MOT-200 TEXT FALL 2001

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Organizations Through the Eyes of a Project Manager

Harvey F. Hoffman, Ed.D. TCI 320 West 31st Street New York, NY 10001 (212) 594-4000 X 318 [email protected] All material copyrighted 2001. Material may not be duplicated without permission in writing from H. Hoffman.

1

TABLE OF CONTENTS

Page Preface

10

Acknowledgement

13

Dedication

13

CHAPTER 1

14

Organizational Expectations and Professionalism

14

Employer Expectations - TACT

16

Employee Expectations

21

Professionalism

25

Dissemination of Information

26

Service

27

Education

27

Managing Oneself

28

Professional Ethics

29

Certifications and Licenses

32

Chapter 1 Questions CHAPTER 2 The Organization

34 43 43

Core Identity

44

Objectives and Goals

49

SWOT

49

2

Sidebar: A Personal SWOT Analysis Personal Action Plan

54 56

Activities

56

Standards

57

Sidebar: Public versus Private Companies

63

Chapter 2 Questions CHAPTER 3

67 70

Project Management Organizational Overview

70

Why Project Management?

78

Project Manager's Responsibilities

80

Organizational Charts

83

Chapter 3 Questions Chapter 4

92 95

Management Concepts Management

95 96

Managers and Supervisors

100

Historical Management Overview

101

Classical Management

104

Human behavioral management

111

Human Resources School

114

Herzberg’s Hygiene Factors

115

Maslow’s Hierarchy

118

Douglas McGregor’s Theory X and Theory Y worker 119

3

Acceptance Theory of Authority

121

Management by Objective

121

Deming’s Ideas

123

Recent management views

126

Management Styles

128

Power

130

Teams

134

Project Managers Lead Teams

139

Leadership

141

Leadership versus management

143

Competitive Advantage

148

Chapter 4 Questions Chapter 5

149 153

Project Planning Planning

153 153

RFP and RFQ

155

Project Charter

158

The Project Plan

163

Plan Benefits

167

The Project Plan Troika Chapter 5 Questions Chapter 6 Project Time Management

168 206 208 208

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Project Time Management

208

Rudiments of Schedule Preparation

211

Creating a Schedule

218

Microsoft Project

222

Task Entry

222

Working Time

224

WBS Number

226

Task Duration

227

Task Dependencies

229

Responsibility Assignment Matrix (RAM)

231

Critical Path

237

Schedule Progress

238

Printing Niceties

240

Sidebar: The 8-Hour Day

240

Summary

241

Chapter 6 Questions

244

Chapter 7

251

Project Estimation and Cost Direct and Indirect Costs

251 252

Material and Material Handling Costs

252

Travel and Living Charges

253

Other Direct Costs (ODC)

253

Sales Commission

254

5

Profit Indirect Costs Overhead and G&A Costs

255 255 256

Bottom-up estimating

258

Villa-Tech Bid Example

262

Overhead rates

263

Indirect Labor

264

Administrative, clerical and secretarial

264

General and Administrative Costs

265

Burdened Wage

267

Functional Manager Estimates

267

Risk Analysis

268

Villa-Tech Project Cost Summary

272

Project Spending Profile

273

Bottom up Estimate Summary

274

Top Down Estimate

275

Rule of Thumb Cost Estimating Approach

275

Parametric Modeling

276

Analogous Estimating Technique

279

Learning Curve

280

Project Estimating Summary

288

Cost Management

291

Financial and Schedule Analysis

292

6

Stakeholders Requiring Special Attention Chapter 7 Questions Chapter 8

295 299 306

Project Communications Communications Management

306 307

Communication Pathways

310

Organization Communications Protocol

312

Communications Process

313

Conducting Effective Meetings

315

Memos

318

Listening

320

Verbal Communications

322

Telephone Protocol

322

Face-to-face meetings

323

Chapter 8 Questions Chapter 9

326 328

Quality

328

The Quality Gurus

330

Quality and the Project Manager

337

Quality Policy

339

Quality Planning, Assurance, and Control

342

Quality Planning IEEE Software Quality Plans

346 350

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Capability Maturity Model® (SW-CMM®) for Software354 ISO Standards

359

Six Sigma

362

Quality Assurance

366

Quality Control

369

Responsibility for Quality Chapter 9 Questions

372 374

Chapter 10

376

Chapter 10

376

Project Risk

376

Risk Management Process

376

Risk Identification at the Proposal Stage

378

Contract

378

Technical Risk

379

Performance

386

Damages

387

Labor Rates and Forward Pricing Projections

388

Business risk issues

388

Terms and Conditions

390

Chapter 11 Project Tracking and Reporting Chapter 12 Epilogue

393 393 395 395

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Project Management Perspectives Within the Organization 396 Project Management Career Project Management Social and Technical Skills

398 399

Social and People Skills

400

Technical skills

402

Appendix 1 - Typical Employee Performance Appraisal Forms

405

Appendix 2 - Ethical Codes of Selected Professional Organizations

417

Appendix 3 - Wilderness Survival Answer And Rationale Sheet

424

AppENDIX 4 – ISO 9000 QUALITY MANAGEMENT PRINCIPLES

427

REFERENCES

435

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PREFACE I know I could never forgive myself if I elected to live without humane purpose, without trying to help the poor and unfortunate, without recognizing that perhaps the purest joy in life comes with trying to help others. – Arthur Ashe

<> During the first year of my tenure as the Dean of Technology at Technical Career Institutes (TCI), I spoke with human resource personnel from more than twenty companies that hired the college’s graduates. Each company praised the technical abilities of the TCI students, but they indicated that the students required improvement in their social skills and understanding of an organization’s operation. The department chairs and I discussed the type of course that would help our students and the outline for this book evolved. The book reflects many of my experiences as an engineer, department manager, and project manager in my 30-year career in industry. Today medium to large organizations routinely use project managers. Technology students will likely encounter a project manager in their first job. They may be part of a project team in the organization they work for or if the organization does not use the project manager methodology, they will meet this person as a supplier or customer. Most undergraduates have little understanding of how an organization operates or of an organization’s expectations. Who makes which decisions and why? Who manages the group? How do you get things done? What does the culture permit? Seasoned employees realize that employment success depends not only on technical abilities, but also on the ability to interact well with colleagues and quickly learning the organization’s “ropes.” This book serves four purposes. First, it introduces students to project based information technology, manufacturing, and research and development business environments. The student will learn business and industry's vocabulary, processes and procedures, and expectations. They will be able to ask intelligent questions regarding the operation of that organization during a job interview. They will be better able to evaluate different organizational management styles to decide what is best for them. Perhaps most important, the student will be ready to step into a new job and have some understanding of the organization’s expectations. To successfully accomplish this first objective, we will examine the project manager's role.. A large number of organizations use the project manager (PM) model to cut across the entire set of departments in an effort to get a job done on time, within budget, and without compromising quality targets. Understanding this person's function will enable the new employee to quickly adjust and contribute to the work environment. In the discussions that ensue, ethical questions may arise. This book will familiarize students with ethical issues that arise in the business and industry context. Questions

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both in the text and at the end of the chapter will promote class discussions and serve to sensitize students to the moral dimensions of an organization’s issues. Finally, the material covered will prepare students for the new Project + certification examination offered by CompTIA. The viewpoint taken will follow the Project Management Institute’s Project Management Body of Knowledge (PMBOK). The material in this book covers the topics required by the CompTIA Project+ examination. TCI instructors have successfully used the text material for a one-term 45-hour introductory project management course. The instructors have followed a sequence similar to the following: 1. 2. 3.

The organization’s expectations, project management overview Organization structures and professionalism Management concepts (Fayol, Taylor, Weber, the Gilbreths, Maslow, Herzberg, McGregor) 4. Leadership, teams, project life cycle 5. Project planning, project objectives, statement of work, work breakdown structure 6. Time management – schedule, milestone charts, critical path analysis 7. Introduction to Microsoft Project 8. Project cost management 9. Cost estimating, learning curves 10. Project communications – assessment and reporting 11. Quality planning, assurance, control 12. Risk management I recommend allocating six-hours to the Microsoft Project software application. During the first three-hours I introduce the student to the fundamental techniques of preparing a schedule using this software. We work in a computer laboratory during this session and each student uses a computer. In the second three-hour session, I assign an inclass student project. The project uses one of the exercises at the end of the chapter. I find that organizing the students into groups of 2 to 3 people works best for student learning. The students share a computer during this session. The topic of quality contains a rich amount of material. It is ideal for students to prepare reports and class presentations. Consequently, we usually devote six class hours to the Quality discussion. We lecture for 1½-hours and allocate the remainder of the time to three person team presentations. Many of the quotes at the beginning of each chapter have influenced my thinking over the years. Others I discovered while doing this research. I hope that it will positively influence the reader.

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Harvey Hoffman Somewhere between Manhattan and Fairfield, CT on the Metro-North train.

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ACKNOWLEDGEMENT I would like to thank the reviewers of the initial text drafts for their valuable and insightful comments. TCI teachers, Roy Lau, Pedro Lopez, and Steve Maybar, class tested versions of the manuscript and provided constructive critique of the work. I am also indebted to the TCI students who suffered through the MOT-200 notes phase and the CD-ROM PDF file. I am grateful for their suggestions, which helped me a great deal.

DEDICATION

I have worked with nontraditional college students for many years. I dedicate this book to the hard work and perseverance of this group of dedicated people. ! To the older men and women who commute to college after or sometimes before a day’s work. ! To the student-parents who have concerns about the whereabouts of their children while they attend school. ! To the student-caretakers who worry about the health and welfare of their children, parents, friends or relatives. ! To the significant-others, spouses and children that give up time during the evenings and weekends so that the nontraditional student can complete the next day’s homework or prepare for a test. Keep plugging. It may take a while, but graduation will come -- and success will feel so good!

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CHAPTER 1 Whether you think you can or whether you think you can't .... You are right. - Henry Ford

<> Chapter objectives After studying this chapter, you should be able to: Understand an organization’s expectations Understand the components of an employee assessment Understand the elements of professionalism

Organizational Expectations and Professionalism

Characteristics of the business environment during the 1990s included rampant technical innovation, a global economic perspective, a free-market, and a requirement for continuous employee learning. The 2000's began with a 30-year low unemployment rate (4.1%) and black and Hispanic workers had the lowest rate (8% and 6.4%, respectively) since the Labor Department began breaking out statistics (Stevenson, p. A1). Even during these good times, numerous layoffs, downsizings, restructurings, and delayerings occurred due to corporate mergers and reorganizations. These organizations focused on productivity to ensure quarterly sales growth and regular profit increases. The economy is cyclical and finally cooled off. In 2001 telecommunications, Internet, data processing, dot-com and other companies slashed their workforce. (See

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for example Washtech.com Technology Layoffs Watch at http://www.washtech.com/specialreports/layoffs_bydate.html .) The lesson is clear; employees must continually manage their careers.

Business and industry provides a service or a product to both internal and external customers and exists not only to make money, but more to the point -- to make a profit. Today's corporation requires employees that are responsive to the customer's needs -employees that will delight the customer while maintaining sensitivity to the bottom-line. Table 1 compares the forces and factors confronting the modern corporation and today's employee with those of some years ago.

Today, corporations move quickly through uncharted water, moving in a direction toward a defined corporate mission, but frequently making seemingly chaotic excursions from the azimuth. Employees must empower themselves. They must embark on a lifelong journey that includes updating their skills and pursuing new opportunities that meet their professional objectives. Maintaining accountability to yourself increases your value to the corporation. Demanding new work experiences, requesting challenges, developing new skills makes you a more valuable person to the organization. Paradoxically, the selfish attitude of looking out for number one, makes you a number one company resource!

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Table 1 - Forces and Factors Confronting the Corporation and Students

Corporation

Traditional

Today

Long term profits

Immediate profits! Quarter to quarter earnings growth Competitive Flat Employer Lean – fewer employees that do more Fast and good Changing, Hectic, Chaos, Turbulent

Insulated Hierarchical Parent Rich Thorough Stable

Employee

Specialized talents Dependent Comfortable Loyal to company Entitled Learn then Earn

Broad capability Empowered Stressed Loyal to self Accountable Learn to Earn – lifelong learning

Adapted from Goldman (http://www.asee.org/assessments/html/goldman.htm)

Employer Expectations - TACT Put yourself in the position of a corporate chief executive officer. Suppose your company has merged with another resulting in a duplication of some jobs and services. Keeping every person employed represents an unacceptable expenditure of funds. Stockholders demand profits and expect increased employee productivity because of the merger. Suppose the company has decided to reduce the workforce by 5%. What guidelines would you propose to your managers to help them decide on the employees to include in a layoff?

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The acronym

TACT representing Technical Competence, Attitude,

Communication, and Teamwork identifies four broad categories of employer expectations (Figure 2). Certainly technical competencies would probably be most people's first choice on the list of important employee capabilities. Every employee must have the unique training, knowledge, and skills to perform the required tasks. Does the person have up-to-date skills? If not, out the door. However, this guideline lists technical competence as one of four employee expectations -- attitude, communication, and teamwork skills complete the set. Employers want a reliable person who will come to work with a positive, can-do attitude. Following the conclusion of a task, supervisors and managers expect employees to move onto the next activity without coaxing.

Some time ago, a newspaper advertised for web masters and web designers with the following words: "We need a variety of risk taking, fun loving, creative people who will thrive in a start-up environment. If you are looking for a traditional or comfortable place to work 9-to-5, FORGET IT! We need cutting edge, offthe-wall, 24/7 type people who don't worry about job descriptions to become a part of our team" (Connecticut Post, September 3, 2000, Section I, p. 2). The emphasis in this advertisement is attitude, enthusiasm, and a willingness to work. The employer expects technical capability, but clearly, that is not the only job requisite.

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Employers will take the zeal and raw talent that a person brings and train them to do the job, if they show promise.

Business depends on accurate and complete verbal and written communication with customers, clients, colleagues, subordinates and supervisors. Promptly inform managers and supervisors of all major issues. Customer reports, manufacturing and production difficulties, vendor delays, engineering problems, and purchasing issues must be quickly documented so that people take appropriate actions and timely responses.

The day of the lone wolf is gone. Business and industry work in teams operating with intra-department groups, cross-functional teams, "tiger teams", "skunk works", joint ventures, and corporate teams. Companies place a premium on "people skills". Teams meet regularly to share information and discuss resolutions of common issues. Members depend on one another to meet commitments that support design, development and production schedules. Teams consist of a broad spectrum of ethnic, racial, regional and international personnel. Employees must work comfortably and compatibly with a diverse mix of individuals. People must respect each other’s gender and age differences. A diverse workforce provides the wide range of skills and insights demanded by today's global marketplace. Unprecedented challenges confront American companies. They must be faster, smarter, and more flexible than the competition. Companies must take advantage of all of the knowledge inherent in a diverse workforce and individuals must respond by welcoming the opportunity to

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maximize the benefits derived from working with people from a wide range of cultures, ages, and backgrounds.

Selecting the best employees requires a detailed review of their previous efforts. The human resource department maintains past employee performance evaluation records. Examining this data will permit managers to make conclusions regarding the employee’s potential for contributing to future successful efforts.

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Figure 1 - Employer Expectations for a Desirable Employee – Remain on the TACT Target

TECHNICAL COMPETENCE • • • • • •

• •

Knowledge of profession and its tools Good judgment Creative Problem solver Analytical and Decisive Continued growth in job and professional knowledge Accountable for their career success Lifelong learners

ATTITUDE • Punctual • Attendance • Dress Appropriately • Initiative • Self Starter • Seeks additional responsibilities • Adaptable • Flexible • Dependable • Reliable

COMMUNICATION • Verbal • Written • No surprises

TEAMWORK ♦ ♦ ♦ ♦

Interact with others Meet commitments Respect diversity Cooperate

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Employee Expectations

People represent an organization's greatest asset. The way they perform has a direct affect on profitability. Performance reviews and evaluations give employers an opportunity to shape the development of employees, improve work standards, and define areas of responsibility. It promotes accountability, and identifies future goals and expectations.

Employees are judged on their contributions to the projects to which they are assigned. Employee performance reviews include two parts. First, the ongoing informal oral or written communication that takes place throughout the year between employee and supervisor. Second the formal discussion between the employee and supervisor that includes a review of the written results in a periodic employee evaluation report.

The periodic evaluation review represents a communications tool between the employer and employee. The document informs the employee of the manager or supervisor's expectations. It provides an opportunity to establish or identify employee goals, and identifies the assistance that the company can provide to assist the employee in attaining them (training, education, etc.). If required, the review usually identifies areas for improvement that will enable the employee to reach a satisfactory level of job performance. The organization informs employees of its professional expectations at the same time it tells employees about their performance relative to these indicators. Based on this evaluation the employer frequently makes decisions about employee

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salary increases, promotions, and training. The performance review and employee appraisal measures on-the-job performance and may indicate future job direction. The review clarifies employee duties and usually summarizes major employee accomplishments since the last review. Reviews should identify areas for improvement and recommend methods to improve to improve performance. The supervisor and employee should discuss training and development needs for both current and future assignments.

Frequently, employers evaluate new employees more often during the first year than those employed for a longer term. New employees may receive reviews three months, six months, and one-year following the date of hire. These reviews encourage supervisors and managers to closely associate with new employees and understand their capabilities while clarifying expectations. Longer-term employees may receive only an annual review.

Examining the employee review forms in Appendix 1 confirms that technical capability is important, but not the sole criteria for long-term success. Companies value and measure many different qualities. These include the following: •

Quality (accurate, complete, timely, consistent).



Quantity of work (keeping pace with the workload, provide the "extra effort" when needed).



Dependable (consistent attendance, punctual, reliable).



Independent (ability to work with a minimum of supervision)

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Organizational ability (sets priorities, meets commitments).



Team player (cooperative, interacts well with customers, suppliers, and colleagues).



Communication (good verbal and written communication skills, shares information with co-workers).



Motivation (committed to work and profession, self-starter, positive attitude).



Judgement (tactful, displays appropriate sensitivity, makes sound decisions).



Handles stress (can work under deadlines, remains calm, controls temper).



Problem solving (quick insight into problems, offers appropriate solutions, able to analyze complex problems).



Creative (willing to try new solutions, develops new ideas).



Decisive (controls analysis paralysis tendencies, takes action).



Dress (reports for work properly attired, clean).

The employee's salary and salary increase will reflect the employee's total performance. Selecting people for a promotion -- or a layoff is a complex decision that depends on a broad range of factors only one of which is technical competence. Since all companies keep records of these evaluations, you may recommend that managers use performance evaluations as the basis for employment decisions. Over time, the employee's complete picture becomes clear and the company takes action based on the overall performance record.

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The following excerpt from an article that appeared on the web (http://biz.yahoo.com/rf/000816/l1688665.html -- August 16, 2000) illustrates the importance of the employer’s perception of the individual’s capabilities and attitude.

FedEx May Cut 200 Information Technology Jobs NEW YORK, Aug 16 (Reuters) - FedEx Corp could cut 200 jobs by next month from its information technology operations, a company spokesman said Tuesday. ``Some of our projects are not adding value,'' said Jess Bunn, a FedEx spokesman in the Memphis headquarters. ``We're looking for better ways to serve our customers and add values, so there's the possibility of about 200 layoffs.'' Layoffs will probably begin by mid-September. In the next two weeks employees will be evaluated based on their contributions to short-term tasks and objectives as well as long-term goals and strategies, their contribution to leadership, cooperation in teamwork and performance, other FedEx officials said. The information technology workers develop and maintain computer software and hardware to help FedEx run its operations

FedEx will make layoff decisions based on a variety of employee characteristics. Technical performance is necessary but not sufficient to keep a job. Social skills and willingness to “do whatever it takes” will help keep a job and enable people to advance in the organization.

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Professionalism The ideas of technical competency, responsibility to clients, customers and employers, lifelong learning, attitudes and behavior stems from the broad concept of professionalism. The Institute of Electronic and Electrical Engineers (IEEE) defines a profession as a learned occupation requiring systematic knowledge and training, and commitment to a social good. There must exist a specialized body of knowledge unique to the profession, which should be intellectual in character. It can be developed by a group of people in the initial stages, but educational institutions must transmit this knowledge to succeeding generations of practitioners (Adams & Kirchof).

Characteristics of a profession include the following: ♦ Predominantly intellectual and varied in character, as opposed to routine, menial, manual, mechanical, or physical work ♦ Sanctioning organization's members share common training, values, and skills ♦ Competencies require knowledge of an advanced type in a field of science or learning ♦ Recognized educational institutions of higher learning provide the coursework in the learned disciplines ♦ Participate in the establishment and maintenance of educational institutions that meet minimum acceptable standards that teach the body of knowledge ♦ Continuous learning ♦ Involved in activities that required the consistent exercise of discretion and judgement

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♦ A well defined and growing body of literature ♦ Refereed (i.e. articles and research requiring peer review before publication) journals ♦ Service motive Using these characteristics, the community of people that share common training, values and skills create a sanctioning or authenticating organization that promotes the profession.

Dissemination of Information Every professional organization defines itself by its mission, guiding philosophy, and unique occupational body of knowledge. Perhaps the dissemination of information is the foremost tool used to promote the organization and the profession. Journals publish peer-reviewed research and development results. Colleagues with similar backgrounds first read these papers. Reviewers respond to the author(s) with comments intended to improve or clarify the work. The author(s) make the corrections and resubmit the manuscript. Papers require up to a year in the review process before final publication. Monthly magazines offered by professional organizations print articles of general interest, which do not pass through such an extensive review process. Even so, it may take from three to six months before publication confirmation.

Frequently the organization distributes a newspaper with current information containing articles of an ephemeral nature, conference announcements, awards, election information, and employment advertisements. Editorial comments may appear in the

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newspapers that reflect members' opinions about national political issues that relate to the organization's mission. Local chapters of national organizations may also publish a monthly or quarterly newsletter.

Service Professional organizations have a wide range of activities. While individuals receive compensation for their work as provided to customers and clients, they seldom receive payment for service to the profession. Service activities include volunteering for local chapter or regional activities or supporting national seminar/symposium meetings. Authors of papers submitted to professional organizations do not receive financial compensation, but do receive the appreciation and sometimes the accolades of their colleagues. Professionals serving on accreditation committees that review the quality of programs offered by educational institutions do so on a voluntary basis. They seek to support and further their chosen profession. Many companies financially support and endorse educational programs, seminars and symposiums offered by professional organizations. They do so to improve the profession and the knowledge of the practitioners in their employ.

Education Organizations participate in a process to promote the quality of education and training received by prospective members and students. As an example, the Institute of Electrical and Electronic Engineers (IEEE), American Society of Mechanical Engineers (ASME) and other engineering organizations collaborate under the Accreditation Board

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for Engineering and Technology (ABET) umbrella to improve the education of technical personnel in engineering and related disciplines. Upon request, ABET representatives visit colleges offering engineering and technology programs. The team conducts a detailed review of the program to ascertain that the institution meets minimum standards established by ABET and its member bodies (the engineering societies). Periodic follow-up reviews encourage the institution to maintain a quality program. ABET accreditation is a voluntary process that helps to assure that graduates of an accredited program are prepared for careers in engineering and engineering technology. With support from organizations like ABET, professions encourage institutions to provide education that meets the career’s changing needs, modernize institutional facilities, employ competent faculty that participate in on-going learning, and introduce new technology into the courses.

Managing Oneself "Success in the knowledge economy comes to those who know themselves -- their strengths, their values, and how they best perform" (Drucker, 1999). We no longer enjoy the days of job security in exchange for moderate performance and corporate loyalty. We each must manage our careers to maintain our employability. Perhaps lifelong education is the most important factor in developing a career-resilient workforce. Waterman, et al, refers to the new professional as people dedicated to the idea of continuous learning and as people who "take responsibility for their own career management. For each individual, this means staying knowledgeable about market trends and understanding the skills and behaviors the company will need down the

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road." With constant changes in technology, professionals must regularly assess their skills and take action to upgrade themselves and direct their careers so that they can function with a maximum of effectiveness. Koonce (1995) advises “ the best way to stay employed today and in the future is to look upon yourself as being in business for yourself even if you work for someone else” (p.20).

For the most part, professional employees are engaged in "at will" employment. That is, the employer can terminate the employee at any time and the employee can likewise leave the employer at any time. Business and industry constantly asks the questions "What have you done for me lately?" and "Are you worth paying for?" Professionals must engage in ongoing and lifelong education to enable them to answer respond positively to these questions.

Professional Ethics Professions want the public to perceive their members as following a principled standard of behavior in dealing with clients, customers and colleagues. Consequently, professional organizations define a standard of behavior in the form of a code of ethics to which members must adhere. Ethic deals with people’s behavior towards others. Ethics attempts to arrive at acceptable principles of obligation and general value judgements, which serves to help us determine human actions and conduct that are morally right, good, and responsible. Several professional organizations' ethical codes are shown in Appendix 2. A common thread among these ethical codes requires a practitioner to accept responsibility for actions taken in the conduct of professional

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activities. The professional must demonstrate responsibility to the public; the employer, customer, client, and colleague; as well as to yourself. The profession requires practitioners to engage in lifelong continuing education to maintain skills that will enable them to perform with competence and the exercise of good judgement. Ethical discussions are particularly relevant with the development of new technologies such as the Internet and networking computers in the office. Ethical questions continually arise with regard to product safety; worker safety; privacy in the workplace; employee and consumer rights; corporation's moral responsibility; obligations of employers to their employees, employment at will; business's social responsibilities; and corporate selfregulations vs. government regulation.

During the course of their work, technologists will confront ethical dilemmas. The discussions in this book are not simply academic exercises for the student. You will have to make discussions and it is quite conceivable that your promotion or job will be at stake. Situations will arise that contain uncertainties, but a technologist must make a decision. Suppose you suspect a safety problem regarding the cold temperature performance of a gasket on a space shuttle; or you suspect the placement of a gas tank in a vehicle may lead to an explosion on impact; or you discover deficiencies in a building's structural integrity, and it would breach client confidentiality to report them to a third party; or you identify potential conflicts between your interests and those of your client; or you charge more hours than you actually work on a job. Ethical dilemmas frequently confront us and we have to first recognize it and then decide on a plan of action.

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Sometimes the questions are not easily resolved and the professional may undergo substantial inner turmoil in making decisions (figure 2). Decisions may result in significant consequences to the employee's future. Employees have resigned from their job because of an ethical conflict. Some have lost their job. The federal government has created the “whistleblower’s” to protect federal employees job after making a charge.

As practicing members of a professional occupation, we have responsibilities to a wide range of people. Employers, customers, clients, and colleagues have concerns and expectations about the professional's performance and ethical standards. Even in the sports arena, which is not a profession in the sense that we use it in this book, Michael Jordan on assuming the position of president of basketball operations at the Washington Wizards, commented that "It's my job to make sure they [the team players] put the effort on the court to show respect for the people paying to watch them" (Sandomir).

The professional occupational organization spells out ethical responsibilities. If ever a conflict arises in your mind between the employer's requests and demands and the professional organization's code of behavior review the organization's ethics code and perhaps talk with a colleague to clarify your position. As a new member of a profession, consider joining and supporting your professional organization.

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Certifications and Licenses In an effort to promote quality professional service, some organizations promote member licensing or certifications by state government or private organizations to signify member competence in the general discipline or specialty areas. Professional organizations frequently establish committees that accept complaints from the public regarding members' performance or behavior. This internal self-policing program has the power to discipline the member. The results of a disciplinary review may extend from no action to censure or even to license or certification revocation.

The foregoing discussion does not intend to demean the competency, importance or quality of trades and craft workers. This community participates in training and apprenticeship programs. Some trades and crafts have sanctioning organizations that promote the vocation. A trade emphasizes manual dexterity and physicals skills rather than intellectual activity. While some trades require a license or certification to practice, few trade organizations monitor their members and have a code of conduct. Few vocations, other than professions, monitor the education providers’ program quality using voluntary service on accreditation committees. Trades and crafts tend not to have peer reviewed publications. Some students confuse the word expert with professional. A professional should be an expert, but an expert need not be a professional. The two words are not synonyms. Plumbers, carpenters, electricians, machinists, auto mechanics, and cab drivers perform vital services and some in these occupations earn more than lawyers, engineers, teachers or physicians. However, in the strict sense used in this book, we don’t call them professionals.

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Figure 2 -- A Cauldron of Difficult Decisions Confronting Employees

Ideals Responsibility Fraud Plagiarism Community

Bias

Standards

Virtue Duty Morality Dishonesty Professional Honor Public Welfare

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Chapter 1 Questions

1) Explain the statement used in the text “The selfish attitude of looking out for number 1 makes you a number 1 company resource.” 2) Do you consider people practicing the following occupations as "professionals"? Explain your answer. a) Electrician b) Plumber c) Nuclear physicist d) Social worker e) Electrical or mechanical engineer f) Stock broker g) Librarian h) Physician i) Lawyer j) Teacher k) Union member l) Locomotive engineer m) Welder n) Military officer o) Police officer p) Politician 3) We sometimes hear the phrase, "That person did or did not behave professionally." Write a short essay describing your concept of professionalism. 4) The text describes characteristics of a profession. With which characteristics do you agree or disagree? Explain your answer. 5) What are the common features of the ethical codes of conduct shown in Appendix 2? With which principles do you agree or disagree? Explain your answer. 6) "The ends justify the means." Explain this statement. Do the ethical codes of conduct in Appendix 2 permit this philosophy? Describe circumstances under which this statement would be appropriate. 7) Limit personal phone calls at work to emergencies only. Do you agree or disagree? Explain your answer. 8) Morning social discussions with work associates a) Improves morale and should be engaged in every day. b) Reduces company productivity. c) Should not be conducted in front of a manager.

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9) Examine the three employee evaluations in Appendix 1. a) b) c) d)

What are the common characteristics found in each? What are the major differences among them? What additional job performance criteria would you include in the evaluation? Describe your view of the perfect employee performance evaluation.

10) In the December 27, 1999 issue of Sports Illustrated, Jeff Pearlman wrote an article about John Rocker of the Atlanta Braves. The article describes Rocker, as a 25 year old, hard-throwing 6'4", 225-pound left-hand relief pitcher. In the article, Rocker bashed African Americans, Asians, Koreans, Vietnamese, Indians, Russians, Hispanics, single mothers, Asian drivers, AIDS patients, gays and those people of a race or sexual orientation different from his. He called an overweight black teammate "a fat monkey." Bud Selig, the baseball commissioner, ordered Rocker to undergo psychological evaluation and then punished Rocker for his comments with a $20,000 fine, a two month suspension and ordered him to undergo "sensitivity training." In an article in The New York Times, Jeffrey L. Seglin commented, Perhaps without the added burden of tabloid headlines, many businesses face similar situations: A star employee's privately tolerated "idiosyncrasies" spin out of control, and management must respond publicly. "In the business world, there's a very good chance that somebody like this would be fired immediately," said Joseph L. Badaracco Jr., professor of business ethics at the Harvard Business School. "The hideous content of his views would badly damage the company's reputation, so they'd want to disassociate themselves." The team did not punish him for this incident. In a subsequent chance meeting with Rocker after publishing the article, reporter Jeff Pearlman said the pitcher threatened him and tried to get him banned from the Atlanta clubhouse. Major League Baseball took no further action against Rocker. Outfielder Brian Jordan said "You've got one guy being a cancer time and time again. Eventually, it's going to have an effect on the team." The Atlanta Braves traded Rocker to the Cleveland Indians in June, 2001.

a) Comment on the statements made by John Rocker. b) Should John Rocker be penalized for exercising his right of freedom of speech as provided for in the first amendment to the U.S. Constitution? c) Suppose you were John Rocker's manager, what would you do to stabilize the situation? In your discussion, consider the impact on his teammates, other teams, the sport, and the public.

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d) Suppose a "star employee" working at a company, voices derogatory comments about some other employee? In your opinion, what position should a company take? 11) Suppose the Rekcor Company manufactured the finest Framistan (a fictitious component) at the lowest prices. If you were a purchasing agent from another company and you discovered that several employees from the Rekcor Company were intolerant of some of your personal beliefs, would you purchase Framistans from this company? Explain your position. 12) The human resource department at Magna-Net has a policy requiring all non-union technical employees to work one unpaid overtime hour daily. Tundra Industries permits flexible hours and does not have a formal policy to check the coming and going of its employees. a) For which employer would you prefer to work? Why? b) What are the advantages and disadvantages of both policies? Formulate your response first from the employer's viewpoint and then from the employee's perspective. c) Which employer treats its staff in a more professional manner? Explain your answer. d) Why would Magna-Net institute such a policy? 13) Do you agree with the statement “Personal ethical practices and business ethical practices have little in common”? Explain your answer. 14) Class Exercise As stated in chapter 1, organizations emphasize cooperation among team members. This class exercise examines both an individual's and a group's response to an unusual set of questions. At the end of the exercise, you will compare your individual score with that of the group. Divide the class into groups of 3 to 4 people and follow the directions. Do not peek at the answers shown in appendix 3 until the group has completed the worksheet. Correct the worksheet after the group has completed their responses.

WILDERNESS SURVIVAL WORK SHEET

Here are twelve questions concerning personal survival in a wilderness situation. Your first task is individually to select the best of the three alternatives given under each item. Try to imagine yourself in the situation depicted. Assume that you are alone and have a minimum of equipment, except where specified. The season is fall. The days are warm and dry, but the nights are cold.

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<> After you have completed this task individually, you will again consider each question as a member of a small group. Your group will have the task of deciding, by consensus, the best alternative for each question. Do not change your individual answers, even if you change your mind in the group discussion. Both the individual and group solutions will later be compared with the "correct" answers provided by a group of naturalists who conduct classes in woodland survival.

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Question

Your Answer

Your Group’s Answer

1. You have strayed from your party in trackless timber; you have no special signaling equipment. The best way to attempt to contact your friends is to: a. Call "help" loudly but in a low register b. Yell or scream as loud as you can c. Whistle loudly and shrilly 2. You are in "snake country". Your best action to avoid snakes is to: a. Make a lot of noise with your feet b. Walk softly and quietly c. Travel at night 3. You are hungry and lost in wild country. The best rule for determining which plants are safe to eat (those you do not recognize) is to: a. Try anything you see the birds eat b. Eat anything except plants with bright red berries c. Put a bit of the plant on your lower lip for five minutes; if it seems all right, try a little 4. The day becomes dry and hot. You have a full canteen of water (about one liter) with you. You should: a. Ration it - about a cupful a day b. Not drink until you stop for the night, then drink what you think you need c. Drink as much as you think you need when you need it 5. Your water is gone; you become very thirsty. You finally come to a dried-up watercourse. Your best chance of finding water is to: a. Dig anywhere in the streambed b. Dig up plant and tree roots near the bank c. Dig in the streambed at the outside of a bend

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Question

Your Answer

Your Group’s Answer

6. You decide to walk out of the wild country by following a series of ravines where a water supply is available. Night is coming on. The best place to make camp is: a. Next to the water supply in the ravine b. High on a ridge c. Midway up the slope 7. Your flashlight glows dimly as you are about to make your way back to your campsite after a brief foraging trip. Darkness comes quickly in the woods and the surroundings seem unfamiliar. You should: a. Head back at once, keeping the light on, hoping the light will glow enough for you to make out landmarks b. Put the batteries under your armpits to warm them, and then replace them in the flashlight. c. Shine your light for a few seconds, try to get the scene in mind, move out in the darkness, and repeat the process. 8. An early snow confines you to your small tent. You doze with your small stove going. There is danger if the flame is a. Yellow b. Blue c. Red 9. You must ford a river that has a strong current, large rocks, and some white water. After carefully selecting your cross spot, you should: a. Leave your boots and pack on b. Take your boots and pack off c. Take off your pack, but leave your boots on

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Question

Your Answer

Your Group’s Answer

10. In waist-deep water with a strong current, when crossing the stream, you should face: a. Upstream b. Across the stream c. Downstream 11. You find yourself rim-rocked; your only route is up. The way is mossy, slippery rock. You should try it: a. Barefoot b. With boots on c. In stocking feet 12. Unarmed and unsuspecting, you surprise a large bear prowling around your campsite. As the bear rears up about ten meters from you, you should: a. Run b. Climb the nearest tree c. Freeze, but be ready to back away slowly

Score: Number You Have Correct:

Average Score For Your Group (Sum of individual scores/ number of group members): Group Score:

Difference Between Group Score And Average:

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Self-check test

Circle the correct answer to each of the following questions or fill in the blanks. 1) Which of the following are services? a) Mail delivery b) Valet parking c) Teaching d) Taxi ride e) Wedding pictures f) Newspaper 2) Which of the following are products? a) Physician’s diagnosis b) Life insurance c) Fruits and vegetables d) Tire e) Tire changer 3) What are characteristics of today’s organizations? a) Stable b) Specialized c) Accountable d) Stressed employees e) Dynamic 4) Identify expectations that employers have of good employees a) Excellent Attitude b) Excellent communication skills c) Limit personal activities (personal telephone calls, web surfing, etc.) to 30 minutes during the workday d) Ethical practice e) Ready and willing to contribute to a team effort f) Sexy dresser g) Come late – leave early h) Outstanding technical capability 5) How often do long-term employees receive formal written employee evaluations? a) Daily b) Weekly c) Monthly d) Annually 6) Which are not examples of professional organizations? a) A trade union b) AFL-CIO c) Automobile Workers Union d) American Management Association e) American Medical Association f) American Bar Association

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g) Institute of Electrical and Electronic Engineers 7) Characteristics of a profession include a) Predominantly intellectual activity b) Learning a skill that will last a lifetime c) Common body of knowledge that is taught in institutions of higher education d) Code of ethics e) Journals publishing peer reviewed articles f) Uniform g) Use of Specific tools 8) Select the best answer that describes a professional code of ethics. a) A principled standard of behavior in dealing with the employer, customers and colleagues. b) A standard of behavior that deals with customers. c) A set of rules to be used at the discretion of the professional. d) A certification that permits a person to practice a profession.

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CHAPTER 2

You miss 100 percent of the shots you never take. -- Wayne Gretzky, Professional Hockey Player

<> Chapter goals After studying this chapter, you should be able to: Understand an organization’s core identity Explain the difference between objectives and goals Explain SWOT Understand organizational standards, policies and procedures

The Organization

The word organization is used throughout this book to mean a group of people working together for common purposes. The group creates a structure in which individuals cooperate to conduct activities. An organization may have a profit or non-profit financial orientation. It may consist of voluntary or paid workers or a combination of both. The organization may originate from the public (e.g., federal, state, local government agencies) or private sectors. It may have religious or secular purposes. It may consist of professionals or hobbyists. It may employ people represented by a labor organization, non-union personnel, or consultants. The organization may exist in a local geographic area or have many sites around the world. Project management ideas discussed in this book apply to small or large organizations. Organizations consisting of

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a single independent contractor as well as large international corporations with multimillion dollar contracts can use the concepts discussed. Core Identity An organization’s core identity consists of three items: a mission, a value ideology, and a vision. Not all organizations think about and create an identity. If management does not prepare and articulate a core identity, the corporate culture will force an identity to bubble up and surface. Lacking leadership, the identity that evolves may or may not inspire and guide the employees in the direction that management prefers.

Mission: The mission statement explains the organization's purpose. It is a statement of why the organization is in business. The mission is a raison d'être (reason for existence), not a goal or a business strategy. The mission statement serves as the basis for establishing the organization’s strategic objectives. David Packard described Hewlett Packard's mission in 1960: "I want to discuss why a company exists in the first place. In other words, why are we here? I think many people assume that a company exists simply to make money. While this is an important result of a company's existence, we have to go deeper and find the real reasons for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so they are able to accomplish something collectively that they could not accomplish separately -- they make a contribution to society, a phrase which sounds trite but is fundamental…You can look around [in the

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general business world] and see people who are interested in money and nothing else, but the underlying drives come largely from a desire to do something else: to make a product , to give a service -- generally to do something which is of value" (Collins & Porras, 1996, p. 68).

Hewlett Packard doesn't exist to make electronic test and measurement equipment but to make technical contributions for the advancement and welfare of humanity. This mission is not time dependent. It will last for as long as Hewlett Packard is around. Other corporate missions include: Konosuke Matsushita (Panasonic): Recognizing our responsibilities as industrialists, we will devote ourselves to the progress and development of society and the well being of people through our business activities, thereby enhancing the quality of life throughout the world. Mary Kay Cosmetics: to enrich women’s lives Sony: To experience the joy of advancing and applying technology for the benefit of the public ExxonMobil: to Provide quality petrochemical products and services in the most efficient and responsible manner to generate outstanding customer and shareholder value. Staples: Slashing the cost and hassle of running your office! New Jersey Transit: to Provide safe, reliable, convenient and cost effective transit service with a skilled team of employees, dedicated to our customers’ needs and committed to excellence.

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Samsung: We will devote our people and technologies to create superior products and services, thereby contributing to a better global society. Reader's Digest: to create products that inform, enrich, entertain and inspire people of all ages and cultures around the world. We are committed to understanding, anticipating and satisfying consumers' needs. This takes precedence in all that we do. Southwest Airlines: dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. Kellogg: committed to building long-term growth in volume and profit and to enhancing its worldwide leadership position by providing nutritious food products of superior value 3Com: to connect more people and organizations to information in more innovative, simple and reliable ways than any other networking company in the world. Adolor Corporation: company committed to the development of the next generation of novel analgesics and related therapeutics for the treatment of pain based upon recent advances in proprietary medicinal chemistry and recombinant opiate receptor technology Abbott Laboratories: to improve lives worldwide by providing cost-effective health care products and services.

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Millennium Restaurant (San Francisco, CA.): We believe that a gourmet dining experience can be created out of vegetarian, healthy, and environmentally friendly foods.

Value Ideology: The "core ideology provides the glue that holds an organization together as it grows, decentralizes, diversifies, expands globally and develops workplace diversity" (Collins & Porras 1996). These represent the values and belief systems underlying the company. These core values will not change over time. The Walt Disney Company is famous for its values of imagination and wholesomeness. Hewlett Packard emphasizes a respect for the individual and a commitment to community responsibility. Merck's core values include corporate social responsibility, honesty and integrity, and profit from work that benefits humanity. Sony's values include the elevation of the Japanese culture and national status, being a pioneer -- not following others, doing the impossible, and encouraging individual ability and creativity. The organization's core values should be so fundamental that the company should follow them even if at some point one or more of them became a competitive disadvantage.

Vision: "A vision is an attempt to articulate what a desired future for a company would look like. It can be likened to '… an organizational dream -- it stretches the imagination and motivates people to rethink what is possible [Belgard, Fisher, & Rayner 1988].' Martin Luther King's most famous speech is literally labeled, I have a dream, because

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he elucidated his vision of a nonracist America" (Jick 1989). The vision represents something the organization aspires "to become, to achieve, to create -- something that will require significant change and progress to attain" (Collins & Porras 1996).

The

Microsoft vision is " A computer on every desk and in every home, all running Microsoft software in every computer." This is certainly a lofty ideal. In the 1960’s, everyone knew and understood the National Aeronautics and Space Administration's (NASA) mission -- Get to the moon and back before the end of the decade. Does NASA have a vision today? Do you know it? No? Perhaps that is part of the reason NASA has funding problems in the congress.

Vision statements may incorporate four elements: 1) customer orientation, 2) employee focus, 3) organizational competencies, and 4) standards of excellence (Jick 1989, p.3). A vision should be vivid and evoke emotion. It should motivate people. It should be powerful enough to engage all those in the organization to willingly align themselves in the effort to achieve this mission. The vision should be ♦ Clear, concise, easily understandable ♦ Memorable ♦ Exciting and inspiring ♦ Challenging ♦ Excellence-centered ♦ Stable, but flexible ♦ Implementable and tangible (Jick 1989, p. 2).

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Know the Company's Core Identity: Before joining an organization investigate its core identity. Ask questions and make certain that you feel personally comfortable with the organization. Confirm that it shares your values and purpose. Try to ascertain that the organization accepts a diversity of people and opinions. When joining an organization, don't expect to create a new core. If the core values are compatible with your values then press on. If not, look into another organization. Sometimes you cannot determine whether employees practice the core values described in the company’s literature. If after joining the organization you discover a value gap exists with which you cannot live then look for a new opportunity.

Objectives and Goals Once the organization establishes the fundamental elements of mission, values, and vision, the employees can establish and pursue objectives and goals. The organization’s goals represent a general statement of purpose and direction. They do not include the setting of specific targets (objectives). Goals may be divided into strategic (long-term) and tactical (short-term) categories. Upper management determines long-term strategic goals that will guide the organization over a longer period – perhaps three to five years. Frequently they use a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis as an aid in determining direction.

SWOT A SWOT analysis helps find the best match between external trends (opportunities and threats) and internal capabilities. 49



A strength is a resource or capacity the organization can use effectively to achieve a desired result.



A weakness is a limitation, fault, or defect in the organization that will keep it from achieving this result.



An opportunity represents a situation that would increase product or service demand.



A threat represents a potentially damaging situation in the organization’s environment. The threat may be a restriction, a barrier, a constraint, or a political or economic situation that might cause problems in successfully delivering the organization’s products or services.

An effective set of strategic goals takes advantage of opportunities by using the organization’s strengths and wards off threats by overcoming them or by correcting weaknesses.

The SWOT analysis requires an impartial examination of the organization and its environment. People in the organization must review markets; competition; technological, political, social, environmental issues, and economic trends; marketing and distribution system; research and development (R&D) status; reputation; and resources including financial, availability of labor, computing, facilities, employee competencies and credentials, inventories, management skills.

Employees evaluate this data to determine whether they constitute strengths, weaknesses, opportunities or threats for the organization. Sometimes, information can

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be considered both a strength and a weakness. Based on this analysis, management creates strategic goals.

Middle managers develop tactical goals to meet near term demands. Typical tactical goals might include increasing the dollar volume of sales; to reduce fixed costs; to increase the number of pounds of material produced, to increase enrollment; to increase worker productivity. Following the establishment of general goals, managers develop a plan to establish objectives to achieve a desired result.

Objectives represent observable and measurable results that contribute towards meeting the general organizational goals. They are measured in terms of what, when, where, and how much. Objectives describe conditions that will exist after the work is performed. In some organizations, managers establish objectives. In others, the people doing the work participate in setting objectives recognizing that approval of the objectives rest with the immediate supervisor or manager. Typical objectives includes challenging a sales person to increase the sales of books in Bergen County, New Jersey from $5,000 per month to $8,000 per month by the end of the year or demanding that an office reduced its mobile telephone costs in the Fairfield County, Connecticut area from $5,000 per month to $3,000 per month by the end of the first quarter. Organizations use the acronym SMART to help establish objectives.

Specific

- Specificity in targeting a task.

Measurable

- Establish a measurable indicator of progress.

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Assignable

- Make the task assignable to someone for completion.

Realistic

- State what can realistically be achieved with budgeted time and other resources.

Time-related

- State the time duration.

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Figure – SWOT Process

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Sidebar: A Personal SWOT Analysis Organizations frequently use the SWOT analysis method to evaluate past efforts and determine its future. This process requires a great deal of soul searching. Frequently organizations send their executives away from the office in which they work. They go to a neutral ground devoid of the daily business interruptions.

There they begin a no-

holds barred brainstorming session. They agree to accept all ideas with no consequences or repercussions following the meeting.

Each of the participants brings different life experiences to the session. They interpret experiences differently. They will not all agree with each other.

However, all

participants must agree to respect each other and give one another the opportunity to articulate their thoughts and perspectives. Many of the comments will be of a sensitive nature. Participants agree to respect information revealed at this meeting and not seek retribution following the meeting. Sometimes organizations cannot really recognize or accept honesty and genuine open thought.

Individuals can benefit from a similar analysis. All of us can profit from an introspective self-examination of our lives. Think about your vision. Put it down in on paper. If you have not thought about it before, do it now. Does it relate to self-satisfaction, marriage, education, money, your occupation … something else? Then categorize your strengths and weaknesses. Consider the prospective opportunities in your life. Identify the situational threats that might prevent you from attaining this vision. Be brutally honest with yourself. Write them down and don’t show it to anyone else.

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Now think about several broad actions that you need to take to pursue this vision. Perhaps it involves the development of a certain skill set or a college education or a move to a new location. These are your goals.

If you have reached this point, you’ve done the hard part. Only the specific tasks remain. For each of the goals that you identified you have to come up with objectives that will assist you in achieving these goals. List the actions that you think are required to achieve the goals. Associate with the tasks, some way of recognizing that you have accomplished the task. Each task should have a well-defined result or outcome that will clearly indicate satisfactory completion. Ideally, you should be able to accomplish the objectives within a month or less. It’s too easy to postpone the start of objectives that take longer than a month.

You may use the chart below to assist yourself in developing this personal action plan. Add more goals if required.

