CONSTRUCTION PLANNING AND CONTROL

UNIT:1
Understanding Project Management, Project manager, Organization structures, Stages of
Construction, organizing and staffing the project office and team

PROJECT MANAGEMENT:

What Is Project Management?

Project management is the practice of initiating, planning, executing, controlling, and closing the work of
a team to achieve specific goals and meet specific success criteria at the specified time. The primary challenge
of project management is to achieve all of the project goals within the given constraints. This information is
usually described in project documentation, created at the beginning of the development process. The primary
constraints are scope, time, quality and budget. The secondary—and more ambitious—challenge is
to optimize the allocation of necessary inputs and apply them to meet pre-defined objectives.

The object of project management is to produce a complete project which complies with the client's objectives.
In many cases the object of project management is also to shape or reform the client's brief to feasibly be able to
address the client's objectives. Once the client's objectives are clearly established they should influence all
decisions made by other people involved in the project – for example project managers, designers, contractors
and sub-contractors. Ill-defined or too tightly prescribed project management objectives are detrimental to
decision making.

A project is a temporary endeavor designed to produce a unique product, service or result with a defined
beginning and end (usually time-constrained, and often constrained by funding or staffing) undertaken to meet
unique goals and objectives, typically to bring about beneficial change or added value. The temporary nature of
projects stands in contrast with business as usual (or operations), which are repetitive, permanent, or semi-
permanent functional activities to produce products or services. In practice, the management of such distinct
production approaches requires the development of distinct technical skills and management strategies.

Project management focuses on planning and organizing a project and its resources. This includes identifying
and managing the lifecycle to be used, applying it to the user-centered design process, formulating the project
team, and efficiently guiding the team through all phases until project completion.
Approaches of project management:

A 2017 study suggested that the success of any project depends on how well four key aspects are aligned with
the contextual dynamics affecting the project, these are referred to as the four P's:

 Plan: The planning and forecasting activities.

 Process: The overall approach to all activities and project governance.
 People: Including dynamics of how they collaborate and communicate.
 Power: Lines of authority, decision-makers, organograms, policies for implementation and the like.

There are a number of approaches to organizing and completing project activities, including: phased, lean,
iterative, and incremental. There are also several extensions to project planning, for example based on outcomes
(product-based) or activities (process-based). Some of the approaches of management is given below:

Benefits realization management

Benefits realization management (BRM) enhances normal project management techniques through a focus on
outcomes (benefits) of a project rather than products or outputs, and then measuring the degree to which that is
happening to keep a project on track. This can help to reduce the risk of a completed project being a failure by
delivering agreed upon requirements/outputs but failing to deliver the benefits of those requirements.

In addition, BRM practices aim to ensure the alignment between project outcomes and business strategies. The
effectiveness of these practices is supported by recent research evidencing BRM practices influencing project
success from a strategic perspective across different countries and industries.

An example of delivering a project to requirements might be agreeing to deliver a computer system that will
process staff data and manage payroll, holiday and staff personnel records. Under BRM the agreement might be
to achieve a specified reduction in staff hours required to process and maintain staff data.

Critical chain project management

Critical chain project management (CCPM) is an application of the theory of constraints (TOC) to planning and
managing projects, and is designed to deal with the uncertainties inherent in managing projects, while taking
into consideration limited availability of resources (physical, human skills, as well as management & support
capacity) needed to execute projects.

The goal is to increase the flow of projects in an organization (throughput). Applying the first three of the five
focusing steps of TOC, the system constraint for all projects, as well as the resources, are identified. To exploit
the constraint, tasks on the critical chain are given priority over all other activities. Finally, projects are planned
and managed to ensure that the resources are ready when the critical chain tasks must start, subordinating all
other resources to the critical chain.

Earned value management

Earned Value chart shows Planned Value, Earned Value, Actual Cost, and their variances in percent. The
approach is used in project management simulation

Earned value management (EVM) extends project management with techniques to improve project monitoring.
It illustrates project progress towards completion in terms of work and value (cost). Earned Schedule is an
extension to the theory and practice of EVM. This theory was introduced in 2019.

Iterative and incremental project management

In critical studies of project management, it has been noted that phased approaches are not well suited for
projects which are large-scale and multi-company, with undefined, ambiguous, or fast-changing
requirements, or those with high degrees of risk, dependency, and fast-changing technologies. The cone of
uncertainty explains some of this as the planning made on the initial phase of the project suffers from a high
degree of uncertainty. This becomes especially true as software development is often the realization of a new or
novel product.

These complexities are better handled with a more exploratory or iterative and incremental approach. Several
models of iterative and incremental project management have evolved, including agile project
management, dynamic systems development method, extreme project management, and Innovation
Engineering.

Lean project management

Lean project management uses the principles from lean manufacturing to focus on delivering value with less
waste and reduced time

Phased approach

The phased (or staged) approach breaks down and manages the work through a series of distinct steps to be
completed, and is often referred to as "traditional" or "waterfall". Although it can vary, it typically consists of
five process areas, four phases plus control:
Typical development phases of an engineering project

1. initiation
2. planning and design
3. construction
4. monitoring and controlling
5. completion or closing

Many industries use variations of these project stages and it is not uncommon for the stages to be renamed to
better suit the organization. For example, when working on a brick-and-mortar design and construction, projects
will typically progress through stages like pre-planning, conceptual design, schematic design, design
development, construction drawings (or contract documents), and construction administration.

While the phased approach works well for small, well-defined projects, it often results in challenge or failure on
larger projects, or those that are more complex or have more ambiguities, issues and risk.

Process-based management

The incorporation of process-based management has been driven by the use of maturity models such as
the OPM3 and the CMMI (capability maturity model integration; see this example of a predecessor)
and ISO/IEC 15504 (SPICE – software process improvement and capability estimation). Unlike SEI's CMM,
the OPM3 maturity model describes how to make project management processes capable of performing
successfully, consistently, and predictably to enact the strategies of an organization.

Project production management

Project production management is the application of operations management to the delivery of capital projects.
The Project production management framework is based on a project as a production system view, in which a
project transforms inputs (raw materials, information, labor, plant & machinery) into outputs (goods and
services).

Product-based planning

Product-based planning is a structured approach to project management, based on identifying all of the products
(project deliverables) that contribute to achieving the project objectives. As such, it defines a successful project
as output-oriented rather than activity- or task-oriented. The most common implementation of this approach
is PRINCE2

Elements of project management:

Traditionally (depending on what project management methodology is being used), project management
includes a number of elements: four to five project management process groups, and a control system.
Regardless of the methodology or terminology used, the same basic project management processes or stages of
development will be used. Major process groups generally include:

 Initiation
 Planning
 Production or execution
 Monitoring and controlling
 Closing

In project environments with a significant exploratory element (e.g., research and development), these stages
may be supplemented with decision points (go/no go decisions) at which the project's continuation is debated
and decided. An example is the Phase–gate model.

Initiating

Initiating process group processes

The initiating processes determine the nature and scope of the project. [35] 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 business environment 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.

The initiating stage should include a plan that encompasses the following areas. These areas can be recorded in
a series of documents called Project Initiation documents. Project Initiation documents are a series of planned
documents used to create order for the duration of the project. These tend to include:

RACI(Q) chart. At least one Responsible and exactly one Accountable person are designated for each project
and planning activity.

 project proposal (idea behind project, overall goal, duration)

 project scope (project direction and track)
 product breakdown structure (PBS) (a hierarchy of deliverables / outcomes and components thereof)
 work breakdown structure (WBS) (a hierarchy of the work to be done, down to daily tasks)
 responsibility assignment matrix (RACI) (roles and responsibilities aligned to deliverables / outcomes)
 tentative project schedule (milestones, important dates, deadlines)
 analysis of business needs and requirements against measurable goals
 review of the current operations
 financial analysis of the costs and benefits, including a budget
 stakeholder analysis, including users and support personnel for the project
 project charter including costs, tasks, deliverables, and schedules
 SWOT analysis: strengths, weaknesses, opportunities, and threats to the business
Planning

After the initiation stage, the project is planned to an appropriate level of detail (see example of a flow-
chart). 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 the Initiation process group, a failure to adequately
plan greatly reduces the project's chances of successfully accomplishing its goals.

Project planning generally consists of

 determining the project management methodology to follow (e.g. whether the plan will be defined wholly
up front, iteratively, or in rolling waves);
 developing the scope statement;
 selecting the planning team;
 identifying deliverables and creating the product and work breakdown structures;
 identifying the activities needed to complete those deliverables and networking the activities in their logical
sequence;
 estimating the resource requirements for the activities;
 estimating time and cost for activities;
 developing the schedule;
 developing the budget;
 risk planning;
 developing quality assurance measures;
 gaining formal approval to begin work.

Additional processes, such as planning for communications and for scope management, identifying roles and
responsibilities, determining what to purchase for the project and holding a kick-off meeting are also generally
advisable.

For new product development projects, conceptual design of the operation of the final product may be
performed concurrent with the project planning activities, and may help to inform the planning team when
identifying deliverables and planning activities.

Executing
 Executing process group processes

While executing we must know what are the planned terms that need to be executed. The
execution/implementation phase ensures that the project management plan's deliverables are executed
accordingly. This phase involves proper allocation, co-ordination and management of human resources and any
other resources such as material and budgets. The output of this phase is the project deliverables.

Project Documentation

Documenting everything within a project is key to being successful. To maintain budget, scope, effectiveness
and pace a project must have physical documents pertaining to each specific task. With correct documentation,
it is easy to see whether or not a project's requirement has been met. To go along with that, documentation
provides information regarding what has already been completed for that project. Documentation throughout a
project provides a paper trail for anyone who needs to go back and reference the work in the past. In most cases,
documentation is the most successful way to monitor and control the specific phases of a project. With the
correct documentation, a project's success can be tracked and observed as the project goes on. If performed
correctly documentation can be the backbone to a project's success.

Monitoring and controlling

 Monitoring and controlling process group processes

Monitoring and controlling consists of those 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 performance is observed and measured regularly to
identify variances from the project management plan.

Monitoring and controlling includes:

 Measuring the ongoing project activities ('where we are');

 Monitoring the project variables (cost, effort, scope, etc.) against the project management plan and the
project performance baseline (where we should be);
 Identifying corrective actions to address issues and risks properly (How can we get on track again);
 Influencing the factors that could circumvent integrated change control so only approved changes are
implemented.

In multi-phase projects, the monitoring and control process also provides feedback between project phases, to
implement corrective or preventive actions to bring the project into compliance with the project management
plan.

Project maintenance is an ongoing process, and it includes:

 Continuing support of end-users

 Correction of errors
 Updates to the product over time
 Monitoring and controlling cycle

In this stage, auditors should pay attention to how effectively and quickly user problems are resolved.

Over the course of any construction project, the work scope may change. Change is a normal and expected part
of the construction process. Changes can be the result of necessary design modifications, differing site
conditions, material availability, contractor-requested changes, value engineering and impacts from third
parties, to name a few. Beyond executing the change in the field, the change normally needs to be documented
to show what was actually constructed. This is referred to as change management. Hence, the owner usually
requires a final record to show all changes or, more specifically, any change that modifies the tangible portions
of the finished work. The record is made on the contract documents – usually, but not necessarily limited to, the
design drawings. The end product of this effort is what the industry terms as-built drawings, or more simply, "as
built." The requirement for providing them is a norm in construction contracts. Construction document
management is a highly important task undertaken with the aid of an online or desktop software system, or
maintained through physical documentation. The increasing legality pertaining to the construction industry's
maintenance of correct documentation has caused the increase in the need for document management systems.

When changes are introduced to the project, the viability of the project has to be re-assessed. It is important not
to lose sight of the initial goals and targets of the projects. When the changes accumulate, the forecasted result
may not justify the original proposed investment in the project. Successful project management identifies these
components, and tracks and monitors progress so as to stay within time and budget frames already outlined at
the commencement of the project.

Closing
 Closing process group processes.

Closing includes the formal acceptance of the project and the ending thereof. Administrative activities include
the archiving of the files and documenting lessons learned.

This phase consists of:

 Contract closure: Complete and settle each contract (including the resolution of any open items) and close
each contract applicable to the project or project phase.
 Project close: Finalize all activities across all of the process groups to formally close the project or a project
phase

Also included in this phase is the Post Implementation Review. This is a vital phase of the project for the
project team to learn from experiences and apply to future projects. Normally a Post Implementation Review
consists of looking at things that went well and analyzing things that went badly on the project to come up with
lessons learned.

PROJECT MANAGEMENT TECHNIQUES

Techniques in project management range from traditional to innovative ones. Which one to choose for running
a project, depends on project specifics, its complexity, teams involved, and other factors. Most of them can be
used in various fields, however, there are techniques that are traditionally used in certain areas of activity, or are
developed specifically for certain fields. Below, we’ve listed the most popular techniques that are used in
project management.

Classic technique

The simplest, traditional technique is sometimes the most appropriate for running projects. It includes preparing
a plan of upcoming work, estimating tasks to perform, allocating resources, providing and getting feedback
from the team, and monitoring quality and deadlines.
Where to use: this technique is ideal for running projects performed by small teams, when it’s not really
necessary to implement a complex process.

Waterfall technique

This technique is also considered traditional, but it takes the simple classic approach to the new level. As its
name suggests, the technique is based on the sequential performance of tasks. The next step starts when the
previous one is accomplished. To monitor progress and performed steps, Gantt charts are often used, as they
provide a clear visual representation of phases and dependencies.

Where to use: this technique is traditionally used for complex projects where detailed phasing is required and
successful delivery depends on rigid work structuring.
Agile Project Management

Agile project management method is a set of principles based on the value-centered approach. It prescribes
dividing project work into short sprints, using adaptive planning and continual improvement, and fostering
teams’ self-organization and collaboration targeted to produce maximum value. Agile frameworks include such
techniques as Scrum, Kanban, DSDM, FDD, etc.

Where to use: Agile is used in software development projects that involve frequent iterations and are performed
by small and highly collaborative teams.

Today, many project & work management software tools like actiTIME offer convenient ways to introduce
Scrum and Agile in work process. With them, you can configure multiple levels of your work structure, track
long-term and short-term deadlines, use estimates in planning process, and create Kanban boards to monitor
work progress. Basically, software tools allow to structure your work according to the Agile method, and
visualize the structure.

Rational Unified Process

Rational Unified Process (RUP) is a framework designed for software development teams and projects. It
prescribes implementing an iterative development process, where feedback from product users is taken into
account for planning future development phases.

Where to use: RUP technique is applied in software development projects, where end-user satisfaction is the
key requirement.

Program Evaluation and Review Technique

Program Evaluation and Review Technique (PERT) is one of the widely used approaches in various areas. It
involves complex and detailed planning and visual tracking of work results on PERT charts. Its core part is the
analysis of tasks performed within the project. Originally, this technique was developed by the US Navy during
the Cold War to increase the efficiency of work on new technologies.

Where to use: this technique suits best for large and long-term projects with non-routine tasks and challenging
requirements.
Critical Path Technique

Actually, this technique is an algorithm for scheduling and planning project works that is often used in
conjunction with the PERT method discussed above. This technique involves detecting the longest path
(sequence of tasks) from the beginning to the end of a project and defining the critical tasks. Critical are tasks
that influence the deadlines of the entire project and require closer attention and thorough control.

Where to use: Critical Path technique is used for complex projects where delivery terms and deadlines are
critical, in such areas as construction, defense, software development, and others.
Critical Chain Technique

Critical Chain is a more innovative technique that derives from PERT and Critical Path methods. It is less
focused on rigid task order and scheduling and prescribes more flexibility in resource allocation and more
attention to how time is used. This technique emphasizes prioritization, dependencies analysis, and optimization
of time expenses.

Where to use: like the previous two techniques, it is used in complex projects. As it is focused on time
optimization and wise resource allocation, it suits best for projects where resources are limited.

Extreme Project Management

Extreme project management technique (XPM) emphasizes elasticity in planning, open approach, and reduction
of formalism and deterministic management. Deriving from extreme programming methods, it is focused on the
human factor in project management rather than on formal methods and rigid phases.
Where to use: XPM is used for large, complex and uncertain projects where managing uncertain and
unpredictable factors is required.

PROJECT MANAGEMENT TOOLS

When applying any of the techniques to the project you need to accomplish, you also need to use specific tools
for successfully implementing the technique. Here’s a list of software tools that are used in project management
on different work steps.

Organizing Workflow & Planning

This step is the core part of starting a project: it defines how the project will be performed, and how the quality
of its outcome will be ensured. Large companies often use such comprehensive solutions as MS Project. For
smaller teams, various alternatives are available. They don’t provide all the rich functionality typical to complex
and expensive tools, but they have planning and roadmap features that are sufficient for visualizing future
project progress. There are also free project management solutions that suit best for startups and small
businesses.

Communication

Being the key point in many techniques and methodologies, communication within a project team needs to be
properly organized. While using email for formal communication and important messages, it’s also essential to
have a corporate messenger – Slack and Skype are the most popular ones. And, if your team members use
different tools to communicate, eliminate the pain of having multiple messengers by integrating them.

Scheduling

When allocating resources and planning for the future, it’s crucial to know who on the team is available for
specific dates. Use scheduling software for that! Such tools as actiPLANS provide a clear visual chart of
absences for upcoming dates and allow to see all necessary details to team members’ leaves and time off.

Time management

Knowing where your team’s time goes not just helps to manage current project risks. It also provides valuable
information for future planning and estimating. Time management tools, such as actiTIME, help managers
understand both individual time expenses and team’s results for any period. Informative reports with time &
cost summaries and notes to the logged time provide insights into how time is used and what can be optimized.

Finance & Accounting

For any project manager and business owner, understanding the financial outcome of the projects is crucial for
analysis and future planning. Most used accounting tools – QuickBooks, Zoho, Freshbooks – help collect this
information. For smaller project teams, other accounting solutions can be reasonable. They require less
investment, but also provide insights on project profitability, teams’ performance, and estimation accuracy.

PROJECT MANAGER:

A project manager is a professional in the field of project management. Project managers have the
responsibility of the planning, procurement and execution of a project, in any undertaking that has a defined
scope, defined start and a defined finish; regardless of industry. Project managers are first point of contact for
any issues or discrepancies arising from within the heads of various departments in an organization before the
problem escalates to higher authorities.

Project management is the responsibility of a project manager. This individual seldom participates directly in
the activities that produce the end result, but rather strives to maintain the progress, mutual interaction
and tasks of various parties in such a way that reduces the risk of overall failure, maximizes benefits, and
minimizes costs.

A project manager is the person responsible for accomplishing the project objectives. Key project management
responsibilities include

 defining and communicating project objectives that are clear, useful and attainable
 procuring the project requirements like workforce, required information, various agreements and material or
technology needed to accomplish project objectives
 managing the constraints of the project management triangle, which are cost, time, scope and quality

A project manager is a client representative and has to determine and implement the exact needs of the client,
based on knowledge of the organization they are representing. An expertise is required in the domain the Project
Managers are working to efficiently handle all the aspects of the project. The ability to adapt to the various
internal procedures of the client and to form close links with the nominated representatives, is essential in
ensuring that the key issues of cost, time, quality and above all, client satisfaction, can be realized.

RESPONSIBILITIES:
The Project Manager is accountable for ensuring that everyone on the team knows and executes his or her role,
feels empowered and supported in the role, knows the roles of the other team members and acts upon the belief
that those roles will be performed.[3] The specific responsibilities of the Project Manager may vary depending on
the industry, the company size, the company maturity, and the company culture. However, there are some
responsibilities that are common to all Project Managers, noting:

 Developing the project plans

 Managing the project stakeholders
 Managing communication
 Managing the project team
 Managing the project risks
 Managing the project schedule
 Managing the project budget
 Managing the project conflicts
 Managing the project delivery
TYPES:

Architectural Project Manager

Architectural project manager are project managers in the field of architecture. They have many of the same
skills as their counterpart in the construction industry. And will often work closely with the construction project
manager in the office of the General Contractor (GC), and at the same time, coordinate the work of the design
team and numerous consultants who contribute to a construction project, and manage communication with the
client. The issues of budget, scheduling, and quality-control are the responsibility of the Project Manager in an
architect's office.

Construction Project Manager

Until recently, the American construction industry lacked any level of standardization, with individual States
determining the eligibility requirements within their jurisdiction. However, several Trade associations based in
the United States have made strides in creating a commonly accepted set of qualifications and tests to determine
a project manager's competency.

 The Construction Management Association of America (CMAA) maintains the Certified Construction
Manager (CCM) designation. The purpose of the CCM is to standardize the education, experience and
professional understanding needed to practice construction management at the highest level.
 The Project Management Institute has made some headway into being a standardizing body with its creation
of the Project Management Professional (PMP) designation.
 The Constructor Certification Commission of the American Institute of Constructors holds semiannual
nationwide tests. Eight American Construction Management programs require that students take these
exams before they may receive their Bachelor of Science in Construction Management degree, and 15 other
Universities actively encourage their students to consider the exams.
 The Associated Colleges of Construction Education, and the Associated Schools of Construction have made
considerable progress in developing national standards for construction education programs.

The profession has recently grown to accommodate several dozen Construction Management Bachelor of
Science programs. Many universities have also begun offering a master's degree in Project Management. These
programs generally are tailored to working professionals who have project management experience or project
related experience; they provide a more intense and in depth education surrounding the knowledge areas within
the project management body of knowledge.

The United States Navy construction battalions, nicknamed the SeaBees, puts their command through strenuous
training and certifications at every level. To become a Chief Petty Officer in the SeaBees is equivalent to a BS
in Construction Management with the added benefit of several years of experience to their credit. See ACE
accreditation.

Engineering Project Manager

In Engineering, project management involves seeing a product or device through the developing and
manufacturing stages, working with various professionals in different fields of engineering and manufacturing
to go from concept to finished product. Optionally, this can include different versions and standards as required
by different countries, requiring knowledge of laws, requirements and infrastructure.

Insurance Claim Project Manager

In the insurance industry project managers often oversee and manage the restoration of a clients home/office
after a fire, flood. Covering the fields from electronics through to the demolition and constructions
contractors....

IT Project Manager

IT Project Management generally falls into two categories, namely Software (Development) Project Manager
and Infrastructure Project Manager.

Software Project Manager

A Software Project Manager has many of the same skills as their counterparts in other industries. Beyond the
skills normally associated with traditional project management in industries such as construction and
manufacturing, a software project manager will typically have an extensive background in software
development. Many software project managers hold a degree in Computer Science, Information
Technology, Management of Information Systems or another related field.

In traditional project management a heavyweight, predictive methodology such as the waterfall model is often
employed, but software project managers must also be skilled in more lightweight, adaptive methodologies such
as DSDM, Scrum and XP. These project management methodologies are based on the uncertainty of developing
a new software system and advocate smaller, incremental development cycles. These incremental or iterative
cycles are time boxed (constrained to a known period of time, typically from one to four weeks) and produce a
working subset of the entire system deliverable at the end of each iteration. The increasing adoption of
lightweight approaches is due largely to the fact that software requirements are very susceptible to change, and
it is extremely difficult to illuminate all the potential requirements in a single project phase before the software
development commences.

The software project manager is also expected to be familiar with the Software Development Life
Cycle (SDLC). This may require in depth knowledge of requirements solicitation, application development,
logical and physical database design and networking. This knowledge is typically the result of the
aforementioned education and experience. There is not a widely accepted certification for software project
managers, but many will hold the Project Management Professional (PMP) designation offered by the Project
Management Institute, PRINCE2 or an advanced degree in project management, such as a MSPM or other
graduate degree in technology management.

IT Infrastructure Project Management

An infrastructure IT PM is concerned with the nuts and bolts of the IT department, including computers,
servers, storage, networking, and such aspects of them as backup, business continuity, upgrades, replacement,
and growth. Often, a secondary data center will be constructed in a remote location to help protect the business
from outages caused by natural disaster or weather. Recently, cyber security has become a significant growth
area within IT infrastructure management.

The infrastructure PM usually has an undergraduate degree in engineering or computer science, with a master's
degree in project management required for senior level positions. Along with the formal education, most senior
level PMs are certified, by the Project Management Institute, as a Project Management Professional. PMI also
has several additional certification options, but PMP is by far the most popular.

Infrastructure PMs are responsible for managing projects that have budgets from a few thousand dollars up to
many millions of dollars. They must understand the business and the business goals of the sponsor and the
capabilities of the technology in order to reach the desired goals of the project. The most difficult part of the
infrastructure PM's job may be this translation of business needs / wants into technical specifications.
Oftentimes, business analysts are engaged to help with this requirement. The team size of a large infrastructure
project may run into several hundred engineers and technicians, many of whom have strong personalities and
require strong leadership if the project goals are to be met.

Due to the high operations expense of maintaining a large staff of highly skilled IT engineering talent, many
organizations outsource their infrastructure implementations and upgrades to third party companies. Many of
these companies have strong project management organizations with the ability to not only manage their clients
projects, but to also generate high quality revenue at the same time.

