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Understanding Project Management Basics

Chapter 5 discusses project management, defining projects as a series of related jobs aimed at achieving major outputs over time. It outlines various project types, organizational structures (pure, functional, matrix), and the importance of tools like earned value management for evaluating project progress. Additionally, it emphasizes the significance of organizing project tasks through work breakdown structures and the use of visual management tools such as Gantt charts.

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0% found this document useful (0 votes)

15 views93 pages

Understanding Project Management Basics

Uploaded by

winniele2308

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

Chapter 5

Projects

April 18, 2025

Learning Objectives

1. Explain what projects are and

how projects are organized.
2. Evaluate projects using earned
value management.
3. Analyze projects using
network-planning models.
2
What is Project Management?
⚫ The management aspects of project management are as
important as the technical aspects.
⚫ For projects, the key resource is often our employees’ time.
⚫ Human resources are often the most expensive, and those
people involved in projects that are critical to the success of
the firm are often the most valuable managers, consultants,
and engineers.
⚫ There are different types of projects, ranging from the
development of totally new products, revisions to old
products, new marketing plans, and a vast array of projects
for better serving customers and reducing costs.
Project of Developing a New
Product – a energy-saving car

4
Revision to Old Product
iPhone – enlarge size, expanded
memory, higher picture resolution

5
Better Customer Service Digital
Payment System

6
Reduce
Cost
Ikea’s
furniture

7
Definition of Project
What is a project?
⚫A project is defined as a series of
related jobs, usually directed toward
some major output and requiring a
significant period of time to perform.
Project Management
What is project management?
⚫ Project management is defined as
planning, directing, and controlling
resources (people, equipment, material,
etc.) to meet the technical, cost, and time
constraints of the project..
Types of Development Projects

Exhibit 5.1
Product Change
Add New Core Product
Traditional Rice Cooker to New Air Fryer

Instructor Slides 11
Product Change
Addition to Product Family
Rice Cooker for Single and Small Family

12
Product Change
Product Enhancement
All Purpose Cooker

13
Process Change
New Core Process – automatic
process of making bread from dough

14
Process Change
Process Upgrade – add various flavor
to the bread

Instructor Slides 15
Process Change
New Machine – Bread Maker –
dough is made by machine

16
Research and Development
New Core Technology
Robot in Amazon Warehouse to fetch
the product

17
Research and Development
Technology Upgrade
Robot can pack the package

18
Research and Development
New Software – from fetching to
packing, faster

19
Alliance and Partnership
Outsource Major Activity
Online shopping company outsources
product delivery

20
Alliance and Partnership
New Partner

21
Alliance and Partnership
Select Carrier

22
Organizing the Project Team
• Before the project starts, senior
managers must decide which of three
organizational structures will be used to
tie the project to the parent company:
1. Pure Project
2. Functional Project
3. Matrix Project

23
1. Pure Project
• When innovation and speed are the
priorities, a small project-focused team
is used.
• In this case, team members are
assigned solely to the team for the
duration of the project.
• The pure project structure is a
structure for organizing project where
a self-contained team works full time
on the project.
24
Pure Project Organization
Chief Executive
Officer

Project One Project Two Project Three

Manager Manager Manager

Staff Staff Staff

25
Pure Project
Advantages Disadvantages
⚫ The project manager has full ⚫ Duplication of resources.
authority over the project. Equipment and people are not
⚫ Team members report to one shared across projects.
boss. ⚫ Organizational goals and
⚫ Lines of communication are policies are ignored, as team
shorted. Decisions are made members are often both
quickly. physically and psychologically
⚫ Team pride, motivation, and removed from headquarters.
commitment are high. ⚫ Team members have no
functional area "home“, they
often worry about “life after
the project” and so project
termination is frequently
delayed. 26
2. Functional Project
• At the other end of the project
organization spectrum is the
functional project.
• The project is done within a
functional division (department).

