Project Management Fundamentals: Key Concepts and Methodology

Project Management

Fundamentals

KEY CONCEPTS AND METHODOLOGY

SECOND EDITION

Project Management

Fundamentals

KEY CONCEPTS AND METHODOLOGY

SECOND EDITION

Gregory T. Haugan PhD, PMP

8230 Leesburg Pike, Suite 800

Vienna, Virginia 22182

Phone: (703) 790-9595

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Copyright © 2010 by Management Concepts, Inc.

All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by an information storage and retrieval system, without permission in writing from the publisher, except for brief quotations in review articles.

PMI, PMP, Program Management Professional (PgMP), CAPM, OPM3, OPM3 ProductSuite, PMI Certified OPM3 Assessor, PMI Certified OPM3 Consultant, PMI global standards, and PMI-ISSIG are registered marks of the Project Management Institute, Inc.

Printed in the United States of America

Library of Congress Cataloging-in-Publication Data

Haugan, Gregory T., 1931–

   Project management fundamentals: key concepts and

   methodology/Gregory T. Haugan. — 2nd ed.

      p. cm.

   ISBN 978-1-56726-281-0

      1. Project management. I. Title.

HD69.P75H3774 2010

658.4’04—dc22

2010025895

10   9   8   7   6   5   4   3   2   1

About the Author

Gregory T. Haugan, PhD, PMP, is the owner of GLH Incorporated and has worked for the company for 25 years. The company specializes in proposal preparation and the use of the work breakdown structure (WBS) and project management methodology. Dr. Haugan has more than 40 years of experience as a project manager, project management advisor, and government and private sector official in the planning, scheduling, management, and operation of projects of all sizes.

Dr. Haugan is an expert in the application and implementation of project management systems. He participated in the early development of WBS and C/SCSC (earned value) concepts at the Department of Defense and in the initial development of PERT cost software. He was the Martin Marietta representative on the Joint Army Navy NASA Committee developing the initial C/SCSC concepts. He is particularly expert in the areas of scope management, cost management, and schedule management; in setting up new projects; and in preparing proposals.

Dr. Haugan received his PhD from the American University, his MBA from St. Louis University, and his BSME from the Illinois Institute of Technology.

To my wife, Susan, for all her help, love, and support.

