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Chapter 1
Introduction to Project
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Management

1.1. Terms, Concepts and Difficulties of Project

Management
The term project is defined by the Cambridge Dictionary Online as a piece
of planned work or an activity that is finished over a period of time and
intended to achieve a particular purpose. This broad definition suggests
that everyone is involved in projects, and project management is important
for anyone performing “planned work”. The Project Management Institute
publishes the Project Management Body of Knowledge (PMBOK) which,
in its fifth edition, defines a project as a “temporary endeavor undertaken
to create a unique product, service, or result.”
The temporary, non-repetitive nature of projects suggests that anyone
who manages a project faces several problems including the following:

(1) Since projects are unique, project managers and project teams are not
repeating the same projects; they are not “riding the learning curve”,
i.e., improvement by mere repetition is limited. Structured learning
and training activities are needed to enable project managers and
their teams to practice, repeatedly, the tools and techniques they may
use to manage a project. It is important to keep the cost of learning
low and, more importantly, to minimize the cost and likelihood of
making mistakes on real projects. One way to support learning and

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2 Hands-on Project Management

to get ready for a new project is by simulating previous, current, and

future projects in a lab-like environment.
(2) As a result of the non-repetitive nature of projects, project managers
and project teams have little opportunity to collect data from identical,
historical projects and to use it to support future decision making. This
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lack of data or “knowledge gap” is the source of risk in projects and

the cause of many project failures. There is a need for “dry runs” or
simulation of project activities and project plans prior to their actual
implementation along with a well-structured process of data collec-
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tion and analysis to improve project plans.

(3) Project teams are assembled for specific projects and, frequently, team
members do not have prior experience of working together as a team.
Team members need shared understanding of how project success is
defined and measured, what needs to be done to achieve project suc-
cess, how it should be done, when, and by whom. There is a need for
team training and team building to create shared understanding of pro-
ject goals and the best way to achieve those goals. A simulated envi-
ronment where the team of a new project can “manage” the project
together and develop shared understanding is one possible solution to
this problem.

Our goal, in writing this book and using the student version of the
simulation software, the Project Team Builder, that accompanies it, is
to help anyone involved in projects deal with the above three problems.
Specifically, this book is written for project managers and project
teams, as well as graduate and undergraduate students, who want to
learn and practice the basic tools of project management. This book
presents tools and techniques commonly used to manage projects.
It also describes and provides a simulation platform with which it is
possible to simulate a large variety of projects in a safe, user-friendly
environment.
Project management is defined by the Project Management Body of
Knowledge (PMBOK) fifth edition as “the application of knowledge,
skills, tools and techniques to project activities to meet the project
requirements.”

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 “9x6” b2977 Hands-on Project Management

Introduction to Project Management 3

To achieve its goals, this book focuses on two issues:

1. It describes the simplest and commonly used knowledge, skills, tools,
and techniques that project managers and their teams are using to
manage projects; and
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2. It facilitates hands-on training of individuals and teams by applying the

knowledge, skills, tools, and techniques in a simulated environment.
The Project Team Builder, the software that comes with the book,
provides a simulation environment in which project managers and their
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teams can practice these tools and techniques in a safe and inexpensive
environment.
There are nine chapters in this book:
1. Introduction to Project Management
In this chapter, we present some of the terminology commonly used in
project management. We also discuss the history of project manage-
ment, focusing on the last one hundred years, as most of the tools and
techniques presented in this book were developed during this period.
The selection and initiation of projects is discussed and illustrated.
2. Introduction to the Project Team Builder (PTB) Simulator
In this chapter, we present the Project Team Builder simulator, its
logic, and the major functions it supports. The PTB is based on the
following principles:

  I. A simulation approach: The PTB simulates real or imaginary

­projects. Any project can be simulated by creating a scenario based
on that project data and simulating the scenario using the PTB
simulator.
   II. A case study approach: In the PTB, the information on the simulated
project is presented in two ways — as scenario data and as a case study
file that introduces the user to the “story” of the simulated project.
III. A dynamic approach: Unlike traditional case studies that present a
snapshot of reality as a specific situation at a given point of time, the
user of PTB can control the simulation time and “execute” the project
to see the dynamic behavior of the project and the interaction over
time between project scope, schedule, and cost.

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4 Hands-on Project Management

IV. A model-based approach: Simple tools and techniques commonly

used for project management are built into the PTB including tools for
scheduling, value analysis, budgeting, resource management, and risk
management.
  V. A data-based approach: All the data required to prepare a project plan
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and to execute it is available as part of the case study or scenario. The

user does not have to input any data and can concentrate on analysis
and decision making.
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 hese principles are discussed in detail later in this book along with
T
examples and screenshots to introduce the PTB to the reader.

