Project

Management:

The Managerial Process Seventh Edition

Erik W. Larson

Clifford F. Gray
Oregon State University

Mc
Graw
Hill
Education
Contents

Preface ix 2.6 Managing the Portfolio System 48

Senior Management Input 48
Chapter 1 The Governance Team Responsibilities 49
Modern Project Management 2 Balancing the Portfolio for Risks and Types
of Projects 50
1.1 What Is a Project? 6 Summary 51
What a Project Is Not 7
Program versus Project 7
The Project Life Cycle 8 Chapter 3
The Project Manager 9 Organization: Structure and Culture 66
Being Part of a Project Team 11
3.1 Project Management Structures 68
1.2 Current Drivers of Project Management 12
Organizing Projects within the
Compression of the Product Life Cycle 12
Functional Organization 68
Knowledge Explosion 12
Organizing Projects as Dedicated Teams 71
Triple Bottom Line (Planet, People, Profit) 12
Organizing Projects within a Matrix
Increased Customer Focus 12
Arrangement 75
Small Projects Represent Big Problems 15
Different Matrix Forms 76
1.3 Project Governance 15
3.2 What Is the Right Project Management
Alignment of Projects with Organizational Structure? 79
Strafe gy 16 Organization Considerations 79
1.4 Project Management Today: A Socio-Technical
Project Considerations 79
Approach 17
3.3 Organizational Culture 81
Summary 18
What Is Organizational Culture? 81
Chapter 2 Identifying Cultural Characteristics 83
3.4 Implications of Organizational Culture for
Organization Strategy and Project Organizing Projects 86
Selection 26 Summary 89
2.1 The Strategie Management Processi
An Overview 29 Chapter 4
Four Activities of the Strategie Management
Defining the Project 100
Process 29
2.2 The Need for a Project Priority System 34 4.1 Step 1: Defining the Project Scope 102
Problem 1: The Implementation Gap 34 Employing a Project Scope Checklist 103
Problem 2: Organization Politics 35 4.2 Step 2: Establishing Project Priorities 106
Problem 3: Resource Conßicts and Multitasking 36 4.3 Step 3: Creating the Work Breakdown
2.3 A Portfolio Management System 37 Structure 108
Classification ofthe Project 37 Major Groupings Found in a WBS 108
2.4 Selection Criteria 38 How WBS Helps the Project Manager 108
Financial Criteria 38 A Simple WBS Development 109
Nonfinancial Criteria 40 4.4 Step 4: Integrating the WBS with the
2.5 Applying a Selection Model 43 Organization 113
Project Classification 43 4.5 Step 5: Coding the WBS for the Information
Sources and Solicitation of Project Proposais 44 System 113
Ranking Proposais and Selection of Projects 46 4.6 Process Breakdown Structure 116
xviii
 Contents xix

4.7 Responsibility Matrices 117 6.4 Activity-on-Node (AON) Fundamentals 167

4.8 Project Communication Plan 119 6.5 Network Computation Process 171
Summary 121 Forward Pass—Earliest Times 171
Backward Pass—Latest Times 173
Chapter 5 Determining Slack (or Float) 175
Estimating Project Times 6.6 Using the Forward and Back ward Pass
Information 177
and Costs 128
6.7 Level of Detail for Activities 178
5.1 Factors Influencing the Quality of 6.8 Practical Considerations 178
Estimates 130 Network Logic Errors 178
Planning Horizon 130 Activity Numbering 179
Project Complexity 130 Use of Computers to Develop Networks 179
People 131 Calendar Dates 182
Project Structure and Organization 131 Multiple Starts and Multiple Projects 182
Padding Estimates 131 6.9 Extended Network Techniques to Come Closer
Organization Culture 131 to Reality 182
Other Factors 131 Laddering 182
5.2 Estimating Guidelines for Times, Costs, Use ofLags to Reduce Schedule Detail and Project
and Resources 132 Duration 183
5.3 Top-Down versus Bottom-Up An Example Using Lag Relationships—The Forward
Estimating 134 and Backward Pass 186
5.4 Methods for Estimating Project Times Hammock Activities 188
and Costs 136 Summary 189
Top-Down Approaches for Estimating Project Times
and Costs 136 Chapter 7
Bottom-Up Approaches for Estimating Project
Managing Risk 206
Times and Costs 140
A Hybrid: Phase Estimating 141 7.1 Risk Management Process 208
5.5 Level of Detail 143 7.2 Step 1: Risk Identification 210
5.6 Types of Costs 144 7.3 Step 2: Risk Assessment 212
Direct Costs 145 Probability Analysis 215
Direct Project Overhead Costs 145 1A Step 3: Risk Response Development 216
General and Administrative (G&A) Overhead Mitigating Risk 216
Costs 145 Avoiding Risk 217
5.7 Refining Estimates 146 Transferring Risk 217
5.8 Creating a Database for Estimating 148 Accept Risk 218
5.9 Mega Projects: A Special Case 149 7.5 Contingency Planning 219
Summary 151 Technical Risks 220
Appendix 5.1: Learning Curves for Schedule Risks 222
Estimating 157 Cost Risks 222
Funding Risks 222
Chapter 6 7.6 Opportunity Management 223
7.7 Contingency Funding and Time Buffers 223
Developing a Project Plan 162
Budget Reserves 224
6.1 Developing the Project Network 163 Management Reserves 224
6.2 From Work Package to Network 164 Time Buffers 225
6.3 Constructing a Project Network 166 7.8 Step 4: Risk Response Control 225
Terminology 166 7.9 Change Control Management 226
Basic Rules to Follow in Developing Project Summary 230
Networks 166 Appendix 7.1: PERT and PERT Simulation 240
xx Contents

