introduction to project management pm-010
TRANSCRIPT
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Qs 01:- Describe the three strategy levels in detail.
Ans01 :-
Strategies can be formulated on three different levels. Johnson
and Scholes define strategy as Strategy is the direction and scopeof an organization over the long term: which achieves advantage for
the organization through its configuration of resources within a
challenging environment, to meet the needs of markets and to fulfill
stakeholder expectations.
Strategy at Different Levels of a Business:
Strategies exist at several levels in any organization -
ranging from the overall business (or group of businesses) through
to individuals working in it
Strategy Levels:
Strategy exists at three hierarchical levels in an
organization ranging from the overall business (or group of
businesses) through to individuals working in it.
1. Corporate Strategy :It is concerned with the overall purpose and
scope of the business to meet stakeholder expectations. This is acrucial level since it is heavily influenced by investors in the
business and acts to guide strategic decision-making throughout the
business. Corporate strategy is often stated explicitly in a "mission
statement". It consists of the kinds of initiatives the company uses
to establish business positions in different industries, the
approaches corporate executives pursue to boost the combined
performance of the set of businesses the company has diversified
into, and the means of capturing cross-business synergies and
turning them into competitive advantage. Senior corporate
executives normally have lead responsibility for devising corporate
strategy and for choosing among whatever recommended actions
bubble up from the organization below.
2. Business Unit Strategy :This strategy is concerned more with how
a business competes successfully in a particular market. It concerns
strategic decisions about choice of products, meeting needs of
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customers, gaining advantage over competitors, exploiting or
creating new opportunities etc. Business strategy concerns the
actions and the approaches crafted to produce successful
performance in one specific line of business. The key focus here iscrafting responses to changing market circumstances and initiating
actions to strengthen market position, build competitive advantage,
and develop strong competitive capabilities. Orchestrating the
development of business-level strategy is the responsibility of the
manager in charge of the business.
3. Operational Strategy : It is concerned with how each part of the
business is organised to deliver the corporate and business-unit
level strategic direction. Operational strategy therefore focuses on
issues of resources, processes, people etc. Operating strategies
concerns the relatively narrow strategic initiatives and approaches
for managing key operating units(plants, distribution centres, geographic
units) and for specific operating activities with strategic significance
(advertising campaigns, the management of specific brands, supply
chain-related activities, and Website sales and
operations).Operating strategies add further detail and
completeness to functional-area strategies and to the overall
business strategy. Lead responsibility for operating strategies is
usually delegated to frontline managers, subject to review and
approval by higher-ranking managers.
Qs 02 :
a) Describe the various roles undertaken by a Project Manager.
b) List and explain in brief the qualities of a Project Manager.
Ans02 :-
a) Various roles undertaken by a Project Manager :
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The role of the Project Manager is to plan, execute
and finalize projects according to strict deadlines and within budget.
This includes acquiring and coordinating the efforts of team
members and third-party contractors or consultants in order todeliver projects according to plan. The role & responsibilities of a
Project Manager is little complex and needs to be explained
elaborately in clear terms for each project. Below are few important
roles & responsibilities of a Project Manager:
The Project Manager is the person responsible for managing
the project.
The Project Manager is the person responsible for
accomplishing the project objectives within the constraints of
the project. He is responsible for the outcome (success or
failure) of the project.
The Project Manager is involved with the planning, controlling
and monitoring, and also managing and directing the assigned
project resources to best meet project objectives. The Project Manager Controls and monitors triple
constraintsproject scope, time and cost (quality also)in
managing competing project requirements.
The Project Manager examines the organizational culture and
determines whether project management is recognized as a
valid role with accountability and authority for managing the
project. The Project Manager collects metrics data (such as baseline,
actual values for costs, schedule, work in progress, and work
completed) & reports on project progress and other project
specific information to stakeholders.
The Project Manager is responsible for identifying, monitoring,
and responding to risk.
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The Project Manager is responsible to the project stakeholders
for delivering a projects objectives within scope, schedule,
cost, and quality.
The reporting structure of a Project Manager will changedepending on organizational structure. He may reports to a
Functional Manager or to a Program Manager.
In a bit exaggerating terms, Project Manager is the God
of his project and he is the one who decides the success of the
project.
b) Qualities of a Project Manager :
You do not lead by hitting people over the head
thats assault, not leadership. How apt these words by Dwight D
Eisenhower are, leadership is not about bullying people, it is about
getting people to respect you with your leadership skills and
qualities. People should want to be lead by the project manager. So
what are the leadership qualities that a project manager shouldhave? Should he be skilled or compassionate? Or maybe he needs
to be a good communicator or a visionary? There is not right answer
and there is no wrong answer. Even as I make this statement, here
is a list of some leadership qualities for a project manager.
1. Vision:
Every project manager should have a vision, avision of what he wants the project to be like, a vision of how
to get things done and a vision of the near future of the
project. And he needs to be able to convey this vision to his
team members. Only when there is vision is there going to be
real involvement on the part of the project manager and thus
involvement on part of the team members. This is when the
team members and project manager start feeling like a part of
the organization and not just the project.
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2. Communication skill:
Most would say communication is the most
important skill of a project manager and some would beg to
differ. But communication is an integral part of the leadershipqualities. Without communication the project manager cannot
lead. Communication not only allows for great leadership but
also for openness and relativity. Persuasion and negotiation
are all a part of communication and the project managers
qualities.
3. Honesty:
Call it honesty, integrity or loyalty, the projectmanager needs to have it all. The actions of the project
manager set an example for the rest of the team members.
The project manager is ultimately responsible for setting
standards, ethically and otherwise for the rest of the team.
The project manager needs to practice before preaching and
to lead by example.
4. Passion:
A project manager without passion is one that is
simple put, lacking dedication. The project manager has to be
passionate about the project; he should have enthusiasm and
the right attitude. Only then will people follow him and respect
his decisions, because they need to feel he is doing it for the
project. There needs to be commitment and optimism
involved.5. Compassion:
Do not mistake empathy or compassion for
sympathy. These two words are independent of each other.
Empathy means to understand. A good project manager needs
to understand or empathize with the fact that there is a life
outside the work place and that people are not machines
without emotions.6. Skill and knowledge:
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There needs to be some skill and knowledge that
the project manager needs to have. To put it simply, the
project manager should know what he is doing and should be
able to guide the rest of the team.7. Delegation:
The project manager should be able to handle
delegation with ease. He should be able to recognize skills and
expertise of his team members and assign or delegate tasks
according to those. Also this shows that the project manager
trusts the team in doing tasks. Trust inspires confidence.
