Project Management Organizations (PMOs)

Posted on April 15, 2016 by Administrator

A Project Management Organization (PMO), also sometimes referred to as a Project Management Office, is usually established to provide project management support within an enterprise or organization.  The type of support and oversight of the project management processes and personnel will vary by organization. The types of support provided by a PMO can include but is not limited to the following:

  • Managing and controlling project resources
  • Assigning project managers to projects
  • Identifying and establishing best practices
  • Establishing project methodologies
  • Coaching, mentoring and training project managers, project support personnel and functional managers.
  • Setting policies, standards and procedures and monitoring compliance
  • Developing templates and other organizational process assets
  • Providing program and portfolio management support
  • Coordinating project, program and portfolio communications

There are generally three types of PMOs:

  • Supportive PMO – this type of PMO is usually established to provide administrative support to Project Managers. This type of PMO is usually “controlled” by the Project Managers.  This type of organization serves to support the needs of the project managers and usually have little or no authority over Project Managers.
  • Controlling PMO – this type of PMO is usually established to not only provide support to Project Managers but also to provide some “control” over the project management functions in an organization.  In order to successfully ensure consistency and compliance with project policies and procedures, the PMO usually has control and accountability over enterprise level policies, procedures and standards.  Typically Project Managers do not report directly to the PMO but must abide by standards established by the PMO.  Projects are subject to review and audit by the PMO.
  • Directive PMO – this type of PMO is established to provide total control over the Project Management functions in an enterprise or organization.  The degree of control is much higher than in a supportive or controlling PMO.  In this type of PMO, Project Managers typically “report to” the PMO.  The PMO has total accountability for the success of project management.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

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Sample “what’s next” Questions

Posted on April 13, 2016 by Administrator

For the test, you must be prepared to understand relationships between processes and so you will come across questions that will challenge you to determine the best next course of action.  The challenge with these types of questions is that you may be given several potentially “right” actions with only one best next action.  Try these:

1. You are the project manager for the development of new technology.  Due to the nature of the project and level of uncertainty, it is important to perform a thorough risk analysis and planning.  Your team has identified risks, ranked the risks for further analysis and conducted a quantitative analysis.  What should you do next?

a.         Conduct a risk reassessment.

b.         Lead the team through the process of mitigating all risks.

c.         Lead the team through the Plan Risk Responses process.

d.         Conduct the Delphi technique.

2. The project manager assigned to a software upgrade for a financial system has left the company.  Fortunately, the project was still in planning.  The project charter has been approved with a proposed budget of $350,000 and a schedule of 9 months.  You are now taking responsibility for this project.  Which should you do next?

a.         Identify risks.

b.         Develop the scope management plan.

c.         Create the Work Breakdown Structure.

d.         Define the activities of the project.

 3.  A consulting services firm has initiated a project to implement a new sales tracking system.  The project manager for this project has interviewed various stakeholders and had a brief discussion of the results of the interview with the CEO of the firm, the project sponsor.  The project charter for the project has already been approved.  Which of the following should the project manager do next?

a.         The project manager should start the collect requirements process.

b.         The project manager should develop the communications management plan.

c.         The project manager should develop the stakeholder management plan.

d.         The project manager should create the stakeholder register.

Answers:

1. The best answer is (c) – “Plan Risk Responses” is the next risk planning process.  Answer (a) is not the best answer because a risk reassessment would be performed in monitoring and controlling, typically after the plan has been completed.  Answer (b) is not the best answer because “mitigating” all risks is not necessarily the best approach – “mitigate” is only one of four possible risk responses or strategies. Answer (d) is not the best answer because this technique, if used, would have been used in the “Identify Risks” process.

2. The best answer is (b) – out of the four planning processes listed, developing the scope management plan would be performed prior to the other processes.  Answer (a) is not the best answer because ideally, you would have created the work breakdown structure before you perform the identify risks process.  Answer (c) is not the best answer because a scope management plan is a prerequisite to the create WBS process.  Answer (d) is not the best answer because a WBS is a prerequisite to the Define Activities process.