What is Organizational Structure?

Organizational structure refers to the way a company or organization is setup. It is usually defined using a
hierarchy chart that shows how groups or functions report within the organization.

For Project Managers, a company's organizational structure type will affect how resources are allocated to
the project and will be a factor in how much influence the Project Manager will have within the
organization.

Organizational Structure Types

There are three basic types of organizational structures...

 Functional Organizational Structure

 Project-Based Organizational Structure

 Matrix Organizational Structure

FUNCTIONAL ORGANIZATIONAL STRUCTURE

Functional organizations are structured around the organization's primary functions.

Functional Organizational Structure

Examples of functions within a company are:

 Advertising

 Engineering

 Human Resources

 Manufacturing
In a functional organization, every employee is positioned within only one function and has one manager
they report to, the Functional Manager. The Functional Manager assigns and manages the employees work
and handles administrative tasks such as employee compensation.

PROJECT-BASED ORGANIZATIONAL STRUCTURE

Project-based organizations are structured around projects and not functions. This type of structure is also
called a projectized organizational structure.

Project-Based Organizational Structure

In a project-based organization most of the organization's resources are involved in project work. Project
Managers have high levels of independence and authority for the project and control the project resources.

MATRIX ORGANIZATIONAL STRUCTURE

Matrix organizations blend features of project-based and functional organizational structures.

The key challenge with a matrix organization is that every employee has two (or more) managers they
report to, their Functional Manager and the Project Manager. If they are working on multiple projects,
they may have even more managers to report to.

There are three types of matrix organizations:

  Weak Matrix

 Balanced Matrix

 Strong Matrix

WE AK M AT RIX

Weak Matrix Organizational Structure

A weak matrix organizational structure maintains many of the features of the functional organizational
structure. The role of the Project Manager is more that of a Project Coordinator. Their ability to make or
enforce decisions is low and most of the authority remains with the Functional Manager.

B AL ANCE D MATRIX
 Balanced Matrix Organizational Structure

A balanced matrix organizational structure recognizes the need for a Project Manager. However, the
Project Manager does not have full authority over the project, project staff or project budget.

ST RO NG M ATRIX

Strong Matrix Organizational Structure

A strong matrix organizational structure has many of the features of the projectized organizational
structure. They have full-time Project Managers and project administrative staff. Project Managers have
considerable authority over the project in this organzational structure.

How Organizational Structure Influences Project Management

Two of the key project aspects affected by organizational structure types are Project Manager
Authority and Resource Availability.

Organizational Structure Spectrum

As you move across the spectrum from Functional to Matrix to Project-Based organizational structure
types, the organization will move from favoring ongoing operations to favoring projects.

On the left side of the spectrum are Functional Organizational Structures. As a Project Manager, you will
have limited positional authority in these type of organizations. You will need to rely on expert
authority and referent authority to get project tasks completed. Because of this, you will need to develop
your influencing and negotiating skills if you want to be successful.

From a Resource Availability perspective, you will be dependent on the Functional Managers in your
organization to provide you with resources. In these cases, the project resources will report indirectly to
you.

On the right side of the spectrum are Project-Based Organizations. As a Project Manager, you will have
more positional authority the further right your project sits on the spectrum. This doesn't mean you can
just command others, but you will have more formal authority for getting project tasks completed.

From a Resource Availability perspective, you will also have greater control over your project resources
since they will be more likely to directly report to you and not to a functional manager.

Understanding what type of organizational structure is used by your company will help you determine
how you should manage your project.

What Organizational Structure Should Be Used in a Construction Project?

A construction project organizational structure has to help ensure on-time project completion within the set
budget. You have to decide how best to assign responsibility for scheduling and cost control while making sure
the project's working-level teams carry out the work in the right sequence and according to the specifications.
An effective project organization leaves project team members free to decide on the technical aspects of their
work while ensuring that they act within the project's time and cost constraints.

Framework
Organization of a project differs from that of an operating company because a project has a limited duration.
Employees making up the project team come from a company's general work force and return there after the
project is finished. Salaries, benefits and disciplinary matters remain with the corporate structure, while work-
related decisions come from the project organizational structure, made up of functional units and working-level
teams reporting to the project manager. Those involved in the project focus on getting the work done according
to the project plan, satisfying specific cost, scheduling and quality objectives

Functional
Project managers need to control the project's scope and costs, as well as handling project scheduling. The
project manager assigns responsibility for these functions to key people, and the organizational structure gives
them direct access to the working-level teams carrying out the work. The teams either report back to the
functional units on costs, progress and scope, or they require the approval of the functional managers to place
orders and schedule work. In either case, the lines of reporting go from the project manager through the
functional units to the working-level teams, and back through the functional units to the project manager.

Technical
Construction projects include a technical component that requires technical training, expertise and professional
qualifications. The project manager organizes the working-level teams to carry out specific tasks, such as
drywall or plumbing, in the right sequence. The functional units track progress, schedule the work and issue
reports back to the project manager. When the company does not have the expertise in a particular field, it can
hire contractors who interface directly with the functional groups to ensure that their work meets the
requirements of the project.

Quality
Quality control is a specialized function that usually has an independent structure parallel to the project
organization. Two requirements for quality control are that the quality manager reports directly to project
management and that the personnel from the quality control department have direct access to everyone carrying
out work on the project. The project organization chart generally shows the quality manager directly below the
project manager with a direct reporting path. The remaining access is through a matrix organization with
reporting paths from each functional unit and working-level team back to the quality assurance department.
Through the link to project management, the quality manager has authority over quality matters throughout the
project organization

STAGES IN CONSTRUCTION MANAGEMENT:

There are five key stages to any construction management project: Design, Pre-Construction, Procurement,
Construction, and Owner Occupancy. Each stage is essential to keeping a project on schedule without losing
sight of the big picture. Here are a few ways that Nautical Lands GeneralContractors (NLGC) ensures success at
each stage and its associated responsibilities.
STAGE 1: DESIGN
 All construction projects begin with the design phase. During this phase, an engineer or architect designs
several sketches keeping in mind the following:

 Building codes and regulations

 Wishes of the client
 Size and space considerations for comfort and use

These designs frequently include information on costs of materials and construction. Once our clients select a
design, NLGC’s designers, architects and engineers create the final drawings and specifications (or blueprints)
that our builders will implement during construction.
STAGE 2: PRE-CONSTRUCTION
With client-approved designs in hand, the next step is to brief and prepare our experienced project management
team. A project team typically comprises several professionals such as:

 Health and Safety Manager

 Contract Administrator
 Project Manager
 Municipal Planner
 Superintendent

In addition to preparing the construction site prior to breaking ground, our project team conducts a site
examination to review all environmental and order the necessary soil testing. These results will produce a map
of the underground sediments, current flow, and previous uses.
All plans must be approved by the city and its committees prior to putting a shovel in the ground. This is usually
a lengthy process, and all city concerns must be addressed.
STAGE 3: PROCUREMENT
One of the biggest responsibilities of the project team is purchasing. They buy all necessary materials and
equipment and are responsible for hiring labourers, always looking for efficiencies or savings to ensure each
project remains on track with respect to its budget. NLGC has developed national and local relationships with
leading businesses and firms to ensure the best for our clients.
STAGE 4: CONSTRUCTION
Before construction can begin, the project manager meets with subcontractors and material vendors to clearly
outline the scope and expectations for the project. After all plans and approvals are satisfied, our team secures
the site, arranges for material shipment and storage, and develops comprehensive safety plans that keep with our
commitment to high standards. Once these jobs are completed, the land is cleared, and construction starts.
STAGE 5: OWNER OCCUPANCY
After construction is completed, the project team tests all systems and equipment to ensure they meet the
standards of our clients and residents. The team also trains the on-site manager in the operation and
maintenance of the building. After the owner moves in, there is a warranty period. Under the written or implied
warranty, the building, including its materials and equipment, must meet the terms of the contract.
By following the five stages of the development process, NLGC is able to increase efficiencies with regards to
timeline and deliver on our commitments and expectations. We hold ourselves to a higher standard, and are
committed to excellence in our industry and for our clients.
ORGANIZING AND STAFFING THE PROJECT OFFICE AND TEAM
Proper project team organization is one of the key constraints to project success. If the project has no
productive and well-organized team, there’s an increased probability that this project will be failed at the very
beginning because initially the team is unable to do the project in the right manner. Without right organization
of teamwork, people who form the team will fail with performing a number of specific roles and carrying out a
variety of group/individual responsibilities. Hence, when you plan for a new project, first you must take care of
the best project team organization through team building activities.
Organizing a project team is a typical task of a project manager. Successful implementation of this task requires
the manager to acquire, develop and lead a group of people who are supposed to do the project. Organization of
the project team is the responsibility of the project manager who is committed to building a productive team of
professionals in order to guarantee that the project deliverables will be produced on schedule, under budget and
as per specification, and thereby the customer will accept those deliverables.

What is a Project Team?

A Project Team is an organized group of people who are involved in performing shared/individual tasks of the
project as well as achieving shared/individual goals and objectives for the purpose of accomplishing the project
and producing its results. The team consists of the full-time and part-time human resources supposed to
collaboratively work on producing the deliverables and moving the project towards successful completion.
A group of people turns into a team when every person of the group is capable of meeting the following
conditions:

 Understanding the work to be done within the endeavor

 Planning for completing the assigned activities
 Performing tasks within the budget, timeline, and quality expectations
 Reporting on issues, changes, risks, and quality concerns to the leader
 Communicating status of tasks
 Being a person who can jointly work with others
Three Conventional Roles

Every team, regardless of the project type, size and nature, has three roles (defined as “conventional”). These
roles are:

 Leader. A project team leader is a person who provides leadership and guidance to the team and takes
responsibility for the results of teamwork. The team leader role involves the development and
encouragement of the team through training, leading, motivation, recognition, rewarding and other
activities that stimulate or force team members to do the required tasks.
 Member. A project team member is a person who is actually involved in doing assigned tasks. Team
members directly access the project and actively evolve its processes. They’re subordinated to the team
leader.
 Contributor. A project team contributor is a person or an organization that participates in teamwork but is
not actually involved in performing tasks and carrying out project team responsibilities. Contributors help
improve the project through giving valued suggestions, expert judgment and consultation. They aren’t
responsible for the project results. Often project team contributors have an interest or concern in the
project, so they facilitate successful completion.
When organization of the project team is appropriate, all the roles are allocated adequately. Successful teams
often work under the direction and supervision of project managers who oversee the work of the team leader
and provide expert advice to team members. In this situation, contributors work in collaboration with the
managers.
Responsibilities and Duties

A team can be responsible for a variety of duties and responsibilities, depending on the project they’re involved
in. Good project team organization entails proper setting of team responsibilities and duties, while considering
specific goals and objectives of the project. Here’re several common responsibilities and duties of a project
team:

 Gaining the right understanding of the amount and scope of assigned work
 Following the planned assignments
 Increasing the details level per task and activities, if needed
 Completing the assigned tasks within the constraints of scope, quality, time and cost
 Inform the leader of any issues arisen
 Proactively communicate and collaborate with other team members
The Organizational Chart

Usually all possible roles, duties and responsibilities of a team are listed in the project team organizational
chart. Below you can read the definition.

A Project Team Organizational Chart is a detailed and document-based graphical representation of the team
to outline specific roles, duties and responsibilities of the team members and other stakeholders participating in
the project, and to formally constitute how exactly they are expected to collaborate with each other throughout
the course of the project implementation process. It is also regarded as a mechanism of managing team
development processes through designing training programmes based on the group relationships established by
the chart.

The team leader usually uses the organizational chart to thoroughly keep track of the processes associated with
team management, and to record particular relationships between group members during the course of the
implementation life-cycle. Team members use the chart to explore what roles and responsibilities they have
been assigned to, who will share those roles, and who will manage and lead their efforts.

Here’s a small checklist of the key tasks for organizing & staffing a project office and team:
1. Make a Project Team List. First you need to list all the people (and theirs names) who are supposed to be
the participants of your project team. You can do this after you’ve finished interviews with candidates to
the team.
2. Allocate the Conventional Roles. Now you must think about what individuals will take what roles. Use
the results of your interviews to start with leaders, then list members and contributors.
3. Assemble the Whole Team. Use your team list with the details on the roles assigned to your people to
assemble the team. This means you need to formally constitute the team.
4. Identify the Stakeholders. Your team if formed, now you need to identify the stakeholders or those
people/organizations having a direct interest in or affected by your project. They are the sponsor and the
customer. Note that although the stakeholders are not participants of the team, they’re added to the project
team organizational plan because they influence decisions of the team.
5. Build the chart. Finally use all the data to create the chart and display relationships between the team and
stakeholders on it. The relationships will show who is reporting to whom and what supervisory mechanism
is used for leading teamwork.
UNIT:2
Construction Planning, Project planning, milestone schedules, WBS, Network techniques,
CPM, PERT and Prima Vera, Line of Balancing Techniques, Critical Chain Method,
Resources leveling and smoothing.

CONSTRUCTION PLANNING:

Construction planning is the first stage of construction management, the discipline of taking a construction
project from conception to completion. Construction management includes several other components that
succeed planning, however: Scheduling is deciding when to start, execute, and complete each
task. Organizing is getting all the moving pieces in position to perform each task. Staffing is assigning people to
duties related to the project. Directing is ensuring that you complete tasks as planned, and monitoring is
ensuring that you meet the requirements and performance benchmarks set during the planning stage. If you
don’t meet these requirements, you’ll devote considerable time to the controlling stage, which involves
managing the budget and meeting contract requirements.

Since humans have been constructing buildings for thousands of years, construction planning is an ancient
discipline. We can trace some form of construction project planning all the way back to the Neolithic period,
when builders in Western Europe were erecting Stonehenge.
Today, the tools, techniques, and equipment that builders use have changed, but planning remains an integral
part of the construction management process. While construction planning is time consuming, the benefits
greatly outweigh the costs. A 1994 study by the Construction Industry Institute (CII) found a “positive,
quantifiable relationship between effort expended during the pre-project planning phase and the ultimate
success of a project.”

To be effective, you should approach construction planning with logic, thoroughness, and honesty. You will
need knowledge and experience in construction methods and contracting, and planners must visualize the tasks
and activities and understand the relationships between them so that they can carry them out in an efficient
sequence.

Goals of Construction Planners: Time, Cost, Quality, and Safety

The objectives of construction planning are the same for all projects: Builders and owners strive to meet cost,
schedule, quality, and safety requirements. The construction planning process also makes owners’ and builders’
responsibilities clear, laying the groundwork for strong communication and better teamwork.

In the construction planning process, you’ll produce a document called the construction master plan. This spells
out how you will schedule, organize, direct, monitor, and control the project, and aims to meet the project’s
technical, time, and cost requirements. The construction master plan includes three types of planning: strategic
planning, operational planning, and scheduling.

Strategic Planning: This determines, sets, and articulates project objectives. It answers the big questions
concerning a project’s mission, how it will achieve this mission, and how these objectives align with the project
sponsor’s or owner’s larger strategy. In short, strategic planning is the big-picture analysis that the project
sponsor carries out.

Operational Planning: This delves into the details of how the project will meet its strategic objectives — if it
can meet them at all. Construction teams evaluate whether they have the resources they need to meet the
strategic objectives, identify any shortfalls, and seek the sponsor’s approval to cover those shortfalls.

Scheduling: This lays out the operational plan on a projected timescale, including the anticipated completion
date. This type of planning does not involve highly detailed scheduling of every project task (that is a separate
activity that usually follows the planning phase). On large projects, specialist schedulers draw up detailed
schedules.
One critical aspect of construction planning is creating a safety plan for the construction site (this is especially
important for larger projects). Construction is a hazardous industry, and regulators such as OSHA (the U.S.
Occupational Safety and Health Administration) may require safety planning. On site, builders, usually via a
safety representative, must determine what the hazards are and decide how to avoid, mitigate, or manage them.
Safety planning spans a variety of activities, from safety and first-aid training to ensuring that equipment and
workspaces meet safety standards, and encouraging or requiring workers to adopt safe practices on the job.

Construction Planning Steps for a Home Renovation

Let’s look at the stages in a typical home renovation, which is one of the bigger, more costly residential project
types. A home renovation project is a good case study because the steps are similar to much larger commercial
projects, even though the scale is smaller.

Select a Designer: Architects and designers offer services ranging from whole-unit design (for architects) to
color and material selection (for interior designers) to a variety of collaborative solutions in between.
Homeowners will (or should) meet with a number of designers to decide which align most closely with their
design and budget objectives.

Create Schematics: The designer creates a floor plan for the remodel, and they go back and forth with the owner
until both sides agree on a design. For a residential project, the schematic design is effectively the project plan.

Select a Contractor: Contractors interviewing for a job will use the schematics to create preliminary cost
estimates. The homeowner checks references and makes sure they are hiring a contractor with a history of
similar successful projects.

Shop for Finishes and Materials: This step includes identifying the finishes and materials for the remodel. The
contractor can make suggestions based on budget and plan for materials to arrive on time. Meanwhile, the
architect will finalize the construction plan and prepare applications for building permits.

Obtain Permits: Applying for a permit can be a time-consuming, expensive process, so homeowners will need
to account for applying and waiting for permits to arrive when estimating their completion date.

Sign a Contractor: Once the contractor has obtained permits, they are ready to put pen to paper. Before doing
this, the owner and contractor may engage in some value engineering — revising aspects of the project to
reduce costs. By this point, the contractor will also have determined the necessary delivery dates of materials
and items so work can progress.

Like planning for a home renovation, planning for a commercial project includes both the planning activities we
discussed earlier — strategic planning, operational planning, and scheduling — and some high-level elements
of the building’s design. During the design stage for a commercial project, client, architect, and engineers will
work together to come up with a building design that meets the client’s requirements. Pre-construction, which
involves different activities for different projects, may include such things as design evaluation, value analyses,
constructability assessments, and contractor bidding. Procurement consists of buying the materials and services
necessary to complete the project. Construction refers to the process of building the structure according to the
plans. Construction is followed by commissioning, which is the process of verifying that a building’s systems
are in proper working order.

Participants in the Construction Planning Process

Any construction project involves a number of key parties. Here’s what each party is responsible for:

Client and Sponsor: The client and sponsor for a project are more often than not the same party, but the two
roles are distinct: The client is the building’s end user, and the sponsor funds the project. In cases where the
client and the sponsor are separate parties, it’s the sponsor’s prerogative to approve changes to the project. An
example of a separate sponsor and client would be a developer and a building owner.

Contractor: This is an umbrella term for people and firms that undertake a contractual obligation to provide
services for a construction project. Most major projects will have a general contractor with many subcontractors
working under their supervision. The general contractor signs a contract with the client/sponsor and is directly
accountable to the client and sponsor for the project’s success, even though they may not do any of the
construction themselves and instead may contract all the work out to specialized subcontractors. The
subcontractor is typically a specialist who performs a limited part of the overall construction effort. The general
contractor organizes, coordinates, and oversees the subcontractors’ efforts.

Consultants: A consultant is any party whose official responsibility is to provide direction and specialized
knowledge during the planning, design, or construction phases of a project. You’re much more likely to see
consultants on commercial projects since you engage them for their expertise in a specific knowledge area (such
as achieving LEED certification) that is not a standard part of residential projects.
Supplier/Vendor: Vendors or suppliers sell the materials that you use for a project. The term supplier has a
loose definition and can describe those who provide services, not just materials. You might also consider
architects and other design professionals to be suppliers.

Architects and Engineers: Architects come up with a design for the project, and engineers make sure the design
works. The architect is the chief designer of a project. He or she creates an agreed-upon schematic (with the
client and sponsor), and then works with the engineer to finalize technical elements of the design. The architect
also provides the project details required for permits. The engineer might also be considered a design specialist,
but his work focuses on functionality and constructability. Engineers ensure that the architect’s designs are
practical, workable, and structurally sound.

The Benefits of Construction Planning for Owners and Builders

To understand how construction planning benefits projects, we have to understand the concerns of the two main
parties in any construction effort: the owners and the builders.

The owners of any project are ultimately interested in three things: that you deliver the project according to the
agreed scope, that you complete it at or below cost, and that it is ready for use on schedule.

If the project is delayed, you lose revenue because the building isn’t ready for use, whether that use be in the
form of leasing to tenants or manufacturing products. If the costs exceed expectations, you reduce return on
investment. Delays and cost overruns may mean it takes longer to pay off loans, which also makes the project
more expensive. There can also be tax consequences.

Owners also need to know when they must disburse funding, so they don’t become victims of a cash-flow
crunch. In addition, they must be aware of how delays and overages might impact both their image and their
ability to effectively market the project.

Builders, meanwhile, are concerned with their own efficiency and profitability. Some bidding methods require
that they themselves cover certain unbudgeted costs rather than billing these to the project owner. They’re also
responsible for ensuring the ultimate quality of the final product and the safety of the construction site. Both the
former and the latter affect their reputation and the future success of their business.

How Construction Planning Can Save Money and Time

Construction planning can help minimize costs by optimizing resource and equipment utilization. Even for
small residential projects, you may have to lease the necessary equipment. On large commercial projects,
leasing or buying specialized equipment is expensive, and maximizing utilization reduces expenses.

In a complex project, construction planning also organizes and coordinates the many moving parts. The process
improves communication among team members and stakeholders, and it reveals unrealistic assumptions or
weak logic. With a properly planned project, everyone knows when subcontractors are supposed to show up and
what work you need to complete before their arrival. You shouldn’t keep materials and equipment lying around
for days or weeks, taking up space and possibly incurring excess rental costs because they arrived long before
you needed them.

Since, by definition, construction planning takes place before work begins, you have the opportunity to
anticipate problems and plan solutions before they occur. Those benefits translate into time efficiency during
construction itself, as well as a superior solution because you haven’t devised a plan under pressure.
Construction planning can pave the way toward more innovative methods of solving building challenges.

To maximize the benefits of construction planning, follow some best practices:

1. Make sure you’re planning as a team. With more faces at the table, you greatly reduce the chances of
overlooking something important.
2. To simplify things, identify the project’s big tasks first. Then, where necessary, split these tasks into
subtasks.
3. Assign these tasks to individuals and contractors. Then, create a schedule that tells everyone what
they’re supposed to be doing and when they’re supposed to do it.
4. Make sure the schedule has a completion date, and make sure you’re following the schedule.
5. You can adhere to the completion date and follow the schedule by monitoring progress regularly. Ensure
that you regularly track and update progress so that information keeps flowing among participants.
6. You can also use templates to ease the planning process: Simply list the necessary information in the
spaces provided, and modify the template to fit your project needs. Below are two free, downloadable
templates that you can use to create a construction timeline and daily or weekly inspection report. You’ll
find other useful templates throughout the article, as well.

Basic Concepts in Construction Planning

While construction planning is important, the steps and principles are not complicated. The challenge is to work
through the steps thoroughly and diligently. Experience and education will improve your skills, and you can
also find good classes and texts.

Construction planners make vital decisions about the technologies and construction methods they use on a
project. For example, when preparing concrete on site, what type of concrete mixer will the builders use — one
that two men can wheel around, one that you have to transport by truck, or an actual concrete mixer truck? The
decision depends on project size and relative costs, but technical and efficiency constraints also play roles.
Maybe the building has many floors, but due to space constraints, you would have to park a concrete mixer
truck far away from the lift that transports concrete to the top floor. Would it still be worth opting for a mixer
truck?

For any construction project, the construction planning management methodology passes through three
stages: the tender stage, awarding of the contract, and the construction period.

During the tender stage, the contractor prepares a tender program. Upon the awarding of contracts, project
managers will prepare a second program, the contract program. This is much more detailed than the tender
program. You develop it with input from the architect and the project owner, and it is the basis for project
monitoring.

During construction, you implement the contract program as the construction program. The construction
program guides work in the field, and you may renegotiate it when the project work changes.

PROJECT PLANNING:

Project planning is a procedural step in project management, where required documentation is created to
ensure successful project completion. Documentation includes all actions required to define, prepare,
integrate and coordinate additional plans. The project plan clearly defines how the project is executed,
monitored, controlled and closed.
Project planning requires an in-depth analysis and structuring of the following activities:

 Setting project goals

 Identifying project deliverables
 Creating project schedules
 Creating supporting plans
Step 1: Project Goals

A project is successful when it has met the needs of the stakeholders. A stakeholder is anybody directly, or
indirectly impacted by the project.

As a first step, it is important to identify the stakeholders in your project. It is not always easy to determine the
stakeholders of a project, particularly those impacted indirectly. Examples of stakeholders are:

 The project sponsor

 The customer who receives the deliverables

 The users of the project output

 The project manager and project team

Once you understand who the stakeholders are, the next step is to find out their needs. The best way to do this is
by conducting stakeholder interviews. Take time during the interviews to draw out the requirements that create
real benefits. Sometimes stakeholders will talk about needs that aren't relevant and don't deliver benefits. These
can be recorded and set as a low priority.