3. Stakeholder Requirements and Value

Project success is measured by its ability to satisfy the needs and
expectations of the stakeholders. In this chapter, we present the con-
cepts of stakeholders and their needs and expectations. We discuss the
terms benefit and value and ways to measure both. We show how the
tools related to benefit and value are implemented in the PTB.
4. Scheduling
Project scheduling tools are probably the most commonly used
tools. The need to estimate the duration of a project, to acquire long
lead-time items, and scarce resources motivated the development of
scheduling tools during the 20th century. Such tools, like the Gantt
chart, are widely used today because they are simple to construct and
to understand and, yet, provide essential information to the project
manager, the project team, and other stakeholders. We present the
concepts of the critical path and slack; we show how they are imple-
mented in the PTB and how they are presented to the user. The impact
of uncertainty on scheduling and the resulting risk are discussed and
illustrated by the Monte Carlo simulation built into the PTB.
5. Resource Management
Resources are needed to perform project activities. Human resources,
machines, equipment, and materials are frequently limited in their
availability, and therefore the project plan must account for resource
constraints. Furthermore, the efficient and effective use of resources
is an important consideration in project planning. Tools like the
resource graph or histogram are discussed, and their usage for project

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Introduction to Project Management 5

planning is illustrated by the PTB. By integrating resource manage-

ment with scheduling considerations, feasible schedules (with respect
to resource availability) are developed. The availability of many types
of resources is subject to uncertainty: machine breakdown, absentee-
ism of workers, and loss of material are examples of sources of risk
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that impact project success. Such uncertainties are introduced in the

PTB, and the user can learn how to factor uncertainty into project
planning processes.
6. Budgeting
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The project budget represents financial sources and the use of funds
throughout the project life cycle. The budget is an important part
of the plan, and it is based on estimates of income and cost. The
direct cost of resources, as well as other costs, such as the cost of
idle time or the penalty due to missed due dates, are presented in the
project budget. The PTB shows historical (past) costs along with
future (estimated) costs, as well as the cash flow and cash position
of the project at any time.
7. Risk Management
The non-repetitive nature of projects limits the amount of past infor-
mation available to the project manager and the project management
team as a basis for planning. A risk is an event with some probability
and some expected outcomes that may occur during the course of a
project and have an adverse effect on the project. A project manager
must assess which risks are most likely to impact the ability of the
project team to achieve the project goals and to satisfy its constraints.
Risk management is an important consideration in project manage-
ment. This activity should start very early in a project life cycle in
an effort to identify risks and to analyze them as a basis for risk-
related decisions. The initial analysis is performed as part of project
initiation, as the level of risk associated with a proposed project is an
important factor in the go/no go decision, i.e., a decision to start the
project. Furthermore if the decision is “go”, there might be differ-
ent technological and operational alternatives to perform the project.
The risk associated with each of these alternatives is a major factor
in the decision as to which alternative to select for implementation.
During the project planning phase, the decision whether to mitigate

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6 Hands-on Project Management

the risks (by eliminating, reducing, or transferring all or part of the

risks identified) is crucial. Risk mitigation is an effort to reduce the
risk or eliminate it altogether before the risk event takes place. Risks
that are not mitigated, as well as residual risks left over after mitiga-
tion, may need a contingency plan or some sort of buffer or reserve
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as a protection. Such risks are monitored during project execution.

Corrective actions are taken whenever a risk event takes place and
derails a project from its original plan.
8. Project Integration — Planning, Executing, Monitoring, and Con­
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trolling the Project.

Project plans represent the way management would like the project
to be executed. Since these plans are based on limited information
and there are risks that might derail the project from its planned
course, a monitoring and control system is implemented. This system
monitors the actual progress of the project and compares it to the
plans. When actual progress deviates from project plans, root cause
analysis is performed, and possible corrective actions are evaluated.
A corrective action is taken when management decides that such an
action is needed to bring the project back to the original plan.
The different aspects of project management discussed so far are
not independent. In other words, project scope management, project
scheduling, cost management, resource management, and risk man-
agement are dependent on each other, and a decision may impact all
or several of the above aspects.
The project manager and the project team must understand the com-
plex relationship between the different dimensions of the project. The
PTB simulator is designed to demonstrate these complex relationships
and to help the user understand how a potential decision may impact
the project — for example, how a decision to add resources might
impact cost or quality. By executing, monitoring, and controlling dif-
ferent scenarios, the user engages in the art and science of project
management while minimizing the cost of making poor decisions.
9. A Review of how Simulation-Based Training is Integrated in Project
Management Courses.
In this chapter, we present short reports of users of the PTB s­ imulator.
Simulation-Based Training (SBT) can be integrated with lectures,

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Introduction to Project Management 7

books, and traditional case studies. We hope that the experience of

several users will help the reader decide how SBT can fit into a spe-
cific setting.

