PGCPM-MPM-003

Part III
UNIT I: PROJECT IMPLEMENTATION

Index - Chapters
A. Risk & Opportunity
B. Teamwork
C. Issue Management
D. Procurement

Page 1 of 66
 PGCPM-MPM-003

Preface
Project Implementation
In Action lies Results. Ultimately, we need
performance to achieve what was targeted or
Analyse and planned / organised. Implementation
is the 5th Phase of the Project Life Cycle following
Oraganisation Phase.

Project manager is the principal actor responsible

for the implementation of the Plan to the
satisfaction to Stakeholders of a project. Project
manager is virtually a mini CEO in implementing a
project to deliver the expected results as an
ultimate outcome of the project. Human resource
management and able to communicate and
negotiate for resources are some of the major challenges faced by project
manager.

Project manager must also display Leadership characteristics and should be

willing to take decisions based on his or her convictions along with carrying
the team.

Implementation Phase depicts the real efforts to bring about a change in

transforming strategies to deliveries.

In spite of detailed Plan available, project manager constantly faces the risk of
changes while implementing Plan. It is a good measure of the robustness of a
Plan to see how minimum changes are called for in the implementing phase.

Page 2 of 66
 PGCPM-MPM-003

Chapter A: Risk & Opportunity

a) Risk v/s Project Life Cycle
The project life cycle is divided into the 8 phases of Conceptualize,
Plan, Organize, Implement, Control, Integrate, Deliver and
Knowledge Leverage.

The process of Control is invoked right from the beginning of

initiating a project to its closure. We have not considered Control as a
separate phase though many do so.

When you start a project, there are many Ifs and Buts. There are many Assumptions and Constraints and
information gaps that need to be bridged.

All these factors make the project comparatively more uncertain and risky in the beginning. As the
project progresses, we start getting more and more clarifications about many ambiguous issues and we
can improve the reliability of our assumptions and constraints. The risk and uncertainties keep on
reducing as the project progresses.

The level of risk remains relatively high during the first two phases of the project i.e. during initiation
and planning and it does not fall significantly until execution progressively translates unknowns to
known.

With proper analysis and due diligence, the initial starting level of total uncertainties comes down to
give a better control on the project during the execution stage.

On the other hand, if the slope is not too much negative, the project will generally face time and cost
related problems besides high risk in deciding the scope of the work. This could partly be due to the fact
that enough emphasis had not been placed on effective planning in the beginning. Perhaps there was a
rush to start the project without doing a thorough risk analysis.

b) Risk Identification
Managing risks is very important and of prime essence in project management. Before we get into the
details of the concepts of risk, let us first understand what we mean by risk.

What is a project risk?

Risks are present in all projects irrespective of the project's sector, size or complexity.

Page 3 of 66
 PGCPM-MPM-003

Project risk is an uncertain event or condition that, if it occurs has a positive or a negative effect on a
project objective. Alternatively, a risk can be defined as an occurrence that may affect the project for
good or bad. Both internal and external sources can give rise to project risks.

A project can be faced with a:

Business risk which allows for both losses as well as gain and a

Pure risk which only leads to a loss such as theft or fire.

The aim of the project manager should be to reduce the impact of negative effects of risks on the
project while maximizing the positive effects of risks on the project.

Risk management is undertaken to avoid threats to the project as well as to identify and enhance new
opportunities.

All potential risks in the project are identified, their impact on the project is evaluated and assessed for
possible outcomes through a qualitative risk analysis and possibly a quantitative risk analysis. A risk
response plan is then developed to deal with each risk and the risk is managed if, and when it occurs.

What is Risk Identification and who all is involved?

Risk identification is the most important component in the risk management process. As the name
suggests, risk identification process primarily involves determining all the risks that could affect the
project and then documenting the characteristics of each risk.

Unless a potential risk has been identified no possible action can be taken to further analyze and assess
the risk to deal with it. In order to make a comprehensive list of all the risks that can affect the project,
as a first step the project's mission, scope and goals as well as the objectives of the sponsor, owner and
client must be fully understood.

It should also be kept in mind that different organizations have different tolerances to risk. Some are
very conservative while others will be more ready to take risks.

To cover as many risks as possible the project manager should involve all the stakeholders in identifying
risks that can impact the entire project e.g.

the sponsor

the project manager

project team members

risk management experts

subject matter experts from both within the organization and outside the organization

Page 4 of 66
 PGCPM-MPM-003

customers

end users etc.

It is advisable to start looking for risks as soon as a project is first discussed. Though risk identification
begins early in the project it is an iterative process and must be carried out throughout the project. As
more and more information is gathered all of the information of likely risks must be consolidated.

Diagram showing the project risks through the project's life cycle.

The major risk identification effort occurs during the planning phase of the project. However, as risks
can occur during other project phases risk identification should continue throughout the project.

Risk Identification - some important inputs

It is a good practice to use many different inputs to help in a broader and more comprehensive
identification all possible project risks.

Different inputs can and should be used for identifying possible risks such as:

The project's overall Risk Management plan

The project's Project Management plan

The detailed Scope Statement

The Work Breakdown Structure (WBS)

Product description

Page 5 of 66
 PGCPM-MPM-003

The project charter

Project's Constraints and Assumptions

Scope statement

Network Schedule

Cost estimates

Time estimates

Procurement plan

Resource plan

Industry specific published information

Historical project information available within the organization

Risk Management Plan is useful as it describes how risk management will be structured and performed
in the project in detail. It is drawn up after considering the project charter, the risk tolerances of the
different stakeholders, the risk categories, the WBS and the different roles and responsibilities

The WBS forms a key tool that is used in identifying risks as each WBS component can be checked for
potential risks. The risk identification process can be more comprehensive as all the elements of the
WBS are considered. When the top project level of the WBS is used to identify risks then the broader
risks that are applicable to the project such as lack of funding and non availability of manpower are
identified.

The Product description is used as it provides the details of the project's output.

Historical information of past projects together with other published information provides valuable
inputs for identifying risks.

Risk categories / sources of risks

There are two types of risks - Business risks which can have both positive or negative effect and an
Insurable or Pure risk such as fire, floods etc. that can only give rise to a loss.

Categorizing of the risk sources makes it easier to identify risk and risks can be broadly categorized as
follows:

Technical risks, quality risks, or scope/performance risks i.e. risks associated with the triple
constraints. These are important risks that include:

Page 6 of 66
 PGCPM-MPM-003

o Technological changes. The technology being used in the project could be new or unproven,
untested, very complex or could change through the project

o Difficulty in maintaining the required quality

o Risks Internal to the project resulting from factors like: the schedule, scope changes,
requirement changes, lack of proper manpower, equipment, poor estimates, non availability
of skilled persons, design errors, poor planning etc.

External risks

Those risk factors that are not directly related to the project. Such risks could arise to changes in
the government rules and regulations, interest rates, labor laws, weather etc. This also includes
Force Major risks such as earthquakes, floods and wars that need disaster management.

Organizational risks

These are organizational conflicts over resource utilization, availability of funding as required,
schedule expectations between different projects as well as changing or unclear scope in a
project

Project management risks

Poor use of project management tools and techniques, inefficient allocation of project
manpower and other resources etc.

Tools and techniques for Risk Identification

In risk identification process the key objective is not to solve any problems but to identify all potential
risks that could affect the project. The project manager should involve the team members and other
stakeholders in identifying risks that could arise in the project and use a mix of tools/techniques for
better results.

Risk identification tools and techniques includes information gathering techniques and other
identification techniques:

Information gathering techniques are:

o Documentation reviews

o Brainstorming

o Interviewing

o Delphi technique

o SWOT analysis

Page 7 of 66
 PGCPM-MPM-003

o Root cause identification

Other identification techniques are:

o Checklists

o Assumption analysis

o Diagramming techniques such as Cause-and-effect diagrams, Influence diagrams and

Flow charts

Documentation reviews:

This involves reviewing all of the project's planning inputs mentioned earlier in a proper structured way.

Lessons learned and risk management plans from previous projects should also be reviewed for more
comprehensive risk identification.

Brainstorming:

This is one of the most popular techniques used by the project team. Generally used for solving
problems and idea generation Brainstorming is also an excellent technique for identifying project risks.

Risk identification should be done in a non-critical way and all the participants should have an equal say
irrespective of their rank or position. Who says what is not important. What is said is the key. An
experienced facilitator should guide the brainstorming session and he/she should:

Brief the participants about the objectives of the session, the inputs required from the
participants e.g. their expert knowledge, experience and the outputs of the exercise which will
be an agreed upon list of identified risks

Provide a framework that the group can focus on e.g. use of the Work Breakdown Structure as
the basis for identifying risks

Delphi technique:

This technique is similar to Brainstorming except that here the participants are not revealed to each
other.

This technique is especially useful if the participants are some distance away e.g. via e-mail and are
unaware of who said what. A qualified group is asked to identify risks anonymously without consulting
other participants. In this way views expressed can remain unbiased. The facilitator acts as a co-
coordinator among participants and sums up the views of all participants. These responses are sent to
all participants and further views are expressed until stable opinions are reached.

Page 8 of 66
 PGCPM-MPM-003

Interviewing:

Experts or people with sufficient experience in a specific type of project or problem can be of great help
in avoiding/solving similar problems over and over again. The persons carrying out the interviews should
first inform the person being interviewed about the project, it's WBS, constraints/assumptions etc.

All the different stakeholders as well as relevant senior management persons should be interviewed to
tap inputs from as broad a base as possible. An added advantage of interviewing all stakeholders is that
it involves them in the process of risk management, which means they will be more interested in
participating in risk management in future.

SWOT Analysis:

This is an analysis of the project's Strengths, Weaknesses, Opportunities and Threats from varied aspects
to help identify more risks.

Check lists:

These are simple but very useful predetermined lists of risks that are possible for a given project. The
check list which contains a list of the risks identified in projects undertaken in the past and the
responses for those risks provides a head start in risk identification.

The check lists can be obtained from projects done earlier by the performing organization or from
industry specific standards.

Assumption analysis:

In Assumption analysis a review is carried out of the project's requirements, scope and specifications to
identify areas of uncertainty. Uncertain areas are generally addressed by making assumptions which are
statements concerning the outcome of future events such as the availability of equipment, resources,
functionality etc.

Assumption analysis reviews these assumptions to check their validity and impact on the project.

The assumption analysis method involves the three steps of:

identifying the assumptions

assessing the sensitivity and stability of the assumptions

generating a list of risks

The sensitivity of each assumption is assessed qualitatively on a scale such as crucial, vital, important,
and unimportant. The stability of the assumption checks how likely it is that the assumption will prove

Page 9 of 66
 PGCPM-MPM-003

to be wrong or false. Those assumptions that have a low stability with high sensitivity should be
treated as potential risks.

Diagramming Techniques: This includes Cause and Effect diagrams, Influence diagrams and Flow
charts.

A Cause and effect diagram shown above is also referred to as the Ishikawa diagram, because Kaoru
Ishikawa developed it, or a fishbone diagram, because the complete diagram resembles a fish skeleton.

This provides a structured method to analyze all inputs to find the potential causes for problems. The
diagram illustrates the main causes and sub-causes that lead to a problem or effect. The potential
factors or reasons that are likely to cause the problem or effect are discussed and explored by the team
members. This process is done using a brainstorming session to arrive at the likely causes.

