Project Management: A Financial Perspective

Project Management: A Financial Perspective

by Jae K. Shim
     
 

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This book is designed to impart a deep understanding of the applications and importance of Project Management. The reader will learn how to assess a project with respect to time, costs, risk, and resources in order to effectively and efficiently reach goals. Intended for students as well as for working professionals and volunteers, the book provides the essential

Overview

This book is designed to impart a deep understanding of the applications and importance of Project Management. The reader will learn how to assess a project with respect to time, costs, risk, and resources in order to effectively and efficiently reach goals. Intended for students as well as for working professionals and volunteers, the book provides the essential skills needed to make effective contributions and to have immediate impact on the accomplishment of projects.

This book follows the framework within the Project Management Institute’s Project Management Body of Knowledge (PMBOK). Readers will become familiar with the five processes involved in Project management – Initiating, Planning, Executing, Controlling, and Closing on time and within budget – along with the nine knowledge areas – Project Integration, Project Scope, Project Cost, Project Quality, Project Human Resources, Project Communications, Project Risk Management and Project Procurement – that are essential to being an expert Project Manager.

Editorial Reviews

From the Publisher
"Shim provides an excellent overview of the application of project management principles and practices. With an emphasis on the financial aspects of project management, the book's 11 succinct, readable chapters are organized around the nine areas of the Project Management Institute's Project Management Body of Knowledge. Excellent illustrations and examples enhance the chapters. Summing Up: Recommended."
Choice
"Shim provides an excellent overview of the application of project management principles and practices. With an emphasis on the financial aspects of project management, the book's 11 succinct, readable chapters are organized around the nine areas of the Project Management Institute's Project Management Body of Knowledge. Excellent illustrations and examples enhance the chapters. Summing Up: Recommended."

Product Details

ISBN-13:
9781906403577
Publisher:
Global Professional Publishing
Publication date:
10/28/2010
Pages:
186
Product dimensions:
6.00(w) x 9.10(h) x 0.90(d)

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Read an Excerpt

Project Management

A Financial Perspective


By Jae K. Shim

Global Professional Publishing Ltd

Copyright © 2010 Jae K Shim
All rights reserved.
ISBN: 978-1-908287-12-0



CHAPTER 1

Overview of Project Management


A project is a temporary endeavor undertaken to achieve a particular aim (such as to create a unique product or service), and to which project management can be applied, regardless of the project's size, budget, or timeline. It is the response to a need, the solution to a problem. A project is defined as a problem scheduled for solution.

As defined in A Guide to the Project Management Body of Knowledge (PMBOK® Guide), project management is the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project. Project management is comprised of five processes – Initiating, Planning, Executing, Controlling, and Closing – as well as nine knowledge areas. These nine areas center on management expertise in Project Integration, Project Scope, Project Cost, Project Quality, Project Human Resources, Project Communications, Project Risk Management and Project Procurement.

The phrase "project management" emerged in the late 1950s and early 1960s when the size, scope, duration, and resources required for new projects began to deserve more analysis and attention. Today, project management is used globally by multibillion-dollar corporations, governments, and smaller organizations alike. It serves as a means of meeting customers' or constituents' needs by both standardizing and reducing the basic tasks necessary to complete a project in the most effective and efficient manner. As a result, project management leadership is an increasingly desirable and sought-after skill as intense global competition demands that new projects and business development be completed on time and within budget.


The Steps in Managing a Project

The actual steps to manage a project are straightforward. Accomplishing them may not be. The model in Exhibit 1 illustrates the steps. Subsequent chapters of this book will elaborate on how each step is accomplished. The following is a brief description of the actions involved.


Define the Problem

As was discussed previously, you need to identify what the problem is that is to be solved by the project. It may help to visualize the desired end result. What will be different? What will you see, hear, taste, touch, or smell? (Use sensory evidence if things can't be quantified.) What client need should be satisfied by the project?


Develop Solution Options

How many different ways might you go about solving the problem? Brainstorm solution alternatives (you can do this alone or as a group). Of the available choices, which do you think will best solve the problem? Is it more or less costly than other suitable options? Will it result in a complete or partial fix?


Plan the Project

Planning is answering questions—what must be done, by whom, for how much, how, when, and so on. Obviously, answering these questions often requires a crystal ball. Answering these questions requires organizational skills applied to realistic thinking, and may in some cases require special knowledge of the project or a special skill set.


Execute the Plan

Once the plan is drafted, it must be implemented. Interestingly, we sometimes find that people go to great effort to put together a plan, and then fail to follow it. If a plan is not followed, there is not much point in planning. No plan, no control.


Monitor and Control Progress

Plans are developed so that end results may be achieved successfully. Unless you monitor your progress, you cannot be sure you will succeed. It would be like having a road map to a destination but not following the route to your destination. Needless to say, if a deviation from the plan is discovered, you must ask what must be done to get back on track and what caused the deviation to occur so as to be better prepared to avoid another setback in the future. If it seems impossible or unreasonable to return to the original plan, you must determine what modifications must be made to adapt to the new realities.


