Unit - 2
Provision of data for Decision-Making
Project Management Concepts
Your startup IT company has just landed its first real contract to install your new human resources software for a local organization. Since you are a startup, you are limited on staff, and the staff all wear multiple hats. This project is important to the company's owner, and he's asked you to fill the role of project manager.
Before trying to understand the project management process, it's important to understand what a project is. A project is a temporary endeavor to create a specific product, service or result. Installing software in a client's environment meets this definition because the effort has a defined beginning and end and will result in the customer's purchase of new products and services to install the software.
Project management is using specific knowledge, skills, tools and techniques to ensure project activities meet the project goals. Deciding you need to understand more about project management before this contract gets off the ground, you decide to do a little research on basic project management concepts, including the skills a project manager should have.
Five phase of project management
Conception and Initiation
Project conception and initiation is where the project starts. This is where someone determines if the project can be realistically completed and if the benefits of doing it make it worth the effort to move forward with the project. The concept and initiation phase is also where you determine what you are going to do to meet an objective and how you are going to do it.
For the software project, you realize this is already in the contract the customer signed, and you simply have to understand it.
Definition and Planning
The concept and initiation phase is very broad, leaving many details unplanned. To further define it, the definition and planning phase digs into project specifics. A project team defines the tasks, calculates a budget and schedule, determines what resources are necessary, and defines acceptance and testing criteria. All of this information is put into a project plan, which is reviewed and approved by the customer. The definition and planning stage ensures everybody has the same expectations, preventing unexpected and often costly mistakes.
For your software project, you realize that the definition and planning phase is where project management will add true value to the success of the contract because the overall concept in the contract is refined into a working plan that lays out, in detail, project expectations. Any concerns can be worked through at this stage before any tasks have been started.
Execution
The execution of the project is where tasks are assigned and completed. This is the phase where you build the product or deliver the services for the customer. In most projects, this is the phase that lasts the longest and takes up most of the project team's energy.
Performance and Control
While a project is in execution, performance and control ensure that the deliverables are produced as specified, at the cost estimated, and on schedule. During this phase, project managers compare 'what is' to 'what should be' and adjust the plan if needed. If the project isn't monitored, the costs could exceed profit and the company would not make money, the schedule could get off track without anyone realizing it, or the product could fail to meet agreed upon criteria.
In looking at this phase as it relates to your software project, you realize that this is an important phase to both the customer and the company because it ensures the customer is happy with the results and the company makes a profit.
Closing
Closing is the phase where the customer formally accepts the project deliverables. By accepting the deliverables, the customer is saying that the product meets the criteria and expectations and work on this project is over.
Closing isn't just for the customer, however. The project team should learn from the project's successes and problems, taking the time to document the lessons learned for future reference.
Different types
Project management methods can be applied to any project. It is often tailored to a specific type of projects based on project size, nature and industry. For example, the construction industry, which focuses on the delivery of things like buildings, roads, and bridges, has developed its own specialized form of project management that it refers to as construction project management and in which project managers can become trained and certified.
The information technology industry has also evolved to develop its own form of project management that is referred to as IT project management and which specializes in the delivery of technical assets and services that are required to pass through various lifecycle phases such as planning, design, development, testing, and deployment. Biotechnology project management focuses on the intricacies of biotechnology research and development. Localization project management includes many standard project management practices even though many consider this type of management to be a very different discipline. It focuses on three important goals: time, quality and budget. Successful projects are completed on schedule, within budget, and according to previously agreed quality standards.
For each type of project management, project managers develop and utilize repeatable templates that are specific to the industry they're dealing with. This allows project plans to become very thorough and highly repeatable, with the specific intent to increase quality, lower delivery costs, and lower time to deliver project results.
Why to manage
PMI defines project management as “the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements.” A basic project management lifecycle covers four stages:
Initiation
Planning
Execution
Closure
In other words, the purpose of project management is to plan and manage a project to successfully complete its listed goals and deliverables. It involves identifying and managing risks, careful resource management, smart budgeting, and clear communication across multiple teams and stakeholders.
Why is project management important?
Because projects are often complex and involve numerous stakeholders, having a project manager to lead the initiative and keep everyone on the same page is critical to project success.
In fact, PMI found that organizations using any type of project management methodology are better at meeting budget, staying on schedule and meeting scope, quality standards and expected benefits.
Here are six reasons why you should use project management.
1. Realistic project planning
The importance of project planning cannot be overstated. Too often, organizations overestimate how quickly they can achieve deliverables, underestimate the costs, or both—a recipe for failure.
A good project manager considers the big picture and sets realistic and achievable goals, budgets, and timelines. Without careful management, a project can quickly get off track before it has even begun.