Undertaking this process helps all team members to become more organized and focused in trying to
find the potential risks.

Influence Diagrams:

An influence diagram is used to graphically represent a problem's timing of events, it's casual influences
and the relationship among different variables and outcomes.

This diagram resembles a network in that it consisting of nodes and arrows. A node represent variables
or decisions while an arrow or arc shows the path by which one node influences another node.

The model represents different influences on a project goal or target. Key influences are shown and the
effects of uncertainty can be determined. For example cause A could be directly influenced by cause B
and B will be indirectly influenced by cause C.

Outputs of Risk Identification

Risk identification helps to get

List of the risks that have been identified

Risk triggers - these are early warning signs for a risk used by a project manager to be aware of
when action will be required

Root causes that are likely to give rise to risks

Page 10 of 66
 PGCPM-MPM-003

Possibly some new sources of risks

All these should be properly documented in a formal risk register.

c) Risk Assessment
Once we have identified all possible risks that could affect the
project, we then need to calculate a risk's impact on the project.
The objective is to gather enough information about the risk
issues to judge the probability of occurrence of each risk and the
consequences if the risk occurs. We first calculate the impact of
the individual risks and then determine their combined impact.

It is possible to identify hundreds of risks in a project. Types of risks can be broadly categorized in many
different ways such as:

Technical, quality or performance risks

Organizational risks

External risks

Project management related risks.

The entire project risks that have been identified should be categorized into one of the above four
groups.

Cost, schedule, and technical risks are related to the other two categories. This relationship requires
supportive analysis among areas to ensure the integration of the risk evaluation process. Some
characteristics of cost, schedule and technical evaluation are as under:

Cost evaluation

Builds on technical and schedule evaluation results

Translates technical and schedule risks into costs

Derives cost estimate by integrating technical risk, schedule risk, and cost estimating uncertainty
impact to resources.

Documents cost basis and risk issues for the risk evaluation

Schedule evaluation

Evaluates baseline schedule inputs

Page 11 of 66
 PGCPM-MPM-003

Reflects technical foundation, activity definition, and inputs from technical and cost areas

Incorporates costs and technical evaluation and schedule uncertainty inputs to program
schedule model

Performs schedule analysis on program schedule

Documents schedule basis and risk issues for the risk evaluation

Technical evaluation

Provides technical foundation

Identifies and describes program risks

Analyses risks and relates them to other internal and external risks

Prioritizes risks for program impact

Quantifies associate program activities with both time duration and resources

Quantifies inputs for cost evaluation and schedule evaluation

Documents technical basis and risk issues for risk evaluation

Describing and quantifying a specific risk and the magnitude of that risk usually requires some analysis
or modeling. Risks can be analyzed Qualitatively or/and Quantitatively.

A quantitative risk analysis generally follows a qualitative risk analysis.

The qualitative and quantitative risk analysis processes can be used separately or together.

Qualitative Risk Analysis

A qualitative risk assessment helps to prioritize risks according to their potential effect on the project's
objectives. Qualitative risk analysis is one of the ways of addressing specific risks and guiding risk
responses.

To prioritize the risks identified, a risk rating is done to rank risks in their order of importance by
considering both the likelihood that the risk will occur and it's impact on the project if it does. This
allows more attention to be focused on higher risks. The Probability (P) and the Impact (I) of each risk is
rated into a range that varies from 3 to 5 categories and a Probability- Impact (P-I) table is formed.

This is a subjective rating of each risk given by competent person/s based on factors like knowledge,
past experience and historical information. A common form of risk rating uses three broad categories
which are described below:

Page 12 of 66
 PGCPM-MPM-003

1. High Risk: Substantial impact on cost, schedule, or technical parameters. Substantial action
required alleviating issue. High priority management attention required.

2. Moderate risk: Some impact on cost, schedule or technical parameters. Special action required
alleviating issue. Additional management attention may be required.

3. Low Risk: Minimal impact on cost, schedule or technical parameters. Normal management
oversight is sufficient.

Tools and Techniques for Qualitative risk analysis

Risk Probability and Impact: In this process we apply a rating process on the risk Probability and the risk
Impact of individual risk events and not to the complete project in order to identify those risks that
should be managed aggressively. Let us look at an example using our sample rating of High, Medium and
Low.

Probability-Impact risk rating matrix: A matrix can be constructed that assigns risk ratings to risks based
on the combination of Probability and Impact scales. Risks with high probability and high impact are
more likely to require further analysis, including quantification and aggressive risk management. The risk
rating is accomplished using a matrix and risk scales for each risk.

There are various ways of sensitizing the combination of probability/impact factor i.e. the Probability
that the risk will occur and it's Impact on cost.

We have demonstrated this in our example shown below by assigning a value of 1, 2 and 3 to the
Probability or likelihood of the risk occurring and 1, 2 and 3 to the Impact of the Risk. This is based on
the use of a 3 by 3 matrix.

The higher the PI score the more aggressively we need to deal with the risk. The maximum PI of 9
represents the maximum Probability that the risk will occur and that it will have the maximum Impact
possible on the project. We call it a PI Factor - P stands for Probability and I stand for Impact.

Page 13 of 66
 PGCPM-MPM-003

There are 4 categories defined in our example.

Category 1 - PI factor 9, which requires

Maximum attention

Category 2 PI Factor 6, that requires Good

amount of attention

Category 3 PI Factor 3, where comparatively

less Attention needs to be paid

Category 4 PI Factors of 1 and 2, where less

attention has to be paid

We should pay maximum attention to those risks that have a higher PI rating. For example, we have
decided to focus on those risks that have a PI rating of 6 and above. Giving a PI number makes it easier
for the project team to focus on those risks that would have a greater negative impact on the project.

Evaluating the impact of risks on major project objectives

Quantitative Risk Analysis

This process aims to numerically analyze the probability of each risk and its consequences on project
objectives, as well as the extent of overall project risk. The process uses various techniques in order to
achieve the following steps:

Determine the probability of achieving a specific project objective.

Quantify the risk exposure for the project, and determine the cost and schedule contingency
reserves that may be needed.

Page 14 of 66
 PGCPM-MPM-003

Identify the risks requiring the most attention by quantifying their relative contribution to
project risk.
Identify realistic and achievable cost, schedule or scope targets.

Tools and Techniques for Quantitative Risk Analysis

Sensitivity analysis

This helps to examine and to assess which identified risks have the most potential impact on the project.
It examines the extent to which the uncertainty of each project element affects the objective being
examined when all other uncertain objects are held at their baseline value. One parameter is changed to
see the impact of this change on the project.

Sensitivity analysis can be applied to both deterministic models and probabilistic models (decision trees,
influence diagrams and Monte Carlo).

Decision Tree analysis

A decision tree analysis uses a decision tree diagram. Also known as Impact analysis diagrams they are
used when a decision must be viewed as a sequence of several interrelated decisions and not as a single
isolated occurrence.

Decision trees contain decision points as well as chance points. Decision points are represented by a
box/square where the decision maker must select one of the several alternatives available. Circles
designate chance points and show that a chance is expected at that point.

Using a decision tree diagram each possible route or scenario is drawn and analyzed to help make the
best decision. Each path of the tree shows the probability and the cost or the reward for the path.

Drawing Decision Tree

A decision tree can be drawn using the following steps:

Create a logic tree from left to right including all decision points and chance points.

Assign the probabilities on the branches, thus forming a probability tree. For every node all the branches
of the node will have a combined value of 1.

Add the conditional payoffs, thus completing the decision tree.

Let us take an example of a simple decision tree.

In our example there is a 40% probability of having good weather and 60% probability of having bad
weather. If there is good weather, 80% chances are that a picnic will be held. 20% chances are that the
picnic will not be held in spite of good weather.

Page 15 of 66
 PGCPM-MPM-003

If there is bad weather, only 30% chances are that the

picnic will be held and 70% chances are that the picnic will
not be held. The decision tree for this can be seen.

The probability of having the picnic is the sum of its

happening irrespective of the weather. That is (40% *
80%) + (60% * 30%) which comes to 50% or, we can say,
the probability of having the picnic is .5. If we decide that
a minimum probability of .65 is necessary to go ahead
with the decision of holding the picnic, then we will drop
the idea of a picnic, as the probability is only .5.

Expected Monetary Value analysis (EMV)

EMV analysis is a statistical technique used to calculate a future outcome for an event that may or may
not happen. It can help make comparisons between a range of uncertain outcomes.

EMV generally uses a decision tree diagram to calculate the outcome of all possible scenarios that could
happen. Opportunities are expressed as positive values and risks as negative values.

In order to calculate the Expected Monetary Value the value of each possible outcome is multiplied by
it's probability of occurrence and then added together.

EMV = P x O

Where P = probability and O = outcome (the amount at stake)

For example if a risk has a 75% chance of occurring and will cost $5k,the EMV of the risk is:

0.75 x $5,000 so EMV = $3750

Let us look at another example of EMV analysis.

You have a choice of either manufacturing sub-assemblies in your company or getting them outsourced.
The market conditions may be good or bad with different probabilities associated with both conditions.

In order to manufacture sub-assemblies, we will incur an expense of $40,000 for purchasing machinery.
In case we outsource the supply of the sub-assemblies our expense is $5,000 to administer the contract.
There is a 70% probability that market conditions will be good and a 30% probability that market
conditions will be bad.

Page 16 of 66
 PGCPM-MPM-003

When we manufacture the sub-assemblies under good market conditions we expect to make a profit of
$100,000. Under poor market conditions the profit will be reduced to $50,000.

In the case of outsourcing, under good market conditions we expect to make a profit of $40,000 and
with bad market conditions we will make a profit of $20,000.

Our aim is to choose the more profitable option between manufacturing and outsourcing.

What would you decide to do assuming that the expenses incurred are totally deducted from the profits
for our calculations?

When we do our own manufacturing the profit is $100,000 multiplied by .7 plus $50,000 multiplied by
.3 which comes to $85,000. The expenditure of $40,000 for buying the machinery must be subtracted
from $85,000. The net profit thus comes to $45,000 when we manufacture the sub assemblies.

The profit in case of outsourcing is $40,000 multiplied by .7 plus $20,000 multiplied by .3 which comes
to $34,000. The $5000 spent on contract administration must be subtracted from this. The net profit
thus comes to $29,000.

Using a decision tree tool we can easily see that we will make an additional profit of $16,000 ($45,000 -
$29,000) if we manufacture the sub-assemblies ourselves. Hence our decision will be to manufacture
and not to outsource.

Simulation
A project simulation is done using a model to show the potential
impact of different detailed level uncertainties on project
objectives at the project level. The Monte Carlo Technique is the
most common tool used to perform simulations.

For a cost risk analysis a simulation may use a traditional WBS as

Page 17 of 66
 PGCPM-MPM-003

its model. For a schedule risk analysis the Precedence diagramming method (PDM) is used.

A three-point estimate of the WBS element provides us with the most likely total costs by summing up
the costs of the three elements - design, build and test.

The mean equals to (Low + Most Likely + High) divided by 3 for each row in Triangular Distribution. For
the above table, this comes to $47.

The cumulative likelihood distribution reflects the risk of overrunning the cost estimate assuming a
triangular distribution with the range data as shown in the above table.