The next step, once you have conducted all the interviews and have a comprehensive list of needs is to prioritise
them. From the prioritised list, create a set of easily measurable goals. A good technique for doing this is to
review them against the SMART principle. This way, the achievement of the goal will be easy to identify.

Once you have established a clear set of goals, they should be recorded in the project plan. It can be useful also
to include the needs and expectations of your stakeholders.

Now you have completed the most difficult part of the planning process; it's time to move on and look at the
project deliverables.

Step 2: Project Deliverables

Using the goals you have defined in step 1, create a list of things the project needs to deliver to meet those
goals. Specify when and how to deliver each item.
Add the deliverables to the project plan with an estimated delivery date. You will establish more accurate
delivery dates during the scheduling phase, which is next.

Step 3: Project Schedule

Create a list of tasks that need to be carried out for each deliverable identified in step 2. For each task determine
the following:

 The amount of effort (hours or days) required for completing the task

 The resource who will carry out the task

Once you have established the amount of effort for each task, you can work out the effort required for each
deliverable, and an accurate delivery date. Update your deliverables section with the more precise delivery
dates.

At this point in the planning, you could choose to use a software package such as Microsoft Project to create
your project schedule. Alternatively, use one of the many free templates available. Input all of the deliverables,
tasks, durations and the resources who will complete each task.

A common problem discovered at this point is when you have an imposed delivery deadline from the sponsor
that is not realistic based on your estimates. If you discover this is the case, you must contact the sponsor
immediately. The options you have in this situation are:

 Renegotiate the deadline (project delay)

 Employ additional resources (increased cost)

 Reduce the scope of the project (less delivered)

Use the project schedule to justify pursuing one of these options.

Step 4: Supporting Plans

This section deals with the plans you should create as part of the planning process. These can be included
directly in the plan.
Human Resource Plan

Identify, by name, the individuals and organisations with a leading role in the project. For each, describe their
roles and responsibilities on the project.

Next, specify the number and type of people needed to carry out the project. For each resource detail start dates,
the estimated duration and the method you will use for obtaining them.

Create a single sheet containing this information.

Communications Plan

Create a document showing who is to be kept informed about the project and how they will receive the
information. The most common mechanism is a weekly or monthly status report, describing how the project is
performing, milestones achieved and the work you've planned for the next period.

Risk Management Plan

Risk management is an important part of project management. Although often overlooked, it is important to
identify as many risks to your project as possible and be prepared if something bad happens.

Here are some examples of common project risks:

 Time and cost estimate too optimistic

 Customer review and feedback cycle too slow

 Unexpected budget cuts

 Unclear roles and responsibilities

 No stakeholder input obtained

 Not clearly understanding stakeholder needs

 Stakeholders changing requirements after the project has started

  Stakeholders adding new requirements after the project has started

 Poor communication resulting in misunderstandings, quality problems and rework

 Lack of resource commitment

Milestone schedule
The milestone schedule provides an estimated timeline for the life of the project. The milestones include all project activities and
interim steps needed to implement the project. The schedule should include milestones for the planning, development,
construction, evaluation and reporting of the project’s implementation. The milestone dates are only projected dates based on an
anticipated grant award. Those dates may change depending on the timing of the grant award.
IMPORTANT TERMS IN MILESTONE SCHEDULING:
Schedule Milestone
Within the confines of project management, a schedule milestone, also known as a milestone activity, is
an event of great significance within the project schedule. See also milestone. This major event may be a
number of possible events, both planned and unforeseen by project management. As a result a schedule
milestone may or may not be present on the project schedule prior to the point in time where the schedule
milestone occurs. A few examples of unforeseen schedule milestones would be: a sudden and disastrous
accident halting a major production or construction effort that is a key part of the project, or the failure to
complete a major deliverable. In most cases project management uses schedule milestones to: mark the formal
end of iteration, indicate the completion of a project phase, validate a project’s progression, justify work already
completed, and mark the successful completion of a major deliverable or deliverables. By definition a schedule
milestone has no duration; the completion of the schedule milestone itself takes absolutely no time or work.
This may not always indicate that the next phase of a project can be immediately begun though. Key schedule
milestones may require senior level project management to review project progress up to the schedule milestone
in question before authorization to continue with the next phase of the project can be given.

Master Schedule
In the process of coordinating and keeping track of all of the different components of a project, the project
management team, and specifically the project management team leader, will devise a number of individual
schedules, each of which will maintain track of a specific component of element of the project on a smaller,
more specified scale. However, keeping track of where things rest on the big picture of the project as a whole
can be an arduous process, particularly in light of the number of individual schedules that exist for the various
components mentioned above. As a result, it is important if not essential for the project team leader to compile a
thorough and complete master schedule for the project. This master schedule represents a summary-level
project schedule the purpose of which is to identify all of the major deliverables for the project as well as all
individual work breakdown structure components.
Milestone
Throughout the entire life cycle of a project, there are going to be a number of natural time gradients that exists,
and are more than likely to be defined by the eventual and natural ebbing and flowing of the project workload
and the momentum of the team’s performance and the business of the schedule. However, it is typically helpful
in attempting to assure that the project is moving effectively as well as to allow points in time for the project
team to pause and look back on what has been accomplished to date as well as what may need to be changed in
the future for the project team leader with or without the help of the project team to establish a number or series
of project milestones. These milestones can occur at any point throughout the project and specifically refer to
any significant or substantive point, time, or event in the life cycle of the project. These milestones typically
refer to points at which large schedule events or series of events have been completed, and a new phase ort
phases are set to begin.
Milestone List
A milestone is an important event in a project. It represents a moment in time wherein the team members have
achieved an important event for the project. Thus, it should be assigned zero duration. Milestones are crucial in
project management as they can add value to the project scheduling. It allows project managers to determine if
their projects are on schedule or not. Simply put, they are used to monitor the progress of the project.

This is the reason why project managers need to create a milestone list. It is a list that identifies all the
milestones of the project. It also indicates if a particular milestone is critical which is required by the contract or
optional for the project. Optional milestones are usually based on historical information from a similar project.

It is the responsibility of the project manager to create the milestone list. Since it is a project management
document, it requires the necessary inputs from the project team members. Inputs for this particular project
document include the scope baseline, schedule management plan, organizational process assets, and the
enterprise environmental factors.
Weighted Milestone Method
The Earned Value provides a snapshot of the work progress at a certain point in time. It also reflects the amount
of work that has been accomplished within a given period of time and it is expressed as the planned value for a
particular work. The key to having a good Earned Value Method is to have an accurate estimate of the Earned
Value. To determine this, project managers need to estimate how much task the project team needs to complete
within a specific time and how much of the budget for the task should be spent for the work.

The Weighted Milestone Method is a type of earned value method that allows project managers to divide work
packages to measurable small segments each ending with an observable milestone. The project manager assigns
a weighted value to every milestone achieved. For this particular method, the earned value is zero until an
activity is completed. Once it is completed, the total activity budget becomes 100%.

In project management, the concept of the weighted milestone method is that is often used by project managers
to divide tasks the take longer time periods to complete. With this particular technique, the tasks have
intermediate and tangible outcomes even if they are not fully completed yet.

Work Breakdown Structure (WBS)

A work breakdown structure (WBS) is a key project deliverable that organizes the team's work into manageable
sections. The Project Management Body of Knowledge (PMBOK) defines the work breakdown structure as a
"deliverable oriented hierarchical decomposition of the work to be executed by the project team." The work
breakdown structure visually defines the scope into manageable chunks that a project team can understand, as
each level of the work breakdown structure provides further definition and detail. Figure 1(below) depicts a
sample work breakdown structure with three levels defined.
Why use a Work Breakdown Structure?

The work breakdown structure has a number of benefits in addition to defining and organizing the project work.
A project budget can be allocated to the top levels of the work breakdown structure, and department budgets
can be quickly calculated based on the each project's work breakdown structure. By allocating time and cost
estimates to specific sections of the work breakdown structure, a project schedule and budget can be quickly
developed. As the project executes, specific sections of the work breakdown structure can be tracked to identify
project cost performance and identify issues and problem areas in the project organization. For more
information about Time allocation, see the 100% Rule.

Project work breakdown structures can also be used to identify potential risks in a given project. If a work
breakdown structure has a branch that is not well defined then it represents a scope definition risk. These risks
should be tracked in a project log and reviewed as the project executes. By integrating the work breakdown
structure with an organizational breakdown structure, the project manager can also identify communication
points and formulate a communication plan across the project organization.

When a project is falling behind, referring the work breakdown structure will quickly identify the major
deliverables impacted by a failing work package or late sub- deliverable. The work breakdown structure can
also be color coded to represent sub- deliverable status. Assigning colors of red for late, yellow for at risk, green
for on-target, and blue for completed deliverables is an effective way to produce a heat-map of project progress
and draw management's attention to key areas of the work breakdown structure.

Work Breakdown Structure Guidelines

The following guidelines should be considered when creating a work breakdown structure:

 The top level represents the final deliverable or project

 Sub-deliverables contain work packages that are assigned to a organization’s department or unit
 All elements of the work breakdown structure don’t need to be defined to the same level
 The work package defines the work, duration, and costs for the tasks required to produce the sub-
deliverable
 Work packages should not exceed 10 days of duration
 Work packages should be independent of other work packages in the work breakdown structure
 Work packages are unique and should not be duplicated across the work breakdown structure
Tools to Create a Work Breakdown Structure

Creating a Work Breakdown Structure is a team effort and is the culmination of multiple inputs and
perspectives for the given project. One effective technique is to organize a brainstorming session with the
various departments that will be involved with the project. Project teams can use low-technology tools like a
white board, note cards, or sticky note pads to identify major deliverables, sub-deliverables, and specific work
packages. These cards can be taped to a wall and reorganized as the team discusses the major deliverables and
work packages involved in the project.

The low-technology approach is easy to do; however, it does not work well with distributed teams or translate
easily into an electronic format. There are several tools available that support mind mapping, brainstorming, and
work breakdown structures. MatchWare MindView is an easy-to-use mind mapping software package that
supports work breakdown structures, project outlines, Gantt charts, and exports easily into Microsoft Project for
further schedule definition.

NETWORK TECHNIQUE:

Meaning of Network Technique:

Network technique is a technique for planning, scheduling (programming) and controlling the progress of
projects. This is very useful for projects which are complex in nature or where activities are subject to
considerable degree of uncertainty in performance time.

This technique provides an effective management, determines the project duration more accurately, identifies
the activities which are critical at different stages of project completion to enable to pay more attention on these
activities, analyse the scheduling at regular interval for taking corrective action well in advance, facilitates in
optimistic resources utilisation, helps management for taking timely and better decisions for effective
monitoring and control during execution of the project.

A network analysis has following objectives:

1. Powerful tool of planning, scheduling and control.

2. Shows the inter-relationships of the activities of a project or a programme.

3. Minimises total cost where the cost of delays and cost of resources required to carry out the tasks can be
measured.
4. Minimise total time where required e.g. in maintenance of production-line machinery in a factory.

5. Minimization of idle resources.

6. Minimise production delays.

7. To provide systematic approach in planning and scheduling.

8. Follow an integrated approach and bring about better coordination between the departments.

9. Focusses attention on critical activities of the project.

10. Provides up-to-date status information.

11. Suggest areas for increasing efficiency, and reduction of cost.

Applications of Network Technique:

Applications of network techniques are very wide, but are very common in some of the following fields:
(i) Planning,

(ii) Construction of buildings, bridges, highways, railways, stadiums, irrigation projects, factories, power
projects etc.

(iii) Assembly line scheduling,

(iv) Development and launching of new products,

(v) Strategic and tactical military planning,

(vi) Research and development,

(vii) Market penetration programmes,

(viii) Planning of political campaigns,

(ix) Maintenance and overhauling of complicated or large machineries,

(x) organising big conferences etc.

Advantages of Network Technique:

Main advantages of the network system are as follows:
1. Detailed and thoughtful planning provides better analysis and logical thinking.

2. Identifies the critical activities and focus them to provide greater managerial attention.

3. Network technique enables to forecast project duration more accurately.

4. It is a powerful tool for optimisation of resources by using the concept of slack.

5. It provides a scientific basis for monitoring, review and control, to evaluate effect of slippages.

6. It helps in taking decision;

(i) To over-come delays,

(ii) To crashing programme,

(iii) Optimising resources, and

(iv) On other corrective actions.

7. It helps in getting better co-ordination amongst related fields.

8. It is an effective management tool through a common and simple language, providing common
understanding.

Limitations of Network Techniques:

Network techniques have following limitations:
(i) Network technique is simply a tool to help the management; hence its effectiveness depends on how well it
is used by the management.

(ii) Its accuracy depends on the estimation of the data used in the network.
(iii) It is useful only if it is updated regularly and decisions for corrective actions are taken timely.

CPM & PERT

CPM (Critical Path Method) was the discovery of M.R.Walker of E.I.Du Pont de Nemours & Co. and J.E.Kelly
of Remington Rand, circa 1957. The computation was designed for the UNIVAC-I computer. The first test was
made in 1958, when CPM was applied to the construction of a new chemical plant. In March 1959, the method
was applied to maintenance shut-down at the Du Pont works in Louisville, Kentucky. Unproductive time was
reduced from 125 to 93 hours.

PERT (Project Evaluation and Review Technique) was devised in 1958 for the POLARIS missile program by
the Program Evaluation Branch of the Special Projects office of the U.S.Navy, helped by the Lockheed Missile
Systems division and the Consultant firm of Booz-Allen & Hamilton. The calculations were so arranged so that
they could be carried out on the IBM Naval Ordinance Research Computer (NORC) at Dahlgren, Virginia.

Benefits of PERT/CPM

 Useful at many stages of project management

 Mathematically simple

 Give critical path and slack time

 Provide project documentation

 Useful in monitoring costs

Limitations of PERT/CPM

 Clearly defined, independent and stable activities

 Specified precedence relationships

 Over emphasis on critical paths

Applications of CPM / PERT

These methods have been applied to a wide variety of problems in industries and have
found acceptance even in government organizations. These include
 Construction of a dam or a canal system in a region
 Construction of a building or highway
 Maintenance or overhaul of airplanes or oil refinery
 Space flight
 Cost control of a project using PERT / COST
 Designing a prototype of a machine
 Development of supersonic planes

Basic Steps in PERT / CPM

Project scheduling by PERT / CPM consists of four main steps

1. Planning
 The planning phase is started by splitting the total project in to small projects. These
smaller projects in turn are divided into activities and are analyzed by the department or
section.
 The relationship of each activity with respect to other activities are defined and established
and the corresponding responsibilities and the authority are also stated.
 Thus the possibility of overlooking any task necessary for the completion of the project is
reduced substantially.

2. Scheduling
 The ultimate objective of the scheduling phase is to prepare a time chart showing the start
and finish times for each activity as well as its relationship to other activities of the project.
 Moreover the schedule must pinpoint the critical path activities which require special
attention if the project is to be completed in time.
  For non-critical activities, the schedule must show the amount of slack or float times which
can be used advantageously when such activities are delayed or when limited resources are
to be utilized effectively.

3. Allocation of resources
 Allocation of resources is performed to achieve the desired objective. A resource is a
physical variable such as labour, finance, equipment and space which will impose a
limitation on time for the project.
 When resources are limited and conflicting, demands are made for the same type of
resources a systematic method for allocation of resources become essential.
 Resource allocation usually incurs a compromise and the choice of this compromise
depends on the judgment of managers.

4. Controlling
 The final phase in project management is controlling. Critical path methods facilitate the
application of the principle of management by expectation to identify areas that are critical
to the completion of the project.
 By having progress reports from time to time and updating the network continuously, a
better financial as well as technical control over the project is exercised.
 Arrow diagrams and time charts are used for making periodic progress reports. If required,
a new course of action is determined for the remaining portion of the project.

The Framework for PERT and CPM

Essentially, there are six steps which are common to both the techniques. The
procedure is listed below:

I. Define the Project and all of its significant activities or tasks. The Project (made

up of several tasks) should have only a single start activity and a single
 finish activity.

II. Develop the relationships among the activities. Decide which activities must precede
and which must follow others.

III. Draw the "Network" connecting all the activities. Each Activity should have unique event
numbers. Dummy arrows are used where required to avoid giving the same numbering
to two activities.

IV. Assign time and/or cost estimates to each activity

V. Compute the longest time path through the network. This is called the critical path.
Network Diagram Representation

In a network representation of a project certain definitions are used

1. Activity
Any individual operation which utilizes resources and has an end and a beginning is
called activity. An arrow is commonly used to represent an activity with its head
indicating the direction of progress in the project. These are classified into four
categories
1. Predecessor activity – Activities that must be completed immediately prior to the start of
another activity are called predecessor activities.

2. Successor activity – Activities that cannot be started until one or more of other activities
are completed but immediately succeed them are called successor activities.
3. Concurrent activity – Activities which can be accomplished concurrently are known as
concurrent activities. It may be noted that an activity can be a predecessor or a successor
to an event or it may be concurrent with one or more of other activities.
4. Dummy activity – An activity which does not consume any kind of resource but merely
depicts the technological dependence is called a dummy activity.
The dummy activity is inserted in the network to clarify the activity pattern in the
following two situations
 To make activities with common starting and finishing points distinguishable
 To identify and maintain the proper precedence relationship between activities that is not
connected by events.
For example, consider a situation where A and B are concurrent activities. C is
dependent on A and D is dependent on A and B both. Such a situation can be handled
by using a dummy activity as shown in the figure.

2. Event
An event represents a point in time signifying the completion of some activities and
the beginning of new ones. This is usually represented by a circle in a network which is
also called a node or connector.
The events are classified in to three categories
1. Merge event – When more than one activity comes and joins an event such an event is
known as merge event.

2. Burst event – When more than one activity leaves an event such an event is known as
burst event.
3. Merge and Burst event – An activity may be merge and burst event at the same time as
with respect to some activities it can be a merge event and with respect to some other
activities it may be a burst event.
 3. Sequencing
The first prerequisite in the development of network is to maintain the precedence
relationships. In order to make a network, the following points should be taken into
considerations
 What job or jobs precede it?
 What job or jobs could run concurrently?
 What job or jobs follow it?
 What controls the start and finish of a job?
Since all further calculations are based on the network, it is necessary that a network
be drawn with full care.

Rules for Drawing Network Diagram

Rule 1
Each activity is represented by one and only one arrow in the network

Rule 2
No two activities can be identified by the same end events

Rule 3
In order to ensure the correct precedence relationship in the arrow diagram, following
 questions must be checked whenever any activity is added to the network
 What activity must be completed immediately before this activity can start?
 What activities must follow this activity?
 What activities must occur simultaneously with this activity?

In case of large network, it is essential that certain good habits be practiced to draw
an easy to follow network
 Try to avoid arrows which cross each other
 Use straight arrows
 Do not attempt to represent duration of activity by its arrow length
 Use arrows from left to right. Avoid mixing two directions, vertical and standing arrows
may be used if necessary.
 Use dummies freely in rough draft but final network should not have any redundant
dummies.
 The network has only one entry point called start event and one point of emergence called
the end event.

Common Errors in Drawing Networks

The three types of errors are most commonly observed in drawing network diagrams

1. Dangling
To disconnect an activity before the completion of all activities in a network diagram is
known as dangling. As shown in the figure activities (5 – 10) and (6 – 7) are not the last
activities in the network. So the diagram is wrong and indicates the error of dangling
2. Looping or Cycling
Looping error is also known as cycling error in a network diagram. Drawing an endless
loop in a network is known as error of looping as shown in the following figure.

3. Redundancy

Unnecessarily inserting the dummy activity in network logic is known as the error of
redundancy as shown in the following diagram

Advantages and Disadvantages

PERT/CPM has the following advantages

 A PERT/CPM chart explicitly defines and makes visible dependencies (precedence

relationships) between the elements,

 PERT/CPM facilitates identification of the critical path and makes this visible,

 PERT/CPM facilitates identification of early start, late start, and slack for each activity,

 PERT/CPM provides for potentially reduced project duration due to better understanding of
dependencies leading to improved overlapping of activities and tasks where feasible.
 PERT/CPM has the following disadvantages:

 There can be potentially hundreds or thousands of activities and individual dependency

relationships,

 The network charts tend to be large and unwieldy requiring several pages to print and
requiring special size paper,

 The lack of a timeframe on most PERT/CPM charts makes it harder to show status although
colours can help (e.g., specific colour for completed nodes),

 When the PERT/CPM charts become unwieldy, they are no longer used to manage the
project.

Critical Path in Network Analysis

Basic Scheduling Computations

The notations used are

(i, j) = Activity with tail event i and head event j

Ei = Earliest occurrence time of event i

Lj = Latest allowable occurrence time of event j
Dij = Estimated completion time of activity (i, j)
(Es)ij = Earliest starting time of activity (i, j)
(Ef)ij = Earliest finishing time of activity (i, j)
(Ls)ij = Latest starting time of activity (i, j)
(Lf)ij = Latest finishing time of activity (i, j)

The procedure is as follows

1. Determination of Earliest time (Ej): Forward Pass computation

 Step 1
The computation begins from the start node and move towards the end node.
 For easiness, the forward pass computation starts by assuming the earliest
occurrence time of zero for the initial project event.

 Step 2
i. Earliest starting time of activity (i, j) is the earliest event time of the tail end event
i.e. (Es)ij = Ei
ii. Earliest finish time of activity (i, j) is the earliest starting time + the activity time i.e.
(Ef)ij = (Es)ij + Dij or (Ef)ij = Ei + Dij

iii. Earliest event time for event j is the maximum of the earliest finish times of all
activities ending in to that event i.e. Ej = max [(Ef)ij for all immediate predecessor of
(i, j)] or Ej =max [Ei + Dij]

2. Backward Pass computation (for latest allowable time)

 Step 1
For ending event assume E = L. Remember that all E’s have been computed by
forward pass computations.

 Step 2
Latest finish time for activity (i, j) is equal to the latest event time of event j i.e.
(Lf)ij = Lj

 Step 3
Latest starting time of activity (i, j) = the latest completion time of (i, j) – the
activity time or (Ls)ij =(Lf)ij - Dij or (Ls)ij = Lj - Dij

 Step 4
Latest event time for event ‘i’ is the minimum of the latest start time of all
activities originating from that event i.e. L i = min [(Ls)ij for all immediate
 successor of (i, j)] = min [(Lf)ij - Dij] = min [Lj - Dij]

3. Determination of floats and slack times

There are three kinds of floats

 Total float – The amount of time by which the completion of an activity could be delayed
beyond the earliest expected completion time without affecting the overall project
duration time.
Mathematically
(Tf)ij = (Latest start – Earliest start) for activity ( i – j)
(Tf)ij = (Ls)ij - (Es)ij or (Tf)ij = (Lj - Dij) - Ei

 Free float – The time by which the completion of an activity can be delayed beyond the
earliest finish time without affecting the earliest start of a subsequent activity.
Mathematically
(Ff)ij = (Earliest time for event j – Earliest time for event i) – Activity time for ( i,
j)
(Ff)ij = (Ej - Ei) - Dij

 Independent float – The amount of time by which the start of an activity can be delayed
without effecting the earliest start time of any immediately following activities, assuming
that the preceding activity has finished at its latest finish time.
Mathematically
(If)ij = (Ej - Li) - Dij
The negative independent float is always taken as zero.

 Event slack - It is defined as the difference between the latest event and earliest event
times.
Mathematically
Head event slack = Lj – Ej, Tail event slack = Li - Ei
 4. Determination of critical path
 Critical event – The events with zero slack times are called critical events. In other words
the event i is said to be critical if Ei = Li

 Critical activity – The activities with zero total float are known as critical activities. In other
words an activity is said to be critical if a delay in its start will cause a further delay in the
completion date of the entire project.

 Critical path – The sequence of critical activities in a network is called critical path. The
critical path is the longest path in the network from the starting event to ending event and
defines the minimum time required to complete the project.

VI. Use the Network to help plan, schedule, and monitor and control the project.

Worked Examples on CPM

Example 1

Determine the early start and late start in respect of all node points and identify critical path for the following
network.

