Review

Project management
midterm exam
Content
Chap 1: Basic concepts of project management
Chap 2: Strategic management and project selection
Chap 3: The project manager
Chap 4: Conflict and negotiation
Chap 5: Project in the organizational structure
Chap 6: Project planning

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 Chap 1: Basic concepts of project management
✘ Project’s characteristics:
Complexity: Project’s subtasks have a high degree of interdependencies, and
therefore require careful co-ordination and control in terms of timing,
precedence, cost and performance.
Uniqueness: is a characteristic of a particular project that has special or
unequalled parameters that determine the project’s originality and
authenticity. It describes an absolute state of the project as compared to other
projects( strategic, operational, time, cost, quality, HR,..)
Limited lifetime with common phases: Projects are complex effort that
start and end. Most projects go through similar phases on the path from origin
to completion: Initiation (Concept), Development, Implementation, and
Termination.
Chap 1: Basic concepts of project management
✘ Constraints of project:
Ex: building a coffee shop
Cost (budget limit)
_ Time: 1 month
Time (schedule) _ Budget: not over 100mil
Performance (scope) VND
Quality _ Scope: As per architect’s
blueprint specifications
_ Quality: space to
pleasure customers
✘ Why is project management important?
The main purpose for initiating a project is to accomplish
some goals
Project management increases the likelihood of
accomplishing that goal
Project management gives us someone (the project
manager) to spearhead the project and to hold
accountable for its completion
The purpose of the project management is obtaining
better control and use of existing resource (internally)
…
✘ Project life cyle:
Chap 1: Basic concepts of project management

✘ Project objectives: A project objective describes the desired results of a

project, which often includes a tangible item. An objective is specific and
measurable, and must meet time, budget, and quality constraints.

✘ Risk associated with project:

_ Cost risk
_ Schedule risk
_ Governance risk
_ Strategic risk
_ Operational risk
_ Market risk
…
 Chap 3: Project manager
✘ Project manager vs Functional manager
• Functional manager: • Project manager:
o Direct, technical specialist o Facilitators and generalists
o Technical skills o Negotiation skills
o More skilled at analysis o More skilled at synthesis
o Use the analytic approach o Use systems approach
o Act as managers o Act as facilitators
o Responsible for a small area o Responsible for the big picture
✘ Project manager’s requirements:
Credibility
_ Technical credibility
_ Administrative credibility
Sensitivity
_ Political sensitivity
_ Interpersonal sensitivity
_ Technically sensitivity
Leadership, ethics and management style
Ability to handle stress
✘ Effective project manager:
 Lead by example
 Are visionaries
 Are technically competent
 Are decisive
 Are good communicators
 Are good motivators
 Stand up to top management when necessary
 Support team members
 Encourage new ideas
✘ Roles and responsibilities of project manager:
Activity and resource planning
Organizing and motivating a project team
Controlling time management
Cost estimating and developing the budget
Ensuring customer satisfaction
Analyzing and managing project risk
Monitoring progress
Managing reports and necessary documentation
…
✘ Environmental and culture issues
Project managers must adapt to the social and cultural
environment in which they are working.
Chap 4: Conflict and negotiation

✘ Categories of conflicts:

Groups working on the project may have different goals and

expectations.

There is significant uncertainty about who has the

authority to make decisions.

There are interpersonal conflicts between people who are

parties-at-interest in the project.
How to solve conflict:
✘ Example:
After running the project in 1 week, deadline is 3 month. Top management
told the leader want you join some technical department employees in
your project team. After their joining the older members and new
members are not ready to understand each other. Technical department
style of doing project is different from the others. It results into conflict
between the team members. So leader decided to make them understand
but they are not listening to the leader with full understanding as well.
Therefore leader use “collaborating style” that both of them decided to
arrange a meeting of all the team members and listen to their pros and
cons about the project and why they are refusing to other team member’s
view point. Everybody who has any issue speaks clearly and openly and
after this meeting all the doubts in the minds of team members about each
other’s view point and project ended. From next day they started very fresh
and work on the project.
✘ Requirements of negotiation
Requirement of all conflicting parties to seek solutions to the conflict
that not only satisfy their own individual needs, but also satisfy the
needs of other parties to the conflict, as well as the needs of the
parent organization.

