<< . .

. 9
( : 22)



. . >>

experience severe morale problems, as people scramble for new jobs before completing their responsibilities.
It is not uncommon for a project to experience lapses in quality as a result.
Keeping these shortcomings in mind, Perry agrees with his boss that a matrix structure is best for the Smythe
Project. A matrix structure obtains resources from functional organizations and also shares those people with
other projects. For command and control purposes, people report to their functional managers but support one
or more project managers. A generic matrix structure is shown in Exhibit 10-2 and the one for the Smythe
wedding is shown in Exhibit 10-3.
The matrix structure offers several advantages. It allows for sharing people with heavy expertise among
several projects. People don™t need to look for a new job as the project concludes. The project manager can
acquire people with the right skills at the right time, thereby reducing the need to keep people on when they
are not needed; this helps keep the cost lower. The matrix structure also gives senior management flexibility
in changing the scope or stopping the project owing to different market conditions.
Perry realizes, though, that a matrix structure presents challenges. It makes planning difficult, especially if
projects are sharing resources. Often, he must negotiate with functional and other managers to obtain people™s
help.
Exhibit 10-2. Matrix structure.

A matrix structure can wreak havoc on morale, too. Team members on multiple projects may be forced to
determine which project to give attention to. Sometimes the competition is so keen that individuals become
pawns in a power struggle among functional and project managers. That struggle can last a long time, adding
to team angst. Finally, the matrix structure often violates the unity-of-command principle (a single superior to
whom subordinates report).
To tackle these challenges, Perry recognizes the stress a matrix structure places on team members. He will
coordinate closely with functional and other project managers to facilitate availability and try to integrate his
project with other projects. He will encourage greater communication, information sharing, and bonding.
Finally, he will stress flexibility; change is a way of life in the matrix environment, since priorities and
resource availabilities constantly change.


Previous Table of Contents Next




Products | Contact Us | About Us | Privacy | Ad Info | Home

Use of this site is subject to certain Terms & Conditions, Copyright © 1996-2000 EarthWeb Inc. All rights
reserved. Reproduction whole or in part in any form or medium without express written permission of
EarthWeb is prohibited. Read EarthWeb's privacy statement.
Project Management Practitioner's Handbook
by Ralph L. Kleim and Irwin S. Ludin
AMACOM Books
ISBN: 0814403964 Pub Date: 01/01/98

Search this book:
Search Tips

Advanced Search


Previous Table of Contents Next



Virtual Teams
Title

Recent advances in information systems have brought unparalleled changes to business, not just technically
but also in managing projects. These changes include e-mail, the Internet, groupware, and client-server
technology. Technologies such as these have enabled team members to work autonomously at remote
-----------
locations during all time periods (e.g., mornings, evenings). But a project team may never meet face-to-face
with some people and will only interact electronically. That is the nature of virtual teams.
There are many advantages to a virtual team. It reduces the need for expensive facilities. Team members feel
greater freedom, working with less supervision. A side benefit is a flatter organization chart, too.



Exhibit 10-3. Organization chart reflecting matrix structure of Smythe Project.
While sounding like a dream come true, reality may provide a different picture. Virtual teams can pose tough
challenges. The first is how to provide support for these virtual team members. There are issues concerning
hardware and software, plus administrative matters such as accessibility to the project library and ways of
collecting information nonelectronically.
Second is how to overcome the purported loneliness that affects some virtual team members. Many work
alone, in remote geographical locations. Their opportunities for social interaction and camaraderie are limited.
Third is the challenge of coordinating the activities of team members. With members geographically
dispersed and in different time zones, coordination can be a nightmare. Since oversight is difficult, project
managers cannot closely monitor work. Similarly, communication usually involves more than e-mail. There
must be a way to discuss major project activities.
Some ways to handle these challenges include:
• Conducting frequent face-to-face meetings and holding social gatherings
• Developing objective ways to measure performance and completion criteria
• Empowering people to assume responsibility and accountability for results
• Establishing time commitments for team members to respond to each other
• Providing a standard suite of hardware and software tools