To set realistic goals, budgets, and timelines, the project manager communicates with different stakeholders to understand the strategic priorities and business objectives of the initiative. Based on their research, the project manager then outlines a project plan that balances those priorities within the constraints of time and budget. This process involves cost estimation, resource management, and risk assessment.
2. Clear focus and objectives
A lack of clear goals was the most common reason for project failure in 2017. Project managers help organizations hone in on their priorities and define their project objectives.
When project management is left to the team to handle, the scope and objectives can easily get muddled. Unclear focus can lead to scope creep, missed deadlines, and overspending.
Plus, without a project manager to oversee the project plans and task breakdowns, many teams may not notice potential risk factors as they arise. If they don’t address evolving project risks, the team could end up prioritizing the wrong tasks.
A good project manager keeps an eye on all these factors so that the team can focus on the right tasks at the right time and adapt as needed.
3. Strategic alignment
One of the most important reasons to use project management is to align projects with business strategy. Mark Langley, the president and CEO of PMI cautions, “If your organization is not good at project management, you’re putting too much at risk in terms of ultimately delivering on strategy.”
In other words, project management is a driver of organizational strategy. So, if you aren’t applying it to your initiatives, you are missing a crucial opportunity to grow.
As project managers oversee the planning and execution of a project, they help ensure the project’s overall goals and its subsequent tasks and milestones all align with the organization’s strategy. Strategic alignment at every level of the project keeps each stakeholder on the same page and ensures your initiatives drive the organization forward.
4. Managed process
Project management is a proactive process that seeks to help the right people do the right tasks at the right time. Without a set project management method, many teams tend to work reactively—handling issues as they arise rather than proactively planning for known risks and setting project goals and parameters from the beginning.
Project managers help teams break down a project into more manageable pieces. By breaking the project into a clear process of assigned tasks, milestones, and deadlines, project managers can direct their teams more efficiently and react to issues with greater agility.
5. Quality control
Quality control is an essential component of project management. Your project could meet all parameters for time and budget, but if the quality standards aren’t met, the project will be deemed a failure.
Unfortunately, this is an all-too-easy trap to fall into. Teams are under a lot of pressure to finish a project on time and on budget. And this can lead to rushed work and shoddy execution.
That’s where project managers come in. They not only manage deadlines and objectives, but they also keep an eye on how well project tasks are executed. Project managers help outline deliverables and define their quality standards so that everyone knows exactly what they’re aiming for.
6. Reduced costs
In 2018, according to PMI, 9.9% of every dollar invested was wasted due to poor project performance—that’s $99 million for every $1 billion invested.
Project management reduces project costs by improving efficiency, mitigating risks, and optimizing resources. Even with the added cost of investing in a project manager, organizations stand to gain much more.
Cost overruns
Cost overruns can be dangerous to project success since they imply that, for maintaining project activities, a firm has to spend funds intended for entirely other purposes at first. 5 reasons for cost overruns in projects controls are
1. Design Errors
One major reason for cost overruns in most projects is design errors. Project design is the base of everything. In order to execute a project, proper representation of the client's requirement, as well as the blue print to achieving good technical input are required, which are both based on the project design. In this practical world, design with errors means the wrong or insufficient representation of the project deliverables.
2. Unfeasible Cost Estimate
An unfeasible cost estimate is another common reason for project cost overruns. Cost estimation is a vital part of a project, which goes hand in hand with the project design phase. If the cost is calculated based on a hunch (imperfect estimation) without considering proper escalations and contingencies, then the project undoubtedly faces cost overruns. This might not be detected in the early phases, but in the later stages, it becomes more evident.
3. Scope Change
Scope change could lead to a delay in schedule or cost overruns. The scope is the term that defines the entire deliverables that are expected at the end of a project. Therefore, it can be said that all project plans, estimation, schedule, quality and baselines are usually designed in the initial project scope.
Project scope change could occur as a result of wrong initial scope definition, inherent risk and uncertainties, sudden change of interest, project funding change, etc. A change in the project scope during execution creates a need to change the entire initial project plan, which results in the redevelopment of the budget, schedule, quality and even the whole project team. This means more time and resources will be needed compared to the initial baseline.
4. Project Complexity
Project complexity often is a contributing factor which results in project cost overruns and schedule delays. Large projects are usually at risk of overrunning their budgets because the larger the project, the bigger the complications that may arise during the execution. With the increase in a project's implementation time, the project can be affected by factors like inflation, change in material prices and exchange rates, all leading to a requirement of additional budget to supplement the initial budget for the completion of the project.
