue-earning projects The strategic input here is the organisational objectives, as shown in Fig. 3.4. This would be of the form - we are in business to be the fastest OR the best OR the cheapest providers of these projects. This can then be reflected into the project objectives - as conformance and performance objectives for key criteria - usually starting with time, cost and quality. These form the so-called 'iron triangle'. However, such an approach is limited. We will consider whether there is a need to consider the further element of flexibility and whether a wider range of measures would, in fact, be beneficial. The first consideration is to determine the nature of the three key objectives. These have been at the heart of consideration in project management for many years, and while limited on their own, are still the basis for any consideration of project objectives. As a minimum, the project manager must define these and then put in place a project process to ensure that these objectives are met. This approach stresses conformance to the stated objectives as being the most important

Figure 3.4 Projects and organisational strategy

Strategy and project management I 61

Tables,i Conformance versus performance attributes of time, cost and quality Time

Cost

Quality

Performance

Shortest possible

Cheapest possible

Highest level

Conformance

As planned

As budgeted

As specified

for measuring project success. This is a measure of the reliability required of the project system, expressed as: • Can the project be guaranteed to deliver on time? • Will the project finish within budget? • Will the project meet the specified level of quality? Taking this further, the emphasis in many business projects today has shifted to excellence being defined in terms of real performance, expressed as: • What is the shortest possible project duration? • What is the lowest cost? • What is the highest level of quality that can be achieved? The mechanisms by which the project manager assures conformance are different from those that ensure performance. For example, by selecting low-cost suppliers, the project manager may attempt to ensure that the project is delivered at minimum cost (performance). Whether it is in fact deliverable is determined by the actions of that manager to secure guarantees that the price (in addition to delivery and quality) will be achieved in practice (conformance). Table 3.1 summarises these characteristics. Time and cost criteria are relatively straightforward concepts. In practice, determining whether key objectives have been achieved can be a matter of some argument and commercial significance. However, one of the least understood concepts is quality. There are a number of manufacturing and service definitions which we will explore later in this text, including the relationship between expectations and perceptions of customers (and other stakeholders) of both the project process and its outcomes. Time, cost and quality are incomplete as a statement of requirements f o r a project, as they assume that such objectives are fixed and known in advance of the project starting. In an ideal world and many project managers' dreams, this would indeed be the case. The process of developing strategy for projects would be easier if customers always knew exactly what they wanted at the outset and were able to communicate this. As will be discussed later, it is the responsibility of the project manager to ensure that customer input is obtained by the project, and there are a number of methods available for doing this. There are, however, many occasions

6 2 ! Phase; One - Define the project

when the requirements of the customer are likely to change as the project progresses. The ability of the project system to address this change is expressed by its flexibility. Such flexibility needs to be accounted for at the outset, as there are penalties in relation to the other objectives - flexibility costs. For example, a firm that makes custom-engineered components is contracted to supply parts to an automotive assembler. It is asked to provide a quotation for new parts, but the specification requires some flexibility, as it will not be determined exactly until the last minute. With this required flexibility, the firm will need to hold back the makihg up of tooling, requiring this to be made by an express service rather than its normal supplier. This design flexibility therefore has potential cost implications, which, unless built into the estimates, will cause the firm to perform poorly on the cost conformance aspect. How do we decide which are the most important objectives and thereby come up with the project objectives? First, we need to understand the nature of the trade-offs that exist in the project. Then, with knowledge of our organisational strategy, we can decide which of the objectives are required to conform and which must be pursued as performance. Trade-off decisions

?

Consider the following scenario. You have been set a task, whether an academic assignment or one at work. You are required to produce a particular result in a given time. At the outset of the task you are able to plan your activities towards achieving the goal in the time required. The quality of the outcome is dependent on the time that you have - the longer you have, the more research you would be able to do and the more effort you could possibly put into the presentation of the end result. If you only have a very short time, this clearly limits what you can do, though you could hire somebody to help you. This shows clearly the relationship between three elements of project strategy: time, cost and quality. We say that there is a trade-off between these three - that you can have the task completed very quickly, but unless you are prepared to compromise on the quality, you may have to pay more. A trade-off is, therefore, the prioritisation of the objectives of a project. It is important at this stage, as there are two major occasions where it will affect the decisions made. The first is during planning. If a customer indicates that a specification for a set of project activities is non-negotiable, the resources of time and cost will need to be manipulated around this central objective. Furthermore, it focuses the project on what is really important, as many projects start with unnecessary assumptions regarding what needs to be achieved. Second, it will affect the decisions made during execution. For example, if the most important objective for a project is to achieve a particular level of cost performance, where problems exist and decisions need to be made, time and quality could be compromised to ensure that the cost objective is met. This does look like a poor compromise but it is the reality, particularly where there are inherent uncertainties in the project. Resources cannot be increasingly stretched to obtain goals that are passing out of sight due to unforeseen problems. It is vital to know in advance what

Sti-ategy and project management I 63

Figure 3.5 Trade-offs in project m a n a g e m e n t

can and cannot be moved should this scenario arise, no matter how undesirable this is in principle. Figure 3.5 illustrates this. Some authors have claimed that the necessity to consider trade-offs has been removed by modern management practices. The evidence for this is not as convincing as suggested and the pragmatic project manager is still faced with making these decisions. Before committing to a course of action, the manager should, however, consider the assumptions that underlie each of the criteria. For example, if a project is running up against time constraints, it may be worth considering the sequence of activities to see if their rearrangement will yield the necessary time savings. This is before any compromise is made on the cost element (reducing time by other means could incur additional costs). Having determined the nature of the trade-offs in the project, the most important ones are determined by our organisational strategy. As stated earlier, this provides the guidance that we compete in a market or market segment by offering projects as the fastest or best or cheapest supplier. If the organisational objective is to be the fastest, then this is a performance objective, while the cost and quality criteria are conformance objectives. As a minimum, we must hit our conformance objectives. We will focus on improving in our performance objectives. The Permanent Way Company, identified in Project Management in Practice at the end of Chapter 2, started their improvement project by considering their conformance and performance objectives. Their customers were telling them that their technical quality and costs were acceptable but their major complaint was that projects took too long and were often late. This set the scene for determining both organisational objectives, and in turn feeding into an organisational change programme. Their conformance objectives were therefore to be quality and cost, and their performance objective was time. Other objectives can form part of the conformance requirements of the project not just time, cost and quality. These may be environmental, ethical, legal, health and safety - indeed any of the constraints identified at the start of Chapter 2 can become objectives. For the majority of projects though, the iron triangle is a good starting point for consideration. Having set the framework for determining the conformance and performance objectives of revenue-earning projects, we can now look at an area that has become a significant user of project management practices in recent years - that of organisational change.

64 ! Phase One ~ Define the project

Strategy in organisational change projects

A major bank was in the middle of a drive to cut cash-handling costs at the same time as it was trying to recruit business customers to make more use of ATMs. For the business users, the incentive being offered was that corporate credit card holders would be able to draw cash from ATMs something they had not been previously allowed to do. Great publicity was generated by this move. The bank's other functions were not so happy about it and this is where the project ran into trouble. The ATMs were operated by one division of the bank, were filled with money by another, connected into the IT system by another and maintained by an outside contractor. All these parties had strong views on who should use the machines, and in particular there was the drive to cut cash-handling costs. Lack of strong leadership meant that the project was stalled for years trying to gain agreement of all the parties concerned. This should have been agreed and sorted at a senior level in the firm before project staff were engaged to operationalise it. The same organisation later found that they had over 500 IT projects running at any one time. N o one individual could or was overseeing these and you can imagine the clashes that such a number produced.

The challenge for organisations here is twofold. The first is to determine a programme of projects that will meet key organisational change requirements. This is strategy deployment. The subject of strategy is well developed, as are the methods for delivering projects. The process of strategy deployment comes between these two, and is less well developed. Having determined the projects that will be carried out as part of the desired organisational change, the task is then to ensure that the downside elements of each are resolved. This is achieved through a strategy matrix.

Strategy deployment The task of strategy deployment 6 is well established in a few world-class organisations, but less so both in general practice and academic writings. It was a central feature of the Total Quality Management movement and more recently in business excellence models - such as that of the European Foundation for Quality Management. The principle is that the strategies and projects of an organisation should show a high level of 'coherence'. This is where, as a minimum, all projects are part of some overall plan for the organisation and forming a recognisable contribution to that plan. Chaos Inc. above clearly needed some help here! Masters of this particular art include the Toyota Motor Company and further examples of the tools of policy deployment are included in Chapter 15. Particular features of this process of deployment are:

Sti-ategy and project management I 65

Table 3.2 Strategy deployment table Objectives Level 1

Activities Level 1

Objectives Level 2

Activities Level 2

Reduce new product lead-time by 20%

1 Establish managed portfolio of projects

Achieve balanced work allocations

Determine

Close down 80% of projects that are over 2 years old

2 Re-engineer project processes

Understand current processes

Examine potential of all projects over 2 years old Map current processes

Increase level of concurrency in processes

Objectives Level 3

Activities Level 3

Identify strengths and weaknesses in processes

Conduct review of all major projects over the past 3 years

workload due to current projects

Co-locate staff for major projects Train project facilitators

3 Implement new design technology

Reduce prototyping time by 80%

Install rapidprototyping equipment

Reduce product engineering time by 38% .

Install new version of design software

• Obj ectives aligned throughout the organisation by making strategy highly visible and well understood. Conflicts between functional and project objectives are resolved at a high level; • All members of the organisation are responsible for the process - strategy is no longer the domain of senior management alone and individuals can show the impact of their contribution to organisational objectives through their contribution to change projects; • Progress towards objectives monitored through highly visible measures (see Chapter 11); • Objectives are based on customer needs - retaining the customer-focused nature of the organisation - as illustrated by the Permanent Way Company example in the previouschapter. The strategy deployment table (Table 3.2) provides a means for project managers to agree objectives for their projects and illustrate how these relate to organisational objectives. These are ideal where an organisation has a large number of projects ongoing and a manager is responsible for more than one project. They can be used both between and within organisations to ensure consistency of objectives. Table 3.2 shows the deployment of a strategy by a firm to reduce its new product lead-time (howlong it takes to bring a new product through from the initial idea to

66 ! Phase; One - Define the project Objective i

Objective 2

o

'reject l 'raject 2

'roject 3 <ey-.

'If

Strong positive relationship

Weak positive relationship

Objective 3

o

Strong negative relationship

Figure 3.6 Strategy matrix when it is launched into a market) by 20 per cent. It is important that the objective set is quantifiable wherever possible - particularly a higher-level objective. This is then deployed into a series of second-level objectives. These include achieving balanced workloads, that is, a balance between the amount of time available and the amount of work that is required to be carried out. As is the case for 'increase level of concurrency in processes', objectives may have more than one activity associated with them. Having ascertained the portfolio of projects and obtained objectives for each of them, these will need to be amplified into a full strategy for each project. This moves us to the next stage of the strategy process-that of using the strategy matrix to balance the objectives. An example of a strategy matrix is shown in Fig. 3.6. This will be used further in the consideration of the issue of policy deployment. The map shows the relationship between three projects and three key strategic objectives. Each of the projects addresses one of the key strategic objectives. However, Project 2 will have a negative effect on Objective 1. This indicates that the project should be reconsidered to see precisely the nature of this impact, and whether the negative effect can be removed. Having determined the project objectives, these are then implemented through the measurement system that is put in place.

3.6

Project Performance Measurement Tell me how you measure me. and I'll tell you how I'll behave. (Goldratt. 1990)

Consider the following (unlikely) scenario. A new call management system is installed in an call-centre on time and on budget. It meets all its requirements in terms of the specification provided for it. Surely this must be considered to be a success? With the conventional time, cost and quality measures, it certainly would be. However, further investigation shows that regardless of the specification, the users of the system are very unhappy with it and are threatening to stop using it. Their needs were not considered and the system has made their task far more lengthy than it used to be, making it far more difficult for the operators to earn their bonuses. The adverse reaction has meant that the payback time for the system is going to be far longer than planned, causing problems with the client firm's plans

Sti-ategy and project management I 67

Table 3.3 NPD metrics Type of measure

Characteristicmeasured

Process measures

Product development cost, time and conformance to quality procedures

Short-term outcome measures

Product performance level, desirability to market, flexibility of design to be changed to meet emergent customer needs

Longer-term outcome measures

Payback period, customer satisfaction, percentage of business being generated by the new product, market share, customisability for high-margin markets

for expansion. The firm decide not to do further business with the system supplier. Now how much of a success was the project? If we purely consider the short-term conformance measures, we are limiting what project managers will aim for. A wider, more appropriate set is required. In the area of new product development, for instance, a selection of a set of metrics is frequently used as shown in Table 3.3. So not only what do we measure, but how and when do we measure it? There are clearly a range of measures, even within the basic time, cost and quality criteria. Measurement will be discussed further in Chapters 11 and 14, but these are vital as the means of checking whether strategy is in fact being implemented.

3J

Relevant Areas of the Bodies of Knowledge There is little in either of the bodies of knowledge concerning the strategic context or aspects of projects. Given the importance of this area and the impact that it has on projects in general, this is a significant omission. There are some points of relevance in the APM version for programme management, and these are given in Table 3.4. fable 3.4 Relevant area of t h e APM body of knowledge

Relevant section

Title

Summary

11

Programme management

Defines programme management and some of the tasks that are done under this heading.

20

Project success criteria

Defines some of the terms used here, including requirements, critical success factors and key performance indicators.

6 8 I Phase O n e - D e f i n e t h e project

3.8

Summary Many of the problems faced by project managers are caused by decisions or lack of decisions at a high level in their organisations. If project performance is to be reformed, changes must be made to the way that projects are managed, right through the organisation. A summary of this process is shown in Fig. 3.7. Figure 3.7 shows how the vision created for an organisation is reflected through to the project activities. The input from competitive analysis might include, for example, an analysis of the organisation's strengths, weaknesses, opportunities and threats (SWOT). It may also consider the impact of changes in technology, new entrants to the market (if a commercial organisation) and other market force changes (e.g. currency movements, legal changes) that will affect the organisation. The other input to this process comes from the organisation itself - demonstrating that strategy is a two-way process. The vision is to be realised through the organisational strategy in the first instance. This provides a focus for all the activities of the organisation, including all projects. Focus is an important concept here, which we define as those aspects of our product or service offering into which we are going to invest time, money and effort, with the objective of securing improved/superior performance. Having determined the theoretical focus, it has been observed that many senior management teams make the mistake of assuming that this will automatically be followed through by those who make decisions within the organisation. This does

Chief Executive Officer

•" •:." SSI

Vision

* reports &

Jties opportunities

Senior Management

•; ;I rTI>. I:?/" opportunities

L J

focus

Programmes

Programme Management

reports &

Competitiveanalysis

Organisational Strategy

—,

reports &

^mission

opportunities ies J'

Project Managers

- ':' *":' -J

Project Team

-~11" ""—ara Figure 3.7 The total process

Project/programme office

I projects prajei & priorities

Project Strategy progress

Aggregate project plan

plans & priorities

Project Activities

Conformance/performance objectives

" '•: 1

'V 'P-

Strategy and project

:

gemeit t 69

not always happen and results in problems for project managers trying to operate in the middle of interdepartmental conflicts, where different views of the mission and focus prevail. The alternative is to instigate programme or portfolio management. Two of the devices that assist programme management are the aggregate project plan and the project office. These ensure that the capacity and capability exist to do the work required by the strategy, and to keep an overview of the many projects going on in an organisation at any one time. Programmes consist of a number of projects. These may be externally generated - as direct revenue earners which will require their own set of strategies. This must be in line with corporate objectives regarding the basis on which the organisation will compete in order to meet customer needs. The project strategy in this case would include both conformance and performance objectives. In addition, o r g a n i s a tional change projects should be part of the strategy deployment of the organisation and their objectives should be put through a strategy matrix to remove conflicts before the project starts. The objective of this process is to clear the way for project activities to be undertaken in a coherent manner with the organisational objectives, focused and with minimal conflict. This process is simple in concept, but very challenging in application. It is notable that in organisations where this does happen, there is an almost palpable feeling of everybody working in the one direction, with many of the stresses and failures that are caused by 'the system' avoided. This is surely a worthwhile objective for our organisations!

A new campus for the University of Rummldge (with apologies to David Lodge) In May 1999 a chance meeting between the leader of the town council of Splot and the Vice-chancellor of the University of Rummidge started a project that would lead to the opening of a new campus in Splot. This appeared to be an ideal opportunity for both parties - the university was unable to expand further on its existing site due to local planning restrictions. This was despite having a well-known brand-name in the market, particularly for management education. The town was in the process of applying to become a city - a status that would confer additional prestige on the area, and almost certain political success for whoever could make it happen. It had~been the recipient of around €4 billion of investment in recent years from leading-edgecompanies in the automotive and electronics sectors. These new firms were providing a major demand for a wide variety of higher education services that the existing institutions were incapable of providing. Local unemployment was virtually zero and firms were having problems recruiting for all types of work. A number of opportunities presented themselves to the Splot council (see below for organisational structure). These included setting up their own university, in conjunction with local businesses, and accessing a remote provider through a virtual campus. The first was rejected on the grounds that they did not have the expertise

70 !Phase;One - Define the project

to do this, and the second on the basis that despite the low unemployment and prevalance of high-technology industries, the majority of the people of Splot did not have Internet access. The availability of school premises in the middle of the town, which could be readily converted into a campus and which was in an area prioritised for redevelopment, sealed the decision. Shutting down the school was a decision eased by the falling numbers of pupils. For the University of Rummidge, there were likewise other options. Expansion into areas that would relieve the dependence on government funding was always a priority, and operations beyond the physical limitations of the campus were increasingly attractive. Internet-based activities were an option for investment, but there were other initiatives in place to promote these. In addition, forming direct relationships with one or more of the large companies in the area for provision of integrated higher education services was considered. The university's management team favourably viewed the opening of a new campus. In order to progress the work, a joint venture organisation entitled 'The University of Rummidge in Splot' was established with the brief to . . explore all the various options that will permit the establishment of a permanent and physical presence by the University of Rummidge in Splot'. The joint venture organisation reported in September 1999, recommending to both the university and the council that the school premises be converted ready for courses to be run in September 2000. A budget for the conversion of the premises and establishment of the campus (including provision of library and IT facilitiesjof million was suggested and funding was underwritten by both organisations, subject to grants being approved from central government and sponsorship being obtained from local companies. It is September 1999 and the main part of the project is now about to start. Academic staff at Rummidge are not impressed by this move as much of the negotiation has taken place without their input. Moreover, Splot is around a one-hour drive from Rummidge, traffic permitting. There are also significant reservations about the location of the campus in a relatively run-down district of the town, and whether there will be sufficient buy-in from local people to make it worthwhile. In addition, there was debate as to whether courses (both undergraduate and would be run at both sites, and whether there would be resources available to assist with the workloads of the departments (both academic and administrative) caused by the new courses. Some of the administrative departments were also unclear as to how the new campus would affect their workloads. The organisauonal structures are shown in outline in Figures 3.8 and 3.9.

Case questions 1 What are the strategic objectives for each of the organisations involved? Are there any conflicts in these objectives? 2 There are many projects that will be taking place in the process of opening the new campus. How might running them as a programme help the chances of success? 3 How might a project office be of use in this case? 4 What would appropriate success measures be for the project?

Sti-ategy and project management I 71

The senate are elected by the staff of the university, with 25% of members being required to stand down each year and be replaced.

Senate

—»

•

—p

Heads of Academic Departments

Heads of Administrative Departments

Academic Departments

Administrative Departments

••»!

Heads of academic departments are nominated from the Professoriate oF their department, but with little direct control over the academic staff. Heads of administrative departments are functional specialists in their particular area, e.g. finance.

Figure 3.8 Outline structure - University of Rummidge

The leader of the majority party on the council

I

• - 1 !! V 111111

—

T":1

The council members are elected by the people of Splot, with 2 5 % of members being required to stand for re-election each year. Currently the power on the council is shared between two parties in a moderately stable coalition. :

' —1

.;

::: :: ^ :

Full-time employees of the council, responsible to the council members for carrying out their departmental duties ' ':: I •' .»»i-'i!?^?^;: '.j^; .l—UIJSt' 1 - '

Figure 3.9 Outline structure - Splot Town Council

Selecting a personal project A group of students, as part of their coursework, have to carry out a group project where they run an event or perform a particular task to demonstrate their ability to plan, execute and review a project. They are assessed on the basis of originality of their idea, the quality of the planning process and the content of a report following the project that reflects on their experiences of the project. They have a meeting and come up with a number of ideas. These are:

72 ' Phase One - Define " v project Originality

Demonstrate skills

Produce

Yearbook

/

/

good report S

/ideo

•

/

S

/

3a|j

Stretching

_. S

. Independent

Avoids

_! (if cithers j \ /

FUN

financial ^Sk X -

*

XXX

Treasure Hint

X

—

—

X

_

J

\ccident jwareness Jay

J

•

-

-

X

•

J

-

Figure 3.10 Decision matrix

• • • • •

Produce a yearbook for their class group; Develop a short video promoting the course that they are studying; Run a formal ball for the entire department; Organise a treasure hunt one Sunday; Organise an 'accident awareness' day for schoolchildren.

The meeting then had to consider which one of these was the first choice. The next activity was then to decide on the decision criteria by which each of the proposals would be judged. The first three were given by the requirements of the assessment - that of originality of idea, whether the idea would allow demonstration of project management skills and whether it would enable them to produce a good report. The group added some further characteristics that they felt that they wanted their project to have. These were: • • • •

It should be sufficientlystretching of the group; It should not depend too heavily on other people for its success'; It must not require them to undertake any large financial risk; It must be fun for the group to do.

They then put this together as shown in Fig. 3.10. You may disagree with the rating that the group gave some of the items, but this is how the group saw the options. They also saw very clearly as a group that there was one clear choice for them - the video. It also told them that the financial risk element (cost of hiring editing facilities and production of the finished product) needed to be minimised.

Case questions/exercises 1 Under what circ*mstances might this approach to selection be beneficial? 2 Use the iron triangle to produce a prioritised set of objectives for the project. 3 How might the measures of success change over time?

Strategy and projet; management I 73

vision mission strategy process performance programme / portfolio management project office revenue-earning objectives strategy deployment trade-offs performance measurement

coherence strategy conformance strategic capability aggregate project plan multi-tasking organisational change focus strategy matrix iron triangle

1 Is there more to project management than a Gantt chart? 2 What does 'the system' mean in the context of project management? 3 What are the impacts at a project level of poor strategy processes? 4 What is coherence and why is it worth pursuing? 5 What is the role of strategy in project management? 6 At the project level, what is the strategy process? 7 Why is an aggregate project plan beneficial for an organisation that pursues a number of projects at the same time? What is the difference between conformance and performance objectives? 9 What is a trade-off in the context of a project that you are involved with? How did you resolve the problem of choosing which aspect you would compromise on?Was this the right choice? 10 Why is it so important for project activities to be in line with organisational strategy?

Buttrick, R. (2000) The Project Workout, 2nd edition, Financial Times Management, London. Deming, W.E. (1986)Out of the Crisis - Quality Productivity and Competitive Position, MIT Center for Advanced Engineering Study, Cambridge, MA. Drucker, P. (1955)Management, Butterworth-Heinemann,Oxford. Goldratt, E.M. (1990)The Haystack Syndrome, North River Press, New York.

74

Phase One - Define t h e project

Hayes, R.H. and Wheelwright, S.C. (1984)Restoring O u r Competitive Edge: Competing Through Manufacturing, Wiley, New York. Johnson, G. and Scholes, K. (1999)Exploring Corporate Strategy, 5th edition, Financial Times Prentice Hall, Harlow. Lord, M.A. (1993)' Implementing Strategy Through Project Management', L o n g Range Planning, Vol. 26, No. l , p p . 76-85. Reiss, G. (1996)ProgrammeManagementDemystified,E ScFNSpon, London.

Akao, Y. (ed.) (1991)HoshinJ£«Mn-Policy Deployment for Successful TQM, Productivity Press, New York. Atkinson, R. (1999)'Project Management: Cost, Time and Quality, Two Best Guesses and a Phenomenon' itsjsrc.] Time to Accept Other Success Criteria', International Journal of Project M a n a ^ g f ? * ! Vol. 17, No. 6, pp. 337-342. Baccarini, D. (1999) 'The Logical Framework Method for Defining Project Success', Project Management/o«ma/, Vol. 30, No. 4, pp. 25-32. Bernstein, S. (2000)'Project Office in Practice', Project Management Journal, Vol. 31, No. 4, pp. 4 - 6 . Block, TR. and Frame, J.D (1998) The Project Office, Crisp Learning, Menlo Park, CA. Fowler, A and Walsh, M. (1999)'Conflicting Perceptions of Success in an Information SystemsProject', International Journal of Project Management, Vol. 17, pp. 1-10. Grundy, A. and Brown, L. (2001)Strategic Project Management: Creating organisational breakthroughs, Thomson Learning, London. Obeng, E. (1995)'The Role of Project Management in Implementing Strategy' in Crainer, S. (ed.) The Financial Times Handbook of Management, Financial Times Pitman Publishing, London, pp. 178-93. Mintzberg, H. (2000) The Rise and Fall of Strategic Planning, Financial Times Prentice Hall, Harlow. Newbold, R (1999)Project Management in the Fast Lane, St Lucie Press, Boca Raton, FL. Wheelwright, S.C. and Clark, K.B. (1992)'Creating Project Plansto Focus Product Development', Harvard Business Review, March-April, pp. 70-82. www.efqm.org for more information on the European Foundation for Quality Management Business Excellence Model.

Notes 1 T h e p r o j e c t b a s e l i n e is t h e o r i g i n a l s c h e d u l e of activities f o r t h e project. By changing the baseline y o u are 'moving the goalposts', as described in 'Ready, fire, aim' in C h a p t e r 1.

2 For explanation of this technique and further examples, see Chapter 13. 3 I t is n o t intended t o provide a detailed consideration of t h e m a n y a n d varied views of strategy here. F o r this, y o u s h o u l d r e f e r t o d e d i c a t e d texts, s u c h as J o h n s o n a n d Scholes ( 1 9 9 9 ) .

Sti-ategy and project management I 75

4 This follows the terminology of Hayes and Wheelwright, (1984) in describing the relationship between operations strategy and organisational strategy. 5 For further examples of this type of change, see Newbold (1999). 6 Another term that is used to describe this process is Hoshin Kanri or Policy Deployment.

Even the longest journey begins with a single step. A project may begin in many ways: a blinding flash of inspiration on t h e part o f an individual or group, one that responds t o a stated need on t h e part of a particular client, or one that is t h e inevitable poisoned chalice - handed t o you and already set up for disaster. Whatever t h e root of t h e project, t h e study of excellence in projects has shown that they are characterised by a combination of order and chaos. Indeed, the chaos usually comes first, followed by t h e order or system that a well-developed process can bring. This order and chaos do not always exist comfortably together, but are vital components of projects. The purpose of this chapter is t o outline t h e process that a project will follow. This understanding of t h e process w i l l facilitate t h e detailed p l a n n i n g (see Chapter 5). Moreover, w e will need t o determine whether any further work on t h e project should be carried out or t h e project terminated. Before w e start w i t h d e t a i l e d planning, w h i c h w i l l i t s e l f c o n s u m e t i m e a n d resources, it is necessary to take an overview of the project. This provides a notion of w h e t h e r t h e project is in fact f e a s i b l e and, if so, t h e n w e can proceed w i t h t h e detailed planning. This overview step is vital if w e are t o retain the focus of t h e project on t h e key objectives. It further provides a framework for what follows. This chapter focuses on developing t h e content of t h e project through t o t h e first stage of designing t h e process by which it w i l l be delivered. These provide t h e basis for t h e detailed planning that follows. Running through this is t h e need to gain support forthe work to be carried out from all stakeholders.

Learning Objectives 4.1 42 43 4.4 4.5 46 4.7

Developing t h e concept Scope management T h e project process W o r k b r e a k d o w n structure fWBS) Process m a p p i n g Establishing check-points Stakeholder management

Project definition I Si-

4.8 Relevant areas of the bodies of knowledge 4.9 Summary Pmject management in practice:Use of gated processes at a major telecommunications manufacturer Key terms Review questions and further exercises References Further information

By the time you have completed this chapter, you will be able to: s Demonstrate the rote and importance cf creativity in projects: • Identify the need for and the features cf a scope control system; • Provide an outline of a project process; • Construct basic stage-gate models; • Recognise the benefits cf constructing a process map at this stage and identifya process mapping technique; • Demonstrate the importance stakeholder management and the features of a basic communications plan.

Chapter 2 identified that there are many different types of activities, all taking place under the heading of 'projects'. Depending on their degree of novelty these were first-timers, as . . . b u t . . . s and painting by numbers. In Chapter 3 we identified t w o further groups of projects - direct revenue earning and organisational change projects. All these have need for creative input to the product (the outcome of the project) or the process (the means by which the projecr is carried out), but especially where there is a high degree of novelty. Projects start by a huge range of means some are presented as well-worked and highly documented, through to the individual who wants to pursue a particular idea. A common format in industries where projects are undertaken for external clients involves the customer or client providing a brief or terms of reference and the project manager replying with a proposal or Project Initiation Document (PID).For many personal and corporate projects (including new product development), the first stage of any project is conceptualisation (seeChapter 2).During this part of the work, there is great opportunity for creativity, as the options open to the emerging project team (which may be nothing more than an informal group at this point) are identified, discussed and evaluated. This creative maelstrom is so important to modern projects, but so often is squeezed out of the process by tight deadlines and an ever-present need f o r quick results. Indeed, read many project management books and the topic of creativity is rarely given a mention. Yet some of the most successful firms in the world have this at the centre cf their processes, and create space within

7 8 i Phase One - Define She project

their people's time for innovation. What we need now is to enshrine this into the process so that it becomes part of the 'way we work' rather than an optional extra. There are situations where leaving the brief as wide open as possible is essential. While this is an example of a large corporation and their efforts to bring creativity to the organisation, the opening phase of the project is an opportunity to envision the future - to see what the project might do. As discussed in the Project Management in Practice example at the end of Chapter 2, the early stage of a personal project or dissertation should be one of exploration, where there are more questions than answers, and the objective is to create as many options for the project as possible. As the boxed example below shows, this is vital in many areas, including new product development projects.

Concept development in new product development

New product development is rarely a linear activity - with the outcome logically following the intention at the start. Particularly in the early stages of the work, there will be an increase in the number of possibilities available, as new ideas emerge. This is highly desirable, provided that the scope of the project is maintained (seefollowing section). At some point however, the ideas will have to be narrowed down, as they are unlikely to all be feasible. This is done by screening - where the ideas are gradually filtered by, for example: • Marketing assessment of the ideas - which ones are most attractive to the market; • Financial appraisal, such as potential to develop a good rate of return on the investment required of it; • Strategic - does this product fit with our current mission? This process is illustrated in Fig. 4.1. Figure 4.1 shows the inputs to the process, including R&D (research & development),suppliers (seeChapter 12), customers and competitors. Staff also have a big input to the process, and this is not just applicable to physical products. The Disney Corporation, for example, employs a number of 'imaginers' who have the job of creating new ideas in entertainment they are there to 'blue-sky' - a term which infers that they spend the day gazing skyward waiting for inspiration as to what the next Lion King will be. At the output side, it is intended that there will a successful new product, but as the 3M example below will show, there are other routes for exploitation of ideas. These include licensing (another organisation paying for the use of your idea), selling the idea, or, as used by many firms today when a new idea comes along, starting a new business to exploit it. Some ideas will also be rejected and some will need to be recycled - possibly into development projects of their own at a later date.

So what are the characteristics of highly creative processes? There have been many attempts to develop sets of rules, but they can be summarised in the following list: Allow time and space for individuals to carry out the exploration. 3M famously allow their development staff up to 15 per cent of their working time to pursue 'personal projects' - work that is not necessarily directly related to their normal role. The result is a stream of new products, which include the eponymous PostIt note, and a turnover in the sale of these ideas that is predicted to exceed their sales of their own products. There is clearly a financial case therefore for such innovation; Protect ownership of ideas. If people feel that the organisation is simply trying to take their ideas from them, they are unlikely to contribute much; Encourage rapid prototyping to try ideas right at the start and see how they work. This approach to rapidly test ideas and rehearse them - walk through the process and see how they work in practice - should become a cornerstone of modem project management practices; Have people at a senior level in the organisation prepared to act as project champions who will promote particular ideas and attempt to obtain the necessary resources from the organisation to progress projects with good potential; Have a rapid development process ready to take on such ideas and see them through to fruition. This must include clear criteria as to what will be supported by the organisation and what will not. Instead, we too often kill the innovation to products and processes through overrestrictive processes or, just as badly, through believing that no process at all is required leave the idea with no path for development. Either of these is a considerable loss. 3M and other world-class organisations are notable by not only having this creativity present but also by the effectiveness of the process that follows from that. This is well-planned and directed (not at all as chaotic and unstructured as many

S o I Phase O n e -

the

would think) and includes the elements of process planning that are described in the rest of this chapter. For the present, the issue of the content of the project rather than the process will continue to be the focus, with the consideration of the role that the project scope plays.

4,2

Scope Management

SU.'Htr. • • BÄSÄI

What is the big issue concerning scope management? Why is it that both the bodies of knowledge considered here and PRINCE2 dedicate significant quantities of effort to ensuring that this is managed not just at the outset but throughout the project? One of the reasons may be seen in the box below.

Initially conceived in the mid-1970s as a four-seater, electrically powered vehicle for under £1000, the concept grabbed a lot of attention. Because it came from such a renowned inventor- Sir Clive Sinclair> famous for one of the first calculators and personal computers - it was a highly popular idea and had no shortage of backers, including Hoover, who kitted out part of their factory for its manufacture. The result at the end of the process was rather different, as shown in Fig. 4.2.

Figure 4.2 Scope creep (Source:

Reproduced c o u r t e s y of Austin Area Electric A u t o m o b i l e Association and

Potgtae)

ark

The figure shows the results of the phenomenon known as scope creep. The original purpose was subtly changed until it no longer represented the original concept. The result was disastrous - the product was a flop and all the firms involved lost substantial sums of money.

Other reasons for the need for explicit management of scope includes making sure that all the parties to the project are agreed what it is that the project is going to do. In many cases, it is appropriate to leave the scope loose early on to enable the creativity described in the previous section. At the end of the definition phase, however, a statement of scope should be agreed as the basis for planning and managing the work that follows. Scope management involves the elements shown in Fig. 4.3.

Project definition I Si-

Initiation Constraints Assumptions

- Selection Strategic plan

Project scope management Change control system /

WBS Scope statement

Performance management

\ V - Scope acceptance Scopeplan

Scope change control

Figure 4.3 Elements of scope management As can be seen, there are three parts to this - the initiation, which we have already covered. The next part is the generation of a scope plan - including the work breakdown structure (see section 4.4) and generation of a scope statement. This specifies very clearly what is included in the project and, just as importantly, what is excluded. This means that certain related but excluded activities will be performed by others or left for further work. For example, a project to produce a marketing plan for a new product a company was launching had to specifically scope out (exclude)the carrying out of direct market research as part of the process. This would have made the process too long and costly for the organisation concerned. This did, however, provide a limitation to the project. The last part of the scope generation is to obtain acceptance.'This may be via a formal sign-off process where a paying client is involved or simply that a meeting is called where everyone agrees to the scope statement as written. It is useful at least to start with agreement on where the project is going and what it is going to do! The scope management and control aspects will be discussed further in Chapter 11 on project control. Having outlined the content and the purpose of the product through the concept and scope development activities, the next consideration will be the process by which the project will be delivered.

The Project Process

as m s M i f l

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So, how will we deliver the project that we have outlined above? The level of formalisation required here, as mentioned above, differs between organisations. Some systemisation here is good, too much is bad - but that is rarely helpful to the project manager. We have two issues to consider here. The first is the level of complexity, as described in Chapter 2. The higher the level of complexity, the higher the level of systemisation that is required. The second factor is custom and practice in the industry or organisation in which you are working. That does not legitimise where inappropriate practices are used in an industry but does recognise the reality of the constraints under which many project managers have to work.

8s '

Onfi -

the project

Where a formal proposal is required it should be considered in the following light: • Who is the proposal for - the investment decision maker or a third party? • Why is the proposal being requested? The first part of the analysis in the proposal development should consider the potential customers for the work - are they internal to the organisation or external? In addition, are the customers end-users, investment decision makers or a third party acting on the behalf of one of these? The degree of formalisation will need to be tailored - a bid to an external organisation usually requiring a much higher degree of formality. In addition, if the project is: • for an internal customer, there needs to be consistency with the organisation's stated goals or aims; • for an external customer, the most basic requirement is that they will be able to pay for the work to be carried out. It is pointless generating detailed proposals only to find that the 'customer' is insolvent or the transaction cannot be completed for other reasons. Where the customer is from overseas, it is worth investigating at a very early stage whether or not they are eligible for export credit guarantees, for example; • going to be appraised by a set of people, it is useful to know their backgrounds. For example, where a client has a detailed knowledge of the subject area, more detail of the nature of the work to be carried out should be included, or, for an investment decision maker, details of the cost-benefit analysis. The reason for the proposal being requested should also be examined to ensure that the result is appropriate: • if it is to be part of a full competitive bid for funding, then it is probably worth investing the time to prepare a detailed proposal; • if it is to be a first examination of the possibilities of such a project, with the customer deciding to find out what would be involved if the project were to be undertaken, then an overview proposal should be submitted; • if the proposal has been requested as part of organisational policy to consider more than one supplier for any product or service, it is worth finding out whether or not an existing supplier already has the contract before investing your time. Providing a very rough proposal can be dangerous as the impression that is left with the customer may not favour you in the future. It may be worth in such a case declining to put in a proposal - though this again should be determined by the aims of the organisation. Other scenarios where the supplier may decide not to submit a proposal (also called a 'bid') include when the capability (organisational capability), resource (e.g. if capital is already tied up in other projects) or desirability (e.g. moving into direct competition with an existing customer) is questionable.

Project definitionISi-

The process of preparing and submitting the proposal is the organisation's opportunity to sell itself to the potential customer. 'You only have one chance to make a good first impression', so basics like ensuring that the proposal document reaches the customer on time, is presented in a way that demands attention and is free from stupid mistakes (particularly spelling and grammatical errors) is essential. This is only part of the process. The pre-sell to the client can involve visits, informal discussions and general information gathering by both parties. The intention, as set out in describing the project environment, is to foster partnership relationships between the two parties. The focus is on long-term mutual benefit rather than shortterm gain at the expense of the longer term. The proposal itself should contain: • an executive summary - provides the basic information in a few words, ideally one that can'be read in one minute; • the main body of the report - diagrams and pictures convey information much better than reams of text, In order to ensure that the presentation is consistent, a standard set of forms is often used which also makes it far more difficult to leave items out (see PMI, 1998). Checklists are also of great value in compiling documents; • appendices - any information that is summarised in the main report can be included in longer form here, along with supporting evidence for any major points made. The plan is the first step in providing the means of satisfying the requirements of the project owner (the person wanting the outcome) or sponsor (the person in charge of the funding for the outcome). It is the beginning of the project manager's input to ensuring that, wherever possible, potential problems are identified and solved in advance. The plan is an explicit statement of the intended timing of project activities and the basis for estimating the resource requirements. Problem and error prevention, rather than rectification, is one of the main drivers of the planning process. The objective of this part of the process is to provide an overview of what the project, should it go ahead, would look like. With the plethora of modern tools available through the medium of the computer, it is easy to forget the objectives of the plan, which are discussed here. Some of the basic techniques for establishing the logic and timing of activities are presented.

A first look at planning To call project planning a 'process' implies that there is a well-defined route for the planner to take. This is not always clear, and a generic model of planning is difficult to construct. Planning as a process involves the consumption of resources - it has costs associated with it. The project manager has to decide on the balance between the costs incurred in the process and the benefits that will be reaped from it, as illustrated by Fig. 4.4. Costs associated with the planning process include: • planned labour and associated expenses (travel, subsistence, etc.); • planner's tools - may include computer assistance;

84 -

. One

Define (he- project

GOOD USE OF PLANNING

Figure 4.4 Balancing costs and benefits

cost of preparing the written plan - typing, binding, etc.; • opportunity cost - what the planner and others drawn into the planning process could have been doing otherwise (e.g. working on an existing project). In order for the planning process to be value adding and not just cost adding, the benefits of the activity have to be shown. These may be identified as: • avoiding the costs of the chaos that would otherwise take place with an unplanned activity; • providing a basis for a formalised evaluation process - filtering out projects that will provide a negative return; • identifying problems in advance and being able to resolve them on paper. The time that a planner spends preparing the plan should reflect the potential benefits of the activity. Figure 4.4 shows the positive and negative effects that the plan can have on project activities.

The plan as a working tool o; organisational straitjacket One of the paradoxes that the project manager has to address is whether the output of the planning process remains a working tool or becomes a form of organisational 'straitjacket'. As a working tool, plans are used to help decision-making and guide future activities. A well-balanced plan will guide the actions of the project team, without the need to define to the absolute detail level what each person will do for every minute of every day. Project plans should change as circ*mstances change. People can get so involved in the plan that the project objectives are forgotten, with

Project

rtefiniticm I 85

the planning becoming an end in itself rather than a means to an end. If the techniques that follow are applied intelligently, changed circ*mstances can be matched by a new course of action. The phrase 'because it says so in the plan' is the defence of a person who, wrongly, does not use the plan as a working tool.

Planning accuracy or precision? A further argument which should be vocalised is the conflict between precision and accuracy - would you rather be roughly right or precisely wrong? The conflict is illustrated in the box below.

You are a sniper. You have a rifle with five rounds in the magazine. You spot your target; he is sitting under a tree leaning against its bole, his rifle resting across his knees. (He is a sniper as well, and he bas got five rounds in his magazine.) You aim and fire five rapid shots. There are five thuds as each round bores into the tree trunk nine inches above your target's head. The holes they make are so tightly clustered you could cover them with a cigarette packet. That is precision. He jerks the muzzle of his gun and quickly fires his five bullets. The first hums past your ear, the second smacks into your thigh, the third clips your hair, the fourth smashes into your chest and the last drills into your head. That is accuracy.

Often, what is termed a 'quick and dirty' approach (with the objective of being as accurate as possible) may be far more beneficial than months of painstaking planning (with the objective of being as precise as possible). Precision, as Frank Price describes it, is pretty; accuracy is deadly. There is clearly a role for detailed planning, but not before an overview plan has been worked through. Evaluating the overview reveals fundamental flaws in assumptions. Until this level of plan satisfies basic criteria such as financial or technical feasibility, detailed plans are inappropriate. Do plans provide information or just data? One of the benefits of modern business systems is the ease and speed with which vast quantities of data can be generated. However, there is a tendency for managers to become overrun with data. Data are the numbers on the page. Information is the part or summary of that which can be usefully applied. The rest is just noise and clutters the thought and analysis process. One of the major roles of the project manager in projects, other than the smallest, will be to gather data from the relevant

8 6 I Phase Onp - Define the projett Controls

Standards1 procedures

V

L . Inputs

Pro|ect

brief

Planning process

Tools and techniques

\

Outputs

Project manager andtearn Mechanisms

Figure 4.5 Activity model using ICOMs

sources. Simply passing the data on is unlikely to be a value-adding activity. The project manager therefore needs to be not just a collector of data but also a provider of information, usually in the form of management reports. The one-page executive summary is one of the most beneficial of these in terms of information gleaned per time committed.

. process of project planning - inputs, outputs and the process itself The process of project planning takes place at two levels. At one level, it has to be decided 'what' happens. This, the tactical-level plan then needs to be converted into a statement of 'how' it is going to be carried out (or operationalised) at the operational level. Figure 4.5 shows an activity model as would be used to analyse systems of activity by considering the inputs, controls, outputs and mechanisms (ICOMs) for the activity. The inputs are the basis for what is going to be converted by the activity - in this case the project brief. The output is the project plan, or more specifically the project proposal. The controls provide the activation, the constraints and the quality standards for the planning process in addition to its outputs, and the mechanisms provide the means by which the process can happen. At the operational level, the way in which the proposal is generated should not be viewed as a one-off activity but should go through many cycles of suggestion and review before the 'final' document is produced. As Fig. 4.5 shows, the first cycles are to provide the major revisions, where significant changes are made. Once these have been done and the project team is happy with the basic format, the last stages are those of refinement, where small adjustments are made. It is important for the overview to be verified first, before further effort is cornmitted to planning at a detailed level - as discussed above. The life-cycle of planning in Fig. 4.6 shows the stages that the plan should go through. Cases such as the one given below are examples where the detail was considered before the major issues. As the example shows below, this is very wasteful of management time.

Project definition I Si-

Figure 4.6 The project planning process

Business plan meetings were serious affairs - they always were. The concept was quite attractive - t o set up an exclusive nursery school with an appealing teaching method in a smart area of the city. So far so good. This was, however, where the rough planning stopped and the group succumbed to the virus that plagues so many projects at this point - detailitus. The discussions were then waylaid by the need to have safety tyres on the school minibus and by the detailed wording of the liability insurance. No matter that the lag between the money being spent on the buildings and equipment and any income from fees received would create interest payments that the company could never hope to meet . . .

The revision/refinement process considers the necessary sub-projects (if any), the results of any numerical analysis (may be financial, resource, risk analysis or some form of mathematical simulation), the element of 'gut feel' (also referred to as the subconscious or back-of-the-mind element) as well as experience. The sponsor and other stakeholders will usually have some input to be considered in this process.

Managing the planning process Most projects of low complexity will bias the ratio of planning:aetion heavily towards the action. As complexity increases, so does the necessity for a formalised plan. This is both a systematic analysis of the project (which provides its own set of benefits)and an opportunity to show that the project manager has been systematic in the planning process (by showing the level of consideration that the project manager has given to issues). 'Traceability' has become a major issue in many companies allowing products to be traced back to records of their constituent parts. The same is required of a project plan. In the event of an unsatisfactory result, for whatever

88 I Phase One - Define (he project

reason, a good plan can show that the planner took every possible precaution to ensure that the result was positive. Conversely, should the project go particularly well, you will have an assignable cause for this - namely your planning! The benefits of using a systematic methodology in planning include: • breaking down complex activites into manageable chunks (see section 4.4); • determining logical sequences of activities; • providing an input to subsequent project management processes, including estimating the time and resources required for the project; • providing a logical basis for making decisions; • showing effects on other systems; filtering frivolous ideas and activities; • providing a framework for the assessment of programmes (the post-project review process relies on comparing the achieved result with the original plan, particularly for the purpose of improving the planning process); • being essential for the revision/refinement process; • allowing lessons to be learned from practice; • facilitating communication of ideas in a logical form to others. What follows shows how these benefits can be achieved through the application of tried and tested methods within a systematic framework. The first stage is to break down the activities associated with the project into manageable chunks of work, through the work breakdown structure.

'So how do you eat an elephant (or vegetarian equivalent)?' 'Justone slice at a time.'

The breaking down of large activities into comprehensible or manageable units is a fundamental part of project management. Figure 4.7 shows how a systems project the installation of a new computer system - was broken down into elements that one person or one department could tackle as an activity in its own right at the lowest level in the project. WBS is also known as 'chunking' or 'unbundling'. This is attractive as it gives people responsibility for a manageable part of the project. WBS also facilitates financial control activities, as individual parts can have their consumption of resources tracked. The sensitivity of such control is preferable to keeping track of a single large activity. Projects can be broken down in a number of ways. The example given above is an activity breakdown - the first level of breakdown is into the major groups of activities that will be undertaken. Other forms of breakdown include a functional breakdown, where the project is divided into its functional areas (in this case IT, purchasing and operations) and the activities for each area identified. A further type of breakdown is by physical grouping - in this case it could be split up into hardware issues and software issues. These alternatives and the accompanying breakdowns are shown in Figs 4.8 and 4.9.

Project definition I Si-

1.2.1.1

1.2.1.2

Contact trade association

Call suppliers for details

Figure 4.7 Example of a work breakdown structure(WBS)

1.1.1 Develop depanmental needs statement

Figure 4.8 Functional breakdown

Figure 4.9 Physical breakdown

90 I Phase One - Define ihe project

The role of WBS is to create a linked, hierarchical series of activities, which are independent units, but at the same time still part of the whole, and here lies the major problem with WBS. Whatever type of structure you choose, there are inevitable conflicts, as demonstrated by a London Underground refurbishment project.

During a line refurbishment the project was broken down into track/tunnel units and train/rolling stock units. Communication between the two was problematic, and when the refurbished (French) trains were delivered they did not fit into the tunnels. Nobody had been assigned to manage the interfaces between the teams during the project, as a result of which everybody relentlessly pursued their own part of the work - regardless of the consequences that it would have elsewhere.

The issues centre around the need for coordination between the different parts of the breakdown. Often this may be achieved through having a liason person or exchanging staff. Practically, one of the ways of achieving this has been through changing the scheduling of activities to run more of them in parallel, but with much greater interfacing and team-working - as will be discussed in the next chapter. This looks like such a simple set of activities, yet it is one of the fundamental steps in achieving success. Trying out different types of breakdown is often beneficial, as is the conscious management of the interfaces. Some organisations have interface managers to ensure that issues do not fall between different parts of the breakdown. The work breakdown structure provides the first attempt at modelling the project process. Whichever type of breakdown is used, at the bottom level will be a list of activities that are passed on to the detailed planning stage. Once completed to the satisfaction of those involved, the next stage is to consider more detail of the elements of the process and their interaction. Constructing process maps is one method that can be used.

How do we describe a process? Many organisations have procedure manuals that run to thousands of pages, and are only dusted off for annual quality audits (see Chapter 7 and the Appendix). Process mapping techniques, such as those discussed throughout this book, work far better and greatly reduce the amount of documentation required, while improving the usefulness of the end result. One graphical technique is four fields mapping or deployment flow charting (FFM/DFC). As shown in Fig. 4.10, it is a way of relating four information fields: • • • •

the team members; the logical phases of an activity; tasks to be performed including decisions made; the standards that apply for each task.

Project definition I Si1 Team members

2 Phases with entry/exit criteria

4 Standards listed for each task

Figure 4.10 foi fields map/deployment flow chart (Source :Dimmt.estu, •

By incorporating the standards element into the plan not only are the time and activity planned in detail but the controls also specified so that the sharing of information across an organisation needed to make the project work can take place. Figure 4.11 shows the use of the technique in the selection of a replacement coating product used in the manufacture of computer disks. The entry and exit criteria at each phase ensure that rhe project does not move on without the team having met certain criteria at that point. For example, at the end of the first phase the outcome must be that the specifications meet the criteria set. N o phase can be completed all errors have been corrected and the causes identified. This, as can be seen, does not sit very comfortably with the conventional ideas of project planning, where activities just proceed at some stated point in time, regardless. The following section considers further the nature of the check-points between the phases of a project.

Establishing Check-points In the above mapping it was suggested that the project be broken into phases. This is part of the role of the planner - to determine the nature and objectives of each phase in a project that will lead to successful completion of the overall project. The use of check-points or gates between the phases provides an additional check for the manager of progress (or otherwise). More importantly, you do not

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Project definition I Si-

Figure4,i2 Stage-gate model of projects

{Source: after Cooper, 1988)

have to wait until the project budget or time allowance expires to find out that there is a fundamental problem. Figure 4.12 shows the basic arrangement of the check-points. The criteria for passing to the next stage must be laid down in advance - as was done using the four fields mapping planning tool, where exit criteria (that determine a project has completed the work in a phase) rather than time determined when a project should pass between phases. Calling a halt to activities can save future expenditure, and must never be discounted as an option, particularly where: • the majority of the benefits from the activities have already been achieved by the organisation; • the initial plans and estimates have turned out to be wildly inaccurate; • a new alternative that is more attractive has materialised; • organisational strategy changes and the project outcome cease to be in line with the new strategy; • key personnel leave the organisation; • the project requires a higher level of capability than the organisation possesses; • to continue would endanger the organisation financially. All projects require check-points as a fundamental discipline. Some - such as where the project is delivering to a contract - are unlikely to be stopped where problems arise. Others can and should be. The nature of a 'failure' at a gate therefore differs between projects. The options include the winding-up of the activities (which often causes bad feeling among the project team and can lead to future disenchantment) or finding ways of maximising the potential benefit while minimising the risk or expenditure. Many development projects have got to the point where they were about to be commercialised and the large amount of finance required (which can be hundreds of millions of pounds, particularly in industries such as pharmaceuticals)could not be provided by the originators. Taking on joint partners and licensing are possible remedies in such a case. The stage-gate system derives from NASA's Phases Review Process (PRP). This favoured the use of gates between activities of different functions within an organAs will be discussed in the following section, this caused problems to be passed on rather than resolved. The systems used by many organisations (as described by Cooper, 1988) consider logical elements of the output product. Each stage in this model involves cross-functional activity. This is an important difference.

94 I Phase

-Definethe

.

Not all organisations approve of having gated processes. For some, the possibility that a project may be stopped does cause instability and a sense of a lack of commitment to the project from the organisation. Also, the downside of a project that is stopped at a gate may be loss of morale by the project team. An example of the stage-gate method in practice is described in the Project Mznagement in Practice at the end of this chapter. All :his preparation and planning is, however, futile if there is no support for your project. This might be from inside your organisation in the case of an organisational change project, or from a client in the case of a direct revenue earner. Support will only be achieved if stakeholders and associated communications are 'managed'.

4.7

Stakeholder Management

The construction of a new airport terminal building at Jersey Airport started well. The design was approved by all the necessary authorities, and contractors were appointed to carry out the work. The main concern was the deadline for completion - it had to be in the spring, in time for the island's main tourist influx in the summer. This was achieved and everyone was, for a time, very happy with the new facility. That was until a few problems arose. These all concerned the impact that the new building was having on the operation of the airport. First, the air traffic controllers (ATCs)complained that they were being dazzled by sunlight reflected from the roof of the new terminal building. No problem, said the Chief Executive of the Jersey Airport Authority -well, at least not during the winter. A further complaint was that the new building affected the accuracy of the airport's wind speed indicator when the wind was in a certain direction. While a new site for the indicator was being sought, the air traffic controllers were having to advise pilots to use their own judgement regarding the wind speed when it was blowing in that direction. Furthermore, the new building obscured the view of parts of the taxiway to the ATCs (they are responsible for aircraft movements on the ground as well as in the air). The solution - install closed-circuit cameras which would relay the obscured area to the control tower. When questioned about these problems, the Chief Executive reminded his interviewer that safety was still a top priority. In the light of these problems, the Financial Times reminded potential visitors to Jersey that . . . they can easily go by boat!' (Source: Adapted from Financial Times, 15 October 1996)

Project definition I Si-

This is an often neglected part of the task of the project manager - as highlighted by the above example. Stakeholders have been defined in Chapter 2 and it is essential that their needs be considered. External customers, for example, will need to know that you have considered their requirements carefully and are being explicit as to how you have met them. Customer satisfaction is essential if you are to obtain repeat business from this group. Customers are, however, notoriously fickle. Unless they receive a high level of satisfaction (delight) from the transactions with your organisation they will be liable to go to someone else. While many project organisations would consider the length of a commercial relationship to be the duration of the contract, many have ongoing relationships through a series of projects. The nature of the benefit of an ongoing customer relationship needs to determine the importance given to stakeholder marketing activities. In addition, though, it is a perpetual challenge to balance their often-conflicting requirements. However, during project definition it is often vital that the right support is being developed for your project to ensure that it has a chance of progressing. It is highly frustrating to see good project ideas fail to get support simply because the people involved were not prepared to go and seek it. There are a number of aspects of this: gaining early adopters 2 gaining a project champion 3 obtaining trials and testimonials of your ideas 4 selling.

Early adopters The idea of rapid prototyping has been discussed in section 4.1. Early adopters are people or organisations who see and like the idea, and are prepared to try it out - even before it has been fully developed. 3M use this to great effect in their medical products division (see Von Hippel et al., 1999) with surgeons ready to be involved in trials of new products from a very early stage. These customer developers are essential to the process. Microsoft gains a large customer base for new releases of products by carrying out massive-scale beta tests - where products are put out with users to trial as part of the process of development. This is also very effective in small-scale projects.

Gaining a project champion The summer ball that gained a local radio presenter to be its champion was enormously successful. The promotion that just one celebrity gave to an idea meant that the rest of the project snowballed for the organisers - with people ready to be involved because that person was acting as the project champion. There are many other cases where this works well, and many organisations that actively encourage their directors to champion projects. The champion role is not to take anything away from the project manager, more to assist with increasing the profile of the project.

Gaining trials and testimonials of

ideas

If you read the brochures of many consulting firms they are usually very keen to promote the list of blue-chip firms for whom they have worked. These provide

96 ^ Phase One - Define the project

implicit testimonials and do give some assurance of the quality of the products. So how good is your project? Gaining trials for the ideas and then people's comments will certainly help in developing the concept, and can greatly increase the likelihood that a project will be continued.

Selling In many countries this is a highly unfashionable term, associated with dishonest second-hand car dealers. The phases of a selling process are of considerable importance, however, if you want key stakeholders to buy-in to your ideas. The phases are:

• • • •

Consult - are you talking with the right people? If not, who are the right people to talk t o ? W h o are the decision-makers? Understand their need - ask lots of questions, find out what they are really after - not just what they say they are after. Develop the need - b u i l d on those elements of their need that you can deliver. Show how your solution can meet their real needs. Close the deal - g a i n sign-off for that PID!

This brings together the other three aspects of this' phase of the stakeholder management process. It will be further discussed in Chapter 7 as part of the consideration of quality planning. (For more ideas on this see Peters, 1999.)

4.8

Relevant Areas of the Bodies of Knowledge Tables 4.1 and 4.2 summarise the relevant sections. Both of these approaches to this phase of the project suggest that proceduralisation is more important than creativity

Table 4.1 Relevant area of the APM body of knowledge

Relevant section

Title

Summary

30

Work content and scope management

This suggests that not only is the project broken down into manageable units, but that the same should happen to the product, and that this comes from a formalisation of the scope definition. The WBS defines the organisational breakdown structure and the cost breakdown structure.

36

Information management

This section covers the formal documentation requirements for largescale projects, and their storage retrieval and distribution. Mention is also made of the communications plan (see Chapter 7 in this text).

51

Marketing and sales

The interactions with marketing and sales are identified through the three primary processes of customer requirements identification, order winning, and customer perceptions management.

ProjectdefinitionISi-

Table 4.2 Relevant area of the PMI body cf knowledge Relevantsection

Title

Summary

2.2

Project stakeholders

Covers the identification of different stakeholder groups and the ofrenseen conflict in their requirements.

5.1

Project scope management initiation

The variety of initiation routes for projects is described, tools and techniques for project selection (seeChapter 6 in this book) and the outcome of the initiation phase should be summarised in a project charter. This provides one of the inputs to scope planning - the next section.

management scope planning

cost-benefit analysis and the identification of alternatives. The output from this process is in the form of a scope statement that can be signedoff before continuing, and a scope management plan - specifically how changes will, in principle, be accommodated in the project.

5.3

Project scope management scope definition

This covers the development cf product and the work breakdown structures and organisational breakdown structures-the allocation of activities to work units.

10.1

Communications The generation of a communications management plan is demonstrated planning through the analysis of stakeholder requirements and the preparation of a plan as described in section 4.7 of this book. Additional points made include the need for regular review of the communications plan, and establishment of the means by which information can be obtained by relevant parties between the scheduled communications.

in projects. They also assume that customers know what they want from a project, and that this is enshrined in a written document of commitment - such as a contract. This environment is alien to many project managers. The disciplines suggested by both of these can be beneficial, however, even in relatively small projects, as they formalise the process of gaining 'buy-in' from key stakeholders.

4.9

Summary Projects are started through an enormous variety of means and their manner of progression is no less diverse. However, there are some principal structures that are generic and of benefit to most projects. These include the formal definition of phases, including a time antTprocess to allow creativity into the development of the concept. This is then enshrined into a scope statement, which allows the start of the development of the process by which the project will be delivered. Key elements of this process are its deconstruction into phases and then manageable work units (through the WBS). These can be modelled through the application of techniques

98 I Phase One - Define the projet;

PHASE

Figure

Chapter s u m m a r y

such as Four Field Mapping to produce a highly visible process. Gates at each stage allow for review and in some cases will prevent failing projects continuing to consume time, energy and resource. Finally, a theme that needs to be addressed at this early stage, and which runs throughout the life of the project, is that of stakeholder management. Expectations and perceptions need to be the subject of active management, partly achieved through the development of a communications plan. A simplified version of the process that this chapter has followed is shown in Fig. 4.13.

Use of gated processes at a major telecommunications manufacturer To assist in the development of new products the managers responsible for the process (there would be several processes ongoing at any one time) had devised a series of gates in the process. Table 4.3 shows these and gives examples of the criteria by which a project would be judged at each stage. The last gate is a check on the success of the project as a whole. Other checks provide an opportunity for the project managers to reassess their goals and objectives in the light of progress and changes in conditions such as markets or technology. »

Case discussion 1 Who should be in the group that would determine whether the project should continue?

°rajet:( definition ! 99

f a b l e 4.3 Gate criteria Gate

Key question

Example of deliverables

Should we launch this project?

Market analysis report, preliminary funding requirements, manufacturing assessment

1

Should we proceed with the design strategy?

Approved product specification, field introduction requirements, project plan, technical support plan

1A

Are we making appropriate progress?

Project cost update, test specifications, prototype assessment

2

Is the product ready to ship to the first end-user?

Updated sales and marketing plan, type approval complete, first piece evaluation report

2A

Are we ready to ship to end-users?

Project cost update, final customer documentation, preliminary field introduction report

3

Is the product ready for volume shipment?

Market readiness report, field return rate, final ordering procedures in place, manufacturing readiness

4

Following a period cf standard production, has the product met its long-term objectives?

Assessment of key metrics from marketing, quality, manufacturing, training and technical support

2 Using the classification of time, cost or quality objectives, which category would each of the deliverables fall into? 3 W h a t other checks could be included in such a process to ensure that there are adequate controls?

concept development terms of reference proposal creativity rapid prototyping scope creep precision versus accuracy work breakdown structure FFM/DFC stage-gate stakeholder m a n a g e m e n t communications plan breakdown structure

early adopters brief PTD screening planning process data versus information mapping check-points exit criteria satisfaction charter project champion selling

1 Why would creativity be essential in a personal project, such as an assignment or dissertation? How might this be incorporated into your plan of work? 2 Why should the plan be viewed as a value-adding activity? 3 Identify the costs and potential negative effects of the misuse of plans. 4 Why is the use of a work breakdown structure important to the project manager? 5 To whom does the project manager have to 'sell'.a proposal? 6 When is it important for the brief to be highly precise and when should it be left as loose as possible? 7 Why is it important to know the customer for a proposal document? 8 What is the benefit to be gained from mapping a process before proceeding with the detailed planning? 9 From a project with which you are familiar, how might providing gates and gate criteria have helped in its management? 10 Using the University of Rummidge in Splot as a case, identify the key stakeholders and their requirements. What are the conflicts likely to be here, and how might they be resolved?

Cooper, R.G. (1988) ' The New Product Process: A Decision Guide for Management', Journal of Marketing Management, Vol. 3, No. 3, pp. 238-55. Dimancescu, D. (1995) The Seamless Enterprise, Making Cross Functional Management Work, Wiley, New York. Peters, T. (1999)The Project SO, Alfred Knopf, New York. Price, F. (1984)Right First Time, Gower, Aldershot. Schräge, M. (2000) Serious Play, HBS Press, Boston, MA. Von Hippel, E. et al. (1999)'Creating Breakthroughs at 3M', Harvard Business Review, September-October, pp. 47-57.

PMI (2001) Practice standard for work breakdown structures, PMI, Upper Darby, PA. Sobek, D.K.IL, Liker, J.K. and Ward, A.C. (1998)'Another look at How Toyota Integrates Product Development', Harvard Business Review, July-August, pp. 36-49. Drucker, P.F. (1998)The Discipline of Innovation', Harvard Business Review, Nov.-Dec., pp. 149-157. www.princd.com -downloads available of PID documents www.teamflow.com - FFM/DFC software

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The p r o d u c t i o n of plans is often treated as an end in itself. This misses t h e p o i n t and t h e value that such an activity can add. Its objectives are twofold. First, it must p r o v i d e an o p p o r t u n i t y for t h e planner t o o p t i m i s e t h e project system. Second, it must present an opportunity for problem avoidance. These two objectives create t h e rationale for what follows. Having prepared t h e o v e r v i e w models, it is n o w t h e t a s k of t h e p l a n n e r t o p u t in place t h e detail. High-level c o n s i d e r a t i o n of t h e o b j e c t i v e s a n d resolution of potential conflicts of t h e project provide a strong foundation on which to build. This chapter presents t h e means by which these details can be put in place, t o provide the information required to all t h e stakeholders. Graphical techniques are preferred, as these create t h e greatest potential for involving others t o gain their insight a n d c o m m i t m e n t . However, t h e o b j e c t i v e of such d e t a i l must remain at t h e forefront of t h e planner's mind. In itself it has little merit. The strength that it offers is in t h e ability to probe t h e plans t o i dentify potential improvements t o t h e methods, which may present opportunities for either better performance or risk avoidance. These w i l l be examined in Chapter 8. For t h e project manager, t h i s is one of the most developed parts of the subject the methods have been in use for over 50 years. They must, however, be considered i n t h e light of experience, and this is discussed in t h e following chapter.

Learning Objectives 5.1 52 5.3 5.4 5.5 5.6 5.7 5.8 5.9

T i m e p l a n n i n g - t h e process G a n t t charts Estimating A c t i v i t y - o n - a r r o w ( A - o - A ) diagrams a n d critical p a t h analysis ( C P A ) Activity-on-node ( A - o - N ) diagrams A c t i v i t y - o n - a r r o w versus a c t i v i t y - o n - n o d e m e t h o d Scheduling Computer-assisted project p l a n n i n g Fast-track projects

îeé ! Phase Two - Design the project process

5.10 Relevant areas of the bodies of knowledge 5.11 Summary Project management in practice: Fast-track product redevelopment at Instron Key terms Review questions and further exercises References Furth er information

By the time you have completed this chapter, you should be able to: Demonstrate basic tools for the modelling cf time, cost and quality requirements of projects; * Carry out basic calculations on a project plan: * Makethese plans amenable to optimisation (improvementand risk avoidance); « Undertake a first attempt at resource allocation; * Identify t h e benefits and pitfalls cf fast-track projects.

5.1

Time Planning - the Process In Chapter 2 one of the issues that proponents of good project management will face is that of people who keep it all in their head. This may work well where projects are very short-term or have little complexity. For the other 98 per cent of projects, some planning is essential. The project planning process was described in the previous chapter as having four main stages - i dentify the constituent activities, determine their logical sequence, prepare estimates of time and resource, and present the plan in a readily intelligible format. This last step allows the plan to be communicated to all parties involved with the project and analysis (the subject of the next chapter). The general approach to planning involves starting with a rough overview and conducting revisions of this through the process shown below. This is known as iterative - it involves going through the cycle several times to test the effects of the changes you make on the outcomes. The objective is to make the major revisions early in the planning cycle and then make minor refinements t o the plan. Following these, though, there should be a period of stability otherwise the plans lose credibility. The revision-refinement cycle is shown in Fig. 5.1. This section is concerned with developing detailed time plans and the techniques that follow are of increasing complexity. However, despite the diversity of projects being considered, one area of commonality between project managers is the use of various graphical techniques to: • allow the construction of a comprehensive but comprehensible picture of the project activities; • communicate this with others.

Time

1105

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A

—

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Figure 5.1 Planning sequence The preference for graphical techniques is more than 'a picture telling a thousand words'. The whole revision-refinement process is built around people being able to understand what is going on. This is known as visibility, and is an essential feature of both the plan and the process. One of the most commonly used techniques is the bar or Gantt chart.

5,2

Gantt Charts

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The purpose of the graphical techniques is to illustrate the relationships between the activities and time. The simplest form is a horizontal bar chart, as in Fig. 5.2. This shows activity A represented by the shaded bar starting at' time 1 and finishing at time 3. Multiple activities can be built up on the same chart, using the same timescale. The following example involves a dissertation planning exercise. The student has a number cf options as to how to present the information. The supervisor, being a busy person, has asked for the information to be presented in graphical form.

Activity A

1

2

3

Time

Figure 5.2 Horizontal bar chart: activity A start s at time 1 and finishes at lime 3

Planning a dissertation The basic planning steps need to be followed here, namely: identify the constituent activities; • determine their sequence; • estimate the time and resources required; • present the plan. The time constraints are the start and end dates. The original statement looked as follows:

î e é ! Phase Two - Design the project process

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Project start date 1 carry out literature review 2 arrange visits 3 prepare questionnaire 4 review questionnaire 5 deliver auestionnaire 6 analyse results 7 write up Hand-in date

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The requirement to present the plan graphically is the next step. In this case, simply showing a week by a star is possible and requires nothing more than pen and paper or a wordprocessor, as shown in Fig. 5.3. In this example, there was: • a level of logic established; and * conventions used (time goes from left to right, activities are arranged top to bottom in order of their occurrence). In addition, the student has had to undertake two critical activities: * forward schedule - started the activities at a given date and followed them forwards in time to determine the end date; * backward schedule - looked at the time by which the project needed to be completed and worked the logic of activities backwards. The tasks have had rough times allocated to see whether they meet the two constraints of start- and end-times. Where there was insufficient time, activities have been shortened. Any excess time (orslack) is used to lengthen activities. Figure 5.4 shows an alternative presentation to the above. Logical links are indicated by the use of arrows. The head of the arrow points to an activity that cannot proceed until the activity at the tail of the arrow is completed. The diamond

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îeé ! Phase Two - Design the project process

shapes on the chart are used to indicate 'milestones', i.e. important points in the life of the project - in this case the start and the hand-in dates. Such a chart is often referred to as a Gantt or linked-bar chart, as it is part of a family of techniques developed at the turn of the last century by Henry Gantt. They were originally used in industrial planning. Gantt charts, drawn by hand: are best suited to relatively simple projects, i.e.: » the number of activities and resources is low; the environment is fairly static; • the time periods are relatively long - days and weeks rather than hours. They do not make the link between time and cost and therefore do not provide a method for determining how resources should optimally be allocated, e.g. there are two activities, X and Y, for which the times have been estimated and which use the same resource. If the resource could be shifted from activity X to activity Y, Y could be completed in a shorter time; X would obviously take longer, but how would this affect the project overall? This kind of analysis with projects of any complexity is assisted by software - see Further Information at the end of this chapter.

Gantt charts - summary Good points • simple to draw and read • good for static environments • useful for providing overview of project activities • very widely used • the basis of the graphical interface for most PC software

53

Limitations • difficult to update manually where there are many changes - charts can quickly become obsolete and therefore discredited • does not equate time with cost • does not help in optimising resource allocation

Estimating So, how long will it take you to complete a major report for your boss or a 3000word assignment for a course of study? Many questions then arise, including: • How precise do you need to be - is a rough/ballpark figure required or are we using this for detailed planning? • Do we have any previous experience of doing this? If so, how long did it take last time? • What are the likely pitfalls that may arise that would cause significant delay? • What other tasks are going to get in the way of doing this (see multi-tasking in Chapter 6). Estimatingis a key part of project planning, though, as we shall see, it is one that is subject to more games-playing and delusion that almost any other field of human

l i m e planning!225

Table 5.1 The nature, role and accuracy of estimate types Name

Nature

Role

Accuracy

Rough/finger-inthe-air/ballpark

Much uncertainty as to what is involved

Early check on feasibility cf brief

Very low

As-buts

As was carried out previously, but with the following amendments - some quantitative data exists

With an appropriate contingency factor - c a n be used for proposals

Moderate

Detailed estimates

Some initial work is carried out to determine what the likely problems are going to be

Proposals

Moderate

. . . t o finish

Much of the project is completed and additional funding is needed to complete the tasks

Additional funds request

High

activity. The basics of estimating are discussed here, but it shouldl be remembered that estimates are otherwise called 'guesses'. We should therefore! be careful how scientifically we treat the numbers that come from this process, and in particular, not be committed in a hurry to making rough estimates that we later get held to. The impacts of this activity are examined in Chapter 6. The project manager's role in the estimation process will vary from the collection of estimates from ocher people in the preparation of the proposal tojthe provision of detailed financial cost-benefit analysis. It is imperative that this function does not operate in a vacuum - t h a t the feedback from previous plans and estimates is used to guide the process. Estimation is an activity which continues during the project life-cycle. As the project nears completion, the manager will have more certainty of the final times. resources. and therefore costs. The accuracv of the estimates is therefore going to get better. The types of estimates, their nature, role and accuracies are shown in Table 5.1. Having the estimates of times and resources required are one part; of compiling the plans. In modelling time, these then need to be built into models of the likely project system that will enable key variables such as project duration and then schedules to be established. As already discussed, Gantt charts are limited in this respect, and the used of network diagrams is appropriate for most projects beyond the simplest.

Dealing with increased complexity through network diagrams Gantt charts are very useful at low levels of complexity. Many projects, however, require a higher degree of sophistication and a method, which better lends itself to

n o I Phuse Two - Design the

process

analysis. Rather than representing an activity as a bar on a bar chart, it can be represented as either: • an arrow - known as activity-on-arrow (A-o-A); • a node - known as activity-on-node (A-o-N). These will be discussed in some detail to illustrate the basics of planning. The type of analysis that can be applied is then demonstrated before the use of A-o-N is covered. Finally, there is a summary of the debate as to which method should be used.

| 5.4 Activity-on-arrow (A-o-A) Diagrams and Critical Path Analysis (CPA) Under this convention the following 'rules' apply: the arrow runs from left to right indicating time running from left to right; • the arrow starts and ends at an event (for the present this can simply be defined as a 'point in time'); • the events and activities should be given unique identifiers or labels; e.g. activity A on its own would he represented as running from event 1 to event 2, as in Fig. 5.5.

Figure 5.5 Activity-on-arrow diagram

The planning sequence identified above of: • identify constituent activities; • determine their sequence; • estimate the times for each; gives a verbal statement of the activities. This will now be converted into the A-o-A format for presentation, e.g. Fig. 5.6 shows two activities, A and B; B cannot start until A has finished and the times for A and B are five and seven days respectively. This logic is known as dependency (e.g. don't drive into the car wash before shutting the windows and removing the aerial) and can be expanded as shown in Figs 5.7 and 5.8. Here, more than one activity is dependent on another, in this case B, C and D cannot start until A has been completed. Likewise, H cannot start until all of E, F and G are finished.

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Figure 5.8 Essential to this convention, where all but the simplest projects are being described, is the addition of 'dummy' activities where: • the logic of the activities' sequence needs to be preserved; the dummy will clarify the diagram; e.g. taking the verbal statement that 'activity L is dependent on activity J but activity M is dependent on both activities J and K' would lead to Fig. 5.9. Simply writing it like this would add an extra logic dependency, however - namely that cf activity L on K. In this case a dummy is added to preserve the logic. It is written as a dotted arrow and in essence is an activity with zero duration, as in Fig. 5.10.

Figure 5.9

Figure 5.10

Clarification should be added where two activities have the same start and end events. Figure 5.11 should be expressed as Fig. 5.12.

n a I Phase Two - I .

.

process

the A

A

B

Figure 5.12

Figure 5.11

In order to provide a consistent format for the analytical phase the convention for the symbols being used is as shown in Fig. 5.13. In order to facilitate the revision of diagrams, the event labels will now go up in tens or fives - allowing interim events to be added without modifying the labels to all subsequent events. Earliest

Activity

Event label event time

Figure 5.13

There are two new terms to be introduced to the diagrams: • earliest event time (EET)-determined by the activities preceding the event and is the earliest time at which any subsequent activities can start; • latest event time (LET)- is the same or later than the EET and is the latest time at which all the previous activities need to have been completed to prevent the whole network being held up. Figure 5.14 shows the simplest case with a single activity.

Figure 5 . 1 4

Figure 5.15 will be used as the basis for the calculation of the EETs and LETs please complete these on the page. The calculation of the two times is split into two processes.

l i m e planning!225

1 Forward pass to determine the EET The first event is assumed to start at time 0 for the purposes of this exercise. The forward pass starts at the first event (10)- the EET in this case is 0. Moving left to right, the subsequent activity time is added to this EET to give the EET for event 20, i.e.: EET at 20 = [EET at 10] + [activity A duration] =0+5 ~5

This can now be added to the diagram. Event 20 should now look as in Fig. 5.15(b). The same process can be repeated for events 30,40 and 50. At event 30: • «[EET at 20|

j -i: ••..:.. .

connecting event (activity :

Add this to the diagram as before and do the EETs for 40 and 50. The first logic snag occurs at event 60. As a reminder, the event cannot happen until all the preceding activities have been completed. In this case there are three possible EETs as shown: [EET at 30] + [activity E duration] = 8 ; 6 = 14 [EETat40[ + [activity Fduration] = 9 + 7 = 16 [EET at 50] 4- [activity G duration] = 10 + 5 = 1.5

I Phase Two - Design the project process In this case the earliest that all the preceding activities will have been completed is 16 {i.e. the latest of the EETs) and therefore this is the EET at 60. Enter this on the diagram and calculate the EET for event 70. The EET for the last event is the earliest time that the project can be completed, with the times and precedence given. Assuming that the project is required to be completed in the shortest possible time, this figure provides the basis for the next step.

2 Reverse pass to determine the LET As the name suggests, the analysis begins on the right-hand side of the diagram at the last event. If the assumption that the project is required to be completed in the shortest possible time is correct, the LET of the final event is the same as its EET. Enter the LET for event 70 so that it looks like Fig. 5.15(c). Working backwards from the end, the next activity is 60, and the LET for 60 is calculated by: LET at 60 - [LET at 70j - |activity H duration |

Do the same calculations for events 30, 40 and SO and note that in two cases the EETs and LETs of those events are different. Enter these on the diagram. A logic challenge now occurs when trying to calculate the LET for event 20 similar to that in the forward pass. There are three possible LETs as shown: - 30] - [acti vity B duration] = 1.0 - 5 = 7 [LET at40J - [activity ( du ration | = -4=5

In making the choice we again check the logic definition of the LET as the time at which all previous activities (in this case, activity A) will have to be completed to prevent the whole network being held up. Here the LET is 5 - i f i t occurs any later than this, the whole project will be set back and is therefore the earliest of the LETs, Fill in the diagram and satisfy yourself that the original LET f o r event 10 still holds. Having completed the network diagram, it is now possible to identify the critical path, which we define as: i cm of activities which begin and -tid in events where the EE! = LET You should now be able to identify this from the diagram. Marking the critical path activities should he done using one of the methods shown in Fig. 5.16.

Figure 5,16 Marks used for critical path activities

l i m e planning ! 225

figure 5.17 Completed network We define float or slack as follows: Fkwt or slack = LET - EET The critical path is that sequence of activities which have no float or slack. In the example, the path B-E has some slack which is evident at event 30. The slack is 10 - 8 = 2. Either of these events could: • start late; • take longer than expected; or • there could be a gap between E finishing and H starting; and provided that the total of these deviations does not add up to more than two, the project will not be held up due to these activities. The completed network is shown in Fig. 5.17.

Origin of CPA The 'invention' of the techniques that have been described here as CPA are variously attributed, depending on the particular book you read. The time of first use, 1957/8, is less debated. The first users/developers are credited as being: • the Catalytic Construction Company for the planning and control cf a construction project for Du Pont Corporation; • Du Pont Consulting; • J. Kelly of Remington-Randand M. Walker of Du Pont. Whoever instigated its usage, the applications are now far and wide - i t is only a shame that unlike products such as the ring-pull on cans, such methods cannot be patented. If they were given just O.lp every time a company had produced a CPA diagram. . . .

n6

Ptiase Two-Design

project process

Activity-on-node (A-o-N) Diagrams This technique is included here because some project managers and their customers prefer it as a convention of project planning. The relative advantages and disadvantages of each method are included later in the chapter. The most common way of representing the activity-on-node is as Fig. 5.18. Rather than talking about EETs and LETs, the method considers the activities directly and records the earliest start times and latest start times directly on the diagram as shown. The activities are linked in a similar way, but there are four ways in which activities can link (seeFig. 5.19). Precedence is indicated by arrows going from: • the start of an activity (topleft-hand or bottom left-hand comer ofthe box); • the finish of an activity (middleof right-hand edge of box); to: the start of an activity (middleof left-hand edge of box); the finish of an activity (top right-hand or bottom right-hand corner of the box).

EST

Earliest start time

Latest start time

1ST

A rtivi// :j;:sc rlpii;;iii Duration

Label Total float

TF

Figure 5.18 Activity-on-node diagram

L Finish-to-start

Start-to-start

Finish-to-finish

Start-to-finish

•

e 5.19

f o u r ways

io link A-o-N activities

ltrr;e planning 1 117

*

0 Start 0

17

8

3

2

6

2

5

5

9

9

A 0

5

8

E

t 0

4 5

7

6

10

16

I

F 0

D 5

10

1

8

16

H

24

Z4

J

Finish 0

11 G

1

5

1

•

Figure 5.20

The four ways in which activities can link are: finish-to-start - the second activity cannot start until the first has finished; start-to-start - the second activity cannot start until the first has started; finish-to-finish - the second activity cannot finish until the first has finished; start-to-finish-the second activity cannot finish until the first has started. The arrows represent a potential time lag in the logic, e.g. if there was a figure, say 2 on the arrow in the start-to-finish case, the second activity could not finish until 2 time units after the first had started. The way in which activities are built up into projects is very similar to that already discussed for A-o-A diagrams - with the exception that dummies are not required for clarification or maintaining logic flow. The same example will be used to illustrate the process of carrying out a critical path analysis with this technique. The logic diagram that was demonstrated in Fig. 5.15 now looks like Fig. 5.20. Starting from the left of the diagram, the first activity is labelled 'Start'. The EST and the LST are zero as if the project starts late, it will finish late. The duration of the activity is set at zero - it is merely a point in time. The total slack is the difference between the earliest and the latest start times for the activity - in this case zero. The first real activity is activity A - the second box from the left. In the same way as was carried out with the A-o-A diagrams, we will carry out a forward pass to determine the project duration and a reverse pass to determine the critical path through the activities.

The forward pass The forward pass determines the ESTs and starts at the left-hand side of the diagram with the EST for the first activity. This is zero. The next activity, activity A, cannot start until this has finished, and so the EST for A is the EST for the start plus

u 8 I Phase Two - Design the project process

the start duration ( 0 ) - zero, as you would expect. Activity A has a duration of 5 and so the ESTs for B,C and D are all:

Continuing with the ESTs, the EST for the E, F and G are as follows: EST (E) = EST (B) + duration oi B = 5 + 3 = 8 EST (F) = EST ( O dura don of C = 5 + 4 = 9

These are now entered onto the diagram. Activity H presents a small challenge in that there are three possible ESTs. These are: - (E) -f : >11 of E = 8 4- = 1 4 ESI' (F) + duration of 1 - 9 + 7 = 3 6 EST . + duration >i (.<=.! + 5 = 1 5 . As for the A-o-A case, activity H cannot start until all three preceding activities have been completed - in this case at time 16 (the latest of the ESTs). Following this through to the end of the network gives the EST (FINISH) as 16 + 8 = 24. This is the project duration.

The reverse pass The reverse pass starts from the end of the network and assigns the LSTs for each activity. The LST at the finish is assumed to be the same as the LST for that activity - with the meaning that we want the project to be completed as soon as possible. Working backwards, the LST for H is the LST for the finish minus the duration of H. That is, it is the latest time that H could start without delaying the entire project. This is 24 - 8 = 16, the same as the EST. Continuing with the analysis, the LSTs for each of the activities E, F and G can now be calculated.

and similarly for B, C and D: 1ST ; • = ! •; (E)- uration . f f t = 1 0 - 3 = 7 • = EST (i - duration of C - 9 - 4 - 5 LST ; • = •••• (G) - duration ot D = 1 1 - 5 = « The LST for A is another case where there is more than one possibility. The three possible LSTs are:

Tine

• ••. 1119

LST(B} - duration of A = 7 - 5 = 2 LST'iC) - duration of A = 5 - 5 = 0 LST(D) -duration of A = 6 •• 5 - 1 The choice is the earliest of the LSTs - zero. Checking back to the start activity, confirm that this is correct. The additional task with A-o-N is to calculate the float in each activity. This is: Float - LSI - E S T This is then inserted in the bottom right-hand side of the activity box. Where there is no float, that means that the activity is critical, and any delay in this activity will delay the project as a whole. The critical path through the network is therefore: A-C-F-H The most used package for project planning, Microsoft Project, uses a different format for its A-o-N diagrams. An example of the format is shown in Fig. 5.21.

Prepare hit-list for sponsors 1

7 days

Wed 25/10/00 Thurs 2/11/00

Contact sponsors 2

36 days

Fri 3/11/00

Fri 22/12/00

Figure 5.21 Microsoft Project output

In Fig. 5.21 the activity description is given in the top of the box. The next row down contains the activity number (simply a label) and the activity duration. The bottom row of the box contains the start and the finish times of that activity. In the example, the duration of 7 days does not include weekend working - hence the start on the Wednesday and not finishing until the Thursday of the following week. The calculation is done for you with this package - hence the apparent lack of detail. This presentation does not allow you to see whether there is any float in the activity, though there are other means of doing this, including showing it in the Gantt chart for the project.

5.6 Activity-on-arrow versus Activity-on-node Method The preference for A-o-A is determined by whether you are going to attempt the planning process manually or use a software package. A-o-A is arguably easier to

i l o i Phase Two - Design the project process

Note: A. B and C representincomingactivities; K, Land M represent outgoing activities.

Note l : A. B, C, K, Land M represent activity descriptions. Note 2: Under certain circ*mstances and in particular with zero duration finish-to-startdependencies,this diagram can be simplified by the introduction of a dummy activity.

Figure 5.22 Comparison of network drawing modes (a) activity-on-arrow and Cb) activity-on-node

construct manually, while A-o-N is the basis of the majority of software packages, including Microsoft Project. Other issues are contained in the table below:

easier to prepare and modify non-experts have a better chance of understanding the network milestone events are easilv marked where there are multiple precedence relationships (seeFig. 5.22), this is much more clearly illustrated

a

easier to show complex relationships, e.g. start-to-finish precedence with time lag (complexwith A-0-A) no dummy activities -keeps the number of activities the same as in the verbal statement (except when showing milestones) all the information about the activities is contained within the box - easier to ensure the right numbers are associated with the right activity

Example - planning t h e marketing of a new product In Fig. 5.23 all the principles so far discussed are used to plan the launch of a new food product. It is possible through examining the EETs and LETs to determine which activities are on the critical path. The diamonds are included to show milestones in the project, i.e. go-ahead and product. Trying to convey this volume of

préparé media

1 2 2 I Pha

. • - Design the project process

information through a verbal statement would clearly be a nightmare for both the planner and the reader, and would not lend itself to the kind of analysis that could be done with this diagram.

Scheduling Knowing the sequence and duration of activities is a major step. This does not, however, answer the question of 'When will activities need to be carried out?' The schedule provides this. As already shown by the critical path analysis, critical activities have to take place at a particular time or the entire plan will be disrupted. In order for this to happen, the necessary resources need to be in place in time for the critical activity. In an ideal world, this would allow a very simple schedule to be used for critical activities and everything else arranged around these. The reality is far less appealing - people are not available when you need them, resources have a long lead-time and there are likely to be clashes with other project schedules in a multi-project environment. This provides a constraint on the scheduling process, and as a result of trying this, the activities and sequence will often have to be changed. This is where an additional element of complexity enters and makes a mess of your nice plans! For example, a plan to refurbish a number of retail units at London Heathrow was thrown into problems by a contractor. All personnel working on the airport need security clearance, a process that takes 6 weeks. One firm did not get their people pre-approved, resulting in considerable delay to the project - the resource was not going to be available when needed to do the job. Similarly, what happens when a resource - for instance, a key individual - is overloaded and becomes a constraint? This problem is discussed further in the following chapter. This provides another cycle of iteration to the development of plans. The inputs to the process of developing the schedule are shown in Fig. 5.24.

Resource capacity

n^rrg&tr

Figure 5.24 Schedule development process

lime planning!225

The arrows for the inputs to the scheduling process are two-way. The network provides the logic for the order in which activities need to be carried out. Having completed this, the input of the time estimates may show that the time that the project requires for completion is longer than is available. This may necessitate a reconsideration of both the network and the time estimates. The resource capability is the set of tasks that the resources available to the project manager can reasonably undertake. These resources are often referred to as the resource pool. For example, where a project is being undertaken by a particular project team, these are the resource pool. If additional staff can be brought in as needed, they should also be considered as part of that pool. This part of the allocation process requires that the project manager have some knowledge of the capabilitiesand limitations of the resources concerned. The resource capacity depends on the volume of resources available and issues such as the resource calendar. For instance, whilst a machine may be scheduled for utilisation 24 hours a day, 7 days a week (with time allowed for maintenance), the same cannot be said of humans. The calendar is those times that the resource is available, allowing for all the usual times when no work takes place (e.g. weekends, public holidays, personal holidays, sick leave). This does significantly limit when work can be carried out. Again the process of scheduling is iterative, with the schedule being developed, the resource availability checked and subsequently rescheduled. Where resources are over- or under-loaded, corrections may be made at this point. This iterative process is often supported for medium and large-scale projects by the use of software - allowing rapid calculation of key project times and evaluation of the impact of difference scenarios. The role of such software is discussed in the following section.