Solution

Calculation of E and L for each node is shown in the network

 Normal Earliest Time Latest Time

Time Float Time (Li -

Activity(i, j) Start Finish Start Finish
Dij ) - Ei
(Dij) (Ei) (Ei + Dij ) (Li - Dij ) (Li)

(1, 2) 10 0 10 0 10 0

(1, 3) 8 0 8 1 9 1

(1, 4) 9 0 9 1 10 1

(2, 5) 8 10 18 10 18 0

(4, 6) 7 9 16 10 17 1
 (3, 7) 16 8 24 9 25 1

(5, 7) 7 18 25 18 25 0

(6, 7) 7 16 23 18 25 2

(5, 8) 6 18 24 18 24 0

(6, 9) 5 16 21 17 22 1

(7, 10) 12 25 37 25 37 0

(8, 10) 13 24 37 24 37 0

(9, 10) 15 21 36 22 37 1

Network Analysis Table

From the table, the critical nodes are (1, 2), (2, 5), (5, 7), (5, 8), (7, 10) and (8, 10)

From the table, there are two possible critical paths

i. 1 → 2 → 5 → 8 → 10

ii. 1 → 2 → 5 → 7 → 10

Example 2

Find the critical path and calculate the slack time for the following network
Solution

The earliest time and the latest time are obtained below

Normal Earliest Time Latest Time

Time Float Time (Li -

Start Finish Start Finish
Activity(i, j) Dij ) - Ei
(Dij) (Ei) (Ei + Dij ) (Li - Dij ) (Li)

(1, 2) 2 0 2 5 7 5

(1, 3) 2 0 2 0 2 0

(1, 4) 1 0 1 6 7 6

(2, 6) 4 2 6 7 11 5

(3, 7) 5 2 7 3 8 1

(3, 5) 8 2 10 2 10 0

(4, 5) 3 1 4 7 10 6

(5, 9) 5 10 15 10 15 0

(6, 8) 1 6 7 11 12 5

(7, 8) 4 7 11 8 12 1
 (8, 9) 3 11 14 12 15 1

From the above table, the critical nodes are the activities (1, 3), (3, 5) and (5, 9)
The critical path is 1 → 3 → 5 → 9

Example 3

A project has the following times schedule

Activity Times in weeks Activity Times in weeks

(1 – 2) 4 (5 – 7) 8

(1 – 3) 1 (6 – 8) 1

(2 – 4) 1 (7 – 8) 2

(3 – 4) 1 (8 – 9) 1

(3 – 5) 6 (8 – 10) 8

(4 – 9) 5 (9 – 10) 7

(5 – 6) 4

Construct the network and compute

TE and TL for each event

Float for each activity

Critical path and its duration

Solution
The network is

Event No.: 1 2 3 4 5 6 7 8 9 10

TE: 0 4 1 5 7 11 15 17 18 25

TL: 0 12 1 13 7 16 15 17 18 25

Float = TL (Head event) – TE (Tail event) – Duration

Activity Duration TE (Tail event) TL (Head event) Float

1 – 2) 4 0 12 8

(1 – 3) 1 0 1 0

(2 – 4) 1 4 13 8

(3 – 4) 1 1 13 11

(3 – 5) 6 1 7 0

(4 – 9) 5 5 18 8

(5 – 6) 4 7 16 5

(5 – 7) 8 7 15 0

(6 – 8) 1 11 17 5
 (7 – 8) 2 15 17 0

(8 – 9) 1 17 18 0

(8 – 10) 8 17 25 0

(9 – 10) 7 18 25 0

The resultant network shows the critical path

The two critical paths are

i. 1 → 3 → 5 →7 → 8 → 9 →10

ii. 1 → 3 → 5 → 7 → 8 →10

Project Evaluation and Review Technique (PERT)

The main objective in the analysis through PERT is to find out the completion for a particular event within
specified date. The PERT approach takes into account the uncertainties. The three time values are associated
with each activity
Optimistic time – It is the shortest possible time in which the activity can be finished. It assumes that every
thing goes very well. This is denoted by t0.

Most likely time – It is the estimate of the normal time the activity would take. This assumes normal delays. If a
graph is plotted in the time of completion and the frequency of completion in that time period, then most likely
time will represent the highest frequency of occurrence. This is denoted by tm.

Pessimistic time – It represents the longest time the activity could take if everything goes wrong. As in
optimistic estimate, this value may be such that only one in hundred or one in twenty will take time longer than
this value. This is denoted by tp.

In PERT calculation, all values are used to obtain the percent expected value.

Expected time – It is the average time an activity will take if it were to be repeated on large number of times
and is based on the assumption that the activity time follows Beta distribution, this is given by

te = ( t0 + 4 tm + tp ) / 6

The variance for the activity is given by

σ2 = [(tp – to) / 6] 2

Worked Examples

Example 1

For the project

Task: A B C D E F G H I J K

Least time: 4 5 8 2 4 6 8 5 3 5 6
 Greatest time: 8 10 12 7 10 15 16 9 7 11 13

Most likely time: 5 7 11 3 7 9 12 6 5 8 9

Find the earliest and latest expected time to each event and also critical path in the network.

Solution

Greatest time Most likely Expected time

Task Least time(t0)
(tp) time (tm) (to + tp + 4tm)/6

A
4 8 5 5.33
B
5 10 7 7.17
C
8 12 11 10.67
D
2 7 3 3.5
E
4 10 7 7
F
6 15 9 9.5
G
8 16 12 12
H
5 9 6 6.33
I
3 7 5 5
J
5 11 8 8
K
6 13 9 9.17

Task Start Finish Total float

Expected
 time (te) Earliest Latest Earliest Latest

A 5.33 0 0 5.33 5.33 0

B 7.17 0 8.83 7.17 16 8.83

C 10.67 5.33 5.33 16 16 0

D 3.5 0 10 3.5 13.5 10

E 7 16 16 23 23 0

F 9.5 3.5 13.5 13 23 10

G 12 3.5 18.5 15.5 30.5 15

H 6.33 23 23 29.33 29.33 0

I 5 23 25.5 28 30.5 2.5

J 8 28 30.5 36 38.5 2.5

K 9.17 29.33 29.33 31.5 38.5 0

The network is
The critical path is A →C →E → H → K

Example 2

A project has the following characteristics

Most optimistic time Most pessimistic time Most likely time

Activity
(a) (b) (m)

(1 – 2) 1 5 1.5

(2 – 3) 1 3 2

(2 – 4) 1 5 3

(3 – 5) 3 5 4

(4 – 5) 2 4 3

(4 – 6) 3 7 5

(5 – 7) 4 6 5

(6 – 7) 6 8 7
 (7 – 8) 2 6 4

(7 – 9) 5 8 6

(8 – 10) 1 3 2

(9 – 10) 3 7 5

Construct a PERT network. Find the critical path and variance for each event.

Solution

te v
Activity (a) (b) (m) (4m)
(a + b + 4m)/6 [(b – a) / 6]2
 1 – 2) 1 5 1.5 6 2 4/9

(2 – 3) 1 3 2 8 2 1/9

(2 – 4) 1 5 3 12 3 4/9

(3 – 5) 3 5 4 16 4 1/9

(4 – 5) 2 4 3 12 3 1/9

(4 – 6) 3 7 5 20 5 4/9

(5 – 7) 4 6 5 20 5 1/9

(6 – 7) 6 8 7 28 7 1/9

(7 – 8) 2 6 4 16 4 4/9

(7 – 9) 5 8 6 24 6.17 1/4

(8 – 10) 1 3 2 8 2 1/9

(9 – 10) 3 7 5 20 5 4/9

The network is constructed as shown below

The critical path = 1 → 2 → 4 → 6 → 7 →9 →10

Example 3

Calculate the variance and the expected time for each activity

Solution

te v
Activity (to) (tm) (tp)
(to + tp + 4tm)/6 [(tp – to) / 6]2

(1 – 2) 3 6 10 6.2 1.36

(1 – 3) 6 7 12 7.7 1.00

(1 – 4) 7 9 12 9.2 0.69
 (2 – 3) 0 0 0 0.0 0.00

(2 – 5) 8 12 17 12.2 2.25

(3 – 6) 10 12 15 12.2 0.69

(4 – 7) 8 13 19 13.2 3.36

(5 – 8) 12 14 15 13.9 0.25

(6 – 7) 8 9 10 9.0 0.11

(6 – 9) 13 16 19 16.0 1.00

(8 – 9) 4 7 10 7.0 1.00

(7 – 10) 10 13 17 13.2 1.36

(9 – 11) 6 8 12 8.4 1.00

(10 – 11) 10 12 14 12.0 0.66

Example 4

A project is represented by the network as shown below and has the following data

Task: A B C D E F G H I
 Least time: 5 18 26 16 15 6 7 7 3

Greatest time: 10 22 40 20 25 12 12 9 5

Most likely time: 15 20 33 18 20 9 10 8 4

Determine the following

Expected task time and their variance

Earliest and latest time

Solution

1.

Activity Least time Greatest time Most likely Expected time Variance

(t0) (tp) time (tm) (to + tp + 4tm)/6 (σ2)

 (1-2) 5 10 8 7.8 0.69

(1-3) 18 22 20 20.0 0.44

(1-4) 26 40 33 33.0 5.43

(2-5) 16 20 18 18.0 0.44

(2-6) 15 25 20 20.0 2.78

(3-6) 6 12 9 9.0 1.00

(4-7) 7 12 10 9.8 0.69

(5-7) 7 9 8 8.0 0.11

(6-7) 3 5 4 4.0 0.11

2.

Earliest time

E1 = 0

E2 = 0 +7.8 = 7.8

E3 = 0 +20 = 20

E4 = 0 +33 = 33

E5 = 7.8 + 18 = 25.8

E6 = max [7.8 + 20, 20 + 9] = 29

E7 = max [33 + 9.8, 25.8 + 8, 29 + 4] = 42.8

Latest time

L7 = 42.8
L6 = 42.8 – 4 = 38.8

L5 = 42.8 – 8 = 34.3

L4 = 42.8 – 9.8 = 33

L3 = 38.8 – 9 = 29.8

L2 = min [34.8 – 18, 38.8 – 20] = 16.8

L1 = min [16.8 – 7.8, 29.8 – 20, 33 - 33] = 0

DIFFERENCE BETWEEN PERT & CPM

BASIS FOR
PERT CPM
COMPARISON

Meaning PERT is a project management CPM is a statistical technique of

technique, used to manage project management that manages
uncertain activities of a project. well defined activities of a project.

What is it? A technique of planning and A method to control cost and time.
control of time.

Orientation Event-oriented Activity-oriented

Evolution Evolved as Research & Evolved as Construction project

Development project

Model Probabilistic Model Deterministic Model

Focuses on Time Time-cost trade-off

Estimates Three time estimates One time estimate

Appropriate for High precision time estimate Reasonable time estimate

 BASIS FOR
PERT CPM
COMPARISON

Management of Unpredictable Activities Predictable activities

Nature of jobs Non-repetitive nature Repetitive nature

Critical and Non- No differentiation Differentiated

critical activities

Suitable for Research and Development Non-research projects like civil

Project construction, ship building etc.

Crashing concept Not Applicable Applicable

Line Balancing (Production and Operations Management)

In production, line balancing is useful tool. Line-balancing strategy is to make production lines stretchy enough
to absorb external and internal indiscretion. This strategy involves setting a planned rate of production for
necessary materials to be fabricated within a particular time frame. Additionally, successful line balancing
requires assuring that every line segment's production quota can be met within the time frame using the
available production capacity. This is an efficient device to develop the throughput of assembly lines and work
cells while decreasing manpower requirements and expenses. Line-balancing is slightly different from assembly
line balancing. Assembly line balancing involved the action of assemble different parts together. It involves
many production lines while normal Line-balancing may only involve one production line. Assembly Line
Balancing is the problem of assigning operations to workstations along an assembly line, in such a way that the
assignment be best in some sense. Since introduction of assembly lines by Henry Ford, Line-balancing has been
an optimisation problem of important industrial importance. The efficiency difference between an optimal and a
sub-optimal assignment can yield economies reaching huge amount per year. Line balancing technique was
used normally in assembly line of the automotive industry which is called ALB. Most of the Small and Medium
Industries do not use line balancing method in the production line.

Line balancing operates under two circumstances:

 1. Precedence Constraint: Products cannot progress to other station if it doesn’t complete necessary task
at that station. It should not across other station because certain part needs to be performed before other
activities.
2. Cycle time Restriction: Cycle time is maximum time for products spend in every workstation.
Different workstation has different cycle time.

Objective of Line Balancing: Following are major objectives of Line balancing procedure. It is used to:

i. Manage the workloads among assemblers.

ii. Recognize the location of bottleneck.
iii. Decide number of workstation.
iv. Decrease production cost.
v. Assigning task to each work station in such a way that there is little idle time.

Terms in Line Balancing Technique

There is range of terms used in assembly line balancing system. Each of them has their meaning and purposes.

I. Cycle Time: Maximum amount of time allowed at each station. This can be found by dividing required
units to production time available per day. This is the time expressed in minutes between two
simultaneous products coming of the end of production line. Gaither and Fraizer (2001) described that
cycle time demonstrates how often the production line can generate the product with current resources
and staffing. It is a precise indicator to signify how the line is currently set up to run. The calculation of
cycle time takes into consideration of the entire production quantities. If multiple lines are producing the
same product, then the composite cycle time is less than the actual lapse time of any individual line.
II. Lead Time: Summation of production times along the assembly line.
III. Bottleneck: Delay in transmission that slow down the production rate. This can be overcome by
balancing the line.
IV. Task Precedence: It is the sequence by which tasks are carried out. It can be represented by nodes or
graph. In assembly line the products have to obey this rule. The product cannot be moved to the next
station if it doesn’t complete at the previous station.
V. Idle time: A period when system is not in used but is available.
 VI. Productivity: Defined as ratio of output over input. Productivity depends on several factors such as
workers skills, jobs method and machine used.
VII. Takt times: The time needed by competent worker or unattended machine to perform a task. This is
usually expressed in minutes. Heizer and Render (2010) stated that takt time is pre-requisite procedure
in doing line balancing task. Takt time is the swiftness of production that aligns production with client
demand. It shows how fast the need to manufacture product in order to fill the customer orders (Vome
lean Briefs, 2006). Producing faster than takt time results in overproduction which is a type of waste
whereas producing slower than takt time results in bottlenecks where the customer orders may not be
fulfilled in time. There are numerous benefits of using takt time (Heizer and Render, 2010). These
include,
i. Achieve a steady and continuous flow of production.
ii. Eliminate the waste of overproduction by producing actual customer demand.
iii. Improves accuracy of planning.
iv. Encourage the development of standardize work instructions, promoting quality and efficiency.
v. Set real time targets for production that shows operators exactly where their work output should
be at any given point of time.
vi. Establish what-if scenario for customer demand based on flexible manning.
VIII. Work station: A physical area where a worker with tools / one or more machines or unattended
machines such as robot perform specific task in a production line (Gaither and Fraizer, 2001).
IX. Downtime: Downtime explained as the time that is non value added (Chase, et al. 2000). It is often
associated with the seven wastes as under:

a. Defects: Defect is direct costs of a company.

b. Overproduction: One of the severe wastes discourages a smooth flow of goods and services,
which may lead to unnecessary lead and storage time. It will lead to the defects which cannot be
detected earlier and then the products may deteriorate. It will also lead to excess work-in-
progress stocks.
c. Waiting: It occur when the goods are not moving or being worked on. It affects both goods and
workforce where the waiting time should be used for some value added activities such as training
and maintenance.
 d. Transportation: Any movement in factory can be considered as waste. Double handling and
excessive movements are likely to cause damage and deterioration with the distance of
communication between processes proportional to time taken. It takes to feedback reports of
poor quality and needs corrective action.
e. Unnecessary inventory: There is a problem with extra inventory. Inventory will increase the lead
time, preventing quick identification of problems and increasing space. Significant storage costs
are wasted which absolutely lower the competitiveness of the organization of value stream.
f. Unnecessary motion: Involve the ergonomics of production where operation might have to
stretch, bend and pick up when these actions actually could be avoided. It not only tires the
workers but also leads to poor productivity.
g. Inappropriate processing: Over-complexity of a process discourages ownership and encourages
the employees to over produce to recover the large investment in the complex machines. It
encourages poor quality and takes corrective action.

Steps in Solving Line Balancing

There are four steps in solving line balancing described by G. Andrew (2006).

I. Drawing Precedence Diagram: Precedence diagram needs to be drawn to demonstrate a relationship

between workstations. Certain process begins when previous process was done.
II. Determining Cycle Time: Cycle time is longest time allowed at each station. This can be expressed by
this formula:

This means the products needs to leave the workstations before it reaches its cycle time.

III. Assigning tasks to workstation: The tasks distributions should be taken after completing a time cycle.
It’s good to allocate tasks to workstation in the order of longest task times.
IV. Calculating an Efficiency Line: This is done to find effectiveness of the line. The formula is given by:

Computerized line balancing: Line balancing manually becomes unwieldy as the problem grows in size.
There are software packages that will balance large line rapidly. They use various heuristic to balance the line at
an acceptable level of efficiency. There are two types of line balancing heuristics which include incremental
utilization heuristic and longest task time heuristic. In incremental utilization heuristic, tasks are added to each
work station in order of task precedence one at a time until utilization is hundred percent. Longest task time
heuristic adds tasks to work station one at a time in the order of task precedence. If there is choice of multiple
tasks, longest task is added. It can only be used when each and every task time is less than or equal to the cycle
time. There can be no duplicate work stations.

What are the Critical Chain, and the Critical Chain Method (CCM)?
The critical chain can be defined as “the longest path in the network diagram considering activity
interdependence and resource constraints.”
(Path “Start->C->D->E->F->End” is the critical chain.)

The critical path can be assumed as a particular case of the critical chain when the project has access to
unlimited resources.

In other words, you can say that the critical chain method is a modified form of the critical path method. Here,
the availability of resources is considered while creating the project schedule.

Buffers are used instead of float in critical chain project management. These buffers are designed in such a way
that they completely eliminate the concept of float or slack.

Three types of buffers are used in critical chain management. These buffers are as follows:

Project Buffer

This buffer is placed between the last task and the project completion date as a non-activity buffer, and this
buffer acts as a contingency for the critical chain activities. Any delay on the critical chain will eat this buffer,
but the project completion date will remain fixed. Also, if there is any gain from the early finish of any activity,
this gain will be added to this buffer as well.

Usually, the duration of this buffer is 50% of the contingency that you have removed from each task estimate.
This helps to move uncertainty from each task to the project buffer.
Please note that although the critical chain starts from the beginning, it ends before the start of the project
buffer. It does not end at the end of the project. This duration will include any time duration borrowed from the
project buffer or exclude the duration added to the buffer.

Feeding Buffers

These buffers are added to the non-critical chain so that any delay on the non-critical chain does not affect the
critical chain. They are inserted between the last task on a non-critical chain and the critical chain.

Feeding buffers and the project buffer are calculated the same way. The duration of these buffers is based on
some fraction of the safety removed from the tasks on non-critical chains.

Resource Buffer

These buffers are kept alongside the critical chain to ensure that they are available when required. This buffer
can be a human resource or any equipment.

Please note that, since the critical chain considers the resource constraints as well, it may be longer than the
schedule based on the critical path. However, this might be compensated by removing the contingencies from
the activities. Resources used in the critical chain are known as critical resources.

How to Create the Critical Chain Network Diagram

Creating a critical chain from the critical path require three steps. These steps are as follows:

1. Remove all contingencies from activities, regardless of whether you have added the calculated
contingencies or any percentage of it. Replace your estimate with an optimistic estimate if you have
used the PERT (Program Evaluation and Review Technique) estimate to build the schedule.
 2. Align the activities with late finish dates and remove resource constraints. Give priority to critical chain
activities while assigning resources.

3. Add feeding buffers to non-critical chains so that their durations become equal to the critical chain. Add
project buffer to end of the critical chain, but before the project end date. The project buffer should be
approximately half the contingency you removed from the activities. This helps to improve efficiency
and reduces the schedule duration.

RESOURCE LEVELLING

Resource leveling is a technique in project management that overlooks resource allocation and resolves
possible conflict arising from over-allocation. When project managers undertake a project, they need to plan
their resources accordingly.

This will benefit the organization without having to face conflicts and not being able to deliver on time.
Resource leveling is considered one of the key elements to resource management in the organization.

An organization starts to face problems if resources are not allocated properly i.e., some resource may be over-
allocated whilst others will be under-allocated. Both will bring about a financial risk to the organization.

The Two Key Elements of Resource leveling

As the main aim of resource leveling is to allocate resource efficiently, so that the project can be completed in
the given time period. Hence, resource leveling can be broken down into two main areas; projects that can be
completed by using up all resources, which are available and projects that can be completed with limited
resources.

Projects, which use limited resources can be extended for over a period of time until the resources required are
available. If then again, the number of projects that an organization undertakes exceeds the resources available,
then it's wiser to postpone the project for a later date.

Structure of Resource leveling

Many organizations have a structured hierarchy of resource leveling. A work-based structure is as follows:

 Stage

 Phase
  Task/Deliverable

All of the above-mentioned layers will determine the scope of the project and find ways to organize tasks
across the team. This will make it easier for the project team to complete the tasks.

In addition, depending on the three parameters above, the level of the resources required (seniority, experience,
skills, etc.) may be different. Therefore, the resource requirement for a project is always a variable, which is
corresponding to the above structure.

Leveling of Resources

Resource leveling helps an organization to make use of the available resources to the maximum. The idea
behind resource leveling is to reduce wastage of resources i.e., to stop over-allocation of resources.

Project manager will identify time that is unused by a resource and will take measures to prevent it or making
an advantage out of it.

By resource conflicts, there are numerous disadvantages suffered by the organization, such as:

 Delay in certain tasks being completed

 Difficulty in assigning a different resource

 Unable to change task dependencies

 To remove certain tasks

 To add more tasks

 Overall delays and budget overruns of projects

Resource leveling Techniques

Critical path is a common type of technique used by project managers when it comes to resource leveling. The
critical path represents for both the longest and shortest time duration paths in the network diagram to
complete the project.

However, apart from the widely used critical path concept, project managers use fast tracking and crashing if
things get out of hand.
  Fast tracking - This performs critical path tasks. This buys time. The prominent feature of this
technique is that although the work is completed for the moment, possibility of rework is higher.

 Crashing - This refers to assigning resources in addition to existing resources to get work done faster,
associated with additional cost such as labor, equipment, etc.

RESOURCE SMOOTHING

Resource smoothing is one of the project management tools used in the resource optimization techniques. It is
defined as a technique that adjusts the activities of a schedule model so that all requirements for the resources
do not go beyond the resource limits already pre-defined during the planning.

There are only a few reusable resources that are limitless thus the time schedules have to be imposed and
adjusted to manage the limited availability of the resources in a given time. Resource smoothing is one of the
tools used to reconcile the limited resources and time but a different approach than resource leveling.It is used
when the time constraint takes important priority in project planning. The objective of this project management
tool is to complete the work or activity within the required date and, at the same time, avoiding peaks and
troughs or the resource demand. A smooth resource profile is usually achieved by delaying some tasks or
works. This will reduce the flexibility of the schedule when it comes to dealing with delays but it is very cost
effective in managing and using the resources.

Let’s summarize differences between Resource Leveling and Resource Smoothing

Resource leveling Resource Smoothing

It applies the resource constraints to the project We apply resource smoothing after doing resource
and may result in a change in project duration. leveling.
Since we need to first accommodate the resource
constraints before we can optimize it.
Here we make use of slack, and will not result in a
change of project duration. Because the total allocation
of a certain resource remains the same.

Resource Leveling is primarily driven by Resource smoothing is more to do with desired limits
resource constraints like you do not have more like we do have 45 hours available for a given resource
 than 45 hours of the given resource for a week. but we wish that we allocate 38 hours per week so we
have some breathing space.

The allocation limits identified in resource The desired limit identified in resource smoothing may
leveling must be applied. not be applied in some cases, if we do not have slack. It
is optimized within the float boundaries

When Resource Leveling changes the project Resource smoothing will not change the critical path; it
dates, may also change the critical path, since tries to make the best use of slack.
constraints drive it.

UNIT:3
Project Management Information system, MIS reporting, Daily, Weekly and monthly reporting, Actual
vs. Planned reporting, Planning & Cost control document, Quality and safety documents at site. Material
management- purchases management and inventory control, ABC analysis.

PROJECT MANAGEMENT INFORMATION SYSTEM (PMIS)

Project Management Information System (PMIS) are system tools and techniques used in project management
to deliver information. Project managers use the techniques and tools to collect, combine and distribute
information through electronic and manual means. Project Management Information System (PMIS) is used by
upper and lower management to communicate with each other.
Project Management Information System (PMIS) help plan, execute and close project management goals.
During the planning process, project managers use PMIS for budget framework such as estimating costs. The
Project Management Information System is also used to create a specific schedule and define the scope
baseline. At the execution of the project management goals, the project management team collects information
into one database. The PMIS is used to compare the baseline with the actual accomplishment of each activity,
manage materials, collect financial data, and keep a record for reporting purposes. During the close of the
project, the Project Management Information System is used to review the goals to check if the tasks were
accomplished. Then, it is used to create a final report of the project close.
To conclude, the project management information system (PMIS) is used to plan schedules, budget and execute
work to be accomplished in project management.