3. The best answer is (d) because the stakeholder register (developed in Initiating) is a prerequisite to the other three planning processes listed.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

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Flashcards for the Knowledge Areas

Posted on April 10, 2016 by Administrator

These are the “flashcards” I use for the 10 knowledge areas. These are in my words.  I encourage you to use your own words to describe each of these areas.

Integration Management

Addresses leadership for the project and provides integration of all other processes.

Scope Management

Develops, monitors and controls the scope baseline for the project.

Time Management

Develops, monitors and controls the schedule baseline for the project.

Cost Management

Develops, monitors and controls the cost baseline for the project.

Quality Management

Concerned with defining, assuring and controlling the quality requirements for the project.

Human Resources Management

Concerned with planning, staffing, developing and managing the project team.

Communications Management

Concerned with planning, managing and controlling project communications.

Risk Management

Focuses on identifying, monitoring and controlling threats and opportunities to the project.

Procurement Management

Focuses on identifying procurement requirements, selecting sellers and managing agreements.

Stakeholder Management

Concerned with defining, managing and controlling the stakeholder engagement plan.

Eddie Merla, PMI-ACP, PMP

DuendePM.com 

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Create Your Own Flashcards

Posted on April 9, 2016 by Administrator

In preparation for the test, I recommend that you create your own set of flash cards using index cards.  On one side, write the process or term and then on the opposite side, write the description. 

I recommend that your “deck” should include the following:

  • One for each of the 5 process groups
  • One for each of the 10 knowledge areas
  • One for each of the 47 processes (the detail information should provide a description and should also indicate the Process Group and Knowledge Area.  Additionally, you should note key inputs and outputs).
  • One card for every tool and technique listed (many are repeated)
  • One card for every unique “output” – specifically documents that are outputs of processes.
  • One card for every “new” term you come across.

These are my “flash cards” for the 5 process groups.  Please note that these are my words – I encourage you to come up with your own words:

Initiating Process Group

The processes required to initiate a project or a phase of a project.

Planning Process Group

The processes required to develop the project performance baselines and supporting plans.

Executing Process Group

The processes used to execute the project plan.

Monitoring and Controlling Process Group

The processes required to monitor project performance and to make adjustments as required.

Closing Process Group

The processes required to close out a project or a phase of a project.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

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Measuring Financial Value

Posted on March 31, 2016 by Administrator

A project manager should be aware of the various techniques and approaches to determine the financial value of a project.  Usually during the concept and initiation stage of a project, best efforts are undertaken to estimate the costs of a project along with an estimate of future financial benefit or value.  Best attempts should be made to provide a complete financial perspective of the project’s impact on the organization’s finances.

In order to perform a cost benefit analysis or to calculate a Return on Investment (ROI), the following should be estimated:

  • Project investment (total cost estimates of resources required to complete the project
  • Total life cycle cost of the product, service or result of the project (i.e. maintenance costs of a software program).
  • Economic benefits (one time and ongoing) – these can include not only additional revenue but also cost reduction or savings.

While Return on Investment can be used to determine the financial viability of a project and prioritization of the project, it may not be the only consideration for funding and prioritization.  Projects with a poor ROI may still be given a green light because of other considerations or strategic reasons including political or social factors.

Common techniques used to determine a Return on Investment (ROI) include determining a payback period, calculating a net present value (NPV) and calculating an internal rate of return (IRR).    Analyzing long term benefits and/or costs requires an understanding of the value of money over time and should also consider economic factors such as inflation.

Payback Method

The payback method can be used to compare the financial value of a project.  Payback is calculated by determining the length of time required to recover the initial investment in the project.  The payback period for a project requiring a $100,000 investment and estimated to return $10,000 a month in benefits after project completion is 10 months ($100,000 / 10).

The advantage of this method is that the calculation is simple and fast.  The disadvantage is that this method does not take into account the value of money.

Net Present Value

The net present value method uses the value of money to calculate financial value of a project.  The resulting value (the “net present value”) can be used to compare projects.  A negative or low value would indicate that the project might not have financial viability.