Contents

Preface

Acknowledgments

PART 1: Introduction and Overview

The Project Management Body of Knowledge

Key Concepts of Project Management

Key Terms

The Basic Project Management Process

Related Concepts

PART 2: The Project Management Methodology

A. Initiating Stage

Step 1. Establish Project Objectives

1.1. Develop the Statement of Objectives

1.2. Define the Deliverables and Their Requirements

1.3. Develop the Project Charter

B. Planning Stage

Step 2. Define the Work

2.1. Develop the Work Breakdown Structure

2.2. Prepare a Statement of Work

2.3. Prepare the Specification

Step 3. Plan the Work

3.1. Define Activities and Activity Durations

3.2. Develop a Logic Network and Schedule

3.3. Assign and Schedule Resources and Costs

3.4. Develop the Cost Estimate

3.5. Establish Checkpoints and Performance Measures

3.6. Establish Project Baselines

3.7. Develop the Project Plan

3.8. Approve the Project Plan

C. Executing Stage

Step 4. Perform the Work

4.1. Budget and Authorize the Work

4.2. Add Staff Resources

4.3. Produce Results

4.4. Accommodate Change Requests

Step 5. Communicate and Coordinate the Work

5.1. Coordinate the Work

5.2. Prepare Progress Reports

5.3. Hold Project Reviews

D. Controlling Stage

Step 6. Track Actual Performance

6.1. Identify Data and Data Sources/Develop Data Collection Systems

6.2. Collect and Record the Data

Step 7. Analyze Project Progress

7.1. Identify Variances from the Baseline, and Determine Trends

7.2. Perform Analyses, and Determine Whether Corrective Action Is Needed

Step 8. Initiate Corrective Action

8.1. Identify Action Items

8.2. Facilitate Corrective Action

8.3. Reach a Resolution

Step 9. Incorporate Changes and Replan as Required

9.1. Manage Change

9.2. Perform Routine Replanning

9.3. Renegotiate Scope as Necessary

E. Closeout Stage

Step 10. Complete the Project

10.1. Prepare a Closeout Plan and Schedule

10.2. Get Customer Agreement, and Notify the Team

10.3. Archive Project Data

10.4. Prepare a Lessons Learned Document

10.5. Bill the Customer

PART 3: Applying the Methodology

Start-Up Questions—Step 0

Applying the Methodology to the Scenarios

Scenario 1. Direct Assignment from Supervisor or Sponsor

Scenario 1, Step 0. Project Phase in the Life Cycle

Scenario 1, Step 1. Establish Project Objectives

Scenario 1, Step 2. Define the Work

Scenario 1, Step 3. Plan the Work

Scenario 2. Direct Assignment from an Organization You Support

Scenario 2, Step 0. Project Phase in the Life Cycle

Scenario 2, Step 1. Establish Project Objectives

Scenario 3. Project Manager—Outsourcing

Scenario 3, Step 0. Project Phase in the Life Cycle

Scenario 3, Step 1. Establish Project Objectives

Scenario 3, Step 2. Define the Work

Scenario 3, Step 3. Plan the Work

Scenario 3, Step 4. Perform the Work

Scenario 3, Step 5. Communicate and Coordinate the Work

Scenario 3, Step 6. Track Actual Performance

Scenario 3, Step 7. Analyze Project Progress

Scenario 3, Step 8. Initiate Corrective Action

Scenario 3, Step 9. Incorporate Changes and Replan as Required

Scenario 3, Step 10. Complete the Project

Scenario 4. Respond to a Solicitation

Scenario 4, Step 0. Project Phase in the Life Cycle

Scenario 4, Step 1. Establish Project Objectives

Scenario 4, Step 2. Define the Work

Scenario 4, Step 3. Plan the Work

Scenario 5. Perform to a Contract

Scenario 5, Step 0. Project Phase in the Life Cycle

Scenario 5, Step 1. Establish Project Objectives, Step 2. Define the Work, and Step 3. Plan the Work