5.8 Computer-assisted Project Planning Ask for a training programme on project management, and many organisations would send you on a course for one of the major software packages. The key ones are listed at the end of this chapter under Further Information. The Gantt chart is probably the most widely used tool for presenting time information, and one of the reasons is that it is the graphical interface for most planning software. This does encourage a one-step approach to planning. As a result of the presentation capabilities of modem planning packages, the visual quality of colour charts means that they gain an implicit credibility. This can result in staff being unwilling to challenge the charts, and so they gain a momentum all of their own. In addition, they encourage the project manager to overcontrol the project rather than devolve the responsibility for the time-plan to team members. With the increasing power and availability of the PC, and increased functionality and interfaceability of the software, there is the tendency for the project manager to become not just 'keeper of the charts' but also computer operator. This will often occur in a vain attempt to keep the computer version of the project plan up to date. Many consider the

124 t Phase Twd - Design the project process

predominance of planning software not to be as helpful to the profession as the vendors of such systems would have us believe. Indeed as the projects director of a large construction company recently commented, 'I believe that computer-based project management software has set the subject back 20 years.' Many truly excellent organisations do not use the CPA approach to planning projects. One of Hewlett-Packard's UK plants uses whiteboards and Post-It notes for p r o j e c t planning at the top level with individual s u b - p r o j e c t managers free to use computerised planning software at the task level. This approach is an adaptation of the principle so well demonstrated by Japanese manufacturers in planning and scheduling - that of ensuring visibility. To assist in moving towards more visual methods of planning, there are many tools and techniques available to the project manager. Deployment flow charts are just one such example, which allow whole processes to be mapped simply. That said, there is significant power in modern planning packages that can be used to some benefit. With very large projects, many consider them vital.

5.9

Fast-track Projects This issue does provide an input to the practicalities of how to arrange a schedule. For instance, the dissertation plan shown at the start of this chapter (Fig. 5.3) does show all the activities running sequentially, i.e. one after the other. This is by far the simplest way to look at it from a scheduling point of view, but it is unlikely to be good representation of reality or the best way to finish the project in a given time. In particular, where different groups are involved in different stages of a project, the effect is often seen that people focus on their part of the project only, with no consideration of the outcome as a whole. This is illustrated by the conventional life-cycle for a new product development (NPD) project, as shown in Fig. 5.25. This suffers from two maior drawbacks. • The message or customer specification is interpreted by different people at each stage of the process. The information that reaches the manufacturing people

marketing identify customer need and express this in their terms - t he marketing brief

designers interpret the marketing brief and convert it into t h e i r t e r m s product drawings

engineers convert the product drawings into manufacturing information

Figure 5.25 Conventional approach to new product development

manufacturing convert this information into their interpretation of it - t he product

marketing interpret the 'revised' product for sellingon the customer

lime planning ! 225

How

marketing described it

©

2 How engineering

What

production produced ti

saw it

©

What the

customer wanted

Figure 5.26 Eflect of 'Chinese-whispers' syndrome on new product development

ii

Ccncepticn

Product launch Time

Figure 5.27

Engineering

activity

telling them what to make is potentially very different from what goes in at the start of the process ('Chinese-whispers' syndrome - Fig. 5.26). • Due to the constant process revision that is required, engineering changes are often made very late in the development process. These cause enormous disruption, in particular delay. It was seen by many who visited Japan and investigated its automotive industry that the level of design changes and engineering activity had a very different profile. The Japanese model was focused on getting the product 'right first time', with the result as shown in Fig. 5.27. As can be seen, the amount of activity declines as the product nears production. The importance of time-to-market has been shown recently to be responsible for over 30 per cent of the total profit to be made from a product during its life-cycle. The reduction in long-term costs has also been shown to be significant if instead of arranging activities to occur sequentially, as would be the simplest arrangment, they are overlapped. Concurrent engineering is used. The arrangement of product development into a process stream, with all the necessary parties involved at all stages to prevent the cycle of work and rework

126 I Phase Two - Design t h e prolecr process

Time

Time saved

Figure 5.28 Sequential versus concurrent models of new product development

of ideas, has the natural effect of allowing activities to run alongside one another (concurrently) as opposed to one after the other (sequentially). This is shown in Fig. 5.28. The advantages of a concurrent engineering approach are shown by the ability of the Japanese automotive producers to bring new vehicles to market every three to four years, while Western manufacturers have been taking five to seven years. (The results of a study of the effects of concurrent engineering can be found in Maylor, 2001.) The benefits for projects in general can be summarised as potential for: • reduced project time; • reduced project costs - due to the reduction in reworking between each stage. The disadvantagesof applying this method of working include: • increased overheads - as the teams require their own administration support; • costs of co-location - people being relocated away from their functions to be with the team with which they are working; • cultural resistance; • inappropriate application - it is no panacea for other project problems.

Time planring 1 1 2 7

The role of running activities to some extent in parallel is to induce cooperation during planning (not necessarily involving co-location)and high levels of communication during the activity phases. It has proved to be beneficial (asshown in the case at the end of this chapter), but as the following example shows, the application needs careful consideration.

The idea of saving time by organising sequential activities to run concurrently is highly appealing. The reality can be far less attractive. Chicago's Millennium Park is one of many millennium projects around the world that have run into problems. Now running at over double its original US$150 million budget and likely to open three years late, it has suffered from a process that didn't work. The fast-track idea was applied to this project to allow construction work to start on converting the former railway yard into a park before the design work had been completed. The problem appears to have been that the designers, developers and various contractors before the start of works had not agreed the overall scheme for the park. As a result, features were added, then removed, work had to be done and then redone when the designs were changed, and the city found itself in contractual wrangliigs with its contractors.

As f o r all 'good ideas', fast-track needs to be considered in context. In such a scenario, there is often great benefit to be gained from having contractors, designers and engineers working together f r o m the outset, to ensure that what is being designed is feasible and can be constructed. There is, however, a logical order to these processes, and continuing without a good basis to work on is futile. The example illustrates what many people know from experience - that the quality of the final job is determined by the level of preparation undertaken. In this case, early resolution of the inherent conflicts with the project should have been undertaken.

5.10 Relevant Areas of the Bodies of Knowledge The bodies of knowledge (Tables5.2 and 5.3) are very different in this respect, with the PMI being relatively comprehensive concerning the nature of the processes involved here and the accompanying tools and techniques. It would be possible in either to lose the reason for carrying out the planning process - to enable optimisation of the project processesand the prevention of problems.

«8 I

Two-Design the pr»

process

Table 5.2 Relevant areas of t h e APM body of knowtedge Relevant section

Title

Summary

31

Time scheduling/ phasing

This topic is broadly defined and includes activity definition, sequencing, estimating, schedule development & control. The issue of phasing termed 'the strategic pacing' of the proj ect - is given some prominence (seeFast-track Projects) and the many techniques including Gantt charts, A-o-A, A-o-N and CPA are identified.

32

Resource management

It is simply stated that the allocation of resources - be they human, machine or organisational - to a project is a 'fundamental requirement of effective project planning and management'.

42

Estimating

This is identified as an important activity, 'closely related to budgeting and cost management'.

Table 5.3 Relevant a r e a s of the PMÎ body cf knowledge Relevant section

Title

Summary

6.1

Project time management activity definition

This process takes in the WBS and all the other project information compiled up to that point. Through consulting with previous similar projects and breaking down the activities further, the outcome is threefold - a list of activities, the information needed to support and define them, and a revised WBS.

6.2

Project time management activity sequencing

This part of the process considers the activity list, all the constraints on when activities can be carried out, the time requirements for the project. These are used to construct the detailed plans through precedence diagramming method ( A-o-N), arrow diagramming method (A-o-A) or other techniques (see Chapter 8 in this book). As a result of this analysis, the activity lists may have to be updated.

6.3

Project time management activity duration estimating

It is not clear how this can take place after the sequencing and analysis of 6.2 - t h e s e estimates are required'to make these decisions. Techniques identified for estimating include expert judgement, analogous estimating (termed as . . . but. . . in this chapter) and quantitatively based (termed parametric estimating in Chapter 7).

6.4

Project time management schedule development

This section presents a wide array of tools and techniques for the development of the network diagrams and activity lists (along with all the associated constraints information) into a schedule for the project.

The objectives of the planning process are to optimise the project process and to prevent problems in the process. This is achieved through the systematic evaluation of the project's constituent activities, their duration, and logical linkage (sequencing). The use of graphical techniques helps in the presentation of the plan and facilitates its review and revision. Having identified the activities through the WBS, the next step is arranging them in a logical sequence and then estimating their time requirements. Estimates become more uncertain the further ahead in time is the situation being considered, and range from rough (usually least accurate) to to-finish (usually most accurate). Learning curves show quantitatively how, when activities are repeated, their times reduce. The most widely used tools for development of schedules are Gantt charts and network techniques. A Gantt chart is a time-scaled graphical planning tool, which gives a static representation of the relationship between activities and their duration. Network techniques provide a graphical means of expressing more complex projects and include activity-on-arrow (A-o-A)and activity-on-node (A-o-N)methods of representation of the verbal statement of activities. The application of these methods must be in line with the objectives for the process and in themselves they have little merit. The first level of analysis that can be applied to the network diagrams is critical path analysis (CPA). This allows determination of the path of activities where, if there is any delay, the whole project will be delayed. The critical path should therefore be the initial focus for management attention - for the purposes of both shortening and control. Scheduling is the process that converts the plan into a specific sets of dates for individual activities to be started and finished. One aspect of this is the phasing of the activities. Recently, the idea of fast-tracking projects has been used with mixed results.

Fast-track product redevelopment at Instron Background Instron designs and manufactures machines for testing the properties of all types of material. One particular plastics testing instrument has been selling around 250 iriits per year worldwide. In 1992 at the height of the recession, with margins being squeezed and sales volume dropping, Instron decided to redesign the instrument to reduce its cost and make it easier to manufacture. The project Instron began to undertake change in the late 1980s, which included a programme t o institute concurrent new product development. This was accompanied by

130 ( Phase Two - Design - e project Process

pressure for cost reduction, the introduction of manufacturing changes, and the breaking of the firm into business teams. Due to this highly transient and changing environment, there were few restrictions on the way the redesign project had to be handled. It was one of the first projects in Instron to be run from the beginning as a concurrent engineering project. A small multi-functional team was formed, consisting of a manufacturing engineer, a design engineer, a marketing engineer and a draughtsman. The design brief was to improve the ease of manufacture of the product such that a cost reduction of 20 per cent could be achieved. The team was co-located in an area adjacent to the manufacturing facility. Although there was some initial resistance, the comment was made that 'they don't know how they ever worked without it'. The ease of communication and sharing of ideas became a more natural part of working life. Adverse effects The principles of concurrency were, in general, favourably accepted by departments downstream of the design process (manufacturing, shopfloor, service) and, with some notable exceptions, unfavourably viewed by the design department. Individuals had concurrency imposed on them in the initial projects selected; first-line managers had decided that it made good business sense, and that it would be tried out. Senior management staff were selected as champions of the cause, with the objective of overcoming the resistance to change that existed. This came in a number of forms: 1 passive resistance - summarised as 'don't show reluctance to apply the new ideas, attend all the group meetings, nod in agreement, then carry on as before'; 2 active resistance - 'do what you like, but don't ask me to do it';< 3 undermining the initiative - through overstating the apparent problems. It was not surprising that this resistance existed: people were uncertain about changes in the authority of the designers, an apparently higher workload, compromised design solutions for the sake of manufacturability, unqualified (in design terms) manufacturing engineers having a major input in designs, and the role of the engineering manager being threatened. There were further worries for all concerned, however. These included reduced product performance, loss of personal contacts (resulting from resiting people), loss of key individuals (who would leave the firm) and higher management overhead. They began by carrying out brainstormingsessions with manufacturingengineers, buyers, members of the shopfloor, suppliers and additional design engineers, to find new and innovative ways to improve the product. The outcome of these investigations was to draw up a list of areas where improvements were thought possible. The benefits achieved The results of this team's actions were:

urne planning ! »31

• cost reduced by 49 per cent; product range rationalised from 12 to 2 versions; • unique part count reduced from 141 to 98 (fewer parts to plan, purchase, stock and handle) and total number of parts reduced from 300 to 189 (much reduced assembly effort); assembly/machining time reduced by 55 per cent; • project completed on time, with last version being released in April 1994. Once operational, few problems were encountered and those that did occur were minor in nature. The success was attributed by the firm to two decisions: • the selection of the right project - one that made it easy to demonstrate concurrency; • the selection of the right people - those who were prepared to be open-minded and have some enthusiasm for the changes. The company now views this as a simple project that restored the profitabilityof an established product through the use of innovation, ingenuity and new design techniques by the whole concurrent team. What is also clear is that the product was subject to technical change in only one area - the materials used. The other benefits have all been due to the approach that the firm's management has taken to its new product development (NPD)process. The firm felt that the project has been a success and that this method of working would become an institutionalised methodology.

Case discussion 1 What is the evidence to support the claim that this project was a success? 2 Identify the steps the firm took in this project. How did this contribute to the success? 3 How might the main adverse effects be identified and countered? 4 The firm attributed the success to the choice of project and the people selected to carry it out. If a similar way of working is to be more widely adopted, what might usefully be done to ensure that other projects are similarly successful?

revision/refinement schedule G n t t or linked bar chart visibility networks

dependency dummies critical path earliest/latest event times forward/reverse pass slack

I Phase

: - Design the project process

1 You have been put in charge of organising a group trip to visit a company in Japan which has expertise that you and your group are interested in finding out more about. Identify the constituent activities, their sequence and estimate the times that each of the activities will take. Show how you have used forward and backward scheduling to achieve this. Display your plan as using a bar chart or similar method. 2 Discuss why graphical techniques for displaying plans are superior to verbal statements. 3 Describe what is meant by 'precedence' and illustrate your answer with an appropriate example. 4 Show the dissertation case example (Fig. 5.3) as an activity-on-arrow diagram. 5 Illustrate the differences between A-o-A and A-o-N methods. 6 Show the information given in Table 5.4 about a project activity as an A-o-A diagram. Table 5.4 Activity

Description

A B C D E F G

Select software Select hardware Install hardware Install software Test software Train staff System run-up

Duration (weeks)

Preceding

activity

4 t 2

I> C

(a) From your diagram identify the total project duration. (b) Show which activities you feel could be run alongside others (in parallel, rather than sequentially). Redraw the network diagram and calculate the new project duration. (c) What further benefits may arise from using parallel activities, rather than sequential? 7 Show the information given in Table 5.5 about project activities as an A-o-A diagram, using the notation of Fig. 5.13. (a) From your diagram, do the forward pass and calculate the minimum project duration. (b) Do the reverse pass and calculate the latest event times.

lime planning ! 225

Table 5.5 Activity

Description

A B C D E F G

Select software Upgrade office network Install hardware Test software Structure database Train staff System run-up

Duration (weeks)

Preceding activity

4 3 6

A A

2 3 5

B B C,D

1

E,F

(d) Assuming that the completion time is critical, identify which activities you would suggest should be the focus for management attention. 8 Table 5.6 considers the development of a short course in project management. From the information, construct the network diagram. Table 5.6 Activity

I

B •> F I!

Description

Design course overview and publicity Identify potential staff to teach on course Construct detailed syllabus Send out publicity and application forms Confirm staff availability Select staff to teach on course Acknowledge student applications Identify course written material Preparation of teaching material Prepare room for the course

Duration (weeks)

Preceding activity

A

B C, E D

F G, H G

(a) Determine the ESTs, the LSTs, the project duration and the critical path activities. (b) Show the slack for each activity. (c) What further factors should be considered in order t o give a better view of the realistic timescale for the organisation of the course? 9 Discuss the relative merits of each of the methods for determining the time content of activities.

134 i i^a5e iwo - Design the project process

BS 6079: Part 2:2000, Project Management - Vocabulary. Drucker, P. (1955) Management, Butterwort h-Heinemann, Oxford, May lor, H. (2001) 'Assessing the Relationship Between Practice Changes and Process Improvement in New Product Development', Omega: The International Journal of Management Science, Vol. 29, 1; PP- 8 5 - 9 6 . Price, F. (1984) Right First Time, Gower, Aid er s hot.

Badiru, A,B, (1993) Quantitative Quorum, London.

Models for Project Planning, Scheduling (puf

Control,

Lock, D. (2000) Project Management, 7th edition, Gower, Aldershot, chapters 7-14. Lockyer, K, and Gordon, J. (1991) Critical Path Analysis and Other Project Network Techniques, 5th edition, Financial Times Pitman Publishing, London. Randolf, W.A. and Posner, B.Z. (1988) Effective Planning md Management: Getting the Job Done, Prentice Hall, Englewood Cliffs, NJ. Reiss, G. (1992) Project Management Demystified: Today's Tools and Techniques, Chapman & Hall, London. Sapoisky, H.M. (1972) The Polaris System Development: Bureaucratic and Programmatic Success in Government, Harvard University Press, Cambridge, MA. Major project planning software Supplier

Product name

URL and comments

Microsoft Corporation

Project

http : //www. microso ft. com /office/project/defa ult. htm and svv the cases of applications at http://www.microsoft.com/office/project/CaseStudies.htm

Primavera Systems Inc.

Primavera

www .primavera.com

Asta Development Corporation

PowerProject

http : //www .astadev.com/c ontent/indexm.htm

ÇFM Inc.

Tea m flow

www.teamflow.com - a non-traditional approach to project planning which focuses on information flow

ProChain Solutions Inc.

Prochain

www.prochain.com - lots of good information on this site and useful discussions on critical chain project management

Why should there be need for other methods for Project Management to replace or maybe enhance CPM/PERT? Self-evidently, CPM/PERT frequently does not work. (Rand. 2000, p. 175) Given the level ofproject failures identified in previous chapters, the need to find the causes and provide solutions has significant economic importance. Chapter 3 identified some of the strategy-related problem areas. In this chapter, some of t h e operational problems associated with the current systems for planning and resource allocation are identified. One of t h e groups of solutions comes from t h e Theory of Constraints. As w i l l be seen, t h i s provided significant benefit in repetitive operations, and there is growing evidence that the application of these principles can yield benefit in project management. To determine whether t h i s is indeed applicable, t h e first step is to identify t h e problems that individuals a n d organisations are facing. Following this, t h e background to critical chain methods is explored, and then their application in the project environment. The Project Management in Practice section at the end of this chapter shows h o w t h i s generated improvements f o r o n e business. Unlike the other chapters, there is no section on the relevant areas of the bodies of knowledge. This is because, at the time of writing (2002), the approach was not recognised in either body of knowledge.

Learning Obje ves 6.1 T h e effects 6.2 T h e causes 6 . 3 Background t o a possible solution - T O C 6 . 4 Application of T O C t o project management 6.5 Planning 6.6 Controllingprojects

6.7 Summary Project management management Key terms

in practice:

B a l f o u r Beatty i n t r o d u c e critical chain project

a36 \ Phase Two

. •

project process

Review questions and further References Further information Notes

exercises

EK the time you have completed this chapter, you should be able to: • Understand the weaknesses cf the PERT/CPM approach to planning and scheduling projects and recognise the need for alternative methods; » Demonstrate the principles cf the Theory of Constraints approach; » Apply basic analysis to allow generation cf buffered programmes; • Design alternative control measures for monitoring the progress of projects.

6.1

The Effects Projects that run late, overbudget, or fail to meet key needs of their stakeholders cause considerable problems for businesses, governments and individuals. A basic analysis suggests that either the methods being used for project management or their application or both must be at fault. In Chapter 3 the problems of what Deming termed 'the system' were considered, and it was demonstrated how many organisations have started to come to terms with these problems through a new approach to strategy. This has the potential to remove one group of problems. It is not sufficient on its own, however, to change project performance radically. That is because the operational problems will inevitably resurface where conventional techniques are used. The problems that we see regularly happening are centred around one fact: projects contain fundamental uncertainties - particularly in as . . . but . . . s and first-timer projects, but also in some painting-by-numbers projects. These may be related to the process (how will we deliver this?)or the outcome (what is it that we achieve?). The challenge is that in many cases, 'we don't know what we will find until we get t h e r e ' . This applies to technological developments, groundworks on construction sites, or even writing books. The response to this uncertainty has not helped, for example: • in large projects in particular, despite the configuration management and change control procedures, many projects are incapable of handling change; • when working under pressure, people tend to jettison the system, and fall back on wishful thinking - the system does not have credibility with its users; • similarly, under pressure, people focus on the short-term objectives of completing activities, l o s i n g sight of the impact of this on the project as a whole; • when things do go wrong, review will reveal that there were procedural deficiencies. Adding further procedures often does not help the system;

Criticai chain project m a n a g e m e n t : 1141

• the longer the project duration, the greater the chance for changes to be required, which traditional methods seem very poor at handling - as stated above. These are symptoms of the fact that the methods used are not sufficiently robust. Moreover, many of the traditional methods of project planning such as PERT (an extension of network techniques - see Chapter 8) have never been the subject of any evaluation - not least because, until recently, there was no alternative. As for many management initiatives, the methods associated with PERT came out of large organisations with an interest in promoting their usage. Success was selectively measured, and further applications justified on the basis of this 'success'. One engineer who had worked on the Polaris missile programme in the UK told how PERT charts had been forced on them by their American partners in the project. He further related how the only time that the PERT plans were consulted was just before a visit from one of the American partners. The project was running significantly late and overbudget, but the charts would then be 'updated' to show that the project was in fact running to the latest version of the plan. Original baselines were conveniently forgotten. These are the effects. The causes can be unpacked from these.

6.2

The Causes Chapter 5 presented some detailed planning techniques for time - in particular the basics of the critical path method (CPM). Having spent some time getting to grips with these techniques, you now encounter a chapter that states that these techniques do not work (opening quotation), The obvious question arises as to why these were covered at all in the first place. There are two reasons: • In order to understand the shortcomings of the techniques and search for potential solutions, you must first understand the techniques themselves; Many organisations still require the use of the original techniques and have not yet adopted the solutions that are presented here. The statement that the techniques of CPM and PERT do not work requires some justification. Seven issues are identified which demonstrate the problems associated with the CPM approach to planning and controlling. These are: 1 All goals are based on estimates, which contain uncertainties. We are poor at meeting these goals because the underlying methods of planning contain basic flaws. These include the myth of the Gaussian distribution in planning - t h a t activities will have a most likely time and the actual time taken could be either side of this. The reality is that activities will sometimes run to time, often late, but almost never early (see Parkinson's Law later in this chapter). 2 Estimates of activity times generally include a large safety margin - people will estimate according to their worst past experience of that type of activity but, as will be shown below, this safety margin at each activity does not help in achieving on-time completion.

138 I Phase Two

the project process

3 Network diagrams (A-o-N) usually contain a latest start time for activities. For non-critical activities, this builds in slack at the start of activities. Perversely, this creates the situation where these activities, if started at their latest start times (as cash-flow pressures often wrongly dictate), also become critical. The more critical paths in a project, the greater the chance of failing to meet time goals, and the less chance of 'focus' that the project manager will have. 4 Because of this method of scheduling activities, the situation arises where . . a delay in one step is passed on in full to the next step. An advance in one s t e p i s usually wasted.' (Goldratt, 1997, p. 121). Worse still, where there are parallel activities, regardless of an early finish in one of the paths, the biggest delay is passed on to the subsequent activities. 5 The way that we measure progress is in error - generally by the time that a project manager is notified of a problem it is already too late to prevent it having an impact. This is represented in another piece of project folklore - t h a t a project will spend 90 per cent of its time 90 per cent complete. It is possible to ignore problems when measures indicate that progress is satisfactory, particularly those that rely on managers' estimates of per cent complete. 6 Related to 3 and 4 above, student syndrome is identifiedas where, despite people being given extra time (slack)for an activity, the extra time is wasted at the front end, and often won't start the activity until the latest possible time. 7 It is usual in business projects for people to have to multi-task. The effect of this is to increase the lead-time for all the projects - see below.

Goldratt (1997)demonstrates this phenomenon very simply in the following example. Imagine that you have three projects to work on - A, B and C. Each is going to take 10 days for you to do your part of the work. If you do them in sequence, the lead-time (start to finish) is shown in Fig. 6.1. This is simple enough. In the scenario described above, each of these projects was being broken down into smaller units. Let us see the effect of breaking each project in two, doing half of each then returning to finish the remainder, in Fig. 6.2. The immediate effect is to make projects take considerably longer than they need to. In the case of the development team mentioned above, one can only imagine the effects of having an average of 12 projects per person

10 days 10 days days

Figure 6.1 Activities

completed

in

sequence

Criticai chain project management: 1141

20 days

Figure 6.2 The effect of multi-tasking

ongoing at any one time. The reality is, therefore, worse than in the simple example given above as the simple model includes the assumption that people can put down and pick up a project without any loss of time. Where bad multi-tasking was evident in a software company (seethe case on the website), programmers would regularly lose 1 - 2 days of work, refamiliarising themselves with the logic of the task that they were undertaking. These was lost because of the inefficiency of the system in which they were working. The management system should have identified rhis and worked to prevent such a waste of time. There are, of course, some projects where there are delays in getting information or results, where some multi-tasking is inevitable. For instance, in the lighting industry, fluorescent lamps are often guaranteed for 10 000 hours of operation. In one year there are 8762 hours, meaning that testing can take several years, with no realistic means to accelerate such life-tests. It would be pointless waiting for test results to come through before starting on other work - the developmentteam have to move on to other projects.

The above requires planning to take account of human behavioural actions in planning and estimating, and to find ways to either amend the behaviour or mitigate its effects. Some further explanation of the problems of estimating are initially discussed, followed by an elaboration of the remaining points raised above.

Problems with estimates Typical problems with estimates include:

I Phase

• - Design the project process

• Inappropriate use of estimates - people being asked for rough estimates as to how long a particular activity will take, only to find that this becomes the target time enshrined in a committed plan; • Inappropriate data used to build estimates - people either taking unrepresentative previous experience or not checking whether this was in fact a good representation of the reality of carrying out the task (it is not unusual for such situations to exist for many years where there is a lack of review); • The estimates are used out of context - having given an estimate of time required to do some work, this is then used despite significant changes having been made to where and how the work is to be carried out. As commented in the previous chapter, estimates are a guess as to how long an activity or sub-project will take. They should not then be imbued with more certainty than they deserve!

The estimating process We can view the construction of estimates as being made up of a number of elements as shown in Fig. 6.3. Consider that you are asked how long it will take to prepare a 1500-word report on a subject with which you are familiar. You know from previous experience that the actual task time is probably no more than 2 days, but you know that to promise this would be dangerous. In order to make sure that you have a chance of finishing this in time, you add to the task time. These may be, say, one day for other things that you had already planned to do at that time, another day for interruptions (phone calls, e-mails and other daily tasks) and say, a n o t h e r h a l f - d a y j u s t i n case t h e r e a r e a n y p r o b l e m s w i t h t h e p r o j e c t , t h e c o m p u t e r crashing o r t h e copier n o t w o r k i n g . O u r 2-day activity n o w takes 4 ~ days - better

say 5 days, just to be sure!

Figure 6.3 Building a time estimate If we now look at what happens to that estimate when the time comes to do the work, we see that there are a number of things that happen. The first is that now we have 5 days to do the job - itwill almost certainly take 5 days, and usually more. Does this make us bad estimators? Well, there are certain other factors that intervene: Parkinson's Law - an activity will expand to fill the time available; • Human nature for many of us is also to leave the project until the last possible minute (called s t u d e n t s y n d r o m e for some reason!) -meaning that the 2 days of real work doesn't need to be started until day 4. We start on day 4 and what happens. . . ?

• The unexpected computer crash (that we had allowed time for initially happens). The problem is that now the time that would have allowed us to recover this has

Criticai chain project management: 1 1 4 1

Figure 6.4 Activity completion profile

been used. The activity is almost certain to be late. The safety was used at the start of the activity and did not provide the necessary 'buffer' between the task and the completion date. The result of this is that time has been wasted on the project - the task still took only 2y days (2 days for the activity and half a day for the computer crash), but the activity time seen is 5 j days. This is typical and results in an activity profile for completion of projects as shown in Fig. 6.4. Figure 6.4 shows the chances of early completion of an activity to be very low we know this from practice. In the unlikely event that someone does finish some work early, they are unlikely to announce the fact for a number of reasons: • They provided the estimate and do not want to be seen to have overestimated the task time; • They know that this shorter time will become the 'expected time' for the activity and do not want to have their own margin of safety reduced in future, which might thereby compromise their own perceived performance. So this early completion does not benefit the project as a whole. This leads us to the fourth point - that delays will accumulate, but early finish benefits are not passed on. Delays accumulate through the late completion of activities on the critical path of a project, causing delay on the project as a whole. Indeed, if you analyse the chance of lateness of a project, far from the certainties implied by CPM, the only certainty is that the project will run late. For instance, if there are four activities on the critical path of a project and it is known that each has a 30 per cent chance of running late (practitioners usually estimate this to be much higher - nearer 50 per cent), the effect on the project is that there is only a 24 per cent chance that the project will finish on time. The mathematics of how this statement was achieved is unimportant - the result is of the greatest 4mportance. Most projects have considerably more than four activities on the critical path and require rather more certainty than 24 per cent chances of on-time completion. It will be seen in Chapter 8 that a major time risk is where there are long critical paths, with many activities on them. These are particularly susceptible to overrun.

142 ;

Design

project

process

The fifth point is that project managers often use per cent complete measures for estimating progress. This point will be discussed further in Chapter 11, but it does not provide them with the control information that they need t o make decisions as to whether any intervention is required to keep the project on schedule. The above discussion provides some clues as to why such high proportions of projects are late. The challenge now is t o analyse the behaviour discussed and determine whether there are alternative methods that may have a better chance of success.

6.3

Background to a Possible Solution - TOC The Theory of Constraints ( T O C ) w a s the result of the application of a structured logic approach to the problems of a manufacturing environment. Specifically, it targeted the way in which production lines were scheduled and the flow of goods was managed. A fundamental of this is to manage systems by focusing on the constraint (also termed the bottleneck). In a production system, the bottleneck can usually be identified by the pile of inventory waiting to be processed by that part of the process. The importance of the constraint is that it determines the ability of the system to do work and thereby earn revenue. This focus on throughput is the factor that differentiated it from other inventory control ideas at the time. It is this focus that will be carried forward to the next section to examine the potential application in projects. Before continuing to consider whether this is likely to yield any benefit, some understanding of the principles of application of this is necessary. The stages of the T O C approach are as follows: 1 2 3 4 5

•

Identify the constraint - the critical path and the critical resources; Exploit the system constraint; Subordinate everything else to the constraint; Elevate the constraint; Go back and find new constraints, repeating the process.

In a production situation, identifying the constraint provided an immediate benefit. New manufacturing technology requires significant investment, and there is no point in adding this to a part of the system that is not a constraint. The focus on the constraint provided an alternative to the conventions of l i e balancing that had proved so unhelpful. Many firms applied the principles to a range of scenarios, with apparent benefit - particularly to the early adopters. TOC in manufacturing never had the widespread impact on practices that it could have. Perhaps the conflict with the existing planning and scheduling tools that could not handle the approach provided the barrier, or perhaps it was just too different from what had been used previously. The first of these was certainly a barrier to its wider adoption, and it is only recently that widely used software, including SAP, have included T O C as part of their scheduling algorithms. So did it work? There were many successful applications, but just as many where no improvements were gained. This does not provide for an uncritical approach to the application in project management, but there are

Criticai chain project management: 1141

as many lessons for implementation of such changes, as for the changes themselves. (For a description of these see Leach, 2001.)

6.4 Application of TOC to Project Management The situation of manufacturing scheduling at the time of publication of The Goal (Goldratt and Cox, 1984) has a number of similarities with project management today. First, there was the tendency to try to solve all perceived practitioner problems using increasingly complex heuristics. This led to the promotion of MRPII 1 in manufacturing, and ever more complex planning and scheduling software for project managers. Second, manufacturing was a subject that was unfashionable and rooted in a reactive rather than a strategic mode. The success of the first of these was undoubtedly limited, and to a great extent, the problems were removed through the application of TOC and JIT. The second of these was tackled by the creation of set of strategic frameworks for manufacturing, which would bring the discussion to the boardroom. In project management, journal articles regularly promote one or other new algorithm or method for planning, but without any real attempt to solve the root causes of the problems that project managers face. These are enshrined in the popular software packages that have become the focus of so much project management activity. The five focusing steps applied to projects are as follows.

The constraint In a project system, the constraint can be: • the critical path of the project; • the resources that are on the critical paths of one or more projects; • dates that are fixed into the schedule and cannot be moved. In such a system the constraint is not so immediately obvious, though often the inventory will be in the form of work waiting to be processed piled on someone's desk. In addition to a physical constraint, this weakest point in the system might be a policy of the firm, which will need addressing in the same manner. The critical path was identified in the previous chapter. Further constraints are then added when resources are added to the discussion. Consider the following example. A marketing firm has two main teams, A and B, to carry out different parts of their projects. There are a number of activities that need to be undertaken and in this case, two activities need the same resource - T e a m A, as shown in Fig. 6.5. Many projects run entirely on scheduled dates with every date being a constraint. This is not a happy situation and the result is often significant lateness in many activities and poor performance of the project overall. Despite this, many organisations still seem deeply committed to the system of scheduling everything by fixed dates. This merely compounds the problem of delays accumulating and prevents the usage of early finishes.

144 * Phase Two - Design the project process Week Week Week Week Week Week Week Week Week Week week Week Week w e d 6 Proiecï

Project

y

W«k

Week Week Wed Wwk 16 17

Week

20

Initial market study ^ a ' n m a r ket study Generate marketing literature Distribute marketing literature Determinemarketing impact

Initial market study Main market study Generate marketing literature Distribute marketing literature Determinemarketingimpart : i

Resource conflict • Team 8

|

l^sourct conflit Team A

out by Team A Activity canled out by Team B

Figure 6.5 Resource contention

Exploit the constraint Having identified the constraint as the weakest point in the system, exploiting means that anything that prevents that part of the system performing to its maximum potential is to be removed. For instance, one road-building project identified the final surfacing as a constraint activity and the one machine that could do this as a constraining resource. Any delay to the work that this machine carried out delayed the project, causing significant additional costs. The surfacing machine was potentially the weakest link here, as it would frequently break down. The project manager took the decision to have another machine on standby at the site should the first break down. The constraint of the machine being available was protected, and therefore exploited. The cost of the additional rental of the machine was more than offset by the additional certainty that the project would not run late for this reason.

Subordinate everything lo the constraint The next step is subordination - itis pointless having local optima in a system. Therefore, make the constraint the point around which schedules are based and ignore local efficiencies that do not consider the constraint of the system as a whole. For instance, a firm that analysed their processes found that a particular designer was the constraint for many projects - all projects required at least some work to be undertaken by him. It was imperative that work was ready for him and that he was not kept waiting or disturbed during this work. Another firm highlighted critical resources or people performing critical tasks by placing a bright orange beach ball on the desk of that person. This seemingly ludicrous practice made the tasks highly visible, and indicated that that person must not be interrupted until the task was complete. It sounds extreme, but at least no-one was in any doubt as to what was going on.

Criticai chain project management: 1141

Elevate the constraint Elevating the constraint means increasing the flow through that part of the system removing that as a constraint. In the two examples given above, the road surfacer and the designer need to have their work capacities increased if the system is required to work any faster - either through working longer or through adding extra help to them (e.g. adding another active machine or designer). The last part is to go back and find the new system constraint, which will probably now be elsewhere in the project. The same rules apply and will ensure that projects are completed as rapidly as possible. Further discussion of these rules is contained in the following section.

Are there any differences in the planning process under the critical chain method? Well, the starting point is suggested to be that the true consequences of a late finish should be properly evaluated in financial terms. It is often not a simple process, as the boxes below show.

• S P WmmNmm

S H f t MM xiaMs

s

P

»

S

i

l

l

A project to refurbish bridges over a stretch of motorway was being planned. It had been allowed a 4-week duration and the client had required that the project finish on the last working day before the Christmas break. This gave the team planning the project very little time to do any prepreparation or any of the normal surveying work before the project started. It was handed to the project manager as a JFDI - Just Do It - project. The project was costing the client £300 000 and the industry norm for the profit to be made on it was in the region of 6 per cent. The potential profit was therefore £18 000, provided it was completed on time. If it was not, the penalty clauses in the contract specified £3000 per day to be paid to the client. In addition, the costs of keeping the site going were £3000 per day. This was not unusual, but the Christmas break (the industry closes down for 2 weeks) meant that if the project was running even 24 hours behind schedule the losses would be a minimum of 14 days of penalty clauses (14x £3000) plus the additional site days. This represented a minimum loss of £42 000, and the chances of running late were substantial. This more than outweighed the potential profit on the project. There was a pressing need to do something different in the management of this project to ensure that it would be completed on time.'

!

146 I Phase Two - Design the project process

This does prove that there is not always a penalty for a late finish. A leisure centre was being constructed for a district council and was completed 2 months late. The council incurred the displeasure of the voters of the region and wanted some redress from the contractors. The problem was determining the extent of the loss that the council had suffered as a result of the lateness. Leisure centres usually require a substantial ongoing subsidy from local government to remain viable. The late opening meant that the council had not had to start paying the subsidy, so the late opening had in fact saved them a considerable sum of money.

Having determined these costs provides the justification for the additional work that follows in the planning stage. The next task is to tackle how estimates are constructed.

Estimates First, the principles: • Estimates (both initial and to-finish) should be based on the activity times only, with no safety added. This relies on a number of underlying changes (see later discussion) including buy-in from all people estimating and a commitment to acceptance that 50 per cent of activities will finish early and 50 per cent late. Finishing late is therefore to be expected for half of all activities, necessitating removal of the stigma of a late finish. • Safety should be included at the end of a critical path - not before. Where there are feeder paths (parallel activities that lead on to the critical path), the safety buffer should be placed at the point where the feeder joins the critical path (see Fig. 6.6). • Time plans establish precedence relationships but should be treated as overviews only. The nature of project management needs to reflect the dynamic of the actual situation, and accommodate changes as they occur. Furthermore, given the uncertainty of plans, it is vital that all the parties involved are given regular updates on when their input is required. This statement, albeit trite, reflects the need for greater communication to ensure that critical activities can proceed without incurring any delay. • Progress should be monitored by the critical path - rather than per cent complete, a time to finish is now required from sub-project managers. This can be represented by the state of the project buffer (theslack time at the end of the project). The constraint may be outside the firm - for instance, with suppliers or customers. It is not unusual in construction or software engineering for delays to be caused by work provided by the client not being ready on time. Suppliers may have

Criticai chain project management: 1141

Feeder path 5

Í

S

8

8 3

1

8

E 0

6

Critical path

Figure

6 . 6 Buffered feeder paths

a similar problem - unable to start their part of the project until they have been provided with the necessary information. Using the same approach provides benefits to all parties - weidentify that there may be a constraint and buffer it accordingly. One of the major challenges for a project manager is in keeping plans up to date. They may replan the project on a daily basis and reissue copies to everyone in the project whenever there are changes. This can become very unsettling for everyone concerned, as the whole situation lacks any stability and is not robust to the inevitable changes that will start the minute the project commences. Critical chain project plans with buffers as described and due-date constraints removed from activities wherever possible are far more stable. This stability (as demonstrated in the Project Management in Practice at the end of the chapter) is a major benefit of critical chain scheduling. Moreover, when a non-critical activity becomes critical it is only necessary to reconsider the criticality as far as the point that the paths merge. Non-critical activities often become critical due to resource contentions. These resources (a person, a department, an external organisation or a piece of technology) are now the constraint, and should be protected by a buffer (some time-slack in front of them). The same rules of managing constraints apply to these constraints, and they should be managed by going through the same five steps in section 6.3. This added complication to the critical path represents the formation of compound series of activities - often involving different paths - w h i c h has been termed the critical chain. The TOC approach does result in a new approach to performance, particularly at a local (activity) level. This alone has considerable potential benefit.

iif8 I Phase Tivo - Design the prefect process

So what is the role of the project manager in control, and how is it different under critical chain methods? The answer to the first part of the question is that the project manager has ultimate responsibility for control - by determining the issues of importance, their measures and then devising the system by which they will be monitored and corrective action implemented where necessary. A full description of this process is contained in Chapter 1 1 . Before we continue, the break with due-dates has been identified as one of the features of critical chain methods. The better alternative is that instead of waiting for a due-date to arrive before starting an activity, that it continues directly from the completion of a subsequent activity. The analogy that describes this best is that of a relay race - where the runners are lined up ready to receive the baton before continuing with their leg of the race. Where due-dates are used, there is no requirement nor incentive for an early finish. Under critical chain, this must be used and any early finish added to the buffers. The role of the project manager therefore changes. Far from watching the dates, the issue becomes one of managing the hand-overs between activities - ensuring that early finishes are encouraged and that subsequent activities are ready to start. This is a major information-handling and communications role, and is one that many project managers undertake anyway, albeit without the framework to gain benefits from the early finish.

Goldratt's solution is sufficiently different from previous approaches to warrant some further attention, and uses the same logical basis - the Theory of Constraints (TOC)that has been successfully applied in manufacturing. References to applications are currently limited but as applications increase and software support improves this solution is likely to be more widely used and open to further evaluation.

Balfour Beatiy introduce critical chain project management Balfour Beatty is a large PLC within the construction sector. The case is divided into two parts - the overview and a more detailed consideration. The involvement with the TOC approach starts in 1995 as part of the efforts of their Business Improvement Team. The case charts their experience of the method through to how it is being used today.

The overview The Business Process Improvement Team identified the possibility of using the approach outlined in The Goal in early 1995. During April 1995, two of the team

Criticai chain project management: 1141

leaders attended the Goldratt Institute's Management Skills Workshop (MSW). They did much analysis of the problems that the firm was facing, including the core that 'We don't work to programme'. Projects were regularly delivered late; indeed it was noted that late delivery was expected in the industry. Focusing on their project, they used the problem analysis techniques on the sub-projects in which each of them was involved. They came up with a new approach that was termed 'programme management', which eventually led to what we know today as 'the critical chain'. In order to make the new approach work a number of senior people went on a two-day programme at the Goldratt Institute in September 1995 to train them in the methods. They returned to work on the A13 project (5.2 km of dual carriageway including three major viaducts, two major junctions and various environmental challenges), which was already under way, but setting up a new 15-month programme. The methods used to support the approach included creating six multifunctional teams who were tasked with working out their own schedules. These were integrated by the site engineer to allow calculation of the critical chain. The outcome of the project was considered a major success for the company. Over the 1 5 months of the programme, the firm achieved more than 95 per cent completion of weekly schedules despite significant changes introduced by the client during this period. This compared with an historical average nearer 50 per cent. Other bonuses came in the form of considerably reduced weekend working. The logic for this was simple - don't work overtime where buffers are not under threat. Weekend working was a feature of the industry, and its reduction had a number of beneficial knock-on effects. These included: • increase in labour productivity; • reduction in accident frequency rate; • the job receiving commendation from the client for its high quality. In addition, as the project was performing so well, staff and contractors achieved their targets and were paid bonuses. In many cases this compensated them for the reduction in overtime. It appeared that the scenario promised by TOC - that of win-win - had materialised on this project. As commented by Barber et al. {1999), 'It [the TOC approach] is not the only approach, but it did prove effective in this instance'. On this basis, it is often taken that the method should be applicable elsewhere and that the successes are therefore imitable. Further consideration of the case reveals that there are many other contingent factors that should be included in any analysis. These include some consideration of the overall impact on the business since the original implementation. Further consideration The issues were revisited with the firm during 2 0 0 0 . This permitted a longer-term view of the approach to be established. It will be shown that despite initial successes, the method ran into heavy resistance, and that the resources which enabled the success were subsequently removed.

xso I Phase t w o

Design the project process

During the Management Skills Workshop the participants learned the basics of applying a structured logic approach to the problems that they faced, for identification and solution. These were used by the teams running the project. The project manager commented that this had removed the excuses for poor performance within the teams and had changed the mindset from that of 'we always run late' to that of 'we can complete on time'. However, there were a number of challenges that were faced in this project. The first was that there was only a six-week buffer at the end of the project. This represents only 5-10 per cent of the schedule and is considerably less than recommended for this method of planning (this does not imply non-lean planning - as noted above, simply the 50:50 early date risk). Second, there was no software available at the time to assist in the planning, requiring a mixture of manual planning and extensive use of 'dummies'. Third, the buffer became a resource for shortening the project for senior managers who did not understand the approach. Given that the stated objective was to . . sell the idea that we could complete on time and show the effect of client changes on the schedule' this was particularly counter-productive. In addition, it required a change in the role of the managers on the site. As the project manager commented, 'it is an information tool - it provides you with the information on which to react. The programme is there to plan management actions, not just construction events.' Furthermore, 'An important part is how you react to the news that the buffer is being shrunk and you have to spend some money'. Given that this was new, many of the middle managers on the sites felt exposed by the approach. On-site, one of the senior foremen commented: 'I thought that this was what we were supposed to be doing anyway,' indicating that at an activity level the changes were not significant. In the scheduling of resources, particular changes worked well. These included a change in the way that priorities were allocated. The project manager cited the example of the batching plant and the temporary works coordinator, both of which could be bottlenecks in the process. While there were several calls on the batching plant for concrete each day, only one or occasionally two could be handled at any one time. Those that received priority would regularly be those associated with 'those that shouted loudest'. Under the new approach, the highest priority was given to the job associated with the activity with the shortest buffer. In addition, the temporary works coordinator would always have a backlog of work, but now this was prioritised by buffer length associated with the activity. Other changes were also made. These included: • delayering the management structure - there were only three (maximum four) layers between the project director and the workforce; • the cross-functional teams (maximumsize 12 people); • team leaders chosen for leadership rather than seniority or technical prowess; • changes to assessments to reflect the need to manage not only an individual's own area of work but also how these interface with others; • supporting actions were demonstrated for the changes that were being made through the 'transition trees' (termed 'action plans' at the firm). It took 2-3 months to get over the problems of buffer conflicts and the new way of resolving them. The changes were supported by a weekly 'critical events meeting'

Critical chain project •

1151

at which each of the team leaders presented their own programmes. There was agreement not to change any activities due to the likely impact on resource constraints once the programme had been fixed. Feeder paths became separate projects in their own right. Subsequent to this, the approach was implemented on their next project - the A30/A35. The project manager was not convinced and there appeared to be a considerable resistance to the approach, consistent with a not-invented-here mentality. The notion that 'we've been doing it for the last 20 years and we've never finished on time' prevailed. The project was not completed on time. Today, the firm is involved predominantly in joint ventures and so is not able to put the TOC approach into practice. In addition, the original business improvement team was disbanded by a new managing director, the firm losing the knowledge as well as the resource to implement the approach.

Case discussion 1 What is the evidence to support the claim that this change was a success? 2 Identify the steps the firm took in this project. How did this contribute to the success? 3 Why would the removal of the supporting resource cause the method to be used in subsequent projects?

TOC robust planning student syndrome safety throughput buffered schedules

uncertainty Parkinson's Law multi-tasking bottleneck resource contentions/conflicts

1 Why is there a need for a new consideration - such as through TOC? 2 What are the constraints in projects?How would you recognise them? 3 Carry out estimating on some tasks that you do regularly - the trip to work or place cf study, for instance. Compare your estimates with the times you actually take. What do you notice about your estimates? 4 Why might it be necessary to shorten some activities, even if someone has given you an estimate for their time? 5 Where should buffers be placed? Using an example of a personal project, show how the use of a buffer would help.

152

• Two - Design t h e project process

6 H o w w o u l d y o u deal w i t h the a r g u m e n t t h a t ' o u r p r o j e c t is t o o s h o r t t o be including buffers into it'? 7 If this is such a good idea h o w come every project organisation is not using it?

Barber, P., Tomkins, C. and Graves, A (1999)'Decentralised Site Management - A C a s e Study', International journal of Project Management, Vol. 17, No. 2, pp. 113-120. Brown, S., Blackmon, K., Cousins, P. and Maylor, H. (2001) Operations Management: policy, practice and performance improvement, Butterworth-Heinemann, Oxford. Goldratt, E.M. (1997) The Critical Chain, North River Press, New York. Goldratt, E.M. and Cox, J. (1984) The Goal, North River Press, New York. Leach, L. (2001) Critical Chain Project Management, Artech House Publishing, Norwood, MA. Rand, G. (2000) ' Critical chain: the theory cf constraints applied to project management', International Journal of Project Management, Vol. 18, pp. 173-177.

www.prochain.com - good website with lots of discussions of critical chain and regular newsletters. Software works with MS Project to allow the necessary additional features required to construct buffered schedules. Leach, L.P. (1999)' Critical Chain Project Management Improves Project Performance', Project Management Journal, Vol. 30, No. 2, pp. 39-51. Newbold, R. (1997)Project Management in the Fast Lane, St Lucie Press, Boca Raton., FL. Rahman, S. (1998) ' Theory of Constraints: A Review of the Philosophy and its Applications', International Journal of Operations and Production Management, Vol. 18, No. 4, pp. 336-355. Schragenheim, E. (1999) Management Dilemmas: The TOC Approach to Problem Identification and Solution, St Lucie Press, Boca Raton, FL. Notes 1 For a description of M R P I I , JIT a n d the application of T O C in m a n u f a c t u r i n g see Brown et al. (2001). 2 Predictably, the p r o j e c t ran c o n s i d e r a b l y over time, a n d c o s t w h a t the firm termed 'a significant a m o u n t of money'.

Time p l a n n i n g was covered before cost a n d quality p l a n n i n g - does t h a t make it more important? Not necessarily. The importance, as described previously, depends on t h e project strategy. The order in which t h e issues are dealt with in practice makes little difference. The three issues of time, cost and quality p l a n n i n g are all interdependent - a decision made in one has an impact on one or both of the other two. They w i l l need t o be revised a n d refined, as described for t i m e planning. through an iterative cycle. In cost planning, t h e nature of t h e costing process w i l l be considered as t h i s determines the process for what follows. Some estimating techniques are described and the costs built up into overall figures. Lastly, t h e estimates, in many cases after amendment, become the project budget - t h e f i n a n c i a l criterion against which you are assessed. In quality planning, t h e definition of the relevant characteristics for t h e project is followed by t h e management of both conformance a n d performance aspects. Treatingthe project as a service ratherthan just a product can have benefits here.

Learning Objectives 7.1 Cost planning process 7 2 Cost-estimating techniques 7.3 Cost build-up 7.4 Cost management: budgets 7.5 The quality planning process 7.6 Quality conformance planning 7.7 Quality performance planning 7.8 Relevant areas of the bodies of knowledge 7.9 Summary Project management in practice: Adopting a standard for project planning - useful discipline or unnecessary constraint? TOBf terms Review questions and further exercises References Further information Note

By the time you have completed this chapter, you should be able to: * Identify the priority and role of costs in a project; * Identify elements of cost and the process cf their compilation; » Demonstrate the role of budgets and haw plans impact these; • Define appropriate characteristics for quality; • Establish how both conformance aspects and performance aspects of projects tan be managed.

7.1

Cost Planning Process The Sydney Olympics were widely regarded as one of the best games of modern times. In this case the objectives were very carefully considered in terms of the trade-offs identified in Chapter 3, those of time, cost and quality. The strategy in that case was that the games had to be delivered on time (there was absolutely no possibility of postponement) with quality as the next driver and cost as the third priority. This did not sideline the issue - it just put in place the necessary strategy from which decisions could follow. When the organising committee had to return t o the Australian Government in 1999 for further funding following the loss of some key sponsors, the argument was clear - if you want the games to be delivered in the way planned it is going to cost more money. Given that the alternative was a compromise on the quality of the facilities or experience for people attending the games this was not an attractive option. The games received the additional funding required. Ey contrast, 'I want the highest quality output from the project, at no cost, delivered tomorrow' is an all too typical statement of the real requirements of a project and is not a great starting point. The first stage in this cost planning process, therefore, is to know the importance that is placed on the costs and the potential for trade-offs with other commodities in the project. This will determine what follows. As a process, cost planning resembles the iterative steps of the time planning process described in Chapter 5. It differs in that there is a further uncertainty with projects of several years' duration. Not only do we not know exactly what the activities will be that far into the project or how long they will take, but we also are susceptible to the vagaries of changes in costs over time as a result of currency fluctuations, inflation and base material costs. We also need to know the basis of the relationship between cost, price and profit in the project that we are undertaking. This will be determined by the context in which we are working.

The role of costing The basic relationship between price, cost and profit can be expressed in a number of ways:

Cost and quality planning!léi cost

r itoIu =

price

price - profit = ri price - cost = profit

equation - different •.

Which one applied depends on whether price, cost or profit is fixed first. These differences can be explained as follows: • in the first case the price is fixed through legislation, for example, or in the case of a target costing system (see below), through market analysis; • in the second the cost is fixed, generally through contract purchase which guarantees that goods will be supplied to you at a particular price. This fixes your costs while your selling price and profits can be varied; • some agreements state the profit that a company is allowed to make through the system known as cost-plus or reimbursable pricing. Target costing is being used increasingly in the automotive and aerospace industries, among others. The target price for a complete vehicle or aircraft is established that will give it competitiveness in the intended market and the margin determined by corporate decision. That leaves a figure of the target cost. Designers work back from that figure to the individual component or system costs. The main implication is for component suppliers, who are subsequently set target costs to achieve on their components or systems. It was normal in the defence industry until a few years ago for everyone to work on a cost-plus basis. This required very detailed time and material cost estimates (and subsequently, records) for a project to be submitted to the purchaser for vetting. Should a supplier be awarded a contract it would be on the basis of direct costs plus a percentage towards overheads and profit. The procedures were lengthy, involved massive bureaucracy and, most importantly, did not encourage suppliers to improve their performance. If costs overran they would still be paid. The changes in the relationships between the various national military procurement agencies and their suppliers mean that contracts are now most likely to be awarded on the basis of competitive tendering with fixed costs for the delivery required. The supplier knows how much they will be paid if awarded the contracts, and has a vested interest in ensuring costs are minimised. Not everyone welcomed the demise of cost-plus - as one veteran of the era said: 'When we worked to cost-plus, you would do the job properly and know you'd get paid for doing a proper job. Now we have to watch every bean. Previously, the engineers had control over these projects, now it's the accountants.' Reimbursable contracts are still in evidence in some sectors, particularly construction. In projects that are not direct revenue earners the method of costing is rarely transparent to the uninitiated, but is usually based on the same techniques of estimates, which become budgets against which you have to control. This makes cost planning less of a one-off activity and more something that will be ongoing throughout the rest of the project. The techniques for estiniating are discussed in the following section.

156 I Phase Two - Design the projet! process

There are two basic approaches to the preparation of costing information: • bottom-up costing - the estimates of each level in the work breakdown structure are compiled and added together by each level of supervision in the project hierarchy - as would be the case for reimbursablecontracts; • top-down costing - you are allocated a certain-amount of money to complete the project activities and this has to be split between the sub-projects. The allocation is based on either senior management's estimates or the use of target costing. The two systems are illustrated in Fig. 7.1. The advantage of bottom-up costing is that the estimates are prepared by the people who will carry out the activities or their supervisor. This gives some notion of commitment to achieving these figures if the costs are accepted unmodified by the project manager. Where it is common for costing proposals to be cut by project managers the activity level costs generally become artificially inflated, as staff try to remove the effect of such cuts. The process consequently loses credibility. This method is not particularly good at generating accurate estimates. T o p - d o w n costing involves the a l l o c a t i o n o f t h e costs t o the s u b -

activities. This creates a degree of competition between the supervisors of the activities for resources which many view as being beneficial. H a v i n g d e t e r m i n e d t h e n a t u r e o f t h e c o s t i n g process i t is nowf necessary t o i d e n -

section. T h e m e t h o d s for putting numbers to these elements are then discussed, leading on to how they are accumulated into a final cost estimate. t i f y t h e e l e m e n t s o f c o s t . T h i s is t h e s u b j e c t o f t h e f o l l o w i n g

Elements of cost The major elements of cost are: time - the direct input of labour into activities; • materials - consumables and other items used in the process;

Bottom-up

Top-down

A

Project owner Costs fixed externally to project

Project manager allocates budgets to sub-projects

Project manager

Su b-projects Activities

Figure 7.1 Top-dawn and bottom-up approaches to costing

Cost; set by the project

manager collates estimates

Cost and quality planning!léi

• capital equipment - the purchase of the means of providing the conversion process, or part of its cost, maintenance, running and depreciation offset against activities; • indirect expenses - e.g. transportation, training; overheads - provision of an office, financial and legal support, managers and other non-direct staff. Materials can be included in the costings, either at the cost to the company or with a margin added. Capital equipment may have to be purchased specially, in which case its entire cost, or part of it, will need to be offset against the project. Where the equipment will have potential further use after the project has finished with it, it may attract a residual value. Indirect expenses are those not directly related to the value-adding activities, but which are considered necessary to support the project. Overheads are carried by all organisations and include the running of the headquarters and the provision of central services. To determine the cost of particular elements in advance of the project (i.e. compile estimates), there are a number of techniques that can he employed: • • • • • •

parametric estimating; as . . . b u t . . . s; forecasts; syntheticestimation; using learning curve effects wishful thinking.

Parametric estimating This type of estimating works well where there is considerable experience of a particular type of project. The project is broken down into a unit that can be readily estimated - for instance, this could be lines of code in a computer program (see Brooks, 1995), hours of contact for a training programme or cost per mile of resurfacing a road. This provides a number to start from with your estimates as shown in the following illustration.

A builder was asked to provide a cost estimate for an extension to a house. The architect had estimated £30 000 for the building works. The builder worked on the basis of £1200 per square metre of additional ground area. The additional ground area was 60 square metres and so there was a considerable variation between the two (£30 000 versus £72 000). Arbitration came from a detailed estimate carried out by a quantity surveyor, who confirmed the builder's estimate by making a very detailed study of the likely hours and materials involved. The parametric version provided a highly robust estimation process.

»58 ! Phase Two - Design the project process

As . . . b u t . . . s As . . . but. . . s are where you or your organisation has experience of doing a similar job previously. The use of previous costs as a baseline for future estimation assumes that these were in some way validated by the previous experience. Given the statement made in Chapter 2 that so many projects are not reviewed in any meaningful way, this is an assumption worth challenging. Indeed, unless there is some method of tracking the actual costings and these are compared with the originals there is considerable doubt as to the validity of such records. Hedgehog syndrome will rule the day. Provided there is some logic to back the continued use of such estimates, they are a good basis from which to start.

Forecasts These are statements of where it is believed that a particular cost influence will he during the life of the project. It is illustrated by the case below.

The 8th International European Operations Management Association (EurOMA) conference was held in Bath, UK, on 3-5 June 2001. The budget on which the conference was based had been approved at the EurOMA board meeting in June 1999. It had been approved with all the income in euros and all the expenses in pounds. The conference organiser included some allowance for the variable number of delegates (no-one knew until they registered exactly how many would attend - w h i c h created a problem in deciding the fixed-cost allocation per head), and in particular for the potential for currency fluctuation. The reality was that the euro depreciated by 17 per cent relative to the pound during the period. This was outside the envelope of uncertainty allowed by the organiser. No more money was forthcoming from the association and no increase in delegate fees was approved. Where now? The organisers had to turn to a range of sponsors to make up the potential shortfall if numbers were low.

For very large projects it is not unknown for the organisation to become involved in currencv speculation - either buying the necessary amount of currency when the rates appear favourable, or agreeing exchange deals at particular rates. Where key 'materials are commodities they may also take an interest in the relevant commodity market. Whatever the case, projects having a currency risk have to factor this into their risk analysis (seeChapter 8).

• and

t\ pliir

!

Synthetic estimates Where there are considerable items of repetitive work in a project the times for people to carry out certain activities can be analysed to provide a generic set of actions and consequent timings. New activities can be deconstructed into these generic actions and the timings added accordingly. Little or no direct measurement of the workplace needs subsequently to be carried out. This is based on the practices of work measurement, and can be used with some reliability off-line to give indications of the scale of effort required to perform particular tasks.

Time estimation - teaming curve effects Watching a skilled craftsperson at work shows how a highly intricate task can be learned and carried out so that it is made to look easy. Gaining such a level of skill requires years of training and practice (and many mistakes). A project rarely has such an opportunity to gain advantage through repetition. There will, however, be repetitive elements to any activity, particularly during the execution phase. Where this occurs, the time taken each time the task is carried out will decrease as the person becomes familiar with the methods. Subsequent improvements in speed are seen to become smaller over time. This can be quantified using the followingformula:

where x Yr K «

= the number of times the task has been carried out = time taken to carry out the task the xth time = time taken to carry out the task the first time = log M o g 2 where b =learning rate

Learning curves and .painting-by-numbers projects A team is set up to carry out a quality audit of ten departments. The first audit takes four days as the auditors are unfamiliar with the procedures. The second audit takes three. After a period of time, the minimum audit time is reached, and very little further improvement is seen. We can plot this progression as shown in Fig. 7.2. If we wish to find out how long the eighth audit will take we need to calculate the learning rate, b. The following values can be assigned from the above information:

x = t h e number of times the task has been carried out = 2 Yx = time taken to carry out the task the xth time = 3 K = time taken to carry out the task the first time = 4 can be calculated

i 6 o I Phase Two - Design

, project process

L_J I

I 2

I I I 1 1 I I 3 4 5 6 7 8 9 Number completed

Figure 7.2 Learning curve effect

L 10

ti me taken

Putting these values in: ,3-4(2}" 2" = 3/4 n . log 2 = log (3/4) II =-0.1249/0.4149 u ^ l o g f>/Iog 2 =-0.4149 log/; = -0.1249 b * 0.75 From this we can say that the project has a 75 per cent learning curve. This can also be seen intuitively as another way of expressing the learning curve is to say that every time the total number of audits completed doubles.the time taken for the last audit will be the learning percentage multiplied by the original time. In this case as the number of audits doubled from 1 to 2, the time decreased from 4 to 3. The percentage is therefore 314 = 75 per cent. As the number of times the audit is done increases, the times taken will decrease as shown in Table 7.1. Table 7.1 Audit no.

1 2 3 4 5 6 7 8

Time taken (days)

4 3 2.54 2.25 2.05 1.90 1.78 1.69

Cost and quality planning ! l é i

To complete this example, the time figures can then be put into the kind of cost build-up calculations described in the following section.

Wishful thinking You are unlikely to find this in any company procedure manual, but the instances of this occurring in practice are legion in most organisations. The prime causes for 'costing by wishful thinking' are: Political - for instance, in the Channel Tunnel project, the total cost escalated from £5 billion to £10 billion. Some of the people who worked on the estimating for that project always maintained that the costs would be £10 billion, but that such a figure was not politically acceptable on either side of the Channel. The need to have the fixed transport link was a matter of European integration, with that objective placed above the costs. • Improper use of estimates - where 'ballpark figures' become official estimates without any checking or further development (seeVerzuh, 1999). For instance, you are asked by a colleague how much time it would take to do a particular task just so they can do some preliminary costings. Without any further referral to you the original request is changed, but your figures are still used in preparing a detailed estimate. The latest version of the work is far more involved than you had been led to believe and it is too late to change the figures. • Failure to be systematic about planning - through either complacency or certainty that they will not actually be called on to do the work being discussed people are vague and give an unqualified estimate to 'get the request off their desks'. There are many other reasons that are found through review for wishful thinking in this area. Reference to a systematic revision-refinement cycle, particularly for medium or large projects, will help. The above techniques are used to provide a means of arriving at elements of project cost, with the objective of avoiding wishful thinking. As has been said many times already, however, the answers from even the best techniques are only estimates, and errors made at this stage are multiplied many times.

7.3

Cost Build-up

We decided to employ a researcher for 6 months to do some data collection and analysis. The direct cost of employing the person was calculated at £12 000. The expenses involved in carrying out the work were in the region of £5000. The total mini-project budget ended up at an incredible 000 by the time overheads, sundry expenses, administrative assistance and office space costs had been taken into account.

162 1 Phase Two - Design •!

project process

Profit I

General overheads

+ +

Figure 7.3 Elements of cast

The process so far has identified particular elements of cost. So how do we end up with the final cost? The process can seem quite baffling, and as shown above, relatively small pieces of work can look very expensive once they have been fully calculated. The elements of cost are added as shown in Fig. 7.3. The following example illustrates the cost build-up principle.

The course coordinator wishes to advertise the course but needs to know how much will have to be charged in order to make a profit. The time estimates are made based on the proposed course length - determined by first considering what it could usefully achieve in given times. These are correlated with the necessary labour input to ascertain the direct cost. The programme requires a consultant to do three days' training which costs £250 per day, to be supported by an administrator, whose time is costed at £90 per day. The direct costs (fixed, i.e. regardless of how many delegates attend) are therefore £1020. The course requires the provision of printed materials and stationery, which are a variable cost (the more delegates, the greater the cost) of £60 per delegate. Assuming the course is fully subscribed and can accommodate 15 delegates, a further £900 needs to be added to the estimate. The total of these is the prime cost. Indirect labour and materials include administrative time arranging the course (say eight days at £90 per day), and general overheads would be the ongoing 'fixed costs' of providing the building, heating, lighting and functions such as finance to provide the funds, and procurement in raising the necessary purchase orders. The overhead is added to the total cost at a rate of 60 per cent.

Cost and quality planning!léi

Reliance on this form of allocating overheads does cause anomalies in costing, which can be very damaging to the profitability of the organisation as a whole. These anomalies cast doubts on the merits of conventional cost accounting, though it is still the most-used system. Where, for example, new methods are introduced which speed the flow of tasks through a department, the revenue for that area falls it is doing the same work only faster, but revenue depends on hours spent on 'doing'. The improved methods therefore generate less revenue for that department, which is unlikely to encourage improvement. These cost estimates are used in a number of ways. At the outset of the project they will provide a rough idea as to whether the project is viable - that is, the returns will justify the investment. If the project progresses to detail planning, these estimates will have to be revised to show the increased level of consideration that has gone into compiling the estimates, ff approved, this spend becomes the budget, though often not without being 'trimmed'. It is this budget that is the subject of the next section, and the basis for control - in particular through earned value (see Chapter 11).

Cast Management: Budgets Collins English Dictionary

spiippwfllpf

I

•

^

•

• :: mû

defines a budget as:

a written statement of money: where it is drawn from, its amount, how itis to be spent

164 ! Phase Two - D e s i g n the project process

Most organisations require managers to perform budgetary analysis at least annually and project managers are in a perpetual cycle of seeking approval and then allocating funds. The following are categories generally found in budget applications/ grants. They are more explicit statements of the categories of costs identified above: • • • • • •

labour; materials; consumables; cap-ex (capital expenditure); travel; subsistence.

In developing bottom-up costs, these are the basic elements that should be considered. Further elements should be added as appropriate. In addition, it is usual for these to provide headings within project codes which activities can draw against. The boxed example/case at the end of this section questions whether this kind of artificial division of resources really helps progress or project monitoring and control, or simply makes the accounting system neater. Budgets in public sector environments can be allocated using zero-base budgeting. Where activities are ongoing but are reviewed on an annual or similar basis this approach takes into account previous performance. Where progress can be demonstrated, funding may be made available. Where progress is deemed to be unsatisfactory, the remaining activities may either be denied funding altogether or be cut. This has been the case where stipulations of attracting private funding to supplement government grants have been made. The discussion of budgeting would not be complete without looking at how costs are tracked as the project progresses. In the majority of industries, direct labour and materials would be allocated and costs tracked through a job-costing system. For the purpose of accounting, the job could be issued a code against which charges are made. When costs are incurred, they are noted against these codes. The construction and defence industries use this method extensively. There is usually a budget holder (often the project manager) who periodically checks that what has been recorded is an accurate record. In considering the value added by the budgetary system there are two problems that frequently arise: • What should happen to funds left in a budget at the end a project or accounting period? • What should happen when one category of expenditure is exhausted, but project activities still need funding in that category? Residual funds at the ends of projects or accounting periods are often spent to prevent their being 'lost' back into the accounting system. This results in unnecessary purchases or in acquisitions being rushed through to beat deadlines. This is unlikely to encourage good use of resources. Underspend through cost efficiency goes unrewarded under conventional systems of budgeting. Alternatives to this include the reward of cost efficiency through greater allocations of funds in the future.

!

Cost a n d

planning 1165

The imposition of constraints, concerning the movement of funds between budget categories, causes anomalies and can result in wasted money (seeexample below).

Four senior engineers working on the development of a new motor system at a UK plant required a face-to-face meeting with colleagues in Switzerland. This was a reasonable request, but it was pointed out that the budget for air travel had been exhausted. Normally, they could have flown out and back in the same day but that was not possible. There was, however, money left in the accommodation budget and travel by road could be subsidised from general funds. The four hired a car, drove to the ferry and to Switzerland, overnighting on both outward and return journeys, with the round trip taking three days. Flights would have cost in the region of £800, and used four person-days of time. The total, including accommodation and subsistence for the three-day trip, was also £800. The time used, however, was 12 person-days - which represented a considerable additional, but hidden, cost. Adhering to the rules of a budgeting system, which was designed to help cost control, caused considerable unnecessary additional costs to be incurred to the organisation. All in the cause of keeping the accounts in order.

Relative to budgets, the total amount of spend in any one category and against any one activity is of interest. For many organisations, there is a further constraint I to the pattern of spend - that of cash-flow. ,

I

Most people have to manage their own cash-flow and there are a number of techniques for doing this. One student, with great discipline, would only draw out a certain amount of money from the cashpoint each week. Once this was gone, nothing further could be purchased. (He is one of the few people 1 have ever heard about who left university without an overdraft!) This fixed approach to cash-flow is not irrelevant to the project manager, as it is not; unusual for funds to be capped and expenditure limited in any one financial period - a quarter or a year.

The size of the budget can be meaningless if you cannot gain access to the funds at the time that they are needed. Part of the challenge of the scheduling process is to ensure that the cash-flow issues do not provide a constraint to the project and that goods supplier. suppliers, only provides thatfor areinstance, unnecessary being witheld can delay bebypaid. abut supplier Stopping is likely due toa to project damage late payment because your relationship of youtheir are last waiting with bill that not for

i

Phase Two -

Design the project process

Other cash-flow issues for project managers include: 1 Where large complex projects are being carried out it is usual for stage payments to be made on completion of certain project milestones. These are vital points in the project for supplier organisations and their business survival can depend on this. 2 The project schedule may have to be revised to reflect the transition from one accounting period to another - a purchase for the project delayed or brought forward to meet other project needs.

Methods

tracking project spend How do we know what has been spent on a project? The costs of purchases and commitments to purchase (either items ordered and not yet delivered, or delivered and not yet invoiced) have to be tracked and this can be directly attributed to your project budget. The labour input can be tracked through: • Direct work measurement of the time input - timesheets are completed by individuals showing on which activities they spent what time working. These are then aggregated and the total costs charged against project budgets by the accounting system. This is the basis of the system of activity-based costing and is used by many organisations including consultants to determine who will pay for each unit of a person's time - either hourly or on a day-rate basis. • Work sampling - random samples are taken of what individuals are doing over a period of time, usually several weeks. These data are representative of how the individual proportionally spends their entire time. From this proportion the input of that individual to a project can be estimated and fed into the costing system as for direct work measurements.

.5

The Quality Planning Process The quality planning process should follow the structure shown in Fig. 7.5. There are a number of elements to this figure, centring around the first step in any quality process - t h a t of definition. Quality is a term that has so many different meanings for different people that it must be subject to some further definition before we can in any sense manage it. The two major inputs are from organisational strategy and from customer requirements. Customer requirements may be explicitly stated in direct value-adding projects through the terms of the contract or, in many cases, will have to be determined through discussions. The strategy input should help to determine the kind of quality that we are trying to achieve - for instance, technical excellence or meeting certain external standards. These two inputs can be put into context by considering the alternative approaches to defining and managing quality and can be summarised in the manufacturing and service paradigms as shown in Table 7.2. The manufacturingapproach to quality championed conformance to specification as the metric for success. This relied on quality being definable through a precisely measurable set cf characteristics. This is applicable to large-scale engineering projects,

Cost and quality planning!léi

Figure 7.5 Quality planning process labia 7.2 Manufacturing and sen/ice approaches to quality

for instance. Outside this environment, there are many types of projects that require a much higher degree of customer orientation, considering management of both perceptions and expectations. Furthermore, many modern projects do not have tangible outputs. Rather than applying product-based measures of quality in such instances, service-based definitions and derived measures are far more appropriate. These feed into the two sets of actions that have to be planned at this stage -developing systems that ensure conformance and performance. These two issues are the subjects of the next two sections.

Quality Conformance Plannin Since the 1950s quality conformance planning - otherwise referred to as quality assurance - has been used to ensure that minimum standards are maintained in a

i 6 8 i Phase Two - Design I.he project process

wide array of activities. There is a considerable literature on it (see Further Information at the end of this chapter). The discussion here will focus on the use of a project manual as a means of not only planning for achieving what you have set out to do in quality terms but also demonstrating that you have planned to achieve what you set out to do in quality terms. This is no small difference, particularly when it comes to legal liability issues or preparingthe information for a review process. The project manual, as the contents list below demonstrates, is not just about quality. It is about bringing all project information - including that about time and cost - into one place. A contents list might include the following: • Introduction - the reasoning behind the project. • Planning - including the objectives, priorities, scope statement and WBS (as described in Chapter 4), and all the detailed plans - those for time and cost, both in summary and detail, contingencies and risk analysis (see Chapter 8). These are the basis for reference when decisions are required. 1 • Execution details -including the schedules, the responsibilities (see below), relevant procedures, standard forms and organisational structure that will be used. • Records - minutes of relevant meetings, notes of problems that have arisen and how they were dealt with, changes requested and made, status reports, other correspondence. • Miscellaneous information - including contact points for all people involved in the project, sources of technical reference material. For relatively small, low-complexity projects such a definition may seem excessive, and indeed it can be reduced to a minimum. As one events manager who used a project manual routinely for her work commented, 'If I fall under a bus tomorrow, someone could walk in here and pick up the project, and get up to speed with it fairly quickly'.

Responsibility allocation A major task for the project manager concerns the allocation of resources to different parts of the project. These may be to different parts of their own firm or even to different organisations. Before plans can go forward for analysis it is vital that the part of the organisation has the resources available to carry out the tasks that have been assigned t o them. Inevitably, some parts of the organisation will have little problem meeting the objectives with the resources under their control. Others will be put under considerable strain. If the plans are to have any credibility, they must consider the limitations imposed by the availability of people and equipment. The allocation of tasks to a project team can be eased by the use of a responsibility matrix. Where there are clear skills requirements for tasks these should be met first, with the less constrained resources matched to the remaining tasks - as was demonstrated in Chapter 6. A responsibility matrix is shown in Fig. 7.6. All the above provides the basis for having the necessary documentation in place to demonstrate that you have done everything possible to ensure that the project delivers as conforming to the stated requirements. Many organisations do legislate the type and style of documentation required, and this is demonstrated both in the Project Management in Practice at the end of this chapter and in the Appendix. For

Cost and quality planning!léi

Activity ; Person A

9 Person having primary responsibility O Some involvement

Figure 7 . 6 Responsibility matrix

large-scale projects the documentation is a significant workload in itself - and one potential role for a project office. The compilation and sharing cf information through a project manual is a task that can be shared using modern IT - Lotus Notes, for instance. Many organisations and individuals do still prefer the project manual to be a physical document, and for this to be available for use and inspection by any of the project team or other stakeholders in the area where the work is being carried out. Does all this make your stakeholders-customers in particular - happy or delighted? The answer to this is that if you do not have it, it will make them very unhappy, but it does not in itself cause delight. Having satisfied the conformance requirements, what can the project manager do to ensure good quality performance?

77

Quality Performance Planning In the Project Management in Practice at the end of Chapter 3 (the University of Rummidge in Splot case) there are several key stakeholder groups, all with different requirements. Compare, for example, the requirements of the council of Splot with those of the staff of Rummidge. At the outset, it would be useful to ensure that there was at least some resolution of the conflict between the objective to have a university based in Splot and the wish of the staff of Rummidge not to have to travel the 40 minutes or more to the new campus. For instance, additional time and travelling allowances could be offered that would counter some of the staff's objections. There are two further aspects that need consideration here: 1 the nature of satisfaction; 2 how then to manage the process by which service provided by the project is delivered.

The nature of satisfaction Some general principles of stakeholder management come from an appreciation of basic customer behaviour. One part of this concerns the nature of satisfaction. Here, Maister's (1993)first law of service is useful, namely that:

. 1 Phase Two - Design the protect process

satisfaction = perception - expectation That is, the satisfaction is determined by the difference between how the project is perceived or viewed by a stakeholder and how they expected it to perform. One of the greatest causes of dissatisfaction is the creation of unrealistic expectations. Where competitive tendering is required for obtaining a contract, firms have to push the limits of what they could achieve. This should be limited, however, as it does set the level of expectations against which they will later be judged. Even where there is no competitive element of bidding for resources, many people still take a very optimistic view of the project outcome. This needs to be considered carefully. Perceptions can to a certain extent be managed. A useful consideration of this element is to provide customer cues - points where the stakeholder's attention is drawn to favourable aspects of the project process or outcome. These are from the stakeholder's own experience, but importantly can be reinforced by external factors such as publicity material. Rather than relying on the assumption that 'quality speaks for itself' and that customers are able unambiguously to evaluate the quality of the outcome or the process, the project manager has a number of channels of communication that can be used to 'manage' consumer perceptions. The publicity element of the marketing communications programme potentially affects the information available to stakeholders - as demonstrated by the following example.

It seems that wherever you go in the world people moan about the state of their country's roads. The UK is no different in this respect. When a local council decided to resurface the road leading to a major tourist area in the height of the summer the anger turned from the state of the road to the stupidity of doing such work during the period of highest demand. For weeks the road was in turmoil, with significant delays being encountered during very hot weather. Local residents were horrified at the amount of work being done during 'anti-social hours' - creating noise from the works and substantial additional heavy traffic, bringing in machinery and materials to the site. Yet this all seemed to be forgotten when the project was completed and notices were posted at the side of the road stating that: 'XYZ contractors, working in conjunction with your local council, are pleased to announce the completion of the road up-grade scheme, 6 full weeks ahead of schedule.'

Even the local paper was impressed. How about this for stakeholder management?!

Cost and quality planning ! léi

A further level in the consideration of the management of perceptions was identified in section 7.5. This concerns the nattkre of the attribute of the outcome of the project as either a product or a service. As was shown then, services can be considered to have a wider array of characteristics that a customer or group of customers will consider. For instance, the outcomé of a project may be the construction of a building or the preparation of a document! Both of these have tangible qualities that can readily be assessed and will form part of the expectations and perceptions of stakeholders. There are also intangible elements of the process. These include: responsiveness- the speed of reply to requests for information or changes; communication-how readily the project teàm provided information; competence/professionalism - the apparent lability of the project organisation to deliver the outcomes; | • courtesy - the style of the treatment received by stakeholders; • accessibility-the ease with which individuals could be identified and contacted when information was required. These elements may not represent the core product of the project - the building or the document. There may be peripheral elements - documentation for the building or support information from a document o n a website. Project managers therefore also need to consider which elements ofi the project are core and which are peripheral. While the core should take the majority of the resources, you may find that provided it is achieved in a satisfactory manner, it is the peripheral product of the project on which you will be judged. Table 7.3 provides a summary of these issues for the project manager. It shows elements of the process and outcomes from the project, and how the expectations and perceptions can be managed in each case. This is a major improvement on the normal system, where managers simply ust customer complaints as a measure o f the success or otherwise of their actions. However, even if your project performs satisfactorily, do not expect customers to be pleased. You will have to find elements - maybe of the peripheral product y- which can be used to provide the excess of perception over expectation. If project management is to move to a more proactive approach to such issues, it is vital that they are considered at the strategy stage. So how do we ensure that we communicate with stakeholders and that key individuals are kept 'in the loop'? Four-field maps/deployment flow-charts do help with

Table 7.3 Management of expectations and pi cept o n s Process

Outcome

Expectations

Provide samples of process documentation; do not overpromise

Determine actual requirements; do not overpromise

Perceptions

Provide regular reports of progress

Promote positive aspects of outcome - cues

172

Phase Two - Design

Table 7 4

project process

Communication plan

Stakeholder

Communication

Timing

Format

Distribution

Person responsible

Project sponsor

Monthly

Week 1 each month

Short report

E-mail

Project manager

Accounts department

Monthly spend schedule

2 weeks before start cf month

Short budget

E-mail

Client department

Monthly

Week 1 each month

1 -page report

E-mail and noticeboard

Administrator Liason officer

this process, and ensure that those directly affected are included. Many project managers also like to include a specific communications plan as part of the planning process, and indeed this is part of both PRINCE2 methods and the PMI body of knowledge. As a tool, it is probably most useful for medium-large-scalecomplexity projects, particularly where there is a diverse stakeholder group.

Communications planning A common technique for communications management centres on the use of a table to identify the nature of the communication (what will be told to whom and in what format), the timing and who is responsible for doing it. We are not considering daily communication or simple information-sharing activities, which while vital, are not the type of 'grand communications' being considered here -typically key reports, announcements of achievements, technical updates etc. To help structure this the basic stakeholder analysis carried out as part of the project strategy formulation process is expanded in Table 7.4. While IT can assist in the distribution of information, many managers suffer from e-mail overload, restricting not only their efficiency but also the effectiveness of the communication. Other, more visible, methods of reporting are therefore preferable, as will be shown in Chapter 11.

Relevant Areas of the Bodies of Knowledge Under the cost heading, both bodies of knowledge in Tables 7.5 and 7.6 recognise the extensive systems that are already in place in organisations used to dealing with large projects for managing such endeavours. Neither recognises the problems of having to establish such systems in other organisations, nor the costs associated with running such systems. Also, while both bodies of knowledge acknowledge the performance aspects of quality management, both focus on the conformance aspects.

Cost and quality planning ! léi

Table 7.5 Relevant areas of the ARM b >dy of knowledge Relevant section

Title

Summary

24

Quality management

The basics of quality planning and control are outlined, as they were for conformance management in this chapter. The performance management issues are covered under the heading of Total Quality Management - TQM.

33

Budgeting and cost management

This is also relevant to Chapter 11 of this book. The role of the budget as the means by which a project is judged is outlined, along with some of the measures that are associated with the measuring conformance to this.

Table 7.6 Relevant areas of the PMI body of knowledge Relevant section

Title

Summary

7JL

Project cost management -resource planning

Having determned the activities, how long they will take and other resource requirements, the resource planning stage pulls all this together prior to the start of cost estimating.

7.2

Project cost management - c o s t estimating

The inputs to the process include several elements not previously discussed - including estimating publications (containing cost rates for different tasks) and risks (discussed in the next chapter in this text). Tools for estimating are identified, including analogous estimating (top-down) and use of computerised tools.

7.3

Project cost management budgeting

'Cost budgeting involves allocating the overall cost estimates to individual activities or work packages to establish a cost baseline for measuring project performance.'

8.1

Project quality management - quality planning

This includes discussion of the role of the organisational quality policy into the process, and the role of quality in any trade-off decisions (as discussed in the context of project strategy). Other issues include the role of prevention versus inspection. Conformance to requirements is treated as conformance management, and fitness for purpose alludes to some of the performance issues identified in this chapter. A significant alignment with ISO 9000 is evident. Lots of tools and techniques suggested as relevant, including Design of Experiments (Taguchi- see Bicheno, 1998).

8.2

Project quality management - quality assurance

Focusing hack onto conformance issues, the main tools and techniques here are quality planning, and quality audit. One of the results of quality assurance is quality improvement - a useful theme in this context.

i8z I Phase Two - Design the project process

7.9

sL

Summary

ilL.

2M2-

-

This chapter has been divided into two issues that are well developed in most project organisations-cost and quality. For almost all projects some consideration of these is highly relevant. Both cost and quality planning rely to some extent on the time planning - hence preceding these in the life-cycle. They are, however, interdependent. For cost planning the issue here is to determine its importance, and through the iterative process outlined to come to some decisions as to the likely costs (and hence price and profit) on the project. This also determines the project viability. There are many techniques for cost estimation, although there is a 'wishful thinking' element to some estimates. Through the idea of cost build-up, all the elements are integrated and when approved, these become the budget against which your project will be assessed. For quality, the process considered the two main inputs of strategy and customer requirements, and the outputs of a process to consider assurance - or conformance to requirements, and a process to work towards customer satisfaction/delight. This would be through first considering the definition of quality that the organisation had as relevant and the needs of the customers. This definitional issue is highly significant due to the diversity of meanings of 'quality' and this is facilitated through the application of both product and service definitions to core and peripheral outputs from the project. In managing conformance, the importance of documented systems including the use of a project manual was covered. The managing of perceptions includes the use of active cues and a communications plan. I • • • • • • I ^ ^ ^ H H H n H H I

Adopting ; standard for project planning - useful discipline or unnecessary constraint? Should all the project plans produced in an organisation conform to a particular set of rules as to how they should be constructed such as: • the notation used in diagrams; • the use of timescaled axes (the left-to-right scale where distance on the diagram is proportional to time); • the units to be used; • who can construct the diagrams; • what procedure, if any, should be used for checking the plans prior to their issue; • the filing, storage and control of plans to ensure that only the current version is being worked to; • the format of reports; . . . or is this just creating unnecessary bureaucracy? There was a clear divide among the project managers who were questioned on this issue, which can be summarised in the following composite cases.

Example i Makesure Electronics There are very tight controls as to how project plans may be drawn up. The bureaucracy of the company is considered necessary to ensure that the end-customers of the projects are kept happy (generallymilitary procurement agencies). The correct paperwork is essential to the project and would be returned to the originator if all the boxes on the accompanying forms are not fully completed. It is generally felt that the process prevents any dynamic activity taking place, but chat is appropriate for their market. Example 2 Internal consultancy in a public service Industry The role of the consultancy is one of a team that moves in to help a department solve a particular problem before moving on to the next. The team is required to be dynamic and respond quickly to changes. Plans are mainly for the use of the team in structuring how they tackle the problem. No particular convention is adhered to and there are no rules which the team believe would constrain the problem-solving process. This often causes problems with their 'customers', many of whom believe in the benefits of the more formalised approach but who nonetheless are generally satisfied with the results of their work. The arguments for and against using a highly formalised approach may be summarised as follows: For formalization • ensures that everyone is working to the same standard - gives the best chance that the plans are universally understood; • imposes a degree of discipline on the process; • can be used as a marketing feature for the project organisation; • is a requirement for some markets, e.g. some construction tenders, government contracts; • covers your back. Against formalisation • restricts creative activity; • standardisation is to some extent taken care of by the use of a common project planning software package; • can mask problems of disorder; • costly to implement and maintain systems; • it is very unusual for,two organisations to work to the same standard or set of rules - does not improve inter-organisational communication.

cost / price / profit cost-plus / reimbursable top-down

target costing bottom-up parametric estimates

• Design t h e project process

as . . . b u t . . . s synthetic estimates cost build-up cash-flow activity-based costing manufacturing/service paradigms responsibility matrix perception versus expectations

forecasts learning curves budgets work sampling conformance / performance project manual satisfaction communications plan

1 Identify the different roles that cost, price and profit can play in determining project costs. 2 In costing proposals, discuss the differences between top-down and bottom-up approaches. 3 Describe the major elements of cost in a proposal to: (a) implement a new computer system for the administration of a college or university (b) construct a new theme park (c) introduce a new range of non-paracetamol headache tablets. 4 Identify the benefits and potential disadvantages of a budget system. 5 'Evans the Steam' has set up a new business and secured a contract to build 32 locomotives for mountain railways, which are being reopened as tourist attractions. The order is to be fulfilled in two batches of 16. The first locomotive takes 30 days to assemble with seven people working full-time on it. The daily rate for a locomotive fitter is £80 and the overheads are estimated to be 50 per cent on top cf the labour rate. Evans is confident that an 80 per cent learning curve is possible. The first batch has been priced with a labour estimate of £l 6 000 per locomotive and the last 16 with a labour cost of £10 000. Comment on the pricing of the labour content and show whether the rates per Locomotive are sufficient to cover the likely actual costs. 6 Draw up a table of potential costing methods, and show where each might be appropriate, giving examples. 7 What is 'quality?' 8 What is the difference between a 'product' and a 'service?' 9 Carry out a web search of companies to see if you can find their quality policy and any relevant quality documentation. What do you notice about the procedural documents? 10 A firm has very poor quality performance and is contemplating what it must do next to improve its situation. Devise a 10-point plan to improve its quality performance.

