Second Edition

PAUL C. DINSMORE AND JEANNETTE CABAN IS-BREWIN

aA/MA Amencan Management á^Jwu3\ Association

THE AMA HANDBOOK OF PROJECT MANAGEMENT

SECOND EDITION

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THE AMA HANDBOOK OF PROJECT MANAGEMENT

SECOND EDITION Edited By

►PAUL C. DINSMORE, PMP ►JEANNETTE CABANIS-BREWIN

AMACOM American Management Association

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Library of Congress Cataloging-in-Publication Data

Dinsmore, Paul C.

The AMA handbook of project management/Paul C. Dinsmore, Jeanette Cabanis-Brewin, 2nd ed. p. cm. Includes index. ISBN 0-8144-7271-0

1. Project management—Handbooks, manuals, etc. I. Cabanis-Brewin, Jeanette. II. Title.

HD69.P75A46 2006 658.4'04—dc22

2005015020

© 2006 Amacom, a division of American Management Association. All rights reserved.

Printed in the United States of America.

"PMI" and the PMI logo are service and trademarks of the Project Management Institute, Inc., which are registered in the United States of America and other nations; "PMP" and the PMP logo are certification marks of the Project Management Institute, Inc., which are registered in the United States of America and other nations; "PMBOK," "PM Network," and "PMI Today " are trademarks of the Project Management Institute, Inc., which are registered in the United States of America and other nations; "...building professionalism in project management..." is a trade and service mark of the Project Management Institute, Inc., which is registered in the United States of America and other nations; and the Project Management Journal logo is a trademark of the Project Management Institute, Inc.

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Printing number

CONTENTS

foreword David I. Cleland, Ph.D.

preface Paul C. Dinsmore, PMP, and Jeannette Cabanis-Brewin

ACKNOWLEDGMENTS

xi xiii xvii

ABOUT THE EDITORS

chapter i What Is Project Management?

Project Management Concepts and Methodologies FRANCIS M. WEBSTER, JR. PHD, AND JOAN KNUTSON

SECTION ONE

The Project Management Body of Knowledge: Comprehension and Practice INTRODUCTION 13

chapter 2 Bodies of Knowledge and Competency Standards In Project Management ALAN M. STRETTON

chapter 3 Project Management Process Groups: Project Management Knowledge in Action GEREE STREUN, PMP, CSQE

chapter 4 Initiation Strategies for Managing Major Projects PETER W. G. MORRIS

chapter 5 Comprehensive Planning for Complex Projects DAVID L. PELLS

chapter 6 Controlling Costs and Schedule: Systems That Really Work RALPH D. ELLIS, JR.

chapter 7 Project Management Integration in Practice GEREE STREUN, PMP, CSQE

eo chapter a Project Scope Management in Practice

RENEE MEPYANS-ROBINSON 74

chapter 9 Time Management in Practice

VALIS HOUSTON, PMP 81

chapter 10 Project Cost Management in Practice

MUHAMED ABDOMEROVIC, PMP 89

10A Studies in Cost Management:

Earned Value—An Integrated Project Management Approach

LEE R. LAMBERT, PMP 104

chapter 11 Project Quality Management in Practice

GEREE STREUN, PMP, CSQE 119

11A Studies in Project Quality Managment:

Achieving Business Excellence Using Baldrige,

Business Process Management, Six Sigma, and Project Management

ALAN MENDELSSOHN AND MICHAEL HOWELL 125

chapter 12 Human Resource Management in Practice

LEE TOWE, PMP 136

12A Studies in Project Human Resource Management: Interpersonal Skills

PAULC. DINSMORE, PMP 144

12B Studies in Project Human Resource Management: Leadership

HANS J. THAMHAIN, PHD, PMP 155

chapter 13 Project Communications Management in Practice

RENEE MEPYANS-ROBINSON 165

13A Studies in Communications Management: Achieving Project Success Through Team Building and Stakeholder Management JOHN TUMAN, JR., P.ENG 174

chapter 14 Risk Management in Practice

DAVID HILLSON, PHD, PMP, FAPM, FIRM 184

chapter 15 Project Procurement Management in Practice

JUDITH A. EDWARDS, PHD, PMP 196

15A Studies in Procurement Management: Managing to Avoid Claims IRVING M. FOGEL

chapter 16 Preparing for the Project Management Professional Certification Exam

THEODORE BOCCUZZI, PMP 211

SECTION TWO

The Profession of Project Management

INTRODUCTION 225

chapter 17 Project Management Ethics:

Responsibility, Values, and Ethics in Project Environments

THOMAS MENGEL, PHD, PMP 227

chapter 18 Professionalization of Project Management: What Does It Mean for Practice?