Close the Project

Once the destination has been reached, the project is finished, but you should take one final step. Some people may call it an audit, a review, a postmortem, and so on. The point is to look back on the project as a source of learning and improving the process the next time around. An easy way to do this is to ask yourself some simple questions. Note the way the questions are phrased. What was done well? What could have been improved? What were some of the best parts of the project plan? What did I contribute to the success of the plan? How could I improve? What else did we learn? The important thing in this stage is realizing that there is always room for improvement in ourselves. However, asking "What did we do wrong?" is likely to elicit a defensive reaction so the focus should always be on improvement, not on placing blame.


The Project Management Body of Knowledge (PMBOK®)

The Project Management Institute (www.pmi.org) has attempted to define a minimum body of knowledge that a project manager needs in order to be effective. At present, PMI identifies nine general areas of knowledge, which are summarized below.

The nine areas of knowledge are the following:

1. Project integration management. Project integration management ensures that the project is properly planned, executed, and controlled. It includes the exercise of formal project change control.

2. Project scope management. Project scope defines the magnitude or size of the job. Changes to project scope are often the factors that kill a project. Scope management includes authorizing the job, developing a scope statement that defines the boundaries of the project, subdividing the work into manageable components with deliverables, verifying that scope planned has been achieved, and implementing scope change control procedures.

3. Project time management. Time management implies personal and combined efforts to manage progress over time. For projects, this amounts to developing a schedule that can be met, then controlling work to ensure that it is.

4. Project cost management. This involves estimating the cost of resources, including people, equipment, materials, and items such as travel and other support details. After this is done, costs are budgeted and tracked to keep the project within that budget.

5. Project quality management. One cause of project failure is the tendency to overlook or sacrifice quality in order to meet a tight deadline. It is not very helpful to complete a project on time, only to discover that the thing delivered won't work properly. Quality management includes both quality assurance (planning to meet quality requirements) and quality control (steps taken to monitor results to see whether they conform to requirements).

6. Project human resource management. Managing human resources is often overlooked in projects. It involves identifying the people needed to do the job; defining their roles, responsibilities, and reporting relationships; acquiring those people; and then managing them as the project is executed.

7. Project communications management. As the title implies, communication management involves planning, executing, and controlling the acquisition and dissemination of all information relevant to the needs of all project stakeholders. This information includes project status, accomplishments, events that may affect other stakeholders or projects, and so on.

8. Project risk management. Risk management is the systematic process of identifying, analyzing, and responding to project risk. It includes maximizing the probability and consequences of positive events and minimizing the probability and consequences of adverse events to project objectives.

9. Project procurement management. Procurement of necessary goods and services for the project is the logistical aspect of managing a job. It involves deciding what must be procured, issuing requests for bids or quotes, selecting vendors, administering contracts, and closing them when the job is finished.


The following are some examples of projects:

* Developing and introducing a new product

* Designing and implementing an information technology (IT) system

* Modernizing a factory

* Consolidating two manufacturing plants

* Designing and producing a brochure

* Executing an environmental clean-up of a contaminated site

* Building a shopping mall

* Rebuilding a town after a natural disaster

* Designing a business internship program for high school students

* Building a Wi-Fi system.

CHAPTER 2

Planning and Controlling Projects


The purpose of the project should be clearly defined. The management of a project requires proper planning and control of a project's completion time, budgetary resources, and desired results. Without proper planning and control, it is highly unlikely that the project will be completed within the deadline or with limited resources, or that the desired results will be achieved.


Key Questions to be Asked

In planning and controlling a project, the following questions should be asked:


Project Objective

* What are the desired results?

* What do we expect to achieve by undertaking this project?

* What problems are likely to be encountered?

* How will those problems be solved?


Time Considerations

* What is the magnitude of the project?

* Is it a large project or a small project?

* If it is a large project, how can it be divided into a series of shorter tasks?

* How long will it take to complete the project?

* What is the project's deadline?

* What are the consequences of not meeting the deadline or postponing the deadline?

* For longer projects, when should each phase of the project be completed?


Financial Considerations

* What is the project's budget?

* What are the major expense categories?

* Will capital expenditures be undertaken?

* How much of the budget should be allocated to planned expenses?

* How much of the budget should be allocated to unexpected expenses and contingency planning?

* What are the consequences of going over or under budget?

* What resources, including human resources, are needed to complete the project?

* What tools and methods will be used to ensure that the project is within budget?


Management

* What is my responsibility?

* Who will be on my project team?

* What is the responsibility of each team member?

* Who will manage and coordinate the various activities in a project and ensure that they are proceeding as planned and that the project will be completed before the deadline?

* Who will monitor that the project is proceeding as planned and within budget?

* How will deviations be identified and corrected for?

* Interim Analysis

* Are the intermediate results consistent with the final desired results?

* Is the project arriving at the desired results for each major step along its completion path?