Scenario 6. Starting a Totally New Program

Scenario 6, Step 0. Project Phase in the Life Cycle

Scenario 6, Step 1. Establish Project Objectives

Scenario 6, Step 2. Define the Work

Scenario 6, Step 3. Plan the Work

Scenario 7: Take Over an Ongoing Project

Scenario 8: Using Agile Project Management

Scenario 8, Step 0. Project Phase in the Life Cycle

Scenario 8, Step 1. Establish Project Objectives

Scenario 8, Step 2. Define the Work, and Step 3. Plan the Work

Scenario 8, Step 4. Perform the Work

PART 4: Environmental and Facilitating Elements

Environmental Elements

Management Support

Project Management Software

Procedures and Directives

Project Management Maturity

Facilitating Elements

Human Resource Management

Human Resource Management Process

Organizational Structures

Project Participants’ Roles and Responsibilities

Risk Management

Definitions

Risk Management Process

Communications Management

Communications Management Process

Need for Communication and Coordination

Principles of Coordination

Project Procurement Management

Configuration Management

PART 5: Agile Project Management

Overview

The Origins of Agile Project Management

Agile Software Development Methodologies

Adaptive Software Development

Crystal Clear Software Development

Dynamic Systems Development Method

Extreme Programming

Feature Driven Development

Lean Software Development

SCRUM

Comparing Agile and Traditional Project Management Methodologies

APPENDIX A: Management Maturity Models

Appendix B: Advanced Project Management Concepts for Further Study

Appendix C: Project and Program Life Cycles

Appendix D: Types of Projects 341

Appendix E: Project Communications Systems and Networking

Bibliography

Index

Figures

Figure 1.1. Key Project Management Terms

Figure 1.2. Basic Project Management Process

Figure 1.3. Project Management Constraints

Figure 2.1. Basic Project Management Process

Figure 2.2. Stages and Steps of the Project Management Methodology

Figure 2.3. Generic Project Charter Outline

Figure 2.4. Flexibility Matrix

Figure 2.5. Sample Project Charter

Figure 2.6. Steps of the Planning Stage

Figure 2.7. Generic WBS Elements

Figure 2.8a. Sample Work Breakdown Structure—Software Project

Figure 2.8b. Sample Work Breakdown Structure—Garage Project

Figure 2.9a. Garage Work Breakdown Structure—Outline Format

Figure 2.9b. Software Work Breakdown Structure and Activities—Outline Format

Figure 2.10. Sample WBS Dictionary Form

Figure 2.11. Steps to Develop a WBS

Figure 2.12. Standard Baseline SOW Framework

Figure 2.13. Standard Outline for an SOW

Figure 2.14. MIL-HDBK-245D Statement of Work Format

Figure 2.15. Characteristics of Activities

Figure 2.16. WBS, Work Package, and Activity Relationship

Figure 2.17. Example of WBS Elements

Figure 2.18. Example of WBS Elements and Activities

Figure 2.19. Hammock Activities

Figure 2.20. WBS Elements and Activities in Microsoft Project

Figure 2.21. Task Relationships

Figure 2.22. Sample GANTT Chart

Figure 2.23. Logic Network Calculation Terms

Figure 2.24. Simplified Resource Table

Figure 2.25. Resource Histogram—Marcia

Figure 2.26. Sample Activity Cost Estimate

Figure 2.27a. Partial Cost Estimating Array, Spreadsheet Model, Layout A

Figure 2.27b. Partial Cost Estimating Array, Spreadsheet Model, Layout B

Figure 2.28. Cost Proposal Format

Figure 2.29. Overhead Rate Definitions

Figure 2.30. Sample Project Plan Outline

Figure 2.31. Responsibility Assignment Matrix

Figure 2.32. Sample Monthly Progress Report Contents

Figure 2.33. Project Review Agenda

Figure 2.34. State Department of Revenue Team Member Progress Report

Figure 2.35. Action Item Status List

Figure 2.36. Project Change Request

Figure 3.1. Start-Up Questions at Step 0

Figure 3.2. Methodology Steps

Figure 3.3. Scenario 3 Life-Cycle Relationships

Figure 3.4. Master Schedule

Figure 3.5. Rules for a Successful Proposal

Figure 3.6. Proposal Organization Methodology

Figure 3.7. Typical Price Calculations (Standard Form)

Figure 3.8. Supporting Data (Labor Hours by Activity)

Figure 3.9. Supporting Data (Travel)

Figure 3.10. Kickoff Meeting Checklist

Figure 3.11. Scenario 5—Replan as Necessary

Figure 3.12. Program Phases

Figure 3.13. Start-Up Questions Applied to Scenario 8

Figure 4.1. Project Sponsor Responsibilities

Figure 4.2. Human Resource Management Process

Figure 4.3. Life-Cycle Program Manager

Figure 4.4. Long-Term Program Manager

Figure 4.5. Risk Management Process

Figure 4.6. Sample Risk Item Watch List

Figure 4.7. Communications Management Process

Figure 4.8. Procurement Process

Figure 4.9. Solicitation and Contract Sections

Figure 5.1. Traditional Project Management Methodology

Figure 5.2. Agile Project Management Methodology

Figure 5.3. Manifesto for Agile Software Development

Figure 5.4. Adaptive Software Development Model

Figure 5.5. The DSDM Life Cycle

Figure 5.6. Feature Driven Development Process

Figure 5.7. The SCRUM Process

Figure 5.8. A SCRUM Master WBS and Tasks

Figure 5.9. A SCRUM Master Schedule Template

Figure 5.10. Comparative Model Phases

Figure 5.11. Agile Model as Variant of Traditional Model

Figure A.1. Generic Maturity Model

Figure C.1. Project Phases

Figure C.2. Project Phase Work Effort

Figure C.3. Typical Output from Each Project Phase

Figure C.4. Life Cycle—Smaller Projects

Figure C.5. Defense Acquisition Management System

Preface

A system of management is an asset, and a good system is a valuable asset.