1.2. Project Life Cycle and Major Components

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of Project Management
Project management has been widely practiced throughout history, dating
back to the construction of the Egyptian pyramids almost 5000 years ago.
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As a discipline, project management is becoming increasingly important

for business and government. For example, as product life cycles continue
to decrease, new products and services are introduced with increased pres-
sure on firms to rapidly go to market. Even if a firm cannot be the first
entrant in a particular market, it can achieve greater profits by being as
fast as possible in entering into an existing market. McKinsey estimated
that a firm loses 12% of its profitability from a product over its life cycle
if the product is three months delayed in getting to market. The penalty
for being late to market increases to 25% reduced profitability if a delay
is five months.
Project management is a very empirical discipline. Hands-on work
experience is necessary for an individual to develop into a capable and
successful project manager. The key methodologies in the field were
developed in industry — not in academia. In the 1910s, the Gantt chart
scheduling method was developed by Henry Gantt. In the 1950s, the
Critical Path Method (CPM) was developed at DuPont. At roughly the
same time, the consulting firm, Booz, Allen, and Hamilton, working on
behalf of the US Navy’s Special Project Office, developed the Program
Evaluation and Review Technique (PERT) to support the Polaris missile
project. Since then, numerous tools and techniques were developed to
support project management. This effort is still on-going; practitioners
and researchers in academia are working on new tools and techniques, as
well as on the improvement of existing ones.
The project management function was often handled in an ad hoc
fashion by many organizations. A manager, from a line organization that
was relevant to a particular project, would be selected to manage and run
the project. Today, project management is a recognized discipline, and

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8 Hands-on Project Management

firms are hiring managers, trained and experienced in project manage-

ment, to lead projects. Projects have become increasingly complex, span-
ning multiple disciplines in a business. A project manager must build and
sustain cross-functional teams in order for a project to be successful. The
increasing technological and organizational complexity of a project has
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required businesses to establish a project management office in order to

support and carry out a large-scale project work stream.
A project, unlike a process, is a one-time, temporary endeavor under-
taken to create a new or unique product or service. Unlike process man-
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agement, which seeks to eliminate variability and create a repeatable set

of tasks, project management accepts variability due to the uniqueness of
the endeavor. A project manager’s job would be quite straightforward if a
project plan ran smoothly without any bumps along the way. In practice, a
project invariably deviates from plan. For example, project scope is modi-
fied by key stakeholders due to changing business conditions. A project
may experience a schedule delay or a cost overrun due to changing eco-
nomic conditions, unforeseen quality issues, or uncertain technologies not
performing as expected. Project management is also concerned with
resource management, including personnel. The possibility of conflict
arising within a team is another source of uncertainty. A project manager’s
responsibility is to mitigate risks early on and to plan for and execute
contingency plans to manage and cope with uncertainty.
The content of a project is divided into stages (or phases), and the
collection of such stages is known as the project life cycle. A simple life
cycle form may have four phases performed in sequence (a phase starts
only after its predecessor phase is finished).

   I. Formulation and selection

  II. Planning
III. Scheduling and control
  IV. Implementation and termination

In the formulation and selection phase, key stakeholders’ needs and

expectations are translated into a business need — to formulate project
ideas addressing that need. In this phase, a high-level project scope is
sketched out. If the proposed project is selected for further development,
alternative technological and operational ways to perform the project are

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Introduction to Project Management 9

proposed and evaluated. Proposals will typically be evaluated based on

their ability to satisfy stakeholders’ needs and expectations, as well as
technological and economic feasibility, the level of risk involved, and
cost and schedule considerations. When an alternative is selected, a more
detailed project plan is created in the planning phase. Specific high-level
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tasks are identified, including an estimate of resources and costs that will
be needed. The heart of a project plan is the scheduling and control phase
when resources are assigned to each project task, and the project idea,
formulated in earlier phases, is realized. Finally, a project concludes with
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implementation that ends when a product or service is handed off to a

user environment. For example, a product prototype developed by the
project team would be moved to a factory production environment in this
final phase.
This simple project life cycle approach that was common for many
years is a sequential approach. In the software development industry, it is
known as the “Waterfall” life cycle. In the Waterfall life cycle, project
phases are performed in sequence with no overlapping. In some cases, a
“gate” is introduced between consecutive phases and, only after passing
this gate successfully, does the project proceed to the next phase. For
example, a Preliminary Design Review (PDR) may be the gate that sepa-
rates the formulation and selection phase and the planning phase, and a
Critical Design Review (CDR) may be the gate that separates the planning
phase and the execution phase.
Another life cycle approach is the “Spiral” approach in which the
project scope is divided into several smaller projects. The first one aims at
delivering the Minimum Viable Product (MVP) — a product configura-
tion with the minimum features and functions that will provide enough
value to justify acceptance by the stakeholders. In consecutive iterations
of the spiral, more features and functions are added to the product based
on the feedback from users and adopters. The advantage of this approach
is a short time to market. A third life cycle approach is the “Incremental or
Agile” project in which short development cycles are used to incremen-
tally add more and more functions and features to the point that the prod-
uct becomes MVP.
Although each project has a unique set of goals, there is enough
commonality at a generic level to permit the development of a unified