SWAT Teams
Special Weapons and Tactics (SWAT) teams are a growing presence in project management. These are small
groups of individuals who are experts not just in project management but also in other subjects. In the sense
that their objective is to move quickly to complete their mission and pull out, these groups are like the police
SWAT teams from which they get their name. Specifically, a project SWAT team must quickly set up the
appropriate project management and technical disciplines at the beginning of a project. Once the disciplines
have been established, the team relinquishes control to a project manager and his group, who are responsible
for completing the project.
SWAT team work is intense. By the time its work is completed, it will have developed and implemented a
complete project plan, from estimates to schedules.
Although hard skills (e.g., expertise with software and hardware) are important, soft skills are important, too.
For example, SWAT team members must solicit buy-in for their work. Active listening, facilitation,
communication, and teaming skills are extremely important. Also important is the ability to keep calm under
pressure and a willingness to share equipment, expertise, or information.
To use SWAT teams effectively:
1. Obtain support for the work of a SWAT team by follow-on teleconferencing sessions; otherwise, the
team™s effort will be wasted.
2. Be aware that working on a SWAT team can cause burnout. Morale and energy levels can plummet.
3. Provide constant training for SWAT team members. They must keep abreast of technologies in
order to provide state-of-the-art expertise. Cross-training can help, but only so far.
4. Select people for the SWAT team who can handle ambiguity. Members must be willing to tackle
projects when goals and deliverables are ill defined.

Self-Directed Work Teams
In recent years, a different approach to building teams has emerged, called a Self-Directed Work Team
(SDWT).
SDWTs are teams that have considerable autonomy while building a product or delivering a service. It is a
group of professionals sharing responsibility for results.
These teams are cross-functional, meaning that people with different disciplines and backgrounds work
together to achieve a common goal. The team decides everything, from setting priorities to allocating
resources. Other actions include selecting people, evaluating performance, and improving processes. The key
characteristic is the autonomy to make decisions without supervisory approval.
Several trends are pushing toward the SDWT concept because these teams:
• Create flatter organizations
• Empower employees
• Encourage greater teaming
• Encourage people to have a more general background
• Enlarge spans of control
SDWTs are excellent candidates for applying project management ideas. Since the entire team is responsible
for the results, all members must help lead, define, plan, organize, control, and close the project. The tools and
techniques of project management enable teams to do that.
Questions for Getting Started
1. Did you determine whether your project organization has or should have a task force or matrix
structure?
2. Regardless of the type, did you consider the following when organizing the team:
• Accountability issues?
• Authority issues?
• Basis for grouping functions?
• Concurrence from the right people?
• Level of autonomy for team members?
• Players?
• Political climate?
• Project goals?
• Responsibility issues?
• Span of control?
• When to publish the organization chart?
• Which are the line and which are the staff functions?
3. If a task force structure, what can you do to deal with its shortcomings (e.g., decline in loyalty)?
4. If a matrix structure, what can you do to deal with its shortcomings (e.g., competition among
projects for key people)?
5. If you have a virtual team, even partially, how will you deal with the challenges (e.g., ongoing
technical support) often associated with such teams?
6. If you have a SWAT team, how will you overcome the challenges (e.g., burnout) often associated
with such teams?


Previous Table of Contents Next




Products | Contact Us | About Us | Privacy | Ad Info | Home

Use of this site is subject to certain Terms & Conditions, Copyright © 1996-2000 EarthWeb Inc. All rights
reserved. Reproduction whole or in part in any form or medium without express written permission of
EarthWeb is prohibited. Read EarthWeb's privacy statement.
Project Management Practitioner's Handbook
by Ralph L. Kleim and Irwin S. Ludin
AMACOM Books
ISBN: 0814403964 Pub Date: 01/01/98

Search this book:
Search Tips

Advanced Search


Previous Table of Contents Next



Title
Chapter 11
Budget Development and Cost Calculation
Nothing gets done without money. Projects are no exception, and Perry is the first to realize this.
-----------

There are many reasons for calculating costs before they are incurred. To begin, they give an idea of how
much the goals will cost to achieve. Cost calculations later become a tool for measuring the efficiency of a
project team. They also help determine priorities as the project progresses. Finally, they contribute to the
overall profitability of a company.
As project manager, Perry has several responsibilities for budgeting. He must develop budgets on a
task-by-task basis and for the entire project. He must ensure that expenditures stay within the budget allocated
for each task and the project as a whole. He seeks additional funding, if necessary. Finally, he tracks and
monitors expenditures, identifying and reporting deviations to upper management.
When estimating his costs, Perry establishes a management reserve, usually 3 to 5 percent of the total
estimate for the project, to address unexpected costs. This reserve increases the overall cost estimate for the
project.
Later, while controlling his project, Perry uses the cost estimates to compare to actual expenditures. Of
particular importance are estimates versus actual costs up to a given point. If the actual costs exceed the
estimated costs up to a specific point, an overrun exists. If the actual costs are less than the estimated costs up
to a specific point, an underrun exists. Perry looks for overruns and underruns on a task-by-task global basis.
If the feedback has an overrun, for example, Perry takes corrective action.