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PERSONAL ACTION PLAN Personal Vision: Goal or Broad-based Endeavor #1: Objectives to Achieve Goal #1:

Specific Objective

Measured Outcome

Time for Completion

Measured Outcome

Time for Completion

Goal or Broad-based Endeavor #2: Objectives to Achieve Goal #2: Specific Objective

Activities Activities are work steps that must be accomplished before a objective or standard can be achieved. Examples of activities include prepare a specification, get a specification approved, complete a design, purchase a component, or install a telephone. Resources represent the raw material used by the organization to complete activities. Resources include people, money, materials, machine, facilities, information, technology, time, and energy, etc. needed to accomplish activities. People exercise control of an activity by comparing current performance to expected performance in

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time and making required changes. Many managers create a model for expected performance by collecting data for similar previous activities. They record information about the resources used to complete the activity for a given level of quality. They use this compiled data to form their own estimate for the resources required to complete an activity.

Standards Expected performance leads to the idea of standards. The International Organization for Standardization (ISO) (http://www.iso.ch/iso/en/ISOOnline.frontpage) defines standards as Documented agreements containing technical specifications or other precise criteria to be used consistently as rules, guidelines, or definitions of characteristics, to ensure that materials, products, processes and services are fit for their purpose. For example, the format of the credit cards, phone cards, and "smart" cards that have become commonplace is derived from an ISO International Standard. Adhering to the standard, which defines such features as an optimal thickness (0.76 mm), means that the cards can be used worldwide. ISO further states that “International standards contribute to making life simpler, and to increasing the reliability and effectiveness of the goods and services we use.’

Managers and supervisors usually have a notion as to the resources required to complete an activity. The estimate for these resources stems from either a

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performance standard based on the organization’s experience or generally accepted industry practice. If a standard doesn’t exist then the organization establishes it. As an example, suppose baseball wants to create a batting standard of performance. The baseball industry assembles a committee with outstanding knowledge about batting and impeccable baseball credentials. This committee meets, creates and adopts the standard of batting excellence shown in Table 2-1.

Based on this standard, we categorize ballplayers based on hitting ability. Table 2-2 illustrates the categories as applied to the 1999 New York Yankees baseball team. Each team member is assigned a quality rating. If after using this standard for some time, the sports community decides that the standard does not reflect their intended needs, then the committee members would meet again to modify the standard. All professional communities continually examine and update old standards, and create new standards as technology and general expectations change.

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Table 2-1 Standard of Batting ‘Excellence' Last Season’s Batting Average .326 or higher .301 to .325 .276 to .300 .251 to .275 .250 or Below

Hitting Ability

Hitting Quality Rating

Outstanding Excellent Good Fair Poor

A B C D F

The player must have had at least 150 turns at bat to qualify for a rating.

Table 2-2 1999 New York Yankees Batting Averages Player

D. Jimenez D. Jeter B. Williams D. Cone O. Hernandez D. Strawberry A. Watson C. Knoblauch P. O'Neill R. Ledee C. Davis T. Martinez C. Curtis L. Sojo S. Brosius J. Posada J. Girardi J. Leyritz S. Spencer C. Bellinger A. Pettitte J. Manto T. Tarasco A. Soriano R. Clemens H. Irabu M. Stanton

1999 Batting Average

No. of times At Bat

1999 Hitting Quality Rating

.400 .349 .342 .333 .333 .327 .300 .292 .285 .276 .269 .263 .262 .252 .247 .245 .239 .235 .234 .200 .200 .182 .161 .125 .000 .000 .000

20 627 591 3 3 49 10 603 597 250 476 589 195 127 473 379 209 200 205 45 5 33 31 8 4 4 1

NR A A NR NR NR NR C C C D D D D F F F F F NR NR NR NR NR NR NR NR

NR signifies that the ballplayer was not rated due to an insufficient number of times at bat.

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The baseball batting example may be considered a production standard. Many types of standards exist. The size, shape, form, and weight of sporting equipment follow prescribed standards. Technical standards exist that define electrical, mechanical, and software interfaces. Standards establish requirements for the composition and structure of material. Workmanship standards detail methods for evaluating welds, soldering connections, wiring harnesses, etc. Documentation standards clarify the formats used for submitting manuscripts. Standards establish expectations. If the items organizations use meet established standards and these standards meet the requirements set forth by the customer, then we have confidence that the product or service will be adequate. Independent organizations such as the U.S. Military, U.S. Department of Agriculture, IEEE, ANSI, Software Engineering Institute, Underwriters Laboratory, and the International Organization for Standardization (ISO) publish standards for a variety of applications.

Organizations use several other common organizational terms. Policies are broad guidelines created to help the organization achieve its plans. A process is a method of reaching a desired outcome within an organization. Davenport (1993) defines a process as "a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization." Davenport & Short (1990) define a business process as "a set of logically related tasks performed to achieve a defined business outcome." They state that processes have two important characteristics: (1) they have internal or external customers, and (2) they cross department boundaries.

Procedures outline

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the steps required to achieve an goal. Rules are definite, specific instructions. Standards, policies, procedures, and rules are necessary to implement plans. As shown in figure

policies created by senior management require a process. Managers

create procedures to implement the process. Rules are the specific detailed instructions that support the procedures.

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Figure

-- Organizational Policy-to-Rule Continuum Example

Policy – Broad organizational guidelines prepared by senior management

Process – a set of procedures required to implement policy

Procedure – outlines the steps required to achieve an objective in the process Rules – the specific detailed instructions

Policy – Organization will have a purchasing approval system

Process – a person or department must complete a purchase requisition and secure management approval

Procedure – 1. complete purchase requisition form; 2. obtain supervisor and management approval; 3. submit to purchasing department

Rules – 1. Specify item, part no., vendor, and preferred delivery date. 2. Purchases over $1000 require 3 bids 3. Purchases over $5000 require Vice President approval 4. Sign form 5. Obtain approvals 6. Employees can purchase items under $100 and receive reimbursement from petty cash.

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The entire planning process enables us to determine the goals and the actions needed to achieve the desired results. Throughout any organization, all components associated with the planning process must be in harmony at each level of management. The planning process is dynamic and must be evaluated and changed to conform to changing circumstances.

Sidebar: Public versus Private Companies Assam and Sarah believed they had a wonderful idea for a fast food Middle Eastern restaurant. Into the pockets of pita bread they wanted to insert a mix of chopped vegetables with balls of spiced falafel (ground chick peas) and a special devised blend of hummus and tahina sauce. As an unusual dessert treat they wanted to offer baklava -- a pastry covered with honey and filled with ground pistachio nuts. The mint tea would include real peppermint leaves and could be served iced or hot depending on the season.

Assam and Sarah took their life savings together with some money they borrowed from their parents and opened Sa-am’s Middle Eastern Restaurant in the city. The people in the business district enjoyed the fresh high quality food, the excellent service, the unique background music and the clean surroundings. In less than a year, Assam and Sarah repaid the loan and were making a profit.

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Based on this accomplishment they decided to open Sa-am’s Too -- a second restaurant in another part of town. With established credit, a proven successful idea, and demonstrated business understanding, they convinced a local bank to loan them the funds to open Sa-am’s Too. After a great deal of hard work finding a good location and setting up the restaurant, they again earned a profit within a year. They repaid the bank loans within two years. Assam and Sarah demonstrated that they had good business sense in addition to wonderful recipes.

Assam and Sarah privately owned and operated the restaurants. The success of these restaurants convinced them to expand the business and open other Sa-am’s Too in nearby towns and cities. This expansion effort required a great deal of money. In order to convince the people that had the money, Assam and Sarah had to develop a good business plan. Assam and Sarah had to begin thinking long-term. They need a long-term vision, goals, objectives, and values. They needed plans for recruiting and training quality staff, obtaining standard cooking equipment, standardizing the restaurant décor, developing a food distribution plan so that new Sa-am’s Too restaurants would enjoy the same food quality, legally protecting their ideas and recipes, and identifying other prospective locations. It would take them away from direct involvement in the two restaurants they started. They would change their careers from restaurant proprietors to restaurant executives.

Assam and Sarah decided to sell a portion of their business and go public. They chose not to borrow the money from a bank because they didn’t want to have monthly

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principal and interest payments. Instead the founders decided to give up part of their ownership. Financial organizations, investment bankers and venture capitalists assist people in raising money for starting a new business or expanding an existing business. In return for the funding to greatly expand their business, the investment organization demanded two-thirds of Assam and Sarah’s business. The investment counselors divided the business into 30,000 shares. Assam and Sarah would keep 10,000 shares and 20,000 were set aside for investors. After examining the industry and similar businesses, they decided to value each share at $25.

The investment organization

prepared the documents associated with an initial public offering (IPO) and attempted to sell the shares to people that had confidence in the future success of other Sa-am’s Too restaurants. If they successfully sold 20,000 shares they would raise $500,000, which the business would use to expand and grow.

Assam and Sarah now led a publicly owned company. As a publicly traded company Sa-am’s Too shareholders could sell their stock to anyone at anytime. A stockbroker would handle the transaction by arranging the stock sale between buyer and seller. The public determines share value by their perception of the company’s future prospects.

The company’s profits or earnings provide a good guideline for the stock

price. Suppose Sa-am’s Too restaurant earns profits of $300,000 or a profit of $10/share after the first year of operation. The price to earnings ratio is a commonly used method for valuing stocks. Many companies have a price to earning ratio of from 15 to 20. That would value Sa-am’s Too restaurants at $150 to $200 per share, which would represent a very healthy profit to the company’s shareholders. On the other

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hand if the restaurant did not earn a profit or worse, lost money, then the value of the shares could plummet to pennies.

Very often, newly formed companies (also known as start-ups) choose to compensate key employees with a lower salary plus shares of stock as a “sweetener”. The employee trades immediate income for a potential for future profits. If the company does well, then the employee will do well because the stock price will likely increase. This arrangement serves to motivate managers and other executives to focus on company profits so that the value of the stock increases.

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Chapter 2 Questions 1) If you were to start a new organization tomorrow, describe the core values you would build into the new organization. 2) Most large organizations have a corporate persona or identity that they share with the public. This identity becomes the public’s perception. Organizations use this identity to shape government policy as well as to convince the public to believe in them and use the services or products they offer. a) Use the Internet to find the names of the 30 companies comprising the Dow Jones Industrial average. b) Visit the web site of two of these companies. Try to discover their corporate identity by searching for their mission, values, and vision statements. The information may not be specifically called out as mission, values, and vision so you will have made a judgement about the data. c) Repeat part (b) using two of the following organizations: American Red Cross Avon Products Boy or Girl Scouts of America Colgate-Palmolive Eastern Mountain Sports Lands’ End Liz Claiborne Patagonia Procter & Gamble Reebok International Ltd. Salvation Army W. W. Norton & Company d) Compare the results of parts (a) and (b). Describe the similarities and differences in the information that you obtained. 3) Use the Internet to determine the winners of the most recent Malcolm Baldrige award.

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Self-check test

Circle the correct answer to each of the following questions or fill in the blanks. 1) An organization’s core identity consists of three items: ____________, _______________, and _______________ . 2) Select the best answers. a) The mission statement explains the organization's purpose . b) A mission statement describes specific and time limited activities. c) A mission statement represents the values and belief systems underlying the organization. d) The vision statement represents something the organization aspires "to become, to achieve, to create -- something that will require significant change and progress to attain." 3) Select the phrase that best defines an organization’s goals a) An organization’s goals represent a general statement of purpose and direction. b) An organization’s goals represent specific targets. c) An organization’s goals represent its Strengths, Weaknesses, Opportunities, and Threats. 4) Which statement characterizes an organization’s objectives? a) Objectives represent observable and measurable results that contribute towards meeting the general organizational goals. b) Objectives are measured in terms of what, when, where, and how much. c) Objectives describe conditions that will exist after the work is performed. d) Objectives represent an organization’s Strengths, Weaknesses, Opportunities, and Threats. 5) The acronym SMART represents the following: i) S ______________________ ii) M ______________________ iii) A ______________________ iv) R ______________________ v) T ______________________ 6) True or False: A SWOT analysis relates external trends (opportunities and threats) and internal capabilities (strengths and weaknesses). a) True b) False 7) Examples of resources are a) people b) land c) machines d) materials e) money f) train ride

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8) True or False: The fundamental premise behind control of an activity is the comparison of current performance to expected performance in time and then making required changes. a) True b) False 9) Which of the following can trace their assigned value to an accepted standard? a) A team’s won-loss record. b) U.S. Grade A meat c) Distance in miles d) Temperature e) Shoe size f) A container of milk purchased in a store g) Lumber

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CHAPTER 3

If I am not for myself, who will be? If I am not for others, what am I? And if not now, when? Hillel, Ethics of the Fathers Ch1-14

<> Chapter goals After studying this chapter, you should be able to: Define a project Explain the difference between a program and a project Understand and create an organization chart Understand the different types of organizational structures Explain a matrix operation

Project Management Organizational Overview

General Management encompasses planning, organizing, staffing, coordinating, executing, communicating, and controlling the operations of an ongoing enterprise. A project is an endeavor undertaken to create a unique product or service. Projects are commonly used today in almost all types of industry, including defense, construction, electronic, pharmaceutical, chemical, and others (Kerzner). Typically, projects begin after signing a contract with a customer; or they are internally initiated with the intention to introduce a new product to the marketplace (Shenhar, p. 33).

The organization

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intends to leapfrog the competition with a new product or play “catch-up ball” and just stay abreast of the competitor’s product.

Every project has a definite beginning and a definite end. Projects do not go on forever. Projects start with an identifiable need. Staff members prepare a requirement list or perhaps a more detailed specification document. The organization’s purchasing department distributes the requirements to potential internal or external suppliers. Organizations usually demand a response from prospective suppliers within 30 to 90 days. The potential suppliers respond to the buying organization with a bid – a proposal describing the equipment they will deliver and the price. The prospective buyer reviews the bid responses, selects a winner and awards a contract. Figure ( ) summarizes the process.

Following contract award, a project manager assembles a team that develops the product or service embodied in customer’s idea and distributes the work and the associated budget to the organization’s departments. Following product or service development and test, technicians install the product or service at the customer’s site and confirm the system operates. Very often, the final customer requirement involves training the customer’s staff in the correct way to use and maintain the product.

This

project lifecycle summarizes the steps associated with a project. The bell shaped pattern shown in the Figure

depicts the money spent on a project or the labor hours

worked on a project. Project funding starts slowly then progressively increases. The design and development effort expends the maximum funds as the largest number of

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people work on the job. Fewer people perform the installation and the chart shows less spending. Projects usually end with an acceptance test at the customer’s site followed by training of the customer’s staff in the use of the product or service. At this point, the remaining people on the project return to their respective departments for reassignment.

A software or hardware product may require ongoing maintenance, but that is not considered part of the original project’s activities. Many organizations have a separate group of personnel that concern themselves with product maintenance. Customers usually receive annual payment notices for periodic hardware or software maintenance and product updates

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Figure

The Bid Process

XYZ Company identifies a need

Suppliers prepare and submit a bid to the XYZ Company

XYZ Company prepares a list of requirements or a specification

XYZ Company evaluates the supplier’s bids

The XYZ Company purchasing department distributes a specification to potential suppliers

XYZ Company awards the contract to the ABC Company

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Figure -- Project Lifecycle Phases No. of people on the job or Labor Hours or Project Spending

TIME Contract Award

Planning Assembling Team & Disbursing Work

Design, Development & Test

Installation

Training

Transfer to Maintenance

A product or service provided by a project differs in some distinguishing way from previously delivered products or services. The Project Management Body of Knowledge (PMBOK) defines Project management as the application of knowledge, skills, tools, and techniques in order to meet or exceed stakeholder needs and expectations from a project. Project managers (PM) use many of the same techniques and tools employed by general managers. After negotiating for the organization's resources required for a project the PM assigns these resources with the intent of completing specific objectives

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and goals. The PM has complete responsibility for the success or failure of the project. Frequently however this person lacks the authority to insist that members of the organization support the completion of the required activities. We will discuss the ramifications of this apparent paradox in the next section.

A program is a group of projects managed in a coordinated way to obtain benefits not available from managing them individually. The projects comprising a program share some common features. The commonalities may include application or purpose, components, development and/or fabrication tools, developer labor pool, training, and maintenance. The organization desires to take advantage of this expertise associated with similar projects and thus creates a program. A program manager will have responsibility for several projects. After a project team gains experience on one of the projects in a program manager would like to assign the existing team to other projects in the program by negotiating with the functional managers. This team understands each other’s strengths and weaknesses. They understand the major technical aspects of the new project and the development tools required to perform the job and do not require extensive training. They are ready to go. Program managers would like to apply this knowledge to other projects in the program thereby saving money. The organization and the customer benefits from combining several similar projects into a program by making use of the experience that the team has gained. Figure 3-1 illustrates the distinction between a project and program. Over a fifty-year time span, the U.S. Navy's Blue Angel flight team used eight aircraft. Each aircraft represents a separate and distinct project. The phases of each aircraft project included initial concept, aircraft development,

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prototype manufacture, and test and evaluation. (The project does not include production manufacturing and aircraft maintenance.) From the U.S. Navy's perspective all the aircraft represents the Blue Angel aircraft program.

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The Project and the Program

Figure 3-1 Fifty years of Blue Angels Aircraft - Grumman F6F Hellcat, Grumman F8F Bearcat, Grumman F9F Panther, Grumman F9F-8 Cougar, Grumman F11F-1 Tiger, McDonnell Douglas F-4J Phantom II, McDonnell Douglas A-4F Skyhawk II, McDonnell Douglas F/A-18 Hornet

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Figure 3-2

Functional Department View of the Organization Engineering

Manufacturing

Purchasing

Human Resources

CustSales omer & Service Marketing



Upper Management Middle Management Supervisory Non-supervisory worker

Figure 3-3

Organizational Level and Function

Upper Management -- Policy Middle Management - Planning Supervisory -- Scheduling Non-supervisory worker - Product or Service

Figure 3-4 Engineering

Operational Islands

Manufacturing

Purchasing

Human Resources

CustSales omer & Service Marketing

Upper Management Middle Management Supervisory Non-supervisory worker

Why Project Management?

Organizations divide into four broad management categories (Figure 3-3). Upper management establishes organizational policy and future direction, middle

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management focuses on planning, supervisory levels focus and work distribution on scheduling, and the large non-supervisory workforce focus on completing and delivering the product or service. Functional managers take responsibility for activities in specialized departments or functions (e.g., engineering, purchasing, manufacturing, management information systems (MIS) or information technology (IT), sales, marketing, human resources, publications, customer service). They concentrate on their area of expertise.

Organizations use the phrase line managers to describe managers actually contributing to making a product or performing a service (Figure 3-2). A line organization describes the direct, straight-line relationships between different levels within the company involved with a product line. The members of the line organization perform or manage functions essential to the existence of the firm. The line organization has a clear chain of command and promotes fast decision-making.

Combining the stratified organization levels with the functional departments creates a patchwork of "fiefdoms" (Figure 3-4). Few managers in the organization take a broad view. In fact, upper management usually prefers that functional managers tend solely to their activities. So, when you examine the organization closely, you view a vast sea of operational islands. That is, highly territorial supervisory and non-supervisory personnel closely guarding the regions of their special interest. This leads to the need for a manager that can integrate and meld parts of these independent "fiefdoms" into a

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cohesive group that takes an interest in completing a particular job or project. This person is the project manager.

Project Manager's Responsibilities The essential goal of project management is to make the most effective use of resources such as labor, equipment, facilities, materials, money, information, and technology so that project goals can be achieved within budget, on schedule, while meeting performance requirements, and receiving customer acceptance. The project manager must take into consideration the changing legal, social, economical, political, and technological environments. The Project Manager is the focal point for integrative responsibility. Upper management holds this person totally accountable for all project activities. This person must coordinate across the organization's functional interfaces, resolve conflicts, and apply integrated planning and control techniques. The PM continually crosses organizational boundaries in an effort to acquire resources. This person must quickly develop the team into a harmonious group. Undoubtedly, a major role involves securing a user commitment to a firm and realistic set of requirements. A good specification defines the job scope, budgets, schedules, and quality controls. The requirement definition has immense impact on the resources selected and profitability of the project. A successful PM must have administrative expertise and an understanding of human behavior. The person must act as an integrator, communicator, leader, and environment enhancer.

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The project manager acts as the focal point to the stakeholders that include customer, upper management, functional management, and other individuals and organizations involved in or affected by project activities (Figure 3-5). Project managers must strive to meet or exceed stakeholders’ needs and expectations, where the stakeholder are Individuals and organizations who are involved in or may be affected by project activities. Without a project manager in charge the project will operate as shown in Figure 3-6.

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Upper Management

Functional Department Management

PM

Customer Figure 3-5-- Project Manager (PM) pulled in all directions

1. Wild Enthusiasm 2. Disillusionment 3. Chaos 4. Search for the Guilty 5. Punishment of the Innocent 6. Promotion of the non-Participants 7. Definition of the Requirements

Figure 3-6 -- The Seven Phases of a Project (without a project manager in charge)

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Organizational Charts

All organizations formally divide management responsibility into layers, which are referred to as organization charts. Figure 3-7 illustrates a traditional top-down organizational chart. Organization charts are not one size fits all. A "best" organization chart does not exist. An organization structure successfully used for a Fortune 500 industrial company may not be suitable for the operations of a smaller business or a different industry. Organization charts are not cast in concrete. They change depending on business, economic or labor conditions. Organization charts reflect the chief executive’s personality and preferred way of conducting operations.

The executive office may consist of the organization’s president, vice presidents, legal staff, and administrative staff. The organization’s staff provides advice and support. The three types of staff personnel perform advisory, service, and control tasks. The vice presidents report to the president and have responsibility for one or more functional or support departments.

Depending on the organization’s size, either a vice president or a director reporting to the vice president will lead functional and support departments. Frequently there exist vice presidents of engineering, manufacturing, sales and marketing, information technology, human resources, etc. Mid-level managers report to these vice presidents and non-supervisory employees report to the mid-level managers. Figure 3-7 depicts a typical functional organization. The disciplines required to develop and produce a

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product or service are identified in the organization chart. Each has a department manager that can trace a line back to the organization’s president. Everyone understands where he or she stands in the “pecking” order. When a special project comes into the “house”, no particular person receives responsibility for its completion. The managers meet and agree to divide the work according to a plan that they devise. Each mid-level manager establishes priorities. A dispute among departments would likely work itself up the chain of command and require interdiction by vice presidents. Probably not a very efficient way to attack a project. Each department manager tries to maximize the use of personnel used within each department. The manager assigns personnel and establishes priorities according to his or her own preferences.

Figure 3-8 illustrates a project management structured organization. This focused order exists to manage a variety of large projects. Employees are dedicated to specific projects. Each project group contains a complement of engineers, technicians, administrators, and other professional and nonprofessional personnel. Functional managers do not have to make project priority decisions -- they only work on a single project. Everyone reports to the manager responsible for the project. This person has both the authority and responsibility for project success. The project manager requests that functional managers hire personnel to work on this specific project. At the end of the project, employers may find themselves looking for a new job unless they can obtain a position in another project organization.

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Most organizations prefer not to duplicate personnel for each project. Instead, they attempt to create a single "world class" functional organization whose talent is shared among the various projects. This leads to the matrix organization shown in Figure 3-9. On receiving a project, the organization assigns a project manager. This manager assembles a team by requesting and then negotiating for support from the required functional groups. Functional managers assign people to the project. Project managers negotiate with the functional managers to obtain the best people for the project. Project manager’s that know the personnel in the organization have the best opportunity for successfully recruiting a capable staff.

The project manager plans and

coordinates the project by working with and integrating all groups within the organization. The project manager must identify and address the needs of all stakeholders. This person relies on organizational and people skills more than technical ability to pursue project success. The PM focuses on work relationships and leadership including motivation, delegation, supervision, team building, and conflict management and resolution. Following a discussion with the functional manger, the PM arrives at a suitable working relationship with the functional manager to reward and discipline employees. The PM influences the stakeholders by using written, verbal, and listening communication skills as well as demonstrating excellent problem solving competencies.

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Figure 3-7 Traditional Management Structure Functional Organization Executive Office Information Technology

Engineering (Director)

Operations

Financial

Administration

Field Service

Division

Marketing And Sales

Mechanical

Electrical

Technicians

Financial

Marketing Staff

Department Software

Manufacturing Purchasing

Sections/ Functions

Digital Analog

Publications, Configuration Management, Secretarial

Sales Force

Structures Adhesives CAD

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Figure 3-8 Project Organization

Executive Office

Information Technology (IT)

Project/Program A Manager

Engineering

Financial

Operations

Administration

Project B Manager

Sales

Field Service

Publications, Configuration Management, Secretarial

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Figure 3-9 Matrix Organization Executive Office

Information Technology

Engineering

Operations

Financial

Administration

Field Service

Marketing And Sales

Project Manager X

Project Manager Y

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Table 3-1 Comparison of Project Leadership for Different Organization Structures

Project leadership responsibility Project priorities Stakeholder Disputes Personnel selection PM responsibility PM authority Personnel at end of Project

Traditional Functional Organization May use a project coordinator

Functional managers recruit personnel None Remains in functional organization

Project Management Structure PM

Matrix Organization PM

Established by PM Resolved by PM

Established by PM Resolved by PM

PM designates managers to recruit personnel High High May leave organization

Functional managers recruit personnel High Weak Return to functional groups

Functional Organization

The functional organization structure is based on specialization such as engineering, production, marketing, accounting, logistics, etc. Individuals report to one superior. In a multiple project environment, conflicts may develop over the relative priorities of different projects in competition for limited resources. The Project manager has little formal project authority and relies on negotiation, the informal power structure and interpersonal skills to realize the project goals. Frequently project team members place more emphasis on their functional specialties, which can work to the detriment of the overall project. One premise behind the functional organization, is that it is easier to manage specialists if they are grouped together and supervised by an individual possessing similar skills or experiences. The functional organization centralizes similar

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resources and provides mutual support to group members by physical proximity. This origination structure can usually define career paths for its participants.

In the project management structured organizational, the PM has total authority over the project and retains the flexibility to acquire resources needed for the project from either within or outside the parent organization. The project team members are assigned from the parent organization to the project. When the task is complete or the project ends, the members return to their respective organizations. The structure promotes more effective informal communications channels between the project manager and the team. The project management structure may not promote efficient use of resources and there may be a possible duplication of facilities. Project team members work themselves out of a job, which results in reassignment that may include a layoff, a release to another project, or a return to the parent organization. The time away from the parent organization may negatively affect promotional progression.

The Matrix Organization represents a combination of the functional and project management structures. It attempts to maximize the benefits of the project management and functional organizational structures and minimizes its weaknesses. The matrix maintains the functional or vertical lines of authority while establishing a relatively permanent horizontal structure supporting new projects. It is designed to work with all functional departments that support the project and reduce or eliminate the amount of duplicate effort found in the project team. The matrix organization is designed to manage several projects simultaneously even though the organization may

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have insufficient resources staff each project separately . This system may create conflict with the project workers in that there are two "bosses" for each worker: the project manager and the functional manager. To reduce the conflict, the roles and responsibilities of each must have a clear definition before work begins. A strong matrix refers to more authority given to the project manager and in a weak matrix the authority is passed on to the functional manager. Table 3-1 summarizes these comparisons.

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Chapter 3 Questions 1) Explain the difference between a project and a program. 2) What is an organizational chart? What is its purpose? 3) Think of a company, religious organization, charitable organization, or a college with which you have some familiarity. Perform a SWOT analysis. That is identify the strengths, weaknesses, opportunities, and threats confronting the organization. Based on your analysis, identify two strategic goals appropriate to the organization. 4) Describe the advantages and disadvantages of functional, project, and matrix organizations. 5) If a project organization completes a project, what may happen to the members of the organization? 6) Describe a functional manager and a line manager. Can they be the same? Explain. 7) Do you believe that a project manager need have a technical expertise in the organization’s specialty areas? Explain your answer. 10) Sketch a project lifecycle. Describe its meaning.

Self-check test Circle the correct answer to each of the following questions or fill in the blanks. 1) True or False: A project is an endeavor undertaken to create a unique product. 2) Every project has a definite ___________ and a definite _______________. 3) True or False: Project management is the application of knowledge, skills, tools, and techniques in order to meet or exceed stakeholder needs and expectations from a project. 4) True or False: The PM has responsibility for the success or failure of the project. 5) True or False: A program is a group of projects managed in a coordinated way to obtain benefits not available from managing them individually. 6) True or False:

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A line organization describes the direct, straight-line relationships between different levels within the company involved with a product. 7) A project manager is concerned about the following: a) Effective use of resources b) Completing the project within budget c) Completing the project on schedule d) meeting performance requirements stated in the contract e) receiving customer acceptance f) achieving state of the art performance g) Giving the customer everything they asked for. 8) Examples of stakeholders are which of the following: a) External Customer b) Functional departments c) IRS auditors d) Suppliers e) Senior management 9) Select the employee(s) that contributes to making a product or performing a service. a) Line manager b) Legal staff c) Librarian d) Company nurse e) Purchasing staff 10) Characteristics of the functional organization include: a) Specialty personnel b) Colleagues sharing a common work area c) Manager with authority to make project priority decisions d) Technical problem solving skills 11) Morning social discussions with work associates a) Improves morale and should be engaged in every day. b) Reduces company productivity. c) Should not be conducted in front of a manager. 12) Characteristics of a functional organization include the following: a) Specialty skills b) Minimal skills c) Contains a broad cross section of the organization’s disciplines d) Outstanding writing skills

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13) . True or false: The matrix organization is designed to manage several projects simultaneously even though the organization may have insufficient resources staff each project separately. 14) True or false: The matrix organization may create conflict with the project workers in that there are two "bosses" for each worker. 15) The PM focuses on work relationships and leadership and uses the following techniques: a) b) c) d) e) f)

Motivation Delegation Supervision Team building Conflict management and resolution Superior technical skills.

16) A project manager’s primary goals involve delivering a product or service (choose all that apply): a) Within budget b) On schedule c) Meeting the performance requirements d) Exceeding the performance requirements described in the specification e) Receiving customer acceptance f) With employee satisfaction

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CHAPTER 4 Management Concepts

There is nothing more difficult to handle, more doubtful of success, and more dangerous to carry through than initiating changes. The innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may prosper under the new. -- Machiavelli, The Prince, Chapter 6

<> Chapter goals

After studying this chapter, you should be able to: Understand the difference between a manager and a supervisor Understand fundamental management theories Define efficiency and productivity Discuss the functions of management Discuss management styles Explain the types of power used by managers Compare a group and a team Explain the difference between a manager and a leader

Class Exercise: Before reading this chapter, students in the class should perform the following the exercise. The purpose of this exercise is to stimulate your thinking regarding a manager's job. Divide the class into small groups consisting of three or four students.

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Most students have held one or more jobs. Recall your supervisor or manager in these jobs. Take a few minutes to answer the following questions individually.

1) List the broad supervisory responsibilities that you believe this person had. 2) List the reasons that you took the job. 3) Identify the actions taken by the organization and the supervisor or manager that would motivate you to pursue your tasks with greater diligence. 4) What did you like least about the job?

Discuss your individual responses to each question with the small group. The group should evaluate the individual responses and select the five most significant answers to each question. Discuss the results of your deliberations in class.

<> Management What does a manager do? What makes a good manager? Practitioners and theorists have wrestled with these topics at length. Most agree that management is the process of getting activities completed efficiently and effectively with and through other people. The manager’s goal is to get the job done in the shortest time with a minimum of cost and expended resources. Resources consist of people, places, and things. From the organization's perspective, it includes time, labor, material, facilities, land, tools,

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money, equipment, etc. An organization includes 1) people that do the work, 2) people that plan and distribute the work, and 3) people that plan for the organization's future. The second category includes the day-to-day managers and supervisors. The last group consists of upper management.

Management is not a new idea. Consider the management skills required by the ancient Egyptians to build the pyramids. Depending on which historian you believe, the pyramids required from 20,000 to 100,000 laborers -- an impressive workforce. The Chinese built the Great Wall a length of 4000 miles across the border between China and the Hun territories in the north. The 4000-year-old Stonehenge structure in the United Kingdom is a set of concentric rings and horseshoe shapes. This construction likely involved moving stones weighing as much as 25 tons from a quarry location 18 miles away. Roman engineers built aqueducts that crossed mountains, valleys and plains. Eleven major aqueducts built over a period of more than 500 years, stretching over hundreds of miles supplied water for the city of Rome. They built aqueducts in numerous other parts of their empire, notably France, Spain, and Northern Africa.

These projects required large amounts of human labor and involved planning,

control, organization and coordination. The jobs used project managers’ skills.

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Figure The Great Wall

Figure

Stonehenge

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Figure

Roman Aqueduct

Figure Pyramid

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All of us receive supervision at work and some of us will be managers during our career. You will likely make employment decisions based on your perception of the organization’s management quality. An understanding of basic management principles will help us make informed decisions about the prospective organization. It will help you ask the right questions at the interview so that you can determine if you would enjoy the work environment. It will help you to decide whether you should consider a management opportunity during your career. Project management requires us to understand and use many of the fundamental management concepts discussed in this section.

Managers and Supervisors The difference between managers and supervisors requires clarification before proceeding. This distinction between the two varies among organizations. Both a manager and supervisor represent the work group to a management level above them. In most organizations the hierarchy begins with a supervisor, followed in turn by a manager, middle manager, and senior manager. A project manager is at the level of a middle manager. The supervisor must still have a good technical command of the needed skills because they are so close to the "hands-on" work performed by the employees. As the person moves up the management hierarchy, technical skills become less important and interpersonal skills assume greater importance.

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Mintzberg points out that managers make broad decisions with potentially wide organizational impact and supervisors makes decisions about a particular work unit. Frequently a manager has an external role and may visit stakeholders such as customers and suppliers while the supervisor has a more limited role confined to the unit or department. Supervisory management is more focused and has a short-term outlook.

The supervisor maintains the routine flow of work. Both the manager and supervisor receive, collect and transmit information. The manager receives and transmits more information from people outside the organization than the supervisor. The manager is a spokesperson to the outside world. The manager disseminates the organization's information into its environment. The manager exists at the center of organizational decision-making. The manager initiates change, deals with threats to the organization, decides on organizational priorities and negotiates on behalf of the organization.

Historical Management Overview Management thought has evolved over the years. An evolutionary continuum is shown in Figure 1. As people conducted social experiments and performed studies, organizations began to modify existing management processes and procedures and adopt new methods. Abrupt changes rarely occur, rather organizations ease into new ideas. Researchers do not necessarily agree on the titles of the schools of management thought discussed below. Certainly, practitioners (managers working in business, industry, profit and non-profit organizations, and public and private sectors)

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do not care about management categories. A senior executive cares about meeting the planned quarterly financial targets and strategic goals. The mid-level executive or project manager share concerns about achieving well defined objectives that the customer demands. Their interests lay in using techniques to motivate the staff to provide a product or service that satisfies the stakeholders. Managers mix and match ideas and theories to help them get the job done. Recognizing that distinct categories blend into one another and do not have sharply defined edges, we will attempt to separate and classify the schools of management thought in an effort to gain insight into the subject. Concepts introduced a century ago still apply today under the appropriate circumstances.

During the industrial revolution (1750 to 1850), the U.S. moved from an agrarian society to urban factory based centers. Dramatic changes in the social and economic structure took place as new technology created the factory system of large-scale production. Managers emphasized the division of labor and the importance of machinery to assist labor.

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Figure 1 – Selected Contributors to Management and Leadership Thought

Other Recent Contributors -- Drucker, Peters, Blanchard

Quality – Deming, Juran, Crosby, Feigenbaum, Ishikawa, Shewart, Taguchi

Leadership Theory – Mintzberg, Bennis, Kotter

Behavioral Theory – Barnard, Follett, Herzberg, Maslow, Mayo, McGregor

Classical Management Theory (Scientific) – Gilbreth’s, Taylor

Classical Management Theory (Administrative) – Fayol, Follett, Gantt, Weber

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1900

1925

1950

1975

2000 10 3

Classical Management Classical management theory developed in the latter part of the nineteenth century and continued into the first half of the twentieth century. The theorists believed that money motivated employees, which is the concept called “economic man”. The classical period focused on efficiency and relied on bureaucratic, scientific and administrative concepts. Improve efficiency and productivity would go up. In technology, we define efficiency as the ratio of output to input expressed as a percentage. In the organization, we can define efficiency as the resources spent to complete a specific task compared with a reference. The resources normally used to complete a task may be an acceptable reference point. Reducing the time to complete that task improves efficiency. Increased worker efficiency can result from gaining experience on the job. Efficiency may also improve from the use of a new tool or piece of equipment as more product will be produced within a given time period. Very often, the use of a new tool may reduce efficiency during the short term until personnel learn to use the equipment effectively. Good efficiency requires the ordering of job tasks in a way that uses a minimum of resources.

Increasing the efficiency of production processes improves

organizational productivity. Productivity measures the worker’s output over some time. A productivity gain yields an increased amount of product or services during a time period as compared with a previous time period.

Managers expect activities to use specific processes, procedures and methods. Bureaucratic management relies on 1) a set of guidelines and procedures or rules, 2) a hierarchy, and 3) a clear division of labor. Scientific management focuses on the way to

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do a job that results in the highest productivity. Administrative management emphasizes information flow in the organization’s operation. The process involves acquiring information and then performing the operations to achieve organizational goals. Several of the leading classical management theorists include Fredric Taylor (the father of scientific management), Henri Fayol, Gantt, Weber, and the Gilbreths (originators of time and motion studies).

Henri Fayol revolutionized management thinking. He identified five functions of management that continue to serve as a basis for administrative actions. These included planning, organizing, commanding, coordinating, and controlling. Planning requires an understanding of the work so that the supervisor or manager can identify the tasks to be performed and then develop a schedule to perform the work. Organizing requires the manager to identify and assemble the resources required to perform the work. Commanding involves assigning the appropriate people to the work and confirming that the job gets done. Coordinating involves unifying the activities, resources in a logical manner so that the work can get done. Finally, the manager must control the operation so that the work is performed and completed in accordance with the organization's established policies and procedures. Controlling the work operation yields output consistency from worker to worker. Luther Gulick and Lyndall Urwick (1937) modified Fayol’s list of management functions as follows: Planning, Organizing Staffing

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Directing Coordinating Reporting Budgeting.

The addition of staffing, reporting, and budgeting adds tasks for which managers frequently have responsibility. Directing, a softer less military-like word, replaced commanding. Gulick & Urwick (1937) emphasized formal authority and the role of direct supervision. Later studies conducted by Mintzberg and Kotter found that successful managers spend a great deal of time communicating, cultivating networks and personal contacts and delegate work to subordinates to get the job done.

Fayol embellished the baseline five management responsibilities with fourteen management principles. These principles or general rules apply to all organizations are:

1.

Division of work through labor specialization. Specializing encourages the development of expertise associated with the performance of specific tasks.

2.

Authority and Responsibility. Authority should reside with the people having the responsibility for the task. Recognized personnel should have the right to give orders and the power to demand that the employee comply. One individual receives recognition by the organization to assume responsibility for making certain that activities associated with a given job get done. Project managers frequently have the responsibility, but not the authority for completing a job.

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3.

Discipline. The manager expects and insists that employees obey the rules and has the means to enforce this demand.

4.

Unity of command. Each employee should have one boss.

5.

Unity of direction. A single project plan controlled by a single individual.

6.

Subordinate Individual Interests to the organization's needs. Pursue only work-related activities at work.

7.

Employee Compensation. Employees receive fair payment for services performed.

8.

Centralization. Consolidation of management functions. Decisions are made from the top.

9.

Scalar Chain (line of authority). Use of a formal chain of command from the top to the bottom of the organization. This creates a pyramid-like top down structure that is standard operating practice in today’s organizations.

10. Order. All materials and personnel have a designated location. The six-sigma quality concept implemented by Motorola and other major organizations used this as a starting point. 11. Equity. Equality of treatment (but not necessarily identical treatment) 12. Personnel Stability. Limited personnel turnover. Changing personnel requires retraining and will lower productivity. In good economic times, people tend to change jobs more often than in business slumps. 13. Initiative. Think out a plan and make it happen. Many managers take the initiative and use the credo “Do it now and ask forgiveness later.” 14. Esprit de corps. Encourage harmony and cohesion among personnel.

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The most widely known of these fourteen management principles include 1) division of work through specialization, 2) authority should be equal to responsibility 4) unity of command, 5) unity of direction, and 9) the scalar chain of command. Classical theorists believed that understanding and applying these principles in a rational manner leads to the successful resolution of management problems.

Henry Gantt is best known for developing a chart used for scheduling tasks over time. Today managers use the Gantt chart more extensively than most other project management tools. Microsoft Project and Primavera are two software products commonly used to develop schedules. Gantt also recommended motivational schemes that emphasized rewards for good work rather than penalties for poor work. He advocated a compensation incentive system with a guaranteed minimum wage and bonus systems for people on fixed wages. Gantt believed in the importance of leadership and management skills in building effective industrial organizations.

At about the same time that Fayol described the manager's job, Frederic Taylor introduced scientific management. Both Fayol and Taylor were task- and thingoriented, rather than people-oriented. Scientific management focuses on worker and machine relationships. Taylor’s scientific model evolved from the factory mass production experience and relied on standardization of work, control of quality, a division of labor, and a structural hierarchy. He analyzed the work that had to be completed and then organized work activities into a group of basic operations. This

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concept worked reasonably well with industrial and repetitive tasks. Taylor strongly believed that managers and supervisors should cooperate with and motivate people to perform. In the effort to improve production efficiency, he advocated improving the tools employees used to perform the work and then selecting and training personnel in their use.

He argued that good working conditions and the use of economic incentives

to motivate employees would help gain their cooperation.

Frank and Lillian Gilbreth further advanced the scientific model by performing detailed time and motion studies. They focused on 1) identifying the fundamental motions in work, 2) the way these motions combine to form a method to perform a task, and 3) the basic time each motion took. Frank Gilbreth collected data by filming individual physical labor movements during the performance of a workers job. They then analyzed the workers movements. They showed managers how to break down a job into its component parts and reassemble the motions to minimize the time to perform tasks. Using the resultant information, the manager prepared a more efficient procedure that the employee followed. These procedures not only reduced the time to complete a job but it helped to make the times consistent from worker to worker. The result enabled managers to accurately estimate time to complete a job, which customers appreciated.

Max Weber promoted bureaucracy as the most logical form for large organizations. During the early part of the twentieth century, the word bureaucracy did not have the negative connotation with which we now associate it. Documented processes, procedures and a hierarchical structure governed by an impersonal authority typify a

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bureaucracy. Authority stems from the individual’s position in the organization’s hierarchy and not on an individual’s personality or charisma. The worker’s title defines the person’s authority. Characteristics of a bureaucracy include the following:



Well-defined and specialized jobs



Qualifications for job tested



Formal behavior rules



Hierarchical system of supervision



Unity of command



Preparation and use of written processes and procedures (e.g., an employee’s handbook, industrial safety directions, or directions on handling hazardous material – HAZMAT)



Skill based training



Work assignments and personnel recruitment based on technical expertise



Operations continuity despite changes in personnel



Promotions based on competence



Continued employment based on merit

Weber believed that organizations would become successful by applying these bureaucratic rules. Bureaucracies established concepts of fairness and equality of opportunity. Bureaucracies excel at businesses involving routine tasks that can be specified in writing and do not change quickly.

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The industrial revolution and the progress made by science and technology in the 1900’s gave credence to the idea of a single best way to manage. Scientific management seemed to reinforce this idea. The training that engineers and scientists receive leads them to expect a single answer to a problem. In mathematics and science courses technology students tend to present a single number as the solution to a question. They are comfortable with the existence of a single, best way to accomplish a objective. During the twentieth century, it was common for engineers and scientists to move up the ranks and become managers. So, the idea of a single best way to accomplish a task moved with them. In the real world however, there frequently exists an array of solutions to business and management problems -- perhaps some better than others, but many very probable. One of Mary Parker Follett's important contributions to management theory was the Law of the Situation that emphasizes that there is no one best way to do anything, but that it all depends on the situation. Contingency theory or situational theory developed by Fielder uses Follett’s concepts. Today this is considered mainstream management thinking. Precise management formulas do not exist. If they did, far more managers would be successful. The techniques recommended by the classical theorists should be used as guidelines to manage organizations.

Human behavioral management Human behavioral management studies began in the 1920s and dealt with the human aspects of organizations. This group of theorists based their studies on psychological concepts. The philosophy of "social man" began to compete with the concept of

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"economic man."

The movement began with the Hawthorne Studies. From 1924 to

1933 at the Hawthorne Plant of the Western Electric Company in Cicero, Illinois, Harvard Business School researchers, T.N. Whitehead, Elton Mayo, George Homans, and Fritz Roethlisberger conducted a series of industrial psychological experiments. One study examined the effect of changing the electric lighting illuminating the employees work area. The researchers established two groups -- a control group wherein the workplace lighting was held at a constant level and an experimental group that had varying illumination strengths. The researchers expected that the group of women workers receiving improved illumination would have greater productivity. The surprising results showed that the productivity of both groups improved. The researchers concluded that the increased attention given to both groups making them both feel very special led to the improved productivity. Mayo identified the “Hawthorne Effect” which is the productivity improvement that results when people know they are being studied.

The researchers at the Hawthorne plant conducted many experiments relating worker and group output to working conditions. Their efforts highlighted the importance of informal groups (i.e. groups arising out of the formal organization, but not specifically created by management) and the benefits of listening to employees’ feelings and opinions. Work breaks, the freedom to talk, and approved requests for supervisory changes positively influenced individuals work behavior. Over a period of years, the researchers found workplace changes other than increased wages influenced productivity. Some of these changes included varying workday and workweek lengths,

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varying starting and stopping times, and providing lunches paid for by the company. Concerns about today’s families’ complicated work/life agenda have forced organizations to seek methods of improving worker satisfaction while improving productivity. Verespej (2000, p. 25) reports about a problem that a company had with mandatory worker overtime on weekends. “Taking the suggestion of its manufacturing employees, the company switched to a schedule where workers put in a full workweek over four days. That allowed to company to schedule overtime, when needed, on Fridays, and let employees save weekends for family activities and, occasionally, have a three-day weekend.” Similarly, Hewlett Packard (HP) had to break its traditional 8 to 5 workday thinking. Verespej (2000) relates “self-directed work teams in one HP financial-services center opted to switch to a four-day-week, 10-hour-day schedule to process the high number of transactions. The results: Overtime dropped 50%, workers had more ‘quiet’ time to develop process improvements, and the number of transactions processed daily per person increased by 70%.”

The Hawthorne studies did not find a direct cause-and-effect relationship between working conditions and productivity. Worker attitude was important. The researchers found that employee's complaints may be a symptom of some underlying problem on the job, at home, or in the person's past. These findings led to the consideration of the psychological and group dynamics aspects of group productivity. People are not the rational and economic beings assumed by classical theorists. Social interaction is important in the workplace and people work well if they feel valued. The studies at the

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Hawthorne plant gave birth to the human relations movement and behavioral science approaches to management. In the 1940’s, group dynamics studies encouraged individual participation in decision-making and group performance did improve.

Scientific management promotes a way of thinking about managing, which is appropriate for an assembly line operation. Many of today's organizations are knowledge based and service oriented. Industries characterized by rapidly changing technology or not well-understood processes require a different management approach. The "cookbook" approach may not work for many of these areas. Managing technology and technologists demands solutions that use unconventional or "out of the-box" thinking.

Human Resources School During the 1950’s, researchers began to examine employee motivations in an effort to increase productivity and efficiency. The behavioral approach did not always increase productivity. Thus, motivation and leadership techniques became a topic of great interest. Modern theorists such as Maslow, McGregor, Herzberg, Bennis and others emphasize the importance of social relations in organizations, understanding workers and managers as human beings with social and emotional needs. The human resources school believes that employees are creative and competent, and that much of their talent is largely unused by employers. Employees want meaningful work; they want to contribute; they want to participate in decision-making and leadership functions.

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Herzberg’s Hygiene Factors Herzberg proposed a theory for motivating workers that introduced organizational motivating agents, which he called hygiene factors. Hygiene Factors are:

! Administrative Policies ! Working Conditions ! Salary ! Personal Life ! Peer, Superior, Subordinate Relationships ! Status within the organization ! Security

Herzberg concluded that positive hygiene factors are necessary, but not sufficient for a contented worker. Poor hygiene factors may destroy the employee’s motivation. An improvement of Hygiene Factors will not likely increase worker motivation. Positive results stems from the opportunity to achieve and experience self-actualization or personal fulfillment. In order to gain maximum worker productivity and efficiency, the person should experience a sense of self-worth or personal growth and responsibility from their work. Positive motivating agents may include

! Recognition for a job well done ! Work content that is meaningful to the employee and to the employer ! The delegation of responsibility for a task ! Ongoing professional growth

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Abraham Maslow’s Hierarchy of Motivational Needs

SelfActualization

Esteem

Social

Safety

Basic Physiological Needs

Abraham Maslow formulated a theory of human motivational needs. He argued that people required the satisfying of an orderly progression of needs, specifically physiological, safety, social, and feelings of esteem, before they can achieve selfactualization as shown in the pyramid. Each layer in the pyramid builds upon the one that precedes it. The workplace has a similar set of fundamental needs, as shown in Table 1.

