Harold Kerzner, PH.D. Carl Belack, PMP

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ManagingCOMPLEXPROJECTS

Managing CO

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THE IIL / WILE Y SERIES IN PROJEC T MANAGEMENT

THE IIL / WILE Y SERIES IN PROJEC T MANAGEMENT

BUSINESS & ECONOMICS/PROJECT MANAGEMENT

DISCOVER HOW YOU CAN APPLY THE KERZNER APPROACH® TO SUCCESSFULLY MANAGE THE MOST CHALLENGING AND

COMPLEX PROJECTS

Managing complex projects not only takes know-how on the part of project managers, but it also requires that they be willing and able to adapt to change, harness their ability to innovate at a moment’s notice, and summon their determination to see a job to completion. This is the book that makes sense out of the complexities that plague today’s project managers. It clearly lays out a blueprint to demystify what can be an overwhelming process into manageable strategies that, if cultivated, become second nature.

Based on principles set forth in the bestselling Project Management: A Systems Approach to Planning, Scheduling, and Controlling, Tenth Edition, this easy-to-follow guide will revolutionize the way you view and practice project management. It introduces the acclaimed Kerzner Approach®, demonstrating how it empowers you with the skills needed to ensure that projects are completed successfully. Most importantly, it shows you how to manage complex projects more effectively.

The International Institute for Learning/Wiley Series in Project Management features

the most innovative, tested-and-proven approaches to project management,

all explained in clear, straightforward language. The series offers new perspectives on

solving tough project management problems as well as practical tools for

getting the job done. Each book in the series is drawn from the related IIL course and is

written by noted project management experts and bestselling authors such as

Harold D. Kerzner, Frank P. Saladis, and Carl Belack.

The application of project management techniques is generally considered standard practice in today’s business environment. This is not to say it is always performed at a high level. What is not widely known is that the learning gap separating good project management from exceptional project management is not as great as one might think—yet, the difference in the return on value can be quite signifi cant. This knowledge becomes especially important as traditional projects increasingly give way to more complicated ones.

Many factors determine how projects are approached, such as rapid shifts in technology, a fl uctuating market, changes in a business’s organizational structure, and even politics. As these forces add to a project’s complexity and duration, project managers must develop strategies that allow them to think outside the box and create new on-the-go methodologies.

Managing Complex Projects delivers the tools necessary to take on an unpredictable economy with an adaptable battle plan proven to meet the differing needs of an ever-expanding set of partners and stakeholders involved in a project. This book shows how to solve some of the issues facing today’s project manager, including:

• Dealing with multiple virtual teams located around the world

• Working with partners and stakeholders that may have limited project management tools and experience

• Adjusting to long-term projects in which the stakeholders may change

• Managing projects where stated goals and objectives differ among stakeholders

Accompanied by illustrations throughout, this book shows how companies such as IBM, Hewlett-Packard, Microsoft, and Siemens are exploring new avenues to aid them in taking on nontraditional, complex projects by combining “hard” skills, such as risk management and scheduling, with “soft” skills that focus on people and interpersonal communication—two sets of skills all project managers should possess. Managing Complex Projects is the resource needed to gain these fresh project management perspectives and serves as a lifesaver for time-crunched project managers looking for new ways to maximize their efforts.

ISBN: 978-0-470-60034-4

HAROLD D. KERZNER, PH.D., is Senior Executive Director at International Institute for Learning, Inc., a global learning solutions company that conducts training for leading corporations throughout the world. He is a globally recognized expert on project, program, and portfolio management; total quality management; and strategic planning. Dr. Kerzner is the author of bestselling books and texts, including the acclaimed Project Management: A Systems Approach to Planning, Scheduling, and Controlling, Tenth Edition.

CARL BELACK, PMP, is a Senior Consultant and Trainer for International Institute for Learning, Inc.

With operating companies all over the world and clients in 200 countries, INTERNATIONAL INSTITUTE FOR LEARNING, INC. (IIL) is a global leader in training, consulting, coaching, and customized course development. IIL’s core competencies include: project, program, and portfolio management; business analysis; Microsoft® Project and Project Server; Lean Six Sigma; PRINCE2®; ITIL®; and leadership and interpersonal skills. Using their proprietary Many Methods of Learning™, IIL delivers innovative, effective, and consistent training solutions through a variety of learning approaches, including traditional classroom, virtual classroom, simulation training, and interactive, on-demand learning. IIL is a PMI® Charter Global Registered Education Provider, a member of PMI’s Corporate Council, an Accredited Training Organization for PRINCE2 and ITIL, a Microsoft Gold Certifi ed Partner and an IIBA® Endorsed Education Provider. Now in its twentieth year of doing business, IIL is proud to be the learning solution provider of choice for many top global companies.