8. Composed:
We do not live in a perfect world. There are times
when things do not go as expected in such a case the project
needs to maintain his cool and be composed irrespective of
the amount pressure he is under. This shows good leadership
and strength in character.
9. Team building:
The project manager should also be a teambuilder. He should be able to hold and pull the team together
to work under different conditions. The team starts as a group
of strangers and needs to be made into a core group of
people.
10. Problem solver:
An efficient project manager should be capable of
solving any and all problems, either with the team or theproject itself.
Qs 03 :-
a) Describe the major types of stakeholders in a project.
b) Describe the major type of Organizational structure in Detail.
Ans03 :-
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a) Major types of stakeholders in a project:
According to PMIs guide to PMBoK, project stakeholders
are individuals and organizations actively involved in the project, or
whose interests may be positively or negatively affected as a resultof project execution or project completion.
According to Stanford Research Institute5 stakeholders
are those groups without whose support the organization would
cease to exist. The major stakeholders of a project are:
Project Manager
Customer Performing Organization
Project Team Members
Sponsor
Society
Below figure depicts a diagrammatic representation of
the major stakeholders of a project.
Project Manager: Project manager is the interface between the
customer and other internal stakeholders. The project manager
holds the responsibility for the successful implementation of theproject and is an important stakeholder.
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Customer::Customers are the internal or external group of
individuals who directly affect the project. The aim of the project is
to create a product, service or facility based on customerrequirements and to deliver it to the customer. Hence, the project
team must consider all requirements of the customer while creating
the deliverable. The customer can be any one of the following:
Internal customer:
They are individuals within the parent organisation. For
example, the IT department is assigned to provide a softwarepackage for the accounts department. The accounts
department is the internal customer.
Intermediate customer:
They are external to the company but not the final user of the
product e.g. distributors and wholesalers.
External customer:
They are individuals or organisations that pay for and use thefinal product.
Performing Organization: The performing organization is the
enterprise whose employees are most directly involved in
performing the work of the project. Therefore, the project
contributes towards achieving the corporate goals of the performing
organization. In addition, there are several other stakeholders likeproject owner, fund providers, suppliers or contractors, government
agencies and media outlets and the society. Stakeholder roles and
responsibilities may overlap. For example, when an engineering firm
finances a plant it is in the designing or construction field, the role
of the engineering firm changes from performing organization to
sponsor for the projects undertaken by the designing or construction
company. The naming or grouping of stakeholders is primarily an
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aid to identify individuals or organizations who view themselves as
stakeholders.
Project Team Members:
Team members working in their individualareas of expertise play a crucial role in the success of the project.
They work directly with or under the project manager depending on
the organization structure adopted for the project. The project
manager, therefore, uses team building skills to ensure that the
team members work as a team.
Sponsor:
The sponsor is an individual or a group within or externalto the parent organization who arranges the financial resources in
cash or in kind for the project. The sponsor may be a senior
executive of an organization or a junior manager with formal
authority who is responsible for the project thus, acting as a link
between the project and the performing organization.
b) Major type of Organizational structure in Detail:
Organizational structure has a significant impact on the
functioning of a project manager. To enable successful completion
of a project, it is important that the resources required for project
implementation flow freely from the organization to the project.
There are three types of organizational structures:
1. Functional organization:It is a hierarchical structure. It
defines a clear Superior-Subordinate relationship, i.e., the line of
control is clear. Each department carries out work in its area of
specialization and employees in each department work with its
respective expertise within the department's line of control. In a
manufacturing organization, the different departments are
production, finance, marketing, quality control, engineering,
administration, personnel ands so on. If a new product is to be
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developed, the engineering department handles only the design
development phase of the product. If answers to questions
concerning manufacturing, marketing or quality control are found,
the query is passed on to the respective department through formalcommunication channels.
2. Project-based organizations:These are designed to provide
near total authority to the project manager. The project manager
directs work and sets priorities to employees assigned to the project
manager for the project. Functional departments exist in this
organization, but the groups working in these departments report
directly to the project manager in the execution of various projects.
3. Matrix-based organizations:It is the combination of the
features of functional and project-based organizational structures. In
this type of organizational structure, project managers and
functional managers have equal authority, which implies that the
functional staff member reports to both project manager and their
functional manager. This constitutes a dual reporting system for
each functional staff member.
Qs 04 :- List and describe in brief the various qualities of the project
management process.
Ans04 :-
Overview of Project Management Processes:
PMBoK organizes Project management processes into
five groups, defined as the Project Management Process Groups,
each group comprising one or more processes. Project
management of a single project essentially comprises a number of
interlinked processes. The underlying concept for the interaction
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among the processes is the Plan-Do-Check-Act (PDCA) cycle is
referred in the American Society for Quality (ASQ) handbook.
Traditionally, project management includes a number of
elements: four to five process groups, and a control system.Regardless of the methodology or terminology used, the same basic
project management processes will be used.
Major process groups generally include:
Initiation
Planning or development
Production or execution
Monitoring and controlling
Closing
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Initiation:The initiation processes determine the nature and scope ofthe project. If this stage is not performed well, it is unlikely that the
project will be successful in meeting the business needs. The key
project controls needed here are an understanding of the businessenvironment and making sure that all necessary controls are
incorporated into the project. Any deficiencies should be reported
and a recommendation should be made to fix them.
Planning and design:After the initiation stage, the project is plannedto an appropriate level of detail. The main purpose is to plan time,
cost and resources adequately to estimate the work needed and to
effectively manage risk during project execution. As with theInitiation process group, a failure to adequately plan greatly reduces
the project's chances of successfully accomplishing its goals.
Executing:Executing consists of the processes used to complete thework defined in the project management plan to accomplish the
project's requirements. Execution process involves coordinating
people and resources, as well as integrating and performing the
activities of the project in accordance with the project managementplan. The deliverables are produced as outputs from the processes
performed as defined in the project management plan.
Monitoring and controlling:Monitoring and controlling consists ofthose processes performed to observe project execution so that
potential problems can be identified in a timely manner and
corrective action can be taken, when necessary, to control the
execution of the project. The key benefit is that project performanceis observed and measured regularly to identify variances from the
project management plan.
Closing:Closing includes the formal acceptance of the project and theending thereof. Administrative activities include the archiving of the
files and documenting lessons learned.
Qs 05 :- Write a short note on the following:
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a) SWOT Analysis as a Strategic Planning tool.
b) Net Present Value (NPV) as a Project selection criterion.