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10 Hands-on Project Management

framework for planning and control. Project management techniques are

designed to handle the common processes and problems that arise during
a project’s life cycle.
The following list contains some of the major components of a “typical”
project.
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(1) Project initiation, selection, and definition

1.1 Identification of needs
1.2 Identification of stakeholders
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1.3 Development of alternatives
1.4 Evaluation of alternatives based on performance (quality), cost,
duration, and risk
1.5 Selection of the “most promising” alternative and gaining
approval

(2) Project organization

2.1 Development of a project governance structure, including
identification of functional areas that will participate in the
project
2.2 Structuring the project’s work content into increasingly smaller
work modules using a work breakdown structure (WBS)
2.3 Allocation of WBS elements to participating organizations and
assigning managers to the lowest level of the WBS hierarchy,
known as work packages
2.4 Development of communication and reporting protocols

(3) Analysis of activities

3.1 Definition of the project’s major activities
3.2 Development of a list of subactivities required to complete each
activity
3.3 Development of precedence relations among activities
3.4 Development of project flow, typically modeled with a network
diagram
3.5 Establishment of milestones

(4) Project scheduling

4.1 Development of a calendar to track the progress of a project’s
activities

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Introduction to Project Management 11

4.2 Assignment of resources to activities and estimation of activity

durations
4.3 Monitoring progress and milestones and updating the schedule

(5) Resource management

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5.1 Estimation of resource requirements for each activity

5.2 Acquisition of resources
5.3 Allocation of resources among a project’s activities
5.4 Monitoring resource usage and cost
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(6) Risk management

6.1 Identification of risks (technological, personnel, etc.)
6.2 Proactive risk management and mitigation
6.3 Reactive risk management and control

(7) Project budgeting

7.1 Forecast of direct and indirect costs
7.2 Estimation of cash flow for each period over a project’s expected
life cycle
7.3 Development of an overall project budget
7.4 Monitoring actual cost

(8) Project execution and control

8.1 Development and execution of data collection and data analysis
systems
8.2 Execution of activities
8.3 Identification of deviations in cost, scope, schedule, and quality
8.4 Development and implementation of corrective plans

(9) Project termination and evaluation

9.1 Evaluation of project success
9.2 Recommendations for improvement in project management
practices

1. Project initiation, selection, and definition. A project idea starts with

identifying a need for a new service, product, process, or system. It may
be initiated by one or more internal stakeholders or it may be initiated
by an external source. If the underlying need is considered significant, a
study of alternative solution approaches is, then, initiated. Each proposed

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12 Hands-on Project Management

alternative is evaluated based upon an agreed set of performance meas-

ures. The most promising alternatives, based on performance, duration,
costs, and risks, comprise an “efficient frontier” of possible solutions.
Due to inherent uncertainty of executing a project (a unique, one-time,
business endeavor), most financial and technological estimates are likely
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to be problematic. For each activity, a project manager must assess the

risks associated with completing the activity as per the project plan. A risk
assessment includes estimating a probability of an unplanned event occur-
ring and an estimate of the unplanned event’s impact on the overall project
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plan. A proactive risk management approach identifies major risk drivers

at a project’s inception. Some of these risks may be avoided or mitigated
by changing plans or reduced to an acceptable level. Remaining risks
(or residual risks) are monitored throughout the project execution.
Sometimes, contingency plans should be prepared to handle unfavorable
events if and when they occur.
Once an alternative is chosen, design details are specified during the
project’s concept formulation and definition phase. Preliminary design
efforts culminate with a configuration baseline. The features and func-
tions of the selected alternative should satisfy stakeholders’ needs and
expectations in order to be accepted and approved by management.
A well-structured and transparent project proposal selection and evalua-
tion process, involving all interested parties, increases the likelihood of
management approval and project success.

2. Project organization. Many stakeholders participate in a particular

project. In a project’s advanced development phase, a Statement of Work
(SOW) is drafted to define the work content. A set of project activities are
defined and arranged hierarchically in a tree-like format, known as a Work
Breakdown Structure (WBS). The relationship between functional organi-
zations participating in a project, known as the Organizational Breakdown
Structure (OBS), is similarly depicted.
In an OBS, the lines of communication between and within organiza-
tions participating in a project are defined. Similarly, procedures and
templates for work authorization and reporting are established. Lowest-
level WBS elements form work packages. A manager in the OBS is
assigned responsibility for each work package.

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Introduction to Project Management 13

At the conclusion of a project’s advanced development phase, a

detailed budget and cash flow are prepared and submitted for management
approval.