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Table 1-- Workplace Equivalents of Maslow's Basic Need Hierarchy

BASIC HUMAN NEEDS

LIFE EXAMPLES

Physiological

Air, Water, Food, Housing, and Clothing

Safety

Protection from danger, Security, Stability, and Freedom from Threat of Physical Harm

Social

Love, Affection, Approval, Friends, and Affiliations.

Esteem

Respect, dignity, Attention, and Appreciation

Self Actualization

Self fulfillment, Growth, Learning, Realize one's potential through competence, creativity, and achievement

WORKPLACE ENVIRONMENT EXAMPLES Adequate Wages, Satisfactory Work Environment – Light, Temperature & Ventilation Job continuity, Complaint system, Government work regulations [e.g., Occupational Safety and Health Administration (OSHA) rules], health insurance and retirement packages. Social interaction, company sponsored functions, team or work groups, professional or trade organizations. Signs of accomplishment (Positive news media statements, titles, awards, peer recognition, publications) Participation in decisionmaking, creating something, lifelong learning.

Maslow’s Hierarchy Maslow suggests that people follow a track extending from the lowest element in the hierarchy (physiological) to the highest (self-actualization). After satisfying a need, the person continues to pursue the next higher one. It is an ongoing activity, in which people attempt to attain perfection through self-development. Integrity, responsibility, high-mindedness, simplicity and naturalness characterize the highest state of self-

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actualization. Self-actualizers focus on problems external to themselves. Reviewing Table 1, we note that people reach the highest level of motivation only after achieving some measure of accomplishment.

Douglas McGregor’s Theory X and Theory Y worker Douglas McGregor examined the attitudes and perceptions of managers and workers. In the form of a theory X and a theory Y, he posed the idea that two diametrically opposed belief systems existed of the managers and workers role in the company. McGregor offered a comparison of two workers and the resulting management implications. First, the theory X worker had the following characteristics:

! People are inherently lazy and require supervision ! People dislike work and prefer to avoid work whenever possible. ! To induce adequate effort, the supervisor must threaten punishment and exercise careful supervision. ! The average worker avoids increased responsibility and seeks to be directed.

This view of people affects management style. Theory X managers rely on an authoritarian style or a top down approach. They use external motivation techniques that include strict rules, performance incentives, rewards, and threats to job security.

In contrast, McGregor’s Theory Y worker has the following characteristics: ! People are creative. ! People want to do the job and do not need continuous supervision.

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! People want to be active and find the physical and mental effort on the job satisfying. ! People willingly participate in a task. ! People not only accept responsibility, but actively seek increased authority. People are not necessarily resistant to the needs of the organization. They are concerned with self growth and fulfillment ! People seek opportunities for personal improvement and gain self-respect.

The Theory Y manager believes that people are self-starters and advocates worker participation in decision-making. The manager expects that workers will tend to work toward objectives without coercion and control. Theory Y managers try to establish cordial worker-manager relationships. They develop an environment where the workers can achieve their objectives by directing their efforts toward organizational goals. They permit workers to design their own jobs. Knowledge workers including highly trained and creative workers require this type of guidance. Using coercive or dictatorial management style practices will find employees leaving for other job opportunities. Nonetheless, caution is advised. Some professionals will want to “tweak” a design or improve the operation of a system beyond the requirement or find a better way to achieve the result or simply exercise scientific curiosity regardless of cost. These people take great pride in their work and desire to express their individualism and talent. Project managers must balance the completion of the task within schedule and budget with the ego and personality of the employee.

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Acceptance Theory of Authority Chester Barnard, a former CEO of New Jersey Bell Telephone, developed the concepts of strategic planning and the acceptance theory of authority. Strategic planning guides the organization in pursuit of major goals. Barnard believed that the most important functions of the executive were to (l) establish and maintain an effective communication system, (2) hire and retain effective personnel, and (3) motivate those personnel. He advanced the idea that managers only have as much authority as employees allow them to have. Employee acceptance of authority depends on the following four conditions:

! Understanding what the manager wants them to do. ! Ability to comply with the directive. ! Belief that the request is inline with the organization’s goals. ! Belief that the manager’s request is not in conflict with their personal objectives.

Barnard believed that each individual accepts orders without consciously questioning authority up to a point. The organization must provide inducements to broaden each employee's band of acceptance so that the manager's orders would be followed.

Management by Objective Peter Drucker has interpreted management theory for more than 50 years. During the 1940’s and 1950’s, he advanced the ideas that management would have to treat

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workers as individuals, that organizational culture would influence production, and foreign competition would become a significant factor in American business. During the 1960’s and beyond, Peter Drucker stressed management fundamentals including strategic management ideas and introduced the phrase management by objective (MBO) also known as managing by results. MBO is the annual process of selecting a set of objectives that an employee would attempt to achieve during the year. The use of objectives in MBO is really a misnomer. The employee creates objectives—targets that meet the SMART criteria (specific, time limited, etc.). Organizations used MBO techniques to establish objectives for the staff in an effort to assess accomplishment. Technical and business managers frequently believe that you can only improve what you can measure. Performance measurement indicators include financial margins, revenue per employee, price to earnings, asset turnover, debt/equity, current ratio, working capital, unit costs, inventory turns, manufacturing cycle time, forecast accuracy, units produced, win/loss rates, service margins, service call rates, customer retention, number of new customers, headcount, retention rate, hire cycle time, learning rate, recruitment, labor costs, skills learned, absenteeism, overtime, on-time delivery, etc. The annual objectives that employees develop usually include a combination of these performance measurement indicators.

MBO gained popularity because 1) it was designed to produce tangible outcomes, 2) It could be used at any or all levels in the organization, and 3) It was relatively simple and inexpensive to implement following training. As a measure of performance, it attempted to keep people focused on producing results. Results are evaluated against outcomes.

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The supervisor periodically meets with the subordinate to review progress in achieving the objectives. Some organizations link salary increments to MBO success.

Drucker (1986) further emphasizes that management must be tough outside (focused on its mission and on the results of the organization), and inside (focused on the structure, values, and relationships that enable the individual to achieve). Drucker asserts that management is a discipline and not a science. It is a practice.

Deming’s Ideas During the 1950’s, Japanese industry exported a variety of products to the U.S. Poor quality characterized many of these products. It was during this time that Japanese industry embraced and incorporated W. Edwards Deming’s ideas of statistical quality control. He stressed the both the human factors of production as well as the technological aspects. He introduced the radical new concept of Total Quality Management (TQM) with the intent to actively involve workers in discovering ways of improving the quality of the products and services they delivered in an ongoing manner. He encouraged industry to continually examine the product at the various stages of production and gather data to determine if the production process veered away from predetermined limits. If it did, he urged the worker and management to identify and implement appropriate changes to fix the problem. In the 1970’s, Japanese car quality became legendary and forced the U.S. auto industry to wake up and improve. In part, these improvements came from the implementation of Deming’s and Juran’s ideas of statistical process control. Forty years after Japanese industry began to use Deming’s

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recommendations, the ideas of worker involvement and statistical process control were accepted and introduced into U.S. industry.

In the 1980’s, Deming consulted with executives from Ford Motor Co. and General Motors about their decision to adopt the continual improvement philosophy. In Deming's system of management, continual improvement becomes a way of life in which everyone wins -- the organization, its people, suppliers, and customers. Managers and workers cooperate in process improvement teams and try to change adversarial attitudes. They use statistical methods that involve collecting and analyzing data. This helps the organization determine if a problem occurs randomly or is embedded in the process. Analyzing and acting on the data leads to a resolution path.

Deming strongly opposed MBO. While he cared about results, he was equally concerned about the method used to try to achieve those results. He believed that working to achieve quotas, fulfill numerical objectives, and otherwise manage by numbers was destructive to the overall organization. This is decidedly different from the views of many management theorists and practitioners.

The 14 points describe Deming’s controversial fundamental philosophy and represent his program for improvement. The Deming-Shewhart Cycle (plan, do, check, act), discussed further in chapter 9, describes his approach towards continuous improvement. Management selects areas for improvement and develops measurement strategies and planning goals. Cross-functional teams using a Total Quality

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Management (TQM) format coordinate improvement for each area of interest. The teams develop tests and gather data to confirm the presence of problems. They generate and then implement action plans to make improvements. The teams evaluate the results of their efforts. They fine-tune the corrections and evaluate further until they achieve satisfactory results.

The team attacks newly recognized issues and problems

as they are discovered.

W. Edwards Deming -- 14 Points for Management Excerpted from Chapter 2 of Out of the Crisis by W. Edwards Deming. 1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs. 2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change. 3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place. 4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust. 5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs. 6. Institute training on the job. 7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul as well as supervision of production workers. 8. Drive out fear, so that everyone may work effectively for the company. 9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.

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10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. 11. a) Eliminate work standards (quotas) on the factory floor. Substitute leadership. b) Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership. 12. a) Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality. b) Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual merit rating and of management by objective. 13. Institute a vigorous program of education and self-improvement. 14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job.

Recent management views In the mid-1960s, the contingency view of management or situational approach emerged. This view integrated management thought by advocating the use of any management approach that the manager deems appropriate to the situation. The manager is an actor and should assume a behavior that deals with the situation’s circumstances.

New management viewpoints have emerged during the last twenty years. Total Quality Management emphasizes achieving customer satisfaction by providing high quality goods and services. Reengineering the organization redesigns the processes that are crucial to customer satisfaction.

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Tom Peters promotes the idea of managing in chaos. He insists that the starts, stops, spurts, and other movements of the technological revolution demands personal and corporate flexibility. The outpouring of information and data, the constant flow of governmental, personnel, and technological changes requires a flat organization wherein people have the authority to respond quickly to competitive pressures.

Managing in the future will face some unusual challenges. AT&T, IBM and other organizations are experimenting with alternative workplaces (see Apgar, 1998). Nontraditional work practices include a variety of techniques such as desk and equipment sharing, and “hoteling”. “Hotel” workspaces include shared space, equipment, and services. Satellite offices for people working in companies with many offices located in different geographic areas would use “hotel” workspaces. As a result of the telecommunications revolution, many of us have heard about employees working at home, also known as telecommuting. For most of us, this represents a new way of operating. Managers and organizations accustomed to face-to-face interaction would have to adjust. Apgar points out that “managers and employees are moving up the curve toward information-age literacy, which is characterized by flexibility, informality, the ability to change when necessary, respect for personal time and priorities, and a commitment to using technology for improving performance.” Managers will have to adjust their way of monitoring employee and project progress. This may affect employee evaluations and salary reviews. Customers, suppliers and other stakeholders will require education in this new approach.

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Managers are still learning how to manage diversity. Cultural, ethnic, and gender differences require special management considerations. Not long ago, I attended an annual corporate status review for a privately held technology company. The chief executive officer (CEO) addressed the assembly of employees. The company consisted of about 400 employees with a minority population of perhaps 5%. The executive, known for his sense of humor, decided to break the ice by telling a joke that made fun of Jews. There was some nervous laughter following the joke’s punch line. The CEO was clearly surprised that his joke did not get the expected response and remarked, “Well, if you didn’t get it, see me in private.” After the meeting, several nonJewish upper managers commented in private on the insensitivity of the CEO’s joke. They lost respect for this person. This joke contributed to a decision by one of the handful of Jewish employees at the company -- a key manager -- that this was not a friendly place in which to work and the person left within a year.

The global organization with transnational operations requires new management approaches. Managing in tomorrow’s environment will require a new set of rules, which have yet to be formulated.

Management Styles Four generic management styles have evolved -- Autocratic, Laissez Faire, Democratic, and Participative. The autocratic manager is the traditional figure of a boss who exercises tight control over the employees. This manager expects the

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employee to follow through on a directive regardless of the employee’s thoughts or wishes. “ I call the plays and don’t bother me with facts.” In today’s environment, this stereotypical theory X manager could demoralize the organization. Perhaps this extreme management style could successfully manage a low risk project with an inexperienced staff that will execute a project plan as presented. The autocratic style could lead to staff resentment if the staff’s contribution is not recognized.

Highly

skilled people desire and expect managers to listen to their voices. Not considering or continually rejecting employee’s thoughts and opinions may lead to dissatisfied employees and incorrect decisions.

Applied to organizational management practice, the French term Laissez-faire means the manager provides little guidance to the staff and employees are free to pursue almost anything they wish. Projects that require considerable creativity benefit from a minimum of management oversight. As an example, people involved in a research and development laboratory or a university environment require a freethinking, tolerant, hands-off atmosphere. A laissez-faire management style will prove disastrous for high visibility, schedule driven projects requiring quick decisions and fast actions.

A democratic management style invites employee involvement.

The management and

staff collectively discuss and evaluate issues and reach decisions. This management style aligns itself with the American culture. A democratic manager lets the forces within the group work toward a decision. Democratic managers empower employees by giving them more decision making power and by seeking ideas from every worker.

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Since the employees participate in the decision making process they will assume ownership and commit to the final plan of action. Democratic leadership implies majority rule or rule by consensus. Sometimes the majority rule may not lead to the best solution – especially if a very vocal, but uninformed person takes leadership of the group. Decisions may take a longer time, if full discussions of the issues take place – a further disadvantage,

The participative manager also encourages employees to participate in making the decision. This manager asks for and receives input from the group. The atmosphere is one of trust, honesty, and open communication. The leader demonstrates to followers that their inputs are valued. However, participative leadership is not the same as democratic leadership as the manager makes the decision. Most managers are unwilling to give up the right to make the decision.

A person’s management style depends on their personality and the situation. Rarely does a manager use one style all the time. A manager must be flexible and use a style appropriate to the stakeholder and to the situation.

Power Managers use power to directly influence the success of the project and elicit employee cooperation.

Power is based on the subordinate's perception of the leader and can be

categorized as shown below (the first five were developed by French & Raven):

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Reward power: the subordinate’s belief in the manager’s ability to obtain rewards (e.g. financial compensation, promotion, recognition, privileges) for those who comply with specific requests.



Coercive power: the subordinate’s belief in the manager’s ability to punish or to bring about negative outcomes (e.g. withholding salary raises and/or promotions, formal reprimands).



Formal power: the right to exercise power because of the individual's designated position in the organization



Referent power: a subordinate's identification with the leader because of attractiveness, reputation, or charisma



Expert power: competence, special knowledge or expertise in a well-defined discipline.



Control of Information power: possession of knowledge that others do not have. Information can be communicated or withheld at will.

Legitimate forms of power (formal, reward, and coercive) stems from the person’s position within the organization. Although the project manager exerts this type of power, it sometimes may not influence knowledge worker’s behavior as much as expected. Creative people and knowledge workers frequently respond better to expert power rather than “bureaucrats”.

Expert power results from internal and/or external recognition that a person has achieved. Employees recently transferred to a project management role as a

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consequence of demonstrating outstanding technical ability will discover a very uncomfortable lesson.

A project manager cannot stay technically current and manage

the project. In any project of some complexity, the project manager will regularly interact with customers, suppliers, functional managers, upper management and other stakeholders. There is much to do and there will not be time to stay technically current. Technical analyses and designs must be left to the functional personnel.

People

entering the project management discipline via the technical ladder find it very frightening to leave their technical background behind them. They spent their careers to that point accumulating, developing and honing their technical skills. Exchanging technical expertise for management competencies may be a sufficient reason to discourage this job change for some people.

Table 2 illustrates how others might view the project manager’s power from their organizational perspective. These evaluations represent subjective conclusions. A technical functional manager may have little regard for a PMs technical ability, but high regard for that person’s ability to control a customer. Upper management may highly value a PM’s ability to plan and coordinate efforts and motivate people. As the primary contact between the organization and external stakeholders, suppliers believe the PM wields great influence on selecting organizations for future contract awards. Suppliers hungry for new work will make great efforts to deliver goods and services in a timely fashion to impress the PM.

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Table 2 -- Project Managers Power Impact

Power Type

Upper Managemen t Formal None Reward None Coercive None Expert Minimal Referent None

GROUP POWER EXERTED ON PM’s Direct Functional Functional External Reports Managers Department Customers Personnel Maximum Moderate Minimal Maximum Maximum Minimal Minimal Minimal Maximum Minimal Minimal Minimal Maximum Minimal Minimal Moderate Maximum Maximum Maximum Moderate

Suppliers (Vendors) Maximum Maximum Maximum Moderate Moderate

Adapted from J.R. Adams & B.B. Campbell, Roles and Responsibilities of the Project Manager in Principles of Project Management, J.S. Pennypacker, Editor, 1996, PMI Publications

Teams During the 1980’s and 1990’s, management discovered the benefits of using teams to get a job done. Katzenbach and Smith (1993) define a team as a small number of people with complementary skills who are committed to a common purpose, set of performance objectives, and approach for which they hold themselves mutually accountable. They are empowered by the organization to establish objectives within the framework of the project’s objectives. Competitive demands requires quick decisions by knowledgeable employees who work close to the source of problems. Empowered teams promote fast decision making capability.

Empowerment is the delegation of

authority to an individual or team. The team receives organizational approval, trust and encouragement to make the decisions necessary to accomplish the job. Successful teams depend on good communication methods to share information and demand outstanding problem-solving skills. Effective supervisors empower employees by giving them more decision making power and by seeking ideas from every worker. 134

Katzenbach and Smith (1993) point out that not all groups are teams. They differentiate a team from a group in the ways shown below:

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Characteristics of a Working Group ! Strong, clearly focused leader ! Individual accountability ! The group/s purpose is the same as the broader organizational mission ! Individual work output ! Runs efficient meetings ! Measures its effectiveness indirectly by its influence on others (e.g., financial performance of the business) ! Discusses, decides, and delegates

Characteristics of a Team ! Shared leadership roles ! Individual and mutual accountability ! Specific team purpose that the team itself delivers ! Collective work output ! Encourages open-ended discussion and active problem solving meetings ! Measures performance directly by assessing collective work output ! Discusses, decides, and does real work together

In a sense, the leader of the team acts as a facilitator. A group achieves synergy (results greater than the sum of its parts) if its members become a team. A team begins as a collection of individuals brought together in a work situation. Tuckman identified the process of uniting the group to form an effective team. The group members must successfully move through four stages of development identified by forming, storming, norming, and performing.

Forming: the members of the group come together and begin to get acquainted. Depending on their personality some are eager to meet and work, some act formally and tentatively, some are hostile, some focus on the task and others focus on people. The group decides and agrees on their objectives and the basic operational ground rules, such as meeting dates and times, attendance requirements, how decisions will be made, and so on.

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Storming: members still view themselves as part of their parent department rather than part of the team. Individual personalities surface and generate interpersonal conflict. Individuals begin to compete for attention and influence. Emotions are stirred and depending on the personality type conflicts may arise. Individuals reveal personal agendas as they assert their feelings, ideas and viewpoints. Interpersonal skills are critical. Members learn to appreciate each other’s capabilities. The group must agree on the distribution of power, responsibility and authority among its members. A sense of humor helps you get through this stage. This is a stage of low morale and productivity. Success cannot begin until the next stage.

Norming: The individuals blend together into a project team and realize that they can achieve work if they accept other viewpoints. The project manager can help this process in a structured manner by establishing an esprit d' corps and a cohesive group.

Individuals begin to think of one another. They

become more sensitive to each other's needs, and begin to share ideas, information, and opinions. Members spend less energy on conflict. Task considerations start to override personal objectives and concerns. Plans develop. Both formal and informal procedures for problem solving, decision-making and conflict resolution develop. Productivity increases

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Performing: The group emerges as a team. Flexibility is the key and hierarchy is of little importance. Team roles are strongly connected to the task that is performed. Members work and problem solve together. Structural and interpersonal issues have been resolved. Members trust, support, and feel comfortable with each other. Everyone cares about doing a good job. If previous phases did not conclude, the team will return to Storming and Norming resulting in wasted time and energy.

In 1983, General Motors began to plan the Saturn Corporation, which would build and sell small cars using an entirely new set of employment practices. Saturn decided to compete with the Japanese cars using self-directed work teams of 10 to 15 members, who were cross-trained and rotated responsibility for the tasks in their unit. Each team had the responsibility for hiring new members and electing their team leaders. Teams had responsibility for quality assurance, job assignments, record keeping, safety and health, material and inventory control, training, supplies, and housekeeping.

These self-governing work teams followed the construction of an automobile throughout the entire assembly line. The objective of the changes was to increase product quality, decrease boredom, and increase worker job satisfaction on the part of its workers. Saturn incorporated robots and other forms of automation into the production line to help reduce boredom and fatigue and ensure high quality standards.

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This successful approach at Saturn helped to alter the rigid department boundaries within the auto industry. This team-based structure consisting of knowledgeable employees who work close to the source of problems promotes quick decisions. Labor and management leaders had to learn to overcome resistance to sharing power. The team concept forced management to redefine the organization’s mission, objectives, and hierarchical structures.

Project Managers Lead Teams Teams succeed if the team is taken seriously, given a clear purpose, given authority to make decisions, have the appropriate technical skill mix and can work together. Effective teams share clear and well-understood objectives that are accepted by members. Frequently organizational outcomes benefit from teamwork and individual member satisfaction improves. Nonetheless, implementing a program of teambuilding is far from easy.

The project manager assembles and leads a team. The PM shares project related knowledge and information so that the team can solve problems. The team members possess the technical knowledge and skills. Power becomes the PM’s ability to facilitate and communicate to and on behalf of the team. The PM acts as the liaison with stakeholders such as upper management, other internal teams, customers, and suppliers. The PM represents the team's interests, obtains needed resources, clarifies expectations, gathers information, and keeps the team informed.

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Implicit to the success of any team is the mutual trust and respect between the PM and the team. They must each have credibility, integrity, character, and reliability. Lacking any of these elements will cause unneeded tension in the group and possibly cause it to return to the storming stage.

Chris Argyris sums up the elements of an effective team in his book, Organization and Innovation.

! Contributions made within the group are additive. ! The group moves forward as a unit; there is a sense of team spirit, high involvement. ! Decisions are made by consensus. ! Commitment to decisions by most members is strong. ! The group continually evaluates itself. ! The group is clear about its goals. ! Conflict is brought out into the open and dealt with. ! Alternative ways of thinking about solutions are generated. ! Leadership tends to go to the individual best qualified. ! Feelings are dealt with openly.

Successfully dealing with and implementing these factors turns the group into a team. Jon R. Katzenbach argues for more attention to the "four Cs" of effective teamwork -communication, cooperation, collaboration, and compromise.

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Leadership Management and leadership concepts are intertwined. John Kotter, a well-known leadership theorist, believes that today's managers must know how to lead as well as manage. Questions arise: What is leadership and does it relate to management? Leadership means different things to different people. The following quotes present various thoughts and opinions on leadership. Do you agree? What do you think leadership is?

Getting the job done using whatever means required! -- 1999 Fairfield University leadership class. Damn the torpedoes--full speed ahead! -- Vice Admiral David Glasgow Farragut at the Battle of Mobile Bay in August, 1864 Always, it seems, the concept of leadership eludes us or turns up in another form to taunt us again with its slipperiness and complexity. So we have invented an endless proliferation of terms to deal with it … and still the concept is not sufficiently defined. – Bennis, 1959 There are almost as many definitions of leadership as there are persons who have attempted to define the concept. -- Stogdill, 1974 Leadership is the ability to inspire other people to work together as a team, following your lead, in order to attain a common objective, whether in business, in politics, in war, or on the football field. … Leadership cannot really be taught. It can only be learned. -- Harold Geneen, Managing. Leadership is the capacity and will to rally men and women to a common purpose and the character which inspires confidence. – Bernard Montgomery, British Field Marshall Leadership is a dynamic relationship based on mutual influence and common purpose between leaders and collaborators in which both are moved to higher levels of motivation and moral development as they affect real, intended change. -- Kevin Freiberg and Jackie Freiberg, NUTS! Southwest Airlines' Crazy Recipe for Business and Personal Success, Bard Press, 1996, p. 298 141

Take the course opposite to custom and you will almost always do well. -- Jean Jacques Rousseau There are many elements to a campaign. Leadership is number one. Everything else is number two. - Bertolt Brecht It's no exaggeration to say that a strong positive self-image is the best possible preparation for leadership in life. - Dr. Joyce Brothers A leader is a man [sic person] who has the ability to get other people to do what they don't want to do and like it. - Harry Truman Coaches who can outline plays on the blackboard are a dime a dozen. The ones who succeed are those who can get inside their players and motivate them. Vince Lombardi Leaders have a significant role in creating the state of mind that is the society. They can serve as symbols of the moral unity of the society. They can express the values that hold the society together. Most importantly, they can conceive and articulate goals that lift people out of their preoccupations, carry them above the conflicts that tear a society apart, and unite them in the pursuit of objectives worthy of their best efforts. - John Gardner We herd sheep, we drive cattle, we lead people. Lead me, follow me, or get out of my way. -- George S. Patton Pull the string, and it will follow wherever you wish. Push it, and it will go nowhere at all. -- Dwight D. Eisenhower Great things are not done by impulse but by a series of small things brought together. - Vincent Van Gogh It is only when you are pursued that you become swift. - Kahlil Gibran The art of becoming wise is the art of knowing what to look over. - William James When you're through changing, you're through. - Bruce Barton Leadership is an influence relationship among leaders and followers who intend real changes that reflect their mutual purposes. -- Joseph C. Rost Example is not the main thing in influencing others. It is the only thing. - Albert Schweitzer

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A leader is responsible for lean and simple statements of policy consistent with beliefs and values, vision and strategy. Policy gives practical meaning to values. Policies must actively enable people whose job it is to carry them out. -- Max De Pree In pluralistic societies, the process of leadership is now and forever a dynamic process-each person or group sometimes gaining, sometimes losing. But if leadership is to be seen as legitimate, every member of the system will expect at all times to be treated fairly and with respect.... At its core, the process of valuesbased leadership is the creation of moral symmetry among those with competing values. -- James O'Toole Leadership is the art of accomplishing more than the science of management says is possible. – General Colin Powell Managers are people who do things right, and leaders are people who do the right thing. -- Bennis & Nanus, 1985 Leadership refers to a process that helps direct and mobilize people and/or their ideas…. Leadership does not produce consistency and order; it produces movement. … 1. Establishes direction - develops a vision of the future along with strategies for producing the changes need to achieve that vision 2. Aligns people -- communicates the direction to those whose cooperation may be needed so as to create coalitions that under the vision and that are committed to its achievement 3. Motivates and inspires -- keep people moving in the right direction despite major political, bureaucratic, and resource barriers to change by appealing to very basic, but often untapped, human needs, values, and emotions. -John Kotter, A Force for Change.

Leadership versus management Are managers leaders? Kotter (1990) draws the following distinction between management and leadership: ! Management is more formal and scientific than leadership. It relies on universal skills such as planning, budgeting, and controlling. Management is an explicit set of tools and techniques, based on reasoning and testing, than can be used in a variety of situations. 143

! Leadership, in contrast to management, involves having a vision of what the organization can become. ! Leadership requires eliciting cooperation and teamwork from a large network of people and keeping the key people in that network motivated, using every manner of persuasion.

Management theorists draw an important distinction between leadership and management. The leader creates a vision for the organization and gains support among the people in the organization. The leader specifies the objectives as well as the strategy for attaining those objectives. In contrast to the leader, the key function of the manager is to implement the vision by establishing objectives to achieve the objectives and using skills such as planning, organizing, directing and controlling. The manager chooses the means to achieve the end that the leader formulates. Leadership deals with change, inspiration, motivation, and influence. Management deals more with carrying out objectives. Table 3, reproduced from Kotter, compares the leader's and manager's organizational approaches.

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Table 3 - Manager/Leader Organizational approach Leader

Creating an Agenda

Developing a Network for Achieving the Agenda

Execution

Establishes direction: develops a vision and the strategies needed for its achievement Involves aligning people: Communicates direction by words and deeds to all those whose cooperation may be needed to help create teams and coalitions that understand the vision and strategies, and accept their validity. Motivates and inspires: Energizes people to overcome major political, bureaucratic, and resource barriers to change change by satisfying basic human needs. Produces change, often to a dramatic degree.

Outcomes

Has the potential of producing extremely useful change, such as new products desired by managers.

Manager Plans and budgets: establishes detailed steps and timetables for achieving needed results; allocates necessary resources Organizes and staffs: Establishes structure for achieving the plans; staffs; delegates responsibility and authority for implementation; develops policies and procedures to guide people; creates monitoring systems Controls and solves problems: Monitors results against plans and then plans and organizes to close the gap. Produces a degree of predictability and order: Has the potential to consistently produce key results expected by various stakeholders (such as meeting deadlines for customers and paying dividends to stockholders)

(John P. Kotter, A Force for Change: How Leadership Differs From Management, New York: The Free Press, 1990)

Some researchers believe that a leader’s fundamental orientation differs from a manager’s. Table 4 compares the beliefs and attitudes of an administrator, manager, and leader. For the examples shown, what would you do? Does the leader's response

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follow Bennis and Nanus’ maxim “Managers are people who do things right, and leaders are people who do the right thing.”?

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Table 3 -- Primary Beliefs -- Management Orientation Rewarding Subordinates Decision-making Basis Strategic Orientation Innovation / Creativity Handling Variables Efficiency / Effectiveness Time Frame for Thinking Big vs. Small Picture Organization Structure Security Level Management Atmosphere Policies People Change

Conflict

Subordinate Loyalty Risk Taking Information Sharing Approach to Problems Handling Mistakes Authority

Administrator Get just what the policy provides for The decision is made by the policy / procedure Internal Change is threatening One variable at a time Covers every detail in depth Short-range month to month, year to year Concentrates on details Bureaucratic, many levels Low, protect my rear You can’t fight city hall Cast in concrete, takes an Act of God to change Emphasis on controls and time spent Maintain status quo, don’t rock the boat or make waves Avoid conflicts at any cost

Is to the policy

Manager Fair pay for fair work Stick with policy except where exceptions are fully justified Internal except when major external events intervene Tries to plan out major changes Handle multiple variable if not too complex Doing things right

Manager/Leader Major rewards for major results/accomplishments Special circumstances require different decisions External Improvements come through change Balances/blends multiple, complex variables Doing the right things

Medium-range 2-4 years Details as they fit into a system Traditional

Strategic 5-10 years Concepts and a big picture

Average, except when things go wrong Your progress depends upon you Exceptions can be made but must be heavily justified Emphasizes team effort

Very secure and confident

Changes made if major problems dictate or when pressure builds up Address if they become major

Flat, few levels

Win-win atmosphere Use only as a guide to most actions Lead by example Change is encouraged continuously Recognizes they will occurconcentrates on resolving them for improvements Is to the leader

Avoids at all costs

Mixed between the policy and the manager Accepts minimal risk

Little

Need to know basis

Encourages planned risk taking Open and frank

Avoid like the plague

Solve as they developreactive Emphasize why it happened, not who caused it Authority goes with the position

Problems are normal part of the job-proactive Learn from them, don’t dwell on them once solved Maximum use of informal authority

Protect my rear and offer excuses, pin the guilty Emphasizes formal authority and power

From McConkey, D. D. (September-October, 1989). Are you an administrator, a manager or a leader?. Business Horizons. pp. 15-21

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Competitive Advantage Industry Week annually selects the 100 best managed companies. “”Each company is a leader in its industry and demonstrates superior management skills in areas such as financial performance, innovation, leadership, globalization, alliances and partnerships, employee benefits and education, and community involvement “ (Hasek, p. 49, 2000). Warren Bennis and Raj Aggarwal state that all of the companies understand that the key to competitive advantage in this century will be the capacity of top leadership to create social architecture capable of penetrating intellectual capital.” Aggarwal went on to say “the best managed companies are able to integrate and implement the neweconomy virtues of speed and e-commerce with the old-economy virtues of generating profit, market share, and excellent customer service.” (Hasek, p. 49, 2000). Major management challenges confront organizations this century.

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Chapter 4 Questions

1.

What type of manager would a stereotypical ex-military officer make? Would this person be a good candidate to manage a drug research organization? Explain your answer.

2.

Presidents Carter and Reagan had distinctly different management and leadership styles.

Use the Internet to obtain examples of each of these president’s

style. Which person would you rather work for? Why? 3.

McClelland & Burnham in the article Power is the great motivator states, " A high need for power is an important characteristic of successful managers.” Comment on the statement: Managers with a high need for power frequently use it for the benefit of the organization rather than for self-aggrandizement.

4.

How well does the following quote describe the managers that you know? Explain.

“Leaders articulate and define what has previously for new attention. By so doing, they consolidate or challenge prevailing wisdom remained implicit or unsaid; then they invent images, metaphors, and models that provide a focus. In short, an essential factor in leadership is the capacity to influence and organize meaning for the members of the organization.” (Warren Bennis and Burt Nanus, Leaders, Harper & Row, 1985, p. 33)

5.

The chapter talks about accountability. Describe the difference between “the boss holds me accountable” and “we (or I) hold ourselves (or myself) accountable.”

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6.

Management theory has evolved based on influences from classical management, behavioral approaches, and quantitative methods. Many have contributed to the development of management as a discipline. Research and discuss someone who has contributed to the development of management theory. Limit the paper to 500 words. Examples of possible people include the following:

Chester Barnard W. Edwards Deming Peter Drucker Henri Fayol Mary Parker Follett Henry Gantt Frank Gilbreth Lillian Gilbreth Douglas MacGregor Peter Block James Kouzes and Barry Posner

Elton Mayo Max Weber Frederick W. Taylor Max Weber Henry Mintzberg Peter Drucker Warren Bennis John Kotter McClelland Chris Argyris

7.

What is meant by “Managers are people who do things right, and leaders are people who do the right thing.”?

8.

What does leadership mean to you? Do you think there is a difference between management and leadership? Explain.

9) Use the Internet or library to respond to this research question. a) Compare and contrast the leadership and management (e.g., vision, planning, organizing, and controlling) styles exhibited by Al Dunlap (formerly of the Sunbeam Corporation) and Howard Shultz (Starbucks Corporation CEO) . b) Characterize Dunlap and Shultz according to McGregor's Theory X and Theory Y leadership style. Explain your answer.

Self-check test

Circle the correct answer to each of the following questions or fill in the blanks. 1) When did classical management theory begin?

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a) 1200’s b) 1650’s c) 1750’s d) 1850’s e) 1950’s 2) Define efficiency. 3) Define productivity. 4) What are characteristics of bureaucratic management? a) Quick reaction to competitive issues b) Wasting time c) Written processes and procedures d) Hierarchical structure e) Impersonal authority f) Large number of employees 5) Which type of work is appropriate for a bureaucratic organization? a) Installing tires on an automobile b) Bank teller c) Designing jewelry d) Train conductor e) Writer 6) Select the basic management functions established by Fayol? a) Planning b) Organizing c) Staffing d) Commanding e) Directing f) Coordinating g) Reporting h) Delegating i) Budgeting. 7) What are three of fourteen management principles discussed by Fayol? a) division of work through specialization b) time and motion c) authority should be equal to responsibility d) unity of command e) unity of direction f) the scalar chain of command 8) What is Fredric Taylor known for? a) Time and motion b) Father of scientific management c) Hawthorne experiments 9) What is a time and motion study? 10) What is the Hawthorne Effect? 11) What are the five basic human needs described by Maslow? Give examples of each. 12) What are characteristics of a theory X worker?

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13) What are characteristics of a theory Y worker? 14) What are four generic management styles? 15) What are the five types of power used by people in organizations? 16) What is the difference between a team and a group? 17) What are the four stages of development that a team passes through? 18) Is conducting a meeting an example of leadership or management? Explain.

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CHAPTER 5

Project Planning

Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, vision cleared, ambition inspired, and success achieved. -- Helen Keller

<> Chapter objectives After studying this chapter, you should be able to: Understand project scope Understand the use of a project charter Understand the components of a project plan Understand and prepare a project statement of work Understand and prepare a project work break down structure

Planning Henri Fayol identified five functions of management that included planning, organizing, commanding, coordinating, and controlling. Hallows (1998) identified four-project phases: (1) understanding the project, (2) defining the project, (3) planning the project, and (4) running the project. The Project Management Institute has identified six project management phases (Initiating, planning, executing, controlling, closing, and projectdriven organization environment) for eight project management knowledge areas (scope, time, cost, quality, human resources, communications, risk, procurement).

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Common to these approaches is the need to plan. Once the organization commits to an endeavor, planning becomes paramount.

Planning is the process of establishing courses of action to accomplish predetermined objectives (Badiru, 1991). Establishing a foundation in the form of a plan before committing the organization’s resources will maximize the likelihood of developing a customer’s product that meets the technical specifications, delivered on time, and within budget. The project manager manages the preparation of a project plan and then must manage to the plan. This chapter deals with the activities that precede the start of the project. The planning discussion that follows applies to ♦ Electronic, mechanical, electro-mechanical and software based products ♦ Small systems consisting of the integration of these components, ♦ Construction of facilities to house the components and systems, and ♦ Services required to support the design, fabrication, installation, and maintenance of these components and systems.

Planning lies at the heart of managing a project’s scope. Without a thorough and mutually agreed upon plan, scope management becomes impossible. Scope management includes the processes required to ensure that the project includes all the work, and only the work required, to complete the project successfully (PMBOK). Scope management extends the length and breadth of the job and encompasses all activities. At some point in most projects, the buyer or seller requests changes. The change may evolve for several reasons. Technology improvements occurring between

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project conception and approval may force changes. Obsolescent components or new software versions may demand changes. Customer requirements may change. Frequently the discussions that take place during the proposal evaluation phase or the initial product development improves the customer’s understanding of the product’s use. The customer sometimes requests the developer to incorporate “minor” product modifications without a corresponding price change. Scope change control becomes paramount. The organization must include a method for evaluating changes and determining the cost. Armed with the facts, the organization can make an informed decision. Agreeing to changes– whether initiated by a customer or the internal organization – without thoroughly understanding their impact is the path to breaking the budget and delivering late.

RFP and RFQ A product or service acquisition process begins with a customer sending a description of its needs to several suppliers in the form of either a Request for a Proposal (RFP) or a Request for a Quote (RFQ). Suppliers interested in providing this product or service prepare a response to this request. A customer distributing an RFP or RFQ for a high technology product or service may do so for the following reasons (1) the customer believes that the product is not readily available off-the-shelf from suppliers and requires a special development effort, (2) if it is readily available, it may require the addition of special features, which the customer chooses not to add themselves, or (3) the product demands technical expertise during the installation or initial operation phases.

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The planning process begins during the preparation of the RFP or RFQ response. The RFP response requires a very detailed description of the deliverable items including a technical discussion describing the unique features of the design and the activities that the organization will perform to ensure delivery within the customer’s requested timeframe. The proposal frequently includes discussions detailing the product history and description, the unique technical features, a descriptions of the organization’s technical competencies, management philosophy, quality assurance approach, and training capabilities. The RFP response also includes sections entitled statement of work (SOW) that includes a work-breakdown structure (WBS) and schedule, and a specification compliance matrix. The compliance matrix need be included only if the customer has attached to the RFP or RFQ a detailed requirements list. If so, the response should include the customer’s specification with a word indicating compliance or noncompliance with each paragraph. Larger organizations attach a set of the terms and conditions – a legal statement attached to the bid that among other things limits the organization’s liability and establishes a return policy. The cost proposal consists of a price for each item on the list of deliverables.

Managing the preparation for an RFP response is a project. Responding to an RFP requires a significant organizational team effort that a project manager leads. The effort will cost money, time and divert resources designated for other activities. The organization should evaluate the likelihood of a win before pursuing the RFP. Larger organizations use a formal evaluation approach sometimes called an opportunity

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review board (ORB). Senior executives make the decision to pursue an RFP for a variety of reasons. Most important, they believe that the organization has a greater than 50% chance of winning. Sometimes an organization submits a bid for strategic reasons. Perhaps the organization wishes to break into a new market and desires to establish a presence for name recognition purposes or an important customer wants the organization to submit a bid. Most organizations will expend the effort to satisfy an existing good customer.

The response to an RFQ requires much less of an effort than a response to an RFP. The respondent prepares a price for each item on the list of deliverables, adds the organization’s standard terms and conditions, and a cover letter. During the response preparations, the supplier may decide that they must spend funds to develop new software, hardware or both. If so, many departments must contribute to the estimate. The project manager contacts the departments contributing to the effort, such as engineering (mechanical, electrical, chemical, software, etc.), training, service, quality, technical support, etc. The project manager must provide each functional department manager and other stakeholders, baseline information including the customer’s technical specification, quantity required, documentation requirements, a schedule, installation needs, testing demands, special standards, quality assurance requirements, etc. For the work required to meet the customer’s specification, each department provides a labor estimate in hours, hardware and software material costs, travel and living estimates, special tools or capital equipment required, consultant fees, and documentation preparation labor hours. The RFQ sums up the costs in a manner that

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will be discussed later, and provides a bottom line number. The details are not usually provided to the customer. The RFP may provide bottom-line prices for the first and subsequent systems plus support service prices or a detailed price breakdown that reflects the customer’s demands.

Project Charter Projects funded by an external customer, receive automatic recognition from the organization. Money is honey! Organizations react to cash. Following a contract award, senior management immediately assigns a PM with the responsibility to do whatever must be done to satisfy the customer with a product or service that meets the customer’s technical specification while delivering it on time and within budget. There is no need for a document entitled project charter, if the contract includes a technical specification and a SOW.

A contract without a definition is like a car without a destination. The motor runs and you go everywhere and nowhere at the same time. Absolutely do not begin a

project until a written agreement exists that includes a specification and SOW -- or a project charter! With the lack of a specification, people will do their own thing. Designers will proceed with their interpretation of the customer’s needs. Purchasing will buy their customary material. Manufacturing will build product following standards that they select. Invariably the customer will have a different view and the completed work will require modifications wasting schedule time and labor.

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The absence of a project definition guarantees cost overruns and delays -- project failure.

Projects that receive internal funds require a project charter. This charter represents formal recognition within the organization of the existence of this project.

As defined

by the Project Management Institute the document includes three items: 1. The business need that the project addresses, 2. A product description, and 3. A signature from a senior executive.

A senior manager’s signature denotes organizational commitment and acceptance of the effort. An approved charter authorizes the project manager to proceed and apply organizational resources to project activities.

The charter as recommended by the Project Management Institute is necessary but not sufficient to describe the project. The project charter should also include a schedule, budget, and a summary of the resources required to complete the project. Some authors have broadened the concept of a project charter (e.g., (Hayes, 2000). Tryon and Associates (1998) promote the use of the following 10-part project charter template: •

Project Description - a brief explanation of why the project was initiated, a description of project intent and the identity of the initial Project Owner.



Opportunity Statement - The business reasons for doing this project.

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Impact Statement - The influence this project may have on business, operations, schedule, other projects, current technology and other systems.



Constraints and Assumptions - Limitations or restrictions placed on the project along.



Project Scope – A precise definition of project boundaries. Specific scope components may include the business areas or functions to be examined by the project (Domain of Study), the work that will be performed (Domain of Work) and the actual results that will be produced (Deliverables). Project Scope should identify both what IS in scope and what IS NOT scope.



Project Objectives - A list of measurable criteria that defines project success.



Project Justifications - A recap of known costs and benefits from performing the project. These financials must be reforecast during the life of the project and should be compared to actuals at the conclusion of the project.



Project Approach - The general strategy for how the project will be done along with non-technical descriptions of any methods, processes or tools that will be used during the project.

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Project Organization - Identification of the roles and responsibilities. The Project Organization should identify the people who will play assigned roles.



Management Commitment – Signatures of senior management signifying agreement with the plan.

The outline from Tryon and Associates (1998) goes well beyond the traditional view of the project charter. Some organizations use it as the basis for a thorough internal project plan (Hayes, 2000).

Plans for internally funded projects differ from those associated with externally funded contract awards. The traditional project charter used for an internally funded project succinctly describes the job. Externally funded projects require far more extensive planning and preparation. Figure 1 compares internally funded versus externally funded efforts. The next section offers a plan outline that establishes the baseline for project planning.

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Figure 1

Project Planning Process

Project Plan Externally Funded

Internally Funded

Receipt of RFP or RFQ

Identify need for product or service

Assemble RFP or RFQ Response Team

♦ ♦ ♦ ♦ ♦

Prepare Response Sections Letter of Transmittal Management Specification (if not included in RFP/RFQ) Statement of Work Specification Compliance Matrix (Responds to Spec in RFP/RFQ) Submit Package to customer

Prepare Project Charter and other Supporting Documents

Submit Project Charter to Senior Management for Approval

Receive Management Commitment

Answer customer questions Begin Work

Receive Contract Award (

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)

The Project Plan Whether the job receives internal organizational funds or external funds, the project plan answers the standard news reporter’s questions: Who, What, Why, Where, When, and How.

Who will do the work? Who is assigned to the project? Do we have adequate personnel to perform the tasks? Will we hire consultants, permanent staff or temporary workers? What must be done? What is the budget? What is the budget for each task? What resources are required to complete the project: What will the people assigned to the project do? What are the deliverables? What equipment do we have to purchase? What documentation is required? What is the chain of command? Why is the organization doing this? Where will the work be done? When are the activities scheduled to start and finish? How will the activities be done?

The project manager defines the project’s scope by listing the technical requirements and objectives. The PM prepares a schedule, which identifies the dates for starting and completing activities and milestones.

A milestone represents the identification of a

significant event. Examples of milestones include the start or end of a project, the start

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or end of a design review, the completion of a major system evaluation, shipping a product, or installing a product.

The plan identifies assumptions made by the different stakeholders. People make all kinds of assumptions during a proposal bid. Managers realize that the organization must acquire labor skills to complete a task. They must inform senior management and the human resource department of the need. A department anticipates outsourcing tasks to other organizations, but senior management may have other plans. Designers may assume that the organization will purchase new software or hardware required for an analysis. Software developers may assume the availability of an updated database application. If the department purchases the latest and greatest equipment, did they also remember to obtain training? Managers may assume that the customer will furnish equipment to facilitate installation and system testing. It may be a correct assumption, but inform the customer of the expectation. Very often there are internal disconnects due to a lack of communication. The PM must obtain the information from stakeholders and put it into the plan.

The project plan identifies schedule, budget, and performance constraints. The schedule must clearly pinpoint tasks that precede others. Sometimes additional funding is contingent upon reaching a certain performance criterion. Functional managers should identify design, operational, or testing sequences. Uninterruptible sequences represent important constraints.

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The plan must include reporting requirements. On a periodic basis, stakeholders review technical, financial, and schedule status. Plans must schedule technical interchange meetings (TIM) that clarify issues that arise during the design and development phases. The proposal should specify the frequency of reporting and the type of information to provide to the customer. Senior management will usually want to review technical, financial, and schedule status on a monthly basis. Functional department personnel frequently participate in these status meetings and the plan should make them aware of this need.

While the PM has responsibility for creating a plan, this person requests functional managers to contribute to the process. Product or service expertise comes from the functional area and not project management. The PM depends on functional or department managers to provide particulars. As part of their input, technical personnel identify risk areas, uncertainties or conflicts, which the PM factors into the price and schedule during the proposal preparation. At the onset of the proposal effort, the PM initially creates a top-level schedule that complies with the customer’s delivery requests. Functional managers provide detailed task descriptions to implement objectives, requirements and milestones. They prepare detailed schedules and labor allocations consistent with project constraints. After reviewing the data, the PM gains an understanding of possible schedule conflicts arising from competing department demands. Internal stakeholders must resolve schedule or technical complications that surface. The PM must inform senior management of exceedingly troublesome technical, schedule or budget issues.

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Ethical conflicts can arise during the preparation of plans for an RFP submission. Suppose a project manager receives draft proposal material from members of the organization. After reviewing the draft, the project manager realizes that the organization cannot meet the customer requested schedule delivery date or perhaps a technical requirement cannot be met. Does the PM proceed without informing the customer? Does the PM submit the proposal response and agree to the customer’s schedule request or technical requirements knowing that the likelihood of meeting these targets is very slim? Does the fear that your competitor may agree to an impossible situation govern your organization’s actions?

Consider this actual scenario. A customer intentionally inserted several technical requirements into an RFP that were impossible to achieve. After discovering the questionable specifications during the proposal response phase, a responding organization wrestled with the actions to take. They ruminated over the answers to these questions:

Has the organization misunderstood the customer’s requirement? Does the customer realize what they requested? What will competitors do? Should the organization agree to everything in the proposal and hope to renegotiate after the contract award?

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The RFP team members met and agreed upon a response strategy. They decided to state in the proposal response that they could not meet certain technical and schedule requests and instead offered an alternative approach. They won the contract. During a kick-off meeting following the contract award, the organization raised the question to the customer “Did the contractor realize that they inserted impossible conditions in the proposal document? “ The customer’s response astounded them. The contractor intentionally inserted certain impossible to meet conditions to see the bidding organization’s response. First, they wanted to see if the bidders would recognize the issues. Were they technically savvy? Then they looked at the response and eliminated companies that gave them a “line of goods.” Sometimes honesty prevails.

Plan Benefits A plan defines the project. It clarifies stakeholders’ expectations, reduces ambiguity and uncertainty and eliminates conflict among functional managers. Who does what and by when? By describing the functional managers’ roles, a plan improves an operation’s efficiency. A plan defines the resources required by the organization to perform the work. A properly prepared plan distributes the expected labor and material expenditures over time, which provides a basis for monitoring and controlling work. A plan identifies the critical areas and permits the organization to focus its efforts on monitoring them.