BILL ZWERMAN AND JANICE THOMAS, PHD 236

chapter 19 Competency and Careers in Project Management

J. KENT CRAWFORD, PMP, AND JEANNETTE CABANIS-BREWIN 248

SECTION THREE

Organizational Issues in Project Management

INTRODUCTION 267

CHAPTER 20 Project Management: A Strategic Asset?

KAM JUGDEV, PHD, PMP 269

chapter 21 Enterprise Project Management: Elements and Deployment Issues CHRIS VANDERSLUIS

chapter 22 Project Portfolio Management: Principles and Best Practices GERALD I. KENDALL, PMP

chapter 23 Measuring the Value of Project Management JAMES S. PENNYPACKER

chapter 24 The Project Office:

Rationale and Implementation

J. KENT CRAWFORD, PMP 312

chapter 25 A Process of Organizational Change:

From Bureaucracy to Project Management Orientation

ROBERT J. GRAHAM, PHD, PMP 323

chapter 26 Managing Multiple Projects:

Balancing Time, Resources, and Objectives

LOWELL DYE, PMP 333

SECTION FOUR

Issues and Ideas in Project Management Practice

INTRODUCTION 347

chapter 27 Dealing With Power and Politics in Project Management

RANDALL I. ENGLUND 348

chapter 28 Multi-Project Constraint Management: The "Critical Chain" Approach

FRANK PATRICK 363

chapter 29 Communities of Practice and Project Management

CONNIE DELISLE, PHD, AND KIM ROWE, P.ENG 372

chapter 30 A Project Management Strategy for Six Sigma Projects

ANTONIO C.A. MAXIMIANO AND ALONSO MAZINI SOLER 384

chapter 31 Cultural Challenges in Managing International Projects

PAUL C. DINSMORE, PMP, AND MANUEL M. BENITEZ CODAS 399

SECTION FIVE

Industry Applications of Project Management Practice

INTRODUCTION 411

chapter 32 Building Organizational Project Management Capability: Learning From Engineering and Construction

CHRISTOPHER SAUER, FIM 413

chapter 33 New Product Development: Issues for Project Management

DENNIS M. SMITH 424

chapter 34 Why IT Matters:

Project Management for Information Technology

KAREN R.J. WHITE, PMP 433

chapter 35 Project Management for Software Engineering

LOIS ZELLS 444

chapter 3e R&D Project Management:

Adapting to Technological Risk and Uncertainty

LEE R. LAMBERT, PMP 458

chapter 37 Applying Project Management Tools and Techniques in the Ecosystem Restoration Industry

STAN VERAART, PMP, AND DONALD ROSS 469

About the Contributors 475

Index 489

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FOREWORD

This handbook provides a set of principles and processes for those managers and professionals who want to enhance their understanding of the theory and practice of project management. Like all good handbooks, this is a comprehensive reference source for practical how-to-do-it information. This handbook also can be used in project management training programs, as well as in degree programs in universities.

There is a flood of books currently being published about project management. Unfortunately all too many of these books take existing works and recast them in a slightly different light, resulting in minor contributions to the growing literature. The AMA Handbook of Project Management is a refreshing change.

This book starts with the Project Management Institute's body of knowledge (PMBOK® Guide) and then goes beyond that through a description of the Project Management profession and its challenges and coverage of organizational issues likely to be encountered in the world of project management, ending with a presentation of industry applications of the project approach.

The material in the book comes from authors who are notable contributors in the project management community, ranging from academics to practitioners who grapple with the challenges of managing or teaching in the project management field.

This is a book that should have a conspicuous place on the bookshelf of anyone who wants to improve their professional practice in the use of project management knowledge and skills.