✘ Principled negotiation
Separate the people from the problem
Focus on interests, not positions
Before trying to reach agreement, invent options for mutual gain
Insist on using objective criteria
Chap 5: Project in the organizational structure

✘ Project and other superior organizations

Functional organization
Projectized organization
Matrixed organization
✘ Functional organization
A functional
organizational
structure is composed
by project team
members allocated
according to the
different functional units
of an organization
✘ Advantages
_ The projects are completed within the basic functional
structure of the organization. There is no radical change in the
operations and structure of the organization.
_ With many specialists available within each functional
department, people can be exchanged between different
projects with relative ease.
_ If the primary responsibility of the project is assigned to the
correct functional unit, it is possible to make use of in-depth
expertise on the most crucial aspects of the project.
_ Incubator for potential experts.
✘ Disadvantages
_ Each functional unit has its own basic work to do and it
happens that project responsibilities are set aside to meet
these primary obligations. This becomes even more difficult
when the project has different priorities for different units.
_ There may be poor integration between functional units.
Functional specialists tend to care only about their own
project segment and not what is best for the project in
general.
_ In general, more time is needed to complete projects within
a functional organizational structure.
_ The motivation of the people assigned to the project may be
weak.
✘ Functional organization good for:

In-depth application of a technology.

Large capital investment, especially when that investment is

concentrated in one functional area.
✘ Projectized organization
A projectized
organization structure is
designed or set up in a
way that the project
manager is on the top of
the hierarchy and has the
full power in any decision
that is involved in the
project.
✘ Advantages
_ Team members are loyal to the project goal.
_ Team members report directly to project managers; the line
of authority is clear. This reduces conflict and decision making
is faster and more flexible.
_ A single reporting system helps shorten communication
lines, creating effective communication within the team.
_ Communication is fast because of a single authority. This
helps solve stakeholders’ concerns quickly.
_ Being the only authority, project managers can make quick
decisions and complete the project faster.
…
✘ Disadvantages
_ Absolute authority can make project manager arrogant.
Lack of power is an issue in a functional organizational
structure, while absolute authority can be an issue in a
projectized organization.
_ Projects always have deadlines and tight schedules, which
can make the work environment stressful.
_ Poor communication can cause resource duplication if there
are multiple projects.
_ There is a sense of insecurity among the team members.
They know they may lose their jobs once the project is
finished. They tend to be less loyal to the organization.
…
✘ Projectized organization good for:

Handling a large number of similar projects.

Handling a one-time project that requires much control, but is

not focused on one functional area.
✘ Matrix organization The matrix organizational
structure is a combination
of two or more types of
organizational structures.
The matrix organization is
the structure uniting these
other organizational
structures to give them
balance. Usually, there are
two chains of command,
where project team
members have two bosses
or managers.
✘ Advantages
_ Allows the sharing of highly skilled resources between
functional units and projects. Communications are open,
which helps knowledge move throughout the organization
with less obstruction.
_ Employess can be part of many different aspects of various
projects. It puts them in an environment that facilitates
learning and gives them an opportunity to grow
professionally.
_ Efficiencies are enhanced, and teams remain loyal because
the structure provides a more stable environment where job
security is strengthened.
…
✘ Disadvantages
_ There can be some confusion when a team member is
subject to two managers. That can also create unnescessary
conflict.
_ There is the functional manager and project manager. There
can be some sparks flying between these two managers in
terms of what they believe to be the authority in the
organization.
_ Workload of employees can be heavy.
…
✘ Variations of matrix organization
Weak, balanced and strong matrix
✘ Matrix organization good for:

Projects that require inputs from several functional areas.

Projects that use technology from several functional areas.

✘ Example:

The world-recognized Dutch origin multinational organization

Phillips which in the year 1970 set up the matrix organization
structure in its company. The managers now had to report to
both the product division and geographical managers.
Chap 2: Project selection

✘ Nonnumeric models
✘ Numeric models
✘ Numeric models

_ Models that return a numeric value for a project that can be

easily compared with other projects.