27
Functional Project Structure
Functional Project
Advantages Disadvantages
⚫ A team member can work on ⚫ Aspects of the project that are
several projects not directly related to the
⚫ Technical expertise is functional area get short-
maintained within the changed.
functional area even if ⚫ The motivation of team
individuals leave the project or members is often weak.
organization. ⚫ The needs of the client are
⚫ The functional area is a home secondary and are responded
after the project is completed. too slowly.
⚫ A critical mass of specialized
functional-area experts creates
synergistic solutions to a
project’s technical problems.
29
3. Matrix Project
• The matrix project is a structure that
blends the functional and pure project
structures.
• Each project uses people from different
functional areas.
• A dedicated project manager decides
what tasks need to be performed and
when, but the functional managers
control which people to use.
30
Matrix Project Structure
Matrix Project
Advantages Disadvantages
⚫ Communication between ⚫ There are two bosses. Often,
functional divisions is enhanced. the functional manager will be
⚫ A project manager is held listened to before the project
responsible for successful manager.
completion of the project.
⚫ It is doomed to failure unless
⚫ The duplication of resources is
the project manager has
minimized.
⚫ Team members have a functional strong negotiating skills.
“home” after project completion, ⚫ Suboptimization is a danger, as
so they have fewer life-after- project manager hoard
project concerns than if they resources for their own
were a pure project organization. projects, thus harming other
⚫ Policies of the parent projects.
organization are followed. This
increases support for the project.
32
Review Question 1
What is a project?
A. A project is a series of activities that are
done in one day
B. A project is a series of related jobs usually
directed toward some major output and
requiring a significant period of time to
perform
C. A project is one single task that can be done
in one day.
D. A project is the money donated to business
organization during its liquidation period
33
Review Question 1
What is a project?
A. A project is a series of activities that are
done in one day
B. A project is a series of related jobs usually
directed toward some major output and
requiring a significant period of time to
perform
C. A project is one single task that can be done
in one day.
D. A project is the money donated to business
organization during its liquidation period
34
Review Question 2
What is project management?
A. Arranging meetings every month
B. Organizing study programs among the
employees
C. Planning, directing, and controlling resources
to meet the technical, cost, and time
constraints of the project
D. Evaluating employee performance on the
annual instead of monthly basis

35
Review Question 2
What is project management?
A. Arranging meetings every month
B. Organizing study programs among the
employees
C. Planning, directing, and controlling resources
to meet the technical, cost, and time
constraints of the project
D. Evaluating employee performance on the
annual instead of monthly basis

36
Review Question 3
What is not a type of development
project?
A. Product change
B. Process change
C. New core technology
D. Change of company’s address

37
Review Question 3
What is not a type of development
project?
A. Product change
B. Process change
C. New core technology
D. Change of company’s address

38
Review Question 4

What is NOT a product change?

A. Develop new core product
B. Addition to product family
C. Have another project leader
[Link] enhancement

39
Review Question 4

What is NOT a product change?

A. Develop new core product
B. Addition to product family
C. Have another project leader
[Link] enhancement

40
Review Question 5
What is NOT a process change?
A. Develop new core process
B. Start a process upgrade
C. Add new machine
D. Find new customers

41
Review Question 5
What is NOT a process change?
A. Develop new core process
B. Start a process upgrade
C. Add new machine
D. Find new customers

42
Review Question 6

What is NOT a type of project

structure?
A. Pure project
B. Functional project
C. Complicated project
D. Matrix project

43
Review Question 6

What is NOT a type of project

structure?
A. Pure project
B. Functional project
C. Complicated project
D. Matrix project

44
Review Question 7

What is NOT a process change?

A. Develop new core process
B. Start a process upgrade
C. Add new machine
D. Find new customers

45
Review Question 7

What is NOT a process change?

A. Develop new core process
B. Start a process upgrade
C. Add new machine
D. Find new customers

46
Organizing Project Tasks
• A project starts as a statement of work
(SOW)
◆A written description of the objectives to
be achieved.
◆Brief statement of work to be done.
◆Proposed schedule (start and completion
date).
• Task – a further subdivision of a project –
usually not longer than several months and
performed by a single group or organization
Statement of Work – sample
工作說明書
⚫ Statement of Work for hardware and software upgrade
of the company’s managers and staff members.
⚫ This project is led by the technology team of the
company. The objective is to install new desktop
computers and upgrade the software used by all 50
staff members of the company from Microsoft office
software 10 to 11.
⚫ This project is scheduled to begin on May 1, 2023 and
completed on October 31, 2023. The deadline for each
department is as follows:
⚫ Marketing department - June 30, 2023
⚫ Sales department – July 31, 2023
⚫ Customer Service Department – August 31, 2023
⚫ Business Analytics Department – September 30, 2023
⚫ Accounting Department – October 31, 2023
48
Organizing Project Tasks (2)
• Project Milestone
• Specific events in the life of the project.
• Work Breakdown Structure (WBS)
• Defines the hierarchy of project tasks,
subtasks, and work packages
• Activities
• Pieces of work within a project that
consume time. The completion of all the
activities of a project marks the end of the
project.
Work Breakdown Structure -
Example Exhibit 5.2