3. Analysis of activities. In order to identify required resources and to

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prepare a detailed schedule, a project management team must develop a

detailed list of required activities. These activities are proposed to accom-
plish the WBS tasks in an efficient and effective manner. Each work
stream in the initial planning phase typically consists of many activities.
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A feasible project plan requires that precedence relations be introduced to

link a project’s activities. Precedence relations, that model various techno-
logical and logistical constraints inherent in a project, are typically repre-
sented graphically in the form of a network model by project management
software packages.
Completion of a significant project activity defines a milestone.
Milestones provide feedback to stakeholders and senior-level manage-
ment and signal progress on the project. They form the basis for budget-
ing, scheduling, and resource management. As a project ensues, the
­project plan and associated project schedule are updated to account for
modified and new activities in the WBS, the successful completion of
activities, and any changes in design, organization, and requirements due
to uncertainty or changes in market conditions.

4. Project scheduling. The expected durations of activities are important

for both financial and operational planning. Funds must be set aside in
a timely fashion and resources must be procured in a timely fashion in
order for a project to realize its milestones. Project scheduling starts with
a calendar, specifying available working hours per day, available working
days per week, holidays, etc. The project management team estimates the
expected duration of each activity. A project schedule is then developed
based on the calendar, precedence constraints among activities, and each
activity’s expected duration time. A project schedule specifies the start-
ing and ending dates of each activity and any slack or leeway. A project
schedule is an input into the budgeting and resource management pro-
cesses. It is also used as a basis for work authorization and as a baseline

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14 Hands-on Project Management

for monitoring a project’s progress. The schedule is updated throughout

a project’s life cycle so that project monitoring and control is up to date.

5. Resource management. Activities are performed by resources based on

project requirements. These requirements form the basis of resource man-
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agement and resource acquisition planning.

If resource requirements exceed expected availability, schedule delays
may occur. A project manager must take action in these cases either by
acquiring additional resources or by subcontracting. Alternatively, a pro-
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ject manager may reschedule activities (especially those with slack) in

order to “smooth” demand for resources and not exceed expected resource
availability. Other potential tactics for dealing with gaps between resource
supply and demand, such as maximizing resource utilization, may be
available as well.
During a project’s execution phase, resources are allocated periodi-
cally to activities according to a predetermined timetable. Since actual
and planned resource usage often differ, a project manager must monitor
progress against the project plan. Low utilization and higher-than-
planned costs or resource consumption rates should promptly be reported
to senior-level management. Large discrepancies between planned and
actual resource output may require significant alterations in a project’s
schedule.

6. Risk management. Risk management starts with an effort to identify

risk — unplanned events that may occur and, if they do, the project
may not achieve its goals or may violate some of its constraints. Typical
sources of risk are technological, financial, political, and resource related.
Identified risks are analyzed by qualitative and quantitative tools, High-
risk events should be mitigated a priori — as part of project planning.
When new technologies are developed or deployed, risks associated with
technological alternatives must be evaluated. In addition, quality tests
to validate operational and technical requirements must be designed,
and contingency plans should be prepared. Changes in requirements or
in market conditions may necessitate modifications to the configuration.
Technology experts should be part of the project team in order to ensure

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Introduction to Project Management 15

that a project achieves its approved configuration. These subject-matter

technology experts can evaluate proposed changes, introduce approved
changes into the configuration plan, and develop a quality management
program. The quality management program seeks to prevent defects and to
continuously improve processes. Ultimately, the quality management pro-
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gram increases the likelihood that a project’s deliverables will meet pro-
ject specifications as stipulated by stakeholders and senior management.
Throughout project execution, a risk management plan is updated as
new information is made available. Risks are monitored, as early detection
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of a risk event can trigger corrective actions to bring a project back to its
planned course.

7. Project budgeting. Preparation of a budget results in a time-phased

plan that summarizes expected costs, revenue, cash flow, and milestones.
A budget is derived by estimating the cost of activities and resources. As a
project schedule tracks activities and resources over time, it serves a basis
for a cash flow analysis. If the cash flow and/or the resulting budget are
not acceptable to a project’s funding source, for example, senior manage-
ment, then the project schedule must be modified. For example, a project
manager may delay activities that have slack, as delaying these activities
will minimize the impact on the overall project duration.
Once a budget is approved, it serves as a baseline financial tool for
the project. A project manager can proceed to establish credit lines and
loans, and the cost of financing the project can be evaluated. As a project
progresses, information on actual cost is gathered and compared with
the original project budget. By comparing actual and planned costs, a
project management team can effectively oversee the financial aspect of
a project.