Ans05 :-a) SWOT Analysis as a Strategic Planning tool:
S.W.O.T. is an abbreviation for Strengths-Weaknesses-
Opportunities-Threats.
One of the most fundamental tools for strategic market
planning is the use of SWOT analysis template to evaluate potential
business success. This simple tool, developed at Stanford University
in the late 1960's, is an extremely powerful ingredient in the recipefor business success.
Used by most Fortune 500 companies in strategic
planning, the SWOT matrix involves a frank evaluation of a business'
Strengths, Weaknesses, Opportunities and Threats:
STRENGTHS:Attributes of the organization those are HELPFUL to
achieving the objective. These are the company's corecompetencies, and include proprietary technology, skills, resources,
market position, patents, and others.
a) WEAKNESSES:Attributes of the organization those are HARMFUL to
achieving the objective. Weaknesses are conditions within the
company that can lead to poor performance, and can include
obsolete equipment, no clear strategy, heavy debt burden, poor
product or market image, long product development cycle, weak
management, and others.
b) OPPORTUNITIES:External conditions those are HELPFUL to
achieving the objective. Opportunities are outside conditions or
circumstances that the company could turn to its advantage, and
could include a specialty niche skill or technology that suddenly
realizes a growth in broad market interest.
c) THREATS:
External conditions those are HARMFUL to achieving theobjective. Threats are current or future conditions in the outside
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environment that may harm the company, and might include
population shifts, changes in purchasing, serious competitive
barriers, changes in governmental or environmental regulations,
and others.SWOT analysis provides an efficient way to evaluate the
range of factors that influence your operation, and can give you
valuable guidance in making decisions about what to do next. It also
provides a highly productive way to get your key personnel involved
in the management decision-making process.
The exercise of going through the SWOT analysis matrix
can be a great opportunity to do management team building. If you
have a large team, break into 4 teams for each of the quadrants and
each team can prepare and report its findings. Make sure to include
not only your market planners, but also finance, operations, product
development and others.
SWOT Analysis is one of the effective analytical tools to
evaluate a situation. The situation may be strategic related or
capabilities related. SWOT Analysis is often used along with
Strategic planning and it forms one of the key critical success
factors in a Strategic Planning Process.
There are many ways how a SWOT analysis is used. This
TQM article aimed to share how SWOT analysis can be used as an
essential tool to Strategic Planning Process as I practiced in my
workshop conducted over the years.
While detail Analysis is performed, it can become a
complex process because it entails several data analysis involves
external factors such as Political, Economic, Societal and
Technological in short called P.E.S.T. Besides, it also examines
internal factors such as operational capabilities as compared to the
competitors.
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b) Net Present Value (NPV) as a Project selection criterion :
In finance, the net present value (NPV) or net present
worth (NPW) of a time series of cash flows, both incoming and
outgoing, is defined as the sum of the present values (PVs) of theindividual cash flows. In the case when all future cash flows are
incoming (such as coupons and principal of a bond) and the only
outflow of cash is the purchase price, the NPV is simply the PV of
future cash flows minus the purchase price (which is its own PV). NPV
is a central tool in discounted cash flow (DCF) analysis, and is a
standard method for using the time value of money to appraise long-
term projects. Used for capital budgeting, and widely throughouteconomics, finance, and accounting, it measures the excess or
shortfall of cash flows, in present value terms, once financing charges
are met.
The NPV of a sequence of cash flows takes as input the
cash flows and a discount rate or discount curve and outputs a price;
the converse process in DCF analysis - taking a sequence of cash flows
and a price as input and inferring as output a discount rate (the
discount rate which would yield the given price as NPV) - is called the
yield, and is more widely used in bond trading.
Each cash inflow/outflow is discounted back to its
present value (PV). Then they are summed. Therefore NPV is the sum
of all terms,
Where
t - The time of the cash flow
i - The discount rate (the rate of return that could be earned on an
investment in the financial markets with similar risk.)
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Rt - the net cash flow (the amount of cash, inflow minus outflow) at
time t. For educational purposes, R0 is commonly placed to the left
of the sum to emphasize its role as (minus) the investment.
The result of this formula if multiplied with the AnnualNet cash in-flows and reduced by Initial Cash outlay will be the
present value but in case where the cash flows are not equal in
amount then the previous formula will be used to determine the
present value of each cash flow separately. Any cash flow within 12
months will not be discounted for NPV purpose.
Net Present Value (NPV) as Project Selection Criterion:NPV is the present value of the future revenues after
deducting future costs. This is a very popular and valid method for
selecting a project from the financial viewpoint. Some factors that
companies use to enhance NPV are:
Government policy. For example, special tax benefits and
exemptions for an industry or a location. Economies of scale: In manufacturing, unit cost is substantially
reduced by adopting high production volume. For example,
petroleum refining, steel production, and mining.
Product differentiation: This is achieved by innovative product
features, high quality products, customised service and so on.
Technology superiority: DRL outperformed its competitors in
the drug-manufacturing industry because of their technologybased on research and development.
Qs 06 :-Describe in brief the Human resource management process in a
project.
Ans06 :-Project Human Resource Management:
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Project Human Resource Management is a subset of
Project Management that includes various processes that are
essential and are required for making the most effective use of the
people involved with the project.Human Resource Management includes various
processes that are vital to make the most effective use of the
people involved with a project. The main process involved with the
HR Management process includes:
Acquiring the project team.
Developing the project team.
Managing the project team.
Acquiring a Project Team:The members who belong to different
groups and functions and are allocated to the activities of the same
project, form a project team. A team can be divided into sub-teams
if required. Generally, the project teams are only used for a defined
period of time. However, they are disbanded when the project iscomplete. Sometimes, due to the nature of the specific formation
and disbandment, project teams are usually agile in organisations.
Acquiring a project team is the process of acquiring the
specific people needed to accomplish all phases of the given
project. Ultimately the team members will bring all the specific
qualifications and capabilities to the project team. However, the
project management team has control over the selection process.Selection of team mates involves certain concerns which need to be
evaluated.
A number of factors are considered while deciding the
team members. These factors include a series of environmental
factors (such as work experience, availability, and cost), derivation
of clear and concise project organisation charts, and formulation of
a thorough staffing management plan. Once the team is properlystaffed, the next steps (or outputs) of the process involve staffing
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out assignments to the team, determining availability of resources,
and updating the staffing management plan.
Important factors that are considered during the process of
acquiring the team are: The project manager should efficiently discuss and induct
others who are in a position to supply the required Human
Resources in a project.