-DAVID I. CLELAND, PHD DECEMBER, 2004

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PREFACE

When the lunar module Eagle landed in the Sea of Tranquility at 13 hours, 19 minutes, 39.9 seconds Eastern Standard Time on July 20, 1969, the event was hailed as one of history's major milestones. It was also one of the most fascinating and significant spin-offs of the U.S. space program and was the development of flexible yet precise organizational structures, forms, and tools that allowed people to work together to reach challenging goals. Out of that grew the modern concept of project management.

Since the Apollo days, project management, applicable both to individual endeavors and to a series of projects called programs, has been applied to many new fields of activity. With the trend toward accelerated change, the scope of project management has expanded from construction projects and aerospace to encompass organizational change, R&D projects, high-tech product development, banking and finance, nonprofit services, environmental remediation ... in fact, just about every field of human endeavor.

Such change in the scope of project management led to the need for a comprehensive update to 1993's The AMA Handbook of Project Management. In its day, the first edition of this handbook was a major contribution to the field, pulling together expert practitioners to share their advice on topics such as designing adequate organizational structures, generating and maintain teamwork, and managing the project life cycle. We have retained many of the original authors, as well as including several chapters that still stand as classics in the field. However, the multitude of changes that have occurred in the project management field since the original publication of this handbook ten years ago meant that, in order to keep pace, the new chapters had to outnumber the old.

We have specifically designed he second edition of this book to complement and supplement the PMBOK® Guide, Third Edition, and to provide supporting materials for those preparing to take the certification exam, or working to maintain their certification. Students who are taking introductory courses in project management as part of a degree in another field (engineering, information technology, business administration, manufacturing or production management, construction management, etc.), or who are studying for degrees in the field of project management will also find it invaluable. As a complementary and supplementary text, the handbook does not contain materials already published in the PMBOK® Guide, but is designed to help those studying project management to understand and integrate the materials contained in that standard, as well as project management concepts and issues which currently are not included in the PMBOK® Guide.

The book targets a broad audience, including not only the traditional project management faithfuls, but also professionals involved in organizational development, research, product development, and other associated fields. The book provides a ready reference for anyone involved in project tasks, including upper management executives, project sponsors, project managers, functional managers, and team members. It addresses those working in any of the major program- and project-oriented industries, such as defense, construction, architecture, engineering, product development, systems development, R&D, education, and community development. Whether you are preparing for advancement in the project management field, through certification or by completing university courses in the field, this handbook will be a valuable reference. For those using the book in a classroom setting, discussion questions provided at the end of each chapter help students and peers initiate fruitful discussions about concepts, problems, and ideas in their chosen field.

ORGANIZATION OF THE HANDBOOK Section 1

The Project Management Body of Knowledge: Comprehension and Practice

This section is designed specifically to aid the reader in learning the basics of project management, and in preparing for taking the Project Management Professional (PMP) certification exam. Chapters 7 through 15, in fact, correspond to chapters of the PMBOK® Guide, Third Edition that are tested on the PMP exam. (Note: The certification exam has recently begun to test an area called "Professional Ethics," but because this subject has not yet been added to the PMBOK® Guide at this writing, we cover this topic in Section 2 of the handbook.) This section summarizes the basics of project management. It includes the fundamental disciplines and describes the processes required to insure that projects are brought to successful completion.

The organization of the book will be specifically designed to raise student interest and to lead them to further analysis of the project management field. Those preparing for certification are generally studying the field of project management for the first time. Thus Section One of the book introduces the student to the basic accepted practices and principles of project management, as practiced within the project. Note that the PMBOK® Guide does not deal with, and the PMP certification process does not test, concepts of project management that extend beyond the bounds of the individual project. Yet the project manager must survive and thrive within highly competitive business organizations, interacting with other organizations both within their employer's organization and from other organizations that have an interest or stake in the project. It is anticipated that as students work through the materials in the first section of this book, they will be generating questions concerning these other aspects of project management that clearly fall outside the individual project (for example, the individual's career potential, the expected contributions of projects to the organization, the requirements to manage multiple projects simultaneously, leadership concepts that cut across organizational lines, management of the power structures and conflicts that typically surround projects, and the interaction of the projects with other major departments of the organization-such as accounting, finance, and other groups being affected by the results of the project). These broader issues are explored in Sections Two through Five of the handbook.

