Benefits of recent Project Management Methods and Tools

Page I/ VII Abstract

Abstract

A wide range of tools to support various aspects of project management are available and are being constantly improved. This research examines recently introduced methods and tools which are applied to Single and Multi-Project Management and reviews the benefits they can bring to project success and on-time performance.

The work goes on to analyse whether these methods are supported by or potentially implantable into IT tools and what further benefits can be gained from software support. A survey of international industrial companies was designed and carried out to determine the requirements, benefits and criticisms of IT-based project planning as reported by people in positio ns ranging from project engineers to top managers. The data collected were evaluated qualitatively and quantitatively to determine the benefits arising from the application of IT tools and the limitations of the currently available software. Finally, proposals are made for the future development of these tools.

Index Page II/ VII

  Index  

  ABSTRACT  I

  INDEX  II

  ABBREVIATIONS AND DEFINITIONS:  IV

TABLE OF  FIGURES  VII

1  INTRODUCTION  1

1.1  THE SITUATION  1

1.2  SCOPE  2

1.3  PROCEDURE OF THIS WORK  2

2  RELEVANT ISSUES IN PROJECT MANAGEMENT  3

2.1  ORGANIZATION OF PROJECTS  8

2.1.1  Organization Structure and Size  8

2.1.2  Informal factors of an Organization and team building  8

2.1.3  Frustration  9

2.1.4  Optimal team size and communication  10

2.2  PROJECT PLANNING: METHODS OF SCHEDULING PROJECTS AND RESOURCES  12

2.2.1  Types of Project Planning  12

2.2.2  Project structure and schedule planning methods  14

2.2.3  Resource allocation methods  15

2.3  PROJECT EXECUTION STEERING METHODS AND TOOLS  18

2.3.1  Problem solving procedure Customer Change Request Procedure  18

2.3.2  Project Team Coordination Groupware tools  19

2.4  METHODS OF PROJECT CONTROLLING  20

2.4.1  Evaluating Project Progress (deadlines costs and subject progress)  20

2.4.2  Project Risk Assessment (risk)  25

2.4.3  Productivity Measurement (time)  27

2.4.4  Performance Measurement (quality)  30

3  IMPLEMENTATION OF PLANNING PROCESSES INTO IT TOOLS  33

4  PREVIOUS EMPIRICAL RESEARCH ON THE BENEFITS OF METHODS AND TOOLS  38

4.1  PROJECT PORTFOLIO MANAGEMENT  38

4.1.1  Findings of Cooper R G Edgett S J Kleinschmidt E J (2001)  38

4.1.2  Findings of Cooke-Davies Terry (2002)  40

4.2  BEST PRACTICES FOR PROJECT MANAGEMENT  41

4.2.1  Findings of Elonen Suvi Artto Karlos A (2003)  41

4.2.2  Findings of an analysis in Balderstone S J Mabin V J (1998)  41

4.2.3  Findings of Di allo Amadou Thuillier Denis (2004)  42

4.2.4  Findings of Matheson D Matheson J (1998)  43

Index Page III/ VII

4.2.5  Findings of Sanchez A M Perez M P (2004)  47

4.2.6  Findings of Shenhar et al (2002)  48

4.2.7  Findings of Ojanen Ville (2003)  48

4.3  PROJECT MANAGEMENT IT TOOLS  49

4.3.1  Findings of Kalthoff C Kunz S (2004)  49

4.3.2  Findings of Projektron Ltd  50

4.3.3  Findings of Ahlborn Jan (2003)  51

