PROJECT

MANAGEMENT
MIDTERM REVISION
Content For Midterm Exam
CHAPTER 1:Introduction Project Management

CHAPTER 2: Strategic Management and Project Selection

CHAPTER 3: The Project Manager

CHAPTER 4: Managing Conflict and the Art of Negotiation

CHAPTER 5: The Project in the Organizational Structure

CHAPTER 6: Project Activity and Risk Planning

 Chapter 1: Introduction Project
Management
Program: Long-term plan with large and long-term objectives including a set of

projects
Project: process including tasks, and work packages related together which can

be done in order to achieve the goals within the constraint of time, resources,

and budget

Task: short-term effort within weeks or a month done by any organization and this

organization can combine with other tasks to implement the project

 7 PROJECT'S CHARACTERISTICS
Importance: The most crucial attribute of a project is that it must be important enough in the
eyes of senior management
Scope: A set of desired end results (purposes)
Limited lifetime with common phases: start/ end - life cycle (must be terminated by some due
date.)
Interdependencies: Projects often interact with other projects being carried out simultaneously
by their parent organization.
Resources: Projects have limited budgets,
Uniqueness: The results must be unique
Conflict: Projects compete with functional departments for resources and personnel
 CHAPTER 3: PROJECT MANAGER
Functional Manager Project Manager

Technical skills Facilitators and generalists

More skilled atanalysis Negotiation skills

Analytically oriented More skilled at synthesis

Use the analytic approach Use a systems approach

Administratively responsible for Act as facilitator

decision making Responsible for the big picture

Responsible for a small area
Direct, technical supervisor
 Key criteria for PM selection
Technical Credibility
Credibility
Administrative credibility

Political sensitivity
Sensitivity Interpersonal sensitivity
Technically sensitivity

Leadership, ethics, and managementstyle

Ability to handle stress

 CHAPTER 4: CONFLICTS and
NEGOTIATION
Categories of conflicts

1.Groups working on the project may have different goals and expectations.

2. There is significant uncertainty about who has the authority to make decisions.

3.There are interpersonal conflicts between people who are parties at interest

in the project.
 Source of Conflicts
The different goals and objectives of the project manager, senior management, and
functional managers are amajor and constant source of conflict

For example, senior management is apt to fix all three parameters of the project—time,
cost, and scope—and then assume that the PM will be able to achieve all the preset
targets. Underestimation of cost and time is a natural consequence of this practice, and it
leads directly to conflict between the PM, as a representative of the project team, and
senior management

The PM tries to pass the stringent cost and time estimates along to functional managers
whose units are expected to perform certain work on the project. More conflict arises
when the functional managers complain that they cannot meet the time and cost
restrictions

The client’s priorities and schedule, whether an inside or outside client, may differ
radically from those of senior management and the project team.
 CHAPTER 5: THE PROJECT INORGANIZATIONAL
STRUCTURE
Functional Organization
The project in organizational structure: is composed of project team members allocated according to the
different functional units of an organization

Flexibility of staff, resources

Better use of resources for multiple projects inside the
department
ADVANTAGES Exchange of ideas, knowledge, and assistance among experts
(Read more on textbook page 179)
inside the department
Retain knowledge and know-how inside department and
organization; continuity
Incubator for potential experts
DISADVANTAGES (Read more on textbook page 179)

The project may not receive the focus needed

Functional organization is good for:
inside the functional dept., when other daily

activities are going on, and slow response to In-depth application of

project issues technology.
Discipline-oriented rather than problem-oriented

No dedicated PM may result in chaos Large capital investment,

More priorities are given to tasks related to the especially when that investment is
concentrated in one functional
department
area.
Lack of motivation, as project staff are not “seen”

Lack of holistic view to address problems or better

serve the clients

 Projectized Organization
Is designed or set up in a way that the project manager is on the top of the hierarchy and
has full power in any decision that is involved in the project.

