Business Project Management
Business Project Management
a. Meaning of project and project management:
A project can be defined as the momentary endeavor commenced for the creation of a unique result which may be in terms of a product or service. The temporary nature of a project is characterized by the precise beginning and ending of the projects and the limited resources which are defined within the project scope (Management, 2012).
The uniqueness of a project is reflected by its non-routine nature in operations, where activities are specially designed so as to achieve a particular goal (Mindtools.com. 2016). Because of this, the individuals involved in a project are generally from varied backgrounds so that unique results can be created.
The examples of projects could be software development for the improvement of business processes in a given Company, building constructions, efforts for the relief of natural disaster victims, sales expansion into different regions and many more. There is also a necessity of experts who can achieve the goals within the constraints of time, budget and organizational needs.
Project Management can thus be defined as the knowledge and skill application to the activities undertaken for the project so that the project requirements can be promptly and efficiently met.
definition of the purpose and need of the project
capture of what the project requirements are and specifications of deliverables quality and resource estimations
Preparation of business cases so that the investment is the justified
Security of corporate level agreements and backing
development and implementation of project management plan
leadership and motivation for the delivery team of the project
Management of the project issues, amendments and risks
Monitor activities of the plan progress
Management of budget of the project
Maintenance of stakeholder communication and organization of the project
The appropriate closing of the project
b. Business Project Management:
With the number of organizations increasing who want to realize their strategy objectives in real life, the practices for project management are also on a rise. These project management practices can be used as tools to generate profits and build competitive advantages. The process of using the skills and knowledge of project management in real life business scenario is the business project management.
c. Project life cycle (4P’s):
There is one common goal for the project team and the project manager which is to perform activities that meet the objectives of the project. Each project is characterized by a start, the middle part, maturity phase and finally the closing phase. For a standard project, there are four primary phases: the initiation phase, the planning phase, the implementation phase and the closure phase. These stages thus represent the trajectory of the project from start to the end and are termed as the project life cycle (Opentextbc.ca. 2016).
The Initiation Phase:
In this phase, the objective of the project or the need for the project is discovered. This goal could be an existing problem or a new opportunity. A business case is developed to represent the correct response to the situation of need and documented with the possible solution alternatives. There is conduction of a feasibility study where the options to address the project objectives are investigated, and a final settlement is chosen to be implemented (Archibald, Filippo, and Filippo, 2016). There is an addressing of the feasibility and justification issues. This phase also involves the appointment of the manager, the project team and the formulation of deliverables.
The Planning Phase:
The initiation phase is followed by the planning stage, where detailed solutions and its particulars are developed. The primary objective is the identification of all the activities that need to be performed by the project team. The requirements of resources along with production and procurement strategies are developed. This process can also be called scope management. There is an outline of tasks, activities, the time frame and other dimensions in the project plan. The budget is developed and monitored for any loopholes. The potential threats to the project are also identified in this process, which is comprised of risk management. The actions or activities that must be taken to tackle the high-risk threats to the project are identified and represented.
A communication plan is also developed for all the project stakeholders. This includes the information need and the method of delivery. The other major aspects documented are the quality plan, the targets for quality, assurance check, measures for control, acceptance plan and criteria listing for gaining acceptance of the customers. At the end of this phase, the project will get ready to be implemented.
The Implementation or Execution Phase:
This is the third phase where the planned actions are acted in real, and performance is observed. The maintenance of control and continuous communication are crucial in this stage. There is continuous monitoring of progress and adjustments are made accordingly as per changes in project factors. Regular meetings are held with the team to report the progress and other activities. Continuous monitoring and publishing of information are a must. The final acceptance of the solution by the customers means that the project can head towards closure.
The closing phase:
The final phase is the closing phase where the major focus is on the final deliverables release so that the final documentation can be handed over to the concerned authorities. It involves extensive communication and termination of all terms related to project stakeholders. Evaluation of the performed activities and their degree of success is also discussed in this part.
d. Concepts of Business Project Management:
There are three major concepts in project management that should be borne by the project affiliates, also known as the project management triangle. These concepts are related to cost, time and the scope of the project.
The completion of the activities of a project may take higher or lesser time amounts. The conclusion of the project tasks is dependent on varied factors such as the employee number, their expertise in the area of project and others. Time is that constraint of the project which is the most uncontrollable. There can be many unfavorable results if a project fails to meet operations deadlines. However, the major reason observed in organizations for project failures is resources lag.