5  A STUDY ON DESIRED FUNCTIONALITY IN PROJ ECT MANAGEMENT IT TOOLS  52

5.1  GOAL AND PROCEDURE OF THE SURVEY  52

5.1.1  Goal of the Survey  52

5.1.2  Design of the survey  54

5.1.3  Searching for and selecting suitable participants  69

5.2  SURVEY RESEARCH IMPLICATIONS  71

5.2.1  Qualitative Analysis  71

5.2.2  Quantitative Analysis  78

6  SUMMARY AND CONCLUSIONS  85

  REFERENCES  86

APPENDIX A:  MANAGEMENT FEEDBACK SURVEY  94

APPENDIX B:  COVER LETTERS OF THE SURVEY  97

APPENDIX C:  SURVEY DATA BASE STATISTICS  99

APPENDIX :D  SURVEY RESPONSE STATISTICS  100

  RESPONSE STATISTICS GENERAL ITEMS  102

  RESPONSE STATISTICS IT TOOLS IMPORTANCE REALIZATION ITEMS (EXCL OUTLIERS)  103

  BEST PRACT ICES OF IT TOOL BASED PROJECT MANAGEMENT:  104

  CORRELATIONS AND FACTOR ANALYSIS OF REASONS FOR PROJECT ’S FAILURE:  105

  INDEPENDENT SAMPLE T-TEST ON PERCEIVED IMPORTANCE OF IT TOOLS BY  

  RESPONDENTS GROUPED BY AGGREGATED PROJECT SUCCESS OF PROJECTS  106

  INDEPENDENT SAMPLE T-TEST ON REALIZATION OF IT TOOLS BY  

  RESPONDENTS GROUPED BY AGGREGATED PROJECT SUCCESS  107

  DATA REDUCTION OF REALIZATION PERCEPTION OF DIFFERENT IT TOOL FEATURES:  108

APPENDIX E:  CRITICIS MS OF AND HINTS FOR IT TOOLS STATED BY PARTICIPANTS  109

APPENDIX F:  ZUSAMMENFASSUNG IN DEUTSCHER SPRACHE  112

Page IV/ VII Abbreviations and Definitions:

Abbreviations and Definitions:

CC Goldratt introduces the notion "critical chain" which stands

for the "critical path" cleaned from safety margins.

DCF discounted cash flow

EPM Enterprise Project Management system: As PMS an IT tool

for Project Management, but for whole Enterprise’s use.

ERP Enterprise Resource Planning: IT Tool for corporate

management

External effectiveness ¹ :

performance of the outcome of a project i.e. a developed

External integration 2

measure for the integration of client’s needs and benefits to

FMEA Failure Mode Effect Analysis

FPY First Pass Yield: A measure of performance in project

ICM interpersonal circumplex model: explanatory model for

1 Barclay, I.; Dann, Z.; Holroyd, P. (2000), p. 5

2 Clark, Kim B.; Fujimoto Takahiro (1991), p. 34

Page V/ VII Abbreviations and Definitions:

Internal efficiency ¹ :

relates to the productivity in a project within the

Internal integration 2

the correctness of a product (Konstruktionsqualität).

IRR Internal Rate of Return (Zinsfuß)

IS Information System (IT tool)

IT tools 3

“Information Technology” tool s: electronic-based computer

systems, appliances, and software tools

MM Man- month: working hours of an emp loyee working one

month, also called person-month

MW Man-week: working hours of one employee working for

one week, also called person-week

MY Man- year: working hours of one employee working for one

year, also called person- year

NPV Net present Value

Lateral organization 4

an organization containing equal to equal (peer), network,

1 Barclay, I.; Dann, Z.; Holroyd, P. (2000), p. 4

2 Clark, Kim B.; Fujimoto Takahiro (1991), p. 40

3 Charvat, Jason (2002), p. 285

4 Sapienza, Alice M. (1995), p. 87

Page VI/ VII Abbreviations and Definitions:

PDM Precedence Diagram Method: networking technique used

PDS Project Definition Structure

PLM Product Lifecycle Management: Enterprise solution of

PMS Project Management System: IT tool for Project Manager’s

level of interest and use

QRA Quantitative Risk Assessment

TOC “Theory of Constraints” for Multi-Project Management

TPQ Total Product Quality is built of the dimensions quality of

construction and quality of conformity of a product

VSMS Visual Scheduling and Management Systems

WBS work breakdown structure

Table of Figures Page VII/ VII

Table of  Figures  

  FIGURE 2 1: -MMODEL AHLEMANN FREDERIK HOPPE UWE ED (2003)  3

  FIGURE 2 2: OVERLAP OF PROJECT PROCESS GROUPS IN A PHASE  4

  FIGURE 2 3: : METRICS PROPOSED IN LITERATURE FOR THE EVALUATION OF R D PROJECTS AND PORTFOLIOS  7

  FIGURE 2 4: OPTIMAL TEAM SIZE ACCORDING TO BROOKS’ THEORETIC FORMULA  11

  FIGURE 2 5: COMPARISION OF SOME RESOURCE ALLOCATION METHODS IN A SIMULATION  17

  FIGURE 2 6: PROJECTS’ PLANNED ACTUAL WORKING HOUR CONFORMITY VISUALIZATION OVER QUARTERS  23

  FIGURE 2 7: PROJECT BUFFER GRAPH  25

  FIGURE 2 8: AN OUTLINE STRUCTURE OF RISK MANAGEMENT METHODS  26

  FIGURE 2 9: DYNAMICS OF TYPICAL P ROJECTS: PRODUCTIVITY OVER P ROJECTS TIME (LEFT)  28

  FIGURE 2 10:ESTIMATED PROJECT PROGRESS IN SOFTWARE P ROJECTS AT SIEMENS S A (RIGHT)  28

  FIGURE 2 11: PERFORMANCE CRITERIA IN PRODUCT DEVELOPMENT PROJECT  30

  FIGURE 2 12: COMMON AND COMPANY SP ECIFIC PROBLEMS IN R D PERFORMANCE MEASUREMENT  31

  FIGURE 3 1: CONCEPT OF PROJECT MANAGEMENT SYSTEMS  34

  FIGURE 3 2: COMPARISON OF SOME PM SYSTEMS  37

  FIGURE 4 1 : HOW MANAGERS SEE THE IMPORTANCE OF PORTFOLIO MANAGEMENT BEST VS WORST  39

  FIGURE 4 2 : THE DOMINANT PORTFOLIO METHOD EMPLOYED BEST VS WORST  40

  FIGURE 4 3: PRIORITISED GRAPH OF PRELIMINARY PROBLEM AREAS  41

  FIGURE 4 4: TOP 10 BEST PRACTICES OF R D PERFORMANCE  43

  FIGURE 4 5: LOWEST 10 OF R D BEST PRACTICES (WORST PRACTICES)  44

  FIGURE 4 6: BEST PRACTICES OF PROJECT MANAGEMENT  45

  FIGURE 4 7: TOP 5 OF CORE BEST PRACTICES  46

  FIGURE 4 8: IMPORTANCE OF PLANNING AND CONTROL METHODS  48

  FIGURE 4 9: MOST IMPORTANT FACTORS OF INTERNAL EFFECT IVENESS  48

  FIGURE 4 10: MOST IMPORTANT FACTORS OF EXTERNAL EFFECT IVENESS  49

  FIGURE 4 11: PROJECT MANAGEMENT SOFTWARE APPLIED FOR PROJECT MANAGEMENT  49

  FIGURE 4 12: INTENDED EXTENDED APPLICATION OF PROJECT MANAGEMENT SYSTEMS  50

  FIGURE 4 13: DESIRED FUNCTIONALITY IN PROJECT MANAGEMENT SOFTWARE  50

  FIGURE 4 14: EFFICIENCY AND COST BENEFITS RESULTING FROM IT TOOL SUPPORTED PLAN NING  51

  FIGURE 5 1: TOP 10 IT TOOL REALIZATION (DIFFERENCES BETTER VS WORSE PERFORMING PROJECTS)  80

  FIGURE 5 2: TOP 10 IT FUNCTIONALITY IMPORTANCE (BETTER VS WORSE PERFORMING PROJECTS)  81

  FIGURE 0 1: RANKING OF BEST PRACT ICES ACCORDING TO IMPORTANCE OF RELATED IT TOOL FEATURES  104

Introduction Page 1/114

Benefits of Project Planning Methods and Tools

1 Introduction

1.1 The Situation

All branches are facing rougher economic environments with increasing competition, increasing market concentration and fragility which is shortening product lifecycles while putting strong requirements to costs and quality. Coincidently less customer and supplier loyalty were forcing industry and science to increase productivity in all branches and business units ¹ . In order to increase productivity, theories were heading production costs;

trying to optimize production flow, lower throughput time and product buffers.

Pressure to perform came also up for project management and the costs coming up from failing projects and lack of efficiency were embattled (every year 75 Billion US Dollar have been spent on failing projects only in the IT-Sector ² ). New methods and tools were

necessary to face inefficiency in projects caused by little pressure to perform, bad planning and unpredicted upcoming resource bottlenecks. As in production, these theories applied critical path, buffer and throughput time planning which guaranteed project schedule optimization.