Different Kinds of Costs
Perry knows that many items in a project cost money. The typical ones are:
• Equipment (purchase, lease, rental, and usage)
• Facilities (office space, warehouses)
• Labor (employee, contract)
• Supplies (paper, pencils, toner, sundries)
• Training (seminars, conferences, symposiums)
• Transportation (land, sea, air)
The standard formulas for calculating these costs are:
Equipment = purchase price
or
lease price — time period
or
rental price — time period
Facilities = lease price — time period
or
rental price — time period
Labor costs = (regular hours — hourly rate) + (overtime hours — time and a half rate) + (overtime hours —
double time rate)
Supplies = quantity — unit price
Training costs = (tuition cost — number of attendees) + (the sum of the labor costs for attendees)
Transportation costs = (daily, weekly, monthly, or hourly rate) — (period of usage)
There are also different ways to classify costs.

Direct vs. Indirect Costs

Direct costs directly relate to the building of a product ” for example, materials and specialized labor.
Indirect costs are other than direct costs and not necessarily related to the building of a product ” for
example, rent and taxes.

Recurring vs. Nonrecurring Costs

Recurring costs appear regularly ” for example, long-term payments for facilities. Nonrecurring costs appear
only once ” for example, the purchase of equipment.

Fixed vs. Variable Costs

Fixed costs are not alterable owing to changes in work volume ” for example, cost of facilities usage.
Variable costs vary depending upon consumption and workload ” for example, cost of materials.
Activity-Based Costing (ABC)
Activity-based costing (ABC) is a process approach to accounting, giving a realistic portrait of the total
costs for a project. With traditional accounting methods, labor is seen as the primary contributor to costs,
while with ABC, overhead and materials have significant impact. Traditional accounting emphasizes
"hacking away many heads," not reducing material and overhead costs. ABC instead focuses on processes
and their improvement, not just reducing head count. It also focuses on customers, since the true cost of the
final product is passed on to the customers.
Project managers can play a major role in furthering the use of ABC. ABC also requires good definitions of
what the customer wants (statement of work), a list of the activities for meeting those wants (work
breakdown structure), and fixed monies (cost estimates) to produce the product or deliver the service.
Project managers can realistically determine direct and indirect costs and also determine what processes to
improve or remove in order to increase customer satisfaction and reduce costs.

Burdened vs. Nonburdened Labor Rates

Burdened labor rates include the cost of fringe benefits ” for example, insurance and floor space and
nonlabor overhead. Nonburdened rates are labor rates minus the cost of fringe benefits and overhead.

Regular vs. Overtime Labor Rates

Regular labor rates are less than or equal to 40 hours per week. Overtime labor rates are more than 40 hours
per week, including time and a half and overtime.

How to Calculate Costs
Making a reliable cost estimate depends on the amount of information available for estimating. Having more
information means you have greater ability to discern the elements that constitute an estimate. Making a
reliable cost estimate also depends on a good work breakdown structure (WBS); see Chapter 6. And, of
course, to produce a reliable cost estimate requires a good project definition; the better the definition, the
more reliable the estimate because the parameters of the final product or service have been established; see
Chapter 5.
Obtaining a reliable cost estimate depends on good time estimates, too. Most cost estimates rely on a count of
labor hours to complete work. If the work estimate is reliable, then the costs should have an equivalent
reliability, since they represent hourly rate times total hours; see Chapter 7. Finally, estimates often are based
on assumptions. Unless identified, these assumptions can lead to misunderstandings and ultimately to
inaccurate calculations. The assumptions are spelled out in the statement of work; see Chapter 5.