Monte Carlo Simulation: This is a simulation software that is used to show a large number of project
outcomes that are possible thus giving a complete picture and what-if scenarios. It creates a series of
probability distributions for potential risk items, randomly samples these distributions and then
transfers these numbers into useful information that reflects the quantification of the potential risks of a
real world situation.

A summary of the steps used in performing the Monte Carlo simulation for cost and schedule are as
follows:

Identify the lowest WBS or activity level for which probability distribution functions will be
constructed.

Develop the reference point estimate (e.g. Cost or schedule duration) for each WBS element or
activity contained in the model

Identify which WBS elements or activities contain estimating uncertainty or/and risk.

Page 18 of 66
 PGCPM-MPM-003

Develop suitable probability distribution for each WBS element or activity with estimating
uncertainty or/and risk

Aggregate the WBS element or activity probability distribution using the Monte Carlo simulation
program. These outputs are then used to determine the level of cost/schedule risk and to identify the
specific cost/schedule drivers.

The combined impact of the different variables is calculated and a probability distribution of possible
outcomes is determined.

Chapter B: Teamwork
a) Types of Teams
The way there are various kinds of organization structures, similarly there are various types of team
structures. Team structures depend on the type of management style or the organizational style being
used in a project.

There are four major kinds of classifications in the types of teams as described below:

Egoless

This is the kind of team organization where no specific and fixed roles are given to the team members.
Also it is a very flat structure of organizing the team. Since all the members are at par with each other
during the project, the project manager can assign any member of the team any role at a given time of
the project. The advantage of such a team organization is that all the members work cohesively with
each other and there is no differentiation amongst the members. However, this may also lead to chaos
and some jealousy if a team member does not get the desired role in a project or if the planning of
assigning roles at the various stages of the project is not effectively done.

Matrix

Similar to the matrix organization structure, this team structure works on the functional and the
projectile / specialized roles. The project team members falling in the specific functional area are given
the responsibility of the related tasks and are required to perform those only. In highly technical
projects with separate specialized components, this structure can work very effectively. In this structure,
the concerns can arise due to conflict in the functional and project priorities, insufficient communication
amongst the various functional team members etc.

Task Hierarchy

Page 19 of 66
 PGCPM-MPM-003

Task hierarchy team type as the name suggests works on the basis that a given task is assigned to the
various team members in the order of their hierarchy. Thus the senior member gets more responsibility
that the ones lower down the order. This type of team structure by far is the most organized and the
most efficient one. Here every member is responsible and accountable to the allocated task since the
tasks allocated are also as per their capabilities. Here it is assumed that the member at a given level is
competent enough to handle the task appropriately allocated to him/her.

Task Force

This style is a little different than that mentioned before as task hierarchy. In this style of team
organization, the group of team members forms a task force to complete the given task. The team
members divide amongst themselves the task on their own, as they may desire. This kind of organization
is well suited where the team members are of similar level of expertise in the given task and are
required to work collaborative internally with in the team in order to accomplish the task. This process
requires very good team understanding and very clear objective definition to be an effective team type.

b) Characteristics of Teams
Effective teamwork can be considered to be at the core of effective project management as it is the
people who ultimately make the project a success or failure. In projects the level of uniqueness of
project and uncertainty creates a large dependency on the team for project success. It is essential to
have high performing, effective teams for project success.

A team is made up of a group of individuals who have a common identity, values, norms and standard of
behavior. A team is one that works together as a group with the aim of achieving a common objective.
Everyone in the team works for the good of the project initially the team has no shared identity and
norms. Each team is unique comprising of different individuals each having different personalities,
backgrounds, skills, knowledge and culture. This means that team members share no common identity,
goals and aims when the team is formed initially.

Differences in teams can also arise through differences of industry, company culture, and management
level. Different industry sectors have different historic approach to structuring of teams - e.g.
construction industry has more autocratic, directive style while IT industry has a more participative,
facilitating style.

Motivating and resolving conflicts between team members are important elements needed to keep the
team together. Team development is an on going process and should begin when the team is formed.
The project manager can begin this in an informal way through start-up meetings, seminars, workshops
etc. about the project every ones role.

Page 20 of 66
 PGCPM-MPM-003

c) Team Building

Forming

According to Tuckmans well known model Project team

members generally go through four stages of formation and
a final stage of disbanding.

Forming - This is the first stage of team development. The

team forms with hesitancy and mixed feelings. Team
members are only moderately effective at this stage as they
lack a common aim, are hesitant, are unsure of each other
and the project and remain guarded and uncertain.

The project manager should give direction to team, build common grounds and help members to
understand each other better

Storming

This is the second stage in team development. As work

progresses differences and hostilities begins to surface between
the team members leading to arguments, different opinions,
personality conflicts and formation of groups and sub groups.

The project manager has to motivate and educate team

members, clarify goals and manage the team conflicts.

Page 21 of 66
 PGCPM-MPM-003

Norming

This is the third stage in team development. Team members start

developing an identity and a set of norms and values with better
understanding and communication as issues become more
important than personalities.

The project manager helps by resolving issues that came up and

defining and assigning team roles and responsibilities.

Performing

Team now becomes a high performing team as it becomes mature,

members understand and appreciate each other, and work
together effectively as a resourceful, focused, cohesive force with
a united aim. Problems are tackled more confidently and
innovatively and more easily resolved.

The project manager's role is to maintain this performance by

coordinating and controlling the work, appraising performance,
delegating work and acknowledging good work.

Adjourning (Mourning)

The project comes to an end and the project team is

disbanded. Team members either join another project or
return to their functional department.

As the team reaches the end of the project team

performance can either rise further as everyone strives
harder to complete the job or it falls a little as team
members are unhappy and regret the break-up of the team.

What exactly is teamwork?

Teamwork is the process of putting together a group of diverse

individuals with diverse aims and goals to form one cohesive group
with one aim, and one goal. Working as one team is crucial for the
projects success. It is very important for the team to work together
for the good of the project.

Team development involves enhancing the ability of the team

members to work together as a team as well as the ability of

Page 22 of 66
 PGCPM-MPM-003

stakeholders to work as effective individuals contributing to the project. The project manager is
responsible for developing and motivating the team. In order to build an effective team it is important
for the project manager to keep in mind factors such as support and trust, cooperation, clear objectives
and goals, sound procedures, individual development and excellent inter group relations.

The project team is at the core of managing the project therefore, a good team is essential for project
success. The team members are responsible for actually performing key parts of the project. Good
teamwork keeps the team members happy, motivated and improves both personal performance and
project performance. Having a good, cohesive team also reduces stress as team members help each
other.

The role and responsibility of team members includes important aspects such as:

Maintaining the harmony and unity of the team

Trying to resolve any differences that come up between team members

Performing the work they are assigned properly

Being innovative in getting their work done

Both being cooperative with and obtaining cooperation from people outside the team

Being open and forthright

Discussing any problems before it gets out of control

Assessing their work realistically

According to Stuckenbruk and Marshal, the team building process includes eight areas of accountability
which are:

Plan for team building

Negotiate for team members

Organize the team

Hold a kick-off meeting

Obtain team member commitments

Build communication links

Conduct team building exercises

Utilize ongoing project team development.

Page 23 of 66
 PGCPM-MPM-003

d) Barriers to Communication
Communication forms a very important part in managing the project. For communication to be effective
the information collected and distributed must be timely and correctly sent and correctly understood.

If any element of the communication process is defective in any way, clarity regarding the meaning and
understanding of the message sent and received can be reduced.

In projects we have to be careful to avoid the many barriers to communication that can arise leading to
bottlenecks, errors and misunderstandings. These Communication Barriers can be due to many reasons
and can be broadly classified under:

Personal (psychological) barriers

Technical barriers

Cultural barriers

Organizational barriers

Environmental barriers

Personal or Psychological Communication Barriers

These are barriers that arise from everyday interactions with other people and have a large negative
impact on communication. Such communication barriers on the part of the receiver can be a result of
factors like:

Page 24 of 66
 PGCPM-MPM-003

Hidden agenda - Receiver has their interest or agenda which is different to the project interests
so message received neglected

Dislike/personal prejudice of the receiver against the sender -the sender becomes more
important than the message sent

Selective/biased listening - receiver has some perceived bias that causes them to
disregard/neglect the message sent and instead listen to what they wish to hear

Defensive listening by receiver - perceptual bias that arises when the information received
clashes with receiver's own self-image. The message received is rejected.

Sender lacks credibility - due lack of respect for the sender at a technical or a personal level

Dogmatic attitude of sender - when the receiver feels that their opinions are not valued they
become defensive and less receptive to message

Technical Barriers in Communication are:

Message is too technical - the receiver does not have the required level of technical knowledge
to understand the message received

Message not structured logically - message is difficult to understand as it is too verbose and
confusing. The receiver is unable to relate to the important parts

To many details - the information transmitted is much more detailed than required or is beyond
the capability of the receiver. It is better for the receiver to follow the principle of 'Keep It
Simple and Short' when sending messages

Message contains unfamiliar terms/jargons - message sent contains many technical terms from
other disciplines or contains many non familiar cultural terms and references making it difficult
for the message to be understood by the receiver

Number of links - More the number of transmission links, more is the opportunities for
distortion to creep into the message.

Cultural Barriers in Communication:

Such barriers are especially important in cross-cultural projects as meanings and interpretations may
vary with different cultures and religious beliefs which can influence the communication process.

Due to globalization people have to work closely with team members from vastly different countries,
locations, backgrounds, cultures, languages, religions, social norms of behavior. Often team members
have never actually met each other. This has impact on communication and can create barriers.

Organizational Barriers in Communication:

Page 25 of 66
 PGCPM-MPM-003

Not only does the individual behavior of team members vary but the reporting style of organizations and
lines of authority also varies depending on the company and the country.

For example, in an Eastern environment the group is given more importance than the individual while in
Western countries the individual is more important.

The difficulties related with status and ego of the organization must be minimized for effective
communication in the project.

Security constraints could also give rise to communication barriers. It may become necessary to avoid
communicating some specific project information as it is confidential.

Environmental Barriers in Communication:

This is due to environmental factors such as electronic or audible noise present in the communication
channel that distorts the message and would require use of an alternative method of communicating
e.g. written communication in place of a telephone conversation

Message Filtering

Often it is found that a portion of the message sent is lost or distorted in upward /downward
communication. This is known as message filtering and can be caused by factors such as:

Differences in language between the sender and receiver so a part of the message is lost in
translation

Differences in culture between the sender and receiver so message not fully understood

A subjective interpretation of the information that is received which can cloud the message
actually sent

Intelligence/knowledge base is not sufficient to fully comprehend the message

Reputation of sender plays a more important aspect then the message actually sent and
received

Organizational position - for instance, differences in the organizational hierarchy can cause a
receiver to disregard an important message

Environmental background

Any pre-determined notions that a sender/receiver has

Historical considerations

Effective listening

Page 26 of 66
 PGCPM-MPM-003

A good way to improve communication is to improve our listening capabilities and attitude.

To improve our listening we should:

Avoid Interrupting: one of the most disruptive things that can be done is to keep interrupting
the speaker as it stops their chain of thoughts and makes them feel that you are not interested
in what they are saying. At times interruption is used as a tactic.

Put the speaker at ease: if a speaker is nervous or uncomfortable you can encourage them by
making some encouraging comments or nodding, smiling etc. to make the speaker feel more
comfortable while communicating.