For more information, visit www.iil.com

See a listing of IIL’s webinars at www.iil.com/webinars

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Managing COMPLEX

PROJECTS

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PRELIMS.indd iiPRELIMS.indd ii 7/23/10 1:52:42 PM7/23/10 1:52:42 PM

Harold Kerzner, PH.D.

Carl Belack, PMP®

Managing

COMPLEX PROJECTS

John Wiley & Sons, Inc.

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This book is printed on acid-free paper. �

Copyright © 2010 by International Institute for Learning, Inc., New York. All rights reserved

Published by John Wiley & Sons, Inc., Hoboken, New JerseyPublished simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and the author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifi cally disclaim any implied warranties of merchantability or fi tness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any loss of profi t or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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“PMI,” the PMI logo, “OPM3,” “PMP,” and “PMBOK” are registered marks of Project Management Institute, Inc. For a comprehensive list of PMI marks, contact the PMI Legal Department.

ISBN: 978-0-470-60034-4; ISBN 978-0-470-92798-4 (ebk); ISBN 978-0-470-92799-1 (ebk); ISBN 978-0-470-92800-4 (ebk)

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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v

CONTENTS

Preface xvAcknowledgments xixInternational Institute for Learning, Inc. (IIL) xxi

Chapter 1:PROJECT MANAGEMENT FRAMEWORK 1

Project Characteristics 2

The Complexity of Defi ning Complexity 4

Components of Complex Projects 6

The Triple Constraint 8

Secondary Success Factors 12

Other Success Factors 14

The Modifi ed Triple Constraint 16

Prioritization of Constraints 18

Types of Project Resources 20

Skill Set 22

Three Critical Requirements 24

Problem Identifi cation and Solution 26

The “Traditional” Project 28

The “Nontraditional” (Complex) Project 30

Why Traditional Project Management Must Change 32

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Traditional versus Complex Projects 38