Furthermore, i n the early nineties ³ , n ew, department overlapping project organization

structures were introduced and Project Managers were increasingly managing multiple projects at a time. This made project schedule planning very complex and prediction of resource bottlenecks without aids nearly impossible.

Therefore some scientists suggested application of IT tool supported detailed project planning and controlling, while others, managers in industry were still widely thinking like Dwight Eisenhower once said: "Plans are nothing, planning is everything” 4 .

1 Clark, Kim B.; Fujimoto Takahiro (1991), pp. 12-18

2 Microsoft Corp. (2003), p. 6

3 Nobeoka, Kentaro (1995), p. 3

4 Lechler, Thomas (2002), p. 1

Introduction Page 2/114

1.2 Scope

This thesis summarizes and analyses, which principal methods and tools for Single and Multi-Project Management are applicable in IT tools for Project Management and which benefits can arise through application of those.

By performing an industry wide empirical survey on Project Managers, importance and actual realization of functionality in IT tools that can influence success factors of project management will be revealed; and the actual benefits of detailed, IT based project planning regarding industry's needs will be found. Finally, it will be tested whether the degree of application of IT tools has a positive influence on the given project success rate underneath the respondents of the survey.

1.3 Procedure of this Work

This work is basically divided into four parts:

In the first part (Chapter 2) key strategies, methods and tools of project management will be summarized and checked upon their potential use in IT tools.

In the second part (Chapter 3), the author will check how professional Planning Tool Provider implemented the Project Management methods in to their systems, and what items still have to be improved.

In the third part (Chapter 4), relevant studies on key issues in project management will be summarized and their findings prepared for survey creation.

The final fourth part (Chapter 5) is related to the creation and execution of a primary empirical study that verifies project manager's tacit knowledge of project management and their perception of IT tool importance and realization. The survey’s outcome will be interpreted qualitatively and quantitatively.

Relevant Issues in Project Management Page 3/114

2 Relevant Issues in Project Management

In order to be able to understand and to judge whether methods and tools are important for project management, it is important to define the principal terms and to know the levels and the structure of project management.

A Project can be defined (according to DIN 69901) as a one time event of certain duration, with a defined goal, having a complex structure with its own, specific and separate organization.

A framework describing all project related activities in companies is the M -Model introduced by Prof. Hoppe of the University of Osnabrück (compare Figure 2.1 below).

Figure 2.1: M-Model, Ahlemann, Frederik; Hoppe, Uwe [Ed.] (2003)

The M-Model consists of three levels of hierarchy: the Management Board, the Project office & Steering committee and Project Manager.

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The upper third of the M-Model’s tasks are related to Portfolio Management. Portfolios include all projects and programs of strategic business units and are built up in order to reduce the complexity of the Management Board’s activities. The Management Board is supposed to drive a strategic portfolio planning and controlling by financial or resource constraints ¹ .

Program Management’s primary planning object is coordination of the project program, a set of interrelated projects at the level of a department or a similar organizational unit at the middle level. Program management is done by Project Office and/or a Steering Committee

Project Management is related to the operational planning and execution activities of a project; primary goal is to ensure that the project meets the requirements during initiating, planning, executing, controlling, and closing phases (compare below Figure 2.2).

In the initiation phase, project ideas are generated, collected, captured, examined and their feasibility, profitability and strategic impact are analyzed for a go/no-go decision of the management. Planning, executing and controlling processes are described in chapters 2.2, 2.3, and 2.4. In the closing process a project, results are analysed, the enterprise closes the project and tries to learn from the experiences made. Initiation and closing processes can be supported by stand alone IT tools.

Figure 2.2: Overlap of Project Process Groups in a Phase 2

1 Ahlemann, Frederik; Hoppe, Uwe [Ed.] (2003), p. 14

2 PMBOK guide (2000), p.31

Relevant Issues in Project Management Page 5/114

As project manger’s job is to ensure that the project meets the requirements; he has to have the following skills: knowledge, c omprehension, application, analysis , synthesis, evaluation; and the following competencies ¹ : business achievement, problem-solving,

influence abilities, people management and self management. Valle and Avella (2003) proved in an empirical study, that the quality of the project manager in the defined tasks correlates to internal efficie ncy as also to extern effectiveness of projects.