To understand Net Present Value, the concepts of Future Value (FV) and Present Value (PV) should also be understood.  The future value of a financial investment can be calculated through the following formula:

FV = PV * (1 + i)n 

Where “FV” is the calculated future value, “PV” is the Present Value (“today’s money”), “i” is the interest rate (or cost of capital) and “n” is the number of time periods.  As an example, the future value of an investment of $1,000 one year from today assuming an annual interest rate of 5% would be $1,050.  The value of that same investment two years from today would be $1,102.50 [$1,000 * (1.05 * 1.05)].

The present value of an expected future financial value can be calculated as follows:

PV = FV / (1 + i)n

Where “PV” is the calculated present value, “FV” is the future sum of money, “i” is the interest rate or cost of capital, and “n” is the number of time periods.  Using the values and data from the previous example, the PV of an expected sum of money of $1,050 one year from now is $1,000 assuming a 5% interest rate.  The present value of an expected sum of money of $1,102.50 two years from now is $1,000 [$1,102.50 / (1.05 * 1.05)].

The net present value of a project is calculated by subtracting the initial investment (project cost)  from the sum of the present values of future cash flows over a fixed period of time
(to allow fair comparisons among multiple projects).  A project with a negative or low net present value most likely not be financially viable.  The net present value of a project can be calculated as follows:

 NPV = ∑ [ FV/(1+i)n ] – I 

Where “NPV” is the net present value, “FV” is the Future Value of the cash flow (or monetary benefit), “i” is the interest rate or cost of capital, “n” is the number of the respective time period for the future cash flow, and “I” is the initial investment or project cost.  This formula could also be shorted as follows:  ∑ PV – I (or sum of the present values less the initial investment).

Let’s try an example:  Project A costs $100,000 and is expected to produce $40,000 in benefits annually.  Assuming the cost of funds is 6%, the net present value of Project A over 5 years is calculated as follows:

PV of year 1 cash flow = $40,000 / 1.06 =      $37,736

PV of year 2 cash flow = $40,000 / 1.12 =      $35,714

PV of year 3 cash flow = $40,000 / 1.19 =      $33,613

PV of year 4 cash flow = $40,000 / 1.26 =      $31,746

PV of year 5 cash flow = $40,000 / 1.34 =      $29,851

                                      Sum of PV’s = $168,660

                                      Less Investment: $100,000

                                          NPV =              $68,660

 Internal Rate of Return

Another way to value a project financially is to determine the rate of return that the project will produce.  The Internal Rate of Return (IRR) is the rate that will cause the project’s net present value to be zero.  Using the following formula, you can solve for the IRR that nets zero:

∑ [ FV/(1+IRR)n ] – I = 0

Where “FV” is the future cash flow, “IRR” is the Internal Rate of Return, “n” is the year of the cash flow and “I” is the initial project investment.  Solving for the IRR can be accomplished through a trial and error approach or more exactly using an excel function. (Note:  the test will not test you on the IRR math but you will be expected to know the concept).  A calculated IRR for a project can then be compared against the company’s cost of capital.  For example, if a company’s cost of capital is 7%, then an IRR lower than 7% would be considered a bad investment while an IRR greater than 7% would be viewed as a favorable IRR.

Tips for the exam:

  • Understand the different methods of calculating a return on investment and the differences between the methods.
  • Remember that the payback method does not take the cost of money into consideration.
  • Understand that ROI is used to determine if a project is financially viable.
  • Understand that NPV can be used to rank projects and could also be used to screen projects which produce a negative or low value.
  • Understand that an IRR greater than the company’s cost of capital is desired while an IRR lower than the cost of capital is not desired.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

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Maslow’s Hierarchy

Posted on March 26, 2016 by Administrator

To be an effective project manager requires an understanding and a proficiency in people skills (also known as “soft skills”).  The PMP® exam will test your understanding of people skills and associated management theories.  Maslow’s hierarchy is one of them.

Maslow’s hierarchy of needs is a theory in psychology proposed by Abraham Maslow in 1943.  It proposes a model for understanding human motivation.  In summary, basic needs (those in the lower part of the pyramid) must be met before higher level needs can be effectively met.

Physiological needs

These are basic human needs – shelter, warmth, water, food, sleep, etc.  If these needs are not met or are temporarily lost, a humans will focus their efforts on resolving these deficiencies.  Once met, other higher level needs can then be prioritized.