Bicheno, J. (1998) The Quality 60, Picsie Books, Buckingham. Brooks, R. (1995) The Mythical Man-month, 2nd edition, Addison-Wesley, Harlow. BS-ISO 10006 (1997)Quality Management - Guidelines to quality in project management. Dimancescu, D. ( 1 9 9 5 ) T h e Seamless Enterprise: Making Cross Functional Management Work, Wiley, New Ytlrk. Drucker, P. (1955)Management, Butterworth-Heinemann, Oxford. Garvin, D. (1984)' What Does Product Quality Really Mean?' Sloan Management Review, Vol. 25, No. 3, pp. 25k36. Maister, D.H. (1993)MönagingtheProfessionalServiceFmn, Free Press, New York. Parasuraman, V. et al. (1985)'A Conceptual Model of Service Quality and its Implications for Future Research', Journal of Marketing, Vol. 49, Fall, pp. 41-50. Verzuh, E. (1999) The Fast Forward MBA in Project Management, Wiley, Chichester. t tt

¥ fflÉlfilMPN JHIIIl II II Bliillilirai""1': "

Badiru, AB. (1993)Quantitative Models f o r Project Planning, Scheduling and Control, Quomm, London. Chase, R.B. and Stewart, D.M. (1994)'Make Your ServiceFail Safe', Sloan Management Review, Vol. 35, No. Feigenbaum, AV. (1956)'Total Quality Control', Harvard Business Review, NovemberDecember, pp. 93-101. Goodpasture, J.C. (200l!) 'Make Kano Analysis Part of Your New Product Requirements', P M Network, May, pp. 4 2 - 4 5 . Gummesson, E (1991)'Truths and Myths in Service Quality', International Journal of Service Industry Management, Vol. 2, No. 3, pp. 7-16. Heskett, J.L. et al. (1997)The Service Profit Chain, Free Press, New York. Kleim, R L . and Rudiin, IS. ( 1 9 9 3 ) T h e Noah Project: The Secrets of Practical Project Management, Gower, |Aldershot. Maylor, H. (2000) ' Strategic Quality Management', in Strategic Management in Tourism, Moutinho, L. (ed.), CABIPublishing. Smith, N. (1995)Project 'CostEstimating, Thomas Telford, London. Zeithami, V. et al. (1990) Delivering Service Quality: Balancing Customer Perceptions & Expectations, Free Préss, New York.

I www.asqc.org - the American Society for Quality Control - some useful publications International Journal of Quality & Reliability Management, Emerald Press.

1 I S O 1 0 0 0 6 c o n t a i n s s p e c i f i c a t i o n s f o r t h e c o n t e n t of q u a l i t y p l a n s - see t h e Appendix.

An individual or organisation will wish to pursue a portfolio of projects that w i l l yield t h e greatest benefits, and so requires systematic methods for assessing proposals. These methods should be reflected in t h e preparation of proposals and t h e assessment of those proposals. Much of t h e assessment of proposals used t o be carried out by specialists, especially f i n a n c i a l justification. Twenty years ago, engineers, for example, w o u l d n o t have been expected t o be able t o c o m p l e t e t h e f i n a n c i a l e l e m e n t s of a proposal. Project management skills today should include t h e ability to speak t h e language of t h e financial analyst. Proposals can be produced and amended w i t h t h i s financial element in mind. Strategic investment decisions are identified as an area in which the normal rules of appraisal do not apply and where new methods are being sought. This chapter considers t h e basic skills required in such analysis. Specifically, t h e plans for time, cost and quality can be examined in a n u m b e r of ways. Where elements are identified that need reconsideration (e.g. shortening t h e duration), these can be integrated into t h e analysis. In addition, risk management is a key element of t h e planning and ongoing management of projects, and t h e methods forthis are well developed. This is only part of the picture, however. The planning must consider not only what might go wrong and h o w this is t o be handled but also t h e opportunities that projects present as the process is progressing.

Learning Objectives

8.1 Analysing time plans 8 2 Analysing cost plans 8.3 Analysing quality plans 8.4 R i s k management 8.5 R i s k quantification techniques 8.6 Relevant areas oft he bodies o f k n o w l e d g e 8.7 Summary Project management in practice: It's a risky business

Key terms Review questions and further exercises References

Further Notes

' the time you have . . i this chaptcr. you should be able to: Carry out basic analysis of plans with the objective 0/maximising the performance of the proj'e * Demonstrate how the negative potential of the project can be minimised through effective management. !i

H It is remarkable how often project managers spend large amounts of time compiling time plans without then analysing what they have done to see if the process could be improved. It was stated in Chapter 5 that the key objectives of the planning process were first to optimise the process, then to remove potential problems. The role of critical chain methods in this have been discussed, and indeed are one of the main means by which this process should be attempted. There are other basic approaches that also need to be considered. In Chapter 5 the issues cf slack and critical paths-were also discussed. Their optimisation provided one level of analysis. The project manager now needs to determine whether these are significant issues. Specifically, the first task is to calculate whether the project can be completed within the required time period. As part of the analysis of the time and resource plan you have prepared the issue frequently arises as to how all or part of the project could be carried out in less time. There are few projects of any scale that have the benefit of significant slack. Even if they do have slack as the project proceeds, unforeseen challenges arise and time needs t o be clawed back from a subsequent activity. Even with critical chain scheduling, when the buffer enters the 'action' zone, there is a need to shorten the remainder of the critical chain. There are a number of ways in which activities can be shortened: • provide an incentive for the work to be completed early - for example, through offering monetary bonuses to contractors for an early finish; • add additional resources such as extra people or machine capacity, provide overtime, additional contracts, etc.; • parallel activities - reduce the risk of overrun by providing parallel means of obtaining an output; • reduce the level of technological change - use existing technology; • remove the constraints to activities starting - for example, through modifying the dependency relationship between activities allowing part of an activity to start before the previous part is completely finished.

i8z I Phase Two - Design the project process

Clearly, there is a decision to be made here -either to compromise the output in terms of time or specification or to commit extra resources. Good project managers often find ways of circumventing such challenges, for example through: • personal supervision of one or more activities, which can ensure an early completion; • meeting with the project sponsor to find the time at which the output was required in reality (the absolute latest time) as opposed to what had been given in the brief; • discussion with the members of the project to find areas that have been conservatively estimated and therefore provide scope for shortening. Any of these can be achieved, usually at minimal visible cost. Where there is a formalised solution required, the addition of further resources will be needed to crash the project.

Crashing There is a limit with most activities as to how much they can be crashed as physical limits are reached, for example drying time of concrete in construction projects or the number of people who can work on one activity at any one time.' The trade-off between cost and time should be balanced such that the minimum cost schedule is achieved, i.e. the activities are crashed in a systematic way - the ones that cost the least being the first to be crashed. The following sequence should be followed once the critical path has been established. 1 The followingdata will be needed for calculating the minimum cost schedule: Normal time ta Normal cost Cn Crashed time ic (the shortest possible time an activity can take) Crashed cost Cc (the cost to achieve the shortest possible time) 2 Calculate the cost per unit time to crash each activity (the relationship between cost and time will be assumed to be linear):

3 4 5 6 7

Select those activities on the critical path as the first to be crashed. Select the one with the lowest costs per unit time (beware parallel paths!). Reduce this by one time unit. Recalculate the critical path. If total time needs shortening further, go to step 3.

Table 8.1 shows the way in which sequential crashing of activities can be achieved. The network diagram is given in Fig. 8.1, along with the critical path calculated from the normal times.

Plan analysis and rfsk ta

•:•••>•• ; * } i 8 t

Tablc98.î Activity

A B C D E

Normal time tjdaysj

Normal cost C„

Crashed time t. (days!

Crashed cost Ct

Crash cost per day

5 6 7 5 4

300. 700 500 400 700

3 5 4 3 3

600 775 650 600 1000

50 100 A'?

Figure 8.1 Network diagram The project duration with the normal activity times is 17 days. Table 8.2 shows the optimal route for taking one day at a time out of the schedule, following the seven-step method given above to achieve the minimum cost schedule. The activities cannot now be crashed any further - the absolute minimum time that the project could take is 11 days. It may be possible to avoid the need for any crashing, and indeed it may simply not be possible to achieve what is being asked within the given constraints. Where such an eventuality does arise, this method will at least give you the evidence as to why it cannot be done, which may persuade the project sponsors to ease one or more of the constraints. Having determined the new schedule, the new costs will have to be added to the cost schedule, and the following analysis of those costs.

8.2 Analysing Cost Plans The financial appraisal of project proposals will consider the potential rewards of carrying out a project against the predicted costs. The form of this evaluation will depend on: • the size of the project being considered; • the timespan over which the costs and benefits are going to be spread.

i 8 z I Phase Two - Design the project process

Table 8.2 Project duration 17 16 15 14 13 12 11

Crashed activities

Marginal crash cost

Total crash cost

50 50 125 150 150 400

50

New critical path

None

C-l C- 2 C - 3,B- 1

100 225 375 525 925

ACD ACD ABCDE ABCDE ABCDE ABCDE ABCDE

Notes

1 2 3 4 5

Notes: (1)+ (2) The cheapest of the critical path activities to crash is C, therefore crash this one. (3) All the activities now lie on the critical path and so to take one unit out of the system either take one day out of A or one day out of B-E and G D . Costs are: Option 3: A - £ 1 5 0 Option 2: B E (cheapest is B ) - £75; G D (cheapestis C ) - £50 = £125 therefore option 2 is cheaper at £125. (4) C cannot be shortened any further - neither can B. Option now is one unit out of A - cost £150 or one unit out of E and one out of D - cost £ 100 + £3 00 = £400. (5) A cannot now be crashed further, therefore take one unit out of E and one from D - cost £400.

Once the cost of completing the project has been determined from the WBS (bottom-up) or senior management (top-down)system the justification is that the r e t u r n will at least exceed the amount spent. T h i s return or payback can be analysed in a number of ways to determine feasibility or net benefit: • payback analysis - simply considers the cash-flow of costs and benefits; • discounted cash-flow - considers the 'time value' of cash-flows; • internal rates of return - s et basic return criteria on time value of money.

Payback The most basic method of financial evaluation is simply to compare the income that will be generated with the initial investment. From this a payback period can be determined, i.e. the amount of time the. revenue will need to be generated to cancel out the investment. For instance, an initial investment of £30 million will be paid back in five years if the revenue' generated is £6 million per year. Many companies set this time period as a hurdle for projects. Some examples of payback times for various items are as follows:

Manufacturing company (Western)production hardware Manufacturing company (Japanese)production hardware Computer facilities McDonald's franchise burger production

5 years 10 years 3 years 12 years

While this method has inherent simplicity it ignores: • the total life-cycle cost of an item and only considers costs within the payback period (if there are major items outside this period to be considered, e.g. high disposal or decommissioning costs, the analysis does not provide a good financial model of reality); • the time value of money (see below).

Discounted cash-flow Where the timespan extends over more than one financial period and certainly where it-is over many years, this 'time value of money' will need to be taken into account, through techniques known as discounting. The basis of the technique is the comparison between the value of the return on an investment and the value of the same sum of money had it been deposited in a bank account at a given rate of interest for the same period. The technique therefore considers the opportunity cost of the project (i.e. the cost of not doing something else with the resources). Example A project proposal aims to spend f 100 000 on information technology and £20 000 a year to maintain it for four years. The return is £50 000 per year in terms of labour savings and extra revenue generated. Would the project be worth pursuing or should other/>ptions be considered? The payback model shows that the project would generate f200 000 in revenue from an expenditure of £180 000, and so looks plausible. However, if the money was deposited in a bank account, at say 7 per cent interest p.a., the account would show a balance of £226 120 at the end of year 4 {see later work for how the calculation was carried out). It is clearly better to leave the money in the bank rather than risk it on this project. The concept of discounting is applied to the cash-flows (not just profits)to determine whether or not the projected costs and benefits are going to yield the necessary results and is called discounted cash-flow. Compound interest or

t h o s e that

have

be given . .

When a sum of money is left on deposit in a bank account it accrues interest. If the interest is paid into the account then in the following period there will be interest paid on the original amount plus interest on the first period's interest. As time progresses the amount on which interest is being paid grows, hence in the following period more interest is paid, and so on. This phenomenon is known as compound interest and was described by Einstein as the eighth wonder of the modern world! If you are

184 ! Phase: Two - Design the project process

in a situation where you have money in the bank it is a great invention. Of course, the converse is also true, that if you borrow money, you will accrue interest charges not only on the capital amount hut also on the unpaid interest levied on the amount. Discounting is the opposite of compounding. All values are considered in today's terms - called the present value (PV).We can calculate the value of the sum that would have to be deposited at a given rate of interest for a certain period to yield a stated end value. Example If you wanted to have a final value of £2012 in 12 years' time with a rate of return (called the discount rate) of 6 per cent, the present value (the amount that would have to be deposited) is £1000. The calculation is done through: PV =

I 1 + i)'

where C„ = future value of the investment n years hence i = discounting rate (Check the above example by putting Cn = 2012, i = 0.06 and n = 12. ) This basic calculation is applied to the benefits, which must then be offset against the costs. This figure is called the net present value (NPV): Net present value -

valise of benefits - present value of costs

Example If a project requires the expenditure of £100 000 now and will yield f 2 0 0 000 in 6 years, how will the manager evaluate whether or not this is viable (assuming a 10 per cent discount rate)? The PV of the benefits = (j + f)" _ 200 000

T h e P V c f the costs = 100 000

the N n = J12 800 - 100 »00 = 12 800 The minimum criterion for project selection is that the NPV > 0 at a given discounting rate. The project therefore meets this basic criterion and could be allowed to proceed.

Plan analysis and risk management • 1 8 5

The discounting rate can be taken as the interest rate which could be earned from a bank. It is more usual for the rate to be stated according to the type of project and allied to the cost of borrowing that money. A consequently higher rate than the normal bank rates is set, for example one manufacturing company had a discounting rate of 20 per cent. The effect was that it was correspondingly harder for projects to meet the minimum criterion of having an NPV of zero. It is usual for the revenues and costs to be occurring over a period of years. More complex examples such as the following can be evaluated. Example You have been asked to evaluate the following proposal. Apply the technique of discounted cash flow to the figures to show whether or not this is worth pursuing. The applicable discount rate is 12 per cent.

Start-up costs Running costs (rent, rates, staffing, etc.) Revenues Sale of business

Now £50 000

Year 1

Year 2

£30 000 £45 000 £40000 £50000

Year3 £4.5 000 £60000 £70 000

The project on this basis is worth pursuing.

Future value; The future value of an investment is the value of that money C if deposited for n years at an interest rate of i and is given by:

Rule of 72 There is a 'rule of thumb' called the 'rule of 72'. If you invest at a per cent for b years, where a x b = 72, your money will roughly double, e.g. if you invest £1000 at a fixed rate of 6 per cent for 12 years, the balance at the end of the 12th year ( 6 x 12 = 72) will be roughly £2000 (actually £2012), and if the rate was 18 per cent and the term 4 years the balance would be the same (actually£l938).

i8z I Phase Two - Design the project process

The internal rate of return (IRR) A related technique is to calculate the IRR of a project, i.e. the discount rate for which the NPV = 0. This can be done mathematically involving a number of iterations (working out the NPV with a variety of discount rates and gradually getting to the point where NPV = 0), or graphically. This does depend on the problem to solve being limited. Example A sum of £100 000 is invested over six years with a potential yield of £200 000 at the end of the sixth year. W h a t is the IRR of the project? As a starting point, an arbitrary rate of 10 per cent is chosen.

The discount rate in this case is clearly too low (the PV of the benefits is too high); try 14 per cent:

This rate is too high (the PV of the benefits is too low). Having two points for the NPV, each on either side of the zero NPV target, the value must be somewhere between the two. This is shown graphically in Fig. 8.2. As can be seen, the

14 000 12 000 000 8 ooo 6 ooo 4 000 2 000

-2000

-4000 - 6

ooo

-8 000 -10

000

Figure 8.2 NPV profile

Discount rate

•:.:

analysis and risk

i ". U 8 7

Figure 8.3

relationship within small changes in the discount rate can often be approximated to linear. Over a larger range, the change is as shown in Fig. 8.3. As the number of benefit points and payout points increases, there will be multiple IRRs. This is shown in Fig. 8.4, there being one change in direction of the curve (point of inflection) for each change in the sign ( + t o - , or - to +) in the NPV analysis.

188 ! Phase: Two - Design the project process

U s i n g IRR Using the percentage rate from an IRR. calculation has a certain appeal. It also gets over the need to choose a discount rate for a project, which can save considerable debate. On the other hand, two projects may have the same IRR but yield very different NPVs, e.g. if two proposals have the same IRR but one has a much higher NPV, the one with the high NPV is clearly preferable (risk and availability of funds allowing). The IRR also cannot cope with changes in the discount rate over time. This would have been particularly problematic over the last 10 years when bank rates have varied by as much as 10 per cent.

Using discounted cash flow (DCF) Originally it was only accountants who would be given the knowledge for the use and application of DCF, and would be the ones to accept/reject projects. Its use is now widespread and built into most financial appraisal systems and there are powerful functions in most spreadsheets (includingLotus and Excel) to assist in this analysis (see Appendix 8.2). Almost anyone can run a project through the financial constraints without needing to submit a project plan formally. This has numerous benefits to the project manager, as they can build not only time-based models of the project but also financial ones. The use of financial models has similar benefits to written project plans: • the model can be interpreted by a non-financial expert to make changes where necessary to components of the model and evaluate the impact of those changes; • no third-party intervention is necessary until a well-developed plan has been constructed. It does have certain limitations. however: • how to determine the interest rate to use - as the late 1980s showed, just about anything can happen where this is concerned. In 4 years, interest rates have fluctuated by as much as 10 per cent; • the process of forecasting cash-flow years into the future involves a high degree of uncertainty; • defining the cash-flows - they are different from the data generally presented in a balance sheet - write-off values, for example, are treated very differently. For many firms, this is an important area of intersection between the financial controllers, management accountants and project managers. In order for everyone to understand the process of financial evaluation of projects better, many organisations provide simple spreadsheet-based evaluation packages, available on intranets or on-line, that can be used by project managers for the purposes of doing initial financial evaluation to see if ideas are worth pursuing. As will be discussed later in this chapter, having such models readily available for people to try out ideas quickly and easily is one of the keys to innovation in both products and processes.

and

management ! 189

Determining cash-flew figures For DCR and IRR calculations In order to present the most accurate picture of the financial health or otherwise of the proposal the following rules should be applied (see Hogg, 1994): " cash-flows, not profit figures, should be used; • sunk costs (those already incurred) should be ignored; • only costs arising directly from the project should be included (fixed costs, which would be incurred whether or not the project goes ahead, should be excluded); • opportunity costs must be taken into account (developing one area of a business t o the detriment of another).

Determining the discount rate It is more usual for the project manager to have discount rates set as part of organisational policy. There are a number of methods for obtaining values for the discount rate - this one determinesthe risk adjusted discount rate (RADR). There are three factors that determine the discount rate: (a)= the rate charged for the use of the capital; (b) =the rate due to inflation (so that the purchasing power is not reduced); (c) = a premium factor due to the fact that the investor is taking a risk that the capital amount may never be repaid. These are selected as follows: (overall rate! =

+ «*){, +•

:

~ c)

Cash-flow considerations The rejection or deferral of a project proposal may have nothing to do with its intrinsic merit. The decision will be based on the availability or otherwise of the necessary cash. A project is almost certain to be competing against others for scarce resources, and as the project manager will have to balance the trade-offs inherent in a project, so the project sponsor will have to balance the cost-benefit trade-offs of a number of proposals. In large projects, the timing of payments may be critical f o r both the project organisation and its customers. For this reason it is necessary f o r both to know when expenditures are going to be made. In order to ease cash-flow, projects may involve stage payments. This is common both in construction and large-scale engineering. While all the necessary credit checks can and should be carried out, it is still a matter of risk for both parties when large contracts are entered into.

in vestment

appraisal The previous section was concerned with conventional theoretical approaches to the appraisal of projects. These are particularly problematic where:

190 ! Phase: Two - Design the project process

• there is no guaranteed return; • the benefit is made in terms of reduction of labour - some companies do not see this as being in Lire with their philosophy; • the project is considered to be 'strategic' in nature. A good example of these is in new manufacturing technology. Very often the justification will be made in terms of increased flexibility or capability - both of which are very difficult to assign a monetary value to. Similarly, for a service industry a new computer system may help speed the transfer of information and encourage the. organisation to become more integrated, but will be challenged to show a cash return. Other countries, particularly Germany and Japan, appear to set less demanding payback criteria where longer-term objectives are served by the investment. AS Charles Handy (1994)commented: The Japanese put long-term growth above short- or even medium-term profits, indeed the profitability calculations hardly figure in some cf their strategic decisions. To keep IBM at bay, Fujitsu won the computer contract for the water-distribution system cf Hiroshima City with a bid cf just one yen. The required rate of return for a 10 year R&D (research and development) project averages 8.7 per cent in Japan compared with 20.3 per cent in the US and 23.7 per cent in the UK. As a result, there is more investment in the future in Japan than in other countries. Some projects do have to have a 'leap of faith' attached to them - the founder of the Kentucky Fried Chicken fast-food chain presented a proposal that was not attractive to hundreds of banks (over600 said 'no'). There are many other pieces of business folklore that initially did not meet the conventional criteria. Indeed, as companies strive to find competitive advantage, conventional solutions are less likely to provide them. This is far more likely to be provided by those that challenge the limits of appraisal systems, though as the bursting of the dot-com bubble showed, there is no getting around some business basics concerning expenditure and return.

Analysing Quality Plans Project quality assurance is an emerging issue for many, and an established one for those in the fields of public contracts, defence, pharmaceuticals, information technology, automotive or construction sectors. The compilation of a quality log will be discussed in Appendix A2 as part of the requirements of PRINCE2. At a high level, there need to be plans for determining customers' expectations of the project and guiding them as to what can realistically be expected. At a systems level, there must be a set of procedures for determining how these will be met. These should be product driven - that is, they should relate to the achievement of specific elements of the project outcomes. As was demonstrated in the financial analysis, there is a set of well-developed tools that allow at least the principles of analysis to be agreed. Quality considerations

Plan analysis a id risk management i 19s

Table 8.3 Example of'tick-sheet' approach to process quality plans Activity

Standard/procedure

Planning

Prepare P1D Get sign-off from sponsor

Stage 1 Use standard forms for data collection recording interview data for study

Completed

Date

Exception

/ J

12105 10106

N N

J

30105

Y

report?

are similarly well developed and likewise the practices and requirements vary widely from industry to industry and from one organisation to another. As a minimum, the standards that should be scrutinised at this stage are those that were identified in the mapping stage of the overview process (see Chapter 4). Other criteria are included in standards such as the ISO 9000 series (see Appendix 1). At the procedural level, however, there is much to recommend the 'tick-box' approach to assessing quality plans. This involves the planning tasks relative to achieving the desired level of quality being listed for each individual or group and a procedure being agreed for identifying that it has been completed satisfactorily. These will obviously only work if the higher-level objectives for quality are agreed and if the procedures are in line with achieving these objectives. Otherwise, they add little value. An example of a sheet that could be used to show the satisfactory completion of parts of the project is shown in Table 8.3. Each activity has a standard or procedure associated with it. When these are completed, they can be ticked, or more usually signed off. Where there are problems that need to be notified, an exception report (also called an issue in PRINCE) can be prepared. In Table 8.3 there was a problem with an activity that was noted and a short report would have been appended to state the nature of the exception and how it was dealt with. The example in Table 8.3 is brief, but shows the ease with which information can be presented in summary tables. These tables should be a working tool at the activity level in the project. Apart from the utility from a management perspective, it can also provide a degree of traceability (ability to demonstrate that procedures were followed). Providing these in the form of a project manual in advance of activities shows that the issue of quality assurance is being taken seriously, and the compilation of this was discussed in Chapter 4. At a procedural level, therefore, the manager can assess whether the sub-projects have adequate assurance activities in place before starting project execution.

Risk Management An evaluation of potential risks can show at an early stage whether or not a proposal is worth pursuing. Furthermore, there are well-developed procedures for managing risk as an ongoing process throughout a project. The practices are most well developed in industries where the projects are typically very large (such as heavy engineering), or where there is a significant technical risk element (aerospace projects). There is

i8z I Phase Two - Design the project process

also a significant body of knowledge on financial risk management, which is separate from the discussion here. Instead we will focus on managing process and outcome risks. The application of active risk management is applicable and beneficial to all projects - right from small, one-person projects up to the very large complex projects that were the origin of many of the techniques. Many eventualities, given the right framework, can be identified in advance to give the project manager a chance to determine the necessary course of action.

The nature cf risk The possibility of suffering harm or loss. (PMI) Uncertainty inherent in plans and the possibility of something happening (i.e. a contingency) that can affect the prospects of achieving business or project goals.

(BS 6079) The first is very broad as a definition and causes some issue as to what then can be managed, as the possibilities for harm or loss at the extreme are almost limitless for even small projects. Risk management therefore needs to incorporate some means of not only identifying potential risks but also analysing the potential of each so that the most significant ones can be 'managed' on an ongoing basis. The second definition considers the fundamental of any looking into the future - as happens in project planning - that there is uncertainty. The objective here is not to eliminate uncertainty or risk. Indeed, an accepted notion in many aspects of business'life is that risk is proportional to return. The greater the risk that you run, the larger the return could be (if all goes well, etc.). However, this does apply in some respects to projects and their management. Risk as a trade-off Saving money on one activity by using a cheaper method of performing that activity, for instance, may result in the work having to be redone. There is the chance, of course, that it won't. The saved money trades off against the increased risk that the cheaper method presents. This trade-off can be identified with other objectives time and quality. It is the job of the project manager, through identification of the organisational objectives or product objectives to take some of the decisions.' There is also the personal view of risk - what are you as an individual prepared to accept in terms of the potential costs and benefits of taking that risk? The costs to you of a high level of risk may be much greater stress levels during the project, as you have to deal with the consequences of your decision. Whatever the process, this is one area where, outside relatively few projects where any project risk is considered unacceptable (e.g. some nuclear industry projects), the treatment of risk is based less on fact but more on partial knowledge and instinct of the project manager and those around them. Science, it certainly isn't, but there are some frameworks and tools to help. Framework

r risk m a n a g e m e n t

We shall divide the activity of risk management into three main areas identification, quantification and response control or mitigation. There are many

Identification Key risk symptoms Assumptions -

External sources TCÛ analysis

Project risk management Opportunities and threats Corrective action

/

—f Contingencyand reserves

Response control

Hideabillty

Quantification

Figure 8.5 Risk management schema

accompanying tools and techniques for each part of this, and some attributes of each are shown in Fig. 8.5.

Risk identification Key risk s y m p t o m s Key risk symptoms are those elements of the project that are likely to be indicators that something is going wrong in a project. For example, if an interim report is not received from part of the project team, the likelihood is that there are problems with that part of the project. These are usually generated by a project team. What we really need to know at this stage, however, is not the symptoms but the outcome, so that it can be quantified in the next stage of the analysis. The analysis is therefore concerned with the effects rather than the likely causes at this stage. External sources In addition to in-house brainstorming and consultation activities, it is possible to seek wider opinions. During the evaluation of research grant applications, for instance, experts in the relevant subject area will be asked for their opinions of the application and its chances of success. While such a peer review process can work against proposals that are more speculative in nature, it is one way of getting expert input/' This is only at a high level and is unlikely to be sufficiently systematic on its own. Reference to the WBS provides some further system, and then looking to the time, cost and quality plans for further issues at a detailed level. TCQ analysis Carrying out an analysis of T C Q plans has been discussed earlier in this chapter. The likely outcomes are that there is the possibility of missing key objectives, (unexpected) changes from stakeholders, technological problems, or staffing changes. These can be generated by a brainstorming exercise with the team - though they are generally fairly gloomy affairs! An alternative is to consider how it could be made to go wrong - looking at the behaviour that would conspire to cause the failure.

>94 i Phase Two -

the project process

This is generally far more productive as people are required to consider how parties to the project might behave, rather than simply what might happen almost passively to the project. Some particular aspects to consider are: • Time - the critical path or critical chain provide one unit for analysis, as do activities where there is uncertainty, particularly where there is novelty involved. Other key areas to check are time plans for the r i s k y activities that might not even be on the critical path at the start but could easily escalate if there are problems; • Cost - the estimates have uncertainty attached to them. How good are they - for instance, if the project is a first-timer? • Quality - do we have assurance of all our processes or is a key part of the project (e.g. work being carried out by a supplier or customer)outside our control systems? Assumptions Key assumptions are also worth checking at this point. A project that will change the way a company operates and is therefore going to save itself some money needs to ensure that it does not simply add the cost somewhere else. The logistics firm that installed satellite tracking devices on its vehicles because it was useful to keep track of them at all times did not factor in the costs of operating the satellite system, which more than outweighed any cost advantage that came from the availability of such information. The system, once installed, was left switched off. The assumptions of ongoing costs had not been checked. The trick is not to stop here, however, as the box below shows.

ins to be OK - we've done the identification * . . One IT firm, considering a new product that was going through development, went through the identification phase and came up with 152 risk events. These included many features of the product not being to the customers' liking to problems with the process, such as not recognising risks early enough and not controlling the specification as the project progressed. This would have been highly productive had the process been followed through with some quantification and mitigation. Unfortunately, this having been achieved, the team left the hotel where they had brainstormed this and during the next two years, over 80 per cent of their risk events actually occurred! The project was a disaster of such proportions that it almost finished the c o m p a n y . 4

The output of the first phase of this risk management process is a list of key risks that will be passed on for the next stage - quantification.

Plan analysts and risk m a n a g e m e n t 1195

Quantification The question that we are trying to answer here is 'just how risky is an event or activity?' The traditional approach to this includes a number of techniques to assess the level of risk. They have a similar approach of: 1 Assessing how likely the event is to occur - somewhere on a scale from improbable to highly likely; 2 Determining the extent of the effect of the event - for instance, is the effect likely to be: - critical - will cause the total failure of one or more parts of a project? - major - will hold up or increase costs in one or more areas? - minor - will cause inconvenience but not set the project back financially or in time? A third factor has been introduced here - that of hideability. This has been introduced because it is often noted that the reasons for failure of projects are not the mainstream risks that were identified during analysis but ones that have emerged because their progress, for instance, was not visible. This factor measures how easy it would be for one party to the project to conceal the fact that things were going very wrong with part of the project. This would mean that the problems cannot be detected until it is too late. These can be done in many ways and the quantification techniques described in the following section allow for the project manager to determine which of the risk events are going to be managed (it is improbable that all can be managed). This leads on to the final and ongoing phase of the risk management process - response control or mitigation.

Response control/mitigation Having identified the risk elements to be managed, some procedures are required to ensure that either the likelihood is reduced of that event occurring or the effects managed or mitigated in some way. For example, the risk of a critical activity running late can be reduced either through reduction in the scale of the activity or by ensuring that there is sufficient buffer at the end of the project to deal with the outcome - the project being delayed. These two approaches cover the main items in Fig. 8.5 of corrective action, and contingencies and reserves. The last issue to consider is the nature of the opportunities that arise as a result of the project. Opportunities and threats One of 3M's most successful and enduring projects has been the Post-It note. It is well described in 3M folklore how this was the by-product of another research project which produced an adhesive that was not sufficiently sticky. Had there not been a process for exploiting such a finding the discovery might have been lost. One of their developers applied the glue to small pieces of paper, which he then used to mark the very thin pages of his hymn book. Other people started asking him to

! Phase Two - Design ' • project process

make some for them for a whole range of different applications. Again the invention might have stopped there had 3M not had a process for developing such ideas. As it was, they did have such a process, and the new product was rapidly brought to market. Many great ideas are lost every day by teams and individuals because there is no route for them to be exploited. And yet, it is noted by many people who specialise in the management of innovation that it is rare that the best products are the result of a development process that started out with that objective in mind. They are the result of there being some scope in the process for such development, and have been discussed in Chapter 4. At this stage, it is worth reconsidering the issue, as it is essential that there is a route not only for threats to the project (as is the negative side of risks) bur also for the exploitation of opportunities. It is not possible to envisage every possible action or turn that the project might take, but some evaluation of the top 20 per cent of risks (those that are likely to cause 80 per cent of the delays or overrun) is going to be beneficial. When a significant risk is encountered, it is normal for some form of contingency plan to be put in place for that eventuality. Such plans should form part of the project proposal. Formal use of risk analysis techniques may be required by: • company policy; • clients (especiallyfor defence contracts). The benefits are considered to be: • providing a vehicle for improving project plans and better reflecting reality; • highlighting areas for attention and contingency planning at the planning stage; attempting to harness much of the 'gut-feel element' of risk assessment and use this vital intuition as a starting point for further analysis; • allowing the quantification of risk to build up experience in a structured way and allowing this factor to be traced historically for future benefit in other projects. The following section considers some of the most widely used techniques for risk quantification, though it is stressed that this is only part of the process. It needs to be followed through with response control or mitigation, and by ensuring that this is not a one-off activity, as risks inevitably emerge during a project.

8.5

Risk Quantification Techniques As for planning, risk analysis is an attempt to provide a mathematical model of the scenario in an attempt to allow the brain to comprehend the effect of a large number of variables on the outcome. Other risk quantification techniques that will be discussed here are: • expected value; • sensitivity analysis; Monte Carlo simulation;

Plai analysis and

management 1197

• failure mode effect analysis; • PERT. Of these, PERT is the most widely accepted, with expected value, sensitivity analysis and Monte Carlo simulation also widely used.

Expected value The expected value of an event is the possible outcome times the probability of its occurrence, e.g. if a project has a 50 per cent chance of yielding a profit of £30 million, the expected value is 0.5 x 30 million = £15 million. This provides a basic tool for evaluating different project proposals as an investment decision-maker. Two projects require funding - one has a potential return of £200 million and the other a return o f f 15 0 million. The first has a 5 0 per cent chance of yielding this, while the second has a 70 per cent chance. The expected value calculations yield £100 million for the first and £105 million for the second - on this basis the second is more attractive.

Sensitivity analysis This works similarly to PERT analysis - an expected value for the main inputs to the project is put into the calculations of the outcome as well as an optimistic (inthis case +n per cent) and pessimistic {-n per cent) value (valueof n is often 10). This will show the effect on the outcome of a change in the variable considered and can show where management control attention should be focused. The price of'materials and labour for a project is likely to fluctuate. As the contract price needs to be fixed in advance, the project manager needs to see the effect of fluctuations on bottom-line performance. The material is one of the major contributors to the cost of the project. Overheads are calculated on the basis of 175 per cent of direct labour. costs:

Materials - £0.60m Direct labour - £0.20m Contribution to overheads - £0.35m Revenues: fixed at £l.2m The calculations are carried out in Table 8.4 as follows: revenue - material costs - combined labour and overhead costs = profit As can be seen, the effect of the changes in costs means that although on initial inspection this looks viable, the figures indicate that should materials increase by 10 per cent, unless there is a drop in the labour costs of the project it will make a loss.

i8zIPhase Two - Design the project process

Table 8.4 Sensitivity analysis

-10%

Labour + overheads

-10%

Expected

+10%

1.2 -0.54

-0.6

-0.66

-0.495 0.165

-0.495 +0.105

-0.495 +0.045

1.2 -0.54 -0.55

-0.6

-0.66

-0.55 +0.05

-0.55

+0.11

+10%

Materials Expected

1.2 -0.54 -0.605 +0.055

1.2

1.2

-0.01

1.2 -0.6

-0.605 -0.005

—0.605 -0.065

Monte Carlo simulation This method requires the use of a computer to be practicable, and uses a range of values or distribution, rather than single values, for time, cost and other estimates, and then shows the effect on the finances or other critical project factors. Monte Carlo simulation is available as an extension to most popular spreadsheet packages (including Lotus and Excel), as well as dedicated pieces of software (see Further Information at the end of this chapter). PERT provides an in-built level of risk assessment, considering as it does three values for time estimates (optimistic, most likely and pessimistic). It does not tell you how likely these are to occur or their effects. Considering this alone results in only a partial picture of the situation. The objective of the risk analysis is to enable the project manager to include contingencies, that is, having identified the most risky elements of the project, to put some actions in place to make sure that the risk is minimised.

Failure mode effect analysis One of the most useful tools, which has been used extensively in industry for many years and is readily applied to projects, is failure mode effect analysis. This considers three elements cf each activity or path through the activities. These were described above as likelihood, severity and hideability. Each of these can be analysed individually, though a practical method is to consider the total risk to be the product of these three elements. Each can be rated on a 1 - 1 0 scale and the total risk is:

Table 8.5 FMEA a n a l y s i s Activity

Development carried out by contractors Development carried out in-house

Severity

Hideability

Likelihood

Total

8 8

9 2

2

144 112

7

{likelihood) x (severity) x (hideability) Two activities are analysed as in Table 8.5. The opportunity exists for development work to he carried out in-house or by contractors. The risk analysis shows that there is potential for failure here - and that the failure would be severe to the project. The criteria in the example are relative to quality objectives. The method works equally well for time plans. Activities from the critical path (or those with little slack) can he subject to the same criteria and then action taken based on the activities' relative totals. This is the basis of the team-based risk assessment, described in the Project Management in Practice at the end of this chapter.

Programme evaluation and review technique [PERT) Programme evaluation and review technique (PERT) was developed for use in the Polaris project in the USA in 1958. Due to the claimed success of the technique in this case, it was for a long time held up as the model that everyone should work to in planning projects (though see the note on PERT in Chapter 6). The technique is intended to deal with the likelihood that the single value given as the estimated time for completion of activities is going to have a degree of error associated with it. Instead of taking a single time, three time estimates for each activity are required: optimistic time - how long the activity would take if the conditions were ideal; • most probable time - t i m e if conditions were 'normal'; • pessimistic time - how long the activity would take if a significant proportion of the things that could go wrong did go wrong. There is an infinite number of possibilities as to how this range is distributed, e.g. optimistic and most probable times may be close together with the pessimistic time considerably different from the other two, or all three may be very close together. This flexibility in the distribution that is applied is one of the major appeals of the technique. The analysis that can be applied can be very simple or go into complex statistics that require the use of a computer. The following example can be done without the need for this. The project that was planned in the critical path analysis section was further examined, and the times estimated for each of the activities expanded to include an optimistic and a pessimistic element. The result is shown in Fig. 8.6. The activity arrows now have three figures associated with each in the order optimistic, most likely, pessimistic, e.g. for activity A

t o o j Phase- T w o - Design r • project process

Figure 8.6 Network diagram showing optimistic, most probable ami pessimistic

limes

optimistic time = o = most likely time — in = 5 pessimistic time = p =7 In order to schedule these activities, it is necessary to calculate the expected time for each activity. This is done by calculating: expected time = [a + 4m + p\f6 In the case of activity A, the expected time = [3 + [4 x 5] + 7]/6 = 5. For activity B, the expected time = [2 + [4 x 3] +10]/6 = 4. This distribution can be represented by Fig. 8.7. The example is now completed using the expected times shown in Table 8.6 instead of the most likely times and a critical path analysis carried out. Putting these figures into the network diagram and carrying out the forward pass gives a project expected duration of 25 days. This is not considerably different from the 24 days that the original analysis revealed. The reverse pass reveals that the critical path has jk

most likely optimistic! expected

pessimistic

1 2 3 4 5 6 7 8 9 1 0 Time

Figure 8.7 Distribution of estimated times for an activity

Plar. • i

and risk

ar i • ••

• 201

Table 8.6 Activity

A B C D E F G H

Optimistic time o

Most likely time m

3 2 3 4 5 5 4 6

5 3 4 5 6 7 5 8

Pessimistic time p

7 10 5 12 7 9 12 10

Expected time

5 4 4 6 6 7 6 8

changed. Originally it was ACFH, but with the consideration of the ranges of times, it is now ADGH. In order to save drawing the distribution each time, it is possible to compare activities in terms of a variance measure. This is calculated as follows: variance of activity tune = j'j'p - oj/6] ; Explanation The standard deviation of each activity's time is approximated to one sixth of the difference between the optimistic and pessimistic times. The variance = [standard deviation]'. The standard deviation is the normal measure of spread in a set of numbers, and is represented by the Greek symbol a or sigma. It is a characteristic of a normal distribution that 99.7 per cent of the numbers being analysed (called the 'population') fall within ±3a of the mean (the average of the population). In this case, the extremes of the distribution are represented by the optimistic and pessimistic times. The normal distribution is applied and the approximation is made that between these two values, 99.7 per cent (practicallyall) of other values will lie. The upper limit (mean+3a> and the lower limit (mean-30) are equated to the pessimistic and optimistic times respectively. The distribution that is being considered is the beta distribution, a generic form of which the normal distribution is a special case. Unlike the normal distribution (represented by a bell-shaped curve) the beta distribution need not be symmetrical about the mean, i.e. it can be skewed. It therefore encompasses the effects of one cf the values of o and p being further from m than the other. Applying this to the example: v a r i a n c e t o r activity R = [j 10 - 2j/6j~ = 1 . 7 8

Thus we have a mathematical measure for what can be seen from the figures, that the variance (as a measure of uncertainty with this activity) is much higher for activity B than for A, i.e. there is more uncertainty in the completion of B than A.

Figures such as the variance are of greatest practical use in estimating the likelihood that a set of activities will be completed within a certain time. The steps involved are as follows. 1 Calculate the variance for each activity. 2 Calculate the variance for each path (a sequence of activities that will take you from the first event to the last - there are generally many paths through networks) in the network diagram. This is done by summing the variances of all the activities on the path. 3 Calculate the standard deviation for that path: <Jrat-„ =

variance.

4 Identify the time within which you wish to complete the activities. 5 Calculate the value for z determined by: z = {specified time - expected rime]/oBadl 6 Refer to Appendix 8.1 at the end of this chapter - the value of z corresponds to a probability (expressed between 0 and l).This is the probability that the activity path will be completed within the time identified in 4. The probability that all the paths that have been considered will be finished in the given time is found by multiplying the probabilities for each of the paths together. This method is best illustrated by an example. If the middle section of the previous example is used, and the events 20-60 considered, the steps are as follows: 1 Calculate the variance for each activity (shown in Table 8.7). 2 Now it is necessary to identify the paths. There are several rules regarding the selection of paths for this process: • Each activity must be on only one path - w h e r e activities are shared between several paths, the one that is the critical path should be used; • Activities on different paths need to be independent - there should be no unwritten logic relationship between activities on different paths. Table 8.7 Activity

B C D E F G

Optimistic time o

Most likely time m

Pessimistic time p

Variance

2

3 4 5

10

6

7 9

1.78 0.11 1.78 0.11 0.44 1.78

3 4 5 5 4

7 5

5 12

12

Table 8.8

Path

Path variance

Standarddeviation

z

Probability of completion in 11 days

B-E C-F D-G

1.78 + 0.11 = 1.89 0.11 + 0 . 4 4 - 0 . 5 5 1.78 + 1.78 = 3.56

1.37 0.74 1.87

[11[11[11 - 12111.87= -0.53

0.7673 0.5000 0.2981

With these in mind the three paths that need to be considered here are: B-E C-F D-G

3 4 5 6 7

The following steps are calculated in Table 8.8. The variances are then summed for each path. The standard deviations are then calculated. The time required for completion is arbitrarily 11 days. The z values are added. The probabilities are derived from Table 8.6. The probability of each of these times being achieved is clearly highest where the expected time was less than the time required for completion (path B-E). These values are now required to find the probability that all three paths will be completed in 11 days. This is achieved through the multiplication of the three probabilities. In this case, the probability that the three paths will all be completed in 11 days is: 0.7673 x 0.5000 x 0.2981 =0.1143 1.e. there is less than a 12 per cent chance that this p a n of the project will be completed in 11 days.

Many authors choose to use PERT as the generic title for network techniques. This is perfectly valid - the original CPA that was carried out using a single value for the estimated time can be taken as a special case of PERT, where the most likely = optimistic= pessimistic time.

The use of PERT in practice As mentioned at the beginning of this chapter, PERT was very popular in the 1960s. It appears to be less well used today as many project managers feel that the additional complexity is not justified by the return in the accuracy of the plans produced. Also, it was suggested that in organisations where this kind of planning is prevalent, the use of PERT can encourage people to be less accurate in their

i8z I Phase Two - Design the project process

forecasting. This said, for many very large-scale projects and particularly in the defence sector, this technique remains popular. For smaller projects, there is likely to be little benefit in attempting the kind of analysis that PERT permits.

8.6 Relevant Areas of the Bodies of Knowledge Both bodies of knowledge in Tables 8.9 and 8.10 are clear about the nature of risk and risk management, and the importance that this issue has for the successful management of projects. The PMI body of knowledge is far more extensive in its coverage of specific techniques and the role of systems to deal with risk on an ongoing basis. In other respects, neither of the bodies of knowledge is particularly strong on the analysis of plans, though both make it clear the need and role of a business case. Table 8.9 Relevant areas of the APM body of knowledge

8.7

Relevant section

Title

Summary

23

Risk management

The identification of risk and its management is stated as a key part of managing projects. Alongside the identification, quantification and mitigation discussed in this chapter, the issue of risk transfer is also mentioned - whereby the impact of the risk is reduced by another party taking responsibility for that. Risks are not only downside, but upside as well. 'Risk management should balance the upside opportunities with downside risks, doing so in an open, clear and formal manner.'

Summary The analysis of plans provides the opportunity for problem prevention as well as performance maximisation. The issues of time, cost and quality are central to this, but are not the only criteria for which plans should be analysed. For instance, environmental impact assessment plans, or human resource performance plans, might be appropriate for particular projects. In time analysis, the basic issue is whether there is sufficient time to perform the project. Often there will need to be compressions of that time period, and the methods for time compression, including crashing to a minimum cost schedule have been discussed. Cost analysis is central to this stage of the analysis, and there is a wide range of tools available to carry this out. Last but not least of the main three objectives is quality. Assessing quality plans can be done through checking the process designs to determine whether procedures for assurance and performance are in place.

F

: . analysis and risk management ; sag

Table 8.10 Relevant a r e a s of t h e PMI body of knowledge Relevant section

Title

Summary

11.1

Project risk management - risk management planning

Treating risk in the same way as TCQ is a comprehensive means of dealing with the subject. The consideration of organisational policies both explicit and inferred (inferredfrom actions of the organisation) and the roles of individuals in'the process shows the potential scope of such an activity in a large project. The risk management plan developed includes the risk tolerance of the organisation.

11.2

Project risk management - risk identification

From the risk plan, there are number of methods that can be employed for risk identification. These are largely as described in this chapter. In addition, triggers are identified as 'indications that a risk has occurred or is about to occur'. These are specific outputs from the risk-identification process.

11.3

Project risk management qualitative risk analysis

The quality of the data provided through the risk identification is first established. Then a number of techniques are applied to determine in qualitative terms (low, medium, high, for instance) the nature of the severity and likelihood of occurrence. The final stage of this process can be to turn these into a quantitative assessment, to feed into a quantitative analysis.

11.4

Project risk management quantitative risk analysis

This section focuses on the use of quantitative techniques to determine the magnitude of particular risks and their impact on the schedules and costs. PERT and Monte Carlo simulation are mentioned, and the probability distributions for such analysis discussed.

11.5

Project risk management - risk response planning

The objective of this part of the risk management process is to ensure that there is some action as a result of a particular risk being identified. By assigning an ' owner' to each risk, and then putting in place plans to avoid, transfer, mitigate or accept that particular risk outcome, the outcome is a risk response plan. This may include the apportionment of contingency funds or time, or changes to plans, contracts or set in train other processes.

11.6

Project risk management - risk monitoring and control

This section reinforces the nature of risk management as an ongoing process, linked in to the control systems for other objectives of the project. The compilation of a risk database is suggested, as is the use of checklists to manage the feeding of risk knowledge gained to future projects.

T h e issue of risk is c e n t r a l t o the c o n s i d e r a t i o n of projects. T h e r e is always risk w i t h any endeavour, and h o w this is m a n a g e d will have a large i m p a c t o n t h e success o r o t h e r w i s e of the project. T h e basic process of identification, q u a n t i f i c a t i o n a n d mitigation, p r o v i d e s a s t r u c t u r e f o r t h i s activity, a n d t h e m a i n t o o l s f o r risk m a n a g e m e n t are described.

It's a risky business Four friends wanted to start a business. After much discussion, they had hit upon the idea of launch a mail-order toys and games business. They were in the development stage of their business plan and wanted to be sure that they had been thorough with their planning. To reinforce this, they had just received a letter from a group of venture capitalists, agreeing to fund the start-up. It concluded its review of their plan by stating: The business plan presents a credible opportunity for all involved and we are prepared to approve the funding request, subject to a risk analysis being carried out on the project to start the business.

The group were stunned - the funding that they had been hoping for was suddenly a reality. Just one thing stood in their way - that damned risk analysis process. They started with identifying the key risk elements that could face the business during its start-up phase. They considered the process between the time that they received the funding and day one of trading. What could possibly go wrong? Lots of things. They brainstormed the possibilities and recorded them. They then considered the effect that these would have on the project as a whole. The list they generated provided them with too much to do - they would spend all their time trying to prevent things going wrong and not enough making sure that the positive steps towards the business opening were happening. They needed to prioritise the events. As importantly, what would happen, when they eventually occurred? Who would be responsible for each of them? on what basis could they rank each risk, in order to identify the most important risks for which they would develop mitigation and ownership? They decided to use a table to show the risk event, the likelihood, the severity and by multiplying the two providing a risk priority number (RPN).This would then allow ranking of the risk elements. For the three highest ranked elements, the group then generate a mitigation process with someone in the group taking ownership of that process. The result of their deliberations is shown in Table 8.11. As can be seen, the top three risks were identified and mitigation tasks put in place to either prevent the risk event happening or to reduce its effect. The initials of the 'owners' of that risk in the last column show who has agreed to monitor that set of events and ensure that the mitigation is put into place before the project suffers from that event occurring.

Case discussion 1 What further methods could have been used to generate ideas for the identification part of the risk process? 2 How scientific can the method that was used to rank the risks claim to be? 3 What should happen as the project progresses to manage risk? Suggest a plan for the remainder of the project (the three months up to the business launch).

Plan analysis • : f risk management j 307

Table 8.11 Simple risk management table Risk event

Likelihood

Brochure not ready in time for business launch

4

"Website not ready in time for business launch

Severity

RPN (rank)

Mitigation

Owner

8

32 (2)

Identify rapid printing firms; develop artwork early

AL

4

9

36(1)

Website to be ready 3 weeks prior to launch for testing; use simple version first

SL

Banking facilities not ready

2

10

20 (J)

Initial stock . not ready

3

8

24 (3)

Place orders immediately for opening stock

KM

Group cannot agree on items to be sold

3

7

21(4)

Loss of one of group members

1

10

10(6)

crashing minimum cost schedule resource smoothing/levelling payback discounting internal rate of return (IRR) PERT quantification cost compound interest risk database

net present value (NPV) risk-adjusted discount rate expected value sensitivity analysis Monte Carlo analysis failure mode effect analysis (FMEA) identification mitigation contingency stage payments risk transferral

1 From the network diagram shown in Fig. 8.8, identify the critical path and show the project duration. In Table 8.12 the crash cost per day is given along with the crash time. Use the information to show the sponsor cf this project the most economical way of taking two days out of the plan. You should explain all the terms used.

i8z I Phase Two - Design the project process

Tables.12

Activity

Normal time (days)

Crash cost. per day

Crash time (days)

A

10

50

6

B

6

30'

C

2

-

D E

4

40

6

F

8

80 100

2

2 In the development of the Sinclair C5 (a recumbent, electrically assisted tricycle) there was the opportunity to develop both new power supplies and new motors, but both required additional development time. The decision was taken to proceed with existing technology - i n this case a conventional car battery and the motor from a truck engine cooling fan. Intended performance was significantly compromised as a result. Evaluate the risks that the company ran by pursuing this course of action and suggest alternative means by which a better technical result might have been achieved. 3 Evaluate, using discounting techniques, which option, lease or buy, is most financially beneficial in the scenario given in Table 8.13. You should consider the discount rate to be 10 per cent and the period of consideration to be five years. Table 8.13

Purchase/lease ccst Annual operating cost Maintenance cost Salvage value at the end of five years

BUY

Lease

£50 000 £4000 per year £2000 per year £20 000

£10 000 per year £4000 per year Maintained by leasing co. not applicable

The purchase of new office furniture for a boardroom has caused conflict between two factions within a company. One faction argues that the company should buy modern furniture, which will cost £12 000, and can be scrapped

and risk management i 209

(replaced with zero salvage costs) in six years' time. The other favours the purchase of antique furniture which costs £30.000, but can be sold for £30 000 in six years' time. The modern furniture will cost £500 in maintenance and the antique £1000. You have been asked to arbitrate the decision and resolve the conflict using financial methods (calculatethe net present value of each scheme, using the company discount rate of 12 per cent). Discuss the three main pricing strategies and indicate which one you feel provides the greatest benefits to customers and which to suppliers. 6 What are the benefits of the 'tick-box approach' to quality assurance at a procedural level in a project for both the project team and the manager? 7 What are contingencies and why should the project manager identify these? 8 Consider a project which may be carried out for reasons other than profit, such as building a non-toll road. How might the benefits of such a project be assessed to provide a justification for its being carried out? 9 Considering the critical path alone for the project Table 8.14, calculate the activity variances and the total variance of the critical path. From this, calculate the standard deviation. Determine the probability of the project being completed within the following times: (a) 30 days. (b) 40 days. (c) 42 days. Table S.14 Activity

Optimistic time

Most likely time

Pessimistic time

3 1 3 8 1 1 2 2 16

4 2 10 10 2 3 3 6 20

11 3 11 18 3 5 4 10 30

A B C D E F G H J

K

i

l

l

10 A construction project requires fve major pieces of work to be completed which are independent. These five paths have variances as given in Table 8.15. Determine the probability that the project will be completed within: (a) 18 weeks. (b) 16 weeks. (c) 13 weeks.

i8z I Phase Two - Design the project process

Path

Expected duration (weeks)

Variance

10 8 12 15 14

1.21 2.00 1.00 2.89 1.44

A B C D E

11 You are in charge of a new product launch. This will be a formal press launch, where the product is introduced by your managing director and the press and major customers have the opportunity to see the product for the first time. The formalities are to be preceded by a buffet. Before hiring the catering service it is necessary to identify the guest list and invite them to determine numbers. Because of tied arrangements between certain venues and the caterers, you will have to select the venue, then select the caterers. The launch publicity materials will need to be designed, and artwork carried out before brochures can be printed. These must be available on the day. The promotional boards to be placed around the launch room should be constructed once the publicity materials have been designed. No artwork is required for these. A sound system is required and must be hired once the venue has been identified. The activities are included in Table 8.16, together with the best estimates for optimistic, pessimistic and most likely times. The MD has asked you to set the launch date (all times are in weeks). Show the criteria that you have used, and include the network diagram.

Table 8,16 Activity

Description time Select launch venue Design launch publicity Have artwork prepared Print brochures Construct promotion stand Order sound system Select caterers Develop invite list Invite and get replies

Optimistic time

!

Most likely

1

Pessimistic time

4

Man analysis arid risk m a n a g e m e n t i a t *

Handy, C. (1994) The Empty Raincoat, Hutchinson, London. Hogg, N. (1994) Business Forecasting Using Financial Models, Financial Times Pitman Publishing, London. Monden, Y. (1992) Cost Management in the New Manufacturing Age, Productivity Press, New York. Waldron, D. and Galloway, D. (1988)'Accounting - The Need for a New Language f o r Manufacturing', Management Accounting, Vol. 66, No. 10, November, pp. 34-5. MmmmBmrnmmmsmmmsmmmmmmKBmmmmmm^mmmmmmmmmam

BS6079: Part 3: 2000, Guide to the Management of Business Related Project Risk. Chapman, C . and Ward, S. (1997) Project Risk Management: Processes, Techniques and Insights, Wiley, Chichester. Chicken, J. (1998)The Philosophy of Risk, Thomas Telford, London. Gray, C.F. and Larson, E.W. (2000) Project Management: The Managerial Process, McGraw-Hill, Singapore, Chapter 5. Kaplan, R.S. and Atkinson, A.A. (1989)Advanced Management Accounting, 2nd edition, Prentice Hall, Englewood Cliffs, NJ. Leach, L. (2001)' Putting Quality in Project Risk Management', PM Network: Part 1: February 2001, pp. 3 5 - 4 0 Part 2: March 2001, pp. 47-52 Lumby, S. (1991)Investment Appraisal and Financial Decisions, 4th edition, Chapman &C Hall, London. Pender, S. (2000) 'Managing Incomplete Knowledge: Why Risk Management is N o t Sufficient', International Journal of Project Management, Vol. 19, pp. 79-87. Williams, T.M. (1995) 'A Classified Bibliography of Recent Research Relating to Project Risk Management', European Journal of Operational Research, Issue 85, pp. 18-38. www.cs-solutions.com - for information about Risk+ software www.predict.com - for information about Predict Risk management software www.pertmaster.com - for information about Pertmaster software

Motes 1 There is a saying that 'no matter how many people you put on the job, it still takes 9 months to have a baby.' 2 I am grateful to Paul Walley of Warwick Business School for sharing his thoughts on this subject. 3 For a further listing of such tools and techniques, see BS 6079:2000: Part 3, Annex B. 4 See Project Management in Practice - t h e VCS case - at the end of Chapter 14.

sua I Phase

- Design

project p r o c e s s

Table

) Areas under the standardised normal curve From

0.09

0.08

0.07

0.0003 0.0004 0.0005 0.0007

0.0003 0.0004 0.0005

0.06

0.05

0.04

to -

0.03

0.02

0.01

0.00

0.0003 0.0005 0.0007 0.0009 0.0013

0.0003 0.0005 0.0007 0.0013

-3.4 -3.3 -3.2 -3.1 -3.0

0.0003 0.0004

0.0003 0.0004

0.0003 0.0004

0.0003 0.0004

0.0003 0.0005

0.0006 0.0008

0.0006 0.0008

0.0006

0.0006

0.0006

0.0008

0.0009

0.0010

0.0011

0.0011

0.0011

0.0008 0.0012

0.0012

0.0009 0.0013

0.0014 0.0019

0.0014

0.0015

0.0015

0.0016 0.0022

0.0027 0.00.37 0.0049

-2.8

0.0028 0.0038 0.0051

0.0029 0.0039 0.0052

0.0030 0.0040 0.0054

0.0025 0.0034 0.0045

0.0026

0,0026

0.0018 0.0024 0.0033 0.0044 0.0059

-2.9

0.0021

0.0017 0.0023 0.0032 0.0043 0.0057

0.0019

0.0021

0.0016 0.0023 0.0031 0.0041 0.0055

0.0018

0.0020

0.0035 0.0047

-2.6

0.0060

0.0062

-2.5

0.0066

0.0068

0.0087 0.0113 0.0146

0.0089

0.0071 0.0094

0.0075 0.0099 0.0129 0.0166

0.0078 0.0102 0.0132 0.0170 0.0217

0.0080 0.0104 0.0136 0.0174

0.0082 0.0107 0.0139 0.0179

0.0188

0.0073 0.0096 0.0125 0.0162 0.0207

-2.4 -2.3

0.0150 0.0192

0.0069 0.0091 0.0119 0.0154 0.0197

0,0222

0.0228

-2.0

0.0233 0.0294 0.0367 0.0455 0.0559

0.0239 0.0301 0.0375 0.0465 0.0571

0.0244 0.0307 0.0384 0.0475 0.0582

0.0250 0.0314 0.0392 0.0485 0.0594

0.0256 0.0322 0.0401 0.0495 0.0606

0.0262

0.0268

0.0281 0.0351 0,0436 0.0537 0,0655

0.0287 0.0359 0.0446 0.0548

-1.6

0.0618

0.0336 0.0418 0.0516 0.0630

0.0274 0.0344 0.0427 0.0526 0.0643

-1.9

0.0329 0.0409 0.0505

0.0668

-1.5

0.0681

0.0823 0.0985 0.1170 0.1379

0.0694 0.0838 0.1003 0.1190 0,1401

0.0708 0.0853 0.1020 0.1210 0.1423

0.0721 0.0869 0.1038 0.1230 0.1446

0.0735 0.0885 0.1056 0.1251 0.1469

0.0749 0.0901 0.1075 0.1271 0.1492

0.0764 0.0918 0.1093 0.1292 0.1515

0.0778 0.0934

0.0793 0.0951 0.1131 0.1335 0.1562

0.0808 0.0968 0.1151 0.1357 0.1587

-1.4 -1.3

0.1611 0.1867 0.2148 0.2451 0.2776

0.1635 0.1894 0.2177 0.2483 0.2810

0.1660

0.1711 0.1977

0.1762 0.2033 0.2327 0.2643 0.2981

0.2358 0.2676 0.3015

0.1814 0.2090 0.2389 0.2709 0.3050

0.1841 0.2119 0.2420 0.2743 0.3085

-0.9

0.2578 0.2912

0.1736 0.2005 0.2296 0.2611 0.2946

0.1788

0.2514 0.2843

0.1685 0.1949 0.2236 0.2546 0.2877

0.3121 0.3483 0.3859 0.4247 0.4641

0.3156 0.3520 0.3897 0.4286 0.4681

0.3192 0.3557 0.3936 0.4325 0.4721

0.3228 0.3594 0.3974 0.4364 0.4761

0.3264 0.3632 0.4013 0.4404 0.4801

0.3300 0.3669 0.4052 0.4443 0.4840

0.3336 0.3707 0.4090 0.4483 0.4880

0.3372 0.3745 0.4129 0,4522 0.4920

0.3409 0.3783 0.4168 0.4562 0.4960

0.3446 0.3821 0.4207 0.4602 0.5000

-0.4 -0.3

0.0002

0.0003 0.0005 0.0007 0.0010

0.0036 0,0048 0.0064 0.0084 0.0110

0.0143 0.0183

0.0116

0.1922 0.2206

0.0122

0.0158 0.0202

0.2266

0.0212

0.1112

0.1314 0.1539 0.2061

0.0010

-2.7

-2.2

-2.1

-1.8

-1.7

-1.2 -1.1

-1.0 -0.8

-0.7 -0.6

-0.5

-0.2

-0.1 -0.0

Plan analysis and risk manager]itn! ' 2 1 3

Table A.i(b) Areas under the standardised normal curve from

to -?

0.05

0.06

007

0.08

0.09

0.5160 QSSS7 0.5948 0.6331 0.6700

0,<31-99

0.5239 0.5636

0,5279 0.5675 0.6064 0.6443

0.5319 0.5714 0.6103 0.6480 0.6844

0.5359 0.5753 0.6141 0.6517 0.6879

0.7019 0.7357 0.7673 0.7967 0.8238

0.7054 0.7389 0.7703 0.7995 0.8264

0.7088

0.7224 0.7549 0.7852 0.8133 0.8389

0.8508 0.8729 0.8925

0.9222

0.8485 0.8708 0.8907 0.9082 0.9236

0.9345 0.9463 0.9564 0.9649 0.9719

0.9357 0.9474 0.9573 0.9656 0.9726 0.9783 0.9830

0,991-8

0.9778 0.9826 0.9864 0.9896 0.9920

0.9938 0.9953 0.9965 0.9974 0.9981 0.9987

0.00

0.01

0.02

0.03

0.5000 0.5398 0.5793 0.6179 0.6554

0.5040 0.5438 0.5832 0.6217 0.6591

0.5080 0,5478 0.5871 0.6255

0.5120 0.5517 0.5910 0.6293 0.6664

0.6915 onzsi 0.7580 0.7881 0.8159

0.6950 0.7291 0.7611 0.7910 0.8186

0.8413 0.8643 0.8849 0.9032 0.9192

0.8438 0.8665 0.8869 0.9049 0.9207

0.8461

0.9332 0.9452 0.9554 0.9641 0.9713 0.9772 0.9821 0.9861 0.9893

0,9990

0.9993 0.9995 0.9997

0.6628

0.04

0.5596 0.5987 0.6368 0.6736

0.6026

0.6406 0.6772

0.6808

0,1173 0.7454 0.7764 0.8051 0.8315

0.7157 0.7486 0.7794 0.8078 0.8340

0.7190 0.7517 0.7823

0.8554 0.8770

0.8577 0.8790 0.8980 0.9147 0,9292

0.8599 0.8810 0.8997 0.9162 0.9306

0.8621

0.9251

0.8531 0.8749 0.8944 0.9115 0.9265

0.9370 0.9484 0.9582 0.9664 0.9732

0.9382 0.9495 0.9591 0.9671 0.9738

0.9394 0.9505 0.9599 0.9678 0.9744

0.9406 0.9515

0.9418 0.9525 0.9616 0.9693 0.9756

0.9429 0.9535 0.9625 0.9699 0.9761

0.9441 0.9545 0.9633 0.9706 0.9767

0.9798 0.9842 0.9878

0,9901-

0,9906

0,9909

0.9922

0.9925

0,99Z9

0.9931

0.9808 0.9850 0.9884 0.9911 0.9932

0,9812 0.9854 0.9887 0.9913 0.9934

0.9817 0.9857

0,9898

0.9793 0.9838 0.9875 0.9904 0.9927

0,9803

0,9868

0.9788 0.9834 0.9871

0.9940 0.9955 0.9966 0.9975 0.9982

0.9941 0.9956 0.9967 0.9976 0.9982

0.9943 0.9957

0.9945 0.9959

0.9946

0,9968

0,9969

0.9977 0.9983

0.9977 0.9984

0.9970 0.9978 0.9984

0.9948 0.9961 0.9971 0.9979 0.9985

0.9949 0.9962 0.9972 0.9979 0.9985

0.9951 0.9963 0.9973 0.9980 0.9986

0.9952 0.9964 0.9974 0.9981

0,9987 0.9991

0.9987

0,9988

0,9988

0,9989

0,9989

0.9989

0,9991

0,9991

0,9991

0,999Z

0.9992

0.9990 0.9993

0.9993

0.9994 0.9995 0.9997

0.9994

0.9994

0.9992 0.9994

0.9994

0,9996

0,9996

0,9996

0,9996

0.9997

0.9997

0.9997

0.9997

0.9995 0.9996 0.9997

0.9995 0.9997

0.6985 0,13Zd

0.7642 0.7939 0.8212 0,8686 0,8888 0,9066

0,9099

QldZZ

0.7734 0.8023 0.8289

0,9960

0,896Z

0.9131 0.9279

0,9608 0,9686 0,91SO

0.9846 0,9881

0.8106

0.8365

0.8830 0.9015 0.9177 0.9319

0,9890 0,991-6

0.9936

0,9986 0,9990

0.9996

0.9993 0.9995 0.9997

0.9997

0,9998

0.9995

» i t I Phase Two ~

the project i

Discount rate

Plan analysis and risk management i 2 1 5

Year

16%

18%

20%

24%

28%

Discount rate 32% 36% 40%

1

0.862

0.847

0.833

0.806

0.781

0.758

0.735

2

0.743

0.718

0.694

0.650

0.610

0.574

3

0.641

0.609

0.579

0.524

0.477

4

0.552

0.516

0.482

0.423

5

0.476

0.437

0.402

6

0.410

0.370

7

0.354

8

50%

60%

70%

80%

90%

0.714

0. 667

0.625

0.588

0.556

0.526

0.541

0.510

0. 444

0.391

0.346

0.309

0.277

0.435

0.398

0.364

0.296

0.244

0.204

0.171

0.146

0.373

0.329

0.292

0.260

0,,198

0.153

0.120

0.095

0.077

0.341

0.291

0.250

0.215

0.186

0..132

0.095

0.070

0.053

0.040

0.335

0.275

0.227

0.189

0.158

0.133

0.,088

0.060

0.041

0.029

0.021

0.314

0.279

0.222

0.178

0.143

0.116

0.095

0.,059

0.037

0.024

0.016

0.011

0.305

0.266

0.233

0.179

0.139

0.108

0.085

0.068

0..039

0.023

0.014

0.009

0.006

9

0.263

0.226

0.194

0.144

0.108

0.082

0.063

0.048

0.,026

0.015

0.008

0.005

0.003

10

0.227

0.191

0.162

0.116

0.085

0.062

0.046

0.035

0..017

0.009

0.005

0.003

0.002

11

0.195

0.162

0.135

0.094

0.066

0.047

0.034

0.025

0..012

0.006

0.003

0.002

0.001

12

0.168

0.137

0.112

0.076

0.052

0.036

0.025

0.018

0..008

0.004

0.002

0.001

0.001

13

0.145

0.116

0.093

0.061

0.040

0.027

0.018

0.013

0,.005

0.002

0.001

0.001

0.000

14

0.125

0.099

0.078

0.049

0.032

0.021

0.014

0.009

0..003

0.001

0.001

0.000

0.000

15

0.108

0.084

0.065

0.040

0.025

0.016

0.010

0.006

0.,002

0.001

0.000

0.000

0.000

16

0.093

0.071

0.054

0.032

0.019

0.012

0.007

0.005

0..002

0.001

0.000

0.000

17

0.080

0.060

0.045

0.026

0.015

0.009

0.005

0.003

0,,001

0.000

0.000

18

0.069

0.051

0.038

0.021

0.012

0.007

0.004

0.002

0..001

0.000

0.000

19

0.060

0.043

0.031

0.017

0.009

0.005

0.003

0.002

0..000

0.000

20

0.051

0.037

0.026

0.014

0.007

0.004

0.002

0.001

0..000

0.000

25

0.024

0.016

0.010

0.005

0.002

0.001

O.OOO 0.000

30

0.012

0.007

0.004

0.002

0.001

0.000

0.000

The gathering together of individuals w i t h t h e aim of making t h e m a cohesive whole and ensuring t h e benefit of a l l stakeholders is a f u n d a m e n t a l role of most project managers. This is at best likely t o be a very h i t - a n d - m i s s process (very f e w w i l l naturally achieve b o t h g o o d social interaction a n d c o m m e r c i a l success) and, at worst, financially disastrous. There have been many attempts t o describe t h e best mixture of personalities that w i l l ensure that t h e group dynamics are right and some of these w i l l be discussed here. These are project issues. A strategic issue is how t h e project management structure fits in w i t h t h e structure of t h e o r g a n i s a t i o n as a whole. The various forms of matrix are also discussed. Project teams are increasingly being formed not just from within one organisation but from multiple organisations (such as in joint ventures) and often geographically separate locations. This presents an extra set of challenges t o t h e project manager and t h e team. Some of t h e ways that organisations have dealt w i t h these challenges are covered.

Learning Objectives 9.1 The role of teams 92 The p u r e p r o j e c t organisation 9.3 Matrixmanagement 9.4 Structure selection 9.5 M i x e d organisational structures and coordination 9.6 Teamwork 91.7 Life-cycles o f t e a m s 9)8 M a n a g i n g personalities in teams 9.9 Effective t e a m w o r k 9.10 M a n a g i n g the team - r u n n i n g effective meetings 9.11 M a n a g i n g the t e a m - w o r k i n g w i t h geographically remote people and groups 9.12 Relevant areas of the bodies of knowledge 9 . 1 3 Summary Project management in practice: M a t r i x management at C a r d i f f B a y Development Corporation Project management in practice: Semco

it!)

Key terms Review questions and further exercises References Further information Note

fy the time you have completed this chapter, you should be able to: 1 Consider the rote of teams in achieving project objectives; 1 Understand the impact that the choice of structure wilt have on the achievement of project objectives; Provide a framework for the project manager to guide understanding of some of the personnel issues that they face.

The Role of Teams The organisation of people into ad hoc groups takes advantage of bringing together individuals from different specialisms (marketing, engineering, etc.) as needed for a project task. It is notable that as organisational size increases, the degree of specialism of individuals is increased. Since the days of Henry Ford, large organisations have been organised by functional specialism into 'chimneys' (see Fig. 9.1).The notion is that by grouping all the specialisms together, the arrangement is very efficient, as when you need that function to be performed, there is an obvious resource to draw on. Quite reasonably, from the point of view of the individual, career paths are well defined and basic administration systems are geared to this way of working. Give a group the task of setting up and running their own business and, 99 per cent of the time, the first task they set themselves is to allocate roles as heads of the various line functions. This arrangement prevails in many traditional industries, but has been shown to be detrimental to the creativity of individuals and the responsiveness of the organisation to changing market needs. However, as discussed in Chapter 1, one single function will rarely provide a customer's entire need or want. To do this requires cross-functional activity, i.e. the linking of the activities of more than one functional area. Functional arrangements

Research and development

Marketing

Engineering

Figure 9-î Management chimneys

Manufacturing

Sales

Human resources

Project o r g a n i s a t i o n ; s t r u c i u r e s and t e a m s I 221

tend to lead individual managers to build their own empires by creating work for themselves - regardless of whether this is value-adding for the organisation as a whole. Departmental head-count is considered to be a measure of the status of the individual manager and the importance of their function. The conventional management hierarchy or pyramid (see Fig. 9.2) has provided the basis on which the majority of organisations are ordered. The style is militaristic and there may be eleven or more layers in the chain of command (foot-soldier to top-ranking general). For many organisations today, this has been the subject of recent change, with de-layering and corporate restructuring attempting to minimise the number of layers in the organisation. These 'flatter' structures may only have three to five levels (instead of eleven or more previously).Organisations that have done this claim that it simplifies decision-making, as well as removing a considerable overhead cost to the organisation. Other structures include organisation by: • • • •

product group; customertype (e.g. military/civil); geographical area (of their operations or the customers they serve); the function they perform.

It is common to see a mixture of these forms of organisation being employed depending on the nature of the business and the degree of vertical integration in the supply stream (how many of the suppliers/customers are owned by the same organisation). Where a project can be defined as having more than one function involved (which systems and strategy projects are almost bound to have) it is emerging as one of the roles of the project management specialist to define possible organisational forms. Many authors note that project managers themselves rarely have a choice about how the project organisation is arranged and, consequently, have to use what are often inappropriate structures. The emerging strategic importance of the project manager means that they are likely to have more input in determining the structures within which they work in the future.

222 I Phase Th'ee - Deliver the pro/ed fdû it!)

The nature of the work organisation is important as it: • • • • •

defines responsibility and authority; outlines reporting arrangements; determines the management overhead (costs); sets the structure behind the organisational culture; determines one group of stakeholders in project activities.

As organisations have expanded, so the functions have often become less integrated by, for example, geographical separation. Walls, both literal and metaphorical, are constructed around them. In order to try to enforce communication between departments, many organisations use 'dotted-line responsibility'. Here an individual may have a responsibility to one functional manager, with a dotted-line responsibility to another. This device has been used frequently to ensure that certain individuals do not engage in empire-building. In the manufacturing industry, this was done by manufacturing directors who wanted to ensure that they retained responsibility for the running of the entire manufacturing operation. Consequently, when it became fashionable to employ a quality manager they were not given any direct staff but inspection and other quality staff would work for the manufacturing manager while given a dotted-line responsibility to the quality manager (indicating that they were linked to the goals of this part of the operation). It did still leave power in the hands of the manufacturing people. . . . In addition to the dotted-line responsibility, detailed administrative procedures are introduced to ensure that some form of integration takes place. Often involving interminable meetings and mountains of bureaucracy, they are an attempt to make the organisation perform acts which it is not designed to do, i.e. integrate. Sloan's General Motors in the USA of the 1930s was run using considerable command-and-control structures - based on the premise that 'whoever holds the purse strings, commands'.

The Pure Protect Organisation To move away from the functional chimneys to the project-based organisation is a major step. It is a structure that predominates in the construction industry (see Fig. 9.3). At the highest levels in the organisation there are staff posts - senior

Brought In as needed

Figure 9. j Project organisation

Project organisation; struciu r es and teams I 223

managers, directors, administrative staff, etc. (called the 'project board'). The next level down is a series of project managers who have control over one or more projects at a time. The constitution of the project team depends on the stage in the life-cycle of the project, e.g. at the planning stage there will be architects, structural engineers, quantity surveyors, and various other technical specialities such as groundwater engineers and legal advisers. These will be replaced by various contractors who are brought in to carry out specific tasks (such as steel fixers, electricians and heating/ventilation engineers) as the project moves through the operational phase. Once the particular task is completed, the team in each case is disbanded. The project manager may be retained to move on to other projects. The advantages of such an arrangement are that: • the labour force is highly flexible - labour can generally be attracted as and when required, without providing a labour burden or overhead for the rest of the time; • the main company only has to administer the employment of its own staff - saving on the costs of directly employing others. The disadvantages are significant: the project team is only temporary and so these people have no commitment to its success. The pay on a piece-rate basis may encourage the speed of work, but does little to ensure high quality or solve problems ahead of time. Paying on a time rate only encourages people to drag out jobs over a longer period of time. The only one who has an interest in the achievement of time:cost:quality objectives is the project manager; when there is a boom in a particular area in an industry, there is a shortage of labour, increasing labour rates and making hiring of the necessary resources problematic; • where there are significant events occurring in a project, it is very hard for the lessons of these to be passed on to future projects as the people who have carried out the 'do' part of the project are not around for the 'review'. They cannot benefit, therefore, from the review process. Progress in improving work methods is likely to be slower.

nn

Matrix Management Matrix management was invented as a way of achieving some of the benefits of the project organisation without the disadvantages. There are three situations where a matrix management structure is appropriate (Mullins, 1999): • where there is more than one orientation to the activities'of the operation, e.g. multiple customers or geographicaldifferences in markets served; • where there is the need to process simultaneouslylarge amounts of information; • where there is the need to share resources - one function or project cannot justify the expenditure on a dedicated resource.

I Phase Three - Deliver the project {da itl)

A matrix organisation can be defined as (Davis and Lawrence, 1977): matrix structure + matrix systems + m a t r i x culture + matrix behaviour

The matrix structure and the variations on the theme are included below. Matrix systems includethe activities of management in planning, organising, directing, controlling and motivating within the structure. The culture requires acceptance of the system by the people who have to work within it, and the behaviour required is the ability to understand and work with overlapping boundaries. The organisation of the matrix follows one of three models: 1 The lightweight matrix In this arrangement the project manager acts as a coordinator of the work of the project and chairs meetings of the representatives of all the departments involved. Responsibility is shared for the success of the project between the departments. This is regarded as being the weakest form of matrix structure, as there is little commitment to project success from anyone and the project manager is relatively impotent compared to the functional managers. The project meetings can be either led off-course or totally discredited by the inclusion of people of too high/low levels of authority respectively in the group. 2 The balanced model This is an attempt to balance the power of the project manager with that of the line manager. The administration of the organisation is such that the line manager needs the activities of the project manager to balance their resources, i.e. the project provides a means of securing part of the income of that function. The emergence of a second line of command - the project and the line manager - over any member of the team is the crucial drawback of this model. The person will have project responsibilities in addition to their line responsibilities. 3 The 'heavyweight matrix' Functional departments have the role of providing resources through seconding people on a full-time basis to the project team. On completion of the project, they return to the line function. In this way it is possible to have the resources available to bring in technical specialists without the project being saddled with their cost on a continuous basis. Such an arrangement is feasible where the project is of vital importance to the organisation. Drawbacks include the discontinuity of tasks for the individual and the resident department. The success of application of the above models depends on: • the training given to both managers and team members on working in such environments; • the support systems - administrative, informational and career-wise; • the nature of the individual - in particular, their tolerance level for role ambiguity. Working in the uncertain environment of the project, and with career progression allied to the department rather than the project, means that there are often conflicting priorities.

It was noted in Chapter 2, in the discussion of the 7-S of issues facing the project manager, that the selection of structure was important. It is not uncommon, however, to find projects run using structures that are wholly inappropriate for their importance to the organisation. The previous discussion has outlined the options available. The choice should refer to the critical objectives of each project that an organisation is undertaking. A summary is provided in Table 9.1 of the relationship between structure and objectives for the project. While Table 9.1 infers a degree of certainty on the choice of structure, there are additional factors to be considered. These include the predominant technology of the firm and the potential resource conflicts that heavyweight teams cause. The choice of structure is therefore a decision that should not be taken in isolation. This again highlights the importance for an organisation of the aggregate project plan and the project being given a definable priority. It is neither feasible nor practical Table 9,1 Relating project structures to project objectives Functional organisation

Lightweight project organisation

Heavyweight project organisation

Project organisation

Example of usage

Minor change to existing product

Implementing change to work organisation, e.g. IT system

Major innovation project

Large construction projects

Advantages

Quality through depth of specialisation possible within functions, possible to 'hide' project costs

Quality maintained

Speed and quality (improvement)through use of relatively 'stable' organisation as a base

Speed highest through dedicated resources; organisation design dependent only on project strategy

Disadvantages

Relatively slow as a process

Some cost disadvantage due to additional coordination expense of the matrix

Adverse reaction from line managers; additional coordination and administration costs

Can incur significant additional cost due to the relative expense of contractors; quality may not improve over time; instability for staff

for the project manager

Integration of functions within the organisation

Two bosses problem

Two bosses problem

Management of knowledge

Adapted from Ulrich and Eppinger (2000)

276 I Phase Three —

• project

for all projects in the firm to have a heavyweight matrix structure. As a simple rule, those with the highest levels of priority should have the heaviest weight structures. One of the drawbacks identified in Table 9.1 is the two bosses problem - a team member must report to the project manager in addition to the line manager of the function in which they normally work. This leads some' to the conclusion that matrix management is unwieldy and practically unworkable and even the comment that 'matrices become hopelessly complicated bureaucracies and gut the emotional energy and ownership of those closest to the marketplace' (Peters, 1992). The dual command leads to power struggles between the two managers and a selection of the following problems (Davisand Lawrence, 1977): • anarchy - people perceive that as soon as a team actually starts to work together, they are disbanded to go to work on another project; groupitis - decision making is removed from the individual who will not take a decision without group approval; • overhead that is imposed is excessively costly - heavyweight structures in particular often have their own coordination and administration alongside that of the functions in an organisation; • decision strangling - so much time is spent trying to get consensus that any individual flair is stifled and the group becomes a barrier to any rapid progress. Having stated all these potential problems, it is understandable that many organavoid the matrix form. There are, however, others who use it to good effect, proving that there is not one single way of managing a project that is applicable in all situations. The model that is chosen must be on a contingent basis, i.e. it responds to the needs of the organisation at that moment in time. In contrast it has been stated that A new management agenda lies ahead . . . one piece of that agenda [is] the weaving together of companywide teams that gather strength by understanding the whole endeavour to which they are connected. This frees them to function independently of the artificial labels and boundaries constructed around them. It also frees them to tap the collective genius of the group, rather than simply cementing individually conceived parts into a lesser whole {Dimancescu, 1995).

Having observed the best Japanese companies' management practices, Dimancescu's view is that the future for project management in large functionally based organisations is to encourage cross-function teaming and communication. However, it still does not solve the two bosses problem, other than to say that the normal situation is for the project process to take precedence over the function. This is the operationalisation of the view stated above - that to do anything in an organisation which meets a customer's need involves many functions. cross-function teams that Dimancescu studied consisted of members from all functions regardless of seniority. The tasks would typically be meeting customer quality requirements, controlling costs or ensuring that deadlines were met (see Fig. 9.4). Traditional planning tools such as CPA or PERT do not-state information requirements that are very often met informally through impromptu corridor

Project organisation; struciures and teams I 227

CEO

1

I Mktg

I Eng

I R&D

. I Sales

"""

I Legal Supplier

Customer

J

Cost Quality Example: what Is the best companywide process to deliverthe product or service at the right time and in the right quantity? The companywide cross-function team determines who does what, when and bow.

Delivery

RESULTS

T

F i g u r e 9 . 4 Cross-function 'process teams" (Source: Dimancescsi,

meetings, for example. The promise of information technology to overcome this deficiency (in identifying information requirements) has not been realised in the majority of organisations. Information provision is frequently hampered by different departments working on different hardware and software, with compatibility between the two being non-existent. Better solutions look to come from improved use of people rather than any increase in the use of technology. Process mapping, as discussed in Chapter 4, is part of the toolkit that can enable the management of cross-functional teams. It is decided at the planning stage who needs information and who needs to be involved at the various stages in a project. This is by nature an integrator - a tool that can be used to keep the overall objectives in view. It can also point to the kind of structure that will be appropriate during the different phases.

9.5

Mixed Organisational Structures and Coordination The above discussion considers the options open to the project manager where a single, hom*ogeneous team is needed. Increasingly, particularly where a project has a high degree of organisational complexity, project managers are being required to use mixed organisational structures and additional coordination mechanisms to help make the structures effective. A recent product development project had the structure shown in Fig. 9.5 which allowed the project manager a high degree of flexibility in resourcing the requirements of the project, but also good use of internal expertise - particularly product knowledge. In Fig. 9.5 the project manager has direct control over the heavyweight team working within the organisation and the contractors being employed on the project. They will have less direct control (usually)over staff members of other organisations, though this devolved authority does form part of some joint-venture contracts. In

i 2 8 1 Phase Three - Deliver the project (do it 0

figure 5 . 5

Mixed

organisational structure

such a case, staff from one organisation may be working directly for a manager from an entirely different organisation. The other issue arising from such complex structures is how to ensure that parts of the project being undertaken by different functions will actually work together. In the case of the London Underground refurbishment where the new trains would not fit into the tunnels (see Chapter 4), the two functions clearly did not work together on aspects o t m u t u a l interest. While it is an additional overhead for the project, many projects use an integrator - someone who works with both functions and ensures that areas of overlap are addressed. Functions may also swap staff or temporarily relocate them as another means of ensuring that this happens.

The distinction between the terms 'team' and 'group' is made to indicate the differences in operating characteristics of each. A group is simply a collection of people. A team meets the following criteria: • the output of the group is greater than the sum of the outputs of the individuals, e.g. a team can engage in creative processes (idea generation) far more effectively than a collection of individuals; • a greater range of options can be considered by exploiting differences in individual thought processes; • decision-making by the team is likely to be better (see Chapter 13). The purpose of studying the role of teamwork in the project environment is: • to help the project manager in the design and selection of the workgroup; • to enable the monitoring of the degree to wineh the team is functioning effectively; • to provide feedback to the team to help improve effectiveness. The above assumes that in the first instance the project manager has the luxury of a free hand in the selection of who should form their project team. In reality, the team or group is more likely to be 'inherited' rather than designed. The study of teamworking will raise awareness of what is possible through teaming and the symptoms and consequences of the process not being managed to best effect.

Project organisation; struciures a n d t e a m s I 2 2 9

Other characteristics of teams include: • more openness to taking risks, as the risk is shared between the team rather than carried by one individual; • higher overall level of motivation, as there is an inherent responsibility to others in the team and a desire not to let them down; • better support for the individuals within the team, who are more likely to be included in a greater range of activities than they would normally be exposed to, but without their having to work alone. Typically a team consists of two to twenty people, though many managers suggest that effectiveness will decrease once the numbers go above ten. Larger teams are managed in the same way as large projects - by breaking down the big team into smaller, more manageable groups. As for the work breakdown structure, such an organisational breakdown must have the appropriate coordination mechanisms in place between the smaller teams.

9.7

Life-cycles of Teams Teams, like projects, can be seen as having various stages of development. These can broadly be defined as collection, entrenchment, resolution/accommodation and synergy, followed almost inevitably by decline. At some point, the team will be disbanded because either they have reached a point at which it is no longer feasible for them to carry on working together or the task they are working on has been accomplished. The characteristics of each phase are shown in Table 9.2 and the effectiveness profile during the life-cycle is shown in Fig. 9.6. A

Collection

Entrenchment

Resolution/ accommodation

Synergy

Time

figure 9.6 Effectiveness profile of team life-cycle

Decline

23«

Phase Three -

wo

Table 9,2 Team fife-cycle Stage

-

Characteristics

Collection

The bringing together of individuals into a group with a collective task or problem to solve. The participants have a degree of eagerness and initial enthusiasm and generally rely on the authority and hierarchy to provide a degree of certainty in this uncertain environment. They will use this initial phase to establish themselves and find what is expected of them.

Entrenchment

As the group starts work they begin to find out where each person stands on various issues. The entrenchment comes when people arrive with preconceived ideas as to how the project should be proceeding and are unwilling to be persuaded of the merits of allowing the group to decide on the course of action. This phase can be very destructive and is generally fairly unproductive. The reasons for this unproductiveness are issues such as disillusionment with the goals of the project, competition for power or attention within the group, or general confusion as the work being undertaken hears little relationship to the goals of the project.

Resolution/ The disagreements begin to be resolved, and characteristics such as mutual accommodation trust, harmony, self-esteem and confidence are seen. This is where the team to put aside the negative social effects and move to being more productive. Synergy

Based on Ansoff (1968), synergy is defined as when the output of the whole is greater than what would be obtained from the component parts, otherwise stated as 2 + 2 = 5. This is the peak of effectiveness of the team, leadership is shared, and there is a new motivation to complete the tasks at hand.

Decline

At some point the team will meet an event when its effectiveness starts to decline - this can be through the nature of the task being undertaken not changing or the focus of the activities being allowed to move towards a social group.

Break-up

If this occurs naturally before the task is finished, there can be problems in getting a new team to take up the remaining work. They will be expected to get 'up to speed' very quickly and have an additional pressure on them. Where the group finishes its task and it is during one of the earlier stages of development, either in resolution or synergy, the effects on future projects can be highly beneficial as the participants go away with good memories of the work they have done.