Failure to obtain the essential Human Resources for the
project will affect project agenda, budgets, consumer
satisfaction and quality. It declines the probability of success
and eventually results in project cancellation.
Developing a Project Team:Developing a project team is a process
of enhancing interaction among the team members and also the
project manager. The process refers to increasing competencies of
individuals and building up team spirit, which finally leads to a
quality project.
To achieve project success, there should be goodcommunication among the team members. Project managers should
administer the development of the project team. The project
manager should create the relevant environment for teamwork,
provide new goals for the team to compete and achieve. Project
managers should encourage feedback from the team. The project
manager should provide effective review and good support to the
team staff.
Open communication between the project manager and
team reduces conflicts. The management should also support the
project managers. The project stakeholders should provide the
required support to the development of the project team.
Projects are done in diversified environments. The
project team may experience variance in language, industry and
culture while at work. The project team should be dedicated to the
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project and the team members should work together, without losing
their individuality. The goals for developing a project team are:
To develop technical knowledge about the project, this leads
to quality output and meeting delivery schedules with reducedcost.
To enhance trust among team members, thus reducing
conflicts.
To develop cohesiveness in the project.
To allow sharing knowledge among team members.
The five stages of team development are,
I.Forming:Forming involves knowing every team member
individually. The team members are inclined to work independently.
They find out about each other and know whos who.
II.Storming:Storming involves the actual Project Management
process. This stage promises action. There is a struggle for project
team control, and momentum builds as members have to lead the
project team. During this phase, the team members figure out the
hierarchy of the team and the informal roles of team members.
III.Norming:Norming is working together, socialising, and providing
constructive criticism. The team develops a strong commitment to
the teams goal and work to achieve it.
IV. Performing:Performing means smooth movement of project
development by a well-organised project team. The team members
blend into their roles and focus on completing the project work as a
team.
V.Adjourning:Adjourning implies completion of the project so that
the team is ready for a new one.
Managing a Project Team:Managing a project team is the process
of delegating responsibilities and tasks, monitoring team
performance, providing feedback, solving issues, and coordinating
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changes to enhance overall project performance. Managing the
team is one of the most critical aspects of project management. The
project manager should encourage building competencies among
the team members and reward them accordingly.Key aspects of managing a project team are:
Assigning work and observing the commitment level in each
team member.
Building co-operative working relationship and ensuring
effective communication among all members of the project
team.
Monitoring team spirit. Providing effective performance review and appraisal to
inspire the project team.
Qs 01 :- List and explain in brief the inputs to the following processes.
a) Acquiring a project team
b) Communication plan
Ans01 :-
a) Inputs to the Acquiring a project team :
The members who belong to different groups and functions
and are allocated to the activities of the same project, form a project team. A
team can be divided into sub-teams if required. Generally, the project teams are
only used for a defined period of time. However, they are disbanded when the
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project is complete. Sometimes, due to the nature of the specific formation and
disbandment, project teams are usually agile in organizations.
Acquiring a project team is the process of acquiring the
specific people needed to accomplish all phases of the given project. Ultimately
the team members will bring all the specific qualifications and capabilities to the
project team. However, the project management team has control over the
selection process. Selection of team mates involves certain concerns which need
to be evaluated.
Important factors that are considered during the process of
acquiring the team are:
The project manager should efficiently discuss and induct others who are
in a position to supply the required Human Resources in a project.
Failure to obtain the essential Human Resources for the project will affect
project agenda, budgets, consumer satisfaction and quality. It declines the
probability of success and eventually results in project cancellation.
The inputs for acquiring a project team are:
Enterprise environmental factors: Team members are available frominternal and external sources. When selecting the team members, it is
important to evaluate the following factors:
Availability
Ability
Experience
Interests
Costs
Assets of organizational process:Assets of organizational process coversreviewing the documented policies, procedures and guidelines governing staff
assignments.
Roles and responsibilities:The roles and responsibilities document shouldbe assessed to determine a team members roles, responsibilities, skills,
levels of authority, and competencies.
Project organization charts:
The project organization chart is aninput/output device that serves a valuable role for the Project Management
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team and team leader in the process of keeping a thorough and careful
organizational record of the projects processes.
Staffing management plan: The staffing management plan with theproject schedule is reviewed to ascertain when team members are needed.
b) Inputs to the Communication plan :
Planning communication is the process of ascertaining the
information and communication needs of the project stakeholders.
Communication plan helps to communicate the right information, to
the right people at the right time. It is a schedule of communication events used
to make sure that the project stakeholders are kept properly informed. The
various factors such as the time, effort and resources that are required to
perform these planned communication activities are the part of the Project
Management. The communication goals, strategies and stakeholders are
described in the communication plan.
The best time for planning communication is at the start up phase
of the project life cycle. It ensures that the plan includes the tasks needed tocommunicate effectively throughout the project cycle. The key features
influencing the communication plan includes Project Management team structure,
scope of the project and feedback from the stakeholders.
There are two ways of planning communication:
Constant communication: Constant or regular communication involves
communicating to the project team, managers and project stakeholders on aregular basis. These types of communication include regular status reports,
project team meetings and monthly status updates about the project. The
constant communication also includes the regular stakeholder report updates
Event driven communication:The event driven or one-time communication
includes sessions discussing critical issues, stakeholder meetings, training
schedules and wrap up sessions.
The advantages of planning communication are:
It facilitates team development.
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It makes it easier to update stakeholders.
It saves creation of additional project documentations.
The inputs for planning communication are:
Stakeholder register:Stakeholder records consist of stakeholder
identification, assessment and classification documents.
Stakeholder management strategy: Stakeholder management strategydescribes the method to gain support and reduce dissatisfaction from the
stakeholders throughout the entire project life cycle.
Enterprise environmental factors: All environmental factors such asorganizational culture, industry standards are considered as inputs for the
planning communication process.
Organizational process aspects: All organizational process assets are
applied while planning communications. The lessons learned and documented
information is important as it gives an idea about the issues resolved.
Qs 02 :- Write short notes on the following idea generation technique:a) Mind mapping
b) Delphi technique
c) Brainstorming
d) Nominal Group technique
Ans02 :-
a) Mind mapping:
Generation of ideas takes place in any hierarchical level of a firm. A
project idea is conceived from a search for promising project ideas. Certain broad
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considerations and guidelines are applied to help generate of project ideas. Some
group creativity techniques to generate a large number of ideas to solve problem
are discussed below.
