fpm module 02 initiation and integration april 11 2013

42
Foundations of Project Management Module 2: Project Initiation and Integration

Post on 19-Oct-2014

174 views

Category:

Business


2 download

DESCRIPTION

 

TRANSCRIPT

Slide 1

Foundations of Project Management

Module 2: Project Initiation and Integration

2 2

Session Outline

1. Project Initiation and Selection 2. Project Integration Management

3 3

Project Initiation Initiating a project includes recognizing and

starting a new project or project phase Some organizations use a pre-initiation

phase, while others include items like developing a business case as part of initiation

The main goal is to formally select and kick-off projects

Key outputs include: Assigning the project manager Identifying key stakeholders Completing a business case Completing a project charter and getting signatures on

it

Initiating Processes

4.1 Develop Project Charter

13.1 Identify Stakeholders

4 4

4.1 Develop Project Charter

Outputs 1. Project Charter

Inputs 1. Project

Statement of Work

2. Business Case 3. Agreements 4. Enterprise

Environmental Factors

5. Organizational Process Assets

Tools and Techniques 1. Expert Judgment 2. Facilitation

Techniques

4

5 5

Business Case Template

Source: IT Project Management, J Marchewka, J Wiley & Sons

6 6

The Project Charter

Process of formalizing projects after deciding what project to work on

A project charter is a document that formally authorizes the existence of a project and provides direction on the projects objectives and management

Key project stakeholders should sign a project charter to acknowledge agreement on the need and intent of the project

PMBOK: p.71 Schwalbe: p.157

7 7

Project Charter Questions

What business need is the project undertaken to address? What is the purpose of the project? What organizational strategic objectives is this project meant to

achieve? What factors, criteria or tools are you using for your justification? What are the customers priorities and in what order? Schedule, cost,

quality and scope? What is your customers risk tolerance to changes in schedule, cost and

scope? What are the project Requirements that will meet customer, sponsor or

other stakeholder needs, wants and expectations? What are Stakeholder Influences? What Human Resources will the project require? What are the projects key Deliverables & Milestones?

8 8

Project Statement of Work The Statement of Work (SOW) is a

narrative description of products or services to be delivered by the project

The SOW indicates the business need, the product scope description, and the strategic plan

Business Case Provides the necessary information

from a business standpoint to determine whether or not the project is worth the required investment

Agreements Any contract, letter, note, e-mail or

other communication describing intent. Contracts most common for external customers.

Develop Project Charter Inputs (4.1.1) Enterprise

Environmental Factors Governmental or industry

standards Organization infrastructure Marketplace conditions

Organizational Process Assets Organizational standard

processes, policies, and standardized process definitions

Templates Lessons learned

9 9

Project Kickoff Meeting The purpose of the kickoff meeting is to formally notify all team members, clients, and stakeholders that the project has begun

A kick-off meeting has some basic objectives: Introduce the people at the meeting

Recap the information in the Project Charter, including the purpose of the project, the scope, the major deliverables, the risks, the assumptions, the estimated effort and budget, and the deadline

Discuss the major roles and responsibilities of the project team, clients and stakeholders

Discuss the project management procedures

Discuss and answer any outstanding questions

Confirm that the project is now underway

10 10

Identify Stakeholders (13.1) Is the process of identifying all people or organizations impacted by project, and documenting relevant information regarding their interests, involvement, and impact on project success

Outputs

1. Stakeholder register

Inputs

1. Project charter 2. Procurement

documents 3. Enterprise

environmental factors

4. Organizational process assets

Tools and Techniques

1. Stakeholder analysis

2. Expert judgment 3. Meetings

This process is part of the Stakeholder Management Knowledge Area

Section will be discussed further in Project Stakeholder

Management

11 11

Project Stakeholders

Government Agencies

Contractors

External Partners

Suppliers

The Public and/or

Community

External Customers

Project Team Project Sponsor

Functional Departments in Organizations

Internal Customers

Internal Partners

Performing Organization

Project

11 PMBOK:p.30 Schwalbe: p512

12 12

Stakeholder Roles

Stakeholder Role and Responsibility

Sponsor Provides approval, authority & guidance

Project Manager Defines, plans, implements and controls project

Project Team Provides the knowledge and skills and performs the work to implement & control project

Customer Defines product requirements and funds the project

Functional Managers Provide the organizations policies and sector-specific knowledge and experience

