ACCA P3 Business Analysis - 2010 - Study text - Emile Woolf Publishing
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Chapter 14: Project management
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The project manager does not usually have the power to reward project team
members. Responsibility for the appraisal, development and rewarding of the
individuals in a project team remain with their line manager in the department from
which they have come.
Project team members have a dual loyalty. The project manager should try to
develop a team identity, so that the individuals assigned to the project feel that they
are members of a team and so develop a loyalty to the team. At the same time,
individuals in the project team remain aware of the views and attitudes of their
managers in the departments from which they come.
The project manager and the project sponsor
When a project manager is having difficulties with individual team members, and
difficulty in developing the project team into an effective unit, it might be possible
to resolve the difficulties through ‘people management’, using team leadership
skills, or negotiating with the line managers of project team members.
In some situations, however, the cause of a problem might be a lack of resources for
the project, or inadequate support from the project sponsor. The project manager
has to work within constraints that are unique to the project. These include a limited
number of team members, who might also be expected to do their normal work.
There are also constraints of time and cost: the project manager is expected to
complete the project on time and on budget.
If a problem cannot be resolved because the constraints on the project are too great,
the responsibility for finding a solution lies with the project sponsor rather than the
project manager.
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Monitoring, controlling and concluding projects
Project management
Project management software
Scope management
Work breakdown structure
Project time management
Project cost management
Project quality management
Project risk management
Requests for changes
Project completion
3 Monitoring, controlling and concluding projects
3.1 Project management
The main tasks of project management are to ensure that the goals of the project are
achieved:
on time
within budget, and
to the required standard of quality or to the required specifications.
The project manager has to plan the project in detail and allocate tasks to
individuals.
In planning the work, he needs to identify all the tasks that will have to be done
and estimate how long each task will take to complete. He must also understand
which tasks cannot begin until others have been completed, and which tasks can
be carried on at the same time.
Having planned the work, the project manager assigns the tasks to individuals
or groups of individuals.
When the work on the project is in progress, the project manager must monitor
progress, and try to ensure that the tasks are completed on schedule and that the
project remains within budget. When there are slippages in time or cost over-runs,
the project manager should take corrective measures of possible to catch up the lost
time (or prevent further delays) or control expenditure more effectively.
Kathy Schwalbe (‘Project Management’, 2006) has identified nine areas of
knowledge that project managers must show:
Integration management. The project manager is responsible for integrating the
efforts of everyone connected with the project, including the project team
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members, so that all the work on the project is directed towards the same
objectives.
Scope management. Scope management is concerned with establishing the
scope of the project, and the work that needs to be done to meet the project
specification. There is a risk that the scope of the project will fail to match the
project specification, so that either not enough work is planned to meet the
project specification, or too much unnecessary work is planned. Scope
management also involves breaking down the total project into individual tasks
(‘work breakdown’).
Time management. The project manager has to manage work on each task and
the time taken on each task, so that the project is completed on time. Tasks that
are not time-critical can be deferred or delayed, without affecting the final
completion date for the entire project. However, tasks that are time-critical must
be completed at the earliest possible time, and the project manager should give
special attention to the prompt completion of these tasks.
Cost management. The expected financial returns from a project should have
been estimated when the project was first initiated. Financial returns might be
expressed in terms of net present value (NPV) and payback, or internal rate of
return on investment (IRR). However, during the progress of the project, the
main concern of the project manager should be to ensure that costs remain
within budget, and that significant controllable cost over-runs do not occur.
Project quality management. Projects must be managed to achieve the required
standards of quality. For IS/IT development projects, this means compliance
with IT project development standards, for example standards for design,
testing and documentation.
Human resource management. The role of the project manager as a motivator of
the project team members, and as a team-builder, has already been described.
Communication management. The project manager is also a communicator. He
must ensure that information flows freely between the project team members,
and that everyone in the team knows what is happening and what the other
team members are doing. The project manager must also prepare periodic status
reports on the progress of the project, and report to the project sponsor. He must
also try to resolve any conflicts that arise, between project team members, or
between the project team and others inside or outside the entity.