Apart from this, as the complexity of the project increases, the need for being more precise increases while executing the plans. Neglecting this might cause a chain of delays, thereby significantly shifting the schedule of the project, which in turn results in budget overruns.
5. Lack of Resource Planning - Inappropriate and Inadequate Procurement
Another common reason for budget overruns and schedule delays is failing to plan the available resources effectively. Failing to estimate the resources that would be used during the project might lead to under assigning or over assigning resources to a task. This means an increase in the duration or a blockage, respectively.
Resource planning also matters with regards to the contract management system. Inadequate, irrelevant or unclear information in the contract may cause long chains of negotiations, disputes, arbitration and mitigation due to work change orders and the quest for reviewed contractual agreement with new budgets and schedule. The result will no doubt be a project delay and cost overrun.
Various stages of project execution: conception to commissioning
At the start of a project, the amount of planning and work required can seem overwhelming. There may be dozens, or even hundreds of tasks that need to be completed at just the right time and in just the right sequence.
Seasoned project managers know it is often easier to handle the details of a project and take steps in the right order when you break the project down into phases. Dividing your project management efforts into these five phases can help give your efforts structure and simplify them into a series of logical and manageable steps.
1. Project Initiation
Initiation is the first phase of the project lifecycle. This is where the project’s value and feasibility are measured. Project managers typically use two evaluation tools to decide whether or not to pursue a project:
- Business Case Document – This document justifies the need for the project, and it includes an estimate of potential financial benefits.
- Feasibility Study – This is an evaluation of the project’s goals, timeline and costs to determine if the project should be executed. It balances the requirements of the project with available resources to see if pursuing the project makes sense.
Teams abandon proposed projects that are labeled unprofitable and/or unfeasible. However, projects that pass these two tests can be assigned to a project team or designated project office.
2. Project Planning
Once the project receives the green light, it needs a solid plan to guide the team, as well as keep them on time and on budget. A well-written project plan gives guidance for obtaining resources, acquiring financing and procuring required materials. The project plan gives the team direction for producing quality outputs, handling risk, creating acceptance communicating benefits to stakeholders and managing suppliers.
The project plan also prepares teams for the obstacles they might encounter over the course of the project, and helps them understand the cost, scope and timeframe of the project.
3. Project Execution
This is the phase that is most commonly associated with project management. Execution is all about building deliverables that satisfy the customer. Team leaders make this happen by allocating resources and keeping team members focused on their assigned tasks.
Execution relies heavily on the planning phase. The work and efforts of the team during the execution phase are derived from the project plan.
4. Project Monitoring and Control
Monitoring and control are sometimes combined with execution because they often occur at the same time. As teams execute their project plan, they must constantly monitor their own progress.
To guarantee delivery of what was promised, teams must monitor tasks to prevent scope creep, calculate key performance indicators and track variations from allotted cost and time. This constant vigilance helps keep the project moving ahead smoothly.
5. Project Closure
Teams close a project when they deliver the finished project to the customer, communicating completion to stakeholders and releasing resources to other projects. This vital step in the project lifecycle allows the team to evaluate and document the project and move on the next one, using previous project mistakes and successes to build stronger processes and more successful teams.
Although project management may seem overwhelming at times, breaking it down into these five distinct cycles can help your team manage even the most complex projects and use time and resources more wisely.
Key takeaways
Project management is using specific knowledge, skills, tools and techniques to ensure project activities meet the project goals
Project execution is characterized by the actual work on the tasks planned and project control involves the comparison of the actual performance with the planned performance and taking appropriate corrective action to get the desired output. During this phase, project team is responsible for the following activities:
- The team members perform the tasks allocated in the earlier phase under the supervision of the project manager and report to him.
- Project manager is responsible for performance measurement, which includes finding variances with respect to cost, schedule and scope.
- Project manager is responsible for providing project status report to all key stakeholders. He should specifically inform the deviation from the plan to the stakeholders. He should also determine the root cause for the deviations and suggest the alternate actions to encounter the deviation caused or expected.
- This helps stakeholders to decide the corrective action to be taken.
- All project key stakeholders are responsible for the review of the variances.
- All project key stakeholders are responsible for taking necessary action of the variances thus determined so as to complete the project within time and cost.
The basic process of the project execution can be:
- Execution of the project plan
- Handle the changes
- Project control
The subsidiary processes during project execution can be:
- Quality control
- Performance monitoring
- Project administration
- Risk monitoring and control
- Scope and control
- Schedule and cost control
- Management of outside agencies (subcontractors)
The key activities during this phase of execution include:
- Award contracts to contractors, vendors, subcontractors: Final selection of suppliers of various supplies of services (generally termed contractors) and physical equipment (generally termed vendors).
