Effective Project Management

Barbara Stone & Jodie MathiesOctober 4, 2007

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Agenda• Project schedule review• MS Project demo of project schedule

building• Critical Path• Schedule Compression• Critical Chain• What are project financials?• Why care about project financials?• Creating a cost baseline• MS Project example

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What is the end goal of the current process?

A project schedule:• With tasks in appropriate level of

detail

• Organized so that the overall project takes the shortest amount of time, without over-committing the resources

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Steps to a project schedule

• WBS – activities and tasks

• Sequencing

• Duration estimating

• Schedule development

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Six Criteria to Test for WBS Completeness

• Status/Completion is measurable• The activity is bounded• The activity has a deliverable• Time and cost are easily estimated• Activity duration is within acceptable limits• Work assignments are independent

Seventh Criteria – Project manager’s judgment that the WBS is not complete

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Factoring in constraints

• Factor if multiple working on task together? – discuss XP example.

• Also factor if do not have resource 100% of time. Why this is a bad idea.

• Adding ‘Project Management’ factor

• Do Jodie and Barbara do this?

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Putting it all together

Tasks

+ Duration

+ Sequencing

+ Start date

= Project Schedule

Does it meet Deadline / Scope / $ constraints?

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Gantt charts

• Best when shows task interdependencies and resources assigned

• Does not help organize complex projects as effectively as WBS & network diagrams

• Should be completed after WBS• Effectively shows progress & time• Widely understood communication

tool

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Common scheduling pitfalls

• Planned downtime – calendar events, team needs

• External interfaces – contractors, external teams

• Constraints – duration, access, etc.• Time to come up to speed• 100% optimization• Just plain missed it

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Critical path - assesses• What tasks must be carried out • Where parallel activity can be performed • The shortest time in which you can

complete a project • Resources needed to execute a project • The sequence of activities, scheduling and

timings involved • Task priorities • The most efficient way of shortening time

on urgent projects.

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Critical path

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Let’s talk about ‘safety’

• Within individual tasks

• At critical milestones (‘Critical Chain’)

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Critical chain• Reduce activity duration estimate by 50%• Eliminate resource contention by leveling

project plan• Add resource buffers• Size and place feeding buffers on all paths

that feed the critical chain• Start gating tasks as late as possible• Provide resources with activity durations

and estimated start times, not milestones• Use buffer management to control the plan

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Factoring in constraints

• Factor if multiple working on task together? – discuss XP example.

• Also factor if do not have resource 100% of time. Why this is a bad idea.

• Adding ‘Project Management’ factor

• Do Jodie and Barbara do this?

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Schedule compression – work w/customer

• Careful, detailed planning – no missed steps

• Customer involvement & commitment to fast turnarounds

• Customer acceptance that initial delivery will not be perfect

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Schedule compression – work with schedule

Analyze WBS• Biggest impact on elapsed time (Pareto

80/20)• Identify & evaluate alternate strategies

to minimize time intensive or difficult tasks

• Consider duplicating work to reduce risk

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Schedule compression - universal

• Use a more experienced team• Encourage creative solutions• Monitor morale• Build infrastructure well in advance• Do proof of concept as early as

possible• TRACK YOUR PROJECT

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MS Project Project Schedule demo

• WBS – activities and tasks

• Sequencing

• Duration estimating

• Schedule development – critical path

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Agile

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Alternative - Agile Project Schedule demo

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What are project financials?

Ways that you measure the cost and value of your project

These can be projected at the start of your project and tracked throughout the course of your project

The delta between the baseline and ending cost is often used to measure the project success

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What can be included?

• Project cost

• Benefit

• Opportunity cost

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Project cost: Manpower

Employees often tracked hourly• often calculated using a blended employee rate• Sometimes tiered rates for job families• precise hourly rates for contractors

Does this mean you need to estimate tasks at the hourly level?

‘job of work’ contracts for vendors

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Project cost: Other expenditures

• Materials• Rent• Fees• Travel• …what else?