Risk management. The project manager is responsible for identifying and
monitoring risks in the project, and taking appropriate action to deal with them.
Procurement management. The project manager is responsible for the
procurement of materials, services and assets for the project. He may therefore
become involved in supplier selection, negotiating contracts with suppliers, and
deciding whether work should be done ‘in house’ or out-sourced to an external
supplier (the ‘make-or-buy’ decision).
Some of these aspects of project management are discussed in more detail later.
3.2 Project management software
Software packages are available for project management, providing the project
manager with a variety of tools and systems for recording, monitoring and
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controlling progress with the project. The software enables project managers to use
project management techniques with the assistance of a PC or laptop computer. (An
example of project management software is Microsoft Project).
Features of project management software
Typically, project management software helps project managers to:
create a list of tasks for the project and their expected duration
construct a schedule for the completion of the project, perhaps in the form of a
critical path chart
assign resources to each task
prepare a budget for the project
track the progress of tasks
record and monitor actual costs
manage the documents for the project
prepare progress reports or status reports.
Software helps the project managers to amend plans more quickly, and prepare
revised critical path charts, and revised budgets.
It also helps managers to prepare better and more comprehensive project
documentation.
3.3 Scope management
Scope management is concerned with trying to ensure that the work on a project
meets the specifications for the project and the needs of the project customer. The
tasks that are performed by the project team should be sufficient to meet the project
specifications, but should not exceed what is required.
Scope creep
Problems can arise when the project specification fails to describe properly what the
project sponsor requires. The project team is therefore being asked to achieve
objectives that the customer does not want.
Incorrect or inexact project specifications are common with IS/IT projects. All too
often, the project specifications omit important requirements or specify some
requirements incorrectly.
‘Scope creep’ is a term that describes a situation in which the project specification
does not properly describe what is required, but the project team carries out the
project work to meet these specifications. However, during the course of the project
uncontrolled scope changes are made to the project so that the finished project
eventually meets the sponsor’s and user’s requirements. As a result, the project is
much wider in scope than it should have been, and it takes longer and costs more
than necessary to complete.
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Scope creep can be summarised as follows:
The project specifications ask for X.
The project sponsor and project user actually want Y.
The project team therefore does X and also, through uncontrolled changes to
specifications, also does Y.
The project therefore results in the achievement of (X + Y) when only Y was
actually required.
3.4 Work breakdown structure
Splitting a project into phases
In order to plan and schedule the work for the project, it is necessary to identify all
the tasks that have to be completed. A first step in the identification of tasks is to
identify the main stages of the project. Each stage should have an identifiable
beginning and an identifiable end (a ‘milestone’). In a typical IS/IT development
project the main stages of the project may include the following.
Stage Starting point Completion point (milestone)
Project planning
Project initiation document/terms of
reference
Project quality plan
System analysis and
design
Project quality plan Detailed system specification
Programming Detailed system specification Completion of system testing
Database design Detailed system specification
Database design specifications
and construction of database
Implementation
Completed system tests and
database construction
Handover of system to the
user/customer
Breakdown of work into lower-level tasks
When the project has been divided into stages, each with its own identifiable
beginning and end (milestone for achievement), the next step is to break down each
stage into more detailed tasks, or ‘lower level tasks.
For example, the systems analysis and design phase of an IS/IT development
project might include, as lower-level tasks:
systems analysis and the production of an outline system specification
design of system input
design of system output
design requirements for individual programs (processing requirements)
file design.
A large number of lower-level tasks may be identified, although the number of tasks
should be restricted. This is because the project manager will need to plan each task,
and monitor its progress. Identifying too many tasks could make the job of the
project manager too complex.
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For each task, the project manager needs to:
estimate how much time will be needed to complete the task (measured,
perhaps, in man-days or man-months), and
allocate each task to specific individuals or small groups.
Prince 2
A work breakdown structure (WBS) is a tool or technique for breaking the total
work on a project into smaller and smaller parts, such as:
the main stages of a project stages
the lower-level tasks within each stage, and
work packages, which are items of work within each lower-level task.