8. Project execution and control. A feasible schedule integrates milestone

deadlines, budget constraints, resource availability, and technological
requirements, while satisfying resource constraints and the precedence
relations among activities.
An initial project schedule inevitably is subject to unexpected or
random events that are difficult (or impossible) to predict. Project control

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16 Hands-on Project Management

systems are designed with three objectives: (1) to identify deviations and
to forecast future deviations between actual project plans and work actu-
ally completed; (2) to identify the root causes of these deviations; and (3)
to support management decisions aimed at righting the course of the
project.
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Project control requires timely collection and analysis of project per-

formance data. A project management team should continually monitor
costs, resource usage, and achievement of milestones. Actual and planned
performance in each of these areas should be compared. Deviations in any
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area (e.g., schedule delay) may trigger deviations in other areas (e.g., cost
overrun).
All project operational data collected by a project control system are
analyzed. If deviations are detected by the project management team, then
corrective actions might be devised to correct a project’s course. The
existing project plan is modified accordingly.
During a project’s life cycle, a project manager is continuously updat-
ing original estimates of completion dates and costs. Updated estimates
are used by the management to evaluate a project’s progress and the effi-
ciency of participating organizations. Management evaluations form the
basis of forecasts concerning expected project success at each stage of its
life cycle.

9. Project termination. A project does not terminate when its technical

objectives are met. Management should derive lessons learned from a
completed project in order to improve management of future projects.
A project management team should conduct a detailed analysis of the
original plan, modifications made over the course of a project, the actual
progress, and the success of the project. A project “postmortem” seeks
to identify processes and techniques that were not effective and to rec-
ommend improvements. As part of the evaluation, a project management
team should identify missing or redundant managerial tools. New tech-
niques should be adopted when appropriate, and obsolete procedures and
tools may be discarded.
Information on the cost and duration of activities, once completed,
and the cost and utilization of resources, once deployed, should be stored
to support planning of future projects.

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Introduction to Project Management 17

1.3. Project Success
The success of a project is measured by the stakeholders, typically across
at least three dimensions known as the project triangle: cost, schedule, and
quality/scope. The first two criteria — cost and schedule — are quantita-
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tive metrics that can be explicitly tracked. However, a project can suffer
from cost overruns and schedule delays and, nevertheless, be deemed a
success. For example, the movie Titanic was released several years after
its initial forecast release date with a budget overrun of close to 100%. Yet,
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it won numerous industry awards and was the first movie to gross over
$1 billion in revenue.
In addition to cost and schedule, a project is evaluated by the value
that it brings to its stakeholders. Specifically, did a project meet or exceed
the goals that were laid out in the original project plan that was approved
by stakeholders? Often, a project’s goals are revised in mid-stream due to
changing internal and market factors. In this case, a project’s ultimate
deliverables can be measured with respect to originally stated goals,
accounting for the changes that were requested and accounting for the
technical and business issues that were encountered in order to incor­
porate requested and needed changes. In some instances, a project can
be compared to other projects in the organization with respect to­
delivering on project milestones. In practice, an organization may arrive at
an overall perception of a project based on various internal and political
considerations.
In general, a project seeks to achieve goals in three dimensions: cost,
schedule, and quality/scope (the project triangle). Typically, a project
manager must make a trade-off between these three dimensions — for
example, delivering a project on schedule by going over budget and hiring
additional resources or working overtime. The dimensions of critical
importance will vary with the type of project. For example, a project to
develop the halftime entertainment at the Super Bowl must be completed
by the time of the Super Bowl, regardless of cost overruns. There is no
credit given if the show is ready one day late, but under budget. Likewise,
a project to develop a new automobile feature must emphasize scope or
quality of the deliverable. In this case, delivery of a faulty product — but
delivering on time and within budget — is meaningless, as customer
safety is paramount.

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18 Hands-on Project Management

Project performance has improved over time, although significant room

for improvement exists. The Chaos Report, which tracks Information
Technology (IT) project performance, reported that, in 1995, 16% of IT
projects surveyed were completed on time and within budget. By 2011, 37%
of IT projects were completed on time and within budget. Conversely, in
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1995, 30% of surveyed IT projects were cancelled prior to completion. This

figure declined to 21% by 2011. Performance issues were particularly preva-
lent in large projects (projects with labor content > $10MM). Only 10% of
large projects were considered successful, whereas 38% failed entirely.
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In contrast, 76% of small projects (projects with labor content < $1MM)
were successful, and only 4% failed. This high level of success among small
projects justifies, in part, the spiral and the agile project development.
In a 2006 study, the Standish Group investigated root causes for
­project failure. In surveying organizations, the study found that overopti-
mistic estimates concerning risk factors and the ability to develop new
technologies and processes coupled with project scope changes were the
leading root causes of project failure. The learning from this study is that
project managers should realistically set expectations for stakeholders at
the outset of a project. Although a project manager should, in general, be
optimistic and passionate, they should also be candid and broad-minded in
assessing risks and potential pitfalls.
The success of a project can also be tied to various factors. Among the
most prominent root causes of a project’s success are: (i) clearly defined
project goals and objectives whereby each individual on the project under-
stands his/her role and how that role contributes to the overall project;
(ii) top management support, which leads to support of resources and
personnel that are needed to successfully execute a project; and (iii) effec-
tive communication channels whereby a project manager or the project
management office is communicating on a consistent basis with a consist-
ent message to all project stakeholders and participants.