Chapter 8 9.6 What If Cost, Not Time, Is the Issue? 321

Scheduling Resources and Costs 250 Reduce Project Scope 322
Have Owner Take on More Responsibility 322
8.1 Overview of the Resource Scheduling Outsourcing Project Activities or Even the Entire
Problem 252 Project 322
8.2 Types of Resource Constraints 254 Brainstorming Cost Savings Options 322
8.3 Classification of a Scheduling Summary 323
Problem 255
8.4 Resource Allocation Methods 255
Chapter10
Assumptions 255
Time-Constrained Project: Smoothing Resource Being an Effective Project Manager 338
Demand 256 10.1 Managing versus Leading a Project 340
Resource-Constrained Projects 257 10.2 Managing Project Stakeholders 341
8.5 Computer Demonstration of Resource- 10.3 Influence as Exchange 345
Constrained Scheduling 262 Task-Related Currencies 345
The Impacts of Resource-Constrained Position-Related Currencies 346
Scheduling 266 Inspiration-Related Currencies 347
8.6 Splitting Activities 269 Relationship-Related Currencies 347
8.7 Benefits of Scheduling Resources 270 Personal-Related Currencies 348
8.8 Assigning Project Work 271 10.4 Social Network Building 348
8.9 Multiproject Resource Schedules 272 Mapping Stakeholder Dependencies 348
8.10 Using the Resource Schedule to Develop a Management by Wandering Around (MBWA) 350
Project Cost Baseline 273 Managing Upward Relations 351
Why a Time-Phased Budget Baseline Leading by Example 353
Is Needed 273 10.5 Ethics and Project Management 356
Creating a Time-Phased Budget 274 10.6 Building Trust: The Key to Exercising
Summary 279 Influence 357
Appendix 8.1: The Critical-Chain Approach 294 10.7 Qualities of an Effective Project Manager 359
Summary 362
Chapter 9
Reducing Project Duration 304 Chapter 11
Managing Project Teams 374
9.1 Rationale for Reducing Project
Duration 306 11.1 The Five-Stage Team Development Model 377
9.2 Options for Accelerating Project 11.2 Situational Factors Affecting Team
Completion 307 Development 379
Options When Resources Are Not Constrained 308 11.3 Building High-Performance Project Teams 381
Options When Resources Are Constrained 310 Recruiting Project Members 381
9.3 Project Cost-Duration Graph 313 Conducting Project Meetings 383
Explanation of Project Costs 313 Establishing Team Norms 385
9.4 Constructing a Project Cost-Duration Establishing a Team Identity 387
Graph 314 Creating a Shared Vision 388
Determining the Activities to Shorten 314 Managing Project Reward Systems 391
A Simplified Example 316 Orchestrating the Decision-Making Process 392
9.5 Practical Considerations 318 Managing Conflict within the Project 394
Using the Project Cost-Duration Graph 318 Rejuvenating the Project Team 398
Crash Times 319 11.4 Managing Virtual Project Teams 399
Linearity Assumption 319 11.5 Project Team Pitfalls 403
Choice of Activities to Crash Revisited 319 Groupthink 403
Time Reduction Decisions and Sensitivity 320 Bureaucratic Bypass Syndrome 404
 Contents xxi