Work for each small part of the project can then be allocated to an individual or
team. This helps managers to plan the work for the project and allocate each item of
work to individual members of the project team.
In the UK, a WBS system in common use for project planning is Prince 2. Prince
stands for ‘Projects in Controlled Environments’. It was first developed in 1989 by
the UK government.
PRINCE 2 provides ‘product breakdown structure’ (PBS) for a project development.
The project, which is seen as consisting of a number of ‘products’, is broken down
from the top-down into smaller and smaller work packages. This enables the project
activities to be identified within the context of work packages. Work packages are
allocated to individuals and teams. The project manager can then monitor the
completion of each work package to control the project deliverables (including cost,
time and quality).
3.5 Project time management
Controlling time to completion
A problem with the scheduling of tasks and allocation of tasks to individual project
team members is to prepare realistic estimates of how long each task might take to
complete. There will be some uncertainty in the estimates.
Another problem is that many tasks in a project are inter-dependent. This means
that some tasks cannot be started until other tasks have been completed. For
example, program software cannot be written until the system has been specified.
Programs cannot be tested until they have been written. A system cannot be
implemented by the user until the files in the old system have been converted into
files for the new system.
Some tasks can be carried out at the same time, in parallel with each other. For
example, programming and database design may happen side-by-side. New
equipment for the IT system can be procured whilst the system is being
programmed and tested.
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In order to schedule a project efficiently, so that it is completed in the shortest time
possible (or by a target completion date), the project manager needs to identify the
inter-dependencies between certain tasks.
Having specified the tasks to be completed, the resources required for each task, the
estimated time to complete each task and the inter-dependencies between them, the
project manager can prepare a schedule for the project. It is common to use
planning tools or techniques to prepare this schedule. A common planning tool is
network analysis (also called critical path analysis).
Project network and critical path
A network is a schedule of the work for a project, showing all the tasks that have to
be completed, the inter-dependencies between them and the time-scale for
completing them. A network is shown as a diagram or chart.
The network chart will also indicate the tasks that must be started and completed at
the earliest time possible, in order for the project to be completed in the earliest
possible time. There is a chain of ‘critical’ activities, one following immediately after
the other, that must all be started and finished at the earliest possible time in order
to complete the total project within the minimum time. This chain of time-critical
activities is the critical path.
Network analysis or critical path analysis is a technique that is widely used to plan
the timing and scheduling of a project, by drawing the project network and
identifying the activities on the critical path and the total duration of the critical
path. Identifying these time-critical activities will help management to allocate
resources to those activities where serious delays to the entire project might
otherwise occur.
In order to prepare a network chart, or critical path analysis (CPA) chart, the
following information is required:
the individual tasks to be completed
the estimated time to complete each task
the inter-dependencies between tasks: in other words, which activities must be
completed before another activity can begin.
Monitoring completion times: slippage
A CPA chart can be used by the project manager to:
check whether the time-critical activities are being completed on schedule
recognise by how much non-critical activities can be delayed without risking the
completion time for the project as a whole
recognise when the completion time for an activity has over-run the schedule
(and there is ‘slippage’ in the timetable for completion) and analyse what the
consequences of the slippage will be for the completion time for the entire
project
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allocate extra resources to time-critical activities if there is a risk of delay, or if
the expected slippage is unacceptable.
3.6 Project cost management
As indicated earlier, one way of controlling costs of a project is to compare actual
costs to date with budgeted costs, and report variances between actual and
budgeted costs. When variances seem to be too high, they should be investigated
and appropriate control measures should be taken where necessary to control excess
spending.
A problem with this method of budgetary control is that differences between actual
and budgeted cost to date will be due to two factors:
actual spending on activities is higher than planned
the amount of work done to date is more or less than scheduled.
An analysis of costs should allow for these two variances: expenditure variances
and schedule variances.
