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2. What are some of the key environmental forces that have changed the way
projects are managed? What has been the effect of these forces on the
management of projects?
Some environmental forces that have changed the way we manage projects are the
product life cycle, knowledge growth, global competition, organization downsizing,
technology changes, time-to-market. The impact of these forces is more projects per
organization, project teams responsible for implementing projects, accountability,
changing organization structures, need for rapid completion of projects, linking
projects to organization strategy and customers, prioritizing projects to conserve
organization resources, alliances with external organizations, etc.
3. Why is the implementation of projects important to strategic planning and the
project manager?
Strategic plans are implemented primarily through projectse.g., a new product, a
new information system, a new plant for a new product. The project manager is the
key person responsible for completing the project on time, on budget, and within
specifications so the projects customer is satisfied. If the project is not linked to the
strategic plan of the organization, resources devoted to the project are wasted and a
customer need is not met. This lack of connectivity occurs more in practice than most
would believe.
4. The technical and sociocultural dimensions of project management are two sides
to the same coin. Explain.
The system and sociocultural dimensions of project management are two sides of the
same coin because successful project managers are skillful in both areas. The point is
successful project managers need to be very comfortable and skillful in both areas.
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Flexible
Open system
Allows for self evaluation of proposed project
Power and politic games are exposed.
8. Consider Honigs Project Portfolio Matrix Model (Figure 2.7) and the Project
relativity matrix (Figure 2.8). When would each of these matrices be used and
why?
Both of these matrices lay out a framework for portfolio management to help align
organisational strategy with project selection and outcomes. The Honig matrix uses
the analysis of the easiness test with the worthiness test in order to prioritise project
selection, approval and resource allocation. It also addresses whether a project fits
within an organisations core competencies. The axis on the Matheson Project
Relativity Matrix covers technical feasibility, with commercial potential for portfolio
decisions and investment in order to prioritise projects. Although originating from an
R&D perspective this tool can be applied to any portfolio or business.
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Chapter 2 Exercises
2. Two new software projects are proposed to a young, start-up company. The
Alpha project will cost $150,000 to develop and is expected to have annual net cash
flow of $40,000. The Beta project will cost $200,000 to develop and is expected to
have annual net cash flow of $50,000. The company is very concerned about their
cash flow. Using the payback period, which project is better from a cash flow
standpoint? Why?
Payback = Investment / Annual Savings
Project Alpha: $150,000 / $40,000 = 3.75 years
Project Beta: $200,000 / $50,000 = 4.0 years
Project Alpha is the better payback.
3. A five-year project has a projected net cash flow of $15,000, $25,000, $30,000,
$20,000, and $15,000 in the next five years. It will cost $50,000 to implement the
project. If the required rate of return is 20 percent, conduct a discounted cash
flow calculation to determine the NPV.
A
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Exercise 2.3
Net Present Value Example
Project 2.3
Investment
Cash Inflows
Required Rate of Return
NPV =
Year 0
Year 1 Year 2 Year 3
Year 4
Year 5
-$50,000
$15,000 $25,000 $30,000 $20,000 $15,000
20%
$12,895
Formula: =C6+NPV(B8,D7:H7)
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Case Study
A Day in the Life
This case shows a glimpse of what it is like to be a project manager. It also underscores
that being a project manager is more social than technical and that project managers
spend the majority of their time interacting with various people who impact on a project.
1. How effectively do you think Rachel spent her day?
Answers will vary. Some students may argue that she is inefficient and does not have
control over her time. Others will argue that this is the nature of the job, and is to be
expected. They will point out that she is appropriately spending her time managing
relations and keeping on top of things that affect the project.
2. What does the case tell you about what it is like to be a project manager?
Rachels day underscores three key functions project managers spend their time
performing:
a. Building and sustaining interpersonal relations. Project managers have to
network and develop good working relations with team members and other
project stakeholders.
b. Information gathering and dissemination. Project managers are the information
hub for their projects. They are in constant communication with various
stakeholders, collecting information from various sources, and sending it to those
who have a need to know.
c. Decision-making. Project managers consult with various people to make
decisions necessary to complete the project.
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