Project Management in PracticeOutlineWhat are projects?Characteristics of ProjectsPMI DefinitionWhy Projects?Three Goals / ObjectivesProjects and OperationsExamples of Projects and GoalsAbilities Needed For Effective Project ManagementProject StakeholdersProject Life CycleProject Life CycleProject Life CycleKnowledge Areas & Life CycleSlide 16A Common Project Life CycleA Different Project Life CycleImplications of Project Life CyclesSelecting ProjectsSome Nonnumeric Selection MethodsNumeric Selection MethodsPayback PeriodPayback Period ExampleDiscounted Cash FlowDiscounted Cash FlowDiscounted Cash FlowRisk & UncertaintiesRisk & UncertaintiesRisk & UncertaintiesRisk & UncertaintiesRisk & UncertaintiesRisk & UncertaintiesThe Weighted Scoring ModelWeighted Factor Scoring MethodSlide 36Mix of ProjectsProject Selection ExerciseProject Management in Practice 1-1The World of Project Management1-2• Projects and their characteristics.• Project life cycle.• Selection methods.• Exercise.Homework: 21, 22, 25, 26Outline1-3What are projects?Characteristics of Projects     1-4PMI Definition“A project is a unique temporary endeavor, with a set beginning and end ”PMI defines project management as “the application of knowledge, skills, tools and techniques to a broad range of activities in order to meet the requirements of a particular project” 1-5Why Projects?Why organize an activity or job as a project?It allows you to better structure and organize the tasks that need to be performedWell developed approaches and tools are available for managing projectsEasy-to-use software is available for scheduling and budgeting projectsExperience has shown that the work/job can be done faster, cheaper, and better when managed as a project1-6Three Goals / Objectives1-7Projects and Operations1-8Projects OperationsExamples of Projects and Goals•What are some examples of projects you’ve worked on?–What were the desired deliverables/outcomes?–What was the project time frame?–What was the biggest challenge during the project?–Which goals were more important?–Were all goals fully met?1-9Abilities Needed For Effective Project Management     1-10Project Stakeholders1-11Project Life CycleThere are many patterns that project life cycles can follow, but the following chart depicts a fairly common pattern:slow startquick momentumslow finish1-12InitiateInitiatePlanPlanExecuteExecuteMonitorAndControlMonitorAndControlCloseCloseStages or Process Groups in the Project Life CycleProject Life Cycle1-131-14Project Life CycleKnowledge Areas & Life Cycle1-151-16Chapter 07Chapter 04Chapter 03Chapter 08Chapter 06Chapter 05Chapter 02Chapter 04A Common Project Life Cycle1-17Time0100Slow startQuick momentumSlow finish% Project completionA Different Project Life Cycle1-18Time0100% Project completionImplications of Project Life CyclesProject life cycle shape will affect the timing of resource and funding needs.Understanding the general project life cycle may help the stakeholders better understand and accept the current status of the project.Understanding the general project life cycle may also help the PM make better goal tradeoff decisions at particular times during the project.1-19Selecting ProjectsWho decides which projects will be undertaken by an organization?What are some examples of criteria that might be used in selecting projects?Why should the PM be made aware of why a project was selected?1-20Some Nonnumeric Selection MethodsSacred Cow Operating/Competitive NecessityComparative Benefits1-21Numeric Selection MethodsFinancial Assessment Methods»payback period»discounted cash flowScoring Methods»Unweighted factor method»weighted factor scoring method1-22Payback Period1-23InflowsCash Net AnnualInvestment Fixed InitialPayback Period ExampleExpected project costs are $700,000Expected returns are $200,000 per year1-24Discounted Cash Flow1-25ntttkF10)1(I- (project) NPVwhere I0 = the initial investment Ft = the net cash flow in period t k = the required rate of return or hurdle rateDiscounted Cash Flow1-26€ NPV (project) = [NetFlowt][DFtt=1n∑]€ DFt = 1(1 +hurdle rate +inflatation rate)tDiscounted Cash FlowInitial cost = $700,000; 4-year annual cash flow = $200,000; required rate of return = 15%NPV = -700,000 + 200,000/(1.15)1 + 200,000/(1.15)2 + 200,000/(1.15)3 + 200,000/(1.15)4NPV = -700,000 + 173,913 + 151,229 + 131,503 + 114,351=-129,0041-27Risk & Uncertainties1-28Risk & Uncertainties1-29Risk & Uncertainties1-30Outcome Prob Pay3H 1002H 751H 100H 0 EVRisk & Uncertainties1-31Risk & Uncertainties1-32Distribution MeansRisk & Uncertainties1-33The Weighted Scoring Model1-34njjijiwsS1where Si = the total score of the ith project sij = the score of the ith project on the jth criterion wj = the weight or importance of the jth criterionWeighted Factor Scoring Method1-35Factor Wt. ProjectAProjectBProjectCCost .4 2 4 3Risk .3 4 3 1Suitable .1 4 2 5Skills .2 2 2 5Wtd. Score 1.0 2.8 3.1 3.0Example: 3 projects, 4 factors, 1-5 (5=best)What uncertainties are encountered in project management? Can they be eliminated?     1-36Mix of ProjectsThe mix of projects undertaken should support the firm’s corporate strategy.•Derivative projects—small improvements•Platform projects—develop new line of products using existing technology•Breakthrough projects—new generation of products using new technology•R&D projects—develop new knowledge1-37Project Selection ExerciseQuality Fleet Ads case•Divide into small groups•Read case (5 min.)•Assignment: (25 min.)–Discuss the advantages of each project–Discuss the cost and budget implications–Rank the projects from most important to least –Which set of projects do you recommend?–What is your proposed budget?