Appear interested: creating the impression that you are very interested in what is being said will
do a lot of good to the speaker and make you retain more information of what is being
communicated.

Reduce distractions: improve the environment where the communication is taking place as
noisy and uncomfortable locations severely inhibit effective communication.

Sum up the message communicated periodically.

Chapter C: Issue Management

a) Issue Logs
Issues between two or more parties can arise due to a number of reasons. In a philosophical plane, an
issue can also arise within one party as well. For instance, a person may have too many things to do at
the same time. The issue for him is to prioritize which one to complete first. Issues are generic in nature
and need to be resolved.

Unresolved issues can have very troublesome and painful outcomes.

Issue logs

A good method is to capture all the Issues that need to be resolved in the project for better efficiency
and effectiveness. Keeping a log of all the issues that arise is the first step. A priority should be assigned
to each of the issues so that the issues can be resolved based on this priority.

Page 27 of 66
 PGCPM-MPM-003

Sometimes it may be worthwhile to apply the 80:20 rule. Resolving the major issues can result in
indirect resolution of some minor issues as well.

A computerized Issue Database is an outcome of automating a list of various Issue Logs. It also helps in
maintaining the history of the Issues for organizational learning and for future references.

Chapter D: Procurement
a) The need of Procurement
When a project is undertaken often there is a requirement for procurement of equipment and materials
to implement the project. There could also be a requirement for project deliverables that has to be
outsourced. Whatever the exact reason, the performing organization often needs to enter into contracts
to procure goods and services to complete the project.

Procurement

Procurement involves acquiring of goods and services required for the project from outside the
performing organization.

Contracts

A contract is an agreement between two or more parties that is binding on all the parties concerned.

A large number of projects are carried out under contract. Projects in construction sector, most
government projects and many projects in private sector are carried out under contractual agreements.

Procurements and contracts are both an important part in managing projects. Where a lot of
procurement is involved it can account for a big chunk of the project costs.

A contract is used to acquire different goods and services needed for the project in return for some
payment. Contracts have a legal standing subject to remedy in court and can lead to litigation if there is
a breach of contract by any party.

Typically a contract would include details of the project's:

Statement of Work (this should be clear and complete)

performance requirements

the schedule

Page 28 of 66
 PGCPM-MPM-003

payment terms

any pricing adjustments due to inflation

the different responsibilities

acceptance criteria

how to deal with change requests

penalties

retain age

liabilities

warranties and guarantees

confidentiality requirements if any

contract termination rules

which country laws will govern contractual disputes if any etc.

There are many types of contracts that can range from simple contracts to very complex contracts. It is
important to choose the type of contract one enters into with care. Large complex projects can involve
the use of a number of contracts and subcontracts.

Components of a contract

A contract can be subdivided into - an Offer, an Agreement and a Consideration.

The Offer - This is an agreement between the parties for the performance of a service, procurement of
supplies or a combination of both service and supplies.

All the parties involved must be legally competent for the agreement to be a valid one. Both parties
must be fully aware of the agreement. Persons who are underage or not in a position to make a
responsible decision due to any impairment cannot enter into a contract. In case the parties are not
legally competent then the agreement made can be proven as null and void in a court of law. The
contract or agreement that is made must be for a lawful purpose and not go against society norms.

The Agreement - This deals with the actual agreement or contract that has been entered into. Both
parties involved in the agreement should be clear about the agreement that they are entering into so
neither party feels pressurized about being forced into the contract.

The Consideration - A consideration which is normally in terms of money is paid in return for providing
the product or service.

Page 29 of 66
 PGCPM-MPM-003

In projects, contracts are concerned with the relationship between the buyer and the seller of products
and services.

When selecting and choosing the type of contract for the project a number of different factors should be
kept in mind and considered:

the type of contract generally used for similar work by the industry

clarity regarding the scope of work

the likely changes in the scope as the project work progresses

does buyer expect a lot of changes in the work

confidentiality of the work

complexities of contract administration

For fixed price contracts a clear and detailed contract statement of work should be provided to the
contractor (seller). If the buyer is uncertain about the work required then a cost reimbursable contract
should be used.

Remember, more effort and resources will be required by buyer to monitor the contractor in cost
reimbursable contracts compared to fixed price contracts.

b) Procurement Planning
Procurement is the acquisition of goods, services or results that are required to complete the project
work from outside the organization or from other departments in the organization. Managing all
changes in contracts as well as administering each contract is also an important part of procurement.

The product description shows the complexity of the items required. How much of the item is to be
procured and when do we wish to procure it? Is the product or service freely available? How can we go
about procuring the item and which supplier should we use? Only after we decide about these critical
issues can we decide about the type of contract that will be suitable to procure the item.

Depending on the project it is possible that we can also be the supplier instead of the buyer.

The make or buy analysis will help in deciding whether to buy something from outside or not. In essence
this means to procure or not to procure. In case the item is being procured from another
unit/department of the same organization then no formal contract will be required

Before making a Make or Buy decision the scope statement must be referred to as it contains all the
information about project needs and strategies which are necessary for planning the procurement
needs of the project.

Page 30 of 66
 PGCPM-MPM-003

It is essential for the buyer to locate the right sellers. All prospective sellers must be fully understood the
buyers procurement requirements by and it is the buyer's duty to clarify any doubts they may have. All
constraints and assumptions related to procurements must be fully discussed with the stakeholder.

Procuring goods and services involves a number of steps which can be broken down into:

Planning for the procurement

Identifying prospective sellers

Reviewing the seller responses

Selection of the sellers

Administering the contract and finally

Closing the contract.

Each organization will have their own procurement guidelines that must be considered and followed.

Planning for procurement

determining what to procure

the scope of work required in each contract

timing when the procurement will be needed

a Make-or-Buy analysis to assess whether the required goods, services or results can be made
in-house or will have to be procured from outside the organization

Detailing out the work required to be done by the seller (contract statement of work)

Identifying prospective sellers (contractors)

Identifying all the potential sources that can supply the required items or services

Finalizing an evaluation criteria for selecting appropriate sellers

Compiling of relevant procurement documents like bids, offers, proposals etc. to be sent to
potential sellers along with the work details, the evaluation criteria being used to evaluate
sellers, response forms and procedures and the proposed contract terms and conditions. These
will be filled in by potential sellers at their own cost and returned to buyer.

Review of sellers responses and selecting the sellers

The responses from the different sellers are evaluated against a pre determined criteria and the seller is
then selected to fulfill the procurement needs.

Page 31 of 66
 PGCPM-MPM-003

Generally there is a negotiation between the buyer and the sellers to choose suitable contracts and the
contracts final terms and conditions.

Administering the contract

Once work begins the contracts have to administered by the buyer for any contract changes and
evaluated and monitored through various reports, meetings, performance reviews and quality checks
and audits to assess whether sellers performance meets contract cost, schedule and quality
requirements.

Closing the contract

Lastly when the work is completed a formal contract closeout is necessary to verify that all the work and
the contract deliverables are acceptable to the buyer, get a formal acceptance from buyer, deal with any
pending contract issues/claims, update each contract file and record the lessons learned from each
contract for future use and learning.

It is essential for the buyer to locate the right sellers. All prospective sellers procurement requirements
must be fully understood by the buyers and it is the buyer's duty to clarify any doubts sellers may have.
All constraints and assumptions related to procurements must be fully discussed with the stakeholder.

Remember some goods or services could have single source or sole suppliers or previously used tried
and tested suppliers who are the organization's preferred suppliers.

Some risks involved in using sole sellers and preferred sellers are:

Preferred sellers may not be able to meet the specific project requirements.

In the case of sole sellers check that they are likely to remain in business, are willing meet the
required quality and the schedule.

Each organization will have their own procurement guidelines that must be considered and followed.

c)Contracting
Type of contracts

If the contract performance is going to be successful then an appropriate contract type must be chosen.
The type of contract will determine the cost and performance risks, which will be placed on the
contractor and this will impact his performance. The type of contract used will depend on the degree of
uncertainty that is facing the project manager.

The life cycle of contracts resembles the project management process of initializing, planning,
implementation and closeout as it goes through many processes, such as a requisition process, a seller
selection process, negotiate and award contract process, contract administration process and finally the
contract close out process.

Page 32 of 66
 PGCPM-MPM-003

All buyer requirements including schedule to be met, performance requirements, technical designs and
specifications to be followed, functionality expected etc. must be clearly given in the contract. This is the
final document that is legally binding between the buyer and the seller. Items informally agreed to but
missing in the formal contract are no longer binding unless they have been formally inserted in the
contract and signed by both parties. Should any disputes/claims come up later on then the contract will
show what requirements were to be fulfilled including some contractual obligations like reports and
meetings.

There are three broad categories of contracts - Fixed Price contracts, Cost Reimbursable contracts and
Time and Material contracts. Within each of these categories, there are various types of contracts,
which can be used individually or in combination.

Cost Reimbursable contracts vary distinctly from Fixed Price contracts. Cost reimbursable contracts are
required when the project involved is uncertain and it is difficult to estimate a fixed price with sufficient
accuracy to ensure a fair price can be obtained for the contract. The buyer is clear regarding the end
result to be achieved but not very clear regarding the work required to be done and cannot give a clear
and detailed contract statement of work to prospective sellers. Cost reimbursable contracts place the
least cost and performance risk on the contractor and just require the contractor to use his best effort
to complete the contract.

In Fixed price contracts the seller understands the total work required and quotes a price for the total
work inclusive of his fee or profit margin. The seller, therefore, faces maximum risk and has to watch his
costs very carefully. It is possible to have fixed price contracts known as Fixed Price Incentive Fee where
the seller is given an incentive for exceeding required performance.

A large number of companies have separate procurement departments. Their job is to handle decisions
regarding contracts. Deciding which type of contract will be most appropriate is a key decision in a
project.

Procurement can be done through a centralized contracting department, where the degree of
specialization regarding contracts will be much higher and the seller needs to deal with only one person.
Where such a department does not exist the contracting work is done in a decentralized way. Generally
in such a set up the involvement of the project team will be much higher in contracting work.

In contracts the buyer is looking to place maximum performance risk on the seller while the seller is
looking to get the best bargain by increasing his profit potential and place maximum risk on the buyer.

Privity

This is a law that recognizes that a contractual relationship exists between the buyer and the seller
(contractor/supplier). If any contractor uses sub-contractors then the original buyer does not have any
direct relationship or control over the sub-contractor. They have to go through their contractor.

Special clauses

Page 33 of 66
 PGCPM-MPM-003

Contracts may require special clauses. A common one is the use of non disclosure clauses that legally
bind the seller from disclosing details of the project to others, especially competitors.

Many companies have standard contract formats that they use regularly for their procurement
simplifying the process.

There is wide variety of contracts that can be used. We will be covering the main types of contracts in
detail.

Page 34 of 66
 PGCPM-MPM-003

UNIT II: PROJECT CONTROL

Index - Chapters
A. Issue Analysis
B. Quality
C. Control
D. Information Management & Reporting
E. Team Performance

Chapter A: Issue Analysis

There are only 2 sides of a given event. Is it falling in a category of an ISSUE or is it falling in the category
of resolving an ISSUE? Of course, resolution of an Issue presumes the existence of an Issue.

In managing change or projects to implement your dream or vision or strategies you are likely to
confront many different types of issues that will need to be resolved. As the project passes through it's
life cycle we would keep on adding Issues that require our attention.