Section Two

The Profession of Project Management

As the student explores the concepts presented in Section One, the issue of professionalism and the development of project management as a profession will be raised. Section Two covers the field of project management as a rapidly growing "profession" that is being supported and developed by a number of professional organizations, particularly in the United States, Europe, and Australia. This section documents the growth and creation of the profession, identifies the major professional organizations contributing to its development, shows the trends and the status of this new profession with a global perspective, and reviews the impact of this professionalizing process on the practitioner of project management and on the supporting organizations. Ethics, professionalism, and career development are the primary topics covered in this section.

Section Three

Organizational Issues in Project Management

Even a certified professional cannot escape the realities of organizational life, and increasingly, the role of the project manager catapults the individual out of the single-project milieu and into organizational issues: multiple projects, maturity measurement, portfolio selection and management, enterprise systems, organizational culture and structure, and alignment with strategy-these areas have become crucial issues in project management in the decade since the first edition of this book was published. Top professionals and academics with specific expertise in these areas have been sought out to provide tutorials on these topics in Section Three.

Section Four

Issues and Ideas in Project Management Practice

Politics; new methodologies and organizational structures; globally diverse teams: Section Four brings together writers on some of the leading edge topics in project management. One thing that is certain about project management: it isn't going to remain static for another ten years. The chapters in this section provide a glimpse of where the discipline and the organizations in which it is practiced may be heading.

Section Five

Industry Applications of Project Management

With the growth of project management in all industry sectors, this section of the book could be 100 chapters long; it was difficult to limit it to a handful of industries. As professionals, the students will need to understand how the basic accepted concepts of project management must be adapted to the environments found in different industries and professions. Section 5 identifies a number of specific industries, technologies and specialty areas in which project management is widely used and recognized, and examines the unique priorities of the project manager in each of these different venues. The overall thrust of this section is designed to demonstrate that the basic concepts of project management apply universally across these venues, even though the specific concepts and ideas may have different priorities and influences on project management practices in each venue.

About the Contributors

Finally, biographical information on all the contributing authors can be found at the end of the handbook. Some of the authors have provided email addresses or website URLs to encourage the interested student to ask questions, learn more, and engage in the kind of dialogue that spurs this fascinating discipline to growth and change.

-PAUL C. DINSMORE, PMP, RIO DE JANEIRO, BRAZIL

-JEANNETTE CABANIS-BREWIN, CULLOWHEE, NORTH CAROLINA, USA

FEBRUARY, 2005

ACKNOWLEDGMENTS

In completing this project, we drew upon the knowledge, comprehension, patience, and diligence of many people. The cornerstones of the project have been Dr. John Adams for his invaluable work in developing the revision plans for the second edition; Crispin Piney for his assistance in evaluating chapters in Section One for correctness; our AMACOM editor, Christina Parisi, and Lisa M. Fisher for expert copyediting assistance. Paul Lombard of the PM College also provided subject matter review for some chapters.

Thanks are also due to our own companies, Dinsmore Associates and Project Management Solutions, for making it possible for us to work on this book, and the families and friends who put up with our schedules over the course of the past year.

Most of all, we want to thank the authors who contributed so much of their time and talent to this project, as well as the contributors to the First Edition, who laid the groundwork for this updated version.

Finally, we'd be remiss if we didn't express our appreciation of the Project Management Institute for its work in developing and maintaining the project management standards that form the basis of the profession.

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ABOUT THE EDITORS

PAUL C. DINSMORE, PMP

Paul C. Dinsmore, PMP, is an international speaker and seminar leader on project management. He is the author of ten books, including Winning in Business with Enterprise Project Management (AMACOM, 1998), and has written more than one hundred professional papers and articles. Mr. Dinsmore is president of Dinsmore Associates, a training and consulting group focused on project management and team building. Prior to establishing his consulting practice in 1985, he worked for twenty years as a project manager and executive in the construction and engineering industry for Daniel International, Morrison Knudsen International, and Engevix Engineering.