—Henry L. Gantt, 1913

The development of project management tools, techniques, and principles followed similar work on scientific management in manufacturing by approximately 50 years. Efficient and effective project management required a unique system, just as manufacturing processes had required a unique scientific management system in the early twentieth century. The current practice of project management cuts across and integrates all the legacy systems within an organization and, using concepts from engineering, economics, accounting, and basic management, integrates and focuses all these systems on delivering products, services, or results.

APPROACH

Project Management Fundamentals: Key Concepts and Methodology, Second Edition, is designed to take the mystery out of project management for new managers of small to medium-sized projects. These projects typically have some or all of the following characteristics:

Three to 25 project team members

Project team members who work on multiple projects simultaneously

Shared resources among multiple projects

Frequent changes in project priorities issued by management

Limited in-house resource base

Limited impact of project failure on the enterprise

A matrix organizational structure.

Although every project is unique, the concepts and basic management techniques, principles, and methodology given here are at their core applicable to all projects of any size. The major variable from one project to the next is the amount of documentation and formal communication involved.

The methodology also provides a refresher for experienced project managers to remind them of the essential discipline necessary to manage a project effectively without taking shortcuts or trying to find magic-bullet solutions for common problems. Project managers overseeing large projects can use the methodology to ensure that all the basic principles and issues are addressed before introducing more sophisticated project management tools and techniques.

Project Management Fundamentals is also designed for use as the basis for an internal methodology when tailored to a specific organization’s unique requirements and way of doing business. In many cases, the guidance presented in this book may simply reinforce and add credibility to common-sense procedures already in practice in the organization.

This book takes a basic approach using conventional project management terminology without inventing new terms for old concepts or alternate ways of packaging concepts to appear new or cutting edge. The step-by-step methodology is like a recipe presented in a cookbook, along with additional explanations for why each step is important and suggested tools and techniques to apply in particular situations.

One size does not fit all when launching and managing a project. There are as many different scenarios as there are projects. Different approaches given as examples in this book are derived from the following scenarios:

Supporting an internal assignment

Supporting another organization

Working as a contract project manager

Responding to a solicitation

Performing a contract

Starting a new program

Taking over an ongoing project

Using an agile project management methodology.

Each of these scenarios requires a different approach when launching the project, which affects the subsequent implementation of the methodology and the use of project management tools.

ORGANIZATION AND CONTENT

Project Management Fundamentals: Key Concepts and Methodology, Second Edition, focuses on the core methodological elements of project management and demonstrates how applying the methodology varies depending on the circumstances and organization, for example, whether you are a customer or a client.

This book is divided into five major parts:

Part 1, Introduction and Overview, presents the basic principles and processes of project management and puts them in perspective.

Part 2, A Project Management Methodology, presents a detailed discussion of each of the ten major steps of the project management process and its substeps.

Part 3, Applying the Methodology, describes eight project scenarios and discusses how to apply the traditional project management methodology and principles to these different types of situations.

Part 4, Environmental and Facilitating Elements, provides an introduction to and understanding of the other important aspects of project management that support the basic methodology.

Part 5, Agile Project Management, presents an overview of agile project management and compares it to the traditional project management methodology.

The book concludes with six short appendices that present additional dimensions of project management:

Appendix A presents a discussion of project management maturity and provides an overview of business development and knowledge management assessments.

Appendix B includes brief summaries of two advanced project management concepts: the earned value management system and critical chain project management.

Appendix C discusses various project life cycles, with examples from the Department of Defense and the Department of Homeland Security.

Appendix D characterizes the three basic types of projects—product, service, and results projects.

Appendix E discusses the use of the Internet and various web-based applications for project communications systems and networking.

A bibliography following the appendices includes the resources referenced in the text as well as additional recommended reading.

SECOND EDITION

This second edition offers several significant additions, including:

A new major part on agile project management and corresponding modifications throughout the text to incorporate agile project management concepts. Traditional project management typically follows a predictive, somewhat fixed approach. Agile project management allows more flexibility and consists of a series of open-minded experiments and speculations, ongoing collaboration, and multiple iterative product deliveries, refined through real-world use and testing over the life of the project. Agile theory assumes that changes, improvements, and additional features will be incorporated throughout the project. These changes are not a failing of the process; rather, change offers opportunities to improve the product to better serve its use and business purpose.

