The simplest way to control cost is to match actual spending to the spending plan, pure and simple. An accounting office might do control that way, lacking any other information or perspective. This is a classic mistake in cost control that does not integrate with work performance or value.
The integrated cost control approach, on the other hand, involves looking at cost from the standpoint of work performed and quality/value achieved, not simply in terms of costs incurred. Integrated cost control is a forward integration tool that points toward completion of the work, keys on current progress, and matches costs to quality output. Forward cost control involves looking at the variance between the work performed in project execution against what it should have cost to do that work. It also looks at the value or quality of the deliverable at any given time to ensure that the customer is getting value for the dollar spent. In other words, a good indicator of whether you are forward integrating your cost control is whether invoices for work performed are paid.
What does integration feel like? In other words this overused term has a significant meaning in many fields, perhaps beyond its literal translation. Asking what integration feels like is not as superficial as it may sound. To explore when we have it is to explore how to get it. The following indicators come to mind:
1. When there is complete integration, a project deliverable reflects in its performance and value to the customer and stakeholders all the project requirements and components outlined for it in the project plan and work breakdown structure (WBS), along with horizontal and lateral coordination. Further, the design and performance of the product facilitates the customer's performance because it is integrated into the customer's systems.
2. When there is complete integration, all parties to a program and project— managers, team members, support people, suppliers, and customers—all are delighted with the project outcome and deliverables, and with their roles in its success.
3. When there is complete integration, all costs, schedule, quality, and risk factors, and changes along the way, are adequately reflected in the final outcome and due dates. The learning that occurs in a program or project is integrated into the product or service through integrated change controls.
4. When there is complete integration, the professional and technical project staffs, for instance, administrative staff, support people, software engineers, mechanical engineers, electrical engineers, and construction workers, who participated in defining specific components for a technical product deliverable, feel they have made a significant contribution and gained new working relationships with their colleagues.
5. When there is complete integration, there are no surprises and there has been an effective blending of cost, schedule, and quality considerations along the way in the project cycle; earned value has been maximized given project developments.
What significance does integration have for program and project managers in tomorrow's business settings?
Since the term integration is the key theme of this book, let's explore what integration means. The concept of integration has many dimensions, individual, technological, organizational, interpersonal, and informational, but the core concept of integration is grounded in connection and alignment. But why will integration be more important in tomorrow's business organization? What makes integration key to organization and product performance?
Integration means completeness and closure, bringing components of the "whole" together in an operating system. Components of a larger system, increasingly global in nature, are brought together to create performance; but what is the process of integration and how does it work generically? The answer lies in systems theory; a system is a series of parts working together with a common objective. Once the whole is defined, the analysis function breaks down the whole into its components for purposes of understanding, building, and managing the system. Integration then puts the "built components" of a system back together to create a performance model that is aligned, so that, all components work together as they were designed to.
Projects must be internally and externally integrated; internal integration means that project work packages, deliverables, and systems are connected; external integration means that the project interfaces with customer systems and produces value for the customer and the market/industry as a whole. Repeated internal and external project integration produces economic development in the larger community and societal framework.
The characteristics of integration that help to frame our understanding of program and project management and that underlie this book are as follows:
1. Systems don't integrate, people do. The individual and project team members, working with an external contingent of support people and stakeholders, is the beginning of integration. The way people who work in a project environment think about their roles, responsibilities, and tasks creates the conditions for integration. Integration thinking means that as people perform their functions, their behaviors reflect an awareness of impacts on other team members and on other product components, and most importantly on the customer's satisfaction with the outcome. Integration support systems connect key aspects of project performance, so that data are produced automatically on cost, schedule, and quality to allow informed decisions.
2. Forward integration means that communication and connection is focused forward on producing deliverables and creating customer satisfaction, not necessarily to bring a project back to its original plan. Plans are estimates; real work performance serves as the basis for corrective action. Forward integration is a downstream concept in which work is performed to provide value downstream toward the deliverable; sequence means that integration occurs at the right moment in the process. This is a horizontal function, cutting across traditional functions to create synergy and cooperation.
3. Top management builds the culture and mechanisms for successful connection and integration, involving extensive coordination by a centralized program and project management function that works to avoid disconnected efforts throughout the enterprise.
4. Integration means integrity. There is a connection between integrity, e.g., producing what you promise and doing it in a professional and ethical way, and integration, making sure required connections occur at the right time. The outcome, product, or service has integrity because it is integrated.
5. Accountability requires integration; new requirements, including the Sarbanes-Oxley legislation, demand top management fiscal accountability, making financial and work performance integration imperative. The new requirement for internal accountability stresses internal control and checks and balances. Once seen as a low-level accounting and audit requirement, this new mandate now requires integration at every level of the organization, including programs and projects.
6. Integration begins at the business level. New forces require a new way of thinking about business itself, business strategy and operations, projects, and markets. These forces come about from developing changes in the landscape of business management, most notably at the global level; integration now occurs across geographical, economic, political, and system boundaries as never before.
7. The "regime" of business, the whole business enterprise system, is also changing as more and more middle and small businesses surface and disappear with the tides of business fortune. How does a business organization, designed as it is to grow and profit through serving customers, assure that it plays in the regime of business fairly and with integrity? Such a business plays by the rules not just to avoid regulatory and government interference, but because the business equates success with integrity.
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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.