Useful to think of these costs in terms of the schedule:

• By when will you need to have the money?

• What are the associated tasks?

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Benefit

quantified ending value of the product of project

• profit from sales

• efficiency gained or other cost avoided

Many benefits are tricky to quantify: customer / employee satisfaction, ‘better decision-making’, etc

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Is this project worth it?

You can’t always quantify the benefits as $ amounts

But when you can: ROI

Benefit of project deliverables

– cost of project

= Return on Investment

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Opportunity cost

In an organizational setting, choosing to undertake a project is part of overall financial management

• What else can be done with the resources this project would need?

• Is this project the most important use of the resources?

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Why do we care about project financials?

In the real world – the bottom line matters

• money is time; time is money

• Resources are limited; need to spend them in the best way

• Cannot understand return without costs

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Why do we care about project financials? (Take 2)

Because you have to.

• Some level of financial understanding of the project is required.

• Your company / organization will most likely have guidelines that you will need to follow

• Even if not, it behooves you to do a reasonable level anyway

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When do you calculate Project financials?

• Beginning: create baseline budget

• During: track progress to baseline;

adjust budget as necessary

• End: success metric of project

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As you go through the Planning Phase, cost estimates’ accuracy increases

 

’Class 1’ - Variance +/- 30% to 50% - High level estimate at the Phase level.

‘Class 2’ - Variance +/- 15% to 25% - As many details as possible.

‘Class 3’ - Variance +/- 10% - Completely filled out as applicable.

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Cost Estimating Tools & Techniques

• Analogous: ‘we did more or less the same thing last year and it took us 6 months and cost $400K”

• Parametric: ‘new home construction = $130/square foot’ Software: Function (or Object) Point Analysis

• Bottom-up: estimating cost of individual tasks, then rolling up

• etc

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Cost Budgeting tip:

Don’t forget contingency for risk

Somewhat equivalent to ‘safety’ in schedule

Apply to Cost Baseline at milestone points, not factor for every task

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How do projects get funded?

What do I mean by ‘funded’?

Approval to use the resources required.

Projects can get funded:

• for entire project, at beginning

• incrementally, at specified points

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2003 2004 total 2003 2004 total 2003 2004 totalLabor

Capital 500 205 705 483 494 977 -17 289 272Expense 208 173 381 220 132 352 12 -41 -29

total labor 708 378 1086 703 626 1329 -5 248 243

HW/SW 793 793 605 605 -793 605 -188

Maint fees 60 60 0 0 -60 -60

Contingency 119 51 170 180 180 -119 129 10

Total Project 1620 489 2109 703 1412 2115 -917 923 6 total project budget up by $6K

Forecast shifts between Stage Funding Requests* Total Labor forecast went up 243* Total Hardware/software forecast reduced - 248* Contingency increased by $10K 10

total impact to project forecast 6

Forecast shifts between fiscal years 2003-2004Current project forecast for 2004 1412Prior project budget for 2004 - 489

total budget shift to 2004 923

less HW/SW - 605318

less unused contingency - 180total planned impact to 2004 138

$605K includes capacity and maintenance fees

Plan as of Stage 2 funding request

Plan as of Stage 3 funding Request

Difference

Construction extended further into 2004 with impact of

Change Requests

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I can hear you saying:

How does this relate to my project?

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You have already been working on cost elements for your project

• Time estimates for team members‘effort’ vs ‘duration’

• Understanding purchases

• Understanding time & cost of risk mitigation plans

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Your cost baseline

(Effort in hours of all tasks * cost per hour)

+ Other budgeted project expenses

Project cost baseline

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MS ProjectProject Cost baseline development

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Assignments – for next week

• Project schedule, showing WBS, project task dependencies, functional milestones, and critical path

• Project cost baseline, with description of assumptions ($ / hour of team members, etc) Be able to track over / under budget amounts at project milestones

• Read Effective Project Management, Chapter 12

Back-up slides

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Cost & Schedule: 2 variables

A project can be:

• On time and on budget

• On time and under budget

• Late and on budget

• Etc

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3rd variable: % complete

= % Work accomplished, measured in

budgeted amounts

Ex:

• total hours budgeted for project = 100

• Half of estimated work accomplished in 30

hours

• % complete = 50%

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EVA – Earned Value Analysis

combines Cost, Schedule and % complete variables into performance metrics

Good way to show ‘project health’, but

only as good as your initial schedule

and budget!