A new appendix covering project communications systems and social networking.

A heavily revised appendix on project and program management maturity, updated with new material on business development maturity and knowledge management maturity.

More emphasis on the unique features of service projects, including performance work statements, performance measurement, and performance management.

More examples from the real world.

An expanded discussion of the standard triple constraints in project management—scope, schedule, and cost—to include an additional three constraints—quality, resources, and risk.

Updates for consistency with the latest Project Management Institute (PMI) standards, including the fourth edition PMBOK®Guide and PMI-published standards for portfolio management, program management, work breakdown structures, and organizational project management.

Gregory T. Haugan, PhD, PMP

Heathsville, Virginia

Acknowledgments

I received a great deal of assistance with the original edition of this book, although some of those who helped may not be aware of it. The book’s genesis was a short primer that Dr. Ginger Levin and I wrote and used in our consulting business at GLH, Inc., in Falls Church, Virginia. Dr. Lew Ireland provided additional input when he worked with us to use and apply the primer’s methodology to our clients’ projects.

I want to thank Jim Hayden of Capital One and the PMI Central Virginia Chapter. Jim provided useful insight into his experiences as a project manager. I recognize how important it is to get input from project managers on the firing line.

Special thanks go to the four reviewers of my first-edition drafts: Rick Peffer, Jeff Carter, Arnold Hill, and Michael Dobson. Rick Peffer provided figures, tables, and other material about project management on IT projects. Jeff Carter offered many recommendations for the book and has one of the best project management programs that I have had the pleasure to witness. Arnold Hill took time away from many more urgent activities at GSA to critique drafts of this book and provide insightful comments. Michael Dobson, an author of several books on project management, provided very useful comments and insights as well.

The new material for the second edition was reviewed and improved by my son, Gregory T. Haugan, Jr., a manager with the Department of Homeland Security. Greg also made useful suggestions for improvements to the entire book.

Special thanks also go to Kris Athey of QuantumPM for his comments and recommendations on the new appendices discussing agile project management and project communications systems and networking.

I’d also like to thank Dr. Ginger Levin for helping me update the second edition by making major revisions to the appendix on project management maturity and by providing several new reference sources.

Finally, thanks always have to go to the staff at Management Concepts and especially to Courtney Chiaparas and Myra Strauss for their great editorial work and for supporting this endeavor along with many of my other books.

PART 1

Introduction and Overview

…it will be seen that the development of a science to replace rule of thumb is in most cases by no means a formidable undertaking, and that it can be accomplished by ordinary, everyday men without any elaborate scientific training; but that, on the other hand, the successful use of even the simplest improvement of this kind calls for records, a system and cooperation where in the past existed only individual effort.

—Frederick Winslow Taylor,

The Principles of Scientific Management, 1911, p. 62

To F.W. Taylor, scientific management was a policy of establishing, after scientific study and research, a standard way of performing each industrial operation with the best possible expenditure of material, capital, and labor.¹ His principles—and those of Harrington Emerson, Henry Gantt, and others—revolutionized the manufacturing industry in the decade preceding World War I. These principles are followed today in manufacturing processes, and extensions of them provide the basis for today’s project management body of knowledge. The concept of using a standard methodology to perform project management functions is the same concept used by F.W. Taylor in his philosophy of one best way.

The recognition that managing projects required skills and techniques different from those required for managing manufacturing processes arose in the late 1950s when the Cold War prompted the United States to develop large, complex weapons systems. Much of the management effort up to that point involved developing principles to manage large companies, organizations, and production processes. These new weapons systems development activities involved integrating the work of several companies involving many disciplines, not just civil or mechanical engineering, to develop one product. Most of the modern project management principles, processes, and practices evolved from the lessons learned in managing early weapons systems development.

These new weapons systems had five things in common: (1) they were one-time efforts and were therefore temporary in that the final products were not endlessly replicated, as occurs on a production line; (2) the final products had to be completed by a specified time; (3) the work required to create the final products had a specified price or budget; (4) the required performance of the final products was specified; and (5) the final products were complex and required coordinating and integrating the activities of several organizations and disciplines in every step of the development process.