The Need for “Value” as a Driver 40

The Benefi ts of “Value” as a Driver 42

Elements of Complexity 44

Types of Virtual Teams 46

Virtual Team Competencies 48

Virtual Team Myths 50

Customer RFP Requirements 52

The Need for Business Solution Partners 54

“Engagement” Expectations 56

Before and After Engagement Project Management 58

Percentage of Projects Using Project Management 60

Possible Complex Project Outcomes 62

Long-Term Globalization Project ManagementStrategy 64

Global versus Nonglobal Companies 66

Quantity of Tools 68

Project Management Software 70

Areas of Best Practices 72

The Collective Belief 74

Chapter 2:INTEGRATION MANAGEMENT 77

Changes in Focus 78

Project Sponsorship (1 of 2) 80

vi C O N T E N T S

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C O N T E N T S vii

Project Sponsorship (2 of 2) 82

Project Accountability 84

EPM Methodologies 86

Enterprise Environmental Factors 88

Organizational Process Assets 90

Weaknesses in Leadership Skills 92

Project’s Business Case 94

Project Governance 96

Project’s Assumptions 98

Alignment of Goals 100

Expert Judgment 102

Project Charter 104

Project Decision-Making 106

Go and No-Go Decision Points 108

Project Replanning 110

Optimism 112

Poor Project Performance 114

Project Justifi cation 116

Project Plan Ownership 118

The Project Plan: Summary Levels 120

Project Management Plan 122

Project Approvals 124

Project’s Constraints 126

Identifi cation of Deliverables 128

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viii C O N T E N T S

Change Management 130

Change Control Meetings 132

Conducting Meetings 134

Partnerships and Alliances 136

Ability to Change 138

Chapter 3:SCOPE MANAGEMENT 141

Project Boundaries 142

Stakeholder Identifi cation 144

Requirements Collection 146

Changing Product Requirements 148

The Project Plan: Work Package Levels 150

Project’s Deliverables 152

Work Performance Information 154

Verify Scope 156

Control Scope 158

Chapter 4:TIME MANAGEMENT 161

Project Dependencies 162

Templates 164

Activity List 166

Project Schedule 168

Purpose of Schedule 170

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C O N T E N T S ix

Types of Schedules 172

Published Estimating Data 174

Project Management Software 176

Top-Down versus Bottom-Up Estimating 178

Three-Point Estimates 180

Duration versus Effort 182

“What-if” Scenarios 184

Schedule Compression Techniques 186

Chapter 5:COST MANAGEMENT 189

The Basis for Project Funding 190

Project Funding 192

Multiple Funding Sources 194

Management Reserves 196

Cost-Estimating Techniques 198

Use of Earned Value Measurement 200

Forecast Reports 202

Chapter 6:HUMAN RESOURCES MANAGEMENT 205

Fervent Belief 206

Confl icts over Objectives 208

Shifting Leadership 210

Wage and Salary Inconsistencies 212

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x C O N T E N T S

High Stakes 214

Culture 216

Multiple Cultures 218

Multicultural Teams 220

Shifting of Key Personnel 222

Quantity of Resources 224

Quality of the Resources 226

Availability of Resources 228

Control of the Resources 230

Worker Retention 232

Chapter 7:PROCUREMENT MANAGEMENT 235

Material/Service Requirements 236

BOT/ROT Contracts 238

Control of Vendors 240

Regulations Governing Vendor Selection 242

Impact of Stakeholders 246

Adversarial Procurement Positions 248

Multiple Contract Types 250

Chapter 8:QUALITY MANAGEMENT 253

“Satisfi cing” Zones 254

Different Life Cycles 258

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C O N T E N T S xi

Technology 262

Cost-Benefi t Analysis 266

New Quality Boundaries 268

Chapter 9:RISK MANAGEMENT 271

Complexity, Uncertainty, and Risk 272

Risk Management 274

Identify Risks 276

Unequal Contingency Planning 278

Risk Analysis 280

Multiple Options Analysis 282

Risk Prioritization 284

Determining Risk Response Strategies 286

Monitoring and Controlling Risk 288

Technical Risks 290

Management Reserve 292

Chapter 10:COMMUNICATIONS MANAGEMENT 295

Stakeholders 296

Stakeholder Commitment 298

Getting Stakeholder Agreements 300

Stakeholder Issues and Challenges 302

Making Bad Assumptions 304

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xii C O N T E N T S

Another Bad Assumption 306

Value Creation 308

Stakeholder Management Responsibility 310

Changing Views in Stakeholder Management 312

Life-Cycle Stakeholder Management 314

Stakeholder Management—Macro Level 318

Stakeholder Management versus Customer Loyalty 320

Stakeholder Management—Micro Level 322

Stakeholder Identifi cation 324

Classifi cation of Stakeholders 328

Tiered Stakeholder Identifi cation 330

Managing Stakeholder Expectations 332

Managing Stakeholder Expectations: The Design of Health Care Products 334

Perform Stakeholder Analysis 336

Stakeholder Mapping 338

Key Stakeholders 342

Unimportant Stakeholders 344

Perform Stakeholder Engagements 346

Defi ning Key Performance Indicators (KPIs) 348

Prioritizing Stakeholders’ Needs 350

Stakeholder Information Flow 352

Virtual Teams 356

Measuring KPIs 358

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C O N T E N T S xiii

Reporting KPI Data 362

Summarized KPI Milestones 364

Stakeholder Communications 366

Project Review Meetings 368

Stakeholder Scope Change Requests 370

Linear Thinking 372

Enforcing Stakeholder Agreements 374

Stakeholder Debriefi ng Sessions 376

Satisfaction Management Survey Factors 378

Complex Project Management Skills 380

Three Critical Factors for Successful StakeholderManagement 382

Successful Stakeholder Management 384

Failures in Stakeholder Management 386

Final Thoughts 387

Index 389

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PREFACE

For more than 50 years, project management has been in use but perhaps not on a worldwide basis. What differentiated companies

early on was whether they used project management, not how well they used it. Today, almost every company uses project management, and the differentiation among companies is whether they are simply good at project management or whether they truly excel at project management. The difference between using project management and being good at project management is relatively small, and most com-panies can become good at project management in a relatively short time period, especially if they have executive - level support. But the difference between being good and excelling at project management is quite large.

For more than three decades, we have become experts in how to manage traditional projects. These traditional projects can be for internal as well as external clients. With these projects, the state-ment of work is reasonably well defi ned; the budget and schedule are realistic; reasonable estimating techniques are used, perhaps even estimating databases; and the fi nal target of the project is stationary. We use a project management methodology that has been devel-oped and undergone continuous improvements after use on several projects, and we are able to capture best practices and lessons learned. This traditional project methodology focuses on linear thinking; we follow the well - defi ned life - cycle phases, and we have forms, templates, checklists, and guidelines for each phase.