We can catgorize the issues under different heads such as technical, team building, contractual, social
etc.

The new world order which is under formation is going to be dominated by those organizations and
societies who have conquered the institutionalization of Issue Resolution Mechanism (IRM). IRM must
ensure faster rate of resolution of issues than their competitors.

As organization move forward to have better control of the market place, they would face numerous
issues that must be resolved fast. The issues can be simple as well as complex. Therefore Issue
management and Analysis is a continuous process and not limited to a given time frame or a particular
phase of the project life cycle.

Following are some of the parameters that should be taken into account in Issue Analysis:

Age analysis since how long has the unresolved issue been pending

Page 35 of 66
 PGCPM-MPM-003

Sensitivity analysis a histogram of the unresolved issues based on their complexity factor

Domain analysis- histogram of the unresolved issues based on the primary classification of an
issue such as technical, team building etc.

Analysis for the Rate of resolving Issues

Source analysis- histogram of the unresolved issues based on the source from where it has
emanated

Influence analysis- histogram of the unresolved issues based on its linkage with the external or
the internal sphere of influence.

Chapter B: Quality
a) Flow Chart
Flow charts which are excellent quality improvement tools are being used in routine for such a long time
that we often do not even consider them to be a quality improvement tool. Flow charts are very easy to
use and are used for a wide variety of reasons as they can be very easily customized.

Flow charts are a part of the seven basic quality control tools.

What are Flow charts?

Flow charts are a pictorial representation of the sequence of steps of any process or a project. Using
flow charts a complete step by step graphical representation can be depicted of the sequence of steps
and the relationships between the different elements in the process or stages of the project. Users can
get a much better as well as clearer understanding and visualization of the total process or project.

The complete workflow is drawn using a common language of symbols. Some key symbols used to
depict different flow chart steps are: start / end symbols, decision points or conditional statements,
arrows showing the flow, process steps, input/output documents, manual input, etc.

Flow charts can be drawn manually by hand or through the use of software.

There are four different types of flow charts:

Top-down flow chart

Page 36 of 66
 PGCPM-MPM-003

Detailed flow chart

Work flow diagrams

Deployment chart

The top-down flowchart is the most common type of flowchart and can be developed quite easily.

b) Histogram
A histogram is a type of a bar chart that is used to pictorially summarize and depict any variable/process
over a selected time period. In other words a histogram depicts the frequency of data.

Histograms are commonly used to show routine information such as the rainfall pattern or temperature
for a place over the 12 months. In a project environment a histogram is a very useful tool that is used to
show resource usage across the project.

The histogram has a vertical 'Y' axis that shows a summary of the dependent variable and a horizontal 'X'
axis which shows the independent variable.

When drawing the histogram the increments on each axis must be in equal increments.

c) Pareto Chart
A Pareto chart or diagram is a graphical tool that is used with a histogram
to rank causes from the most significant to least significant. In quality
control it is used to rank the quality defects in the order of frequency of
occurrence or importance. It has been found that 80% of the problems
come from 20% of the work.

The Pareto diagram is based on the Pareto principle, which was first
defined by Dr. J. M. Juran in 1950. This principle is named after the 19th century Italian economist,
Vilfredo Pareto who found that 80% of the wealth was in the hands of 20% of the population.

This 80/20 rule can apply in quality also. Dr. Juran found that only Vital Few 20% causes gave rise to 80%
of the problems.

By using the Pareto diagram the critical causes which create maximum problems or defects can be
focused on. Factors that create maximum problem can be addressed in their order of importance.

However, it should be kept in mind that the frequency of occurrence may not necessarily always be the
optimum criteria for ranking of defects as the most frequent cause may be a trivial one. It should be
used on a measure of relative importance such as costs or customer impact.

Page 37 of 66
 PGCPM-MPM-003

The Pareto chart is one of the "seven tools of quality."

Chapter C: Control
a) Change Management Concept
Generally all projects are faced with many changes during their life cycle. As changes normally lead to
increased costs and some rework it is important to have a formal process to manage and control all
changes in the project.

These changes can be desirable and beneficial or unnecessary. They could arise as a result of omissions
or new requirements. Whatever the cause for the change a proper assessment should first be made to
see the impact of the change before it is approved.

A project change can be described as some event or process that alters the originally stated and
finalized project scope in the contract. A change request can come from the customer or the contractor.
The projects costs, time, scope and risks can all get affected by changes in the project.

Changes can be both external changes or internal changes. At times a seemingly small change can lead
to big changes later on. Whatever the type or level of change it must be properly managed.

Some external changes are:

Customer requests - these generally have to be accepted and may be billed extra depending on the
change

Page 38 of 66
 PGCPM-MPM-003

Dayworks Orders - these are special add-on changes found in construction projects e.g. paint another
room. Track is kept of the extra work and paid for by the client

Some internal changes are:

Engineering design changes -these are changes that arise from within the project organization that
could arise due to an omission, redesign, improvements etc. that may/may not alter the project
deliverables

No matter what the reason for the changes requested they should follow a formal process in writing
using the appropriate change control form and be action upon only if approved.

All projects should use some form of formal change control. For large, complex projects a formal change
control procedure must be in place whereas for smaller projects a more informal change control can be
used.

The change control policy to be used in the project should be decided in the beginning of the project.

Change management should be a formal process used in the project to implement changes in the
project plan after they have been approved.

A complete change history should be maintained through the use of a formal change request procedure
and given in writing using a Change Request Form. All changes requested for any reason along with
dates and reasons for the change, their status etc. will be available for any repeat reviews and for final
closing.

Change Request Forms - A formally submitted change request form that is used to track all stakeholder
requests (including new features, enhancement requests, defects, changed requirements, etc.) along
with related status information throughout the project lifecycle.

Change (or Configuration) Control Board (CCB) - The board that oversees the change process consisting
of representatives from all interested parties, including customers, developers, and users. In a small
project, a single team member, such as the project manager or software architect may play this role.

The CCB is appointed on behalf of the Sponsor

CCB Review Meetings - The function of this meeting is to review Submitted Change Requests. An initial
review of the contents of the Change Request is done in the meeting to determine if it is a valid request.
If so, then a determination is made if the change is in or out of scope for the current release(s), based on
priority, schedule, resources, level-of-effort, risk, severity and any other relevant criteria as determined
by the group. This meeting is typically held once per week. If the Change Request volume increases
substantially, or as the end of a release cycle approaches, the meeting may be held as frequently as
daily.

Page 39 of 66
 PGCPM-MPM-003

Typical members of the CCB Review Meeting are the Test Manager, Development Manager and a
member of the Marketing Department. Additional attendees may be deemed necessary by the
members on an "as needed" basis.

b) The need for change control

No matter how well the project is planned every project can go through some changes. These changes
can cover areas such as requirements, expectations, features etc. and are requested by the stakeholders
due to various possible reasons like legal necessity, economic advantage, technology changes, new
requirements, improper planning or omissions.

To record and keep track of these changes and to ensure that the proposed changes are first assessed to
see their impact on the project before they are approved and implemented some kind of control is
necessary. This formal process is even more necessary in large projects and is termed as Change Control.

Change control is a process that ensures potential changes to the deliverables of a project are recorded,
evaluated, authorized and managed.

To make the procedure effective, the project manager needs to define and put in place a formal change
control process that must be followed for the smooth and effective functioning of the project.

Any change, which is required by any of the stakeholders, needs to go through this change control
process where it will be approved and implemented, rejected or deferred.

c) Formal Change Control Procedures

A change control process comprises of formal documented procedures that includes steps for changing
project documents. It should include the required paperwork, monitoring and tracking and approving
authorities to authorize any changes.

The change control process for the project could include the following steps:

Description of the change needed by the originator in a Change Request Form - any stakeholder
can request a change

Submission of the request to the change coordinator who records the change requested in a
change register or log

Review of the change request by the approving authority such as the Change Control Board. The
Change Request is reviewed by the Change Control Board Review meeting to determine if it is a
valid request. If so, then a determination is made if the change is in or out of scope for the
current requirement(s), based on various relevant criteria. The board can approve / reject /
defer the change requested

Proper documentation is made of the approved or rejected change in related documents

Page 40 of 66
 PGCPM-MPM-003

Dissemination of the change to all concerned stakeholders if the change is approved

A method to monitor the implementation of the change

Review of the change and updation of approved change in concerned records and plans

If change not approved / deferred originator informed

Assign & Schedule Work

Once a Change Request is approved, the Project Manager will then assign the work to the appropriate
team member - depending on the complexity of the change and resource availability.

Make Changes

The assigned team member/s performs the set of activities defined within the appropriate section of the
process to implement the change requested.

These activities will include all normal review and test activities as described within the normal process.

Verify Changes in Test Build

After the assigned team member resolves the changes, the changes could be assigned to a tester and
Verified in a test build of the product if required.

The change implemented must be updated in the relevant project plans. The Change Request will then
be considered as Resolved.

Change Request Forms

A Change Request Form contains information covering the following aspects:

The details of the project and the change requested

Project Name

Description of the change

Request change date

Person requesting the change

Reason for the change

The impact assessment of the requested change on the project's scope, time, cost, risk and quality etc.,
the work that will be affected by the change and the recommended solution

Work Package affected by the change

Page 41 of 66
 PGCPM-MPM-003

Impact of the change on other aspects of the project like time, cost, risk and quality

Impact of change on other items/tasks

Recommendation

Authorization signatures

Signature of person requesting the change

Signature and authority of person approving the change

Date of approval

Signature of client/contractor approving the change

A Change Register/Log is used to keep a record of all the changes that were requested throughout the
project. This would have similar details as the change request form for all changes requested.

Often an organization will have a change control procedure that can be directly used for the project.
Change control systems may also include a group responsible for approving changes. Such a group is
referred to as a Engineering Review Board (ERB),a Technical Assessment Board (TAB), a Technical
Review Board (TRB) etc.

Chapter D: Information Management & Reporting

a) Meetings
Performance Reporting

Information management and distribution leads to the production of project records, project reports
and presentations. The project reporting includes project performance reporting exercise as one of its
important component to understand the project progress.

Performance reporting involves collecting and disseminating performance related information to

provide stakeholders with information about how the resources are being used to achieve the project
objectives.

Performance reporting should generally provide information on scope, schedule, cost, quality etc. Many
projects also require information on risk and procurement. Reports for such activities may be prepared
comprehensively or on an exception basis as planned and required in the project.

The reports include Status reports, Progress reports and Forecasting.

Page 42 of 66
 PGCPM-MPM-003

Status reports: these reports describe the current status of the project as it presently stands

Progress reports: these reports describe what the project team has accomplished during a specific
period of time with reference to some pre-determined parameters such as schedule, costs, time, etc.

Forecasting: this exercise consists of predicting the future status and progress of the project assuming
the present level of progress will continue or looking at alternative progress possibilities

Project performance reporting is done using various methods and techniques:

Some of the techniques are discussed below:

Performance reviews: These are meetings held to assess the project status and progress. These are
typically used in conjunction with one or more of the performance reporting techniques described
below.

Trend Analysis: Trend analysis involves examining project results over time to determine if performance
is improving or deteriorating.