Just as scientific management principles were documented in the period from 1910 to 1920, project management principles and practices were documented in many books, company manuals, government reports, and magazine articles starting in the 1960s.

The lead in monitoring and documenting project management practices transitioned from the public to the private sector in the 1980s with the major reductions in the National Aeronautics and Space Administration (NASA) space program, the end of the Cold War, and the rapid growth of the public sector’s awareness of the importance of formal project management.

THE PROJECT MANAGEMENT BODY OF KNOWLEDGE

As the private sector developed its formal project management practices, one organization in particular took the lead in documenting best practices. The Project Management Institute (PMI), a professional association of nearly 300,000 members in 170 countries, provides a forum for the growth and development of project management practices through its conferences, chapter meetings, monthly magazine PM Network, and quarterly journal Project Management Journal.

Building on the seminal work of the U.S. government and the aerospace industry in the 1960s, PMI published a landmark document titled The Project Management Body of Knowledge in August 1987, which was followed in 1996 by A Guide to the Project Management Body of Knowledge (PMBOK® Guide), now in its fourth edition.²

PMI has also published two derivative PMBOK® Guide documents focusing on the construction industry and government, respectively.³ More recently, PMI published standards for portfolio management, program management, work breakdown structures, and organizational project management.⁴

The PMBOK® Guide documents proven classic practices that are widely applied, as well as more advanced practices used less often but also generally accepted. This book is generally consistent with the PMBOK® Guide and the derivative PMI publications noted here.

Despite the frequency of new project management systems purporting dramatic changes and improved methods, in reality basic project management concepts haven’t changed much since they were developed during the late 1960s and standardized in the original PMBOK® Guide. Two areas developed recently, however, are web-based communications and self-organizing team concepts key to agile project management. Both are discussed in this new edition.

KEY CONCEPTS OF PROJECT MANAGEMENT

An understanding and appreciation of the evolution of project management is useful when applying the techniques to individual problems and situations. It is important to understand why each step in the project management process is performed, so you can effectively tailor that step to individual projects in your organization.

Project management today, just like the scientific management of Taylor’s day, still involves records, a system, and cooperation, although now these are called data collection, planning and control, and communications.

The core of this book is the application of a basic project management process or methodology that consists of a number of steps performed in sequence. Some of these steps require more than one iteration to incorporate unforeseen changes, and several have sub-processes with their own defined steps, as well.

While all projects can be managed successfully by following these steps, the effort and emphasis placed on performing each step must be tailored to the specific project and its context. For example, every project requires planning, but the planning for a major aerospace project is far more extensive than the planning required for a two-week project to develop a marketing brochure. Similarly, the planning that is performed when responding to a request for proposals is different from that required for a new project assigned by a supervisor.

In recognition of each project’s unique conditions, Part 3 presents eight scenarios of different conditions or situations a project manager may encounter and describes how to tailor the basic methodology presented in Part 2 to each of these scenarios.

Part 4 discusses critical project environment elements needed in addition to the basic methodology, including management support, project management software, procedures and directives, and project management maturity. Part 4 also discusses particular facilitating elements needed in addition to the basic methodology, including human resource management, risk management, communications, project procurement management, and configuration management.

Part 5 discusses agile project management, which evolved from software development projects using an incremental approach to delivering the final product. The agile approach assumes that the entire suite of initial requirements cannot be developed or planned at the start of the project. Increments of the final product can be delivered very early, and their testing and evaluation can provide essential input for succeeding iterations and deliveries. The process is continued until a satisfactory set of product functions, performance, or features is attained, fulfilling the customer’s objectives.

For more advanced project managers, Appendix A provides a new discussion of project management maturity and an overview of business development and knowledge management assessments.

Communications methods and tools have evolved rapidly with the evolution of the Internet and social networking applications. A new appendix on project communications systems and networking provides an overview of the tools currently available to the project and program teams.

KEY TERMS

The world of project management is full of jargon and acronyms. Figure 1.1 defines the most common project management terms used frequently in this book and in the project management field. These definitions are included in similar form in the glossary of