13 13

Project Selection

Benefit Measurement Framework

Decision Models

Project Selection Process

Projects Product Description

Projects Selection Framework

Organizations Strategic Plan

Project Knowledge Base and Historical

Information

Project Selected

Project Denied

Project Charter Assigned PM Constraints Assumptions

Lessons Learned

13

14 14

Methods for Selecting Projects There are usually more projects than available time

and resources to implement them Project Selection Criteria

Generation of alternative ideas for project Estimation of investment costs and benefits Analysis of the cost/benefits of each alternative Selection and implementation of appropriate Strategy Evaluation of outcome of implemented investment

ROI PBP DCF NPV IRR

15 15

Project Selection Example A Project task can be implemented by either Machine A or Machine B. The original investment and cash flow from the two machines are shown below

Original Investment $ 35,000 Year Cash Flow 1 20,000 2 15,000 3 10,000 4 10,000 Total Cash Flow 55,000 Profit 20,000

Machine A Machine B

Original Investment $ 35,000 Year Cash Flow 1 10,000 2 10,000 3 15,000 4 20,000 Total Cash Flow 55,000 Profit 20,000

16 16

Return on Investment Return on investment (ROI) is calculated by subtracting

the project costs from the benefits and then dividing by the costs ROI = (total discounted benefits - total discounted costs) / discounted

costs The higher the ROI, the better Many organizations have a required rate of return or

minimum acceptable rate of return on investment for projects

Internal rate of return (IRR) can by calculated by finding the discount rate that makes the NPV equal to zero

17 17

Return On Investment (ROI) ROI = [Average Annual Profit/Org. Investment] x 100

Original Investment $ 35,000 Year Cash Flow 1 20,000 2 15,000 3 10,000 4 10,000 Total Cash Flow 55,000 Profit 20,000 Profit/Yr. : (55K 35K)/4 = 5000 ROI: (5K/35K) x 100 = 14%

Machine A Machine B

Original Investment $ 35,000 Year Cash Flow 1 10,000 2 10,000 3 15,000 4 20,000 Total Cash Flow 55,000 Profit 20,000 Profit/Yr. : (55K 35K)/4 = 5000 ROI: (5K/35K) x 100 = 14%

18 18

Payback Analysis Another important financial consideration is payback

analysis The payback period is the amount of time it will take to

recoup, in the form of net cash inflows, the total dollars invested in a project

Payback occurs when the net cumulative discounted benefits equals the costs

Many organizations want IT projects to have a fairly short payback period

19 19

Pay Back Period (PBP) PBP is the time taken to gain Financial Return equal to the Original Investment

Original Investment $ 35,000 Year Cash Flow 1 20,000 2 15,000 3 10,000 4 10,000 Total Revenue 55,000 PBP = 2

Machine A Machine B

Original Investment $ 35,000 Year Cash Flow 1 10,000 2 10,000 3 15,000 4 20,000 Total Revenue 55,000 PBP = 3

20 20

Discounted Cash Value DCV ( Time Value of Money)

(Cash flow n years from today)

DCV = ( 1+ r )n

DCV = present value of future cash r = interest Rate n = number of years from today when cash flow occurs

21 21

Time Value of Money Tables

No of Years 5% 10% 20%

1 .9524 .9091 .8333 2 .9070 .8264 .6944 3 .8638 .7513 .5787 4 .8227 .6830 .4823 5 .7835 .6209 .4019 6 .7462 .5645 .3349 7 .7107 .5132 .2791 8 .6768 .4665 .2325 9 .6446 .4241 .1938 10 .6139 .3855 .1615

22 22

Future & Discounted Value of Money

The Present (Discounted) Value of a future income of $1000 at an interest rate of 10% is:

1 year $909.10 2 years $826.40 10 years $385.50

The Future Value of a $ 1000 investment at an

interest rate of 10% is: 1 year $1,100.00 2 years $1,210.00 10 years $2,594.00

23 23

Net Present Value Analysis Net present value (NPV) analysis is a method of

calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time

Projects with a positive NPV should be considered if financial value is a key criterion

The higher the NPV, the better

24 24

Net Present Value = DCF - Initial Investment

Machine A: Initial Investment= $ 35,000, Interest Rate = 20%

Year 1 2 3 4

Cash Flow

20,000 15,000 10,000 10,000

Present Value

20,000 x .8333 = 16,666

15,000 x .6944 = 10,416

10,000 x .5787 = 5,878

10,000 x .4823

=4,823 Total Present Value = 16,666 + 10,416 + 5,878 + 4,823 = 37,783 Net Present Value NPV = 37,783 35,000 = 2,783