Another way to look at the human levels of thinking is the mind mapping
concept. Mind mapping exercise is aimed at increasing mental energy to utilize
creative thinking skills, enabling the mind to track out ideas which normally lie in
obscurity on the edge of thinking.
Following example is taken from the software Buzans iMind Map which
was chosen for the brainstorming session aimed at planning for the future of
young and developing minds. The software replicates the organic shape, form and
use of colors and images to convey a thought or idea a graphic technique for
stimulating creativity and unleashing the truth, often untapped potential of the
mind. This was used in June 2008 at Petra, Jordan, where 30 Nobel Prize winners
(scientists, entrepreneurs, academics, and humanitarians) participated in the
conference focused on the theme Reaching for New Economic, Scientific and
Educational horizons. Two of the many conclusions of the brainstorming session
were - elimination of child poverty worldwide is essential to move forward with
educational development; new and innovative learning tools are the foundation
for a positive future for the next generation.
b) Delphi technique:Generation of ideas takes place in any hierarchical level of a firm. A
project idea is conceived from a search for promising project ideas. Certain broad
considerations and guidelines are applied to help generate of project ideas. Some
group creativity techniques to generate a large number of ideas to solve problem
are discussed below.
The Delphi Technique was originally conceived as a way to obtain the
opinion of experts without necessarily bringing them together face to face. In
recent times, however, it has taken on an all new meaning and purpose.
The Delphi Technique is based on the Hegelian Principle of achieving
Oneness of Mind through a three step process of thesis, antithesis, and
synthesis. In thesis and antithesis, all present their opinion or views on a given
subject, establishing views and opposing views. In synthesis, opposites are
brought together to form the new thesis. All participants are then to accept
ownership of the new thesis and support it, changing their own views to align
with the new thesis. Through a continual process of evolution, Oneness of Mind
will supposedly occur.
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This is a systematic, interactive, forecasting method that relies on a panel
whose members are carefully selected independent experts. It is based on the
principle that forecasts from an unstructured group of individuals are
comparatively inaccurate than forecasts from a structure group of experts. The
experts answer prepared questionnaires in two or more rounds. After each round,
a facilitator provides an overall summary of the experts forecasts from the
previous round as well as the reasons they provided for their judgments. The
participants revise their earlier answers by knowing the responses of other
members of the group. The process stops after a predetermined stop-criterion
like number of rounds or achievement of consensus. Usually, participants
maintain secrecy even after completion of the final report. The facilitator, who is
the coordinator of the Delphi method, sends out the questionnaire, collects and
analyses responses, and identifies common and conflicting viewpoints.
c) Brainstorming:
This method aims to give people freedom of mind and action to create and
reveal new ideas. All spontaneous ideas from a group are gathered to find a
solution for a specific problem. The rules followed during brainstorming are as
follows:
No criticism of ideas Go for large quantity of ideas
Build on each others ideas
Encourage wild ideas
Brainstorming consists of a facilitator who composes the brainstorming
panel and an idea collector to record the suggested ideas. Sometimes the
facilitator is also the idea collector. Some of the leading questions that a
facilitator asks during the session are Can we combine these ideas? and Howabout looking from another perspective? The idea collector also numbers each
idea for future reference. When a participant exhausts all ideas, the creativity and
experience of another participant is brought out. This often makes group
brainstorming sessions enjoyable experiences. This also facilitates in bringing
team members together. Individual brainstorming is effective in generating many
ideas, but not at developing the ideas.
Brainstorming is used to generate ideas, for others to evaluate and select.
The strategy is more effective when the brainstorming group evaluates and
selects a solution to the problem proposed. In either case, the organization offers
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incentives so that participants maintain their brainstorming efforts.
Brainstorming is a lateral thinking process. It is employed particularly
when new ways of thinking are called for and when there is a need to break out
of old established patterns of thinking. Some instances where brainstorming is
used are when there is a need to look at new opportunities, when there is a need
to improve the service offered, or when existing approaches are just not giving
the right results.
d) Nominal Group technique:
Nominal group technique (NGT) is a structured method for group
brainstorming that encourages contributions from everyone. This technique
encourages all participants to have an equal say in the session. Participants are
asked to write their ideas anonymously. The moderator collects the ideas and
each idea is voted on by the group. The process of voting can be simply by show
of hands. The top ranked ideas are sent back to the group or subgroups for
further brainstorming. Each subgroup comes back to the whole group for ranking
the listed ideas. Sometimes the group revaluates the ideas that were previously
dropped. This method requires a trained facilitator.
The benefit of the technique is that the group shares and discusses all
issues before evaluation, with each group member participating equally in
evaluation. The evaluation works with each participant "nominating" his or herpriority issues, and then ranking them on a scale of, say, 1 to 10.
Nominal Group Technique is just one group process for achieving
consensus. Another group consensus technique is the Delphi Method, which is
used among groups of experts to make complex decisions, usually without face-
to-face meetings.
When to use Nominal Group Technique:
When some group members are much more vocal than others.
When some group members think better in silence.
When there is concern about some members not participating.
When the group does not easily generate quantities of ideas.
When all or some group members are new to the team.
When the issue is controversial or there is heated conflict.
Qs 03 :- Describe in brief the various sources of project financing.
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Ans03 :-
Sources of Project Financing:
The term project finance is used loosely by academics, bankers and
journalists to describe a range of financing arrangements. Often bandied about in
trade journals and industry conferences as a new financing technique, project
finance is actually a centuries-old financing method that predates corporate
finance. However with the explosive growth in privately financed infrastructure
projects in the developing world, the technique is enjoying renewed attention.
The purposes of this note are to contrast project finance with traditional corporate
financing techniques; to highlight the advantages and disadvantages of project
finance and ; to propose that a single structure underlies every project finance
transaction; to explain the myriad of risks involved in these transactions; and, to
raise questions for future research.
Project Financing is a unique financing technique that has been used on
many high-profile corporate projects, including Euro Disneyland and the Euro
Tunnel. Employing a carefully engineered financing mix, it has long been used to
fund large-scale natural resource projects, from pipelines and refineries to
electric-generating facilities and hydroelectric projects. Increasingly, project
financing is emerging as the preferred alternative to conventional methods of
financing infrastructure and other large-scale projects worldwide.
Project Financing discipline includes understanding the rationale for projectfinancing, how to prepare the financial plan, assess the risks, design the financing
mix, and raise the funds. In addition, one must understand the cogent analyses
of why some project financing plans have succeeded while others have failed. A
knowledge-base is required regarding the design of contractual arrangements to
support project financing; issues for the host government legislative provisions,
public/private infrastructure partnerships, public/private financing structures;
credit requirements of lenders, and how to determine the project's borrowing
capacity; how to prepare cash flow projections and use them to measure
expected rates of return; tax and accounting considerations; and analytical
techniques to validate the project's feasibility.