Using this knowledge, the project manager can identify the stage at which their team is operating, ensuring that the decline phase is held back for as long as possible. This may be done through changing the composition of the team to take the development back a little or expanding the range or scope of the tasks being undertaken to add a new challenge. The important point is, though, that teams do have a natural life-cycle and this should be recognised and used to advantage.

Project organisation: structures arid teams I 23»

Quality circles have been a very popular management tool for encouraging people from all parts of organisations to work together to solve problems. They are a move to get people who only previously had limited responsibilities to use their natural creativity and have the opportunity to innovate. The idea was promoted very heavily during the 1980s by the UK's Department of Trade and Industry for use in all organisations. The frequently quoted example was that of a trade delegation to Japan who were amazed to find the extent of the use of quality circles in industry, and even more to find it in service industries - including a restaurant where the waiters had formed their own quality circle. The initiative was taken up by a large number of companies. Quality circle meetings would often take place in the workers' own time, though generally they were given worktime at the start to set up the circles. It was notable that within a very short period (often less than 12 months) these project teams were being disbanded and the idea of quality circles discontinued. Initial results were generally found to be excellent - the biggest problems were tackled first by the newly integrated groups and considerable savings were made. Then they started to decline. As was found by Lawler and Mohrman (1985): During this period, groups meet less often, they become less productive. and the resources committed to the program dwindle. The main reason the groups continue at all is because of the social satisfaction and pleasure the members experience rather than the group's problem-solving effectiveness. As managers begin to recognise this they cut back further on resources. As a result, the program shrinks. The people who all along have resisted the program recognise that it is less powerful than it once was, and they openly reject and resist the ideas it generates.

As was demonstrated by the above, the idea of using quality circles over an extended timeframe neglects to take account of the natural life-cycles of teams. The alternatives are as follows: 1 Have the team assembled for the purpose of solving one single problem, then to be disbanded once it has been solved. 2 Provide a path for the development of the role of the team from solving one or a small number of low-level problems into semi-autonomous workgroups. This will require other changes (in management reporting arrangements, for example) and considerable development of the team through education and training.

9.S Managing Personalities in Teams It is stated above that the project manager can benefit from an understanding of the ways in which individuals behave in group situations. These situations have been studied by social scientists for a long time and the results of these studies form a significant part of the sociological and management literature. Managing the process is discussed in the following section, while here it is useful to consider the role of the individual. In order to determine the character of an individual (the 'personality profile') there are hundreds of commercially available psychometric tests that can be used. Many claim to be the 'definitive and only possible test you will need to find that ideal candidate for your team', but most can be bluffed by an intelligent candidate and few are totally applicable to people other than graduates. They can also be expensive to administer and often require expert guidance to interpret the results. The curriculum vitae and interview, though maligned, is still the normal mode for recruiting in most project environments. In designing your team there are certain basic requirements you may wish key players to have, e.g. qualifications or relevant experience. These determine their eligibility for the job. The suitability can be determined through assessing how they are likely to fit in with the rest of the team, and whether or not the team has a balanced portfolio of characteristics relative to the task being undertaken. Belbin (1993, 2000) has shown that a structure based on a greater number of classifications than those given above can prove useful in both the selection and ongoing management of the project. The characteristics that Belbin identifies are shown in Fig. 9.7. Having categorised the individual's personalities, it is worth considering the effect this has on their behaviour. Belbin cites this as consisting of six factors: •

• • •

personality - as determined through testing; mental abilities - e.g. critical reasoning; current values and motivations (determined by all sorts of personal factors - the weather, family situation, how well the Blues did on Saturday, etc.); field constraints - those rules and procedures that affect behaviour from the environment in which you are working; experience - prior events which have left varying degrees of impression on the individual: role-learning - the ease with which an individual can take on one of the roles listed in Fig. 9.7, but which is not their natural role - this increases their role versatility.

The effects on the design of the team are that there can be a degree of scientific method applied to the selection of individuals - though how scientific tests (like the Belbin role profiling) are is open to debate. They are liked by many project managers not just for their use in selection (making sure that there is the right balance of people in the team) but also as part of team development. Understanding the roles of individuals in the team can have a very positive effect on the interactions between team members.

•Projectorganisation:structures and teams i 233

Roles and descriptions contribution

-

team-role

Allowable weaknesses

Plant: creative, imaginative, unorthodox. Solves difficult problems.

Ignores details. Too preoccupied to communicate effectively.

Resource investigator: extrovert, enthusiastic, communicative. Explores opportunities. Develops contacts.

Overoptimistic. Loses interest once initial enthusiasm has passed.

Coordinator: mature, confident, a good chairperson. Clarifies goals, promotes decision-making, delegates well.

Can be seen as manipulative. Delegates personal work.

Shaper: challenging, dynamic, thrives on pressure. Has the drive and courage to overcomeobstacles.

Can provoke others. Hurts people's feelings.

Monitor evaluator: sober, strategic and discerning. Sees all options. Judgesaccurately.

Lacks drive and ability to inspire others. Overly critical.

Teamworker:cooperative, mild, perceptive and diplomatic. Listens, builds, averts friction, calms the waters.

Indecisive in crunch situations. Can be easily influenced.

lmplementec disciplined, reliable, conservative and efficient. Turns ideas into practical actions.

Somewhat inflexible. Slow to respond to new possibilities.

Completer: painstaking, conscientious, anxious. Searches out errors and omissions. Delivers on time.

Inclined to worry unduly. Reluctant to delegate. Can be a nit-picker.

Specialist: single-minded, selfstarting, dedicated. Provides knowledge and skills in rare supply.

Contributes on only a narrow front. Dwells on technicalities. Overlooks the 'big picture'. .

Strength of contribution in any one of the roles is commonly associated with particular weaknesses. These are called allowable weaknesses. Executives are seldom strong in all nine team roles. Figure 9 . 7 The nine t e a m roles : S ou -ce: Belbin, 1993. Reprinted with permission of ButterwortlvHeinemann, a division of Reed Educational and Professional Publishing)

2 3 4 ! P h a s e Three - Deliver the project (do it!)

Y o u h a v e cleared s o m e of t h e s t r u c t u r a l b a r r i e r s t o success - as identified in p r e v i o u s chapters. Y o u have planned the project using the best available methods. Y o u n o w w a n t t o m a k e sure t h a t t h e p r o j e c t t e a m w o r k m a k e s a positive c o n t r i b u t i o n t o t h e success of t h e p r o j e c t . E i g h t characteristics, m o s t of w h i c h a r e u n d e r t h e c o n t r o l of t h e p r o j e c t m a n a g e r , h a v e b e e n identified (see L a r s o n a n d L a F a s t o , 1989). T h e s e a r e as f o l l o w s : •

• • •

• •

•

a clear, elevating g o a l - a sense of m i s s i o n m u s t he c r e a t e d t h r o u g h t h e d e v e l o p m e n t of a n o b j e c t i v e w h i c h is u n d e r s t o o d , i m p o r t a n t , w o r t h w h i l e a n d p e r s o n a l l y o r collectively c h a l l e n g i n g ; p r o v i d e a r e s u l t s - d r i v e n s t r u c t u r e - t h e s t r u c t u r e a n d c o m p o s i t i o n of t h e t e a m s h o u l d be c o m m e n s u r a t e w i t h t h e t a s k being u n d e r t a k e n (see b e l o w ) ; c o m p e t e n t t e a m m e m b e r s - need t o b a l a n c e p e r s o n a l w i t h t e c h n i c a l c o m p e t e n c e ; u n i f i e d c o m m i t m e n t - c r e a t e t h e e n v i r o n m e n t of ' d o i n g w h a t h a s t o be d o n e t o succeed'; f o s t e r a c o l l a b o r a t i v e c l i m a t e - e n c o u r a g e reliance o n o t h e r s w i t h i n t h e t e a m ; standards of excellence - through individual standards, team pressure, k n o w ledge of t h e c o n s e q u e n c e s of failure; e x t e r n a l s u p p o r t a n d r e c o g n i t i o n - w h e r e g o o d w o r k is p e r f o r m e d , recognise it. I t is likely t o be a b s e n t f r o m t h e o t h e r s t a k e h o l d e r s , so i t will be t h e responsibility of t h e p r o j e c t m a n a g e r t o p r o v i d e it; institute p r i n c i p l e d l e a d e r s h i p - see C h a p t e r 10.

T h e f i r s t p o i n t is s t a t e d in v i r t u a l l y every c o n s i d e r a t i o n of t h i s s u b j e c t . I n d e e d , m a n y g o as f a r a s t o s a y t h a t d e m a n d i n g p e r f o r m a n c e w h i c h is c h a l l e n g i n g is a n i n t e g r a l p a r t of t h e w a y of c r e a t i n g a t e a m . I n a d d i t i o n , t h e first t a s k s t h a t t h e t e a m c a r r i e s o u t w i l l s e t t h e s c e n e f o r t h e e n t i r e p r o j e c t , in p a r t i c u l a r t h r o u g h t h e d e f i n i t i o n o f r o l e s a n d rules of b e h a v i o u r . T h e s t r u c t u r e of t h e t e a m a n d its c o m p o s i t i o n a r e b r o k e n d o w n i n t o t h r e e basic categories - creative, t a c t i c a l a n d p r o b l e m - r e s o l u t i o n . T h e use of e a c h c a n be r e l a t e d t o t h e a p p r o p r i a t e o r m o s t likely p h a s e in t h e p r o j e c t life-cycle. T h e r e q u i r e m e n t s of t h e s t r u c t u r e of e a c h a r e s h o w n in T a b l e 9.3. H o w t e a m s / g r o u p s w o r k c a n be seen in Fig. 9.8. A t o n e e n d of t h e s p e c t r u m is t h e d i s i n t e g r a t e d g r o u p , w h e r e t h e r e is n o a g r e e m e n t b e t w e e n t h e t e a m m e m b e r s a n d c o m p l e t e b r e a k d o w n of t h e d e c i s i o n - m a k i n g processes. A t t h e o t h e r e n d is t h e i n t e g r a t e d t e a m , w h i c h h a s c o m p l e t e c o n s e n s u s o n all m a t t e r s , b u t w h i c h h a s 'gone o v e r t h e edge' in t e r m s of effectiveness. T h e i r p r o c e s s e s c a n be c a t e g o r i s e d b y w h a t is t e r m e d g r o u p - t h i n k , o t h e r w i s e d e s c r i b e d by 'they've b e a t e n t h e defence, b u t n o o n e c a n h a n g t h e ball i n t o t h e b a c k of t h e n e t w i t h o u t d i s c u s s i n g it w i t h t h e g r o u p first'. G e n e r a l l y t h i s results in l u d i c r o u s d e c i s i o n s being m a d e - t h e ill-fated c h a r g e of t h e L i g h t Brigade resulted f r o m a g r o u p of g e n e r a l s w h o sat a r o u n d a n d a g r e e d w i t h e a c h o t h e r , r a t h e r t h a n u p s e t t h e w o r k i n g of t h e g r o u p by d i s a g r e e i n g w i t h t h e decision!

•Project organisation: structures and teams i 235

Table

; Requirementsof team structure

Category

Likely phase of project life-cycle

Characteristics of team structure

Creative

Planning

Needs to have a high degree of autonomy in order to explore the widest range of possibilitiesand alternatives. Needs to be independent of systems and procedures and requires independent thinkers and people who are self-starters.

Tactical

Doing

Needs a well-defined plan, hence unambiguous role definitions and clarity of objectivesfor the individual members. The team members should have loyalty and a sense of urgency.

Problem solving

Doing (when problems arise)

Will focus on problem resolution rather than any predetermined conclusions - t h e s e must be eliminated. The desirable characteristic of the people involved is that they are intelligent and have people sensitivity.

Boundaries cf effective teamwork

y

X

Disintegration ^ — N> agreement, breakdown of group processes, group reverts to a collection cf individuals

Integration Total consensus leads to 'group-think', initiative removed, group processes provide focus ratherthan task in hand

Figure 9.8 Spectrum of t e a m / g r o u p performance

Managing the Team - Running Effective Meetings Manager i : 'I'm really not in favour of the Scorpion Project - it certainly won't do what my department wants.' Manager 2: 'Mine neither. Don't worry, I'll just make sure that the meetings go nowhere. They'll soon drop it!' T h e project m a n a g e r will o f t e n h a v e t o c h a i r meetings, so a discussion of the g o o d p r a c t i c e concerning h o w t h e y s h o u l d be r u n is very relevant. T h i s is a n e x c e p t i o n a l m a n a g e m e n t skill, yet it is so basic t h a t m o s t people a s s u m e t h a t t h e y k n o w h o w t o d o it. In practice, this is rarely t h e case a n d m e e t i n g s o f t e n b r e a k u p w i t h o u t a n y

236 I Phase 1 hree - Delivet the project jdo rt'j

p r o g r e s s b e i n g m a d e - a s is o c c a s i o n a l l y i n t e n d e d a n d d e m o n s t r a t e d b y t h e q u o t a t i o n a t t h e s t a r t o f t h i s section. T h i s s h o r t s e c t i o n is i n t e n d e d t o p r o v i d e o n l y a f e w guidance notes as t o w h a t constitutes g o o d practice. 1

C o n f i r m t h e p u r p o s e of t h e m e e t i n g - t h e r e h a s t o b e a r e a s o n w h y y o u n e e d t o bring people together. This should be very specific s o as t o help eliminate spurious issues that can detract f r o m the m a i n purpose.

2

D e c i d i n g w h o s h o u l d be invited w i t h t h e m i n i m u m r e q u i r e m e n t of i n c l u d i n g a n y o n e w h o w o u l d b e o f f e n d e d if t h e y w e r e l e f t o u t . It is o f t e n w o r t h c h e c k i n g by a s k i n g t h e i n d i v i d u a l c o n c e r n e d if y o u a r e in d o u b t .

3 The pre-meeting preparation - the location and timing, agenda, and any reports p r o v i d i n g b a c k g r o u n d i n f o r m a t i o n o n t h e t o p i c u n d e r discussion s h o u l d be c i r c u l a t e d in a d v a n c e . 4 R u n n i n g the meeting - provide a f o r u m f o r constructivedebate while limiting the s c o p e of d i s c u s s i o n t o t h e m a t t e r i n h a n d . D o n o t a l l o w r e p e t i t i o n o f p o i n t s o r a n y o n e m e m b e r t o d o m i n a t e t h e discussions. R e g u l a r l y s u m m a r i s e p r o g r e s s a n d ask f o r conclusions t o be d r a w n based o n the discussions. T h e project m a n a g e r s h o u l d h a v e in m i n d t h a t t h e level of a t t e n t i o n of m o s t p e o p l e d e c l i n e s r a p i d l y a f t e r t h e f i r s t 2 0 m i n u t e s , a n d a f t e r t w o h o u r s t h e r e is u n l i k e l y t o b e a n y c o n s t r u c t i v e p r o g r e s s . P e o p l e will o f t e n a g r e e t o a n y t h i n g a t t h i s p o i n t s i m p l y t o g e t o u t o f t h e m e e t i n g . O b t a i n i n g c o n s e n s u s is a n a r t , w h i c h t h e s k i l f u l c h a i r o f a m e e t i n g will a i m t o achieve. T h i s e n s u r e s t h a t t h e e n t i r e m e e t i n g h a s ' b o u g h t - i n ' t o a d e c i s i o n a n d m a k e s c a r r y i n g it o u t f a r e a s i e r t h a n w i t h a n u m b e r of d i s s e n t e r s . 5 Post-meeting follow-up - send copies of the minutes with action points a n d w h o s h o u l d c a r r y t h e m o u t listed a g a i n s t each. M o s t m e e t i n g s c a n h a v e t h e i r c o n c l u s i o n s a n d a c t i o n p o i n t s s t a t e d o n o n e side of A 4 p a p e r - t h e y h a v e a h i g h c h a n c e o f b e i n g r e a d i n t h i s f o r m , r a t h e r t h a n 'filed'. T h e s e m i n u t e s a n d a c t i o n p o i n t s m u s t then f o r m t h e basis of the next meeting's early discussions, ensuring t h a t w h o e v e r said they w o u l d c a r r y o u t a t a s k h a s a n a t u r a l responsibility t o t h e m e e t i n g t o d o it. T h e y a l s o k n o w t h a t s h o u l d t h e y fail t o c a r r y o u t a n a c t i o n , t h i s will be identified a t t h e n e x t m e e t i n g . T h e r e a r e m a n y excellent m a n a g e m e n t skills c o u r s e s w h i c h d e v e l o p t h e a b o v e ideas, i n c l u d i n g s o m e of t h e m o r e c o m p l e x a s p e c t s s u c h a s conflict r e s o l u t i o n , a n d a s p i r i n g p r o j e c t m a n a g e r s s h o u l d a v a i l t h e m s e l v e s of these. T h e F u r t h e r I n f o r m a t i o n a t t h e e n d of t h i s c h a p t e r c o n t a i n s several t e x t s w h i c h p r o v i d e a n e x p a n s i o n o f t h e s u b j e c t .

9.11 Managing the Team - Working with Geographically Remote People and Groups All t h e a b o v e g o o d i d e a s a b o u t w o r k i n g w i t h t e a m s a r e fine w h e r e e v e r y o n e is ' d r i n k i n g f r o m t h e s a m e watercooler/coffee m a c h i n e ' . T h a t is, t h e y a r e g e o g r a p h i c a l l y close. M a n y p r o j e c t m a n a g e r s t o d a y , e v e n f o r p r o j e c t s of m e d i u m c o m p l e x i t y , are having t o w o r k with other organisations, often at a distance. A m o n g the reasons f o r t h i s is t h e i n c r e a s e in o u t s o u r c i n g (see C h a p t e r 1 2 ) a n d in t h e n u m b e r of c o l l a b o r a t i v e p r o j e c t s a s a r e s u l t o f o r g a n i s a t i o n s w o r k i n g m o r e closely t o g e t h e r .

•Projectorganisation: structures and teams i 237

For example, one project t o develop a n e w m a g n e t i c t a p e drive at HewlettPackard required w o r k t o be undertaken at their plants at Greeley (USA),Bristol ( U K ) and Japan. The obvious problems concern: •

L a n g u a g e a n d c u l t u r e - e a c h of t h e s e o p e r a t i n g u n i t s h a d their o w n w a y of w o r k ing a n d d e s p i t e t h e f a c t t h a t t w o of t h e s e t h r e e n o m i n a l l y h a d E n g l i s h a s t h e i r f i r s t l a n g u a g e , t h e r e w a s m u c h w o r k t o be d o n e t o e n s u r e t h a t c o m m u n i c a t i o n w a s effective;

•

W h e r e e a c h g r o u p placed t h i s p r o j e c t in t h e i r p r i o r i t i e s - e a c h o p e r a t i n g u n i t h a d its o w n set of p r i o r i t i e s , a n d t h e p r o d u c t h a d a v e r y d i f f e r e n t relative i m p o r t a n c e f o r e a c h site; • T h e t i m e - z o n e - r e l a t i v e t o t h e UK, t h e U S p l a n t w a s 6 h o u r s b e h i n d a n d t h e J a p a n e s e p l a n t 8 h o u r s a h e a d . T h i s m e a n t t h a t t h e r e w a s n o t i m e in t h e d a y w h e n all p a r t i e s w o u l d n a t u r a l l y be a t w o r k ; • S t a n d a r d s - d u e t o t h e d i f f e r e n t r e q u i r e m e n t s of e a c h m a r k e t t h a t e a c h p l a n t served, t h e y h a d d i f f e r e n t s t a n d a r d s a n d tests t h a t w o u l d h a v e t o be u n d e r t a k e n o n t h e p r o d u c t . T h i s h a d t h e p o t e n t i a l t o c r e a t e t e c h n i c a l conflict. A s y o u c a n see e v e n f r o m s u c h a superficial analysis, t h e r e is p l e n t y of p o t e n t i a l f o r p r o b l e m s a n d i t is v e r y d i f f i c u l t t o c o n c e p t u a l i s e t h e m a n a g e m e n t t a s k in t h i s e n v i r o n m e n t . M o r e g e n e r a l l y , p r o b l e m s t h a t arise include: • • • • •

o b t a i n i n g b u y - i n t o o b j e c t i v e s f r o m r e m o t e t e a m s a n d individuals; p o o r d e v e l o p m e n t a n d c o m m u n i c a t i o n of p l a n s ; n o c l a r i t y a s t o w h o is r e s p o n s i b l e f o r w h a t a n d t o w h o m ; lack o f s h a r i n g of p r o b l e m s as a n d w h e n t h e y arise; d e l a y s c a u s e d by s u p p o r t s y s t e m s - in p a r t i c u l a r , i n c o m p a t i b i l i t i e s b e t w e e n a d m i n i s t r a t i v e s y s t e m s (e.g. w h e r e p r o c e d u r e s f o r a l l o c a t i n g a n d h a n d l i n g b u d gets m a y be v e r y d i f f e r e n t ) .

A d d t h e s e t o t h e f e e l i n g s of i s o l a t i o n of i n d i v i d u a l s w o r k i n g in s u c h e n v i r o n m e n t s a n d t h e e f f e c t s c a n be c o n t r a r y t o t h e e x p e c t a t i o n s of h i g h - p e r f o r m i n g t e a m w o r k . T o c o u n t e r t h e s e t h e f i r s t s t a g e f o r t h e p r o j e c t m a n a g e r is r e c o g n i t i o n t h a t s u c h p r o b l e m s arise a n d t h a t it is o n l y t h r o u g h m o r e active m a n a g e m e n t t h a t t h e y will be a v o i d e d o r a t least m i n i m i s e d . T y p i c a l l y , o t h e r devices t h a t m a n a g e r s use t o help in such environmentsinclude: •

•

F o r m a l p r o j e c t s t a r t - u p m e e t i n g - N o r t h A m e r i c a n f i r m s o f t e n use a n all-singing a n d d a n c i n g r o a d s h o w t o 'rev t h e t e a m up'. Q u i t e h o w effective t h i s is in o t h e r c u l t u r e s is d e b a t a b l e ;

Regular face-to-face meetings to ensure t h a t c o m m u n i c a t i o n s are working and t o k e e p t h e t e a m e n g a g e d w i t h t h e project; • Establishing regular video-conferences where face-to-face meetings are n o t p o s s i b l e - use t h e s a m e g u i d e l i n e s f o r m e e t i n g s a s in t h e p r e v i o u s section; • J u d i c i o u s use of e - m a i l in t h e c i r c u l a t i o n of p r o j e c t i n f o r m a t i o n , t h a t is, k e e p p e o p l e 'in t h e l o o p ' b u t d o n ' t a d d t o t h e i r d r o w n i n g in u n n e c e s s a r y d a t a . A l s o being a w a r e of t h e p r o b l e m s t h a t p e o p l e 'reading b e t w e e n t h e lines' in w h a t is a relatively i n f o r m a l c o m m u n i c a t i o n s m e d i u m c a n have;

238 I Phase 1 hree - Delivet the project jdo rt'j

• W o r k i n g w i t h senior m a n a g e r s t o clear t h e w a y f o r p r o j e c t staff in r e m o t e locat i o n s t o be s u p p o r t e d in t h e i r project w o r k , including a s s e s s m e n t a n d r e w a r d s ; • E s t a b l i s h s o m e rules f o r d e a l i n g w i t h p a r t i c u l a r s c e n a r i o s - e.g. w h e r e c o n f l i c t s arise in t h e t e a m , a n d h o w these s h o u l d be h a n d l e d ; • C r e a t e highly visible progress m e a s u r e s t h a t c a n be viewed by all t h e p r o j e c t t e a m in real time ( s e e C h a p t e r 1 1 ) ; • Don't e x p e c t t o get full p r o d u c t i v i t y f r o m a t e a m t h a t is so diverse - m a n y m a n a g e r s h a v e f o u n d t h a t 75- 85 p e r c e n t is t h e m o s t t h a t can be expected, d u e t o all t h e reasons given a b o v e . This m a y require l o n g e r schedules or additional resources t o be e m p l o y e d , b u t is a t least realistic. T h e a b o v e list again s h o w s t h a t p r o j e c t m a n a g e m e n t , f a r f r o m being a m u n d a n e a n d routine t a s k , is o n e of t h e m o s t challenging t h a t w e face. Tliere a r e n o h a r d a n d f a s t rules here - j ust s o m e structures a n d guidelines t h a t w a r n of potential p r o b l e m s t h a t a r e k n o w n t o arise u n d e r p a r t i c u l a r c i r c u m s t a n c e s , a n d t h e a c t i o n s of s o m e m a n a g e r s in d e a l i n g w i t h t h e m . T h e g a p b e t w e e n t h a t a n d practice is t o be filled by t h e i n d i v i d u a l m a n a g e r , u s i n g t h e i r k n o w l e d g e a n d creativity, t o find w a y s of w o r k i n g t h a t fit the c o n t e x t a n d m e e t t h e i r p a r t i c u l a r set of challenges.

Relevant Areas of the Bodies of Knowledge T h e P M I a p p r o a c h in p a r t i c u l a r ( s e e T a b l e s 9.4 a n d 9.5) suggests t h a t t h e r e s h o u l d be a highly p l a n n e d a n d formalised process f o r all these stages. T h e reality f o r m a n y

Table 9.4 Relevant area of t h e APM body of knowledge Relevant section

Title

Summary

66

Organisational structure

The point is made that the organisational structure defines the reporting and authority relationships in the project. Three basic kinds of organisation are defined (functional, project, matrix), and it is noted that this may change through the project life-cycle.

70

Communications

The many forms of communications are identified, including the need for particular meetings to be conducted - e.g. a kick-off meeting at the start of the project.

71

Teamwork

The importance of the project team is discussed and theprinciples outlined that motivation and conflict resolution are important aspects of this. In addition, it is stated that 'Cultural characteristics of team members should be given full consideration: different cultures create different working needs.'

75

Personnel management

The recruitment, development, safety and welfare of staff is identified as a specialist skill set, where the project manager has some responsibility.

•Project organisation: structures andteamsi255

Table 9.5 Relevant area of the PMI body of knowledge Relevant section

Title

Summay

9.1

Project human resource management organizational planning

This is counted as part of the project planning phase, where the structure is determined in advance, and jobs designed into the structures. This is a very involved process that results in the production of an organisation chart for the proj ect, along with job descriptions and identified needs for staff development.

9.2

Project human resource mana ement g staff acquisition

The characteristics of the individuals required should be determined to include their experience, interests, characteristics, availability and competencies. They are then recruited through negotiation with functional heads, or procurement from outside sources.

9.3

Project human resource management team development

'Development as a team is critical to the project's ability to meet its objectives.' This activity should be in line with the needs of the project therefore, and the tools for doing this include team-building activities, general management skills enhancement and training, reward and recognition and, interestingly, co-location.

project managers is that they are handed a team, an imperfect structure and told to 'get on with it'. These are good guidelines, however, but present a significant upfront workload to the project manager. They do contribute to problem prevention, development of human capital and recognition of competence.

The conventional approach to designing organisations is to have the key functions arranged into 'chimneys' with people who perform a similar set of tasks grouped together with their own hierarchies. These are very convenient, but are not the most appropriate for achieving results through projects. The pure project organisation is possibly the most flexible and far removed from the conventional approach to management - people are brought in on a contract basis for the project and no other task. The hiring organisation does not then have a further labour overhead when there is no work to be done. Matrix management is an attempt by conventional organisations to give some degree of authority to the project manager while retaining the benefits of the functional organisation. The three different types of matrix model represent increasing levels of authority given to the project manager - namely lightweight, balanced and heavyweight. Matrix management is extensively used but does suffer from the problem of one person having two bosses. The choice of the structure to be used is dependent on, among other criteria, the strategic objectives of the project.

34» I Phase Three-

•: : jjfoject •'. . i t i i

O n e r e p r e s e n t a t i o n of t h e h e a v y w e i g h t m a t r i x - called the seamless enterprise e x i s t s w h e n t h e f u n c t i o n a l c h i m n e y s a r e seen as being s u b o r d i n a t e t o key b u s i n e s s processes. T h e use of t o o l s s u c h as p r o c e s s m a p p i n g c a n help t o m a k e t h i s a reality b y s t i m u l a t i n g c r o s s - f u n c t i o n c o m m u n i c a t i o n a n d activity. F o r m i n g g r o u p s of i n d i v i d u a l s i n t o t e a m s is a c o m p l e x process. T h e r e a r e m a n y p r o d u c t i v i t y a n d effectiveness benefits ( s y n e r g y ) t o be g a i n e d f r o m t e a m w o r k o v e r t h a t of a g r o u p . T e a m s h a v e a n a t u r a l life-cycle w h i c h h a s r e c o g n i s a b l e c h a r a c t e r istics t o e a c h p a r t . T h e p r o j e c t m a n a g e r c a n h a v e a r o l e in c o n t r o l l i n g b o t h t h e e m e r g e n c e of t h e v a r i o u s p h a s e s a n d t h e m a n a g e m e n t of n e g a t i v e effects w h e n t h e t e a m g o e s 'over t h e hill'. Belbin, a m o n g o t h e r s , h a s p r o v i d e d m a n a g e r s w i t h a t o o l f o r i d e n t i f y i n g t h e p e r s o n a l i t i e s of individuals w h i c h c a n p r o v i d e a g u i d e a s t o t h e n a t u r e of t h e p e r s o n o r m i x t u r e of p e o p l e w h o w i l l be r e q u i r e d f o r p a r t i c u l a r t a s k s w i t h i n a p a r t i c u l a r t e a m . C l a s s i f i c a t i o n s s u c h a s Belbin's d o p r o v i d e a u s e f u l a v e n u e f o r t e a m d e v e l o p m e n t activities. H o w e v e r , in o r d e r t o g e t t h e m o s t f r o m a t e a m , t h e m a n a g e r c a n d r a w o n t h e e x p e r i e n c e of o t h e r s . P r o v i d i n g a c l e a r a n d elevating g o a l is o n e of t h e m o s t i m p o r t a n t p o i n t s . T h e n a t u r e of t h e t e a m c a n a l s o be m a n a g e d t h r o u g h t h e c a t e g o r i s a t i o n of t h e t a s k t o be c a r r i e d o u t - creative, t a c t i c a l o r p r o b l e m solving. R u n n i n g m e e t i n g s - a s f o r m o s t of p r o j e c t m a n a g e m e n t - is a skill t h a t c a n be l e a r n e d , a n d t h e r e a r e m a n y issues t o be r e s o l v e d w h e n a t e a m is g e o g r a p h i c a l l y s p r e a d , a n d b e c o m e virtual teams. O v e r a l l , g e t t i n g t h e m o s t f r o m a n o r g a n i s a t i o n of i n d i v i d u a l s d o e s r e q u i r e t h a t t h e y w o r k in a s t r u c t u r e t h a t is a p p r o p r i a t e t o t h e t a s k being u n d e r t a k e n , a n d t h a t t h e i r l o c a l e n v i r o n m e n t is m a n a g e d a s p a r t of t h e p r o c e s s . T h i s is a w h o l e a r e a of s t u d y in its o w n right.

Matrix management at Cardiff Bay Development Corporation A s a g o v e r n m e n t - f u n d e d b o d y t h e c o r p o r a t i o n is o n e o f a n u m b e r of UK r e g i o n a l d e v e l o p m e n t c o r p o r a t i o n s c h a r g e d w i t h t h e r e g e n e r a t i o n of s p e c i f i c a r e a s . It is a p r e d o m i n a n t l y p r o j e c t - b a s e d o r g a n i s a t i o n - t h e l i f e - s p a n of t h e c o r p o r a t i o n w a s g e n e r a l l y fixed a t its inception. Its roles i n c l u d e t h e p r o m o t i o n of t h e a r e a a n d t h e b r i n g i n g in o f b u s i n e s s , h o u s i n g a n d t h e n e c e s s a r y i n f r a s t r u c t u r a l c h a n g e s t o m a k e i t all w o r k . A s i d e f r o m L o n d o n ' s D o c k l a n d s d e v e l o p m e n t , t h e C a r d i f f B a y d e v e l o p m e n t is o n e o f t h e m o s t a m b i t i o u s s c h e m e s c u r r e n t l y r u n n i n g . I t i n c l u d e s t h e c o n s t r u c t i o n of a b a r r a g e a c r o s s t h e e s t u a r i e s of t h e r i v e r s T a f f a n d Ely, w h i c h will f o r m a f r e s h w a t e r l a g o o n w h e n c o m p l e t e d . T h e 2 2 0 0 acres o f l a n d t h a t w i l l be d i r e c t l y a d j a c e n t t o t h e l a g o o n a r e u n d e r t h e c o n t r o l of a n u m b e r of o w n e r s , w i t h a r o u n d 6 0 p e r c e n t of it b e i n g u n d e r c o n t r a c t o r n e g o t i a t i o n f o r redevelopment. W h e n f o u n d e d in 1 9 8 7 , t h e c o r p o r a t i o n w a s d i v i d e d i n t o f u n c t i o n a l g r o u p s engineering, commercial, finance a n d administration, each u n d e r the control of a director. A s t h e w o r k of t h e c o r p o r a t i o n g r e w , it w a s decided t h a t t h i s w a s b e c o m i n g

•Project organisation: structures and teams i 257

u n w i e l d y a n d t h a t in o r d e r t o simplify m a t t e r s , a m a t r i x (overlay) structure w o u l d be a d o p t e d . T h e directors m a i n t a i n e d overall c h a r g e a n d t h e t e a m m e m b e r s w e r e d r a w n in as n e e d e d . T h e o v e r l a y c o n s i s t e d of e i g h t h o r i z o n t a l f u n c t i o n s , d i v i d e d i n t o geographical areas. As t h e engineering director c o m m e n t e d : This proved to be too complicated as people found themselves on too many teams. They lost sight of the corporate objectives - the teams ended up competing against each other for developers to take plots of land, regardless of who was most suitable for that site. What we needed to do was to maintain that competitive spirit, but channel it more constructively. The sale of sites was also problematic as the revenue generated w o u l d technically be earned by the teams, but would go back into a central pot For use by all. T h e e x p e r i m e n t w i t h this f o r m of m a t r i x m a n a g e m e n t w a s a b a n d o n e d . T h e curr e n t s t r u c t u r e k e e p s t h e p o w e r of t h e f u n c t i o n s i n t a c t b u t l o o k s a t f o u r k e y a r e a s t h r o u g h t h e b u s i n e s s p r o c e s s e s t h a t are carried o u t in t h o s e areas. In this w a y , it n o w m o r e closely f o l l o w s t h e seamless ideas t h a n those of t h e c o n v e n t i o n a l m a t r i x .

i i i i i M i i P i i i i « mull

m

n

Semco S e m c o is a n u n u s u a l c o m p a n y . Based in Brazil, it h a s g o n e t h r o u g h t h e w o r s t of Brazil's e c o n o m i c m a y h e m , s u r v i v e d ( 8 0 0 p e r c e n t - p l u s inflation, t h e g o v e r n m e n t seizing large p r o p o r t i o n s of available cash, a n d a t t i m e s a n a l m o s t n o n - e x i s t e n t h o m e m a r k e t f o r its g o o d s ) a n d still g r o w n . It has d o n e this t h r o u g h t h e e v o l u t i o n of a n e w m a n a g e m e n t structure - k n o w n as t h e satellite o r n e t w o r k e d o r g a n i s a t i o n . T h e case is a n e x a m p l e of taking t h e p r o j e c t m a n a g e m e n t o r g a n i s a t i o n t o a n extreme. S e m c o w a s a traditional, h i e r a r c h i c a l l y oriented m a n u f a c t u r i n g business w h i c h w a s r u n by its f o u n d e r . W h e n t h e business passed t o his son, t h e c h a n g e s started. T h e r e c e s s i o n in Brazil m e a n t t h a t t h e r e w o u l d h a v e t o be m a j o r r e d u n d a n c i e s o r t h e f i r m w o u l d close. T h i s p r e s e n t e d a u n i q u e o p p o r t u n i t y t o t h e c o m p a n y . E m p l o y m e n t legislation in Brazil m e a n t t h a t s e v e r a n c e p a y w a s v e r y high. T h e i r services w o u l d still be required, h o w e v e r , in s o m e m e a s u r e , p a r t i c u l a r l y t h o s e of t h e d i r e c t e m p l o y e e s . By selecting t h e w o r k e r s w h o c o u l d h a n d l e t h e b r e a k , t h e c o m p a n y h e l p e d t h e s e p e o p l e t o set t h e m s e l v e s u p in t h e i r o w n b u s i n e s s e s , p r o viding t h e c o m p a n y ( a n d any others w h o m i g h t wish t o use t h e i r services) w i t h t h e service t h e y h a d previously provided as employees. O f t e n this w o u l d be o n t h e very h a r d w a r e t h a t t h e y h a d u s e d p r e v i o u s l y , b u t w h i c h w a s n o w leased o r o w n e d by t h e m . T h i s idea w a s applied t o all a r e a s of t h e i r o p e r a t i o n s - legal, a c c o u n t a n c y as well as s o m e m a n u f a c t u r i n g . N o g c a r a n t e e s w e r e given o n e i t h e r side, a strategy w h i c h w a s i n t e n d e d t o m a k e sure t h a t b o t h parties c o u l d r e m a i n c o m p e t i t i v e a n d flexible. T h e structure is s h o w n in Fig. 9.9. T r e a t i n g people w h o w e r e previously employees as c o n t r a c t o r s h a d the necessary e f f e c t of r e d u c i n g t h e fixed l a b o u r o v e r h e a d . I n a d d i t i o n , p e o p l e v i e w p r o b l e m s

242 I Phase 1 hree - Delivet the project jdo rt'j

Figure 9,9 Satellite organisation

d i f f e r e n t l y w h e n w o r k i n g f o r t h e m s e l v e s . T o o o f t e n p r o j e c t m a n a g e r s w o u l d be left w i t h o t h e r people's p r o b l e m s because t h e y h a d n o stake in solving t h e m . N o w t h e y have t h e same interest in t h e a c h i e v e m e n t of a n end-result as d o e s the p r o j e c t m a n a g e r . E n c o u r a g i n g p e o p l e t o t a k e c o n t r o l of t h e i r w o r k i n g lives t h r o u g h s e l f - e m p l o y m e n t is a m a j o r b r e a k - a p e r s o n is n o w p a i d f o r w h a t t h e y do, r a t h e r t h a n w h a t t h e i r j o b title is w o r t h . W h a t S e m c o h a s d o n e is t o hive off m u c h of t h e l i n e - m a n a g e m e n t r e s p o n s i b i l ity a n d b e c o m e p u r e l y p r o j e c t f o c u s e d - r e m o v i n g t h e c o n s t r a i n t s of p r o c e s s e s a n d p r o c e d u r e s . Its c o r e b u s i n e s s is a s m a l l a m o u n t of a s s e m b l y w o r k , w i t h t h e c o o r d i n a t i o n of i n n o v a t i o n being t h e central a i m of t h e core. T h i s is a n e x a m p l e of w h a t H a n d y ( 1 9 8 9 ) calls t h e ' s h a m r o c k organisation', a n d d o e s a w a y w i t h c o n v e n t i o n a l s t r u c t u r e s in f a v o u r of s o m e t h i n g f a r less easily c o m p r e h e n d e d , b u t w h i c h m e e t s t h e n e e d s o f t h e m o d e r n business in achieving t h e necessary strategic flexibility. Such a f o r m is clearly t h e u l t i m a t e e x p r e s s i o n of t h a t c u r r e n t m a n a g e ment buzzword - empowerment.

functional chimneys cross-functional activities dotted-line responsibility matrix management seamless enterprise teamwork

collection/entrenchment/resolution/ synergy/decline/break-up p e r s o n a l i t y profile group-think meetings

Project organisation; structures end teams I 243

1 W h y is t h e f u n c t i o n a l o r g a n i s a t i o n p r e v a l e n t in m o d e m business? 2 W h a t are t h e d i s a d v a n t a g e s of t h e f u n c t i o n a l o r g a n i s a t i o n ? 3 Briefly list t h e o t h e r w a y s in w h i c h a n o r g a n i s a t i o n m a y be structured. 4 W h y is the subject of o r g a n i s a t i o n a l structure so i m p o r t a n t ? 5 W h y is the 'pure project' o r g a n i s a t i o n a useful s t r u c t u r e ? 6 W h y s h o u l d a n o r g a n i s a t i o n use the m a t r i x s t r u c t u r e ? 7 Briefly describe t h e t h r e e basic types of m a t r i x o r g a n i s a t i o n . 8 W h y s h o u l d a n o r g a n i s a t i o n c o n s i d e r it very carefully before a t t e m p t i n g t o use matrix management? 9 H o w d o t h e i d e a s of t h e 'seamless e n t e r p r i s e ' d i f f e r f r o m t h o s e of m a t r i x m a n a g e m e n t a n d t h o s e of f u n c t i o n a l m a n a g e m e n t ? 10 W h y s h o u l d p r o j e c t m a n a g e r s c o n c e r n themselves w i t h the w a y the g r o u p s t h e y are w o r k i n g w i t h interact? 11 H o w m i g h t a k n o w l e d g e of t h e life-cycle of t e a m s h e l p the p r o j e c t m a n a g e r ? 12 Using Belbin's c h a r a c t e r profiles, indicate w h i c h of t h e s e y o u feel best a p p l i e s t o you. Y o u m a y like t o apply this t o a g r o u p in w h i c h y o u are w o r k i n g by t h e n analysing each other's characteristics. 13 W h a t actions c a n t h e p r o j e c t m a n a g e r t a k e t o try t o ensure effective t e a m w o r k ? 14 D i s c u s s t h e s t a t e m e n t t h a t 'project m e e t i n g s regularly t a k e u p t o o m u c h t i m e a n d achieve very little'.

Ansoff, H.I. (1968) Corporate Strategy, Penguin Books, New York. Bartlett, A. and Ghoshal, S. (1990)'"Matrix Management" - Not a Structure, a Frame cf Mind', Harvard Business Review, July-August, pp. 138-45. Belbin, R.M. (1993)Team Roles at Work, Butterworth-Heinemann, Oxford, p. 23. Belbin, R.M. (2000) Beyond The Team, Butterworth-Heinemann, Oxford. Davis, S.M. and Lawrence, P.R. (1977) Matrix, Addison-Wesley, Reading, MA, pp. 18-19. Dimancescu, D. (1995) The Seamless Enterprise: Making Cross Functional Management Work, Wiley, New York. Handy, C. (1989)The Age of Unreason, Arrow, London. Knight, K. (ed.) (1977) Matrix Management- A Cross Functional Approach to Organisations, Gower, Aldershot. Larson, C.E. andLaFasto, F.MJ.(1989)7ea»t Work, Sage, London. Lawler, E.E. and Mohrman, S.A. (1985)'Quality Circles After the Fad\Haruard Business Review, January-February, pp. 65-71.

Mullins, L.J. ( 1 9 9 9 ) M a n a g e m e n t and Organisational Behaviour, 5th edition, Financial Times Pitman Publishing, London, pp. 542-3. Peters, T. (1987)Thriving on Chaos, Macmillan, London. Peters, T. (\992)Liberation Management, Macmillan, London. Semler, R (\993i)Maverick! The Success Story Behind the World's Most Unusual Workplace, Century, London. Ulrich, K.T. and Eppinger, S.D. (2000) Product Design and Development, 2nd edition, McGraw-Hill, New York.

Beme, E. ( \ 9 6 1 ) G a m e s People Play: The Psychology of Human Relationships, Penguin, Harmondsworth. Bishop, S.K. (1999)'Cross-Functional Project Teams in Functionally Aligned Organisations,' ProjectMamgement Journal, September, pp. 6-12. Blanchard, K., Carew, D. and Parisi-Carew, E. (1992)The One Minute Manager Builds High Performing Teams, HarperCollins, London. DeMarco, T. and Lister, T. (1999)Peopleware: Productive Projects and Teams, 2nd edition, Dorset House, London. Katzenbach, J.R. and Smith, D.K. (1993) The Wisdom of Teams, Harvard Business School Press, Cambridge, MA. Kerzner, H. and Cleland, D.I. (l9S5)Profect/Matrix Management, Policy and Strategy, Cases and Situations, Van Nostrand Reinhold, New York. www.belbin.com - Belbin Associates website and on-line role profiling. Note

1 See t h e results of r e s e a r c h carried o u t by Bartlett a n d Ghoshal ( 1 9 9 0 ) , a n d t h e a n e c d o t a l evidence of Peters ( 1 9 8 7 , 2 9 9 2 ) .

The literature o n t h e s u b j e c t o f m a n a g e m e n t a n d l e a d e r s h i p is vast. A search o f a single university library y i e l d e d in excess of 6 0 0 0 references - t h e s y s t e m simply d i d not bother t o count beyond this. The subject is w e l l studied in many disciplines a n d so p r o v i d e s for an o v e r l a p w i t h t h e o r g a n i s a t i o n a l b e h a v i o u r a n d t h e h u m a n resources m a n a g e m e n t specialisms. There is also a s u b s t a n t i a l literature w h i c h is practitioner based t h a t has much t o offer t h e practising manager and student alike. This chapter considers t h e basics of m a n a g e m e n t a n d leadership and cites s o m e of t h e key historical d e v e l o p m e n t s in t h i s area. A structure is provided for t h e Literature and t h e role of new m a n a g e m e n t theories or 'paradigms' is considered. The need for t h e m a n a g e r t o s h o w leadership a n d treat t i m e as a v a l u a b l e resource is highlighted t h r o u g h t h e c o n s i d e r a t i o n of t i m e management.

Learning Objectives 10.1

T h e r o l e o f l eadership a n d m a n a g e m e n t in projects

10.2

Individual skills and attitudes

10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10

Individualmotivation S t r u c t u r a l i m p l i c a t i o n s f o r p r o j e c t managers C u l t u r a l i implications f o r p r o j e c t managers M a n a g e m e n t style T h e development ofmanagement t h i n k i n g T h e development o f n e w management paradigms Relevant areas of t h e bodies o f k n o w l e d g e Summary

Project management in practice: Doesn't time fly? Key terms Review

questions

and further

References Further

information

exercises

246

Phase Three

Deliver the project fdo iîO

By t h e t i m e t h a t you have c o m p l e t e d t h i s chapter, you s h o u t d be a b l e to: * i d e n t i f y t h e d i f f e r i n g r o l e s cf l e a d e r s h i p a n d m a n a g e m e n t in t h e p r o j e c t

environment; * S h o w t h e i m p a c t of t h e individual m a n a g e r on t h e p e r f o r m a n c e of t h e g r o u p cf p e o p l e t h a t they a r e m a n a g i n g ; * D i s c u s s t h e role of c h a n g e s in m a n a g e m e n t t h i n k i n g a n d t h e i m p l i c a t i o n s cf t h e s e for practitioners.

10.1

The Role of Leadership and Management in Projects T h e structure e m p l o y e d f o r these discussions is s h o w n in Fig. 10.1. T h e a s s u m p t i o n is m a d e t h a t m a n a g e m e n t h a s a positive role t o play in t h e a c h i e v e m e n t of p r o j e c t goals. T h e figure s h o w s the m a j o r c o n t r i b u t o r y f a c t o r s in this. A t t h e highest level, t h e g e n e r i c ideas c o n c e r n i n g p r o j e c t m a n a g e m e n t a r e d e c o n s t r u c t e d i n t o t h r e e m a j o r c o m p o n e n t s w h i c h all h a v e a n i n p u t i n t o t h e i n d i v i d u a l p r o j e c t m a n a g e r / leader's role: •

• •

m a n a g e m e n t - t h e t e c h n i c a l discipline of a p p l y i n g a n d a d m i n i s t e r i n g a u t h o r i t y over o t h e r s w h i c h is given t h r o u g h t h e f o r m a l i s e d structural a r r a n g e m e n t of t h e organisation; l e a d e r s h i p - t h e q u a l i t y of o b t a i n i n g r e s u l t s f r o m o t h e r s t h r o u g h p e r s o n a l influence; i n d i v i d u a l skills a n d attitudes w h i c h t h e p r o j e c t m a n a g e r possesses.

F i g u r e 1 0 . 1 s h o w s t h e c o m p o n e n t s o f t h e i n d i v i d u a l p r o j e c t m a n a g e r ' s role in p l a n n i n g , o r g a n i s i n g , directing, c o n t r o l l i n g a n d m o t i v a t i n g t h e p e o p l e c o n c e r n e d w i t h t h e a c h i e v e m e n t of t h e task. A p a r t f r o m t h e t h r e e characteristics a l r e a d y m e n t i o n e d , t h e n a t u r e of t h e task being u n d e r t a k e n , the m o t i v a t i o n s of t h e i n d i v i d u a l s in t h e t e a m , t h e o r g a n i s a t i o n a l s t r u c t u r e a n d t h e elusive n o t i o n of 'culture' a r e all i n p u t s t o d e t e r m i n i n g t h e r o l e t h a t t h e p r o j e c t m a n a g e r s h o u l d play. T h i s in t u r n d e t e r m i n e s t h e style t h a t will be a d o p t e d , w h i c h leads t o t h e c o n c e p t of each p r o j e c t o r t a s k being a 'test of m a n a g e m e n t effectiveness'. S h o u l d t h e f a c t o r s t h a t t h e p r o j e c t m a n a g e r uses p r o v e t o h a v e been u s e d effectively t h e n t h e r e will be a positive influence o n t h e o u t c o m e . T h i s is n o t t o say simplistically t h a t t h e o u t c o m e itself will be positive, a s t h e r e a r e m a n y e x t e r n a l f a c t o r s t h a t c a n h a v e a m o r e s i g n i f i c a n t e f f e c t . T h e r e f o r e , t h e d i s c u s s i o n of t h e role of m a n a g e m e n t in t h i s c h a p t e r is limited t o t h e f a c t o r s t h a t are internal t o t h e o r g a n i s a t i o n o r t h e p r o j e c t t e a m itself. is a t e r m t h a t implies capability t o direct a n d a d m i n i s t e r the w o r k o f others. It does n o t imply technical specialism, t h o u g h this is o f t e n required, b u t t h e t e r m 'manager' s h o u l d imply a k n o w l e d g e of the issues involved in 'managing'. T h e d e f i n i t i o n o f m a n a g e m e n t h a s been stated t o include a m e a s u r e of p o w e r o r authority

Management and leadership in project environments s 247

given by the organisational structure. Managing is therefore considered t o be task-related. As Drucker (1955)commented: The m a n a g e r is t h e dynamic, life-giving element in every b u s i n e s s . W i t h o u t his leadership, the resources of production remain resources and never become production. In a competitive economy above all, t h e quality a n d performance of t h e managers determine t h e success of t h e business, indeed they determine its survival. For t h e q u a l i t y a n d performance o f its m a n a g e r s is t h e only effective advantage an enterprise in a competitive economy can have.

264 Phase Three

Deliver t h e p r o j e c tfdoiîO

Assumes leaders are born and not made. Leadership consists of certain inherited characteristics or personality traits. Focuses attention on the person in the job and not on the fob Itself.

THE FUNCTIONAL OR GROUPAPPKOACH Attention is focused on the Functions and responsibilities of leadership, what the leader actually does and the nature of the group. Assumes leadership skills can be learned and developed

—„_

—

.—__——

LEADERSHIP AS A BEHAVIOURAL CATEGORY The kinds of behaviour of people In leadership positions and the influence on group performance. Draws attention to a range of possible managerial behaviour and the importance of Leadership style.

STYLES OF LEADER5HIP The way in which the functions of leadership are carried out and the behaviouradopted by managers towards subordinate staff. Concernedwith the effects of leadership on those being led.

THE SITUATIONAL APPROACH AND CONTINGENCY M O D E L S The importance of the situation. Interactions between the variables involved in the leadership situation and patterns of behaviour. Belief that there is no single style of leadership appropriate to all situations.

Figure 10.2 A framework for t h e study o f managerial leadership (Source: Muttîns, t,j., 1999, Management

and Organisational

Behaviour, 5th edition, Rnaneia!

T i m e s P i t m a n P u b l i s h i n g , p. 2 6 0 . R e p r o d u c e d w i t h p e r m i s s i o n )

Leadership L e a d e r s h i p involves t h e influencing of o t h e r s t h r o u g h t h e p e r s o n a l i t y o r actions of t h e individual. T h e definition is t h e r e f o r e people-related. A f r a m e w o r k f o r t h e study of m a n a g e r i a l l e a d e r s h i p is given in Fig. 10.2. T h e earliest a p p r o a c h t o l e a d e r s h i p w a s t h e 'traits' a p p r o a c h . T h e c o n t e x t w a s militaristic, aligned t o the n o t i o n t h a t b o m leaders are t h e type of people w h o c o u l d lead a g r o u p o u t of the trenches a n d i n t o attack. T h e idea t h a t 'leaders are b o r n a n d n o t m a d e ' is c o n t e n t i o u s a n d highly d u b i o u s . G r e a t leaders in all spheres of h u m a n e n d e a v o u r have d e v e l o p e d t h e i r skills a n d attributes t o the p o i n t needed f o r the t a s k t h e y are u n d e r t a k i n g . B o t h of these are t e a c h a b l e - p r o v i d e d t h e i n d i v i d u a l w i s h e s t o learn. Intelligence is o n e of t h e f e w characteristics t h a t c a n n o t be t a u g h t , t h o u g h

Management and leadership in project environments s 2 4 9

t h i s h a s r a r e l y b e e n a c o n s t r a i n t o n success. M u c h of t h e r e s e a r c h i n t o e s t a b l i s h i n g t h e p r e c i s e c h a r a c t e r i s t i c s of a l e a d e r h a s b e e n i n c o n c l u s i v e o r c o n t r a d i c t o r y .

The

m o r e recent approaches (functional or g r o u p approach, k a d e r s h i p as a behavioural c a t e g o r y , s t y l e ) h a v e t o s o m e e x t e n t f o l l o w e d t h e s a m e p a t t e r n . T h e e m e r g e n c e of t h e ' c o n t i n g e n c y ' m o d e l s r e c o g n i s e s w h a t m i g h t h a v e b e e n e x p e c t e d , t h a t t h e r e is n o single 'recipe f o r leadership' w h i c h , if f o l l o w e d , will m a k e y o u instantly s u c c e s s f u l . T r a n s f o r m a t i o n a l l e a d e r s h i p is t h e m o s t r e c e n t a n d m o s t c h a n g e - f o c u s e d of t h e a p p r o a c h e s , i n v o l v i n g a m o r e h u m a n - c e n t r e d a t t i t u d e t o m a n a g e m e n t issues. T h e f o l l o w i n g q u o t a t i o n q u e s t i o n s w h e t h e r it is p o s s i b l e f o r a n i n d i v i d u a l t o b e b o t h a m a n a g e r a n d a l e a d e r in t h e s a m e c o n t e x t : W h a t is t h e b e s t w a y to d e v e l o p l e a d e r s h i p ? Every s o c i e t y p r o v i d e s its o w n a n s w e r t o t h i s q u e s t i o n , a n d e a c h , g r o p i n g f o r a n s w e r s , d e f i n e s its d e e p e s t c o n c e r n s a b o u t t h e p u r p o s e s , d i s t r i b u t i o n s a n d u s e s of p o w e r . B u s i n e s s h a s c o n t r i b u t e d its a n s w e r t o t h e l e a d e r s h i p q u e s t i o n by e v o l v i n g a n e w b r e e d c a l l e d t h e m a n a g e r . S i m u l t a n e o u s l y , b u s i n e s s h a s e s t a b l i s h e d a n e w p o w e r e t h i c t h a t f a v o u r s collective o v e r i n d i v i d u a l l e a d e r s h i p , t h e cult of t h e g r o u p o v e r t h a t of personality. W h i l e e n s u r i n g t h e c o m p e t e n c e , c o n t r o l a n d t h e b a l a n c e of p o w e r r e l a t i o n s a m o n g g r o u p s with t h e p o t e n t i a l f o r rivalry, m a n a g e r i a l l e a d e r s h i p u n f o r t u n a t e l y d o e s n o t n e c e s s a r i l y e n s u r e i m a g i n a t i o n , c r e a t i v i t y , o r e t h i c a l b e h a v i o u r in g u i d i n g t h e d e s t i n i e s of c o r p o r a t e e n t e r p r i s e . ( Z a l e z n i k , 1 9 7 7 ) W h i l e t h e r e is c l e a r l y a r o l e f o r b o t h p r o j e c t m a n a g e r s a n d l e a d e r s , t h e t e r m m a n a g e m e n t will b e u s e d f r o m h e r e o n t o d e n o t e b o t h t h e m a n a g e m e n t of t h e t a s k a n d t h e l e a d e r s h i p o f t h e p e o p l e involved.

10.2

Individual Skills and Attitudes T h e m o d e l in Fig. 1 0 . 1 s h o w s t h e i n p u t s of p e r s o n a l i t y ( d i s c u s s e d in C h a p t e r 9), e x p e r i e n c e ( f r o m p r e v i o u s activities w i t h i n a n d o u t s i d e t h e w o r k e n v i r o n m e n t ) a n d ( i n ) f o r m a l m e t h o d s of t r a i n i n g a n d e d u c a t i o n (see b e l o w ) . M a n y of t h e skills r e q u i r e d of t h e p r o j e c t m a n a g e m e n t a r e l e a r n a b l e , in p a r t i c u l a r p e r s o n a l m a n a g e m e n t ( t h e m a n a g e m e n t of y o u r s e l f , a s o p p o s e d t o p e r s o n n e l m a n a g e m e n t w h i c h is t h e m a n a g e m e n t of p e o p l e ) a n d t h e a b i l i t y t o m o t i v a t e a t e a m . P e r s o n a l m a n a g e m e n t will be d i s c u s s e d h e r e a n d m o t i v a t i o n in s e c t i o n 1 0 . 3 . T h e b a s i s of t h e s t u d y of p e r s o n a l s k i l l s m a n a g e m e n t is t h e a p p l i c a t i o n Deming's fifth point:

of

I m p r o v e c o n s t a n t l y a n d f o r e v e r every a s p e c t of p r o d u c t a n d service p r o v i s i o n . T h e b e s t p l a c e t o s t a r t w i t h a n y m a n a g e m e n t c h a n g e is y o u r s e l f . M o s t m a n a g e r s w o u l d like t o h a v e e x t r a t i m e , a n d n o m a t t e r w h a t p r o j e c t y o u a r e i n v o l v e d in, t i m e is o n e r e s o u r c e t h a t is n o t r e p l e n i s h a b l e . T h e s u c c e s s f u l p r o j e c t m a n a g e r h a s l e a r n e d t o a p p l y s o m e f o r m of s t r u c t u r e d m e t h o d t o the a l l o c a t i o n of t h a t r e s o u r c e . W h i l e there are m a n y excellent proprietary time m a n a g e m e n t systems, the discussion here

will be on the general principles rather than the characteristics of any one particular example. A study showed that for a sample of American managers who had not had any time management training (DeWoot, quoted in Godefroy and Clark, 1989): 49 per cent of their time is spent on tasks that could be done by their secretaries; 5 per cent is spent on tasks that could be delegated to subordinates; 43 per cent is spent on tasks that could be delegated to colleagues; 3 per cent is spent on tasks which justify the input of their talents and abilities. Many project managers work long hours, with their own work always being subject to delays and fitting the description 'running to stand still'. This leads to poor decision-making as time is not properly allocated to the analysis and consideration of the issues involved. Their work assumes a pattern where they have no basis for making the decision as to whether to accept or reject further tasks and so undertake more than they can realistically handle. For many people, this is a way of remaining useful as they are seen to be busy, but in reality they are rarely effective. Time allocation fits three broad categories: • proactive - working on plans that are beyond the timeframe of 'that which needs to be done immediately' with the emphasis on 'problem prevention'. If one considers management to be a process and have a 'management product', the quality of that product will be determined by the effect that it has on both the short- and long-term performance of the project they are managing; • reactive - there is a problem, work to solve it. This is also known as 'firefighting' or 'busy work' and is a style of management which can be very rewarding in that the constant attention of that manager is required (Zeus culture) but stress is high and progress on innovative matters haphazard; • inactive - resting between the bouts of proactive and reactive work. Does not include thinking time, but does include time spent outside work. The basis of any time management system is that it provides a logical base to work from in deciding how to prioritise time between the three categories. The effects of good or bad time management are shown in Fig. 10.3.

Figure

3 Effects of time management m

behaviour of individuals

Management and leadwshio in project

O n e of t h e m a j o r e f f e c t s o f p o o r p e r f o r m a n c e in m a n a g e m e n t is stress. T h i s is p r e s s u r e w h i c h , t h r o u g h t h e n a t u r a l r e a c t i o n s of t h e h u m a n b o d y , g e n e r a t e s in t h e individual symptoms ranging f r o m anxiety t o death. T h e b o d y generates adrenalin ( f o r 'fight o r flight') w h i c h is n o t w o r k e d o f f by t h e b o d y - p a r t i c u l a r l y in s e d e n t a r y o c c u p a t i o n s . W h i l e a c e r t a i n a m o u n t of p r e s s u r e is beneficial a n d leads t o e n h a n c e d p e r f o r m a n c e a s a n i n d i v i d u a l rises t o a c h a l l e n g e , t h e negative side is 'stress'. By f a r t h e m o s t h e l p f u l g u i d e t o t h e i n d i v i d u a l m a n a g i n g stress h a s c o m e in t h e f o r m of t h e ' f o u r Ps': • •

p l a n y o u r w a y o u t of t h e s i t u a t i o n t h a t is c a u s i n g y o u t h e stress; p a c e yourself - don't try t o d o e v e r y t h i n g a t once;

• •

p a m p e r yourself - r e w a r d yourself f o r g o a l s a c c o m p l i s h e d o r p l a n s c o m p l e t e d ; piss yourself l a u g h i n g - rhe h e a l i n g p o w e r of l a u g h t e r is e n o r m o u s .

T h e a p p r o a c h t o i m p r o v i n g t i m e m a n a g e m e n t i n v o l v e s t a k i n g a little o f t h a t c o m m o d i t y t o p l a n a n d involves t h e classical business s t r a t e g y d e v e l o p m e n t cycle: •

A n a l y s e t h e c u r r e n t s i t u a t i o n - t h e best w a y of d o i n g t h i s is t o c h a r t t h e a m o u n t of t i m e t h a t y o u s p e n d d u r i n g a p e r i o d of several w e e k s o n c e r t a i n t a s k s - r e c o r d t h e m in a t a b l e such a s T a b l e 10.1. T h i s is g e n e r a l l y a fairly d e p r e s s i n g exercise, especially w h e n y o u r e f e r t o t h e n e x t s e c t i o n . T h e p r i o r i t y c o l u m n s h o u l d r a n k t h e i m p o r t a n c e of t h e item b e i n g c o n s i d e r e d f r o m 1 (will c o n t r i b u t e t o l o n g - t e r m o b j e c t i v e s ) t o 5 (totally i r r e l e v a n t d i v e r s i o n ) .

•

Set g o a l s a n d t a r g e t s f o r s h o r t - , m e d i u m - a n d l o n g - t e r m ( b r o k e n d o w n into p r o fessional, financial, p e r s o n a l a n d a n y o t h e r ) objectives, w h i c h m u s t be S M A R T : S - s p e c i f i c a n d w r i t t e n d o w n - t h i s is a f u n d a m e n t a l starting p o i n t f o r b o t h p e r s o n a l a n d p r o j e c t m a n a g e m e n t , d e f i n i n g , specifically w h e r e it is t h a t y o u w a n t t o be (discussion of t h e need t o set o b j e c t i v e s o f t e n uses t h e m e t a p h o r of a j o u r n e y - y o u w o u l d n o t s t a r t o u t u n l e s s y o u k n e w w h e r e it w a s y o u were going); M - m e a s u r a b l e - t h e r e s h o u l d be a d e f i n a b l e p o i n t a t w h i c h it c a n be o b j e c t i v e l y determined that the goal has been achieved; A - a c h i e v a b l e - t h e objective m u s t be physically possible;

Table 10.1 Time usage analysis Start time

Activity

Time taken

Priority

Comments

252 I Phase Three - Deliver the

it!)

R - realistic - for yourself to achieve this, without being too conservative (goal should be uplifting - s ee Chapter 6f; T - time-framed - having a limit on the date by which it will be achieved. Where there is a discrepancy between the objectives you have set for yourself and the way in which time is allocated, the plan to achieve those objectives must be changed as follows: 1 Set the plan in place as to how to achieve those goals - there is a certain amount of time that we have to allocate to each of the above areas of activity. This amount of time should reflect the priority that each takes, e.g. the time outside contracted working hours - is that to be spent doing extra work, time with family, in front of the television or on social or sporting activities? Most people can put these in a ranking. The achievement of a certain goal should be associated with the allocation of a certain amount of time to it. 2 Use specific techniques to keep to the above (see Table 10.2). 3 Constantly review your performance - the use of a diary along with the repetition of the time evaluation form from time to time can show the magnitude cf improvement. Some cf the most successful people keep a 'journal'. This is a record of their performance, both good and bad, written at regular intervals This form of honest self-analysis is excellent for charting progress, particularly over a period of years and providing support to the idea that taking charge of your time can yield enormous benefits. As one very successful

Table 10.2 Techniques

k e e p to a plan

Use a diary or other form of time-planner ('the shortest pencil is better than the longest memory') -record activities rather than trying to remember them -this only takes up valuable space in your mind. Say 'no' to non-goal-achieving tasks - do not add to your current task list. Handle each piece of paper once only - this rule avoids die little time-bombs (memosthat required action by a date which is approaching rapidly) that sit in an office because you have not got round to tackling them. Use checklists and to-do lists to save you having to remember events and to enable you to sequence them rationally. Do not avoid difficult or unpleasant tasks. Get them done and out of the way so that your time may then be more positively employed.

Make telephone calls with a fixed duration -e.g. ty callingfive minutes before a meeting you limit the time of the conversation to five minutes. When you talk to someone have your agenda written down and record the results of the discussion. Don't handle information twice. Allow people to make and implement decisions for themselves - they do not need to bring all basic issues to you - the rules for making the decisions should be established. Do not allow interruptions to disturb meetings or periods when you need to be engaged in proactive work. Do not be constrained by die normal work practices of time and place (if allowable).

Management and leadership in project environments s 269

project manager put it, 'What better way of showing that you are ready for the responsibility of managing other people than by taking effective control of your own time? How on earth can you hope to be an effective manager of other people, if you are incapable of managing yourself?' One thing at a time the idea of focus that has been applied to such effect in the development of organisational strategy (the operation that focuses on meeting a narrow range of needs will be more successful than that which tries to meet a wider range) is also applicable to personal time management. Focusing on the goals to be achieved and eliminating distractions can clear the wav of unwanted activities. The last two Ps are vital if you are to be successful as a project manager. The former takes on the ideas of balance in your life as a whole through sport or other recreation, while having fun is a major spur to better performance as well as a great stress reliever. Peters (1992)quotes a Californian marketing company as having a number of strategies to encourage the 'fun' back into work, including regular water-pistol fights in the accounts department (see also Schrage, 1999; Peters, 1999; Firth, 1996). Having cited these methods for improving your time management, these kinds of skills are only the basis of a longer period of sustained self-improvement. Formal post-experience education for managers is a major industry and most forwardlooking organisations promote individuals taking time to study through providing study leave or flexible working arrangements. Some organisations have gone as far as creating their own study centres {e.g. Unipart University in the UK). Informal methods of learning are just as valuable such as reading new books and journals, in addition to sharing knowledge and ideas with colleagues and people from other organisations (often referred to as 'networking').

10.3

Individual Motivation The modern project manager has a responsibility both to the organisation and to the team members to ensure that they are provided with a high level of motivation. People work better and faster when they have pride in their work. The individual will need to gain satisfaction from the tasks they are assigned, as work generally occupies a significant part of their lives (call this a 'social duty'). By providing for the needs of an individual, their performance can be made less uncertain and, to a degree, managed for benefit to both the individual and the organisation. The major theories of work motivation are shown in Fig. 10.4.

Scientific management Figure 10.4 includes the work of Frederick Taylor (1911)in the development of the principles of scientific management. This is included as its importance is largely historic, but it had an unprecedented effect on management thinking. Despite the principles being nearly a century old, there is still much evidence of their application. The principles of scientific management or 'Taylorism' are most applicable to repetitive work. They are as follows.

254 I Phase 1 hree - Delivet the project jdo rt'j

Figure 10.4 Main theories of work motivation

1 W o r k s h o u l d be studied scientifically t o d e t e r m i n e in q u a n t i t a t i v e t e r m s h o w it s h o u l d be divided a n d h o w e a c h s e g m e n t s h o u l d be d o n e . T h e aim is t o m a x i m i s e efficiency of t h e activity a n d is a c h i e v e d t h r o u g h m e a s u r e m e n t , r e c o r d i n g a n d s u b s e q u e n t analysis. 2 T h e w o r k e r s h o u l d be m a t c h e d scientifically t o t h e job, e.g. w h e r e a t a s k h a s a physical i n p u t t o it, the p h y s i q u e of t h e i n d i v i d u a l s h o u l d m a t c h t h e r e q u i r e m e n t s of t h a t task by, f o r e x a m p l e , using a well-built p e r s o n t o m o v e h e a v y loads. 3 T h e person c a r r y i n g o u t a task s h o u l d be t r a i n e d t o d o it as p e r t h e results of t h e analysis - i t m u s t be carried o u t exactly as designed a n d closely supervised. 4 T h e p e r s o n c a r r y i n g o u t t h e t a s k s h o u l d be r e w a r d e d f o r f o l l o w i n g t h e prescribed m e t h o d exactly by a substantial m o n e t a r y bonus. T h e r e s u l t of T a y l o r i s m is t h e s e p a r a t i o n of t h e w o r k t a s k f r o m a n y t h i n k i n g p r o c e s s by t h e individual. A n y a t t e m p t a t m o t i v a t i o n is p u r e l y f i n a n c i a l l y b a s e d . S u p p o r t activities a r e c a r r i e d o u t b y t r a i n e d individuals. T h e a d v a n t a g e of t h e system f o r w o r k i n g is t h a t t h e task is m a d e very simple, w h i c h m e a n s t h a t a n indiv i d u a l c a n b e c o m e very proficient a t it a n d c a n be replaced w i t h relative ease. T h e d o w n s i d e s are considerable, h o w e v e r , w i t h t h e p e r s o n being a l i e n a t e d f r o m t h e t a s k t h e y are d o i n g a n d h a v i n g n o real i n p u t t o t h e c o n v e r s i o n process. T h i s alienation c a n be passive in the f o r m of losing of interest in the process ('don't care' a t t i t u d e ) r a n g i n g t o destructive ( p i l f e r i n g , s a b o t a g e , deliberate waste, b o m b threats, m i l i t a n t u n i o n action).

The Hawthorne studies T h e H a w t h o r n e studies w e r e carried o u t t o assess t h e i m p a c t of w o r k i n g c o n d i t i o n s ( t e m p e r a t u r e , light, noise) o n t h e m o t i v a t i o n a n d h e n c e t h e p r o d u c t i v i t y of i n d i viduals (Roethlisbergerand Dickson, 1939). T h e y focused o n a g r o u p of p r o d u c t i o n w o r k e r s a n d s h o w e d t h a t initially, w h e n t h e lighting level w a s i n c r e a s e d , t h e level of p r o d u c t i v i t y of t h e p e o p l e a l s o i n c r e a s e d . T h e link w a s m a d e - i m p r o v i n g t h e l i g h t i n g - i m p r o v e s t h e m o t i v a t i o n - i m p r o v e s p r o d u c t i v i t y . T h e lighting w a s increased o n s u b s e q u e n t occasions w i t h t h e s a m e result. T h e lighting level w a s n o w r e t u r n e d

to its original level and the productivity still increased. This caused the initial hypothesis to be rejected - there was a much more important factor at work. There is a fundamental rule of measurement - check that the measurement process does not affect the performance of what you are trying to mezsure. Whiie the measurement process was relatively unobtrusive, what was causing the change was the attention being paid to this group of workers. This finding was far more significant than the finding about physical conditions. There is a clear implication for practical application here -paying attention to groups improves the likelihood of good performance. Figure 10.4 shows three paradigms of modern motivation theory/management behaviour: • content theories - focuses on what motivates an individual at wore, i^ey theories include the 'hierarchy of needs' and 'motivation-hygiene'; • process theories -focuses on how particular behaviour is initiated, or the process of motivation. Key theories include 'expectancy'; • reinforcement - focuses on how desirable patterns of behaviour can be reinforced.

Content theories Maslow published his theory on the 'hierarchy of needs' in 1943 (see also Maslow, 1970) and these are shown in Fig. 10.5. This analysis of needs is based on the notion that individuals will have basic requirements to be content at one level. Once these are met on an ongoing basis, their needs move to the next level, and so on. As Maslow stated, 'Man is a wanting animal and rarely reaches a state of complete satisfaction except for a short time. As one desire is satisfied, another pops up to take its place.' This theory has intrinsic appeal, as it enables the person designing a working environment to meet the needs of an individual at an appropriate level providing the elusive motivation through an individual pursuing as yet unmet needs. The first set of needs are physiological - food, shelter, etc. Maslow argues that until the basics are met, someone will not be looking for higher-order needs, such as

n

Figure iQ.5 Wtaslow's hierarchy of needs

356 i Phase Three - Deliverthe project fdo ft!)

recognition. Safety needs are the next level up the hierarchy where the provision of the basic needs is seen to be enduring rather than transitory. Above this is the need to belong, which represents 'man the social animal'. This may be to a social group or to a recognisable team, something which will give them an identity. The need for self-esteem and respect comes next, with the thoughts of others about an individual counting in their own self-image. The need for self-actualisation- or to be the best person you can be - is the highest level of needs. Maslow did recognise that this order was not universal and that individuals would have their own hierarchies. H e r z b e r g ' s work to produce his 'motivation-hygiene' theory focused on the provision of rewards to the individual. He categorised needs from the task as either 'hygiene' factors or.'motivational'. Hygiene factors are those needs that, unless satisfied, will have a negative effect on motivation. Once a level of satisfaction is reached, increasing the level still further will not increase motivation. Pay is considered to be one such factor for many people. Motivators are those factors which result in higher motivation the better they are met. Recognition is one such factor.

Process theories Vroom (1964)first developed one of the main theories in this category - that of 'expectancy'. The theory considers that people have a choice regarding the amount of effort they expend (termed the 'motivational force') in a certain situation. This will depend on their perception of the likelihood of their receiving a desired outcome from this. The first-level outcomes are performance-related (the results from the task directly - the satisfaction of doing a good job, for example). The second level is the extrinsic benefits that are achieved, such as praise from a colleague or superior, promotion or pay rise. This motivational force is translated into effective work, through the skills and abilities of the individual. Further revisions of this work have taken place, all building in more or different factors to try to provide a theory which is universally applicable. Human behaviprocesses are far more complex than the models can allow, particularly where science dictates that a single exception disproves a rule. Such theories in practical application may help in explanatory roles, but are rarely effective in a predictive mode.

Reinforcement Reinforcement as a means of influencing behaviour is often, somewhat cynically, related closely to the manipulation of people. It forms a significant part of popular 'how to manage' books and is summarised by the way in which good behaviour can be positively reinforced. The five rules for providing this are as follows (see Skinner, 1985): 1 Be specific - praise should refer to specific achievements and be backed up with current information. 2 Be immediate - do the praising as soon as the good performance becomes obvious. This will enable the individual to make the link between the good action and the praising.

Management and leadership in project environments s 257

3 Make targets achievable - help individuals to break down tasks so that they consist of a series of achievable and recognisable milestones (or even 'inch-stones' or their metric equivalent) and praise on the completion of each. 4 Remember the intangible - praise may be more of a motivator to future performance than pay or status. 5 Make it unpredictable - the passing comment of praise can be far more rewarding than the expected 'pat on the back'. There is, however, an underlying assumption of rationality in the above theories - that an individual's environment can be logically designed and their needs met on an individual basis. While this is clearly desirable, not only the environrnent but also the system of reward (usually based on promotion and the pay system) have to be designed. Doing so in a large organisation will obviously be an immensely timeconsuming activity if the principle that 'the system of reward should he designed to meet the motivation system of the individual' is adhered to. Practically stated, if the individual is motivated by purely financial considerations (which is only a few per cent of the population), then their reward system should be financially based. If they are seeking recognition through status or title, then this should be provided (or offered as a potential reward). Other factors that affect the motivation of the individual include the following: • Location - there are differences between the motivation systems and expectations of traditional rural communities and those from urban backgrounds. • Length of service of the individual - someone with long service (beyond two to five years) is going to have different needs from someone new in a job. If a project is being run with a new team, the focus for early management action should be to provide guidance and early feedback so that expectations of the individual are defined. Working with uncertain assessment criteria is very unsettling as you have nothing to rate yourself against. As was stated in Chapter 3: Tell me how you measure me and I will tell you how I will behave. If you •measure me in an illogical way, do not complain about illogical behaviour (Goldratt, 1990). • Previous work environment - people react and mould to the constraints placed on them. Man is a surprisingly versatile animal. Change in attitude and role does not always come with changing jobs or joining a new project team. For this reason, many new manufacturing companies have placed age restrictions on new employees who are going to work in line environments. The objective is that they required people who had not been sullied by the intense management-union fighting at the end of the 1970s or whose spirit had not been broken by too many years in a Tayloristic environment. The literature is probably most fragmented in the area or motivation. Vroom cites over 500 different studies on the impacts of various factors on motivation back in 1964. What the figure for 2002 would he. .. .

258 I Phase1hree - D e l i v e ttheproject jdo rt'j

10A

Structural Implications for Project Managers T h e role of o r g a n i s a t i o n a l s t r u c t u r e h a s a l r e a d y been discussed in C h a p t e r 9. T h e f o l l o w i n g section considers s o m e of t h e cultural i m p l i c a t i o n s of t h e a p p l i c a t i o n s of v a r i o u s o r g a n i s a t i o n a l structures. T h e application of T a y l o r i s m r e q u i r e d a highly developed o r g a n i s a t i o n a l f u n c t i o n a l h i e r a r c h y . T h e e v o l u t i o n of t h e m o r e m o d e r n m a n a g e m e n t p a r a d i g m s h a s c h a n g e d this c o n s i d e r a b l y . T h e r e are i m p l i c a t i o n s of structure f o r m o t i v a t i o n of t h e individual. T h e issue has already been raised of t h e system of p r o m o t i o n f o r p r o j e c t m a n a g e r s a n d h o w this is o f t e n n o t as clear as f o r line personnel. Taiichi O h n o is widely accredited as the designer behind t h e T o y o t a p r o d u c t i o n system. H i s role in the d e v e l o p m e n t of project engineering (as W o m a c k et al., 1990, s h o w e d ) h a s been significant as w a s s h o w n by c o m p a r i n g t h e w a y in w h i c h W e s t e r n c a r p r o d u c e r s organise t h e i r p r o d u c t design t e a m s w i t h those of t h e lean p r o d u c e r s (all J a p a n e s e ) . T h e W e s t e r n a p p r o a c h is t o organise people by f u n c t i o n a l g r o u p , e.g. e n g i n e d e s i g n e r s w o u l d h a v e g r a d u a t e d f r o m being c o m p o n e n t d e s i g n e r s a n d , if successful, m a y h o p e t o p r o g r e s s t o p o w e r t r a i n design. T h i s p r o v i d e s a c l e a r p r o g r e s s i o n p a t h f o r individuals, b u t a designer simply p r o g r e s s e s as a designer w i t h n o i n c r e a s i n g a p p r e c i a t i o n of t h e i m p l i c a t i o n s of t h e i r w o r k o n t h e m a n u f a c t u r i n g process. As w a s c o m m e n t e d : O h n o a n d Toyota, by contrast, d e c i d e d early on t h a t p r o d u c t e n g i n e e r i n g inhere n t l y e n c o m p a s s e d b o t h process a n d i n d u s t r i a l engineering. Thus they f o r m e d t e a m s w i t h strong leaders t h a t c o n t a i n e d all t h e relevant expertise. Career p a t h s were structured so t h a t rewards w e n t t o strong t e a m players rather t h a n t o t h o s e d i s p l a y i n g g e n i u s in a single area o f product, process, or i n d u s t r i a l engineering, b u t w i t h o u t r e g a r d t o t h e i r f u n c t i o n as a t e a m ( W o m a c k e t a l . , 1990). T h e subject of p r o m o t i o n is r a t h e r cynically s u m m a r i s e d by t h e s t a t e m e n t that: 'In a hierarchy, anyone w i l l be p r o m o t e d t o t h e i r level ofincompetence.' T h i s is k n o w n as 'the Peter principle' (Peter a n d H u l l , 1 9 7 0 ) a n d w a s u s e d by its originators t o e x p l a i n w h y , in t h e i r e x p e r i e n c e , so m a n y m a n a g e r s a p p e a r e d t o be lacking in t h e basic qualities needed f o r the t a s k of m a n a g i n g . T h e i r t h e o r y relates t o t h e a b o v e very closely - t h e y n o t e d t h a t c o m p e t e n c e in a line t a s k w o u l d generally be r e w a r d e d by f u r t h e r p r o m o t i o n u p t h e line of a u t h o r i t y . T h e f u r t h e r t h e y were p r o m o t e d , t h e f u r t h e r t h e y moved f r o m t h e specialism f o r w h i c h t h e y h a d first b e e n p r o m o t e d f o r being c o m p e t e n t . As n o t e d earlier in this text, p r o j e c t m a n a g e m e n t d o e s n o t escape this p a r t i c u l a r principle.

10.5

Cultural Implications for Project Managers C u l t u r e itself is a l m o s t impossible t o define. This is because of t h e n u m b e r of d i f f e r e n t cultures t h a t exist w i t h i n a n y o n e o r g a n i s a t i o n a n d t h e f a c t t h a t even t h e m o s t

Management and leadership in project environments s 259

Table 10,3 Culture of organisations . Name

Description ofculture

Characteristics

Advantages

1 ItMitiu'itagM

Apollo

Role

Formalised, ruleStable, predictable, based, focused on visible individual specialisms

Stable, predictable

Zeus

Club

Entrepreneurial, focused on single leader, autocratic style

Little structure to prevent dynamism

Little logic to what is done, total dependence on one person

Athena

Task

Group gathered with common purpose

Creative, dynamic

Expensive to maintain, needs constant stream of new tasks and highly qualified people

Dionysus

Existential

Organisation that shares resources but where people are not dependent on each other

Allows each to be self-determining, little structure

Relies on individual responsibilities and risks, needs high level of personal development

detailed d e c o n s t r u c t i o n w o u l d p r o v i d e a n i n a c c u r a t e picture of t h e totality. At t h e simplest level, t h e culture of a g r o u p o r t e a m c a n be described as relating t o o n e o r m o r e of t h e G r e e k g o d s - A p o l l o , Z e u s , A t h e n a a n d D i o n y s u s . T h e s e ideas w e r e d e v e l o p e d b y H a n d y ( 1 9 8 5 ) a n d s h o w h o w t h e n a t u r e of t h e g r o u p will n e e d t o influence t h e style of m a n a g e m e n t t h a t is p r a c t i s e d if the t w o are n o t t o clash. T h e styles, t h e i r c h a r a c t e r i s t i c s a n d t h e a d v a n t a g e s a n d disadvantages o f each are s h o w n in Table 10.3. T h i s table is of interest in providing t h e kind of m a n a g e r i a l o v e r v i e w t h a t is o f t e n m o r e u s e f u l t h a n a n a c a d e m i c d e s c r i p t i o n of t h e s a m e issues. W h e n t h e 'so-what' test is applied, s o m e f u r t h e r amplification of t h e effect of culture in attaining m a n a g e m e n t success is required. T h e f u n d a m e n t a l principles are t h a t t h e culture s h o u l d reflect t h e t e a m m e m b e r s h i p a n d t h e t a s k , a n d t h e m a n a g e m e n t style s h o u l d be in line w i t h t h a t culture. In a p r o j e c t environment, it is a l m o s t inevitable t h a t t h e role of t h e project m a n ager will have m u c h in c o m m o n with t h a t of a line o r o p e r a t i o n s rrtanager f o r periods of time, e.g. in t h e e x e c u t i o n p h a s e of a p r o j e c t t o develop a n e w m a t e r i a l t h e r e w a s m u c h testing a n d retesting of samples t o be u n d e r t a k e n . Similarly, ^c-all levels in all projects t h e r e will be routine t a s k s t h a t have t o be p e r f o r m e d , d o c u m e n t a t i o n being a g o o d example. In this situation, t h e A p o l l o culture prevails. Using a g r o u p w h i c h is best described as h a v i n g an A t h e n a culture (a m o t i v a t e d , highly t r a i n e d t a s k f o r c e ) t o carry out such t a s k s will cause disinterest due t o the lack of scope in t h e t a s k f o r creativity.

260 I Phase 1 hree - Delivet the project jdo rt'j

In the Zeus organisation, an autocratic boss rules by their word alone. Many businesses are run in this way - usually small ones. This kind of boss makes the decisions for their people and will control absolutely, jealously guarding their knowledge of how the business operates. Projects run in this way may get the task achieved, but often at the expense of the project team and other stakeholders. Where the task is anything other than the simplest, attempting to get one person to consider all the issues involved is impossible. There are times, though, for example when a project is running behind and desperate measures are called for, when shortterm gains may be made by taking this approach. The Apollo organisation is highly structured - relying on the idea that breaking down the task into small units creates pockets of specialism. Many organisations have this kind of culture - government departments, large companies. The roles of departments and individuals have already been discussed under the topic of line management. As previously stated, one of the major drawbacks is the lack of creativity that this engenders, in addition to a degree of bureaucracy. Bureaucracy is often typified by a kind of behaviour that obstructs progress. A storekeeper at a major company refused to allow a project manager to have the equipment he needed f o r a crucial part of his project, as he claimed that the item was not logged on the computer system. When the manager pointed it out to him on the shelves in the store, the storekeeper would still not release the equipment, as without the necessary listing on the computer system the correct paperwork could not be generated. Following an investigation of the business processes, the storekeepers were abolished and the stores run on a take-as-needed basis, with key suppliers filling the shelves directly. The Dionysus and Athena cultures rely more heavily on the role of the individual than the other two. The Dionysus culture is represented in some ways by the university culture in the UK. Staff are seen as groups with very loose ties that are bonded to the organisational nucleus by the need for the services that they provide - such as administration, buildings and maintenance, technology provision and, mostly, funding for both individual activities and collective projects. Other professions have a similar culture - the medical profession (particularly hospitals) where the sharing is of central facilities. Consequently it should be no surprise that certain problems have arisen: • Quality systems have been shown to be less applied in organisations that have Athena, Dionysus or Zeus cultures. Such systems invariably lead to a degree of preceduralisation that would fit well with an Apollo culture, but again it is an example of the characteristics of one being superimposed onto another. • Matrix management often fails to yield the results planned - the Apollo culture of the functional organisation is overlaid with an Athena culture which is task-centred. The effect of the early work on the planning of projects should be taken into account. The ideas of work breakdown structure are likely to lead to a functional arrangement and the kindling of an Apollo culture. The project may be far more dynamic than this and require more of an Athena approach. Parkinson's Law of 1000 is that once you have a corporate staff of 1000 people, they can become totally self-sustaining in work generated within the company

Management and leadership in project environments s 277

without any need for external interaction. That is, they can generate enough work to keep themselves busy (generally by paying people to read reports that you have paid others to generate) without adding one penny of value.

Cooperation-coercion scale Cooperation is based on educating' the individual as to the reasons why it is in their interests to participate in your venture as an active contributor. This is the focus of the humanistic movement and works well in ventures which require active participation rather than grudging acceptance. The style of management that is required is accommodating - ensuring that the needs of the individual are met through the activities and the group support. Coercion is based on using whatever functional devices and authority exist to force the individual to carry out a particular task - the basis of Tavlorism. This works well in the short term where there is a specific task to be carried out. The style of management is confrontational, as there is no commonality of purpose between the individual and their superior.

.7

The Development of Management Thrnkin There are two distinct approaches to management thinking. The i/ai; be, broadly categorised as either academic or popularist. There was a time when academic thinking was based on the work of a few key individuals whose theories had been proved through limited trials. As is often the case, some of the most advantageous work was done first. The application of psychology and other sciences to management actions has resulted in the wide literature that was referred to in the introduction. All the above discussions on the academic literature can be summarised in a move from Taylorism at the start of the twentieth century to a new humanism at the end (see Table 10.4). The emergence of humanism is the result of society demanding a new management agenda, the reversal of fortunes of Taylorism (the industrial strife at the end of the 1970s showed that while the Tayloristic systems had provided the Western world with an unprecedented standard of living, it had gone past the point where it was going to continue to be beneficial) and the study of world-class performers in all sectors. Those companies that were showing world-class traits invariably were those that had the greatest ability to harness the creativity of all the individuals within their organisation. In addition, modern expectations, as gleaned in schools, mean that people are far less likely to agree to work under such conditions. The new management is not universal, nor is it without critics or opponents. The move to what has been termed 'anthropocentric management' is also not easy. Letting go of hard-won control sits uneasily with people used to working in Zeus or Apollo cultures. It is almost certain that future organisations will move away from these structures.