Stakeholders use the plan embedded in the proposal as a

communications tool. The PM monitors technical, schedule and budget status based on the agreed upon plan.

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The Project Plan Troika So, how does a PM create a project plan? We address all of the news reporter’s questions in three documents – (1) a formal product or system definition in the form of a list of requirements or a specification, (2) a Statement of Work (SOW) that includes a Work Breakdown Structure (WBS) and a schedule, and (3) a budget for each task given to every department in the organization and to subcontractors. The PM submits the system definition and the SOW to the external customer. Usually department budget data remain in the organization.

1) Requirements/specification This document represents a quantitative definition of the deliverables as delineated in the contract, sales order or an internal project agreement. The company receiving the contract award agrees to deliver a product or service that meets the customer’s requirements. Organizations call this list of requirements a product or service specification. The PM assigned to the job distributes the specification to all stakeholders. A PM monitors the project and continually reminds development personnel of the minimum technical requirements. The organization receiving the award has an obligation to deliver a product or service that meets the minimum requirements and not a bit more. Improving on the specification may be a challenge and great technical fun, but it costs labor effort and time for which the customer did not agree to pay. The PM is interested in maximizing the organization’s profit and certainly not losing money (especially for a non-profit organization).

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Exhibit 1 illustrates a typical hardware or software product specification. The specification includes critical performance factors describing product or system speed, size, capacity, scalability, upgradability, reliability, and required software and hardware interfaces. Products delivered to environmentally unfriendly regions require special consideration. A computing system that must operate at the North Pole or the heat of a desert demands special consideration. Likewise, a system delivered to an offshore oilrig may have to withstand the rigors of high humidity and salt-water conditions. A medical project development such as a pacemaker will require careful design and quality components to ensure high reliability. The developers of the space shuttle Challenger ‘O’ ring assumed a Florida ambient temperature of greater than 50° F. On that tragic day in 1986, the temperature at Cape Canaveral dipped below 40° F. The rubber ‘O’ ring joining the two rocket sections became brittle. During the launch, a crack appeared, internal flammable gases escaped and ignited a few seconds into the mission. The rocket exploded and lives were lost. The engineers built the system to a specification, but NASA officials and Morton-Thiokol executives chose to ignore the specification limitations. (Morton-Thiokol designed and fabricated the ‘O’ ring.) Customers and development organizations must carefully define a product’s design parameters and constraints taking into consideration all of the possible applications – especially critical life critical issues.

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Stakeholders involved in a sole source contract frequently develop a specification together and complete it before work begins on the project. The product definition attempts to anticipate all questions that designers might ask.

If a product or system definition doesn’t exist, create one and circulate it among the stakeholders for approval. Invite the stakeholders to comment on the draft document.

Request the reviewers to complete their efforts within a reasonable

time. Comments not received by that date will signify tacit approval of the definition. This is hardball, but if you are the project manager, it’s you’re neck that’s on the line. Developing a system, product, etc. without a definition guarantees breaking the budget and ensures late delivery. A stakeholder may complain after the project start, “I didn’t realize that we were doing this.” Well, if it’s in the specification and they didn’t comment on it, they lost all rights to complain. We have all heard about the proverbial camel -- a horse built by a committee without a specification. Everyone on the committee had a different view of the horse and no one took the time to write it down. A product definition baseline must exist and it’s up to the project manager to make it happen.

2)

Statement of Work (SOW)

The SOW is a detailed narrative description of the products and services supplied under the contract. The specification describes what will be supplied; the SOW states the quantity and defines the supporting material and services. The SOW also details responsibilities for supplying material, products, and services that may not be

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explicitly included in the list of deliverables. A schedule accompanies the SOW that lists the tasks and the time relationships among the tasks.

A SOW includes a methodology for proving to a customer that the product or service meets the specification. Where do we conduct the verification tests – at the development site, at the customer’s site, both locations? How extensive should the testing be? The buyer and seller must agree on these issues during price negotiations.

Two actual examples serve to illustrate the importance of clear definition. A medium sized industrial company delivered a large system to a desert site in Nevada. The contract did not clearly identify which organization would supply utilities such as electricity and water, nor did it take into consideration basic human needs like a portable toilet and a cabin for protection from the intense sun. The resolution of this oversight delayed the schedule by two weeks until the portable generator, fuel, water supply and a trailer were brought to the site. The lack of clarity in the SOW forced the company to pay for these items out of its own pocket.

On another occasion, a manufacturer delivered a water monitoring system to a site in China. Technicians from the company installed the system on the bank of a river, but the statement of work did not describe the system acceptance testing at the customer’s site. Seller and buyer had two different ideas about a system acceptance test. The buyer wanted to confirm the operation of the system using a

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six-month evaluation period and the seller expected to install the system and perform a three-day brief confirmation of operation. Clearly a disconnect. A very expensive disconnect for the seller because the customer expected the seller to participate in this six-month on-site evaluation. Even if the seller could provide a technician to live in a remote area in China for six-months, they did not want to incur the costs and the loss of an employee for this extended stay. The resolution of this dilemma required the seller to extend the product warranty for two-years beyond the original warranty.

A SOW exists to clarify both buyer and seller’s expectations and should anticipate all eventualities. During the preparation of the SOW, the PM contacts all internal stakeholders to discuss the product. This enables the PM to understand as many of the possible problems that could arise during the development, delivery, installation, and operation of the product or service. The statement of work reflects stakeholders’ comments. Adding work or deliverables to the contract will have an upward influence on the price quoted to the customer.

The key elements of the SOW include a)

General statement describing the scope of work (refer to the functionality section of the specification)

b)

List of deliverables -- includes hardware, software, construction items, documentation, supplied utilities, training, etc.

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c)

Reference to related studies, documentation, standards, and commercial or military specifications that apply to this project

d)

Data and Documentation requirements

e)

Support equipment for contract end item

f)

Customer furnished material (property, facilities, equipment, services, documentation) required by the contractor

g)

Overall schedule of performance

h)

Testing (define expectations at the developer’s location and the customer’s site)

i)

Governmental regulations and permit responsibilities

j)

Method of shipping.

k)

Explanatory exhibits, attachments and appendices

The very detailed SOW template in Exhibit 2 outlines many of the items that define a product or service job. Exhibit 4 illustrates an actual statement of work. The SOW describes a short project with the objective of delivering and installing a standard database software package to a medical office. The document uses a subset of items described in Exhibit 2. The actual SOW is tailored for this specific project. It does not contain every item listed in Exhibit 2. The PM takes responsibility for the preparation of the SOW. It may read like a legal document and that’s because it is. In large organizations, the PM frequently obtains legal assistance from the legal staff. If this is not possible then the PM must examine the

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agreement and confirm that it protects the organization while delivering the product that the customer requires.

Critically examine the sample statement of work in Exhibit 4. Identify the paragraphs that describe the customer’s responsibilities. A typical area of confusion surrounds software maintenance. This is customarily part of the buyer’s responsibility. Unsophisticated customers frequently believe that software does not require maintenance. A month or two after the installation of a database application software, customers may complained to the supplier that the package runs slow. Failure to maintain the system will result in poor performance. Sellers protect the organization by warning the customer that the system requires maintenance. This minimizes misunderstandings as well as notifies the customer to budget funds for this effort in the future.

One bite at a time!

How do you eat an elephant?

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In one old joke, an insect asks “How do you eat an elephant?” A second replies ”One bite at a time.” A gruesome story perhaps, but it serves to make the point that successfully completing a huge project requires dividing the job into a large number of bite sized pieces to which we apply adequate resources. Viewing a job as an entire entity seems overwhelming. We need to define a process that will break the project down into manageable steps. The Work Breakdown Structure (WBS) accomplishes this task. Although usually not explicitly called out, a WBS is an integral part of the SOW. The WBS consists of a grouping of tasks that organizes and defines the total scope of the project. The WBS is prepared in outline form so that each descending level represents an increasingly detailed definition of the project (Figure 1). The lowest level or highest number of the WBS defines a work assignment performed by a team member. The tasks may involve labor, or purchases for products or services. The WBS becomes the basis for the performance schedule.

Figure 1

Work Breakdown Structure Hierarchy

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WBS No. 1 1.1 1.1.1 1.1.1.1 1.2 1.2.1 1.2.1.1

Project Task Project Task #1 Subtask Work Package Task #2 Subtask Work Package

WBS Level 1 2 3 4 2 3 4

Sometimes a buyer provides a WBS, which is called a Contractual Work Breakdown Structure (CWBS). The CWBS generally includes less detail than the WBS used by the seller to manage the project (PMBOK). The customer uses the CWBS to define the level of reporting that the seller provides.

Think about a WBS as a list all of the tasks needed to complete a job. As an example, an organizer planning a wedding would begin by listing the activities associated with the bride, groom, bride’s parents, groom’s parents, catering hall, caterer, musicians, invitations, and church, synagogue or mosque facilities. To obtain specific information about each activity the organizer would request menu details from the caterer, the songs and dances from the musicians, requirements for chairs, tables, linen, cutlery, glass ware from the catering hall, etc. In this way, the organizer obtains a very detailed list of activities that must be completed to successfully conduct a wedding.

The PM performs the same effort for a project as the wedding organizer. First, the PM outlines all the known activities. The PM might base this list on experience or from historical records of other similar projects. For further details, the PM goes to

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the functional managers that thoroughly understand the specialized activities and request them to identify the tasks. The PM adds the inputs from the functional manager to the previously created outline.

The completed WBS represents the basis for task assignments and the schedule. A typical WBS used for an electromechanical and/or light construction development project is shown in Exhibit 3. The final price represents a summation of the costs for each task listed in the WBS. The PM creates a schedule by assigning a time span for each task listed in the WBS. The PM consults functional managers for clarification on task durations. Usually the PM assigns responsibility for each task assignment and deliverable item to a person or department as part of the schedule. The next chapter focuses on schedule preparation. The WBS facilitates status reporting by permitting the PM to track time, cost, and performance progress versus each task in the plan.

The WBS represents a planning tool that enables the PM to gain project personnel commitment. Each task item has a name or department associated with it, thus minimizing the possibility of omitting deliverable items and clarifying stakeholder responsibilities. Including a task in the WBS permits status tracking and ensures some level of visibility.

A well-written SOW minimizes stakeholder interpretation. Avoid imprecise language such as nearly, approximately, almost. Quantify expectations. Clearly

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state alternatives and consequences. Obtain customer review and approval of specifications, documentation, schematic, tests, etc. Preclude delaying tactics by requiring a finite number of customer review and approval cycles. Delineate responsibilities where questions could arise.

The conclusion of the statement of work includes the sellers terms and conditions. Section 15 of Exhibit 4 (the sample statement of work) lists typical terms and conditions. This paragraphs in this section states the sellers standard business policies regarding hardware and software warranties, return policy, and liability limitations in the event things don’t go as planned. As an example, suppose an installation of the software package doesn’t go as smoothly as predicted. Perhaps a development problem or a supplier labor issue caused a 30-day delay before project completion. The consequences of the late installation to the buyer can result in a significant loss perhaps due to missed business opportunities. A nuclear power plant receives revenues in the order of $1 million per day. A company failing to deliver a software or hardware product essential to the operation of the business, will force the plant to lose a significant sum of money – possibly resulting in a request by the buyer for damages. Section 15.6 in the sample terms and conditions limits the seller’s liability to the purchase price of the system.

Other clauses of the terms and conditions define ownership of the product, documentation and patent rights. Many people are unaware that purchasing software gives them a license to use the software application. The purchaser does

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not own the software and cannot make copies for sale. Frequently the license only gives them permission to install the software on a single computer. This information lies within the terms and conditions. Most often, the seller’s organization has a standard set of terms and conditions and the PM need only insert those at the end of the proposal.

3)

Department Tasks and budgets

Multiple departments and external suppliers may contribute to performing tasks in the WBS. After consultation with functional managers, the PM assigns a budget in labor hours or dollars to each department performing work on a task. Every person that works on a project task records his or her time working on the project. Each worker enters time data on a time card or directly into a computer database. A typical time card may look like Figure 2. Each project and each task within the project have assigned numbers. Administrators assign number identifications to describe projects because they are shorter and less confusing than project names. Every employee inserts the project and task numbers on which they worked during the week. They then enter the number of hours worked on the task daily.

At the end of the week, the PM examines the number of hours worked on the job. This bookkeeping procedure represents the basis for fiscal control. If people assigned to a specific project task, do not work it, then the PM must find out why. If people charge the job but have not accomplished the expected work, the PM again

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must find out why.

Are employees mischarging their time or is the task more

difficult than anticipated?

Project planning is essential. The first two elements of the plan – specification and SOW – serve as the basis for a project proposal submittal to the customer. The third element – task budgets -- provides the basis for the project proposal price. If the customer awards a contract award to the organization, then the three plan elements become the basis for assigning project resources, monitoring project progress and controlling project spending.

The PM exists to deliver a product or service requested by a customer on time, within budget and technically satisfactory. Only a well thought out plan enables the PM to execute Fayol’s other management responsibilities -- organizing, coordinating, and controlling.

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Figure 2 – Typical Employee Time Card Blank Card

Employee Name: ______________ Department No.: _____________

Employee ID No.: _____________ Week Ending Date: ____________

Project No. Task No.

Total Hours

Sunday Monday Tuesday Wednesda y Thursday Friday Saturday Total Overtime Hours

Completed Card

Employee Name: John Sanchez Department No.: 814 Project No. Task No. Sunday Monday Tuesday Wednesda y Thursday Friday Saturday

Employee ID No.: 451880 Week Ending Date: October 2

3705 12

7829 43

3712 2

Total Hours

4

2

3

4.5

2 8 .5

8 8 8

2 1

5 6

1 1

8 8

17.5

12.5

40

Total Hours 10 Overtime

181

Hours

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Exhibit 1 -- Typical Hardware or Software Product Specification Outline Specification Title: Date: Specification Number (if required): Specification Revision No.: Author (s): Name & address of organization preparing document: 1. Product Or Service Description – including intended usage 2. Definition Of Terminology 3. Requirements 3.1. System Architecture 3.2. Software Required 3.3. Components Required 3.4. Unique Hardware Or Software Features 3.5. Test Features 3.6. Product or System Self-Test Capability 3.7. Factory Test 3.8. On-Line Test 4. Interfaces 4.1. Software 4.2. Hardware 4.3. Equipment 4.4. Operator 4.5. Input/Output Devices 4.6. Electrical 4.7. Mechanical 5. Product Or Service Characteristics 5.1. Physical 5.1.1. Size 5.1.2. Weight 5.1.3. Power 5.2. Performance Characteristics 5.2.1. Speed 5.2.2. Response Time 5.2.3. Data Rates 5.2.4. Electrical Performance 5.2.5. Mechanical Performance 5.2.6. Start-Up and Shut-Down Characteristics 5.2.7. Capacities (e.g.. Electrical, Mechanical) 5.3. Reliability 5.4. Maintainability 5.5. Environmental 5.5.1. Temperature

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5.5.2. Humidity 5.5.3. Vibration levels 5.5.4. Shock 5.5.5. Natural Environments (e.g., earthquake levels) 5.5.6. Electromagnetic interference 5.5.7. Nuclear Effects 5.6. Safety Considerations 5.7. Quality Assurance Provisions

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Exhibit 2 - Sample Statement of Work Outline 1.

Top Level Functional Description (Reference Specification for Details)

2.

List of Required Customer Supplied Items a) Items Required for Development Purposes b) Items Required for Factory acceptance test (FAT), Installation, site acceptance test (SAT)

3.

List of Contractor Supplied Deliverables and Quantity a) Site Construction b) Hardware c) Software d) Manuals, Documentation & Data No. of copies of documents Documentation examples include the following: i) Site architectural drawings ii) System interconnection drawings iii) Design Review Documentation iv) Functional Design Specification v) Assembly drawings vi) Electrical schematics vii) Intermediate & Final product test results viii) Factory Acceptance Test ix) Site Acceptance Test x) System Software Specification xi) Software license rights xii) Software Source Code rights (Sometimes a provision exists to store source code in escrow) xiii) Software User Manuals xiv) Maintenance Manual xv) Block Diagrams xvi) Installation & Operating Manuals xvii) Training Manual xviii) OEM Vendor manuals and documentation for items such as a computer, I/O devices (printer, bar code reader, display, etc.) and third party software as received from the manufacturer. xix) Spares requirements xx) Reliability analysis xxi) Environmental analyses xxii) Performance Bond xxiii) Certifications (e.g., material, Y2K Statement)

4.

Customer/Subcontractor Reviews

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a) b)

c) d) e)

Quantity & location of Technical Interchange Meetings (TIM), Design Reviews, etc. Preliminary list of Discussion Items (schematics, drawings, hardware specifications, software specifications, documents, testing, QA policies, etc.) for each meeting. Define contents and expected outcomes of Preliminary Design Review (PDR) and Critical Design Review (CDR). No. of times customer may Review Documentation Policy on travel and living expenses (who pays at what price?)

5.

Preferred Vendors - Identify/Comment

6.

Applicable Reference Documents and Appropriate Standards a) Quality Assurance standards (e.g., ISO 9000) b) Hardware standards (e.g., UL license, CE compliance, electromagnetic interference) c) Software standards (e.g., IEEE 730, Software Engineering Institute) d) Construction (e.g., building codes) Standards e) Fabrication (e.g., welding and soldering) Standards f) Environmental (e.g., Federal Environmental Protection Agency and/or local requirements) Schedule a) Create a WBS b) Link tasks c) Assign Start & Finish Dates d) Identify Critical Dates e) Specify customer approval dates f) Identify critical path

7.

8.

Task Responsibility a) Contractor - responsible for the design, production, integration, calibration, factory testing, installation and training for the proposed system. b) Customer - responsible for all site preparation needed for the installation and operation of the system. Customer personnel responsible for ensuring the readiness of the installation site, and for providing all heavy equipment and professional riggers required to receive, transport, and assemble the system at the installation site. c)

Readiness of the installation site shall include, but is not limited to: i) Providing heavy equipment and professional riggers to unload system components from delivery truck(s), transport system components through the facility, and reassemble system components at the installation site. ii) Ensuring floors, thresholds, loading dock ramps, freight elevators, cranes, forklifts, etc., have sufficient loading capacity to allow heavy equipment to unload and transport system components without

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iii)

iv)

v)

vi)

exceeding maximum weight limits, and to enable the system to be installed and operated. Ensure loading docks, doorways, hallways, rooms, etc., have sufficient size to allow heavy equipment to unload and transport system components through the facility, and to enable the system to be installed and operated. Ensure ductwork, piping, security cameras or other obstructions are moved before delivery and installation to allow the unloading, transport and assembly of system components. Ensure that all system facility requirements (i.e., electrical power, heating, air conditioning, etc.), are ready for system installation and operation. Ensuring that facility labor is available at the time of installation.

9.

Acceptance Criteria a) Sub-assembly acceptance b) System Factory Acceptance c) Site Acceptance

10.

Method of Shipment a) Air, Train, Truck, Courier b) Freight Costs c) Clarify FOB location. d) Customer responsibilities -- off loading, rigging, forklift, overhead crane, positioning, leveling, placing equipment positioned in the area desired for installation and use. e) Title to and risk of loss shall pass to Buyer at factory or when delivered to transportation center, or site.

11.

Site modifications Required and Responsibility Defined a) Plumbing b) Electrical c) Heating, Ventilation, and Air conditioning d) Gas lines e) Fuel storage and distribution f) Chemical material storage and distribution g) Hazardous material storage

12.

Site Installation

13.

Training a) Course(s) description b) No. of people attending c) Location of course d) Define Facilities/resources required e) Facilities/resources supplier

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14.

Warranty and Support a) Define equipment warranty term and coverage. b) State start of warranty (within two months of delivery to customer) c) Policy on software updates. Notice that future software may require additional hardware, operating system changes or other updates, which may or may be covered by the Software Support Contract. d) Contractor assumes no responsibility for user-written programs added to the provided system. e) Warranty Exclusions (e.g., Warranty service is contingent upon the proper use of all equipment and does not cover equipment which has been modified without the contractor’s written approval, or which has been subjected to unusual physical or electrical stress as determined by Contractor’s Service personnel.)

15.

Permits, licenses and special training a) Identify responsibility for obtaining any permits and licenses required for the installation and operation of the proposed system. b) Identify employ site training requirements

16.

Union and Organized Labor Considerations a) The customer is responsible for making all required labor arrangements necessary for the installation and operation of the proposed system. b) Special local, state, federal, and country requirements (e.g., OSHA)

17.

Price and Payment Terms The final sale price may vary depending on the customer’s final specification and other requests such as testing, documentation, training, support services, and date of order placement. The proposal is valid for a stated period, beyond which final purchase price may vary due to changes in market material costs. Base the quote on U.S. dollars. a) The price is usually exclusive of local taxes, permits and fees. b) Payment Terms -- invoice for goods and services as provided. Payment due within 30 days of invoice. c) Consider using a Payment Milestone Schedule Approval of Design 10% Material Procurement 25% Completion of Factory Acceptance Test 25% Delivery to site 30% Completion of Site Acceptance Test 10%

18.

Ownership of Data, etc. a) Contractor retains all ownership and rights to the contractor-manufactured software supplied. Buyer purchases a license to use the supplied software.

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b)

Any specifications, drawings, manufacturing data, or other information transmitted to Buyer by Seller are the property of Seller and are disclosed in confidence on the condition that, without Seller’s prior written consent, they shall not be reproduced or copied, and shall not be used except in connection with the goods and/or services which are the subject of the Sales Contract.

19.

Late Delivery or Technical Performance Failure Penalties

20.

General Corporate Terms and Conditions

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Exhibit 3 -- Sample Work Breakdown Structure (WBS) Project Widget Project Number: 1175 WBS No.

Tasks or Work Packages

1 System 1.1 Define the System Performance Requirements 1.1.1 Distribute Specification 1.1.2 Distribute Statement of Work 1.2 System Architecture Definition 1.2.1 Major Trade-off Studies 1.3 Define Major Electrical/Mechanical Assemblies 1.3.1 Cable Definition 1.4 Unique Algorithm Development 1.5 Define Software/Firmware Functions and Architecture 1.6 Technical Analyses 2 Design Assembly #1 2.1 Hardware 2.1.1 Define Hardware/Software Interfaces 2.1.2 Electrical/Electronic Design 2.1.2.1 Define Subassemblies/Modules/Functions 2.1.2.2 Module/Function Specification 2.1.2.3 Make/Buy/Subcontract Trade Studies 2.1.2.4 Design 2.1.2.4.1 Electrical Schematic and/or Wiring Drawing 2.1.2.4.2 Harness & Connector Definition 2.1.2.5 Fabricate subassemblies 2.1.2.6 Assemble the Units 2.1.2.7 Software Integration 2.1.2.8 Calibrate & Test 2.1.3 Mechanical 2.1.3.1 Define Assemblies/Subassemblies 2.1.3.2 Assembly/subassembly Specifications 2.1.3.3 Make/Buy/Subcontract Trade Studies 2.1.3.4 Design 2.1.3.5 Fabricate Components and subassemblies 2.1.3.6 Assemble the Subassemblies 2.1.3.7 Integrate components and subassemblies 2.2 Software 2.2.1 Define Hardware/Software Interfaces 2.2.2 Define Software Modules – SQAP 2.2.3 Requirements Specification – SRS 2.2.4 Make/Buy/Subcontract trade-off Studies 2.2.5 Design – SDD

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2.2.6 Integrate Software with Hardware 2.2.7 Prepare Software Verification and Validation Plan – SVVP 2.2.8 Perform Verification and Validation (QA) Tests 2.2.9 Provide to Software Library and Distribute Software 3 Design Assembly #2 - WBS tasks for subsequent assemblies 4 Project Management 4.1 Interdepartmental Coordination 4.2 Work Authorization Preparation 4.3 Cost Management 4.4 Technical Management 4.4.1 Establish Specifications 4.4.2 Engineering Task Definition And Partitioning 4.4.3 Parts Coordination 4.4.4 Internal Specification Review 4.4.5 Engineering Document Release 4.4.6 Engineering Support To Production 4.4.7 Assembly Fabrication & Rework 4.4.8 Coordinate Resolution Of Vendor Problems 4.5 Schedule Management 4.6 Material Procurement 4.7 Prepare and Coordinate Subcontracts 4.8 Internal Hardware/Software Design Reviews 4.9 Customer Reviews & Technical Interchange Meetings 4.9.1 System Requirements Review (SRR) 4.9.2 Preliminary Design Review (PDR) 4.9.3 Critical Design Review (CDR) 4.9.4 Interim Technical Interchange Meetings(TIM) 4.10 International, Federal, State, and Local Code Issues 5 Engineering Equipment 5.1 Identify Equipment Needed for System Design and/or Test (e.g., CAE, CAD, Gate Array Programmer, Test Equipment, Software, Software Platform) 5.2 Equipment Acquisition Plan (Buy, Borrow, Lease, In-house) 6 Support Equipment 6.1 Identify Equipment Needed to Support/Maintain System in Field 6.2 Equipment Acquisition Plan 7 Site Construction 7.1 Plan Development 7.1.1 Architect’s Plans 7.2 Identify Zoning Issues 7.2.1 Obtain Permits 7.3 Prepare Bid for Subcontractor’s 7.4 Bid Process to Select Construction Subcontractor(s) 7.5 Construction 7.5.1 Roads 7.5.2 Earth Moving 7.5.3 Facility

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7.5.3.1 Foundation and Structure 7.5.3.2 Electrical 7.5.3.3 Plumbing 7.5.3.4 Heating, Ventilation, and Air-conditioning (HVAC) 7.5.4 Beautification –Trees, Shrubs, Lawns 8 System Integration & Test 8.1 Prepare Factory Acceptance Test 8.2 Prepare Site Acceptance Test 8.3 Collect and Assemble Component Items 8.4 Interconnect All Assemblies 8.5 Install special Hardware 8.6 Perform Software-Hardware Integration 8.7 Verify Quality Assurance Documentation 8.8 Calibrate System 8.9 Perform Temperature Tests 8.10 Perform Shock and Vibration Tests 8.11 Perform Reliability Tests 8.12 Perform Factory Acceptance Test 8.13 Crate and Ship 9 Site Installation and Test 9.1 Special Site Training (e.g., Hazardous Material - HAZMAT) 9.2 Confirm Resolution of Labor Issues 9.3 Unpack System 9.4 Interconnect All Assemblies 9.5 Calibrate System 9.6 Perform Site Acceptance Test 10 Data 10.1 Technical Publications 10.2 User’s Manual 10.3 Training Manual 10.4 Engineering Data 10.5 Electrical Schematics 10.6 Printed Circuit Board Art Work Drawings 10.7 Mechanical Assembly Drawings 10.8 Software Requirements Specification 10.9 Software Design Document 10.10 Software Verification and Validation Plan/Report 10.11 Software Source Code 10.12 Environmental Test Reports 10.13 Factory Acceptance Test Report 10.14 Site Acceptance Test Report 10.15 Management Data 10.16 Labor Hours 10.17 Costs 10.18 Schedule 10.19 Engineering Analyses and Support data

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10.20 Quality Plan/Report 10.21 Reliability Plan/Report 10.22 Maintainability Plan/Report 10.23 Failure Mode and Effects Analysis 10.24 User Guide 10.25 Training manual 10.26 Repair manual 10.27 Data/software repository 11 Operational & Site Activation 11.1 Site Construction/Conversion 11.2 Vehicle Purchase and Conversion 11.3 Site Equipment Rental/Purchase 12 Services and Training 12.1 Software/Hardware Field Installation 12.2 Warranty 12.3 Hardware 12.4 Software 12.5 Maintenance 12.6 Training 12.6.1 Identify and Obtain Required Training Equipment 12.6.2 Make/buy Training Decision 12.6.3 Design and Develop Training Material In-house 12.6.4 Subcontract Training Material 12.6.5 Conduct Training 13 Industrial Facilities 13.1 Factory Construction/Conversion/Expansion 13.2 Manufacturing Equipment Acquisition/Modernization 13.3 Factory Maintenance 14 Spares and Repair Parts

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Exhibit 4 – Statement of Work Example

The following representative statement of work describes a fictitious medical practice software appointment scheduling and invoicing package entitled SoftApps. The fictitious company SoftHuge developed and manufactured the software. Although complex, SoftApps is a standard off-the-shelf product. The document states that SoftHuge offers to install both the hardware and software, transfer existing data from a software package presently operating in the office to the new system, test the resulting system, train the staff, deliver documentation and provide a warranty to the customer called MedPrac. While a relatively short project, the SOW describes in detail both SoftHuge’s and the customer’s obligations and responsibilities. Most brand names used in this document to describe products are fictitious. The SOW establishes the deliverables and delineates the expectations to minimize surprises. The author provides this statement of work purely for educational purposes and does not advocate its use without obtaining appropriate legal representation. Every project and contract award requires unique tailoring.

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Statement of Work 1 Product Description SoftHuge Industries offers software and hardware to MedPrac that will perform billing, scheduling, document control and patient history software management for medical and dental offices. The software package called SoftApps developed by SoftHuge Industries provides full financial and receivables tracking, electronic billing/claims submission, medical records, managed care data, and appointments management. Some of the unique software features contained in SoftApps include: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦

Relational database structure Real-time data processing Patient account retrieval by a variety of search criteria Family billing capability Preparation of a budget payment plan specific to each patient Capacity for up to 50 insurance fee schedules Sequential billing of up to six insurance carriers per patient Open item posting Insurance payment accuracy audit against carrier fee schedules Automatic reporting and resubmission of delinquent claims Collection notes on patient accounts User defined billing cycles User defined linkage between procedure codes and appropriate diagnosis codes Insurance specific diagnosis and procedure codes On demand insurance forms, itemized statements and receipts On demand reprinting/resubmission of insurance form or patient statement Electronic payment posting Treatment plans Cross checking of diagnosis to procedure codes Reconciliation of actual payments to expected payment Built in Automatic Re-bill capability

SoftApps calculates your practice’s procedures and fees. The system can submit your office’s claims to major medical insurance commercial carriers electronically. There are multiple levels of system security, and the administrator or provider can designate each user's level of access. This protects patient confidentiality and limits access to clinical, bookkeeping, and financial data entry to unauthorized personnel. Areas of particular interest to mental health practices are: ♦ Integrated word processing and medical records features allows for recording treatment plans and progress notes, and can generate letters and reports to referring physicians or other appropriate sources. ♦ Track and record patient outcomes. 195

♦ Multiple providers' schedules can be easily viewed at one time. ♦ Setup future appointments for patients who want the same times/day(s) of the week. ♦ Track referral sources ♦ Automatically provides warnings when the number of remaining allowable visits is approaching the limit. ♦ Track Medications, dosages, and prescriptions ♦ Track patients paying on sliding fee schedules based upon income, family size, etc. 2 Installation Schedule Following the contract award, SoftHuge Industries will organize a meeting to review the project activities in detail with MedPrac's personnel. The meeting will review MedPrac’s detailed requirements, computer hardware and existing database software, schedule, prospective software customizations, initial software installation, data transfer from the your practice’s existing system, testing, and training. Task priorities and schedule may change as a result of discussions between MedPrac and SoftHuge Industries personnel. In general, the program will proceed according to the following phases: TASK Phase I

Planning - Organization & Review/Agreement on Plan Phase 2 Hardware Procurement Phase 3 Hardware & Software Customization (if required) Phase 4 Hardware & Software Installation & Testing Phase 5 Data Migration Phase 6 Site Acceptance Test Phase 7 Training Phase 8 First Year Warranty Support ARO – After Receipt of Order

WEEKS ARO 2 3-7 None required 8-10 11-12 13 14-15 14-65

SoftHuge Industries will assign a project manager who will quickly arrange for a conference between SoftHuge Industries and MedPrac’s personnel to complete the details of the working plan. Together, we will develop a process to ensure prompt response to questions and the review of the proposed hardware and software plan. We will also discuss the support that SoftHuge Industries personnel will need from MedPrac during the installation and test periods. Our technicians will review questions relating to the distribution of clients and servers, networking, modem access to the system, unique system interfaces, and software version compatibility. Following these discussions, the SoftHuge Industries project manager will provide an in-depth schedule to meet MedPrac’s required completion dates.

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3 Deliverables Deliverables include the following: Software SoftApps version 10.8 application software Report Writer Hardware Server computer Dual Pentium III, 1200 MHz. processors 256 Mbytes memory 1 Mbytes cache memory 24 gigabyte RAID hard drive 24X DVD Ethernet interface FAX Interface 56K Modem interface Printer interface 19” monitor Laser printer – 20 PPM Mouse Keyboard Documentation SoftApps user manual 10 - SoftApps System Operation training manuals 10 -- SoftApps Database Administration training manuals Third party supplied hardware documentation Services SoftApps installation resident on server computer Installation of MedPrac supplied Elcaro database management system Creation of operational and test environments Data migration of MedPrac data into new system Site test Verification of printer, network, modem, and FAX interfaces. Verification of customer data transfer Verification of standard SoftApps screens One-year hardware and software service and maintenance agreement as described in section 15. Two training courses with up to 10 students in each course SSO-1234 [SoftApps System Operation] SDA-5678 [SoftApps Database Administration]

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4

Installation and Database Security Guidelines

The effort includes installation of SoftApps on MedPrac’s computer, creation of training and production environments, and the initial relational database tuning. SoftHuge Industries will install the system on MedPrac’s server. At extra cost, SoftHuge personnel can install SoftApps on MedPrac’s client computers. SoftHuge Industries personnel will require assistance from MedPrac’s personnel on these tasks. MedPrac must assist SoftHuge Industries personnel to ensure strict controls between the operational and test versions of databases. The data migration (sometimes called data transfer) phase requires that MedPrac establish a cut-off date after which data will not change. Newly collected data must be stored and entered into the system at a future time. MedPrac must provide SoftHuge personnel a comma delimited ASCII file of the data to be migrated to the new system. SoftHuge personnel will transfer MedPrac’s data into the new database. SoftHuge personnel will require an isolated development area at MedPrac’s faculty during portions of the project. SoftHuge expect MedPrac to perform several tasks during and after the installation. These include the following: ♦ ♦ ♦ ♦

Maintain a copy of all operational databases. Ensure that backups of all database software are made on a regular basis. Develop a database recovery policy. Develop and implement adequate office security features to protect the database integrity, confidentially, and availability. ♦ Appoint a database administrator. This person should support SoftHuge personnel during the installation and data migration phases. The customer accepts responsibility for installing the network, attaching the computers to the network, and maintaining the network. 5

Relational Database

The Elcaro relational database management system will be provided by MedPrac unless otherwise arranged. SoftHuge Industries requires Elcaro version x.y.z and SQL*NET version v.w. Elcaro will be installed as part of the normal system installation. 6

Manuals and Documentation

SoftHuge Industries will supply the SoftApps user manual, ten - SoftApps System Operation training manuals, and ten -- SoftApps Database Administration training manuals. Additional User or training manuals may be purchased at a cost of $150 per

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copy. All third party supplied hardware documentation will be delivered to MedPrac as received by SoftHuge. SoftHuge Industries will provide one copy of the following SoftApps documentation: Software Requirements Specification (SRS), Software Design Documentation (SDD), Software Verification and Validation Plan (SVVP), Software Verification and Validation Report (SVVR). 7

Software Customizations

The baseline effort provides a standard off-the-shelf product. SoftHuge Industries has a staff of outstanding software engineers and technicians dedicated to developing and maintaining database products, a technical database product support staff, database trainers, and project managers. These people are supported by knowledgeable health and insurance professionals. Consequently, SoftHuge Industries’ engineers can provide software customizations as an extra cost option, if required. 8 Factory Acceptance Test Specific factory acceptance tests will not be performed on this product. 9 Site Acceptance Test A standard SoftApps site acceptance test will be used to verify SoftApps installation and performance at MedPrac’s site as part of the installation process. 10 Maintenance and Support The SoftApps system represents the most cost-effective approach to implement a medical office invoicing, record keeping and appointment system. SoftHuge Industries provides upgrades to SoftApps as part of its annual maintenance program. The first year warranty service begins following completion of the SoftHuge Industries site acceptance test. One-year of SoftApps product support is included in the price. Your staff may contact SoftHuge Industries technical staff from 8:30 AM to 5:00 PM (Eastern Time) on business days. The cost for subsequent years is detailed in the price quote. SoftHuge Industries can provide a quote for 24-hour/7 day per week SoftApps support service. The SoftApps Support Software Service agreement includes the following SoftApps application services: ♦ ♦ ♦ ♦

Toll Free Telephone Assistance SoftApps software and documentation updates Released software updates Immediate notification of Critical Software Problems

As a courtesy to SoftHuge customers purchasing the service agreement, SoftHuge Industries software engineers may provide limited assistance on third party software

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associated with the SoftApps package (e.g., Windows and Elcaro). Elcaro database maintenance support is not part of this service agreement. SoftHuge Industries will provide a quote for a separate Elcaro database maintenance service contract, if requested. The quotation includes the cost for Elcaro product support from 8:30 AM to 5:00 PM on business days. As part of this extra cost option, SoftHuge Industries engineers will perform the following work on a periodic basis: Monitor Performance Monitor File I/O Monitor tables and Indices Monitor space utilization Database tuning Distribute table spaces among different disks based upon usage Re-size table and index storage parameters based upon statistics Add/remove Indices for faster response to complex queries Adjust System Parameters based on changing needs Database maintenance De-fragment table spaces Cleanup temporary (unused) space Direct MIS staff to Archive unused data Direct MIS staff to Backup system 11 License SoftHuge Industries provides the license to use its software products and copies of the executable files. SoftHuge Industries retains all ownership rights to the software. SoftHuge does not transfer either the title or the intellectual property rights to MedPrac. MedPrac may not sell, redistribute or reproduce the Software, nor may you decompile, reverse engineer, disassemble or otherwise convert the Software to a humanperceivable form. SoftHuge owns all trademarks and logos and the customer may not copy or use them in any manner. 12 SoftHuge Industries Quality Assurance Program SoftHuge Industries has developed a comprehensive Quality Assurance Program. This program has been developed over the years by a combination of requirements demanded by industry tempered by a common sense approach to quality. It is our policy that all products and services, which we offer, will meet the stipulated requirements and overall expectations of our customers. This policy is supported at all levels within the organization.

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A corrective action system is in place to accept and act on customer complaints and process related problems requiring the involvement of the Quality Assurance organization. SoftHuge Industries software products comply with IEEE 730 requirements. This standard requires the completion of a Software Quality Assurance Plan (SQAP) for each project. The SQAP dictates how we produce the software and related documentation for the project. Included in the SQAP for SoftApps is the production of a Software Verification and Validation Plan and a corresponding Software Verification and Validation Report. The Software Verification and Validation Plan (SVVP) ensures the software meets the requirements in the Software Requirement Specification and the design in the Software Design Description. The SVVP also ensures compatibility between the software and the user documentation. The SVVP encompasses unit, integration and system tests. The implementation of the SVVP results in the generation of the Software Verification and Validation Report (SVVR). The Software Verification and Validation Report consist of any discrepancies or enhancements observed during the implementation of the SVVP. These quality documents (SQAP, SVVP, and SVVR) are placed in storage for seven years. 13 Service Support SoftHuge Industries offers its customers a comprehensive software support program, including toll-free telephone support, software and documentation updates released during the support period, and immediate notice of any critical software problems. Service support is included for the first year of operation following the site test. The customer may purchase support for subsequent years on an annual basis. Service support includes the following features: ♦ ♦ ♦ ♦ ♦ ♦ ♦

Software and documentation updates. Toll-free Telephone technical Support Immediate Notification of Critical Software Problems Logging of All Customer Support Calls Modem Support for Remote Software Assistance Optional software Support for SoftHuge Industries Supplied 3rd Party Software Optional On-Site Training for Software Updates and Modifications

14 Training SoftHuge Industries maintains a Training Department assigned the mission of providing excellence in customer training, software and hardware support, and technical documentation. SoftHuge will conduct two training course for up to 10 students in each course at your facility. The courses will be SSO-1234 [SoftApps System Operation] and SDA-5678 [SoftApps Database Administration].

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15 Terms and Conditions 15.1 Software Product Conditions 15.1.1 SoftHuge Industries agrees to grant and the customer agrees to accept a nontransferable and nonexclusive License from SoftHuge Industries on the following terms and conditions: 15.1.2 Customer shall have the right to use SoftApps software solely for internal purposes on the computer(s) designated. Customer may use the SoftApps software temporarily on a machine other than the designated computer in the event the designated computer(s) is (are) inoperable. Customer may make one (1) copy of the software solely for archival purposes or emergency back-up purposes. 15.1.3 Title to and ownership of the SoftApps software shall at all times remain with SoftHuge Industries. 15.1.4 MedPrac agrees not to provide or otherwise make available the SoftApps software or any portion thereof, including but not limited to flowcharts, logic diagrams, object codes, source codes, requirements specifications, design documents, verification and validation procedures, and listings, in any form, to any person other than MedPrac or SoftHuge Industries employees without the prior written approval of SoftHuge Industries, or in the case of source codes, a separate license. The licensed granted and the SoftApps software may not be assigned, sublicensed or otherwise transferred by MedPrac without prior written consent from SoftHuge Industries. No right to reprint, copy, reverse compile or reverse assemble, distribute, market, rent, lease or transfer all or any portion of the SoftApps software etc., in whole or in part, is granted except as otherwise provided. In the event, MedPrac neglects or fails to perform or observe any of its obligations under this Agreement this License Agreement and all Licenses granted hereunder to MedPrac shall immediately terminate. Within two (2) weeks after any such termination, MedPrac shall return the SoftApps software, all documentation to SoftHuge Industries and cease using the SoftApps software. 15.2 Cancellation MedPrac may not cancel this order, or any portion thereof, except upon written notice to SoftHuge Industries and upon payment to SoftHuge Industries of the cancellation charges specified below. Such cancellation charges are as follows: Cancellation Notice Received Prior to Scheduled Delivery ================

Cancellation Charges (Percentage of Sales Price of Goods and/or Services) ========================

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20 days or more Less than 20 days

35% 25%

MedPrac may not cancel any order, or portion thereof, after shipment. MedPrac may not reschedule or change any order, or portion thereof, without SoftHuge Industries’ prior written consent. 15.3 Price and Payment Terms of payment are cash upon delivery as described in the attached quotation. A finance charge of 1 1/2% per month will be assessed on any amounts outstanding beyond 30-day payment terms. Price is in U.S. currency. 15.4 Taxes Prices are exclusive of all federal, state, or local property, license privilege, sales, use, excise, and other taxes and government charges. Customer shall be responsible for all such taxes. 15.5 Title and Risk of Loss Title to and risk of loss for Domestic U.S. shipments shall pass to the customer at the customer’s shipping address. 15.6 Limitation of Liability Under no circumstances, including, but not limited to, negligence, shall SoftHuge be liable for any special or consequential damages that result from the use of, or the inability to use SoftApps or any downloaded materials from the SoftHuge web site, even if SoftHuge or its representative has been advised of the possibility of such damages. In no event shall SoftHuge’s total liability from all damages, losses, and causes of action (whether in contract, or otherwise) exceed the amount paid to SoftHuge. In no event shall the liability of seller and its subcontractors for damages arising out of or connected with the sales contract, or the performance of breach thereof, or the design, manufacture, sale, resale, delivery, installation, use operation, maintenance, or repair of the goods and/or services provided under the sales contract, whether in contract, tort (including negligence), strict liability or otherwise, exceed the purchase price of such goods and/or services. 15.7 Right to Use Software Software supplied by SoftHuge Industries may only be used on the single computer system specified. It shall not be made available to any other person or entity without prior approval of SoftHuge Industries. Permission is granted by CNPG to make a single copy of the software for archival purposes. 15.8 Delays SoftHuge Industries shall not be liable for delays in performing or failure to perform its obligations under the Sales Contract resulting directly or indirectly from, or contributed to by acts of God; acts or failures to act of Customer; acts or failures to act of civil or

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military authority; governmental priorities; fires; strikes; or other labor disputes; accidents; floods; epidemics; war; riot; delays in obtaining or inability to obtain materials, components, labor, fuel or supplies; or any other circumstances beyond SoftHuge Industries’ reasonable control, whether similar or dissimilar to the foregoing. In the event of any such failure or delay, the time for SoftHuge Industries’ performance shall be extended by a period equal to the time lost due to such failure or delay. SoftHuge Industries shall notify the customer promptly of any material delay, and shall specify the revised delivery date as soon as practicable. 15.9 Patents SoftHuge Industries owns all patents associated with developments made under this Sales Contract. 15.10 Ownership of SoftHuge Industries’ Data, Etc. Any specifications, drawings, manufacturing data, documentation or other information delivered to MedPrac by SoftHuge Industries are the property of SoftHuge Industries and may not be reproduced or copied, and shall not be used except in connection with the goods and/or services which are the subject of the Sales Contract. 15.11 Assignment MedPrac may not assign its rights or obligations under the sales contract without the prior written consent of SoftHuge Industries and any purported assignment of such rights or obligations without such consent shall be void. 15.12 Warranty 15.12.1 Basic Warranty Equipment manufactured and software developed by SoftHuge Industries is warranted against defects in materials and workmanship for a period of twelve months from the date of shipment, provided that the equipment/software has been used properly (as detailed in the instruction manuals). All other equipment/software provided by SoftHuge Industries from other manufacturers would carry the warranties provided by those manufacturers. During the warranty period, repairs or replacement will be made at SoftHuge Industries' option on a return-to-factory basis. The transportation cost, to and from SoftHuge Industries, including insurance, is the responsibility of MedPrac, except for defects discovered within 30 days after receipt of equipment where shipping expense will be paid by SoftHuge Industries to and from SoftHuge Industries. The SoftHuge Industries Basic Warranty applies only to equipment manufactured by SoftHuge Industries which is returned to the factory. If equipment must be repaired at MedPrac's site, the actual repair labor and parts will be provided at no charge during the warranty period. Travel expenses to and from MedPrac's site (travel time labor and living expenses while on site) shall be paid by MedPrac.

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SoftHuge Industries shall have no liability for any special, indirect, or consequential damages, whether from loss of production or otherwise, arising from any breach of warranty or defect or failure of any product or products sold under this agreement. 15.12.2 Exclusions Warranty service is contingent upon the proper use of all equipment and does not cover equipment which has been modified without SoftHuge Industries' written approval, or which has been subjected to unusual physical or electrical stress as determined by SoftHuge Industries Service personnel. SoftHuge Industries shall be under no obligation to furnish warranty service (preventive or remedial): (1) if adjustment, repair, or parts replacement is required because of accident, neglect, misuse, failure of electrical power, air conditioning, humidity control, transportation, or causes other than ordinary use; (2) if the equipment is maintained or repaired, or if attempts to repair or service equipment are made by personnel other than SoftHuge Industries personnel without the prior approval of SoftHuge Industries; (3) if the SoftApps software has been modified or a software program has been added to SoftApps by the customer’s personnel.

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Chapter 5 Questions

1) Define organizational planning. 2) Define scope management. 3) What are the essentials of a project plan? 4) Why is project planning so important? 5) Why is managing the project scope important? 6) What is the difference between an RFP and a RFQ? Which is easier to assemble and why? 7) Why does a customer distribute an RFP? 8) What should an RFP response contain? 9) Describe the circumstances under which an organization decides to respond to an RFP or RFQ. 10) Explain why it is necessary to involve other departments and functional managers in the preparation of a labor estimate and a schedule. 11) Describe the use of a project charter. 12) What should a project charter contain? 13) The ABC organization has received a contract from the XYZ organization to develop a Widfram. Must the project manager develop a project charter? Explain your answer. 14) Explain why it is necessary to involve other departments and functional managers in the preparation of a labor estimate and a schedule. 15) A technical person at the Zeta Corp0oration has an idea for an improvement to a product presently manufactured by the organization. She would like to prepare a prototype unit. Describe the information that she should present to the Vice President to seek funding approval for this project. 16) What is a milestone? 17) List five benefits of a project plan. 18) Identify the three documents required for a project plan. 19) What is the fundamental purpose of a statement of Work?

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20) Identify 10 items included in a statement of work and describe their importance. 21) The text requests the reader to critically examine the sample statement of work in Exhibit 4 and identify the paragraphs that describe the customer’s responsibilities. What are they? 22) Describe the document that a project manager must have before preparing a project schedule. 23) Professionals frequently complete a timecard describing their daily activities. Why is this important? 24) Describe the importance of a work breakdown structure. 25) Prepare a list of tasks to make a breakfast for six people. We will offer hot oatmeal, eggs, bread, fresh orange juice, a fruit cup, coffee, and cake. We wish to serve the breakfast soon. Identify the tasks that can be completed together. Organize the list into a work breakdown structure and assign personnel to each task. Estimate the time required to complete each task and sketch a schedule for the breakfast. 26) Describe the contents of a project specification. 27) Discuss the value of a project specification. 28) What environmental characteristics may be considered in a product or system specification?

Note: Widget, Plamfly, Widram are fictitious products and companies created for illustrative purposes.