Variance analysis: It involves comparing actual project results to planned or expected results. Cost and
schedule variance are the most commonly analyzed aspects of the project performance. However,
variances from plan in the areas of scope, resource, quality and risk are often of equal or greater
importance.

Earned Value Analysis (EVA): EVA in its various forms is the most commonly used method of
performance measurement. It integrates scope, cost and schedule measures to help the project
management team assess project performance. It has been dealt in details under sections Cost and Time
management.

Project reporting results in the production of project reports and further action in the form of change
requests to be taken to deliver the project as per the schedules and other constraints.

Performance reports: Performance reports organize and summarize the information gathered and
present the results of any analysis from such reports. Reports should provide the kinds of information
and the level of detail required by stakeholders as documented in the communication management
plan.

Common formats of reports include bar charts, S curves, histograms, tables etc.

Change requests: Analysis of project performance often generates a request for a change to some
aspect of the project. These change requests are documented and handled as per the procedures
documented in the change control processes. Change requests can generate due to various reasons like
change in the scope, requirements, schedules, resources etc.

Page 43 of 66
 PGCPM-MPM-003

b) Information Management Fundamentals

Project managers are basically involved in communication processes very extensively. They
communicate with the team members, with the functional heads for negotiating the resources, seniors
to keep them informed, subcontractors to monitor their progress and to stakeholders to meet their
diversified expectations at times. Basically, a project manger spends upto 70 to 80% of his/her time in
communication process.

Communication should be so effective that the right information or the status is passed on timely and
effectively without voluminous reports and 'requiring rocket science' to understand them. The simpler
the communication process the more effective it becomes. Often, if the information reports and
monitoring status reports are not simple, they are not used.

There is an information explosion and it is doubling every year. It is necessary to get the relevant
information required in the project for taking timely decisions.

We use information both to keep ourselves up-to-date about the status of the events and also to be able
to take timely decisions in the project. Information should be clear and precise.

The fundamental principle of information management is that if one has all the information one needs,
it has a very good possibility of receiving the best treatment in terms of decision-making, monitoring
and control.

With no information, the uncertainty level goes up and it becomes very risky. Risk is clearly very high in
taking decisions based on little or no information. One may not have the luxury of having all the
information one would like to have before taking a decision still it is very important for all the
stakeholders to receive reliable information/reports as and when they require it.

Information, both in terms of knowledge and actual documents/records is essential to communicate in

the project. Right through the project from its conception to post project reviews, a large and wide
range of information will be used.

One would also need reports to meet statutory and legal requirements in the project.

The actual type of information will depend on the phase and type of the project undertaken. In order to
manage this information a policy has to be formulated and followed. This can be done only after first
understanding all the specific needs of the different stakeholders of the project.

Information management is crucial in any project.

Reports required would cover two types - those needed for decision making in the project and to meet
statutory requirements.

A formally approved Information Management Policy to manage the information has to be put in place
by the project manager. Such a policy should consider heads such as:

Page 44 of 66
 PGCPM-MPM-003

Document types

Retention schedules

Information security

Project working procedures

Supporting systems

The Information Management Policy must address aspects given below:

Assigning specific roles and responsibilities to manage the information

The procedures, standards and guidelines to be followed in information management

The infrastructure (hardware, computers etc) needed

How information management will fit into the overall project structure

Document details/Matrix

Most information that will be used in the project will be some form of document. A document matrix is
formally made that will highlight the type of document, it's author, number and date, version number,
document's retention period, destruction date, destruction authorization etc.

Similarly a document distribution schedule should also be made that will highlight what
information/document is to be sent to whom, the frequency, format required etc.

The type of documents used could cover topics such as:

project progress

meeting agendas/minutes of meetings

risk management

change requests

bar charts

architectural drawings

variance reports

When handling information the project manager must also consider the security and confidentiality of
the data. A balance has to be kept in what to distribute and to whom.

Page 45 of 66
 PGCPM-MPM-003

In today's scenario computerization plays a key role in information generation, management and
storage.

Information management covers the key eight functionalities of:

Acquisition

Creation

Retrieval

Distribution

Document depository

Records management

Workflow

Collaborative working

Document depository which stores and keeps track of all the project data including latest configuration
details is the backbone of the data available and full data security should be maintained to keep it intact.

c) Estimate at completion(Cost)
Conventionally while managing projects we look at the cost dimension and the time dimension
separately. Our normal concern is - how much more time do we need for completing the particular task
and how much more money will it cost! Imagine if we could translate the expenditure of money itself as
a function of time and combine these two dimensions of time and cost to a single dimension of cost
alone, shouldn't our project life become a little simpler? Certainly, yes.

The technique of Earned Value integrates cost and schedule performance in one report unlike
traditional reports in which cost and schedule are reported separately.

Estimate At Completion (EAC) which is a part of the Earned Value Management System, is used to give
us an estimate of what the project is likely to cost based on the project's actual performance. The
Earned Value Management System is a good methodology to give us a fairly accurate estimate of what
the project was planned to cost and forecast what it will actually end up costing.

Earned Value Management System uses the three key independent values - PV, AC and EV, which are
used together to get the performance status and progress of the project.

Planned Value (PV)

Page 46 of 66
 PGCPM-MPM-003

The first value is the Planned Value (PV). Earlier this was called the Budgeted Cost of Work Scheduled
(BCWS).

PV or BCWS is the physical work that was scheduled or planned to be performed plus the authorized
budget to accomplish this scheduled work. Today the term Planned Value (PV) is more commonly being
used than the earlier nomenclature Budgeted Cost of Work Scheduled (BCWS).

The total Planned Values for the complete project is known as the Budget At Completion (BAC). On an
'S' curve this will be the tip of the PV curve.

Actual Cost (AC)

The second key value used for EVMS is the Actual Cost (AC). Earlier this was called the Actual Cost of
Work Performed (ACWP).

This is the total cost that was actually incurred in accomplishing the work that was completed. Today the
term Actual Cost (AC) is more commonly being used than the term Actual Cost of Work Performed
(ACWP)

Earned Value (EV)

The third value is the Earned Value (EV). Earlier called the Budgeted Cost of Work Performed (BCWP).

This is the sum of the approved cost estimates for the physical work that was actually accomplished on
the project plus the authorized budget for activities or portions of activities that have been completed.
This includes the sum of all the approved cost estimates.

EV may include overhead allocation for activities or portions of activities completed during a given
period, which is generally project-to-date. It should be noted that this value is based on the costs that
were planned or budgeted to be incurred for completing the work and NOT what was actually incurred.

Today the term Earned Value (EV) is more commonly being used than Budgeted Cost of Work Performed
(BCWP).

Let us take an example to see how to calculate the Earned Value. Suppose there are 7 activities that are
to be performed within certain time frame.

Let us assume that our 7 activities are A, B, C, D, E, F and G. The Planned Value (PV) or Budgeted Cost of
Work Scheduled (BCWS), which is the estimated budget that has been approved for performing each of
these 7 activities, is US$100 per activity.

Page 47 of 66
 PGCPM-MPM-003

In the below table, we can see all the three accumulative EVMS values for our project activities.

Note: On Tuesday activities C and D are added and for Wednesday activities B and G.

Let us now look at the cost dimension.

What is the cost position in our project?

Have we:

Spent more money or resources than what was approved

The same amount of money or

Less money than the approved budget

Page 48 of 66
 PGCPM-MPM-003

In order to monitor this we need to look at what is called the Cost Variance (CV).

CV is a measure of the conformance of actual cost of performing the work to the budget. Let us check
the status of our project activities and see where we stand.

In the schedule plane to check the progress of work we calculated the Schedule Variance (SV). In the
cost plane we now calculate the Cost Variance (CV) to check the Actual Cost that was incurred in the
project to perform the project activities in comparison to what we had planned to spend for executing
the same work.

Cost Variance (CV)

To calculate the Cost Variance (CV), the Actual Costs (AC or ACWP) incurred for doing a certain amount
of work is subtracted from the Earned Value (EV or BCWP) for the same amount of work.

Cost Variance (CV) = EV - AC (or BCWP - ACWP)

In our project at the end of Wednesday, EV was $400 and AC was $525 so:

CV is $400 - $525 = -$125

A negative CV implies that we have spent more money (resources cost money) in executing work then
what was planned and approved for the work. A negative CV is BAD as it shows a cost overrun.

If Cost Variance (CV) is zero it means that the actual costs incurred were exactly as planned

A positive CV would mean that our project is under budget i.e. we spent less than the planned
budget

A negative CV would show that we are over budget

For our project on Wednesday evening a cumulative Earned Value (EV or BCWP) of $400 and an Actual
Cost (AC or ACWP) of $525 means that we have spent $525 to do work that was budgeted to be
completed in only $400 i.e. this work had a PV of $400. This means we are over budget by $125.

Please note, the Cost Variance gives us an absolute value of the costs incurred and does not provide a
clear picture of the relative magnitude of the costs incurred.

To do that we need to calculate CV in %.

CV in % = CV*100/EV (or CV*100/BCWP)

= -$125*100/$400

= -31.25%

Page 49 of 66
 PGCPM-MPM-003

CV in % shows us how effectively we are utilizing our funds in terms of what we should have spent and
what we actually spent in performing the same work. It measures the deviation between the Earned
Value and the Actual Cost.

In our project a figure of 31.25% means that for every $ we were supposed to spend for doing the work
we are actually spending 31.25 cents more. +% would mean that we are spending less than we had
planned. Negative is BAD.

Cost Performance Index (CPI)

Let us define another term called Cost Performance Index (CPI). CPI gives us the cost efficiency of doing
the work.

CPI is the ratio of the Earned Value to the Actual Cost of performing the work.

CPI = EV/AC(same as BCWP/ACWP)

In our project activities the CPI = $400/$525 = approximately .75

A CPI of .75 means that for every $ spent in the project, we are effectively getting 75 cents worth the
value in terms of our original plan. Ideally, CPI should be equal to or close to 1.

CPI, we can have 3 possibilities.

CPI = 1 which means that the project cost is right on target i.e. for the work that has been
accomplished (EV) the actual cost (AC) incurred is the same as the approved budgeted cost for
performing it. The project cost is same as planned.

CPI < 1 means that the project is over budget. For the work that has been accomplished (EV) the
actual cost (AC) incurred is more than the approved budgeted cost for performing it.

CPI > 1 means the project is under budget. For the work that has been accomplished (EV) the
actual cost (AC) incurred is less than the approved budgeted cost for performing it.

In essence, in reviewing our sample project of 7 activities we find that on the schedule front we are
behind schedule while in the cost front we are over budget.

Let us now look at the status of the project as a diagram by using 'S' - Curves which are based on
cumulative figures. (Since any line that is drawn using cumulative figures generally resembles the
alphabet S such cumulative figures are called S- Curve.)

The diagram below which is being reviewed during the project shows the project's Planned Value,
Earned Value, Actual Cost the Schedule Variance and the Cost Variance.

Page 50 of 66
 PGCPM-MPM-003

It is possible to compute the expected total cost of an activity, a group of activities or the project when
the defined scope of the work is completed.

In the planning stage, before project execution has begun, the Budget At Completion (BAC) - the
planned total Budget for the project provides this figure. Remember, BAC is the same as the cumulative
Planned Value (PV) or BCWS for the entire project.

During the implementing stage of the project the Estimate At Completion (EAC) will help the project
manager to forecast the revised budget for the total project or for an activity as this figure is based on
the project's current performance. Estimate At Completion (EAC) therefore helps to forecast the revised
budget for the total project or for any activity.

