Lesson 4

Ch.3 Project Management Process

Pages 47 -62

Lesson objectives

1. To understand and be able to identify a Process

2. To understand each project management process group with its mapping to project management areas

3. To learn about criteria for selecting individual projects

Project Management Processes

• Application of skills, knowledge tools and techniques

• Applied to meet project objectives

Project Management

• Set of interrelated actions• To create a pre-specified service, result, product• Having input, tools and techniques, and the pre-

defined output.

Processes

Project Management Processes

• Initiation Process Group• Planning Process Group• Executing Process Group • Monitoring & Controlling Process Group• Closing Process Group

The five process groups

Common process interaction

Common process interaction

Project Information

• Collected during project execution

Data

• Data collected during execution is analyzed, processed and transformed into information during M/C processes

• Information is distributed as reports

Information

Project Information

• Raw data, measurement related to the actual work• E.g: actual cost, % of work done, number of defects, actual

duration, etc

Work performance data

• Data collected through various controlling processes analyzed in context across various knowledge areas

• E.g: status of deliverables, estimates to complete, etc.

Work performance information

• The physical or electronic representation of WPI • E.g: Reports for decision makings

Work performance report

• Various economic criteria are used for selecting one project over another

• The criteria are as follow:1. Benefit Cost Ratio2. Cash flow3. Internal Rate of Return 4. Present Value5. Return on Investment 6. Opportunity Cost

Project Selection Criteria

• The value obtained by dividing the benefit by the cost.

• The greater the value, the more attractive the project is.

• For example: Project A costs 40,000 and benefits 80,000 and Project B cost 20,000 and benefits 30,000.

• You choose project A over project B

Project Selection Criteria:Benefit Cost Ratio

• Cash flow refers to both the money coming in and the money going out of an organization.

• A single project with positive cash flow is undertaken

• When there are many projects to choose from, the project with higher cash flow is selected.

Project Selection Criteria:Cash flow

• Internal Return Rate looks at the cost of the project as the capital investment and translates the profit into the interest rate over the life of that investment.

• Calculations for IRR are not part of this certification.

• The greater the value for IRR, the more beneficial the project is.

Project Selection Criteria:Internal Rate of Return

• The value of money in future is called PV• When calculating PV, inflation rates are considered• NPV means the PV of cash inflows minus cash

outflows in future• PV tell us the value of our project’s product at the

time of selecting the project • For a project to be worth-while economically, the

NPV must be positive. • When selecting between various projects, you

choose the one with higher NPV values

Project Selection Criteria:PV and NPV

Example, Assume you invest 300,000 today to build a house, which will be completed and sold after three years for 500,000. Also assume that real estate that is worth 400,000 today will be worth 500,000 after three years. In this case PV = 400,000, and NPV = 400,000 – 300,00 = 100,000

Project Selection Criteria:PV and NPV

• The ROI is the percentage profit from the project.

• For example, if you spend 400,000 on the project, and the benefit for the first year is 500,000, then ROI equals (500,000-400,000)/400,000, which equals 25%.

• You select a project with higher ROI

Project Selection Criteria:Return on Investment

• Opportunity Cost refers to selecting a project over another due to the scarcity of resources.

Questions:There are three projects Project A: 30,000 NPVProject B: 40,000 NPVProject C: 23,000 NPVYou choose project B, what is the opportunity cost?The answer should be: 30,000

Project Selection Criteria:Opportunity Cost

1. Question: Which of the following is NOT a characteristic of a project?

2. Constrained by limited resources3. Planned, executed, and controlled4. Creates a unique product or service5. Ongoing and repetitive

Correct choice 4

Justification:A project is a temporary endeavor undertaken to create a unique product, service, or result. The temporary nature of projects indicates that a project has a definite beginning and end.

Question: In a kick-off meeting for your project, you provided information to your team members about the different process groups to be followed in the project. According to PMI, which are the project management process groups?

1. Conceptualizing, Initiating, Executing, Monitoring and Controlling, and Closing

2. Initiating, Planning, Executing, Monitoring and Controlling, and Closing

3. Initiating, Verifying, Executing, Monitoring and Controlling, and Closing

4. Initiating, Planning, Executing, Controlling, and Administrative Closure

Correct choice 2

Question: You are managing the release of a new drug in the market. Your role is that of a:

1. Functional Manager, because you have good functional knowledge of the pharmaceutical industry

2. Project Manager, because you are creating a unique product within specific time schedules

3. Operations Manager, because you have to do several repetitive tasks

4. Program Manager, because you have to manage several projects to do your job effectively

Correct choice 2

Justification: Every project creates a unique product, service, or result. A project can create a service or a capability to perform a service (e.g., a business function that supports production or distribution).

