Chapter ETHICS

Ethics (Greek ethika, from ethos, "character," "custom") are principles or standards of human conduct, sometimes called morals. Ref.

"Ethics," Microsoft® Encarta® Online Encyclopedia 2003 © 1997-2003 Microsoft Corporation. All Rights Reserved.

© 1993-2003 Microsoft Corporation. All Rights Reserved.

From the Encarta, we find that:

Philosophers have attempted to determine goodness in conduct according to two chief principles, and have considered certain types of conduct either good in themselves or good because they conform to a particular moral standard. The former implies a final value, or summum bonum, which is desirable in itself and not merely as a means to an end. In the history of ethics there are three principal standards of conduct, each of which has been proposed as the highest good: happiness or pleasure; duty, virtue, or obligation; and perfection, the fullest harmonious development of human potential.

Many companies, and most organizations, subscribe to a code of ethics. For example the codes for the Institute of Electrical and Electronics Engineers (IEEE) and for the Project Management Institute (PMI) are shown.

Project Managers are responsible for determining the ethics that are to be used by the project team, for ensuring that all team members are aware of these rules, and then ensuring that everyone acts in a totally ethical manner at all times during the project. This is obviously a challenging assignment, but it is critical that the PM assumes this responsibility, and that all team members act in an ethical fashion at all times.


The Project Management Institute (PMI) is a professional organization dedicated to the development and promotion of the field of project management. The purpose of the PMI Member Code of Ethics is to define and clarify the ethical responsibilities for present and future PMI members.


In the pursuit of the project management profession, it is vital that PMI members conduct their work in an ethical manner in order to earn and maintain the confidence of team members, colleagues, employees, employers, customers/clients, the public, and the global community.

Member Code of Ethics

As a professional in the field of project management, PMI members pledge to uphold and abide by the following:

I will maintain high standards of integrity and professional conduct I will accept responsibility for my actions I will continually seek to enhance my professional capabilities I will practice with fairness and honesty

I will encourage others in the profession to act in an ethical and professional manner.

Also from the Encarta, we learn that through history morals and ethics have developed because they were necessary for the well being of the group. Why would projects be any different?

For as long as people have been living together in groups, the moral regulation of behaviour has been necessary to the group's well being. Although the morals were formalized and made into arbitrary standards of conduct, they developed, sometimes irrationally, after religious taboos were violated, or out of chance behaviour that became habit and then custom, or from laws imposed by chiefs to prevent disharmony in their tribes. Even the great ancient Egyptian and Sumerian civilizations developed no systematized ethics; maxims and precepts set down by secular leaders, such as Ptahhotep, mingled with a strict religion that affected the behaviour of every Egyptian. In ancient China the maxims of Confucius were accepted as a moral code. The Greek philosophers, beginning about the 6th century BC, theorized intensively about moral behaviour, which led to the further development of philosophical ethics. Ref: Encarta

The team must be clear about the ethical standards to be applied in the project work, and to subscribe to these. Particularly in the technical areas, but also on the project as a whole, engineers must ensure that their own behaviour and in fact all behaviour of project personnel is ethical. Some projects are multi-company, and even multinational. In these projects, teams may find themselves dealing with people who subscribe to different ethical codes. Most of the basic standards will be the same everywhere, but there can be deviations which must then be identified, understood and resolved as much as possible. This can cause stress and problems for the team members in both areas. If this is the situation on a project, the project manager should be aware of the situation, and may need to clarify for the team which standards are to be followed for the project. As long as the standards do not conflict, the team should honour both sets. If there is a conflict, the PM must decide which to follow, and this should be done with input from the team, and discussion. This can be one of the more challenging aspects of project management on such projects.

IEEE Code of Ethics

We, the members of the IEEE, in recognition of the importance of our technologies in affecting the quality of life throughout the world, and in accepting a personal obligation to our profession, its members and the communities we serve, do hereby commit ourselves to the highest ethical and professional conduct and agree:

1. to accept responsibility in making engineering decisions consistent with the safety, health and welfare of the public, and to disclose promptly factors that might endanger the public or the environment;

2. to avoid real or perceived conflicts of interest whenever possible, and to disclose them to affected parties when they do exist;

3. to be honest and realistic in stating claims or estimates based on available data;

4. to reject bribery in all its forms;

5. to improve the understanding of technology, its appropriate application, and potential consequences;

6. to maintain and improve our technical competence and to undertake technological tasks for others only if qualified by training or experience, or after full disclosure of pertinent limitations;

7. to seek, accept, and offer honest criticism of technical work, to acknowledge and correct errors, and to credit properly the contributions of others;

8. to treat fairly all persons regardless of such factors as race, religion, gender, disability, age, or national origin;

9. to avoid injuring others, their property, reputation, or employment by false or malicious action;

10. to assist colleagues and co-workers in their professional development and to support them in following this code of ethics.

Approved by the IEEE Board of Directors, August 1990


Earned Value is a tool which enables project managers to determine where the project stands in relation to the budget and the schedule, even on projects with hundreds or thousands of activities, some of which are on track at any given time, while others are either ahead of schedule or behind. Since Earned Value refers to cost, this concept could have been introduced in Chapter 7 with the other financial concepts. Or, since Earned Value shows the status of the Schedule, the concept could have been introduced in Chapter 8. But, given that the main value is as a tool for project management, this project management chapter seems to be the best place to cover this very important concept.