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CHAPTER 6

Project Time Management

Out of clutter, find simplicity From discord, find harmony In the middle of difficulty lies opportunity. -- Albert Einstein, Three Rules of Work

<>

Chapter objectives After studying this chapter, you should be able to: Understand the relationship between the project schedule and the work breakdown structure Understand the need for a project schedule Read and interpret a project schedule Analyze a project schedule to determine task priorities Identify and find the critical path Prepare a project schedule

Project Time Management Project time management includes the processes required to ensure timely completion of the project (PMBOK, 1996). The schedule represents the fundamental tool used by a project manager to plan and then control activities. At a minimum, it consists of the following:

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1) A list of tasks required to complete the project, 2) Task duration, and 3) Task dependencies. Frequently, PMs include as part of the schedule the department or personnel responsible for task completion. Sometimes, the PM creates a separate document called a Responsibility Assignment Matrix that lists the people or the department responsible for each WBS element.

Task dependencies require knowledge of the predecessor and successor tasks associated with a given task. This chapter will enable the reader to read, interpret and prepare a project schedule. It will accomplish this by actively engaging the reader in the process of preparing a Gantt chart.

The time management process begins with the creation of the Work Breakdown Structure discussed in chapter 5. The PM and the functional managers identify the specific activities needed to produce and deliver the project deliverables. With every activity defined, the project team determines duration and sequence relationships. To accomplish this with the highest confidence in its accuracy, the PM requests assistance from the functional managers. They estimate the length of time for each task and recommend the appropriate sequence relationship. That is, they identify the task or tasks that should precede or follow any given task. Teams use their collective expert

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judgement to estimate activity durations. Some organizations keep history files of past project experiences to support the estimating process.

You want it when?

Schedule

Requesting assistance from the functional managers and using their recommendations promotes harmony and encourages ownership of the project among the stakeholders. The stakeholders assume responsibility for their labor and time duration estimates. If the PM assigns task durations without consultation with the functional managers, their response will be “Well, you assigned the dates, you meet it!” Therefore, it is imperative that discussions take place, issues raised, and disagreements voiced and resolved before the project begins. The output of this phase will be a schedule with which stakeholders can live.

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The schedule establishes a basis for communications among stakeholders. It provides the entire picture for all participants to view and promotes understanding of activity relationships. The schedule permits the determination of the project’s critical path. The critical path represents the subset of project activities that leads to the shortest project completion time.

Extending the length of time for any of the activities on the critical

path increases the overall project duration. Knowledge of the tasks on the project’s critical path enables project managers to establish task priorities. Stakeholders understand the need to assign resources (money, labor, facilities, tools, and equipment) in support of critical path items. Employees can anticipate both project and functional managers to pay close attention to personnel working on tasks in the critical path. If issues arise, they want to know about it so they can resolve the problems using the appropriate resources. Understanding the schedule clarifies and highlights short-term project objectives. This knowledge informs and consequently aligns personnel with regard to the project’s needs. Rudiments of Schedule Preparation The schedule development process involves defining the activities to be accomplished, assigning responsibility for completing activities to stakeholders, identifying logical activity sequences, establishing activity dependencies by identifying successor and predecessor tasks, and designating task durations. Managers use a Gantt or bar chart that lists all tasks on the left. A horizontal bar is associated with each task and illustrates the task duration. An example of a Gantt chart using Microsoft Project is shown in Figure 1.

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Figure 1 – Gantt Chart

Gantt Chart Wizard Icon

Gantt Chart Option

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Figure 2 – Milestone Schedule 213

Organizations commonly use the Microsoft Project software tool for developing schedules and assigning resources. Figure 2 illustrates a schedule consisting solely of milestones. The diamond ! signifies a milestone. The milestone chart provides an overview of the entire project and lists only the expected beginning or ending dates of significant activities. The summary solid rectangular line in Figure 2 serves to indicate the duration of all of the activities falling under it.

Traditional Gantt charts use a horizontal rectangle to denote the duration of a task.

The length of the rectangle indicates the length of time the task takes. The user must observe the units on the time scale to assess the actual task time. The horizontal time axis in Figure 2 denotes quarters or 3-month intervals. The user has the ability to make these intervals finer or coarser to suit the individual’s needs.

A rectangle partially filled with a solid bar illustrates that work has begun on this task.

If the bar extends across the entire task then work on the activity has completed.

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Usually, the start of a task depends on the conclusion of a prior activity. This common finish to start (FS) relationship looks like

Task A Finish to Start (FS) Relationship Task B

The arrow extending from task A to task B signifies that task B begins after Task A finishes. The tasks are sequential. Task B requires the completion of task A. The vertical down arrow identifies the dependency of task B on task A. Task B need not follow immediately after the conclusion of Task A. The Gantt chart concept permits a delay before the next task begins as shown below.

Task A

Finish to Start Relationship includes a delay in the start of Task B

Task B

As an example of finish to start relationships, when baking bread, the baker must mix the ingredients before kneading. The baker places the dough in the oven after rising has completed. To ensure a successful product, the baker cannot deviate from the task sequence. The schedule below illustrates the bread baking sequence. All of these relationships follow a finish to start sequence. Time always appears on the schedule’s

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horizontal axis. For a very short duration project, the user can adjust the time axis to read hours or even minutes.

Mix bread ingredients

Knead Dough

Bread rises

Bake

Time

Other relationships exist between tasks such as a start-to-start (SS) relationship. In the diagram below, Task D begins only if task C begins.

Task C

Task D

An example of a start-to-start operation involves laying tar on a road surface. Workers place asphalt on the road surface and then distribute it evenly in an interactive manner.

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The asphalt and tar smoothing process begins immediately following the placement of the material on the road surface and continues concurrently until task completion.

The finish-to-finish relationship demands linked tasks finish together as in tasks E and F.

Task E

Task F

Finish-to-Finish (FF) tasks frequently involve inspections or testing. The electrical house-wiring task in the fabrication of a new house cannot be considered complete until the town or city inspects it. Only then can the contractor feel confident about releasing the electricians. An example in the software development industry involves programming. Writing software code and preparing the documentation represents two processes of many in a large software program. The successful execution of the Software Verification and Validation Plan enables Quality Assurance personnel to confirm correct software operation. Only at that point will the software design manager acknowledge completion of the software design process.

Some tasks have no predecessors and can proceed at the same time, also referred to as in parallel, with other tasks. These activities begin at the discretion of the project

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planner. If possible, link tasks. This enables the planner to easily shift the schedule if the team decides to insert an additional task into the plan.

Schedule planners regard some task dependencies as mandatory because the processes that they describe force the relationship. Project teams use their experience and judgement to establish task linkages.

Creating a Schedule In order to obtain the maximum benefit from the text, the remainder of this chapter requires the reader to use Microsoft Project. Consider this non-technical project example to illustrate the schedule development process using Microsoft Project. A local charity decides to conduct a fund raising event. The event will feature a motivational speaker. The charity seeks to use neighborhood facilities and the organization wishes to hold the event in 4 months. Organization committees will decide the food service and the price of tickets.

A charity executive committee meets to identify the tasks required to conduct this event. They accomplish this by engaging in a brainstorming session and creating lists of tasks in a random fashion. After this initial attempt to identify the work, they organize the activities into logical groupings. The executive committee selects a person who agrees to take responsibility for leading the effort -- a project manager. The PM integrates the lists of activities and resolves the organization’s competing needs for common resources into a viable plan. The PM presents the draft schedule and submits it to

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organization members (functional managers, committee members and other stakeholders) for comments and corrections. After incorporating the stakeholders’ responses, the PM presents a baseline operational schedule to the team.

The PM prepared the baseline work breakdown structure for the charity event shown in Exhibit 1. The table also includes an estimate of the labor hours that the stakeholders have provided. Note that 0d in Microsoft Project designates a milestone. Tasks consisting of lower level tasks do not have associated labor hours. Microsoft Project will automatically add lower level task labor hours and calculate higher-level tasks. For example, WBS numbers 8.4.1, 8.4.2 and 8.4.3 determine the hours in 8.4. After reviewing the list of tasks, enter the data into Microsoft Project following the directions in the next section.

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Exhibit 1 - WBS for a Charity Organization Speaking Event

LINE NO.

WBS NO. 1

1 2 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

20 21 22 23 24 25 26 27 28 29 30 31 32

3 3.1 3.2 3.3 4 5 5.1 5.2 5.3 6 6.1 6.2 6.3 6.4 6.5 7 7.1 7.1.1

7.1.2 8 8.1 8.2 8.3 8.4 8.4.1 8.4.2 8.4.3 9 9.1 9.2

TASK NAME OR DESCRIPTION Executive Group Agrees to hold Charity Speaker Event Executive Group Organizes committees and prepares draft schedule Activity & committee budgets Prepare Budgets Budget acceptable -- Go/no-go decision Distribute Budgets to Committees Agree on Event Date - 12/4/04

Site selection committee Contact neighborhood fraternal association hall for availability Confirm Event date Site Status Decision Speaker selection Committee Evaluate potential speakers Select speaker Make offer to speaker Confirm date availability with speaker Speaker Decision Critical Review Meeting Organizational meeting Status - Budget, event date, site, speaker agreement, committees in place Final Go/No-go decision Publicity Committee Prepare information circular Mail flyer to organization members Distribute flyer to community stores Event Advertisement Prepare advertisements Place ad in Newspaper Place ad on Radio & TV Ticket committee Print event tickets Event ticket distribution

LABOR HOURS 0d

PREDECESSO R LINE

60h

1

10h 0d

2 4

24h 0d

5 6

40h

7

8h 0d

9 9,10

80h 24h 24h 8h 7d

6 13 14,16 14 15

8h

6,11,17

0d

20

40h 24h 40h

6,21 23 23

80h 8h 8h

6,21 27 27

80h 160h

6,21 31

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Exhibit 1 - WBS for a Charity Organization Speaking Event (continued) LINE NO. 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

WBS NO. 10 10.1 10.2 10.2.1 10.2.2 10.2.3 10.2.3.1 10.2.4 10.2.4.1 10.2.4.2 11 11.1 11.2 11.2.1 11.2.2 11.2.3 11.2.4 11.2.5 11.2.5.1 11.2.5.2

TASK NAME OR DESCRIPTION Food and refreshment committee Decide on Food and refreshments Purchases Food Wine & Liquor Refreshments Snacks, cake, soda, coffee, tea Supplies Paper plates, cups, napkins & utensils Trash bags Event Day Activities Day of Event Kick-off Status Meeting Day of event preparations - Set-up committees Set-up Tables Set-up Chairs Set-up Table Place Settings Set-up cocktail hour area Audio system Install Test

LABOR HOURS

PREDECESSO R LINE

2h

21,6

3h 1d

34,44SS-3d 34,44SS-3d

1.5h

34,44SS-3d

0.5h

34,44SS-3d

0.5h

34,44SS-3d

30m

30,22,21

45m 45m 1h 1h

44 46 47 44

2h 30m

44 51

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Exhibit 1 - WBS for a Charity Organization Speaking Event (continued) LINE NO. 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68

WBS NO. 11.3 11.3.1 11.3.2 11.3.3 11.3.4 12 12.1 12.2 12.3 12.4 12.5 12.6 13 13.1 13.2 13.3

TASK NAME OR DESCRIPTION Food and refreshment committee Obtain pots, pans, and serving dishes Prepare & cook food Set up food and refreshment tables Refreshment and food distribution Event Activities Ticket Collection Cocktail hour Speaker meets reception committee Introduction of speaker to audience Speaker’s talk Thank speaker Clean-up Committee Obtain trash bags Clean hall Teams Collapse

LABOR HOURS

PREDECESSO R LINE

30m

44

4h 3h 3h

54 44 55,56

3h 1h 0.5h 0.2h 1h 0.1h

44 49 60 61 62 63

0.2h 2h 1h

64 66 67

Microsoft Project Load Microsoft Project on your computer and select the Gantt chart option (refer to Figure 1). The Gantt chart Icon appears in the column on the left side of the screen. Click on Project - Project Information and enter the project start date -- August 1, 2004. Select Schedule from: Project Start Date. This last statement references all activities to the project’s start date.

Task Entry Enter each activity listed in Exhibit 1 under the column called Task Name or load the file called Charity Event on the disk supplied with the text. For the moment, disregard the WBS number. Do not skip lines between tasks. Figure 3 illustrates the entry of some of

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the activities into the column called Task Name.

If you need to add or delete lines,

use the INS (insert) key or the DEL key, respectively. Save your data every 10 minutes to avoid losing information. Use the save without a baseline option. Call the file Charity Event.

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Figure 3 – Project Task Name Data Entry

Indent or outdent

Format

Tools

Project Information

Working Time Microsoft Project defaults to an 8-hour workday (8:00 a.m. to 12:00 noon and 1:00 p.m. to 5:00 p.m.). Other than defining Saturday and Sunday as non-working days, the program makes no assumptions regarding other non-working days. To modify nonworking days (e.g., to accommodate vacation, holidays, organization events, creating a

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seven day week, etc.) or the number of hours in a working day, click on Tools – Change Working Time and make changes as required. Use the pop-up window buttons or type the correct working time. Press OK to save your preferences.

The project organization’s schedule planner controls the horizontal length of the chart by choosing to view it in days, weeks, months, or quarters. Microsoft Project offers a variety of options that enables the planner to use two time scales simultaneously (Major and Minor Scale) and choose the scale’s units. Choose your preference by selecting Format – timescale. For this exercise, make the selections shown in Figure 4.

Figure 4 -- Microsoft Project Timescale Selection

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WBS Number Designate a column to the left of the task name for the WBS number. To do this, highlight the task column by clicking once on the word Task Name. Select Insert – column. Under the Column Definition window (Figure 5), use the drop down menu listed under Field name and select WBS. Click OK. Figure 5 – Creation of WBS column using the Drop-down Menu

After completing the entry of the list of project activities and inserting the column for the WBS number, assign a WBS level number to the tasks in Exhibit 1. As an example, highlight the task Prepare Budgets on line 4. Move the cursor and click on the right arrow indent shown in Figure 6. The task entitled Prepare Budgets moves to the right and the WBS number on line 4 changes to a 3.1. Repeat the process for all second through fifth level tasks shown in exhibit 1. A level 3 task such as 6.1.2 requires two clicks on the right arrow. If you inadvertently click too many times, use the left arrow to reduce the WBS level.

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Figure 6 – Task Names with WBS Completed WBS Column Entry Indent

Task Duration Duration on the Microsoft Project Gantt chart corresponds to the number of labor hours required to complete an activity. A job that takes a person 6 hours to complete will reduce to 3 hours, if we decide to put assign 2 people to do the work. Just a word of caution. While Microsoft project halves the time to complete work if two people are assigned to a job, life does not always work in that linear fashion. A woman requires nine months to deliver a baby. Placing two women on the job will likely have very little

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influence on the results.

Indeed, placing additional people onto a job will frequently

not provide a proportional relationship in time saved. More often than not, the time to complete the task will reduce, but not necessarily inversely proportional to the number of people assigned to the job.

As Microsoft Project recognizes an 8-hour day, it automatically distributes a task requiring 8 or more hours (after taking into consideration the applied resources) over multiple days. Exhibit 1 offers recommendations for the duration of the charity event activities. Enter duration data only for the non-bold tasks. As previously stated, Microsoft Project automatically calculates the duration time for tasks in bold print. Planners refer to these bold print tasks as roll-up activities. They correspond to summations of the lower level WBS elements that make up that task.

As you enter the durations, use the abbreviation w, d, h, and m corresponding to weeks, days, hours, and minutes. (1w corresponds to 1 week, 3d corresponds to 3 days, 2h corresponds to 2 hours, and 20 m corresponds to 20 minutes.) Change the duration times if you wish. Do not enter any dates in the start or finish columns. Figure 7 illustrates the entry of the duration data onto the Gantt chart.

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Figure 7 – Task Duration entered into the Gantt Chart

Task Dependencies The next step in the development of a schedule involves establishing task dependencies. The planner must identify the tasks that precede or follow other activities.

As in estimating labor time, this step depends on the planner’s opinions,

perceptions, and preferences. Microsoft Project Gantt chart includes a Predecessor column, which the planner completes.

The predecessor column in Exhibit 1 includes suggestions for tasks that precede a given line. As an example, WBS no. 8.1 on line 23 (Prepare information circular) can

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only begin following the completion of the tasks on line numbers 6 and 21. If during the actual project either of these activities incurs delay, then WBS 8.1 will not begin on time. It must await the completion of the tasks Distribute Budgets to Committees and Final Go/No-go decision. The PM then must inquire into the nature of the delay and make decisions to get the job back on schedule. As the planner inserts the predecessor line numbers into the schedule, a light line drops from the predecessor task to the successor task. Figure 8 illustrates the insertion of the predecessor tasks into the Charity Event schedule.

As you enter interdependency information into the chart, most should be relatively straightforward. Creating a schedule making extensive use of interdependencies permits an easily modifiable chart. The planner may desire to insert at task. If the planner previously linked all tasks, then the tasks automatically shift to accommodate the added task and the changed dependencies.

Sometimes the plan includes a firm date as in the date of the charity event in our example. The executive committee scheduled December 4 for the gala event. We cannot change this date – “it’s cast in concrete.” Consequently, during the preparation of the schedule, we inserted December 4 as a hard date in the Gantt chart for line number 44 (WBS number 11.1). The Microsoft Project indicator column (the column headed by the encircled (i) signifies a schedule constraint in line 44.

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The Food and Refreshment committee decided to purchase the food 3 days before the actual event day. The predecessor constraint includes the type of food decision (line 34, WBS no. 10.1) and the day of the event minus 3. That is, the food purchases precede or lead the event day as determined by line 44 by 3 days. SS-3 means that the food purchases start 3 days before the start of the event day activities. Therefore, the purchases on line numbers 36,37,39,41,and 42 reads 34,44SS-3.

There may be times for which a successor task must lag the predecessor task by 3 days. To delay a successor task the entry would look like 44SS+3.

Responsibility Assignment Matrix (RAM) Frequently project planners prepare a Responsibility Assignment Matrix (RAM) as shown in Exhibit 2. This is an ideal tool to assign people to tasks and make them aware of the due date. The creator of the list distributes it to all team members. This avoids any misunderstandings. Some planners use the schedule to record responsibility. To do this, place the cursor on a task and double-click on the task name. Select the Resource tab in the Task Formation window. Enter the group, department or person’s name in the Resource Name line that will assume responsibility for performing the task. The number 100% signifies that the Resource will work on the job 100% of their time. If, for example, the resource spends 50% of its time on the task, the 60-hour calendar time doubles and the schedule stretches. Experiment with this feature.

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Figure 8 – Task Information Window

232

Figure

- Charity Event Schedule Includes Predecessor Information

233

234

235

236

Exhibit 2 – Responsibility Assignment Matrix (RAM) WBS NO. 1 2 3 3.1 3.2 3.3 4 5 5.1

TASK NAME OR DESCRIPTION Executive Group Agrees to hold Charity Speaker Event Executive Group Organizes committees and prepares draft schedule Activity & committee budgets Prepare Budgets Budget acceptable -- Go/no-go decision Distribute Budgets to Committees Agree on Event Date - 12/4/04 Site selection committee

5.2 5.3 6

Contact neighborhood fraternal association hall for availability Confirm Event date Site Status Decision Speaker selection Committee

6.1 6.2 6.3 6.4 6.5

Evaluate potential speakers Select speaker Make offer to speaker Confirm date availability with speaker Speaker Decision

Task Responsibility Executive Committee Executive Committee

Project Manager

Executive Committee Site Selection Committee

Speaker Selection Committee

Critical Path As previously stated, the critical path controls the project’s completion date. The project manager must recognize those tasks that cannot be delayed without affecting the finish date. Those tasks demand the PMs close attention. Microsoft Project permits the determination of this path. Click the Gantt chart Wizard icon (Figure 1) and follow directions. Microsoft highlights the resulting critical path in red. The PM usually informs the managers and personnel working on the tasks in the critical path of the importance to project success of their start and completion dates.

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Schedule Progress After the PM develops the baseline schedule and gains agreement among the stakeholders of its value, the PM uses it to track progress. Microsoft Project permits the user to enter the Percent completion for each task on the chart. Double clicking the task, once again brings up the Task Information window. On the General tab, the Percent complete entry area permits the PM to enter any value between 0 and 100%. A solid line appears in the horizontal task bar that corresponds to the amount of work completed.

Different philosophies exist among PMs with regard to this value. Some permit the functional manager or person responsible for the task to select any numerical estimate that approximates the percent of the task completed. While this the functional manager great flexibility in selecting the progress, it is very subjective. Can the manager really distinguish between17% and 19% task completion? Therefore, some PMs restrict the selected completion estimate value to 0, 25, 50, 75, and 100%. Still others believe in assigning only three numbers – 0, 50, and 100%. In this last case, if the functional department did not begin the task then the schedule reflects the completion of 0% of the task. The PM assigns 50% completion as soon as the functional department begins the task. Only following the completion of the task does the PM assign 100%. Selecting the percent of task completion is very subjective. This last approach attempts to simplify the percent complete selection. However, if a scheduled task lasts for more than 4 weeks, the PM may not have an accurate indication of the progress for most of

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this time. At the end of a long working period, the PM could face an unpleasant surprise.

During the schedule preparation phase, the PM requests functional managers to examine long duration efforts and separate them into their constituent parts. One or two week task durations are best – certainly not more than 4 weeks. The PM requests that functional managers arrange that each activity have an easily measured and welldefined output. This gives the PM maximum insight into the job’s progress.

A major

contributor to project success involves clarifying stakeholder expectations so that everyone understands their roles and the work expected of them.

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Printing Niceties The planner can tidy up the completed schedule by adding the project name to the head of each printed sheet, the date the planner prepared the schedule and the planner’s name to the printed output. To enter this information, click Page Setup on the File menu. After clicking the Header, Footer, or Legend tab and selecting the Left, Center, or Right tab add the project information in the text box.

Sidebar: The 8-Hour Day Most planners use an 8-hour day for the purposes of schedule preparation. Do we really work on the job for 8 hours? If we work from 8 a.m. to 5 p.m. and take an hour for lunch, we remain at the job for 8 hours. Eight hours a day, five days a week over 52 weeks results in 2080 labor hours during a year. Perhaps you are thinking to yourself, “Well we don’t work during vacation and holidays.” The benefit packages in most organizations include two weeks or 80 hours of vacation time and 10 paid holidays (e.g., Memorial day, Independence day, Labor day, Thanksgiving, and Christmas) during the year. Think about all the non-productive work time that we engage in during the workday – department meetings, coffee breaks, office chitchat, talking with your colleagues about the latest political scandal or baseball scores. How about sick days and personal days? The table below illustrates that we average less than seven productive work hours per day after taking into consideration non-productive work associated activities. Microsoft project can adjust the schedules by changing the work

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hours from 8 to 7 hours per day. A schedule that uses a 7-hour day will extend the completion time by 12% as compared with a schedule based on 8 working hours per day. However, very few executives will accept this change or the argument just advanced. They will argue that 1) the organization compensates workers for 8-hour days and expects 8 hours of work, 2) the planner should adjust the schedule for holidays and vacations, and 3) don’t plan for sick and personal time because employees may then take it as a matter of course.

APPROXIMATE ANNUAL LABOR HOURS

TASK DAILY Department meeting Vacation Designated Holidays (10 Days including New Years Day, Christmas, July 4, Labor Day, Memorial Day, Thanksgiving day, etc.) Personal and sick time Training Coffee break 2/3 (40 minutes)

WEEKLY 1

3

Total non-working time Baseline Employment Hours

ANNUALLY 50 80 80 80

30 30 150 420

40

Baseline Working Hours

2080 1660

1660 labor hours per year averages 6.5 hours per day.

Summary

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The Gantt or Bar Chart tool assists project managers to organize jobs. The schedule forms the basis for all project planning and predicting. PMs should never unilaterally assign activity labor hours or time durations during the preparation of the schedule. Functional managers must contribute to the schedule’s development. Participation in the estimation process forces “ownership” and requires functional managers to take responsibility for their decisions. The PM leads the team in identifying the work activities, assigning priorities, developing task dependencies and time durations. The PM uses the schedule as a communications tool. Team members gain an understanding of their project roles and responsibilities by reading the specification and developing estimates. During the project, monitoring the schedule on a daily basis informs all participants of potential trouble spots.

The PM and the project team benefits from the use of scheduling tools. The schedule provides management with the ability to plan for best possible use of resources in order to achieve a given objective within time, cost and resource limitations. The schedule facilitates “what if “ exercises. With an understanding of the critical activities, slack time, uncertainties and the crucial task elements, the PM and the functional managers can experiment with the schedule by applying different resources at different times to determine the overall project impact.

The project schedule planning process takes place during the proposal phase. It consists of the following steps:

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1. PM highlights the deliverables and distributes the specification to the functional managers 2. Establish project start and completion dates 3. Create a project Responsibility Assignment Matrix (RAM) to complete the proposal 4. Kick off meeting to review assignments 5. Identify capital equipment required 6. Functional managers submit to PM department names/titles of personnel necessary to accomplish each task 7. Functional managers submit to PM task duration estimate 8. Task dependency decisions - Which tasks can be done in parallel? - Which tasks require the completion of other tasks before they can start? 9. PM prepares draft WBS 10. Functional managers review draft schedule.

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Chapter 6 Questions

GANTT Charts 1) Identify whether the following statements are True or False: a) The vertical axis on the Gantt chart matrix lists all the tasks to be performed. b) Each row in a Gantt chart contains a single task that must be completed during the work effort. c) Each row in a Gantt chart contains a WBS number. d) The horizontal axis on the Gantt chart has columns indicating estimated task duration and sometimes the name of the person or department assigned to the task. e) A solid bar on the horizontal axis indicates progress for project task under-way. 2) Select the best answer. A critical path a) Contains the maximum schedule slack time. b) Involves a set of unrelated tasks. c) Consists of a set of dependent tasks, which together take the longest time to complete. d) Consists of tasks all performed by a single department or person. 3) Tasks falling on the critical path a) Should receive special attention by both the project manager and the personnel assigned to them. b) Require minimal attention. c) Will be performed by an external organization. d) Will be performed by the PM department. 4) The schedule development process involves a) Defining the activities to be accomplished b) Assigning responsibility for completing activities to stakeholders c) Identifying logical activity sequences d) Establishing activity dependencies by identifying successor and predecessor tasks e) Designating task durations. f) All of the above 5) Plan for remodeling a bathroom The following list represents typical tasks involved in remodeling a bathroom. Use the task list and prepare a schedule by performing the following: a) Establish a start date for this project.

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b) After reviewing the tasks shown in the accompanying table, identify the milestones. c) Assign duration times for each task. d) Assign responsibility for each task. e) Assign task interdependencies f) Prepare a schedule by entering the data in parts a) through e) using Microsoft project. g) Determine the project’s critical path.

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Bathroom Remodeling Task List Task no. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Task Description Decision to Redesign bathroom Design Concept & Layout Obtain Construction Permit Component selection Plumbing fixture selection Electrical fixture selection Wall and floor cabinet selection Tile selection Window selection Shower closure Seek design input from contractors Receive contractor bids Plumber Electrician Tile layer Carpenter Painter Award Contract(s) Payment #1 Procure Material Bath & faucets Shower & faucets Toilet Sink & faucets Tile Floor cabinet Medicine cabinet Towel rack Toilet paper holder Soap dish Tooth brush holder Window Shower door Payment #2 Order and receive trash debris container Remove existing walls and floor Remove old fixtures Plumbing Electrical Equipment delivery

Duration

Dependency

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Bathroom Remodeling Task List (continued) Task no. 41 42 43 44 45 46 47 48 49 50 51 52 53 54

Task Description Rough installation Carpentry Window Install plumbing pipes Install electrical wiring, switches, fixtures Install wallboard Install wall and floor tile Install accessories Install plumbing fixtures Test and evaluate Trash pick up Paint Town Inspection Final Payment

Duration

Dependency

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6) Plan for a Computer Network Installation The following list represents typical tasks involved in installing a computer network. Use the list and prepare a schedule by performing the following: a) Establish a start date for this project. b) After reviewing the tasks shown in the accompanying table, identify the milestones. c) Assign duration times for each task. d) Assign responsibility for each task. e) Assign task interdependencies f) Prepare a schedule by entering the data in parts a) through e) using Microsoft project. g) Determine the project’s critical path.

Computer Network Installation Task List Site survey Air conditioning Electric capacity Electric outlet placement Available rooms Plans Define number and location of users Air conditioning plan Electric power distribution and outlet placement Equipment location Network Architecture plan Cabling type (fiber optic, wire, RJ-45, 10baseT, category 5 etc.) Wide area network (WAN) Local area Network (LAN) Server protocol Ethernet Token ring TCP/IP Novell Routers Bridges Software and software tools Firewall Security Virus detection E-mail 248

World wide web File transfer protocol Internet service provider trade study Internet connectivity option trade study Dial-up access Leased line Infrastructure Planning Room construction Furniture (desks, chairs, etc.) Cabling Internet connections Client workstation connections Identify central wiring area Local Construction code impact Required licenses and permits Preparation of implementation plan Computer specification Server Workstation Hubs, Bridges & routers Design Review Initial and Ongoing support Assemble and train staff Select Network management & system administration tools Develop a user address plan Develop Help desk procedures Develop End user technical support policies Purchases Computers Furniture Cable and connectors Hubs, Bridges & routers Wire trays Dropped ceiling equipment Miscellaneous cabling equipment and tools Construction Obtain local permits and licenses Rooms Heating/air conditioning equipment Install cabling trays and cabling Electric power connections

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Internet connections LAN connections Install furniture Computer Installation Unpack Install software Place and connect computers in approved locations Assign and install user addresses Site Test Prepare a system test procedure Perform test User Training

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CHAPTER 7

Project Estimation and Cost

Always bear in mind that your own resolution to succeed is more important than any other one thing. --Abraham Lincoln

<> Chapter objectives After studying this chapter, you should be able to:

Understand the difference between bottom-up and top-down estimating. Understand the elements that enter into a project’s cost Understand the meaning of direct and indirect costs Identify indirect cost components. Understand the difference between cost and price. Read and interpret the project’s financial statements Participate in a project cost estimate effort

The PM together with the project cost estimating team establishes a budget before the project begins. Typically, the cost estimating team consists of the project manager, functional managers, selected commercial partners and subcontractors. This team has the objective of approximating the costs of the resources needed to complete project activities.

Every employee action on the project has cost implications. The PM’s

team must predict the cost for the work packages. Following contract award, the PM carefully monitors both the work progress and the expended funds. At the job’s

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conclusion financial analysts compare the predicted costs with actual costs to determine the accuracy of the estimate and the amount of profit the organization earned on this job. The amount of profit earned on the job may determine the PM’s next job -- harsh fact of life.

Direct and Indirect Costs Project costs consist of a wide assortment of expenditures – some obvious and some not. Perhaps the most obvious expense is the employee’s base salary. However, labor costs represent only a portion of the cost associated with a project. Employees receive fringe benefits and require office furniture and computers. They share tools, conference rooms, coffee machines and water coolers. Basic operating costs such as rent and utility bills have to enter the equation. Accountants separate all costs into direct and indirect categories.

Direct costs identify with a single product, project or contract. Employee salaries involved with designing, building, and installing a product or providing a service represents one of the largest direct costs. Other direct costs include project related supplies and material and subcontracted costs. The paragraphs below examine several of the other significant project direct costs.

Material and Material Handling Costs All material and supplies required for a job represents a direct project cost. In addition to purchases, this category includes the lease or rental of special hardware and/or

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software tools and equipment. Organizations usually add a handling charge to the material and equipment purchased for a specific job for which they expect the customer to pay. Material handling costs cover a host of expenses that include storage, inspection to verify receipt of the correct material, breakage, theft, restocking fees and the cost of borrowing money to obtain the material. Many organizations charge customers an additional 10 to 25% of the material cost to offset these expenditures.

Travel and Living Charges Travel, living and entertainment costs include the costs associated with a business trip or hosting customers to lunch or dinner. Charges associated with a short business trip include air, bus, train, taxi fares; reasonable costs for breakfast, lunch, and dinner; car rental; hotel charges; and parking fees. Travel and living charges can be direct or indirect. Charges applied to support a specific contract or project are direct costs. Travel and living charges placed into the indirect category may support a proposal effort. Many organizations add a percentage of the travel and living charges to cover the costs of making and sometimes rescheduling reservations, and penalty charges for changing reservations.

Other Direct Costs (ODC) Other Direct Costs (ODC) include labor supplied by people and organizations not directly affiliated with the organization that received the contract. A typical example of ODC includes engaging a consultant to assist the staff. Frequently organizations bolster their technical expertise in a discipline by employing independent consultants.

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The organization may lack manpower to complete a task or they may not have the inhouse expertise in a technology. Sometimes an organization may request the consultant to provide an independent assessment and review of the work completed todate. Outsourcing is a term that organizations use if they choose to subcontract a portion of the project’s work to external organizations. Other ODC items may include the rental or purchase of project dedicated equipment such as copy machines, telephones and FAX units. Project related postage or overnight mail deliveries also fall into the ODC category. If the contract requires attendance at a conference, then typical charges to the ODC account also include conference registration fees and special course costs.

Some organizations follow an accounting policy of not applying overhead and G&A to ODC activities. A lower sales price results if the organization wraps a profit around a consultant’s charges, but no overhead and G&A charges. In this case, reselling a consultant’s efforts enables the organization to make a profit without using its own resources -- that’s a winner. Organizations do charge the customer a sales commission and profit on the ODC items.

Sales Commission As with many of the accounting and conventions discussed in this section, organizations have options in regard categorizing sales commission. Some organizations combine sales commission as part of general management and administration others. Others place sales commission into a separate category.

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Profit Profit is the lifeblood of business. Very few reasons exist for not making a profit. Poor estimating, inept management, or sudden market changes may result in unintentional losses. If an organization desires to venture into a new area, they may choose to entice a customer with a lower price than customary or perhaps offer to do the project at cost. Organizations may permit some projects not to make a profit, but they cannot lose money or they will receive challenges to their continued existence.

Industry executives managing publicly traded companies feel pressure to produce short-term profits to satisfy Wall Street analysts and stockholder demands. In return for ongoing short-term profits, the financial expects immediate increases in stock value. So, a commercial profit-making organization must make a profit to remain viable. Many dot.com businesses created in the early 2000’s failed because they did not make a profit. How much profit does the financial community expect of businesses? General Electric, one of the best operated businesses in the world earned a profit (net income before taxes divided by gross revenues) of 13-15% percent from 1998-2000. During the last few years, the Walt Disney Company’s operating profit hovered around 10%. Organizations doing business with the US government earn about a 12% profit. At the other extreme, during 1999 and 2000 Microsoft’s profits reached 40%. It’s your call.

Indirect Costs

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Indirect costs include all costs that are not direct. Indirect costs apply to two or more products, projects or services. This category includes support costs incurred for common or joint objectives. These costs cannot be identified readily or specifically with a particular project.

Operational costs refer to the sum of direct and indirect costs associated with a department, business unit or organization.

Overhead and G&A Costs Often indirect costs are divided into two subcategories -- overhead and general management and administrative (G&A). Overhead costs are indirect costs that support a specific part or function of the company, but not the whole company. For example, manufacturing organizations distribute factory maintenance costs to the various manufacturing jobs performed in the factory. Administrators combine engineering library costs into the engineering department overhead and not with material handling or the accounting department. In addition to the cost/lease/rental of buildings and equipment in which project activities take place, other basic overhead costs include the licenses and certifications to do business; facility heating; lighting; malpractice, liability, fire and theft insurance; building, equipment and property maintenance; costs associated with staffing; supporting libraries; advertising costs; indirect labor such as plant security, clerical and administrative support personnel; social security, unemployment and worker’s compensation insurance; and fringe benefits such as vacation, medical, dental and disability insurance, and pension costs.

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General and administrative (G&A) costs are required to support the business as a whole and are not associated with any particular department, project, or program. Common examples of G&A costs include the salaries of the chief executive officer and his or her staff, legal and accounting costs, marketing expenses, research and development costs, and bid and proposal (B&P) costs.

The classifications of direct versus indirect has to do with the relationship of the cost to a final cost objective. Overhead and G&A costs are indirect because they benefit more than one cost objective. The classification into direct or indirect does not bear on the importance or need of the activity or position.

Factory equipment maintenance,

usually an indirect cost, is just as necessary as the direct cost of the machine operator.

The organization’s accounting system collects cost information. As projects incur costs through labor, material, equipment and other expenditures, the accounting system assigns and distributes these costs to departments and projects. Accounting systems create an indirect expense rate, which PMs must add to the individual’s labor rate to determine the true cost of employing that person. The PM quotes a price to the customer for the use of an employee that includes the employee’s salary, indirect costs, sales commission, and profit. The formula for this calculation looks like:

Customer Price for Employee Labor = Employee Base Salary + Overhead costs + G&A costs + Sales Commission + Profit

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This formula describes the fully burdened labor price that the customer pays to use an organization’s employee. Most often, organizations relate the overhead costs to a department and calculate the overhead as a percentage of the employee’s base salary. The Villa-Tech example later in the chapter illustrates this approach.

Bottom-up estimating Bottom-up estimates begin with a detailed WBS that the project manager develops with the functional managers. The PM requests support from the functional managers to estimate the cost of each work package assigned to their department. The estimate accounts for all of the resources needed to support the design and development, test, installation, training and any customer handholding. The PM receives the estimates for each project element and sums the individual project element estimates into a project total. Table 1 illustrates the format for collecting data using a partial WBS. Provided the organization has a good understanding of the job, this method should result in an accurate estimate. However, this process is labor intensive and time consuming.

A large electromechanical system may involve an enormous number of technical specialties, departments and people. Depending on the job, the functional departments may include many of the following disciplines: •

Electrical/electronics engineering

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Mechanical engineering



Software engineering



Networking engineering



Systems engineering



Model shop



Engineering assistants



Hardware test technicians



Software test technicians



Factory technicians



Field service support



Purchasing



Publications



Training



Configuration management



Quality assurance



Reliability and maintainability



Specialty engineering such as hazardous material control, environmental testing, nuclear



Project management



Incoming inspection



Administrative support (secretarial and financial)



Shipping



Heating, ventilation and air-conditioning (HVAC)

259



Legal



Marketing



Technical librarian

The PM obtains estimates from each of these departments. Based on their understanding of the job, the functional managers estimate department labor hours, material purchases, the business travel (number of trips and length of stay) required for the job, and the need for consultants. Most PMs list the data in a spreadsheet similar to Table 1.

Labor – includes time required to gain familiarity with the documentation required for the job; special training required to learn to use a new tool; preparation for and attendance at design reviews and other technical interchange meetings; travel time to visit and evaluate prospective suppliers; and design, development, and test time.

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Table 1 -- Project Cost Summary

Task No. 10000 11000 11100 11120 12000 12100 13000 13020 13050 13100 14000 15000 16000 20000 21000 21100 21200 21210 21220 21230

WBS NO.

Department Hours Elect Mech Soft Netw Tech Field Pubs Training Material Travel ODC Line Eng. Eng ware ork Service Purchases & Item Eng Eng Living Cost Tasks or Work Packages $ $ $ $

1.

System Define the System Performance Requirements 1.1.1. Review Specification 1.1.2. Review Statement of Work 1.2. System Architecture Definition 1.2.1. Major Trade-off Studies 1.3. Define Major Assemblies 1.3.1. Electrical Assemblies 1.3.2. Mechanical Assemblies 1.3.3. Cable Definition 1.4. Unique Algorithm Development 1.5. Define Software/Firmware Functions and Architecture 1.6. Technical Analyses 2. Assembly #1 2.1. Hardware 2.1.1. Define Hardware/Software Interfaces 2.1.2. Electrical 2.1.2.1. Define Subassemblies /Modules/Functions 2.1.2.2. … 2.1.2.3. 1.1.

Subtotal

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Villa-Tech Bid Example To illustrate the concepts associated with developing a bid estimate for a project, we will examine a fictitious company called Villa-Tech.

The organization’s accountants

normally calculate the salary rates, overhead rates, and G&A rates and distribute this information to the project managers. However, we will perform the computations to enhance the student’s understanding of the technique.

Villa-Tech intends to bid on a job. The project manager has distributed the customer’s data and a draft WBS and schedule to the functional managers. As part of an interactive process functional managers prepare and submit to the project manager a technical response, their individual sections of the WBS and schedule, and the associated cost. The PM places this data into a spreadsheet to calculate the customer’s price.

Villa-Tech accountants have decided on the following financial ground rules: •

Material handling costs -- Add 10% to all purchases, rentals, and leases.



Travel and living fees – Add 15% to all travel, entertainment, and living costs.



Profit -- !5%



Sales commission – 6%



Do not apply overhead and G&A to purchased material

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Apply the organization’s standard sales commission and profit to purchased material



Do not apply overhead, G&A, sales commission, and profit to travel costs.

Overhead rates The accounting department determines that the wages paid to the engineering staff at the Villa-Tech Company consist of electrical, mechanical, software, and networking personnel. The annual Villa-Tech company engineering salaries totals $1,711,000 (shown in Table 2 ). These represent the engineering department’s direct labor costs.

Table 2 -- Villa-Tech Engineering Payroll

Engineering Department or

No. of

Total Engineering

Discipline

Personnel

Direct Labor

Electrical

4

$340,000

Mechanical

3

$261,000

Software

9

$810,000

Networking

4

$300,000

20

$1,711,000

Total

However, $1,711,000 does not represent Villa-Tech’s total cost for these employees. Accountants at Villa-Tech aggregate all the indirect costs that support the 20 person

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engineering staff into an engineering overhead pool as shown in Table 3. Although there exists generally accepted accounting practices, organizations use different practices in assigning overhead and distinguishing overhead from G&A costs. The approach used here is representative of the overhead calculation.

Table 3 -- Villa-Tech’s Engineering Overhead Expenses Expense Indirect Labor

Description Administrative, clerical and secretarial

Allocated Annual Cost $75,000

Federal, state, or local mandated costs

Social security (FICA), unemployment and worker’s compensation insurance

$214,320

Fringe Benefits

Vacation, medical, dental and disability insurance, retirement pension costs.

$267,900

Training

Non-project or contract related training and educational expenses

$80,000

Indirect Operating Expenses

Share of rent and utilities (e.g., oil, gas, electricity, and telephone), share of organization’s liability insurance, copy machine lease, office supplies, postage, depreciation of computers and associated equipment, professional and business organization memberships.

$132,000

Maintenance & Repair

Copy machine and other equipment repair contracts, share of facility maintenance and repair

Total Indirect Expenses

$12,000

$781,220

Engineering staff salaries aside, Table 3 corresponds to the expenses required to operate the engineering departments. In addition to the $1,711,000 direct labor

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charges Villa-Tech spends $781,220 to support the engineering organization. Accountants define the engineering overhead rate as the ratio in percent of the annual engineering indirect expenses to the annual engineering direct labor costs or

Engineering Department Overhead Rate = 100%

Annual Engineering Indirect Expense x Annual Engineering Direct Labor Costs

The Villa-Tech engineering department overhead rate is

Engineering Department Overhead Rate =

x 100% = $781,220 $1,711,000

45.6% .

This means that almost $.46 of indirect charge is added to every $1 of direct labor charged to the contract or project. While the overhead rate continually changes, organizations tend to keep the overhead rate constant for the year.

General and Administrative Costs Villa-Tech has a small executive management team. The general and administrative costs total $2,2640,000 as shown in Table 4. Table 4 -- Villa-Tech General and Administrative Expenses Engineering Department or Discipline President/CEO & Staff Vice President Marketing Department Corporate Accounting Annual Research and Development Budget B&P Budget Legal staff Total

G&A Expenses $350,000 $155,000 $290,000 $280,000 $775,000 $540,000 $250,000 $2,640,000

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Accountants have determined that Villa-Tech’s annual payroll is $11,200,000. An organization’s G&A rate is the ratio of the Annual G&A expenses to the Annual direct labor costs or Organization’s G&A Rate =

Annual G&A Expenses x 100% Annual organization Direct Labor Costs

In this case, Villa-Tech’s G&A rate is Organization’s G&A Rate

=

$2,640,000 x 100% = $11,200,000

23.5% .

This means that $.23 ½ of G&A charge is added to every $1 of direct labor assigned to the project or contract.

Table 5 – Villa-Tech Employee’s Burdened Hourly Wage

Departments and/or Disciplines

Electrical Mechanical Software Eng. Eng Eng Average Department hourly labor costs Overhead – 45.6% General & Administrative – 23.5% Sales commission – 6% Profit – 15% Burdened Hourly Wage

Network Eng

Technician

Field Service

Configuration Training Management

$38.60

$37.50

$41.00

$36.50

$22.00

$29.75

$15.45

$31.00

$18

$17

$19

$17

$10

$14

$7

$14

$9

$9

$10

$9

$5

$7

$4

$7

$4

$4

$4

$4

$2

$3

$2

$3

$10 $80

$10 $77

$11 $85

$10 $75

$6 $45

$8 $61

$4 $32

$8 $64

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Burdened Wage Table 5 illustrates the method of arriving at the fully burdened hourly wage for several disciplines and departments. In order to determine the dollar amount to charge a customer, accountants start with the department’s average salary and add overhead, general and administrative costs, sales commission and profit. Examining this chart reveals that a customer will pay Villa-Tech slightly more than double an employee’s hourly salary for the use of their services.

A company cannot charge less than the

burdened hourly labor wage and remain in business for long.

Unless they reduce the

overhead or G&A expenses, the only significant flexibility that a company has surrounds the profit or sales commission they choose to apply. By its nature, overhead is difficult to change in the short run, but profit and sales commission are easy to modify.

Functional Manager Estimates After due deliberation, the Villa-Tech functional departments submit project estimates to the project manager as shown in Table 6. The functional managers may have based the response on professional judgement, historical data, a parametric approach, a wild guess or any other means. The PM places the data into the summary chart ( Table 8).

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Table 6 – Functional Department Estimates Functional Department

Labor Hours

Material Purchases & Leases/Rental s $45,000

Travel, Living & Entertainmen t $800

ODC

Electrical Engineering

1675

$2,400

Mechanical Engineering

495

$31,000

$500

$2,100

Software Eng

2237

$37,000

$1,000

$3,700

Network Eng

234

$29,000

Technician

348

$3,000

$500

Field Service

150

$4,500

$2,500

Configuration Management Training

45 110

$4,500

$4,200

Total

5294

$154,000

$9,500

$8,200

Risk Analysis An in-depth discussion of project risk occurs in chapter 10. This section identifies a method for including risk funding into the cost estimate. Every work activity has associated with it some measure of risk and uncertainty. Adding the costs for each work package comprising the WBS should yield a bid estimate accurate to within +/10% of the actual costs -- an acceptable risk. Some individual task estimates may turn out high and others low, but at the project’s conclusion they will average out. Designate activities with a risk probability of more than 75% as a certainty and include their entire cost as part of the baseline estimate.

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Functional managers may identify a limited number of tasks with time duration or cost uncertainty ranging from 20% to 75%. Certainly there should be fewer than 10 activities involving more than a 20% risk -- otherwise, executive management might seriously question the logic of pursuing the job at all. The cost estimator identifies these activities in a separate chart (Table 7). The estimator enters the task’s nominal labor hours, material, travel & living funds, and ODC into the chart. Quantify the risk in hours or dollars. For each task, assign a risk probability ranging from 0.25 to 0.70. The weighted risk is the product of the risk probability and the maximum risk in hours or dollars. Complete this process for each risk item. The last line in Table 7 sums the weighted risk hours and dollars for all of the Risk items. The PM transfers these results to Table 8.

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Table 7 – A Method for Calculating the Project’s Financial Risk Department Labor Hours Risk Item No. Task No. 1

2

WBS No.

Tasks or Work Packages

Elect Mech Soft Net Tech Field Pubs Training Material Eng. Eng ware work Service Purchases Eng Eng $

Travel ODC & Living $ $

WBS Item Maximum Risk in hours or $ Probability of Risk Weighted Risk – hours or $ WBS Item Maximum Risk in hours or $ Probability of Risk Weighted Risk – hours or $

3 Risk Impact Total

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Table 8 – Villa-Tech Project Cost Summary Electrical Mechanical Eng. Eng

Project Subtotal – Hours Non-labor Project Subtotal - $

1675

495

Software Eng

2237

Network Eng

234

Technician

348

Field Service

150

Configuration Management

45

Training

Material Purchases

Travel & Living

ODC

110 $154,000

$9,500

$8,200

Risk Impact Subtotal 1 – Includes Risk Department hourly labor costs Department Labor Costs - $ Material handling charges –10% Travel & Living Overhead charges – 15% Overhead – 41% General & Administrative – 23.5% Subtotal 2 Sales commission – 6% Subtotal 3 Profit – 15% Total Price - $

$38.60

$37.50

$41.00

$36.50

$22.00

$29.75

$15.45

$31.00

$64,655

$18,563

$91,717

$8,541

$7,656

$4,463

$695

$3,410 $15,400 $1,425

$29,483 $15,194

$8,465 $4,362

$41,823 $21,553

$3,895 $2,007

$3,491 $1,799

$2,035 $1,049

$317 $163

$1,555 $801

$109,332 $6,560

$31,389 $1,883

$155,093 $9,306

$14,443 $867

$12,946 $777

$7,546 $453

$1,176 $71

$5,766 $346

$169,400 $10,164

$10,925

$8,200 $492

$115,892 $17,384 $133,275

$33,273 $4,991 $38,263

$164,399 $24,660 $189,059

$15,309 $2,296 $17,606

$13,723 $2,058 $15,782

$7,999 $1,200 $9,199

$1,246 $187 $1,433

$6,112 $917 $7,029

$179,564 $26,935 $206,499

$10,925 $1,639 $12,564

$8,692 $1,304 $9,996

Total Project Price

$640,704

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Villa-Tech Project Cost Summary Table 8 illustrates the summary of the results of the bottom-up project estimate started in Table-1 for the Villa-Tech project. The PM inserted the estimates into the Table 1 spreadsheet for which functional managers provided labor, material, travel and ODC costs. After due consideration, the Villa-Tech PM together with the functional managers deemed the risk to complete the project’s activities to be within +/-10% of the cost and therefore, added no risk funding to the price. Summing the individual columns in Table 8 yields a price to the customer of $640,704. Villa-Tech executives consider this price in the light of the organization’s desire and need for the job. After due diligence they submit a bid to the customer.