Multi-Project Management represents leverage of multiple, simultaneous projects at a comparable level to program management ^{2 3} : solving conflicts of resources between

projects, discovering redundancies and synergies, setting priorities, and using experience from past projects to apply to others. The differences between multi project management and program management are vague; a multi project manager’s tasks are more likely to be coordination and analysis – rather than leadership. He tends to have no responsibly over budget and personnel, in contrast to the program manager ⁴ .

1 Barber, Elizabeth (2004), p. 304

2 Lomnitz, Gero (2004) , p.3

3 http://www.projektmagazin.de/glossar

4 Lomnitz, Gero (2004) , p. 3

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Methods of Project Portfolio Planning and Controlling

The purpose of project portfolio planning is to evaluate the importance of each project within a company’s set of projects, with the goal of distributing financial and operational resources or to terminate projects with low importance or high risk. Industry experts estimate that project portfolio management efforts can provide businesses with a 30% return on investment within one year ¹ . The Gartner Group found the following benefits result from applied project portfolio management ² :

- Eliminating redundant projects and initiatives

- Improved resource allocation and utilization

- Improved financial visibility

- Better alignment of projects to corporate initiatives

- Improved project communication and documentation

- Establishing processes, methodologies and best practices A shared database for all project data ^- Benefitsare tied to costs through charge-backs. ^- Aproject’s importance (potential benefit) and performance evaluation can be realized by quantitative measures (“metrics”) of success as a guideline for financial and human resource distribution. The following metrics for external effectiveness and internal efficiency have been suggested by scientists within the last few decades (See below Figure 2.3 ).

IT-tools can greatly support financially based portfolio evaluation methods, but according to a study of Cooper and Kleinschmidt (2001), strategic methods appear to be the more successful ones (compare Figure 4.2: The Dominant Portfolio Method Employed - Best vs. Worst

on page 40).

1 Microsoft Corp. (2003), p. 4

2 Gartner Group (2003), p. 15

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Figure 2.3: metrics proposed in literature for the evaluation of R&D projects and portfolios 1

1 based on Linton et al. (2002), p. 140; Suhanic, George (2001); further research

Relevant Issues in Project Management Page 8/114

2.1 Organization of Projects

2.1.1 Organization Structure and Size

The “organization structure” of projects is dependant on the type of project and the organization. Different types of organizations require specific features, different complexity and different level of flexibility in IT-planning and controlling tools. The different kinds of organizational characteristics are briefly discussed belo w.

Most important rule in organization of projects i s that collaborating people in dynamic environments of high uncertainty have to be able to act as peers to each other. This urges lateral organization structures. They enhance the collaboration, the intellectual challenge, the candid and transparent communication, and the willingness to take risks 1 .

This has to be taken into account in IT tools. They should offer a collaborative rather than a hierarchical environment and furthermore; some organizational structures as the influence and the matrix project organization demand functionality that solve the conflicts of competencies in the reporting lines. Change tracking & confirmation as also version control in IT tools can be counted on to be absolutely necessary for a correct plan update procedure considering both; interests of project managers and heads of departments.

2.1.2 Informal factors of an Organization and team building

Informal factors can be of very high importance concerning team performance and thus also for internal efficiency, especially in very innovative projects. Garber, Peter R. (1993) considers, that the most realistic measures for success of a team might be the “feeling of teamwork among each other”, “the pride they have in their team”, “the support of their ‘fans’/customers and their shared sense of accomplishment”, as these factors can significantly improve communication and motivation of the team (take note, that intensive application of IT tools can reduce these informal factors).

1 Sapienza, Alice M. (1995), p. 88

Relevant Issues in Project Management Page 9/114

Motivatio n of the team and team building as a success factor of project management is a topic that has been frequently addressed especially in product development literature. Teams appear to create an environment that can enable and motivate individuals to engage in the creative process. Individual creativity can be enhanced through formal mechanisms like cross- functional teams , heavyweight product managers or established meetings. Tidd and Bodley (2002) coincidently found, that cross- functionality is of special importance in projects of high novelty, who desire more intense creativity than projects of low novelty. Clark and Takahiro (1991) state, that cross functional teams were especially important for product development in unstable markets having relatively short product life cycle times and intense competition. According to

Kellner (2002) the happiness of innovators can also improve creativity in projects, especially through its ability to enhance optimism and thus improve success of projects.