Now that we have become good at these traditional projects, we are focusing our attention to the nontraditional or complex projects. The following table shows some of the differences between managing traditional and nontraditional projects:

xv

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xvi P R E FAC E

Traditional Projects Nontraditional Projects

Time duration of 6 – 18 months Time duration can be overseveral years

The assumptions are not expected to change over the duration of the project

The assumptions can and will change over the project ’ s duration

Technology is known and will not change over the project ’ s duration

Technology will most certainly change

People that started on the project will remain through to completion (the team and the project sponsor)

People that approved the project and are part of the governance may not be there at the project ’ s conclusion

The statement of work isreasonably well - defi ned

The statement of work isill - defi ned and subject tonumerous scope changes

The target is stationary The target may be moving

There are few stakeholders There are multiple stakeholders

Companies like IBM, Hewlett - Packard, Microsoft, and Siemens are investing heavily to become solution providers and assist clients on a worldwide basis on managing nontraditional, complex projects. Some of the distinguishing characteristics of complex projects, just to name a few, include:

� Working with a large number of stakeholders and partners, all at different levels of project management maturity, and many of whom may not even understand the technology of the proj-ect or project management practices

� Dealing with multiple virtual teams located across the world, and where decisions on the project may be made in favor of politics, culture, or religious beliefs

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P R E FAC E xvii

� Starting projects with an ill - defi ned scope, thereby requiring numerous scope changes throughout the project and, conse-quently, having a moving target as an end point

� Working with partners and stakeholders that may have limited project management tools and antiquated processes that are incompatible with the project manager ’ s tool kit

� Long - term projects in which the stakeholders may change, new applicable technologies may emerge, and for which fund-ing needs to be justifi ed on a regular basis

� Project in which the stated goals and objectives are not shared by all key stakeholders

For companies to be successful at managing complex projects on a repetitive basis and function as a solution provider, the project management methodology and accompanying tools must be fl uid or adaptive. This means that you may need to develop a different project management methodology to interface with each stakeholder given the fact that each stakeholder may have different requirements and expectations, and the fact that most complex projects have long time spans. And while the processes in the PMBOK ® Guide remain useful on complex projects, it ’ s often necessary to supplement the tool set normally used by project managers employing those processes.

The project manager capability set is necessarily expanded for the management of complex projects. To manage projects with the characteristics noted above, the project manager needs to be able to thrive in and manage an environment of constant change — change in technologies, change in the business and market environments, change in organizational structures and policies, and change among the project ’ s key stakeholders. This requires an increased deftness in the management of what are traditionally known as the “ soft skills ” of project management — team building, stakeholder management, and leadership, to name a few. There has always been a need for

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xviii P R E FAC E

technical credibility and some business knowledge in traditional project management. However, managing complex projects, with their emerging emphasis on returning real business value to both the owner and the contractor, requires an added understanding of the business implications not only of the project itself but also of the proj-ect ’ s end product and its value to end users. Finally, the transnational nature of many complex projects requires both political astuteness and cultural sensitivity.

The 4th edition of the PMBOK ® Guide does an excellent job emphasizing the importance of stakeholder management. Stakeholder management, the fi rst process of the Communications Management knowledge area, may very well be one of the keys to successful manage-ment of complex projects. Equally important is the management of project risk, since all of the uncertainties associated with the manage-ment of complex projects boils down to risk management. The master-ing of the remaining processes of the Communications Management knowledge area, an area of project management in which project managers spend the preponderance of their time, is also a critical success factor in the management of complex projects.

In this book, we fi rst set out to describe project management in terms of its application to, and the differences between, traditional and complex projects. We spend the rest of our time looking at each of the nine knowledge areas of the PMBOK ® Guide and show how some of the knowledge may have to be applied differently when man-aging complex projects. The PMBOK ® Guide is certainly applicable to complex projects, but other factors, such as enterprise environ-mental factors, may take on a higher degree of importance than they normally would.

HAROLD KERZNER, PH.D.

CARL BELACK, PMP ®

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ACKNOWLEDG M ENTS

Some of the material in this book has been either extracted from or adapted from Harold Kerzner, Project Management; A Systems

Approach to Planning, Scheduling and Controlling , 10th ed. Hobo-ken, NJ: John Wiley & Sons, 2009.

Reproduced by permission of Harold Kerzner and John Wiley & Sons, Inc.

We would like to sincerely thank the dedicated people assigned to this project, especially the International Institute for Learning, Inc. (IIL) and John Wiley & Sons, Inc. staff for their patience, profession-alism, and guidance during the development of this book.

We would also like to thank E. LaVerne Johnson, Founder, President & CEO, IIL, for her vision and continued support of the project management profession, and Judith W. Umlas, Senior Vice President, Learning Innovations, IIL for their diligence and valuable insight.

In addition, we would like to acknowledge the many project man-agers whose ideas, thoughts, and observations inspired us to initiate this project.