In order to describe this concept, we use the terms already mentioned in Chapter 7:

BCWS- budgeted cost of work scheduled or PV - planned value BAC- budget at completion

ACWP- actual cost of work performed or AC - actual cost EAC- estimate at completion

The PMBOK® Guide uses the terms PV and AC. Both terms are included here because some people use one version, while others use the second version. Then we add some additional concepts, related to the amount of work completed, and the overall schedule and budget status:

BCWP- Budgeted cost of worked performed = Earned Value CV- Cost variance - which is BCWP - ACWP SV- Schedule variance - which is BCWP - BCWS

BCWP is also called Earned Value (EV). Using this tool at any point in time we can evaluate the amount of work actually completed. Then we calculate the dollars that were budgeted for completing that work. The cumulative graph of these budgeted costs is the budgeted cost of work performed. Let's walk through this.

First, we have a list of project activities. For each of these activities, we have a planned cost, or the amount that we budgeted to complete that activity. And, for each, we have a start date and a finish date in the schedule. At any given point in time some activities will have started, some will not, and others will be finished. If we can get a solid estimate of how far along each of the activities is at the point in time - and this is a big if in itself -then we can determine the overall status of the project using Earned Value.

Let's look at this graphically.

Figure 1

The Earned Value is the Budgeted cost of Work Performed. What does this mean. For any item there is a budget. If we have completed that item, we have obtained a value. What value? According to our plan, the value of that item is the amount that was budgeted. So we have obtained the value that was in the budget. Note that this does not reflect in any way the actual cost to obtain this value. The cost of this item might have been higher then, the same as, or lower than the budgeted value. If the actual cost was higher, then for this item we are under budget; if lower we are obviously over budget. If we can calculate this amount for each of the action items, then we can determine for the project as a whole whether we are over budget, under budget, or on track financially.

For items that have not yet started, the value obtained is zero. But for items that are partially completed, things become more complicated. Someone has to determine the value obtained for each of these. Probably the best way to determine this value is to ask the people working on the activity how much work has been completed to date. This needs to be done carefully. Most people feel that they have worked hard, and accomplished quite a lot when they are working on activities. It is quite common for people to estimate that an activity is 80% finished, then find that the last 20% of the work takes 80% of the time. So, in order to balance this, the PM should ask how much work is remaining on the item. An estimate of the remaining work, subtracted from 100%, should give a more accurate reading of the percentage complete. Once this percentage completion is known, we know what percentage of the value has been obtained. We can then multiply the budgeted amount for the activity by this percentage to calculate the value obtained to date, or the earned value. Again, when we have all of the earned values, we can add these to get the overall EV for the project. This can then be compared to the actual cost to determine the budget status, called the cost variance, (CV) and to the planned value to get the schedule status, called the schedule variance (SV). See figure 1. CV = BCWP-ACWP SV = BCWP-BCWS

Forecasting Trends

Time Now Time

Figure 2

Time Now Time

Figure 2

This technique can be used to identify trends early. In fact, problems will show up even if these are masked by the usual calculations of actual cost versus budget. Because it takes all related factors into account, even on a complex project, this technique can unearth problems that are undetectable using other methods of analysis. Because this tool identifies potential problems early, the PM should start using this technique early in the project.

Additional information can also be calculated, if required, as shown in the following formulae.

■ SPI: Schedule performance index is BCWP/BCWS or EV/PV

■ CPI: Cost performance index is BCWP/ACWP or EV/AC

■ VAC: Variance at completion BAC- EAC

■ TCPI: To complete performance index (BAC-BCWP)/ (BAC-ACWP) or (BAC - EV)/(BAC-AC)

■ Percent complete BCWP/BAC or ACWP/EAC

However, be careful in using such calculations. You must know more than the numbers to apply these formulae properly. If people have been working hard, but facing some difficulties in the work, and these are expected to continue, so that the project is expected to progress at more or less the same rate as it has been progressing in the past, then the formula for EAC can be used. However, if the current variances are negative due to some significant one time problems that occurred in the early stages of the project, then the formula does not apply, because the performance indices are valid for the conditions experienced to date, not for those expected in the remainder of the project. In that case, to calculate the EAC, the PM would have to get estimates for cost to complete each of the remaining activities, add these, and then add on the cost to get to the current point. That would give the actual estimate to completion. Another technique which should give a reasonable estimate in these circumstances would be to calculate the amount budgeted for the work remaining, and add this to the actual cost to date. Since the remaining work is expected to proceed according to the original plans, this should give an accurate completion estimate.

To look at another parameter, consider CPI. CPI is a productivity measure. It is measuring how well the project is doing against the planned budget. If it is less than 1, then the project is in trouble. The same is true for SPI. If it is greater than 1 then the team has completed more work than planned by this time (SPI). But be careful in making this assessment. Maybe the team put a large amount of contingency into the early portion of the schedule to help cover for a risk, but it did not happen. So that contingency may not have been needed yet. The project will appear to be doing better than budget. However, if the contingency is needed later instead, this would bring the index down at that time.

In summary, earned value is a valuable tool. Some of the benefits of using it are that it shows trends early, so that these can be dealt with. It allows calculation of completion time even when the order of tasks is shuffled. The calculations can be done by milestone or by discipline if desired. These calculations can be combined with critical path analysis to give an even more comprehensive picture of the project status.

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