As mentioned, the performance increasing impact of cross functional teams arise from proximity of the team members of different qualification who enlighten each other and create a creative environment. Groupware tools and forums could probably have an enlightening effect in not project based organization forms like the matrix organization. However, lack of team spirit in groupware tools or other reductions of informal factors of organizations through Information Systems could harm the positive effects in other, project oriented organization types. IT tools could compensate the advantages of cross- functional teams or even diminish these positive effects.

2.1.3 Frustration

One further problem of Innovator s / Engineers in R&D Projects is the frustration, not only in U.S. ¹ but also in German companies. “Engineers require more encouragement than other

professionals because they work more often on virgin problems and must be given confidence that it is all right to work on some new approach and to make mistakes”. Mistakes are to be seen as a sign that an engineer is willing to take chances, be creative, and

1 Frankel, Ernst G. (1993), pp.54ff

Relevant Issues in Project Management Page 10/114

take innovative steps. This kind of motivation can only come through personal contact. Engineers can become frustrated because of ¹ the role they play in the corporate culture, the

lack of opportunity to advance, discouragement of networking and the lack of effective internal communication channels, lack of feedback from marketing and strategic management to engineers. As frustration is a cause of inefficiency and lack of productivity it has to be tackled.

Virtual collaboration in distributed teams and strong utilization of IT tools in project management could increase frustration because of lack of interpersonal exchange. Engineers could ge t isolated from important contacts to general management who are needed in order to advance. Thus, IT tools could enforce frustration and thus harm productivity. These are reasons for non-acceptance of IT tools and further ones are described by the interpersonal circumplex model (ICM) ¹ and the Technology Acceptance Model (TAM) ² .

2.1.4 Optimal team size and communication

Another factor of productivity in innovative organizations is the team size. The optimal Team size is dependent on the task break down possibilities of a project and the ability to perform simultaneous engineering that can be improved through IT systems. In general, team size should be set to 3 or 4 up to a maximum of 7 or 8 people ³ . "Adding manpower to a late software project makes it later" ⁴ , “there is a maximum number of additional team members that can be added to reduce the development time” ² , meaning that an increased

number of team members progressively increases the time needed for communication between the team members progressively and thus can reduce project completion time. Also Bob Norton, an experienced Project Manager, believes, that a small group of “3 to 6 really good programmers can beat a team of 100 programmers at some corporate giant

1 compare Brown, H. G.; Poole, M. S.; Rodgers, T. L. (2004) who improved the ICM

2 Davis, Fred D. (1989), p. 333; improvements of TAM by Gefen, David; Straub, Detmar (1997), p. 396

3 Sapienza, Alice M. (1995), p. 144

4 Brooks, F. P. Jr. (1995), p. 25

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every single time” ¹ . Also Simmons thinks that team size should normally not exceed 8 people ² .

Contrarily, Swink (2003) finds that “adding part-time workers and a greater diversity of technical experts on accelerated projects surpasses the supposed negative effects of added complexity”. He posit s that the reason for this is that additional resources are employed more strategically on intentionally accelerated projects.

In a theoretical approach, Brooks developed a formula in 1975 which describes the time effort needed for communication within teams depending on team size. According to Brooks’ formula, the highest outcome a team can have is that of 5.76 single working people at a team size of 8 (HC=head count). A team of 8 people looses, theoretically, the work of 2.24 people in communication (compare below ).

7

6

5 total outcome in HC

4

3

2

1

0

Figure 2.4: Optimal team size according to Brooks’ theoretic formula

Although Brooks’ theoretic formula is coincident with the practical experience of managers and scientists, there are also criticisms to this formula , for example that not every item has to be communicated with others, i.e. group meetings and discussions within subgroups can improve the efficiency of communication within the whole team. Kedzierski (1984) developed a communication system in order to reduce the pair-wise inter-communication with a structured, formal way of communication. Each essential communication can be classified by: question, request, inform, grip and plan and used to mark upcoming items by

1 Norton, Bob (2004), p. 2

2 Simmons, Dick B.. (1998), p.206

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“Q,R,I,G,P” ¹ . Such a communication form could ideally be implemented into an IT System in order to also record each member’s participation and upcoming problems and to enhance general performance of communication. This would reduce the percentage of time needed for communication and thus increase the team’s productivity and also the maximum number of team members for maximal output. With application of such enhanced communication technologies efficient teams of more then 8 members should be imaginable. Furthermore it is evident that structured computerized communication could enhance intercultural communication and documentation. Multicultural communication barriers are a

major problem in international teams ² and could be solved by IT-communities.