262 ! Phase Three - DeOver the project (do

Table 10.4 The Taylorisfic versus the humanistic agenda

agenda Humanisticagenda

Level cf needs met

Most basic level - physiological and possibly safety

Higher level - need to belong up to self-actualisacion

Role of individual

Automaton carrying out specialised task under stated rules

Individual with freedom and autonomy

Advantages for system

Predictability of outcomes

Intrinsically motivated individuals, providing caring creativity

Advantages for individual

existence

Challenging role with chance for self-determination

Role of management

Designer and controller of work tasks

Provider of scenarios and facilitator

Responsibility for outcomes

Lay with project manager

Shared between all members of the team

safe, ordered

T h e popularists are characterised by b o o k s a n d articles based o n either p e r s o n a l m a n a g e m e n t e x p e r i e n c e ( s u c h a s H a r v e y - J o n e s , 1 9 8 8 ) o r t h a t of a collective of o r g a n i s a t i o n s ( i n c l u d i n g In Search o f Excellence a n d o t h e r s by T o m Peters). T h e basics are t h e sharing of w h a t t h e a u t h o r s consider t o be elements of good practice t h a t h a v e w i d e r a p p l i c a t i o n . T h e s e a r e o f t e n distilled i n t o principles t h a t o n e is t e m p t e d t o t r e a t like laws of physics - f u n d a m e n t a l a n d immovable, w h i c h all guarantee a m a n a g e m e n t revolution. However, if there is one lesson t o be learned f r o m these texts, it is t h a t the ability t o remain flexible a n d c u s t o m e r - f o c u s e d are the only constants. I n Search of Excellence w a s n o t a b l e in t h a t m a n y of the companies t h a t were studied a n d c o n s i d e r e d t o be excellent s o o n r a n into financial trouble. These popularist texts have a n i m p o r t a n t role t o play in the ongoing development of m a n agers a n d m a i n t a i n i n g a n interest in h o w the virtues of c u s t o m e r ( o r s t a k e h o l d e r ) f o c u s a n d flexiblity can best be applied.

10.8 The Development of New Management Paradigms T h e m o d e r n m a n a g e r w h o r e a d s widely w o u l d be forgiven f o r being c o n f u s e d by the r a n g e of m a n a g e m e n t paradigms or theories w h i c h all a p p e a r t o have universal application. T h e t e m p t a t i o n is either t o go a h e a d a n d try the ideas o r just t o get o n w i t h w h a t y o u are d o i n g a n d hope t h a t , like m a n y fads, they will pass. T o t a l quality m a n a g e m e n t , the lean p a r a d i g m a n d business process re-engineering are a m o n g the m o s t significant a n d influential t o emerge over the last ten years. W h a t is clear f r o m

Management and leadership in project«

:

-i-

the literature examining the success of such changes in management thinking is that success is far more likely to come from adaptation of a particular idea rather than its wholesale adoption. The role of the successful project manager will be to keep up to date with changes in management thinking, but to take an intelligent approach as to which changes will add value. In summary, any new idea should be • • • • • • • •

adopted only after careful consideration; purged of unnecessary buzzwords and clichés; judged by their practical consequences; tied to the here and now; rooted in genuine problems; adapted to suit particular people and circ*mstances; adaptable to changing and unforeseen circ*mstances; tested and refined through active experimentation; discarded when they are no longer useful.

This concept of constantly making small changes and observing the results on a continuous treadmill of improvement is possibly the most significant. The project manager is especially well positioned to adopt this approach, as their role is central to achieving predetermined outcomes -particularly with organisational change projects. For many, the adoption of project management methods fits with this discussion (seeChapter 15). As Sir John Harvey-Jones (1988)commented: Increasingly companies w i l l only survive if they meet t h e needs of the individuals who serve in them; not just t h e question of payment, important as this may be, b u t people's true inner needs, w h i c h t h e y may even be reluctant t o express t o themselves. People want jobs which have continual interest and enable t h e m to g r o w personally. It goes w i t h o u t saying t h a t t h e y w a n t a d e q u a t e rewards, b u t in my experience people are less greedy, and far less motivated by reward, t h a n capitalist theory would suggest. It is certain that every individual not only expects, but should be entitled t o a reward which recognises his contribution. The needs of one's people are also wider t h a n just t h e paypacket. They wish t o feel that they are doing a worthwhile job which makes some contribution t o soci

10.9

Relevant Areas of the Sodies of Knowledge The APM body of knowledge starts with the behavioural characteristics of project management professionals: attitude, common sense, openmindedness, adaptability, inventiveness, 'prudent risk taker', fairness and commitment. These present an interesting wish-list of characteristics, without showing how these would be detected or developed in individuals. None of these are tested (orindeed, are testable) empirically. Both bodies of knowledge (Tables 10.5 and 10.6) appear to demonstrate that this an emerging area, with far fewer rules than in other areas such as planning, and therefore less ability for either to be prescriptive.

364 I Phase Three - Deliver the project KloitlJ

Table to. 5 Relevant area of the APM body of knowledge Relevant section

Title

Summary

72

Leadership

The distinction is drawn here between management (involving organising, directing and controlling)and leadership (providingthe conditions for high levels of morivation of the team). Project leaders are differentiated from other roles, including the champion and the sponsor.

Table 10.6 Relevant a r e a s cf t h e PMS body Relevant section

Title

2.4

Key general management skills

knowledge

Summary The skills of a general manager are very broad, requiring ability to manage functions, structures, work relationships, and oneself. These aspects are elaborated at some length, including the aspect of negotiation (notcovered in this text).

So - w h a t a r e the skills a n d a t t r i b u t e s of a g o o d p r o j e c t m a n a g e r o r l e a d e r ? T h e skills and attitudes of the project m a n a g e r will be determined by personality, experience, a n d b o t h f o r m a l a n d informal e d u c a t i o n a n d training, a n d there are a n u m b e r of s t r u c t u r e s t h a t can be applied t o h e l p w i t h the u n d e r s t a n d i n g of this area. It is i m p o r t a n t t o t h e organisation a n d t o individuals as the project m a n a g e r c a n have a significant i m p a c t on the achievement of o u t c o m e s f o r all stakeholders. Leadership is categorised by the hopefully positive influence of the individual o n people, w h e r e a s m a n a g e m e n t is centred o n people being treated as o n e of a n u m b e r of r e s o u r c e s . F o r t h e i n d i v i d u a l m a n a g e r o r l e a d e r , t i m e is a n o n - r e p l e n i s h a b l e resource and m u s t be m a n a g e d accordingly. Leadership a n d m o t i v a t i o n are intrinsically linked. C r a f t - b a s e d industries were replaced during the nineteenth century by organisations with tasks designed according t o t h e principles of scientific m a n a g e m e n t . These relied o n financial r e w a r d as the prime motivator. However, financial reward is only one m e a n s t h a t m a n a g e m e n t can provide as a motivator. Meeting certain other needs through the w o r k task can be more beneficial (Maslow) as well as treating people as individuals rather than automatons. Leadership also involves having a s y m p a t h y w i t h the c u l t u r e of the organisation in w h i c h y o u are working. These m a y be broadly described as either role (Apollo), c l u b ( Z e u s ) , t a s k ( A t h e n a ) o r existential ( D i o n y s u s ) . E a c h h a s d i f f e r e n t roles f o r m a n a g e m e n t a n d situations w h e r e it is applicable. Finally, n e w m a n a g e m e n t p a r a d i g m s ( i n c l u d i n g t h e w i d e s p r e a d a p p l i c a t i o n of project management!) should be screened very carefully before being a d o p t e d by t h e

Management and leadership in project environments s 281

m a n a g e r . T h e h y p e s h o u l d be e l i m i n a t e d a n d a realistic e v a l u a t i o n of their ability t o a d d v a l u e t o t h e ' m a n a g e m e n t p r o d u c t ' c a r r i e d out.

Doesn't time fly? I t w a s 7 . 3 0 o n a T u e s d a y m o r n i n g , w h e n J o h n E d w a r d s , g e n e r a l m a n a g e r of t h e J e n k i n s C o m p a n y ' s m a i n f a c t o r y , t u r n e d o n t o t h e M 3 t o d r i v e t o h i s o f f i c e in Basingstoke. T h e j o u r n e y t o o k a b o u t t w e n t y m i n u t e s a n d g a v e J o h n a n o p p o r t u n i t y t o reflect o n t h e p r o b l e m s of t h e p l a n t w i t h o u t i n t e r r u p t i o n s . T h e J e n k i n s C o m p a n y r a n t h r e e p r i n t i n g p l a n t s a n d h a d n a t i o n w i d e clients f o r its high-quality colour work. There were about 350 employees, almost half of w h o m w e r e b a s e d a t B a s i n g t s t o k e . T h e h e a d office w a s a l s o a t Basingstoke. J o h n h a d started w i t h J e n k i n s a s a f r e s h g r a d u a t e t e n y e a r s p r e v i o u s l y . H e w a s p r o m o t e d r a p i d l y a n d a f t e r five y e a r s b e c a m e a s s i s t a n t m a n a g e r of t h e s m a l l e r p l a n t in B i r m i n g h a m . A l m o s t t w o y e a r s a g o h e h a d b e e n t r a n s f e r r e d t o B a s i n g s t o k e a s assistant m a n a g e r and w h e n the m a n a g e r retired he w a s p r o m o t e d t o this position. J o h n w a s in g o o d f o r m t h i s m o r n i n g . H e felt t h a t t o d a y w a s g o i n g t o be a p r o d u c t i v e d a y . H e b e g a n p r i o r i t i s i n g w o r k in h i s m i n d . W h i c h p r o j e c t w a s t h e m o s t i m p o r t a n t ? H e decided t h a t u n i t - s c h e d u l i n g w a s p r o b a b l y t h e m o s t i m p o r t a n t - c e r t a i n l y t h e m o s t u r g e n t . H e h a d b e e n m e a n i n g t o g i v e it his a t t e n t i o n f o r t h e p a s t t h r e e m o n t h s b u t s o m e t h i n g e l s e a l w a y s s e e m e d t o c r o p up. H e began t o plan t h i s project in his m i n d , breaking d o w n t h e objectives, p r o c e d u r e s a n d i n s t a l l a t i o n steps - it g a v e h i m a feeling of s a t i s f a c t i o n as h e c a l c u l a t e d t h e c o s t savings t h a t w o u l d occur once this project w a s implemented. H e assured himself t h a t it w a s t i m e t h i s project w a s s t a r t e d a n d m u s e d t h a t it s h o u l d have been c o m p l e t e d a long time ago. This idea h a d been conceived t w o years a g o a n d been given the g o - a h e a d b u t h a d b e e n t e m p o r a r i l y shelved w h e n J o h n h a d m o v e d t o Basingstoke. J o h n ' s t h o u g h t s r e t u r n e d t o o t h e r p r o j e c t s t h a t h e w a s d e t e r m i n e d t o implement: h e b e g a n t o t h i n k of a p r o c e d u r e t o s i m p l i f y t h e t r a n s p o r t of m a t e r i a l s f r o m t h e B i r m i n g h a m p l a n t ; h e t h o u g h t of t h e n o t e s o n his d e s k ; t h e i n v e n t o r y a n a l y s i s h e n e e d e d t o i d e n t i f y a n d e l i m i n a t e s o m e of t h e s l o w - m o v i n g stock items; t h e p a c k i n g c o n t r o l s w h i c h n e e d e d revision a n d t h e n e e d f o r a n e w o r d e r f o r m t o be d e s i g n e d . There were a few other projects he r e m e m b e r e d needed looking into and he w a s sure h e w o u l d f i n d s o m e t i m e in t h e d a y t o a t t e n d t o t h e m . J o h n really felt he w a s g o i n g t o have a p r o d u c t i v e d a y . As h e e n t e r e d t h e p l a n t , J o h n w a s m e t b y t h e s t o c k c o n t r o l l e r w h o h a d a p r o b l e m w i t h a n e w m e m b e r o f staff n o t t u r n i n g u p . J o h n s y m p a t h i s e d w i t h h i m a n d s u g gested t h a t h e g o t P e r s o n n e l t o call t h e absentee. T h e s t o c k c o n t r o l l e r a c c e p t e d t h a t a c t i o n b u t t o l d J o h n t h a t h e n e e d e d t o find h i m a p e r s o n f o r t o d a y . J o h n m a d e a m e n t a l n o t e of t h e p r o b l e m a n d h e a d e d f o r his o f f i c e . H i s o f f i c e m a n a g e r , M r s James, a s k e d h i m w h e t h e r she s h o u l d send o f f s o m e s a m p l e s , o r w o u l d t h e y n e e d t o be i n s p e c t e d ? W i t h o u t w a i t i n g f o r a n a n s w e r , M r s J a m e s t h e n a s k e d if he c o u l d s u g gest a r e p l a c e m e n t f o r t h e s e a l i n g - m a c h i n e o p e r a t o r , as t h e n o r m a l o p e r a t o r w a s ill, a n d t o l d h i m t h a t Pete, t h e m a n u f a c t u r i n g engineer, w a s w a i t i n g t o h e a r f r o m him.

266 \ Phase Three- Deliverthe project do it?)

John told M r s James t o send the samples. H e noted the need for a sealer-operator a n d t h e n called Pete, a g r e e i n g t o m e e t in his office b e f o r e lunch. J o h n started o n his r o u t i n e m o r n i n g t o u r o f t h e p l a n t . H e a s k e d e a c h s u p e r v i s o r t h e v o l u m e s a n d t y p e s of o r d e r s t h a t w e r e b e i n g p r o c e s s e d t h a t m o r n i n g , h o w t h i n g s w e r e g o i n g , a n d w h i c h o r d e r s w o u l d be r u n n e x t . H e h e l p e d o n e w o r k e r t o f i n d s t o r a g e s p a c e f o r a c o n t a i n e r - l o a d of p r o d u c t w h i c h w a s a w a i t i n g d i s p a t c h , discussed quality control with an employee w h o had been producing p o o r work, arranged to transfer people temporarily to four different departments and talked t o t h e d i s p a t c h s u p e r v i s o r r e g a r d i n g p i c k - u p s a n d special o r d e r s w h i c h w e r e t o be processed that day. R e t u r n i n g t o h i s o f f i c e , J o h n r e v i e w e d t h e p r o d u c t i o n r e p o r t s a g a i n s t his p r o j e c t e d t a r g e t s a n d f o u n d t h a t t h e p l a n t w a s r u n n i n g slightly b e h i n d s c h e d u l e . H e c a l l e d in t h e p r o d u c t i o n f o r e m a n a n d t o g e t h e r t h e y w e n t t h r o u g h t h e m a c h i n e schedules, m a k i n g several c h a n g e s . D u r i n g t h i s discussion, J o h n w a s a s k e d by s o m e o n e else t o a g r e e several l a b e l l i n g c h a n g e s t o their p r o d u c t s a n d received a t e l e p h o n e call f o r t h e a p p r o v a l of a revised p r i n t i n g schedule. J o h n next b e g a n t o p u t delivery dates o n i m p o r t a n t orders received f r o m cust o m e r s a n d t h e sales f o r c e ( M r s J a m e s h a n d l e d t h e r o u t i n e o n e s ) . W h i l e d o i n g this, h e h a d t w o p h o n e calls, o n e f r o m a s a l e s p e r s o n a s k i n g f o r a b e t t e r delivery d a t e a n d o n e f r o m t h e p e r s o n n e l m a n a g e r a s k i n g h i m t o b o o k t i m e f o r a n initial i n d u c t i o n m e e t i n g w i t h a n e w e m p l o y e e . J o h n t h e n h e a d e d f o r his m o r n i n g c o n f e r e n c e a t t h e e x e c u t i v e offices. H e h a d t o a n s w e r t h e c h a i r m a n ' s q u e s t i o n s o n n e w o r d e r s , c o m p l a i n t s a n d p o t e n t i a l n e w business. T h e p r o d u c t i o n d i r e c t o r a l s o h a d q u e s t i o n s o n p r o d u c t i o n a n d p e r s o n n e l p r o b l e m s . H e t h e n h a d t o see t h e p u r c h a s i n g m a n a g e r t o e n q u i r e a b o u t t h e delivery of s o m e c a r t o n s a n d a l s o t o p l a c e a n o r d e r f o r s o m e n e w p a p e r . O n t h e w a y b a c k t o h i s office, J o h n w a s t a l k i n g t o t h e chief e n g i n e e r a b o u t t w o c u r r e n t e n g i n e e r i n g p r o j e c t s . W h e n h e r e a c h e d h i s desk, h e lit a c i g a r e t t e a n d l o o k e d a t h i s w a t c h - it w a s t e n m i n u t e s b e f o r e lunch. ' D o e s n ' t t i m e fly,' h e c o m m e n t e d as M r s J a m e s e n t e r e d h i s o f f i c e t o p u t s o m e p a p e r s o n h i s d e s k . 'No,' s h e r e p l i e d , ' T i m e stays, w e go.' W o n d e r i n g a b o u t t h e m e a n i n g of this, h e h e a d e d f o r t h e c a n t e e n . After lunch he started again. H e began by checking the previous day's product i o n r e p o r t s a n d t h e a f t e r n o o n f o l l o w e d t h e p a t t e r n of t h e m o r n i n g . A n o t h e r b u s y d a y , b u t h o w m u c h h a d he a c c o m p l i s h e d ? A l l t h e r o u t i n e t a s k s h a d b e e n m a n a g e d , b u t w i t h o u t a n y creative o r special p r o j e c t w o r k being done. H e w a s the last t o leave t h e p l a n t t h a t night. A s h e d r o v e h o m e he p o n d e r e d t h e role t h a t h e w a s p a i d t o f u l f i l a n d w o n d e r e d where the time t o carry out any innovative thinking h a d gone today. H e w a s sure t h a t h e h a d p l a n n e d intelligently a n d d e l e g a t e d his a u t h o r i t y . H e a c k n o w l e d g e d t h e n e e d f o r a p e r s o n a l a s s i s t a n t , b u t s a w t h a t a s a l o n g - t e r m p r o j e c t as t h e c h a i r m a n w a s h a v i n g a blitz o n t h e o v e r h e a d c r e a t e d by n o n - d i r e c t staff.

Case discussion 1 Identify the tasks which John should have done himself and those which he should have delegated. 2 Discuss h o w h e uses his t i m e - w h a t a r e t h e m a i n p r o b l e m s ?

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• : and leadership ia project environments I 267

3 H o w effective d o y o u feel J o h n ' s ' m a n a g e m e n t by w a l k i n g about' is? 4 H o w c o u l d he i m p r o v e his time p l a n n i n g ? 5 W o u l d e m p l o y i n g a p e r s o n a l a s s i s t a n t f o r J o h n really ' a d d value' o r j u s t be a n o t h e r overhead cost o n t h e c o m p a n y ?

m a n a g e m e n t and leadership stress time management motivation scientific m a n a g e m e n t (Taylorism) h i e r a r c h y of needs

humanism culture cooperation coercion management paradigms

1 Differentiate b e t w e e n t h e t a s k s of l e a d i n g a n d m a n a g i n g a project. 2 S h o w t h e influences t h a t a n i n d i v i d u a l p r o j e c t m a n a g e r will bring t o t h e role. 3 W h a t a r e t h e influences f r o m w i t h i n a n o r g a n i s a t i o n o n t h e role t h a t a p r o j e c t manager takes? 4 W h y m i g h t the study of time m a n a g e m e n t be f u n d a m e n t a l t o a project m a n a g e r ? 5 Using T a b l e 1 0 . 1 , e x a m i n e y o u r o w n t i m e - m a n a g e m e n t p e r f o r m a n c e o v e r t h e p e r i o d of o n e o r t w o days. H o w d o e s this relate t o t h e g o a l s t h a t you have set yourself? 6 F r o m y o u r analysis in Q u e s t i o n 5, s h o w w h a t strategies y o u a r e going t o use t o keep yourself o n t r a c k t o t h e t a r g e t s you have set f o r y o u r s e l f . 7 C o m p a r e t h e w o r k of t h e m a j o r t h i n k e r s o n m o t i v a t i o n . W h a t i n f l u e n c e h a s each had on modern management? 8 W h y is it r e a s o n a b l e t o t h i n k t h a t "as m a n a g e r s , o u r action c a n have a n e f f e c t o n a project outcome? 9 W h y d o people need t o h a v e a c l e a r p r o m o t i o n p a t h in t h e i r jobs? W h a t o t h e r m o t i v a t o r s w o u l d you provide f o r p e o p l e ? 1 0 Distinguish b e t w e e n t h e f o u r basic types of o r g a n i s a t i o n a l culture as o u t l i n e d by H a n d y ( 1 9 8 5 ) . Give e x a m p l e s of each a n d s h o w h o w each meets t h e n e e d s o r constraints i m p o s e d o n t h e o r g a n i s a t i o n in w h i c h t h e y operate. 1 1 W h y is it necessary t o e n s u r e t h a t t h e style of m a n a g e m e n t meets the culture o f the o r g a n i s a t i o n ? 1 2 S h o w h o w t h e e m e r g e n c e of h u m a n i s m c h a n g e d t h e w a y in w h i c h p e o p l e a r e treated w i t h i n organisations.

268 I Phase1hree - D e l i v e t the project jdo rt'j

13 C o m p a r e o n e m a j o r popularist text (e.g. I n Search of Excellence) w i t h a n acad e m i c journal article of y o u r choice. W h a t are the purposes, potential audiences a n d likely effects of each of t h e s e ? In y o u r view, w h a t is t h e i r role in f o r m i n g m a n a g e m e n t thinking? 14 H o w might a project manager differentiate between management paradigms t h a t m a y p r o v e beneficial and those w h i c h are going t o be of n o benefit?

Drücker, P. (1955)Management, Butterworth-Heinemann, Oxford (first published in 1 9 5 5 many later editions are available and still as relevant to the discussion of the role of management). Firth, D. (1996)How to Make Work Fun, Gower, Aldershot. Godefroy, C.H. and Clark, J. ( 1 9 8 9 ) T h e Complete Time Management System, Piatkus, London. Goldract, E M (1990) The Haystack Syndrome, North River Press, New York. Handy, C. (1985)Gods of Management, revised edition, Pan Books, London. Harvey-Jones, J. ( 1 9 8 8 ) M a k i n g Ji Happen: Reflections on Leadership, Collins, London, pp. 249-50. Herzberg, F. (1974) Work and the Nature of Man, Granada Publishing, London. Markham, U. ( 1 9 8 9 ) The Practical Guide to Using Stress Positively, Element Books, London. Maslow, A.H. (1970)Motivation and Personality, 2nd edition. Harper Sc Row, New York. Mullins, L.J. (1999)Management and Organisational Behaviour, 5th edition, Financial Times Pitman Publishing, London. Nohria, N. and Berkley, J.D. (1994)'Whatever Happened to the Take-Charge Manager?' Harvard Business Review, January-February, pp. 128-37. Peter, L. and Hull, R. (1970)The Peter Principle, Pan Books, London. Peters, T. (1992)Liberation Management, Macmillan, London, p. 602. Peters, T. (1999)The Project 50, Alfred Knopf, New York. Peters, T.J. and Waterman, R.N. (1982)In Search of Excellence - Lessons from America's Best-run Companies, Harper Sc Row, New York. Porter, L.W., Lawler, E.E. and^mmet, E. (1968)Managerial Attitudes and Performance, Irwin, Homewood, IL. Roethlisberger, F.J. and Dickson, W.J. ( 1 9 3 9 ) Management and the Worker, Harvard University Press, Cambridge, MA. Schrage, M. (1999)Serious Play: H o w the World's Best Companies Stimulate to Innovate, Harvard Business School Press, Boston, MA. Skinner, W. (1985)Manufacturing: The Formidable Competitive Weapon, Wiley, New York. Taylor, F.W. (1911) The Principles of Scientific Management, Harper, New York. Vroom, V.H. (1964) Work and Motivation, Kreiger Publishing, New York. Womack, J., Jones, D. and Roos, J. (1990) The Machine That Changed The World, Rawson Associates, New York. Zaleznik, A (1977)Managers and Leaders: Are They Different!' Harvard Business Review, May-June, pp. 67-78.

Adair, J. (1988)The Action-Centred Leader and Effective Leadership: A Modern Guide to Developing Leadership Skills, revised edition, Industrial Society, London. Alexander, R. (1992)Commonsense Time Management, Amacom, New York. Forsyth, P. (1994)First Things First, How to Manage Your Time for Maximum Perfoirmance, Institute of Management/Pitman Publishing, London. Handy, C. (1985)Understanding Organisations, 3rd edition, Pelican, London. Jay, A. (1987)Management and Machiavelli, revised edition, Business Books, London. Kloppenborg, T.J. and Petrick, J A (1999)'Leadership in the Project Life Cycle and Team Character Development', Project Management Journal, Vol. 30, No. 2, pp. 8-13. Pettersen, N. (1991)'Selecting Project Managers: A i Integrated List of Predictors', Project Management Journal, Vol. 22, No. 2, pp. 21-26. Slevin, D P . and Covin, J.G. (1990)'Juggling Entrepreneurial Style and Organisational Structure: H o w to Get Your Act Together', Sloan Management Review, Vol. 31, No. 2, pp. 4 3 - 5 3 . Tack, A (1984)Motivational Leadership, Gower, Aldershot. Thorns, M. and Pinto, J.K. ( 1 9 9 9 ) 'Project Leadership: A Question of Timing', Project Management Journal, Vol. 30, No. 1, pp. 19-26. www.iofl.org - the Institute of Leadership

'I love deadlines. I particularly like t h a t w h o o s h i n g noise t h e y m a k e as t h e y g o flying by.' (Author unknown) So, how's it g o i n g ? An i n n o c e n t e n o u g h q u e s t i o n , b u t o n e t h a t causes a l l s o r t s of p r o b l e m s f o r p r o j e c t managers. Where p r o j e c t s are o f l o w c o m p l e x i t y i t may b e p o s s i b l e t o apply s o m e basic c o n t r o l w i t h o u t any o f t h e d e v i c e s d e s c r i b e d i n t h i s chapter. For m e d i u m - a n d high-complexity p r o j e c t s t h e role o f t h e project manager in e s t a b l i s h i n g a n d m a i n t a i n i n g s o m e system f o r c o n t r o l is p a r a m o u n t d u r i n g t h i s 'Do It' phase of t h e project. The nature of control is discussed here a l o n g w i t h t h e characteristics t h a t require controlling. W e shall again see t h e influence of strategy w h e n w e select w h a t t o control, a n d t h e d e v e l o p m e n t o f a n u m b e r o f d e v i c e s t h a t w i l l assist in t h e c o n t r o l process. S o m e o f t h e s e are very simple, others very involved. Whatever t h e system, t h e objective is t o maximise t h e visibility of progress a n d t h e performance measures t h a t w e use s h o u l d be chosen w i t h t h i s in mind.

Learning Objectives 1 1 . 1 C o n t r o l systems 1 1 . 2 C o n t r o l o f m a j o r constraints - q u a l i t y 1 1 . 3 C o n t r o l o f m a j o r constraints - c o s t a n d t i m e 11.4 Visual control 11.5 Last Planner 1 1 . 6 T e c h n i c a l performance m o n i t o r i n g 11.7 T h e role o f Project M a n a g e m e n t I n f o r m a t i o n Systems ( P M I S ) 11.8 Change control 11.9 C o n t r o l of the w o r k of d w e l o p m e n t projects-intellectual property 1 1 . 1 0 R e l e v a n t areas o f t h e bodies o f k n o w l e d g e 11.11 Summary Project m a n a g e m e n t in practice: T h e Lifter p r o j e c t Key terms Review questions and further exercises References Further information

By t h e t i m e you h a v e completed t h i s chapter, you should be a b l e to: • Identify t h e e l e m e n t s of a control system a p p r o p r i a t e t o a particular project: • Determine t h e key p e r f o r m a n c e m e a s u r e s t h a t will be controtled by t h e system; * Select a p p r o p r i a t e t o o l s and t e c h n i q u e s t o e n a b l e such control.

ji

Control Systems G i v e n t h a t m a n y p r o j e c t s d o r u n late, o v e r b u d g e t o r o t h e r w i s e f a i l t o d e l i v e r t o c u s t o m e r / s t a k e h o l d e r r e q u i r e m e n t s , t h e q u e s t i o n is o f t e n a s k e d - ' h o w did t h i s happen?' T h e answer is o f t e n t h a t it happened very gradually, w i t h days being lost a n d m o n e y spent, n o t in o n e large block b u t in small a m o u n t s . T h e s e a m o u n t s g r a d u a l l y a d d u p a n d over t h e life of m o s t p r o j e c t s will provide significant problems. T h e only w a y t h a t w e c a n d e a l w i t h t h i s is by h a v i n g s y s t e m s t h a t will d e t e c t s u c h o c c u r rences, a n d a l l o w t h e p r o j e c t m a n a g e r t h e o p p o r t u n i t y t o i n s t i g a t e c o r r e c t i o n actions t o bring t h e p r o j e c t b a c k o n t r a c k . This assumes, of c o u r s e , t h a t w e k n o w w h a t t h e p a r t i c u l a r t r a c k is t h a t w e are trying t o stay on. W h e r e there h a s been p o o r use of p l a n n i n g t h e r e m a y be c o n s i d e r a b l e c o n f u s i o n as t o w h e t h e r p r o g r e s s is indeed acceptable o r w h e t h e r i n t e r v e n t i o n f r o m the p r o j e c t m a n a g e r is required. While this w o r k on control predominantly takes place during the execution p h a s e of t h e p r o j e c t , it s h o u l d be given c a r e f u l c o n s i d e r a t i o n d u r i n g t h e p l a n n i n g p h a s e . It m u s t be c a r e f u l t o a d d v a l u e t o t h e p r o j e c t - so m a n y p r o j e c t s b e c o m e o v e r b u r d e n e d by t h e w e i g h t o f b u r e a u c r a t i c r e q u i r e m e n t s i m p o s e d t o try t o k e e p t h e p r o j e c t in order. S u c h a b u r d e n is c o u n t e r p r o d u c t i v e - as people will resist t h e additional w o r k required a n d either ignore o r find w a y s a r o u n d 'the system'. T h e alternative is t o provide c o n t r o l a t d i f f e r e n t levels w i t h i n t h e p r o j e c t t h a t relies o n simple a n d easily u n d e r s t o o d m e a s u r e s t h a t reflect the objectives of t h e project. T h e basic r e q u i r e m e n t s f o r a c o n t r o l system include: • •

defining system characteristicsof i m p o r t a n c e ; defining limits t o their variation;

• • • •

m e a s u r e m e n t o f those characteristics; m a k i n g progress visible; feedback t o t h e t e a m of p e r f o r m a n c e ; instituting corrective action w h e r e required.

T h i s c o n s t i t u t e s t h e m o s t b a s i c m o d e l of a c o n t r o l s y s t e m a n d is s h o w n in Fig. 11.1. In this d i a g r a m , t h e o u t p u t of a process is m o n i t o r e d by s o m e m e a n s t o d e t e r m i n e the c h a r a c t e r i s t i c s o f t h e o u t p u t . T h e s e d a t a are interpreted a n d t h e n f e d b a c k in o r d e r f o r the p r o j e c t m a n a g e r t o m a k e the necessary c h a n g e s t o t h e process. O n receipt of this i n f o r m a t i o n , a d j u s t m e n t s are m a d e t o t h e process. By using this k i n d of 'feedback c o n t r o l system', t h e p e r f o r m a n c e of the process c a n be g u i d e d by t h e a p p l i c a t i o n of corrective actions t o k e e p it w i t h i n certain Limits ( h a v i n g defined 'acceptable deviation' f r o m t h e desired p e r f o r m a n c e ) .

i Phase Three - Detiver the project

-it!) Feedback

Figure

Defining system characteristics of importance So - w h a t characteristics are important? In an ideal world we would be able to say that everything was important and we could devote massive resources to the control effort. If you are NASA, this might be the case. For the rest of the world, we have to prioritise the most important characteristics for control. The most important aspects that need controlling are those that form part of our strategy - typically time, cost and quality. We will know from our strategy which of these is the most important, and should therefore have the greatest attention paid to it. Again here it is vital that project activities and processes are consistent with strategy. The Sydney Olympics, discussed in Chapter 7, had the strategy that time and quality were paramount, and that cost would be sacrificed should the need arise rather than compromise the other two. The greatest efforts were therefore placed on ensuring that the quality and time objectives were met through controlling activities. We must not assume that TCQ objectives are necessarily the only ones that an organisation will have. Other issues of strategic importance were identified in Chapter 3 and these (legal, ethical, environmental, human resource) and others may also be the subject of control.

Defining limits to their variation The second requirement is to define limits to the variation of the performance in those key areas. We have seen in previous chapters that performance does vary across people and activities, and various methods have been discussed to deal with this variation (see Chapter 6). So, when does a deviation from a requirement become a problem? For some organisations, a 1 per cent deviation from cost targets would be tolerated, while a day's delay would be unacceptable. Others would state their objectives differently. So, what are the limits of variation? The first issue here is that there will always be some variation - but that should be both positive and negative. The theory runs that provided we can harness the positive benefits, they will cancel out the negative issues. That's the theory. For all the reasons discussed in Chapter 6, the reality is that it is often difficult to harness the positive variations, but the negative ones inevitably accumulate. Having accepted this, you immediately put some stability into the process. In reality any negative deviation (activities running over time/cost or failing to meet quality), should trigger further monitoring to ensure that we can keep track of what is happening. There should then be a further zone that triggers action (see box below).

Control of project I 273

As discussed in Chapter 6, there should be a buffer that can be monitored during the project. At regular intervals - daily in many instances - activity managers are asked 'how long to finish?' Their answers can be simply interpreted in terms of the effect that they will have on the buffer - an early finish will add days to it, a late finish will take days from it. This information provides the project manager with a means of deciding what to do next. One method that has proved highly effective is to divide the project buffer up into three regions. If the buffer was, say, 30 days, each of these regions would have 10 days in them. Once there is any erosion of the buffer at all, this puts the project manager into the first zone - that of monitor carefully. Use of 10 days of this buffer puts the project into the next zone plan. Here plans are drawn up to restore the buffer to its original size (oras a proportion of the time remaining in the project). It is only when 20 days of the buffer has been eroded that the plan is required to be put into action. The three zones are shown in Fig. 11.2. Buffer size

Buffer penetration 4

o days

30 days Monitor closely

days

days

> Plan

.10 days

20 days 1

'ii-i*!.- 1 .

Implement

F i g u r e u . 2 Buffer penetration

Measurement of characteristics What we measure has been defined as part of our reconsideration of strategy. A crucial part of control is when to measure. Here, control activities need to strike a balance. Somewhere between finding out too late to take any action and permanently harassing people to find out how they are progressing lies a position that will satisfy both the needs of control and the needs of the project team to keep the work:reporting ratio right. Imagine that you are driving a car. This is a good example of a Control system. You are sensing characteristics of the environment around you (e.g. seeing a corner ahead) and based on that sensing, making changes to speed and direction to keep

274 I Phase 1 hree - Delivet the project jdo rt'j

the car on the road and away from other cars. While this clearly doesn't apply in the capital cities of most countries, the principle still holds in most other situations. Here you are sensing continuously what is happening around you, unusual for the project situation. What is clear in the driving case is that you need t o assess the feedback and take action without delay. Imagine if you only opened your eyes for a second every 10 seconds, o r t h e n w a i t e d 5 seconds before reacting t o t h e s i t u a t i o n

in which you found yourself. How long would it be before your (control' failed? Not long. These two issues are as important in project management - the timing of your observation and speed of reaction to the situation. Time delay in receiving i n f o r m a t i o n o r i m p l e m e n t i n g action is a k i l l e r f o r a n y c o n t r o l s y s t e m .

Making p r o g r e s s visible and feedback of performance This is an area where there have been many developments in recent years. The principle of visible control was evident in the world-class Japanese manufacturing syst e m s ( e . g . Andon

lights above machines in a factory that w o u l d indicate where there

was a problem, and continuous monitoring and display of the quantity of output relative to the day's target) were found to be a key factor in their success. The same principles apply very well to project management situations. Given the importance of this, it will be covered in a separate section later in this chapter.

Instituting corrective action Finding that there is a deviation from what you expected to be happening is only the first part of the job of the control system. The issue then arises of what to do about it. In the critical chain example given above, it is clear what the action to be taken is (monitor, plan or implement). In other situations it may be less clear, but here an important principle of control shows itself: you can only manage the future - w h a t has happened is history. While knowing where you are is important, it is what you do next that will make the difference. Example of a control system - corrective actions and stability in a physical system Try balancing a ball in the centre of a tray - start it moving and try to bring it to rest again 10 centimetres away from the start point. Very quickly the movements of the tray get larger and the movement of the ball will generally become anything other thah diminishing as it passes over the point without stopping. The system rapidly becomes unstable as the movement of the ball has passed out of control and soon leaves the tray completely. This is the result of instability in the system - the brain cannot make the necesssary corrective action to bring it back to rest and so the control actions get larger as the ball exhibits behaviour which is considerably different from that which is required. The movement of the ball becomes as shown in Fig. 11.3. Programming a machine to do the same task with the application of appropriate control actions can render the system stable in a very short period of time. The pattern of motion is as shown in Fig. 11.4. This system is stable the movement or response of the system does not go off to infinity or cause the

Control of projects I 375

Time

Figure 11.3 instability

Figure 1 1 4 S t a b l e systerti

d e s t r u c t i o n of t h e system ( a s e v i d e n c e d b y t h e ball finally r u n n i n g o t t t n e e d g e of t h e t r a y in t h e first test), b u t settles b a c k t o a n e q u i l i b r i u m ( s t a t i o n a r y ) a f t e r t h e initial disturbance (the move). T h e c o n t r o l of p r o j e c t s r e q u i r e s t h e v i e w t h a t a l t h o u g h t h e r e is a single e v e n t b e i n g c a r r i e d o u t , it is t h e p r o d u c t of m a n y i n t e r l i n k e d s m a l l e r e v e n t s ( w i t h i n t h e W o r k B r e a k d o w n S t r u c t u r e ) w h i c h , like t h e m o v i n g of t h e ball o n t h e t r a y , c a n h a v e t h e i r p r o g r e s s m o n i t o r e d a n d a p p r o p r i a t e c o r r e c t i v e a c t i o n s a p p l i e d to k e e p t h e m on track. T h e s y s t e m f o r o v e r a l l c o n t r o l c a n be v i e w e d a s a series of s m a l l e r s y s t e m s o f c o n t r o l , w h i c h t h e p r o j e c t m a n a g e r i n t e r l i n k s . T h i s o v e r a l l s y s t e m of c o n t r o l will e x p a n d , t h e l a r g e r t h e p r o j e c t b e c o m e s a n d , a s it d o e s so, m o r e of t h e c o n t r o l a c t i o n s will h a v e t o be d e v o l v e d . T h e s y s t e m of c o n t r o l s y s t e m s w i t h i n s y s t e m s is s h o w n in Fig. 11.5. I n h i g h - c o m p l e x i t y p r o j e c t s , t h e r o l e of t h e p r o j e c t o f f i c e a s g a t h e r e r s a n d p r o c e s s o r s of d a t a is f u n d a m e n t a l . T h e c o n t r o l t h a t will be d i s c u s s e d t h r o u g h o u t t h i s c h a p t e r is a m i x t u r e of f e e d b a c k c o n t r o l a n d feedforward. A u s e f u l w a y t o t h i n k of f e e d f o r w a r d c o n t r o l is t o c o n s i d e r t h e d r i v i n g e x a m p l e , w h e r e y o u a r e n o t o n l y l o o k i n g a h e a d b u t using y o u r k n o w l e d g e of t h e r o a d t o m a k e a d d i t i o n a l c h a n g e s t o s p e e d a n d d i r e c t i o n . F o r instance, if y o u k n e w t h a t t h e r e w a s a p a r t i c u l a r l y d a n g e r o u s b e n d a h e a d , y o u m a y t a k e e x t r a care - r e d u c i n g y o u r s p e e d a h e a d of t h e bend. In p r o j e c t s w e look. a h e a d

2 7 6 î Phase Three

Deliver the project (do Report

Overall project level

Sub-project level

Feedback/control

Activity

actions

level

Figure 11.5 Hierarchy of control systems

to see what problems or situations we will be faced with and make changes to protect the project outcomes from the potential of these events. Part of this feedforward control is risk management - performed at the start and ongoing through the project.

Control of Major Constraints - Quality The project manager has two roles in the control of quality. These concern the conformance of the product and process to agreements (both actual and implied) and the performance of the delivery - specifically to manage the stakeholder expectations and perceptions of the project process and outcome.

Conformance The establishment and management of an effective system to control the quality of products and services is a role of increasing importance in project management. The quality system contains a number of key elements -policies, system description and procedures. The policies for quality control are determined and set out either as part of organisational policy or as required by contractual terms laid down by a client organisation. The systems are then put in place to meet the requirements of these policies and the procedures are what people at all levels of the organisation carry out on a day-to-day basis. The objective of such quality control is: To provide a formalised system within the project system which ensures that the needs of the customer or the stated objectives of the system are continually being met. The system needs to be formalised and so requires much of the informality which exists within organisations to be removed. The 'customer' here is anyone who takes the output of the project activities - from an end-user of an artefact or system to a department that receives information from the project team (e.g. accounts or marketing). There are other reasons for having a quality system in place:

Control of projects I 375

• to protect the project organisation, as far as is possible, from legal liability, most notably professional negligence and product liability claims. The organisation, through its quality system, can demonstrate that it has taken 'every reasonable precaution' to ensure that the project was carried out in a way that ensures that the stated needs were met. This requirement has emerged for many project managers as the business environment in many countries becomes increasingly litigious; • it is a prerequisite for obtaining business in many markets, including aerospace, defence, public procurement and the motor industry. The emergence of the importance of quality systems has come as a natural extension of the role of specialisation. In traditional craft industries, the crattsperson would have responsibility for the quality of the output of their process - hence the use of hallmarks in silverware and other forms of labelling of the product, which would allow it to be traced back to the originator. The medieval trade guilds provided a level of quality assurance by regulating their members. As organisations have become more complex and the division of labour has been more extensive (alongTayloristic lines) the role of the quality specialist has emerged. More recently it has become common to consider not only product (or output) quality but also the 'process' by which that output is delivered. Quality systems provide elements for assuring both of these. One of the recognisable sranaards for a quality system is ISO 9000 - t h i s is discussed in the Appendix.

Performance The control of stakeholders' expectations and perceptions has been identified as vital if businesses are to achieve customer satisfaction and retain customers profitably. For a non-revenue-generating project such as organisational change, managing expectations and perceptions is an ongoing challenge. Some issues here are: • Don't create expectations that cannot be delivered - as a minimum a project should have the characteristic of the paint advert that stated: It does exactly what it says on the tin.

Measure expectations and perceptions - the issue here is vital for control, that throughout the process we recognise the importance of the stakeholders. Where deviations are uncovered, it is often possible to make very small changes that will bring the perceptions back into line. Like other aspects of control, time here is critical - not leaving it too long to measure or to act where unacceptable deviations are uncovered.

11.3 Control of Major Constraints - Cost and Time This control requires a considerable input from the project manager in their establishment and execution. The attributes cf cost and time are interlinktd as previously discussed. The need is for practical tools that will identify when corrective actions

are required a n d w h a t t h e y should be. T h e role of t h e project m a n a g e r in cost control m a y be stated as: •

setting u p t h e cost control system in c o n j u n c t i o n w i t h t h e needs a n d r e c o m m e n d a -

t i o n s of the financial f u n c t i o n ; • allocating responsibilities f o r a d m i n i s t r a t i o n a n d analysis of financial data; • •

e n s u r i n g costs are a l l o c a t e d p r o p e r l y ( u s u a l l y a g a i n s t p r o j e c t c o d e s ) ; e n s u r i n g costs are incurred in t h e g e n u i n e p u r s u i t of project activities;

•

e n s u r i n g contractors' p a y m e n t s are a u t h o r i s e d ; checking o t h e r p r o j e c t s are n o t using y o u r budget.

T h e m e a s u r e m e n t t h a t is o f t e n t a k e n t o consider p r o g r e s s using cost as a m e a s u r e is 'sunk costs'. T h i s is t h e m e a s u r e of w h a t h a s been s p e n t t o a p a r t i c u l a r p o i n t in t i m e o n activities. It is n o t o r i o u s l y u n r e l i a b l e as a m e a s u r e of h o w m u c h h a s been achieved, as it is p e r f e c t l y possible f o r a p r o j e c t t o be 80 p e r c e n t c o m p l e t e h u t t o h a v e incurred 9 5 p e r c e n t of t h e b u d g e t a l l o c a t e d t o it. C o n t r o l l i n g c o s t o v e r r u n s clearly needs m o r e t h a n just a r a w figure such as e x p e n d i t u r e incurred. T h e 'earned value' c o n c e p t is o n e a t t e m p t t o m a k e t h e m e a s u r e m o r e m e a n i n g f u l .

Earned value F o r c o m p l e x p r o j e c t s w h e r e w a r n i n g of p r o b l e m s a n d a n ability t o p r e d i c t final costs a n d times a t c o m p l e t i o n is r e q u i r e d , t h e use of the c o n c e p t of e a r n e d value c a n be m o s t useful. T h i s m e a s u r e b r i n g s t o g e t h e r t i m e a n d cost p e r f o r m a n c e e l e m e n t s i n t o a m o n e t a r y q u a n t i t y - a u n i t t h a t is easily u n d e r s t o o d . F o r i n s t a n c e , a p r o j e c t h a s t e n activities t o b e p e r f o r m e d o v e r a p e r i o d of 1 0 w e e k s . T h e first stage in t h e e a r n e d value a s s e s s m e n t process is t o set a b u d g e t f o r each of t h e activities. T h e activities are identified a n d t h e b u d g e t f o r each estimated, b a s e d o n t h e e s t i m a t e d t i m e , m a t e r i a l s a n d o v e r h e a d e l e m e n t (see C h a p t e r 7 ) f o r each. T h e s e t i m e s a n d costs a r e s h o w n in T a b l e 11.1. Each of the activities will r u n sequentially, o n e a f t e r t h e other.

Table l i . i Activity 1

2 3

4 5 6 7 8 9 10

TOTAL

Time 1 1 1 1 1 1 1

week week week week week week week week 1 week 1 week 10 weeks

Budget €5 000

€8 000 €7 000

€12 000 €14 000 eio eis ei l €16

ooo ooo ooo 000

64 000 €100 000

Control of projects I 375

T h e n e x t stage in t h e m e a s u r e m e n t of e a r n e d value t a k e s p l a c e du . i a s tb-r: project. A f t e r a n u m b e r of w e e k s , t h e p r o j e c t m a n a g e r h a s a n u m b e r o f w a y s t o a d d r e s s t h e m a i n q u e s t i o n - h o w ' s it g o i n g ? ' I n t h i s case w e will c o n s i d e r p r o g r e s s at w e e k five. W e n e e d t o k n o w h o w m u c h h a s b e e n s p e n t o n e a c h of t h e activities (see be:low f o r d i s c u s s i o n of t h e d i f f i c u l t y of c a l c u l a t i n g a m o u n t s s p e n t ) . W e a l s o need t o k n o w w h i c h of t h e activities h a v e b e e n c o m p l e t e d a t t h i s p o i n t . A f t e r 5 wieeks, it is f o u n d t h a t activities 1 - 4 h a v e b e e n c o m p l e t e d , a n d t h a t t h e s p e n d t o t h i s t i m e is € 3 6 0 0 0 . U s i n g a m e a s u r e t h a t simply l o o k e d a t t h e spend, t h e t a r g e t w a s t o have c o m p l e t e d five activities d u r i n g t h i s t i m e a n d t h e r e f o r e t h e s p e n d s h o u l d be: € 5 0 0 0 + € 8 0 0 0 + € 7 0 0 0 + g 12 0 0 0 + € 1 4 0 0 0 = € 4 6 0 0 0 W e h a v e s p e n t o n l y € 3 6 0 0 0 , so t h i s is g o o d , isn't i t ? P l a n n e d s p e n d of € 4 6 0 0 0 , a c t u a l s p e n d of € 3 6 0 0 0 m e a n s t h a t w e a r e r u n n i n g € 1 0 0 0 0 u n d e r b u d g e t . D o n ' t s t a r t t o p l a n t h e p o s t - p r o j e c t p a r t y j u s t yet. T h e e a r n e d v a l u e m e a s u r e s t e l l u s a d i f f e r e n t story. T h e p r o j e c t m a n a g e r d o e s t h e f o l l o w i n g calculations. T h e first is t o a e t e r m i n e t h e e a r n e d value. 'Value' is 'earned' by t h e c o m p l e t i o n of activities a n d t h e b u d g e t f o r e a c h a c t i v i t y is t h e v a l u e t h a t is e a r n e d . In t h i s c a s e it w o u l d be t h e s u m of t h e b u d g e t s f o r t h e c o m p l e t e d activities 1 - 4 :

Earned value after completion of activities 1-4 m €5000 • €3000 + €7000

So n o w w e h a v e a n a r r a y of m e a s u r e s : A c t u a l spend: P l a n n e d spend: E a r n e d value:

€36 000 €46 000 €32 000

H o w d o w e i n t e r p r e t t h e s e ? T h e first is t o c o n s i d e r t h e c o s t perfc JE^iJisr.. T h i s is d o n e by c o m p a r i n g t h e e a r n e d v a l u e w i t h t h e a c t u a l s p e n d . In t h i s case w e c a n see t h a t t h e e a r n e d v a l u e is € 4 0 0 0 less t h a n t h e a c t u a l s p e n d - t h i s is n o t g o o d . W e c a n s t a t e t h a t t h e r e is a v a r i a n c e of € 4 0 0 0 b e t w e e n t h e s e t w o . A n o t h e r w a y t o s t a t e t h i s is t o p r o v i d e a r a t i o of t h e t w o m e a s u r e s - k n o w n a s t h e c o s t p e r f o r m a n c e indicator. Cost p e r l m n i a n c e i n d i c a t o r = e a r n e d v a l u e / a c t u a l si

= 32 000/36 000 = 0.889 N e x t w e can consider time performance. T o d o this we compare the earned value w i t h t h e p l a n n e d s p e n d a t t h a t p o i n t i n t i m e . T h e r e is a c o n s i d e r a b l e v a r i a n c e here. E a r n e d value of € 3 2 0 0 0 c o m p a r e d w i t h t h e p l a n n e d s p e n d of € 4 6 0 0 0 - a v a r i a n c e of € 1 4 000. A n o t h e r w a y t o state t h i s is t o p r o v i d e a r a t i o of t h e s e t w o m e a s u r e s k n o w n as t h e s c h e d u l e p e r f o r m a n c e i n d i c a t o r .

a8o i

Three •• Deliver the project (do itl)

Schedule performance indicator = earned value/planned

I

- 5 2 ; >0/46 0 0 0

Both the schedule p e r f o r m a n c e i n d i c a t o r a n d t h e cost p e r f o r m a n c e indicator s h o w t h a t there are p r o b l e m s here - as t h e y are b o t h c o n s i d e r a b l y less t h a n 100 p e r cent. M o r e t h a n this, t h e y provide the project m a n a g e r w i t h a predictive capability. T h i s will s h o w t h e likely e f f e c t o n t h e o v e r a l l c o m p l e t i o n of t h e p r o j e c t if nothing is changed. In this case w e c a n provide a f o r e c a s t of b o t h t h e likely cost a n d t i m e t o c o m p l e t e the project. T h e cost is calculated f r o m t h e cost p e r f o r m a n c e indicator a n d the original project b u d g e t as follows:

Estimated cost at completion = Original budget/cost performance indicator

Similarly, w e c a n calculate t h e time of c o m p l e t i o n as follows:

Estimated rime of completion

••• . : . t i m e indicator

.ri

/Whet!»

performance

= 10

Both of these are useful calculations a n d with the assistance of simple spreadsheetscan p r o v i d e g o o d i n f o r m a t i o n o n t h e likely effects of t h e c u r r e n t state of p e r f o r m a n c e o n the project overall. T h e project m a n a g e r c a n t h e n decide o n a p p r o p r i a t e action t o take. T h e s e m e a s u r e s can be s u m m a r i s e d in t h e f o r m of reports w h i c h provide t h e i n p u t t o p r o b l e m - s o l v i n g processes ( s e e C h a p t e r 13). T h e i n f o r m a t i o n n e e d s t o be collated by a t i m i n g c o o r d i n a t o r w h o can d o so in o n e of the f o l l o w i n g ways: • •

•

o b t a i n i n g a verbal r e p o r t o n progress f r o m t h e person o r t e a m carrying o u t t h a t section of w o r k ; s e n d i n g o u t a n d collecting a f o r m of p r o g r e s s q u e s t i o n n a i r e , w h i c h outlines t h e activities a n d t h e o r i g i n a l t a r g e t s f o r t h e m w h i c h t h e t e a m m e m b e r s c o m p l e t e a n d return t o t h e c o o r d i n a t o r w i t h t h e current status r e c o r d e d ; detailed i n t e r n a l m e a s u r e of p r o g r e s s - a n a s s e s s o r v i e w i n g p r o g r e s s a s a semii n d e p e n d e n t arbiter; an external assessor c a r r y i n g o u t s o m e f o r m of a u d i t o n t h e project, w i t h w i d e spread p o w e r s of access t o p r o j e c t data.

Clearly t h e last two a r e u s e f u l w h e r e i n d e p e n d e n t c h e c k i n g of i n f o r m a t i o n is required, but it t e n d s t o infer a lack of trust of the people d o i n g t h e w o r k . T h e p o i n t is t h a t whatever d a t a is collected m u s t be reliable (it is n o t u n u s u a l f o r p r o b l e m s t o g o h i d d e n o r undisclosed d u e t o a n individual's f e a r of retribution if p o o r p e r f o r m a n c e

Control of projects I 375

is discovered). Verbal reports are fine but they can obscure important information through either of two extremes - a person who complains about 'problems' even though progress is good, and the person who will say things are OK simply because 'it is not as bad as it could be/as it was last time we did this'. The project manager must be aware of these and look f o r evidence to corroborate the information received from other sources. Thus the cost information should be matched with verbal reports of time progress from several members of the same team, in addition to gleaning opinion from other teams. The climate f o r reporting should be set to provide a balance: • people require feedback on how they are performing; • people need to be clear what information to report, in what format (and what to leave out); • the project manager needs to have a positive statement that progress is being made according to plan; • but the major reports need to be the exceptions - where there is a clear deviation from acceptable performance in meeting any of the constraints imposed on an activity. This focus on the exception is vital and must be reflected in the importance that the various reports are given. The bureaucracy of 'paying someont to read reports that you have paid someone else to write' is partially eliminated by this focus on exception. The factor not so far discussed in relation to the reporting and feedback loop is timeliness. If the information or feedback is held up for any period of time, the control action will have to be more severe than if the deviation had been spotted and acted on earlier. The analogy of trying to control a car showed this problem. There are many measures that can be used by the project manager and there are many ways to make these visible. The following section shows some methods for doing this.

11.4 Visual Control

tlilS

Blill;

If you can see what is happening you can control it, runs the theory. There is certainly plenty of evidence to support this, as the measurement and assessment part of the control system is easily achieved. Compare, for instance, the control of the •"* construction of a building with the writing of software. The construction project has one great advantage in terms of control - y o u can see what is happeni::-.' (or at least a trained person could determine whether progress was being made). Obtaining some notion of progress when writing a complex piece of software, on the other hand, is more difficult, as the progress will be determined by the finished result only. To guide progress, the number of lines cf code written may be checked or the product modularised so that the unit of control (the element that you are controlling)

282 I Phase1hree - Delivet the project jdo rt'j

is m a d e s m a l l e r . E i t h e r w a y , t h e m e a s u r e is n o t s o e a s y t o c o n s t r u c t . H o w t h e n w o u l d y o u c o n t r o l a scientific r e s e a r c h p r o j e c t - say, o n e of t h e p r o j e c t s w o r k i n g o n t h e c u r e f o r a d i s e a s e ? T h e result m a y n o t be achievable, so t h i s is n o t a g o o d m e a s u r e , a n d is t o o f a r a w a y t o p r o v i d e a u s e f u l p o i n t f o r c o n t r o l . I n s u c h a case, t h e m e t h o d of c o n t r o l is o n t h e p r o c e s s r a t h e r t h a n t h e o u t c o m e . F o r i n s t a n c e , t h e n u m b e r of e x p e r i m e n t s p e r f o r m e d o r t h e n u m b e r of ideas g e n e r a t e d t h a t w o u l d lead t o t e s t a b l e f o r m u l a t i o n s f o r d r u g s c o u l d be m o n i t o r e d . W h a t e v e r t h e c i r c u m s t a n c e , some measures are needed. T o m a k e t h e c o n t r o l visible t h e r e a r e a n u m b e r of systems used. T h e G a n t t c h a r t f r e q u e n t l y h a s a role t o play (see t h e P r o j e c t M a n a g e m e n t in Practice a t t h e e n d o f t h i s c h a p t e r ) . O n e f i r m n e e d e d t o t r a c k t h e p r o g r e s s of c r i t i c a l j o b s t h r o u g h a n office. T h e y did t h i s by p l a c i n g a large o r a n g e b e a c h b a l l o n t h e d e s k of t h e p e r s o n w o r k i n g o n t h e c r i t i c a l t a s k a t t h a t t i m e . T h i s h a d a n u m b e r of e f f e c t s . First, it m a d e p r o g r e s s h i g h l y visible - simply l o o k f o r t h e b e a c h b a l l t o d e t e r m i n e t o w h i c h stage t h e p r o j e c t h a d p r o g r e s s e d . S e c o n d , it r e i n f o r c e d t h e i m p o r t a n c e of t h e critical p a t h - t h a t a n y d e l a y h e r e w o u l d d e l a y t h e entire p r o j e c t . T h e m e s s a g e t o o t h e r s of 'keep a w a y - t h i s p e r s o n is w o r k i n g o n a critical activity' w a s m o s t effective. O t h e r systems include t r a f f i c lights a n d v a r i o u s c o m p u t e r - b a s e d 'digital d a s h b o a r d s ' . T h e latter a r e p a r t i c u l a r l y effective w h e r e t e a m s a r e s p r e a d o u t o v e r a n u m b e r of sites o r l o c a t i o n s a n d m a k e e x t e n s i v e use of c o m p u t e r s . A p a r t of t h e c o m p u t e r d e s k t o p (the w o r k i n g a r e a of t h e s c r e e n ) is g i v e n o v e r t o i n d i c a t o r s t h a t s h o w h o w p a r t i c u l a r activities a n d s u b - p r o j e c t s a r e p r o g r e s s i n g .

Real-time control T h e availability of cost-effective n e t w o r k c o m m u n i c a t i o n s h a s given rise t o t h e p o s sibility t h a t c o n t r o l i n f o r m a t i o n c a n be r e p o r t e d a s it h a p p e n s , w i t h p e o p l e m a k i n g r e p o r t s o n p r o g r e s s several t i m e s a d a y . T h i s d a t a is f e d t o a c e n t r a l p r o c e s s i n g u n i t ( o n e of t h e p o s s i b l e roles f o r a p r o j e c t office) a n d a d d e d t o d a t a f r o m o t h e r activities. T h e r e p o r t i n g is f a r less f o r m a l , a n d t h e r e s u l t s f e d b a c k t o t h e u s e r s i m m e d i ately. T h i s gives t h e o p p o r t u n i t y f o r s m a l l corrective m e a s u r e s t o be a p p l i e d , e i t h e r w h e r e a c t i v i t i e s a r e r u n n i n g a h e a d of t i m e ( a n d s u b s e q u e n t a c t i v i t i e s s h o u l d be a l e r t e d t o t h e possibility of a n e a r l y s t a r t ) o r w h e r e t h e y a r e r u n n i n g late ( w h e r e t h e a p p l i c a t i o n of f u r t h e r r e s o u r c e s w o u l d b r i n g it b a c k i n t o c o n t r o l ) . H o w e v e r , t h e r e a r e o t h e r w a y s of m a k i n g t h e p r o g r e s s of a p r o j e c t visible. T h e s e i n c l u d e u s i n g a w h i t e b o a r d in t h e c e n t r e of t h e a r e a in w h i c h t h e p r o j e c t t e a m a r e w o r k i n g . O n g o i n g activities a r e listed a n d t i c k e d off a s t h e y a r e c o m p l e t e d . H e r e w e c a n a l s o a p p l y t h e t r a f f i c lights idea: P r o j e c t w i t h i n 2 p e r c e n t of c o s t a n d b u d g e t P r o j ect w i t h i n 1 0 p e r c e n t of c o s t a n d b u d g e t P r o j ect n o t w i t h i n 10 p e r c e n t of c o s t a n d b u d g e t

Green or © Amber or © Red or ©

T h e s e d o , h o w e v e r , rely o n t h e i n f o r m a t i o n collected t h r o u g h t h e k i n d of s y s t e m s that we have discussed above, and are intended t o demonstrate h o w w e are conforming rather than performing.

Control of projects I 375

Last Planner

There are many ways to perform the detailed planning on a project. However, it is often seen to be a weakness and a reason for failure that this was not well carried out. One way to do this detailed planning is to have a central planning office that undertakes such work. Putting the planner at a distance from the work itself is thought by some to provide a degree of independence of the estimate, making it therefore more accurate. Consistent with all the current management thinking and approaches to empowerment, the alternative of allowing the detailed planning to be carried out by those who perform the activities being planned has become popular. This has been promoted by the Lean Construction Institute in the USA, and published as the Last Planner (Ballard, 1 9 9 4 ) . The method involves the production of look-ahead schedules (consistent with feedforward control) for 4 - 6 weeks in advance. These contain the details of activities and provide an opportunity to explore the detailed dependencies between activities that are frequently not identified at higher levels of planning. This is of benefit in itself. The main issue for control here is the use of weekly schedules. These are prepared from the look-ahead schedules and contain all the work activities, broken down into half-day units or less. This feature is important - that the work unit size is small (around half a day) and consistent between the different activities. These are listed in a table, and Table 11.2 shows how the preparation of part of a report and presentation by a team with the activities is broken down in this way. The following week they were able to review their progress simply by taking the same table and adding two extra columns - one for whether the activity was complete or not (just a simple yes or no) and where an activity had not been completed why this was the case. Table 11.3 shows the result that the group achieved for this week. The table shows the basic analysis that can be performed weekly - and the main measure that is used is that of Planned Percent Complete. This is calculated as PPC

activities

completed / intended

activities

In this case 12 of the 18 activities were completed this week - giving a PPU measure of 67 per cent. The PPC measure works well where there are a number of activities going on at any one time. Weekly review meetings provide the forum for discussing progress, but most importantly is that this tool provides for ongoing problem-solving. Where a group is working together week on week, this provides a means by which review can be carried out every week, and the project process improved as the project progresses. In the above example, the group could meet and discuss the causes of the problems that were faced that week - in this case by the non-completion of the project analysis. Why was this - was it not planned well? Were the time estimates too short? Was the information not made available by someone from within or outside the group? Whatever the reason, the weekly meeting provides an < unity to

284

Pl-asr Three - Deliver the project • > it!)

Table i i . 2 Activity

When

Who

Write outline of chapter 4

Mon a.m.

All

Write section 4.1

Mon p.m.

H T Sc MR

Complete graphics for chapter 3

Mon p.m.

WF

Complete telephone interviews

Mon p.m.

KR

Write section 4.2

Tues a.m.

HT &WF

Outline presentation

Tues a.m.

MR

Write section 4-3

Tues p.m.

HT & WF

Relies on 42 being complete

Transcribe telephone interview data

Tues p.m.

KR & MR

Relies on interviews being complete

Wed a.m.

KR&WF

Relies on transcription being complete

Write section 4.4

Wed a.m.

HT & MR

Relies on section 4.3 being complete

Write conclusion to chapter 4

Wed p.m.

HT & M R

Needs all 4 sections complete

Outline chapter 5 - data analysis

Thurs a.m.

All

Relies on chapter 4 and the data analysis being complete

Write up data analysis

Thurs p.m.

KR & MR

Extract key findingsinto presentation

Thurs p.m.

HT&WF

Prepare graphics for chapter 5 and presentation

Fri a.m.

WF

Compile report and check flow

Fri a.m.

HT, KR &£ MR

Integrate chapter 5 graphics and print report

Fri p.m.

All

Practice presentation

Fri p.m.

All

interview data

Notes

Relies on 4.1 being complete

Needs all sections complete, graphics to be insertedfor chapter 5 later

make sure that problems are solved a t this level, and not left until the post-project review (see Chapter 1 4 ) t o be resolved. Week by week, we should expect the PPC measure t o improve. This is a highly visible and easily understood measure and very powerful in communicatingwith teams.

Contre! of

- I 2:85

Table u . 3 Activity

Complete

Write outline of chapter 4

Y

Write section 4.1

Y

Reason for incomplete

Complete graphics for chapter 3 Complete telephone interviews

Y

Write section 4.2

Y

Outline presentation

Y

Write section 4.3

Y

Transcribe telephone interview data

y

Analyse interview data

Y

Write section 4.4

Y

Write conclusion to chapter 4

y

Outline chapter 5 - d a t a analysis

Y

Write up data analysis

n

Analysis not completed in time

Extract key findings into presentation

n

Analysis not completed in time

Prepare graphics for chapter 5 and presentation

n

Analysis not completed in time

Compile report and check flow

n

Awaiting chapter 5

Integrate chapter 5 graphics and print report

Awaiting chapter 5

Practice presentation

Conclusions not yet ready

PLANNED PERCENT COMPLETE (PPC)

67%

11.6 Technical Performance Monitoring As w a s s t a t e d in C h a p t e r 3, t h e n e a r e r t o c o m p l e t i o n t h e p r o j e c t gets, t h e easier it b e c o m e s t o f o r e c a s t w h a t t h e final result will be - in t e r m s n o t just of c o s t a n d time b u t also of t h e t e c h n i c a l p e r f o r m a n c e c f t h e result. A 'technical p e r f o r m a n c e

5>8ß

Phase Three-

the

it!)

measure' can provide an objective and visible means of comparing the actual-topredicted performance. This should be a part of the regular project review procedure, as it allows other estimates based on this to be re-evaluated. i 'HI lill i»iM>III—WHWilllli'lff|ll|i|||ii|Hi||lil|H|||l||||H|l|WHlHIIIM^f

I

'i

The problem with scientific research projects is that there is not an output that can be easily measured for the project manager. Bodies that fund science (national governments, trusts, the EU and private firms) are reasonable for asking for some control measures over the money that is invested in the research work. Typically, a project can be evaluated post-completion by the number and quality of publications that are generated. This might be of scientific interest, but is of little help to the manager - the control loop is simply too long, as the findings may take many years to be published. Peer review is frequently used, both of such publications and of the process, as a means of monitoring 'how it's going'. Other measures include the number of pieces of experimentation carried out, number of additional avenues for further research identified, or number of aspects of the matter explored to a certain stage. Linking these to budgetary control can give measures of progress. One twist has generated some discussion. EU-funded projects now pay only the final stage payments for research on submission of acceptable final reports. This provides a considerable incentive for scientists to complete work and submit final reports.

11.7 The Role of Project Management Information Systems (PMIS) The control and distribution of information to the project team members and other stakeholders form a significant part of the responsibility of the project manager. They are particularly vital if the stakeholders' expectations are to be managed effectively. The cycle of events that leads to the generation of reports should be as follows:

measure - record - analyse - act If an attribute is to be measured for control purposes it should be recorded, ideally in the form in which it was collected and without any interpretation. This and other measures should be combined and analysed before action is formalised. Not proceeding with the cycle at any point wastes the previous actions. To prevent this waste, if data is not going t o form part of an analysis and subsequent possible action, it should not he collected. Computer-based PMIS are the most commonly used and allow the regular updating of schedules to provide a basis for management action. The bar charts produced

Control of projects I 375

Legend

E S S W S F k fSntiSfr*

^/V/l

Work

planned

Figure 11.6 Bar chart s h o w i n g work completed

by the planning system are a convenient tool for continuous monitoring and updating of plans (see Fig. 11.6). The work completed is shown as the top half of the bars in the chart and is indicated by dark shading. The purveyors of project management software like t o help their customers believe that impressive-looking systems can be the panacea in control. This reliance on computers can lead to the following problems: • computer paralysis - the project manager spends all day at the computer updating the project data. This is not a value-adding or problem-solving activity; • PMIS verification - selective treatment of data can hide problems very effectively; • data overload - t h e r e is too much for anyone to make sense of and hence act effectively; • isolation - t h e project manager becomes a slave to the computer and detached from what is really happening; • dependence - apparently removes the role of problem analysis and decisionmaking from managers, leading to less effective actions and removal of proactive problem-solving; • misdirection - the effects of problems are tackled rather than the inherent causes (seeThambain, 1987). The role of the system should be to identify exceptions (as above) and provide timely control information. The decision in setting up the systems should ask 'at what point does the difference between expected and actual performance merit a control action?' This needs t o take into account the fact that in any activity there will be a degree of variability. It is the role of the decision-maker to set limits (called 'control limits') at which it is determined that the deviation from desired oerformance is significant (i.e. would not have occurred through natural variation). The concept of applying control Limits to projects is shown in Fig. 11.7.

Upper control limit ACWP - - Lower control limit

Time

Figure

Control limits applied to progress in budget spend

This business would be fine if it wasn't for our clients. Stakeholders change their views about their requirements of the outcome of projects. The cause cannot always be eliminated, at least not without eliminating the clients themselves. The control system has to have the capability to change the inputs to the process based on changed requirements by one or more of the stakeholders. The typical system is shown in Fig. 11.8.

- Description of change required Reasons for the change Its priority (mandatory, essential, desirable) The benefits of the change Details of originator Authorisation to raise change request

who generates

Figure is,8 Change control system

Control of projects I 375

T h e o r i g i n a t o r of t h e c h a n g e m a y be a n y one of t h e d o w n s t r e a m processes f r o m y o u r o w n project, e.g. in p r o d u c t d e v e l o p m e n t it is n o t u n u s u a l f o r p r o d u c t s t o h a v e relatively m a j o r c h a n g e s in t h e final stages of t h e i r d e v e l o p m e n t , particularly a s t h e y a r e a b o u t t o g o i n t o p r o d u c t i o n . T h e e n g i n e e r s raise c h a n g e requests, w h i c h a r e passed t h r o u g h a system f o r evaluating: • • • •

costs a n d benefits; t h e priority a t t a c h e d t o the c h a n g e ( w h e t h e r it is c o s m e t i c o r f u n d a m e n t a l ) ; t h e effects of t h e c h a n g e o n o t h e r processes; the effects o n o t h e r a s s u m p t i o n s - particularly cost.

It is u s u a l f o r this t o be c o m p l e t e d o n a proforma a n d t o be circulated until t h e necessary a p p r o v a l s have been o b t a i n e d . Such a b u r e a u c r a t i c system can provide benefits f o r m e d i u m - and high-complexity projects, and can help avoid the problems o f scope creep t h a t have been previously discussed.

119 Control of the Work of Development Projects - Intellectual Property Intellectual p r o p e r t y is t h e s a m e as o t h e r f o r m s of o w n e r s h i p in law. T h e role o f intellectual p r o p e r t y legislation is s u c h t h a t i n d i v i d u a l s o r c o m p a n i e s t h a t d e v e l o p n e w ideas h a v e t h e o p p o r t u n i t y t o exploit t h e m w i t h o u t f e a r of s o m e o n e else c o p y ing t h e i r w o r k . T h e m a i n f o r m of intellectual p r o p e r t y p r o t e c t i o n is the 'patent'. If y o u wish t o m a i n t a i n c o n t r o l of t h e o w n e r s h i p of t h e p r o d u c t o r process t h a t y o u have developed ( n o t e - n o t s o f t w a r e ) t h e n p a t e n t i n g is the m a j o r r o u t e o p e n t o you. T h e r e is a n o t h e r f u n d a m e n t a l role of the p a t e n t i n f o r m a t i o n f o r t h e d e v e l o p m e n t o r g a n i s a t i o n , t h a t of a 'design database'. O v e r 80 p e r c e n t of t h e r e c o r d s h e l d in t h e P a t e n t O f f i c e have expired, i.e. t h e y a r e e i t h e r m o r e t h a n t w e n t y years old o r the r e n e w a l fees have n o t b e e n paid. It is e s t i m a t e d t h a t as m u c h as 3 0 p e r c e n t o f d e v e l o p m e n t w o r k d u p l i c a t e s t h a t w h i c h h a s been d o n e already. T o a v o i d this, a relatively c h e a p search of P a t e n t O f f i c e r e c o r d s c a n be t h e a l t e r n a t i v e t o m o n t h s of e x p e n s i v e d e v e l o p m e n t activity. S o m e m a j o r c o m p a n i e s ( i n c l u d i n g S o n y a n d H i t a c h i ) have representatives employed t o scan filed a p p l i c a t i o n s f o r patents. T h e s e will o f t e n n o t g o t h r o u g h the full process t o b e c o m e p a t e n t e d a n d so enter t h e public domain. O n c e a d e v e l o p m e n t h a s b e e n m a d e , t h e g r a n t i n g of a p a t e n t d e p e n d s o n it fulfilling t h e f o l l o w i n g f o u r criteria: m u s t involve an inventive step - n o t be a n i m m e d i a t e l y o b v i o u s d e r i v a t i o n of a n existing idea; • n o t have been previously disclosed - t h r o u g h publication o r discussion w i t h others, f o r example; • be c a p a b l e of c o m m e r c i a l e x p l o i t a t i o n - t h e only r e a s o n t h a t p a t e n t s are g r a n t e d is t o e n a b l e t h e i n v e n t o r t o have the right t o e x p l o i t the idea commercially; • n o t be excluded - designs f o r n e w nuclear w e a p o n s , f o r e x a m p l e , are excluded, as it w o u l d n o t be desirable t o h a v e t h e m o n p u b l i c display in t h e P a t e n t Office!

290 f

::

Three - Deliver the project (do

)

O n c e a p a t e n t h a s been g r a n t e d , you have t h e exclusive rights to: exploit this t h r o u g h c o m m e r c i a l i s a t i o n o f t h e idea; • licence a third p a r t y t o c o m m e r c i a l i s e t h e idea, usually f o r a fee; • g r a n t a n u m b e r of parties non-exclusivelicences t o t h e technology.

11.10 Relevant Areas of the Bodies of Knowledge T h e r e is s o m e similarity in t h e a r e a s c o n s i d e r e d by t h e t w o b o d i e s of k n o w l e d g e , w i t h t h e e m p h a s i s o n t h e systemic n e e d s f o r m a n a g i n g t h i s a r e a . Less e m p h a s i s is placed o n t h e visual a n d c o m m u n i c a t i o n s a s p e c t s of c o n t r o l t h a n h a s been suggested is necessary in this chapter. Table i i . 4 Relevant a r e a of the APM body of knowledge Relevant section

Title

Summary

34

Change control

This recognises the inevitability of change during projects, and the requirement for this to involve the full array of stakeholders to the project. A documented change control system should be in place to allow the impact of changes to be assessed.

35

Earned value management

The concept of earned value is explained, with the requirement for project managers to report cost to completion at various stages during the project.

46

Configuration management

This is described as an assurance function for the project deliverables. A major issue is change control.

Table 11.5 Relevant a r e a s of the PM! body of knowledge Title

Summa y

4.3

Integrated change control

Establish how changes will occur, how they are to be evaluated and accepted or rejected, implemented, and assess their impact on scope and performance. Updated plans to be produced and distributed where changes are accepted.

5.5

Scope change control

When a change is requested, from wherever it comes, a set of procedures are required to determine the impact on the original scope statement. This may mean reworking the WBS, for instance.

section

Ctmtrol of projects I 291

fable 11.5

(cont'd)

Relevant section

Title

Summary

6.5

Schedule control

Provide a means to keep the project consistent with original objectives, but recognising that changes will occur during the process. This system should be able to show the impact of events, both possible and actual, to assist in decision-making. It should also be capable of keeping stakeholders informed of progress and future plans.

7.4

Cost control

A system is required to track costs, the effeicts of changes and report these to the necessary people. Typically this might include assessments of the Earned Value of the project and updates to budgets.

8.3

Quality control

The application of the principles of manufacturing quality control to a project processes, including defect prevention, inspection, and reporting of quality issues.

10.3

Performance repomng

A system for gathering performance data and then reporting it should be established. This will indicate the current state of the project and provide forecasts for the effects of deviations in performance to the necessary stakeholders.

11.6

Risk monitoring and control

A system for identifying, quantifying and mitigating risks as rhey emerge through the life of the project. This will involve the updating of the risk log/register and interface with other control systems - all those given above.

So, h o w ' s it g o i n g ? It p r o b a b l y started as a very simple q u e s t i o n a t t h e start of this chapter, b u t t h e execution p h a s e of t h e p r o j e c t is a c o m p l e x t a s k even in relatively s i m p l e p r o j e c t s if c o n t r o l is t o be a p p l i e d effectively. G i v e n t h e history of p r o j e c t s failing a n d its incremental n a t u r e in t h e m a j o r i t y of cases, t h i s clearly deserves s o m e a t t e n t i o n . T h e r e are s o m e relatively n e w a p p r o a c h e s t h a t a p p e a r t o be g e n e r a t i n g benefits - Last P l a n n e r a n d o t h e r m e t h o d s t o increase t h e visibility of progress, in particular.

T h e m o s t basic a p p r o a c h t o control centres a r o u n d a f e e d b a c k c o n t r o l system. T h i s r e q u i r e s m o n i t o r i n g of t h e p r o j e c t a t t h e a c t i v i t y level, p r o c e s s i n g t h e i n f o r m a t i o n t o d e t e r m i n e if t h e r e is a s i g n i f i c a n t v a r i a t i o n f r o m d e s i r e d p e r f o r m a n c e , a n d t h e n i n s t i g a t i n g corrective a c t i o n t o t h e p r o c e s s itself. T h e n a t u r e of t h e f e e d b a c k d e t e r m i n e s w h e t h e r o r n o t t h e system is stable a n d t i m e l i n e s s is essential in t h e p r o v i s i o n of f e e d b a c k . T h e f o c u s of c o n t r o l is o n t h o s e aspects t h a t w e r e defined by t h e p r o j e c t s t r a t e g y a s being t h e m o s t i m p o r t a n t . A m o n g o t h e r t e c h n i q u e s , c o s t s c a n be m o n i t o r e d t h r o u g h t h e a p p l i c a t i o n of t h e 'earned value' concept. Technical performance monitoring provides an ongoing i n p u t t o f u t u r e f o r e c a s t s of t h e o u t c o m e of t h e p r o j e c t a c t i v i t i e s a n d P r o j e c t M a n a g e m e n t I n f o r m a t i o n Systems (PMIS) provide the means f o r achieving the m e a s u r e - r e c o r d - a n a l y s e - a c t s y s t e m f o r e n s u r i n g m i n i m i s a t i o n of w a s t e in t h e c o n t r o l s y s t e m . C h a n g e c o n t r o l is n e e d e d t o c h e c k t h a t t h e e f f e c t s of c h a n g e s ( i n p a r t i c u l a r , t h e c u m u l a t i v e e f f e c t s o f m a n y small c h a n g e s ) a r e c o n s i d e r e d b e f o r e t h e y are implemented. , I n t h e d e v e l o p m e n t of n e w p r o d u c t s o r p r o c e s s e s , p a t e n t r e c o r d s a r e a s o u r c e of design d a t a , a n d p a t e n t i n g p r o v i d e s legal p r o t e c t i o n f o r t h e results of t h e design process.

mm

I n 1 9 9 8 t h e L i f t e r C o m p a n y s a w t h a t t h e m a r k e t p o t e n t i a l existed f o r a n e w m o d e l in its range. F o l l o w i n g s o m e p r o b l e m s d u r i n g t h e p r o j e c t , t h e p l a n s w e r e r e d r a f t e d , a s s h o w n in Fig. 1 1 . 9 . T h e d e c i s i o n n e e d s t o be m a d e n o w as t o w h e t h e r t h e project is likely t o be delivered o n t i m e o r w h e t h e r t h e l a u n c h d a t e s n e e d t o b e m o v e d f u r t h e r b a c k . ( H o m o l o g a t i o n is n o t a n issue here, a s it will be d o n e in e a c h c o u n t r y in w h i c h t h e p r o d u c t is l a u n c h e d a s a n o n g o i n g activity.) A t t h i s t i m e ( A u g u s t 2 0 0 0 ) it w a s d e c i d e d t o a l l o c a t e f u r t h e r r e s o u r c e s t o t h e p r o ject. H o w e v e r , a n a l y s i s of t h e c o s t s i n c u r r e d w a s p r o d u c e d f o r t h e n e x t q u a r t e r l y r e v i e w in O c t o b e r . T h e e f f e c t s of t h e a d d i t i o n a l r e s o u r c e s c a n be s e e n o n t h e c o s t c u r v e in Fig. 1 1 . 1 0 . T h e c o m p a n y d i r e c t o r s a r e c o n c e r n e d a b o u t t h e c o s t o v e r r u n , b u t t h e p r o j e c t m a n a g e r t h i n k s t h a t t h i s w i l l b e m i n i m a l . A g a i n , a d e c i s i o n is r e q u i r e d a s t o w h e t h e r t h i s is realistic, as it will h a v e s i g n i f i c a n t i m p l i c a t i o n s f o r t h e b u d g e t of t h e firm.

Case discussion 1 F r o m t h e p l a n s of Fig. 1 1 . 9 a n d t h e h i s t o r y of t h e p r o j e c t t o d a t e , is it realistic t o t h i n k t h a t t h e p r o j e c t w i l l be c o m p l e t e d w i t h o n l y a s m a l l a m o u n t of s l i p p a g e ? H o w d o you k n o w and could you say this with any certainty? 2 W h a t d a t a , o t h e r t h a n c o s t s i n c u r r e d a n d e s t i m a t e d times, m i g h t h e l p t h e p r o j e c t m a n a g e r t o f o r m a b e t t e r overall p i c t u r e of p r o g r e s s ? 3 H o w m i g h t t h e d a t a b e t t e r d e m o n s t r a t e p r o g r e s s in t h i s p r o j e c t ?

O •o

Figure 11.9 A summary of the pro led against the baseline set on 2 2 / 0 6 / 0 0

2 9 4 I Phase1hree - D e l i v e t the project jdo rt'j Date today 7th October, zooo

01 JUL

01 OCT

99

99

01 IAN 00

01 APR 00

01 JUL 00

01 OCT 00

01 IAN 01

01 APR 01

01 JUL 01

01 OCT 01

01 JAN 02

Figure u . i o Cost control curves for Lifter project

f e e d b a c k c o n t r o l systems action Last P l a n n e r P l a n n e d Percent C o m p l e t e t e c h n i c a l p e r f o r m a n c e m e a s u r e (TPM) a u d i t a n d review e a r n e d value

actual cost of w o r k p e r f o r m e d ( A C W P ) b u d g e t e d cost of w o r k p e r f o r m e d (BCWP) variance e s t i m a t e d c o s t a t c o m p l e t i o n (ECAC) b u d g e t e d cost of w o r k scheduled ( B C W S ) intellectual p r o p e r t y patents

1 W h a t is c o n t r o l in t h e c o n t e x t of p r o j e c t m a n a g e m e n t ? 2 W h y is m a k i n g p r o g r e s s visible so i m p o r t a n t ? 3 H o w d o m e a s u r e s of conformance

a n d performance

differ?

4 C a r r y o u t a n internet search f o r e x a m p l e s of e a r n e d value being used in practice. W h a t are t h e limitations of this t e c h n i q u e ? 5 W h a t are the potential a d v a n t a g e s of the L a s t P l a n n e r a p p r o a c h t o p r o j e c t c o n t r o l ? A r e all m e m b e r s of a p r o j e c t t e a m likely t o be so h a p p y w i t h s u c h m i c r o - l e v e l p l a n n i n g a n d c o n t r o l ? If not, w h a t w o u l d y o u d o a b o u t t h i s ?

•ol of projects 1 395

6 Why is configuration management and change control so important to the project manager? 7 Carry out a search of patents relating to an object that you have recently purchased using the www.patent.gov.uk website.

Ballard, G. (1994) The Last Planner, see www.leanconstruction.org Thambain, H.J. (1987) 'The New Project Management Software and Its Impact on Management Style', Project Management journal, August

Archibald, R.D. (1992)Managing High Technology Progams (aid Projects, 2nd edition Wiley, Chichester. Brandon, D.M. Jr (1998) Implementing Earned Value Easily and Effectively', Project Management Journal, Vol. 29, No. 2, pp. 11-18. Fleming, Q.W. and Hoppelman, J.M. (1996) Earned Value Project Management, PMI, Upper Darby, PA. Goldratt, E.M (1990) The Haystack Syndrome: Sifting Information Out of the Data Ocean, North River Press, New York. www.patent.gov.uk - T h e Patent fffirp

Most of the goods and services that we buy are not the result of one individual or firm but the product of a supply chain. The same applies to a large proportion of project work - and hence the importance of the area. This is the result of a relatively recent trend for firms to outsource major parts of their business (have it provided by external firms, rather than carry out the work by direct employees of the firm). Indeed, for many organisations today the relationships that are developed between themselves and other parties in the their supply chains are vital to their survival.

12.1 12.2 12.3 12.4 12.5 12.6

Introduction to supply chain management Purchasing Contracts From buying to relationshipmanagement Modem techniques in supply chain management Relevant areas of the bodies of knowledge

12.7 Summary Project management in practice: Project partnering at British Airports Authority '(BAA) terms Review questions and further exercises References Further information Notes

the time you have completed this chapter, you should he able to: * Identify the rois of the supply chain in project management and its importance in ensuring project success; * Discuss e evolution of the approaches to provision of boupht-in products and services, from purchasing to the current state of supply chain management: Describe the nature of the supply chain relationships that can exist; * Identify the use and limitations of contracts in modem supply chain relationships.

Introduction t o Supply Chain Management A p r o j e c t is o n l y a s g o o d a s t h e w e a k e s t p a r t of t h e p r o c e s s . W e c a n c o m m i r c o n siderable resources t o ensuring that t h e processes within o u r organisation are t h e best t h a t t h e y c a n be, b u t t h e o u t c o m e will be p o o r if t h i s excellence d o e s n o t a l s o exist i n o u r s u p p l y chains. T h e s u b j e c t of s u p p l y c h a i n m a n a g e m e n t h a s evolved c o n s i d e r a b l y in recent years. T w e n t y y e a r s a g o , t h e c e n t r a l issue w a s t h a t of p u r c h a s i n g , a n d m a n y f i r m s h a d specialist b u y e r s a n d p u r c h a s i n g staff. T h i s f u n c t i o n w a s a l m o s t e n t i r e l y reactive a n d u s u a l l y h a d a v e r y s i m p l e o b j e c t i v e - o b t a i n i n g t h e necessary g o o d s a n d services a t t h e l o w e s t p o s s i b l e price. W h i l e t h i s a p p e a r e d t o p r o v i d e t h e n e c e s s a r y s h o r t - t e r m n e e d s of t h e firm, it w a s b e c o m i n g c l e a r t h a t t h e r e w e r e m a n y d i f f e r e n t a p p r o a c h e s b e i n g used. I n p a r t i c u l a r , t h e p e r f o r m a n c e of t h e J a p a n e s e a u t o m o t i v e p r o d u c e r s w a s being studied, including t h e w o r k of t h e I M V P a t M I T 1 in t h e USA. T h e s e studies w i l l be r e f e r r e d t o f u r t h e r i n C h a p t e r 1 5 . T h e y s h o w e d t h a t t h e J a p a n e s e a u t o m o t i v e p r o d u c e r s h a d significantly d i f f e r e n t r e l a t i o n s h i p s w i t h t h e i r suppliers f r o m t h e i r W e s t e r n c o u n t e r p a r t s . T h e s e w e r e m u c h c l o s e r - relying f a r less o n c o n t r a c t f o r control a n d f a r m o r e o n t r u s t a n d long-term relationships. These differences w e r e r e s u l t i n g is a m u c h h i g h e r level o f p e r f o r m a n c e of t h e s u p p l y c h a i n - s h o r t e r d e v e l o p m e n t t i m e s f o r n e w p r o d u c t s , m u c h l o w e r levels of i n v e n t o r y a n d h i g h e r levels o f quality. T h e s e d i f f e r e n c e s a r e illustrated t h r o u g h t h e e x a m p l e s given i n t h e b o x e s b e l o w a n d t h r o u g h o u t t h i s c h a p t e r w e will c o n s i d e r h o w t h e s e i s s u e s f r o m repetitive ( m a n u f a c t u r i n g ) i n d u s t r i e s c a n be a p p l i e d in t h e p r o j e c t e n v i r o n m e n t .

Scenario A - The construction manager

'For us t h e c o n t r a c t is a f o r m a l i t y . It is k e p t in tl n drawer. We k n o w that if w e have t o resort t o t h e contract term nditions, w e are in t r o u b l e . W e rely o n m u t u a l g o a l s - w e h e l p t h e a s s e m b l e r (their i m m e d i a t e c u s t o m e r ) t o d e v e l o p t h e i r p r o d u c t , a n d t h e n s u p p l y , f i t a n d help m a i n t a i n t h o s e c o m p o n e n t s a n d s y s t e m s o v e r t h e life of t h e a i r c r a f t . I n m a n y cases, w e a r e t h e sole s u p p l i e r o f p a r t i c u l a r p r o d u c t s t o t h a t firm, W e need t h e m , a n d t h e y need us.'