Figure 1 -- Project Lifecycle Phases No. of people on the job or Labor Hours or Project Spending

TIME Contract Award

Planning Assembling Team & Disbursing Work

Design, Development & Test

Installation

Training

Transfer to Maintenance

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Project Spending Profile The project life cycle developed in Chapter 1 and reproduced in Figure 1 provides an approximate illustration of the project spending at any point in the project. Integrating or summing up the costs in Figure 1 with respect to time yields the cumulative project spending profile or “S” curve shown in Figure 2. Projects usually start spending money slowly. The initial project activities require planning. The PM develops work packages to make certain that the team members perform productively. These packages authorize employees in the various departments to start the project. They contain brief descriptions of specific work activities, schedules, associated budgets. The project manager assembles a team. Employees prepare documentation for subcontracts. These initial tasks require a relatively small number of people. Consequently, the spending is low. The rates of spending increases during the development effort wherein departments make major project purchases and the bulk of the money for labor is spent. As the project enters the test and installation phases, spending tales off. The project usually concludes with the completion of the site acceptance test and training. These latter items involve a relatively small number of the organization’s personnel.

273

Figure 2 -- Time Distribution of Project Labor or Cost ($)

Project Cumulative Labor Hours or Cost

Time

Bottom up Estimate Summary The accuracy of the bottom up estimate depends on the quality of the input received from the stakeholders participating in the process. This team examines every task in the WBS and provides expert judgement of the labor involved in completing the activities. They estimate time and material based on their experience performing similar activities on other projects. By submitting an estimate, the individual estimators make a commitment to complete the job with the specified hours. Many people participate resulting in a highly labor intensive and expensive effort. A concern arises if team members lack expertise in new or different technologies -- their estimates lack

274

credibility. Project cost evaluators take issue with expert judgement as it depends on the personnel making the estimate. Individual biases may slant the estimate and some estimators don’t document their work well. For this reason, organizations frequently maintain a historical record of the costs of previous jobs to support the staff’s expert judgement. Cost data associated with previously completed work authorizations enables the team to develop an accurate new estimate for the project under consideration. Based on this documented past experience, the team can arrive at a reasonable rationale for the activity’s costs.

Top Down Estimate The bottom-up approach provides an accurate approach to project estimating. However, it is labor intensive and takes time for the team to complete. A top-down estimate yields a project estimate in a relatively short time and uses a minimum of labor house to support the estimate. Top-down estimates use rules of thumb, parametric models, analogies, or commercial databases. Project planners and estimators can choose apply these techniques to the entire job or only a portion of the project.

Rule of Thumb Cost Estimating Approach Examples of cost estimating relationships or rules of thumb based on historical experience include 2.5 hours of software labor time to develop a line of source code, or two-hours of labor time to write a single page of text in a technical document, or $125 of cost per square foot for home construction. Project planners and estimators arrive at

275

these values after participating in a variety of projects. Sometimes the industry accepts these values as a good reference point, other times the values are company specific.

Parametric Modeling Parametric modeling involves the use of project characteristics (parameters) in a mathematical model to predict a gross estimate for development project costs. Once a group has achieved confidence in a parametric model, the calculation is fast and inexpensive. Practitioners find this objective approach to cost estimating consistent and repeatable.

As with all estimates, the result depends on the quality of the information

inserted into the system. The model requires calibration by the user, which limits its effectiveness to the use of old technology. If the technical staff decides to use new technology, the results will require some tinkering to accommodate the new approach. Only after project completion and the insertion of the actual labor results into the model will the parametric system provide a more accurate labor estimate with the use of the new technology. Some organizations use the results obtained from parametric model estimates as independent assessments of cost estimates prepared by other methods. Managers call this a “sanity check” on the calculations obtained from a bottom-up estimate.

Several commercial databases using parametric models exist. These include Cocomo and the Price system. The Martin Marietta Price Systems (formerly RCA Price and then GE Price) models both hardware and software. As with all parametric models, the

276

systems require extensive training and user calibration before application on actual bids.

The PRICE H Model provides hardware system cost estimates based on •

quantitative parameters such as system complexity, quantity, weight, and size



qualitative parameters such as environmental specification, equipment function, packaging and level of integration and



schedule driving parameters such as months to first prototype, manufacturing rate, and amount of new design.

The PRICE-S system calculates software development costs from System Concept through Operational Test and Evaluation. Costs are calculated and reported for Design Engineering, Programming, Data, Project Management, Quality Assurance, and Configuration Management.

Cocomo is a model designed by Barry W. Boehm to give a labor estimate for developing a software product. The team developed the first COnstructive COst MOdel after studying about 60 projects at TRW. Boehm states that "Basic COCOMO is good for rough order of magnitude estimates of software costs, but its accuracy is necessarily limited because of its lack of factors to account for differences in hardware constraints, personnel quality and experience, use of modern tools and techniques, and other project attributes known to have a significant influence on costs (1981)." Teams at USC revised the software cost estimation model in the 1990’s to reflect the changes in

277

professional software development practices that evolved since its development in the 1970s. COCOMO II provides a range for project cost and schedule. The software tool permits a planner to examine the effects of adjusting requirements, resources, and staffing on costs and schedules (e.g., for risk management or job bidding purposes).

The following list of organizations provides those interested in pursuing additional information about the subject a starting point to learn more about parametric estimating techniques: Galorath Incorporated -- www.galorath.com/SEER_tools.html Mainstay Software Corporation -- www.mainstay.com NASA/Air Force Cost Model -- www.jsc.nasa.gov/bu2/NAFCOM.html PRICE Systems -- www.pricesystems.com Quantitative Software Management -- www.qsm.com Acquisition Reform Network -- www-far.npr.gov COCOMO Models -- sunset.usc.edu/COCOMOII/suite.html Cost Estimating Resources-- www.jsc.nasa.gov/bu2/resources.html Defense Acquisition Desk book -- www.deskbook.osd.mil DOD Acquisition Reform -- www.acq.osd.mil/ar/ar.htm National Performance Review (NPR) -- www.npr.gov Software Engineering Institute (SEI) -- www.sei.cmu.edu Software Engineering Laboratory (SEL) -- sel.gsfc.nasa.gov Software Technology Support Center (STSC) -- www.stsc.hill.af.mil International Society of Parametric Analysts (ISPA) -- http://www.ispa-cost.org

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Tecolote Research, Inc.-- http://www.aceit.com/Products/ace.htm

Analogous Estimating Technique Analogous estimating uses the actual cost of a previous, similar project as the basis for estimating the cost of the current project. The approach assumes that comparable elements of the new and existing systems and subsystems cost the same. The project planner together with other stakeholders concludes that a prospective job opportunity is more or less difficult than a similar previous job. Based on their collective experience, they arrive at a percentage that expresses the degree of difficulty as compared to the reference project. The estimator multiplies the cost of the reference job by this number to arrive at a cost for the opportunity under consideration. Managers sometimes use this technique to estimate total project costs if only a limited amount of detailed information exists about the project. Here again, people may have difficulty estimating new technologies because of the lack of a precedent reference project.

As an example of analogous estimating, suppose a company receives an RFQ to quote on the purchase, installation, networking and test of 100 computers. The estimator assigned to the project recalls that a previous network installation of 150 computers in an office building actually cost $750,000 inclusive of all direct and indirect costs. Based on the principle of analogous estimating, the planner concludes that since 100 computers represents two-thirds of the previous job; a reasonable estimate would be two-thirds of $750,000 or $500,000. This approach is fast, easy, and economical but is

279

heavily dependent on the accuracy of the information about prior work. It also requires the expertise of people qualified to evaluate and compare different jobs.

Learning Curve This last project can also use another approach to estimate the opportunity. The concept of a learning curve recognizes that employee productivity improves as the person gains familiarity with the sequence of activities involved in the production process. Task repetition results in a learning effect. “Practice makes perfect.” Up to a point, people gain familiarity with a process, they become more skilled and the time taken to complete the process decreases. Musicians and athletes understand the learning experience well. As they train, their confidence grows; they gain speed, improve reliability and gain accuracy. Plotting the number of wrong notes that a student learning a musical instrument plays while practicing a new piece might look like the data in Table 10.

Table 10 – Improvements Resulting from Practicing No. of Repetitions 1 2 3 4 5 6 7 8

No. of Incorrect Musical Notes 20 12 9 7 6 6 5 4

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The student experienced a learning effect. Initially unfamiliar with the piece, the student gained confidence and expertise after each repetition and the number of incorrect notes decreased.

The majority of the learning benefit occurred over the first few attempts,

but continual slight improvement occurred over time.

T. P. Wright published an article in the February 1936 Journal of the Aeronautical Science. Describing the learning curve concept as applied to the aircraft industry. In the article, he described a theory for obtaining cost estimates based on repetitive production of airplane assemblies.

Ever since, estimators have applied learning

curves to all types of work ranging from simple to complex tasks.

The learning curve states that each time the quantity produced doubles, the cumulative average time to produce a unit will reduce by a constant percentage of the previous cumulative time. As an example, suppose a technician performs a site acceptance test on a just installed computing system. The functional manager estimates that the first system requires 100 hours to test and prepare a written report. The manager believes that subsequent tests will follow an 80% learning curve. Applying the learning curve concept results in an 80 hour per system average test time for the first two systems and a 64 hour per system average test time for the first four systems. Table 11 shows the results of this 80% learning curve.

Table 11 -- 80% Learning Curve Applied to a Computer System Test No. of Units

Learning Curve Factor

Average Estimated time to Test units

Cumulative Estimated Time to Test n Units

281

Tested - n

(Hours/unit)

(hours)

1

100

100

2

80%

80

160

4

80%

64

256

8

80%

51.2

409.6

16

80%

40.96

655.36

The first unit required 100 hours to test. The second unit, doubling the previous quantity of one, results in an average of 80 hours of test time to test each unit for a total of 160 hours for the 2 units.

Doubling the tested systems to 4 units reduces the

average time to test and prepare a report to 80% of 80 hours or 64 hours which results in a total estimated time of 256 hours. The learning curve process continues in the remainder of the chart.

Table 12 -- 90% Learning Curve Applied to a Computer System Test No. of Units Tested - n

Learning Curve Factor

1

Average Estimated time to Test units (Hours/unit)

Cumulative Estimated Time to Test n Units (hours)

100

100

2

90%

90

180

4

90%

81

324

8

90%

72.9

583.2

16

90%

65.61

1049.76

Table 13 -- 100% Learning Curve Applied to a Computer System Test – No Learning

282

No. of Units Tested – n

Learning Curve Factor

1

Average Estimated time to Test units (Hours/unit)

Cumulative Estimated Time to Test n Units (hours)

100

100

2

100%

100

200

4

100%

100

400

8

100%

100

800

16

100%

100

1,600

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Table 14 -- 50% Learning Curve Applied to a Computer System Test No. of Units Tested - n

Learning Curve Factor

1

Average Estimated time to Test units (Hours/unit)

Cumulative Estimated Time to Test n Units (hours)

100

100

2

50%

50

100

4

50%

25

100

8

50%

12.5

100

16

50%

6.25

100

Table --12 illustrates the time required to perform the identical tests using a 90% learning curve. Note that the average test time increases compared with the 80% curve. The learning curve upper limit of 100% means that learning does not take place at all. Each system takes the same labor time as the first system (see Table 13). A 50% learning curve results (Table 14) if the worker takes no additional time to test the next doubled number of systems. Using a 50% learning curve is akin to a perpetual motion machine. It is difficult to conceive of testing n systems for the price of one.

The estimator can use the log-log graph in Figure 3 to calculate the labor hours to complete a repetitive task. Suppose the first system requires 100 hours, we can estimate the labor to complete ten systems using the monograph. For a ten system production run, the average number of hours to complete a system using a 75, 80, and 85% learning curve is approximately 39, 49 and 60 hours respectively. The cumulative numbers of hours to complete ten systems assuming the 75, 80, and 85% learning

284

curves are 390, 490, and 600 hours. Of course, if no learning took place, the tensystem completion total would be 1000 hours. Figure 3 – Learning Curve Parametric Graph

Figure 4 illustrates the use of the learning curve graph to calculate the labor hours for multiple prototype systems with an initial system estimate other than 100 hours. Suppose a planner uses the graph to estimate the labor hours required to build 2, 5 and 10 computer prototype systems. Figure 3 provides data for units based on a 100-hour first unit . The estimator feels fairly confident that the first system will take 150 hours. Create an adjustment factor which is the ratio of the system number 1 labor estimate to

285

the system 1 baseline reference of 100 hours (150/100). From Figure 3, we read that for a 5 prototype run, the average number of labor hours per system with a 75% learning curve is 52 hours. Adjust the average number of hours to compensate for the 150 hour initial system effort. Do this by multiplying 52 hours by the 1.5 adjustment factor which results in an average of 78 hours per system. The total number of hours to produce 5 systems is found by multiplying 78 hours by 5 or 390 hours.

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Figure 4 Number of Systems Produced

1

2

5

10

Labor hours required for system #1 Ratio of labor estimate for system no. 1 to reference (100 hours) From Figure 3 Average number of labor hours per system with a 75% learning curve Adjusted Average number of Labor hours with a 75% learning curve Total Labor hours with a 75% learning curve

150

150

150

150

1.5

1.5

1.5

1.5

100

75

52

39

150

113

78

59

150

126

390

590

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Learning curves usually range from 75% to 90%. A 90% learning curve represents a cautious selection that anticipates a modest amount of learning, whereas a 75% curve represents an aggressive estimate that expects the stakeholders to learn rapidly. The selection of the learning curve can dramatically affect the labor estimate and therefore the price of a project. Even if the technician or engineer does not contribute to the estimate for a repetitive task, you can assume that the project manager has applied this curve to the estimate. The PM will expect to see reductions in the labor effort as the repetitive work progresses. If you are the technologist performing this repetitive task, anticipate a visit from the PM if the reduction doesn’t correspond to the estimate’s predictions.

Project Estimating Summary Accurately predicting the cost of a project is vital to the survival of any organization. The project manager has the responsibility for assembling and gathering ! labor estimates, ! material costs, ! New equipment and tool costs, ! special training costs ! the amount of business related travel, ! consultant usage costs, ! other required project resources, ! quantitative estimates of risk, and ! coordinating prospective subcontractor bids.

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To remain competitive, organizations must arrive at the lowest price yet deliver a technically superior product or service in the fastest time with the best quality – the modern technology mantra faster, cheaper, better. A challenge to be sure and the team led by the PM must make it happen.

The estimating process begins with the decision to submit a bid. After reviewing the specifications and other project documentation, the estimator meets with the functional managers to decide on the methodology used to calculate the price -- top-down or bottom-up, learning curve percentage. The project estimator compiles and analyzes data on all the factors that can influence costs—such as materials, labor, location, and equipment. Since most organizations earn only a relatively small profit margin on many projects, it is vital to obtain an accurate answer. The accuracy of the resultant effort will determine the project’s financial success. As a top-down estimate requires appropriate historical data as well as software and personnel training, smaller organizations that have not acquired the software may decide to use a bottom-up approach – sometimes in combination with an analogous method to complete the estimate.

Many senior executives use their own favorite rules of thumb to test the

“sanity” of the organization’s final estimate.

Estimating the impact of a new technology on a project represents a challenge to almost all of the cost estimating approaches discussed. Technical staff unfamiliar with the use of a new tool will usually require more time than expected to gain the required expertise. The staff may require formal training in the use of new or different versions

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of existing products. Cutting edge efforts may even use tools or equipment that have “bugs” – usage problems not yet worked out. Manufacturers sometimes offer “Beta” software packages, which means they have not yet formally released the product for sale because minor technical issues remain. The use of unproven software will slow down the project. Teams must make allowances for new tools, equipment and technologies. Aggressive labor estimates in these cases will likely come back to haunt the organization. Project cost estimating is as much an art as a skill. It improves with experience.

If time permits, the use of multiple estimating techniques will corroborate the technologists expert judgement. Anticipate a management review of the estimate. Executives will examine the resulting estimate from a broad perspective. They will likely not examine the details that support the estimate. Instead, they will pay particular attention to the final price and compare it to the organization’s intelligence on the competition’s submittal and the customer’s expectations. Management will also take a close look at the anticipated profit percentage and the risk exposure. Quantify the risk. As part of the risk analysis, be prepared to discuss the following issues: ! Technical and performance concerns, ! Schedule challenges, ! Organizational labor availability, ! Costs and availability of equipment and tools, ! Cost and availability of other required resources, ! Required personnel training,

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! Supplier problems, ! Competitive situations, and ! Other cost drivers. After reviewing and digesting this information, management will decide to go with the estimating team’s recommendation, adjust the price, or possibly no-bid the job.

Cost Management You win the contract. Congratulations, but you have no time for celebrating; now your organization must perform. Although not the only concern, making a profit is high on the list. In the preceding sections, we discovered that most corporate profits are only in the 10-15% region. The PM must protect against excessive spending and this requires careful cost control procedures. Cost control requires cooperation from every stakeholder.

At a minimum, it includes these items:

! Organization Support ! Preparation and distribution of budgets together with Work Authorizations based on the WBS ! Monitoring schedule, technical performance progress and budget ! Data Accumulation and Reporting ! Cost and schedule variance analyses ! Baseline Maintenance and Control -- manage the customer

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Financial and Schedule Analysis Project cost management begins with a set of expectations that includes a realistic and accurate estimation of project costs together with an equally valid schedule. It certainly is not a good first step if suppliers and functional managers gasp and throw up their hands in horror on first examining the budget and schedule. The PM also has the right to expect that stakeholders feel committed to support the project by providing appropriate resources at the times designated by the schedule. People work on the job when required. Material arrives on time. Suppliers deliver equipment on time. Personnel obtain the requisite training to use equipment and tools on time. After the PM creates and distributes budgets to the functional managers for each of the work packages (detailed short tasks) identified in the work breakdown structure, he/she expects that stakeholders will act responsively to meet the schedule’s demands. Unfortunately, this frequently doesn’t happen. So the PM carefully monitors the budget and schedule to identify issues at an early stage. The internal organization completes and submits timecards so that financial administrators can determine who is working on the job and how much time they are spending.

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Figure 3 – Comparison of Project’s Budgeted Funds versus Actual Expenditures – Overspending

Project Cumulative Labor Hours or Cost

Budgeted Funds

Costs in excess of the budget – a potential problem Actual Expenditures to Date – Curve A

Today’s date

Time

Financial analysts total labor, material purchases, ODC, travel, etc. data on a weekly basis. At the beginning of the project, the PM calculated a spending profile budget. Each week, financial administrators compare the budgeted time distribution of funds to the actual expenditures. If actual charges are too high (figure 3), it could signify that a technical problem exists (bad news!) or on the positive side, it could mean that the

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schedule is farther along than initially planned. In the former case, the PM seeks to identify the reasons and then tries to secure greater expertise for the group to enable them to resolve the issues as soon as possible.

Figure 4 – Comparison of Project’s Budgeted Funds versus Actual Expenditures -Under spending

Project Cumulative Labor Hours or Cost

Budgeted Funds

Under spending the budget – a potential problem

Actual Expenditures to Date – Curve A

Time

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If the actual time and material project charges are lower than the budget (figure 4) different issues exist. Perhaps the functional managers overestimated the work complexity and accomplished the expected amount of work spending less money than anticipated. (The probability of this happening is only slightly better than a used car salesperson telling the truth.) The more probable reason for a budget under run falls into one or more of these categories: ! Fewer people have worked the job than promised and the project is behind schedule ! The purchasing department has not ordered equipment and material ! Suppliers have not shipped equipment or material

Examining the schedule’s progress should reveal the problem areas. The PM then examines the root cause for these issues and focuses on resolving them. The earned value method discussed in Appendix

, provides the project manager with a powerful

quantitative tool to monitor schedule and financial progress.

Stakeholders Requiring Special Attention Many project managers periodically visit or at a minimum maintain contact with suppliers of important material and equipment used on the project. The PM will discuss technical and schedule progress in an effort to confirm that no surprises await them. If technical or schedule issues surface, the PM needs time to prepare “work-arounds.” The PM may devise alternative plans, modify schedules, reshuffle labor, or even consider withdrawing the contract from the subcontractor if the problems warrant.

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Engineers and technicians enjoy tinkering. They love to experiment, to “tweak” just a bit more performance from the system. While scientific curiosity may be an admirable technical trait, uncontrolled it can cost time and money. The PM must sometimes remind the technologist to provide customers with the products and services contractually agreed upon. The customer should get what they paid for and not a bit more – if more means additional cost or schedule. Keep the delivery objective in sight.

Conversely, if the functional manager or project manager requests a work change, it behooves the technologist to request added budget and schedule. After all, the technician or engineer developing the product or service will also be judged on their adherence to the schedule and budget.

Perhaps the most difficult aspect of cost control involves customer management. . Invariably customers discover at some point in the project that they require a contract change -- perhaps some additional features, or an additional piece of equipment, or another report or a newer software version. The changes from an innocent realization that the customer missed something in the specification of the original contract. However, once the project has started and the team proceeds, they quickly complete tasks. Some of this work would require repetition with a contract change thereby incurring additional labor charges. Items returned to a supplier may incur restocking fees. The use of a new or revised software package may bring with it unforeseen system integration issues that cost time. The PM walks a delicate line – balancing

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contractual agreements with the desire to “delight the customer.” The PM wishes to satisfy the customer in hopes of obtaining repeat business but yet wishes to make a profit on this project. Keep in mind that the substance of the PM’s annual review or financial bonus frequently depends on the project’s success. The project must turn a profit.

A common approach to resolving the issues involves good old “horse trading.” The PM exchanges an existing contractual item for the change that the customer desires. The PM should attempt to exchange items of similar cost. Say a customer desires to replace an old but reliable software package with a recently released version. The functional manager would love to use this package since it contains several new features that customer’s have requested. A “win-win” situation emerges. Management may view this as an opportunity to invest a small amount of money to update the organization’s product. Perhaps the new software version incorporates features that the organization would develop as part of the project. Using the new software might save money. Alternatively, sometimes the organization can agree to a customer demand in exchange for relieving a difficult contractual specification.

The PM’s rule of thumb should not change the SOW without a corresponding increase in contract funding. Some government contractors used this idea to their advantage. Recognizing that the vast majority of contracts involve changes after contract award, they would bid the job with little or no profit. After they won the contract, the

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organization would “get well” by charging very significant sums for the changes that almost certainly followed the award.

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Chapter 7 Questions

1) Explain the statement that a project manager has responsibility for the following -technical content, project cost, and schedule. 2) What quantitative measures can a project manager use to determine that project activities are progressing satisfactorily? a) Examine budget b) Compare labor and material budget with actual expenditures c) Compare schedule plan to actual progress d) Ask the functional managers e) Ask the company’s vice president 3) Explain the difference between bottom-up and top-down estimating. 4) True or false: A project manager uses a learning curve to estimate the labor time required to perform repetitive activities. 5) The time required for a person to perform an activity a second time will usually take more

or

less

time than required to perform the activity the first time.

Explain your answer. 6) Describe the difference between direct and indirect costs. 7) Explain the purpose of a material-handling fee. Do you think it justified? Explain. 8) Give examples of Other Direct Costs (ODC) that may be charged to a project. 9) Describe the difference between overhead and general and administrative (G&A) costs.

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10) Your boss has developed the following documentation preparation time rules of thumb: Each Power Point slide requires 45 minutes per page including research time. Each text page requires 6 hours. Each graphic (picture, drawing, etc.) requires 2 hours. The contract requires the preparation of a training manual. Based on similar previous jobs, the trainers estimate that a manual will contain 25 pages of text and 12 graphic illustrations. They estimate that they will require 37 slides to teach the course associated with the product. Estimate the time (in hours) to complete the training manual document and the training class presentation. 11) Why does the use of a new hardware or software tool entail some measure of risk? How should the project or functional managers minimize this risk? 12) A small service business wishes to determine the amount of money to charge its customers. The service manager calculates that the average salary the company pays its technicians is $32 per hour. The company’s accountant informs the service manager that the overhead expense and general and administrative (G&A) rates are 50 and 25%, respectively. The company president informs the service manager that they expect a 20% profit.

What labor charge should the service manager

charge the company’s customers on an hourly basis? 13) Explain the difference between the price a customer pays for the product or service and the developer’s cost.

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14) As the project manager for a medium sized company, you have collected the following data from the organization’s functional department managers during a proposal preparation effort.

Functional Average Labor Department Salary - Hours $ Electrical Engineering Mechanical Engineering Software Eng Network Eng Technician

$45.50

1775

Dept. Overhea d Rate - % 55

Material Purchases & Leases/Rental s-$ $45,000

Travel, Living & Entertainmen t-$ $800

Consultant s-$

$42.75

225

55

$31,000

$500

$5,100

$48.10

2400

45

$37,000

$1,000

$6,200

$53.00

160

48

$29,000

$31.60

310

35

$1,000

$500

Field Service

$29.30

145

40

$1,500

$2,500

Training

$28.75

90

30

570

$4,200

$4,400

The company’s accountant informs you that the organization’s general and administrative (G&A) rate is 33%. The software department has indicated that they have a 10% risk associated with the development process. No other department has identified significant risk. The company’s vice-president expects to earn a 15% profit and has asked you to prepare a chart that summarizes the project’s costs and the price to the customer. She would like to discuss the project with you tomorrow afternoon. a) What information will you bring to the meeting with the vice president?

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b) Will you request support personnel to accompany you to the meeting? If so, who and why will you bring them? c) Prepare the financial material that you will show to the vice president that leads to the suggested customer price. Keep in mind that the material must be clear – almost self-explanatory. Minimize written material and try to organize the material in charts. 15) Team Project: The following problem simulates a small business activity. You will create a three member team corresponding to the three owners of CompRep -- a small system maintenance and repair company. The principals represent three different perspectives. Gayle provided the majority of risk funding to start the business and becomes involved in major business decisions. She invested $100,000 into the business at its founding. As the major investor, she is interested in protecting her investment and expects to see at least a 10% annual return on her money. Keisha provides the technical expertise. She is thoroughly familiar with the construction, maintenance, repair, and networking software associated with computers. Keisha has passed the A+, N+, Project +, MCP, MCSE, CNA and CCNA certification examinations. Her motto is “Never fear, Keisha is here.” She receives a salary of $45,000 per year. Tamir is in charge of sales. During the past three years, maintenance and repair contract sales have grown consistently from $200,000 in the first year to last year’s $450,000 total. Tamir works on a 6% commission of the gross sales price. He wants to offer the customer a low contract price to get their business. After all, no sale means no commission and no salary for Tamir.

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The CompRep owners have decided to bid on a two-year computer maintenance and repair project for a local school district. The school district has 780 computers located in two buildings that are 10 miles apart. The schools are open for operation 180 days per year. The school district has determined that on the average, 1% of the computers fail each week of operation. The chart below illustrates the historic component failure rate for the computers.

Component

Power supply Memory chip Floppy disk Hard drive Sound card Video card Mother board Network interface card Other interface cards Cables and connectors

Distribution of component and module Failures -% 45 15 8 5 3 3 5 6 9 1

Present Year Average Material cost $ 75 68 27 179 79 119 375 65 55 30

Average Labor to diagnose and repair Hours 1.2 0.6 1.5 2.5 0.8 0.8 2.5 0.9 1.0 1.0

The CompRep facility lies mid-way between the two schools. The contract demands a 24-hour repair turn-around time. Service personnel may gain access to the school from Monday to Friday between the hours of hours of 8:00 a.m. to 4:00 p.m. Component distributors guarantee to deliver replacement components within 48 hours of placing an order. The existing business presently grosses $450,000

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annually. The owners wish to expand the business and winning this contract represents a significant step in this direction.

As the owners of this company, your team must calculate a competitive price to submit to the school district. In addition to Keisha and Tamir, CompRep also employs another computer technician and a receptionist on a full time basis for a total of four full-time employees. Half-time employees include a bookkeeper and a computer technician. As your team goes through the bid process, questions will arise that will require the principles to make certain assumptions. Note these questions and the assumptions reached about CompRep and its business. Item

Salaries of Full-time employees Salaries of Part-time employees Legal expenses

Quantity

Annual Expens e-$

Comment

4 2

Advertising expenses Rent Utilities Liability insurance Office supplies Professional and local organization membership Facility maintenance and repair Office equipment costs

$1,500

Retainer – review documents

$7,500 $30,000 $8000 $4000

$1000 FAX, copy machine, cell phone, office phone

a) Complete the annual costs omitted in the chart. b) Calculate CompRep’s annual payroll.

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c) Calculate the overhead and G&A expenses. Assume that FICA and Medicaid taxes total 10% of the employees’ annual salary. d) Decide if you need to stock certain hardware components. If stock is required, identify which components and the quantity to purchase. e) What profit should CompRep seek? f) What was the cost of living increase last year? How would you find this out? g) As this is a two-year contract, separate the costs into year 1 and year 2 to take into account the likelihood of inflation increases in labor and material. h) Based on the data provided, how many trips to each school are required during the year? What is the annual transportation cost? Use a travel expense of $.33 per mile in your calculations. i) How much labor time is required to fulfill the contract requirements? j) What price will CompRep submit to the customer for the two-year computer maintenance and repair contract? Support your team’s decision with the appropriate spreadsheet calculations.

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CHAPTER 8

Project Communications

There is a w and e but no i in teamwork.

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Chapter objectives After studying this chapter, you should be able to:

Understand the role of communications in projects. Prepare crisp, informative and to-the-point memos. Conduct a worthwhile meeting. Understand how to follow-up on meeting actions

Communications represents a process for exchanging information among people. In organizations, we use a variety of means to inform and influence others. Techniques that we use include the following: ♦ Verbal or written messages such as memos and reports ♦ Discussions that use verbal and nonverbal information exchanges ♦ Telephone

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♦ Radio and video conferencing ♦ Meetings ♦ Lectures ♦ Graphics (charts, illustrations, photographs, clip-art, graphs)

Project communication includes the processes required to ensure timely and appropriate generation, collection, dissemination, storage, and ultimate disposition of project information (PMBOK). Technical project managers spend a large portion of the day receiving or distributing information. The delivery of this information frequently demands project managers with excellent social as well as technical skills. Knowing how and when to say and present information is just as important as knowing what to say.

Communications Management During the early project phases, project managers promote the exchange of technical requirements, data, interface descriptions, assignment responsibilities, schedules, work authorizations and contractual documents among stakeholders. Throughout the job, the PM prepares performance and status reporting information after receiving data from the stakeholders. The organization submits interim reports to management, regulatory agencies, suppliers, and the customer. All stakeholders need to be quickly informed about significant issues that arise during the project. The PM controls and coordinates this information flow. The end of the job brings with it a flurry of documentation preparation that includes test reports, final product or service descriptions, training and

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maintenance manuals, and financial analyses. Delivery and installation of the newly developed product requires a good deal of interaction between project and customer personnel. Finally just before closing out the project, the staff prepares a list of “lessons learned” and shares the information with colleagues. In this way, everyone benefits from one another’s experience.

Table 8-1 illustrates the varied type of information exchanged by technologists during the project. Depending on the recipient, technologists prepare material in different ways. Personnel frequently submit monthly reports and descriptions of problems and issues by E-mail. Many use overhead transparencies or present a power point presentation for larger audiences. Unbelievably, governmental agencies and some large organizations still require completing a standard form using a typewriter.

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Table 8-1 Information transfer considerations

Examples

Feature Target audience

Colleagues, manufacturing, customers, technicians, management, government regulators, suppliers

Material Type

Data sheets, specifications, documents, drawings, graphics, reports, proposals, letters, orders, statements, invoices, schematics, manuals, contracts, samples, memos, technical information, directions, standard forms

Time urgency

Overnight, immediate, future

Transfer Method

E-mail, US mail, overnight delivery, courier service, telephone conference, voice mail, video, meetings, lecture

Electronic format

ASCII files, rtf, Word files, Macintosh or PC, voice, video

Media

Paper, vellum, electronic (e.g., zip drive, floppy disk, magnetic tape), computer display, overhead transparencies, 35 mm slides.

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Communication Pathways

A project usually requires decisions and actions from a large number of areas. Most information exchange takes place in a lateral direction -- among colleagues in functional groups. Figure 8-2 illustrates the usual communication pathways followed by project stakeholders. For example, only the project manager should speak with the customer. The PM provides the customer’s point of contact with the organization. Commitment to perform a task or agreement for a change normally comes from the PM. If a subject that will be discussed with the customer involves details with which the PM does not feel comfortable, then the PM frequently requests a technical person to participate in discussions. Management briefings come from the Project manager. Functional groups, manufacturing, and suppliers all interact as required. If required to hire permanent or temporary workers, then each of the internal stakeholders work with the human resource department directly.

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Executive Management Customers

Functional Groups

Project Management Office

Project Manager

Human Resources

Operations Manufacturing Purchasing Incoming Inspection Suppliers

Figure 8-2 Communication Pathways

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Organization Communications Protocol In their zeal to impress all people in the organization with their unbounded knowledge, new employees sometimes let the ease of adding names to the E-mail list overcome good judgement.

Always inform your immediate supervisor first about anything and

everything. Report problems, issues, customer compliments or complaints, late deliveries, system failures, machine breakdowns, whatever to your supervisor. The novice technician loves to announce to the immediate world that they have discovered the “next best thing to sliced bread.” They have solved problems that have troubled the organization since the founders began operation. Wait. Informing your boss’s boss before informing your boss violates courtesy as well as an unwritten organizational cardinal rule. Weber’s organizational hierarchy still applies. Follow the chain of command and give your supervisor the courtesy of assessing your finding. Then let your supervisor suggest the time, place and the people to whom to announce the information.

Personnel in the organization contain an assortment of political agendas. Upsetting your supervisor may impede your advancement. Making your boss look good may bring choice job opportunities and a better chance for a salary increase. Remember the functional manager assigns work and recommends people for promotion and salary adjustments. Develop your supervisor into an ally. Go easy and share the glory until you have learned to operate in the political organizational jungle.

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Communications Process

The project manager has the responsibility for the flow of information. S/he makes needed information available to project stakeholders in a timely manner (PMBOK). The PM decides on the message content, to whom to send the message, the tone of the message, and the degree of technical complexity. Messages sometimes require translation into language that all can understand. Project managers use communication to build consensus.

Depending on our backgrounds, we interpret words in different ways. Sociology teaches us that people from different cultures have different expectations and perceptions. In our diverse organizational environment, we interpret statements differently. Suppose you saw the following E-mail messages:

Message #1

COME SEE ME! BOB

Message #2

See me at your earliest convenience. Bill

Both messages convey the same information, but after the first, you think “Uh Oh, what have I done now.” The tone of the second message is not quite as threatening. Many people familiar with E-mail interpret all capitals as shouting. On the other hand, Bob may not be an experienced typist and does not want to bother with lower case letters.

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Figure 8-3 illustrates a message interpreted differently by two people. Maria comments that she would like to eat strawberries for lunch and Tom interprets the snack request as strawberry pie. A minor misunderstanding, but not unusual. Use specifics in conveying information to others in order to minimize misinterpretation. Some cultures prefer a forthright and frank presentation. Others find that approach offensive. Think about the people to whom we send information. Respect their sensitivities. We all bring unique personality and background experiences to the workplace, which may color our interpretation of the information.

Message Source Personality Experience Encoder and Filter

Personality, Perception & Experience Decoder and Filter

Message Destination

Figure 8-3 The communication encoder decoder environment

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Conducting Effective Meetings Project managers spend a lot of time in meetings. Meetings represents a cost effective way to convey information to a group of people. It is certainly less time consuming to meet collectively than individually. The participants can discuss the presented information and begin to clarify issues. At the conclusion of the meeting, the person that called for the meeting usually asks the assembled people to engage in an activity.

Before assembling the participants, think through what you wish to accomplish. Prepare an agenda to clarify the meeting’s purposes. The agenda should reflect the meeting’s priorities. If not officially part of the agenda estimate the time that you will allocate to each topic on the agenda. Select and inform the people that you wish to attend the meeting. In your notice requesting people to attend the meeting, include the agenda, starting time, place and anticipated length of the meeting. The latter item acknowledges that people have busy schedules and represents a courtesy to enable them to plan the remainder of their day. Start the meeting on time. If people are late, conduct the meeting without them. If you begin late, people will come late.

Distribute data, documents and special information in advance . this is especially true if the group will review or make decisions regarding the material. If possible, try to permit all people to comment on the material, but do not let anyone dominate the discussion. at the start of the meeting, assign a person to take minutes. Meeting participants should receive copies of the minutes within a reasonable time following the event.

No

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meeting is complete without assigning action items. During the course of most meetings, participants raise issues requiring examination and resolution. The meeting chair assigns responsibility to resolve these actions to appropriate people and expects resolution by an agreed date. Unless the work demands a specific deadline date, request the person assigned to the action item for a reasonable closure date. Often, the participants decide to hold another meeting to review the progress or completion of the action items .

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Figure 8-4 Procedure for Effective Meetings Distribute Information

Select People Data

Notify People -Time & Place

Agenda ~-~-~~~-~-~ ~-~-~~~-~-~ Hold Meeting

Review Action Items

Minutes ~~--`..-~~ -`--‘~~~~+-

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Memos Memos represent the grease for the communication machinery that makes things happen in today’s moderate to large size organization. A memo is a no-nonsense communications document. It is designed to quickly inform or ask something from people within an organization or work group. Employees use memos to tell their supervisor that they accomplished a specific task or they have confronted a problem. Many project managers keep a memo record of the activities performed on the project. They create a paper trail for the actions and agreements among the project stakeholders. While most memos are brief, they should follow good technical writing principles. They use clear and accurate language. Memos reflect back onto the organization and the person that wrote it. Stakeholders jump to the conclusion that the writer of a sloppily written and unclear memo is unfocused.

E-mail messages are by far the most common form of memo. Every memo should follow E-mail format. It should include the following basic information: Date: To: From: cc: Subject: Memo Body

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The term cc comes from Carbon Copy paper. While obsolete technology, the term persists. People placed on the cc list receive a copy of the memo. Observe the chain of command. Gain the trust and respect of your management organization by distributing memos to the proper personnel.

Make your memos short and to the point – no more than one page. Clearly state the purpose in the first paragraph – preferably in the first sentence. Indeed, why do you want to write that memo? Crystallize your objective. Ask for something. Provide supporting and clarifying information in subsequent paragraphs. Answer the journalist's questions: who, what, when, where, and why. Use bullet lists to get your idea across succinctly. The memo receiver can then immediately prioritize the memo’s importance and decide whether or not to read the additional information. Do not use jargon unless you are certain the reader will understand it. To be on the safe side, define unusual expressions and acronyms. Organize performance information, status reporting, progress measurement, forecasting, and other numerical based reports into charts with appropriate column headings. Send copies of the memo to those people that have a need for the information.

Always be polite and upbeat. Unless the purpose of the memo is simply to inform, conclude with action recommendations. State the actions that you plan to take next and the completion dates. Managers value the professional that identifies a problem and also provides several recommendations to solve it.

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Finally, proofread the document. Does it say what you mean? Soften criticism. Delete overly harsh comments. Do not use the memo as a cathartic psychological experience to vent your emotions. Check your English usage. Use the spell check word processor feature. Proofread it again. Spell check will not catch correctly spelled words used incorrectly. Obvious grammatical errors and misspellings reflect badly on the memo writer. Listening Perhaps the most difficult aspect of communication is listening. We all love to talk and have our view heard. Do we really listen to others?

The single most important step to improve our listening skills requires us to stop talking. Pay attention to people. Listen to their verbal statements and watch their nonverbal motions. Look at the speaker. Make eye contact. Your eyes pick up the nonverbal signals that people send out when they are speaking. Show you want to listen by putting the talker at ease and removing distractions. Stop answering the telephone and halt other interruptions. Be patient and let the talker get the idea across. Hold your temper and take it easy on arguments and criticism. This does not mean that you should not react to the speaker. Show emotion. Move your face to indicate that you follow what the speaker has to say. Ask questions. Listen to the answers and repeat the speaker’s words to emphasize that you are listening. Remain open to new ideas.

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People feel strongly about issues and want to be taken seriously. Even if you do not agree with a person’s argument, listening to it helps to build rapport between you and the other group members. During the ensuing discussions, put forth your points firmly but in a friendly manner. Support your opinions with facts and refer back to points made by other members of the group.

During the project life cycle, we continually engage in negotiation -- the process through which two people or groups with differing wishes or views strive to reach a satisfactory agreement. The parties may not reach a level of mutual satisfaction, but they can accommodate the decision.

You cannot begin to negotiate until you listen to the other party. Only after groups begin to understand one another can they work toward a solution to their disagreement. Work towards a joint solution by listening and asking for your colleague’s opinions. Then build on others’ ideas and offer your own ideas. The structure of a compromise solution frequently evolves borrowing from everyone’s ideas and building on them.

Listening is just one of the people skills that project managers develop. A project manager gets things done through people. Respect people and foster trust. Give support and help as needed. Make your expectations clear. Let people do their thing and let them know how they are doing. Do not micromanage every task. Offer praise. Praise does not cost anything and can sometimes make employees who feel

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undervalued more cooperative. Establish an open and active communications policy early in the project.

Verbal Communications Telephone Protocol Telephone conversations consume project managers for much of the day. The PM speaks with suppliers, aids a technician in obtaining technical information, requests a status report from a software functional manager, asks FedEx about their delivery schedule, requests travel information, reassures a customer regarding their order, discusses a personnel issue with a member of the human resource department, requests financial information from an administrative assistant and talks with other internal and external stakeholders about a myriad number of issues. The PM follows correct telephone protocol during these telephone meetings. Identify yourself at the beginning of the phone call. A typical greeting might be “This is Jane Dawkins speaking. May I help you?” If you initiate the call, immediately state “Good morning, this is José Padua. I am a project manager from Villa-Tech and I am inquiring about ______________.”

Courtesy and tact is mandatory. Perhaps the customer just finished yelling at you for omitting an instrument from the last shipment, which caused a week slippage in their schedule. The customer vented all their frustration on you and you feel like exploding. Naturally, you remained calm and courteous during the customer’s tirade. You explained that the omission was inadvertent and would never happen again. You get

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off the phone drained and upset. This is a time to take a break. Do not answer another phone until you calm down. A customer will detect your upset and stressed condition if you answer the phone immediately following this episode. Avoid jeopardizing relationships by placing yourself under further stress.

Take notes during the conversation. Develop a rapport with the caller by using their name. At the end of the call, briefly summarize the actions that each of you will take. The exchange may warrant a summary E-mail sent to the caller with copies to a colleague or your supervisor. Sometimes you may want to send the summary e-mail only to yourself as a record of the conversation. The E-mail system provides an opportunity to maintain a historic record of the project’s communications.

Face-to-face meetings Speaking in front of both large and small groups is a fact of organizational life. The PM does it everyday. Your talks should inform, persuade and involve the participants. Conduct conversations with one or two people in a businesslike manner. Stick to the technical or business matters. Take care to minimize small talk or non-business related discussion. This area is fraught with danger. Avoid discussions about politics, religion, race, ethnicity, sex and your personal or family issues. People hold very strong opinions about politics and religion. Some group members may find even seemingly innocent conversation on these subjects offensive. You risk creating enemies. Do not treat customers, work associates, and suppliers as friends. They are business

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associates. You might choose not to have them as friends, but frequently you have no choice in the selection of coworkers and stakeholders.

Discussions about sex will likely offend someone and you risk disciplinary charges or even dismissal. Do not comment about your colleague’s clothing or body. Your associate could charge you with sexual harassment, which may lead to dismissal. Do not burden the conversation participants with your family’s problems. Chances are they have problems of their own and do not want to be involved in yours. Restrict lunch, coffee break or dinnertime chitchat to non-provoking issues. Start the conversation with comments about the weather. Neutral issues include topics such as sports, your hobby, computers, software, a non-controversial book that you recently read, food, cooking or an amusing travel story. If someone else brings up one of the forbidden topics (politics, religion, race, ethnicity, sex and personal life), keep your mouth shut and limit your nonverbal movements to normal breathing. Change the subject at an opportune time.

Research shows that many people dread public speaking. An ideal way to overcome stage fright involves the use of visuals such as overhead transparencies and power point presentations to support your talk. Visual aids enable the speaker to plan and control the talk. Follow your prepared material. Do not memorize your talk and do not read the slide presentation. Paraphrase the words shown on the screen to prevent the talk from sinking into boredom. Keep the audience awake. Visuals focus the

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audience’s attention. They reinforce the presentation and help the audience remember your talk.

Other presentation tips include the following:

! State the purpose of the presentation. ! Speak loudly and vary your voice tone and volume to emphasize key points. Speak naturally – not too fast or slowly. ! Make eye contact with individuals in the audience. Look at a person, and act as if you are speaking directly to him or her. After a minute, pick someone else. This helps you communicate with the audience. ! Liven up your presentation by using graphics to make a point (pictures, graphs, charts, etc.) ! Smile ! Show enthusiasm ! Do not wander. Stick to the topic as outlined in the visuals ! Summarize your main points at the end ! Ask for something. A researcher presenting the results of a study to top management might request funds to pursue an avenue of research. A salesperson might ask a group of prospects for an order. A project manager might request a customer to accept a delayed delivery in exchange for a longer product warranty. ! Offer a question-and-answer period. ! Distribute handouts describing the talk.

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Chapter 8 Questions 1) What type of communication techniques do organizations use? 2) Identify the steps in conducting a meeting. 3) Define action items. Give three examples. 4) Politeness and saying “please” and “thank you” when speaking with stakeholders a) Is not necessary. b) Is appropriate protocol in all situations? c) Is far too formal for today’s times. 5) If a customer is abusive on the phone, the appropriate reactions are to a) Hang up b) Tell them that this is not your job c) Grin and bear it d) Transfer the call to your supervisor e) Yell at the customer because you will not accept this from anyone. 6) When speaking on the phone with stakeholders a) Take notes b) Identify yourself early in the discussion c) Summarize the action items at the end of the discussion d) Send an e-mail summarizing the discussion e) All of the above 7) The first paragraph in an E-mail should a) Describe the purpose of the memo.

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b) Ask how the family and kids are doing. c) Set the stage -- Describe the historical background surrounding the issue. 8) Describe five group presentation suggestions. 9) You are taking a customer out to lunch. Identify five non-business topics to discuss during the meal. 10) You are an Evangelical Christian. You have recently discovered that your work associate professes atheism. This view is abhorrent to your thinking. You are considering raising the issue during your lunch with the idea of converting this person to your religious views. Identify three reasons why you should and should not hold this conversation. 11) Which of the following are good presentation tips? (Select all that apply.) a) Speak softly and fast so that the group will pay attention. b) Do not offend anyone by looking directly at him or her. c) Do not inject any humor into the discussion when dealing with serious subjects. d) Liven up your presentation by using graphics to make a point e) Smile f) Show enthusiasm g) Do not wander. Stick to the topic as outlined in the visuals h) Summarize your main points at the end

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CHAPTER 9

Quality

Show me someone who has done something worthwhile, and I'll show you someone who has overcome adversity. Lou Holtz

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Chapter objectives After studying this chapter, you should be able to:

Define quality Understand the role of quality assurance in projects. Understand the major contributors to the quality field Understand the role of quality policies, planning, assurance and control in organizations. Compare and contrast quality planning, assurance and control in organizations. Understand the meaning and importance of ISO, CMM, and other quality plans. Support ISO, CMM and other quality efforts in your organization. Contribute to the software quality assurance effort in your organization

How do you define quality? Imai (p. xxiii) states, “There is very little agreement on what constitutes quality. In its broadest sense, quality is anything that can be improved.” The PMBOK (p. 6) defines quality management as the processes required to ensure

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that the project will satisfy the needs for which it was undertaken. A software process is a set of activities, methods, and practices used to develop and maintain software. Quality involves procedures, techniques and tools used to ensure that a product meets or exceeds an agreed upon specification. Deming suggests that quality involves product or service uniformity and repeatability. The commuter expects the train to arrive at the station at 7:27 a.m. Arriving significantly earlier or later leads to disappointment and dissatisfaction with the service. Software that consistently performs as advertised satisfies the consumer and gives the impression of a quality product. Pralahad and Krishnan argue that the emerging view of quality requires organizations to adjust to its customers’ dynamically shifting expectations (1999, p 110). They support Reicheld and Sasser (1990) who offered the view that the focus of quality has shifted from zero defects in products to zero defections of customers. Pralahad and Krishnan offer a view of quality that integrates the ideas of conformance to requirements, organization adaptability and innovation. Kerzner (p. 1085) sums it up with a broad definition of quality: Quality is a process to retain existing customers, win back lost customers, and win new customers.

