Copyright 2013 John Wiley & Sons, Inc.

Chapter 6:

Managing Process Improvement Projects

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Overview

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Décor Cabinets

• Décor Cabinets adopted a goal of 100 percent on time delivery– Long-term customer loyalty

– Enhance profitability

• Having clear objective helped them assemble a project portfolio focused on that goal

• Meant declining some seemingly profitable project ideas

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Mississippi Power and Hurricane Katrina

• Primary and secondary storm center knocked out

• Third location had no electricity or running water

• Within days, had 11,000 repairmen• Needed housing, beds, food, water, 5,000

trucks, 140,000 gallons of fuel a day, 8,000 tetanus shots and much more

• Directing was a massive project

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“Big Dig”

• Boston’s “Big Dig” highway/tunnel project is one of the largest, most complex, and technologically challenging highway projects

• Original cost estimate was $3 billion• Final cost was over $14 billion

1. Major underestimate of initial scope2. Lack of cost control

• Estimated benefit is $500 million per year• Expected to have a 78 year payback

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Introduction

• Project management concerned with managing organizational activities

• Often used to integrate and coordinate diverse activities

• Projects are special types of processes

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Defining a Project

• Projects are a special type of process• Projects are a set of activities that, taken

together, produce a valued output• Each project is unique with a clear beginning

and end• They are performed infrequently and ad hoc,

with a clear specification of the desired objective

• Limited budget• Extremely important to the organization

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Project Management

What is a project? A series of related jobs, usually directed toward some

major output and requiring a significant period of time to perform.

What is project management? Planning, directing, and controlling resources (people,

equipment, material, etc.) to meet the technical, cost, and time constraints of the project.

Why is project management important? At the highest levels of an organization, management

often involves juggling a portfolio of projects.

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Examples of Projects

• Constructing highways, bridges, tunnels and dams

• Building ships, planes, rockets, or a doghouse• Erecting skyscrapers, steel mills, and homes• Locating and laying out amusement parks,

camping grounds, and refuges• Organizing conferences and conventions• Managing R&D projects• Running political campaigns, war operations,

and advertising campaigns

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Reasons for Growth in Project Operations

1. More Sophisticated Technology

2. Better-Educated Citizens

3. More Leisure Time

4. Increased Accountability

5. Higher Productivity

6. Faster Response to Customers

7. Greater customization for customers

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Planning the Project

• Planning is probably the single most important element in the success of the project

• Will discuss:– Project portfolio– Project team– Actual project planning tools

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The Project Portfolio

• Long-term purpose of projects is to achieve the organization’s goals

• Accomplished through the project portfolio– Also know as the aggregate project plan

• It is vital to consider the interactions among various projects

• Must manage projects as a set

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Four Categories of Project

1. Derivative projects– Seek to make incremental improvements in the

output and/or process2. Breakthrough projects

– Seek the development of a new generation of outputs

3. Platform projects– Fall between derivative and breakthrough projects

4. R&D projects– Entail working with basic technology to develop

new knowledge

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The Aggregate Project Plan

Figure 6.1

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An Example of Aggregate Project Plan

Figure 6.2

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Types of Development Projects

Type of Project

Degree of Change

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Project Structure

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Pure Project Structure

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Project Structure

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Functional Project Structure

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Project Structure

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Matrix Project Structure

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The Project Life Cycle

• Project progress is rarely uniform• Tend to be either stretched or

exponential• With stretched, the project starts slow

but gathers speed during implementation• With exponential, there is continuous

activity but no output until everything comes together

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Two Project Life Cycles (a) Stretched-S and (b) Exponential

Figure 6.3

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Projects in the Organizational Structure

• In a functional organization, projects are frequently housed in the department with a major interest in its success– More generic projects might report to a vice

president

• Some organizations are structured by projects– Called projectized organizations

• Some firms use a matrix structure to get the benefits of both structures

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Organizing the Project Team

• A team is required to run a project• Some team members report directly to the

project manager– Those having long-term relationship with project

– Those needing to communicate closely with project manager

– Those with necessary skills

• Not common for project manager to have reward authority

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Four Major Attributes for Project Managers

1. Credibility

2. Sensitivity– To both politics and personalities

3. Leadership, ethics, and managerial style

4. Ability to handle stress

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Project Plans

• Initiation of a project should include the development of a project charter– Also known as the project plan

• Elements form the basis for more detailed planning– Budgets

– Schedules

– Work plan

– General management

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Elements of Project Charter

• Overview– A short summary of what the client expects from

the project• Goals, or scope

– Contains a more detailed statement of the general goals

• Business case– Describes the justification for the project

• General approach– Describes both the managerial and the technical

approaches

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Elements of Project Charter (Continued)

• Contractual Aspects– Includes a complete list and description of all

reporting requirements, customer-supplied resources, liaison arrangements, and so on

• Schedule and milestones– This outlines the schedule and lists milestone

events

• Resources– The project budget and cost

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Elements of Project Charter (Continued)

• Personnel– The project team, approvers, and other involved

departments

• Risk management plan– This covers potential problems that could affect the

project

• Evaluation method– Every project should be evaluated against

standards

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Three Project Objectives

Figure 6.4

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Scheduling the Project

• Schedule based on activities that must be conducted to achieve the project goals

• The Length of time each activity requires

• Order in which they must be completed

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Terminology

• Activity– One of the project operations

• Event– Completion of an activity

• Network– Set of all project activities shown

graphically

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Terminology (Continued)

• Path– A series of connected activities from start to

end

• Critical path– Any path that delayed will delay project

• Critical activities– The activities on the critical path

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Project Scheduling with Certain Activity Times

• Inputs– List of the activities that must be completed – Activity completion times– Activity precedence relationships

• Outputs– Graphical representation of entire project– Time to complete– Critical path or paths with critical activities– Slack time– Early and late start/end times

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Data for a Mortgage Refinancing Project

Figure 6.1

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Network Diagram for Process Improvement Project

Figure 6.8

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Network-Planning Models

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Critical Path Method (CPM)

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Example 4.1 – Identify Activities and Construct Network

A(21)

C(7)

B(5) D(2)

F(8)

E(5)

G(2)

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Determine Early Start/Early Finish and Late Start/Late Finish Schedule

A(21)

C(7)

B(5) D(2)

F(8)

E(5)

G(2)

0 21

0 21

21

21

28

28

21

21

26

26

26

26

28

28

28

28

36

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28

31

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Critical Path 1: ACFG

Critical Path 2: ABDFG

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