25 25

Net Present Value = DCF - Initial Investment Machine B: Initial Investment= $ 35,000, Interest Rate = 20%

Year 1 2 3 4

Cash Flow

10,000 10,000 15,000 20,000

Present Value

10,000 x .8333 = 8,333

10,000 x .6944 = 6,944

15,000 x .5787 = 8,681

20,000 x .4823

=9,646 Total Present Value = 8,333 + 6,944 + 8,681 + 9,646 = 33,604 Net Present Value NPV = 33,604 35,000 = (- 1,396)

26 26

Internal Rate of Return (IRR) IRR is the rate of growth a project is expected to generate. It is an indicator of the efficiency or quality of an investment.

The Internal Rate of Return is the Value of the Discount Rate at which the NPV is equal to zero, or at which DCF equals the Initial Investment.

CF/ (1 + IRR)n = Initial Investment

The value of IRR is usually obtained by an iterative process.

26

27 27

Uncertain Event

Expected Monetary Value and Decision Trees

Decision

O11

O12

O21

O22

Decision Node

Probability of Outcome

Potential Outcome

Expected Monetary

Value

P11 x O11

P12 x O12

P21 x O21

P22 x O22

EMV1 = P11 x O11 + P12 x O12 EMV2 = P21 x O21 + P22 x O22 27

28 28

Example: Choosing between 2 Projects

$28,000

$30,000 =

=

60,000

-32,000

42,000

-2,000

-10,000

+

+

+

Profit of $300,000

Loss of $40,000

Profit of $60,000

Loss of $20,000

Loss of $50,000

20%

80%

70%

10%

20%

Bid on Project 1

Bid on Project 2

Decision

Possible choices

Outcome probability

Potential outcome EMV per

outcome Total EMV

28

29 29

Balanced Scorecard Approach

Innovation and Learning Perspective How do we keep getting better?

Financial Perspective How do we look to our shareholders or to those who provide funding to us?

Customer Perspective How do we look to our customers and other stakeholders?

Internal Processes Perspective What internal processes we must excel at in order to attract and retain our customers and other key stakeholders?

Source: IT Project Management, J Marchewka, J Wiley & Sons

It is a performance management approach that involves measuring a companys vision and strategy via four perspectives. By balancing internal process measurement and financial results with customer feedback, the performance picture becomes complete.

29

30 30

Project Integration Management

Project Integration Management includes the processes and activities needed to identify, define, combine, unify and coordinate the various processes and project management activities

Integration includes characteristics of unification, consolidation, articulation and integrative actions that are crucial to project completion

31 31

Project Integration Management Processes 4.1 Develop Project Charter: working with stakeholders to

create the document that formally authorizes a project 4.2 Develop Project Management Plan: coordinating all

planning efforts to create a consistent, coherent document 4.3 Direct and Manage Project Work: carrying out the project

management plan by performing the activities included in it 4.4 Monitor and Control Project Work: overseeing project

work to meet the performance objectives of the project 4.5 Perform Integrated Change Control: coordinating changes

that affect the projects deliverables and organizational process assets

4.6 Close Project or Phase: finalizing all project activities to formally close the project

32 32

4.2 Develop Project Management Plan The process of documenting the actions necessary to define, prepare, integrate

and coordinate all subsidiary plans.

Outputs

1. Project management plan

Inputs

1. Project charter 2. Outputs from other

processes 3. Enterprise

environmental factors

4. Organizational process assets

Tools and Techniques

1. Expert judgment 2. Facilitation

techniques

The Project Management Plan defines how the project is executed, monitored, controlled and closed.

33 33

Project Management Plan A Project Management Plan consolidates other subsidiary management plans

including: Scope management plan Requirement management plan Schedule management plan Cost management plan Quality management plan Process improvement plan Human resource plan Communication management plan Risk management plan Procurement management plan

34 34

Project Management Plan (continued) A Project Management Plan includes:

Project Charter Budget Schedule Resources Scope Statement WBS Responsibility charts/assignments Management Plans

The Project Management Plan also includes project baselines, including: Schedule baseline Cost performance baseline and Scope baseline

35 35

4.3 Direct and Manage Project Work Is the process of performing the work defined in the project management

plan to achieve the projects objectives.