COMPONENTS OF PMIS

The components of a project management information system are:

 Scheduling
 Estimating
 Resources
 Project documents and data
 Portals and dashboards
 Collaborative work management tools
 Social media
 Project control
Scheduling

Because schedules are such a core component of project management as a whole, almost all project
management information systems contains scheduling tools. The project schedule is communicated
to stakeholders and forms the baseline for project control, that is, the project is continuously measured on the
basis of its adherence to the schedule.

In project management, the development of a project schedule contains 5 steps:

1. Divide the project into tasks

All of the project management functions are based on the division of the project into constituent tasks, for
example,
Tas
Name
k

100 Dig hole

200 Pour concrete

2. Estimating the task duration

The duration of each task must be estimated to determine a realistic project schedule.
 Task Name Start End

Mar.
100 Dig Hole Mar. 4
1

Mar.
200 Pour Concrete Mar. 10
3

3. Determining the task dependencies

Each task is related to at least one other task, else it would not be part of the project. For example, Task
200 cannot start until Task 100 is 50% complete.
Task Name Start End Dependencies

100 Dig Hole Mar. 1 Mar. 4

200 Pour Concrete Mar. 3 Mar. 10 100

4. Developing the Network Diagram and Gantt chart

Once the durations and dependencies are known, the network diagram is used to determine the critical
path, that is, the tasks which must complete on time or they will affect the overall project completion date.
Once the critical path is determined, the gantt chart is the most useful and intuitive tool to the project
manager.

5. Resource leveling
The network diagram and gantt chart do not take into account resource usage. In this last step, resources
are assigned to each task and the schedule is adjusted to accommodate the availability or cost of resources.

It is rare that the project schedule is not one of the most important aspects of project success. Therefore,
software scheduling tools are a critical component of project management information systems as they allow the
scheduling function to be performed quickly and efficiently. They also allow for easy projection of the impact
of potential schedule changes mid-project. But we know that never happens!
In addition, a strong function of a PMIS is the ability to track actual vs. planned completion dates. This can
then be analyzed to determine the likelihood of future project delays using earned value analysis indicators like
the Estimate at Completion (EAC), Variance at Completion (VAC) or To Complete Performance Indicator
(TCPI).

Estimating

Project estimating involves assigning a price to each of the project tasks. Each task is then rolled up into an
overall project estimate. In a perfect world, the actual project cost will always fall within the estimate, but we
know that is only an ideal to be strived for.

Each project task should have a budget, for example:

Tas
Name Budget
k

100 Dig Hole $3,000

200 Pour Concrete $5,000

A good project management information system will track the estimated cost of each task as well as the
justification for the estimate. For example a parametric estimate based on a unit rate taken from an industry
source, or an analogous estimate from another project. The estimator can enter the information so that it can be
referenced later.

Tas
Name Budget Budget Justification Actual
k

100 Dig Hole $3,000 Avg. of last 2 projects –

200 Pour Concrete $5,000 From sidewalk project, scaled up –

Even better is an information system that tracks all tasks throughout all of the organization’s projects, so that it
is very easy to call up and compare past actual data with new estimates. Many project-based organizations or
programs (series of many projects) track data this way:

Task Avg.
Task ID Number of Projects Avg. Budget Avg. Actual
Name Duration
315400 Dig Hole 4 3 days $6,000 $5,500

Resources

Almost all tasks require resources for their completion. The simplest tasks often have only a project team
member for a specified period of time, but that is still a resource that needs to be available and managed in order
to complete the task.

Hence, a good project management information system will allow the assignment of resources to tasks. These
resources should also come with meta data such as their cost per unit, efficiency rate, or maintenance
requirements.

Tas
Name Resources Efficiency
k

100 Dig Hole Jon, Backhoe 25 ft3 / hour

Jon, Bob,
200 Pour Concrete 5 ft3 / hour
Concrete

This allows for ease of project tracking when the project management team must acquire the resources to ensure
the task completes on its expected end date. It also ensures the resource requirements are adequately planned
into the project, for example maintenance requirements or efficiency rate.

More sophisticated project management information systems can utilize components such as resource calendars,
which specify when a resource is available, or resource breakdown structures, that specify a hierarchical matrix
of resources which can be chosen from and coordinated with other projects.

Project Documents and Data

Virtually all projects produce documents as part of their scope, for example design reports or product
documentation. Most projects also import documents and data for use in project work, for example databases.
Still other projects have a reference library data set that is consulted by the project. For these reasons, project
document control has become a specialty in and of itself.

Every document tracked by the project is cataloged and the requirements are defined. Variables used to track
documents include:

 Owner
 Storage location
 Format
 Scheduled dates: Creation, approval, and submission
 Actual dates
 Review / Approval team members
 Status
Large projects like engineering or industrial projects utilize comprehensive project document control software
systems run by dedicated document control staff. However, for most small and medium sized projects, a
smaller document control system will suffice consisting of a web based portal that allows the upload and
tracking of project documents.

Portals and Dashboards

There are many web based project management software tools that provide a centralized dashboard for the
project. Their features includes many of the other categories, like scheduling, documents, and project team
messaging. This technology is becoming relatively advanced and provides strong feature sets without major
investments in software training.

In addition, project stakeholders often require information dissemination tools such as web sites and project
portals. For example, governmental regulatory agencies often have department-specific document upload and
project information sites, which are then communicated to the stakeholder group on the other side who’s needs
are being balanced with the project.

Collaborative Work Management Tools

Nowadays many projects utilize internal communication tools like project chat rooms, messaging apps, and so
forth. This technology allows project team members to quickly and confidentially record critical
project communications with other members of the team.

Often these software tools are located within larger web based project management tools, but they can also be
standalone apps.

Social Media

Many project also use social media to communicate with stakeholders. This technology is very easy to set up
and use, and most stakeholders already know how to navigate the software.

For example, project facebook pages or twitter accounts can be used to rapidly communicate project
information to stakeholders, but they are dependent on the stakeholder checking for new messages.
Hence, critical messages should probably be communicated via a “push” method rather than social media,
which is a “pull” method.

Project Control

Project control refers to the tasks undertaken by the project management team to measure the project’s progress
and ensure it conforms to the project management plan. Usually project control is dominated by the two uber-
important factors of schedule and budget. But there are other, smaller aspects.

Project control involves the following components:

 Schedule: Ensure the project is on track to complete on time.

 Cost: Ensure the project is on track to complete within its budget.
 Scope: Ensure the scope has not changed, and that additional, unauthorized work is not being performed.
 Quality: Ensure the quality of the products being produced is according to the specifications within the
plan.
 Resources: Ensure the resources are still available and they are not overextended.
 Procurement: Ensure the required subconsultants, suppliers, and materials are still available and are
performing their work as planned.
 Risks: Ensure the risks to project success are still being adequately mitigated.
 Communications: Ensure the stakeholder communications are conforming to the communications plan.
An effective project management information system provides a place for the project manager to track these
items, thereby ensuring a project that sticks like glue to its project management plan.

Because a project is defined as temporary and unique, the first two (schedule and cost) are virtually always a
central consideration in project success. They are tracked using a system called earned value management. In
this system, the budget and schedule status are calculated based on the percent complete of each task. This
status is calculated and reported in the following four variables:

1. Schedule Variance (SV): The amount that the project is ahead or behind schedule expressed as a project
budget, for example, SV = $1,000 means that the project is ahead of schedule.
2. Cost Variance (CV): The amount that the project is under or over budget. For example, CV = $1,500
means that the project under budget by this amount.
3. Schedule Performance Index (SPI): The schedule efficiency, or the amount that the project is ahead or
behind schedule as a percentage of the overall project size. For example, SPI = 1.1 means the project is
10% ahead of schedule.
 4. Cost Performance Index (CPI): The cost efficiency, or the amount that the project is under or over
budget as a percentage of the overall project size. For example, CPI = 0.8 means the project is 20% over
budget.
Benefits and Expectations

The PMIS should enable a project team to pinpoint the variances in terms of time, money and resources and see
if they can find the reason why these have occurred. It should enable the team to track the status of each part of
the project and assess the work that is completed and the work that remains to be done. When this information
is available the project team will be able to reallocate the necessary resources to see that each part of the project
contributes to the success of the project. It should be able to help the project leaders to assess the impact on the
project from any future risks caused by time and cost overruns, and also to ensure that the quality of the project
does not suffer. It should help the team to understand which of the parts of the project require revised guidelines
and how they are to be implemented.For an effective PMIS, it is necessary that the preliminary estimates and
technical specifications are very precise and all encompassing. Cost control and feedback systems have to be
always up to date. Project milestones need to be very clearly identified and linked to the resources that are
required to reach them. Vendor selection, materials management, human resources have to be individually
looked into to ensure that each of these areas fits within the parameters for the project. Document control
including its coding and movement is another vital area of PMIS.
MANAGEMENT INFORMATION SYSTEM (MIS)

A management information system (MIS) is an information system used for decision-making, and for the
coordination, control, analysis, and visualization of information in an organization.

The study of management information systems examines people, processes and technology in an organizational
context. In a corporate setting, the ultimate goal of the use of a management information system is to increase
the value and profits of the business.

TYPES OF MIS

The following are types of information systems used to create reports, extract data, and assist in the decision
making processes of middle and operational level managers.

 Decision support systems (DSS) are computer program applications used by middle and higher
management to compile information from a wide range of sources to support problem solving and decision
making. A DSS is used mostly for semi-structured and unstructured decision problems.
 Executive information systems (EIS) is a reporting tool that provides quick access to summarized reports
coming from all company levels and departments such as accounting, human resources and operations.

 Marketing information systems are management Information Systems designed specifically for managing
the marketing aspects of the business.

 Accounting information systems are focused accounting functions.

 Human resource management systems are used for personnel aspects.

 Office automation systems (OAS) support communication and productivity in the enterprise by
automating workflow and eliminating bottlenecks. OAS may be implemented at any and all levels of
management.

 School Information Management Systems (SIMS) cover school administration, often including teaching and
learning materials.

 Enterprise resource planning (ERP) software facilitates the flow of information between all business
functions inside the boundaries of the organization and manage the connections to outside stakeholders. [8]

 Local Databases, can be small, simplified tools for managers and are considered to be a primal or base level
version of a MIS.

ADVANTAGES & DISADVANTAGES OF MIS

The following are some of the benefits that can be attained using MIS:[9]

 Improve an organization's operational efficiency, add value to existing products, engender innovation and
new product development, and help managers make better decisions.[10]
 Companies are able to identify their strengths and weaknesses due to the presence of revenue reports,
employee performance records etc. Identifying these aspects can help a company improve its business
processes and operations.
 Giving an overall picture of the company.
 Acting as a communication and planning tool.
  The availability of customer data and feedback can help the company to align its business
processes according to the needs of its customers. The effective management of customer data can help the
company to perform direct marketing and promotion activities.
 MIS can help a company gain a competitive advantage.
 MIS reports can help with decision-making as well as reduce downtime for actionable items.

Some of the disadvantages of MIS systems:

 Retrieval and dissemination is dependant on technology hardware and software.

 Potential for inaccurate information.

DAILY, WEEKLY & MONTHLY FINANCIAL REPORTS

Top Daily Financial Reporting Examples

A daily financial report is a method to track the previous day’s activities that have an impact on your financial status. It
can keep you apprised of all the requisite data management used to track and measure potential errors, internal production,
and revenue loss.

As we mentioned above, these reports provide a limited vision, but you can use the examples beneath to see how some
daily actions on problematic factors that can impact your final results.

a) Tracking Potential Staff Errors

Maintaining an efficient, productive work environment, and ensuring that you can identify any employee discrepancies or
issues is critical to being proactive about business growth. Monitoring employees working hours and productivity levels
can help you detect potential staff errors quickly, control these errors, and avoid negative impacts on your financial results
at the end of the day, and ultimately, the month.

Real-time management live dashboards offer clear visuals regarding employee management processes with the following
metrics and KPIs:

Organizational Performance: These are key metrics for tracking and evaluating some factors impacting your
performance.

 Employee Overtime: Overtime per Employee = Total Overtime Hours / FTE

 Absenteeism: Number of employees absent today

Work Quality: These metrics help companies determine the quality level of their employees’ work performance.

 Amount of errors
 Product defects

Work Quantity: These metrics indicate the employee performance related to quantity, such as sales figures, or the
number of codes a programmer can create in a given amount of time. Quantity does not, of course, mean quality, but on
monitored daily, it can reveal bottlenecks or under-production problems.

 Sales Numbers: the number of client contacts, the number of calls an employee makes, the amount of active sales leads.
 Units Produced: lines produced during coding, number of keys a nurse receptionist can hit per minute, etc.
 Customer Handling Time: how many customer calls are answered during a specific time period, for example.

b) Measure Revenue Loss

By tracking staff errors, you can track the money it costs your company (having a problem in production, finding the
problem and fixing it), which will inevitably end up in your financial statements, as the money you lost. Tracking revenue
loss can be especially beneficial for those companies with customer accounts or recurring revenue. A daily report helps
businesses quickly monitor revenue-related factors, so they can increase their revenue. Revenue loss can also originate
from one-time purchases, customers who move to your competitor, or customers who move out of the area. Metrics used
to measure these factors can include:

 Number of daily transactions

 Average gross margin
 Average cost per order

2. Weekly Financial Report Examples

A weekly financial report serves to help your business monitor all your short-term financial activities in weekly
increments. It should be created and reviewed each week and provides a comprehensive look at the short-term
performance of your business.

Now we will take a look at some financial statements examples to get a clearer picture of what can be tracked in weekly
intervals.
 a) Operating Cash Receipts, Disbursements, Balance

Part of a business’s budgeting process may include cash receipts and disbursements, which uses actual data for cash
collection to design a budget, or create income statements, for example. Weekly reports can help companies gain insights
from accurate reporting based on using cash receipts and disbursements. Metrics and KPIs can include:

Cash Flow Report: indicates the changes in cash versus its fixed counterparts, such as exactly where cash is used or
generated during the week.

 Operating Activities: measures a business’s operating cash movements, whereby the net sum Operating Cash flow is
generated.
 Financing Activities: tracks cash level changes from payments of interest and dividends, or internal stock purchases.
 Investing Activities: tracks cash changes derived from the sale or purchase of long term investments, like property, for
example.

Operating Activities: indicated any activities within a business that affect cash flows, such as total sales of products
within a weekly period, employee payments, or supplier payments.

 Direct Method: This metric obtains data from cash receipt and cash disbursements related to operating activities. The sum
of the two values = the Operating Cash Flow (OCF).
 Indirect Method: This metric uses the net income and adjusts items that were used to calculate the net income without
impacting cash flow, therefore converting it to OCF.

b) Any Generated Current Receivables

Weekly financial reports can help businesses stay on top of invoicing, billing procedures, cash basis of accounting,
accounting records, and ensure that they don’t fall behind on being paid for services and goods that are owed to you from
customers or suppliers. Weekly report metrics and KPIs include:

 Days Sales Outstanding (DSO): This measures how fast your business collects money that you’re owed following a
completed sale.
DSO = (Accounts receivable / total credit sales) x number of days in period.
 DSO vs. Best Possible DSO: Aligning these two numbers indicates the collection of debts in a timely fashion.
Best Possible Days Sales Outstanding = (Current receivables x number of days in a week) / weekly credit sales.
 Average Days Delinquent: Indicates how efficient your business processes are in your ability to collect receivables on
time.
ADD= Days Sales Outstanding – Best Possible Days Sales Outstanding

3. Top Monthly Financial Report Examples

Monthly financial reports are a management way of obtaining a concise overview of the previous month’s financial status
to have up-to-date reporting of the cash management, profit and loss statements while evaluating future plans and
decisions moving forward.

This example of financial report offers a more panoramic view of an organization’s financial affairs, serving up elements
of information covered in our daily and weekly explanations. By offering the ability to drill down into metrics over a four-
week period, the data here is largely focused on creating bigger, more long-term changes, strategies, and initiatives.

These reports offer detailed visual insights into the following areas:

 Cash management: A comprehensive overview of your organization’s liquidity and existing cash flow situation.
 Profit and loss: A critical glimpse into your company’s income statement and profits in a number of critical areas of the
business.
 The bigger picture: A financial report format that offers a full overview of the company’s core financial activities over a
monthly period, providing data geared towards developing sustainable strategies and improvements that will foster growth
and increased profitability.

PLANNING & COST CONTROL MANAGEMENT AND RELATED DOCUMENTS

What Is Project Cost Management?

Cost management refers to the activities concerning planning and controlling a project’s budget. Effective cost
management ensures that a project is completed on budget and

Cost management activities are conducted throughout the project life cycle, from planning and budget
allocation to controlling costs during project execution and assessing a project’s cost performance upon
completion.

Although cost management includes a whole ensemble of activities, it is sometimes referred to in terms of more
specific functions, such as spend management, cost accounting, and cost transparency. Cost managers
sometimes use these terms as loose synonyms for the broad cost management function.

Cost Management: Four Major Steps

The Project Management Body of Knowledge (PMBOK), the bible of project management theory, says cost
management is made up of four processes. These generally adhere to the sequence that follows — as a project
goes from the planning board to reality.

Resource Planning: Part of the initiation stage of a project, resource planning uses a work breakdown
structure — a hierarchical representation of all project deliverables and the work required to complete them —
to calculate the full cost of resources needed to complete a project successfully. Managers typically determine
required resources for each work breakdown structure component and then add them to create a total resource
cost estimate for all project deliverables.

Cost Estimating: Cost estimating is an iterative process that uses a variety of estimating techniques to determine
the total cost of completing a project. Cost estimating techniques vary widely in their approaches to computing
project costs, and stretch from conceptual techniques that draw mainly from historical experience and expert
judgment to determinative techniques that estimate costs on a component-by-component basis. We will discuss
these techniques in detail later, as they vary in their levels of accuracy. Determinative techniques are the most
accurate; however, while the estimator’s job is always to create the most accurate estimate possible,
determinative estimating techniques are only an option if you’ve reasonably finalized a project’s scope and
deliverables. As such, you use the less accurate estimating techniques during the earliest stages of project
planning, and then revise and update estimates as the project continues to be defined.

Key Components of the Cost Management Plan

The cost management plan guides these four processes. Created during the project planning phase, the cost
management plan is a document that defines how you manage, control, and communicate a project’s costs in
order to complete the project on budget.

Among other things, a cost management plan identifies the individual or group responsible for cost
management, details how you will assess a project’s cost performance, and sets rules for how to communicate
cost performance to project shareholders. It also establishes the methodologies by which you will control
project cost variations.

While you can customize a cost management plan to fit your organization’s needs, they generally follow a
standard format. Sections often include the cost variance plan, the cost management approach, information on
cost estimation, the cost baseline, cost control, and reporting processes, the change control process, the project
budget, and approvals. You may also want to include the spending authority levels for key project personnel,
specifying which roles can approve costs up to specific thresholds.

Let’s look at the sections in greater depth:

Cost Variance Plan: Cost variance is when the actual amount differs from the budgeted amount. In your cost
management plan, you’ll need a section that details the actions you should take, including who is held
responsible in the case of a cost variance. The size of the variance usually necessitates different action: a cost
variance of less than five percent might result in an explanation of that variance, while a 95-percent-or-greater
variance could force the project to be abandoned. To learn how to calculate cost variance, read Hacking the
PMP: Studying Cost Variance. For a more detailed template on tracking schedule and budget variances, see this
template:
Cost Management Approach: This section outlines the approach a manager uses for cost management. The level
of rigor can vary, but this describes how to establish a cost baseline and how to compare actual costs. You
usually track and report costs through control accounts, where you roll up costs of subtasks. This often occurs at
the third level of the work breakdown structure, a tool that breaks a project into small components or chunks of
work to determine the resources needed to complete a job or project. However, the point at which you track and
report depends on the scope of the project.

Cost Estimation: Here you will define the methods used for estimating project costs, the levels of variation, and
the expected precision, accuracy, and risk.

Cost Baseline: This has a specialized meaning in project management and represents the authorized, time-
phased spending plan against which you measure cost performance. It’s the sum of the estimated project cost
and contingency reserves.

Cost Control and Reporting Process: This section establishes how you measure costs and their key metrics
during the project. We’ll provide greater detail on this later.

Change Control Process: This describes the process for making changes to the cost baseline and how to approve
those proposed changes.

Project Budget: The budget builds on the cost baseline by totalling the cost of executing the project (including
contingencies for possible risks). It also adds in management reserves, which is an amount to cover
unanticipated risks or unidentified events that may arise. An organization will usually set a policy for this, and
the amount is often five to 15 percent of the total budget.

Cost Management Activities: Essential Functions at Each Phase

Here are some key terms and stages relevant to cost management:
Planning: Using the work breakdown structure to determine the resources needed to complete a job or project.

Estimating: The act of calculating or predicting the expected total cost of completing a project.

Budgeting: The authorization of a budget based on a cost estimate to complete the project. You typically
authorize budgets in tandem with schedules, so you can assess cost performance at specific points.
Financing and Funding: The process of requesting, authorizing, and receiving money for a project.

Cost Management: The general practice of overseeing project expenditures and making cost-related decisions
throughout the project life cycle.

Controlling: Addressing cost variations to avoid cost overruns.

Job Control: Controlling project expenditure by comparing costs predicted by the cost estimate and costs
actually being incurred.

Scheduling: You can determine a project’s cost performance by using a schedule that compares the expected
expenditure to the actual costs the project is incurring at any point in time.

Accounting: The practice of recording expenditures and reconciling transactions.

How Accurate Project Cost Estimating Aids Cost Management Efforts

The first step towards robust cost management is having a clear idea of your project’s likely costs. However, it’s
futile to track and control costs if you base your spending on unrealistic estimates.

Project estimating considers several variables, including the method you use to create the estimate, the stage at
which you build your estimate, and the types of cost you include.

The first variable is the method you employ. You can produce cost estimates using a variety of estimating
techniques, depending on the extent to which you define a project and the type of information you have access
to. Here are some common estimation techniques:

Analogous Estimating: This uses historical data from similar past projects to create estimates for new projects.
This method works if you have experience with projects of the same type.

Parametric Estimating: This method estimates time and cost by multiplying per unit or per task amounts by the
total number expected in the project. The rates are often standard or publicly published rates and can be
expressed in hours of work, amount of data entered, or the number of units of a product manufactured. This
technique has a reputation for good reliability, but it’s less relevant when output isn’t uniform, such as when
writing computer code. Some projects have widely varying or unprecedented tasks, so they do not lend
themselves to this method.

Bottom-Up Estimating: This is a determinative estimating technique that estimates costs for work breakdown
structure components and adds them together to create a cost estimate for an entire project. The project team
members help create the estimate. Since the people who are going to be doing the work are engaged in
estimating, professionals consider this method highly accurate, as well as a team commitment builder.

Three-Point Estimating: This is a PERT-related statistical method that uses the optimistic (lowest), pessimistic
(highest), and most likely cost estimates to create expected values and standard deviations for project
expenditures.

Software-Based Estimating: You can use software-based estimating techniques, such as Monte Carlo
simulation, to model the effects of risk events on project costs.

Another factor influencing the cost estimating is the stage at which you build your cost estimate. As a project
progresses, you discover more variables and actual costs, so project estimates become more refined. You can
classify cost estimates based on how well you define the project scope at the time of estimation and on the type
of estimation technique you use - the latter generally determines the accuracy of an estimate. In order of
accuracy, the main classes of cost estimates are:

Order of Magnitude Estimates: These are very rough cost estimates based on expert judgment and on adjusting
the costs of the current project to reflect the costs of similar, past projects. Created before fully defining
projects, they are only used in high-level project screening.

Preliminary Estimates: A preliminary estimate uses somewhat-detailed scope information to form estimates
based on unit costs. These estimates are accurate enough to use as the basis for budgeting.

Definitive Estimates: Created when you’ve fully defined a project’s scope, a definitive estimate uses
deterministic estimating techniques, such as bottom-up estimating. Experts agree that definitive estimates are
the most accurate and reliable.
The final variable affecting project estimation is the type of cost included. Of course, your project budget must
include all the relevant costs for labor and materials, but whether you include a portion of your organization’s
indirect costs depends on the policies of your organization and the type of project. Here are the terms experts
use to distinguish between various types of costs:

Direct Costs: Direct costs are those which you can directly associate with a specific cost object. They are
billable to specific projects.

Indirect Costs: You cannot associate indirect costs with a specific cost object, and you typically incur indirect
costs by a number of projects at the same time. They are not billable to specific projects.

Fixed Costs: Fixed costs are costs you incur during manufacturing that are not associated with the volume of
produced output.

Variable Costs: Variable costs are costs you incur during manufacturing that are directly associated with the
volume of produced output.

Sunk Cost: A sunk cost is an expense you cannot recoup once it is incurred.

Opportunity Cost: When selecting a course of action, its opportunity cost is the loss of potential benefits from
all alternative courses of action.