Overview

Details
Work Breakdown Structure
• The work breakdown structure (WBS) defines the
hierarchy of project tasks, subtasks.
• Completion of one of more subtasks results in the
completion of a subtask.
• The WBS is important in organizing a project because it
breaks the project down into manageable pieces.
• The number of levels depend on the project:
➢The level at which a single individual or organization can be
assigned responsibility and accountability for accomplishing
the tasks.
➢The level at which budget and cost data will be collected
during the project.
Corporate Event Party
52
Work Breakdown Structure

Event Planning

Planning Catering Area Guest Entertainment

Decide catering Tables and Invite

Decide Time Invitation
company chairs entertainers

Decide Venue Menu Decoration Guest list Rehearsal

Car
Equipment
arrangement

53
Review Question 1
What is a work breakdown structure?
A. The hierarchy of departments and
managers
B. The hierarchy of product lines and
individual product
C. The hierarchy of investment by level of
risk
D. The hierarchy of project tasks,
subtasks, responsible person(s)
54
Review Question 2
What is a good way of completing a
project?
A. Finish the entire project by one person
B. Break down the project into tasks and
subtasks and work piece by piece
C. Increase the resources without budget
D. Eliminate communication between
various departments

55
Learning Objectives

1. Explain what projects are and

how projects are organized.
2. Evaluate projects using
earned value management.
3. Analyze projects using
network-planning models.
56
Managing Projects
• Charts and various types of standard forms are useful
because their visual presentation are easily
understood. Examples are:
A. Gantt chart, sometimes referred to as a bar chart,
showing both the amount of time involved and
the sequence in which activities can be
performed.
B. Total program cost breakdown
C. Divisional breakdown of costs and labor hours
D. Cost and performance tracking schedule
E. Bar/Milestone chart
Exhibit 5.4

Managing Projects

⚫ Charts provide an easily

understood visual
presentation
⚫ Software can be used to
create the charts
⚫ Gantt chart – shows in a
graphic manner the
amount of time involved
and the sequence of
activities. Often referred
to as a bar chart.
B. Total Program Costs Breakdown
59
C. Divisional Breakdown of
60
Costs and Labor Hours
D. Cost and Performance
61
Tracking Schedule
62
E. Bar/Milestone Chart
Review Question 1
Which one of the following is NOT a tool
to manage projects?
A. Gantt chart
B. Total program cost breakdown
C. Employee training program
D. Cost and performance tracking
schedule

63
Review Question 2
Why is project management important?
[Link] managers may have a number of
projects on hand, so it is important to
allocate the resources among them.
[Link] managers must do the same things
over and over again
[Link] customers cannot find products to
buy
[Link] managers do not have to report to
the chief executive officer of the company.
64
Review Question 3
What cost is usually NOT considered in
the project management?
A. Labor costs
B. Materials costs
C. Overhead (rent, utility, fixed
employee salaries, etc.)
D. Investment income

65
Earned Value Management (EVM)
⚫ Earned value management (EVM) is a
technique for measuring project progress in
an objective manner.
⚫ Has the ability to combine measurements of
scope, schedule, and cost in a project
⚫ Provides a method for evaluating the relative
success of a project at a point in time
Earned Value Management
– Essential Features

Predefined earning
A project plan that
or costing rules to
identifies the A valuation of each
quantify the
activities to be activity work
accomplishment of
accomplished
work
Earned Value Management Charts Exhibit 5.5

Why we need EVM?

Budgeted costs (scheduled) and actual costs Budgeted costs of scheduled and performed work

Budgeted cost (work performed) and actual costs All budgeted costs and actual costs
Project Tracking without EVM
Exhibit 5.5

• A simple comparison of just costs versus budget does not tell

the whole story

Without a means of quantifying

how much work has been
accomplished, costs are the only
available information. After week 5, the
project appears
to be under
Project appears to be budget.
over budget in weeks
1 – 4. Actual costs
exceed budget.
Project Tracking with EVM
• With pre-defined methods of quantifying the
quantity of work accomplished, EVM provides much
Exhibit 5.5
more information.

EVM provides
information about
performance according
to the schedule.

After week 6, the

Project is ahead project has fallen
of schedule in behind schedule.
weeks 1 – 5.
Project Tracking with EVM (2)
• With pre-defined methods of quantifying the quantity
of work accomplished, EVM provides much more Exhibit 5.5
information.