Once actual execution of the project begins, the Estimate At Completion (EAC) gives us an estimate of
what the project is expected to cost at project completion based on the actual performance of the
project.

At the planning stage the Estimate At Completion (EAC) will be the same as the Budget At Completion
(BAC). However, in real life, projects seldom progress and perform completely as planned. In order to
monitor and control the project during it's execution phase, we deploy various techniques for
forecasting the project's Estimate At Completion (EAC) based on the project's actual performance.

To calculate the EAC the planned Budget At Completion (BAC) is either adjusted for the to-date project
performance or for a new expected performance.

(Note: PV and BCWS are same but the term PV is now more commonly used than BCWS; AC and ACWP
are same but the term AC now more commonly used; EV and BCWP are same but the term EV now
more commonly used.)

Let us assume that we have undertaken a Project called 'Firefighting 329'. It's:

Budget At Completion (BAC) is $122 Million

The planned time to complete the project is 52 weeks

Page 51 of 66
 PGCPM-MPM-003

At the end of 26 weeks the project is reviewed and we find the following status at this point of time:

the Planned Value (PV) was $61 Million

the Earned value (EV) is $52 Million

the Actual Cost (AC) is $57.1 Million

As we said earlier EAC forecasts the revised budget for the total project based on the current project
performance. To arrive at this figure the planned Budget At Completion (BAC) is either adjusted for the
to date project or for a totally new performance that is expected from now onwards.

Let us see how we can calculate EAC at end of week 26 under 3 different assumptions.

Assumption No. 1

The current rate of efficiency of using capital or money that exists to-date will continue during
the entire project.

Under this assumption the Estimate At Completion is calculated by dividing the Budget At
Completion (BAC) by the current Cost Performance Index (CPI).

The current efficiency in deploying capital can be calculated by computing our project's to-date
Cost Performance Index (CPI).

CPI = EV / AC (same as BCWP / ACWP)

= $52 Million / $57.1 Million

= .9107 or let us round off to .91

EAC = BAC / CPI (Budget At Completion / Cost Performance Index)

= $122 Million / .91

= $134.06 Million

Therefore, assuming that the current rate of efficiency will continue throughout the project, the
project's Estimate At Completion (EAC) will be $134.06 Million instead of the originally planned
$122 Million.

Assumption No. 2

The rate of efficiency of using the capital or money in the project changes from now onwards for
the Balance work.

What is the Balance work and how should we calculate the Estimate At Completion under this
assumption?

Page 52 of 66
 PGCPM-MPM-003

Let us say efficiency or CPI improves to 100% from now onwards till the project is completed.
The lower efficiency till date was due to some peculiar conditions encountered by the project
that will not be repeated in future.

The Balance work is simply the project work still to be executed. Remember the completed work
is the Earned Value so the Balance work is the Budget At Completion (BAC) minus the Earned
Value as on date.

To compute the EAC under this assumption we need to divide the Balance work by the new CPI
and add this figure to the to-date Actual Costs (AC). The Actual Costs have already been incurred
so it must be taken into account.

In our example the new CPI is 100% which means that the remaining work will be completed
exactly as per the planned budget.

Let us calculate our project's EAC assuming CPI will be 100% from now onwards:

Balance work = Budget At Completion (BAC) minus Earned Value as on date

= $122 Million - $52 Million

= $70 Million

EAC

= AC + (Balance work / the new CPI)

= $57.1 Million + ($70 Million / 100%)

= $127.1 Million

Therefore, if the Cost Performance Index improves to 100% from now onwards the project's
Estimate At Completion is $127.1 Million.

Suppose that instead of the CPI improving to 100% from now onwards the efficiency of using the
capital or money is 95% from now onwards till the project is completed.

Let us compute the new EAC for our project.

Balance work = Budget At Completion (BAC) minus Earned Value as on date

= $122 Million - $52 Million

= $70 Million

The EAC will be Actual Cost to date plus the Balance work divided by new the estimated
efficiency of 95%.

Page 53 of 66
 PGCPM-MPM-003

EAC = $57.1 Million + ($70 Million /.95)

= $57.1 Million + $73.68 Million

= $130.78 Million

In summary, the EAC is the Actual Costs incurred to-date + (the Balance work divided by the Cost
Performance Index).

Assumption No. 3

An entirely new figure is given as the value of the Balance work possibly because it was found
that the old BAC was erroneous. Let us say this revised value of the Balance work is $85 Million.

To calculate the EAC under such as assumption we need to simply add the value of the Balance
work now given and add it to the project's Actual Costs which have already been incurred.

Hence the EAC for our project = AC + $85 Million

= $57.1 Million + $85 Million

= $142.1 Million

As we can see that a good advantage of such forecasting is that the project manager can create
different what-if scenarios to see what the EAC will be under different CPI's.

d) Estimate to completion(Time)
Activities are performed in time dimension. Activities consume
resources. Some of the resource categories are: human potential,
material, equipment and machinery. There are 2 types of material
- one which is physical like steel, aluminum, oil, etc. and the other
type of material relates to invisible i.e. thoughts, concepts and
ideas. They become visible only when expressed.

Similarly there are 2 types of raw material - one which is physical

like iron ore or crude oil etc. and the other type of raw material
which is invisible i.e. raw material which makes thoughts and ideas to get formed and developed. At this
stage, this resource becomes visible. We can call it as 'brain ore' responsible for generating concepts and
ideas similar to 'iron ore' for making steel. Often I also like to term 'brain ore' as 'brianotrons' keeping in
view the word electrons.

To maintain control of the project we must be proactive in our monitoring instead of being reactive.

Page 54 of 66
 PGCPM-MPM-003

In a typical project environment project progress is generally measured against time and cost separately
as two different independent values.

The work is monitored against the network and the cost is monitored against a given budget - have we
spent more or less then the allotted budget till date.

Typically no check is made to see how much money was spent for the actual work units completed and
what we planned to spend for that much work.

For effective monitoring and control we should have an early warning system that provides a signal of
problems ahead.

A system that helps to provide a more realistic picture of the progress against the plan, identifies
potential cost and schedule overruns and forecasts likely time and cost overruns.

The Earned Value Management System (EVMS) helps the project manager and the project team to be
proactive in monitoring and controlling the project's progress against the planned progress.

Earned Value is an excellent monitoring tool as it looks at both time and cost together to provide an
integrated picture of the progress of the planned work in terms of the planned network schedule and
the actual spent to complete the work done to-date.

The physical work achieved in the project is represented in a cost based structure.

To use EVMS, in the planning stage a budget must be allocated for the total work to be done in each
work package in monetary terms or some other quantifiable units like man-hours.

This planned approved budget is known as the Planned Value (PV) for the work.

Once implementation begins and work is completed the project gets an 'Earned Value' (EV) for the
completed work units based on the Planned Value associated with that work. It earns the Planned
Value for the completed work units.

The work progress is measured against the planned schedule. We review how much work has been
performed with reference to TIME. Are we ahead in time dimension or lagging behind?

At any review point it is thus possible to know:

What was the Planned Value at that point of time

What is the Earned Value at that point of time

How much was actually spent or the Actual Cost (AC) to complete that amount of work.

Planned budget and the actual spending are thus integrated with the work performed for effective
monitoring and control allowing for quicker remedial action.

Page 55 of 66
 PGCPM-MPM-003

The Planned Value (PV) was formerly known as Budgeted Cost of Work Scheduled (BCWS).

The Earned Value (EV) was formerly known as the Budgeted Cost of Work Performed (BCWP).

The Actual Cost (AC) was formerly known as the Actual Cost of Work Performed (ACWP)

Let us now take a concrete example.

There is a project to build a home undertaken by a lady. She has organized money for building up the
home. The cost of this home project is fixed at $100,000. The home should be ready for occupation
within 6 months from the date of starting. First let us be clear as to what does start imply? Is it from the
time the idea was generated to build a home or from the time the money was organized or when the
architect and engineering firm were finalized for the construction?

Let us assume that the start date is counted from the date the owner had organized the money.

She has now laid out the total plan for executing the project. After planning in terms of her
requirements, she would have hired the services of a consultant to schedule the activities in such a way
as to complete the project within 5 months as 1 month has already gone in planning, selecting a
consultant and other associated activities.

The lady is now ready to define all her requirements in terms of Costs.

She is bothered about maintaining the $100,000 magic number that the total project is expected to cost.
This is the total Budget at Completion (BAC) which is the sum of the Planned Value (PV) for the project.

PV is the sum of the approved cost estimates (including any overhead allocation) for activities, or
portion of activities scheduled to be performed during a given period.

Planned Value and the Budget at Completion (BAC) is known prior to beginning execution. You plan all
your work and assign costs to them and then schedule them against a time period.

The Planned Value shows the approved budget across the project life cycle. The different activities have
been transformed into an equivalent cost worth. At the end of June 2008, the owner should be ready to
move into her new home.

Page 56 of 66
 PGCPM-MPM-003

Planning is the first step to achieve success but in this real world, everything does not go fully as per
plans.

We need to monitor actual performance and measure the progress against the plan. We then need to
take any necessary corrective actions to ensure that the performance goes according to the plan or is
even better.

As work on the house progresses we can check the actual work performed at a given time period and
the value of the work done on a monthly basis. To do this we use the Earned Value (EV).

Earned Value shows the value of the completed work.

EV is defined as the sum of the approved cost estimates (including any overhead allocation) for activities
or portions of activities completed during a given period (usually project-to-date).

Let us compare the cumulative Earned Value (BCWP) and Planned Value (BCWS) on a monthly basis.

When we review the progress of the house at the end of March 2008 we find that we should have
completed work worth $40,000 but have only completed work worth $33,000. We still have to complete
work worth $7000. This tells us that we are lagging behind in our schedule and need to take some
proactive steps to get back on track.

Through Earned Value we can find the Schedule Variance (SV) at the end of March 2008.

The Schedule variance will show the actual variance between the work that should have been
completed as per the plan and the work actually completed. SV is in monetary terms or other
quantifiable units.

Page 57 of 66
 PGCPM-MPM-003

SV = EV - PV (BCWP - BCWS)

SV = $ 33,000 - $ 40,000 = - $ 7,000

Remember, a negative SV means we are behind the planned schedule

The Schedule Variance (SV) gives us the absolute value of the Schedule at the review point. It,
however, does not give an indication of the relative magnitude of the project status. To get this we need
to calculate the SV in %.

SV in % = SV*100/ PV (BCWS)

= -$7000*100/$40,000

= -17.5%

SV in % tells us how far ahead or behind we are in %. A SV in % of 17.5% means that our actual
schedule is behind by 17.5% in comparison to the work we had planned to complete. Had the SV in %
been +17.5% it would have meant that we are ahead of our planned schedule by 17.5%.

Using this Schedule Variance we can be more proactive and do an analysis of when we can now expect
to complete the House project based on current progress.

Schedule Performance Index (SPI)

Let us define another term called Schedule Performance Index (SPI). SPI gives us the schedule efficiency
of performing the work.

SPI is the ratio of the work we have actually completed against the work that is required to be done in
the activity. SPI can be calculated both at the activity level and at the total project level.