Outputs

1. Deliverables 2. Work

performance data 3. Change requests 4. Project

management plan updates

5. Project documents updates

Inputs

1. Project management plan

2. Approved change requests

3. Enterprise environmental factors

4. Organizational process assets

Tools and Techniques

1. Expert judgment 2. Project

management information systems

3. Meetings

36 36

Direct and Manage Project Execution The process includes:

Perform activities to accomplish project requirements Create project deliverables Staff, train, and manage the team members assigned Obtain, manage, and use resources Implement the planned methods Establish and manage project communication channels Generate project data, such as cost, schedule, technical progress, and

status Manage risks and implement risk response activities Manage sellers and suppliers Collect and document lessons learned

37 37

4.4 Monitor and Control Project Work Is the process of tracking, reviewing, and regulating the progress to meet

the performance objectives defined in the project management plan.

Outputs

1. Change requests 2. Project

management plan updates

3. Project documents updates

Inputs

1. Project management plan

2. Schedule forecasts 3. Cost forecasts 4. Validated changes 5. Work performance

information 6. Enterprise

environmental factors

7. Organizational process assets

Tools and Techniques

1. Expert judgment 2. Analytical

techniques 3. Project

management information system

4. Meetings

38 38

Monitor and Control Project Work The process is concerned with:

Comparing actual project performance against the project management plan

Assessing performance to determine whether corrective or preventive actions are required

Identifying new risks, and analyzing, tracking, and monitoring existing project risks

Maintaining an accurate, timely information base concerning the projects product

Providing information to support status reporting, and forecasting Monitoring implementation of approved changes as they occur

39 39

4.5 Perform Integrated Change Control Is the process of reviewing all change requests, approving changes and managing changes to the deliverables, organizational process assets, project documents and

the project management plan

Outputs

1. Approved change requests

2. Change log 3. Project

management plan updates

4. Project documents updates

Inputs

1. Project management plan

2. Work performance information

3. Change requests 4. Enterprise

environmental factors

5. Organizational process assets

Tools and Techniques

1. Expert judgment 2. Meetings 3. Change control tools

40 40

Perform Integrated Change Control Configuration management with change control provides a

standardized, effective and efficient process to centrally manage changes within a project.

It includes identifying, documenting, and controlling changes to the baseline

Project wide application of configuration management system, including change control processes, has three main objectives:

Establishes an evolutionary method to consistently identify and request changes to the established baselines, and to assess the value and effectiveness of those changes

Provides opportunities to continuously validate and improve the project by considering the impact of each change.

Provides the mechanism for the project management team to consistently communicate all changes to the stakeholders

41 41

4.6 Close Project or Phase Is the process of finalizing all activities across all the Project Management

Process Groups to formally complete the project or phase

Outputs

1. Final product, service or result transition

2. Organizational process assets updates

Inputs

1. Project management plan

2. Accepted deliverables

3. Organizational process assets

Tools and Techniques

1. Expert judgment 2. Analytical

techniques 3. Meetings

42 42

Close Project or Phase The act of completing a project or a phase of a project, either because it has been completed or because it has been terminated early.

The close project or phase process also establishes the procedures to investigate and document the reasons for actions taken if a project is terminated before completion

Includes all of the activities necessary for administrative closure of the project or phase

Also includes Releasing team members Celebration of completion

Foundations of Project ManagementSession OutlineProject Initiation4.1 Develop Project Charter Business Case TemplateThe Project CharterProject Charter QuestionsSlide Number 8Project Kickoff MeetingSlide Number 10Project StakeholdersStakeholder Roles Project SelectionMethods for Selecting ProjectsProject Selection ExampleA Project task can be implemented by either Machine A or Machine B. The original investment and cash flow from the two machines are shown below Return on InvestmentReturn On Investment (ROI)ROI = [Average Annual Profit/Org. Investment] x 100Payback AnalysisPay Back Period (PBP)PBP is the time taken to gain Financial Return equal to the Original InvestmentDiscounted Cash Value DCV( Time Value of Money)Time Value of Money TablesFuture & Discounted Value of MoneyNet Present Value AnalysisNet Present Value = DCF - Initial InvestmentNet Present Value = DCF - Initial InvestmentInternal Rate of Return (IRR)IRR is the rate of growth a project is expected to generate.It is an indicator of the efficiency or quality of an investment.Expected Monetary Value and Decision TreesExample: Choosing between 2 ProjectsBalanced Scorecard ApproachProject Integration ManagementProject Integration Management ProcessesSlide Number 32Project Management Plan Project Management Plan (continued) Slide Number 35Direct and Manage Project ExecutionSlide Number 37Monitor and Control Project WorkSlide Number 39Perform Integrated Change ControlSlide Number 41Close Project or Phase