1.4. Project Initiation, Selection, and Definition

Although this book focuses on methods and tools to support project plan-
ning and execution, project selection (which is part of portfolio manage-
ment) is an equally important business process. In selecting a project

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Introduction to Project Management 19

or a portfolio of projects to undertake, a business needs to consider the

risk/reward trade-off. In general, a business seeks projects that maximize
net present value while not exceeding some risk threshold. In addition,
resource constraints involving both funding and personnel availability
may influence the decision of whether to undertake a project at a par-
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ticular point in time. For example, an organization may highly value a

proposed project, but may defer its execution until additional funding may
be available from its parent company. In a constrained business environ-
ment, rather than making a go/no go decision regarding a project (i.e.,
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embarking on a project proposal in its entirety or rejecting it outright), a

firm may elect to modify a project’s scope or duration and fund a portion
of the originally proposed project.
Various factors influence an organization’s decision on whether to
undertake a project.

1. Strategic factors — An organization may feel a competitive neces-

sity to embark on a project. An organization may desire to keep a
foothold in a particular market so as to not fall behind its competi-
tion. A project may also represent a market expansion opportunity.
For example, quite a few early e-commerce projects were financial
losers for many years. However, businesses had the foresight to envi-
sion a “digital” world in which virtual shopping would increase in
popularity and profitability. Some projects are undertaken because the
ultimate deliverable product or service is consistent with an organiza-
tion’s mission. For example, the popular automobile manufacturers
will regularly update their family sedan line, since this product is a
staple in this industry. Finally, a project may be undertaken, as it may
be perceived to enhance a company’s image; for example, sponsorship
of a major sporting event.
2. Portfolio factors — An organization typically seeks to diversify the
set of projects that it undertakes at any given time. For example, an
automobile manufacturer will produce a full line of cars and trucks —
not only high-end models that are most profitable. A pharmaceutical
manufacturer may undertake development of a range of medicines
across various disease states. Some of its compounds may be of a “me
too” variety, as they emulate existing medicines in the market with

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20 Hands-on Project Management

respect to efficacy and safety. The research and development effort

on “me too” compounds is typically less risky, and the probability of
successful clinical trials is high. In contrast, some of a pharmaceutical
manufacturer’s research and development program may be devoted
to discovering breakthroughs in disease areas with significant unmet
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needs. In these cases, the probability of developing a safe product with

improved efficacy is low, but the commercial and societal benefit, if
successful, is quite rewarding. In addition to balancing risk, an organi-
zation’s project portfolio (sometimes referred to as a product pipeline)
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needs to balance cash flow and resource usage. For example, certain
key developers may be required for a number of lucrative proposed
projects. If only a finite number of such resources are available at any
particular time and if significant barriers exist in acquiring similar
resources, an organization may have to defer some profitable projects
to a later date when required resources become available.

If a project proposal is accepted and funded by stakeholders, a project

plan is developed by the project manager (or project management office)
and shared with stakeholders. A project plan contains additional details of
the project, beyond those specified in the proposal. A project plan will
describe roles and responsibilities of each project subteam and the project
governance committee. A plan outlines a tentative project schedule with
key milestones and project checkpoints. A high-level budget, including
placeholders for subcontractors, is provided. A plan may also specify
processes for change management — stakeholders seeking to modify
project requirements in mid-stream — and quality management — user
approval of milestone deliverables.
A critical component of a project plan is a WBS. A WBS is a
­hierarchy that has the project’s ultimate product or service deliverable at
its apex. Successive levels of the WBS hierarchy provide increasingly
detailed identification of individual tasks that constitute the production of
the end product. The lowest level of a WBS hierarchy is known as Work
Packages (WP). Associated with each WP are required resources, budget,
duration time, performance measures, and a specific deliverable date.
The following example illustrates a WBS. Consider a project to
develop an MBA curriculum in a university (Level 1). The second level of
the WBS consists of developing courses in each of the major disciplines

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Introduction to Project Management 21

required in a business school; for example, marketing, finance, account-

ing, and management. The third level of the WBS involves planning and
developing course content for a line of courses in a discipline. For exam-
ple, the finance line would break out into courses such as “Introduction to
Finance”, “Corporate Finance”, and “International Finance.” The third
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level of the WBS, in this example, would correspond to WPs, as individual

professors and instructors may be assigned to develop each course within
a specified time period and with specified funding.
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1.5. Project Management from Art to Science