Intuitively we can understand that the lack of quality affects product and service cost as well as the organization’s profits. Traditional costs of poor quality result from scrap material costs, product rework, extensive inspection, rejects and a customer’s excessive use of product warranty due to failures or faulty operation. Less obvious issues that impact quality costs stem from engineering changes, long times, more manufacturing setups than planned, labor to expedite material purchasing resulting

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from inadequate planning, excessive test time to validate a product of service’s operation, lost customer loyalty due to late delivery or not meeting the customer’s expectations, and excess inventory due to excessive material orders.

Quality is a very

broad term that encompasses a myriad of issues. Every employee contributes to a product or service’s quality or lack of it.

The Quality Gurus Today’s quality movement traces its roots back to the 1920’s with developments by Dr. Walter A. Shewhart and Dr. Joseph Juran at Western Electric. Shewhart , the father of modern quality control , pioneered the use of statistical techniques to control processes in an effort to minimize defective output. He combined elements of statistics, engineering and economics in his work.

Dr. W. Edwards Deming who also

worked briefly at Western Electric based much of his work on Shewhart’s teachings. Following World War II, Deming introduced statistical quality control concepts and the idea of total quality management to Japan. He referred to the Shewhart Cycle as a systematic approach to problem solving. Proponents called it the Deming-Shewhart cycle or simply the Plan-Do-Check-Act cycle, which is the essence of continuous quality improvement.

Deming stresses that management has an obligation to constantly

improve the system of production and service. The Plan-Do-Check-Act (Figure 1) cycle permits management to install a process that promotes ongoing quality improvements. The process implies that inspecting the product or service at the end of the job is too late and too costly. Plan-Do-Check-Act shifts the paradigm from detection

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to continuous examination of the process thereby proactively attempting to prevent problems.

Figure 1 – The Deming-Shewhart Plan-Do-Check-Act Cycle

Act

Check

Plan

Do

Movement Toward Continuous Quality Improveme nt

Although Deming began to discuss these concepts in the 1930’s and 1940’s, American industry did not accept Deming’s ideas until the 1980’s. In his 1986 book Out of the Crisis, Deming presented his 14 points, which he believed applied to small or large organizations, and to service as well as to manufacturing organizations. The 14 points require a good deal of discussion by members of the organization before adoption. These points are controversial and at times contradict industry practices and the approaches described by other gurus. Table 1 examines some of these differences.

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Dr. Edward W. Deming ( Quality Management Philosophy and Continuous quality improvement)

Dr. Joseph M. Juran (quality trilogy)

Dr. Philip Crosby (zero defects and cost of quality)

Dr Armand Feigenbaum, (Originator of "Total Quality Control" phrase)

Dr. Kaoru Ishikawa (Quality tools)

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Table 1 – Alternative Views on Selected Items from the 14 Points Point No.

Deming’s Text

Dissenting or Alternative Views

4

End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.

5

Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

6

Institute training on the job.

8

Drive out fear, so that everyone may work effectively for the company.

10

Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. b) Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership. b) Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual merit rating and of management by objective. Institute a vigorous program of education and self-improvement.

Most organizations including the U.S. Government require a minimum of 3 bids before awarding a contract. Many purchasing departments would look with suspicion if a department awarded a contract to another organization without a bid process. This effort requires meetings of employees at all levels in the organization and may not show immediate results. Managers may resent a subordinate making suggestions to improve a process while in a meeting with their superiors. Many organizations offer minimal training and expect the employee to train themselves on their own time. Coercive power is a commonly used technique by many managers. Some managers and supervisors continue to use stated or implied threats. For example, “Four hours of free overtime per week is expected of all employees, ”Do this task or I will assign you to second shift,” etc. For many years, slogans such as Zero Defects (recommended by Crosby) and Quality is Job One, etc. were used by industry to motivate workers.

11

12

13

Most production and sales organizations use numerical goals to spur on their employees. American business and industry regards the annual employee review as a “holy” practice.

Many organizations offer less than 40 hours of staff development per year.

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The Union of Japanese Scientists and Engineers (JUSE) sponsored Deming’s lectures to Japanese industry during the early 1950’s. The material so influenced Japanese industry that they named a quality award after him. The Deming award is given annually to organizations worldwide that meet demanding quality standards. In 1960, Deming received the Second Order of the Sacred Treasure award for his contribution to Japan's reindustrialization.

Dr. Joseph M. Juran followed Dr. Deming to Japan in 1954. Like Deming, Juran received training in statistics. His lectures also sponsored by the Union of Japanese Scientists and Engineers added to Japan’s focus on quality improvement. He also received the Second Order of the Sacred Treasure award for his contribution to Japan's industry. He developed the idea of a quality trilogy: quality planning, quality improvement and quality control. Quality Planning •

Determine customer’s needs



Develop a product or service that responds to those needs.



Optimize the features to meet producing organization and customer’s needs.

Quality Improvement •

Develop a process that produces the product or service



Optimize the process.

Quality Control

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Prove that the process can produce the product under operating conditions.



Transfer the process to Operations.



Optimize the process.

Central to Juran’s message is the belief that quality requires planning. For success, the organization should integrate quality improvements into corporate plans. Organization wide plans should include the identification of customer’s needs; establishing optimal quality goals; creating metrics to facilitate measurement; and developing processes capable of meeting quality goals under actual operating conditions. Quality requires teamwork and problem solving. Ultimately, Juran declared, quality is fitness for purpose.

Japanese industry’s adoption of quality concepts advocated by Deming and Juran assisted them in turning around a country decimated by war into a quality powerhouse within a decade. During the 1950’s, Japan exported a variety of merchandise to the United States ranging from trinkets for sale in five and dime stores to automobiles. This inexpensive merchandise would break apart and fail in a short time. Japanese vehicles had a reputation of turning into a “rust bucket” after a few years of use. Japanese automakers failed to sell their cars in the U.S. market because of their poor quality and performance. By the late 1960s - after the implementation of quality concepts into the production system, Japanese cars became competitive against U.S. products. Although it took some time, Japanese industry turned this reputation for poor quality merchandise around. Assisted by a domestic oil crisis caused by the Arab-Israeli war in

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1973 and the Iranian revolution of 1979, U.S. consumers willingly paid a premium for a fuel efficient Japanese built automobile that met their needs and provided reliable service.

Feigenbaum advocated the concept of total quality control. Involve all business functions in the pursuit of quality including design, engineering, administration, marketing, purchasing, manufacturing, production, inspection, packaging, delivery, installation and service. Everyone had responsibility for quality not only the quality professionals. He stresses that quality does not mean ‘best' but 'best for the customer use and selling price'.

Crosby advocated satisfying the customers' needs and expectations by implementing the four absolutes of quality management, which are •

Quality is conformance to requirements



The system of quality is prevention



The performance standard is zero defects.



The measurement of quality is the price of nonconformance.

Crosby championed the slogans Do It Right First time and Zero defects, which many organizations adopted. The U.S. Military placed posters around their facilities reminding civilian and military personnel about this quality goal. Crosby’s writings emphasized that poor-quality products could prove disastrous for the organization. He believed that quality paid for itself in the end.

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Ishikawa developed a tool to assist in the analysis of process quality. The "Ishikawa" or "cause-and-effect" diagram uses statistical data to categorize the causes of inadequate quality into •

Materials,



Processes or work methods,



Equipment, and



Measurement.

For example, materials may differ when sources of supply or size requirements vary. Equipment or machines also function differently depending on variations in their own parts. These variations affect a product's quality. Ishikawa's work lead Japanese firms to focus quality control attention on improvements in these four areas.

Quality and the Project Manager Quality is paramount in the eyes of the project manager. It leads to a satisfied customer, which makes the job easier. Producing quality products and services has a schedule and cost impact. To some managers, quality costs additional money. They believe that the price of goods and services may surge astronomically if the organization follows Crosby’s goal of zero defects.

Other quality practitioners argue

that quality ultimately leads to cost reduction and the practices that ensure quality should be a way of doing business.

Creating a quality product or service involves a

variety of organization wide processes and procedures. The project manager must be

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aware of these practices. Aguayo points out two methods used by organizations to improve quality – 1) inspection and 2) the constant improvement of the process and products. Both approaches affect the project’s cost, schedule and resource usage. Both approaches require planning to incorporate the process into the schedule.

The costs of quality involve evaluating products and services for conformance to a set of standards. Many organizations rely on inspecting the product at various stages in its production or development. In some production operations, inspectors merely remove out of tolerance or faulty units from the line without considering the underlying reasons for the failures. Modern quality approaches focus on prevention techniques. That is, personnel continually examine the product, service or process with the idea of improving it. Continuous quality improvement brings with it the expectation that higher productivity, lower costs, higher profits and higher quality result from this effort. The Japanese use a quality control method called Kaizen, which means continuous improvement in personal life, home life, social life, and working life as a whole. As related to the workplace, kaizen means continuing improvement involving managers and workers, customers and suppliers alike. Implementing kaizen processes leads to more competitive products and services. Management concepts such as total quality management (TQM) and Quality circles involve employees at all levels within the organization meeting to examine or create processes and procedures that lead to product or service improvement. They believe that a great number of small improvements over time will create substantial improvement in organizational performance (see for example http://www.kaizen-institute.com). Kaizen ideas

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encourage people to continually question current practices and seek a better way of doing something. The practice does not demand perfection – only continual movement towards the ideal. The process demands contributions from the cross-functional team. Quality Policy Organizations start the quality process by establishing a quality policy, which is a statement of operational practice principles. The quality policy promotes uniformity and consistency in the processes and procedures used by the organizations. The policy identifies specific guidelines for performing work. Functional experts prepare the section of the quality policy manual pertaining to their jobs. After reviewing and understanding the document, the organization’s executive management approves and supports the policy. This commitment on management’s part is crucial to the success of the quality process. It means that they will not dispense with quality procedures to ship a product. Management’s commitment to quality receives the real test when the end of the fiscal quarter approaches and they have not reached their sales goal. Will management support the quality organization’s efforts to maintain a product or service for which the company can feel proud or will they buckle under to the sales or production department’s drive to meet the monthly quotas? Will employees adhere to and implement the policies under stressful conditions? Imagine the pressure. The customer calls hourly demanding delivery. Bonuses are at stake for the vice presidents on down to the sales department personnel for shipping on time. Perhaps a follow-up contract hinges on a successful delivery. This places a huge psychological and perhaps a physical burden on the purchasing, manufacturing, engineering, and training departments to follow the purchasing, fabrication, installation, testing, and

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documentation procedures they have established. However, if the organization’s reputation for delivering a reliable, robust, easy to use, unbreakable, technically superior product is to be upheld, personnel must adhere to these quality policies.

It is common for customers to request a review of an organization’s quality policy before placing the order. They may wish to determine if the organization performs operations in conformity with accepted industry practices. The quality policy quickly helps outsiders understand the organization’s procedures. Many customers are leery of placing business with a firm that has little depth and has not trained the staff to follow standard operating procedures. If only a small cadre of employees follow unwritten and undocumented procedures to accomplish the tasks, the customer becomes uneasy. The customer has concerns that their job will not be completed satisfactorily and within the allotted time if one of those crucial people leaves and the remainder of the organization chooses not to follow the undocumented task procedures. Therefore, the organization counters this anxiety by developing a methodology that enables others to complete the task.

The organizations' quality policy manual frequently includes statements related to the topics shown in Table 2. The project manager need not be intimately familiar with these policies, but the PM must recognize that they exist and understand whom to contact if additional information is required. If a policy exists then the PM must include its implementation in the overall project plan. That translates into allocating schedule, budget and resources to complete the quality policy requirements.

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Table 2 – Typical Quality Policy Items in the Organization Department or Function Executive Management Human resources

Engineering

Project Management

Quality Other functional department guidelines Manufacturing Sales and Marketing Information Technology (IT)

Accounting Legal Documentation and publishing Purchasing Incoming Inspection Instrument Maintenance and Repair Field service

Typical Policy Topics

Mission; vision; values; organization chart; strategy; tactics. Personnel policy manual; job descriptions; recruitment; hiring process including psychological testing and interview scheduling; new employee orientation; phone list; discipline; employee reviews; salary guidelines; employee training; Compliance with U.S. Department of Labor and Justice regulations and requirements Documentation requirements; design guidelines; design reviews; testing; component selection; preferred standards; software selection; proposal preparation, format and review. Documentation and activities required to begin, manage, and terminate a project. (For example, requirements list, project charter, SOW, schedule, WBS, periodic actual versus expected costs, etc.) General guidelines; ISO requirements; internal quality audits; preparation of quality records; Control of Quality Records Training and Personnel Qualifications; ongoing training; Customer Supplied Products and equipment; Identification and Control of customer Items Equipment usage training; safety training; dress; fabrication techniques; purchased material processing Territory distribution; warranty; new product development and introduction; pricing Desktop and portable computer policies; networking; Internet access; firewall; external/internal access to E-mail; organization web page; computing system maintenance and upgrade; data back-up; business records and information storage. Accounting practices Contract acceptance Review; Standardized terms and conditions; government regulatory issues Preferred publishing software; format guidelines Supplier selection; preferred vendors; vendor negotiations; multiple bid requirement Control of nonconforming material and equipment Calibration and Control of Test Equipment; Instrument Maintenance frequency Corrective and Preventive Actions; customer servicing; dress; response speed to customer request

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Table 2 – Typical Quality Policy Items in the Organization (Continued) Department or Function Training Safety and Environmental Handling, Storage, Packaging and Delivery Security Facility Maintenance

Typical Policy Topics

Developing and preparing customer courses and seminars Handling of hazardous materials; Protection of workers from hazardous material; worker safety policies Material and equipment Handling; Static sensitive device handling; Ambient storage conditions (e.g., temperature and humidity); Shipping and Delivery Employee access to the facility Equipment replacement schedule; Equipment maintenance schedule; Building maintenance; Compliance with U.S. Department of Labor Occupational Safety & Health Administration (OSHA) requirements; compliance with U.S. Department of Justice Americans with Disabilities Act (ADA) requirements

Quality Planning, Assurance, and Control At some point in an organization’s maturing process, it considers the need for quality processes and the associated documentation. Frequently the motivation arises from a desire to do business with customers that demand a well-defined quality policy. For example, many European companies demand ISO 9000 compliance. Power companies such as the Tennessee Valley Authority, demand that an organization have a quality policy in place and employees use it. After they establish broad policies, many organizations institute three quality management processes: •

Planning – selecting quality standards

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Assurance – a means of ensuring that organization members implement the written plans and policies, and selected standards



Control – quality control centers on a monitoring activity that measures and evaluates data. On an assembly line, it includes inspections that focus upon testing the product and rejecting faulty items. In a service environment, organizational performance may be objectively compared with pre-established criteria. The group then analyzes and interprets this information with an eye towards improving the product or service.

Figure 2 graphically depicts the need for organizations to build a quality structure on well-rooted and supported quality policies. Quality planning, assurance, and control follow from these policies. Ultimately, this combination will blossom into satisfied customers.

The continuous quality improvement cycle shown in Figure 3 follows from the gurus’ work. As discussed by Deming, Juran and others, quality is a never-ending sequence involving all employees. During the planning process, departments and functional disciplines identify the standards, which they agree to meet. To assure a quality product, the staff develops standard operating procedures that personnel follow. After receiving training in the organization’s procedures, the quality assurance staff audits personnel to verify that they are aware of the procedures and use them. Data are collected, analyzed and compared with a reference. As part of the evaluation process, the organization encourages staff members to suggest process improvements. After

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discussion, the staff develops procedural changes. The staff pilots the recommended process change while continuing to collect and analyze data. Changes that make the product easier to produce, cheaper, better, simpler, smaller, and faster become permanent while those that do not show an improvement are discarded.

Figure 2 - The Quality Tree of Organization Life

Customer Satisfaction

Quality Assurance Quality Planning

Quality Control Quality Planning

Quality Policies

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Figure 3 - Continuous Quality Improvement Cycle

Policies • • •

Identify organizations and functional areas that will have formal quality policies Create broad objectives Create quality policies

Change

Planning

Develop a model for change if

• • • •

a) performance criteria are not met, or b) process modifications may improve outcomes



Define Outcomes (performance criteria) Establish goals Identify Resources Select external standards Select and/or Prepare internal standards

Control • • • •

Define performance indicators & criteria Measurement (Tools and Procedures) Data collection, reduction & analysis Data Evaluation

Assurance – Implementation process • Preparation of procedures • Staff development and training • Audit • Measurement methodology • Feedback

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Quality Planning Quality planning involves identifying and selecting the quality standards relevant to the project and determining how to satisfy them. These standards include both internally and externally driven requirements. Internal standards comply with each department’s methodology for performing work. They may have evolved from product testing, safety considerations, and experience or past successful practice. Examples of internal standards include the following: •

Physical or educational requirements required to perform a job



Minimum test scores required to perform a job



Checklist used to verify a hardware or software development effort during a design review



Software or hardware Installation procedures



Usage of standard software, tools, system components and/or equipment



Purchased item inspection



Hazardous material handling

External standards may include requirements derived from professional, international organizations, local, state and federal government guidelines and regulations. Contracts may require product deliveries that meet generally accepted industry standards prepared by organizations such as those shown in Table 3. At times, a customer may impose its own internal standard onto a contractor.

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Table 3 – Typical External Standards Standard Software Engineering Institute (SEI) European Software Institute

Institute of Electrical and Electronic Engineers (IEEE)

American Society for Quality (ASQ)

American National Standards Institute (ANSI) International Organization for Standardization (ISO) e.g., ISO-9001: 2000, ISO/IEC JTC 1

U.S. Department of Defense Military Standards

Malcolm Baldrige Award

U.S. Department of Labor Occupational Safety and Health Administration (OSHA)

Purpose Software standards for product design, development, test and documentation. Software standards for product design, development, test and documentation – used primarily in Europe. The IEEE standards cover the fields of electrical engineering, electronics, radio and the allied branches of engineering, and the related arts and sciences. Design development, test, and installation of electronic hardware, computer software, and computer networking standards. Standards in the field of Quality Management, Environmental Management, Dependability, and Statistics. ANSI registers and distributes standards from accredited developers. Covers international standardization in the field of Information Technology. Information Technology includes the specification, design and development of systems and tools dealing with the capture, representation, processing, security, transfer, interchange, presentation, management, organization, storage and retrieval of information. Military Standards covering everything from component selection to welds and from specification preparation to product testing. Design development, test , and installation of electronic hardware, computer software, and computer networking used for military purposes. Group that establishes quality standards for business, academic, and health organizations. Designates outstanding examples as award recipients. Occupational safety, health and ergonomic standards to protect workers in organizations.

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The organization’s quality plans clarify stakeholders’ expectations of the design, development, fabrication and installation processes. Employees understand the nature and complexity of the design review(s) at the outset of the project. Software and hardware developers recognize that at some point in the process, the design freezes. That is, the design can only change for good reason and must pass through an approval cycle. Supporting documentation such as an engineering change notice (ECN) must accompany the proposed change. These precautions exist because of the likelihood of a design change following the “official design release” will affect another department’s work. The approval process forces awareness of the modification by other departments by requesting functional managers to “sign” the paper work. This change may trigger a variety of reactions. Depending on the nature of the change, purchasing may have to order a different part, or the installation or maintenance procedure changes, or software version changes may introduce compatibility problems, etc. A formalized notification process informs all departments of the impending change and permits them to take appropriate action.

Policy plans spell out the organization’s philosophy for managing software and hardware documentation such as requirements statements, schematics, drawings, manuals, specifications, test plans and test results etc. following stakeholder acceptance. The documentation policy establishes a change “paper trail” or product history that frequently assists the organization in identifying the reasons for problems that arise.

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Typically after product test, purchased material cannot change without approval from the engineering development team. Frequently, engineers transfer the tests used to verify the operation of the development system to the manufacturing organization. Test technicians do not change these tests arbitrarily. Even the equipment used to test the developed system “freezes.” The PM requests test technicians to record the test equipment manufacturers’ model numbers and software versions so that the test can be accurately repeated in the future. This control ensures an accurate baseline system configuration.

Many external organizations provide outlines for establishing a quality plan. These include the Institute of Electrical and Electronic Engineers (IEEE), the Software Engineering Institute (SEI), the European Software Institute (ESI), the International Organization for Standardization (ISO), and the Malcolm Baldrige Award organization. All these organizations have their place and are important. The six sigma concept does not have an organization that promotes it, but many companies have adopted this approach to quality. For the most part, these programs do not conflict with one another. Indeed, they are mutually supportive.

Each of these processes affects the project manager’s

process and documentation responsibilities. The PM does not have to perform the work, but must understand the process so that the project gets done on-time and within budget. Usually the customer accepts the quality program in-place at the organization. Some customers demand that the contractor use one or more of these external

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standards. We will briefly examine several quality plans that organizations commonly use.

IEEE Software Quality Plans The software project plan documents the work necessary to conduct, track and report on the progress of a project. It contains a full description of how the technical staff will perform the work. The Institute of Electrical and Electronic Engineers (IEEE) developed a set of software lifecycle standards representing its view of best commercial practices. Table 4 illustrates a list of these plans. Some software development organizations follow a combination of these specifications. For example, they commonly use the following five plans:

Software Quality Assurance Plan (SQAP): IEEE 730.1 Software Requirements Specification (SRS): IEEE 830 Software Design Document (SDD): IEEE1016 Software Verification and Validation Test Plan (SVVP): IEEE1012 Software Verification and Validation Report (SVVR)

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Table 4 -- IEEE Software Quality Standards

IEEE Quality Standard Software Quality Assurance Plans Guide for Software Quality Assurance Planning Software Configuration Management Plans Software Test Documentation Guide for Software Requirements Specifications Software Unit Testing Software Verification and Validation Plans Recommended Practice for Software Design Descriptions Software Reviews and Audits Guide to Software Configuration Management Software Productivity Metrics Software Project Management Plans Guide for Software Verification and Validation Plans Software Quality Metrics Methodology Software User Documentation Developing Software Life Cycle Processes Software Maintenance Guide to the Project Management Body of Knowledge

IEEE Standard Number 730-1998 730.1-1995 828-1998 829-1983 830-1984 1008-1987 1012-1998 1016-1987 1028-1988 1042-1987 1045-1992 1058-1998 1059-1993 1061-1992 1063-1987 1074-1991 1219-1998 1490-1998

The SQAP serves as a contract between the project team and the software quality assurance department. The SQAP identifies the specific tasks the software quality assurance department must perform to support the project team. These activities may include the following: •

Reviewing project plans



Identifying software standards, practices, and conventions used on the project



Specifying a method of verifying compliance with the selected standards, practices, and conventions

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Describing the configuration management activity to ensure that project documents (such as the project management plan, the SQAP, the test plan; and deliverable documentation) are maintained under change control



Performing audits to verify that all software personnel follow the software plans



Coordinating software review meetings



Participating in the risk management program, and



Monitoring the software test program.

The SRS collects and formalizes the customer’s requirements in a systematic and comprehensive manner. The document’s goal is to define the system to meet the user's needs, which should lead to user satisfaction. Some contracts demand that the software developer submit the SRS to the customer for review and approval. This procedure verifies that the developer has correctly interpreted the customer’s requests and included all of the customer’s requirements in the document. The customer and contractor must negotiate and resolve all discrepancies before work can proceed.

The SDD represents a detailed version of the SRS. It examines the system's functions and sub-functions before coding. In addition to providing a detailed description of the internal design details of each function, the SDD defines naming standards and coding standards; specifies the software architecture, includes appropriate design analyses; and describes interdependencies among the software functions and system interfaces. The interfaces specified in the SRS may include operator, computer, and input/output

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devices such as a bar code reader, terminal or printer. The interfaces frequently consist of the linkages between third party software such as a database and a report writer. The descriptions can take the form of narratives, flow charts, or any other methodology on which the team agrees. This design information becomes the basis for coding and software testing.

Following the completion of the SDD, the programmers code using the agreed upon software tools. The software verification and validation plan (SVVP) uses the SDD as the basis for functional testing. Verification involves reviewing, inspecting, testing, and checking something to ascertain that processes, services or documents conform to specific requirements. Validation requires the software developer to evaluate software throughout the development process to ensure compliance with user requirements. Programmers generate a plan that tests every aspect of the software and its interfaces. The programmer prepares test cases and procedures to enable a quality assurance technician to evaluate the software’s operation. Software developers prepare software test documentation that contains detailed instructions and templates for every aspect of the software test process. The tests performed by a software quality assurance technician verify that the developers implemented the customer’s requirements as expected. Technicians record the results of test cases. At the test’s conclusion, the technician prepares a software verification and validation report (SVVR) that describes to stakeholders the software package’s status. In addition to verifying that the software program correctly implemented all of the customer’s requirements, the software test technicians determine the robustness of the package. That is, they intentionally make

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mistakes; they combine unusual key combinations; pursue unintended pathways in the software package. The object of this effort is to determine the software’s sensitivity to human error. If the software goes off to “never-never-land” (locks up the computer or breaks down in some fashion) too often, then further work is required by the developers. After SVVR approval, the Q.A. Department releases the software for manufacture and distribution.

®

®

Capability Maturity Model (SW-CMM ) for Software The Software Engineering Institute (SEI) is a federally funded research and development center sponsored by the U.S. Department of Defense (DOD) and operated by Carnegie Mellon University. In the 1970’s and 1980’s, Military and commercial software projects consistently fell behind schedule, exceeded budgets and did not meet the customer’s operational requirements. Paulk (1995) reported that organizations complete typical commercial software projects a year late and overrun the planned budget by 100%. In a review of one DOD software organization’s 17 major projects, auditors discovered that software developers missed the average 28-month schedule by an average of 20 months. A planned four-year project took seven-years to complete and no project was delivered on time. Clearly, a problem existed. The U.S. Department of Defense engaged the Carnegie Mellon University to participate in the development of a software development methodology to bring the management of software projects under control. SEI developed a model to establish a coherent software design process that organizations could follow. The Software Capability Maturity Model (CMM or SW-CMM) assists managers in judging the maturity of an

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organization’s software processes. The model does this by categorizing the processes (Table 5) used by organizations on a scale from poor to outstanding or as SEI terms it from ad hoc, chaotic processes to mature, disciplined software processes. As described on the Software Engineering Institute web site (http://www.sei.cmu.edu/cmm/cmm.sum.html), CMM places an organization into one of five maturity levels. Organizations that develop software with this model have as an objective predictability, customer responsiveness, and control so that managers can accurately predict software development costs and delivery.

Each key process area is described in terms of the key practices that contribute to satisfying its goals. The key practices describe the infrastructure and activities that contribute most to the effective implementation and institutionalization of the key process area.

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Table 5 - Software Capability Maturity Model (CMM) CMM Level 5

4

3

CMM Level CMM Level Characteristics Descriptor Optimizing Continuous process improvement is enabled by quantitative feedback from the process and from piloting innovative ideas and technologies. Managed Detailed measures of the software process and product quality are collected. Both the software process and products are quantitatively understood and controlled. Defined The software process for both management and engineering activities is documented, standardized, and integrated into a standard software process for the organization. All projects use an approved, tailored version of the organization's standard software process for developing and maintaining software.

2

Repeatabl e

Basic project management processes are established to track cost, schedule, and functionality. The necessary process discipline is in place to repeat earlier successes on projects with similar applications.

1

Initial

The software process is characterized as ad hoc, and occasionally even chaotic.

Key Process Areas

Organization Focus

Defect Prevention, Technology Change Management, and Process Change Management. Quantitative Process Management and Software Quality Management.

Implement continual, measurable software process improvement

Organization Process Focus, Organization Process Definition, Training Program, Integrated Software Management, Software Product Engineering, Intergroup Coordination, and Peer Reviews. Requirements Management, Software Project Planning, Software Project Tracking and Oversight, Software Subcontract Management, Software Quality Assurance, and Software Configuration Management.

Establish an infrastructure that institutionalizes effective software engineering and management processes across all projects

Establish a quantitative understanding of both the software process and the software work products built

Establish understanding between customer and software developer. Establish basic project management controls

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Few processes are defined, and success depends on individual effort and heroics. Source: Software Engineering Institute (http://www.sei.cmu.edu)

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Most small organizations today remain at level one. They do not prepare technical and managerial plans and schedules, nor do they prepare and monitor budgets. Requirements are sometimes fuzzy. They may or may not hold formal or informal design reviews. Slightly in excess of 200 organizations had the courage to declare their CMM status level (Table 6). Approximately 37% of those place themselves in level 3 – which is quite good.

Table 6 - The Software Engineering Community's Compiled List of Published Maturity Levels (as of June 5, 2001)

CMM Level

Number of Declared

Percent Distribution

Organizations 1

--

--

2

35

17%

3

76

37%

4

40

20%

5

52

26%

Source: Software Engineering Institute (http://www.sei.cmu.edu), July 2001

The Software CMM has had a wide influence on software design processes and quality improvements. It may be the best known and most widely used model worldwide for software process improvement. As with all of the quality methodologies discussed, it demands that employees receive training in its use. By following the model, software

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developers learn that software development consists of more than code writing. The software CMM model promotes evolutionary or incremental change as espoused by a kaizen-style or CQI approach to organizational change. That is, it supports gradual, cumulative improvement to business processes rather than revolutionary changes. Following the CMM process prohibits the project manager from saying “Ship it now and fix it in the field.” This kind of sloppy management damages the organization’s reputation and credibility.

ISO Standards The International Organization for Standardization (ISO) is a worldwide federation of national standards bodies from approximately 140 countries (refer to the web site http://www.iso.ch/iso/en/ISOOnline.frontpage). ISO’s mission “is to promote the development of standardization and related activities in the world with a view to facilitating the international exchange of goods and services, and to developing cooperation in the spheres of intellectual, scientific, technological and economic activity. ISO's work results in international agreements which are published as International Standards.” Many of the ISO ideas link directly to the perspectives espoused by Crosby, Deming, Feigenbaum, Ishikawa, and Juran (Smith and Angeli, 1995). In common with the quality plans previously discussed, ISO standards strives to: •

Form a foundation for project improvement, consistency and profitability.



Provide stability, improved products and services, customer satisfaction and reduce waste.



Increase employee awareness of company requirements and procedures.

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Establish a basis for continuing improvement

The terms ISO 9000, ISO 9001, ISO 9002, ISO 9003 and ISO 9001:2000 all deal with quality management in organizations. People use the generic term ISO 9000 certification to mean certification against ISO 9001, ISO 9002 or ISO 9003. The difference among the three is one of scope. The ISO website distinguishes one standard from another in the following ways: •

ISO 9001 sets out the requirements for an organization whose business processes range from design and development, to production, installation and servicing;



ISO 9002 is the appropriate standard for an organization that does not carry out design and development. The organization may be involved in product production, installation and servicing. Appropriate for a distributor or manufacturer without design functions



.

ISO 9003 is the appropriate standard for an organization whose business processes do not include design control, process control, purchasing or servicing. The company uses inspection and testing to ensure that final products and services meet specified requirements.

As with all quality systems, ISO 9000 compliance success requires extensive employee training. Although the primary purpose of ISO 9000 compliance is to improve product and service quality, the marketing aspects of achieving certification should not be overlooked. Some organizations will only purchase products and services from those that have achieved ISO 9000 certification. This is particularly true for the automotive 360

industry and European based organizations. You can bet that a company’s sales and marketing department’s will use ISO 9000 certification as a marketing tool.

The International Organization for Standardization (ISO) is in the midst of a transition period. The three levels of certification (ISO 9001, ISO 9002 or ISO 9003) have changed to a single certification (ISO 9001: 2000). Organizations have until December 15, 2003 to make the transition to the new standard.

ISO 9000:2000 has defined

eight quality management principles for performance improvements, which are 1. Customer focus 2. Leadership 3. Involvement of people 4. Process approach 5. System approach to management 6. Continual improvement 7. Factual approach to decision making 8. Mutually beneficial supplier relationships The complete document may be found on the ISO web site (http://www.iso.ch/iso/en/ISOOnline.frontpage).

CMM and ISO 9000 series of standards share a common concern with quality and process management. Paulk (1994) compared the two systems. His analysis showed that by following ISO 9000 procedures, the organization would satisfy most of the level 2 goals and many of the level 3 goals. Because there are practices in the CMM that are

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not addressed in ISO 9000, it is possible for a level 1 organization to receive ISO 9001 registration. Some areas addressed by ISO 9001 are not addressed in the CMM. Paulk (1994) states that a level 3 organization would have little difficulty in obtaining ISO 9001 certification, and a level 2 organization would have significant advantages in obtaining certification. The two models continue to evolve and influence each other.

An organization that complies with ISO 9000 quality plans employs processes that describe and control every element of the project lifecycle. As part of the ISO qualification process, an external group audits the organization to verify that the organization performs the quality routines they purport to do. In preparation for these external reviews, the internal quality department periodically performs audits of the organization’s departments to verify that all department members have familiarized themselves with the processes. ISO recognizes that every organization uses processes unique to it. The question with regard to obtaining ISO certification is does the organization practice what it preaches? Do the organization’s members consistently follow the policies and procedures outlined in the quality plan? Organizations that can satisfy these issues have minimal difficulties passing audit examinations.

Six Sigma All of the quality plans discussed share a great many similarities. They focus on customer satisfaction, emphasize data analysis, strive for product and process improvements and demand senior management involvement.

Six sigma also focuses

on customer satisfaction and continuous improvement to reduce defects. However,

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unlike the others, six sigma quantifies the defect rate objective to 3.4 defects per million installations, products manufactured, etc. The method also specifies tools designed to both identify and correct these defects.

How good is good? Motorola (Harrold, 1999) asks if the following defect rates are acceptable: •

20,000 lost pieces of mail every hour.



Unsafe drinking water almost 15 minutes every day.



5,000 incorrect surgery operations per week.



2 short or long landings at most major airports each day.



200,000 incorrect drug prescriptions each year.



No electricity for almost 7 hours each month.

These numbers reflect a defect rate of about four sigma or a bit less than 1 failure in every 100 units produced. Do you think a 1% failure rate is acceptable for a heart rate monitor or a pacemaker? Is one airplane crash in every 200 takeoffs acceptable? Table 7 identifies the failure rate in several industries. A test grade of 99 out of a 100 may be praiseworthy, but it is unacceptable in many industries. You may have second thoughts about contacting the IRS for tax advice if they provide the wrong answer one out of four times. Perhaps the IRS could benefit from quality training. Indeed, the average company at 3σ could use help.

In the 1980’s Motorola decided to strive for something better and coined the term "Six Sigma." Six sigma uses a DMAIC (Define, Measure, Analyze, Improve and Control)

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program to affect positive change in business processes. The method represents an alternate view to the approach shown in Figure 1. The concept does not differ dramatically from the Deming-Shewhart plan-do-study-act cycle.

In addition to

Motorola, General Electric, Allied Signal, Sony and Cummins Engine, have used the six sigma approach to achieve customer satisfaction.

Table 7 - Typical Defect Rates in Selected Industries and Professions

Profession

Approximate Percent Defect Rate -%

Defect Failure Rate

25

IRS phone-in tax advice

(2.2σ)

Restaurant bills, doctors prescription writing, and payroll processing

(2.9σ)

Average company

(3.0σ)

6.7

Airline baggage handling

(3.2σ)

5

Best in class companies

(5.7σ)

0.002

U.S. Navy aircraft accidents

(5.7σ)

0.002

Watch off by 2 seconds in 31 years

(6σ)

0.00034

8.5

0.00032 Airline industry fatality rate (6.2σ) Source: Harrold, D. (1999). Designing for Six Sigma Capability. Control Engineering Online. http://www.controleng.com/archives/1999/ctl0101.99/01a103.htm

Although Six Sigma's tools and methods include many of the statistical tools used in other quality approaches, here they are employed in a systematic project-oriented fashion. Six sigma requires extensive employee education. From 1996 to 2000, GE invested heavily in six sigma activities by training the vast majority of its 230,000 employees. They hired outside consultants to support this effort. General Electric chief

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executive officer (CEO), Jack Welch committed the organization to support this effort because he strongly believed that it would pay for itself. (Remember, rarely does a CEO in the capitalist system embark on a project without the expectations of a healthy return on investment.) Portions of the executives bonuses were linked to the introduction of six sigma – this had to be serious business. By all accounts, the quality program has proven very successful at GE.

The six sigma training program borrows titles from the martial arts and creates Master Black Belts, Black Belts, and Green Belts all of whom have varying levels of competency. The Master Black Belts are the teachers. Black Belts provide project leadership. Green Belts work for a Black Belt and lead smaller projects. The tools that these quality practitioners use includes 1) Histograms that show the range and distribution of the product’s variances, 2) Ishikawa diagrams, 3) check sheets to verify the order and number of the tasks to perform, 4) diagrams that show the factors that contribute the most defects, 5) graphs that plot output versus time, and 6) scatter diagrams – a statistical technique that plots variations with respect to a reference. The quality gurus listed in this chapter introduced many of these techniques. Six sigma built and expanded on the concepts already widely used by different businesses and industry. The approached integrated many of these concepts into a cohesive package, introduced quantitative targets and further emphasized mass employee training.

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Quality Assurance The foregoing examples of quality plans involve specific actions that employees must follow to provide a product or service. The quality assurance process attempts to create a culture that centers on the use of reliable processes and systems involving checking and feedback. Quality assurance concentrates on policy and procedural mechanisms for quantifying organizational performance. The typical means of implementing quality assurance involves employee training and then following up by an auditing process.

To make certain that employees follow the recommended plans and procedures, the QA organization encourages departments to prepare forms and procedures (Table 7) that define what to do and how to do the department’s work. The usage of these forms creates a “paper-trail” that confirms that employees used approved design, fabrication, test, and installation methods in performing their activities. In medium to large organizations, the quality assurance department periodically audits functional department to verify that employees understand and follow recommended procedures.

Total quality management (TQM) is the generic concept behind quality assurance. The continuous quality improvement process described in one form or another by all of the gurus goes into action. With executive management’s support and blessing all employees on a project meet on a regular basis to discuss ways of improving the products and services they offer. Everyone has the right, in fact the responsibility, of thinking about the product and service and saying “I think we should do this …” or “the

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customer believes that the product would be better if …” or “we could save money if we did this ….” Or “the competition is doing …., why don’t we do … .” or “ this supplier’s product gives us these problems …. Consider using XYZ supplier.”

At a TQM meeting, don’t be shy. Express your viewpoint. Each member of the organization from management to line worker has a unique perspective that helps to pinpoint problems and improve the product or service. Help open up the discussion at a TQM meeting. This will improve the CQI process. Avoid the Abilene Paradox -- a well known tale in management literature wherein a family (team members), each privately opposed to an action, publicly encourage others to continue, for fear of offending a team member or appearing negative.

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Table 7 -- Typical Quality Assurance Documentation

Organization Chart

Firmware Development

Proposal Documentation

Hardware Development Procedure

Statement of Work

Document Control Procedure

Specification

Project Management Procedure

Work Breakdown Structure

System Configuration Procedure

Schedule

Software Development (e.g., SQAP, SRS, SDD, SVVP & SVVR)

Forms Project Kick off Meeting Assignments Responsibility Assignment Matrix (RAM) Engineering Change Notice

(ECN)

Product or Service Test Procedures Work Instruction Work Authorization

Product or system configuration checklist

Product Assembly Instructions

Project Management Checklist

Computer setup Instructions

Guidelines

Manufacturing Equipment Instructions

Hardware Development Guidelines

Computer Backup Instructions

Software Development Guidelines

Test Integration Instructions

Procedures

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Quality Control Harold Geneen states, “In quality control, you are controlling the down side. You are stipulating how many defects, how many minus numbers, are acceptable (p. 35).” During the manufacturing process, quality control involves product inspection, measurement of variation from norms, collecting and then analyzing data. At selected stages of the design, fabrication or manufacturing process, technicians test the product to verify it performs according to expectations. Variances outside of a preset tolerance range require examination to determine the reason for the discrepancy. Reasons for large variation include poor design, worn tools, unclear fabrication directions, weary workers, suppliers providing defective material, and others. The issue requires study of the process to determine appropriate solutions.

In a service environment, quality assurance typically makes use of customer surveys, focus groups, and customer feedback. Surveys exist to determine if the company does its job of “delighting the customer.” Most college students have completed course and faculty evaluation reports. These reports represent one aspect of a college’s continuous quality improvement system targeted at upgrading course content and assisting faculty in improving course presentation.

Restaurants place evaluation forms

on tables that help them evaluate the quality of the dining experience. They seek comments regarding food, service or facilities that will help them better serve the diner or reward outstanding employees. Typical restaurant surveys ask the diner to comment on a scale from poor to excellent on items such as: •

Pleasant greeting on entering the establishment

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Speed of service



Food quality



Value



Restaurant/restroom cleanliness

An airport in the United Kingdom conducts surveys to determine passengers' perception of its service. They ask travelers to rate the airport from poor to excellent on their day’s experiences in the following areas: •

Ease of finding your way through airport



Flight information screens



Availability of flights to a destination



Ease of making connections with other flights



Availability of baggage carts



Courtesy, helpfulness of airport staff



Restaurant facilities



Shopping facilities



Washrooms



Passport and visa inspections



Customs inspection



Comfortable waiting /gate areas



Cleanliness of airport terminal



Speed of baggage delivery service



Ground transportation to/from airport



Parking facilities

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Sense of security



Ambience of the airport



Overall satisfaction with airport.

A Holiday Inn hotel in downtown Vancouver requests each customer to comment on their stay by responding to a survey that rates their satisfaction from very dissatisfied to very satisfied in a five step scale. The include the following items in the survey: •

Outside appearance of hotel



Lobby condition



Service at check-in (friendly, efficient, prompt)



Guestroom ! Overall cleanliness ! Bath facilities ! Heating/air-conditioning ! Bed comfort ! Television/radio ! Condition of furniture ! Condition of bedspread/drapes/carpet



Service of hotel staff ! Responsiveness to your needs ! Friendliness ! Attitude and appearance



Restaurant ! Quality of food/beverage

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! Restaurant cleanliness ! Quality of service •

Telephone services (wake-up calls, messages, long distance/ local services)



Lighting



Hotel safety and security (lighting, locks, safety deposit)



Accuracy of billing



Service at check-out (friendly, efficient, prompt)



Value received for price paid

Whether prepared for a specific project or for a more general purpose, organizations collect and analyze both quantitative and qualitative data. Organizations identify and select the corrective actions to pursue as they follow the Deming-Shewhart Plan-DoCheck-Act Cycle. In the operations area, quality control also considers postmanufacture issues such as distribution, installation, service and product use.

Responsibility for Quality

No matter which quality approach the organization follows, the project manager has the responsibility for implementing the selected process. The PM works with the organization’s quality department, functional managers, suppliers, executive management, customer and all other stakeholders to make certain that they follow the prescribed quality policies. The PM works with the stakeholders to

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Identify quality problems



Recommend solutions



Execute solutions



Stop work if the product or service does not conform to expectations until satisfactory problem resolution.



Prepare the required documentation

The costs for implementing quality measures should be included in the preparation of the RFQ or RFP. Juran believed that quality does not happen by accident, it must be planned. The PM has the responsibility to make certain that the organization successfully carries out the plan.

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Chapter 9 Questions

1) W. Edwards Deming, Joseph Juran, and Phillip Crosby were instrumental in the development of quality management thought. Go to each of the following Web sites and compare and contrast each of their philosophies: W. Edwards Deming Institute (http://www.deming.org/), Juran Institute ( http://www.juran.com/), Philip Crosby (http://www.philipcrosby.com/). 2) Identify four quality management theorists and briefly describe their contributions. 3) What are the three aspects of a quality program? Briefly describe them. 4) Briefly describe four quality plans used by organizations. 5) Describe the five Software Capability Maturity Model (CMM) levels. 6) Is a quality level of one defect out of a hundred sufficient? Explain your answer. 7) At the Juran Institute’s Web site (http://www.juran.com/,), you will find several of Dr. Juran’s articles available for download. Select one article and develop a two or three paragraph summary of its key points. 8) Visit the Malcolm Baldrige Web site ( http://www.quality.nist.gov/show.htm) and examine the profiles and web sites of the most recent winners. What aspects of their quality management system distinguish them? 9) A page on the Malcolm Baldrige Web site ( http://www.quality.nist.gov/show.htm) identifies the features of outstanding colleges. Compare and contrast five attributes expected of quality colleges and compare and contrast them with a college with which you have some familiarity. 10) Do you agree with the statement “Personal quality standards and business quality standards have little in common.” Explain your answer. 11) Do you agree with the statement “Quality relates to the process as much as to the goal?” Explain your answer. 12) Are people who talk about quality idealists? Explain your answer. 13) The organization that sponsors ISO 9000 is the International Organization for Standardization. Why do they refer to themselves as ISO? The answer can be found on the ISO Web site: http://www.iso.ch/.

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14) Visit the Malcolm Baldrige Web site and determine the quality requirements that they espouse. Compare it with any other quality plan discussed in this chapter.

Self-check test Answer True or False 1. Quality is preventing problems rather than picking up the pieces afterward. 2. Quality can always be improved. 3. The most important reason for a quality program is to have satisfied customers. 4. Constant attention to quality is unnecessary. 5. Quality involves the little things as well as the big things. 6. A quality program must have management support to be successful. 7. Quality guidelines are best communicated by word-of-mouth. 8. Customers pay little attention to quality. 9. A quality program must integrate with the organization’s goals and profit plans. 10. Quality means conformance to standards. 11. Quality should operate in all parts of a business. 12. Quality requires commitment.

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CHAPTER 10 CHAPTER 10

Project Risk

When one door of happiness closes, another opens; but often we look so long at the closed door that we do not see the one which has been opened for us. --Helen Keller

<>

Chapter objectives After studying this chapter, you should be able to:

Understand the concept of risk management Understand the four processes and actions to manage risk involved in risk management Understand the risks during the proposal stage Use a template to estimate the cost of risk during the proposal pricing stage Contribute to resolving the risk management effort in your organization

Risk Management Process Risk deals with the uncertainty of attaining a goal or objective. The PMBOK (2000, p. 127) states that “Project Risk Management includes the processes concerned with identifying, analyzing, and responding to project risk. It includes maximizing the results

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of positive events and minimizing the consequences of adverse events. “ The PMBOK suggests using the following processes and actions to manage risk: •

Risk Identification – determine the risks likely to affect the project and document the characteristics of each.



Risk Quantification - evaluate risks and risk interactions to assess the range of possible project outcomes.



Risk Response Development – define the steps to thwart the threats.



Risk Response Control - respond to changes in risk over the course of the project.

Risk management recognizes that things can go wrong throughout the project lifecycle and implies that PMs should prepare for it. During the project planning stage, the PM together with the functional managers, suppliers and other stakeholders review the customer’s requirements. The team assesses the ability of the system under development to meet these requirements. As they progress during the planning stage, the team identifies areas of concern. If they identify a customer requirement or project objective that seems questionable, the planning team documents the issues (technical or otherwise) and estimates their impact on the cost, schedule, and available resources. The stakeholders prepare an action plan to mitigate the risk if any of the problem issues arise. The PM sets aside a contingency budget to fund the inevitable problems and issues arise.

During the project, the team members track and report on the project

activities with attention paid to the emergence of the noted risk indicators. If the

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anticipated problem issues arise, then the stakeholders whip out the corrective action plans and implement them.

Risk Identification at the Proposal Stage

Contract Most customers award a firm, fixed price contract. The fixed price includes all of the costs, overhead, G&A, and profit in the final price. That is, the customer and the contractor agree on a price and that is the price paid to the contractor no matter the cost. The customer does not care if the contractor or developer makes a profit on the job. The customer simply wants a finished product or service at the end of a specified time at the agreed price.

In years gone by, the government sometimes offered a “cost

plus” contract. Under a cost plus contract, the contractor received a profit (typically 10%) based on total project expenditures. Under this contract format, the contractor had no incentive to reduce costs and frequently would load the project with unneeded personnel. It was a great way to train new employees in the organization’s procedures. After six months to a year the employees gained the experience to contribute meaningfully to the organization’s activities. Some of them would likely be transferred to different job – perhaps a fixed price contract – and replaced by another crop of new hires. The government would pay for all of this. Not too efficient, but permissible on a cost plus contract. In defense of this policy, some contractors refused to bid on a new and potentially difficult development project using unproven technologies for fear of

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under-estimating the costs and losing money. The government offered the cost-plus contract to entice companies to pursue difficult new and risky developments.