2 9 8 I P h a s e Three

Deliver

ie project (do it!)

Figure 12.1 S c o p e cf influence of p u r c h a s i n g , m a t e r i a l s m a n a g e m e n t , and supply chain m a n a g e m e n t

As d e m o n s t r a t e d in these cases, t h e a p p r o a c h t o t h e role of p u r c h a s i n g a n d supply m a n a g e m e n t is very different. T h i s is reflected in t h e d i f f e r e n c e s in t h e role a n d s c o p e of i n f l u e n c e of t h e p u r c h a s i n g a n d s u p p l y p r o f e s s i o n a l s a n d d e p a r t m e n t s . T h e s e are s h o w n in Fig. 1 2 . 1 . As the figure shows, t h e r e is a large s c o p e d i f f e r e n c e b e t w e e n t h e d i f f e r e n t roles. At o n e extreme, t h e traditional p u r c h a s i n g d e p a r t m e n t is purely c o n c e r n e d w i t h t h e r e l a t i o n s h i p w i t h first-tier suppliers - t h o s e w h o s u p p l y t h e p r o j e c t o r g a n i s a t i o n directly. Materials m a n a g e m e n t , t h o u g h restricted t o a c o n c e r n w i t h physical g o o d s , d o e s l o o k a f t e r t h e logistics a s p e c t s of the f l o w b e t w e e n first-tier suppliers, t h r o u g h t h e p r o j e c t o r g a n i s a t i o n , t h r o u g h t o t h e first-tier c u s t o m e r s . I n m a t e r i a l s m a n a g e m e n t , a product breakdown structure will p r o v i d e t h e p h y s i c a l m a t e r i a l r e q u i r e m e n t s f o r t h e project, in t h e same w a y t h a t t h e w o r k b r e a k d o w n structure p r o v i d e d t h e activity list f o r the project. T h i s p r o d u c t b r e a k d o w n structure is also called a bill of materials a n d will o f t e n be m a n a g e d t h r o u g h a system of M a t e r i a l s R e q u i r e m e n t s Planning. 1 A t t h e m o s t extensive, s u p p l y chain m a n a g e m e n t involves issues c o n c e r n e d w i t h t h e strategic a n d o p e r a t i o n a l in projects, f r o m p r i m a r y i n d u s t r y ( w h e r e a p p l i c a b l e ) t o e n d - u s e r . I t s i n f l u e n c e c a n g o b e y o n d t h e s e c o n d - t i e r s u p p l i e r s i n d i c a t e d in Fig. 1 2 . 1 . T a b l e 1 2 . 1 s h o w s e x a m p l e s of s u p p l y c h a i n s in s o m e m e d i u m - a n d highc o m p l e x i t y projects. H a v i n g identified t h e s u p p l y c h a i n t h a t is relevant t o the p r o j e c t , h o w important is it t o t h e success of t h e p r o j e c t ? T h e a n s w e r t o this d e p e n d s o n t h e following: • • • •

t h e value of t h e b o u g h t - i n p r o d u c t s o r services relative t o t h e t o t a l value of t h e project; the criticality of t h e i t e m s being p u r c h a s e d - d o t h e y r e p r e s e n t key p a r t s of t h e project o u t c o m e ? t h e t i m i n g of the w o r k being p u r c h a s e d ; t h e i m p a c t of t h e quality level of w o r k purchased.

Some o r g a n i s a t i o n s t o d a y c o n d u c t relatively little of t h e i r o w n p r o j e c t w o r k , p r e f e r r i n g t o h a v e it carried o u t by specialist c o n s u l t a n t s o r contractors. T h i s is t y p i c a l in m a n y p a r t s of t h e I T i n d u s t r y , c o n s t r u c t i o n a n d m a n u f a c t u r i n g . T h e level of

Supply chain i s s u e s I 2 9 9

fable 12.1 Examples of supply chains Project

Second-tier supplier

First-tier supplier

Integrator

First-tier customer

IS implementation project

Computer components supply

Hardware supplier

System implementer

IT department client firm

Construction of new houses

Raw material extractor

Material manufacturers

House-building firm

Sales department of house-building firm

House buyers

New product Private research development in institute pharmaceutical firm

Formulation testing firm

Pharmaceutical firm

Distributors cf drugs - shops and phannacie

End-users

Consulting firm advise a firm on improving customer service

Contracted consultants

Consulting firm

Immediate client Customers wishing to ^ ^ H o f nmediate improve ^ ^ ^ ^ ^ I c l i e r l t customer servii

Providers of knowledge, e.g. research firm, regulatory bodies

md-tier omer sers m nt firm

i m p o r t a n c e of t h e s u p p l i e r c a n t h e r e f o r e be r a t e d a c c o r d i n g t o t h e a b o v e f o u r characteristics. W h e r e a firm is using o r h a s the s c o p e t o use t h e same suppliers o v e r a p e r i o d of t i m e , a n d t h e s u p p l i e r s r a t e h i g h l y o n t h e s e f o u r c h a r a c t e r i s t i c s , t h e o r g a n i s a t i o n s h o u l d be investing c o n s i d e r a b l e t i m e a n d e f f o r t , d e v e l o p i n g t h e i r relationships w i t h the suppliers. W h e r e large firms are being supplied b y relatively small firms, this m a y i n c l u d e d i r e c t i n v e s t m e n t a n d k n o w l e d g e - s h a r i n g . M a n y a u t o m o t i v e a n d electronics f i r m s require t h e i r suppliers t o u n d e r g o p a r t i c u l a r t r a i n i n g a n d t o h a v e p a r t i c u l a r p r o c e s s e s in p l a c e . T h i s is highly intrusive f o r t h e suppliers, b u t results in a very d i f f e r e n t r e l a t i o n s h i p b e t w e e n t h e m s e l v e s a n d t h e i r c u s t o m e r s . T h i s is d e s c r i b e d f u r t h e r in t h e f o l l o w i n g sections. B e f o r e w e c o n s i d e r t h e n a t u r e of t h e relationships b e t w e e n d i f f e r e n t p a r t s of a p r o j e c t supply chain, w e shall discuss t h e f u n d a m e n t a l s of p u r c h a s i r

12.2

Purchasing A s identified above, t h e r e are m a n y instances w h e r e a significant p a r t of t h e value of a p r o j e c t is spent w i t h suppliers a n d contractors. Indeed, s o m e o r g a n i s a t i o n s o n l y exist as ' m a n a g e m e n t shells', h a v i n g n o direct capability t o deliver t h e projects f r o m w h i c h t h e y e a r n t h e i r r e v e n u e . T h e s e i n c l u d e b u s i n e s s e s f r o m m o s t sectors. T h e ability t o c o o r d i n a t e the delivery of t h e p r o j e c t a n d t a k e p a r t of t h e revenue f o r this service p r o v i d e s t h e business rationale. T h i s i n c r e a s e in t h e role of o u t s o u r c i n g is

35
also n o t limited t o large projects. M a n y o r g a n i s a t i o n s h a v e r e d u c e d t h e size of t h e i r h u m a n resources f u n c t i o n significantly by buying-in t r a i n i n g r e s o u r c e f r o m c o n s u l t a n t s r a t h e r t h a n t r y i n g t o m a i n t a i n it in-house. Similarly f o r I T - t h e r e w a s a t r e n d a t t h e start of t h e 1990s ( s i n c e r e v e r s e d i n m a n y f i r m s ) t o o u t s o u r c e all the IT p r o v i sion a n d s u p p o r t . T h e r e f o r e , n o t o n l y a r e d i r e c t c o s t s t h e s u b j e c t of o u t s o u r c i n g , b u t a l s o m a n y of t h e i n d i r e c t o r o v e r h e a d c o s t s - i n c l u d i n g p r o j e c t m a n a g e r s in s o m e firms. W h o d o e s t h e p u r c h a s i n g a n d w h a t is i n v o l v e d ? T h e d i v e r s i t y of activities covered b y t h i s t e r m is illustrated by t h e f o l l o w i n g e x a m p l e . In o n e firm, E20 million of p u r c h a s e s w e r e m a d e e a c h y e a r by a p u r c h a s i n g d e p a r t m e n t of t w o p e o p l e . In a n o t h e r , it t o o k 2 0 p e o p l e t o achieve t h e same v a l u e of p u r c h a s e s . W h y s h o u l d t h i s be s o ? T h e t r a d i t i o n a l p u r c h a s i n g p r o c e s s involves t h e steps s h o w n in Fig. 12.2. It-is t h e n u m b e r of t h e s e steps t h a t t h e y a r e involved w i t h t h a t d e t e r m i n e s t h e w o r k l o a d , in a d d i t i o n t o t h e size of e a c h o r d e r (several large o r m a n y small orders), t h e size of t h e s u p p l y base a n d t h e ease of placing a n o r d e r ( e l e c t r o n i c d a t a i n t e r c h a n g e versus h a v i n g t o create v a s t q u a n t i t i e s of p a p e r w o r k ) . As s h o w n in Fig. 12.2, o n l y a u t h o r i s e d staff c a n m a k e p u r c h a s e s - t h i s p r o v i d e s t h e central p o i n t of c o n t r o l f o r m a n y projects. A f o r m a l r e q u e s t f o r a p u r c h a s e leads t h e p u r c h a s i n g d e p a r t m e n t t o c a r r y o u t a search f o r a suitable supplier. W h e r e t h i s is a r e g u l a r item p u r c h a s e d o r o n e t h a t is p a r t of a s t a n d a r d range, t h i s m a y be a relatively s h o r t p r o c e s s . F o r large c a p i t a l p u r c h a s e s , t h e p r o c e s s of s e e k i n g a n d

Supply chain issues I 301

selecting suppliers is extensive. Having determined the supplier and negotiated prices (see below) an order is placed. This can be in a number of forms, from an e-mail or fax, and as a minimum, most organisations require an order number. This is a unique identifier for the order that allows its origin and all other information relating to it to be traceable. On arrival of the materials, another document is triggered - the goods inwards note. This must be reconciled with the delivery note from the supplier, the purchase order, and eventually the invoice or request for payment from the supplier. Provided these all agree, the invoice can be passed for payment. When the process is largely automated and the suppliers consistent, it is possible for the scenario with two people to be feasible. With the number of activities that need to be carried out and pieces of documentation that must be reconciled, there is clearly scope here for twenty to he perfectly feasible too. There are many decisions to be made and issues to be understood with regard to purchasing in projects. These include the nature of the organisation that can carry out the purchasing role, the purchasing objectives and the nature and role of contracts established.

For large project organisations, the decision will have to be made as to the nature of the purchasing organisation. While the design and control of the purchasing function is clearly a management specialism in its own right, the project manager should be aware of the implications of the design chosen for the organisation. The two extremes of purchasing organisation are shown in Table 12.2 - centralised and localised. For a firm, centralising the purchasing organisation means that all projects place their requirements through one purchasing office that has control of all the requirements for all the business. At the other extreme, a project manager can employ or use the services of a local purchasing officer. In other cases, it is not uncommon for the purchasing function to be outsourced to an external provider. It is not uncommon for there also to be mixed purchasing arrangements. For instance, large or standard items can be purchased through a central office. Where local knowledge or a rapid delivery is required, these items can be sourced through local arrangements made by project staff. This does reduce the level of central

Table 12.2 Centralised and localised purchasing

Advantages

• Purchasing power due to aggregation cf orders • Better materials utilisation and stock management • Economies cf staffing • Standardisation^ purchasing procedures

•

L o c a l k n o w l e d g e of suppliers

• Low organisati tia • Local management control • Enhanced supplier relationships

i P h a s e T h r e e - Deliver t h e project

control t h a t m a n y o r g a n i s a t i o n s seem t o like, b u t it c a n provide a closer m e e t i n g of p r o j e c t needs. In addition, f o r large capital projects, a purchasing agent m a y be used - a n i n t e r m e d i a r y w h o specialises in t h e p u r c h a s i n g of those p a r t i c u l a r items. A t t h e m o s t local level, s o m e f i r m s h a v e a l l o w e d t h e i r e m p l o y e e s t o p u r c h a s e m a t e r i a l s a n d services u p t o certain values, using a c o m p a n y credit card. T h i s allows direct c o n t a c t between t h e buyer a n d supplier, significantly i n c r e a s i n g t h e effectiveness of the i n f o r m a t i o n t r a n s f e r , a n d simplifies the p u r c h a s i n g process considerably. Billing is also simplified a s a c c o u n t s are p r o v i d e d o n o n e m o n t h l y statement, r a t h e r t h a n every item h a v i n g t o be processed as a separate t r a n s a c t i o n . T h e credit c a r d s c h e m e s t h a t s o m e f i r m s h a v e p u r s u e d h a v e p r o v i d e d a lead-in f o r p u r c h a s i n g t o be carried o u t on-line. A s t h e p o t e n t i a l f o r cost-savings t h r o u g h o n - l i n e p u r c h a s i n g h a v e g r o w n (British T e l e c o m w a s c l a i m i n g £ 5 billion s a v i n g s t h r o u g h e - p r o c u r e m e n t in 2 0 0 1 , t h o u g h n e v e r b o t h e r e d t o justify h o w this w o u l d be realised in practice) so h a v e t h e n u m b e r of f i r m s m o v i n g this w a y . T h e p r o j e c t e n v i r o n m e n t d o e s p r e s e n t s o m e p r o b l e m s h e r e - n o t least t h a t i t e m s a n d services p u r c h a s e d m a y be unique. W h i l e a u t o m a t i o n of t h e p u r c h a s e of s t a n d a r d o r c o m m o d i t y i t e m s t h r o u g h this c h a n n e l m a y p r o v i d e benefits, the case still n e e d s t o be m a d e f o r one-off o r special items. T h i s said, t h e r e are m a n y p r o j e c t - b a s e d i n d u s t r i e s t h a t d o p u r c h a s e large q u a n t i t i e s of s t a n d a r d i t e m s , a n d t h e o p p o r t u n i t i e s f o r f a s t i n f o r m a t i o n t r a n s f e r m a y a c t u a l l y h e l p in t h e s o u r c i n g of u n i q u e items. On-line a u c t i o n s also provide s o m e firms w i t h o p p o r t u n i t i e s t o source p r o d u c t s a n d services globally, f o r i n s t a n c e b u y i n g p r o g r a m m e r s ' t i m e f r o m I n d i a o r i n c r e a s i n g t h e r a n g e of p r o d u c t s t h a t m a y be c o n s i d e r e d f o r a p a r t i c u l a r a p p l i c a t i o n ( s e e w w w . q m x . c o m ) . In a d d i t i o n , as w a s d e m o n s t r a t e d by t h e p r o c e s s e s of Fig. 12.2, t h e r e is c o n s i d e r a b l e p o t e n t i a l f o r a u t o m a t i o n of t h e p r o c e s s , a n d t h e use of t h e W e b p r o v i d e s o n e w a y of d o i n g this.

Purchasing and project strategy T h e o b j e c t i v e s of t h e p u r c h a s i n g activities s h o u l d be c o n s i s t e n t w i t h t h o s e of t h e project. In p r o j e c t strategy ( C h a p t e r 3 ) , w e considered t h e objectives f o r t h e p r o j e c t t o be b r o a d l y stated as h a v i n g time, c o s t o r quality as t h e p r i m a r y objective, w i t h t h e o t h e r objectives a r r a n g e d in priority. In p u r c h a s i n g t e r m s , t h e strategy is c o n verted into 'the five rights'. T h e s e are i n t e r d e p e n d e n t c h a r a c t e r i s t i c s o f a supplier o r c o n t r a c t o r d e p e n d i n g o n t h e i r ability t o deliver: • • • • •

t h e right q u a n t i t y ; the right quality; at the right price; a t t h e right t i m e a n d place; a n d be . the right supplier.

Quantity T h e q u a n t i t y of g o o d s o r services ( c o n t r a c t o r s a r e g e n e r a l l y a s s u m e d t o d e l i v e r a service) is d e t e r m i n e d f r o m t h e s c h e d u l e s d r a w n u p w i t h t h e plans. W h e r e t h e r e h a v e been c h a n g e s these are b u i l t in a n d t h e q u a n t i t y calculated. A t o n e t i m e , big

Supply chain i s s u e s I 3 0 3

o r d e r s w e r e considered t h e w a y t o be - w i t h large volumes incurring large d i s c o u n t s - s o buy as m u c h as possible a t o n e time. As will be s h o w n in t h e f o l l o w i n g sections a n d in C h a p t e r 14, t h e n o t i o n t h a t prevails t o d a y is t h a t t h e necessary g o o d s s h o u l d b e p r o v i d e d a t t h e p o i n t of n e e d in t h e q u a n t i t y r e q u i r e d f o r t h a t piece of w o r k only. T h i s r e q u i r e s very d i f f e r e n t systems f o r c o n v e y i n g o r d e r s a n d m a n a g i n g t h e s u p p l y a n d resupply process in p r o j e c t s w h e r e t h e r e are repetitive elements o f w o r k t h a n w h e r e t h e r e are single large o r high-value items.

Quality T h e quality of g o o d s a n d services m a y be d e t e r m i n e d t h r o u g h : • •

t i a l supply o f g o o d s o r services; p r i o r reputation;

•

certification o r a s s e s s m e n t of a supplier's quality system.

T h e r e a r e also o t h e r issues t o c o n s i d e r s u c h as w h e r e c o n t r a c t o r s a r e h i r e d o n a n i n d i v i d u a l basis, t h e recruiter m a y also seek m e m b e r s h i p of a p a r t i c u l a r professional b o d y a n d p o s s i b l y a s k t h e c o n t r a c t o r t o p r o v i d e their o w n legal i n d e m n i t y insurance. H o w e v e r , these issues all p r e s u m e t h a t c o n f o r m a n c e t o standard is t h e quality t h a t is required. T h e r e a r e m a n y o t h e r definitions of quality - such as t h e quality o f service t h a t is provided, t h e s p e e d o f r e s p o n s e t o enquiries, a n d o t h e r indirect feat u r e s of a p u r c h a s e d p r o d u c t o r service t h a t have a g r e a t i m p a c t o n t h e overall quality o f the project. For instance, t h e suppliers of h a r d w a r e f o r a n I T p r o j e c t m a y have a g r e a t influence o n the o u t c o m e of the p r o j e c t n o t o n l y t h r o u g h the h a r d w a r e t h a t t h e y p r o v i d e b u t also t h r o u g h t h e t e c h n i c a l s u p p o r t t h a t t h e y give t o t h e s o f t w a r e p r o d u c e r s a n d t h e installers. T h e i m p o r t a n t quality issues f o r the project m a n a g e r w i t h purchasing are therefore: • •

Assurance - m a n a g i n g t h e c o n f o r m a n c e of the supplied g o o d s a n d services t o t h e necessary levels of quality ( t e c h n i c a l a n d service quality); P e r f o r m a n c e - w o r k i n g w i t h the suppliers a n d c u s t o m e r s t o o b t a i n the Ibest p o s sible result.

Price Achieving a p u r c h a s i n g ' d e c i s i o n a t t h e right price is a challenge. In p r o j e c t organisat i o n s t h e r e is o f t e n t h e need f o r l o n g - t e r m r e l a t i o n s h i p s t o be built u p between buyer a n d supplier, t h o u g h t h e relationship f o r t h a t p a r t i c u l a r project m a y be tairly short. T h e r e are clearly g a i n s t o be m a d e by a p p l y i n g pressure o n t h e price t o o b t a i n t h e c h e a p e s t supply. In t h e long t e r m , however, t h e s u p p l i e r m a y g o o u t of business o r m a y s i m p l y e c o n o m i s e in w a y s t h a t c o s t y o u m o n e y elsewhere. I n d e e d , D e m i n g ' s f o u r t h p o i n t is: End the practice of awarding business on t h e basis of a price-rag. rurchasing must be combined with design of product, manufacturing and sales to work with the chosen supplier: the aim is to minimise total cost not merely initial cost.

304 i Phase

the project

T h e best s u p p l i e r m a y n o t t h e n be t h e c h e a p e s t , a s there is o f t e n a t r a d e - o f f in o t h e r a r e a s . A s f o r p r o j e c t strategy, t h i s m a y be a g a i n s t t i m e , c o s t o r flexibility. F u r t h e r p a r t s of t h i s discussion a r e c o n c e r n e d w i t h t h e r e l a t i o n s h i p b e t w e e n cost a n d q u a n t i t y . F o r i n s t a n c e , will a s u p p l i e r of m a t e r i a l s assess t h e d i s c o u n t g i v e n d e p e n d i n g o n t h e value of e a c h o r d e r , o r will t h e y simply c o n s i d e r a n n u a l v o l u m e s of b u s i n e s s ? O t h e r issues i n c l u d e t h e c o s t of p u r c h a s i n g - typically large. O n e firm d i v i d e d t h e i r t o t a l p u r c h a s i n g c o s t s by t h e n u m b e r of o r d e r s p l a c e d w i t h s u p p l i e r s , a n d f o u n d t h a t t h e i r a v e r a g e c o s t p e r o r d e r w a s £ 8 . T h i s c a n be a c o n s i d e r a b l e overh e a d c o s t t o a project. Section 12.4 c o n s i d e r s s o m e of t h e w a y s t h a t f i r m s have t r i e d t o reduce this.

Time A c h i e v i n g t h e r i g h t t i m e a n d p l a c e is t h e b a s i s of m u c h l i t e r a t u r e a n d t h e p r e d o m i n a n t c o m p l a i n t t h a t i n d u s t r i a l p u r c h a s e r s h a v e a b o u t suppliers. T h e rating of s u p p l i e r s a n d r e g u l a r p e r f o r m a n c e r e v i e w s c a n k e e p t h i s a s a n issue f o r t h e m . It is also o n e a d v a n t a g e t h a t a degree of c e n t r a l i s a t i o n c a n h a v e f o r t h e p u r c h a s i n g f u n c t i o n - t h a t of being able t o t r a c k s u p p l i e r p e r f o r m a n c e o n t h e basis of criteria such a s late delivery. A m a j o r p o i n t t o n o t e is t h a t it is n o g o o d b l a m i n g a supplier f o r late delivery if p a p e r w o r k t o place t h e o r d e r t a k e s six w e e k s t o be p r o c e s s e d by t h e p u r c h a s i n g f u n c t i o n . G i v i n g s u p p l i e r s t h e longest possible time in w h i c h t o fulfil a n o r d e r is g o i n g t o be beneficial t o b o t h p a r t i e s in t h e long t e r m .

Supplier Being t h e r i g h t s u p p l i e r c l e a r l y h a s d e p e n d e n c e o n t h e o t h e r f o u r c a t e g o r i e s , b u t is i n c l u d e d t o s t a r t t h e d i s c u s s i o n a s t o t h e w a y i n w h i c h o n e selects suppliers. T h e choice based on price alone has been s h o w n t o provide possible s h o r t - t e r m gains, w h i c h c a n be m o r e t h a n c o u n t e r e d in t h e l o n g e r t e r m . T h e r e a r e several o t h e r f a c t o r s t h a t s h o u l d be considered: •

A r e choices m a d e o n t h e basis of a 'free l u n c h ' ? T h e e x p a n s i o n of t h e c o r p o r a t e hospitality industry over the last fifteen years in m o s t countries h a s been i m m e n s e . Interestingly, this h a s been paralleled b y e f f o r t s by m a n y c o m p a n i e s t o be seen t o be b e h a v i n g ethically a n d state publicly t h a t their staff will n o t a c c e p t g i f t s , h o w e v e r s m a l l , f r o m s u p p l i e r s . T h e r e is c l e a r l y a c o n t r a d i c t i o n b e t w e e n t h e s e t w o f a c t s . I n t h e UK, T h e C h a r t e r e d I n s t i t u t e of P u r c h a s i n g a n d S u p p l y ( C I P S - see F u r t h e r I n f o r m a t i o n at t h e e n d of t h i s c h a p t e r ) h a s a c o d e of c o n d u c t f o r t h e i r m e m b e r s w h i c h e x p r e s s l y p r o h i b i t s t h e a c c e p t a n c e of g i f t s f r o m suppliers, a n d o t h e r n a t i o n a l r e g u l a t o r y bodies d o likewise. • H o w a r e o r d e r s c o n v e y e d , w i t h w h a t f r e q u e n c y a n d h o w d o t h e s u p p l i e r s really k n o w w h a t y o u r r e q u i r e m e n t s a r e ? Also, t h e y o f t e n h a v e e x p e r t i s e i n b o t h t h e design of t h e i r p r o d u c t s a n d t h e i r a p p l i c a t i o n , w h i c h , as D e m i n g suggests, s h o u l d be used a s a source of k n o w l e d g e a n d i m p r o v e m e n t . It is o b v i o u s l y n o t possible t o t r e a t t h e p u r c h a s e of t h e smallest-value items in t h e way suggested above (through partnership rather t h a n adversarial relationships

Supply chain i s s u e s I 321

w i t h suppliers). T h e use of a version of P a r e t o analysis ( s e e C h a p t e r 13) c a n identify t h e 2 0 p e r c e n t of bought-in g o o d s a n d services t h a t t a k e 8 0 per c e n t of the project spend. It is o n these t h a t t h e f o c u s of p u r c h a s i n g attention will rest as t h e y are t h e a r e a s t h a t will h a v e g r e a t e s t s c o p e t o i m p a c t t h e p r o j e c t ' s costs. H o w e v e r , w h e r e time is t h e key issue, t h e c o n s i d e r a t i o n of t h e value of t h e p r o d u c t s or services being provided m a y be i m m a t e r i a l if t h e y are critical t o the project. In such cases t h e cost f o c u s c a n be misguided. O n e of t h e activities t h a t m a n y p r o j e c t m a n a g e r s n e e d assistance w i t h is in t h e n e g o t i a t i o n of deals w i t h suppliers a n d c u s t o m e r s alike. In this respect, p u r c h a s i n g staff have o f t e n p r o v e d i n v a l u a b l e , as, h a v i n g h e a r d sales pitch a f t e r sales pitch, t h e y are less likely, in t h e o r y a t least, t o be influenced by t h e shine o v e r t h e s u b stance of t h e deal. Also, unless y o u a r e a w a r e of t h e g a m e s of n e g o t i a t i o n , it is a minefield. Some considerable assistance can be p r o v i d e d t h r o u g h t h e s t u d y o f s o m e of t h e specialist p u b l i c a t i o n s in t h a t a r e a (see, f o r instance, Acuff, 1 9 9 7 ; Fisher et al., 1 9 9 7 ; Kennedy, 1 9 9 8 ) . T h e details o f t h e e s t a b l i s h m e n t of c o n t r a c t s b e t w e e n suppliers a n d p u r c h a s e r s is a t o p i c t h a t c o n c e r n s m a n y specialist h o o k s . N o t o n l y a r e t h e r e o b v i o u s a n d large n a t i o n a l d i f f e r e n c e s between practices in contract law, t h e r e a r e m a n y sectoral idiosyncrasies with which project m a n a g e r s should familiarise themselves. The b o o k s o n c o n t r a c t l a w a r e filled w i t h h o r r o r stories of h o w c o n t r a c t s d r a w n u p b y n o n - e x p e r t s h a v e o n l y w o r k e d w e l l if t h e y w e r e n e v e r q u e s t i o n e d o r t e s t e d . T h e safest advice, in a c o m m e r c i a l e n v i r o n m e n t w h e r e litigation is b e c o m i n g m o r e c o m m o n , is t o rely o n p r o f e s s i o n a l s in t h i s field. T h e r e a r e s o m e issues t h a t c a n s a f e l y be d i s c u s s e d a t a g e n e r a l level t h a t will f a c i l i t a t e u n d e r s t a n d i n g of s o m e p r o j e c t e n v i r o n m e n t s . T h e c o m m e n t will be m a d e a g a i n , as s t a t e d in sect i o n 12.1, t h a t m a n y industries have reduced t h e i r reliance o n c o n t r a c t as a m e a n s of control.

12.3

Contracts

' I

•

It w a s stated in section 1 2 . 1 t h a t t h e u s e of c o n t r a c t s in m a n y i n d u s t r i e s h a s c h a n g e d . T h e process by w h i c h c o n t r a c t s are a w a r d e d d e p e n d s o n t h e n a t u r e of t h e t a s k being c o n t r a c t e d , t h e r e l a t i o n s h i p b e t w e e n t h e p u r c h a s e r a n d s u p p l i e r a n d t h e relative size of each. In addition, i n d u s t r y n o r m s apply, e.g. in c o n s t r u c t i o n , t h e allocation of c o n t r a c t s f o r t r a d e services, while f o l l o w i n g basic rules, m a y he a t t h e discretion of t h e site m a n a g e r . T h e r e a r e t w o issues h e r e f o r t h e p r o j e c t m a n a g e r . T h e first is t h e type of c o n t r a c t t h a t t h e y m a y be w o r k i n g w i t h , a n d t h e second is t h e p r o c e s s f o r w o r k i n g w i t h c o n t r a c t s - w h i c h will be c o m p a r e d b e t w e e n large a n d small projects. Some c o n t r a c t types are listed below:

• Fixed price -

just w h a t it says - t h e r e is this m u c h m o n e y agreed f o r t h e j o b t o be d o n e , t h e r e is n o m o r e ; • T i m e a n d materials - the c u s t o m e r agrees t o p a y a p a r t i c u l a r h o u r l y o r daily rate a n d t h e c o s t of t h e m a t e r i a l s . T h i s s e p a r a t i o n of l a b o u r a n d m a t e r i a l m a y

increase the transparency of the costings, particularly where materials are a large proportion of the activity cost; Target cost - where the customer sets a target cost for an item (see Chapter 7) and the supplier is required to work back from this to see what they can provide for that cost; Revenue share - this has been used with some success in-the aerospace sector, where the selling price of a finished aircraft is determined by its performance. The better it performs, the more it is worth. In an effort to get their systems suppliers (major components, e.g. navigation, instrumentation, flight control etc.) working together, deals were agreed where systems would be sold to the firm on the basis that they would attract a percentage of the final selling price of the aircraft. The more it sold for, the greater the price that the systems suppliers would receive; Cost-plus - this is where the customer agrees to reimburse whatever costs the supplier incurs on a project, plus a margin f o r profit. This was until relatively recently the preferred form of contract for many military development and procurement projects.

The process Where a contract is being placed for the supply of a major part of the project spend the process shown in Fig. 12.3 may be used. This is a single-stage process - unlike that recommended by the World Bank for development projects, and the major high street banks for human resource development projects. Here a two- or more stage process may be beneficial with a first call to see who has the technical capability and capacity to deliver the project. This identifies potential bidders and may provide considerable insight into how what is being requested can be improved, for instance to reduce cost by making small changes to the requirements. A second phase may

Determine requirements

— -H—•— 1

BB3S5S—MS— ———•! • . "

Issue invitation to tender - ITT (beware EU legislation)

~

-

r - " -

Accept tenders or bids on the due date (either 'sealed' or 'open')

~

f

- '

Compare the merits of each

Ï Amend calculations forthe project finance and schedule

T Establish contractual arrangements if work is to progress

Figure 22.3 Establishment of contracts

Suppiyehatn issues I 307 then ask the potential bidders to provide detailed costings of their proposals. Such a phased approach does take more time to complete, as there will have to be several rounds of bidding, but it does save time by pre-filtering the bidders by technical capability. There are further rules - for instance, the value for public contracts (central government, purchase/lease of goods or services), over and above which open European tender (the ITT must be published Europe-wide) is required, is in the region of €140 000 (approximately £90 000). This is not large by the standards of much project management activity. When the bids or tenders arrive, they may be treated as either 'sealed' (not opened until a given time) or 'open' (where the information contained in the bids becomes public at the time the bids are received). The system of sealed bids is often felt to be fairer for larger contracts. The information contained in the bids should be fed into the project's financial and time calculations and any amendments to budgets or schedules made on this basis. Contractual arrangements are usuallv based on standard terms and conditions, but establishing whether the supplier's terms and conditions or those of the purchaser apply is a role for legal advisers, due to a process known as battle of the forms: Customer: 'We place the order subject to our terms and conditions.' Supplier: We accept, subject to our terms and conditions.' The main objective is t o ensure that the contracts can be met on both sides. Breaches of contracts and the ensuing litigation rarely benefit either party greatly but the legal industry considerably. The engineering institutions of the UK have recognised the need to provide a point, which can eliminate some of the wrangling between suppliers and purchasers. Various bodies have compiled standard forms of contract, e.g. in the construction industry CIRIA 85 ('Target and Cost Reimbursable Construction Contracts', 1982) provides a standard form for target cost contracts and the Institute of Chemical Engineers has its 'Red Book' ('Model Form of Conditions of Contract for Process Plants: Lump Sum Contracts', 1981). Other contract issues that project managers should at least be aware of include: • Role of penalty clauses - used in many sectors to encourage suppliers to do what they said that they would do. In practice, it does appear that these are treated as the point of last resort if they have to be invoked, which leads onto: • The role of bonds and insurances - if you are providing goods and services to a larger project, the effects of your part of the project going wrong could have implications way beyond the scale of your part of the project. (For example, a building contractor, contracted to do the concreting of the ground floor of a skyscraper, used concrete that didn't cure properly, resulting in a 4-week delay to the opening of the building. The contract value: £80 000. The damages as a result of their 'misfortune': £2.8 million.) Before being awarded contracts, many firms will require insurances to be in place and bonds to be provided. These may require certain quality procedures to be in place as well.

3 0 8 I P h a s e H ••••• - Deliver t h e project i d o i l ! )

• Retention money - on completion of large projects there are often final pieces of work to be carried out. These may not delay the completion of the contract and payment of the majority of the agreed contract fee, but the customer may insist on retaining some of the money to ensure that the final jobs are completed to their satisfaction. • Stage payments - in order for suppliers to stay afloat financially, it is usual in many projects for there to be interim payments made on delivery of particular objectives. • Contracts may get in the way of project start-up. Where days or even weeks are crucial, a supplier who will not start work until a contract is in place may hold up the project considerably. More flexible means of proceeding (letters of intent are often used) do not replace contracts, but may overcome the initial problems. A final thought before moving on. The most basic piece of contract legislation in place in many countries is that goods and services provided should be what they say that they are, and do what they say that they should do. This may come as a surprise to many firms who have purchased large IT packages. The systems that they were promised at the usually very glitzy sales promotions do not turn up until very late and then only partly work - the remaining features that you needed being 'still in development'. This being the case for so many IT projects, it must be asked how the firms selling such goods manage to do so without any apparent fear of legal action. The answer appears to lie in the nature of what you buy. In the case of software, you usually do not buy the product, which would be subject to such law, but you buy a licence to use the product. This apparently circumvents the usual laws.

2.4

From Buying to Relationship Management As stated earlier in this chapter, there have been big changes in the nature of the relationships between buyers and suppliers in some sectors. As will be shown, this has moved from short-term arrangements based on contracts to long-term relationships based on trust. This change is by no means universally applicable nor desirable, but the project manager should be aware of the implications of the intentions of the arrangement for decisions and processes in the project. There are many classifications of relationship available. For the project manager, we shall simply consider three basic types: • Traditional adversarial - characterised by the reliance on contract, competitive bidding, short-term relationships (as long as the contract), and little by way of process cooperation between the buyer and supplier. The focus of the choice of supplier will be on cost and short-term gain on each side. Orders are conveyed by fax or letter and there will often be several suppliers for each item. • Partnership - here two firms enter into a long-term agreement, whereby the purchaser agrees to award a firm sole-supplier status in return for process developments being undertaken and closer cooperation on costs (see below) and

chain issues I 309

Table 12.3 Adversarial versus partnership relationships Feature

Adversarial

Partnership

Temporal basis

One-off purchase

Ongoing

Commodity

Product

Product, service, knowledge support

Contractual basis

Each purchase negotiated competitive basis

Long-term deals agreed in advance, trust-based rather than contractually reliant

Communications and involvement

Limited to 'information as necessary' as determined by contract terms; use standard communications - telephone, fax, e-mail

Involved at all relevant stages cf the project, as determined by impacts on all parties; may involve staff loan; suppliers involved in scheduling and planning; communicate through linked networks and regular information-sharing sessions

Focus

Our bit of the project is most important - maximise the return from that bit

The performance of the project as a whole is most important

information transfer. Orders may be exchanged by Electronic Data Interchange (EDI)or call-offs from a pie-agreed quantity ('we don't need all of it, this is the amount that is needed now'). Where there is a small supplier for a large firm, this may take the form of direct investment e.g. in particular equipment or research and development. • Relationship management - this is where one of the parties in a complex supply network takes on the role of coordinating and developing the entire supply network. This goes way beyond managing a partnership, but may consider all the elements of the supply chain from primary industry to customer. The British Airports Authority is a good example cf a project customer taking control of the supply network and getting involved with firms way down the supply chain to ensure that any weak links are strengthened. Table 12.3 describes the differences between the traditional adversarial approach and the partnering approach that many firms are at least aspiring to today. The key points of note are the differences in the practices applied in the execution f the work being carried out. Instead of looking around to many suppliers, it is likely that under partnering, a firm will have one supplier for each category of purchase. This has resulted in a significant rationalisation of the supply base by many firms, and a simplification of the purchasing process - as was described in Fig. 12.2. There is another side to this type of relationship that is evident in repetitive industries, and has become apparent in certain project environments (see Larson and Drexler, 1997). This concerns the intrusive nature of the relationship and the

35
tough requirements that are often placed upon suppliers for improvement. As one project-based supplier of components to the automotive sector commented: The first year they d e m a n d e d a 5 per cent reduction in our costs from one project t o t h e next. That was just about achievable - w e t o t a l l y rethought our processes and managed to hit our targets. The second year, w e were asked t o do t h e same again. That w a s really hard and w e struggled. The third year, t h e same w a s asked again. We asked them to suggest ways t o d o this, but d i d not receive any further help from them. We made a loss on t h e business that year and t o o k t h e decision to end t h e relationship. It w a s all one-way. Possibly, it w a s because they were a big firm and w e were a small one. We have moved out of this sector and concentrated elsewhere, a n d are n o w m a k i n g three times as much profit as w e used t o make, without any of t h e aggravation!

As can be seen, the management of relationships is not all win-win and while the principles are admirable, there is clearly considerable effort to be expended with application. As for other 'good ideas' there is plenty of case material on the application which is worth referring to (see Further Information at the end of this chapter).

12,5

Modern Techniques in Supply Chain Management

Open-book accounting This has been widely used in the automotive industry, particularly where firms are first-tier suppliers to the automotive companies. The principle is that by opening up the accounts of a supplier, the customer can see how much profit is being made out of them. Too little, and the supplier is going to be unable to have the investment necessary to improve its processes in the future. The customer may suggest ways to reduce costs in such a situation. Too much profit, and the customer will be looking for price reductions. The use of open-book agreements is not universally popular, with many, particularly small, suppliers resenting the intrusion of accountants from the large firms into their business. They also reduce significantly the bargaining power cf a supplier in price negotiations, as the customer is privy to their data. In principle, therefore, this is a nice idea, with helpful customers ensuring that their suppliers remain financially healthy. The reality is often far from this, with the costs data simply being a tool for beating suppliers with, rather than helping them directly. For the project environment, the notion of greater transparency of costs does apply, as it does in repetitive operations.

Vendor-managed inventory For many organizations the only way to obtain goods for projects was to buy them in bulk in advance of need. For instance, if a building project needed 400 pallets

Supply chain i s s u e s I 327

of b r i c k s f o r t h e w h o l e j o b ( s a y , 10 w e e k s ' s u p p l y ) , t h e s e w o u l d be o r d e r e d a n d delivered a t t h e w a r t of t h e j o b - w h i c h l o o k s g o o d a s t h e m a t e r i a l s are t h e r e r e a d y f o r use, t h e g o o d s w e r e o b t a i n e d a t a d i s c o u n t price a s t h e y w e r e b o u g h t in b u l k , a t l e a s t i n t h e s h o r t t e r m . If w e l o o k c l o s e r , t h i s p r e s e n t s a n u m b e r of p r o b l e m s f o r b o t h s u p p l i e r a n d c u s t o m e r . F o r t h e supplier, they have a s u d d e n s u r g e in d e m a n d . I n o r d e r t o m e e t t h i s d e m a n d , t h e y m a y h a v e staff w o r k i n g o v e r t i m e , a n d t h e r e b y i n c r e a s i n g c o s t s . F o r t h e c u s t o m e r , w h a t d o t h e y d o w i t h 4 0 0 pallets of b r i c k s ? T h e y s t o r e t h e m , c o u n t t h e m , m o v e t h e m , a n d p r o b a b l y h a v e t o g u a r d t h e m . T h e f t of s u c h stocks is c o m m o n . Also, b e c a u s e of t h e b u l k o r d e r i n g issue, t h e m a t e r i a l s p l a n ners have probably overordered t o sure m a k e that there are enough f o r the job. I n t h e c o n s t r u c t i o n s e c t o r t h e r e a r e m a n y c o u n t r i e s w h e r e it is n o r m a l t o o v e r o r d e r b y a m i n i m u m o f 1 0 p e r cent. A n y m a t e r i a l s l e f t a t t h e e n d of t h e j o b a r e either 'removed' f o r o t h e r jobs by the staff o r the firm has t o pay to have t h e m taken away. Such a s c e n a r i o is c o m m o n in m a n y sectors, n o t j u s t c o n s t r u c t i o n , a n d results in c o n s i d e r a b l e w a s t e (see C h a p t e r 1 5 ) . T h e p r i n c i p l e of v e n d o r - m a n a g e d i n v e n t o r y is t h a t the s u p p l i e r will w o r k w i t h t h e c u s t o m e r t o d e t e r m i n e the a m o u n t of t h a t p a r t i c u l a r t y p e of m a t e r i a l t h a t will b e n e e d e d d u r i n g d i f f e r e n t p h a s e s of t h e p r o j e c t . T h i s is m a d e a v a i l a b l e o n - s i t e , a n d t h e m a t e r i a l is t a k e n a s n e e d e d f o r t h e job. The supplier o w n s the material ( a n d m a y even have t o pay the c u s t o m e r rental f o r s i t e - s p a c e t o s t o r e i t ) u n t i l it is u s e d . T h e s u p p l i e r w i l l t h e n i n v o i c e t h e u s e r r e g u l a r l y f o r t h e m a t e r i a l u s e d . T h e s u p p l i e r b e c o m e s t h e sole s u p p l i e r f o r t h o s e i t e m s a n d in d o i n g so g a i n s t h e m a x i m u m s h a r e of t h a t b u s i n e s s . As i m p o r t a n t l y , a s t h e sole s u p p l i e r t h e y w i l l b e i n v o l v e d i n t h e p l a n n i n g p r o c e s s t o e n s u r e t h a t the necessary materials are available a t the time they are needed, a n d m a y also p r o v i d e t e c h n i c a l s u p p o r t f o r t h e p r o d u c t s a n d a d v i c e ( f o r i n s t a n c e , if t h e s a m e p r o d u c t is a v a i l a b l e f r o m a n o t h e r m a n u f a c t u r e r a t a b e t t e r p r i c e ) . S u c h a r r a n g e m e n t s a r e used in a u t o m o t i v e a n d e l e c t r o n i c s p r o j e c t s a n d m a n u f a c t u r i n g , a n d a r e i n c r e a s i n g l y being used in retailing. It a p p e a r s t o be a w i n - w i n f o r b o t h s u p p l i e r a n d c u s t o m e r as: • •

t h e c u s t o m e r n o w p a y s o n l y f o r t h e m a t e r i a l a c t u a l l y used; t h e c u s t o m e r p a y s o n l y f o r m a t e r i a l w h e n i t is u s e d - n o a d v a n c e p u r c h a s i n g costs;

•

t h e n u m b e r of t r a n s a c t i o n s is d r a s t i c a l l y r e d u c e d - o n l y o n e bill f o r all t h e

m a t e r i a l s supplied, instead of m a n y ( o v e r h e a d c o s t r e d u c t i o n ) ; • t h e c u s t o m e r e l i m i n a t e s t h e c o s t s of s t o r a g e , c h e c k i n g , a n d m o v i n g materials; • t h e s u p p l i e r c a n p r o v i d e r e g u l a r s m a l l deliveries r a t h e r t h a n h a v i n g t o a r r a n g e small n u m b e r s of large deliveries; • t h e possibilities f o r p a r t n e r s h i p b e t w e e n t h e f i r m s is increased. T h e s u p p l i e r clearly n o w h a s a bigger role, m a n a g i n g m a t e r i a l a s o p p o s e d t o j u s t the i n t e r m e d i a r y b e t w e e n the m a n u f a c t u r e r ( o r their a g e n t ) a n d t h e user. T h i s is n o t a t r a n s i t i o n t h a t m a n y m a k e w i t h o u t p r o b l e m s , b u t t h e r e a r e p l e n t y of i n s t a n c e s of existing p r a c t i c e f o r t h e m t o d r a w o n f o r k n o w l e d g e of h o w t o m a k e it w o r k . It a p p e a r s t o h a v e b e e n highly successful in a r e a s of s u p p l y such as s t a t i o n e r y - see t h e b o x below.

328 I Phase Three - Deliver the project (do .tl)

W h e n t h e firm d e c i d e d t o c a r r y o u t a n a u d i t of a n n u a l s p e n d t h e y w e r e h o r r i f i e d a t t h e v a l u e of p u r c h a s e s of s t a t i o n e r y in t h e year. S o m e q u i c k p a r a m e t r i c estimating, a n d based o n t h e n u m b e r of people a n d t h e type of w o r k t h e firm c a r r i e d out, a n d t h e y w e r e b u y i n g r o u g h l y t h r e e t i m e s t h e a m o u n t of s t a t i o n e r y t h e y t h o u g h t t h a t they w o u l d n e e d . T h i s w a s being p a s s e d o n t o i n d i v i d u a l p r o j e c t s in t h e f o r m of o v e r h e a d costs, s o it w a s c o n s i d e r e d w o r t h m o n i t o r i n g . In a d d i t i o n t o t h e c o s t s of t h e i t e m s being b o u g h t , t h e r e w a s s i g n i f i c a n t t i m e d e d i c a t e d t o t h e ordering, s t o r i n g a n d distribution of items. A s h o r t i n v e s t i g a t i o n revealed t h a t because t h e supply line w a s c o n s i d e r e d t o be unreliable, a l m o s t e v e r y o n e in t h e o r g a n i s a t i o n k e p t t h e i r o w n stock of m a t e r i a l s . O n c e 'theirs', these stocks w o u l d be f a r m o r e likely t o end up a t h o m e . T h e R a p i d Pencil C o m p a n y o f f e r e d t h e firm the o p p o r t u n i t y t o r e m o v e m o s t of t h e stocks f r o m t h e system a n d t o e l i m i n a t e o r d e r i n g costs. T h e y did this by p r o v i d i n g c u p b o a r d s o n each m a j o r office level. T h e s e c o n t a i n e d a n agreed level of stock a n d w e r e replenished each week. In addition, w h e r e there w e r e special requirements, these could be ordered direcdy via a website. T h e f i l m submitted one invoice per m o n t h t o t h e firm, rather t h a n one f o r each separate order. As t h e f i n a n c i a l director of t h e firm c o m m e n t e d , 'It w a s a step of t r u s t t o let t h e m t a k e o v e r t h i s activity f r o m us, b u t it h a s w o r k e d really well. N o m o r e o r d e r i n g f o r t h i n g s t h a t w e have r u n o u t of - t h a t used t o h a p p e n a l m o s t daily - a n d just o n e i n v o i c e a m o n t h . W e n o w k n o w r o u g h l y w h a t t h e spend s h o u l d be, a n d w e c a n simply check a g a i n s t that.'

12.6

Relevant Areas of the Bodies of Knowledge B o t h bodies of k n o w l e d g e (Tables 1 2 . 4 a n d 1 2 . 5 ) are based in t h e traditional v i e w of p u r c h a s i n g a n d a r e f o c u s e d o n t h e n o r m s f o r large-scale o r first-time p r o j e c t s . T h e y only partially c o v e r the m o r e c o m m o n s c e n a r i o of multiple/repeat p u r c h a s i n g a n d the n a t u r e of o n g o i n g relationships w i t h o t h e r parties in t h e s u p p l y chain. Table 12.4 Relevant a r e a s of t h e APM body of knowledge Relevant section

Title

Summary

53

Procurement

As the title suggests, this is concerned with the purchasing process, though the scope given for it is wide—to include the support of purchased items, and materials management functions. The role of contracts is stressed.

Supply chain issues 1 313 Table 12.5 Relevant areas of the PMi body ofknowtedge

m .7

Relevant section

Title

Summary

12.1

Procurement planning

Including what to buy (as opposed to do in-house) how much, and when to bup it. Produce specifications for products and servicps and agree thjt; type of contract to bt; used.

12.2

Solicitation planning

Provide documents that will invite potential suppliers to tender for the work, determine how they will be selected and keep them up to date with any changes.

12.3

Solicitation

Invite potential suppliers to tender for the work, answer queries related to the work, gather the bids.

12.4

Source selection

Selecr suppliers ond negotiate contracts.

12.5

Contract administration

Control to contract terms \i;p aspects oA time, cost and quality perfor m a n ce, a dm imster c ha nges and ensure that invoices provided are correct and passed for payment.

12.6

Contract close-out

Ensure that the contract is completed as required, and when this is achieved, close down the administration system, providing necessary documentation for audit and review. Issue close-out notices.

Summary The value of goods and services purchased can make up a major proportion of a project budget. This has been the case for many project-based industries for some time, and the trend to outsource more and more of our businesses has increased the impact of the suppliers on projects as a whole. Partly in response to this change, the role of purchasing or procurement in organisations has changed to incorporate the management of both suppliers and customers with the objective of maximising the performance of the project. This has led to the area being referred to as supply chain management, rather than simply purchasing or procurement. The activity of purchasing is still important, however, and the stages involved in a typical purchasing process have been described with the accompanying documentation that is required by many systems. A feature o f the work of many in the supply chain management area acs been the negotiation of contracts. There are many standard procedures to follow and legal issues to navigate - particularly where international trade is concerned. The contract is still the formal basis of soure projects, containing the criteria by which it will be assessed. In other projects where the basis of the relationship is different between

35
the parties t h e c o n t r a c t takes t h e role of a d o c u m e n t 'just in case' it all goes w r o n g . T h i s is just o n e f e a t u r e of t h e d i f f e r e n t styles of relationship t h a t c a n exist b e t w e e n suppliers a n d c u s t o m e r s . A t the extremes, the r e l a t i o n s h i p c a n be adversarial o r r u n o n a p a r t n e r s h i p basis. While the potential a d v a n t a g e s of p a r m e r i n g b e t w e e n o r g a n a r e c l e a r , t h e r e is a c o n s i d e r a b l e d o w n s i d e e l e m e n t t o t h e s e , p a r t i c u l a r l y w h e r e o n e of the parties is significantly m o r e p o w e r f u l t h a n the o t h e r .

jSS: pfflSSfi S f l l i H

Project partnering at British Airports Authority (BAA) T h e c o n s t r u c t i o n sector in recent times h a s n o t b e e n n o t e d f o r its high levels of perf o r m a n c e . Firms like BAA, w h o o w n a n d o p e r a t e a i r p o r t s including H e a t h r o w a n d G a t w i c k - L o n d o n ' s t w o m a j o r a i r p o r t s - rely heavily o n their suppliers, including t h e i r c o n s t r u c t i o n suppliers, f o r their o w n p e r f o r m a n c e . W h e r e c o n s t r u c t i o n p r o jects a r e d e l a y e d , t h e f i n a n c i a l c o n s e q u e n c e s c a n be d i s a s t r o u s . F u r t h e r m o r e , t h e d i s c i p l i n e s of w o r k i n g o n a i r p o r t p r e m i s e s , i n c l u d i n g t h e security issues, p l a y a significant p a r t in t h e daily w o r k i n g lives of p r o j e c t staff. N e w f i r m s b r i n g i n g n e w staff o n t o t h e a i r p o r t sites i n v a r i a b l y r e q u i r e t i m e t o b r i n g t h e m u p t o speed w i t h the a p p r o p r i a t e w a y s of w o r k i n g . P a r t i c u l a r p r o b l e m s include: •

security - all p e r s o n n e l w i t h access t o airside p a r t s of the a i r p o r t (i.e. p a s t passp o r t c o n t r o l ) m u s t be security vetted a n d t r a i n e d . T h e vetting p r o c e s s t a k e s six weeks, s o f i r m s m u s t p r e p a r e p r o j e c t staff in advance;

•

deliveries - g e t t i n g m a t e r i a l s into t h e a i r p o r t is p r o b l e m a t i c , d u e t o significant c o n g e s t i o n a n d lack of availability of a r e a s f o r storage; c o n s t a n t u s e of t e r m i n a l b u i l d i n g s by p a s s e n g e r s - t h e c l o s i n g of a r e a s c a u s e s p r o b l e m s w i t h passenger capacity. T h e f i r m s a r e r e q u i r e d t o w o r k w i t h the c o n straints of passengers u s i n g the a r e a s a r o u n d w h e r e the w o r k is being carried o u t a n d p h y s i c a l a n d noise intrusion m u s t be k e p t t o a m i n i m u m ; the c o m m e r c i a l activities ( s h o p s a n d r e s t a u r a n t s ) a r e t h e e c o n o m i c l i f e b l o o d of t h e business, w i t h l a r g e g r o u n d - r e n t s . T h e o b j e c t i v e of p r o j e c t s i n v o l v i n g these areas is n o t simply t o c o m p l e t e w o r k s o n time b u t as early as possible, s o t h a t the a r e a s c a n s t a r t t o generate r e n t a l incomes.

•

T h e t r a d i t i o n a l a p p r o a c h t o m a n a g i n g f i t - o u t p r o j e c t s ( c h a n g i n g internal l a y o u t s t o a c c o m m o d a t e d i f f e r e n t facilities a n d in p a r t i c u l a r n e w retail facilities) w a s t h a t every c o n t r a c t w a s d i f f e r e n t , a n d w o u l d be n e g o t i a t e d w i t h d i f f e r e n t c o n t r a c t o r s . T h e s e w o u l d t h e n e m p l o y their o w n s u b - c o n t r a c t o r s to carry o u t p a r t s of t h e w o r k . T h e a p p r o a c h t h a t h a s w o r k e d f a r b e t t e r f o r all c o n c e r n e d h a s b e e n t h r o u g h t h e a p p o i n t m e n t of lead c o n t r a c t o r s , w i t h l o n g - t e r m c o n t r a c t s - in m o s t cases 10 years - t o b e t h e p r i m e s u p p l i e r of f i t - o u t services t o BAA. T h i s p a r t i c u l a r c o n t r a c t w a s a w a r d e d t o M A C E . A s p a r t of t h e a g r e e m e n t , B A A h a s p a i d f o r M A C E staff t o a t t e n d t r a i n i n g p r o g r a m m e s ( i n c l u d i n g w o r k t o i m p l e m e n t L a s t P l a n n e r - as described in C h a p t e r 11).This h a s e x t e n d e d f u r t h e r , w i t h h e l p b e i n g o f f e r e d t o their s u p p l i e r s - of b o t h m a t e r i a l s a n d l a b o u r - f o r d e v e l o p m e n t . W h e r e p a r t i c u l a r

ippty chain issues

315

p r o b l e m s are identified, t h e supplier can be a s k e d t o t a k e p a r t in a n i m p r o v e m e n t p r o g r a m m e . S a t i s f a c t o r y c o m p l e t i o n c a n r e s u l t in s i m i l a r l o n g - t e r m d e a l s ( t i e d t o c o n t i n u a l i m p r o v e m e n t ) b e i n g o f f e r e d t o tho'se suppliers. In s o m e c a s e s t h e p r o b l e m s - p a r t i c u l a r l y w i t h designs f o r a r e a s - h a v e b e e n t h e responsibility of BAA. T h e m e c h a n i s m s are n o w in place t o identify these p r o b l e m s and t o introduce n e w practices t o avoid t h e m in future.

Case discussion 1 Summarise the a r g u m e n t s f o r such a policy of p a r t n e r i n g w i t h a m a j o r supplier such as BAA and M A C E have done here. 2 W h a t m i g h t be the d r a w b a c k s f o r b o t h parties of such a n a r r a n g e m e n t ? 3 Carry o u t f u r t h e r research t o identify f u r t h e r e x a m p l e s of p a r t n e r i n g in projects. H o w well d o they a p p e a r t o be w o r k i n g ?

ITT

contracts tiers outsourcing order number reconciliation five rights bid

battle of t h e f o r m s o p e n - b o o k accounting

v e n d o r - m a n a g e d inventory

relationships materials m a n a g e m e n t PBS/bill of m a t e r i a l s EDI invoice centralised/localised

adversarial/partnership

1 Consider the w a y t h a t y o u m a k e purchases for yourself. H o w d o you decide f r o m w h o m t o b u y ? Are there examples of y o u r personal p u r c h a s i n g w h e r e y o u have f r e q u e n t e d a particular business and f o r m e d a parmership-type relationship? 2 W h y is the process f o r p r o c u r e m e n t so involved? Figure 12.2 contains significant bureaucracy that surely does n o t help the objective of getting the project completed. Suggest why these processes are in place a n d h o w they m i g h t be simplified. 3 W h y the trend t o o u t s o u r c i n g ? Suggest h o w this m i g h t or m i g h t n o t be beneficial t o a project organisation. 4 Surely it w o u l d be better f o r project m a n a g e r s simply t o deal directly w i t h suppliers? U n d e r w h a t circ*mstances would such a n a r r a n g e m e n t be beneficial a n d w h e n w o u l d it be inappropriate? 5 Y o u have been offered tickets t o y o u r f a v o u r i t e e n t e r t a i n m e n t event of the year by a m a j o r potential supplier. T h e offer includes f u l l corporate hospitality treatment. Should you accept this o f f e r ?

35
6 W h a t are t h e likely trade-off issues in the p u r c h a s i n g decision, a n d h o w w o u l d y o u resolve these? 7 H o w is t h e I n t e r n e t c h a n g i n g the role of the p u r c h a s i n g f u n c t i o n ? C a r r y o u t a search of s o f t w a r e v e n d o r s a n d investigate t h e k i n d s of f e a t u r e s t h a t are being offered here. W h a t are the possible benefits f o r project m a n a g e r s of these?

Acuff, F. ( 1 9 9 7 ) H o w to Negotiate Anything With Anyone Anywhere Around the World, Amacom. Association for Project Management (1998) Contract Strategy for Successful Project Management, APM, High Wycombe. Brown, S., Blackmon, K., Cousins, P. and Maylor, H. (2001) Operations Management: Policy, Practice and Performance Improvement, Butterworth-Heinemann, Oxford. Fisher, R , Ury, W. and Patten, B (1991)Getting to Yes, Arrow Books, London. Kennedy, G. (1998) New Negotiating Edge - the Behavioural Approach for Results a n d Relationships, Nicholas Brealey Publishing, London. Larson, E. and Drexler, J.A. Jr (1997)'Barriers to Project Partnering: Report from the Firing Line', Project Management Journal, Vol. 28, No. 1, pp. 46-52.

Raily, P, Farmer, D., Jessop, D. and Jones, D. (1998)Purchasing andManagement, Financial Times Prentice Hall, Harlow. Harland, C.M., Lamming, R.C. and Cousins, P. (1999)'Developing the Concept of Supply Strategy', International Journal of Operations a n d Production Management, Vol. 19, No. 7. Hines, P. and Rich, N. (1997)' The Seven Value Stream Mapping Tools', International Journal of Operations and Production Management, Vol. 17, No. 1. Hines, P., Cousins, P., Lamming, R. et al. (2000) Value Stream Management, Financial Times Management, Harlow. Lamming, R. (1993) Beyond Partnership: Strategies for Innovation and Lean Supply, Prentice Hall, Harlow. Lock, D. (2000)Project Management, 7th edition, Gower, Aldershot, chapters 15-18. www.cips.org - The Chartered Institute of Purchasing and Supply

Notes 1 I n t e r n a t i o n a l M o t o r Vehicle P r o g r a m m e a t t h e M a s s a c h u s e t t s I n s t i t u t e o f Technology - see h t t p : / / w e b . m i t . e d u / c t p i d / w w w / i m v p / i n d e x . h t m l 2 F o r a f u r t h e r description of M R P a n d other m a t e r i a l s m a n a g e m e n t issues, see

Brown et al. (2001)Chapters 5 and 7.

During t h e execution phase o f a project particularly, t h e project manager w i l l be faced with t h e need t o solve a whole range of problems rapidly and effectively. As it w i l l not be possible to pre-plan all eventualities, t h e objective of this chapter is t o s h o w h o w such situations can be handled. Most of the techniques meet t h e criterion of being simple enough t o be used by anyone, though some of t h e mathematics can be considerably more involved. Decision-making is considered as part of a generic problem-solving process. Price (1984) describes one of t h e conflicts that exists in management: Business is a risky undertaking. According to those w h o have devoted their lives to t h e proper study of mankind, Man is a risk-evasive animal. From what I have seen, risk addicted seems closer to t h e norm. There is excitement i n taking risky decisions and it is possible t o get hooked on it; it makes you feel good. Risk, unnecessary risks, are taken by t h e t h o u s a n d every day. Often they are unnecessary simply because they are made in t h e light of inadequate knowledge, but it boosts somebody's self-esteem t o make t h e m w i t h an air of omniscience, which is one of the reasons why we are on t h e whole, such poor quality performers. There is another view, namely that t h e m o d e m project manager is overloaded w i t h data rather than information; t h e information revolution has provided t h e means t o access large quantities o f numbers quickly, often w i t h o u t t h e means t o assimilate them. Handling such volume complexity w i t h o u t succumbing t o 'data paralysis' is a significant t a s k and one of the value-adding roles that management can play. The project manager should have t h e option either t o try t o provide a structure for making 'rational' decisions or rely on gut-feel and experience and hope that this is appropriate.

Learning Objectives 13.1 The problem f r a m e w o r k 13.2 M o d e l l i n g systems for decision-making

13.3 13.4

Handling uncertainty in decision-making Mathematicalmodelling techniques

35
13.5 Problem-solving tools 13.6 Cause-effect-cause analysis 13.7 Decision trees 13.8 Simple decision frameworks 13.9 Decision-support systems 13.10 The importance of the follow-up actions 13.11 Relevant areas of the bodies of knowledge 13.12 Summary Project management in practice: The use of cause-effect-cause analysis Key terms Review questions and further exercises References Further information Notes

By

time have completed this chapter, you should be able to: Provide a structure fbrihe identification, definition and solution of problems; Identify appropriate tools which can be brought to bear at different stages the problem-solving process; ! Show the implications some of the changes management thinking the area of decision-making.

One of the key roles of a manager is to handle problems that challenge them in their own role, as well as being a resource for members of the project team to turn to for help. Problem-solving is a core management skill but, like leadership, one that too often is assumed to be an inbred attribute rather than an acquired skill. For the purposes of this discussion, a problem is defined as: The gap between an actual situation or the perception of it and the required or expected situation. The two properties, expectation and perception, are subjective and based on the viewpoint of the individual. Many issues presented to managers fail this definition; people perceive that there is a problem without identifying the gap. Clarifying the reality of the situation with objective measures is a precursor to the problem-solving process. Part of the role of the project manager in this process is the gathering of the possible worldviews. This requires the skill of being involved yet objective. The nature of the problem determines the point of departure for the manager. This can be categorised as:

Probie^-solvlng and decision-making ! 319

•

r e q u i r i n g a n i m m e d i a t e r e a c t i o n - t h e timescale of a decision requires a 'conditioned reflex' r a t h e r t h a n a 'considered response'. Such a situation w o u l d include the t h r e a t e n i n g of the wellbeing of a n individual;

•

r e s p o n s e t o a crisis - t h e p r o b l e m c a n b e c o n s i d e r e d w i t h i n a relatively s h o r t t i m e p e r i o d , i.e. a n u n d e s i r a b l e s t a t e of a f f a i r s h a s o c c u r r e d - y o u n e e d t o d o s o m e t h i n g a b o u t it soon; • e m e r g i n g p r o h l e m - some undesirable state of a f f a i r s a p p e a r s likely t o h a p p e n w h a t are y o u going t o d o t o resolve it? • r e s p o n s e t o a n o p p o r t u n i t y (see R e e b o k in s e c t i o n 13.10 b e l o w ) - s p e c u l a t i v e p r o b l e m - s o l v i n g o r a v o i d a n c e in a d v a n c e of a n u n d e s i r a b l e s i t u a t i o n ( m i s s e d opportunity); • s t r a t e g y f o r m u l a t i o n - t h e p l o t t i n g of a c o u r s e t o a d e s i r e d s i t u a t i o n o v e r a period of years. T h e time period of t h e first kind of p r o b l e m m e a n s t h a t the response o r intended s o l u t i o n m u s t be e i t h e r instinctive ( s u c h as t o r u n a w a y ) o r i n g r a i n e d t h r o u g h t r a i n i n g ( t o r e m o v e the source of p o t e n t i a l d a n g e r ) . T h e r e is scope in the latter f o r a m a j o r c o m p o n e n t of any discussion o n problem-solving - t h a t of proceduralisation. T h i s is n o t restricted t o emergency situations but is a m a j o r c o m p o n e n t of any w o r k situation t o d a y . This proceduralisation or systematisation c a n be defined as: T h e e n a c t i o n of a p r e d e t e n n i n e d r e p o n s e t o a given set of conditions. T h e systematisation of p r o b l e m resolution d e p e n d s o n identifying the situation. T h e p r o g r a m m e d response is then initiated, as s h o w n in Fig. 13.1. T h e p r e p r o g r a m m i n g of a c t i o n s has a n u m b e r of advantages: • • • • •

o n c e a m e t h o d h a s been defined f o r resolving a situation, it c a n he refined a n d improved; by r e m o v i n g t h o u g h t processes f r o m t h e actions they are, t o a great extent, indep e n d e n t of the individual carrying t h e m out; if a p r e d e t e r m i n e d procedure is followed, actions are traceable back t o t h e people w h o carried t h e m o u t ; the actions are then the responsibility of the organisation rather t h a n the individual; s h o u l d t h e p r o c e d u r e fail, t h e i d e n t i f i c a t i o n of t h e f a i l - p o i n t is c o n s i d e r a b l y helped, as the steps c a n be retraced.

T h e alternative is t h a t t h e p r o b l e m - s o l v i n g cycle is invoked. As f o r the p l a n n i n g process, t h e cycle is iterative (involvesrepetition of steps if the o u t p u t does n o t meet recognised or e m e r g i n g c o n d i t i o n s ) . T h e r e m a i n d e r of this c h a p t e r will consider t h e possible. a p p r o a c h e s t o p r o b l e m s w i t h a d e g r e e of n o v e l t y - t h o s e t h a t a r e b e i n g solved f o r t h e first time a n d t h o s e t h a t are being considered f o r p r o c e d u r a l i s a t i o n . T h e r e is a d o w n s i d e , n o t least of w h i c h is t h e r e m o v a l of t h e individualism in t h e p e r f o r m a n c e of t h a t p a r t of the task. N o - o n e has yet achieved a n effective p r o c e d u r a l description f o r c a r r y i n g o u t the j o b 'as if y o u cared personally a b o u t the outcome'. T h e p r o b l e m - s o l v i n g m o d e l (Fig. 13.1) s h o w s t h e p r o c e s s m o v i n g f r o m . d e t e r m i n a t i o n whether a s t a n d a r d p r o c e d u r e exists t o choosing a definition for the problem. Classical problem-solving focuses very heavily o n p r o v i d i n g a definition f o r

35
Does a problem exist?

Refer back to check for existence of gap

Is the answer pre-structured?

Refer to procedure and institute 'programmed' action

Are definitions acceptable?

Analysis

Is the one definition acceptable?

Synthesis

Solution acceptable?

Action

1 Figure 13.1 Systematic problem-salving model the problem - indeed, it is often stated that 'if you can define the problem you are working with, you are half-way t o a solution'. The definition must include the statement of the gap between the two states: actual/perceived situation and desired/ expected situation. Without these two, the problem is said to be 'unbounded'. Once

Problem-solving and decision-making I 321

t h e p r o b l e m h a s b e e n defined in this way, the process c a n m o v e o n t o the n e x t stage - the c o n s t r u c t i o n of v a r i o u s alternatives. A t this p o i n t t h e process leaves t h e a n a lysis of t h e p r o b l e m , at l e a s t t e m p o r a r i l y , a n d m o v e s t o t h e s y n t h e s i s p h a s e . T h i s t r a n s i t i o n involves the first m a j o r piece of decision-making. T h e logic of t h e process is f a i r l y simple a t t h i s p o i n t - t h e r e n e e d s t o be a decision m a d e only if t h e r e is a choice of definitions or solutions. W h e r e only o n e exists t h e implications need t o be c o n s i d e r e d , b u t w i t h o u t w a s t i n g time o n non-decisions. I n C h a p t e r 1 0 t h e e x t r e m e s of m a n a g e m e n t style w e r e identifed a s 'coercive' a n d 'cooperative'. T h e n a t u r e s of t h e d e c i s i o n - m a k i n g p r o c e s s e s a r e different. F o r t h e f o r m e r , t h e p r o j e c t m a n a g e r w o u l d be the key decision-maker. In t h e latter, m a n y of t h e decisions w o u l d be devolved, either t o the individual w i t h the m o s t k n o w l e d g e o r responsibility f o r this p a r t of the p r o j e c t o r t o the g r o u p a s a whole. T h i s d e v o l u t i o n r e m o v e s a large p a r t of t h e d e c i s i o n - m a k i n g role of t h e m a n a g e r . P a r t of the process of devolution involves seeking ideas f r o m others. This ensures t h a t the set of possible solutions can bridge the p r o b l e m gap - a n d includes 'brainstorming'.

Brainstorming T a k i n g a g r o u p o u t of t h e i r n o r m a l w o r k s i t u a t i o n t o p o n d e r a p r o b l e m c a n be immensely beneficial t o b o t h the o r g a n i s a t i o n a n d t h e g r o u p . T h e d y n a m i c s of t h e b r a i n s t o r m i n g p r o c e s s are a i d e d by a d h e r e n c e t o a f e w rules: •

p r o v i d e a basic s t r u c t u r e t o t h e t a s k of d e c i s i o n - m a k i n g - g r o u p s a r e generally very b a d a t l o o k i n g f o r s t r u c t u r e o r logic in decisions;

•

t h e benefit is f r o m t h e e x t r a c t i o n a n d c o m b i n a t i o n of ideas f r o m a variety of p e o -

ple - t h e o b j e c t of the exercise is t h e r e f o r e t o facilitate this; • give p e o p l e t h e o p p o r t u n i t y t o d o s o m e p r e - t h i n k i n g o n t h e p r o b l e m - t h e s u b c o n s c i o u s m i n d h a s a n e n o r m o u s capacity a n d c a n p r o v i d e s o l u t i o n s w i t h o u t t h e i n p u t of c o n s c i o u s e f f o r t ; • a t t h e s t a r t of t h e m e e t i n g an ice-breaking exercise will h e l p p e o p l e t o relax a n d p r o v i d e a 'safe e n v i r o n m e n t ' f o r the generation of ideas; • •

• •

all ideas m u s t be w r i t t e n d o w n - use w h i t e b o a r d s a n d 3 M ' s P o s t - I t n o t e s , f o r example; express ideas as t h e p a r t i c i p a n t s state t h e m - p a r a p h r a s i n g r e m o v e s the original m e a n i n g a n d a d d s a slant of y o u r o w n . If in d o u b t as t o t h e veracity of the p o i n t b e i n g m a d e , seek clarification; d o n o t allow a n y criticism of ideas p u t f o r w a r d - t h i s will destroy the credibility of t h a t p e r s o n a n d y o u ' w i l l be unlikely t o gain m u c h m o r e f r o m t h e m ; d o n o t p e r m i t one o r a small g r o u p of individuals t o d o m i n a t e t h e p r o c e e d i n g s this will e x c l u d e potentially v a l u a b l e i n p u t f r o m others; s u m m a r i s e a n d record t h e o u t c o m e of t h e b r a i n s t o r m i n g session a n d t h e n circulate it t o all t h o s e c o n c e r n e d - t h e a f t e r - m e e t i n g f e e d b a c k is a f u r t h e r s o u r c e of solutions a n d ideas, a s p e o p l e t h i n k of all the t h i n g s t h a t they w o u l d like t o h a v e c o n t r i b u t e d d u r i n g the session.

D e c i s i o n - m a k i n g a s a process is t h e p e r i o d involving t h e s e e k i n g of a l t e r n a t i v e s t h r o u g h t o the end of the c o m p a r a t i v e e v a l u a t i o n stage. T h e i n p u t s t o this process are:

322 I Ph.Hst? Three - Deliver She project (

• strategic - in order for an organisation to retain coherence the decisions made in the projects that it undertakes need to fit with the overall strategy outlined for the organisation; • fundamental/political - each person brings their own viewpoint to the decisionmaking process. This will range in form from bias (often undeclared) to a forthright statement of personal beliefs; • quantitative modelling; • subconscious elements - obtaining people's legitimate reservations about a decision can be a preventor of 'group-think' provided that an atmosphere can be created in which people feel free to try to elucidate such thoughts. The nature of the decision-making process depends on the system that the decision concerns. In Chapter 4 a basic overview of systems was given which showed the application of the input/output/constraints and mechanisms model to a project system. Further examination of this is needed to determine whether it is: • an open system - having interaction with systems outside through the flows of material or information; • a closed system - being self-sustaining in informational and material terms operating in isolation. It is tempting when considering systems to look for the closed-system model. If this is possible, the modelling process involves defining variables from within the system and then optimising these. In most projects, however, this leads to inappropriate models of behaviour being constructed, as they do not show the dynamic nature of the interchange between the systems and their external environments, i.e. they are open systems. The use of open-system models is not as attractive, however, as by definition they require the variables from external factors to be continuously introduced and the nature of the environment to be dynamic and inherently unstable. This instability is reflected in a tendency for the behaviour of the system to be unpredictable, and hence the need for the risk management practices and robust planning developed in previous chapters. .2

M o d e l l i n g Systems for Decision-making Drucker (1956)states the reasons for poor decision-making as being: • data not properly ordered or structured; • too much time spent developing answers to problems rather than the statement of the problem; • an inability on the part of the decision-makers to consider all the variables/ factors involved; • an inability to evaluate the impact of extraneous factors. The growth of the use of personal computers and the availability of a great range of highly capable software mean that there exists relatively cheap means of processing

aiir

I .

1

large quantities of data. There is little excuse now for the data not to be properly ordered or structured. The ease of preparation of graphs and other graphical techniques should have removed this as a cause. The same argument could also be applied to the third of Drucker's points, as the ability to build more data into decisionmaking models has been greatly enhanced. The second and fourth of the factors are procedurally linked to the decision-making process and are only removed by: • increased awareness of the potential of both of these to affect the process; • focus on the removal of the damaging effects of poor decisions, i.e. make the decisions more robust. There has been a considerable growth in the use of sophisticated models in decisionmaking. The application of scientific models to the solving of management problems has developed into a specialist branch of management known as 'management science' or 'operational research'. The temptation is to view the output of management science analysis as having a high degree of truth, because the mathematical models that are used are very difficult for a lay person to dispute. In reality, management science is one of the tools that can be employed in decision-making, rather than being the totality of the process. The model of the system may take on one of many forms, including:

• • •

•

a descriptive model - using words or graphical means to describe the action or performance of a system, e.g. systemigrams; a geometric model - expressing an object in a mathematical form (asuseeHn computer-aided design systems); a mechanistic model - determining the inputs to and outputs from a system; static predictive - taking a limited picture of the state of a system at a particular point in time and using various mathematical techniques to predict the future performance; a dynamic predictive model - a 'real-time system' which takes a constant review of the inputs to a system, providing the most up-to-date forecast of future performance. Taking a generic view of the modelling process, a model of a system is defined as:

A system which is constructed under controlled conditions, whose behaviour mimics that of another system where it would not be possible for those conditions to be controlled (economicallyor physically). The benefits of using modelling during projects are (see Jennings and Wattam, 1994): • time contraction - it is often possible to speed up events to show the effects of time on a system and use it in the prediction as to what will happen after a period of time, without necessarily waiting that long; what-if - the decision-makers have the option to manipulate a model and determine a range of scenarios based on their own individual predictions of the conditions as to what the external environment for the system will be;

3 2 4 I Phase Three - Deliver the project (do .tl)

• error avoidance/detection - there are many systems that can shadow the decisions made by others and act as a coarse filter for marginal decisions or ones where there has been an error. Such systems are often used both in mechanical design and stock-market trading. In addition: • it is possible to examine the fundamental assumptions on which a model was based; • parameters can be optimised without the need for potentially expensive trial and error with reality; • the sensitivity to external effects can be measured. Modelling involves a cycle of activities as used in the project planning cycle - that is, the model is designed, built, tested and then amended based on the comparison . of the performance of the real system and the model. The model is then updated based on this performance. The process itself involves: • making assumptions about the bebaviour of systems; • simplification of the system parameters; • estimation of the likely values of unrelated variables. Handling Uncertainty in Decision-making

•

•

•

H

H

B

There are two basic paradigms associated with handling uncertainty - the mathematical and the managerial. The research literature on improving mathematical models for handling uncertainty is vast. Most requires the input of an expert statistician to be used effectively. This approach tries to impose a degree of certainty on to the system through treating the causes of the uncertainty. The alternative (managerial perspective) is to provide a basis for handling the effects. As an example, a company is about to launch a new product onto a market in which it has previously operated. It feels that there is a considerable degree of uncertainty as to whether the new product will be a success. There are a number of possible routes open to it: • first, analyse, using the best data available, the possible sales patterns for this product; • second, do rough predictions and spend the rest of the time looking for options as to what will happen given various scenarios - both good and bad. In the former case, the managers are unlikely to have much input to the process by which forecasts are generated, nor faith in the results. In the latter case, the process is visible and the options given market conditions can be evaluated. This also involves setting up frameworks which can be improved on for future product launches - they can review what they decided would happen given a certain set of

I

Problem-solving and decision-making I 335

conditions, t h e n h o w their reaction t o this w o u l d w o r k . T h e first looks at Ihandling t h e cause of a p r o b l e m , the uncertainty inherent w i t h p r o d u c t v o l u m e foncasting, and tries t o remove it. T h e second accepts t h a t variability exists b u t focuses on the task of pre-evaluating various m a n a g e m e n t Strategies given various sets of conditions.

T h e use of mathematical models in decision-making is widespread, ranging f r o m basic s p r e a d s h e e t c a l c u l a t i o n s t o the m o s t a d v a n c e d statistical t e c h n i q u e s . T a b l e 13.1 indicates the most-used techniques, a description of their usage a n d survey results indicating the degree t o w h i c h they are employed w i t h either f r e q u e n t or m o d e r a t e usage in industry ( f r o m Forgionne, 1 9 8 3 ) . Each of these techniques required a diff e r e n t level of m a t h e m a t i c a l skill t o use effectively a n d e a c h would justify a c h a p t e r t o itself.' T h e role of simulation, n e t w o r k analysis a n d decision trees is discussed below. Table 1 3 . 1 The u s e and

of application of a v a r i e t y of mathematical modelling t

in

decision-making

Technique

Description

Utilisation (see note below) (%)

Simulation

Computer modelling of a scenario

87.1

Linear programming

Optimal allocation of restricted resources to maximise or minimise a variable (such as price or cost)

74.2

Network analysis through CPM or PERT

Obtaining the logic of both precedence relationships and time requirements in a project environment through graphical means (see Chapters 4 and 5)

74.2

Queueing theory

Shows how a system reacts when faced with a random (stochastic)customer who demands the services of that system

59.7

Decision trees

Graphical method for describing the flow of decisions depending on the ps a:, i hi i 11 i tn available at each juncture. May be pursued as a statement of possibilities or with statistical analysis

(Not included in thus survey) 60 (estima mi ;

To determine, in a sequential manner, the probability of the occurrence of certain events

(Not included in this survey) 30 (estimated)

processes

Note: Forgionne (1983)shows the percentage of respondents to their survey who indicated frequent or moderate usage of the techniques.

326

Phase Three •••

prefect (do it!)

1 2 3 4 5 6 7 8 9

10 11

Categories of problem

Figure 13.2 Pareto analysis

{3.5

Problem-solving Tools The basic problem-solving tools of the project manager include Pareto analysis and Ishikawalfishbone diagrams.

Pareto analysis Pareto was an 18th-century economist who found that 80 per cent of the wealth of Milan was held by 20 per cent of the people. This 80120 'rule' often recurs - many companies find that 80 per cent of their profits are generated by 20 per cent of their products or services (seeFig. 13.2) or that 20 per cent of their clients provide 80 per cent of their business. The Pareto principle applied to problem-solving means that part of the initial analysis is to discover which 20 per cent of causes are causing 80 per cent of the problems. The effort of the problem-solvers can then be focused on establishing solutions to the major factors. Over time, the 80 per cent of problems has been removed, but the principle is still valid, stated simply - apply effort where it is going to yield the greatest result.

Ish 1 kawa/fish b0 1 e diagrams Thefishbonediagram is a simple graphical technique which can help to structure a problem and guide a team into seeking further information about the nature of the system under consideration. The effect is shown on the right-hand end of Fig. 13.3. The causes are then broken down into categories and these are then further deconto show what contributes to that problem from those categories. The problem of late delivery of software to clients is considered in the example shown in Fig. 13.3. As can be seen, the problem is broken down into four main subject areas - management of the team, specification of the software, the people in the development team, and the hardware on which they are working. Each of these is then broken down further. The predominant cause is shown by highlighting the particular area - in this case it is the changing of the specification during development.'

Problem -solving and decision-making I 32? Management of team

\

Specification of software Incomplete

Reassigned programmers 10 other teams Ambiguous

Employed \ inappropriate mixture of skills and personalities

V " Changed during \ development Software delivered late

i r

Only concerned with their module

"

/

People in team

Changed during development

Provided incomplete documentation at handover

!

/

/

not

meet requirements

Hardware

Figure 13.3 ishikawa/fishbone diagram applied to

delivery problem

Several challenges f r e q u e n t l y emerge d u r i n g t h e problem-solving process: • •

t h e p r o b l e m is c o m p l e x a n d difficult t o structure; p e o p l e e n t e r t h e discussions w i t h solutions in m i n d r a t h e r t h a n t h e analysis of t h e p r o b l e m itself.

T h i s leads either t o s t a g n a t i o n in t h e process d u e t o t h e inability t o h a n d l e t h e c o m plexity o r t o i n a p p r o p r i a t e solutions being given lengthy discussion time. N e i t h e r of these is likely t o p r o m o t e g o o d decision-making. A m o n g t h e problem-solving techn i q u e s t h a t h a v e s o u g h t t o overcome these challenges is c a u s e - e f f e c t - c a u s e a n a l y s i s . T h i s is a p p r o p r i a t e where: •

a trained, literate a n d skilful facilitator is available;

• the group is open to consideration of new problem-solving methods. The objective is to analyse what the group states to be the undesirable effects of the p r o b l e m (the g a p ) t o f i n d t h e r o o t cause o r causes. T h e s e c a n then be systematically a d d r e s s e d , r a t h e r t h a n a t t e n t i o n b e i n g f o c u s e d o n t h e effects. T h i s is a n excellent

way to bound a problem and come up with a detailed description of its nature. The t e c h n i q u e is n o t novel, b u t h a s recently b e e n p o p u l a r i s e d by G o l d r a t t ( 1 9 9 3 ) i n his t r e a t m e n t of it as p a r t of his 'theory o f constraints'. U s e d as a b o v e it c a n be very

3 2 8 I Phase Three - Deliver the project (do itlj

p o w e r f u l . It h a s b e e n f o u n d f r o m e x p e r i e n c e t o be less u s e f u l f o r solving t a c t i c a l p r o b l e m s t h a n f o r strategic ones, as t h e skills a n d r i g o u r of c h e c k i n g t h e logic of t h e system a r e n o t a l w a y s available a t the l o w e r levels of companies. T h e J a p a n e s e use t h e t e c h n i q u e of a s k i n g w h y a p r o b l e m o c c u r s five t i m e s ( t h e five w h y s ) - this gets t o t h e r o o t of the p r o b l e m as they see it, t h o u g h it is likely t o suggest a single r o o t c a u s e r a t h e r t h a n , as o f t e n h a p p e n s , several. T h e p r o c e s s is similar f o r c o n s t r u c t i n g c a u s e - e f f e c t - c a u s e analysis - f o r t h e t o o l t o w o r k , t h e logic h a s t o be p r e s e r v e d in b o t h t h e reality of t h e effects listed ( d o they e x i s t ? ) a n d f o r t h e linking of causes t o effects. T h e t a s k o r d e r s h o u l d be c o m p l e t e d as f o l l o w s . It l o o k s o d d t o s t a r t w i t h but, like t h e c o n s t r u c t i o n of n e t w o r k d i a g r a m s , will b e c o m e c l e a r o n c e y o u h a v e p r a c tised u s i n g it. •

List t h e effects of t h e p r o b l e m y o u a r e tackling - d e v e l o p m e n t p r o j e c t s a r e a l w a y s delivered late, f o r example. T h e s e m u s t all be real entities, i.e. it m u s t be a g r e e d t h a t these d o e x i s t as s t a t e m e n t s in their o w n right. • Start w i t h this as o n e b u b b l e in t h e m i d d l e of a page (seeFig. 13.4). • Select a n o t h e r of t h e e f f e c t s a n d s h o w h o w t h i s r e l a t e s t o t h e first - e i t h e r as a cause o r an effect. S h o w the result as in Fig. 13.5. T h i s s h o u l d t h e n be r e a d as: IF A T H E N B, e.g. IF [it r a i n s t o m o r r o w ] T H E N [we will n o t be a b l e t o c o m p l e t e t h e site testing]. Select o t h e r effects a n d build these r o u n d the first t w o . M a n y will be interlinked, t h o u g h a t first sight they a p p e a r e d unrelated. G o as f a r as y o u can, a g a i n e a c h time c h e c k i n g the links y o u h a v e m a d e t o e n s u r e t h a t t h e logic is f o l l o w e d . • W h e r e o n e cause has a n u m b e r of effects, this should be d r a w n as in Fig. 13.6. • W h e r e t h e r e is m o r e t h a n o n e c a u s e l i n k e d t o a n effect, t h i s s h o u l d be as Fig. 13.7, if t h e r e is d e p e n d e n c y o n b o t h of t h e m , i.e. IF [A] A N D [B] T H E N [C], If the d e p e n d e n c y is o n either [A] O R [Bj f o r [C] t o exist, this is d r a w n w i t h o u t the ' b a n a n a ' linking t h e two.

Figure 13.4

figure 13,5

IF Figure 13.7

Problem-solving and decision-making I 3 2 9

I t is o f t e n n e c e s s a r y d u r i n g t h e c o u r s e o f c o n s t r u c t i n g t h e d i a g r a m s b o t h t o a m e n d t h e e n t i t i e s a n d t o a d d o t h e r s , e . g . in t h e e x a m p l e t h a t f o l l o w s t h e l i n k b e t w e e n [doesn't a l l o c a t e t i m e well] a n d [ p e r m a n e n t l y tired] is n o t entirely logical. T h e a d d i t i o n a l e n t i t y [goes t o b e d late] w a s a d d e d t o k e e p t h e l o g i c f l o w . I t w a s o b v i o u s l y n e c e s s a r y t o c h e c k , as b e f o r e , t h a t t h i s e n t i t y w a s real. T h e e x a m p l e s h o w s h o w a p r o b l e m c o n c e r n i n g t h e p o o r p e r f o r m a n c e of a p e r s o n w a s analysed. T h e limited set of e f f e c t s were listed as: [Bill's p e r f o r m a n c e a t w o r k is p o o r ] [He w o r k s slower] [He h a s a b a d attitude] [He is o f t e n late] [He is p e r m a n e n t l y t i r e d a t w o r k ] [He a p p e a r s m o r e i n t e r e s t e d in fishing] [ H e d o e s n o t allocate his t i m e well] T h e s e a r e t h e n f o r m e d i n t o t h e d i a g r a m s h o w n i n Fig. 1 3 . 8 . T h e a d d i t i o n a l entities a n d l o g i c links a r e a m a t t e r of o p i n i o n t o s o m e d e g r e e . A f u r t h e r e x a m p l e o f h o w t h i s t e c h n i q u e c a n be u s e d t o s t r u c t u r e p r o b l e m s is i n c l u d e d a t t h e e n d of this chapter.J

his time well

Figure 13.8

35
Figure 13.9 Decision t r e e s (Source: Greenwood, 1969)

13.7

Decision Trees A t e c h n i q u e similar in f o r m a t t o t h e c a u s e - e f f e c t - c a u s e a n a l y s i s , d e c i s i o n t r e e s c a n b e t r e a t e d a t a s i m p l e q u a l i t a t i v e level o r b y d e t a i l e d c o n s i d e r a t i o n t h r o u g h t h e a d d i t i o n of p r o b a b i l i t i e s / d i s t r i b u t i o n s t o e a c h of t h e events. A basic f o r m a t f o r c o n s t r u c t i n g d e c i s i o n t r e e s is s h o w n in Fig. 13.9. T h e d e c i s i o n p o i n t s a r e s h o w n as s q u a r e s w h i l e possible o u t c o m e s a r e s h o w n a s circles. T h e possibilities a n d i m p l i c a t i o n s of d e c i s i o n s a r e t h e r e f o r e clearly identified p r o v i d e d t h a t all t h e d e c i s i o n p o i n t s a r e s h o w n . T h e q u a l i t a t i v e t r e a t m e n t of t h e s t r u c t u r e h a s m e r i t in its s i m p l i c i t y a n d s p e e d of c o n s t r u c t i o n . F u r t h e r a n a l y s i s of t h e p r o b a b i l i t i e s of t h e c h a n c e e v e n t s o c c u r r i n g c a n be m a d e , p r o v i d i n g a m e a n s f o r assessing t h e l i k e l i h o o d of n e e d i n g c o n t i n g e n c y plans. T h e use of ' e x p e c t e d v a l u e ' m e a s u r e m e n t s c a n be b o t h d e r i v e d f r o m a n d a p p l i e d t o t h i s t o o l . T h e likelihood of t h e o u t c o m e of a n e v e n t is assessed, a n d t h e c o s t / b e n e f i t in m o n e t a r y t e r m s c a l c u l a t e d b a s e d o n t h i s o u t c o m e . T h e e x p e c t e d value of t h e b r a n c h e s c a n t h e n be c a l c u l a t e d f r o m t h e s u m of t h e s u b s e q u e n t e x p e c t e d values.