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INTERNATIONAL INSTITUTE FOR LE ARNING, INC. ( I IL)

With global operating companies all over the world and clients in 200 countries, IIL is a global leader in training, consulting,

coaching and customized course development. IIL ’ s core competen-cies include: Project, Program and Portfolio Management; Business Analysis; Microsoft Project ® and Project Server * ; Lean Six Sigma; PRINCE2 ® * * ; ITIL ® ; Leadership and Interpersonal Skills. Using their proprietary Many Methods of Learning ™ , IIL delivers innova-tive, effective and consistent training solutions through a variety of learning approaches, including Traditional Classroom, Virtual Class-room, simulation training and interactive, on - demand learning. IIL is a PMI ® Charter Global Registered Education Provider, a member of PMI ’ s Corporate Council, an Accredited Training Organization for PRINCE2 and ITIL, a Microsoft Gold Certifi ed Partner and an IIBA ® Endorsed Education Provider. Now in its twentieth year of doing business, IIL is proud to be the learning solution provider of choice for many top global companies.

*Microsoft Project and Microsoft Project Server are registered trademarks of the Microsoft Corporation. * * PRINCE2 ® is a trademark of the Offi ce of Government Commerce in the United Kingdom and other countries.

xxi

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PROJECT MANAGEMENT FRAMEWORK

1 C h a p t e r

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2 P RO J E C T M A N A G E M E N T F R A M E WO R K

PROJECT CHARACTERISTICS

Have a specifi c objective (which may be unique or one-of-a-kind) to be completed within certain specifi cations

Have defi ned start and end dates

Have funding limits (if applicable)

Have quality limits (if applicable)

Consume human and nonhuman resources (i.e., money, people, equipment)

Be multifunctional (cut across several functional lines)

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We must begin with the defi nition of a project. Projects are most often unique endeavors that have not been attempted before

and might never be attempted again. Projects have specifi c start and end dates. In some cases, projects may be very similar or identical and repeti-tive in nature, but those situations would be an exception rather than the norm. Because of the uniqueness of projects and their associated activities, estimating the work required to complete the project may be very diffi cult and the resulting estimates may not be very reliable. This may create a number of problems and challenges for the func-tional manager.

Projects have constraints or limitations. Typical constraints include time frames with predetermined milestones, fi nancial limitations, and limitations regarding quality as identifi ed in the specifi cations. Another typical constraint may be the tolerance for risk and the amount of risk that the project team or owner can accept. There may also be limitations on the quality and skill levels of the resources needed to accomplish the tasks.

Projects consume resources. Resources are defi ned as human — people providing the labor and support; and nonhuman — equipment, facilities, and money, for example.

Projects are also considered to be multifunctional, which means that projects are integrated and cut across multiple functional areas and business entities. One of the primary roles of the project man-ager is to manage the integration of project activities. The larger the project, and the greater the number of boundaries to be crossed, the more complex the integration becomes.

P RO J E C T C H A R AC T E R I S T I C S 3

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4 P RO J E C T M A N A G E M E N T F R A M E WO R K

THE COMPLEXITY OF DEFINING COMPLEXITY

Projects are usually defi ned as being complex according to one or more of the following elements interacting together:

Size

Dollar value

Uncertain requirements

Uncertain scope

Uncertain deliverables

Complex interactions

Uncertain credentials of labor pool

Geographic separation across multiple time zones

Other factors

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Complex projects differ from traditional projects for a multitude of reasons, many of which are shown in the following feature.

There are numerous defi nitions of a complex project. The projects that you manage within your own company can be regarded as a complex project if the scope is large and the statement of work only partially complete.

Some people believe that research and development (R & D) proj-ects are always complex because, if you can lay out a plan for R & D, then you probably do not have R & D. R & D is when you are not 100 percent sure where you are heading, you do not know what it will cost, and you do not know when you will get there.

Complexity can also be defi ned according to the number of inter-actions that must take place for the work to be executed. The greater the number of functional units that must interact, the harder it is to perform the integration. The situation becomes more diffi cult if the functional units are dispersed across the globe and if cultural differ-ences makes integration diffi cult.

Complexity can also be defi ned according to size and length. The larger the project in scope and cost, and the greater the time frame, the more likely it is that scope changes will occur affecting the bud-get and schedule. Large, complex projects tend to have large cost overruns and schedule slippages. Good examples of this are Denver International Airport, the Chunnel between England and France, and the “ Big Dig ” in Boston.

T H E C O M P L E X I T Y O F D E F I N I N G C O M P L E X I T Y 5

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6 P RO J E C T M A N A G E M E N T F R A M E WO R K

COMPONENTS OF COMPLEX PROJECTS

Interactions

Size

and

Cos

t Uncertainty

CulturalImplications

MultipleStake-holders

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