Chapter 3 – Project Integration Management Flashcards
Types of Project Selection Models
- Nonnumeric Models
* Numeric Models
Nonnumeric Models
• Do not return numeric value
- Cannot be compared
• It is a justification
• Does not make them all ‘bad’
Types of Nonnumeric Models
- Sacred Cow
- Operating Necessity
- Competitive Necessity
- Project Line Extension
- Comparative Benefit
Sacred Cow
• Project has taken life of its own
• Not due to any justification
- but “Just because”
Operating Necessity
• A project required to:
- Protect lives or property - Keep company in operation
Competitive Necessity
• Project required to:
- Maintain company’s position in marketplace
Project Line Extension
• Project expanding a product line:
- How well the new product meshes with existing product line (new <> old)
Comparative Benefit
• Projects:
- Subjectively rank ordered based on perceived benefit (to the company)
Numeric Models
• Returns a numeric value - Can be easily compared • Two major categories: - Profit/profitability - Scoring
Profit/Profitability Models
• Looks at: - Costs - Revenues ~ Payback period ~ Discounted cash flow (NPV) ~ Internal rate of return (IRR) ~ Profitability index • More common: - NPV - IRR
Payback Period
• Length of time - Until project’s original investment has been recouped - Shorter payback period is better • Drawbacks: - Time value of money: ~ Not considered - More difficult to use ~ Cash flow change over time - Less meaningful ~ Over longer periods of time
Discounted Cash Flow
• Value of cash: - Inflows - Outflows • Also known as: - Discounted cash flow - Discounting • Widely used to evaluate: - Projects - Time value of money - Inflows - Outflows - Payback point • Requires a percentage - To reduce future cash flows • Discount rate: - Hurdle rate - Cutoff rate • Usually be one overall discount rate
Internal Rate of Return [IRR]
• Discount rate (k) - Causes NPV to be equal to 0 • Higher the IRR = better - Possible to have multiple IRR’s - Not a practical issue • Finding the IRR requires: - Financial calculator - Computer
Profitability Index
• Benefit cost ratio • NPV: - Divided by initial cash investment • Ratios: - Greater than 1.0 ~ Good
Advantages of Profitability Models
• Easy to: - Use - Understand • Based on: - Accounting data - Forecasts • Familiar & well understood • Give: - Go/no-go indication • Can be modified: - To include risk
Disadvantages of Profitability Models
• Ignores: - Non-monetary factors - Time value of money - Cash flow after payback • Discounting models (NPV, IRR): - Biased to the short-term
Scoring Models
- Unweighted factor model
* Weighed factor model
Unweighted
• Weighted the same • Less important factors: - Same as important ones • Easy to compute • Total/average the scores
Weighted
• Weighted relative to its importance - Allows important factors stand out • Include non-numeric data - In the analysis • Need to sum to one • All weights are set up: - Higher values = more desirable • Small difference in totals: - Not meaningful
Integrated Change Control
Basic causes results project changes: • Uncertainty - Technology on which the work of the project or its output is based • Increase in: - Knowledge base - Sophistication of the client user ~ Leads to scope creep • Modification of the rules - Applied to: ~ Process of project’s execution/output
3 main integrated control objectives
• Influencing factors that create changes: - Ensure changes are beneficial • Determine: - Change has occurred • Managing: - Actual occurring changes
Change Control on Information Technology Projects
• Former view: - Project team: ~ Do exactly as planned ~ Within budget • Problem: - Stakeholders: ~ Rarely agreed up-front on project scope ~ Inaccurate: \+ Time estimates \+ Cost estimates • Modern view: - Project management: ~ Process of: \+ Constant communication \+ Negotiation • Solution: - Changes: ~ Beneficial - Project team: ~ Make plans
Change Control System
• Formal, documented process - Describes when and how official project documents and work may be changed • Describes who is authorized to: - Make changes - How to make changes
Change Control Board (CCB)
• Formal group of people - Responsible for: ~ Approving ~ Rejecting • Changes on a project • Provides guides for: - Preparing change requests - Evaluate change requests - Manage implemented of approved changes • Includes: - Stakeholders from the entire organization
Making Timely Changes
• CCBs:
- Only meet occasionally
~ May take too long for changes to occur
• Policies in place for time-sensitive changes (by organizations):
- 48-hour policy
~ Allows decisions to be made
~ Can reverse decisions made within 48 hours (pending senior management approval)
- Delegate changes
~ To the lowest level possible but keep everyone informed of changes
Configuration Management
• Ensure: - Project’s products description: ~ Correct ~ Complete • Involves: - Identifying & controlling: ~ Product and support documentation’s functional & physical design characteristics • Configuration management specialists: - Identify & document: ~ Configuration requirements ~ Control changes ~ Record changes ~ Report changes ~ Audit the products - To verify conformance to requirements
Suggestions for Performing Integrated Change Control
• View project management as: - Process of constant communication and negotiation • Plan for change • Use: - Effective configuration management - Written & oral performance ~ Help identify and manage change - Project management and other software ~ Help manage and communicate changes • Define procedures for: - Making timely decisions ~ On smaller changes
Closing Projects and Phases
• Finalize all activities • Transfer the completed/cancelled work to the appropriate people • Main outputs include: - Final product - Service - Result transition - Organization process asset updates
Using Software to Assist in Project Integration Management
• Documents: - Word processing software • Representations: - Presentation software • Tracking: - Spreadsheets - Databases • Communication software: - E-mail - Web authoring tools ~ Facilitate communications • Business Service Management (BSM) - Track the execution of business process flows