Sometimes circumstances demands project completion by a given date and the customer willingly agrees to pay a premium for this outcome. The customer develops a contract intended to motivate the developer by offering a fixed price plus an incentive fee. That is, the customer pays the agreed price to the contractor if the contractor completes the project on the scheduled date. However, if the contractor delivers early, then the customer pays the contractor the agreed price plus an additional percentage of the price, which is commonly referred to as an incentive fee. The downside of this arrangement involves a penalty if the contractor delivers late. The penalty aspect of this contract represents risk and the PM must carefully monitor the execution of the plans to prevent returning money to the customer.

Technical Risk Small electromechanical system and software developers frequently confront technical risk in a new project. Risk exists if your organization has not previously delivered a similar system or software package. The use of software, hardware or manufacturing tools not previously used by your organization entails risk. Initiating changes into the development or fabrication process introduces risk. Frequently, the consequence of these risks surrounds schedule which results in additional labor hours to complete the task(s). It may take longer for the staff to learn about something than you anticipated.

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Murphy’s laws never take a vacation. [ 1) If anything can go wrong, it will. 2) Nothing is as easy as it looks. 3) Everything takes longer than you think it will.]

A new technology brings with it all manner of risk. By its very nature, a research project contains very significant risk because the staff does not know if it will succeed. The maturity of the technology used on the project has a major bearing on the system risk.

Referring to Table 1, the use of a leading edge technology raises the eyebrows of most PMs. Whether software or hardware, unproven or recently introduced technology will have bugs – unknown problems that limit the use of the application software. Sometimes engineers on technology’s front cusp insist on using Beta software. The term Beta signifies software in an advanced state of development but still in test and not yet officially released for production. This software has problems. Manufacturers release Beta software versions to knowledgeable customers to help them “wring out” the software just before formal production. The customer willingly accepts the risk entailed in using unproven software to take advantage of unique features that it desires. When using leading edge technology, functional managers and project managers anticipate setting aside time and budget for staff training. Depending on the complexity of the new technology or software, it will take some time for the staff to achieve proficiency in the use of the new products. PMs understand that new technology has documentation problems. Organizations frequently deliver documentation such as application notes, operational user manuals, maintenance manuals , and training manuals sometime after product release.

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Invariably the standard computers available in the organization will require upgrade to operate leading edge software. New developers tend to use the latest available computer features. For cutting edge software they will expect a cutting edge platform that includes a large hard drive, gobs of memory or some other feature. Make certain to budget for additional computer hardware to operate the new software.

Expect reliability issues associated with new electromechanical and electronic products. Assuming there are no engineering design issues, large production runs usually require some time to work out the manufacturing kinks. Great demand and limited initial production translates into a high price for the product during the first months following introduction.

Initially, a new electronic product usually has only a single supplier. Some time elapses before other manufacturers decide to second source the product. Usually the component price remains high during the time for which only a single source exists. Another downside consideration of using a sole sourced item is that your organization will have major redesign issues if the sole source supplier decides to change or discontinue the component. If the sole source supplier experiences production problems or gains success in the marketplace and your organization is not a preferred customer, then your organization may have difficulty obtaining the required component. Of course, situations exist that demand the use of a sole sourced supplier. Another company may not offer a product containing the requirements that your organization

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demands. If this is the case, then you must develop a close rapport with the supplier and stay abreast of any anticipated product specification, technology or price changes.

For these reasons, many project managers prefer not to use leading edge technology. They prefer to consider state of the art or mature technologies to eliminate the risks inherent in this technology. It does take some convincing, because most engineers and technicians want to use “the latest and the greatest” product. They feel they become obsolete if they do not use the most recent technological innovation.

During the state of the art years, the leading edge technology products become reliable, available and the price stabilizes. Training becomes readily available and second sources may emerge.

The PMs favorite, the mature technology, has everything going for it – product availability, low price, reliability, multiple sources, and accurate documentation. Product availability will likely continue for several years to come, which will satisfy system maintenance issues. By this time, technology practitioners have received training and the project will not incur schedule delays or budget surprises due to lack of training. The software will work on all computers, because computer hardware will have caught up to the features required by the software. Little, if any, risk is involved. Great choice.

Risk begins to increase if the project intends to use sunset or aged technology. Technical personnel become harder to recruit. They voice reluctance about working on

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older technology. While on the job they may seek other opportunities within and external to the organization to enable them to work on projects with newer technology. Job changing may result in schedule delays while a new person assumes a transferees responsibilities.

Component multiple sources disappear as product demand

decreases and manufacturers no longer enjoy the profits they would like.

Avoid legacy system components. Only companies specializing in obsolete product sales will help you. If a supplier has obsolete product in stock, expect a high cost. Within your organization, few personnel will have familiarity with obsolete components. Certainly no one wants to work on them. Recent graduates will not have any background in this technology and will be at a loss. In a Pentium 4 world would you want to work on a computer with an 80386 or 80486 processor? Manufacturers no longer support legacy components. Few people in their organization can help you with an application. The most recent computers may have difficulty operating legacy software. As an example, try running DOS based software in a Windows 2000 environment. Forget about it!

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Table 1 – Technology Risk

Technology

Elapsed Time in Years Since Introduction

Employee Training

Leading edge

<1

Maximum

State of the art

1-3

Mature technology

Training Availability

Software or Electronic Hardware Reliability

Electronic Hardware Product Availability

Few courses available

Poor

Limited

Moderate

Courses become available

Good

Good to Excellent

3-5

Minimal

Plentiful Courses

Excellent

Excellent

Sunset

5-8

Moderate

Fewer courses available

Excellent

Moderate

Legacy

>8

Seek specialists

No courses

Excellent

Limited Availability

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Table 1 – Technology Risk (Continued)

Technology

Computer Platform to Operate Software

Electronic Hardware Second Source Availability

Documentation Availability

Product Price

Leading edge

New or Upgraded older system

None

Lack of availability and error prone. Few application engineers available to assist with problems.

High

State of the art

New or Upgraded older system

Likely

Improving

Moderate

Mature technology

Standard Platform

Yes

Complete with all updates

Low

Sunset

Standard Platform

Yes but decreasing

Complete with all updates

Moderate

Legacy

Limited Availability

Limited Availability

Complete with all updates.

High

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Performance Some customers request that the contractor demonstrate compliance with every requirement listed in the specification.

A performance test requires significant

preparation time as well time to actually perform the test. It is customarily performed during the factory or site acceptance test. Anticipate that things will not go smoothly. This will cost schedule and labor hours.

At times, customers desire a hardware product to achieve a minimum reliability or a maximum repair time. Mean time before failure (MTBF) is a measure of a hardware system’s reliability. As the name implies, it signifies the approximate time the hardware system operates before incurring a failure.

Reliability engineers can calculate the mean time before failure (MTBF) using standard failure rate tables. This data does not exist for newer technologies. Consequently, technologists may not be able to accurately determine and meet the customer’s desired MTBF. Some customers will require the completion of an MTBF test before accepting the product. If this test includes a provision to set the elapsed time to zero following every failure, this could severely affect the schedule and test budget. Delete this provision from the customer’s list of test requirements.

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Similarly, a new packaging approach may bring with it difficulty in meeting a customer’s desired mean time to repair (MTTR). A customer’s application may require quick product repair. If so, they may include a provision in the contract stating an MTTR goal of some time, perhaps 30 minutes. Proving this may also require an extensive array of testing, which the PM should estimate and for which the customer should pay.

Unusual Schedule Risk? Concurrency of Production and Development? Reliability or Availability Demonstrations? Operational Performance Demonstration?

Damages Some projects critical to an organization’s operation may cause great harm to the business if it becomes inoperative or does not meet contract specifications after installation. The organization may include a statement in its terms and conditions requiring the project developer to pay for lost business or demand some other compensation during the time the developer makes corrections.

From time to time, a

contractor will seek collateral damages. Liquidated Damages?

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Labor Rates and Forward Pricing Projections Some projects require several years to complete. This multi-year procurement brings with it a very positive outcome – work for an extended time period. However risks abound, not the least of which is the need to reflect the increased labor costs in the estimate. Typically the staff receives 3-4% annual salary increases. Material costs rarely go down. The multi-year price to the customer must reflect the salary and material increases. In addition to taking into account small labor and material price increases, some PMs word the price statements to take into account inflation. The contractor states that all prices are in year 2002 dollars. So, if rampant inflation takes over the economy in 2003, the customer accepts and pays the additional inflationary costs.

Business risk issues From time to time, a contractor decides to move into a new business area and offers a very low price or even accepts zero profit to influence the customer to place the order with them. Under these circumstances, the PM scrutinizes labor and material expenditures to prevent over-running the budget. The contractor willingly undertakes the risk of exceeding the budget in hopes of establishing themselves as potent players in the new business area. Sometimes a customer structures a project in phases with each successive phase contingent upon the successful completion of the previous stage. A contractor may decide to bid a low price on the first stage. The contractor believes that the customer will be reluctant to switch contractors if they successfully fulfill the terms of the first phase. The contractor anticipates recovering the profit during

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subsequent project phases. This strategy, which is known as cost amortization, has worked successfully many times. As long as the contractor does not become too greedy, a customer will tend to remain with the original contractor. The organizations involved have developed a rapport and understand each other’s method of operating. It is easier for the customer to continue the relationship than to seek a new developer.

Outsourcing, the process of subcontracting work to organizations not part of your operation, has always been a way of doing business.

This places a burden on the

PM. The subcontractors require intensive monitoring to verify that they will deliver the product or service on schedule, technically acceptable and at the agreed price. Organizations outsource for a variety of reasons. Some of these reasons include the following: •

The selected contractor may not have the technical skills to perform some aspect of the job.



The selected contractor may not have the technical skills to perform some aspect of the job. They may have the technical knowledge, but not have the resources to complete a portion of the job within the required schedule.



The customer may direct the selected contractor to use a particular subcontractor.



The contractor may have entered into a teaming arrangement with another organization. The agreement requires them to subcontract a portion of the job to team members.

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Organizations commonly enter into a teaming relationship to make the total package of experience and available resources more attractive than either of the team members alone could provide. Organizations select team members that complement one another by providing greater technical or managerial depth than they alone could provide. Sometimes an organization selects a team member because they understand the customer very well and can provide insight into their operation.

Terms and Conditions Review the customer’s terms and conditions during the proposal phase. Raise potential risk issues to executive management for discussion and resolution. Look for an unusual warranty – for example, an extended warranty or a warranty that includes the installation of new software versions during the first year after delivery and installation. In addition to installation labor and software cost, this condition may have software compatibility issues. For example, if the system that your organization delivers includes third party software in addition to the organization’s developed software, a risk exists that the installation of new untested software version may not operate satisfactorily in the customer’s environment. Only include updating software if your organization receives payment on a time and material basis.

Make certain that a satisfactory payment schedule exists longer development contracts. Customers prefer to pay for the job at the conclusion. That is OK for them, but your organization must use its own money until it gets paid. Organizations prefer to use the customer’s money to fund the project’s progress.

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Companies collect patents for protection purposes. If company A appears to infringe on one of company B’s patents, company B slaps company B with a lawsuit. After receiving notice of the lawsuit, very often company A examines company B’s product patents in an effort to counter sue for patent infringement. In all likelihood the suits will settle out of court. Customers frequently include in the terms and conditions, the right to own all patents that emanate from a development contract. Organizations try to keep all patent rights for inventions that they develop even if the customer pays for it. The PM settles these stipulations before the parties sign the final contract.

5. Other Costs Capital Requirements? Investment Required? Inadequate Milestone Billings? Special Management Systems Required to Execute the Program?

6. Manpower/Staffing Staffing Requirements Outside of Current Manpower Plan? Critical Skills Required & Not Now available?

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Mitigating Risk at the Proposal Stage

Estimating the Risk WBS Item

Task Desc.

Item Cost - $

Risk - $

Probability of Risk

Weighted Risk -

Total Item Cost - $

$

Total

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CHAPTER 11 Project Tracking and Reporting

Following the planning and contract award stages, comes the execution of all the organization’s promises. During this stage, the project manager stays out of the functional department’s way. The project manager’s role is to obtain status information and keep the customer happy and far away from the technical organization. The PM tracks the project’s progress against the implementation plan. Project tracking serves the needs of senior management, the functional managers, and the customer, Project tracking involves •

monitoring and reviewing the project accomplishments and results against plan estimates of cost and schedule



verifying that the organization receives material procurements on time



Maintaining contact with subcontractors and obtain the status of their assigned work.



Developing work-around plans to correct technical , schedule, cost , and subcontracting issues that goes awry.



Verifying that resources become available when required

Close attention to basic control principles will improve the success of projects. Achieving this requires a disciplined approach to tracking project status, anticipating potential problems that may arise, and quick attention to resolve any problems. Project

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tracking and reporting should include the following minimum components, with a comparison between estimated and actual status for that time period. Changes to project sponsorship, management, or organization Project schedule and milestones (including changes to scheduled dates for key deliverables or milestones and planned completion date) Project budget (including cash flow and funding sources) Project scope, objectives, or requirements (if any changes occur) Summary of accomplishments since the last reporting period Summary of past, current and future issues (including steps to mitigate actual or potential problems and an updated risk analysis) Project tracking methods and requirements will vary by project, based on the size, cost, complexity, and impact on the affected organizations. The management of a project includes processes for tracking and communicating project status and performing risk assessments. The formality of this tracking process may change, based on the specific project. The project manager has responsibility for tailoring all elements to meet the specific needs of the project. These same factors will affect the frequency of reporting, whether monthly, quarterly or less frequently. All projects should have a final report that summarizes final costs, issues, and lessons learned.

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CHAPTER 12 Epilogue

The Blind Men and the Elephant Is mighty plain," quoth he; "'Tis clear enough the Elephant Is very like a tree!"

It was six men of Indostan To learning much inclined, Who went to see the Elephant (Though all of them were blind), That each by observation Might satisfy his mind.

The Fifth who chanced to touch the ear, Said: "E'en the blindest man Can tell what this resembles most: Deny the fact who can, This marvel of an Elephant Is very like a fan!"

The First approached the Elephant, And happening to fall Against his broad and sturdy side, At once began to bawl: "God bless me! but the Elephant Is very like a wall!"

The Sixth no sooner had begun About the beast to grope, Than, seizing on the swinging tail That fell within his scope, "I see," quoth he, "the Elephant Is very like a rope!"

The Second, feeling of the tusk, Cried, "Ho! what have we here So very round and smooth and sharp? To me 'tis mighty clear This wonder of an Elephant Is very like a spear!"

And so these men of Indostan Disputed loud and long, Each in his own opinion Exceeding stiff and strong, Though each was partly in the right, And all were in the wrong!

The Third approached the animal, And happening to take The squirming trunk within his hands, Thus boldly up and spake: "I see," quoth he, "the Elephant Is very like a snake."

So, oft in theologic wars, The disputants, I ween, Rail on in utter ignorance Of what each other mean, And prate about an Elephant Not one of them has seen!

The Fourth reached out his eager hand, And felt about the knee. "What most this wondrous beast is like

The Blind Men and the Elephant, translated by John Godfrey Saxe (1816-1887), is a Hindu fable that occurs in the Udana, a Canonical Hindu Scripture.

<>

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Project Management Perspectives Within the Organization While organizations view separation into departments or divisions as an efficient way of structuring, modern corporations often have barriers between divisions, which limit their ability to interact. The result is much like the fable of the blind men and the elephant. Each person’s perception was colored by where they stood. And so it is within the organization. Different departments focus on one specific area of the business while losing the vision of the big picture (the elephant). Each operational business island may use different operating procedures, different tools, different software applications, and different databases and not integrate well with other parts of the organization. The PM attempts to meld these disparate teams into a cohesive unit using similar tools and procedures.

The project manager focuses on the project and spreads the “big picture” vision to the entire organizational team. You read about the lack of communication, coordination and integration associated with major projects in the newspapers every day. The New York Times reported that the cost of completing projects at the New York City Board of Education was running at more than 10 times the Board of Education’s estimates and two years behind schedule (Wyatt, 2001). If a project manager existed at the Board of Education, the person forgot to execute. Stakeholders did not see the big picture. The project manager’s work certainly does not stop with plans. Job success depends on monitoring and control.

The Department of Energy (DOE) acknowledged that their

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“Projects take much longer and cost about 50% more than comparable projects by other federal agencies or projects in the private sector. Moreover, DOE projects commonly overrun their budgets and schedules [and] have resulted in facilities that do not function as intended, projects that are abandoned before they are completed, or facilities that have been so long delayed that, upon completion, they no longer serve any purpose. In short, DOE’s record calls into question the credibility of its procedures for developing designs and cost estimates and managing projects (Committee to assess the policies and practices of the Department of Energy to design, manage, and procure environmental restoration, waste management, and other construction projects, 2000, p.1).” The report concluded that the DOE had to “undertake a broad program of reform for the entire project management process.” The committee’s findings and recommendations as stated in the report reads like a project management text table of contents. They include the following: •

Establish adequate policies, procedures, documentation and reporting



Define requirements. Prepare a statement of work.



Identify and control risks.



Use performance measures and incentives.



Control project changes. Implement a system for managing change



Define project organizational lines of authority and the responsibilities of all parties.



Implement an ISO 9000 certification process

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Mandate a reporting system that tracks and communicates the cost, schedule, and scope of a project



Develop contingency plans and set aside contingency funds



Train managers in project management skills.



Formalize procedures to conduct independent project reviews



Provide fiscal rewards for contractors who meet or exceed schedule, cost, and scope performance targets



Arrange the organization to provide focused and consistent management attention to projects. Establish an office of project management operating at a high organizational level

The DOE’s unique demands make it imperative that they implement project management concepts into its operation. Their complex projects frequently rely on technologies that have not been field proven. The report concluded that the problems at the DOE are more institutional than technical. The DOE had to change its culture and focus on the system problems of cost and schedule overruns, which involve DOE’s policies and procedures for identifying, planning, procuring, and managing projects. The report clearly stated that improving the project management methods would go a long way to reigning in technical, cost and schedule problems that they experienced.

Project Management Career Today project management is a widely recognized and accepted career track. These professionals become involved at the birth of the project (proposal state) and remain to the final site acceptance test. Many project managers seek opportunities to manage a

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variety of jobs that include large, small, maintenance, and new development and an assortment of multiple projects managed simultaneously. All of these projects require a similar set of skills.

PM’s have a wide assortment of tools they use to plan, estimate and track jobs. Communications and negotiations involve all stakeholders.

The PM’s core

competencies involve both social and technical skills. PM’s use social skills to influence behavior and attitude. They build relationships among all stakeholders using communication and negotiation methods. Social skills influence people to make it happen. Technical skills involve planning, scheduling, and controlling. The PM uses technical skills to identify the project’s technical goals and procedures and to ascertain progress.

Project Management Social and Technical Skills Organizations measure the PM’s output on the their ability to get thing’s done on time, within budget, meeting the customer’s specifications. This demands a broad range of skills. Invariably technology students enter a technical program with the goal of learning as many technical subjects as they can cram into their schedule. On talking with their employers six months to a year after employment, we hear a common and consistent thread of dissatisfaction. Employers complain, “The new students just out of school have outstanding technical skills, but they lack social skills. They lack an understanding of the organization and people skills. They lack customer sensitivity.” Social and people skills employers refer to include communications, leadership, management,

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adapting to change, listen, and willingness to go the extra mile – in essence the TACT acronym discussed in chapter 1. This split in thinking limits the new employees’ professional growth and advancement within the organization until they develop these skills. Many technology students choose to ignore this aspect of their personal growth and development during their college years. They only realize its importance after they have discovered their limited upward movement within the organization. Social and People Skills The new PM should focus on developing social skills and abilities in the following areas: •

Leadership: set a vision, communicate the vision, align the team to the vision, and identify the steps required to achieve that vision. Acknowledge that change will happen. If it will improve the product or service, assist the team in changing technology, processes, procedures, and suppliers.



Management: Plan, organize, control, delegate, and communicate. Consider using McGregor’s theory Y approach; coercive power will not work over the long run. Request senior management clarification if a conflict exists between the project and business goals.



Flexibility: More often than not, several viable options to problems present themselves. Let your team members participate in the solution process. Remain open to alternate solutions. Learn to juggle resources. Adapt and deal with situations during periods of change. Offer employees support (resources or a word of encouragement) if the resolution to a problem endangers the schedule.

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Your word: Keep your commitments. Follow the precepts espoused by Horton, the Dr. Seuss character - I meant what I said and I said what I meant. (Horton Hatches an Egg, Dr. Seuss, Random House, 1968). Expect others to keep their commitments.



Communication: Listen to people and respond to them.

Make your

expectations known with clear , precise , unequivocal language. Manage by “walking around” so that people have access to you. Remain accessible, no matter how busy you are.

Negotiate all the time. Seek win-win situations. A

humiliated stakeholder following an embarrassing negotiation loss may become unmotivated and not perform to your expectations. Permit stakeholders a graceful exit. You and your team will benefit. •

Feedback: Provide feedback to team members. As soon as practical, acknowledge a job well done or offer constructive criticism.

Blanchard suggests

that you keep the criticism pointed and short. •

Tolerate Ambiguity: Analyses in mathematics and engineering frequently result in a single answer. Some technologists have difficulty working in an environment in which multiple sets of reasonable choice explanations exist. Solutions in business and human relations rarely involve clear-cut answers. More often than not, you will discover a variety of ways of “skinning the cat.” You may never know which approach offers the optimum solution. Permit your team members to select the approach with which they feel most comfortable –

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unless the customer mandates the solution or the team’s alternative demands excessive funding. •

Conflict Resolution: Issues arise during the course of the project. Sometimes the stakeholders voice very strong opinions about an issue. The good project manager learns to resolve conflicts among stakeholders, quell the upset, and calm things down. Seek win-win solutions.



Coping Mechanisms for Anxiety and Stress Reduction: Technologists are usually uncomfortable and unaccustomed to dealing with people. People are not logical. People sometimes voice illogical opinions with passion and strong conviction. As a project manager, you will have to convince them to redirect themselves. Senior management, customers, suppliers, and functional designers often have conflicting views. Projects frequently have aggressive and tight schedules, which leads to anxiety. Coping with these issues requires a huge amount of energy and frequently drains people.

Conflicting demands

leads to stress. Problems and issues continually arise and, PM’s should learn coping mechanisms to minimize the impact on health and family life.

Technical skills Beyond the social and people skills discussed, project managers must have a command of the processes and tools required to get the job done. Project Management processes discussed in this volume include planning, estimating, scheduling, tracking, controlling, and measuring. Some of the hard skills found critical to successful project managers include the following:

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Project definition: Every project demands a plan based on a set of requirements defined by the customer and deemed realistic by the contractor. Project Managers must be able to define the project's business objectives and goals, deliverables, assumptions and constraints, project communication plan (how status and information will be shared with all stakeholders), and top level implementation plan.



Tools: Learn to use spreadsheets and word processor programs well. Gain familiarity with schedule preparation and tracking tools such as Microsoft Schedule or Primavera. Learn to develop agendas and to conduct meetings. Prepare and use tools such as a responsibility assignment matrix and a specification compliance matrix. Use check lists to verify that you have completed tasks. Employ a labor and material database system that promotes easy employee labor entry and promotes broad status checking. Organizations refer to these products as enterprise resource planning (ERP) systems. These tools enable the project manager to stay on top of expenditures, monitor purchases, and understand the labor charges on the job.



Estimating: Compile estimates during the proposal phase. Develop a lessons learned list to provide a sanity check on functional manager’s estimates. While a PM should never change functional manager’s estimates without their knowledge and approval, a PM should anticipate a job’s cost. A major disparity between the functional manager’s estimate and the PM’s rough order of magnitude gives cause for a discussion.

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Monitor Status and Control Processes: Monitor fundamental data. Compare labor and material expenditures for every project task versus the plan. Examine the technical progress. Identify supplier issues as they arise. Talk with the constituent organizations if things look out of whack. Ask questions and get to the root of the problems. Re-plan as the organization obtains more information.



Control the customer: Keep the customer informed of the job’s status. Request the customer to sign and date approvals to indicate their agreement with the progress to-date. Obtain customer signatures for design reviews and factory and site acceptance tests. These signatures signify customer awareness, understanding and approval with the progress. Involving the customer reduces the likelihood of the customer demanding changes due to a lack of knowledge or understanding. One of the most difficult project tasks requires the PM has is to say no to a customer requesting out of scope changes. It must be done! The PM must balance the need to delight the customer with the organization’s demand to make a profit.



Consensus building: Develop team-building skills.



Continuing Education: Improve your technical skills by pursuing a certification such as the CompTIA Project+ or the Project Management Institute's Project Management Professional (PMP) Program. Attend conferences and local seminars. Read project management journals. Keep abreast of new developments and revisit old methods to keep them fresh in your mind.

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APPENDIX 1 - TYPICAL EMPLOYEE PERFORMANCE APPRAISAL FORMS

Four lessons of self-knowledge One: You are your own best teacher. Two: Accept responsibility. Blame no one. Three: You can learn anything you want to learn. Four: True understanding comes from reflecting on your experience. On becoming a leader – Warren Bennis

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PERFORMANCE APPRAISAL EMPLOYEE NAME:

EMPLOYEE ID NO.:

POSITION TITLE:

LABOR GRADE:

REVIEWER:

REVIEW DATE:

PERFORMANCE ASSESSMENT Objectives for This Period Assessment

PERFORMANCE FACTORS Using the following broad definitions, complete those factors that are appropriate to the individual's job requirements, indicating the effectiveness with which they were applied in performing the duties of the job. Include specific examples/comments for each block. AREA FOR DEVELOPMENT: STRENGTH: MEETS REQUIREMENTS: NEEDS IMPROVEMENT: UNSATISFACTORY:

An area that the employee should concentrate on developing for future growth Consistently exceeds expectations or requirements; displays continuous improvement Competently meets expectations or requirements; attempts to improve whenever possible Is meeting some requirements, but needs improvement in this area Does not meet requirements, shows little or no improvement

QUALITY: Continuously improves to achieve the highest quality possible. Strives to get the job done right the first time. Supports the organization’s quality policies. Customer-focused with both external and internal customers. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

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COMMITMENT & INITIATIVE: Is continuously committed to the Company and its goals. Initiates actions that show continuous improvement; creatively solves problems. Can temporarily assume unaccustomed or additional duties. Is dependable, prompt and has good attendance. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

ATTITUDE: Gets along well with others; is a dedicated team player. Remains positive and cooperative. Puts the customer first. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

JUDGEMENT/DECISION MAKING: Makes sound judgments and decisions. Is willing to make decisions and remains flexible regarding changing decisions if needed to support the pursuit of quality. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

PLANNING AND ORGANIZATION: Analyzes priorities. Organizes and executes short and long-term plans while maintaining high quality. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

COMMUNICATION: Effectively communicates with co-workers and customers, both verbally and in writing, in a cooperative manner and with an emphasis on quality and timeliness. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

JOB KNOWLEDGE: Is knowledgeable in methods and skills required for the position/field. Stays current with state-of-the-art technologies. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

Meets Requirements

Strength

Meets Requirements

Strength

Meets Requirements

Strength

PRODUCTIVITY: Continuously improves productivity without sacrificing quality. (Circle one) Comments:

Unsatisfactory

Needs Improvement

MANAGING CHANGE: Effectively initiates and/or adapts to changes in operations. (Circle one) Comments:

Unsatisfactory

Needs Improvement

COST CONTROL: Effectively cuts costs without sacrificing quality. (Circle one) Comments:

Unsatisfactory

Needs Improvement

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SAFETY: Complies with/supports safety policies and procedures. (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

COACHING: Empowers and involves employees in making decisions and solving problems for the department. Encourages teamwork, innovation and excellence in achieving objective. Acts as coach and mentor (Circle one) Comments:

Unsatisfactory

Needs Improvement

Meets Requirements

Strength

OVERALL RATING: Rate the most important aspects of performance based upon the expectations for the position. Unacceptable Improvement Meets Expectations Exceeds Outstanding Required Expectations Comments:

OBJECTIVES FOR NEXT REVIEW PERIOD TASK

DUE DATE

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DEVELOPMENT GUIDANCE Outline development guidance for the employee's current position as well as possible future positions.

EMPLOYEE COMMENTS

APPROVAL SIGNATURES Reviewer:

Date:

Approval:

Date:

Human Resources:

Date:

Employee Signature:

Date:

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EMPLOYEE PERFORMANCE APPRAISAL Employee Name: __________________________________________ Salary Labor Grade: _________________

Title: ______________________________

Employee ID No.: __________________ Dept. No.: _______________

Evaluation Period Dates: ______________________ Check the level that most closely identifies the quality of performance for the following factors: Performance Factor

A.

Outstanding

Good

Competent

Needs Improvement

Unacceptabl e

Technical Effectiveness

B. Defines, Analyzes, And Solves Problems

C. Planning And Organization

D. Personal Time Management - Prioritizes And Uses Time Effectively (Meets Deadlines, Tardiness, And Attendance) E.

Self Motivation - Exhibits Initiative

F.

Oral Communication – Expresses Ideas To Ensure Understanding

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Performance Factor

Outstanding

Good

Competent

Needs Improvement

Unacceptabl e

G. Written Communication -- Expresses Ideas To Ensure Understanding H. Teamwork -- Cooperates With Peers, Supervisors, Customers I.

Leadership – Organizing And Motivates Others

J.

Supports Diversity

K. Supervisory Effectiveness – Delegates Assignments, Recognizes Potential In Others

ESSAY Comment on the employee's overall performance during the evaluation period. Detail specific accomplishments. Comment on: • Team performance • Matrix assignments • Diversity initiatives

• • • •

Environmental, Health, and Safety contributions Meeting Objectives/goals Outstanding contributions/achievements Career development activities

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PERFORMANCE SUMMARY Considering the previous performance factors, the essay, and employee’s overall evaluation of productivity against expectations, check the box that best describes the SUMMARY level of performance. Outstanding

Competent

Needs Development

Unacceptable

SIGNATURES Reviewer

Date

Approved

Date

EMPLOYEE COMMENTS:

Employee Signature

Date

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Employee Evaluation Employee Name:_______________________

Title: _______________

ID No. __________________

Period covered: _____________

Category

Excellent

Very Good

Good

Fair

Unsatisfactory

A. Work quality B. Dependability C. Initiative D. Flexibility E. Skill building F. Job knowledge G. Punctuality H. Supervisory ability

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General comments on performance:

Objectives for the coming year:

Prepared by: _______________________

Date: _________

Staff signature: _____________________

Date: _________

Employee signature: _____________________

Date Reviewed: _________

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Employee Evaluation Name:_____________________________ Employee Number: _____________ Department:_______________________________ Job Title:_________________________________ Department:______________________________ Supervisor:_______________________________ Rate employee’s performance on a scale of 1 (needs improvement) to 4 (excellent) in each area:

1. Work attitude:

Needs Improvement

Fair

Good

Excellent

1

2

3

4

Comments:____________________________________________________________________ 2. Ability to work with others:

1

2

3

4

Comments:____________________________________________________________________ 3. Independent decision making:

1

2

3

4

Comments:____________________________________________________________________ 4. Quality of work:

1

2

3

4

Comments:____________________________________________________________________ 5. Initiative:

1

2

3

4

Comments:____________________________________________________________________ 7. Organizational Skills:

1

2

3

4

Comments:____________________________________________________________________ 8. Attendance/Punctuality:

1

2

3

4

Comments:____________________________________________________________________

9. Technical ability:

1

2

3

4

Comments:____________________________________________________________________

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10. Verbal ability:

Needs Improvement

Fair

Good

Excellent

1

2

3

4

Comments:____________________________________________________________________ 11. Writing ability:

1

2

3

4

Comments:____________________________________________________________________ 12. Dependability:

1

2

3

4

Comments:____________________________________________________________________ 13. Appearance:

1

2

3

4

Comments:____________________________________________________________________ 14. Overall performance:

1

2

3

4

Comments:____________________________________________________________________

15. Recommendations for professional growth: ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ _____________________________________________________________________

This report has been discussed with the employee:

____Yes

____No

_____________________________________ Employee name (please print) ___________________________________ Employee Signature

___________________ Date

____________________________________ ___________________ Supervisor name (please print) Title ___________________________________ Supervisor Signature

___________________ Date

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APPENDIX 2 - ETHICAL CODES OF SELECTED PROFESSIONAL ORGANIZATIONS

We are all faced with a series of great opportunities brilliantly disguised as unsolvable problems. --John W. Gardner

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American Chemical Society The Chemist's Code of Conduct The American Chemical Society expects its members to adhere to the highest ethical standards. Indeed, the federal Charter of the Society (1937) explicitly lists among its objectives "the improvement of the qualifications and usefulness of chemists through high standards of professional ethics, education and attainments...". Chemists have professional obligations to the public, to colleagues, and to science. One expression of these obligations is embodied in "The Chemist's Creed," approved by the ACS Council in 1965. the principles of conduct enumerated below are intended to replace "The Chemist's Creed". They were prepared by the Council Committee on Professional Relations, approved by the Council (March 16, 1994), and adopted by the Board of Directors (June 3, 1994) for the guidance of society members in various professional dealings, especially those involving conflicts of interest. Chemists Acknowledge Responsibilities To: •

The Public Chemists have a professional responsibly to serve the public interest and welfare and to further knowledge of science. Chemists should actively be concerned with the health and welfare of co-workers, consumer and the community. Public comments on scientific matters should be made with care and precision, without unsubstantiated, exaggerated, or premature statements.



The Science of Chemistry Chemists should seek to advance chemical science, understand the limitations of their knowledge, and respect the truth. Chemists should ensure that their scientific contributions, and those of the collaborators, are thorough, accurate, and a unbiased in design, implementation, and presentation.



The Profession Chemists should remain current with developments in their field, share ideas and information, keep accurate and complete laboratory records, maintain integrity in all conduct and publications, and give due credit to the contributions of others. Conflicts of interest and scientific misconduct, such as fabrication, falsification, and plagiarism, and incompatible with this Code.



The Employer Chemists should promote and protect the legitimate interests of their employers, perform work honestly and competently, fulfill obligations, and safeguard proprietary information.



Employees Chemists, as employers, should treat subordinates with respect for their

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professionalism and concern for their well-being, and provide them with a safe, congenial working environment, fair compensation, and proper acknowledgment of their scientific contributions. •

Students Chemists should regard the tutelage of students as a trust conferred by society for the promotion of the student's learning and professional development. Each student should be treated respectfully and without exploitation.



Associates Chemists should treat associates with respect, regardless of the level of their formal education, encourage them, learn with them, share ideas honestly, and give credit for their contributions.



Clients Chemists should serve clients faithfully and incorruptibly, respect confidentiality, advise honestly, and charge fairly.



The Environment Chemists should understand and anticipate the environmental consequences of their work. Chemists have responsibility to avoid pollution and to protect the environment. Last Updated : January 04, 2000

http://www.acs.org/membership/conduct.html Copyright © 2000 American Chemical Society. All Rights Reserved. 1155 16th Street NW • Washington DC 20036 • (202) 872-4600 • (800) 227-5558

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American Society of Mechanical Engineers (ASME) CODE OF ETHICS OF ENGINEERS The Fundamental Principles Engineers uphold and advance the integrity, honor and dignity of the engineering profession by: I. Using their knowledge and skill for the enhancement of human welfare; II. Being honest and impartial, and serving with fidelity the public, their employers and clients; and III. Striving to increase the competence and prestige of the engineering profession. The Fundamental Canons 1. 2. 3.

4.

5. 6. 7. 8.

Engineers shall hold paramount the safety, health and welfare of the public in the performance of their professional duties. Engineers shall perform services only in the areas of their competence. Engineers shall continue their professional development throughout their careers and shall provide opportunities for the professional and ethical development of those engineers under their supervision. Engineers shall act in professional matters for each employer or client as faithful agents or trustees, and shall avoid conflicts of interest or the appearance of conflicts of interest. Engineers shall build their professional reputation on the merit of their services and shall not compete unfairly with others. Engineers shall associate only with reputable persons or organizations. Engineers shall issue public statements only in an objective and truthful manner. Engineers shall consider environmental impact in the performance of their professional duties.

http://www.asme.org/asme/policies/p15-7.html

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The Institute of Electrical and Electronics Engineers (IEEE)

CODE OF ETHICS We, the members of the IEEE, in recognition of the importance of our technologies affecting the quality of life throughout the world, and in accepting a personal obligation to our profession, its members and the communities we serve, do hereby commit ourselves to the highest ethical and professional conduct and agree: 1.

to accept responsibility in making engineering decisions consistent with the safety, health and welfare of the public, and to disclose promptly factors that might endanger the public or the environment; 2. to avoid real or perceived conflicts of interest whenever possible, and to disclose them to affected parties when they do exist; 3. to be honest and realistic in stating claims or estimates based on available data; 4. to reject bribery in all its forms; 5. to improve the understanding of technology, its appropriate application, and potential consequences; 6. to maintain and improve our technical competence and to undertake technological tasks for others only if qualified by training or experience, or after full disclosure of pertinent limitations; 7. to seek, accept, and offer honest criticism of technical work, to acknowledge and correct errors, and to credit properly the contributions of others; 8. to treat fairly all persons regardless of such factors as race, religion, gender, disability, age, or national origin; 9. to avoid injuring others, their property, reputation, or employment by false or malicious action; 10. to assist colleagues and co-workers in their professional development and to support them in following this code of ethics. Approved by the IEEE Board of Directors, August 1990 http://www.ieeeusa.org/documents/CAREER/CAREER_LIBRARY/ethics.html

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Project Management Institute (PMI) Code of Ethics for the Project Management Profession Preamble: Project Management Professionals, in the pursuit of the profession, affect the quality of life for all people in our society. Therefore, it is vital that Project Management Professionals conduct their work in an ethical manner to earn and maintain the confidence of team members, colleagues, employees, employers, clients and the public. Article I: Project Management Professionals shall maintain high standards of personal and professional conduct and: A: Accept responsibility for their actions B: Undertake projects and accept responsibility only if qualified by training or experience, or after full disclosure to their employers or clients of pertinent qualifications. C: Maintain their professional skills at the state of art and recognize the importance of continued personal development and education. D: Advance the integrity and prestige of the profession by practicing in a dignified manner. E: Support this code and encourage colleagues and co-workers to act in accordance with this code. F: Support the professional society by actively participating and encouraging colleagues and co-workers to participate. G: Obey the laws of the country in which work is being performed. Article II: Project Management Professionals shall, in their work: A: Provide necessary project leadership to promote maximum productivity while striving to minimize cost. B: Apply state of the art project management tools and techniques to ensure quality, cost and time objectives, as set forth in the project plan, are met. C: Treat fairly all project team members, colleagues and co-workers, regardless of race, religion, sex, age or national origin. D: Protect project team members from physical and mental harm. E: Provide suitable working conditions and opportunities for project team members.

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F: Seek, accept and offer honest criticism of work, and properly credit the contribution of others. G: Assist project team members, colleagues and co-workers in their professional development. Article III: Project Management Professionals shall, in their relations with their employers and clients: A: Act as faithful agents or trustees for their employers and clients in professional or business matters. B: Keep information on the business affairs or technical processes of an employer or client in confidence while employed, and later, until such information is properly released. C: Inform their employers, clients, professional societies or public agencies of which they are members or to which they may make any presentations, of any circumstance that could lead to a conflict of interest. D: Neither give nor accept, directly or indirectly, any gift, payment or service of more than nominal value to or from those having business relationships with their employers or clients. E: Be honest and realistic in reporting project quality, cost and time. Article IV: Project Management Professionals shall, in fulfilling their responsibilities to the community: A: Protect the safety, health and welfare of the public and speak out against abuses in these areas affecting the public interest. B: Seek to extend public knowledge and appreciation of the project management profession and its achievements.

http://www.pmi.org/certification/code.htm

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APPENDIX 3 - WILDERNESS SURVIVAL ANSWER AND RATIONALE SHEET

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The following pages identify the recommended courses of action for each of the situations on the Wilderness Survival Work Sheet. These answers come from the comprehensive course on woodland survival taught by the Interpretive Service, Monroe County (New York) Parks Department. These responses are considered to be the best rules of thumb for most situations; specific situations, however, might require other courses of action. 1. (a) Call "help" loudly but in a low register. Low tones carry farther, especially in dense woodland. There is a much better chance of being heard if you call loudly but in a low key. "Help" is a good word to use, because it alerts your companions to your plight. Yelling or screaming would not only be less effective, but might be passed off as bird calls by your friends far away. 2. (a) Make a lot of noise with your feet. Snakes do not like people and will usually do everything they can to get out of your way. Unless you surprise or corner a snake, there is a good chance that you will not even see one, let alone come into contact with it. Some snakes do feed at night, and walking softly may bring you right on top of a snake. 3. (c) Put a bit of the plant on your lower lip for five minutes; if it seems all right, try a little. The best approach, of course, is to eat only those plants that you recognize as safe. However, when you are in doubt and very hungry, you may use the lip test. If the plant is poisonous, you will get a very unpleasant sensation on your lip. Red berries alone do not tell you much about the plant's edibility (unless, of course, you recognize the plant by the berries), and birds just do not have the same digestive systems we do. 4. (c) Drink as much as you think you need when you need it. The danger here is dehydration, and once the process starts, your liter of water will not do much to reverse it. Saving or rationing will not help, especially if you are lying unconscious somewhere from sunstroke or dehydration. So, use the water as you need it, and be aware of your need to find a water source as soon as possible. 5. (c) Dig in the streambed at the outside of a bend. This is the part of the river or stream that flows the fastest, is less silted, deepest, and the last part to go dry. 6. (c) Midway up the slope. A sudden rainstorm might turn the ravine into a raging torrent. This has happened to many campers and hikers before they had a chance to escape. The ridgeline, on the other hand, increases your exposure to rain, wind, and lightning should a storm break. The best location is on the slope. 7. (b) Put the batteries under your armpits to warm them, and then replace them in the flashlight. Flashlight batteries lose much of their power, and weak batteries run down faster in the cold. Warming the batteries, especially if they are already weak, will restore them for a while. You would normally avoid night travel, of course, unless you were in open country where you could use the stars for navigation. There are just too

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many obstacles (logs, branches, uneven ground, and so on) that might injure you -- and a broken leg, injured eye, or twisted ankle would not help your plight right now. Once the sun sets, darkness falls quickly in wooded areas; it would usually be best to stay at your campsite. 8. (a) Yellow. A yellow flame indicates incomplete combustion and a strong possibility of carbon monoxide build-up. Each year carbon monoxide poisoning kills many campers as they sleep or doze in tents, cabins, or other enclosed spaces. 9. (a) Leave your boots and pack on. Errors in fording rivers are a major cause of fatal accidents. Sharp rocks or uneven footing demands that you keep your boots on. If your pack is well balanced, wearing it will provide you the most stability in the swift current. A waterproof, zippered backpack will usually float, even when loaded with normal camping gear; if you step off into a hole or deep spot, the pack could become a lifesaver. 10. (b) Across the stream. Errors in facing the wrong way in fording a stream are the cause of many drownings. Facing upstream is the worst alternative; the current could push you back and your pack would provide the unbalance to pull you over. You have the best stability facing across the stream, keeping your eye on the exit point on the opposite bank. 11(c) In stocking feet. Here you can pick your route to some degree, and you can feel where you are stepping. Normal hiking boots become slippery, and going barefooted offers your feet no protection at all. 12. (c) Freeze, but be ready to back away slowly. Sudden movement will probably startle the bear a lot more than your presence. If the bear is seeking some of your food, do not argue with him; let him forage and be on his way. Otherwise, back very slowly toward some refuge (trees, rock outcrop, etc.)

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APPENDIX 4 – ISO 9000 QUALITY MANAGEMENT PRINCIPLES

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The following pages introduce the eight quality management principles defined in ISO 9000:2000, Quality management systems fundamentals and vocabulary, and in ISO 9004:2000, Quality management systems guidelines for performance improvements. The document may be found on the ISO web site. These principles may be used by management as a framework to guide their organizations towards improved performance.

Principle 1 Customer focus Organizations depend on their customers and therefore should understand current and future customer needs, should meet customer requirements and strive to exceed customer expectations. Key benefits: •

Increased revenue and market share obtained through flexible and fast responses to market opportunities.



Increased effectiveness in the use of the organization's resources to enhance customer satisfaction.



Improved customer loyalty leading to repeat business.

Applying the principle of customer focus typically leads to: •

Researching and understanding customer needs and expectations.



Ensuring that the objectives of the organization are linked to customer needs and expectations.



Communicating customer needs and expectations throughout the organization.



Measuring customer satisfaction and acting on the results.

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Systematically managing customer relationships.



Ensuring a balanced approach between satisfying customers and other interested parties (such as owners, employees, suppliers, financiers, local communities and society as a whole).

Principle 2 Leadership Leaders establish unity of purpose and direction of the organization. They should create and maintain the internal environment in which people can become fully involved in achieving the organization's objectives. Key benefits: •

People will understand and be motivated towards the organization's goals and objectives.



Activities are evaluated, aligned and implemented in a unified way.



Miscommunication between levels of an organization will be minimized.

Applying the principle of leadership typically leads to: •

Considering the needs of all interested parties including customers, owners, employees, suppliers, financiers, local communities and society as a whole.



Establishing a clear vision of the organization's future.



Setting challenging goals and targets.



Creating and sustaining shared values, fairness and ethical role models at all levels of the organization.



Establishing trust and eliminating fear.

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Providing people with the required resources, training and freedom to act with responsibility and accountability.



Inspiring, encouraging and recognizing people's contributions.

Principle 3 Involvement of people People at all levels are the essence of an organization and their full involvement enables their abilities to be used for the organization's benefit. Key benefits: •

Motivated, committed and involved people within the organization.



Innovation and creativity in furthering the organization's objectives.



People being accountable for their own performance.



People eager to participate in and contribute to continual improvement.

Applying the principle of involvement of people typically leads to: •

People understanding the importance of their contribution and role in the organization.



People identifying constraints to their performance.



People accepting ownership of problems and their responsibility for solving them.



People evaluating their performance against their personal goals and objectives.



People actively seeking opportunities to enhance their competence, knowledge and experience.



People freely sharing knowledge and experience.



People openly discussing problems and issues.

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Principle 4 Process approach A desired result is achieved more efficiently when activities and related resources are managed as a process. Key benefits: •

Lower costs and shorter cycle times through effective use of resources.



Improved, consistent and predictable results.



Focused and prioritized improvement opportunities.

Applying the principle of process approach typically leads to: •

Systematically defining the activities necessary to obtain a desired result.



Establishing clear responsibility and accountability for managing key activities.



Analyzing and measuring of the capability of key activities.



Identifying the interfaces of key activities within and between the functions of the organization.



Focusing on the factors such as resources, methods, and materials that will improve key activities of the organization.



Evaluating risks, consequences and impacts of activities on customers, suppliers and other interested parties.

Principle 5 System approach to management Identifying, understanding and managing interrelated processes as a system contributes to the organization's effectiveness and efficiency in achieving its objectives. Key benefits: •

Integration and alignment of the processes that will best achieve the desired results.

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Ability to focus effort on the key processes.



Providing confidence to interested parties as to the consistency, effectiveness and efficiency of the organization.

Applying the principle of system approach to management typically leads to: •

Structuring a system to achieve the organization's objectives in the most effective and efficient way.



Understanding the interdependencies between the processes of the system.



Structured approaches that harmonize and integrate processes.



Providing a better understanding of the roles and responsibilities necessary for achieving common objectives and thereby reducing cross-functional barriers.



Understanding organizational capabilities and establishing resource constraints prior to action.



Targeting and defining how specific activities within a system should operate.



Continually improving the system through measurement and evaluation.

Principle 6 Continual improvement Continual improvement of the organization's overall performance should be a permanent objective of the organization. Key benefits: •

Performance advantage through improved organizational capabilities.



Alignment of improvement activities at all levels to an organization's strategic intent.

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Flexibility to react quickly to opportunities.

Applying the principle of continual improvement typically leads to: •

Employing a consistent organization-wide approach to continual improvement of the organization's performance.



Providing people with training in the methods and tools of continual improvement.



Making continual improvement of products, processes and systems an objective for every individual in the organization.



Establishing goals to guide, and measures to track, continual improvement.



Recognizing and acknowledging improvements.

Principle 7 Factual approach to decision making Effective decisions are based on the analysis of data and information Key benefits: •

Informed decisions.



An increased ability to demonstrate the effectiveness of past decisions through reference to factual records.



Increased ability to review, challenge and change opinions and decisions.

Applying the principle of factual approach to decision making typically leads to: •

Ensuring that data and information are sufficiently accurate and reliable.



Making data accessible to those who need it.



Analysing data and information using valid methods.

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Making decisions and taking action based on factual analysis, balanced with experience and intuition.

Principle 8 Mutually beneficial supplier relationships An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value Key benefits: •

Increased ability to create value for both parties.



Flexibility and speed of joint responses to changing market or customer needs and expectations.



Optimization of costs and resources.

Applying the principles of mutually beneficial supplier relationships typically leads to: •

Establishing relationships that balance short-term gains with long-term considerations.



Pooling of expertise and resources with partners.



Identifying and selecting key suppliers.



Clear and open communication.



Sharing information and future plans.



Establishing joint development and improvement activities.



Inspiring, encouraging and recognizing improvements and achievements by suppliers.

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