A further important issue of this section is that irrelevant communication, communication problems and activities which are not project related have to be minimized within the team. Perhaps, IT tools can help in pursuing the planning process and facilitate evaluation and supervision of project progress and costs, but on the other hand they also require frequent administration and updating by each team member. It thus has to be questioned, whet her the benefits of utilization outweigh these administrative costs.

2.2 Project Planning: Methods of Scheduling Projects and Resources

In project planning, the requirements for successful project termination are being estimated and evaluated. Project Planning starts by estimation and enumeration of all work packages included in a project (work breakdown structure) and ends up in the creation of a project schedule including due dates and a cost plan.

2.2.1 Types of Project Planning Three different types of Project Planning can be categorized ³ : Rough Order-of-Magnitude, Top-Down and Bottom- Up. Top-Down and Bottom-Up methods are widely supported by IT tools.

1 Kedzierski , B. (1984), pp. 446ff

2 Storm, Jörg (2004), p. 3

3 Taylor, James (2000), pp. 141 – 143; Burghardt, Manfred (2002), p. 145; Charvat, Jason (2002), p. 151

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The Rough Order-of-Magnitude (ROM) is the quickest method available and is based on experience and some historical data. Mostly based on intuition it gives a snapshot of the project’s cost and schedule (-25 to +75% of project budget). Subjective estimation of costs is risky because:

1. Tough competition can drive optimism in cost estimates in order to get the project 2. The managers can overestimate their own performance capabilities 3. Managers may not have enough experience and knowledge about costing 4. Nice-to-have features may find too high consideration

5. Risks may be underestimated

The quick Top-Down method is based on comparisons with similar historical projects and applies parametric models in order to extrapolate data from one project to another. It is the most appropriate technique for top level planning and decision making. Offering accuracy to within -10% and +25% it is good enough for planning, but not adequate for a final estimate.

The Bottom-Up method is the most accurate one and based on lowest level of Work Breakdown Structure planning. The effort of each Work package is determined with the person who performs it s tasks. The technique is used to update the estimates of the final project budget. It is very time consuming but on the other hand very accurate (-5% to +10% of project budget).

According to Diesel Engineering Management of Bosch Automotive Systems, Japan Bottom-Up planning has certain risks which can lead to lower accuracy than a top-down planning:

1. Managers have a very good implicit/tacit knowledge for the duration of major steps in projects derived from experience. Contrarily, the effort for single sma ll work package s is not known exactly. An unrealistic effort estimation of a repeated single work package can lead to very inaccurate effort estimation.

Relevant Issues in Project Management Page 14/114

2. The sum of duration of all work packages is not the time needed for a project. Time needed for communication and administration is neglected in the bottom-up method.

3. Work package completion times are effected by learning curves. A once estimated effort for a work package can be much lower when same work package is repeated.

2.2.2 Project structure and schedule planning methods

Project schedules are commonly planned on a basis of graphical work package planning or on network diagrams such as MPM (Metra-point- method), CPM (Critical Path Method), and PERT (Program Evaluation and Review Technique) ¹ . Especially the mo re and more

frequent use of Visual Scheduling and Management Systems (VSMS) like MS Project, Scitor or Artemis enforces the graphical bar diagram based planning first introduced by Henry Gantt for Hoover Dam and Interstate highway construction planning ² .

The Gantt Charts implemented in MS Project and the above named tools principally pursue an estimation of a project’s total duration based on the critical path in work breakdown structure and project progress tracking based on milestone achievement control. These methods are well described in a wide range of common project management literature like Pollalis (1993), Litke and Kunow (1995) and Lock (1987).