Sources of Finance:
Just as financial instruments range from debt to equity and hybrids such as mezzanine
finance, project finance can raise capital from a range of sources. Raising finance depends upon
the nature and the structure of the project. Lender and investor interest will vary depending on
the goals and risks related to the financing. In assembling project financing, all available
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financing sources should be evaluated. Following are some sources of capital used in project
financing
Equity:Equity is often raised in the stock markets and from specialized funds. Equity is
generally more expensive than debt financing. Equity can be raised in the domestic capital
markets as well as in the international capital markets. Delhi Metro Rail Corporation is form
by the joint venture of Government of India (GOI) and Government of National Capital
Territory of Delhi (GNCTD).Both GOI and GNCTD holds 50-50% equity. This 50% each of
GOI and GNCTD equity holds only 30% of the project cost.
Developmental loan:A developmental loan is debt financing provided during a projects
developmental period to a sponsor with insufficient resources. Developmental lenders, who
fund the project sponsor at very risky stage of the project, desire some equity rewards for
the risk taken, hence, it is not unusual for developmental lender to secure rights to provide
permanent financing for the project as part of the development financing agreement.
Subordinated loan:Subordinated loans, also called mezzanine financing or quasi-
equity, are senior to equity capital but junior to senior debt and secured debt. Subordinated
debt usually has the advantage of being fixed rate, long. term, unsecured and may be
considered as equity by senior lenders for purposes of calculating debt to equity ratio. They
are usually used to cover over-runs during the construction stage.
Senior debt:Commercial banks and institutional lenders are an obvious choice
for financing needs of a project. Senior debt of project finance usually constitutes the largest
portion of the financing. These loans usually format least 50% of the capital needs. The
prime reason is that it is cheaper than equity financing. They fall into two categories secured
and unsecured loans. Secured loans are loans where the assets securing the loan have
value as collateral. Such assets are marketable and can readily be converted into cash.
Unsecured loans basically depend on the borrowers general creditworthiness, as opposed to
perfected security arrangement. Nearly 60% of total estimated cost of Delhi metro project is
finance by JBIC (Japan Bank of International Cooperation).Recently operational planning for
Phase III is going on. JBIC appraisal team has given clearance for their next tranche for the
Phase III.
Syndicated loan:A syndicated loan is a loan that is provided to the borrower by two
or more banks and is governed by a single loan agreement. The loan is arranged and
structured by a lead arranger and is managed by an agent bank. The best part about a
syndicated loan is that the funding can be gathered from the international lending
market, which means such a lending can be used for projects which need enormous
amounts of capital.
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World Bank group financing sources:Multilateral institutions such as the World Bank
provide finds to infrastructure development projects worldwide. The scope and extent
of involvement of such institutions in financing project is very limited. World banks provide
funding through its (a) loan program; (b) guarantee program and (c) indirect support forprojects.
Bonds:In recent years the use of the bond markets as a vehicle for obtaining debt funds
has increased. Bond financing is similar to commercial loan structure, except that the
lenders are investors purchasing the borrowers bonds in a private placement or through the
public debt market.
Investment funds:Investment funds mobilize private sector funds for investment in
infrastructure projects. E.g. asset funds or income funds, investment management
companies, venture capital provider and money market funds.
Institutional lenders:These include life insurance companies, pension plans, profit-
sharing plans and charitable foundations. These entities can be a substantial source of
funding.
Host government:The host government can also be a direct or indirect source of
financing. This is more evident in the emerging markets where the governments are usually
eager to fund and support infrastructure projects. They provide indirect support
through tax incentives. GOI and GNCTD have financed approximately 30% of
project incurred cost.
Qs 04 :- Explain the important concepts in Research design?
Ans04 :-
The research designer understandably cannot hold all his decisions in his
head. Even if he could, he would have difficulty in understanding how these are
inter-related. Therefore, he records his decisions on paper or record disc by using
relevant symbols or concepts. Such a symbolic construction may be called the
research design or model. A research design is a logical and systematic plan
prepared for directing a research study. It specifies the objectives of the study,
the methodology and techniques to be adopted for achieving the objectives. Itconstitutes the blue print for the plan is the overall scheme or program of
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research. A research design is the program that guides the investigator in the
process of collecting, analysing and interpreting observations. It provides a
systematic plan of procedure for the researcher to follow elltiz, Jahoda and
Destsch and Cook describe, A research design is the arrangement of conditions
for collection and analysis of data in a manner that aims to combine relevance to
the research purpose with economy in procedure.
Components of Research Design:
It is important to be familiar with the important concepts relating to
research design. They are:
1. Dependent and Independent variables:A magnitude that varies is known as a variable. The concept may assume
different quantitative values, like height, weight, income, etc. Qualitative
variables are not quantifiable in the strictest sense of objectivity. However,
the qualitative phenomena may also be quantified in terms of the presence or
absence of the attribute considered. Phenomena that assume different values
quantitatively even in decimal points are known as continuous variables.
But, all variables need not be continuous. Values that can be expressed only
in integer values are called non-continuous variables. In statistical term,
they are also known as discrete variable. For example, age is a continuous
variable; whereas the number of children is a non-continuous variable. Whenchanges in one variable depends upon the changes in one or more other
variables, it is known as a dependent or endogenous variable, and the
variables that cause the changes in the dependent variable are known as the
independent or explanatory or exogenous variables. For example, if demand
depends upon price, then demand is a dependent variable, while price is the
independent variable.
And if, more variables determine demand, like income and prices of
substitute commodity, then demand also depends upon them in addition tothe own price. Then, demand is a dependent variable which is determined by
the independent variables like own price, income and price of substitute.
2. Extraneous variable:
The independent variables which are not directly related to the purpose of
the study but affect the dependent variable are known as extraneous
variables. For instance, assume that a researcher wants to test the
hypothesis that there is relationship between childrens school performance
and their self-concepts, in which case the latter is an independent variable
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and the former, the dependent variable. In this context, intelligence may also
influence the school performance. However, since it is not directly related to
the purpose of the study undertaken by the researcher, it would be known as
an extraneous variable. The influence caused by the extraneous variable on
the dependent variable is technically called as an experimental errors
Therefore, a research study should always be framed in such a manner that
the dependent variable completely influences the change in the independent
variable and any other extraneous variable or variables.