Costing Techniques : Determine How to Account for Project Costs

A costing technique is the way in which you compute the total cost of producing a product or performing a task.
Depending on the activity or activities being costed, you may use a variety of techniques. Here are some
commons ones:

Job Costing: Managers use job costing, also called job-order costing, to determine the cost of a product that is
unique or dissimilar to other products. In industries such as construction, it’s extremely rare for two jobs to be
identical. Job-order costing uses a unique job-cost record that compiles total labor and resource costs, as well as
applicable overheads, for each task or activity completed as part of a task to determine total expenditures for the
job. The job-cost record includes both direct and indirect costs.
Process Costing: You use process costing to determine costs for products or tasks that are identical. Unlike job
costing, it does not compute the total cost of a product by summing up the costs of all tasks and activities that
go into creating the product. Instead, process costing looks at the processes included in the mass production that
creates products. By dividing the total cost of a process by the number of units output, it is possible to determine
the cost per unit of each process. After this, you may total the costs per unit of every process involved in the
eventual manufacturing of the product. In this way, you compute the cost per unit of each product on a process-
by-process basis.

Activity-Based Costing: Activity-based costing (ABC) is an approach to assigning overhead costs to products.
Since overhead cost allocation based simply on the number of machine hours needed may be misleading, this
costing technique looks at the activities focused on creating a product — testing, machine setup, etc. — and
then assigns portions of their costs to all products created using these activities. Products that were not created
via these activities do not have shares of these activities’ costs added on.

Direct Costing: Direct costing, also called contribution costing or variable costing, is a technique that only
assigns variable manufacturing costs to the cost of a product. You do not add fixed manufacturing costs to the
cost of creating a product but instead associate those costs with the time period during which you incur them.
Life-Cycle Costing: Life-cycle costing is a comparative analysis technique that involves summing the total
costs incurred during the life cycles of project options in order to choose the best option. Since starting capital
costs may not be an accurate representation of how much a project will eventually cost, life-cycle costing
includes all costs associated with ownership — including maintenance and disposal costs — to enable better
decision making

How to Control Costs

Effective cost control means performing a number of related activities that all begin by monitoring costs —
since you can’t know if costs are greater than planned unless you are tracking actual expenses. Then, project
managers need to decide how to respond to cost variances. Here are some key steps and concepts that inform
the cost control process:

Monitoring Cost Performance: A project manager routinely monitors a project’s cost performance by creating
performance reports that summarize current performance and forecast whether you will complete the project on
budget. You provide project stakeholders with information about a project’s cost performance.
Reviewing Changes: You must amend the cost baseline to reflect all cost-related changes, and you should
inform the project shareholders about all changes.
Actual Costs versus Budgeted Costs: Upon milestone and entire project completion, you examine the variances
between actual costs and budgeted costs. Responses to the cost management plan will depend on the magnitude
of the variance and the stage of the plan - this could range from a discussion to changes in the project scope that
reduce costs.
Reserve Analysis: Use reserve analyses to allocate contingency reserves to projects based on the likelihoods and
magnitudes of risk.
Cash-Flow Analysis: Used in financial reporting, cash-flow analyses detail cash inflows and outflows over a
given period of time, and provide starting and ending balances.
Learning-Curve Theory: The learning-curve theory applies to the relationship between the time spent producing
a unit and the number of units produced. According to the theory, the time spent on each unit should decrease as
workers gain experience and therefore produce units faster.

HEALTH AND SAFETY DOCUMENT MANAGEMENT:

Businesses in the UK must comply with the Health and Safety at Work Act 1974 and any records created as a
result of Health and Safety must be kept, and safely stored, not only for legislative reasons but also as evidence
in legal cases, demonstrating the correct safety procedures and processes within the organisation and to also
identify staff training needs.

But how long do you keep Health and Safety Records for and how long is it before they reach the end of their
administrative life? Whilst it is paramount to retain documents for a certain period, it is also essential that they
are disposed of formally and in line with legislation.
In many organisations, health and safety records are not always kept in one place and whilst this leads to
communication problems, it also challenging trying to locate documents for audit, inspection, review, evidence
or planning.

Failure to hold or provide accurate health and safety records may lead to penalties of prosecution, prohibition
notices, improvement notices or heavy compensation payments.

With so many vital documents to keep, and over such a long length of time, storage and security is evidently a
dilemma for many companies.
 Health and Safety Document Management – Records may include:

 Accidents and Incidents

 Purchasing of Plant and Equipment

 Maintenance of Plant and Machinery

 Maintenance and Security Records

 Health and Safety Training and Development

 Dangerous Substances under COSHH (Control of Substances Hazardous to Health)

 Reporting of injuries, Diseases and Dangerous Occurrences

 Fire Safety Checks

 Procedural Records

 Health and Safety Manuals

 Employment Records – including medical records

 Waste Disposal

 Asbestos at Work

 Noise Damage

 Manual Handling

 Risk Assessments

MATERIAL MANAGEMENT:

Material management is an approach for planning, organizing, and controlling all those activities principally
concerned with the flow of materials into an organisation.

Materials Management's scope:

The scope is vast. Its sub functions include Materials planning and control, Purchasing, Stores and Inventory
Management besides others.
Basically, its scope are :
 emphasis on the acquisition aspect
 inventory control and stores management
 material logistics, movement control and handling aspect
 purchasing, supply , transportation , materials handling etc
 supply management or logistics management
 all the interrelated activities concerned with materials

From the management point of view , the key objectives of MM are :

 To buy at the lowest price , consistent with desired quality and service
 To maintain a high inventory turnover , by reducing excess storage , carrying costs and inventory losses
occurring due to deteriorations , obsolescence and pilferage
 To maintain continuity of supply , preventing interruption of the flow of materials and services to users
 To maintain the specified material quality level and a consistency of quality which permits efficient and
effective operation
 To develop reliable alternate sources of supply to promote a competitive atmosphere in performance and
pricing
 To minimize the overall cost of acquisition by improving the efficiency of operations and procedures
 To hire, develop, motivate and train personnel and to provide a reservoir of talent
 To develop and maintain good supplier relationships in order to create a supplier attitude and desire
furnish the organisation with new ideas , products, and better prices and service
 To achieve a high degree of cooperation and coordination with user departments
 To maintain good records and controls that provide an audit trail and ensure efficiency and honesty
 To participate in Make or Buy decisions

MATERIAL PURCHASES AND INVENTORY CONTROL:

Many businesses invest thousands of dollars in inventory yet make no attempt to monitor purchasing
procedures or account for any part of the inventory value. It is not uncommon to discover that the value of
the inventory is greater than or out of ratio with working capital, and even though the relationship between
current sales to inventory may be satisfactory, poor purchasing procedures and excessive inventory
have resulted in heavy, unexpected and untimely losses.

When management pays no heed to the necessity for control of inventory, it will always find itself in a position
where cash is tight. To ensure that cash is not tied up in excess inventory caused in part by ineffective
purchasing, implementation of the Materials Purchasing & Inventory Control program:
1. Reduces costs by helping management hold inventories to a minimum
2. Helps the purchasing department receive greater discounts and the lowest prices
3. Develops a minimum of items to be carried in stock at any given time
4. Establishes a base for sales forecasts by using accurate inventory figures
5. Prevents errors in pricing by maintaining an accurate cost and price
6. Prevents ordering above the maximum, thus reducing investment in inventory
7. Increases profit by maintaining current saleable items
8. Establishes a sales analysis by the month and year for sales reference

ABC analysis

ABC analysis is an approach for classifying inventory items based on the items’ consumption values.
Consumption value is the total value of an item consumed over a specified time period, for example a year. The
approach is based on the Pareto principle to help manage what matters and is applied in this context:

1. A items are goods where annual consumption value is the highest. Applying the Pareto principle (also
referred to as the 80/20 rule where 80 percent of the output is determined by 20 percent of the input),
they comprise a relatively small number of items but have a relatively high consumption value. So it’s
logical that analysis and control of this class is relatively intense, since there is the greatest potential to
reduce costs or losses.

2. B items are interclass items. Their consumption values are lower than A items but higher than C items.
A key point of having this interclass group is to watch items close to A item and C item classes that
would alter their stock management policies if they drift closer to class A or class C. Stock management
 is itself a cost. So there needs to be a balance between controls to protect the asset class and the value at
risk of loss, or the cost of analysis and the potential value returned by reducing class costs. So, the scope
of this class and the inventory management policies are determined by the estimated cost-benefit of class
cost reduction, and loss control systems and processes.

3. C items have the lowest consumption value. This class has a relatively high proportion of the total
number of lines but with relatively low consumption values. Logically, it’s not usually cost-effective to
deploy tight inventory controls, as the value at risk of significant loss is relatively low and the cost of
analysis would typically yield relatively low returns.

What benefits does the approach provide?

1. Better control over high-value inventory improves availability, and reduces losses and costs.

2. More efficient use of stock management resources. For example, during stock count more resources are
dedicated to A class than B or C class holdings, or fewer counts are made of B or C class holdings –
which saves time and money.

3. Relatively low value of B or C class holdings can allow a business to hold bigger buffer stocks to reduce
stock outs.

4. Fewer stock outs resulting in improved production efficiency.

5. Fewer stock outs and improved production efficiency resulting in more reliable cycle time and,
therefore, improved customer satisfaction.

Implementing ABC inventory management? Questions to consider

1. Is there reliable and accessible cost and demand information by item?

2. Will your inventory management systems and processes facilitate efficient and effective implementation
and operation of the ABC approach?

3. Have the costs and benefits of implementing and operating ABC been quantified and is the business case
compelling?

4. Has the impact of the change to ABC on capability been assessed and planned for?

Actions to take / Dos Actions to avoid / Don'ts

  Check to ensure that systems and processes  Whilst cost and demand are key
can be adapted to ABC before embarking on factors, don’t ignore other material
the change. aspects of stock management that

 Base the business case on reliable data. ABC doesn’t address.

 Be realistic about the resource and time  Avoid assumptions that could derail

demands required to implement ABC. the project.

 Create a robust business case with a

compelling cost-benefit analysis and SMART
targets.

 Plan for measurement of and reporting on the

cost-benefit.

UNIT:4
Management: Introduction for Management, History of Management theory, Leadership,
Motivational Theories, Project controls. Construction Labour, Payment of wages Act, Workmen’s
Compensation Act, Minimum Wages Act.

MANAGEMENT: INTRODUCTION FOR MANAGEMENT:

DEFINITION OF MANAGEMENT
Although management as a discipline is more than 80 years old, there is no common agreement
among its experts and practitioners about its precise definition. In fact, this is so in case of all social
sciences like psychology,sociology, anthropology, economics, political science etc. As a result of
unprecedented and breath-taking technological developments, business organizations have grown in
size and complexity, causing consequential changes in the practice of management. Changes in
management styles and practices have led to changes in management thought. Moreover,
management being interdisciplinary in nature has undergone changes because of the developments
in behavioural sciences, quantitative techniques, engineering and technology, etc. Since it deals with
the production and distribution of goods and services, dynamism of its environments such as social,
cultural and religious values, consumers' tastes and preferences, education and information
explosion, democratization of governments, etc., have also led to changes in its theory and practice.
Yet, a definition of management is necessary for its teaching and research, and also for improvement
in its practice.

Many management experts have tried to define management. But, no definition of management has
been universally accepted. Let us discuss some of the leading definitions of management:

Peter F. Drucker defines, "management is an organ; organs can be described and defined only
through their functions".

According to Terry, "Management is not people; it is an activity like walking, reading,

swimming or running. People who perform Management can be designated as members,
members of Management or executive leaders."

Ralph C. Davis has defined Management as, "Management is the function of executive leadership
anywhere."

According to Mc Farland, "Management is defined for conceptual, theoretical and analytical

purposes as that process by which managers create, direct, maintain and operate purposive
organization through systematic, co-ordinated co-operative human effort."

Henry Fayol, "To mange is to forecast and plan, to organize, to compound, to co-ordinate and to
control."

Harold Koontz says, "Management is the art of getting things done through and within
formally organized group."
William Spriegal, "Management is that function of an enterprise which concerns itself
with direction and control of the various activities to attain business objectives.
Management is essentially an executive function; it deals with the active direction of the
human effort."

Kimball and Kimball, "Management embraces all duties and functions that pertain to the
initiation of an enterprise, its financing, the establishment of all major policies, the
provision of all necessary equipment, the outlining of the general form of organization
under which the enterprise is to operate and the selection of the principal officers."

Sir Charles Reynold, "Management is the process of getting things done through the
agency of a community. The functions of management are the handling of community
with a view of fulfilling the purposes for which it exists."
CHARACTERISTICS OF MANAGEMENT

Management is a distinct activity having the following salient features:

Economic Resource :
Management is one of the factors of productiontogetherwithland,labourandcapital.As

industrialization increases, the need for managers also increases. Efficient management is the most
critical input in the success of any organized group activity as it is the force which assembles and
integrates other factors of production, namely, labour, capital and materials. Inputs of labour, capital
and materials do not by themselves ensure production, they require the catalyst of management to
produce goods and services required by the society. Thus, management is an essential ingredient of
an organization.

1. Goal Oriented : Management is a purposeful activity. It coordinates the efforts of workers to

achieve the goals of the organization. The success of management is measured by the extent to
which the organizational goals are achieved. It is imperative that the organizational goals must be
well-defined and properly understood by the management at various levels.

2. Distinct Process : Management is a distinct process consisting of such functions as planning,

organizing, staffing, directing and controlling. These functions are so interwoven that it is not
possible to lay down exactly the sequence of various functions or their relative significance.
3. Integrative Force : The essence of management is integration of human and other resources to
achieve the desired objectives. All these resources are made available to those who manage.
Managers apply knowledge, experience and management principles for getting the results from the
workers by the use of non-human resources. Managers also seek to harmonize the individuals' goals
with the organizational goals for the smooth working of the organization.

4. System of Authority : Management as a team of managers represents a system of authority, a

hierarchy of command and control. Managers at different levels possess varying degree of authority.
Generally, as we move down in the managerial hierarchy, the degree of authority gets gradually
reduced. Authority enables the managers to perform their functions effectively.

5. Multi-disciplinary Subject : Management has grown as a field of study (i.e. discipline)

taking the help of so many other disciplines such as engineering, anthropology, sociology and
psychology. Much of the management literature is the result of the association of these disciplines.
For instance, productivity orientation drew its inspiration from industrial engineering and human
relations orientation from psychology. Similarly, sociology and operations research have also
contributed to the development of management science.

6. Universal Application : Management is universal in character. The principles and techniques

of management are equally applicable in the fields of business, education, military, government and
hospital. Henri Fayol suggested that principles of management would apply more or less in every
situation. The principles are working guidelines which are flexible and capable of adaptation to
every organization where the efforts of human beings are to be coordinated.

MANAGEMENT FUNCTIONS /PROCESS OF MANAGEMENT

There is enough disagreement among management writers on the classification of managerial

functions. Newman and Summer recognize only four functions, namely, organizing, planning,
leading and controlling.

Henri Fayol identifies five functions of management, viz. planning, organizing, commanding,
coordinating and controlling. Luther Gulick states seven such functions under the catch word
"POSDCORB' which stands for planning, organizing, staffing, directing, coordinating, reporting and
budgeting. Warren Haynes and Joseph Massie classify management functions into decision-making,
organizing, staffing, planning, controlling, communicating and directing. Koontz and O'Donnell
divide these functions into planning organizing, staffing, directing and controlling.

For our purpose, we shall designate the following six as the functions of a manager: planning,
organizing, staffing, directing, coordinating and controlling.

7. Planning : Planning is the most fundamental and the most pervasive of all management
functions. If people working in groups have to perform effectively, they should know in advance
what is to be done, what activities they have to perform in order to do what is to be done, and when
it is to be done. Planning is concerned with 'what', 'how, and 'when' of performance. It is deciding in
the present about the future objectives and the courses of action for their achievement. It thus
involves:

(a) determination of long and short-range objectives;

(b) development of strategies and courses of actions to be followed for the achievement of these
objectives; and

(c) formulation of policies, procedures, and rules, etc., for the implementation of strategies, and
plans.

The organizational objectives are set by top management in the context of its basic purpose and
mission, environmental factors, business forecasts, and available and potential resources. These
objectives are both long-range as well as short-range. They are divided into divisional, departmental,
sectional and individual objectives or goals. This is followed by the development of strategies and
courses of action to be followed at various levels of management and in various segments of the
organization. Policies, procedures and rules provide the framework of decision making, and the
method and order for the making and implementation of these decisions.

Every manager performs all these planning functions, or contributes to their performance. In some
organizations, particularly those which are traditionally managed and the small ones, planning are
often not done deliberately and systematically but it is still done. The plans may be in the minds of
their managers rather than explicitly and precisely spelt out: they may be fuzzy rather than clear but
they are always there. Planning is thus the most basic function of management. It is performed in all
kinds of organizations by all managers at all levels of hierarchy.

8. Organizing : Organizing involves identification of activities required for the achievement of

enterprise objectives and implementation of plans; grouping of activities into jobs; assignment of
these jobs and activities to departments and individuals; delegation of responsibility and authority
for performance, and provision for vertical and horizontal coordination of activities. Every manager
has to decide what activities have to be undertaken in his department or section for the achievement
of the goals entrusted to him. Having identified the activities, he has to group identical or similar
activities in order to make jobs, assign these jobs or groups of activities to his subordinates, delegate
authority to them so as to enable them to make decisions and initiate action for undertaking these
activities, and provide for coordination between himself and
his subordinates, and among his subordinates. Organizing thus involves the following sub-
functions :

(a) Identification of activities required for the achievement of objectives and implementation of
plans.

(b) Grouping the activities so as to create self-contained jobs.

(c) Assignment of jobs to employees.

(d) Delegation of authority so as to enable them to perform their jobs and to command the
resources needed for their performance.

(e) Establishment of a network of coordinating relationships.

Organizing process results in a structure of the organization. It comprises organizational positions,

accompanying tasks and responsibilities, and a network of roles and authority-responsibility
relationships.

Organizing is thus the basic process of combining and integrating human, physical and financial
resources in productive interrelationships for the achievement of enterprise objectives. It aims at
combining employees and interrelated tasks in an orderly manner so that organizational work is
performed in a coordinated manner, and all efforts and activities pull together in the direction of
organizational goals.

9. Staffing : Staffing is a continuous and vital function of management. After the objectives
have been determined, strategies, policies, programmes, procedures and rules formulated for their
achievement, activities for the implementation of strategies, policies, programmes, etc. identified
and grouped into jobs, the next logical step in the
management process is to procure suitable personnel for manning the jobs. Since the efficiency and
effectiveness of an organization significantly depends on the quality of its personnel and since it is
one of the primary functions of management to achieve qualified and trained people to fill various
positions, staffing has been recognized as a distinct function of management. It comprises several
sub- functions :

(a) Manpower planning involving determination of the number and the kind of personnel
required.

(b) Recruitment for attracting adequate number of potential employees to seek jobs in the
enterprise.

(c) Selection of the most suitable persons for the jobs under consideration.

(d) Placement, induction and orientation.

(e) Transfers, promotions, termination and layoff.

(f) Training and development of employees.

As the importance of human factor in organizational effectiveness is being increasingly recognized,

staffing is gaining acceptance as a distinct function of management. It need hardly any emphasize
that no organization can ever be better than its people, and managers must perform the staffing
function with as much concern as any other function.
10. Directing : Directing is the function of leading the employees to perform efficiently, and
contribute their optimum to the achievement of organizational objectives. Jobs assigned to
subordinates have to be explained and clarified, they have to be provided guidance in job
performance and they are to be motivated to contribute their optimum performance with zeal and
enthusiasm. The function of directing thus involves the following sub-functions :

(a) Communication

(b) Motivation

(c) Leadership
11. Coordination : Coordinating is the function of establishing such relationships among various
parts of the organization that they all together pull in the direction of organizational objectives. It is
thus the process of tying together all the organizational decisions, operations, activities and efforts
so as to achieve unity of action for the accomplishment of organizational objectives.

The significance of the coordinating process has been aptly highlighted by Mary Parker Follet. The
manager, in her view, should ensure that he has an organization "with all its parts coordinated, so
moving together in their closely knit and adjusting activities, so linking, interlocking and
interrelation, that they make a working unit, which is not a congeries of separate pieces, but what I
have called a functional whole or integrative unity". Coordination, as a management function,
involves the following sub-functions:

(a) Clear definition of authority-responsibility relationships

(b) Unity of direction

(c) Unity of command

(d) Effective communication

(e) Effective leadership

12. Controlling : Controlling is the function of ensuring that the divisional, departmental,
sectional and individual performances are consistent with the predetermined objectives and goals.
Deviations from objectives and plans have to be identified and investigated, and correction action
taken. Deviations from plans and objectives provide feedback to managers, and all other
management processes including planning, organizing, staffing, directing and coordinating are
continuously reviewed and modified, where necessary.

Controlling implies that objectives, goals and standards of performance exist and are known to
employees and their superiors. It also implies a flexible and dynamic organization which will permit
changes in objectives, plans, programmes, strategies, policies, organizational design, staffing
policies and practices, leadership style, communication system, etc., for it is not uncommon that
employees failure to achieve predetermined standards is due to defects or shortcomings in any one
or more of the above dimensions of management.

Thus, controlling involves the following process :

(a) Measurement of performance against predetermined goals.

(b) Identification of deviations from these goals.

(c) Corrective action to rectify deviations.

It may be pointed out that although management functions have been discussed in a particular
sequence-planning, organizing, staffing, directing, coordinating and controlling – they are not
performed in a sequential order. Management is an integral process and it is difficult to put its
functions neatly in separate boxes. Management functions tend to coalesce, and it sometimes
becomes difficult to separate one from the other. For example, when a production manager is
discussing work problems with one of his subordinates, it is difficult to say whether he is guiding,
developing or communicating, or doing all these things simultaneously. Moreover, managers often
perform more than one function simultaneously.

LEVELS OF MANAGEMENT

An enterprise may have different levels of management. Levels of management refer to a line of
demarcation between various managerial positions in an enterprise. The levels of management
depend upon its size, technical facilities, and the range of production. We generally come across two
broad levels of management, viz. (i) administrative management (i.e., the upper level of
management) and (ii) operating management (i.e., the lower level of management). Administrative
management is concerned with "thinking" functions such as laying down policy, planning and
setting up of standards. Operative management is concerned with the "doing" function such as
implementation of policies, and directing the operations to attain the objectives of the enterprise.

But in actual practice, it is difficult to draw any clear cut demarcation between thinking function and
doing function. Because the basic/fundamental managerial functions are performed by all managers
irrespective of their levels or, ranks. For instance, wage and salary director of a company may assist
in fixing wages and salary structure as a member of the Board of Directors, but as head of wages and
salary department, his job is to see that the decisions are implemented.

The real significance of levels is that they explain authority relationships in an organization.
Considering the hierarchy of authority and responsibility, one can identify three levels of
management namely:

(i) Top management of a company consists of owners/shareholders, Board of Directors, its

Chairman, Managing Director, or the Chief Executive, or the General Manager or Executive
Committee having key officers.

(ii) Middle management of a company consists of heads of functional departments viz. Purchase
Manager, Production Manager, Marketing Manager, Financial controller, etc. and Divisional and
Sectional Officers working under these Functional Heads.

(iii) Lower level or operative management of a company consists of Superintendents, Foremen,

Supervisors, etc.

1. Top management : Top management is the ultimate source of authority and it lays down
goals, policies and plans for the enterprise. It devotes more time on planning and coordinating
functions. It is accountable to the owners of the business of the overall management. It is also
described as the policy making group responsible for the overall direction and success of all
company activities. The important functions of top management include :

(a) To establish the objectives or goals of the enterprise.

(b) To make policies and frame plans to attain the objectives laid.

(c) To set up an organizational frame work to conduct the operations as per plans.

(d) To assemble the resources of money, men, materials, machines and methods to put the plans
into action.

(e) To exercise effective control of the operations.

(f) To provide overall leadership to the enterprise.

2. Middle management : The job of middle management is to implement the policies and plans
framed by the top management. It serves as an essential link between the top management and the
lower level or operative management. They are responsible to the top management for the
functioning of their departments. They devote more time on the organization and motivation
functions of management. They provide the guidance and the structure for a purposeful enterprise.
Without them the top management's plans and ambitious expectations will not be fruitfully realized.
The following are the main functions of middle management :
1. To interpret the policies chalked out by top management.
2. To prepare the organizational set up in their own departments for fulfilling the objectives implied
in various business policies.
3. To recruit and select suitable operative and supervisory staff.
4. To assign activities, duties and responsibilities for timely implementation of the plans.
5. To compile all the instructions and issue them to supervisor under their control.
6. To motivate personnel to attain higher productivity and to reward them properly.
7. To cooperate with the other departments for ensuring a smooth functioning of the entire
organization.
8. To collect reports and information on performance in their departments.
9. To report to top management
10. To make suitable recommendations to the top management for the better execution of plans and
policies.