Team Spirit Becomes Team Infatuation 404 Percent Complete Rule 467
Going Native 404 What Costs Are Included in Baselines? 467
Summary 405 Methods of Variance Analysis 468
13.5 Developing a Status Report: A Hypothetical
Chapter 12 Example 470
Assumptions 470
Outsourcing: Managing Interorganizational
Baseline Development 470
Relations 4X8
Development of the Status Report 471
12.1 Outsourcing Project Work 420 13.6 Indexes to Monitor Progress 475
12.2 Request for Proposal (RFP) 424 Performance Indexes 477
Selection of Contractor from Bid Proposais 425 Project Percent Complete Indexes 474
12.3 Best Practices in Outsourcing Project Work 426 Software for Project Cost/Schedule Systems 477
Well-Defined Requirements and Procedures 426 Additional Earned Value Rules 478
Extensive Training and Team-Building Activities 428 13.7 Forecasting Final Project Cost 476
Well-Established Conflict Management Processes 13.8 Other Control Issues 481
in Place 429 Technical Performance Measurement 481
Frequent Review and Status Updates 431 Scope Creep 483
Co-Location When Needed 432 Baseline Changes 483
Fair and Incentive-Laden Contracts 432 The Costs and Problems ofData Acquisition 485
Long-Term Outsourcing Relationships 433 Summary 486
12.4 The Art of Negotiating 434 Appendix 13.1: The Application of Additional Earned
1. Separate the People from the Problem 435 Value Rules 505
2. Focus on Interests, Not Positions 436 Appendix 13.2: Obtaining Project Performance
3. lnvent Options for Mutual Gain 437 Information from MS Project 2010
4. When Possible, Use Objective Criteria 138 or2015 511
Dealing with Unreasonable People 438
12.5 A Note on Managing Customer Relations 439 Chapter14
Summary 442 Project Ciosure 514
Appendix 12.1: Contract Management 451 14.1 Types of Project Closure 516
14.2 Wrap-up Closure Activities 518
Chapter 13 14.3 Project Audits 521
Progress and Performance Measurement The Project Audit Process 522
and Evaluation 458 Project Retrospectives 525
Project Audits: The Bigger Picture 529
13.1 Structure of a Project Monitoring Information
14.4 Post-Implementation Evaluation 532
System 460
Team Evaluation 532
What Data Are Collected? 460
Individual, Team Member, and Project Manager
Collecting Data and Analysis 460
Performance Reviews 534
Reports and Reporting 460
Summary 537
13.2 The Project Control Process 461 Appendix 14.1: Project Closeout Checklist 539
Step 1: Setting a Baseline Plan 461
Appendix 14.2: Euro Conversion—Project Closure
Step 2: Measuring Progress and Performance 461
Checklist 541
Step 3: Comparing Plan against Actual 462
Step 4: Taking Action 462 Chapter15
13.3 Monitoring Time Performance 462
International Projects 544
Tracking Gantt Chart 463
Control Chart 463 15.1 Environmental Factors 546
Milestone Schedules 464 Legal/Political 546
13.4 Development of an Earned Value Cost/Schedule Security 547
System 467 Geography 548
xxii Contents

Economic 549 16.3 Agile PM in Action: Serum 585

Infrastructure 550 Roles and Responsibilities 586
Culture 551 Serum Meetings 587
15.2 Project Site Selection 553 Product and Sprint Backlogs 588
15.3 Cross-Cultural Considerations: Sprint and Release Burndown Charts 589
A Closer Look 554 16.4 Applying Agile PM to Large Projects 592
Adjustments 555 16.5 Limitations and Concerns 593
Working in Mexico 556 Summary 595
Working in France 559
Working in Saudi Arabia 560 Appendix One: Solutions to Selected
Working in China 562 Exercise 603
Working in the United States 563 Appendix Two: Computer Project
Summary Comments about Working in Different Exercises 616
Cultures 565
Culture Shock 565 Glossary 633
Coping with Culture Shock 567
15.4 Selection and Training for International Acronyms 640
Projects 568 Project Management Equations 641
Summary 571
Cross Reference of Project
Chapter 16 Management 642
An Introduction to Agile Project Socio-Technical Approach to Project
Management 578 Management 643
16.1 Traditional versus Agile Methods 580 Index 644
16.2 Agile PM 582