SPI = EV / PV (or SPI = BCWP/BCWS)

SPI = EV/PV (BCWP/BCWS)

SPI = $33,000/$40,000 = .825

In this ratio we can have 3 possibilities:

SPI can be = 1 which shows that the project is right on target i.e. the work actually performed
(EV) is the same as the planned work (PV).

SPI < 1 shows that the project is behind schedule i.e. the work actually performed (EV) is the less
than the planned work (PV).

SPI > 1 shows that the project is ahead of schedule i.e. the work actually performed (EV) is the
more than the planned work (PV).

Page 58 of 66
 PGCPM-MPM-003

Both Schedule Variance and the Schedule Performance Index will vary at every review point based on
actual progress.

The project's progress was behind schedule till end May 2008 but we managed to not only stop the
slippage but also complete our work as planned by end of June 2008.

An S-curve is used to display a graphic representation of cumulative costs, labor hours, or other
quantities, plotted against time. The name derives from the S-like shape of the curve (flatter at the
beginning and end, steeper in the middle) produced on projects that start slowly, accelerates and then
tails off.

Let us see how the different progress scenarios would look if drawn as a 'S' curve.

Recap: PV or BCWS shows the cumulative planned budget, AC or ACWP shows the costs actually
incurred in completing the PV and EV or BCWS reflects the value of the planned budget not the actual
expenses for the work completed by the review date.

OVER BUDGET and AHEAD OF SCHEDULE

UNDER BUDGET and AHEAD OF SCHEDULE

UNDER BUDGET and BEHIND SCHEDULE

Page 59 of 66
 PGCPM-MPM-003

Estimate to complete:

Estimate to complete or ETC is a forecast of completing a project based on the information provided on
Schedule Performance Index (SPI).

Let us look at the following scenario:

Project called P2000 is planned with a capital outlay of $ 1 Million. The project completion schedule is 12
months. The project is being reviewed at the end of month 4. The status of the progress is given in the
following table. Please note that all the figures are accumulative.

We are asked to forecast the time when the project can be expected to be completed.

Case 1

Assuming that the current schedule performance will remain the same for the balance of the project.

The current schedule Performance Index (SPI) is the Accumulative EV at the end of 4 months divided by
the Accumulative PV at the end of the 4 months.

The SPI being this ratio is $280,000 (EV at the end of the 4th month)/ $400,000 (PV at the end of the 4th
month) comes to .7.

As the performance efficiency will remain the same for the balance of the project, the

Estimate To Complete (ETC) shall be the original time estimate of the project i.e. 12 months divided by
the current performance efficiency of .7.

Page 60 of 66
 PGCPM-MPM-003

ETC is 17.143 months. There is a time overrun of 5.143 months.

Case 2

Assuming the Performance efficiency will become 1 from the 5th month onwards and assuming that the
PV for the 3rd month is uniformly distributed across the month. The 3rd month is of 30 days and there
are no holidays.

EV at the end of the 4th month is $280,000. The PV of $280,000 should have been originally planned
between 2nd and 3rd month i.e. between $240,000 and $360,000. The work planned for the 3rd month
is equivalent to $120,000. There are 30 days and no holidays, it would mean that $4000 is required to be
performed on each day ($120,000/ 30 days).

We would have originally planned to complete $280,000 worth of projects in 2 months and 10 days. At
the end of the 2nd month, PV is $240,000. The balance of $40,000 should have been done in 10 days at
a rate of $4000 per day. However, we have earned $280,000 at the end of the 4th month. Basically, it
implies that from the original schedule, the project is going late by 1 month and 20 days. (4 month
minus 2 months and 10 days).

We have been given to understand that the performance efficiency from the 5th month onwards shall
become 1. This implies that the total project delay shall be limited to the extent of incurred as on the
end of the 4th month.

Adding the time delay of 1 month and 20 days to the original schedule of 12 months, the project shall be
completed in 13 months and 20 days.(12 months being the original Schedule Plus delay as on the review
date being at the end of the 4th month i.e. 1 month and 20 days)

Chapter E: Team Performance

a) Motivation Theories
Today, motivation is considered to be a very important aspect of human resource development. It is
interesting to know that till World War II motivation was not considered as an important aspect of
management.

What is motivation and how does it affect the project environment?

Motivation has been described in many ways. We all agree that people play a crucial role in making the
project a success. Broadly speaking we can say that motivation is the drive, the willingness, the desire
displayed by people to perform their work optimally. It involves people being satisfied at an economic,
social and psychological level so that they can perform their work productively.

Page 61 of 66
 PGCPM-MPM-003

There are many motivational theories that help the project manager to understand how to keep his
team motivated. A motivated team will be a high performing team. We are covering a few of the main
motivational theories here.

Maslow's Hierarchy of Needs Theory

In 1943, Abraham Maslow developed a concept of hierarchy of needs. A relatively simple concept, this
theory of needs centers on five basic human needs which, when fulfilled, will motivate the individual.
The order of fulfillment is essential, for Maslow states that one cannot ascend to the next level until the
previous level needs are fulfilled.

Maslow's Hierarchy of Needs theory is shown below:

The different levels of Maslow's Hierarchy of Needs from the lowest to the highest level (bottom to top)
are:

Physiological needs: These are the basic needs of survival such as Air, Water, Food, Shelter and Clothing.

The project manager has to make sure that the basic needs of food, shelter, clothing etc. of his
team members is satisfied so they can concentrate on their work.

Security & Safety needs: These needs cover Security, Stability, and Freedom from Threat of Physical
Harm and Pain.

This requires providing of proper job safety at workplace, friendly rules and policies, no sexual
harassment or fear of violence etc.

Social needs: This covers aspects like Love, Affection, Approval, Friends, Association and Social Status.

The project manager should ensure a friendly and participative work environment with good
interpersonal relationships among the team members. Can also organize group get-togethers,
picnics etc.

Page 62 of 66
 PGCPM-MPM-003

Recognition/Esteem needs: This covers needs such as Accomplishment, Respect, Attention, and
Appreciation.

The project manager allows team members to feel needed, take more project decisions and
increase their pride in their work by recognizes their efforts through some non monetary public
reward system like merit letters, pins, trophies etc.

Self Actualization needs: Self-fulfillment, Growth, Learning and development of own potential.

The team members looking to achieve higher goals can be given more challenging jobs that
require some specialized skills, creativity and responsibility.

Herzberg's Motivation and Hygiene Theory

Fredrick Herzberg developed another well-known theory on motivation. This theory deals with what
Herzberg refers to as Hygiene Factors that relate to the work environment and Motivating Factors that
relate to the actual work.

According to him both these Factors play a different role in motivating people as one helps to prevent
dissatisfaction while the other helps to keep people motivated.

Hygiene Factors are necessary to prevent dissatisfaction.

When Hygiene Factors are not maintained then people become unhappy and dissatisfied. Such factors
do not directly motivate people but are necessary to prevent dissatisfaction. However, their positive
impact in bringing about satisfaction is short term and temporary. For example, though money is
important giving more money helps to keep a person satisfied and happy but it's positive impact is short
term while less salary will make a person dissatisfied.

Motivators (Motivating Factors) are necessary to increase satisfaction.

The impact of Motivating Factors on people is more permanent and they help to keep persons
motivated and satisfied with their work.

Hygiene Factors cover aspects such as:

Administrative policies

Working conditions

Salary

Personal life

Status

Peer, superior and subordinate relationships

Page 63 of 66
 PGCPM-MPM-003

Security

Amount of supervision

Motivating Factors cover work aspects such as:

Giving more challenging and responsible assignments

Being provided with growth opportunities

More authority and accountability at work

Being given work that allows for more personal growth

Expectancy Theory

This theory was developed by Victor Vroom and addresses employees who believe that their efforts will
lead to better and more effective performance. They expect rewards for better performance and it is
the rewards that keep them happy and motivated when it meets their expectations.

The extent to which an individual becomes motivated will depend on the level of expectation they have
that their efforts will result in some desired outcome like rewards for good performance. This linkage
continues to motivate them to do well.

McGregor's Theory X and Y

Douglas McGregor, who came out with this theory said that most workers could be placed in two
categories - X and Y and it shows how managers are likely to deal with their subordinates.

Theory X says that the average worker is primarily motivated by money, dislikes working, is inherently
lazy, likes to avoid responsibility, needs a lot of supervision, etc.

The management style that accepts this type of theory is generally considered to exercise an
authoritarian style to decision making and uses a lot of rigid rules and regulations. This was the typical
style of management theory prior to World War II in most countries including USA and other European
countries.

Theory Y on the other hand assumes that workers are committed, creative, willing to do their job
without continuous supervision, interested in assuming responsibility and that they are more motivated
by Maslow's higher levels of needs. Theory Y relies on self-motivation and for workers to be more
involved in decision-making.

The management style followed is more open with less supervision. Managers give more responsibility
and opportunity for growth to their workers.

Page 64 of 66
 PGCPM-MPM-003

b) Conflict Resolution
In a project environment where pressures and tensions are high,
with strict deadlines and diverse groups of people working
together, often for the first time, conflicts are bound to arise.
Conflict management is the process through which the project
manager deals with these disagreements and disputes using
appropriate managerial techniques.

In conflict management there are two points of view. The traditional view holds that all conflicts are
bad; they are created by troublemakers and should be avoided at all costs. However, this view has
changed over the years and the modern view is that conflicts are inevitable in a project environment.
They are a result of constant changes in the society and inevitable. They should be dealt with
imaginatively and can actually be beneficial at times.

Project stakeholders have varying perceptions, aims, cultures, outlook, interests, values and skills and
knowledge. Conflicts often result from differences and pressures arising out of the need for such diverse
people/groups with varying goals, aims and attitudes who must work together.

A conflict can have a positive or a negative affect on the project. Conflict management is the art of
managing and resolving conflicts creatively so that any conflict has a positive rather than a negative
influence on the project.

The project manager is responsible for building and keeping the unity of the team. It is important that
they make it a point to deal with any conflict as soon as it arises. This is an important step in conflict
resolution as any unresolved conflict will fester and create disunity among the team members. A
balance has to be maintained between healthy and unhealthy competition.

Conflicts can arise due to issues related to technical differences, cost and schedule conflicts,
disagreements over personality and cultures, project priorities etc. Contracts are another big cause that
gives rise to conflicts in the project.

Blake and Mouton have proposed five key ways of resolving conflicts which are:

Withdrawing

Smoothing

Compromising

Confrontation/Problem solving

Forcing

Page 65 of 66
 PGCPM-MPM-003

Withdrawing This method involves retreating from or avoiding a potential or actual conflict by
ignoring it. Withdrawing could be used if the problem needs to be further studied. This is a passive
method to resolve a conflict that has a loose-loose outcome.

Smoothing Emphasizing areas of agreement rather than the areas of difference. This has a loose-loose
outcome.

Compromising Reaching for solutions that help to bring some degree of satisfaction to all parties. This
has a loose-loose outcome.

Confronting/Problem Solving Conflicts are approached as an issue to be solved by examining

alternatives. This approach requires a give-and-take attitude and open dialogue. This is considered as
the best way of solving conflicts and has a win-win outcome.

Forcing Exerts one viewpoint at the expense of others. Generally uses authority to exert this
viewpoint. This has a win-loose outcome.

The project manager must attempt to solve all conflicts as soon as they arise so that the team unity and
project progress is least disturbed.

Page 66 of 66