3. Lower or operative management: It is placed at the bottom of the hierarchy of management,

and actual operations are the responsibility of this level of management. It consists of foreman,
supervisors, sales officers, accounts officers and so on. They are in direct touch with the rank and
file or workers. Their authority and responsibility is limited. They pass on the instructions of the
middle management to workers.

They interpret and divide the plans of the management into short-range operating plans. They are
also involved in the process of decisions-making. They have to get the work done through the
workers. They allot various jobs to the workers, evaluate their performance and report to the middle
level management. They are more concerned with direction and control functions of management.
They devote more time in the supervision of the workers.

MANAGERIAL SKILLS

A skill is an individual's ability to translate knowledge into action. Hence, it is manifested in an

individual's performance. Skill is not necessarily inborn. It can be developed through practice and
through relating learning to one's own personal experience and background. In order to be able to
successfully discharge his roles, a manager should possess three major skills. These are conceptual
skill, human relations skill and technical skill. Conceptual skill deals with ideas, technical skill with
things and human skill with people. While both conceptual and technical skills are needed for good
decision-making, human skill in necessary for a good leader.

The conceptual skill refers to the ability of a manager to take a broad and farsighted view of the
organization and its future, his ability to think in abstract, his ability to analyze the forces working in
a situation, his creative and innovative ability and his ability to assess the environment and the
changes taking place in it. It short, it is his ability to conceptualize the environment, the
organization, and his own job, so that he can set appropriate goals for his organization, for himself
and for his team. This skill seems to increase in importance as manager moves up to higher positions
of responsibility in the organization.

The technical skill is the manager's understanding of the nature of job that people under him have to
perform. It refers to a person's knowledge and proficiency in any type of process or technique. In a
production department this would mean an understanding of the technicalities of the process of
production. Whereas this type of skill and competence seems to be more important at the lower
levels of management, its relative importance as a part of the managerial role diminishes as the
manager moves to higher positions. In higher functional positions, such as the position of a
marketing manager or production manager, the conceptual component, related to these functional
areas becomes more important and the technical component becomes less important.

Human relations skill is the ability to interact effectively with people at all levels. This skill
develops in the manager sufficient ability (a) to recognize the feelings and sentiments of others; (b)
to judge the possible actions to, and outcomes of various courses of action he may undertake; and (c)
to examine his own concepts and values which may enable him to develop more useful attitudes
about himself. This type of skill remains consistently important for managers at all levels.

PRINCIPLES OF MANAGEMENT
A body of principles of management has been developed by Henri Fayol, the father of modern
management. Fayol wrote perceptibly on the basis of his practical experience as a manager.
Although, he did not develop an integrated theory of management, his principles are surprisingly in
tune with contemporary thinking in management theory.

Fayol held that there is a single "administrative science", whose principles can be used in all
management situations no matter what kind of organization was being managed. This earned him
the title of "Universality". He, however, emphasized that his principles were not immutable laws but
rules of thumb to be used as occasion demanded.

Fayol held that activities of an industrial enterprise can be grouped in six categories : (i) technical
(production), (ii) commercial (buying, selling and exchange), (iii) financial (search for and optimum
use of capital), (iv) security (protection of property and persons), (v) accounting (including
statistics); and (vi) managerial. However, he devoted most of his attention to managerial activity. He
developed the following principles underlying management of all kinds of organizations :

1. Authority and Responsibility are Related : Fayol held that authority flows from
responsibility. Managers who exercise authority over others should assume responsibility for
decisions as well as for results. He regarded authority as a corollary to responsibility. Authority is
official as well as personal. Official authority is derived from the manager's position in
organizational hierarchy and personal authority is compounded of intelligence, experience, moral
worth, past services, etc.

A corollary of the principle that no manager should be given authority unless he assumes
responsibility is that those who have responsibility should also have commensurate authority in
order to enable them to initiate action on others and command resources required for the
performance of their functions. This aspect of relationship between responsibility and authority is
particularly relevant in India where authority tends to be concentrated in higher echelons of
management.
2. Unity of Command : This principle holds that one employee should have only one boss and
receive instructions from him only. Fayol observed that if this principle is violated authority will be
undermined, discipline will be jeopardy, order will be disturbed and stability will be threatened.
Dual command is a permanent source of conflict. Therefore, in every organization, each subordinate
should have one superior whose command he has to obey.

3. Unity of Direction : This means that all managerial and operational activities which relate a
distinct group with the same objective should be directed by "one head and one plan. According to
Fayol, there should be, "one head and one plan for a group of activities having the same objective".
It, however, does not mean that all decisions should be made at the top. It only means that all related
activities should be directed by one person. For example, all marketing activities like product
strategy and policy, advertising and sales promotion, distribution channel policy, product pricing
policy, marketing research, etc., should be under the control of one manager and directed by an
integrated plan. This is essential for the "unity of action, coordination of strength and focusing of
effort". Violation of this principle will cause fragmentation of action and effort, and wastage of
resources.
4. Scalar Chain of Command : According to Fayol scalar chain is the chain of superiors ranging
from the ultimate authority to the lowest ranks. The line of authority is the route followed via every
link in the chain by all communication which start from or go to the ultimate authority.
5. Division of Work : This is the principle of specialization which, according to Fayol, applies to
all kinds of work, managerial as well as technical. It helps a person to acquire an ability and
accuracy with which he can do more and better work with the same effort. Therefore, the work of
every person in the organization should be limited as far as possible to the performance of a single
leading function.

6. Discipline : Discipline is a sine qua non for the proper functioning of an organization.
Members of an organization are required to perform their functions and conduct themselves in
relation to others according to rules, norms and customs. According to Fayol, discipline can best be
maintained by : (i) having good superiors at all levels; (ii) agreements (made either with the
individual employees or with a union as the case may be) that are as clear and fair as possible; and
(iii) penalties judiciously imposed.

7. Subordination of Individual Interest to General Interest : The interest of the organization is

above the interests of the individual and the group. It can be achieved only when managers in high
positions in the organization set an example of honesty, integrity, fairness and justice. It will involve
an attitude and a spirit of sacrificing their own personal interests whenever it becomes apparent that
such personal interests are in conflict with organizational interests. It may, however, be emphasized
that social and national interests should have precedence over organizational interests whenever the
two run counter to each other.

8. Remuneration : Employees should be paid fairly and equitably. Differentials in remuneration

should be based on job differentials, in terms of qualities of the employee, application,
responsibility, working conditions and difficulty of the job. It should also take into account factors
like cost of living, general economic conditions, demand for labour and economic state of the
business.

9. Centralisation : Fayol believed in centralisation. He, however, did not contemplate

concentration of all decision making authority in the top management. He, however, held that
centralisation and decentralisation is a question of proportion. In a small firm with a limited number
of employees, the owner-manager can give orders directly to everyone. In large organizations,
however, where the worker is separated from the chief executive through a long scalar chain, the
decision making authority has to be distributed among various managers in varying degrees. Here
one generally comes across a situation of decentralisation with centralised control. The degree of
centralisation and decentralisation also depends on the quality of managers.

10. Order : Order, in the conception of Fayol, means right person on the right job and everything
in its proper place. This kind of order, depends on precise knowledge of human requirements and
resources of the concern and a constant balance between these requirements and resources.

11. Equity : It means that subordinates should be treated with justice and kindliness. This is
essential for eliciting their devotion and loyalty to the enterprise. It is, therefore the duty of the chief
executive to instill a sense of equity throughout all levels of scalar chain.

12. Stability of Tenure of Personnel : The managerial policies should provide a sense of
reasonable job security. The hiring and firing of personnel should depend not on the whims of the
superiors but on the well-conceived personnel policies. He points out that it takes time for an
employee to learn his job; if they quit or are discharged within a short time, the learning time has
been wasted. At the same time those found unsuitable should be removed and those who are found
to be competent should be promoted. However, "a mediorce manager who stays is infinitely
preferable to outstanding managers who come and go".

13. Initiative : It focuses on the ability, attitude and resourcefulness to act without prompting
from others. Managers must create an environment which encourages their subordinates to take
initiative and responsibility. Since it provides a sense of great satisfaction to intelligent employees,
managers should sacrifice their personal vanity in order to encourage their subordinates to show
initiative. It should, however, be limited, according to Fayol, by respect for authority and discipline.

14. Esprit de Corps : Cohesiveness and team spirit should be encouraged among employees. It is
one of the chief characteristics of organized activity that a number of people work together in close
coopearation for the achievement of common goals. An environment should be created in the
organization which will induce people to contribute to each other's efforts in such a way that the
combined effort of all together promotes the achievement of the overall objectives of enterprise.
Fayol warns against two enemies of esprit de corps, viz. (i) divide and rule, and (ii) abuse of written
communication. It may work to the benefit of the enterprise to divide its enemy but it will surely be
dangerous to divide one's own workers. They should rather be welded in cohesive and highly
interacting work-groups. Overreliance on written communication also tends to disrupt team spirit.
Written communication, where necessary, should always be supplemented by oral communication
because face-to-face contacts tend to promote speed, clarity and harmony.

The other important principles of management as developed by pioneer thinkers on the subject are :

(a) Separation of planning and execution of business operations.

(b) Scientific approach to business problems.

(c) Adoption of technological changes.

(d) Economizing production costs and avoiding the wastage of resources.

(e) Fuller utilization of the operational capacity and emphasis on higher productivity.
(f) Standardisation of tools, machines, materials, methods, timings and products.

(g) Evaluation of results according to criteria of standard levels of performance.

(h) Understanding and co-operation among the members of the

organization set-up.

SIGNIFICANCE OF MANAGEMENT

Management is concerned with acquiring maximum prosperity with a minimum effort. Management
is essential wherever group efforts are required to be directed towards achievement of common
goals. In this management conscious age, the significance of management can hardly be over
emphasized. It is said that, anything minus management amounts to nothing. Koontz and O' Donnel
have rightly observed "there is no more important area of human activity than management since its
task is that of getting things done through others."

The significance of management in business activities is relatively greater. The inputs of labour,
capital and raw material never become productive without the catalyst of management. It is now
widely recognized that management is an important factor of growth of any country. The following
points further highlight the significance of management :

1. Achievements of group goals : Management makes group efforts more effective. The group
as a whole cannot realise its objectives unless and until there is mutual co-operation and co-
ordination among the members of the group. Management creates team work and team spirit in an
organization by developing a sound organization structure. It brings the human and material
resources together and motivates the people for the achievement of the goals of the organization.

2. Optimum utilization of resources : Management always concentrates on achieving the

objectives of the enterprise. The available resources of production are put to use in such a way that
all sort of wastage and inefficiencies are reduced to a minimum. Workers are motivated to put in
their best performance by the inspiring leadership. Managers create and maintain an environment
conducive to highest efficiency and performance. Through the optimum use of available resources,
management accelerates the process of economic growth.

3. Minimisation of cost : In the modern era of intense competition, every business enterprise
must minimise the cost of production and distribution. Only those concerns can survive in the
market, which can produce goods of better quality at the minimum cost. A study of the principles of
management helps in knowing certain techniques used for reducing costs. These techniques are
production control, budgetary control, cost control, financial control, material control, etc.

4. Change and growth : A business enterprise operates in a constantly changing environment.

Changes in business environment create uncertainties and risk and also produce opportunities for
growth. An enterprise has to change and adjust itself in the everchanging environment. Sound
management moulds not only the enterprise but also alters the environment itself to ensure the
success of the business. Many of the giant business corporations of today had a

humble beginning and grew continuously through effective management.

5. Efficient and smooth running of business : Management ensures efficient and smooth
running of business, through better planning, sound organization and effective control of the various
factors of production.

6. Higher profits : Profits can be enhanced in any enterprise either by increasing the sales
revenue or reducing costs. To increase the sales revenue is beyond the control of an enterprise.
Management by decreasing costs increases its profits and thus provides opportunities for future
growth and development.

7. Provide innovation : Management gives new ideas, imagination and visions to an enterprise.

8. Social benefits : Management is useful not only to the business firms but to the society as a
whole. It improves the standard of living of the people through higher production and more efficient
use of scarce resources. By establishing cordial relations between different social groups,
management promotes peace and prosperity in society.

9. Useful for developing countries : Management has to play a more important role in
developing countries, like India. In such countries, the productivity is low and the resources are
limited. It has been rightly observed, "There are no under-developed countries. They are only under-
managed ones".

10. Sound organization structure : Management establishes proper organization structure and
avoids conflict between the superiors and subordinates. This helps in the development of spirit of
cooperation and mutual understanding, and a congenial environment is provided in the organization.

THE HISTORY OF MANAGEMENT THEORY:

While the next section will get into the nitty-gritty behind the history of different types of management theory,
it is important to have a basic understanding as to why management theory was such an important and ground-
breaking idea. The industrial revolution is at the center of management theory. From the late 1700s through the
early 1900s, the industrial revolution brought extraordinary change to the workplace and forever transformed
the way companies operate.

The industrial revolution brought better and faster technology allowing companies to perform more efficiently
than ever before and gave them the ability to dramatically increase their output. However, increased output
meant lower prices which increased demand which in turn required more employees. Companies that once had
a couple dozen employees were now growing into gigantic corporations. No longer was it possible for a
manager to know each and every one of their employees on a friendly level. In order to meet demand, company
leadership had to ensure their employees were productive. Sounds simple, right? Not exactly.

While productivity goals can be set easily, managing a team to meet productivity goals was not so simple. For
the first time, managers had to find new and innovative ways to motivate a sizable number of employees to
perform. Since this was a new concept, research, observations, experiments, and trial and error were all used to
find new and better ways to manage employees. The industrial revolution gave birth to a variety of management
theories and concepts, many of which are still relevant and essential in today’s workforce. In addition, many
management theories have developed since the end of the industrial revolution as society continues to evolve.
Each management theory plays a role in modern management theory and how it is implemented.

LEADERSHIP

What is Leadership

Leadership is a process by which an executive can direct, guide and influence the behavior and work of others
towards accomplishment of specific goals in a given situation. Leadership is the ability of a manager to induce
the subordinates to work with confidence and zeal.
Leadership is the potential to influence behaviour of others. It is also defined as the capacity to influence a
group towards the realization of a goal. Leaders are required to develop future visions, and to motivate the
organizational members to want to achieve the visions.

According to Keith Davis, “Leadership is the ability to persuade others to seek defined objectives
enthusiastically. It is the human factor which binds a group together and motivates it towards goals.”

Characteristics of Leadership

1. It is a inter-personal process in which a manager is into influencing and guiding workers towards
attainment of goals.
2. It denotes a few qualities to be present in a person which includes intelligence, maturity and personality.
3. It is a group process. It involves two or more people interacting with each other.
4. A leader is involved in shaping and moulding the behaviour of the group towards accomplishment of
organizational goals.
5. Leadership is situation bound. There is no best style of leadership. It all depends upon tackling with the
situations.

Importance of Leadership

Leadership is an important function of management which helps to maximize efficiency and to achieve
organizational goals. The following points justify the importance of leadership in a concern.

1. Initiates action- Leader is a person who starts the work by communicating the policies and plans to the
subordinates from where the work actually starts.
2. Motivation- A leader proves to be playing an incentive role in the concern’s working. He motivates the
employees with economic and non-economic rewards and thereby gets the work from the subordinates.
3. Providing guidance- A leader has to not only supervise but also play a guiding role for the
subordinates. Guidance here means instructing the subordinates the way they have to perform their work
effectively and efficiently.
4. Creating confidence- Confidence is an important factor which can be achieved through expressing the
work efforts to the subordinates, explaining them clearly their role and giving them guidelines to achieve
the goals effectively. It is also important to hear the employees with regards to their complaints and
problems.
 5. Building morale- Morale denotes willing co-operation of the employees towards their work and getting
them into confidence and winning their trust. A leader can be a morale booster by achieving full co-
operation so that they perform with best of their abilities as they work to achieve goals.
6. Builds work environment- Management is getting things done from people. An efficient work
environment helps in sound and stable growth. Therefore, human relations should be kept into mind by a
leader. He should have personal contacts with employees and should listen to their problems and solve
them. He should treat employees on humanitarian terms.
7. Co-ordination- Co-ordination can be achieved through reconciling personal interests with
organizational goals. This synchronization can be achieved through proper and effective co-ordination
which should be primary motive of a leader.

ROLE OF A LEADER:

Following are the main roles of a leader in an organization :

1. Required at all levels- Leadership is a function which is important at all levels of management. In the
top level, it is important for getting co-operation in formulation of plans and policies. In the middle and
lower level, it is required for interpretation and execution of plans and programmes framed by the top
management. Leadership can be exercised through guidance and counseling of the subordinates at the
time of execution of plans.
2. Representative of the organization- A leader, i.e., a manager is said to be the representative of the
enterprise. He has to represent the concern at seminars, conferences, general meetings, etc. His role is to
communicate the rationale of the enterprise to outside public. He is also representative of the own
department which he leads.
3. Integrates and reconciles the personal goals with organizational goals- A leader through leadership
traits helps in reconciling/ integrating the personal goals of the employees with the organizational goals.
He is trying to co-ordinate the efforts of people towards a common purpose and thereby achieves
objectives. This can be done only if he can influence and get willing co-operation and urge to
accomplish the objectives.
 4. He solicits support- A leader is a manager and besides that he is a person who entertains and invites
support and co-operation of subordinates. This he can do by his personality, intelligence, maturity and
experience which can provide him positive result. In this regard, a leader has to invite suggestions and if
possible implement them into plans and programmes of enterprise. This way, he can solicit full support
of employees which results in willingness to work and thereby effectiveness in running of a concern.
5. As a friend, philosopher and guide- A leader must possess the three dimensional traits in him. He can
be a friend by sharing the feelings, opinions and desires with the employees. He can be a philosopher by
utilizing his intelligence and experience and thereby guiding the employees as and when time requires.
He can be a guide by supervising and communicating the employees the plans and policies of top
management and secure their co-operation to achieve the goals of a concern. At times he can also play
the role of a counselor by counseling and a problem-solving approach. He can listen to the problems of
the employees and try to solve them.

QUALITIES OF LEADER:

A leader has got multidimensional traits in him which makes him appealing and effective in behavior. The
following are the requisites to be present in a good leader:

1. Physical appearance- A leader must have a pleasing appearance. Physique and health are very
important for a good leader.
2. Vision and foresight- A leader cannot maintain influence unless he exhibits that he is forward looking.
He has to visualize situations and thereby has to frame logical programmes.
3. Intelligence- A leader should be intelligent enough to examine problems and difficult situations. He
should be analytical who weighs pros and cons and then summarizes the situation. Therefore, a positive
bent of mind and mature outlook is very important.
4. Communicative skills- A leader must be able to communicate the policies and procedures clearly,
precisely and effectively. This can be helpful in persuasion and stimulation.
5. Objective- A leader has to be having a fair outlook which is free from bias and which does not reflects
his willingness towards a particular individual. He should develop his own opinion and should base his
judgement on facts and logic.
6. Knowledge of work- A leader should be very precisely knowing the nature of work of his subordinates
because it is then he can win the trust and confidence of his subordinates.
 7. Sense of responsibility- Responsibility and accountability towards an individual’s work is very
important to bring a sense of influence. A leader must have a sense of responsibility towards
organizational goals because only then he can get maximum of capabilities exploited in a real sense. For
this, he has to motivate himself and arouse and urge to give best of his abilities. Only then he can
motivate the subordinates to the best.
8. Self-confidence and will-power- Confidence in himself is important to earn the confidence of the
subordinates. He should be trustworthy and should handle the situations with full will power
9. Humanist-This trait to be present in a leader is essential because he deals with human beings and is in
personal contact with them. He has to handle the personal problems of his subordinates with great care
and attention. Therefore, treating the human beings on humanitarian grounds is essential for building a
congenial environment.
10. Empathy- It is an old adage “Stepping into the shoes of others”. This is very important because fair
judgement and objectivity comes only then. A leader should understand the problems and complaints of
employees and should also have a complete view of the needs and aspirations of the employees. This
helps in improving human relations and personal contacts with the employees.

Differences between Leadership and Management

Leadership differs from management in a sense that:

1. While managers lay down the structure and delegates authority and responsibility, leaders provides
direction by developing the organizational vision and communicating it to the employees and inspiring
them to achieve it.
2. While management includes focus on planning, organizing, staffing, directing and controlling;
leadership is mainly a part of directing function of management. Leaders focus on listening, building
relationships, teamwork, inspiring, motivating and persuading the followers.
3. While a leader gets his authority from his followers, a manager gets his authority by virtue of his
position in the organization.
4. While managers follow the organization’s policies and procedure, the leaders follow their own instinct.
5. Management is more of science as the managers are exact, planned, standard, logical and more of mind.
Leadership, on the other hand, is an art. In an organization, if the managers are required, then leaders are
a must/essential.
 6. While management deals with the technical dimension in an organization or the job content; leadership
deals with the people aspect in an organization.
7. While management measures/evaluates people by their name, past records, present performance;
leadership sees and evaluates individuals as having potential for things that can’t be measured, i.e., it
deals with future and the performance of people if their potential is fully extracted.
8. If management is reactive, leadership is proactive.
9. Management is based more on written communication, while leadership is based more on verbal
communication.

LEADERSHIP STRATEGY

Here are some tips while selecting leadership strategy / style:

A leader must be aware of his / her personality traits and those of his team members /
followers to understand which leadership style will be most effective.

A leader may not adopt a consistent leadership all through his / her career. Situational
Leadership helps addressing varied needs / expectations of the followers as he the leader
adopts a strategy based on a situation he / she is in. In case a leader has a self-reliant team, he
needs to be using a directive leadership style or lead form the front. He could instead delegate
and provide inputs where necessary.

A common mistake especially a lot of new leaders make is to copy established / well know
leaders. Remember, each situation is unique and so are the followers. A leadership style which
may be suited to a well known leader may not be appropriate for your team. Make no mistake
here - do not try and imitate other leaders.

A leader will never be afraid of trying new approach to solve a work problem or address a
conflicting situation. It is quite a possibility that a leader adopts a style that is not by the book.

A leader must keep enhancing his / her leadership skills. While on the job experience matters
a lot, getting enrolled into leadership courses after detailed evaluation of the program and
feedback of the participants will help implementing a leadership style more effectively.