The PM has total authority, a single boss

The staff are also responsible to one boss only
Communications are streamlined, and decision making quicker,
ADVANTAGES with better responses tochanges
(Read more on textbook page 180)
Project identity is promoted
Better commitment and motivation
The structure is easily understood, the better working
atmosphere in general
Problems are solved with a holistic approach
DISADVANTAGES (Read more on textbook page 182)

Resources and efforts, not shared but

Projectized organization good for:
duplicated and wasted
Excess resources tend to be stored idly in
Handling a large number of similar
individual projects to be ready “when
projects.
necessary”

Project technical staff might become outdated Handling a one-time project that
with technical advancement, and lack of a requires much control, but is not

breadth of knowledge as they are away from focused on one functional area.

the functional dept.

Technical procedure not strictly followed

Mental issues: rivalries among projects, anxiety

for life after projectsfinished

 Matrix Organization

Keeps desirable features of both standalone and functional

projects
Avoids some of the disadvantages of each type
It is a combination of standalone projectized and functional
organization structures

Can take on a variety of specific forms

 The project is the point of emphasis

The project has access to the entire organization for labor and

technology
ADVANTAGES
Less anxiety about what happens when the project is completed
(Read more on textbook page 184)
Response to client needs is rapid

Access to administrative units of the firm

Better balance of resources

Great deal oforganizational flexibility

DISADVANTAGES (Read more on textbook page 185)
Power balance is delicate
Matrix organization is good for:
Projects compete for resources

Projectitis is still a serious disease Projects that require inputs from

several functional areas.
Division of authority and

responsibility is complex Projects that use technology

Matrix management violates the from several functional areas.

management principle of unity of

command
 Factors For Selecting An
Organizational Form

Project size Unique aspects of the project

Project length Situation determined

Project management experience Each form has pros and cons

Philosophy and visibility of executives No one form is best for all

Project location projects, or even best for one

Available resources project throughout its entire

lifecycle.
 CHAPTER 6: PROJECT PLANNING
WBS 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 skill set

required
 CHAPTER 6: PROJECT PLANNING
WBS STRUCTURE

Steps to compose and use WBS

Using information from the action plan, list the task breakdown in successively
finer levels of detail. Continue until all meaningful tasks or work packages have
been identified
For each such work package, identify the data relevant to the WBS. List the
personnel and organizations responsible for each task.
Visually breaks down Project Scope:
Project
Subproject
Deliverables
Work packages
Tasks
CHAPTER 2: PROJECT SELECTION
PAYBACK PERIOD
The length of time until the original investment
has been recouped by the project

A shorter payback period is better

 CHAPTER 2: PROJECT SELECTION

Example: Ifthe initial investment cost $5,000, and the savings are $100
each month, what 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.
 CHAPTER 2: PROJECT SELECTION

Example: Ifthe initial investment cost $20,000, and the annual savings
is $4000, what is the payback period? (FOR EQUAL ANNUAL SAVING)

Payback period =$20,000 / $4000 =5 years

So, it would take 5 years to reach the payback period.
 CHAPTER 2: PROJECT SELECTION
FOR UNEQUAL CASHFLOW
What is the payback period for the following set of cashflows?
CHAPTER 2: PROJECT SELECTION
FOR UNEQUAL CASHFLOW

Calculate:

Payback =3 +1,700/3,000= 3.6years

1,700 =8,000 -6,300

Cash flow during the year is 3,000 (since in year 4 you
can recover your initialinvestment)
 CHAPTER 2: PROJECT SELECTION
NET PRESENT VALUE (NPV)
The NPV technique is a discounted cash flow method that considers the time value of money in
evaluating capital investments.

Decision rules: if NPV >0 Accepted. If NPV <0 Reject

CHAPTER 2: PROJECT SELECTION
NET PRESENT VALUE (NPV)
 CHAPTER 2: PROJECT SELECTION
NET PRESENT VALUE (NPV), with inflation rate

Consider project A, if the annual inflation rate is 5%.What is the new NPV?

WHEN CONSIDERING BETWEEN THE TWO PROJECT, CHOOSE THE ONE THAT
HAS HIGHER NPV
CHAPTER 2: PROJECT SELECTION
PROFITABILITY INDEX (PI)

Acceptance rule:
IfPI>1:accept the project
IfPI<1:reject the project
 What is the PIof projectA?

=124,257.19
Sum of PV of cashflow =

=>PIof projectA
THANK YOU AND GOOD LUCK
FOR YOUR EXAM!