Cost:
A properly estimated cost system is a prerequisite for the organization and the project managers to maintain effective authority (www.tutorialspoint.com. 2016). The completion of the project within the benchmark cost will only be ensured by a well-prepared budget and its correct monitoring. In certain cases, there needs to be an allocation of added resources by the project managers so that deadlines can be met even when a penalty in the form of costs need to be paid.
Scope:
The project scope defines the outcome of the undertaken project. The project team needs to deliver the particulars of the deliverables list, which is comprised in the project scope. A project manager will be deemed successful if he or she can balance the project scope and scope changes which eventually impact project cost and time.
Quality
Though quality is not recognized as one of the parts of the project management triangle, it is taken as the eventual goal of each project delivery. Thus, the implication and representation of the project management triangle are quality. Certain quality standard maintenance may require a rise in the cost of the project. The use of resources that are of low quality for the accomplishment of deadlines will not qualify it as total project success. Quality is thus one of the crucial deliverables.
Calculation:
Given,
Cost of capital: 10%
The NPV value of the project A, project B and Project C amount to be -1101, 8800 and 3600 respectively.
The IRR of the project A, project B and project C is calculated to be 0, 25% and 15% respectively.
The initial outlay has not been given. Thus, the information is not sufficient to calculate the payback period.
The ranking on the basis of the three methods are
The decision based on NPV should be considered on the basis of which project B and C can be accepted.
One of the advantages of using payback period is its measure of investment risks. It is because the shorter the payback period, lesser will be the risk. It is even more relatable when liquidity is one of the criteria for selecting a project.
Advantages and Disadvantages of NPV, IRR and Payback Period
NPV:
The first advantage of using the NPV method is that it considers the concept of time value of money. Another advantage would be the recognition of risks that are related to prospective cash flows as they are uncertain in nature.
The first disadvantage of the method is that there is no visibility regarding the time that is taken for a project to receive a positive NPV (Benefitsrealization.blogspot.com. 2016). The rule of NPV follows that all investments having an NPV higher than zero should be accepted. But, there is no clarity as to where and when this NPV can be gained. Other limitation would be that capital is assumed to be abundant, and the concept of capital rationing is not included. In case there is resource scarcity, there needs to be a careful notice of the NPV of all evaluating projects along with the investment size. One of the measures that have been developed to overcome these limitations is the IRR.
IRR:
The first advantage of IRR is that it is the most used and accepted method of financial calculation, which is based on discounted cash flows meaning that it considers the concept of time value of money. Additionally, the proper use of the method shapes up to be a great guidance factor for adding to the value and risks associated with the project.
The disadvantages of the method can be expressed in terms of three major points:
Zero or no rates of return: In projects where the signs for the stream of cash flows are changes higher than once, there may arise problems of having no IRR or in some cases, multiple IRRs.
Discount Rate Changes: The rule of IRR states that a project is to be accepted in situations when the IRR is higher than the calculated WACC or the opportunity cost of the capital. However, with the changing nature of the discount rates on an annual basis, the comparison does not make much sense.
Non-cumulative property of the IRRs: Unlike the NPV method where two projects can be evaluated together by simply adding up the NPVs, this provision is unavailable in case of IRRs. They cannot be used for evaluating accumulated projects on an incremental basis.
c. Payback period:
The advantage of considering the payback period for decision making is that it is easy to understand by the stakeholders and the members of the management. It gives an idea of when there will be a recoupment of the investment. The decision taking becomes simple.
The disadvantage of the method is that time value of money is not considered. Discounted cash flows are not used for calculation. It also ignores the cash flows post the reaching of the payback period.
Work breakdown structure and the WBS chart
One of the prime deliverables of the project that is involved in the organization of work of the team into sections that can be well managed is the work breakdown structure. The definition of the work breakdown structure as given by the Project Management Body of Knowledge (PMBOK) would be the hierarchical decomposition of the orientation of deliverables that is to be completed by the project team (Brighthub Project Management. 2016). There is a visual representation of the chunks of work that the project team needs to accomplish. At each level, detail and definition of the process are given so that the interpretation and implementation are easier.
Change management plan and Risk management plan
The definition of the activities and authority for the management and control of project changes at times when the project is in execution and control stage is the change management plan. The basis for the measurement of change is project baseline. This baseline is the interpretation of the scope, schedule, budget and planning of the project. In the execution and control stage of the project, there may be a requirement for the issues of project baseline revisions because of the changes.