To find the first optimal sequence of work packages, methods of operational research can be employed: branch and bound, dynamic programming, and newer methods like Lagrangian Relaxation, and neural networks ³ . Besides a design specification, a work

breakdown structure that allows the maximum number of tasks to be developed in parallel while requiring minimal communication is the most effective way to reduce development time and thus project total duration ⁴ . In order to simulate the dynamics of critical paths

1 Burghardt, Manfred (2002) , S. 216ff

2 according to survey made, most managers do not know the meaning of Gantt or PERT diagrams but well use MS Project for project scheduling; compare also Kalthoff, C.; Kunz, S. (2004)

3 Morton, T. E.; Pentico, D. W. (1993), p.88, p.93, p. 120

4 Simmons, Dick B.. (1998), p. 210

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during project execution, Monte Carlo scheduling and materials requirements planning software has been developed.

-A different approach for project scheduling and controlling is the CriticalChain (CC) for single project management and Theory of Constraints (TOC) methodology for multi project management published by E. Goldratt ¹ .

Based on this theory, multiple software packages have already been improved (i.e. Scitor Project Scheduler 8, Speed to Market's Concerto 2002, or ProChain Solutions Inc. 1999).

The princip al methodology behind CC is a new concept for milestone achievement. Milestones are not planned on a 100% probability basis (or 80% as commonly done), which leads the project manager to create security buffers prior to each milestone of a project’s schedule. Instead, milestones are planned on a probability basis of 50% and delays are put into a project buffer at the end of the project ² . In order to ensure bottleneck availability for

multi-project-planning, a capacity buffer is to be created for each bottleneck.

The motivation of team’s productivity through a buffer's fill ratio controlling instead of easy-to-achieve Milestone s is supposed to greatly improve productivity.

2.2.3 Resource allocation methods

Resource allocation algorithms implemented in IT tools so far do often not offer optimal results automatically (compare below findings of Pisz et al. (2003) on page 17). Furthermore, resource allocation method and buffer based controlling suggested by Goldratt is not optimal neither ³ . The following heuristics of resource allocation and

criticisms to them can be found in the literature, and they are almost all derived from production planning:

1 Goldratt, Eliyahu M. (1997), pp. 26ff.

2 Leach, Larry P. (1999), p.43 suggests setting the project buffer length to 50% of the project’s total duration

3 see Figure 2.2on page 17

Relevant Issues in Project Management Page 16/114

No Control –the simplest method available. Push System based first come first served

(FCFS) priority rules are randomly followed ¹ .

CC – basic principle of CC is to focus on few key constraints ² if projects are scheduled according to CC methodology, resource allocation is performed by buffer management and follows the following constraints: critical chain activities have higher priorities than noncritical chain activities; activities with highest level of buffer utilization have priority.

EDD – (Earliest Due Date) ³ ; takes into account the earliest due date and the maximum lateness of a work task for resource allocation. The work package with the earliest due date or with maximum tardiness is served. Application of EDD rule prevents embarrassment of very large lateness, but is poor with respect to average tardiness.

MinSLK - (Minimum Slack heuristic, also called Least Slack heuristic) ⁴ ; is based on constant recalculation of the critical path and slack times after completion of a work package (whereby slacktime is defined as the difference between late start time and early start time. It can turn negative if the start time of a work package is later than the late start time that is needed in order to complete the project on its due-date.) Employing MinSLK, resources are always allocated to work packages having the lowest slack time.

ConPIP - (Constant Number of Projects In Process) ⁵ . ConPIP regulates the starting date of new projects based on a predetermined number of projects to be in process. An arriving project starts its processing immediately if the number of projects concurrently in process within the system is below the defined number.

QSC - (Queue Size Control) ⁶ In QSC a predetermined maximum number is given for simultaneously processed work packaged, within the resource queue of a bottleneck. A new

1 compare Barron, Y., & Mandelbaum, A. (2003) for a deeper analysis

2 Goldratt, Eliyahu M. (1998), p. 1

3 Morton, T. E.; Pentico, D. W. (1993), p. 64

4 Morton, T. E.; Pentico, D. W. (1993), p. 68

5 Anavi-Isakow, S.; & Golany, B. (2002) , pp. 11ff

6 Cohen, Izack / Mandelbaum, Avishai / Shtub, Avraham (2003), p. 13