Mr. Dinsmore has performed consulting and training services for major companies including IBM, ENI-Italy, Petrobrás, General Electric, Mercedes Benz, Shell, Control Data, Morrison Knudsen, the World Trade Institute, Westinghouse, Ford, Caterpillar, and Alcoa. His speaking and consulting practice has taken him to Europe, South America, South Africa, Japan, China, and Australia. The range of projects where Mr. Dinsmore has provided consulting services include company reorganization, project start-up, development and implementation of project management systems, and training programs, as well as special advisory functions for the presidents of several organizations. Mr. Dinsmore contributes articles to such professional magazines as PM Network and Chief Project Officer. He participates actively in the Project Management Institute, which awarded him its Distinguished Contributions Award as well as the prestigious title of Fellow of the Institute. He is also on the Board of Directors of the PMI Educational Institute.

Mr. Dinsmore graduated from Texas Tech University and completed the Advanced Management Program at Harvard Business School. He can be reached at [email protected] dinsmore.com.br.

JEANNETTE CABANIS-BREWIN

Jeannette Cabanis-Brewin is Editor in Chief of the Center for Business Practices, a knowledge center that captures, organizes, and transfers business practice knowledge to project stakeholders through publications, research, and benchmarking forums. The CBP is the research and publishing division of PM Solutions, a project management consulting and training firm. Ms. Cabanis-Brewin has written on project management and organizational development topics for the CBP publications People on Projects: The Project Management Best Practices Report, PM Library Update, and the Best Practices e-Advisor, as well as for a wide variety of other business and technology publications, including Chief Project Officer, [email protected], developer.com, Primavera magazine, myplanview.com, and PM Network. A former staff writer and editor for the Project Management Institute's Publishing Division, her feature articles for PM Network have been republished around the world. She has edited two award-winning project management books, including The Strategic Project Office by J. Kent Crawford, winner of PMI's 2002 David I. Cleland Literature Award, and is co-editor with James S. Pennypacker of What Makes A Good Project Manager? (CBP, 2003). She is also the coauthor, with J. Kent Crawford, of Optimizing Human Capital with a Strategic Project Office, (Auerbach, 2005).

Cabanis-Brewin has a BA in English, Professional Writing Concentration (summa cum laude) from Western Carolina University, and has done graduate work in organizational development (WCU) and nonprofit management (Duke University). She can be reached at [email protected], or though the CBP website at www.cbponline.com.

SUPPORTING EDITOR

Crispin ("Kik") Piney, B.Sc., PMP, after many years managing international IT projects within large corporations, is now a freelance project management consultant and trainer. At present, his main areas of focus are risk management, change management, scope management, and organizational maturity, as well as time and cost control. He has developed advanced training courses on these topics, which he delivers in English and in French to international audiences from various industries. He has also carried out work for PMI on a volunteer basis as Design Cell Leader for the creation the Organizational Project Management Maturity Model (OPM3™) as well as participating actively in the teams developing the Third Edition of A Guide to the Project Management Body of Knowledge for both the English and the French language versions. He is currently acting as coordination architect for the forthcoming PMI Program and Portfolio Management Standards. He has presented at a number of recent PMI conferences in Europe and the USA and published papers in PMI Network, PMI Journal and PMI Today—as well as some light-hearted project management verse on the allPM Web site. Mr. Piney is based in Nice, France and can be contacted at [email protected].

THE AMA HANDBOOK OF PROJECT MANAGEMENT

SECOND EDITION

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CHAPTER 1

What Is Project Management? Project Management Concepts and Methodologies

►FRANCIS M. WEBSTER, JR., PHD, WESTERN CAROLINA UNIVERSITY, RETIRED

►JOAN KNUTSON

PROJECTS: THE WORK

Projects are ubiquitous. They are everywhere, and everybody does them. Projects are the driving force for many organizations in most industries. Projects can be looked upon as the change efforts of society, and the pace of change has been increasing. Therefore, effectively and efficiently managing change efforts is the only way organizations can survive and grow in this modern world.

One way to describe projects is by example. Most such descriptions start with such things as the pyramids, the Great Wall of China, and other undertakings of ancient history. These were major construction projects, and indeed, construction is inherently a project-oriented industry. But there are other project-oriented industries: pharmaceuticals, aerospace, and IT all operate on a project basis and all are notable for technological developments that have changed the way we live and work.