- Procure equipment and services: After continuously monitoring the suppliers, the project team has to procure the goods and services.
- Erection of equipment: The procured equipment needs to be placed on the designed place after preparing the required foundation.
- Control and monitor project cost, schedule and scope: As majority of efforts, time and cost are incurred during this phase, it is critical to monitor the project schedule and cost during this phase. This is generally done using various tools like Gantt chart and Earned Value Analysis.
- Motivation of project team: As this phase consumes maximum energy of the team members, motivating them during this phase is critical to the success of the project.
Detailed engineering activities
A detailed engineering project is the set of documents generated from the Basic Engineering. These include all the construction details by discipline (Civil, Mechanical, Process, Electric, Telecommunications, Instrumentation and Control, Computer Systems) which must be approved for construction. This process serves to provide a closed project cost estimate. The objective of STE ENGOPHARM is to offer an engineering project result without deviations in time and cost.
The documentation of the detailed engineering project:
- Civil Engineering
- Enclosures
- Air Conditioning
- Electricity
- Compressed Air, Steam, Hot and Cold Water
- Purified Water
- Extraction
- Waste Treatment
- Special Gases
- Fire Protection Systems
- Safety
- Communications
- Other Installations
Key takeaways
Project execution is characterized by the actual work on the tasks planned and project control involves the comparison of the actual performance with the planned performance and taking appropriate corrective action to get the desired output.
The Project Executing Process Group is where the actual implementation work takes place to complete the work. Work is completed when the project meets the stated project objectives and scope defined in the Project Scope Statement. By this point, the planning has completed (or at least a significant portion of it has completed) so that there is a first set of baseline requirements and planning documents to begin project implementation.
The Executing Process Group consists of the processes that assist with this purpose. It involves executing the project according to the project plan. Coordination of the 9 knowledge areas during project execution is critical to the overall success of the project.
Some of the activities that take place during project execution include:
- Managing Project Scope (This includes preventing uncontrolled change)
- Performing Quality Assurance
- Acquiring the Project Team (According to the Project Management Body of Knowledge (PMBOK)), although this very well started during planning
- Request and select products and sellers
Expect that everything will not go as planned during project execution. There will be normal variances that pop up through the course of project execution, which might require updates in planning documents, requirements, risk registers, quality assurance procedures, communications strategies and other knowledge areas.
Also expect that the majority of the budget will be expended during the project execution phase of the project. According to the International Council on Systems Engineering, 70 percent of the project life cycle cost takes place during project executing.
Project execution typically involves three primary components: following processes, managing people, and distributing information.
Following processes
During the planning phase of project management, you should have outlined systems and procedures to help finish your project within your organization’s requirements. For example, you might have created processes to interact with third-party vendors who supply essential raw materials.
Sticking to your processes can help ensure your project proceeds efficiently. Rather than making a series of time-consuming, one-off decisions, you can look to your plan for guidance and move ahead with confidence. However, if circumstances or market forces change, don’t be afraid to reevaluate and adjust course. Stubbornly sticking to a plan when a change is warranted can jeopardize your entire project.
Managing people
Making sure your personnel are following the project plan is essential, but keeping people on task is not your only job. It’s important that you also motivate, encourage, and cheer the team on. Pausing to celebrate each incremental victory is one way to show the team how much you value them, and it will inspire them to keep up the hard work.
Try to foster a healthy level of internal disagreement. If one of your workers spots a fatal flaw in your project, you want them to feel comfortable coming forward to explain their concerns.
Distributing information to stakeholders and clients
Involve your clients and stakeholders throughout the execution phase of the project. When you keep stakeholders in the loop, you can prevent costly misunderstandings and delays. The project execution phase is often the most extensive phase of the project life cycle. Instead of disappearing for weeks or months while you create the final product, encourage open communication and transparency all along the way.
One way to increase visibility during the execution phase of project management is to schedule regular check-ins to discuss progress. Even better, consider using an enterprise work management platform to boost transparency and trust. This way, no one has to wait for a check-in to know where things stand.
Key takeaways
The Project Executing Process Group is where the actual implementation work takes place to complete the work
References:
- Cost Accounting a Managerial Emphasis, Prentice Hall of India, New Delhi
- Charles T. Horngren and George Foster, Advanced Management Accounting
- Robert S Kaplan Anthony A. Alkinson, Management and Cost Accounting
- Ashish K. Bhattacharya, Principles and Practices of Cost Accounting A. H. Wheeler publisher
- D. Vohra, Quantitative Techniques in Management, Tata McGraw Hill Book Co. Ltd.