3. Control:
One of the most important features of a good research design is to
minimize the effect of extraneous variable. Technically, the term control is
used when a researcher designs the study in such a manner that it minimizes
the effects of extraneous independent variables. The term control is used in
experimental research to reflect the restrain in experimental conditions.
4. Confounded relationship: The relationship between dependent and independent variables is said to
be confounded by an extraneous variable, when the dependent variable is not
free from its effects.
Research hypothesis:When a prediction or a hypothesized relationship is testedby adopting scientific methods, it is known as research hypothesis. The research
hypothesis is a predictive statement which relates a dependent variable and an
independent variable. Generally, a research hypothesis must consist of at least
one dependent variable and one independent variable. Whereas, the relationships
that are assumed but not be tested are predictive statements that are not to be
objectively verified are not classified as research hypothesis.
Experimental and control groups:When a group is exposed to usual conditionsin an experimental hypothesis-testing research, it is known as control group. On
the other hand, when the group is exposed to certain new or special condition, it
is known as an experimental group. In the afore-mentioned example, the Group
A can be called a control group and the Group B an experimental one. If both the
groups A and B are exposed to some special feature, then both the groups may
be called as experimental groups. A research design may include only the
experimental group or the both experimental and control groups together.
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Treatments:Treatments are referred to the different conditions to which the
experimental and control groups are subject to. In the example considered, the
two treatments are the parents with regular earnings and those with no regular
earnings. Likewise, if a research study attempts to examine through an
experiment regarding the comparative impacts of three different types of
fertilizers on the yield of rice crop, then the three types of fertilizers would be
treated as the three treatments.
Experiment:An experiment refers to the process of verifying the truth of a
statistical hypothesis relating to a given research problem. For instance,
experiment may be conducted to examine the yield of a certain new variety of
rice crop developed. Further, Experiments may be categorized into two types
namely, absolute experiment and comparative experiment. If a researcher wishes
to determine the impact of a chemical fertilizer on the yield of a particular variety
of rice crop, then it is known as absolute experiment. Meanwhile, if the
researcher wishes to determine the impact of chemical fertilizer as compared to
the impact of bio-fertilizer, then the experiment is known as a comparative
experiment.
Experiment unit:Experimental units refer to the predetermined plots,
characteristics or the blocks, to which the different treatments are applied. It is
worth mentioning here that such experimental units must be selected with great
caution.
Qs 05: Explain the following:
a) Project Vs. Program Vs. Portfolio
b) Project work and Traditional functional work
Ans05 :-
a) Project Vs. Program Vs. Portfolio:
Project Program Portfolio
A temporary endeavor
undertaken to create a
unique product, service,
or result.
A group of related projects
managed in a coordinated
way to obtain benefits and
control not available frommanaging them individually.
A collection of projects or
programs and other work that are
grouped together to facilitate
effective management of thatwork to meet strategic business
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objectives.
Hopefully we all know
what a project is.
PMBOK defines a project
as a temporaryendeavour undertaken
to create a unique
product, service or
result. In my terms, a
project has a specific
start and end date with
a clearly defined
deliverable produced.Project management is
the application of
knowledge, skill, tools,
techniques and
processes to effectively
manage a team towards
this final deliverable.
In real life this means
the management of a
specific project (e.g.
implementing a new
accounting system).
This project will start on
a specific date and end
according to our project
plan with the delivery of
your new accounting
system.
This is where the confusion
seems to start. A program is
a group of related projects
managed together to obtainspecific benefits and controls
that would likely not occur if
these projects were managed
individually. While project
management focuses on
delivering the specific
objectives of the project
program management isfocused on achieving the
strategic objectives and
benefits of the integrated
program.
The implementation of an
Enterprise Resource Planning
(ERP) system is often
performed as a program. The
ERP system will include
several specific individual
projects (i.e. Finance,
Purchasing, Materials
Management, etc.). Each of
these specific projects should
be run by a project manager
using a formal project
management approach. The
overall grouping of these
related projects will be run by
a Program Manager.
The Program Manager will be
responsible for the rolling up
of information from each of
the projects and ensuring the
overall program is driving
A portfolio is a collection of
projects or programs grouped
together to facilitate effective
management of efforts to meetstrategic business objectives.
These projects or programs are
not necessarily interdependent or
directly related. Portfolio
management is the centralized
management of multiple projects,
programs and possibly portfolios.
This typically includes identifying,prioritizing and authorizing
projects and programs to achieve
specific strategic business
objectives.
The group of projects and
programs within a specific
business division could be an
example of a portfolio. This might
include the implementation of a
Customer Relationship
Management (CRM) program;
Sales Data Warehouse program;
Commission Tracking project; And
a project to launch a new product
within the Sales & Marketing
Division. In this case the Portfolio
Manager is managing this broad
range of somewhat unrelated
programs and projects towards a
specific set of strategic divisional
business objectives.
The Portfolio Manager will become
very involved in the frontend
activities of identifying,
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towards achieving the
business objectives. This
requires each of the project
managers to manage their
individual projects in a
fashion that easily integrates
into the overall program plan
(easily said more
challenging in actual
practice).
The Program Manager is also
responsible for tracking and
analysing across the entire
program. This involves
considering risk management
strategies not only for each
individual project but also
analysing the collective risk
across the program. The
same goes for quality
management, schedulemanagement, cost
management,
communications, etc.
prioritizing and initiating projects
and programs. All of these
activities will be within the
context of achieving the strategic
business objectives. The
Portfolio Manager will also track
these projects/programs to
ensure they continue to deliver
towards the expected strategic
outcome in terms of quality, cost,
schedule and scope. They will also
be responsible for analysing and
tracking project management
elements across the entire
portfolio looking for ways to
leverage economies of scale,
reduce risk and improve the
probability of successfully
delivering expected business
results.
b) Project work and Traditional functional work:
Project work and traditional functional work differ in many ways. It is
important to understand these differences.
Functional work is routine on-going work. Each day machine operators, car
salesmen, secretaries, accountants, financial analysts and quality inspectors
perform functional work that is routine, notwithstanding some variations from day
to day. The functional worker gets training from a manager assigned to the
specific function, and the manager supervises and manages the worker according
to standards of productivity and quality set for the particular function.
In contrast to functional work, project work is a temporary endeavor
undertaken to create a unique, non-routine product or service. A project manager
manages a specific project with people and other resources assigned to him only
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for project management support on the specific project, and not on an ongoing
basis. The project manager is responsible for the approved objectives of a project
such as budget, schedule and specifications. Project terms are typically not
organized in the same hierarchical structure as that of functional group.