* How will the pace be accelerated if your team falls behind schedule?

* How will costs be reduced if actual costs begin exceeding the budget?

* If problems are developing, what actions will be taken to correct them?


Final Report

* How will the results of the project be documented?

* What type of final report will be prepared and by whom? For whom?


To successfully complete the project, the project manager must have a clear understanding of the desired results and how these results will satisfy the needs of the end-user.

To successfully complete the project, the project manager must have a clear understanding of the answers to these questions and of how the desired results satisfy the needs of the end-user.

Project managers should assume a leadership position. Their aim should be not only to supervise but more importantly to coordinate the efforts of the team members. This often requires direct involvement in the major phases of the task so that the team works together, budgets do not show significant variances, schedules are kept, and deadlines are met.

A schedule of work should be prepared for outlining responsibilities. Everything should be written down. Checklists should be used to ensure that all team members know their responsibilities and deadlines. Team members sometimes work on several projects simultaneously. Under these conditions, there may be conflicts among priorities, especially if' they are working under different project managers. To minimize such conflicts, team members should be asked to let project managers know in advance about scheduling conflicts. Team members may then be reassigned to different tasks.

Team members should be given detailed instructions, and participation should be encouraged from the beginning. Their input should be solicited. Let the members propose solutions and assist in implementation. Active participation will motivate the project team, and when the ideas are good, the entire project benefits.


Conducting the Initial Meeting

Before starting the project, the project manager should meet with the team to set a positive tone and define the project's purpose. The meeting can help avoid misunderstandings and save time and effort later. It also clarifies the nature of the assignment, as well as the authority and responsibility of each individual.

Meetings should then be scheduled at regular intervals, but limited in time and frequency. If the project team spends all its time in meetings, not much else will be accomplished. At the same time, it is important to get together to review progress, resolve problems, and ensure adherence to budgets and schedules.

At the initial meeting, each team member should identify the problems he or she anticipates in working on the project. A list should of anticipated problems should be prepared and team members should generate solutions. If additional data is needed, a discussion should be started regarding who will research the data and from what sources. How will this information be verified? What if the data are inaccurate, obsolete, or misinterpreted? Be sure to consider how much time it will take to gather and check additional data or to conduct research.

A list of initial tasks should be prepared and assigned to appropriate individuals. Whenever possible, let the team members volunteer; they are likely to be more motivated if they define their own roles. The entire team should gain an understanding of the scope of the entire project at the initial meeting.

For all major phases of the project, prepare an initial schedule. For each phase, as well as for the overall project, establish the anticipated start and completion dates. Some phases, of course, may overlap. Subgroups of the team may be working independently and the work of one subgroup may not depend on the work of another subgroup. Nonlinearity in a project and its overlapping phases offer tremendous flexibility in scheduling activities.

While deadlines should be established in the initial schedule, maintaining flexibility is also important. It is highly unlikely that everything will happen according to schedule. Furthermore, as the team starts its work, the members will gain a better understanding of the problems, and the schedule and budget may have to be modified.

An initial financial budget should be prepared for each phase of the project. The initial budget should be prepared after considering human, financial, and information resources. For capital expenditures, consider both purchasing and leasing, as appropriate. Variance analysis should be conducted at the end of each phase by comparing the actual to budget Exhibits for costs, time, and productivity. This allows you to monitor actual expenditures and time, and to take corrective action, if necessary, to keep the project within budget.


Assembling the Project Team

The project team is a major determinant of the success or failure of a project. As the team increases in size, its diversity increases, managing the tasks becomes more difficult and complex, and the potential for conflict increases. There might be misunderstandings in communication. Different individuals have different motives and goals.


Team Assignment

As a project manager, you may or may not have control over the staff members assigned to the project team. If a team is being imposed, you should communicate with senior management and request that they allow your involvement in the selection process. For example, you could give them a list of individuals with whom you have worked successfully in the past. Emphasize the importance of having a cohesive project team and that such a team is critical to the project's success.

Of course, sometimes it just is not possible to put together a team of your choice and you have to do the best with those you are given. These individuals may be perfectly capable of doing the job. Alternatively, they may have been assigned to this project simply because they were available. It is also possible that these individuals were assigned because of their interest or talent. In any event, you should give each individual a chance to do the best possible work, and you may find yourself pleasantly surprised.

It is important to inspire and motivate team members. Your aim should be to help team members understand how the success of the project will affect their individual success. It is common for individuals to place top priority on self-gain, so ensuring that team members anticipate personal success ensures their commitment to the project. You need to specifically identify the benefits to the team members to motivate them and to focus their energies on the project. An ideal team member understands the desired results and is committed to making it happen.


(Continues...)

Excerpted from Project Management by Jae K. Shim. Copyright © 2010 Jae K Shim. Excerpted by permission of Global Professional Publishing Ltd.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Meet the Author

Jae K. Shim is Professor of Business Administration at California State University, Long Beach, and a consultant for over twenty years. He is also president of the National Business Review Foundation.

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