Megaprojects like the pyramids in Egypt, the temple in Jerusalem, or the
road systems and water systems of the Roman Empire were completed
successfully thousands of years ago. There is little record of the tools and
techniques used to manage those megaprojects. Is it possible that com-
plex projects of the ancient world were managed without using tools and
techniques? We do not know for sure, but we do know that, even today,
project management is a combination of art and science: some parts of
project management are hard to teach using traditional lectures, books, or
exercises. On-the-job training and work experience are essential for devel-
opment of project managers.
Consider some human aspects of project management. Projects are
performed by humans (such as project managers and project teams) to
generate value or benefits for humans (the stakeholders). The success of a
project is judged by the ability of its deliverables to satisfy the needs and
expectations of the stakeholders. These needs and expectations are not
always fully known early on in the project life cycle and, therefore, con-
tinuous communication with stakeholders throughout a project life cycle
is a key success factor. A project manager needs communication skills to
communicate not only with stakeholders, but also with team members
and other parties involved in the project, like suppliers, subcontractors,
regulators, project team members, and the internal management team.
Some communication skills can be taught and practiced; other skills are
the gift of God (also known as charisma) and may be hard or impossible to
teach. This is one of the reasons that project management is considered by
many to be a combination of art and science.

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22 Hands-on Project Management

Another gift of God that project managers need is an ability to

­ otivate their team and to lead team members, sometimes with limited
m
authority. This is the case whenever some (or all) of the team members are
not working full time on the project and (or) are not fully committed to the
project. As an example, consider a functional organization in which mem-
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bers of the organization are grouped into functional units, such as an

engineering department or a marketing division. The project manager in
such organizations may be a coordinator that coordinates the work of dif-
ferent functions. The project manager usually has full responsibility for
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the success of the project but has limited authority over the people
­performing project activities. In some organizations, a project manager
must work through the functional managers to get things done.
Another example of a project organization structure is a matrix
organization. In this case, a project manager has some authority, as the
organizational structure is a combination of the functional structure and
the project-oriented structure. However, the project manager in a matrix
organization shares authority with functional managers and has to coordi-
nate with them. In both the functional structure and the matrix structure,
communication skills are very important as is the ability of the project
manager to take full responsibility of the project with limited authority.
Understanding the internal politics of the organization and how to “get
things done” is another important but hard-to-teach skill.
Even in a project-oriented organizational structure, a project manager
may not be able to select the project team members; a project team may be
formed prior to the nomination of the project manager. Alternatively, team
members may be selected based on which individuals are available at the
time the project is initiated.
Development of shared understanding of project goals and constraints
as well as shared understanding of the way the project team members
should work together is a crucial step in team formation. In many projects,
shared understanding is developed “on the job” during project planning
or, even later, during project execution. The price is a low performing
team and conflicts among team members during early, important phases of
the project. Research found that teams that used simulation to analyze
alternative project plans and performed dry runs of the execution of
selected project plans developed shared understanding among team mem-
bers much earlier (Shtub et al. 2014).

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Introduction to Project Management 23

The use of simulators to support the development of shared under-

standing and team formation is still a relatively new idea. Early research
findings suggest that this might introduce more “science” into project
management and improve project success rates (Iluz et al. 2015).
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1.6. Summary
Project management is the art and science of planning and executing a
non-repetitive effort to achieve specific goals while satisfying the needs
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and expectations of project stakeholders. Due to the non-repetitive nature

of projects, learning by repetition and the impact of the learning curve
are rather limited. The non-repetitive nature of projects causes knowledge
gaps, uncertainty, and risks that must be managed throughout the project
life cycle. This book presents the tools and techniques that support project
management. The Project Team Builder simulator that accompanies the
book provides an opportunity for practicing these tools and techniques in
a safe simulated environment.

References
Salas, E., Wildman, J. I. and Piccolo, R. F. (2009). Using simulation-based t­ raining
(SBT) to enhance management education, The Academy of Management
Learning and Education, 8(4), pp. 559–573.
Shtub, A. (1999). Enterprise Resource Planning (ERP): The Dynamics of
Operations Management, Kluwer Academic Publishers, Boston.
Shtub, A., Parush, A. and Hewett, T. ( 2009). Guest editorial: The use of simulation
in learning and teaching, International Journal of Engineering Education,
25(2), pp. 206–209.
Iluz, M., Moser, B. and Shtub, A. (2015). Shared awareness among project team
members through role-based simulation during planning — a comparative
study. Procedia Computer Science, 44, pp. 295–304.
Shtub, A., Iluz, M., Gersing, K., Oehmen, J. and Dubinsky, Y. (2014). Imple­
mentation of lean engineering practices in projects and programs through
simulation based training, PM World Journal, 3(3) pp. 1–13.

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