Qs 06 :- Describe the following quality control tools:
a) Ishikawa diagram
b) Flow chart
c) Pareto chart
d) Scatter diagram
Ans06 :-
a) Ishikawa diagram:
Ishikawa diagrams (also called fishbone diagrams, cause-and-effect
diagrams or Fishikawa) are causal diagrams that show the causes of a certain
event -- created by Kaoru Ishikawa (1990). Common uses of the Ishikawa
diagram are product design and quality defect prevention, to identify potential
factors causing an overall effect. Each cause or reason for imperfection is a
source of variation. Causes are usually grouped into major categories to identify
these sources of variation. The categories typically include:
People: Anyone involved with the process
Methods: How the process is performed and the specific requirements for
doing it, such as policies, procedures, rules, regulations and laws
Machines: Any equipment, computers, tools etc. required to accomplish
the job
Materials: Raw materials, parts, pens, paper, etc. used to produce the
final product
Measurements: Data generated from the process that are used to evaluate
its quality
Environment: The conditions, such as location, time, temperature, and
culture in which the process operates
Ishikawa diagrams were first used in the 1940s, and are considered
one of the seven basic tools of quality control. It is known as a fishbone diagram
because of its shape, similar to the side view of a fish skeleton.
The Ishikawa Diagram resembles a fishbone (hence the alternative
name "Fishbone Diagram") - it has a box (the 'fish head') that contains the
statement of the problem at one end of the diagram. From this box originates
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the main branch (the 'fish spine') of the diagram. Sticking out of this main
branch are major branches that categorize the causes according to their nature.
Mazda Motors famously used an Ishikawa diagram in the
development of the Miata sports car, where the required result was "Jinba Ittai"
or "Horse and Rider as One". The main causes included such aspects as "touch"
and "braking" with the lesser causes including highly granular factors such as
"50/50 weight distribution" and "able to rest elbow on top of driver's door". Every
factor identified in the diagram was included in the final design.
b) Flow chart:
A flowchart is a diagrammatic representation that illustrates the
sequence of operations to be performed to get the solution of a problem.
Flowcharts are generally drawn in the early stages of formulating computer
solutions. Flowcharts facilitate communication between programmers and
business people. These flowcharts play a vital role in the programming of a
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problem and are quite helpful in understanding the logic of complicated and
lengthy problems. Once the flowchart is drawn, it becomes easy to write the
program in any high level language. Often we see how flowcharts are helpful in
explaining the program to others. Hence, it is correct to say that a flowchart is a
must for the better documentation of a complex program.
Flowcharts are usually drawn using some standard symbols;
however, some special symbols can also be developed when required
The following are some guidelines in flowcharting:
In drawing a proper flowchart, all necessary requirements should be listed
out in logical order.
The flowchart should be clear, neat and easy to follow. There should not
be any room for ambiguity in understanding the flowchart.
The usual direction of the flow of a procedure or system is from left to
right or top to bottom.
Only one flow line should come out from a process symbol.
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c) Pareto chart:
The Pareto Chart is named after Vilfredo Pareto, a 19th century
economist who postulated that a large share of wealth is owned by a small
percentage of the population. This basic principle translates well into quality
problems. A Pareto Chart is a series of bars whose heights reflect the frequency
or impact of problems. The bars are arranged in descending order of height from
left to right. This means the categories represented by the tall bars on the left are
relatively more significant than those on the right. This bar chart is used to
separate the vital few from the trivial many. These charts are based on the
Pareto Principle which states that 80 per cent of the problems come from 20 per
cent of the causes. Pareto charts are extremely useful because they can be used
to identify those factors that have the greatest cumulative effect on the system,
and thus screen out the less significant factors in an analysis. Ideally, this allows
the user to focus attention on a few important factors in a process.
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A Simple Example:
A Pareto chart can be used to quickly identify what business
issues need attention. By using hard data instead of intuition, there can be no
question about what problems are influencing the outcome most. In the example
below, XYZ Clothing Store was seeing a steady decline in business. Before the
manager did a customer survey, he assumed the decline was due to customer
dissatisfaction with the clothing line he was selling and he blamed his supply
chain for his problems. After charting the frequency of the answers in his
customer survey, however, it was very clear that the real reasons for the decline
of his business had nothing to do with his supply chain. By collecting data and
displaying it in a Pareto chart, the manager could see which variables were
having the most influence. In this example, parking difficulties, rude sales people
and poor lighting were hurting his business most. Following the Pareto Principle,
those are the areas where he should focus his attention to build his business back
up.
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Understanding the Pareto Principle (The 80/20 Rule):
Originally, the Pareto Principle referred to the observation that 80%
of Italys wealth belonged to only 20% of the population.
More generally, the Pareto Principle is the observation (not law)
thatmost things in life are not distributed evenly. It can mean all of the following
things:
20% of the input creates 80% of the result
http://betterexplained.com/articles/understanding-the-pareto-principle-the-8020-rule/http://betterexplained.com/articles/understanding-the-pareto-principle-the-8020-rule/ -
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20% of the workers produce 80% of the result
20% of the customers create 80% of the revenue
20% of the bugs cause 80% of the crashes
20% of the features cause 80% of the usage
The Pareto Principle is an observation, not a law of nature.
d) Scatter diagram:
A scatter diagram is a tool for analysing relationships between two
variables. One variable is plotted on the horizontal axis and the other is plotted
on the vertical axis. The pattern of their intersecting points can graphically show
relationship patterns. Most often a scatter diagram is used to prove or disprove
cause-and-effect relationships. While the diagram shows relationships, it does not
by itself prove that one variable causes the other. In addition to showing possible
cause and-effect relationships, a scatter diagram can show that two variables are
from a common cause that is unknown or that one variable can be used as a
surrogate for the other.
Scatter diagram is used to examine theories about cause-and-
effect relationships and to search for root causes of an identified problem. It can
also be used to design a control system to ensure that gains from quality
improvement efforts are maintained.
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In the above example, the points are plotted by assigning values of
the independent variable X to the horizontal axis and values of the dependent
variable Y to the vertical axis. The pattern made by the points plotted on the
scatter diagram usually suggests the basic nature and strength of the relationship
between two variables. The scatter diagram also shows that, subjects with large
waist circumferences also have larger amounts of deep abdominal AT. These
impressions suggest that the relationship between the two variables may be
described by a straight line crossing the Y-axis below the origin and making
approximately a 45-degree angle with the X-axis.