_ Two major categories:

1. Profit/profitability
2. Scoring
✘ Profit/profitability models
_ Payback period
_ Discounted cash flow(NPV)
_ Internal rate of return(IRR)
_ Profitability index
✘ Payback period
The payback period refers to the amount of time it takes to
recover the cost of an investment. Simply put, the payback
period is the length of time an investment reaches
a break-even point.

Ex: if solar panels cost $5,000 to install and the savings are
$100 each month, when is the payback period?

Payback period = $5,000 / $100 = 50 months = 4.2 yrs

So, it would take 4.2 years to reach the payback period.
✘ Ex: What is the payback period for the following set of
cash flows?
✘ Solution:
year Cash flow Collected
payback
1 2,700 2,700

2 1,400 4,100

3 1,700 5,800

4 2,600 8,400
✘ Discounted payback period:

Future value:
 ✘ Ex: Your investment is $5,800. Discount rate of 10%. What
is the payback period for the following set of cash flows?
Solution:

year Cash flow Discounted cash flow Collected

payback
1 $2,700 $2,700 x 1.10-1 = $2454.55 $2454.55
2 $1,400 $1,400 x 1.10-2 = $1157.02 $3611.57
3 $1,700 $1,700 x 1.10-3 = $1277.24 $4888.81
4 $2,600 $2,600 x 1.10-4 = $1775.83 $6664.64
✘ Net present value(NPV)
The NPV technique is a discounted cash flow method that
considers time value of money in evaluating capital
investments.
Format:
Year Cash flows Discounting Present value
factors
0 Initial investment
1
2
NPV xxxxxxxxx

Decision rules: if NPV > 0 Accept

if NPV < 0 Reject
✘ Formula
✘ Ex: calculate NPV of the project and suggest which of the
project should be accepted assuming discount rate is
10%.
Project A
Initial $40,000
investment
Estimated life 5 yrs
scrap value $2,000

Cash flow:
year 1 2 3 4 5
Project A 10,000 20,000 20,000 6,000 4,000
✘ Solution:
year Cash Discounte PV
flows d cash
flow
0 (40,000) 1 (40,000)
1 10,000 1.10-1 9,090
2 20,000 1.10-2 16,520
3 20,000 1.10-3 15,020
4 6,000 1.10-4 4,098
5 4,000 1.10-5 2,484
scrap 2,000 1.10-5 1,242
NPV 8,454
✘
✘ Example:
calculate PI of the project and suggest which of the project
should be accepted assuming discount rate is 10%.
Project A
Initial $40,000
investment
Estimated life 5 yrs
scrap value $2,000

year 1 2 3 4 5
Project A 10,000 20,000 20,000 6,000 4,000
✘ Solution:
year Cash Discounte PV
flows d cash
flow
0 (40,000) 1 (40,000)
1 10,000 1.10-1 9,090
2 20,000 1.10-2 16,520
3 20,000 1.10-3 15,020
4 6,000 1.10-4 4,098
5 4,000 1.10-5 2,484
scrap 2,000 1.10-5 1,242
✘ Weighted scoring
Definition: Weighted scoring prioritization uses numerical
scoring to rank your strategic initiatives against benefit and
cost categories. It is useful for product teams looking for
objective prioritization techniques that factor in multiple
layers of data.
✘ Example
Chap 6: project planning

✘ Work breakdown structure:

Define what needs to be done in the project and the order in
which activities and their tasks should be completed
Determine what resources are required and when they will be
required or in project terminology “allocated”
Define tasks for delegation and the skills set required
✘ WBS structures:
✘ Example
✘ Decision tree analysis
A Decision Tree Analysis is a graphic representation of
various alternative solutions that are available to solve a
problem. The manner of illustrating often proves to be
decisive when making a choice. A Decision Tree Analysis is
created by answering a number of questions that are
continued after each affirmative or negative answer until a
final choice can be made.
✘ Decision tree nodes

Decision point

Chance point
✘ Example
Thank you!