But not all projects are of such great magnitude. A community fund-raising or political campaign, the development of a new product, creating an advertising program, and training the sales and support staff to move and service a product effectively are all projects. Indeed, it is possible that most executives spend more of their time planning and monitoring changes in their organizations—i.e., projects—than they do in maintaining the status quo.

All of these descriptions focus on a few key notions. Projects involve change—the creation of something new or different—and they have a beginning and an ending. Indeed, these are the characteristics of a project that are embodied in the definition of project as found in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) published by the Project Management Institute (PMI): "A temporary endeavor undertaken to create a unique product, service, or result."1 This definition, while useful to project managers, may not be sufficient for others to distinguish projects from other undertakings. Understanding some of the characteristics of projects and comparing projects to other types of undertakings may give a clearer perspective.

Some Characteristics of Projects

►Projects are unique undertakings that result in a single unit of output. The installation of an entertainment center by a homeowner with the help of a few friends is a project. The objective is to complete the installation and enjoy the product of the effort. It is a unique undertaking because the homeowner is not likely to repeat this process frequently. It is not unusual, however, for multiple units to be involved in a project at one level of detail or another.

►Projects are composed of interdependent activities. Projects are made up of activities. Consistent with the definition of a project, an activity has a beginning and an end. Activities are interrelated in one of three possible ways. In some situations, one activity must be completed before another can begin. Generally, these mandatory relationships are very difficult to violate, or to do so just does not make sense. The relationship of other activities is not as obvious or as restrictive. These more discretionary interdependencies are based on the preferences of the people developing the plan. Some activities are dependent upon some external event, such as receiving the materials from the vendor. In any of the three instances, mandatory, discretionary, or external, activities have a relationship one to another.

►Projects create a quality deliverable. Each project creates its own deliverable(s) which must meet a standard of performance criteria. In other words, each deliverable from every project must be quality assured. If the deliverable does not meet its quantifiable quality criteria, that project cannot be considered complete.

►Projects involve multiple resources, both human and nonhuman, which require close coordination. Generally there are a variety of resources, each with its own unique technologies, skills, and traits. When focusing on human resources, this leads to an inherent characteristic of projects: conflict. There is conflict amongst resources as to their concepts, approach, theory, techniques, etc. Also there is conflict for resources as to quantity, timing, and specific assignments. Thus, a project manager must be skilled in managing both such conflicts.

►Projects are not synonymous with the products of the project. For some people, the word project refers to the planning and controlling of the effort. For others, project means the unique activities required to create the product of the project. This is not a trivial distinction as both entities have characteristics unique to themselves. The names of some of these characteristics apply to both. For example, the life cycle cost of a product includes the cost of creating it (a project), the cost of operating it (not a project), the cost of major repairs or refurbishing (typically done as projects), and the cost of dismantling (often a project, if done at all). The project cost of creating the product is generally a relatively small proportion of the life cycle cost of the product. Figure 1-1.

►Projects are driven by the Triple Constraint. The Triple Constraint represents the balance of time, resources (human and otherwise), and technical performance (quality). One of these three constraints is the driving or gating factor of each project. Different projects may be driven by a different constraint depending on the emphasis established by management. Being first in the market often determines long-term market position, thus creating time pressure as the major driver. Most projects require the investment of considerable sums of money and/or labor prior to enjoying of the benefits of the resulting product; thus containing resource expenditures may be the driving factor. A need exists for the resulting product of the project to be of the highest quality; for example, a new system within the healthcare industry.

In summary, projects consist of activities, which have interrelationships amongst one another, produce quality-approved deliverables, and involve multiple resources. Projects are not synonymous with product. During the life cycle of any product, the concept of project management is used while during other times, product or operations management is appropriate. And finally, how projects are managed is determined by which of the variables of the Triple Constraint is more important: time, resources, or quality.

O A Project

Concept Development Implementation Termination

Project Life Cycle \ O A Product of a Project

Feasibility Acquisition Operation and Maintenances Disposal

Product Life Cycle for a Capital Facility

O Product Development Multiple Projects

Basic Research Product Research Design

Production

Q A Product of a Project: The Marketing View

Life Cycles for a Mass-Produced Product

Introduction Growth Maturity Decline

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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