Example
A project was scheduled to last for one year and to cost $4,000,000. Actual spending
after three months was $1,150,000. It was expected that after three months, 20% of
the total project work would be completed. However, the actual amount of work
completed was 25% of the total work required to complete the project.
After three months, it was expected that 20% of the work would be completed, at a
cost of (20%) $800,000. Only 25% of the work was completed, therefore the cost to
date should be $1,000,000 (= 25% × $4,000,000). This means that $200,000 of the
overspending can be attributed to faster-than-expected completion of the work.
However, 25% of the project should cost only $1,000,000 (= 25% × $4,000,000) and
the actual expenditure was $1,150,000. This difference of $150,000 is due to excess
spending on the activities. The activities actually performed to date have cost
$250,000 more than budgeted.
A summary of the situation after three months is therefore as follows:
$
$
Costs of work scheduled to date
800,000
Variances
Schedule variance:
Extra cost because work is ahead of schedule 200,000
(A)
Expenditure variance:
excess spending on actual work to date 150,000
(A)
350,000 (A)
Actual spending to date
1,150,000
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This method of analysis provides a better analysis of spending than traditional
budgetary control, because it provides an analysis of differences between actual and
budgeted costs due to:
differences between scheduled work to date and actual work to date, and
differences between actual and budgeted costs for the work actually done so far.
This method of analysis is the basis of earned value analysis.
Earned value analysis
Earned value analysis is a method of providing regular periodic reports on the costs
to date of a project. The information provided by earned value analysis reports
helps the project manager to:
identify the excess spending on a project, by comparing the actual and budgeted
costs of the work done to date
provide a measurement of progress on the project, by comparing the budgeted
cost of the scheduled work to date and the budgeted cost of the actual work to
date.
As shown in the previous example, these two variances together explain the
difference between the scheduled cost to date and the actual expenditure to date on
the project.
With earned value analysis, the comparison of scheduled work and actual work
done, and actual and budgeted expenditure, is done on an activity-by-activity basis.
Project management software may include a facility that allows project managers to
make this type of analysis.
Example
A project has just been started. At the end of May, it had been scheduled that four
activities would have been started, and one of these would have been finished. By
the end of May, only three activities had been started but two of these had been
finished. An analysis is shown below.
Activity Scheduled
completion by
the end of May
Actual
completion by
the end of May
Budgeted cost
for entire activity
Actual cost
to date
$ $
A 100%
100%
20,000 22,000
B 50%
25%
18,000 6,000
C 75%
100%
40,000 43,000
D 10%
0%
25,000 0
71,000
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An earned value analysis can be made, as follows.
Activity Scheduled
cost by the
end of May
Budgeted cost
of actual work
done
Actual
cost
to date
$ $
$
A 20,000
20,000
22,000
B 9,000
4,500
6,000
C 30,000
40,000
43,000
D 2,500
0
0
61,500
64,500
71,000
$
$
Costs of work scheduled to date
61,500
Variances
Schedule variance:
Extra cost because work is ahead of schedule 3,000
(A)
Expenditure variance:
excess spending on actual work to date 6,500
(A)
9,500 (A)
Actual spending to date
71,000
3.7 Project quality management
Controlling quality
There should also be systems for ensuring that the project work is achieving the
required standards of quality, or meeting the project specifications. One method of
controlling quality is to establish ‘gates’ that the project must pass through on the
way to completion. To pass through a gate, the project must succeed in passing a
test of quality.
Depending on the nature of the project, it might also be possible to use statistical
quality control methods for monitoring and controlling quality.
Project quality plan
A project quality plan might be prepared, providing specifications for various
aspects of the project, in order to ensure that the required project quality standards
are achieved.
The project quality plan may contain the following items:
Project overview. This gives a broad description of the project and its objectives,
and identifies the project user/customer. This section of the project quality plan
should be consistent with the project initiation document (terms of reference).
Project organisation. This section of the quality plan specifies the management
and organisation structure for the project, and the management responsibilities.
It includes, for example, the names of:
- the members of the project steering committee
- the project sponsor
- the person to contact in each user or customer department