Example A d e c i s i o n h a s t o be m a d e o n w h e t h e r t o f u n d p r o j e c t X o r p r o j e c t Y. E a c h h a s t w o p o s s i b l e o u t c o m e s . F o r X , it h a s a 7 5 p e r c e n t c h a n c e of yielding £ 1 0 0 0 0 0 b u t a 2 5 p e r c e n t c h a n c e of yielding o n l y £ 2 0 0 0 0 . F o r Y , it h a s a 5 0 p e r c e n t c h a n c e of yielding £ 2 0 0 0 0 0 a n d a 5 0 p e r c e n t c h a n c e t h a t t h e r e will be n o yield. T h e d e c i s i o n t r e e in Fig. 13.10 illustrates t h e p r o b l e m . T h e f i n a n c i a l d e c i s i o n is b a s e d o n t h e s u m of t h e e x p e c t e d v a l u e s of t h e y i e l d s of e a c h b r a n c h of t h e decision t r e e :

For project X - expected value = {0.75 x 1.00 000) 4- (0.25 x 20 000) = 80 <>1 H t r p r o j e c t y - expected value = (0.5 x 200 000} + ( 0 . 5 x 0 ! = 100 000.

Probietn-sut vin g and decision-making 1 331 £100 0 0 0

£20 000

£200 000

£0

Figure 13.10

The a s s u m p t i o n is t h a t w e w i s h t o maxirjiise t h e yield, t h e r e f o r e p r o j e c t Y s h o u l d be pursued. T h i s m e t h o d is attractive in t h a t n: U .ively c o m p l e x m o d e l s c a n be c o n s t r u c t e d a n d evaluated quickly. T h e figures ior ^rnlxibi'i.n: •-» a n d values of return a r e b o t h a m a t t e r of p r e d i c t i o n , so t h e oiuioivif will he doren 11 tried by t h e quality of t h e d a t a w i t h w h i c h t h e m o d e l is provided.

13.8

Simple Decision Frameworks

E

M

; Si •

.• : • - I

| ffll » i fflg 1 11 »

M a n y c o m p l e x decisions are best m a d e if t h e y c a n be b r o k e n d o w n i n t o t h e desirable elements of the o u t c o m e of t h a t decision. T e c h n i q u e s f o r a i d i n g in this process include t h e use of attribute analysis a n d force-field analysis. A t t r i b u t e analysis involves breaking d o w n the decision i n t o a set of desirable o u t comes. T h e s e a r e t h e n placed alongside t h e choices in the decision process a n d rated accordingly. F o r example, a c o m p a n y wishes t o choose a supplier f o r a project. T h e r e are five alternative suppliers (A t o E) w h i c h are a r r a n g e d a c r o s s the t o p of t h e table, as s h o w n in T a b l e 13.2. T h e desirable o u t c o m e s are a r r a n g e d d o w n t h e t a b l e ( k n o w l e d g e a n d e x p e r i e n c e , r e p u t a t i o n , etc.). T h e m a n a g e r of t h e t e a m c a n t h e n rate t h e i n d i v i d u a l suppliers o n t h e i r perception of h o w t h e y will p e r f o r m o n each of t h o s e outcomes/attributes. T h e rating is given o u t of t e n , a n d t h e n totalled f o r each supplier. T h i s f o r m of a t t r i b u t e a n a l y s i s a s s u m e s t h a t e a c h of t h e a t t r i b u t e s is o f e q u a l i m p o r t a n c e . W h e r e o n e is c o n s i d e r a b l y more i m p o r t a n t t h a n a n o t h e r (e.g. reliability of delivery t i m e s m a y be vital if t h i s is a critical p a t h activity), it c a n be g i v e n a n increased weighting - m a k i n g the score on t of 30, say, f o r t h a t attribute. The totals are viewed in the s a m e w a y as before. This is clearly a fairly a r b i t r a r y m e a n s of arriving at t h e decision, h o w e v e r it is simple t o c o n s t r u c t a n d a l l o w s a degree of traceability b a c k t o h o w a d e c i s i o n w a s m a d e . It a l s o e n a b l e s p e o p l e t o h a v e a d i s c u s s i o n o n each of the attributes a n d c o m e u p w i t h ^mik- relatively objective m e a s u r e .

3 3 2 I Phase •.;••:•- Deliver the project (do it!)

Table 13,2

Supplier selection using unweighted attributes

Attribute

A

Knowledge and experience Reputation Prone to strikes/bankruptcy Significance cf their support Design appreciation and conformance QA system Defectsand warranty claims to date Reliability cf delivery times Cost control Service level Total

60

65

75

85

90

where 1 =very bad, 10 =excellent

Time Fear of losing Short-term career New view Discuss issues Long-term career Desire t o do it

~3

-2

-1

+1

*2

I

L

+3

+4

+5

Figure 13.11 Force-field a n a l y s i s o n s t a n d i n g f o r e l e c t i o n

Force-field analysis examines the strengths of different influences on a decision. This is best illustrated through the following example (see Fig. 13.11). The decision to stand for election to a representative body (student's union council, parish or town council, club committee, etc.) has a number of implications. First, the time input to get elected may be substantial and the fear of losing the election significant. There is an opportunity cost - other work has to be put off until after the project is complete (whichgenerally proves to be a poor career move, at least in the short term). There are benefits, such as the requirement to take a new view on a subject and to discuss issues that affect your life. It may improve your CV and career prospects. A major consideration is also whether you want to be elected. These influences can then be rated on a 0 - 5 scale as being positive (stand for election) or negative (find something better to do). The influences with some numbers assigned are shown in Fig. 13.11. As can be seen by summing the positive (+12) and negative influences ( - 9 ) a n d subtracting the negative from the positive, the decision was positive.

Prohiern-solvingand decision-making ! 3 3 3

13.9

Decision-support Systems T h e p r i n c i p l e w h i c h d e c i s i o n - s u p p o r t sy s t e m s e m b r a c e is t h a t t h e r e is s u f f i c i e n t k n o w l e d g e existing f o r t h e s u b j e c t t o b e c o n s i d e r e d c o m p l e x , a n d t h e r e f o r e c a n be b e t t e r interpreted t h r o u g h t h e abilities of c o m p u t e r s t o deal w i t h large a m o u n t s o f i n f o r m a t i o n . T h e k n o w l e d g e m u s t exist w i t h i n t h e s y s t e m , a n d t h i s is p r o v i d e d t h r o u g h t h e c o n t r i b u t i o n of experts in t h e relevant subjects. T h e m o s t b a s i c f o r m o f d e c i s i o n - s u p p o r t s y s t e m is a d a t a b a s e . T h e d a t a is s t r u c t u r e d in 'fields' w h i c h t h e d a t a b a s e system c a n m a n i p u l a t e a n d s t r u c t u r e a s r e q u i r e d . O n e e x a m p l e is t h e d a t a b a s e of p o i s o n s h e l d a t L l a n d o u g h H o s p i t a l in C a r d i f f - t h e e f f e c t s o f t h e p o i s o n , a n d irs a n t i d o t e o r :.sppr<:.[iri:\'.v (rearm cut, are held o n a central c o m p u t e r decision o n t h e ".ork by the vrenfing docror. Anorhi:;- use the i n t ' t r n a f i o r : on t h a t datab: is u> t r a c k back f r o m t h e s y m p t o m s t o t h e n a t u r e of the poison. A f u r t h e r d e v e l o p m e n t of t h e d a t a b a s e is t h e e x p e r t system - otherwise k n o w n as artificial intelligence. T h e e x p e r t system takes t h e e x p e r t k n o w l e d g e , usualh gained f r o m a n i n d i v i d u a l o r a n u m b e r of individuals o v e r a period o f timie. Curtis ( 1 9 9 5 )

An expert system typically: • incorporates expert knowledge in a particular subject area, usually by storing and representing this as rules or other representative forms (knowledge base); • separates the general knowledge from the details of a particular case under consideration to which the knowledge base is applied (particular context); • clearly distinguishes the knowledge from the mechanism of reasoning (inference engine); • possesses an interactive user interface for providing explan ustifkations and questions to the user; provides, as its output, advice or decisions in the area of expertise. T h e logic IF [A] T H E N [B] is simple f o r c o m p u t e r s t o handle. Decision-taking f a r m o r e o f t e n i n v o l v e s t h e logic I F t o a c e r t a i n e x t e n t [A] T H E N t o a certain e x t e n t [B], T h i s is k n o w n a s ' f u z z y logic' a n d n e e d s f u r t h e r e x a m i n a t i o n b e f o r e it is a m e n a b l e t o c o m p u t e r analysis. T h i s system o f rules c a n be m o d e l l e d directly as a s y s t e m , a l t h o u g h f o r p e o p l e w h o d o n o t h a v e this level of p r o g r a m m i g skills, t h e use of a n e x p e r t system 'shell' is likely t o be t h e m o s t beneficial.

13,10 The Importance of the Follow-up Actions M a n y p o o r decisions have been 'rescued'' by t h e w o r k t h a t f o l l o w e d . T h i s process will be aided t h e m o r e p e o p l e h a v e 'bou Êht in' t o t h a t decision. G a i n i n g t h a t kind of c o m m i t m e n t will o n l y w o r k if t h e ;:: vic of m a n a g e m e n t is p a r t i c i p a t i v e c o n f r o n t a t i o n a l m a n a g e m e n t will f o c u s t b a c k o n t o the decision-maker.

334

Phase Three

Deliver

. pmject (do it I)

This can be of benefit if the manager wishes to insulate the team from external elements.

Example Reebok launches ' t h e pump" Reebok launched its 'pump' range of sports shoes at a show where it had not planned to do so and despite its marketing plan being incomplete. The pump offered the wearer new levels of comfort due to part of the shoe being inflatable - it would then mould exactly to the contours of the wearer's foot. The case is an excellent example of opportunism - the company's chief executive officer was attending a European trade show and saw that there was little by way of innovative new products being presented. He made the decision to launch the product at that show, without waiting for the normal cycle of development to be completed. This was a bold move which gained the company a great deal of positive publicity - the follow-up action, however, made the decision a good one. The company was then mobilised to carry through the implications of this decision and appears to have managed to do so well. Had the company itself not been so capable, the decision, in retrospect, would have been a very poor one.

13.11 Relevant Areas of the Bodies of Knowledge While both bodies of knowledge refer to decision-making, neither actively recognises the need for the problem-solving process. To some extent, this is dealt with procedurally through the risk and quality management processes that have been described elsewhere, but there are no specific sections on either of these topics.

13-12

Summary Problems will arise during projects - that is one certainty that you can rely on! As for other project issues, some structure to the thinking and some tools for the process greatly help the project manager in managing towards a successful conclusion. The first stage in this is to define the issue. We define a problem as the gap between perceptions of an actual situation and that of the expected or required situation. Furthermore, problems may be categorised according to the required reaction time and the nature of the response required - for instance, responses may be predetermined through proceduresor reasoned through the problem-solvingcycle. To assist the process, a model may be constructed either qualitatively (through descriptive modelling) or quantitatively (through mathematical modelling) to provide a representation of reality which can be tested under controlled conditions. As we saw during the discussion of risk in Chapter 8, uncertainty can be handled either through statistical means, calculating the most likely set of events, or through managerial action to make the system more robust to the effects of uncertainty. Various mathematical tools can be employed to take away the need for subjective decision-making in some areas, while providing decision support in others. Other methods to help in the problem-solving process include:

Problem-solving and

•- s

on-making i 335

Ishikawa/fishbone d i a g r a m s provide a graphical m e t h o d f o r structuring problems; P a r e t o analysis provides a guide as t o w ^ i c h p r o b l e m s t o t a c k l e first. C a u s e - e f f e c t - c a u s e analysis provides a Graphical t e c h n i q u e f o r finding the 'root' of a p r o b l e m t h r o u g h structuring t h e logjc of t h e situation. Decision trees w h e r e t h e route t h a t actions t a k e c a n be graphically e v a l u a t e d a n d probabilities t h e n assigned t o e a c h r o u t e if required. D e c i s i o n - s u p p o r t systems are normally c o m p u t e r - b a s e d and allow e x p e r t k n o w ledge t o be expressed a s a series of rules w h i c h are t h e n interpreted by the system. These d o n o t eliminate t h e need f o r gut-feel a n d experience, however - indeed t h e y s h o u l d be better at c a p t u r i n g these elements. T | |ey have a vital role t o play 1 n decisionm a k i n g _ a n a r e a t h a t is c e n t r a l t o t h e d i s c u s s i o n of ' w h a t m a n a g e r s d o ' . T h e m a n a g e m e n t p r o d u c t m u s t be p a r t of the p r i c e s s of c o n t i n u a l i m p r o v e m e n t t o o .

use of cause-effect-cause analysis A b o a r d m e e t i n g w a s held a t t h e M i g h t y Se ig C o m p a n y . T h e r e w a s g r o w i n g c o n cern a b o u t t h e competitive environment which the c o m p a n y w a s operating. Board members were asked to state what tJLy felt t h e m a j o r p r o b l e m s were. T h e y highlighted eight issues. T h e s e were: 1 2 3 4 5 6 7 8

Existing m a r k e t is in decline. Sales people d o n o t sell effectively. W e have insufficient sales s u p p o r t material. W e have a n i n a d e q u a t e e n t r y barrier ( t o the m a r k e r s in w h i c h w e operate). W e are c o n f u s e d as t o w h i c h p r o d u c t s w e s h o u l d sell. W e a r e u n a b l e t o exploit n e w markets. W e d o n o t really u n d e r s t a n d o u r m a r k e t e n v i r o n m e n t . T h e r e is increasing c o m p e t i t i o n .

T h e s e p r o b l e m s o r 'undesirable ei'tVcrs" ( U O f o j provided the ba;,ii tor c o n s t r i c t i n g t h e logic d i a g r a m (the 'current i n t r o d u c e d t o t h e tree t o shows t h a t there are

sales volume), but tb/U there is one major cause over which the company has sosne c o n t r o l - U D E n o . 7 [we d o n o t reaLv uridsrrstvmd out market I'm--, finding provided In o r d e r t o start t o resolve t h e issues faced., die same form of knjic d i a g r a m m i n g w a s used. T h e result: t h e ' f u t u r e t o r e s u l t i n a p a r t i c u l a r desired v o l u m e g r o w s ) . T h i s is

shown in Fig. 13.13. T h e m e t h o d s h o w n allowed a way, a n d initiatives p u t in place place. H o w these w o u l d c o n t r i b u t e t o rin: d ^ i i m i (

in a s y s t e m a t i c t h e processes t h a t w e r e t a k i n g rive could t h e n be m a p p e d .

To increase profit we must increase sales Price becomes an issue New markets require different design, etc. to existing market Some competitors t a n reduce price

Some may have lower costs

Some may not offer same level of service

Market is financially attractive

Open market

/ No loyalty

\ No tariffs

Figure 43.12 Current reality tree

Do not really understand competitive environment

Management concentrate on management not CYA

t

Meet budget Wfe learn (more) about the marketplace

Management set effective directionlcontrol

- — t — . Sales volume grows

Î

Sales teams better exploit new opportunities whilst

\ \

\

defending existing accounts

Management can manage better Management able to teach salesmen to

\

Salesmen learn to sell (better) from managers

Management will want to manage (better)

Salesmen are (more) motivated to learn Salesmen have spare time

t

Management are (better) trained

Selling time is more bcused

t Management have spare time

Figure 13.13 Future reality tree - selling effectiveness

We understand the marketplace

->- We target prospects'off-line'

r

Case discussion 1 What is the benefit of constructing a 'current reality tree'? 2 Why is it necessary to insert additional elements into the tree? 3 Why would focusing on 'selling effectiveness' lead to a better understandingof the market? 4 Evaluate the 'future reality tree' - does it resolve the UDEs listed at the start of the exercise?

problem-solving cycle programmed actions bounding a problem brainstorming management science/operational research what-if analysis Pareto analysis

diagrams cause-effect-cause analysis decision frameworks decision trees attribute analysis force-field analysis decision-supportsystems expert intelligence

1 Discuss the statement made by Price in the introduction to this chapter that 'Man is a risk-addictedanimal'. 2 How might the tools outlined in this chapter reduce the risk in decision-making? 3 Show the advantages of having preprogrammed actions: (a) as part of a health and safety policy - for example, in the event of a fire (b) in the handling of client enquiries (c) for the installation of new work procedures. 4 Show the effect of time on problem-solving and give practical examples of each of the different timescales. 5 What is the role of'brainstorming' and how might it be used to greatest effect? 6 What are the major inputs to the decision-making process and how might these be best harnessed to ensure that the decision-making process is effective? 7 What are the basic forms of systems model? Give an example of each and their role in a project environment. 8 As a project manager in a development activity for a new range of computer software, discuss how uncertainty may be handled.

9 Y o u a r e t h e c o o r d i n a t o r of a m o d eirately c o m p l e x p r o j e c t . T h e f o l l o w i n g p r o b l e m s h a v e a r i s e n d u r i n g t h e e x e c u t i o n p h a s e of p r e v i o u s p r o j e c t s w i t h t h e r e s u l t i n g d e l a y s a s s h o w n . Use a n ap p r o p r i a t e t e c h n i q u e t o s h o w w h i c h of the problems you w o u l d f o c u s y o u r ttention o n a n d show the results o f y o u r analysis g r a p h i c a l l y .

Problem A Late delivery f r o m suppliers B L a s t - m i n u t e redesign of a s s e m b l y d ^ e t o c u s t o m e r c h a n g e of s p e c i f i c a t i o n C S u p p l i e r s fail t o m e e t t h e q u a l i t y levels r e q u i r e d in g o o d s supplied D S c h e d u l e did n o t leave e n o u g h t i m e f o r testing E C o m p o n e n t s d i d n o t fit t o g e t h e r w h e n a s s e m b l e d F C u s t o m e r rejected initial trial system G Engineer left team during the proje t H Office m o v e w a s s c h e d u l e d f o r d u r i n g t h e c o m p l e t i o n p h a s e J H a u l i e r s ' firm s a c k e d by c u s t o m e r d u e t o d i s p u t e o v e r delivery t i m e s

Delay (days) 36

7 41 5 6 12 16 5 3

1 0 Select a p r o b l e m w i t h w h i c h y o u h a v e b e e n i n v o l v e d , a n d u s e t h e I s h i k a w a / diagram t o structure the of t h e p r o b l e m . I n d i c a t e w h a t y o u feel t o be t h e biggest c a u s a l f a c t o r .

11 State t h e s a m e p r o b l e m using c a u s e - e j f e c t - c a u s e analysis, s h o w i n g t h e r e l a t i o n s h i p b e t w e e n t h e v a r i o u s f a c e t s of t h a t e d a b o v e still h o l d ?

problem. Does the root c

o u indic-

1 2 Use a decision-tree m o d e l t o s h o w t h e ffect o n y o u r finances of various decisions r e g a r d i n g t h e choice of a h o l i d a y t h i s u m m e r . 1 3 D i s c u s s t h e role t h a t d e c i s i o n - s u p p o s y s t e m s such a s e x p e r t s y s t e m s will play in t h e d e c i s i o n - m a k i n g of t h e m o d e n | - r o j e c t m a n a g e r 1 4 D i s c u s s t h e benefits of e n s u r i n g t h a t a I ' h a r d ' a n d 'soft' i n f o r m a t i o n is i n c l u d e d in t h e d e c i s i o n - m a k i n g process. 1 5 F o r e c a s t w h a t t h e h o m e of t e n years 1 t i m e will c o n t a i n in t h e w a y of l a b o u r s a v i n g g a d g e t s a n d e n t e r t a i n m e n t . If t h e r e a r e 3 0 m i l l i o n h o m e s in t h e U K by t h i s t i m e , c o n s i d e r h o w m a n y of t h e s e will h a v e t a k e n u p t h i s t e c h n o l o w . Filter t h e s e ideas by c o n s i d e r i n g : (a) the cost-benefit t o the purchaser ( b ) w h e t h e r y o u r v i e w is a f f e c t e d by y o u r e n t h u s i a s m f o r t h e t e c h n o l o g y • ( c ) w h e t h e r t h e r e w o u l d be h a r d statistical e v i d e n c e w h i c h c o u l d b e d r a w n o n t o p r o v e y o u r e s t i m a t e s of t h e likely t a k e - u p of t h e n e w t e c h n o l o g y .

3 4 » • Phase Three

Deliver the pr- •••••• • fdo itO

Anderson, D.R., Sweeney, D.J. and Williams, T.A. (1991)An Introduction to Management Science, 6th edition, West Publishing, St Paul, MN. Bicheno, J. (1998)The Quality 60, Picsie Books, Buckingham. Curtis, G. (1995) Business Information Systems, 2nd edition, Addison-Wesley, Reading, MA, pp. 536-7. Dennis, T.L. and Dennis, L.B. (1991 )Management Science, West Publishing, St Paul, MN. Drucker (1956)Nation's Business, The Chamber of Commerce of the US, April. Forgionne, G. (1983) ' Corporate Management Science Activities: An Update', Interfaces, Vol. 13, No. 3, June. Goldratt, E. ( 1993 )Tbeory of Constraints, North River Press, New York. Greenwood, W.T. (1969) Decision Theory and Information Systems, South Western, pp. 83-104. Jennings, D. and Wattam, S. (1994)Decision-Making: An Integrated Approach, Pitman Publishing, London. Mizuno, S. (ed.) (1988) Management for Quality Improvement: The 7 New Q C Tools, Productivity Press, New York. Price, F. (1984) Right First Time, Wildwood House, London, p. 66.

Cooke, S. and Slack, N. (1991)Making Management Decisions, 2nd edition, Prentice Hall International, Hemel Hempstead. Goldratt, E. (1995) It's Not Luck, North River Press, New York. Littlechild, S.C. and Shutler, M.F. (eds)(1991) Operations Research in Management, Prentice Hall, Englewood Cliffs, NJ. Rivett, P. (1994) The Craft of Decision Modelling, Wiley, Chichester. Notes 1 For a detailed discussion of linear and integer programming, queueing theory and M a r k o w processes, see, for example, Anderson et al. ( 1 9 9 1 ) a n d Dennis and Dennis (1991). 2 Further problem-solving tools (alsocalled tools of quality control) may be found in Bicheno ( 1 9 9 8 ) a n d Mizuno (1988). 3 For further developments of this technique, see Goldratt (1993).

Once t h e main part of t h e work is completed, it is very t e m p t i n g t o move on rather t h a n ensure t h a t t h e work is c o m p l e t e d and t h e m a x i m u m benefit yielded from it. How t h e last phases of ' check and act on t h e results of t h e checks' are managed w i l l determine t o a large extent t h e views of stakeholders on t h e outcomes as well as set t h e chances for future project success. These final processes carry a n u m b e r of challenges, which t h e project manager wilt have t o address: •

trying t o make t h e review process objective while t a k i n g into account a rich picture of t h e events surrounding project performance; • relating procedural conformance t o project performance: • t h e e s t a b l i s h m e n t of long-term programmes of i m p r o v e m e n t w h i l e being assessed on short-term measures which are predominantly financial; • satisfy a l l t h e relevant stakeholder groups, while looking ahead to the next project. Such challenges are not easily resolved, particularly where weak guidance is provided from senior management. These same people may be demanding ever greater performance w i t h o u t providing t h e means t o improve. As w i l l be shown, IF organisat i o n s want t o take t h e challenge and significantly improve their project processes, THEN they w i l l have t o d e d i c a t e some resources i n t h e short t e r m t o this. In t h e longer term, it w i l l be d e m o n s t r a t e d t h a t t h e i m p r o v e m e n t process becomes selfsustaining, at least i n financial terms. Given t h e poor performance identified during Chapter 1 of t h e majority of projects and project-based firms, t h e potential here for financial benefit in the medium to long term is enormous.

Learning Objectives 14.1 14.2 14.3 14.4 14.5 14.6

Project c o m p l e t i o n and handover Structuring i m p r o v e m e n t activities Learning before d o i n g - t h e role o f external k n o w l e d g e Learning by d o i n g - t he role o f audit a n d review C a r r y i n g o u t reviews Justifying it a l l - evaluate the cost o f quality

:•• I

:• - Develop the process (do ft better next time)

14.7 Relevant areas of the bodies of knowledge 14.8 S u m m a r y Projcct management i n practice: I T all g o e s pear-shaped at VCS Key terms R e v i e w questions a n d further exercises References Further information Notes

By t h e t i m e that you have completed this chapter, you should be able to: * I d e n t i f y the s t e p s required t o c o m p l e t e the project and start t h e final p h a s e ~ t h a i cf process improvement; * Construct the m e c h a n i s m s for process improvement; * Conduct basic reviews of projects using appropriate techniques; Provide a b u s i n e s s c a s e to justify such activity through a n a l y s i n g cost >t quality.

T h e B a n g k o k skyline is littered w i t h u n f i n i s h e d s k y s c r a p e r s . T h e s e b u i l d i n g s l o o k eerie, w i t h t h e i r c o n c r e t e r e i n f o r c i n g b a r s sticking u p i n t o t h e sky. T h e c o n s t r u c t i o n of t h e s e b u i l d i n g s is o v e r - m a n y w i l l h a v e t o b e p u l l e d d o w n . F o r t h e m o m e n t t h e y r e m a i n a p o w e r f u l r e m i n d e r of t h e f i n a n c i a l c r a s h t h a t h a s c a u s e d s o m u c h e c o n o m i c hardship t h r o u g h o u t Asia. These projects were stopped simply because t h e f i r m s b u i l d i n g t h e m w e r e n o t able t o raise t h e necessary c a p i t a l t o c o m p l e t e t h e m . T h e r e a r e m a n y r e a s o n s t h a t w o r k s t o p s o n p r o j e c t s . F o r s o m e , it is b e c a u s e of t h e s u c c e s s f u l c o m p l e t i o n of t h e t a s k . S o m e a r e s t o p p e d by t h e i r s p o n s o r s , d u e t o c h a n g i n g n e e d s o r p o o r p r o j e c t p e r f o r m a n c e , a n d others, as t h e skyline of B a n g k o k t o d a y testifies, d u e t o lack of t h e necessary r e s o u r c e s t o c o n t i n u e . W h e r e p r o j e c t s a r e p r e m a t u r e l y t e r m i n a t e d it is u s u a l f o r t h e staff t o be d i s p e r s e d w i t h n o p r o v i s i o n f o r a r e v i e w , W h e r e p r o j e c t s a r e c o m p l e t e d , t h e r e s h o u l d be n o r e a s o n f o r n o t r e v i e w i n g . H o w e v e r , m a n y f i r m s d o n o t a l l o w staff t i m e t o r e v i e w p r o j e c t activities, p r e f e r r i n g t h e m t o s t a y b u s y a n d s i m p l y c o n t i n u e t o t h e n e x t p r o j e c t . I n C h a p t e r 2, w e identified t h e r e s u l t of t h i s - h e d g e h o g s y n d r o m e . H e r e , m i s t a k e s a r e r e p e a t e d o v e r a n d o v e r a g a i n , a n d t h e r a t e of i m p r o v e m e n t of s u c h o r g a n i s a t i o n s is p o o r o r n o n - e x i s t e n t . F o r t h e i n d i v i d u a l s i n v o l v e d t h i s p r e s e n t s m u c h f r u s t r a t i o n . A s w e will see i n s e c t i o n 14.6, t h i s is a v e r y s h o r t - s i g h t e d v i e w a n d t h e c o s t s of h e d g e h o g s y n d r o m e a r e e n o r m o u s . B e f o r e w e g e t t o t h i s stage, h o w e v e r , t h i s is t h e t i m e w h e n c o m p l e t e r - f i n i s h e r s (see t h e B e l b i n a n a l y s i s in C h a p t e r 9 ) b e c o m e a h i g h l y v a l u a b l e c o m m o d i t y , a n d o t h e r role types t r y t o r u n off" t o s t a r t o n t h e n e x t p r o j e c t ! P r o p e r c o m p l e t i o n of p r o j e c t s r e q u i r e s d i s c i p l i n e . C a r r y i n g o u t a w o r t h w h i l e r e v i e w r e q u i r e s i n v e s t m e n t of t i m e a n d resource. T h i s c h a p t e r will c o n s i d e r b o t h of t h e s e .

Project ro nip let ion and review ! 345

T h e e l e m e n t s t h a t w i l l r e q u i r e t h e a t t e n t i o n of t h e p r o j e c t m a n a g e r d u r i n g this p h a s e are: e n s u r i n g there is a n incentive f o r t h e p r o j e c t t o be finished anti t h a t activities are c o m p l e t e d (all projects); •

e n s u r i n g d o c u m e n t a t i o n of t h e p r o c e s s is p r o v i d e d t o a l l o w r e v i e w , a n d of t h e o u t c o m e t o facilitate a n y f u t u r e s u p p o r t activities (all projects); • closing d o w n the p r o j e c t systems, p a r t i c u l a r l y t h e a c c o u n t i n g s y s t e m s ( p r o j e c t s w h e r e there has been a m e d i u m - h i g h organisational complexity a n d dedicated systems h a v e b e e n used); • c o n s t r u c t i n g the i m m e d i a t e review of activities - p r o v i d i n g a s t a r t i n g p o i n t f o r all i m p r o v e m e n t activities (all projects); •

a p p r a i s a l a n d relocation of staff w h o h a v e c o m p l e t e d their activities a n d disposal

•

of assets t h a t a r e s u r p l u s t o r e q u i r e m e n t s ( s o m e projects); e n s u r i n g t h a t all stakeholders are satisfied - sell y o u r a c h i e v e m e n t s a n d m a x i m i s e t h e business benefit f r o m y o u r p r o j e c t (all projects, every time!:!.

Completion T h e s i t u a t i o n t h e p r o j e c t m a n a g e r n e e d s t o a v o i d is w h e r e a p r o j e c t s p e n d s 9 0 per c e n t of its life 9 0 p e r c e n t c o m p l e t e . Finishing the activities so t h a t resources c a n be released f o r o t h e r w o r k a n d m i n i m i s i n g t h e c o s t s i n c u r r e d d u r i n g t h e c l o s e - d o w n p h a s e a r e vital. T h e r e is a t r a d e - o f f t o be c o n s i d e r e d h e r e - h o w m u c h t i m e a n d r e s o u r c e s h o u l d be p u t i n t o t h e c l o s i n g of a c t i v i t i e s ? A t o n e e x t r e m e , t h e r e is a t e m p t a t i o n t o a b a n d o n the activities in a great r u s h t o m o v e o n t o o t h e r tasks. Such action risks u n d u e haste a n d r e m o v e s t h e possibilities f o r m a x i m i s i n g t h e benefit of the review, f o r e x a m p l e . A t t h e other, a c l o s e - d o w n process c a n b e c o m e d r a w n out, n o t h i n g is really f i n i s h e d , a n d t h e o v e r h e a d costs of t h e activities r e m a i n i n g k e e p escalating. W h i c h a p p r o a c h is t a k e n o f t e n d e p e n d s o n t h e success o r o r h e r w i s e of the p r o j e c t - it is clearly m u c h m o r e desirable t o spend time closing a p r o j e c t w h i c h is a n a p p a r e n t success, w h e r e a s a disaster is m o r e likely t o be rapidly a b a n d o n e d . As already discussed, t h e r e v i e w process is equally i m p o r t a n t in either case. as a r e t h e o t h e r activities listed above. In t h e kind of o r g a n i s a t i o n w h e r e p e o p l e a r e b r o u g h t in o n c o n t r a c t f o r the d u r a t i o n of t h a t p r o j e c t alone a n d are p a i d a time r a t e ( a c c o r d i n g t o t h e a m o u n t of time t h e y s p e n d w o r k i n g o n it), t h e r e is little i n c e n t i v e f o r t h e w o r k t o be f i n i s h e d o n time. Indeed, it is in their interests t o ensure t h a t t h i n g s g o mildly w r o n g a n d result in the p l a n of w o r k being e x t e n d e d . T h e p r o v i s i o n of some f o r m of b o n u s f o r early c o m p l e t i o n should b e c o n s i d e r e d w h e r e p e r s o n n e l h a v e a n active i n p u t t o t h e result. C o n t r a c t o r s a n d s u b - c o n t r a c t o r s s h o u l d be t r e a t e d as suppliers in this respect a n d be eligible f o r d e v e l o p m e n t e f f o r t ( a s d i s c u s s e d in C h a p t e r 1 2 ) . In addition, as a n y o n e w h o h a s h a d t r a d e s p e o p l e w o r k i n g a t their h o u s e will k n o w , y o u f i n d yourself saying, 'While you're here, will y o u t a k e a q u i c k l o o k a t t h e l e a k / s q u e a k y b o a r d etc.?' T h i s a d d i t i o n t o t h e t a s k list c a n be a serious a d d i t i o n a l cost, a n d o n e t h a t c a n d i s r u p t significantly, the m a i n task. T h a t doesn't m e a n t h a t they should be avoided, j u s t n o t t a k e n as 'free'.

346 I Phase-fou? - Develop the piccess ida il better next time)

Documentation T h i s s u b j e c t usually elicits g r o a n s f r o m p r a c t i t i o n e r s , f o r w h o m t h i s is t h e least e x c i t i n g p a r t of t h e project. P r o j e c t p e r s o n n e l w h o a r e used t o b e i n g very goal f o c u s e d often have great difficulty getting t o grips w i t h this task, and the quality of d o c u m e n t a t i o n is o f t e n c o m p r o m i s e d as a result. T h e p u r p o s e of p r o v i d i n g d o c u m e n t a t i o n is: •

t o p r o v i d e evidence t h a t the p r o j e c t h a s been c o m p l e t e d in a p r o p e r m a n n e r increasingly i m p o r t a n t given the r e q u i r e m e n t s of I S O 9 0 0 0 , t o assist a v o i d a n c e of f u t u r e l i t i g a t i o n a n d t o provide t h e s t a r t i n g p o i n t f o r review. Section 14.6 d e m o n s t r a t e s t h e i m p o r t a n c e of t h e quality of t h e i n f o r m a t i o n t h a t is p r o v i d e d d u r i n g this phase;

•

t o give the c u s t o m e r of the o u t p u t of the project guidance o n the o p e r a t i o n a n d maintenance of the item provided - particularly so in the case of a piece of software, a building or a piece of machinery; t o a l l o w any f u t u r e w o r k o n a similar p r o j e c t t o have a g o o d s t a r t i n g p o i n t k n o w l e d g e of w h a t w a s done in this project.

In a d d i t i o n the f o l l o w i n g should be noted: 1 If it is left t o the e n d t o write d o c u m e n t a t i o n m u c h i n f o r m a t i o n c a n be lost, as staff are a l r e a d y reassigned t o o t h e r activities a n d the t a s k gets left t o c e r t a i n individuals t o complete. As noted above, this t a s k is one t h a t m o s t people dread. I n c l u d i n g t h i s activity a s p a r t of the w o r k b r e a k d o w n s t r u c t u r e is vital, r a t h e r t h a n h o p i n g t h a t it will be carried o u t as a n u n a c c o u n t e d e x t r a . W h e r e time is short, this activity s h o u l d n o t be r e g a r d e d as t h e o n e t h a t c a n be 'squeezed' t o provide slack f o r o t h e r hard-pressed activities o r this will immediately signal t h a t it is less i m p o r t a n t t h a n 'the real w o r k of t h e project'. 2 T h e n a t u r e of the d o c u m e n t a t i o n includes the f o r m a l items presented t h r o u g h o u t t h e c o u r s e of t h e w o r k a n d t h e c o m m u n i c a t i o n d o c u m e n t s a n d n o t e s of individuals. Individuals need t o k e e p their o w n l o g b o o k s of events, discussions and agreements. T h e professional institutes require these t o be kept during training as the basis f o r assessment of training p r o g r a m m e s . Their long-term use is growing m o r e i m p o r t a n t as the issue of p r o f e s s i o n a l liability b e c o m e s m o r e p e r t i n e n t . S u c h a d o c u m e n t m i g h t p r o v i d e v a l u a b l e m a t e r i a l s h o u l d a n i n d i v i d u a l be implicated in an inquiry involving professional negligence. 3 Formal d o c u m e n t a t i o n includes all project correspondence - including contracts, permissions, letters a n d m e m o r a n d a . All d o c u m e n t a t i o n w i t h legal ramifications m u s t be kept a n d the length of time they are t o be k e p t f o r determined (the life of t h e p r o d u c t or 7 years, whichever is the longer is used by m a n y o r g a n i s a t i o n s f o r c o m p l e x projects). A policy should be established for electronic d o c u m e n t s a n d e-mails as t o w h e t h e r these need t o be stored in h a r d - c o p y f o r m ( b e c o m i n g less likely) and w h e t h e r the electronic d a t a can be consigned to a d a t a warehouse. In this respect, ISO 9 0 0 1 states the requirement f o r record storage: t h a t the organisation should provide a filing system f o r project data, including a guide as t o the w h e r e a b o u t s of any item of information.

Projectroniplet ion and review ! 347

T h e close-down activities should f o r m p a r t of the detailed planning. However, it is o f t e n difficult t o k n o w e x a c t l y w h a t will need finishing d u e t o variations in t h e project schedule. S o m e f u r t h e r planning is therefore vital d u r i n g this phase t o ensure t h a t t h e r e is s o m e system t o t h e activities being c a r r i e d o u t a n d t o minimise t h e t e m p t a t i o n f o r p r o j e c t s t o d r i f t on. A m a j o r tool here is checklists - t o p r o v i d e a highly visible m e a n s of e n s u r i n g t h a t t h e f i n i s h i n g t a s k s a r e c a r r Such a checklist is: • •

a n aide-mémoire in a d d i t i o n t o f o r m a l w o r k allocation; evidence t h a t t h e close-down tasks were planned; evidence, w h e n completed, t h a t the tasks were carried out, by w h o m

:

dawn the project systems T h e activity curve in C h a p t e r 2 s h o w s that, in general, the level of activity Falls off as the project nears completion. T h i s is a c c o m p a n i e d by a s l o w d o w n in the spending rate - on b o t h labour and materials. As people leave the project r e a m it m u s t be r e m e m b e r e d that the systems, in particular the accounting and quality systems, are still operational. F o r the a c c o u n t i n g systems, it is likely t h a t p e o p l e will kntow the codes against w h i c h items could be charged. R a t h e r t h a n deplete n e w budgets, there is always the t e m p t a t i o n t o try t o get e x p e n d i t u r e set against o t h e r budgets. In o r d e r t o ensure t h a t costs are n o t r u n u p against project codes, the project m a n a g e r must ensure t h a t f u r t h e r u n a u t h o r i s e d e x p e n d i t u r e is curtailed. T h e r e will, however, be late invoices being received f r o m suppliers a n d possibly overhanging a d m i n i s t r a t i o n activities t h a t will need t o continue t o be charged. These m u s t be paid a n d are one of the r e a s o n s why the financial position a t the end of m a j o r w o r k does n o t always p r o v i d e a g o o d i n d i c a t o r of t h e f i n a n c i a l p e r f o r m a n c e of the p r o j e c t overall. As stated in C h a p t e r 11, assessing the c o m m i t t e d spend of large p r o j e c t s is a c o m p l e x task in itself. A f o r m a l notice of closure is issued in m a n y industries t o inform other staff a n d s u p p o r t systems t h a t there are n o f u r t h e r activities t o be carried o u t or charges t o be made. In contract project activities, the legal t e r m i n a t i o n of activities occurs a t the time w h e n the c u s t o m e r 'signs off' the project. It is o f t e n t e m p t i n g f o r w o r k t o continue a f t e r this h a s o c c u r r e d a n d f o r t h e t e a m t o p r o v i d e t h e c u s t o m e r w i t h Tree' c o n sultancy. M a n y service p r o j e c t s h a v e t h i s e l e m e n t , in p a r t i c u l a r in i n f o r m a t i o n technology. However, n o o r g a n i s a t i o n can a f f o r d t o : • •

cut off the c u s t o m e r completely a t this p o i n t a n d ruin the possibilities f o r f u t u r e business; continue t o provide services f o r w h i c h they d o n o t charge.

In reality, if this 'consultancy' is required o n a n o n g o i n g basis, i r i s likely t o indicate t h a t o t h e r aspects of t h e p r o j e c t e x e c u t i o n w e r e less well m a n a g e d . This c o u l d be in p a r t i c u l a r t h e h a n d o v e r p r o c e s s o r the f a i l u r e of d o c u m e n t a t i o n t o identify solutions t o problems. W h e r e the completion criteria f o r projects are left open, y o u

34®

Phase Four - D e v e l o p s

process (do

better next

are more likely to end up providing further benefits with possibly no hope of obtaining payment for them. Further specifics about the nature of the close-down processes are contained in PRINCE2 (see the Appendix) and the bodies of knowledge.

Conducting immediate project reviews The review system contains key elements, providing further control or corrective actions: • immediate 'post-mortem' on the activities; immediate remedial and improvement action; • long-term audit and review; • strategic and procedural changes. The formal long-term review may prescribe major procedural or strategic changes. The one that is carried out as a completion phase activity is intended to provide rapid feedback on the performance of individuals and systems that the dispersing team members can take away with them. It is the basis for identifying short-term needs, such as procedural changes or changes in skills required by individuals. People need rapid feedback on their own performance - the organisation should provide this in order that: • they know what aspects of their performance should be repeated; • managers can identify training or educational requirements; • the organisation can assess the utility of individuals to future teams. A further role of the post-mortem is to provide a case-history of the project which is then a guide as to the documentation that will be required, over and above that already compiled, for the long-term audit. The assessor or reviewer in this case should be someone who can be brought up to date on the context of the project and the challenges that have been faced - physical, political, environmental, financial and personal. The likely reviewers are the sponsor and the manager, though many believe that the manager could not be expected to be sufficiently objective about the process. Other project managers in the organisation can lead a review, and it is a role that can be well taken by staff from the project office (see Chapter 3)or even an external consultant. One of the tools which is of considerable benefit to short-term improvement is an audit of the management by the team (assumes that the team is managed by an individual rather than being autonomous). Such characteristics as attitude, skills, approachability, openness, ability to delegate authority yet share responsibility, ability to represent the project team to others, and willingness to embrace change, may be assessed. This kind of management questionnaire can demonstrate very clearly that the manager is serious about improving the 'management product' through continuous self-improvement, rather than just preaching the message to others. The feedback gained by individuals (both managers and team members) provides reinforcement for good skills and behaviours and a path for change where

Project ro nip let ion and review ! 3 4 9

improvement is required. This information is a vital input to the work of the human resources function in identifying satisfaction levels associated with different ways of working and levels of motivation. This is only one type of review. For low-complexity projects, this is likely to be all that is required to feed onto future improvement activities. For medium- and high-complexity projects, a more formal review of the longer-term aspects of the performance is necessary. Such an extended review is discussed later in this chapter.

Appraisal and

relocation of staff and disposal of surplus assets

Conducting staff appraisal was mentioned above and is a vital part of nurturing the 'human capital' of project organisations. It is one of the management skills that is often assumed to be present in people because they have the title 'manager'. The reality is that this is part of a skill-set that is not included in any genetic ability, but needs to be trained. Having carried out appraisal, many project managers will themselves move on to other projects. The relocation of staff is one area where project managers may have little direct influence, but provision of support and help during this process is desirable. Many project managers note the importance of such activities in building a network of good people who can be called upon to carry out particular project activities in the future. Provision of such assistance will strengthen these personal ties. Assets left at the end of activities include surplus stocks. These represent waste they were not needed and should not have been supplied. Other project hardware that is not absorbed by the controlling organisation also needs to be disposed of. This is often carried out with the view that as the job is finished, the sooner they are eliminated from the accounts, the site or just from view, the better. Valuable material is put in skips, left to rot or any number of other options that an entrepreneur would baulk at. Trying to encourage people to think of beneficial means of disposal of assets is unnatural for many - they.have the attitude that the organisation can afford it and often that 'the paperwork would cost more to raise than would be raised in revenue from its proper sale'. This is, however, more symptomatic of galloping bureaucracy than detachment of the individual from financial results. In such a case, it is possible to outsource the disposal and retain a significant percentage of the market value of such assets.

Ensuring that all stakeholders are satisfied Marketing influences much of our consumer behaviour, consciously or otherwise, from the clothes that we wear to the brands of groceries we buy. Selling success appears to be an unpopular concept among project professionals, but one that should be considered in enhancing the customers' image of the project organisation. The data for such promotion should come from the review process (for total disasters, the potential and opportunities for improvement come from the same source). The concept of the 'product surround' should be utilised - actual performance is likely to account for 20 per cent of people's perceptions (and hence impact) but costs 80 per cent of the budget to achieve. The 80 per cent of the impact of the work

35o I Phase Four - Dewlap ihe process tckt it bettei nent time!

carried out comes from 20 per cent of the spend. Put simply, 'an ounce of image is worth a pound of performance'. Achieving good publicity can have internal benefits as it is seen that items of good performance are being both looked for and recognised - organisations are often regarded as only after 'catching you out for doing something wrong'. Marketing professionals can and should, therefore, be involved at this stage in the process to maximise the business return on the project work. Trade journals, even national newspapers, may pick up on a particular success story following a press release.

mm There is much written on the subject of process improvement from almost any perspective you care to imagine. This provides a degree of confusion for the practitioner, often leading to a kind of paralysis where everything looks possible so nothing gets changed. Management paralysis is often seen and can usually be linked to poor strategy and policy deployment on the part of senior management. As was discussed in Chapter 3, strategy provides the essential focus for improvement activities and all our activities should be geared towards these strategic objectives. With the focus of a clear strategy, the project manager can carry out activities that will improve the performance of future project processes on these criteria. A useful structure is to separate two elements (seePisano, 1997): • learning before doing - ensuring that the necessary knowledge and skills are available in advance of their need in a project; • learning by d o i n g - those elements that can be learned from previous activities. The original intention of this structure was concerned with technical elements of processes, though they apply equally to the management elements of processes. It is the management of the process that we will be referring to here. The system is shown in Fig. 14.1. Audit and review

Learning by doing

Learning before doing

External knowledge

Figure 14.1 Process improvement

Projectroniplet ion and review ! 351

L e a r n i n g before d o i n g is difficult t o m a n a g e in practice. Identifying sources of ideas for changes t h a t are likely t o yield the results t h a t y o u are seeking takes time a n d requires a very clear view of t h e available sources. T w o sources f o r such ideas a r e the use of c o n s u l t a n t s (see t h e f o l l o w i n g s e c t i o n ) a n d b e n c h m a r k i n g (see C h a p t e r 15). M a n y world-class organisations, however, m a k e f a r m o r e use of t h e learning f r o m their o w n projects. Research recently carried o u t at one of H e w l e t t Packard's plants s h o w e d t h a t the review i n f o r m a t i o n f r o m p r e v i o u s projects p r o v i d e d a s t a r t i n g p o i n t f o r t h e p l a n n i n g of f u t u r e projects. T h i s h a d been d o n e consistently over a long period, resulting in highly developed processes. T h i s internal learning w a s o f t e n missing a t firms t h a t h a d less well-developed processes a n d tended t o rely on external sources f o r their process development efforts. As a whole, these were less successful t h a n those generated internally. T h e f o l l o w i n g t w o sections consider e a c h of the issues of learning before d o i n g a n d learning by d o i n g in m o r e depth.

: • II

I

—

—

I

B

M

P—III

M l

—

T h e m a i n sources of external k n o w l e d g e t h a t will be considered in this section are t h r o u g h training and education, and the use of consultants.

Training and education In the a r e a of p r o j e c t m a n a g e m e n t it is f r e q u e n t l y seen t h a t f i r m s r u n t r a i n i n g courses f o r their people, t h o u g h w i t h very varied rates of success. H a v i n g visited the h o m e of a p e r s o n w h o h a d a y e a r previously b e e n o n a t r a i n i n g c o u r s e , I w a s regaled with the excellence of the hotel a n d the quality of the course notes. 'In fact,' said the friend, 'I've g o t them here.' H e w e n t t o his kitchen a n d reached u p a b o v e the kitchen units and pulled d o w n a very impressive-looking file. Blowing t h e d u s t f r o m it he remarked. 'onlv w i s h I could have used the ideas. N o b o d v a t w o r k w a s really interested.' T h a t course had cost the firm the wages of the person f o r a week, the course fee a n d the hotel, plus travelling expenses, a n d yet h a d derived n o noticeable benefit. T r a i n i n g therefore needs t o have a relatively immediate application if it is t o be w o r t h w h i l e . This includes a g r o u p of p e o p l e w h o will be able t o w o r k in the n e w m e t h o d , once the p e r s o n h a s been t r a i n e d . It is rare t h a t one person on t h e i r o w n will be effective in changing methods. They m o r e often are demoralised by the lack of c o o p e r a t i o n f r o m c o l l e a g u e s a n d the p r o c e s s e s r e m a i n u n c h a n g e d as a result. M a n a g e r s must realise t h a t change requires a critical m a s s - that is, it h a s been suggested t h a t f o r any c h a n g e t o o c c u r in processes, o v e r 80 p e r cent cf t h e p e o p l e w o r k i n g in t h o s e p r o c e s s e s m u s t be c a p a b l e a n d w i l l i n g t o m a k e t h e n e c e s s a r y changes. This could save a g r e a t deal of wasted training time in f u t u r e a n d provide a greater f o c u s f o r i m p r o v e m e n t activities. Such s u p p o r t a n d m e n t o r i n g f o r change in project processes can be provided by t h e project office as n o t e d in C h a p t e r 3. A n o t h e r e x t e r n a l s o u r c e of k n o w l e d g e t h a t is used w i t h very varied levels of effectiveness is consultants. T h e role of c o n s u l t a n t s is discussed below.

352 I Phase Four - Oevelofj the process (

Consultants There are many large and influential management consultancy firms (e.g. PticeWaterhouseCoopers, McKinsey, Accenture) in addition to legions of individuals, but very little is written on their roles or how their skills can best be applied. The general role of consultants is in the provision of specific services such as accountancy, strategic analysis, human resource development or information technology. The consultant within the project environment can have the following roles: • an integrator - providing an overall project management service as a single point of contact for a customer. They arrange the allocation of tasks between sub-contractors and are responsible for overseeing progress; • as an honesty-broker - gaining an external 'independent' viewpoint on a situation can be immensely beneficial. As one consultant commented, 'Sometimes people get too close to the coal face to see the wood for the trees!' People working within the project organisation can be more inclined to accept the views of an outsider on changes than to move from entrenched positions at the behest of a colleague. As importantly, such a solution may allow individuals to 'save face'; • as a change-agent- providing the focus for activities while keeping an overview as to what is happening; • as a knowledge provider in one or more specific areas or techniques; • as a resource provider - to allow tasks to be carried out that people from within the organisation would claim that they do not have the time or capability to do (certain documentation activities or specialist technical knowledge); • as a checker of the way in which the process is being carried out; • as a trainer - rather than doing the job for the organisation, the knowledge is imparted to the members of the organisation through training. As one consultancy firm advertised, 'Your consultant says "Do this. . . . You do it. Your consultant says "Now-do this.. . V You do it. Your consultant leaves. What do you do now?' The first stage in employing consultants is to decide exactly what it is that they are being brought in to achieve. The means of achieving this must be determined either through having the consultants do the job for you or through training. The evaluation of the suitability of one or other firm can be performed through: • • • •

membership of appropriate professional bodies; talking to previous clients; closely evaluating their capabilities; evaluating the costs for the job, in particular whether there is any financial incentive for them to finish the job in a given time, and whether their fee is linked to tangible benefits achieved from their work.

One encounter with a consulting company ended when the two consultants stated that nothing had been written on the area in question. The manager concerned had preprepared for the meeting by going to the local university library and locating two large tomes on the subject, which he duly produced for the meeting. The consultants did not get the assignment.

Project completion arid review I 353

One of the challenges of employing consultants is how to evaluate the benefit of the service that they have provided. Many consultants in the field of total quality management treated it as heresy if a company employing them evaluates their impact in terms of financial cost and benefit. This may be condoned if there is going to be a definable longer-term benefit, but the mechanisms need to be put in place to ensure that this is achieved. Many managers, when viewing the output of consulting mssignments, have made the comment that 'If you give them your watch, they will tell you the time!' This does not mean that the findings had little value - getting someone impartial to state the obvious is as good a means as any of starting the debate on such issues. One of the benefits of a consultant's study is that it is largely impartial. The allocation of tasks to consultants should be fully in the knowledge of any potential conflicts of interest, e.g. if they also do work for a major competitor or if they are employed at various stages in the project. A consultant may be employed to help in the evaluation of a project proposal. The same consultant could quite reasonably be brought in later in the project if it goes ahead. Therefore they would have a vested interest in its going ahead! In the future consultants are going to have an important role to play in the management of projects and in the provision of resources that companies are not large enough to have in-house. Their role will need intelligent purchasers of their services if it is to be successful. The lure of the consultant's patter can then be put to good use selling the necessary ideas to those for whom their activities will be valueadding in the longer term. The way that consultants charge for jobs may also be reconsidered. The normal method is currently to work on the basis of a daily rate (one hundred up to several thousand pounds per day per consultant). This does not offer the consultant much incentive to get the job done at any particular speed. Some firms have included clauses in agreements that they will achieve a return in a given period of so many times their fee for a client. This appears to be moving in the right direction. 1.4.4

Learning by Doing - the Rote of Audit and Review The process of auditing and reviewing activities at a slight time distance from their execution is a part of normal life in some project organisations and an obvious omission from many others. Carrying out audit and review some time after the project has benefit as the results of the actions and the way in which they were undertaken become evident. The return-on-development activities may take even longer to yield the benefits that were attributed to them during the planning process. This should form part of the normal project processes, just as planning does. The process itself requires: • a reason to exist; • information; resources; • credibility.

35ii ! Phase Four - Develop the process ido it better next rime)

The reason for reviews is often described as 'praise of the unworthy followed by punishment of the innocent'. The reason must go beyond this and be set out clearly in the terms of reference. The main goal is to ensure that continuous improvement activities are in place and are followed through. It also provides a point at which the responsibility of the project manager can be objectively assessed. Before continuing to look at some procedural issues associated with review, the first task is to identify the aspects of the project that need reviewing. T i e must be allocated from other activities and an appropriate auditor/reviewer arranged. The project manager should be involved in the process. Information should be provided along with the necessary access and authority to obtain further information. It should be resourced, either from central overhead allocation or from an amount set aside from the project funds to carry it out. As for the manager, the process must be given credibility. The research should be carried out in a manner that is rigorous but fair, and there should be no hidden agendas (praise or punishment). The auditing process involves: • establishing the procedures - the formal statement of intent as to how activities should be carried out, whether financial, quality or environmental; • checking documentation and other records of practice to show that they have been followed; • presenting a report detailing the areas where there are deficiencies or irregularities. An audit is often viewed as a negative process, i.e. it is trying to catch people out. However, it is responsible for identifying inconsistencies, double-checking information as well as seeking alternative viewpoints on the proceedings. There will regularly be conflict into which the players may try to draw the audit team. The review process involves: • studying overall performance relative to constraints; • identifying areas where the procedures failed or have otherwise been shown to be inadequate; • reporting on the areas and suggesting improvements. It is a real skill and art to carry out a worthwhile review process. Getting the truth, or many versions of it, and attempting to make sense of the conflicts (as for audits, but with a more open mandate) are common tests. It is always going to be a subjective exercise - this factor is worth remembering. Two different teams, given the same project, are likely to produce totally different reports. This will depend on the skills and biases of the individuals. The review should differ from the audit in one further dimension - that of the focus. Audits look internally, while reviews should take into account the impact of the project on the environment as a whole. The changes that were impressed by the environment should also be considered. The nature of the feedback will differ from the post-mortem type of review. Changes are rarely made to procedure-level events at this stage - procedures may have already been changed considerably and the context is unlikely to be completely the same again. Where the greatest impact will be felt is in strategic issues - the role

Project ro nip let ion and review ! 355

of the project manager, of suppliers and the imposition or relinquishing of controls on activities can be examined. Above all, it is likely that a full picture of performance indicators will be available by this time and provide a more complete picture of the accuracy of forecasts and the veracity of other planning assumptions. In the execution of a formal audit or review the criteria under consideration will to some extent determine who should be the auditor or reviewer. Expecting someone without accountancy skills, experience or qualification to carry out a financial audit is unlikely to produce usable or credible results. The criteria for the assessor also require a degree of independence. There is often the tendency in formal organthat run projects in matrix form for one department or function to assess another's projects and vice versa. This arrangement, while being convenient and usually very cost-effective, can be counter-productive as there is the equal chance of complicity or hidden agendas as the departments have old scores to settle. This 'culture of distrust' is perpetuated by such arrangements and simply adds another degree of paying someone to check the work that you have paid someone else to do in the first place. Although it can expose incompetence, the audit/review procedure has to be seen as a value-adding activity, rather than simply an opportunity to be negative about the work of others. The implication of the above is that there can be a worthwhile role for the project audit and review process. An assessor works with the project sponsor and rnanager to look for areas of improvement. In reality, if you want to find the major areas for improvements, the people who are in the best position to provide this information are those that were directly involved with the activities - the project team themselves. This knowledge is collated with the assessor taking a collaborative role rather than an adversarial one, and utilising their experience to be fair and openly objective, rather than having to indulge in political games-playing. The view should be holistic - no one aspect of the project performance should be considered in isolation and data should be corroborated wherever possible. Substantiating the claims of suppliers (both internal and external) by verification with their customers is always a good check of data. Maintaining a focus which looks externally as well as at the internal data sources ensures that the fundamental objective of 'meeting customer requirements at lowest cost' remains on the management agenda. Table 14.1 shows the nature of both procedural audits and performance reviews that can be used to assess a project. It shows a variety of criteria and their methods Table 14.1 Review and audit criteria Criteria

Audit

Review

Financial

Accounting systems Conformance to plan Quality procedures Conformance to policy Conformance to policy Conformance to plan Systems for control

ROI, cost variance Customer satisfaction Customer perceptions Team-spirit, motivation EI assessment Cost, techniques used Basis for improvement

Time

Quality

Human resources Environmental Planning Control

356 1 Phase F o u r - Develop the process (do it better next time)

of assessment. As stated during the work on control, if you measure only financial performance measures, do not be surprised if the focus of the project team rests on short-term performance gains. Carrying out such assessment shows the team how seriously the organisation regards the criteria set out. If policy statements at senior management level are not backed up by the allocation of assessment effort and resources for improvement as a result of these assessments, the policies will become discredited. Given that all these are possible, how do you decide which of these is important enough to warrant the effort of a review? The answer comes through the same means as many other decisions of project managers, by reference to the organisational strategy. If time performance is the most important issue for the organisation, then audits and reviews of planning, control and time performance should be carried out. Other aspects of performance can be the subject of particular reviews and it is important that the subject of the review changes over time. This would reflect the changes in strategy and attempts to close performance gaps, as identified in Chapter 3.

Long-term review The case where a project was identified as a success at its completion but where the poor quality of the product of the project only became recognised later was identified in Chapter 3. Ongoing measurement of project outcomes has been established in the construction and engineering sectors for some time by identification of whole-life costs - the initial project cost with the ongoing maintenance and eventual disposal costs of the product. Given the level of dissatisfaction of many firms with their IT suppliers, this would be a useful measure to apply. Other forms of longterm review include individuals reflecting on their own experiences of the project. This adds real validity to the concept of experience. It is a feature of many people who participate in regular training on this subject that the training time provides them with an opportunity for this reflection. Some professions require the compilation of a log-book. This type of diary could be highly beneficial to the project management professional as a means of facilitating review of personal experience. This can form a third element of the learning model - learning after doing.' Some further issues concerning how to carry out reviews are included in the following section.

14.5

Carrying Out Reviews It was noted above that many firms do not bother to carry out reviews for a variety of reasons. During recent research it became clear that a major reason why this is so is that people resent the fact that reviews frequently have become major fingerpointing exercises, simply concerned with allocating blame for shortcomings in the project. Given that this often points at managers, it is perfectly understandable why they are so reluctant to have reviews! However, under some different guidelines it is possible for medium- to high-complexity projects to have very constructive formal reviews. These guidelines include:

Project ro nip let ion and review ! 3 5 7

• Focus on processes, not individuals - Dr Deming suggested, as has been stated before, that the majority of defects in our workplaces are the fault of the systems that people work in rather than the individuals. Given that this is the case, and that the systems and their design and redesign are under the control of managers, it is reasonable that changes could be expected to the systems rather than simply the individuals; • Use factual data wherever possible - it is amazing after even a short period of time how people forget salient points relative to the project. This is a vital role for project documentation to help relieve the problems associated with shortterm memory loss or resolve difference of opinion as to what happened and when; • Allow rehearsal of alternatives, e.g. what would have happened i t . . . ? This rehearsal actually can be very useful if allowed for a short part of the review, not to dominate it but to allow some exploration as to how the project system would have responded under different conditions. Given that the objective is the future improvement of the system, this is a legitimate part of the review; • Use tools and techniques of problem-solving - in particular for ordering data and presenting the findings. This will further help to avoid jumping to conclusions and does help the process of review to be more objective; • Discourage glib classification - this frequently arises, particularly in the absence of structured reviews and problem-solving activities. People participate in reviews often with very definite ideas of where the problems lie. As discussed in Chapter 13, using a structured cause-effect-cause analysis will yield the root cause, rather than simply discussing one of the intermediary effects. (For a more detailed discussion of there issues see Busby, 1 9 9 9 . )

In new product development it is traditional for the product to be designed, then engineered, then passed to manufacturing for making. The designers would be having battles with the engineers over the need for design features to be preserved, and the engineers with the manufacturing staff over what could, and could not be made (these were described in Chapter 5). HewlettPackard, as part of the linking process between the different functions, ensures that key staff who do the design work carry the project through. Not just to the end of the project, and its handover to manufacturing but to three months into mass production of the designed items. This provides ample opportunity for problems to emerge, and for the designer to witness the effects of their decisions on the end product. It is a case of knowledge management of the highest order - people gain great insight from this process, and retain this for subsequent projects. As a by-product of this, the networks of people who they have worked alongside during these extended handovers means that there is far better communications in the organisation.

358

! Phase Four - Develop the process (do

it be!let next tune)

As has been shown, reviews can be an immensely powerful tool for starting process improvement. In themselves, though, they do nothing. As with other decisions, it is how these improvements are followed up with changes in processes and improvements in the individuals and parties to the project that will make the difference in future. Part of the process of convincing firms and individuals to follow through and make these changes is to provide the business case for them. This is discussed in the following section through the tool of quality costing.

Justifying It AU - Evaluate the Cost of Quality The financial implications of many sorts of failure in performance can be calculated for the purpose of providing the business case for performance improvement activities. The costs are generally enormous and can be expressed as a percentage of turnover. For the purposes of calculation, quality costs are broken down into three categories - prevention, appraisal and failure. The inclusions in tach category are shown in Table 14.2. Failure can be broken down into internal failure (that which is detected by the organisation before the customer does, thus allowing a rapid remedy) and external failure (one that the customer detects after delivery of the product or consumption of the service). Generally, it can be stated that the failure costs are orders of magnitude higher than those of prevention and appraisal. Crosby (1979) researched how the performance of the quality system related to the profitability of the organisation. The findings of this work were that: For a well developed quality system, the costs of quality can make up as little as 2 per cent of turnover. For an organisation with a poor or neglected quality system, they can make up in excess of 20 per cent.

Table 14,2 Elements of quality cost Category

Activities included

Prevention

Quality planning, training and auditing, supplier development costs of maintaining a quality improvement programme or system, maintenance of all testing equipment

Appraisal

Any checking activities (and materials consumed during these),analysis and reporting cf quality data, auditing suppliers' quality systems, storing records cf quality results

Failure

Internal- any wasted activities, be they in the production of an artefact that is scrap or the generation of a document that is not read, changing or rectifying work already done because it was not right first time, downgrading goods or services, problem-solvingtime External-replacement of faulty goods, having to-return to a site to redo tasks, complaints and consequent loss of goodwill and repeat business, product and professional liability claims

Project ro nip let ion and review ! 3 5 9

A r e c e n t a u d i t of a p r o j e c t o r g a n i s a t i o n w i t h i n t h e a e r o s p a c e i n d u s t r y s h o w e d quality costs t o be 3 6 per cent of turnover. This w a s a surprise f o r them, given t h a t external failure happened very rarely ( a s one might hope with aircraft components!). A n o t h e r study w i t h a c o n s t r u c t i o n f i r m s h o w e d q u a l i t y c o s t s of 38 per cent of turnover. While t h e aerospace firm could rightfully claim t h a t the p r e c a u t i o n s t h a t they h a d t o t a k e t o prevent failures in service were very costly, w h e t h e r it justified such a large p a r t of their costs w a s doubtful. A m o r e realistic b e n c h m a r k f o r t h e m w a s 1 5 - 2 0 per cent in the m e d i u m term. F o r the c o n s t r u c t i o n firm t h e r e w a s n o such excuse, a n d the o p p o r t u n i t y f o r t h e m very large (given t h a t profit margins a t the time were of the order of 3 - 8 per cent of turnover). A b e n c h m a r k f o r this firm w o u l d be in the range 2 - 5 per cent. 1 T h i s is a m a j o r d r i v e r a n d s o u r c e of cost savings if r e c o g n i s e d a n d a system implemented properly. Savings a r e generally m a d e t h r o u g h the increase of prevention a n d appraisal activities, w h i c h in the m e d i u m term will result in reduced failure costs. T h e project organisation has t o accept that in the s h o r t term, overall costs are likely t o increase as the improvements t a k e their time t o w o r k t h r o u g h the system. H e l p in identifying quality cost elements is available in BS 6 1 4 3 : Part 1: 1 9 9 2 . Part 2 gives t h e prevention, appraisal a n d failure m o d e l a n d includes some sample p r o f o r m a s f o r c o m p l e t i n g quality cost reports. Both have high practical value in a p r o j e c t m a n a g e m e n t e n v i r o n m e n t . F u r t h e r discussion of quality c o s t i n g is in t h e Further I n f o r m a t i o n at the e n d of this chapter.

B o t h b o d i e s of k n o w l e d g e f o c u s o n t h e c o n t r a c t u a l a n d p r a c t i c a l of t h e c o m p l e t i o n process. N e i t h e r c o n s i d e r t h e p o t e n t i a l f o r l e a r n i n g a n d t h e d i f f e r e n t types of a u d i t a n d review t h a t can be undertaken. Table 14.3 Relevant area of the APM body of knowledge Relevant section

Title

Summary

64

Hand-over

This is defined as a managed process w ^rtrhi outcome of the project along with all the associated project documentation is delivered to the project sponsor. It is an opportunity to reflect on the original business case for the project.

65

(Post-) project evaluation review [O&M/ILSl

This assumes that there is a definable product or system that is put into operation as a result of the project - hence the O&.M (operation and maintenance) and ILS (integratedlogistic support). It is stated that the review should be an integral part of the project, not just at the end, but also during the process, and the knowledge shared with other projects.

360 i Phase

Four - Develop the process (.do it better next Table 14.4 Relevant areas of Relevant

time)

PM! body sf knowledge

Title

Summary

5.4

Project scope management scope verification

This is a process of obtaining agreement between the stakeholder groups of which parts of the project scope have or have not been achieved. The latter is particularly applicable in projects that are terminated early.

10.4

Administrative closure

Document project processes and results to obtain acceptance by the project customer, provide the basis for review and determining lessons learned from the project. Archives should be established to contain the documentation for the project.

12.6

Contract close-out

Ensure that the contract is completed as required, and when this is achieved, close down the administration system, providing necessary documentation for audit and review. Issue close-out notices.

section

At the start of Chapter 2 the question was asked - where do we start? There were structures that would facilitate the thinking for that part of the process. A certainty of the definition of a project is that it will end in one way or another. The question could similarly be asked - h o w do we end the project? Again there are structures and ideas to help here. Two basic principles guide this. The first is that there must a positive statement of closure, rather than simply allowing the project to fizzle out. The second is that the knowledge gained by doing the project must be captured. This is achieved through the review and audit process, feeding back into both project process knowledge and technical knowledge. The project may have cost the organisation and individuals dearly - and now is the opportunity to realise some payback from that 'investment'. Closing out the project involves the shut-down of all project systems, ensuring all activities are completed, and preparing for the forthcoming reviews. Audits are there to check conformance to procedure. In short — did you do what you said that you would do, in the way that you said that you would do it? Reviews look for opportunities for process improvement, at particular aspects of how the project was managed. The aspects cf importance are determined by the project strategy - it is not feasible to review every aspect of performance. The learning process from projects was suggested to be at least twofold, through learning before doing (through identification of appropriate knowledge in advance

Project ro nip let ion and review ! 3 6 1

of need), learning by doing (through review and integration of that knowledge into the organisation), and longer-term reflection. The costs of failure were identified above as an 'investment', and these should be calculated as part of a quality costing exercise. This is frequently a good starting point, as the extent of the failures and their costs are usually surprising to most organisations. They also provide considerable insight into what is really going on in the organisation. ' H HI giHgnH

S m ^ i f f i i i & a S H m K ^ ^ H M l ^ ^ : : a

IT all goes pear-shaped atVCS Introduction 'The department that later became VCS was founded in 1987 to provide computer support in a major firm. Over time, this role expanded, and in 1992, the function was bought out by three of its managers to begin life as a company in its own right. In 1997 the firm was sold to a PLC, which made VCS one of its operating divisions. In January 1999 VCS was sold again to a corporate holdings firm, with interests in a number of software and hardware companies. range of products all required regular upgrades to keep them competitive and consistent with changes in the hardware and other software used by its clients. The Time-Track product was undergoing a major revision when a number of problems became apparent. These included areas of the product which were far too complex for the task that was required of them (incurring significant problems elsewhere) and little control over time or cost. As a result, the product arrived late in the market, to the embarrassment of the firm and particularly their new owners. This was given significant attention at board level, and technical specialists conducted a number of internal reviews. Realising that there were more fundamental issues at stake here, the firm's management team was debating their next • move. The product Time-Track is used as a means of compiling time data from employees as to how they have spent their time, so that clients may be billed accordingly. The product has to work with a company's own accounting software and is viewed by many firms as 'mission-critical' - if the product fails they are unable to bill their clients and thereby earn revenue. Reliability is therefore essential from the customer's point of view. A major review of the product was required, as many of VCS's clients were moving from thick to thin client systems, 1 This accompanied other changes in the technology that Time-Track needed to work with, in addition to the firm's everpresent imperative to continuously improve the product. Moving from Version 2 (V.2) of the software to V.3 meant that, in addition to obtaining upgrade revenue from existing clients, new features could be added to bring new clients in. It was therefore a project of the highest strategic importance for the firm.

36a

I

Phase Four - Develop the

process tda it better

(text time)

T h e project Looking back, the V.3 project does not appear to have ever been officially launched. Documents relating to technical aspects of the product were generated during 1997 -including a 200-page proposal which was circulated to the technical staff, though notably not the sales or marketing people who would be responsible for the income the new product would generate. In early 1999, no-one on the development team was able to produce a copy of this document. The project was intended to be a collaborative venture between two companies from the same group, based on potential synergies generated by combining two of their existing offerings. The firms became part of the same owning group during the 1997 buyout. They had fundamentally different products but some commonality in the technology being used. There was significant excitement caused by the potential for the new product - it provided a much-needed replacement for the product sold by one of the firms based in Blackburn (north-west England), by upgrading an established product which was being sold by VCS in Cardiff (South Wales). This opened the market from predominantly public-sector clients to a much wider range including large corporations. Additional sales personnel with corporate sales experience were recruited and began selling the product into the market early in 1998 in expectation that the new product would soon be available. At the end of 1997, there was a meeting of the project participants from both sites on neutral territory. They considered what could go wrong with the project. A total of 152 potential problems were identified that could lead to project failure. These included the departure of key personnel as well as failures in the technical elements of the process. At the VCS board of directors' monthly meeting in February 1998, the project manager, Dave Grant, reported that work had started in earnest. He noted then that there were differences in the approaches of the two sites involved in the project, but felt that these could be overcome. He himself was based at the Blackburn site, and much of the early project work on adding functionality was being carried out there. At VCS, their main role was detailed coding (programming) of the product.

Problems start to become evident As early as March 1998, problems between the two sites became evident. VCS technical director, Steve Timms, reported to the monthly board meeting that things were not going right, that it was hard to know what was going on in Blackburn, and that there was a complete lack of agreement on technical protocols between the sites. Without these protocols, development work lacked any solid foundations on which to build. Dave Grant reported that progress at the Cardiff site had been disappointing. Overruns of the construction of one of the databases necessary for the system were due to overoptimisticestimates and the use of less experienced developers. He further commented in a direct criticism of VCS management that Work to motivate the team by improving the local supervision of their work is needed to ensure that this slippage is made up'. During the following month, this problem continued leading to a further report of poor progress on the new product. This time, he identified the problem as . . too many projects for the Cardiff staff to work on. While the staff in Blackburn have one project to work on, Cardiff have a

Ptojeti completion and review I 3 6 3

w h o l e list of p r o j e c t s t o deliver b e f o r e t h e e n d of t h e year. T h e w h o l e of t h e develo p m e n t d e p a r t m e n t a t C a r d i f f is g r o s s l y overcommitted.' T h e d e v e l o p e r s a t C a r d i f f w e r e a l s o starting t o b e c o m e f r u s t r a t e d . A s t h e develo p m e n t c o o r d i n a t o r a t V C S , Bill J o n e s n o t e d , ' W h e n o u r c u s t o m e r service p e o p l e have a p r o b l e m w i t h s o m e t h i n g t h e y don't u n d e r s t a n d o r w i t h a c u s t o m e r , w e just h a v e t o g o a n d d o it. It's a l w a y s V.3 t h a t gets d r o p p e d . W o r s e - V . 3 w o r k will be t h e f i r s t t h i n g t h a t w e g e t s t o p p e d t o d o s o m e t h i n g else. It's really h a r d t o k e e p t h e g u y s (the p r o g r a m m e r s ) geed u p a n d saying " t h i s is it - e v e r y b o d y ' s d e p e n d i n g o n u s n . It d o e s h a v e a n e f f e c t o n t h e guys.' T h e d i s r u p t i o n c a u s e d t o t h e p r o g r a m m e r s by t h e c o n s t a n t c h a n g i n g of t h e i r r o l e s w a s a l s o n o t e d . 'You c a n lose half a d a y easily if s o m e t h i n g t a k e s y o u off t h e t r a i n of t h o u g h t f o r a s little a s half a n hour.' T h e M a y r e p o r t c o n t i n u e d in a s i m i l a r v e i n , w i t h g o o d r e p o r t e d p r o g r e s s a t B l a c k b u r n a n d p o o r o r n o n - e x i s t e n t p r o g r e s s a t C a r d i f f . T h e a d d i t i o n of a n e w team m e m b e r at Cardiff with significant relevant experience gave some hope that t h e s i t u a t i o n w o u l d i m p r o v e f r o m t h e n on. A p r o t o t y p e of t h e n e w system w a s p r o duced and demonstrated to the company's user g r o u p (firms w h o were already using t h e i r p r o d u c t s ) d u r i n g M a y . T h i s p r o v i d e d t h e d e v e l o p e r s w i t h a f i r s t o p p o r t u n i t y t o g a i n f e e d b a c k o n t h e i r ideas f o r t h e n e w nroduct." T h e f i r s t t a r g e t d a t e f o r c o m p l e t i o n of t h e p r o j e c t w a s a n n o u n c e d f o r A u g u s t 1998. A t t h e e n d of M a y t h e r e w a s still s o m e belief t h a t t h i s d e a d l i n e c o u l d be met. M a r k e t i n g a n d sales p e o p l e w e r e i n f o r m e d a c c o r d i n g l y , c r e a t i n g a n e x p e c t a t i o n f o r V . 3 in t h e m a r k e t - a m o n g existing c l i e n t s w h o w i s h e d f o r t h e p r o m i s e d u p g r a d e s , a n d n e w c u s t o m e r s w h o w e r e i n t e r e s t e d in t h e p o t e n t i a l f u n c t i o n a l i t y : H o w e v e r , d e s p i t e t h e a d d i t i o n of e x t r a s t a f f , t h e r e w e r e u n d e r l y i n g p r o b l e m s . M a r k Small, a m e m b e r of t h e d e v e l o p m e n t t e a m , c o m m e n t e d , ' W h e n I c a m e in in M a y 1998, p r o g r a m m e r s w e r e d o i n g things, b u t n o b o d y c o u l d tell y o u w h y they w e r e d o i n g it a n d w h o h a d m a d e t h e d e c i s i o n t h a t it s h o u l d be d o n e this w a y . W h a t t h e y w e r e t r y i n g t o a c h i e v e d i d n o t seem t o be d e f i n e d a n y w h e r e . ' A n o t h e r of V C S ' s d e v e l o p m e n t c o o r d i n a t o r s n o t e d t h e result of t h i s t o b e t h a t 'The d e v e l o p m e n t g u y s w e r e m a k i n g lots of d e c i s i o n s t h a t they s h o u l d n e v e r h a v e been e x p e c t e d t o m a k e - t h e y w e r e g e t t i n g little o r n o guidance.' F o l l o w i n g c o n c e r n s a b o u t t h e s p e e d of p r o g r e s s a review o f t h e w o r k o u t s t a n d i n g identified a f u r t h e r 90 p e r s o n - d a y s of w o r k r e q u i r e d in o n e a r e a a l o n e , w h i c h h a d n o t p r e v i o u s l y b e e n i n c l u d e d in a n y p l a n s o r w o r k l o a d c o n s i d e r a t i o n s .

Problems come to a head J u n e 1998 w a s a w a t e r s h e d f o r t h e c o m p a n i e s a n d t h e p r o j e c t . A t t h i s t i m e , it b e c a m e a p p a r e n t t o t h e B l a c k b u r n firm t h a t t h e p r o d u c t ( V C S T u n e - T r a c k V . 2 ) w h i c h they h a d d e c i d e d t o b u i l d u p o n w a s n o w h e r e n e a r as s o p h i s t i c a t e d a s f i r s t t h o u g h t . T h i s m e a n t t h a t in o r d e r f o r it t o d o half of w h a t their e x i s t i n g p r o d u c t d i d ( w h i c h it w a s i n t e n d e d t o s u p e r s e d e ) , t h e r e w o u l d h a v e t o be a s u b s t a n t i a l r e w o r k o f t h e C a r d i f f p r o d u c t . In a d d i t i o n , t h e r e w e r e m a n y p r o b l e m s w i t h t h e p r o g r a m m i n g q u a l i t y w h i c h r e q u i r e d s i g n i f i c a n t r e c t i f i c a t i o n w o r k b e f o r e i t c o u l d be developed further. T h e s e t w o p r o b l e m s w e r e a m a j o r b l o w f o r t h e p r o j e c t a n d s o o n led t o the d e p a r t u r e o f t h e t w o m e m b e r s of t h e t e a m f r o m B l a c k b u r n . O n e of t h e s e h a d b e e n

•j64

I

Phase f our - Develop the process Wo it better next time)

p r o m i s e d a p r o j e c t m a n a g e m e n t role in this p r o j e c t , b u t w a s given c h a r g e o f only o n e p r o g r a m m e r . T o m a k e m a t t e r s w o r s e , t h e r e w a s little m a n a g e m e n t required in this role a n d h e e n d e d u p d o i n g m u c h of the c o d i n g w o r k - c o n t r a r y t o his expectations. W h e n his m a n a g e m e n t role did n o t materialise, he s t a r t e d l o o k i n g f o r w o r k elsewhere. T h e pressure t o complete a p r o d u c t ( w h a t e v e r t h a t w a s ) m o u n t e d o n t h e C a r d i f f t e a m . T h e y still h a d neither design specification n o r m e t h o d of testing the p r o d u c t . F u r t h e r m o r e , t h e i r l a c k of e x p e r i e n c e of t h e b u s i n e s s p r o c e s s e s i n v o l v e d w a s starting t o tell o n t h e p r o d u c t . Steve T i m m s , technical director at Cardiff, p r o b a b l y sensing t h e m o u n t i n g p r o b l e m s a n d t h e i m p e n d i n g p r o d u c t d i s a s t e r , d e c i d e d t o leave. H e h a d been n o t e d f o r his ability t o have t h e w h o l e vision f o r the p r o d u c t in his head. T h i s led staff t o c o m m e n t t h a t W e all k n e w w h a t w e were doing, n o b o d y k n e w why.' His departure caused a significant vacuum within t h e project team. M e a n w h i l e , Dave G r a n t at B l a c k b u r n w a s t a k i n g active steps t o dissociate himself f r o m t h e p r o j e c t . I n d e e d , t h e C a r d i f f s t a f f perceived t h a t t h e o n l y t i m e t h a t D a v e G r a n t w a s interested w a s just b e f o r e a b o a r d meeting. By the J u n e report, t h e r e w a s a real sense of g r o w i n g f r u s t r a t i o n f o r the p r o j e c t manager. The newly appointed project coordinator at Cardiff, w h o n o w played a p i v o t a l role in t h e d e v e l o p m e n t , w a s u n e x p e c t e d l y off w o r k due t o p e r s o n a l c i r c u m stances. Since i t w a s a small firm, r e p l a c e m e n t c o v e r w a s p r o v i d e d o n a g o o d w i l l basis f r o m o t h e r areas. W i t h little c o o r d i n a t i o n o n t h e g r o u n d , s l o w p r o g r e s s w a s being made, a n d t h e project w a s increasingly seen as u n b a l a n c e d . W o r k carried o u t a t B l a c k b u r n w a s i n n o v a t i v e a n d c o m p l e t e ; t h a t a t C a r d i f f w a s outside a n y p l a n s t h a t h a d been laid d o w n ( t h o u g h n o - o n e c o u l d actually find a n y detailed p l a n s f o r the C a r d i f f w o r k at this stage). Dave G r a n t c o n t i n u e d , in his w o r d s , 'to t r y t o m a n age t h i n g s f r o m afar', t h o u g h this w a s d e b a t a b l e f r o m t h e C a r d i f f staff's p e r s p e c t ive. A d d i t i o n a l d e v e l o p e r s w e r e a d d e d t o t h e t e a m a t C a r d i f f , t h o u g h a t t h e same t i m e , a n u p d a t e d v e r s i o n ( V . 2 . 1 ) of t h e p r e v i o u s release of t h e s o f t w a r e w a s s e n t o u t . A n d y M o r g a n w a s b r o u g h t in as t h e n e w d e v e l o p m e n t m a n a g e r a n d described some of t h e p r o b l e m s being faced in a r e p o r t h e p r e p a r e d at t h e e n d of June:

Proposed work General enhancements Specific p r o g r a m m i n g D a t a structuring M a i n t e n a n c e f o r V.2.1 General s u p p o r t f o r o t h e r p r o d u c t s

P l a n n e d time 15 29 8 15 5

days days days days days

Actual time 20 d a y s 6 days days 2 7 days 5 days

As t h e t a b l e shows, little progress w a s being m a d e o n the specific programmingof t h e 2 9 d a y s allocated t o it, o n l y six w e r e actually used t o c a r r y o u t w o r k o n the m a i n p r o g r a m m i n g f o r t h e p r o j e c t . T h i s resulted in a significant p a r t of this w o r k being carried f o r w a r d f o r completion the following month, which only cornp o u n d e d t h e time shortage. A n d y M o r g a n stated: 'We've allowed in t h e plans f o r a d a y a w e e k per p r o g r a m m e r f o r maintenance. But it's n o t w o r k i n g , we're c o n s t a n t l y

Project ro nip let ion and review ! 365

b e i n g k n o c k e d s i d e w a y s , in t e r m s of p l a n n i n g , b e c a u s e of t h e p u l l f r o m m a i n tenance.' T h i s w a s indeed a significant issue - c u s t o m e r s w e r e d e m a n d i n g t h a t p r o b l e m s in t h e i r existing p r o d u c t s w e r e r e s o l v e d , b u t t h i s r e s o u r c e c o u l d o n l y c o m e f r o m the d e v e l o p m e n t t e a m . F u r t h e r c o m p l i c a t i o n s arose w h e n a p r o g r a m m e r w a s r e m o v e d f r o m t h e a l r e a d y small t e a m t o w o r k o n a 'more critical p r o j e c t ' - Y2K changes for another product. In J u n e , A n d y M o r g a n w a s a p p o i n t e d as p r o j e c t m a n a g e r f o r t h e V.3 p r o j e c t , a n d f r o m t h e n on, D a v e G r a n t ' s role w a s unclear, as B l a c k b u r n w e r e n o longer very interested in the p r o j e c t - it w o u l d n o t provide t h e m w i t h the p r o d u c t t h e y w a n t e d . T h e w o r k w a s comoletelv t r a n s f e r r e d t o t h e Cardiff site. In J u l y , D a v e G r a n t n o t e d t h a t t h e r e h a d b e e n s o m e p r o g r e s s w i t h t h e p r o j e c t a n d suggested t h a t t h e s o f t w a r e be released f o r Q u a l i t y A s s u r a n c e ( Q A - t h e people w h o will test t h a t the p r o d u c t w o r k s b e f o r e it is released t o c u s t o m e r s ) . A separate Cardiff report f o r July stated t h a t t h e y were o n t a r g e t f o r a c o n t r o l l e d release of t h e s o f t w a r e in late O c t o b e r , t h o u g h n o m e n t i o n w a s m a d e of the earlier agreed A u g u s t deadline. In A u g u s t , t h i s b e c a m e 'controlled release in N o v e m b e r ' . T h e p r o b l e m f o r A n d y M o r g a n in C a r d i f f w a s a lack of the resources t o c a r r y o u t the necessary Q A of t h e p r o d u c t , a n d t o o m u c h w o r k left t o o late in t h e p r o j e c t . In S e p t e m b e r , A n d y M o r g a n reported t h a t d u e t o f u r t h e r requests f o r a d d i t i o n a l f u n c t i o n a l i t y f r o m t h e u s e r g r o u p the s o f t w a r e w o u l d u n d e r g o c o n t r o l l e d release in J a n u a r y 1999. In O c t o b e r , this w a s still 'the schedule'. T o facilitate this, h e c o m m e n t e d t h a t t h e Q A h a d b e e n set u p n e x t t o t h e d e v e l o p m e n t office, a n d t h a t a w h i t e b o a r d h a d been installed t o give t h e p r o j e c t h i g h e r visibility. A t this p o i n t , c o n c e r n s w e r e raised a b o u t t h e quality of t h e final s o f t w a r e . T h i s a p p e a r e d t o be vital - t h a t quality w a s rated 'above all else', t o e n s u r e t h a t it is relatively 'bug-free' . w h e n p u t o n general release. N o t only w o u l d the s o f t w a r e need to be checked, b u t a n y p r o b l e m s f o u n d w o u l d have t o be solved. W i t h s u c h a c o m p l e x piece of s o f t w a r e this w o u l d inevitably m e a n f u r t h e r p r o b l e m s as w h e n you c h a n g e o n e a r e a it inevitably affects a n o t h e r . H e reiterated his p o i n t t h a t 'Quality is t h e m o s t i m p o r t a n t f e a t u r e of Version 3 a n d it will g o o n general release w h e n w e a r e c o n f i d e n t of its quality.' C o n t r o l l e d release w a s t h e n scheduled f o r t h e t h i r d w e e k of J a n u a r y . D u r i n g Q A , it b e c a m e a p p a r e n t t h a t the original p r o g r a m m i n g , so highly p r a i s e d by D a v e G r a n t , w a s p o o r l y c o n s t r u c t e d a n d regularly f a i l e d t o p e r f o r m s i m p l e tasks, let alone the c o m p l e x ones it w a s designed t o do. T h e p r o b l e m s w i t h the c o d ing ( p r o g r a m m i n g ) w e r e e x a c e r b a t e d by a n attitude of 'QA is t h e r e t o find the p r o b lems - that's t h e i r job'. W h e n t h i s w a s investigated f u r t h e r , it w a s f o u n d t h a t while s o m e of t h e p r o g r a m m e r s w e r e excellent a n d a l w a y s checked their o w n w o r k b e f o r e it w e n t t o Q A , others w e r e c o n s i s t e n t l y n o t d o i n g so. T h i s lack of c o m m i t m e n t t o t h e p r o j e c t w a s f u r t h e r n o t e d by one of the b o a r d m e m b e r s w h o stated t h a t 'They [the p r o g r a m m e r s ] just c o m e in a t 9:00 a n d leave by 5:15. N o b o d y w o u l d t h i n k w e w e r e having m a j o r p r o b l e m s w i t h t h e product.'