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EVA Calculations

Planned value = $ amount of work you expected to complete at this point in the project

Earned Value = $ amount of work you expected what you have accomplished to take

Actual Cost = $ amount you have actually spent at this point in the project

Performance metrics:

Cost Performance Index = project ratio of expected to actual cost (EV/AC)

Schedule Performance Index = project ratio of accomplished to planned work (EV/PV)

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Formulas to know• PV (BCWS)• EV (BCWP)• AC (ACWP)• CV EV-AC• CPI EV/AC• SV EV-PV• SPI EV/PV• EAC BAC/CPI or

AC/BAC• ETC EAC-AC• VAC BAC-EAC

• % complete = BAC

• PERT (P+4M+O) 6• Standard deviation

(P-O)6

• Task Variance• (P-O) squared 6

• Present value = FV (1+r)n

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An example w/ MS Project

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% Complete

Work is 70% complete 5 months along (62.5% of duration)

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But what is the actual cost?

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EVA Calculations

Planned value = $24,000 (62.5% of budget)

Earned Value = $26,880 (70% of budget)

Actual Cost = $34,875 (91% of budget)

CPI = .77 (bad)

SPI = 1.12 (good)

What was the priority on this project, cost or schedule?

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Globalization Workflow

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Technique review

• Affinity Diagram• Cause and effect/Ishikawa/fishbone• Six Hats

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Affinity diagrams

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Cause and Effect Diagram

what is it ?• A Cause and Effect

Diagram is an analysis tool to display possible causes of a specific problem or condition.

what is it used for ?• Identifying potential causes

of a problem or issue in an orderly way (example: Why has membership in the band decreased?; why isn't the phone being answered on time?; why is the production process suddenly producing so many defects?)

• Summarizing major causes under four categories (e.g., People, Machines, Methods, and Materials or Policies, Procedures, People, and Plant)

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Cause and Effect Diagrambenefits

• Cause and Effect Diagrams provide a visual format which allows people to catalog all of the ideas about factors that may contribute to an effect.

• Can also be used as a communication tool to describe causal factors

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Cause and Effect Diagramexample

Reasons Why the Phone is Not Answered

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Cause and Effect Diagramhow to construct a fishbone

1. Write the issue (problem or process condition) on the right side.

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Cause and Effect Diagramhow to construct a fishbone

1. Identify the major cause categories and write them in the four boxes on the Cause and Effect Diagram.

2. Brainstorm potential causes of the problem. As possible causes are provided, decide as a group where to place them on the Cause and Effect Diagram. It is acceptable to list a possible cause under more than one major cause category.

4. Review each major cause category. Circle the most likely causes on the diagram.

5. Review the causes that are circled and ask "Why is this a cause?" Asking "why" will help get to the root cause of the problem. Ask “why” five times.

6. Reach an agreement on the most probable cause(s).

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Let’s try it

Lack of communication between faculty, staff

And students

Students don’t

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• Students don’t understand how short term policy changes will impact the long run• Don’t understand how they were administered before• No history – alumni linkage communication

• No venue for administration/faculty to inform the students of what they are discussing• Key faculty/staff have left• News committee decimated• Faculty & students used to meet – meetings have been discontinued

• Don’t feel students need to know – internal decision• Short staffed

• No budget to hire• Staff leave for better pay/positions

• No incentive to communicate• No one clearly charged with communicating• No clear delineation of areas of responsibility• Are delegates the best people to take on