Project is under
budget in terms of
actual work
performed
Project Tracking with EVM (3)
• A combined view gives an overview of project performance in
terms of the original plan. Exhibit 5.5
Earned Value Management – Example 5.1
Red color: actual performance
Blue color: budget
At time “X”, Activity A is 100% complete
(budgeted cost was $18K).

At time “X”, Activity B is 80% complete

(budgeted cost was $10K).

At time “X”, Activity C is 70% complete

(budgeted cost was $20K). 80% of this
activity should be complete by now.

At time “X”, Activity D is 0% complete

(budgeted cost was $40K). 15% of this
activity should be complete by now.
Earned Value Management Example
• From the diagram, the budgeted cost of all the project
work is the following: Activity A - $18K, B - $10K, C -
$20K, D - $40K.
• This is the cost of each activity when it is 100 percent
completed.
The project is currently at day X According to the diagram.
1. 100 percent of activity A should be completed, and it is
2. 100 percent of activity B should be completed, but only
80 percent is
3. 80 percent of activity C should be completed, but only
70 percent is
4. 15 percent of activity D should be finished, but it has
not started.
Earned Value Management Example

Step 1: Calculate the Budgeted Cost of Work

Scheduled (BCWS)

Step 2: Calculate the Budgeted Cost of Work

Performed (BCWP)

Step 3: Obtain the Actual Cost (AC) of the

work performed

Step 4: Calculate key performance measures

for the project
75
Earned Value Management Example
Step 1: Calculate the Budgeted Cost of Work Scheduled (BCWS)
given the current state of the project. This is the value or cost of the
project that is expected, given the project is at time X:

⚫ Activity A – 100% of $18K = $18K

⚫ Activity B – 100% of $10K = $10K
⚫ Activity C – 80% of $20K = $16K
⚫ Activity D – 15% of $40K = $6K
⚫ BCWS = $18K + $10K + $16K + $6K = $50K
Earned Value Management Example
Step 2: Calculate the Budgeted Cost of Work Performed (BCWP)
given the current state of the project. This is the actual value or
cost of the project to date, given the project is at time X:

⚫ Activity A – 100% of $18K = $18K

⚫ Activity B – 80% of $10K = $8K
⚫ Activity C – 70% of $20K = $14K
⚫ Activity D – 0% of $40K = $0K
⚫ BCWP = $18K + $8K + $14K + $0K = $40K
Earned Value Management Example

Step 3:
⚫ Obtain the Actual Cost (AC) of the
work performed.
⚫ This would need to be obtained from
accounting records for the project.
⚫ Assume that the actual cost for this
project to date is $45K.
AC = $45K
Earned Value Management Example
Step 4: Calculate key performance measures
for the project:
• Schedule Variance: This is the difference
between the Budgeted Cost of Work
Performed (BCWP) and the Budgeted Cost of
Work Schedule (BCWS) (step 1 and 2)
➢ Schedule Variance = BCWP – BCWS
➢ Schedule Variance = $40K - $50 K = – $10K
Earned Value Management Example
Performance Measures

Schedule Variance: 𝑺𝑽 = 𝑩𝑪𝑾𝑷 − 𝑩𝑪𝑾𝑺 = $40𝐾 − $50𝐾 = −$10𝐾

𝑩𝑪𝑾𝑷 $40𝐾
Schedule Performance Index: 𝑺𝑷𝑰 = = = 0.8
𝑩𝑪𝑾𝑺 $50𝐾

Cost Variance: 𝑪𝑽 = 𝑩𝑪𝑾𝑷 − 𝑨𝑪 = $40𝐾 − $45𝐾 = −$5𝐾

Actual cost of
𝑩𝑪𝑾𝑷 $40𝐾
Cost Performance Index: 𝑪𝑷𝑰 = = = 0.89 $45K obtained
𝑨𝑪 $45𝐾 from accounting
For performance indices:
records
CPI < 1 means actual costs are higher than planned
CPI = 1 means actual costs are exactly as planned
CPI > 1 means actual costs are lower than planned
Review Question 1
What is earned value management (EVM)?
A. a technique for measuring profitability of
company.
B. a technique for measuring project
progress at a point in time.
C. a technique for measuring cost per unit in
the production
D. a technique for measuring customer
satisfaction.
81
Review Question 2
ABC Company has a project which is scheduled to start on January 1
and end on December 31. ABC Company would like to evaluate the
project process on June 30. The budget for the entire project is
$100,000. The project is 40% complete. The actual cost is $45,000.
The project work is divided equally across 12 months.
time x