Risk management plan is the systematic task of identifying, assessing and mitigating risks so that it can be taken down to a level that is acceptable (The MITRE Corporation. 2016). The determination of the project processes, tools, authority and tools and techniques is done by the risk management plan. The structure of risk management and the project performance are duly planned and monitored in the risk management plan.
References
Anon, (2016). [online] Available at: https://www.apm.org.uk/WhatIsPM [Accessed 10 Mar. 2016].
Archibald, R., Filippo, I. and Filippo, D. (2016). The Six-Phase Comprehensive Project Life Cycle Model Including the Project Incubation/Feasibility Phase and the Post-Project Evaluation Phase. 1st ed.
Benefitsrealization.blogspot.com. (2016). Benefits Realization and Business Cases: Pros and Cons of NPV, IRR, and Payback calculations. [online] Available at: http://benefitsrealization.blogspot.com/2008/05/pros-and-cons-of-npv-irr-and-payback.html [Accessed 10 Mar. 2016].
Brighthub Project Management. (2016). What is a Work Breakdown Structure? Examples of a WBS. [online] Available at: http://www.brighthubpm.com/templates-forms/2645-what-is-a-work-breakdown-structure/ [Accessed 10 Mar. 2016].
CHANGE MANAGEMENT PLAN. (2016). 1st ed.
Investopedia. (2008). Advantages and Disadvantages of the NPV and IRR Methods - CFA Level 1 | Investopedia. [online] Available at: http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/advantages-disadvantages-npv-net-present-value-irr-internal-rate-of-return.asp [Accessed 10 Mar. 2016].
Investopedia. (2012). Payback Rule - Complete Guide To Corporate Finance | Investopedia. [online] Available at: http://www.investopedia.com/walkthrough/corporate-finance/4/npv-irr/payback-rule.aspx [Accessed 10 Mar. 2016].
Management, I. (2012). Project management and project life cycle. [online] Slideshare.net. Available at: http://www.slideshare.net/iirmjaipur/project-management-and-project-life-cycle [Accessed 10 Mar. 2016].
Mindtools.com. (2016). What is Project Management?: Managing Complex Tasks and People. [online] Available at: https://www.mindtools.com/pages/article/newPPM_00.htm [Accessed 10 Mar. 2016].
Opentextbc.ca. (2016). 3. The Project Life Cycle (Phases) | Project Management. [online] Available at: https://opentextbc.ca/projectmanagement/chapter/chapter-3-the-project-life-cycle-phases-project-management/ [Accessed 10 Mar. 2016].
Pma.doit.wisc.edu. (2016). PMA - 3.Plan - Develop Quality Management Plan. [online] Available at: http://www.pma.doit.wisc.edu/plan/3-4/what.html [Accessed 10 Mar. 2016].
Pmi.org. (2016). Project Business Management (PBM) Methodology Model. [online] Available at: http://www.pmi.org/learning/project-business-management-methodology-model-7298 [Accessed 10 Mar. 2016].
Pmi.org. (2016). What is Project Management? | Project Management Institute. [online] Available at: http://www.pmi.org/About-Us/About-Us-What-is-Project-Management.aspx [Accessed 10 Mar. 2016].
Project Smart. (2016). A Project Management Primer: Basic Principles - Scope Triangle. [online] Available at: https://www.projectsmart.co.uk/project-management-scope-triangle.php [Accessed 10 Mar. 2016].
Projectsmart.co.uk. (2014). Work Breakdown Structure (WBS). [online] Available at: https://www.projectsmart.co.uk/work-breakdown-structure.php [Accessed 10 Mar. 2016].
SearchCIO. (2016). What is project management? - Definition from WhatIs.com. [online] Available at: http://searchcio.techtarget.com/definition/project-management [Accessed 10 Mar. 2016].
The MITRE Corporation. (2016). Risk Management Approach and Plan. [online] Available at: http://www.mitre.org/publications/systems-engineering-guide/acquisition-systems-engineering/risk-management/risk-management-approach-and-plan [Accessed 10 Mar. 2016].
Wideman, R. (2016). The Role of the Project Life Cycle (Life Span) in Project Management. 1st ed.
Workbreakdownstructure.com. (2016). What is a Work Breakdown Structure - Workbreakdownstructure.com. [online] Available at: http://www.workbreakdownstructure.com/ [Accessed 10 Mar. 2016].
www.tutorialspoint.com. (2016). Project Management Triangle. [online] Available at: http://www.tutorialspoint.com/management_concepts/project_management_triangle.htm [Accessed 10 Mar. 2016].