Previous Table of Contents Next




Products | Contact Us | About Us | Privacy | Ad Info | Home

Use of this site is subject to certain Terms & Conditions, Copyright © 1996-2000 EarthWeb Inc. All rights
reserved. Reproduction whole or in part in any form or medium without express written permission of
EarthWeb is prohibited. Read EarthWeb's privacy statement.
Project Management Practitioner's Handbook
by Ralph L. Kleim and Irwin S. Ludin
AMACOM Books
ISBN: 0814403964 Pub Date: 01/01/98

Search this book:
Search Tips

Advanced Search


Previous Table of Contents Next



What follows is an example of how Perry estimates the costs for each task in the WBS. He uses a worksheet
Title
format (Exhibit 11-1) to calculate the figures. The summary of his calculations is the total cost for the project,
excluding the management reserve.
Perry tracks the estimate-at-completion for each task and the management-estimate-at-completion (MEAC).
The estimate-at-completion is a combination of actual expenditures to date up to a specific point plus the
-----------
remaining estimate to complete the project. The MEAC is the actual expenditures to date plus the remaining
estimate to complete the entire project. Both the estimate-at-completion and the actual expenditures to date
give




Exhibit 11-1 Worksheet for estimating costs.
Costs
($)
Labor 560.00
Telephone 12.00
Transportation 20.00
Training 0.00
Equipment 0.00
Supplies 0.00
Total Estimate 592.00
round to
600.00

Perry a good idea of how well expenditures have gone and will go if the current levels of performance
continue.

What Happens If Cost Estimates Are Too High?
Frequently, project managers are asked to reduce their estimates. Top management often feels that a project
can be completed with less money. It may even declare a 10 percent across-the-board reduction for all
projects. Dealing with such commands is one of the hardest challenges facing project managers. Fortunately,
they have several options.
The project manager can communicate her reasons for the cost estimates. She can explain, for example, the
rationale behind the time estimates and the accompanying calculations. Presenting the reasons and
assumptions especially gives a persuasive argument for retaining the cost estimates.
The project manager can also develop revised cost estimates. Based on feedback from senior management,
she can select the best revised estimate.
Finally, the project manager can negotiate with the customer to reduce or revise the scope of the project,
reduce the work requirements as described in the work breakdown structure, reduce the time estimates, and
modify the assignments. Ultimately, revisions to the scope will then be reflected in the estimated costs.

The key: Identifying and Managing Costs

Money is the oil that gets projects moving and keeps them running. The Smythe Project is no exception. Perry
appreciates the importance of identifying and managing costs throughout the life of the project. He knows that
how he categorizes costs is not as important as ensuring that the project completes within budget.
Perry knows, too, that costs, along with schedules, are susceptible to positive and negative changes that may
increase or decrease the reliability of his estimates. To a large extent, this reliability will be affected by the
degree of risk associated with his schedule and cost estimates.

Questions for Getting Started

1. Did you identify all the types of costs for your project?
2. Did you identify the rates for usage and quantity that you plan to consume?
3. Did you calculate the total costs by summing the totals for each task?
4. If you elect to have a management reserve, did you determine the appropriate percent to be
multiplied against the total costs of the tasks?
5. If you received pressure from your management or the customer for having too high an estimate, did
you develop alternative ways to deal with their resistance?


Previous Table of Contents Next




Products | Contact Us | About Us | Privacy | Ad Info | Home

Use of this site is subject to certain Terms & Conditions, Copyright © 1996-2000 EarthWeb Inc. All rights
reserved. Reproduction whole or in part in any form or medium without express written permission of
EarthWeb is prohibited. Read EarthWeb's privacy statement.
Project Management Practitioner's Handbook
by Ralph L. Kleim and Irwin S. Ludin
AMACOM Books
ISBN: 0814403964 Pub Date: 01/01/98

Search this book:
Search Tips

Advanced Search


Previous Table of Contents Next



Title
Chapter 12
Risk Management
Projects can fail for a number of reasons and the risks are always high. While a project manager cannot
-----------
eliminate risk, she can prevent or mitigate its impacts by using risk management.

Managing Risk: A Four-Step Process
Risk management is the process of identifying, analyzing, controlling, and reporting risk. Risk identification
is the identification of major elements of a project and their associated risks. To do this, Perry will rely on his
and others™ knowledge and expertise. He will meet with core team members, the customer, and senior
management to solicit input. He will review documentation, including the statement of work, work
breakdown structure, and requirements documents. This information prepares him for the next step. Risk
analysis is the classification of those elements to different levels of risk. Perry will compare the “should be”
controls with the ones that do exist and will identify any discrepancies. He will also determine the probability
or likelihood each risk will materialize and whether a control is necessary. Risk control is the determination
of controls that can mitigate the risks. It involves deciding under what circumstances to take action to prevent
or mitigate the impact of a risk. Perry essentially will do contingency planning, which involves anticipating
responses to negative circumstances. Risk reporting is the act of informing team members and senior
management of those risks.

<< . .

. 9
( : 22)



. . >>