Product release L i m i t e d p a r t s of t h e s o f t w a r e w e r e i n d e e d released t o a k e y c l i e n t a t t h e e n d of January, t h o u g h the product was nowhere near ready. Here, the situation w a s described as 'lose-lose - if w e deliver a n y later, we lose the client, if w e deliver a n d

j66

I Phase Four

Develop

process (doit better next

it doesn't work, we lose the client.' The controlled release served one purpose - i t showed that there were further problems with the software. On the positive side, the users liked the parts that they saw, and even said that they perceived the implementation to be managed well by VCS by not releasing the full version until it was ready. Commenting on the controlled release, the sales director noted, 'The consultant went on-site at the client and started trying to make the product work. There was no documentation or other help available other than the members of the development team. Even then, there were many parts of the product that nobody knew how they were supposed to work. After three days of trial and error, we had to take the software out again. They are probably our largest client. They wanted V.3 because there were so many bugs in V.2.1 and they wanted fixes for them. We had to stop supporting V.2.1 and told them to go to V.3 to get these things fixed. The do not want a whole load of new features, just the ones they had bought initially to work. The testing was to see that nothing had got worse. This was a shock to me - I thought they wanted the enhancements.' In addition, one key technical feature (which most users would not be in a position to evaluate anyway) was causing major problems for the developers. The implications of this feature were an increased level of technical complexity, which had been introduced by Steve Timms. As was commented, 'He was technically brilliant - he'll do everything to the nth degree, try to get everything perfect, but half of it won't relate to user requirements. The other problem we've got is that it is an enormous program, it is horribly complex, and every time we fix a bug somewhere, it causes a bug somewhere else. That is the problem for us - the wrong person given too much rope. He built on things we didn't need, but that he thought were a good idea technically.' During the period of uncertainty this one person was able to make all sorts of changes as and when he saw fit. Later comments include 'One of the things we desperately need to implement is change control throughout maintenance as well as new product development.' The product was fully released in June 1999, ten months after the original deadline. It has cost the company dearly. As the sales director commented: 'We've lost £500k worth of business in the past 3 months alone because of these problems.' For a company with a £5 million annual turnover this was a significant amount of revenue. He further noted that the result of the problems with V.3 was that the firm had gone from being a leader in the field to being one that was now pushing obsolete technology and had been overtaken by their competitors. Moreover, they had gained a reputation for being unable to deliver products to the market as they had promised - either at the time or with the full list of promised features. A final comment on the development process concerned the role of the departments that were concerned with the product and its roll-out to customers. The developers were responsible for the product until it left the firm while a separate function, the consultancy group within the firm, were the ones who would take the product to a customer's site, install it and then train staff in its usage. This placed a heavy burden on the consultants, often requiring them to 'fix' problems that became evident with the product during implementation. After the launch, one of the development team concluded: 'The project was and still is a nightmare.'

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The review Following the project, the management team and the staff at V C S carried out a review. Issues raised during the review included the split-site working where 'The communications simply did not work. There were lots of tests made early on to define standards - ways of doing things, and then latterly to transfer the knowledge of the Blackburn work down to us. There were lots of attempts made, meetings etc. - it was a struggle all the way along. Towards the end the communications broke down quite badly.' When they considered the project planning Andy Morgan commented that 'Another problem that we have faced is the constant underestimate made bv the guys of the work remaining. What we've tried to do as part of a philosophy of getting the ownership down a couple of levels (developmentcoordinator etc.), is to try to get the programmers to commit to their own estimates. They do, but they always get it wrong, and fundamentally wrong - particularly in the most complex parts. Part of this is inexperience, and part because they do not have any specification to work to. They do not have a technical breakdown - it's pure guesswork.' Related to this, the managing director commented that 'We didn't know until things were going wrong that there was a problem, which is vital for managing customer expectations.' Further planning issues were raised by staff, including the comment that We need hands-on project management - regular meetings, not just once a month the day before the board meetings. The team never worked as a team - too much them and us.' Another member of staff commented, 'A key problem was that there were too few people involved at the start of the project. As a result, when the Cardiff technical director left in June 1998 so much of the product knowledge left with him. None of this was down in writing, so we lost it. The knowledge base in future must be spread a lot more.' In addition, he noted: 'There was never any business case for the features that were being built into the system. I cannot see how either the existing or future client base is going to benefit from many of the features. The amount of effort we have put into it is disproportionate to the benefit that will be gained.' The need to start work on V.4 was pressing - many of their clients were demanding Web-based features that were not available on V.3. As the management team contemplated the review there were clearly a significant number of issues that required attention. 'Above all,' the financial director commented, 'this must never happen again.'

Case

discussion 1 What are the root causes of the problems that VCS faced during the V.3 project? Carry out a review of the project to determine what went wrong. 2 How do you suggest that they ensure that these problems 'never happen again'? Use an appropriate framework to structure your arguments. 3 What are the barriers to progress likely to be? 4 How could these be overcome? 5 What additional suggestions do you have for the company?

3 6 8 1 Phase Four - Deveioo the process (do it better next time)

close-out handover review documentation stakeholder satisfaction management paralysis learning by doing education consultant prevention failure

completion termination audit sign-off product surround learning before doing

training critical m a s s c o s t of q u a l i t y appraisal

1 W h y is t h e r e a t e n d e n c y f o r p e r s o n a l p r o j e c t s in p a r t i c u l a r , t o s p e n d '90 p e r c e n t of t h e i r t i m e 9 0 per c e n t complete'. 2 S h o w t h e activities t h a t m u s t be c o m p l e t e d d u r i n g t h e final p h a s e s of a project. 3 W h y m i g h t c o m p i l i n g p r o j e c t d o c u m e n t a t i o n be c o n s i d e r e d s u c h a b u r d e n t o t h e t e a m , yet be s o e s s e n t i a l ?

4 What issues must be considered when deciding how far post-delivery service should extend (such as providing free consultancy with new IT systems)? 5 W h a t are t h e likely benefits t h a t will be realised f r o m reviews a t d i f f e r e n t t i m e s ? 6 C o n s t r u c t a n a u d i t q u e s t i o n n a i r e of m a n a g e m e n t p e r f o r m a n c e , w h i c h c o u l d be g i v e n t o m e m b e r s of a p r o j e c t t e a m . T e s t t h i s o n s o m e o n e w h o h a s m a n a g e d you. W h a t a r e a s w o u l d y o u s u g g e s t f o r i m p r o v e m e n t ? 7 D i s t i n g u i s h b e t w e e n a u d i t s a n d reviews. 8 W h a t a r e t h e c r i t e r i a t h a t s h o u l d be t a k e n i n t o c o n s i d e r a t i o n w h e n selecting a n

auditor/reviewer? 9 C o n s i d e r i n g t h e v e r y v a r i e d n a t u r e of t h e d i f f e r e n t a u d i t s a n d reviews t h a t c a n be c a r r i e d o u t , is it likely t h a t t h e s e c a n be d o n e a t o n e t i m e b y o n e p e r s o n ? 1 0 D i s c u s s t h e r o l e of r e v i e w in t h e p r o c e s s of c o n t i n u o u s i m p r o v e m e n t a n d w h y t h i s is vital f o r t h e survival of o r g a n i s a t i o n s .

Frojett completion oris review I 3 6 9

Busby, J. (1999) 'An Assessment of Post Project Reviews,' Project Management Journal, Vol. 30 No. 3, pp. 23-29. Crosby (1979)Quality is Free, McGaw-Hill, New York. Pisano, G.P. (1997)The Development Factory, HBS Press, Boston, MA.

BS 6143: A guide to assessment of quality-related costs. Dale, B.G. and Plunkett, J. (2000) Quality Costing, 2nd edition. Chapman Hall, London. Pisano, G.P. (1994)'Knowledge, Integration, and the Locus of Learning: An Empirical Analysis of Process Development', Strategic Management Journal, Vol. 15, pp. 85-100.

Motes 2 I am grateful to one of the reviewers for this addition. 2 These figures were arrived at following an analysis of the elements of quality cost. The majority of the failures in each case were preventable, and these are costs that would be incurred to carry out the necessary prevention and appraisal measures, with a given level of 'inevitable' failure. 3 This indicates the relative processing power of a central computing facility versus that which an individual has in the PC on their desk. Thin client systems require less powerful PCs as more of the processing is done by a central mainframe/ server system. 4 Functionality is literally 'what the product will do'.

Given t h e widespread poor performance of companies identified i n Chapter 1, t h e potential here for financial benefit in t h e m e d i u m t o long term is enormous. How organisations rise to t h e challenge of improving their processes will determine their success in t h e long term, and many of t h e aspects that require attention have been discussed in t h e preceding chapters. There are some Further issues that practitioners are working w i t h in t h e search For process improvement. As w e shall see, however, this search For improvement is by no means universal, despite t h e potential. Also - w h e r e t o now for project management? With its level of economic importance there is clearly an opportunity for t h e development of b o t h t h e practices and the academic knowledge of the'area. Given t h e relatively topical nature of this chapter, it is no surprise that there are no relevant areas of t h e bodies of knowledge, but it is anticipated t h a t t h e material will have considerable influence on these in t h e future.

Learning Objectives 15.1 Project management maturity 15.2 Major influences on process change (1) - b u s i n e s s process re-engineering 15.3 Major influences on process change ( 2 ) - b e n c h m a r k i n g 15.4 Major influences on process change ( 3 ) - l e a n project management 15.5 Making it happen - the three pillars of change 15.6 Future challenges for project management 15.7 Summary Project management in practice: N e w product development at T o y o t a Forklift Truck - the X 3 0 0 project Key terms Review questions and further exercises References information Notes

By the time vou have completed this chapter, you should be able'.'to: relevant features of project management performance can be used to identify the current level development of organisation; ; Demonstrate the role of BPR, benchmarking and processes in the search for project process improvement: Design an effective implementation strategy new processes in project management; identify areas within project management that require further development. i

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Why is it that some organisations have well-developed project processes and others have something that closely resembles chaos? Surely each has the same commercial imperative and desire to be successful? Why also do some organisations become totally bogged down in structures and intensive documentation, losing sight of the reasons for their processes? In an effort to start to provide answers to some of these questions we will first consider the effects of such characteristics, and how they change over time. Some of the process characteristics associated with these effects can be identified. Subsequent sections then consider the approaches that organisations have taken in an attempt to change. The final section in this chapter considers the drivers for change, all of which must be in place before meaningful process improvement can be undertaken. There are many ways of characterising organisations, and for the purpose of this discussion we will consider their ability to meet basic objectives of time, cost and quality, and then to improve these over time. Four types of organisation become apparent. They are: • Group 1 - the flatliners• despite good intentions to improve, these make little or no progress in project performance. Mistakes are repeated and performance stays flat over time. • Group 2 - the improvers. Some improvement actions are put in place and performance shows some increase over time. • Group 3 - the wannabes. This group generally follows every initiative in the book, in an attempt to catch up with the best. • Group 4 - the world-class performers. This small number of organisations set an ever-increasing standard for performance. These are shown in Fig. 15.1. The figure shows a number of features of performance: • The performance gap between the best and 'the rest' is large; • The performance gap doesn't seem to be narrowed over time, indeed it appears that 'the best are better at getting better.'

372

Four - Develop

it

next time)

Performance

A

Group 4

Group 3

Group 2 • Group 1

Figure 15.i. Performance groups Table 15.1 Project management maturity stages Type

Characteristics

Group 1

Little by way of processes or disciplines. Every project is novel and little learning takes place as a result of project activities. External ideas rejected as being'not invented here'. Goal of projects poorly established, if at all.

Group 2

Some processes and systems in place, resulting in pockets of acceptable performance. Little learning from one project to another. Goal of projects sometimes established, and focused on conformance to objectives.

Group 3

Processes well documented and systems imposed as to how to run projects. Improvement based on trying to keep up with the best by imitating their processes, but limited by the constraints of system documentation. Goals of projects routinely established and focused on conformance to objectives.

Group 4

Processes mapped (seeProject Management in Practice at the end of this chapter) and based around a core, which is forever being improved. Learning evident within and between projects. Goal of project is to exceed the objectives and deliver the best project possible (performance).

T h e second of these points shows t h a t there are some f u n d a m e n t a l l y different mechanisms f o r improvement in place in the f o u r groups of organisations. L o o k i n g m o r e closely, t h e r e a r e s o m e characteristics of e a c h of these t y p e s of o r g a n i s a t i o n s t h a t c a n be d i s c e r n e d . T h i s is t h e i r level of ' p r o j e c t m a n a g e m e n t maturity'. T h e characteristics are s h o w n in Table 15.1. T h e s e c h a r a c t e r i s t i c s e n a b l e s o m e p r e d i c t i o n of t h e likely p e r f o r m a n c e of t h e o r g a n i s a t i o n a n d also represent a p a t h f o r improvement. While process changes (see f o l l o w i n g sections) are needed, a f u n d a m e n t a l change in the a p p r o a c h t h a t is t a k e n will be required t o move between the groups. M a n y o r g a n i s a t i o n s have moved f r o m g r o u p 1 t o g r o u p 2 - s h o w i n g the application of some systems t o their project m a n a g e m e n t . M o v i n g t o g r o u p 3 r e q u i r e s c o n s i d e r a b l e discipline, a n d this is usually imposed t h r o u g h rules a n d well-defined structures a n d d o c u m e n t a t i o n . While n o t a

improvingpriafeetperformance t 373

good vehicle for improvement, this does instil the necessary disciplines in the organisation. It is only when the procedures are eventually discarded and the organisation has the maturity to be able to take the standard systems and tailor them to each individual project and project team requirements that real improvement takes place. It is usual that a firm will need to move through the stages in sequence. Jumping stages is unlikely, as the disciplines learned at each stage are required later. In moving between the groups, a number of the following topics have been used as the means of generating the necessary changes.

I Business process re-engineering or BPR was one of the main management 'fads' of the 1990s. It resulted in dramatic headlines (which seem to appear with every new 'good idea' - see section 10.8), including 'Ford cuts accounts payable headcount by 75 per cent' and similar stories from the great and the good. The fundamental principle is that companies redesigned their processes to remove unnecessary elements and consequently reduced the time, labour and resources required to perform those tasks. The early writers on the subject (see, for example, Hammer, 1990) provided the necessary credibility that the idea required to make it of general interest. The main themes of BPR have been discussed in some detail alreadv in this book though not under this particular banner. The focus is on improving processes, and rather than the kind of incremental change suggested by the learning cycles identified in the previous chapter, the goal is for step change. This is shown in Fig. 15.2. There is always the tendency with such initiatives to make the whole thing sound considerably grander than it is. In reality, the excellent performers identified in the previous section were re-engineering their processes all the time. As one firm put it 'it is part of the way we work'. They did not draw the distinction between the grand processes of change suggested by BPR and the more incremental improvements that can be achieved every day in our organisations. There was some agreement in the steps to process change. These, predictably, should start with an examination of and be clear that the objective of the BPR is to create project processes that Performance

A •• •• Step change Incremental

change

Figure 15,2 incremental vs. step changes

374 I Phase Fout - Develop the process (do it better next time)

more closely meet the needs of the organisation as set out in their strategy. For instance, if the objective is to be the cheapest deliverer of projects, then the focus of the re-engineering process should be on cost reduction. The next step is the mapping of processes. It was noted in the previous section that only the most advanced organisations had process maps available -enabling everyone involved to be able to understand the process and analyse how improvements could be made. BPR has the same approach. The process objectives are stated at the outset and a process is designed to meet those objectives. This can then be compared with the existing process and changes made where necessary. Considering the impact on the organisation in which the BPR activities are being undertaken, the project manager has to consider the assumptions that underlie the existing processes and how these might be removed. Organisational rules and working practices are certain to be compromised by the changes. The objectives of activities will also be reassessed in line with a process rather than a function. The comfort of 'the way it has always been done' will disappear as processes are analysed. This may require that different people or organisations are used for tasks than has been the case in the past. The scope of such processes is not limited to the one organisation. Where projects affect many organisations, all these need to be involved as discussed in Chapter 12. In short, the case for arguing for continuous improvement is proven, while the case for going with BPR as described here is not. Trying to find the substance to it is difficult, and the notion of step changes, while often favoured by Western companies at one time, is not necessarily superior to the incremental route. Many firms have used such initiatives to improve performance and it is not always necessary to badge it as BPR Balfour Beatty, identified in the Project Management in Practice in Chapter 6, had implemented a Business Process Improvement Team. This provided the mechanism by which it was possible to attempt such changes in terms of both sourcing the necessary knowledge and some of the additional work that was required. In setting the objectives of the re-engineering process, many organisations have chosen to txyto become more 'lean'. This provides a set of principles that will guide the organisation in its re-engineering efforts and these are discussed following the section on benchmarking.

.

v

F r V ? ^ ^

This is another example of management jargon which has resulted in a large amount of business for the consultancy industry. Organisations are being told 'How can you be certain that you are as good as you say you are, unless you compare your performance with that of others?' This is a very persuasive logic, hut before engaging in any benchmarking activities, a deeper understanding of the possibilities and protocols should be explored. A benchmark is a reference point - some standard by which other phenomena are judged. It is a temporarily fixed point, with the location or magnitude decided

improvingpriafeetperformance t 375

by r e l e v a n t metrics o r measures. T h e original use of b e n c h m a r k s w a s claimed by the early m a p - m a k e r s w h o n e e d e d c e r t a i n reference p o i n t s by w h i c h t o j u d g e o t h e r s - in

this case in spatial distance along three dimensions from the reference point. The distances having b e e n assessed, t h e n e w p o i n t c o u l d a l s o be c o n s i d e r e d t o be a r e f e r ence p o i n t , t h o u g h t h e a c c u r a c y w o u l d be d i l u t e d t h e f u r t h e r o n e w e n t f r o m t h e original data. large-scale c o m m e r c i a l i s a t i o n of b e n c h m a r k i n g activities w a s b e g u n by R a n k X e r o x in 1979. M a n a g e r s f r o m its A m e r i c a n o p e r a t i o n s w e r e e n c o u r a g e d t o go t o v i e w h o w its J a p a n e s e o p e r a t i o n s w e r e b e i n g m a n a g e d a n d c o m p a r e their p e r f o r m ance. W h e r e t h e r e w e r e p e r f o r m a n c e differences, t h e m e t h o d s used w e r e n o t e d t o e x p l o r e t h e possibilities f o r a d a p t i n g the m e t h o d s t o their o w n plants. Initially fairly i n f o r m a l , the m e t h o d o l o g y h a s b e c o m e m o r e f o r m a l i s e d a n d is v i e w e d as o n e g o o d w a y of o b t a i n i n g ideas f o r i m p r o v i n g b o t h p e r f o r m a n c e a n d processes. In p r o j e c t m a n a g e m e n t , t h e a d o p t i o n of KPIs ( K e y P e r f o r m a n c e I n d i c a t o r s ) h a s b e e n t r i e d a c r o s s a r a n g e of sectors t o a l l o w s o m e p e r f o r m a n c e b e n c h m a r k i n g t o t a k e p l a c e . I n t h e c o n s t r u c t i o n sector, f o r i n s t a n c e , KPIs of p e r c e n t of p r o j e c t s delivered o n t i m e , b u d g e t c o n f o r m a n c e a n d c u s t o m e r - s a t i s f a c t i o n indices a r e b e c o m ing m o r e widely used, t h o u g h , as will be s h o w n , this is a very limited a p p r o a c h a n d o n e t h a t h a s n o t been w i t h o u t its problems. Indeed, this f o l l o w s a n o r m a l d e v e l o p m e n t w h e r e t h e initial a p p r o a c h t o b e n c h m a r k i n g involves c o n s i d e r a t i o n of very basic d a t a , usually f i n a n c i a l ratios, w h i c h p r o v i d e d a m e a n s of c o m p a r i s o n of t h e o v e r a l l e f f e c t i v e n e s s of m a n a g e m e n t . Figures w i t h o u t e x p l a n a t i o n of their m e a n s of collection a n d the m e a n i n g s of each, w i t h clear b o u n d s established as t o w h a t they include, a r e misleading. T h i s u n d e r s t a n d i n g of w h a t lay behind the n u m b e r s c a u s e d p r o b l e m s a t a large U K specialist m a n u f a c t u r e r w h e n its G e r m a n h o l d i n g c o m p a n y carried o u t a b e n c h m a r k i n g study t o c o m p a r e r a t i o s of d i r e c t t o n o n - d i r e c t staff. T h e U K o p e r a t i o n a p p e a r e d t o be s i g n i f i c a n t l y o v e r s t a f f e d w i t h n o n - d i r e c t s c o m p a r e d t o o t h e r c o m p a n i e s in t h e g r o u p . O n a n a l y s i s , h o w e v e r , t h e c o m p a r i s o n w a s n o t valid as t h e d e f i n i t i o n s of d i r e c t a n d n o n - d i r e c t e m p l o y e e s w e r e very d i f f e r e n t . T h e G e r m a n c o m p a n y , f o r example, c o u n t e d t r a n s p o r t operatives a s direct employees, w h i l e the UK o p e r a t i o n c o u n t e d t h e m a s s u p p o r t ( n o n - d i r e c t ) staff. T h e c o m p a r i s o n w a s b e t w e e n u n l i k e sets of statistics - t e r m e d 'apples a n d oranges'. T h e c o m p a r i s o n t h e r e f o r e d o e s n o t w o r k well. T h e n u m b e r ' s c a n t h e r e f o r e p r o v i d e u s e f u l d a t a , b u t w i t h c a v e a t s . Of m u c h g r e a t e r interest a n d p o t e n t i a l benefit t o the p r o j e c t m a n a g e r is t o c o n s i d e r t h e p r o cesses b e h i n d t h e figures. M a p p i n g p r o c e s s e s p r o v i d e f a r m o r e u s e f u l i n f o r m a t i o n on h o w particular constraints are handled, obstacles o v e r c o m e a n d problems solved. T h e s e c a n be collected t h r o u g h b e n c h m a r k i n g clubs, e s t a b l i s h e d w h e r e a g r o u p of i n d i v i d u a l s h a v e a p a r t i c u l a r interest, a n d m e e t t o d i s c u s s this. T h i s is being used t o s o m e effect w h e r e p r o j e c t m a n a g e m e n t p r o f e s s i o n a l s m e e t t o discuss p a r t i c u l a r issues. S u c h n e t w o r k i n g p r o v i d e s a n i n f o r m a l m e t h o d f o r b e n c h m a r k i n g processes, a n d it is o f t e n f o u n d t h a t p r o b l e m s b e i n g f a c e d by m a n a g e r s were m o r e easily solved by o t h e r s t h a n themselves (see w w w . b a t h . a c . u k / p r o j e c t m a n a g e m e n t / networks). T h e generation of b e n c h m a r k i n g d a t a d o e s h a v e clear benefits. T h e n a t u r e of t h e c o m p a r i s o n c a n be w i t h :

Î j é I Phase Fout - Develop the process (do it better next time)

functional projects - those conducted within the same functional part of the organisation; • internal projects - others conducted by the same organisation; • generic projects- process-related studies comparing projects with similar processes; • competitor benchmarking - comparison with competitors. Hie objective is to find how the best performers are doing and how these results are achieved. Thus a functional benchmarking exercise is clearly Limited to the level of improvement, but it provides a good starting point and is likely to be highly costeffective. The use of internal studies again develops benchmarking experience among staff and can be considered to be 'safe' as the information is developed and kept in-house. Generic processes are where the most benefit can often be gained, but where the comparisons are likely to be the most difficult. Consider the project activities associated with publishing a book. If the publisher wished to decrease the time to market, they might consider benchmarking themselves against one of the newspapers, who regularly have to take copy from writers and turn it into printed material within a few hours. For most textbooks, the development process takes months (7 months from-submission of manuscript to publication is normal). The methods or processes are similar, the end-product is considered to be very different. Competitive benchmarking is possibly the most difficult to execute effectively, due to the defensive attitudes of organisations towards their performance. This most certainly should involve a 'code of conduct', including retaining confidentiality of data. The activities do not necessarily involve site visits as much of the information can be collected and exchanged by telephone or e-mail. Other data is often in the public domain and, while it is almost always out of date as soon as it is printed, provides useful indicators, particularly where a project organisation is at the start of its improvement activities. Any criteria where data is gathered as part of the review process can be used to provide benchmarks. The minimum criteria are that an organisation consistently improves on its own benchmark data, and targets for improvement form an intrinsic part of organisational strategy. One key measure that is often cited in large benchmarking studies' is that of productivity. Most simply stated, this is the output achieved per unit of input resources. In operations management, this may be associated with units per hour of output cf production lines. In project management, while the measure can be applied to some of the execution phase of the project where repetitive tasks exist, applying it to oneoff activities is unlikely to be useful. It was stated in Chapter 11 that it is difficult to control activities where there is a non-tangible output, such as in design. As the output and the output rate are very difficult to define (designs produced per month does not consider the quality of the design and can focus attention on the wrong priorities - speed over quality or completeness), productivity at this level is also likely to be meaningless. Overall productivity measures (such as engineering hours per major design activity) are more useful but again focus on speed rather than quality. The achievement of 'right first time' is a worthwhile goal, and so measures of numbers of engineering change requests or manufacturing problems that are accredited to design are more relevant.

improving pria feet performance t 377

In a discussion of this vital aspect of performance assessment, Kaplan and Norton (1992) show how providing a kind of scorecard which contains both process and performance measures can be beneficial (demonstrated in Chapter 11).For each of the following categories, both goals and measures are constructed: financial perspectives (how do we look to shareholders?); • customer perspectives (how do customers see us?); • internal business perspectives (what must we excel at?); • innovation and learning perspectives (can we continue to improve and create value?). This kind of balance to measures can now provide the basis for benchmarking activities as the organisation seeks to improve its scores, as was discussed in Chapter 11. 2 A measure of activity-centred progress would be the number of improvement programmes being carried out within an organisation or the number of staff who have been through the quality improvement training programme. Measures of performance include the percentage improvement in customer satisfaction as a result of improvement activities and reductions in quality costs, for example.

The output of a benchmarking activity can be the data that establishes which organisation is either 'best-in-class' or even 'world-class'. These two terms are widely used and not always consistently. Best-in-class (BIC) implies that in one or other aspects of performance measure the organisation is rated as being the best within a limited class of organisations, such as a competitive group. This is often confused with being truly world-class, where the performance of that attribute would rank alongside the best in the world in that measure. A world-class company is one that is considered to be world-class in a number of measures. In the recent benchmarking exercise cited above, world-class companies were those that had achieved considerably better performance in measures of quality and productivity than their counterparts. These may be considered now to be benchmarks for other manufacturing industries. This discrepancy between what constitutes world-class performance and managers' perceptions of it was highlighted recently when a survey showed that 78 per cent of companies questioned said that they were world-class. On further investigation, only 2 per cent of these were achieving world-class levels of quality or productivity. From the above discussion, it can be seen that the definition of world-class performance is open to debate and that this is not always totally objective. More than one company can be world-class at any one time in any one sphere of activity, though the gap between the world-class performers and the others can be considerable. In general, the Japanese automotive assemblers are considered to be the epitome of such companies, though little research has been carried out in the project management environment. The way in which their operations have been improved has been summarised and can be adapted to the project environment.

I Phase Four" Develop the process (do i1 he iter next time]

The fundamental characteristics for being progressive can be compared to conventional organisations as follows (Suzaki, 1987): • structures (organisational) are flexible rather than rigid to accommodate changes in customer requirements. This must he within the context that has been discussed of changelconfiguration management. As discussed in Chapter 3, flexibility is not free; the organisation focuses on optimisation of the entire flow of projects through it, rather than through a single area or department (see below); • open communications from flat organisational structures as opposed to tall hierarchies leading to long chains of command (where messages are interpreted and changed at each link in the chain). This is a particular challenge for project managers, where they may not have direct authority over the individuals in their 'team' on whom they have to rely. The system for making important projects heavyweight matrix organisations is consistent with this objective; • agreements between parties (includingsuppliers) are trust-based rather than contractual; this reiterates the principles discussed in Chapter 12. As stated. there are particular problems with this approach for certain project-based sectors; • the skills base of the teams is wide to allow flexibility rather than narrow and specialist. The cross-training of individuals allows them to spend time outside their normal field of work (as described in the Hewlett-Packard example in Chapter 14, section 14.5). This also recognises the need for processes and process-thinking rather than functional thinking; • education and training are significant parts of work activity rather than inconvenient distractions from the work in hand. This is an area where there is so much opportunity for improvement in project management. Training often involves little more than a guide to using Gantt charts, network techniques and some of the basics, and many firms undertake it just so that they can tick the box on the Human Resources Training Record marked 'project management'. Unless this is placed in an appropriate structure, it is unlikely to be beneficial. As stated, there is little by way of rocket science here, except that it brings together all the themes covered in this book. Is lean project management the same as good project management? There is much to suggest rhat it is, but that the structures within which the project managers work are different. In addition, there is the treatment of the concept of waste not mentioned in either of the bodies of knowledge, and, given the costs of quality identified in the previous chapter, presenting a significant improvement opportunity. A lean approach to management (developed by Wornack et al., 1990), continues the ideas of Henry Ford who is quoted as saying: 'if it doesn't add value, it's waste'. This principle may be applied to the project environment as shown in Table 15.2. The first of these points concerns the flow of information through a project organas a manufacturing engineer would plan the routing of a product through a process. The focus is on the simplification of flows so that it becomes visible where problems and hold-ups are occurring. In order not to be seen to be idle, people tend to build up inventories of tasks to be completed, regardless of the consequences of this hold-up in the flow of information being progressed. Consequently problems get hidden. The role of simplification is to move the type of information flow from

improvingpriafeetperformance t 379

Table 15.2

principles applied to project

Line management

management

Integrated single-piece workflow produced just in time

Information treated as inventory and processed immediately rather than spending long periods of time waiting

Absolure elimination of waste

See section on seven wastes

Focus on global rather than local optima

Focus on achieving the goals of the organisation through this and other project activities and considering the project in this light rather than as a totally independent item (developsidea of the role of the stakeholders)

Defect prevention

Defea prevention

Multi—killingn team-based operations

Multi—killingn team-based projects

Few indirect staff

Few indirect staff

Information

Figure 15.3 Complex information flow around systems Information

Figure 1 5 4 Simplified

. now through

that shown in Fig. 15.3 to that shown in Fig. 15.4. In the latter case, there are no inventories. This means that periodically a person may complete their tasks with n o further work to be done. In this case, rather than them creating inventory for downstream activities, they may engage in other work through being multi-skilled. A p a r t f r o m becoming faster at processing information, the above leads t o improved responsiveness - customer requests and the inevitable changes can be implemented more quickly.

380 I Phase Four - Develop t h e process (ou it better next time)

In lean thinking, the seven wastes are identified as follows: • do not carry out activities above and beyond what is required by the customer in terms of either quality or quantity; • eliminate waiting time either for people or project information; • the movement of information, people or materials is generally a non-valueadding process; • eliminate the need for processes that generate the need for further processing; • eliminate the wastes associated with the building up of inventory (as above); • avoid the waste of motion - not having materials or information on-hand when needed and having to go and find them; • continuously strive to reduce the waste caused by defects or mistakes, as discussed in Chapter 14. Wherever possible: • tasks should be simplified - procedures are often needlessly complicated and open to too much interpretation; • tasks should be combined - putting together tasks through multi-skilling can eliminate the transfer time and reduces the need for handover information; • non-value-adding tasks should be eliminated, such as bureaucracy, constricting accounting systems and computer-planning systems, which absorb large proportions of managers' time, etc. The above represents some very basic disciplines which can be applied throughout the project organisation. While it is often tempting to seek technological solutions, 90 per cent of all improvement comes from the application of what is termed 'common sense'. Further improvement activities need to be focused on the entire value-chain or value-network. It is not unusual for 60 per cent or more of a project spend to be with external suppliers and, unless these are also engaged in improvement activities, the scope for performance improvement of your own organisation is distinctly limited. The concept of removing local optima is applicable here. For example, where a supplier provides you with materials that are required for the execution phase of a project and will be used at a steady rate during this phase, there is little point in their delivering the entire order at the start of work, even though their machines may be geared to produce in such quantities. This would provide a local optimum, namely at the suppliers. The purchaser now has a stock or inventory which will require storing, checking and possibly guarding - all activities that involve costs. The optimum can be redistributed to benefit all parties, with staged deliveries, for example. Helping suppliers to become more responsive is part of many initiatives currently being promoted. Better utilisation of their expertise is provided through the Toyota production system, where suppliers are given a rough specification for the needs of a product-and are required to carry out design activities themselves. In this way they can achieve better designs, as their manufacturing processes can be accommodated in the component design.

improvingpriafeetperformance t 3 8 1

15.5

Making It Happen - the Three Pillars of Change The performance and rate of improvement differences described at the start of this chapter provide some interesting material for the management researcher. Why do such differences exist? The answer does not lie with individual project processes but with the fundamentally different approach to change that underlies it. Research showed that these differences were the result of a large number of factors, but that they could be reduced to three main themes. These are shown in Fig. 15.5.

Figure 15.5 The three, pillars . change

Figure 15.5 shows that all three of these need to be in place f o r change in processes to occur. For instance, referring back t o the Balfour Beatty case from Chapter 6 again, the implementation of critical chain methods worked well initially, because all the pillars were in place. When one of these was removed, the changes were reversed over time, despite the gains achieved. The pillars and their constituent activities are summarised in Table 15.3.

Table 15.3 Key change issues Strategy deployment

Knowledge management

Strategy/policy deployment Prioritisation cf changes Drivers for change

Organisational learning Explicit structure for sources cf change ideas Systematic evaluation of new ideas pre-implementation

(internal/external)

Coherence

Implementation

Measurement cf impact cf changes Implementation methodology

/ Strategy deployment This has been discussed in Chapter 3, and throughout this text, with explicit strategy driving the decision-making processes of the organisation. The elements of this include how the organisation determines what to change and therebv avoid the problem of 'change paralysis' discussed previously where there are so many change

381 I Phase Four - Develop the process (do it better next time)

possibilities t!hat n o - o n e k n o w s w h e r e t o s t a r t . C o h e r e n c e is also v i t a l - s t r a t e g y ensuring that all changes are moving the processes in one particular direction. The nature of the drivers for change here is interesting. Many organisations cannot change until they are on the very edge of extinction. This is an extreme example of a driver. Other drivers for change are more usually internal initiatives or customers demanding improvements.

2 Knowledge

management

In the previous chapter the role of learning before doing and learning by doing was discussed. The themes that need to be addressed are relevant to this. Specifically, how do we identify potential improvement targets and the means to achieve them? How do we evaluate the possibilities and identify the limited range of issues that can be addressed at one time? 3 implementation As a result of pressure from their customer, a large automotive supplier, a firm implemented a number of new tools and techniques. At least their procedure documents said that they had implemented those tools and techniques. People were trained in their use and pilot projects established, but it never went further than that. Why? Very simply, the measures by which people were assessed were not changed. Therefore, after the hype, the practices reverted to normal. In this case, the implementation failed also because there were problems, and there was no-one around with the necessary expertise to assist in finding solutions. Organisations trying new ideas almost always adopt the 'poke-it-with-a-stick' method. If they don't get bitten, they may pursue it further. Or they may not. This is hardly the kind of systematic trial and evaluation that would lead to some conclusion as to whether the changes: • were a success and should seek wider application; • were a limited success and should be developed further; • were a complete disaster and should be ditched forthwith. Without relevant measures in place, practitioners are unable to be objective about the change. The message from the implementation themes is that measures should be put in place to identify if the strategic objectives of the change are being met, and that implementation includes full training and support for changes. Such support may be required for a considerable period after the initial implementation. The three pillars of change must all he in place for any change process to be successful. Indeed, any change is in itself a project, and one that is consistent with the approaches discussed in this text can show significant benefits from being managed in a way that shows people in the organisation what good project management looks like.

improving pria feet performance t 3 8 3 r

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C h a p t e r 2 used the 7-S structure t o identify the m a i n issues f a c i n g project managers. T h i s structure is also ideal f o r the discussion of the requirements a n d likely changes in t h o s e issues in the future. T h e f o l l o w i n g is a s u m m a r y . •

•

•

• •

•

•

Strategy - the system f o r projects t o become a m e a n s f o r the execution of strategy a n d a m e a n s t o e a r n value has been discussed at length in this text. In f u t u r e , the role of stategy will be m o r e explicitly recognised by organisations, resulting in a n increase in the use of devices such as the aggregate project plan. This will reduce c o n f l i c t w i t h i n a n d b e t w e e n o r g a n i s a t i o n s . M o r e o v e r , t h e ability t o i m p r o v e repetitive processes is being exhausted in many industries. They will have t o look t o their non-repetitive processes (i.e. their projects) f o r i m p r o v e m e n t in the future. Structure - a t present it is c o m m o n f o r organisations t o fail t o balance the i m p o r t a n c e of a p r o j e c t w i t h t h e s t r u c t u r e used f o r it. As p r o j e c t m a n a g e m e n t asserts itself as of i m p o r t a n c e w i t h i n organisations, m o r e a p p r o p r i a t e structures will be used. F u r t h e r m o r e , o r g a n i s a t i o n s will have t o begin w o r k i n g outside the existing s t r u c t u r e s - using h y b r i d s a n d n e w structures of their o w n t o achieve their objectives. Systems - we will continue t o see an increase in the visibility of project systems, with visual control being the driver. There is a challenge f o r IT providers t o p r o duce project m a n a g e m e n t s o f t w a r e t h a t will help this process. Staff - the selection of staff f o r p r o j e c t s needs t o be m o r e objectively m a n a g e d . T h e tools a n d techniques are available; it is vital that they find wider application. Skills - t h e skills o f t h e p r o j e c t m a n a g e r will increase i n value as the c h a n g e s n o t e d in t h e section a b o v e o n s t r a t e g y s t a r t t o t a k e place. In m a n y industries, people are given project responsibility because of their technical competence in o n e o r m o r e disciplines. In f u t u r e , t h e skill-set of t h e p r o j e c t m a n a g e r will become better recognised a n d valued by organisations. Style/culture - this has been used by m a n y organisations as a reason f o r changes n o t being m a d e t o their w a y of working. It is vital t h a t in future, m a n a g e r s t a k e responsibility f o r t h e c u l t u r e t h a t they c r e a t e a r o u n d t h e m a n d f o r t h e i r o w n style. Awareness of this should be routine, given t h e a m o u n t of research t h a t h a s been carried o u t in rhis area. As f o r staff selection, there are well-developed tools a n d techniques f o r m a n a g e r s t o use in this respect (e.g. t h r o u g h cultural audit). T h s i r application will increase. Stakeholders - t h e m a r k e t i n g of a c h i e v e m e n t s t o s t a k e h o l d e r s is in its relative infancy. T h e improved m a n a g e m e n t of the i n f o r m a t i o n that s t a k e h o l d e r s have is a n i m p o r t a n t area in w h i c h p r o j e c t m a n a g e r s will need t o w o r k alongside their m a r k e t i n g colleagues.

O n e f u r t h e r issue concerns all the above, a n d t h a t is learning. O r g a n i s a t i o n s and individuals in m a n y roles, n o t just project managers, are generally p o o r a t learning f r o m their o w n successes a n d failures, b u t particularly bad a t learning f r o m the successes a n d f a i l u r e s of o t h e r s . It is a f a c t t h a t t h o s e o r g a n i s a t i o n s t h a t l e a r n t h e f a s t e s t are a l s o t h e best p e r f o r m e r s . T h e m a j o r challenge f o r p r o j e c t m a n a g e r s is

I Phase Four - Develop the process (do it better next time!

how to bring in the necessary knowledge (both managerial and technical). All the issues from the 7-S given above provide potential areas for improvement. Part of the skill of the project manager is going to be identifying where the major benefits will be gained and the changes that will be needed to realise them. This will require a very wide knowledge of both theoretical and practical aspects of project management. It is noteworthy that this knowledge is rare in practitioners, but it is readily available in many publications on the subject. One further aspect that I have noticed coming into the lives of the professionals that I have contact with is that their working lives must fit with their wider goals. The structures of regulating work by rational means are well understood in the context of providing aggregate project plans, and considering the scheduling of individuals as a non-elastic resource. The new application of this is to themselves. After all, why should individual project managers have to tolerate the notion that they would soak up any shortfalls in the resource requirements by compromising on their home lives? As stated in previous chapters, there is considerable personal application of this project management knowledge, and we are only just seeing its application beginning. 15.7

Summary There have been many different improvement initiatives that have tried, and in most cases, failed to revolutionise the ways that we work. Project management is not one of these, whatever people may try to do with it. It is a business basic, a skill-set and will be required long after current business forms and firms have ceased to exist. Moreover, it is creative, requiring the greatest personal input? Some of the major changes that have affected project management in the recent past are BPR, benchmarking and the lean paradigm. BPR relies on step-changes, and many firms have pursued initiatives to try to achieve this. It is suggested that regular, incremental improvement is likely to be more successful, but that the process of redesigning core processes is valid. Benchmarking has only just begun to have repercussions for project management and has considerable real-world value still to offer the vast majority of practitioners and organisations. Comparison of processes will be the area that offers the greatest scope for benchmarking. Lean projects are still few and far between, though the principles are largely already imbedded in 'good project management.' The area that differs is in the treatment of waste and its pursuit. These ideas are fine, but are nothing more than 'of theoretical benefit' if they cannot be implemented. Research suggested that there are three pillars of change - those of strategy deployment, knowledge management and the actual practices of implementation. If any one is missing, the change process will fail. This is key to gaining change and improvement in project management processes. There are many areas still requiring investigation in project management. A list of topic areas was suggested, but given the nature of the area, these should he viewed as fluid. As an academic discipline, the comment by Turner (1999) was that 'project management as a subject is not over-burdened with theory' suggests the potential for development of the area.

J ITS praying project performance I 385

In conclusion, for the aspiring career project manager, there is a significant opportunity. With the increased recognition of the contribution of project managers will come greater rewards. Continuously improving our own processes should be the goal of every project manager. The knowledge exists: we need to find ways to apply it, mindful of strategic requirements and in a way that is open to evaluation. In future, we will need to be able to manage not only the improvement process but also its speed. Now there's a challenge that may also turn out to be great fun. Here's hoping.

New product

development

j

Toyota Forklift Truck - the X300 pre-j

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The whole design cycle is described by the system shown in Fig. 15.6 As can be seen, each step of the process is identified and quality assurance procedures assigned. The terminology used in Fig. 15.6 is as follows: * PPC - process plan chart: flowchart showing the steps involved • FMEA - failure mode effect analysis: product or process review method, which assesses the likelihood of failure, the effect or severity of that failure and the probability of its being detected • QCP - quality control plans • Q A - quality assurance Assigning the procedures in this way at the outset enables quality to ne 'built in' to the product. Processes are designed so that the right people have the right information at the right time and designs should be 'right first time'. The review of designs is an ongoing activity, rather than one that takes place at the end of the process. This ensures that checks are made very close to the time each part of the process is carried out, and amendments are incorporated before further cost is added. Quality assurance starts with the information that the design process is being fed. The market research (note the departments involved from Fig. 15.6) provides an explicit statement of customer needs using a 'Quality Deployment Table', the output of a process known as 'Quality Function Deployment'. This method reduces the risk inherent in converting customer attributes into the language that the product developers understand, namely engineering characteristics. Further data on actual customer usage of products is obtained in this way, in this case from visits to dealers as well as customer and market research carried out by outside companies. Tools such as FMEA (see above) are applied to (a)designs at an early stage to ensure robustness and (b)the process by which the final products are to be made. The review systems for product planning, product design and product preparation are shown in Figs 15.7, 15.8 and 15.9. A very high degree of systematisation exists, though the driver is not bureaucracy but customer satisfaction. Information flows are studied and, where work is becoming held up (engineering'bottlenecks'), additional resources are provided to identify and solve the causes, preventing delay.

Market Toyota Division office Marketing Motor vice president department Corp.

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Figure 25.6 Toyota X300 project design cycle (Source: R e p r i n t e d w i t h p e r m i s s i o n of t h e Asian Productivity O r g a n i z a t i o n from K a n e m i t s u Tsuzuki, in Cross-Functfonal Kenji K u r o g a n e (ed.). Copyright - J 9 9 3 by t h e Asian Productivity O r g a n i z a t i o n )

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(Source: Reprinted with p e r m i s s i o n of the Asian Productivity O r g a n i z a t i o n from KancmltsuTsuzuki, i n Cross-FunctionalMonagement, Kenji Kurogane (ed.). Copyright © 1 9 9 3 by t h e Asian Productivity Organization)

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Figure 15.8 Product design system (Source- Reprinted w i t h p e r m i s s i o n of the Asian Productivity Organization f r o m Karsemitsu Tsuzùki, in CrossFunctionat Management, Kenjt Kurogane (ed.). Copyright © . by t h e Asian Productivity-Organization)

3 9 « t P h a s e Four • Develop the process (do it better next time)

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figure 15,9 Production preparation system R e p r i n t e d w i t h p e r m i s s i o n c f t h e Asian P r o d u c t i v i t y O r g a n i s a t i o n f r o m K a n e m i t s u T s u z u k l ,

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T h e t r a n s f e r t o p r o d u c t i o n w a s c o m p l e t e d w i t h a h i g h d e g r e e of c o n t r o l . T h e p r o d u c t specifications w e r e identified a n d t r a n s f e r r e d t o t h e r e q u i r e m e n t s of t h e m a c h i n e s o n w h i c h the p r o d u c t s w e r e t o be m a d e (process c a p a b i l i t y ) . An objective of design w a s t o w o r k w i t h i n t h e capability of t h e available p r o d u c t i o n technology. Similarly, r a t h e r t h a n w a i t f o r the p r o d u c t t o arrive in p r o d u c t i o n f o r w o r k e r s t o be t r a i n e d o n its m a n u f a c t u r e , t r a i n i n g w a s s c h e d u l e d as t h e t r a n s f e r p r o c e s s w a s ongoing. 1 Design review 1 ( D R 1 ) is the process f o r e n s u r i n g t h a t t h e u n i q u e selling p o i n t s of a p r o d u c t a r e g o i n g t o be a c h i e v e d by t h e o u t l i n e design. T h e s e s h o u l d n o t h a v e b e e n r e m o v e d o r c o m p r o m i s e d by t r a d e - o f f s in t h e p r o c e s s . A t t h e s a m e time, c o m p e t i t o r analysis will reveal h o w l o n g these f e a t u r e s will p r o v i d e c o m petitive advantage, based o n a k n o w l e d g e of their p r o d u c t s a n d design capability. 2 Design reviews 2,3 a n d 4 ( p r o t o t y p e d e s i g n review, r e v i e w f o r s h i f t i n g t o p r o d u c t i o n , a n d p r o d u c t design r e v i e w ) e n s u r e t h a t t h e quality objectives a r e being met. This process used t o be carried o u t by a user g r o u p , w h o w o u l d be a s k e d t o evaluate prototypes prior to production, but was abandoned due to cost and unreliability. 3 D R 5 ( p r o d u c t i o n p r e p a r a t i o n r e v i e w ) p r o v i d e d a c h e c k - p o i n t on t h e p r o d u c t i o n p r e p a r a t i o n p l a n , p a r t i c u l a r l y o n e l e m e n t s of p r o d u c t quality, availability a n d cost. T h i s is a feasibility check a n d d o e s involve a c o r p o r a t e e v a l u a t i o n p o i n t . As p r o d u c t i o n engineering h a d been involved f r o m a n early stage, however, the p r o d u c t i o n p r e p a r a t i o n plan w a s very rapidly p r e p a r e d , w i t h m i n i m a l a l t e r a t i o n s o r a m e n d m e n t s t o t h e p r o d u c t design. 4 D R 6 (review f o r s h i f t i n g t o p r o d u c t m a n u f a c t u r i n g ) w a s t h e 'engineering signo f f p o i n t , d u r i n g w h i c h n o t only p r o d u c t q u a l i t y w a s a g a i n reviewed b u t a l s o t h e checks o n process capability, staff t r a i n i n g a n d t h e readiness of t h e m a n u f a c t u r i n g a r e a t o a c c e p t the n e w product. All t h e s e p r o c e s s e s e n s u r e d t h a t t h e p r o d u c t w a s n o t ' t h r o w n o v e r t h e w a l l ' b e t w e e n d e p a r t m e n t s , a n d t h a t t h e r e w e r e n o s u r p r i s e s w h e n t h e p l a n s l a n d e d in o n e d e p a r t m e n t f o r f u r t h e r processing. All t h e time, t h e likely o u t c o m e w a s being reviewed against objectives a n d t h e t h e m e of it being a s u p e r i o r p r o d u c t reiterated. T h e i n v o l v e m e n t of all d e p a r t m e n t s in t h e d e v e l o p m e n t process e n s u r e d a very r a p i d d e v e l o p m e n t t i m e a n d p o l i c y d e p l o y m e n t t h r o u g h t h e p a r t i c i p a t i o n of high-level staff e n s u r e d consistency w i t h c o r p o r a t e objectives. T h e a b o v e w a s a highly successful project w i t h a highly competitive p r o d u c t b e i n g available o n time, a n d w i t h i n t h e d e v e l o p m e n t budget. F u r t h e r i m p r o v e m e n t s in t h e p r o c e s s a r e p l a n n e d , based o n the results of t h e r e v i e w processes. E a c h p r o vides a basis f o r f u t u r e lessons t o be learned a n d f o r r e f i n e m e n t of t h e p r o c e s s a n d its c o n t r o l system.

Case discussion 3 Identify w h y t h e v a r i o u s design reviews should t a k e place. H o w m i g h t they r e p resent a n i m p r o v e m e n t over a n d a b o v e a single design review process at t h e end of the p r o d u c t design s t a g e ?

. I Phase

-Develop'he process (do

time'!

2 Why is the 'voice of the customer' so important in this process? 3 Discuss the nature of the changes that can occur in passing information about customer requirements from a marketing department to the engineering department and to the manufacturing department. 4 Show how relating the customer attributes, in their own words, to 'engineering characteristics' may help the provision of a product that is more in line with their needs.

flatliners wannabes rate of improvement BPR KPIs lean waste strategy deployment implementation

improvers world-class core processes incremental versus step-change benchmarking best-in-class information flow knowledge management

1 How might an organisation recognise their level of performance and plot a way forward? 2 Why are the best 'better at getting better?' Are there any limitations to this? 3 Identify the role that benchmarking and BPR can play in improving project performance in organisations. What are the potential drawbacks? 4 Are the principles of 'lean' truly applicable to project management? What are the limitations likely to be? 5 Carry out a review of the organisational change literature. Identify the overlaps with that on project management and, in particular, section 15.5. 6 What are the personal applications of the work that you have covered on project management? Draw up a list of five areas of personal change that you would want to make following on from this material. 7 Identify an overlap with another management discipline - such as marketing, finance, operations, HRM - and consider how this material has direct relevance to project management. What are the aspects of each of the subjects that overlap that could be developed?

Hammer, M. (1990)'Reengineering Work: Don't Automate, Obliterate', Harvard Business Review, July-August, pp. 104-12. Kaplan, R.S. and Norton, D.P. (1992)'The Balanced Scorecard - Measures that Drive Performance', Harvard Business Review, January-February, pp. 71-79. Schaffer, R.H. and Thomson, H.A. (1992)'Successful Change Programs Begin With Results', Harvard Business Review, January-February, pp. 80-91. Suzaki, K (1987)TÎ>e New Manufacturing Challenge: Techniquesfor Continuous Improvement, Free Press, New York. Tsuzuki, K. (1993)in Cross-Functional Management, K. Kurogane (ed.), Tokyo, Asian Productivity Organization. Turner, J.R. (1999) ' Editorial: Project Management: A Profession Based on Knowledge or Faith?' International Journal of Project Management, Vol. 17, No. 6, pp. 329-30. Womack, J.P, Jones, D.T.and Roos, D. (1990) The Machine That Changed The World, Associates, New York.

• K H M K ^ H K I ^ t ^ ' V I SIÉ

www.bprc. warwick. ac.uk - part of a network of business process resource c entres i n the UK, Grover, V. and Malhotra, M.K. (1997)'Business Process Reengineering', Journal of Operations Management, Vol. 15, pp. 193-212. Kerzner, H. (1998)'In Search cf Excellence', in Project Management: Successful Practices in High-Performing Organisations, Van Nostrand Reinhold, New York. Maylor, H. (2001) 'Beyond the Gantt Chart', European Management, awss^i,, Vol. 19, No. 1, pp. 92-100. Sobek, D.K. II, Liker, J.K. and Ward, AC. (1998)'Another Look at How Toyota Integrates Product Development', Harvard Business Review, July-August, pp. 36-49. Winch, G. (1996) 'Thirty Years of Project Management: What Have We Learned?'

www.bprc.warwick.ac.uk/repwinch.html

Notes 1 Such as the Worldwide M a n u f a c t u r i n g Competitiveness Study, Andersen Consulting, 1995. 2 The focus on results and scores is echoed by Schaffer and Thomson (1992), w h o contrast the p e r f o r m a n c e of results-oriented initiatives with those of activitycentred programmes. 3 Some may go as far as saying that it is 'art'.

A.1 ISO 9000 A.2 PRINCE2 A.3 ISO 14000 Project management in practice: Implementing BS-EN-ISO 9000 in a health service environment Project management in practice:To PRINCE or not to PRINCE? Further information

ISO 9000 iSO 9000 evolution Early quality systems were sets of procedures which developed with the emergence of international standards setting out how such systems should be constructed and operated. The first formalised specifications for quality systems were developed by military purchasers, who attempted to provide a generic standard for systems that would ensure that the specific needs laid down in procurement contracts would be met. These relied heavily on the requirement for checking or inspection actions quality was simply 'conformance to specification'. Such systems would frequently cause conflict between the people who were carrying out the tasks and the inspectors, as the implicit assumption was that it is the people at the task level who are to blame for errors. (Demingargued for many years that it is the management system that is to blame for over 80 per cent of operational errors.) These military standards, including AQAP 1 (Allied Quality Assurance Publication), have been used for 20 years by suppliers to NATO armed forces. These and other standards (DEF-STAN 05-21,"05-24, 05-29) provided the basis for the first UK commercial standard - BS 5750 (1979).This was amended and brought into line with the ISO 9000 series of standards in 1987 and subsequentlyrenamed, along with the equivalent German and International standards, as the BS-EN-ISO 9000 series in 1994. Most ,of the major automotive manufacturers have their own

Appendix 1 3 9 5

standards in addition to this which they require their suppliers and contractors to work cnder (Ford's Q l , Rover's RG2000). Recently there have been moves to integrate their requirements, thereby simplifying the task for suppliers who service more than one manufacturer. The standards provide details of the minimum specifications for systems, based on procedural adherence to ensure the quality of the process. They should never be taken as a guarantee of the absolute quality level of the outputs of the system. They set out the way in which the systems should be operated. The extent of the impact on the organisation depends on the particular standard chosen. BS-EN-IS0 9001 is the most extensive covering design, development, production, installation and servicing - the majority of the product life-cycle. BS-EN-ISO 9003 covers only final inspection and testing. The former will be discussed here ;as the commercial standards that are the most widely used. From the language used in the specifications (see below) it is clear that the standards were developed for application in the manufacturing industry, particularly for contract manufacturers. However, the organisations that have applied the standard to date include banks, dentists, electricians, academic institutions(l), road recovery firms and distribution/logistics companies. There is clearly the need for interpretation of a generic set of rules to the specific situation. To enable this process, the BSI (British Standards Institution) has published a series of guides to accompany the standards, e.g.: • BS-EN-IS0 9 0 0 0 - 1 entitled 'Quality Management and Quality Assurance Standards; Part 1: Guidelines for selection and use'. BS-EN-IS0 9 0 0 4 - 1 entitled 'Quality Management and Quality Systems Elements; Part 1: Guidelines'. BS 5750 Part 8: Guide to the Application of BS 5750 : Part 1 to services. • BS 5750 Part 13: Guide to the Application of BS 5750 : Part 1 to the development, supply and maintenanceof software.

ISO 9000 requirements The twenty requirements of the standard BS-EN-ISO 9001 (2000 ; are paraphrased below. 1 Management responsibility - there must be a defined management representative to provide a single point cf contact for customers. 2 Establish and maintain a documented quality system. 3 Establish and maintain a system for reviewing customer contracts to ensure that it brings together product offered and required. 4 The design process shall have a quality control system on inputs, outputs and the process itself. 5 Document control - all documents should be controlled to ensure that the current issue is the only one in use. 6 Ensure that the purchased product conforms to specified requirements, e.g. through auditing, and then supply under certificates of conforulance or inspection of the incoming product.'

3 9 6 I Appendix

7 Where a customer supplies a product for you to work on, it must be identified as belonging to the customer. 8 A l l products must be labelled during processing and must be traceable to records of component parts. 9 Processes should have the necessary degree of process control. 10 Need to keep receiving, in-process and final inspection and test records. 11 Any measurement equipment used must be labelled and calibrated as well as being suitable for the application (no mention, however, of measurement capability). 12 The product must be identified so that the inspection status (awaiting inspection, inspected and passed, failed or concessioned) is immediately obvious. This may be through the use of marked bins or appropriate tags. 13 Procedures must be identified so that when a non-conforming product is produced, there is a system for dealing with it. 14 Procedures must be identified for preventing recurrence of non-conformances through the analysis of defective data, procedural amendments, etc. 15 The product needs to be handled and stored so that there is no damage or deterioration in the product or accompanying documentation. 16 Procedures are required for the identification, filing, indexing, storage, maintenance and disposition of records. 17 'The supplier shall carry out a comprehensive system of planned and documented quality audits.' 18 Procedures need to be set up to identify needs for employee training and to ensure that records are kept accordingly. 19 Servicing must be carried out in accordance with the contract, if specified. 20 Statistical techniques must be used where appropriate. major requirements from the point of view of the project manager include: • Point 2 - there is a need to provide a 'quality manual' to describe how the system works. This is a hierarchical series of documents which addresses each of the points within the standard and is structured as shown in Fig. A.1. At the top level is the statement of policy (the policy document) which outlines the aim of the Policy document

Functionaldocuments

Proceduraldocuments

Associated documents

Figure A,i Hierarchy of quality system documentation

Appendix

1

397

system and the structure and names of the documents below it. At the next level is the functional documentation which provides statements as to how each of the functional areas is organised. Below this are the procedural documents, which state how each piece of work is to be carried out. At the lowest level are reference documents such as technical data manuals (e.g. for materials or machine specifications). • Point 3 - the project manager must establish regular contact points and formalised review meetings so that the assent of the customer/sponsor to progress is gained and that the original requirements are regularly reviewed. • Point 4 - treating one-off activities such as design as a process and requiring control of these requires much of the 'art' of such processes to be expressed as science. • Point 17 - once the system is in place (documented and operational) the system needs to be audited in a similar way to financial auditing. Point 18 - people need to be appropriately trained to carry out their tasks. The project manager must be able to verify this through the production of training certificates, course records, etc. This process has been helped recently by the advent of National Vocational Qualifications (NVQs).

Obtaining

certification The process of implementing a quality system to the requirements of a recognised specification should follow the route below. 1 Establish the reason for wanting the system - is it simply to obtain business through having certification or will it provide an advantage in a competitive bidding situation? Unless this reason is established at the start of the programme of implementation, it is unlikely to be effective. It is not unusual for an organisation to take two years to have implemented such a system fully, if the aim is to achieve recognition through having the quality system approved and certified. 2 Train people in working to the requirements of the system, including the preparation of documentation. This is a major task, and one that is particularly difficult for project organisations. The intention is to provide a set of procedures which describe in detail how each job will be performed. In project organisations, making these procedures generic enough to cover the variety of work that is carried out can be a real challenge. Similarly, convincing people that when they work outside the existing procedures their actions have to be documented is often fraught. People will need to be trained in the assessment of systems to provide for step 4. 3 Create the documentation including the necessary reference manuals. 4 Carry out an internal audit (check whether procedures are being adhered to) and review (consider the efficacy of the procedures). This should be done initially by someone within your own organisation, though it is normal for it to be someone outside your immediate function. Set a plan for the implementation of any changes identified by this process. 5 Have your systems audited by an external auditor from a registered assessment body. The progression from this audit is shown in Fig. A.2.

3 9 8 I Appendix

Figure A.2

.

following external quality system audit

6 If you are granted 'registered firm' status, you may carry the BSI logo on your stationery and other publicity material. Your organisation will then be subject to periodic audits (usuallyannually) as well as 'flying visits' which are announced at 24* hours' notice. The process of accreditation is not simple for an organisation going through it for the first time. Gaining accreditation can involve the use of consultants to provide services ranging from training of staff to providing you with a pre-written quality manual. This latter option is not to be recommended as much can be gained from compiling your own, through improved understanding of the processes and people then having ownership of that part of the quality manual. For the project organisation, many of the structures necessary for compliance with such a standard will already be in place. However, where this is a requirement, the project manager should be aware that this provides an extra workload for team members - the approval process alone can absorb thousands of working hours. Where people are brought in on short-term contracts, the documentation services and control systems are likely t o have to be provided centrally. The checks and administration, which affect every part of the organisation, will require an ongoing commitment of time. This must be built into the schedules. Expecting people to do it as an additional activity for which no time has been allowed is unreasonable and will certainly result in a system which frequently falls down.

Appendix

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399

Preparing quality manuals using One of the major challenges of attempting to gain cemfication to a recognised standard such as BS-EN-IS0 9001 is the volume of paperwork that has to be generated. For the project organisation particularly, the timescale in which this has to be completed will be short, and so it is often viewed as a burden. The BSI now recognises certain flowcharting methods as being valid replacements for large quantities of text. These have the added benefit of providing a method by which people can be helped to understand processes, which can in turn form the basis of improvement activities. Figure A.3 is a form of process map, which shows the means for meeting the criteria set out in section 5 of the standard (DocumentControl).

PRINCE2 (Projects IN Controlled Environments) is a structured method for managing projects, small and large. It is the accepted standard for the UK government's Central Computer and Telecommunications Agency (CCTA) and was revised in 1996. As a standard for project management, it is widely used in the IT industry and is finding application in other sectors. PRINCE2 identified eight key processes, for which it lays down standards as to how they should be carried out. These are as follows: 1 Directing the project - carried out by the senior management team (previously called the project sponsors). These are the high-level decision-makers who define the need for the project, the resources to be allocated to it (if at all) and whether it should continue (if ongoing). 2 Planning a project - an ongoing activity which, using specified methods (many of which are identical or similar to those that are discussed in previous chapters), provides a model of the activities, their sequence, duration and resource requirements and associated risks. 3 Starting up a project - once the project has received approval, the project resources need to be organised. This starts with the appointment of the management team and assigning their individual objectives. A plan of work needs to be drawn up leading to the terms of the contract between the project organisation and its customer. 4 Initiating a p r o j e c t - this part of the process results in the overall project strategy and sets the criteria against which it will eventually be judged. 5 Controllinga stage - once the project activities have started in earnest, tb 1 s activity includes those aspects of control and problem-solving required to ensure that the project meets the original objectives. 6 Managing product delivery - where there are multiple teams working on different aspects of the project, this process is vital to ensure that each knows their responsibilities and their interfaces with other parts of the project, and that activities are not omitted because they were not properly allocated. 7 Managing the stage boundaries - at the end of each stage, to fvynrrt on the -progress and problems encountered in that stage and their implications, and following this the plans for the next stage.

4S0 I Appendix

initiator of document change

Copy holder

Management representative

5.2 DOCUMENT APPROVAL AND ISSUE Ensure documented quality system and records are maintained - appropriate issues available to all who need them? - invalid/obsolete documents removed from place of work, and either destroyed or suitably identified.

5.3 DOCUMENT CHANGES identify need for document c h a r g e

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Request change

It Check impact on quality system

Ï Check impact on compliance to standard

Approve change

Issue new procedures and a m e n d m e n t record

1 Receive new procedure and amendment record

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oyold procedure, return amendment confirmation

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Communicate change to all people involved In change process

I

Retain old procedure and a m e n d m e n t record for audit

Figure A.3 Document approval and issue criteria i.Si

Excels is c o n s u l t a n t s )

Appendix

1

417

8 Closing a project - shut down the project systems, provide repci rts and .kedback for future process improvement, establish the performance of the proiect relative to the original objectives. All these aspects would normally be termed 'good project management'. The difference here is the level of structure and documentation that is required by the standard. Project structures - including the roles - are highly defined, for example the requirement of having a project board to oversee the project activities and its composition. This board has a number of specific roles which provide some differentiation from mainstream project management: • project assurance - the ongoing tasks of ensuring that the outcome of the project conforms to the criteria specified at the outset and that business risks are managed (within certain preset tolerances); project support ( o p t i o n a l ) - providing a technical and man; esource, where required, to the project team. This organisational requirement has many similarities with the arrangement suggested in the previous chapter, where a senior management team was involved in the management of aggregate project plans. The role is similar, as it maintains an overview of the project in the context of all the organisation's activities. It differs in the element of project assurance that PRINCE2 specifies (this would normally be the responsibility of the project manager). The project board lacks the main strategic concerns of the senior management committee. Subsequent to the organisational requirements, PRINCE2 specifies particular objectives and requirements of the planning process. These are helpful for the project manager in providing a detailed structure to their considerations. There are certain pieces of documentation that require completion. In addition to the conventional project documentation, these are: • quality log - a record of any checks carried out on the product or on the process, including the nature of the checks and a signature of the person carrying them out; issue log - a record of any problems experienced and any changes made as a result of these; • risk log - as a means of providing ongoing control to show that risks were actively managed, this document identifies the main risks associated with the project and the control actions (see Chapter 8) that were carried out. PRINCE2 provides bureaucratic controls on the planning and execution of projects. In this way, it forces the identification of some of the potential problems that may arise in the project and does stress early conflict resolution - a feature of much of the recent literature on project management. It is limited, however, by its approach. It focuses on the 'product', usually a computer program or system, and does not provide any guarantees of success. Indeed, there have been a number of high-profile failures of projects, despite their being run in line with the standard. It is a standard for process - that is, it does not specify the quality of the outcome of

# 4 0 2 I Appendix

a p r o j e c t , o n l y t h e w a y in w h i c h it h a s t o be c a r r i e d o u t . T h e r e is little c h a n c e o f specifying t h e precise processes t h a t n e e d t o t a k e place t o e n s u r e c o m p l e t e success, p a r t i c u l a r l y w h e r e o v e r o p t i m i s t i c p e o p l e a r e involved.

(SO 14000 Being a n d being seen t o be e n v i r o n m e n t a l l y r e s p o n s i b l e is a n increasingly i m p o r t a n t issue f o r m o s t f i r m s in m o s t c o u n t r i e s . C o m p a n i e s h a v e r e s p o n d e d in d i f f e r e n t w a y s - e.g. t h e electricity g e n e r a t o r s ' 'dash f o r gas' a n d i n s u r a n c e c o m p a n i e s w h i c h s t a r t e d u s i n g p a p e r l e s s systems. M o r e f u n d a m e n t a l l y , l e g i s l a t i o n h a s c h a n g e d a n d t h e i m p a c t of b r e a c h e s of legislative r e q u i r e m e n t s is ever m o r e severe. T h e m a j o r ity of p r o j e c t m a n a g e r s s h o u l d be a w a r e of t h i s issue, as if it is n o t a l r e a d y h i g h o n t h e m a n a g e m e n t a g e n d a , it w i l l s o o n b e c o m e t h a t w a y . T h e r e a r e , h o w e v e r , a n u m b e r of challenges associated w i t h e n v i r o n m e n t a l issues. M a n y a u t h o r s c o m m e n t t h a t t h e issue of ' e n v i r o n m e n t a l responsibility' h a s b e e n t h e s u b j e c t o f m u c h rhetoric, b u t less a c t i o n d u e t o t h e scarcity of p r a c t i c a l g u i d a n c e . S t a k e h o l d e r s w h o h a v e a n interest in the e n v i r o n m e n t a l p e r f o r m a n c e of the p r o j e c t o r g a n i s a t i o n include: •

p a r t n e r o r g a n i s a t i o n s i n j o i n t ventures;

• •

clients/customers; team members; sponsors; • i n s u r e r s - o b t a i n i n g t h e necessary i n s u r a n c e t o p r o t e c t t h e o r g a n i s a t i o n f r o m t h e e f f e c t s of c l a i m s is a s e r i o u s issue in m a n y c o n s t r u c t i o n p r o j e c t s , a n d w i l l o f t e n involve d e m o n s t r a t i n g t o t h e i n s u r e r s t h a t y o u r o r g a n i s a t i o n is g o i n g t o c a r r y o u t t h e p r o j e c t in a responsible m a n n e r ( s e e s y s t e m s b e l o w ) ; • legislators a n d l a w e n f o r c e r s ( s e e E U role b e l o w ) .

T h e r o l e of p r e s s u r e g r o u p s a n d t h e m e d i a a s s t a k e h o l d e r s (in t h e s e n s e t h a t t h e y c a n c a u s e m u c h d i s r u p t i o n t o p r o j e c t activities) needs t o be recognised. O n e of t h e effects of legislation is t o m a k e o r g a n i s a t i o n s ' e n v i r o n m e n t a l p e r f o r m a n c e o p e n t o s c r u t i n y by t h e public a n d m e d i a . Publicity g a i n e d t h r o u g h p o o r p e r f o r m a n c e is p r o v i n g d a m a g i n g t o t h e p u b l i c i m a g e of t h o s e c o m p a n i e s a n d t h e i r p r o d u c t s , directly a f f e c t i n g t h e i r financial p e r f o r m a n c e . T h e role of t h e EU in p r o v i d i n g legislation o n e n v i r o n m e n t a l m a t t e r s is c o n s i d e r able. T h e F i f t h E u r o p e a n C o m m u n i t y E n v i r o n m e n t a l A c t i o n P r o g r a m m e sets o u t t h e a i m s of t h e U n i o n f o r its e n v i r o n m e n t a l policy f r o m 1 9 9 3 t o t h e y e a r 2 0 0 0 . It is t r y i n g t o c r e a t e a w o r t h w h i l e c h a n g e in e m p h a s i s - t o r e m o v e policies as a b u r d e n t o i n d u s t r y a n d t o m a k e t h e m s e l f - s u s t a i n i n g . T h e r e q u i r e m e n t o n i n d u s t r y is t o b e c o m e p r o a c t i v e r a t h e r t h a n reactive, t h r o u g h t h e d e v e l o p m e n t of 'clean t e c h n o l o gies' a n d t h e d e v e l o p m e n t of m a r k e t s f o r p r o d u c t s t h a t a r e e n v i r o n m e n t a l l y sound. This emphasis o n making the process self-sustaining will occur a f t e r the e n f o r c e m e n t o f e x i s t i n g legislation t h r o u g h t a x a t i o n ( i n c e n t i v e s a n d p e n a l t i e s ) a n d legal liability.

Appendix

1

403

'Eco-labelling' is well established (disposable food and house hold ojinsumables containers being at the forefront of this), but the requirement for companies to treat their environmental performance as they have done their quality performance has been less successful. The parallel between the two is useful as: • • • •

there is a requirement for policy to be made; documented systems are required; there is a standard for environmental systems - ISO 14000 (see below); it will be possible in the future for such systems to be accredited and for the organisation to obtain recognition in the same way as for BS-EN-IS0 9000.

The requirements of the environmental systems standard (I sO i 4i'00) are as follows: 1 Commitment - required at the highest levels in the organisati monstrate that the intentions will be backed with authority. 2 Environmental policy - as for quality systems, there must bs a documented policy which includes the steps that will be taken to ensure continuous improvement in this area. 3 Environmental review - carry out an initial review of the current state of environmentally relevant practices in order to provide a base for future action. 4 Organisation and personnel - ensures that all people invohrcd in establishing and running the system have the appropriate authority. 5 Registers of environmental effects - the organisation must keeo records of legislation as it affects their operation in addition to relevant permissions, e.g. discharge consents, planning permissions, etc. 6 Objectives and targets - in order that continuous improvement over and above legislative requirements can be demonstrated, the organisation m u i t provide quantitative goals for itself. 7 Environmental management programme - a documented plan of action. 8 Environmental management documentation and manual - as for quality systems, the environmental management svstem must be described in the form of a written manual, which must be updated with changes in practice and legislation. 9 Operational control and records - where shortcomings are identified, procedures must exist for dealing with these and preventing recurrence. 10 Environmental audits - periodic reviews must be carried out in a planned and documented way to determine the level of procedural adherence. 11 Systems reviews must be carried out in accordance with a predetermined plan to consider the efficacy of the procedures laid down in the system. The formulation of environmental policy should be focused on four main areas: • the organisation and its products; • the direct environmental impact of products and processes; • the infrastructural implications of the activities of the organisation - impact on road usage, etc.; • external relations with the community - through education, the role of a good 'corporate citizen'.

Implementing B 5 - E N - I S 0 9000 in a heaith service environment The international standard for quality systems BS-EN-ISO 9000 cfeums how nn organisation should set its own standards and provide procedures for reaching ibosn standards. It concerns the way that an organisation operates, rather than the standards of the output itself (products, services, etc.). The environment in which the unir was operating was that of intense financial pressure, coupled with the indication that the functions of the unit would be put oui to commercial tender in the near future (through market-testing). It was also bopnd that the discussion of quality and the formalisation of parts of the organisation would give accountability and help focus on customer needs. The move to bring their method of operating within the requirements of the standard came as part of the measures to give them an advantage in any future competitive tendering situation for health services. The project was set a target of achieving the necessary certification within two years in some areas, and longer in others. Staff would nned to bn trained and the necessary documentation (detailing all working procedures) would have to bn prepared. The project was started and a new project manager (called the quality manager) recruited to provide both knowledge and n degree of independence from the other functions within the organisation. Across the organisation, there were pockets of enthusiasm, but otherwise annoyance from departmental managers who saw the changes as being bureaucratic and as interference from outsiders in the wax they ran their departments. Above all, there was resistance to change which was both obstructive and destructive. The common feeling was that people bad enough to do already, and this was an additional workload. The result of this was that the areas which took the new standard on board, and made it work in their way, got through the process earliest and with greatest benefit. On reviewing the implementation, it was shown that onn or the reasons that people had opposed the changes was a lack of comprehension as to what they would mean in practice. They could not sue how the documentation of, adherence to and continuous improvement of working processes would improve their lives, or improve the organisation.

Case discussion 1 What was the nued and how did the project go towards meeting this? 2 Describe the complexity of the project. 3 How might identifying ail the people who could hold up progress earlier in the project baire increased the speed of achieving the project goals? 4 Why might recruiting an external project manager be beneficial, and what risks would there be?

Appendix14 0 5

To PRINCE or not to PRINCE? There are many opposing views as to whether the application of a standard such as PRINCE is useful. In searching for a way to improve their processes, a team was tasked with deciding appropriate standards, and reviewing their applicability to their environment. They interviewed two project managers - one from Big Computer Installation Company, and another from the Communications Hardware Design Company. The first was unashamedly up-beat about PRINCE: Our business is in the specification, installation and maintenance of networked computer systems. Wfe supply predominantly large corporations, who have computers scattered over many sites. We use PRINCE2 for all our projects and all our staff and project managers have to work within the P R I N C E 2 methods. This provides us with a competitive advantage during the bidding process for contracts several of our competitors do not have the level of approvals that we do, and it shows. Clients are demanding more and more that we assure our processes, and that is what we have done through PRINCE. I know that some people claim it is too bureaucratic, but just one instance this week showed its worth: a client was very vague about what they wanted in particular areas of the implementation. By convening a project board, we were able to provide a forum for discussion of what they really wanted. Other firms I have worked for, would simply have provided what they considered was best, rather than going back to the client. We also have a system for changes - the usual bug-bear of these projects. Clients can request changes at any time, but they are put through the process of calculation of the impact of those changes, including schedule and costing implications, before we seek approval to do the extra work. The systems provide us with the necessary traceability for our documents, and we simply see the procedures as the best way to deliver what our clients want. I don't know how other firms do without it. This contrasted strongly with the communications hardware company: We design, develop and manufacture communications hardware - all the electronic parts of a modern communications system. V\fe started using PRINCE2 four years ago, under our last managing director. He thought it would be a good thing for us to do - we always thought the idea came from one of his golfing mates. Since then, we have implemented all the changes that PRINCE required of us, and all our staff were trained. The problem was that all the extra cost was not offset by any improvement in performance - we still had problems delivering our projects on-time, and our client base is not demanding it. So when our new managing director was appointed, he removed the requirement to work this way and we had a ceremonial burning of the procedure manuals. We started again by looking at our processes - using the P R I N C E 2 documentation. With every project, we identified significant parts of the process that caused us work, but that did not

4 0 6 I Appendix

add any value t o our customers. This removed s o m e t h i n g like 20 per cent o f t h e effort required for each project. We still u s e some of the disciplines that t h e standard required - particularly w i t h regard t o h o w we handle clients and risk, b u t w e have scaled t h e rest back. In retrospect, using t h e standard has imposed some discipline on t h e processes, but I'm very glad to be free of it now.

Central Computer and Telecommunications Agency (1997)PRINCE 2: An Outline, Her Majesty's Stationery Office, London. www.prince2.com www.spoce.com Project Manager Today - series of articles from February 2000 onwards covering various aspects of PRINCE2 application.

3M 79,195-6 4-D model 14, 27-32 7-S 3 2 - 4 , 3 8 3 - 4 accidental profession 3 activity level profile 29 activity-on-arrow method 110-15 activity-on-node method 116-22 adversarial relations with suppliers 308-10 aggregate project plan 56-7 analysing plans 178-216

APM 13,21 APM Body of Knowledge 3 9 - 4 0 , 6 7 , 9 6 , 127-8,172-3,204,238,264-5,290, 312,334,359 appraisal costs 358-9 as-buts 4,158 estimating 109 assumptions 194 attribute analysis 331-2 audit 353-6 , authority 222 BAA 314-15 backward schedule 106 balanced scorecard 377 Balfour Beatty 148-51 ballpark figures 108-9 battle of the forms 307 Belbin, R.M. 232-3 benchmarking 374-7 best-in-class 377 bid 82 bill of materials 298 bodies of knowledge 1 3 bonds and insurance 307-8

bottom-up costing 156 brainstorming 321-2 brief 24, 77 BS 6079 192 BS 6143 359,369 budgets 163-6 buffers 141,146,148 Business Process Re-engineering (BPR) 373-4 calendar 123 Cardiff Bay Development Corporation 240-1 cash-flow 165-6 cause-effect-cause analysis 51, 327-9, 335-8 change 6, 8,381-2 control 288-9 Channel Tunnel 1 chaos 76 Chartered Institute of Purchasing and Supply 304,316 check-points 91-4 Chinese whispers syndrome 125 choice of audit and review 355-6 choice of project structure 225-6 closing down project systems 347-8 coherence 64 communications plan 172 competitive advantage 35 completion and review 343-69 complexity 34,35,36-9, 81 measures 37-8 compound interest 183-4 computer-based project planning 119, 123-4

4 0 8 I Index

concept development 77-8 conceptualisation 77 concurrent activities 1 2 4 - 7 , 1 2 9 - 3 1 conditioned reflex 319 configurationmanagement 288-9 conformance 54,60, 372 objectives 63 considered response 319 constraints 25, 142-5,146 consultants 352-3 contingent approach 7 contracts 297,305-8 establishment process 306-7 standard forms 307-8 control 148,270-95 systems 271-6 Critical Chain 273 role of Project Management Information Systems 286-8 timeliness 281 coordination mechanism 5 2 , 5 6 - 6 0 core and peripheral products 171 cost build-up 161-3 cost control 277-89,294 Cost Performance Indicator (CPI) 279 cost plan analysis 181-90 cost planning 1 5 4 - 6 6 cost-plus 155,306 crashing activities 180-2 creativity 1, 77 Critical Chain 135-52,273 Critical Path Analysis/Critical Path Method (CPA/CPM) 7,110-22,135,137,141, 226,325 Crosby, P. 358 cross-functionalactivity 9 0 - 2 , 2 2 0 , 2 2 6 - 7 cues 170 culture 246,258-61 cumulative expenditure 29 customer delight 95 D l : Define the project 2 8 , 4 9 - 1 0 0 D2: Design the project 28,101-216 D3: Deliver the project 28,217-341 D4: Develop the process 28,341-93 decision trees 325, 3 3 0 - 1 decision-making 317-40

decision-supportsystems 333 definitions 4 Deming, W.E. 50,249,303 dependency 110,116 Dimancescu, D. 226-7 direct work measurement 166 direct-revenue earning projects 60 Discounted Cash Flow (DCF) 183-5, 1868,189 discounting rate 184,185,186-8 documentation 346—7 dotted line responsibility 222 Drucker, P. 247-8,322 dummy activities 111-12 Earliest Event Time (EET) 112 Earliest Start Time (EST) 116-18 earned value 163,278-1 EFQM 74 Electronic Data Interchange (EDI) 309 estimates learning curves 1 5 9 - 6 1 parametric 157 synthetic 159 estimating 108-9,137,139-42,146 EU purchasing rules 307 expectations 170-1,277,318 expected value 197 failure costs 1 , 5 0 , 3 5 8 - 9 Failure Mode Effect Analysis (FMEA) 198-9,206-7 fast-track projects 124-7,129-31 first-timers 4 326-7 flexibility 61-3 float 115,119 flowcharts 299 follow-up actions 333-4 force-field analysis 332 forecasts 158 forward pass 113-14,117 forward schedule -106 four fields map 90-2,171,386-7,400 fun 3,253,385 future value 185

index I 4 0 9

Gantt Chart 5 5 , 1 0 5 - 8 , 2 8 7 , 2 9 3 Gantt, H 108 Goldratt,E.M. 66,137-8,257

lightweight matrix 224 London Ambulance Servicr 1 Lord, M.A. 52-3

Harvey-Jones, J. 263 Hawthorne studies 2 5 4 - 5 heavyweight matrix 224 hedgehog syndrome 27,344 Hewlett Packard 357 hierarchy of needs 2 5 5 - 6 historical Perspective 6 holistic approach 1 humanistic agenda for management 261-2

Maister, D.H. 169-70 Maslow, T. 255 materials management 298 matrix management 2 2 3 - 7 , 2 4 0 - 1 maturity model 371-3 measures of outcome 67 measures of process 67 mechanisms 26 meetings 2 3 5 - 6 mission statement 53 mixed structures 227-8 modelling systems 322-4,. Monte Carlo simulation 15»S motivation content theories 2 5 5 - 6 process theories 256 reinforcementtheories 2 5 6 - 7 Mullins, L.J. 248 multi-tasking 138-9

implementation 381-2 improvement projects 4 3 - 4 improving project performance 370-93 1MVP 297 innovation 78-80 input-output model ' 2 4 - 6 lnstron 129-31 integrator 7 , 2 6 , 2 2 8 intellectual property 289-90 interface management 90 Internal Rate of Return (ÏRR) 188-9 investment appraisal 189-90 iron triangle 6 0 - 3 Ishikawa diagrams 326-7 IS014000 402-3 IS09000 3 9 4 - 4 0 1 , 4 0 4 certification 397-8 IT projects - overruns 1 Jones, D.T. xvi knowledge management 381-2 last planner 283-5 Latest Event Time (LET) 112 Latest Start Time (LST) 116-19 leadership and management 2 4 5 - 6 9 lean 377-80 learning by/before doing 3 5 0 - 8 , 3 8 2 , 3 8 3 learning curves 159-61 letter of intent 308 leverage 4 Lifter Project 2 9 2 - 4

Net Present Value (NPV) 1 8 3 - 4 , 1 8 6 - 8 , 214-15 network analysis 109-22,200 new product development 7 8 - 8 0 , 1 2 4 7 , 129-31 notice of closure 347 Ohno, T. 258 one best way approach 7 open-book accounting 310 opportunities 195,319-20 order number 301 organisational change projects 60 complexity 3 6 - 9 organisational strategy 51-2 organisational structures 2 1 9 - 4 4 outcome measures 6 7 outsourcing 296,300 painting-by-numbers 4 paradigms 262-3 parametric estimating 157 Pareto analysis 326

4 i o f Index

Parkinson's Law 137,140 Parkinson's Law of 1000 260 partnership relations with suppliers 308-10, 314-15 payback analysis 182-3 penalty clauses 307 perceptions 170,171,277,318 performance 61,372 performance objectives 63 Permanent Way Company 4 3 - 4 personal management 249-53,265-7,384 Personal projects 4 4 , 7 1 - 2 PERT 7,135,137,199-204,212-13,325 Peter principle 258 pillars of change 381-2 Pisano, G. 350 Planned Percent Complete (PPC) 283-5 planning 145-7,153-77 accuracy and precision 85 costs and benefits 83-8 as an iterative process 104 process 83-8 standards 174-5 PMI 13,21 PMI Body of Knowledge 3 9 , 4 1 - 2 , 9 7 , 127-8,173,204-5,238-9,265, 290-1,313,334,359-60 Polaris 137 prevention costs 358 Price, F. 85,317 PRINCE2 13,191,399-402,405-6 priorities 58 problem framework 318-22 problem-solving 317-40 process mapping 90-1 process measures 67 Product Breakdown Structure (PBS) 298 professionalisation 5 5 management 59 project champion 79,95 project goals and organisational goals 52 Project Initiation Document (PID) 77 project life-cycle 14,27-32 project management and general management 11 Project Management Professional (PMP) 3

project manager roles 17-18 project manual 168 project office 58-60 project management and operations management 4 , 1 2 project-based organisations 2 proposal 77, 82-3 purchasing 298,299-305 5-rights 302-5 or localised 301-2 price 303-4 quality 303 strategy 302 time 304 pure project organisation 222-3 quality 61 circles 231 conformance planning 167-9 control 276-7 costing 358-9 manual 396 performance planning 169-2 plan analysis 190-1 planning 166-72 manufacturing approach 166-7 service approach 166-7 Rand, G. 135-52 rapid prototyping 79, 95 Reebok 334 reimburable pricing 155 relative importance of projects 57 resource capability 123 resource capacity 123 resource complexity 36-9 resource conflictslcontentions 144 resource pool 123 responsibility 222 allocation 168 matrix 169 retention money 308 revenue share contracts 306 reverse pass 114-15,117 review 348-9,353-8 revision-refinement process 87, 105 right first time 125

risk 317 management 191-204 as a trade-off 192 framework 192 identification 193-4,206-7 quantification 195,196-204,206-7 response control / mitigation 195,207 robustness 137 role profiling 232-3 rule of 72 185 safety margin 137, 140,146 Schedule Performance Indicator (SPI) 279-80 scheduling 122-3 Scientific Management 253-4 scope creep 81 scope management 80-1 screening 78-9 selling 96 Semco 241-2 sensitivity analysis 197-8 service sector 35 sign off 347 Sinclair C5 80 slack 115 SMART objectives 251 staff 34 stage payments 308 stage-gate process 93-4, 98-9 stakeholder management 94-6,170-2, 349-50 stakeholders 34 standards 13,394-406 strategic approach 5 4 - 5 strategic capability 5 1 - 2 , 5 4 , 5 5 - 6 strategy 10, 33, 49-75,154, 356 deployment 6 4 - 6 , 3 8 1 - 2 matrix 64, 66 process 54-5, 68 structures 33 student syndrome 138,140 34 Supply Chain Management 296-316

SWOT analysis 68 synthetic estimates 1$9 systems 8 , 9 , 3 3 target cost 155,306 Taylor, F.W. 253 teams 220-2 effectiveness 234-5 geographical separation 236—8 and groups 228-38 life cycle 229-1 and personalities 232-3 technical complexity 36—9 technical performance monitoring 285-6 terms of reference 77,354 The Big Dig 19 Theory of Constraints (TOC) 142-5 tick-sheet 191 time control 277-89 top-down costing 156 Toyota 10, 35, 64, 380,385-92 traceability 191 trade-off 62-3 traffic lights 282 training 351-2 uncertainty 136,137,192,324-5 University of Rummidge 69-71 VCS 361-7 vendor-managed inventory 310-12 virtual teams 7 visibility 105, 124,274,281-2 vision, corporate 53 volume-variety 4 waste xvi, 378-80 WBS 81,88-90 whole life costs 356 wishful thinking 161 work sampling 166 world-class 377 zero base budgets 164