MOTIVATIONAL THEORIES IN MANAGEMENT:

Some of the important theories are explained as under:

(i) Monistic or Economic Theory of Motivation
(ii) Hierarchy of Needs Theory
(iii) Theory of Douglas McGregor
(iv) Herzberg’s Motivation-Hygiene Theory
(v) Equity Theory of Motivation
(i) Monistic or Economic Theory of Motivation:
Monistic theory of motivation is based upon the assumption that individuals are highly
responsive to money reward. People feel highly motivated when rewarded with more money.
People repeat their behaviour if it leads to reward.
The theory assumes that:
a. Motivation is more effective and direct when based upon individual incentives.
b. The incentive is more effective where reward immediately follows the efforts.
c. More the efforts, more the rewards. Thus, efforts are having direct relation with reward.
(ii) Hierarchy of Needs Theory:
In 1943, an American psychologist Abraham Harold Maslow put forward his theory of
human motivation. His theory is based on the Hierarchy of Human Needs. According to
Maslow, human behaviour is related to his needs.
It is adjusted as per the nature of needs to be satisfied. In hierarchy of needs theory, Maslow
has identified five types / sets of human needs arranged in a hierarchy of their importance and
priority.
Maslow’s need hierarchy theory covers the following aspects:
a. There is always an urge to fulfil these needs.
b. Needs are in the form of a structure called as hierarchy.
c. Lower level needs have to be partially satisfied before the higher level needs emerge.
d. As soon as one need is satisfied, another need emerges.
e. A need that is satisfied is not a motivator.
According to Maslow, there are five general categories of needs given in an order:
I. Physiological Needs:
At the base of the hierarchy are the physiological needs, which include basic needs like food,
shelter, clothing, rest and recreation. These basic human needs have priority over all other
needs. These needs cannot be postponed for long. Unless these basic physiological needs are
satisfied, other needs do not motivate an employee.
II. Security Needs:
After satisfying the physiological needs, the next needs felt are safety and security needs.
Security needs are the needs for a safe and secure environment. In the workplace, these are
the needs for job safety, job security, and fringe benefits.
III. Belongingness Needs or Social Needs:
Social needs relate to the desire to have social interaction, friendship, affection,
belongingness with groups, acceptance, affection, and support from others and so on. Such
needs become motivators when physiological and safety needs have been fairly satisfied.
IV. Esteem Needs:
Ego or esteem needs deal with the desire to receive attention and appreciation from others. In
a work environment, this is the need for status and recognition for one’s contributions to the
work group and the organisation.
Esteem needs are of two types:
a. Internal esteem needs / self-esteem (self-respect, confidence, competence, achievement and
freedom)
b. External esteem needs / esteem of others (recognition, power, status, attention and
admiration).
V. Self-Actualization Needs:
Self-actualization needs include the needs for self-fulfilment and competency. At work, this
translates into needs for personal growth, development, and self-respect. This is the highest
among the needs in the hierarchy of needs suggested by Maslow.
Criticism of Maslow’s Need Hierarchy Theory:
Maslow’s need hierarchy theory is criticized on the following grounds:
a. There is lack of direct cause and effect relationship between need and behaviour.
b. Needs are not the sole determinants of motivation.
c. The theory gives an over-simplified version of needs and motivation.
d. The hierarchy of needs cannot be fixed or constant.
e. Satisfaction of a need may or not may not stop its motivating ability.
Hence it can be concluded from Maslow’s theory that human beings generally try hard to
satisfy their basic needs or lower order needs first before looking for satisfaction of higher
order needs.
(iii) Theory of Douglas McGregor:
In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of
human behaviour at work. In other words, two different views of individuals (employees)-
one of which is negative, called as Theory X and the other is positive, so called as Theory Y.
I. Theory X’:
The important assumptions underlying this theory are as follows:
a. Average human being has an inherent dislike of work and will avoid if they can.
b. Because of this human characteristic of disliking work, people must be controlled, directed
and even threatened to put their efforts for achieving an organisational goals.
c. He avoids accepting responsibility.
d. An average person lacks ambition and prefers to be led by someone else.
e. He is self-centered and indifferent to organisations goals.
f. Man resists to change of any type and want security above all.
Conclusion of Theory X:
An Organization with theory X type of management will have close supervision. As per
McGregor, all assumptions about human nature are negative in their approach. So, a manager
has to persuade, punish or reward such workers in order to achieve goals of an organization.
Employees will have little or no influence over business policy. Autocratic type of leadership
is required to lead such kind of people.
II. Theory Y:
According to McGregor, Theory X was based on negative assumptions. So he suggested a
different theory of managing people which was named as Theory Y.
The important assumptions of Theory Y, described by McGregor are:
a. People do not dislike work; work is a natural part of their lives.
b. People are internally motivated to reach objectives to which they are committed.
c. An employee is capable of assuming responsibility and accepting challenge and change.
d. People have the capacity to be innovative in solving organizational problems.
e. This theory further suggests that employees may not require threat, external control and
coercion to work, but they can use self-direction and self-control if they are dedicated and
sincere to achieve the organizational objectives.
Conclusion of Theory Y:
Theory Y is dynamic and flexible as an average employee is a sociable and smart person. An
average person likes work, capable of assuming responsibility and accepting challenge and
change, ambitious, and achievement-oriented.
Managers practicing theory Y attempt to get maximum output from their employees with
minimum amount of supervision and control. Here, individual goals are coordinated with
organizational goals. He is competent to exercise self-direction and self-control.
Thus, we can say that Theory X presents a pessimistic view of employees’ nature and
behaviour at work, while Theory Y presents an optimistic view of the employees’ nature and
behaviour at work.
Criticism:
The critics point out that – Although McGregor suggests the key to motivation is ‘job’,
however in reality not everyone looks for motivation from the ‘job’ he / she does. There can
be many more factors for motivation. A manager may also switch between the two
approaches based on the requirements of the situation.
(iv) Herzberg’s Motivation-Hygiene Theory:
(A) Motivational Factors or Satisfiers:
Motivators are job content factors and are inherent in the job. These factors have a positive
influence on morale, satisfaction, efficiency and high productivity.
Some of these factors are:
(a) Job itself
(b) Recognition
(c) Responsibility
(d) Achievement
(e) Growth & advancement.
Employees find these factors inherently rewarding. When motivation factors are present in
job, they could cause satisfaction and motivation; when they are not present, the people feel
no satisfaction or no motivation.
They are also called as satisfiers. Motivating factors motivate subordinates to take more
interest in the work. Such factors raise efficiency and productivity of employees. As per
Frederick Herzberg, motivating factors are essential in order to provide job satisfaction and to
maintain a high level of job performance.
(B) Hygiene Factors:
Hygiene factors also called as maintenance factors, dissatisfiers or extrinsic factors because
they only help in maintaining the existing level of performance on the job. They are called as
dissatisfiers because their absence dissatisfy the workers and lead to decline in their
performance of workers from that of the existing level. They are called extrinsic because they
are related to the work environment (job context) and not to the job content.
Some of the hygiene factors are:
(a) Wages.
(b) Salary.
(c) Types of employee benefits.
(d) Company policies that govern the working environment.
(e) Inter-personal relations with peers, supervisors, subordinate.
(f) Working conditions and job security.
Criticism:
Herzberg theory is criticized on the following reasons:
1. He gave much stress on satisfaction rather than performance.
2. This theory was based on data from a small sample of 200 accountants and engineers. It is
insufficient size of sample and representation.
3. The theory ignores manual workers and is only applicable to knowledge workers.
4. The theory doesn’t give any clear difference in motivators and maintenance factors.
5. Herzberg theory of motivation is not free from bias; motivation seekers are motivated
basically by the nature of the task whereas maintenance seekers are motivated by the nature
of the environment.
(v) Equity Theory of Motivation:
J. S. Adams formulated Equity theory of motivation in 1965 in USA. Adams’s theory is
based on the basic assumption that members of an organisation expect justice, fairness and
balance in the treatment they get from employers. As per J. C. Adams, individuals’
motivation level is concerned with his perception of fairness, equity, justice practiced by the
management.
This theory of motivation is based on two assumptions about human behaviour:
1. Individuals make contributions (inputs) for which they expect certain outcomes (rewards).
Inputs include employees training, experience, skill etc. Outcomes include wages, promotion,
status, recognition etc.
2. Individuals decide whether or not a particular exchange is satisfactory, by comparing their
inputs and outcomes to those of others in the form of a ratio.
Major Components of Equity Theory:
1. Person- These are the people who perceives themselves in relation to other people.
2. Other- These are the people that are the basis of the comparisons made.
3. Inputs- Inputs are what an individual perceives as what he has put into the job.
4. Outcomes- Outcomes are rewards he gets from the organisation.
Other highlights of the theory are:
1. Motivation depends on the equity between inputs and outcomes.
2. An individual also compares equity he gets with that of another person in (the same or)
another organisations doing a similar job. He expects equity between these two also.
3. An individual who feels that the outcomes he receives are fair in comparison to his inputs
will be satisfied and motivated.
According to Adams, Equity is perceived when the ratio is equal. In other words, equity
exists when an individual concludes that his/her own outcomes/input ratio is equal to that of
other people. And if the ratio is unequal, then it will create a negative tension in an
employee’s mind and thus he will be motivated to reduce his tension.
Criticism:
Adams theory is criticized on the following reasons:
1. It provides narrow explanation of motivation.
2. The theory is insufficient in explaining the process by which an individual will choose a
comparison with others.
3. Equity theories explain the relationship of employee’s motivation with perception and
feeling of the employee and thus ignores the other factors influencing human behavior.
OVERVIEW OF PROJECT CONTROLS
Project controls are all-encompassing for project definition, planning, execution, and
completion; assisting in the entire lifecycle of your project. As we said before, the use of
controls will vary according to individual project demands, but project controls address,
organize, and of course control the following aspects of your project management system:
1. Developing your project strategy; defining methods that will enhance the future PM
software use and project outcomes
2. Development, updates, and maintenance scheduling for the PM software
3. Estimating project costs; engineering and controlling costs and assessing project value
4. Managing risks; assessing and analyzing project risks, and cataloging past risks and how to
avoid future risks
5. Earned schedule and earned value management, including both work and organizational
breakdown structures
6. Controlling project documentation
7. Diagnosing project scheduling and costs with forensic assessment procedures
8. Oversight and quality assessment of supplied materials
9. Comprehensive integration of the elements of control and other domains of project
management
The importance of project controls
Now that you know the scope of what project controls provide for your PM software, let us
go over why these controls are important. The opposite of control is chaos, disorganization,
bedlam, which are plain anathema to successful project management.
Successful project execution first begins with planning the process of execution. So how do
project controls fit in?
To craft a well thought-out plan for executing your projects can only happen if you have a
sufficient set of controls in place for your project scheduling methods. A project control
system that will work for your company goals is essential to take full advantage of your PM
software, and guarantee smooth sailing
The concept of project management has been in place going back to the mid 20th century.
Over the course of the past several decades, it has been demonstrated time and time again
how a lack of adequate planning and thoroughly attentive monitor can almost certainly result
in project failure. Hence, the development of PM software in conjunction with project control
tools are aimed at fixing scheduling missteps.
How to set your project controls in 10 simple steps
Setting smart, effective project controls begins well before the execution stage of your
project. Monitoring and control go hand in hand with each other for every stage of your
project. Controls and monitoring should be solidified by using each of the following steps:
1. Determining the scope of the project; explaining and communicating every aspect of the
project to all members of the team.
2. Team structure and assigning tasks; determining who is best suited for each required task,
how many members are assigned to each team, and planning on how to monitor progress.
3. Predetermined risk factors; knowing which risks are worth taking, and which are
guaranteed to sabotage project success. Setting a risk management plan to mitigate risks
before they can become real project threats will save you a boundless amount of pain when
risks are managed,
4. Adaptability contingencies; both internal and external factors can demand that a project
must change its course. Plan for the unexpected, but possible factors that would demand
change to your project process, and set contingencies to adapt to change.
5. Monitoring of project status; set a schedule and determine a method (i.e. whether in person
regular meetings, or the submission of written reports) for monitoring how well or poorly
your project is progressing. Also, if the project is moving along ahead of schedule,
investigate and find what is facilitating the rapid progress. Apply the factors to future
projects. The same rings true in the opposite scenario, when your status is behind schedule.
You will then know what to monitor for and avoid in future projects, saving valued time and
money.
6. Plans for effective communication; obviously your lines of communication should be
efficient and transparent, but pay equal care to your plans for communicating with both
customers and project stakeholders alike.
7. Deadlines and budgeting; set in place a plan for establishing the initial project costs,
keeping track of changes to the budget by regular communication with the accounting
department, and ensuring that deadlines are met. Also, develop a contingency plan for if and
when a deadline is not met, how to avoid future deadline failures.
8. Analysis/evaluation; set a system for evaluating and analyzing how well each element of
the project planning and execution is contributing to the overall project success within the
scope of the project. Is anything missing? Do you need to allocate more resources or reassign
personnel? A system should be in place to solve questions (and all others) like these during
both execution and planning.
9. Corrective contingencies; following step 8, if there are indicators that corrections should be
made to the project or, that you discovered that some of your bases are not covered, plan not
only for a system to implement changes, but also for contingencies in case the corrections
also include their own set of complications. You cannot predict the future, but you
can imagine it and set plans to do your best to control the future.
10. Planning for project presentation; determine the people that will be responsible for
presenting the final product, the required supplies if any, and whom to present to. Also, plan
for how to address handling status.
THE BUILDING AND OTHER CONSTRUCTION WORKERS (REGULATION OF
EMPLOYMENT AND CONDITIONS OF SERVICE) ACT, 1996
In building and other construction works more than eight million workers are engaged
throughout the country. These workers are one of the most vulnerable segments of the
unorganised labour in India. Their work is of temporary nature, the relationship between
employer and the employee is temporary, working hours are uncertain. Basic amenities and
welfare facilities provided to these workers are inadequate. Risk to life and limb is also
inherent. In the absence of adequate statutory provisions to get the requisite information
regarding the number and nature of accidents was quite difficult and due to this to fix
responsibility or to take corrective measures was not an easy job. Although the provisions of
certain Central Acts were applicable to the building and other construction workers yet a need
was felt for a comprehensive Central Legislation for regulating the safety, welfare and other
conditions of service of these workers. In pursuant to the decision of the 41 st Labour
Ministers Conference held on 18th May, 1995, the Committee of State Labour Ministers had
expressed its consensus for the Central Legislation on this subject. In order to regulate the
employment and conditions of service of building and other construction workers and to
provide for their safety, health and welfare measures the Building and Other Construction
Workers (Regulation of Employment and Conditions of Service) Ordinance, 1995 (Ord. 14 of
1995) was promulgated by the President on 3rd November, 1995 as the Parliament was /not
in session. To replace this Ordinance a Bill was introduced in the Lok Sabha on 1st
December, 1995. Since the Bill could not be taken up for consideration it lapsed. On
5th January, 1996 the President promulgated the Building and Other Construction Workers
(Regulation of Employment and Conditions of Service) Ordinance, 1996 (Ord. 3 of 1996). To
replace this Ordinance a Bill was introduced in the Parliament which could not be passed and
the President promulgated the Building and Other Construction Workers (Regulation of
Employment and Conditions of Service) Second Ordinance, 1996 (Ord. 15 of 1996) on 27th
March, 1996. As this Ordinance could not be replaced by an Act of Parliament the President
promulgated the Building and Other Construction Workers (Regulation of Employment and
Conditions of Service) Third Ordinance, 1990 (Ord. 25 of 1996) on 20th June, 1996. In order
to replace this Ordinance the Building and Other Construction Workers (Regulation of
Employment and Conditions of Service) Bill was introduced in the Parliament.

PAYMENT OF WAGES ACT

OBJECT OF THE ACT:

The Payment of Wages Act regulates the payment of wages to certain classes of persons
employed in industry and its importance cannot be under-estimated. The Act guarantees
payment of wages on time and without any deductions except those authorised under the Act.
The Act provides for the responsibility for payment of wages, fixation of wage period, time
and mode of payment of wages, permissible deduction as also casts upon the employer a duty
to seek the approval of the Government for the acts and permission for which fines may be
imposed by him and also sealing of the fines, and also for a machinery to hear and decide
complaints regarding the deduction from wages or in delay in payment of wages, penalty for
malicious and vexatious claims. The Act does not apply to persons whose wage is Rs.
24,000/- or more per month. The Act also provides to the effect that a worker cannot contract
out of any right conferred upon him under the Act.

APPLICATIONS:

(1) This Act may be called the Payment of Wages Act 1936.

(2) It extends to the whole of India.

(3) It shall come into force on such date as the Central Government may by notification in the
Official Gazette appoint.

(4) It applies in the first instance to the payment of wages to persons employed in any factory
to persons employed (otherwise than in a factory) upon any railway by a railway
administration or either directly or through a sub-contractor by a person fulfilling a contract
with a railway administration and to persons employed in an industrial or other establishment
specified in sub-clauses (a) to (g) of clause (ii) of section 2.

(5) The State Government may after giving three months' notice of its intention of so doing
by notification in the Official Gazette extend the provisions of this Act or any of them to the
payment of wages to any class of persons employed in any establishment of class of
establishments specified by the Central Government or a State Government under sub-clause
(h) of clause (ii) of section 2:

Responsibility for payment of wages [Section 3].

Every employer shall be responsible for the payment to persons employed by him of all
wages required to be paid.

 In the case of the factory, manager of that factory shall be liable to pay the wages to
employees employed by him.
 In the case of industrial or other establishments, persons responsibility of supervision shall
be liable for the payment of the wage to employees employed by him.
 In the case of railways, a person nominated by the railway administration for specified
area shall be liable for the payment of the wage to the employees.
 In the case of contractor, a person designated by such contractor who is directly under his
charge shall be liable for the payment of the wage to the employees. If he fails to pay
wages to employees, person who employed the employees shall be liable for the payment
of the wages .

Workmen's Compensation Act, 1923

The Workmen’s Compensation Act, 1923 provides for payment of compensation to workmen
and their dependants in case of injury and accident (including certain occupational disease)
arising out of and in the course of employment and resulting in disablement or death. The Act
applies to railway servants and persons employed in any such capacity as is specified in
Schedule II of the Act. The schedule II includes persons employed in factories, mines,
plantations, mechanically propelled vehicles, construction works and certain other hazardous
occupations.

The amount of compensation to be paid depends on the nature of the injury and the average
monthly wages and age of workmen.The minimum and maximum rates of compensation
payable for death (in such cases it is paid to the dependents of workmen) and for disability
have been fixed and is subject to revision from time to time.

A Social Security Division has been set up under the Ministry of Labour and Employment ,
which deals with framing of social security policy for the workers and implementation of the
various social security schemes. It is also responsible for enforcing this Act. The Act is
administered by the State Governments through Commissioners for Workmen's
Compensation.

The main provisions of the Act are:-

 An employer is liable to pay compensation:- (i) if personal injury is caused to a

workman by accident arising out of and in the course of his employment; (ii) if a
workman employed in any employment contracts any disease, specified in the Act as
an occupational disease peculiar to that employment.
 However, the employer is not liable to pay compensation in the following cases:-

1. If the injury does not result in the total or partial disablement of the workman
for a period exceeding three days.
2. If the injury, not resulting in death or permanent total disablement, is caused
by an accident which is directly attributable to:- (i) the workman having been
at the time of the accident under the influence of drink or drugs; or (ii) the
willful disobedience of the workman to an order expressly given, or to a rule
 expressly framed, for the purpose of securing the safety of workmen; or (iii)
the willful removal or disregard by the workman of any safety guard or other
device which has been provided for the purpose of securing safety of
workmen.

 The State Government may, by notification in the Official Gazette, appoint any person to
be a Commissioner for Workmen's Compensation for such area as may be specified in the
notification. Any Commissioner may, for the purpose of deciding any matter referred to him
for decision under this Act, choose one or more persons possessing special knowledge of
any matter relevant to the matter under inquiry to assist him in holding the inquiry.
 Compensation shall be paid as soon as it falls due. In cases where the employer does not
accept the liability for compensation to the extent claimed, he shall be bound to make
provisional payment based on the extent of liability which he accepts, and, such payment
shall be deposited with the Commissioner or made to the workman, as the case may be.
 If any question arises in any proceedings under this Act as to the liability of any person to
pay compensation (including any question as to whether a person injured is or is not a
workman) or as to the amount or duration of compensation (including any question as to the
nature or extent of disablement), the question shall, in default of agreement, be settled by a
Commissioner. No Civil Court shall have jurisdiction to settle, decide or deal with any
question which is by or under this Act required to be settled, decided or dealt with by a
Commissioner or to enforce any liability incurred under this Act.
 The State Government may, by notification in the Official Gazette, direct that every
person employing workmen, or that any specified class of such persons, shall send at such
time and in such form and to such authority, as may be specified in the notification, a
correct return specifying the number of injuries in respect of which compensation has been
paid by the employer during the previous year and the amount of such compensation
together with such other particulars as to the compensation as the State Government may
direct.
 Whoever, fails to maintain a notice-book which he is required to maintain; or fails to send
to the Commissioner a statement which he is required to send; or fails to send a report which
he is required to send; or fails to make a return which he is required to make, shall be
 punishable with fine.

MINIMUM WAGES ACT

The Minimum Wages Act 1948 is an Act of Parliament concerning Indian labour law that
sets the minimum wages that must be paid to skilled and unskilled labours.

The Indian Constitution has defined a 'living wage' that is the level of income for a worker
which will ensure a basic standard of living including good health, dignity, comfort,
education and provide for any contingency. However, to keep in mind an industry's capacity
to pay the constitution has defined a 'fair wage'. Fair wage is that level of wage that not just
maintains a level of employment, but seeks to increase it keeping in perspective the industry’s
capacity to pay.

To achieve this in its first session during November 1948, the Central Advisory Council
appointed a Tripartite Committee of Fair Wage. This committee came up with the concept of
a minimum wage, which not only guarantees bare subsistence and preserves efficiency but
also provides for education, medical requirements and some level of comfort.

India introduced the Minimum Wages Act in 1948, giving both the Central government and
State government jurisdiction in fixing wages. The act is legally non-binding, but statutory.
Payment of wages below the minimum wage rate amounts to forced labour. Wage boards are
set up to review the industry’s capacity to pay and fix minimum wages such that they at least
cover a family of four’s requirements of calories, shelter, clothing, education, medical
assistance, and entertainment. Under the law, wage rates in scheduled employments differ
across states, sectors, skills, regions and occupations owing to difference in costs of living,
regional industries' capacity to pay, consumption patterns, etc. Hence, there is no single
uniform minimum wage rate across the country and the structure has become overly complex.
The highest minimum wage rate as updated in 2012 was Rs. 322/day in Andaman and
Nicobar and the lowest was Rs. 38/day in Tripura. In Mumbai, as of 2017, the minimum
wage was Rs. 348/day for a safai karmachari (sewage cleaner and sweeper), but this was
rarely paid.

Fixation and revision of minimum wages

The Minimum Wages Act 1948 generally specifies minimum wage rates on a per day
basis, and extends to the entire country and is revised within a period of not less than five
years, however there is a provision to increase dearness allowance every two years. The
norms in fixing and revision of minimum wages were first recommended by ILC, 1957.

Revision of minimum wage rates is based on a 'cost of living index' and wages can be fixed
for an entire state, part of the state, class or classes and employments pertaining to these
categories. The fixation of wages is based on the norms mentioned and a wage board
(different for different industry).

Under the Minimum Wages Act, State and Central Governments have the power to fix and
revise minimum wages. The act specifies that the "appropriate" government should fix the
wages i.e. if the wages to be fixed are in relation to any authority of Central government or
Railway administration then the Central government fixes it. However, if the wage rate is to
be fixed or revised for a scheduled employment, the respective state governments fix it. The
Centre fixes the National floor level Minimum Wage that is lower than most states' respective
minimum wages. The ambiguity and overlap in the jurisdiction of both these tiers of
government have caused debates and controversies. One of such debates revolves around
fixing wage rates of MGNREGA scheme, an employment guarantee initiative by the Central
Government

As per Section 5 of the Minimum Wages Act, 1948, there are two ways of fixing and/or
revising minimum wages • Committee Method: Committees and Sub-committees are set up
to make recommendations or create inquiries. • Notification Method: The government
publishes proposals and an official date in the Official Gazette. All advice and
recommendations form various committees and sub-committees as well as representations are
collected before the specified official date and the government then proceeds to fix/revise
minimum wages.

ISSUES IN ACT

42% of all wage earners in India receive wages below the national minimum wage floor rate.
[62]
The data used for these statistics includes half of casual labourers and 1/4th of those
salaried. Female workers and those in rural areas are more likely to be paid below a minimum
wage. Those who are illiterate or have no mid-level education are most likely to be paid
below a minimum wage. For Salaried workers, if they are employed in agriculture, it is more
likely that they are paid higher than the minimum wage. Whereas casual workers in
construction and unionised workers in production and manufacturing are likely to receive
wages at the minimum wage rate. In sum, the implementation and enforcement of minimum
wages is dismal and marginalised groups and communities suffer the most. The government
has announced that many amendments are underway to improve enforcement such as penal
action against violations and mandatory revision of minimum wages every 5 years.

 Large unemployment: Ensuring a payment at the minimum wage rate does not
ensure employability to a willing worker. Many workers out of desperation then accept a
wage below the minimum wage. Workers are too weak and vulnerable to demand their
rights and after liberalisation, collective rights to have grown weaker with decreasing
power of trade unions. These two factors combined give the employer the capacity to
offer employment at wages below the minimum wage rate. There have also been cases
where workers are paid wages below the minimum wage floor in government funded
road and construction projects.

 Less protection against inflation: Real minimum wage rates may decline in the face of
accelerating inflation for three main reasons. Firstly, wages are not revised as frequently
as prescribed in the norms i.e. not more than five years. In fact it is believed that revision
every three years and even alternate years not only to help workers from increasing costs
of living but also to improve supervision of the act. Secondly, many states do not provide
for dearness allowance, a safeguard against inflation and finally minimum wages are not
linked to a cost of living index.

 Exemptions from payment of minimum wages: Government projects have been known
to resort to various channels for paying wages below the minimum wage rate. They use
methods such as special notifications and exemption clause (26-2) of the Minimum
Wages Act. The parliamentary sub-committee, 1987 noted that wages of government
programs such as NREP and RLEGP were below the prescribed minimum wage rate.
Many professions and industries do not fall under the coverage of the act, for the simple
 reason that no minimum wage has yet been prescribed, hence employers pay wages on
their own discretion.

 Lack of awareness: Many citizens are not aware of the existence of a statutory provision
that ensures a minimum wage rate. "80% of workers earn less than INR 20/day or less
than half of government stipulated minimum wage rate (rural INR 49 and urban INR
67)”. On certain instances of doubt among workers on existence of a minimum wage rate,
officials have denied claims of any statutory act or legislation.

 Delays and inaction: There are delays in appointment of committees for fixation,
revision and implementation. A lot of industries and industries do not fall under the
purview of the act as their specific minimum wage rates are yet to be fixed. Permanent
Labour Inspectors have not been posted in many districts and those posted are known to
not visit their districts regularly. For instance in 2008, inspections in Arunachal Pradesh
were as low as 7 while Maharashtra reported to have 71651 inspections.

 Terminology: The government and its committees have defined three types of wages:
'living wage', 'minimum wage' and 'fair wage'. These concepts are vague in definition and
correspond to a utopia where the government and industry could afford them