Question: You are working in the Project Management Office (PMO) of your organization. Your job responsibility is to:

1. Manage the operational activities in the company2. Manage human resource and risk management issues for

individual projects3. Provide support functions to project managers in the form

of training, providing software, standardizing policies, etc.4. Provide subject matter expertise in the functional areas of

the project

Correct answer 3

Justification: A project management office (PMO) is a management structure that standardizes the project-related governance processes and facilitates the sharing of resources, methodologies, tools, and techniques. The responsibilities of a PMO can range from providing project management support functions to actually being responsible for the direct management of one or more projects.

Question: Which of the following statements is NOT true about a project life cycle?

1. All project life cycles are usually identical.2. The level of risk is highest at the start of the project and

decreases as the project progresses.3. The ability of the stakeholders to influence the final

characteristics is highest at the start and gets progressively lower as the project continues.

4. Cost and staffing requirements usually peak during the intermediate phases.

Correct choice 1

Justification: Although many projects may have similar phase names with similar deliverables, few are identical.

Further, look out for absolute statements with terms like "All", "None", "Never", "Always", "Must", etc. Such options should be carefully evaluated because they may be incorrect.

Question: Almost all projects are planned and implemented in a social, economic, or environmental context, and have intended and unintended positive or negative impacts. In this context, which of the following statements about Enterprise Environmental Factors is NOT true?

1. Neither promote nor hold back the project management processes

2. May restrict the project management processes3. May promote the project management processes4. May either promote or hold back the project management

processes.

Correct choice 1

Justification: Enterprise environmental factors may enhance or constrain project management options, and may have a positive or negative influence on the outcome.

Question: In your company, the project manager shares responsibility with the functional manager to assign priorities and directs the team members of the project. In this case, it is NOT the responsibility of the project manager to:

1. Plan resources2. Manage cost and budget3. Carry out performance appraisal of project team4. Define tasks

Correct choice: 3

Justification: In a matrix organization, the project manager shares responsibility with the functional managers for assigning priorities and for directing the work of persons assigned to the project.

PMstudy.com comments: In most matrix organizational structures, personnel performance management is not the responsibility of the project manager; this task is usually done by the functional manager. However, a project manager is always responsible for Plan resources (Option 1), Manage cost and budget (Option 2), and Define tasks (Option 4).

Question: The CEO of ABC bank is concerned about the increase in "call answering time" in the bank`s call center (i.e., customers have to wait longer for their calls to be answered by an operator). She wants to improve call center processes to decrease the "call answering time." What should the CEO do to address the situation?

1. Set up a PMO2. Assign a very competent project manager to manage

activities in the call center3. Move to a projectized organizational structure4. Continue with a functional organizational structure, and

try to streamline activities

Correct choice: 4Justification: This is an operation and not a project (projects are temporary and unique, but call center activities are ongoing and repetitive).

In this context, the CEO should not try to handle this issue as a project and do none of the activities mentioned in option 1, option 2, or option 3.

Since this is an operation, option 4 provides the best course of action for the CEO to address this situation, i.e., continue with a functional organizational structure (which is recommended for managing operations) and try to streamline activities.

Question: As a project manager, you realize that managing project stakeholder expectations is an important priority. Which statement on project stakeholders is NOT correct?

1. Negative stakeholders must be ignored if the project has to be successfully completed.

2. Stakeholders have varying levels of responsibility and authority when participating on a project and these can change over the course of the project life cycle.

3. Some key stakeholders include project manager, operations management, project team, customers, and sponsor.

4. Stakeholder expectations may be difficult to manage, because stakeholders often have very different or conflicting objectives.

Correct answer 1

Justification:In the case of stakeholders with positive expectations for the project, their interests are best served by making the project successful.... In contrast, the interests of negatively affected stakeholders are served by impeding the project`s progress. Overlooking negative stakeholders interest can result in an increased likelihood of failures, delays, or other negative consequences to the project.