Safety needs

Once the physiological needs have been met, safety needs then take priority.  Safety needs include security from danger or crime, financial security, and safety against accidents or illness.

Social needs

After physiological and safety needs are addressed, social needs begin to take priority.  Social needs, also referred to as belonging needs, addresses the needs for humans to socialize, the need for belonging, the need for friendship and love. 

Esteem needs

Esteem needs include the need to be respected, the need to be recognized and to recognize and respect others.  People at this level need to be engaged in meaningful work that provides a sense of contribution.

Self-actualization

The need for self-actualization is at the top of the hierarchy and becomes the driving need when all other lower needs have been met.  Creativity, problem solving, enjoyment of the work, a sense of higher mission and purpose are indicators of self-actualization.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

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Conflict Management Resolution

Posted on March 16, 2016 by Administrator

Types of Conflict Management Resolution

Almost every project introduces conflict of various sorts.  Conflicts can occur due to resource issues, schedule issues, budget issues, and scope disagreements just to name a few.  The project manager must know how to deal with conflict and learn to resolve conflict.  Generally, there are six types of conflict management resolution techniques:

Confronting (or “problem solving”) – this technique deals with conflict directly as a problem to be resolved.  This technique requires open communication and cooperation to solve the conflict.  This technique usually results in a “win-win” solution where both parties benefit from the resolution.  This technique may usually take longer and is more complex than other techniques but the results are usually longer lasting as well.

Compromising – this technique usually involves bargaining and searching for solutions.  The disadvantage to this approach is that quick “lose-lose” solutions are usually preferred over long term “win-win” solutions.  This happens because there is a willingness to resolve the conflict quickly and both parties are usually willing to “give up something” in order to achieve a quick resolution.

Smoothing (or “accommodating”) – this technique overlooks the root causes and emphasizes areas of agreement as a way to move beyond the conflict.  The disadvantage to this technique is that it usually does not address the areas of disagreement and so does not solve the conflict.

Withdrawing (or “avoiding” or “ignoring”) -  this technique avoids the conflict and avoids trying to solve the conflict.  Of course, since the conflict is never resolved with this technique, the conflict may actually worsen and cause more disruption in the project environment.

Forcing – this technique forces one’s viewpoint over another to resolve the conflict.  This technique usually results in a “win-lose” solution and, depending on the situation, may result in long term damage to a relationship. 

Collaborating – this technique usually involves incorporating different perspectives and insights in order to achieve a resolution that gains commitment from various stakeholders.

Which technique is best?  Which technique is worst?  Per the PMBOK®, each one has its place and use.  Generally, confrontation and collaboration result in win-win solutions.  Forcing may result in long-term damage to a relationship and withdrawing results in no solution and potential damages to the project environment.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

 

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Types of Power

Posted on March 15, 2016 by Administrator

Types of Power

While the PMBOK® does not provide a specific definition of power, it alludes to power as a level of authority.  From a project manager perspective, power is the authority and ability to get things done.    Knowing the different types of power in project management, and knowing how and when to use them, can be crucial to managing projects successfully.  For the PMP® exam, it is important to know the following 5 types of power:

  • Legitimate – also known as “formal” power.  This is the power that comes from holding a title or a position of power.  The CEO or president of a company has legitimate power.  An individual with the title of “Project Manager” also has legitimate power although, as you should know, this title may not have as much power in a functional organization where most of the legitimate power is held by functional managers.
  • Coercive – this is fear based power.  An individual with coercive power has the power to inflict punishment or take away benefits.  A drill sergeant in the military uses coercive power to train new recruits.  A Theory X manager would rely heavily on coercive power to get things done in his or her organization.
  • Reward – this type of power is the ability to award something of value or benefit.  This may or may not involve monetary compensation.  Opportunities for advancement or promotion and recognition are also rewards.  Reward power is about giving people what they desire so that you can ask them to do something in return. For this to work, the person must believe that the offer of reward is genuine, that the reward is worth enduring the pain of performing the task, and of course, they must believe that they can accomplish the task.
  • Expert – this type of power is based on the special skill or knowledge of the individual providing leadership to the team, whether informally or formally.  Project managers should strive to develop this type of power but should also recognize when individual members of the team hold expert power informally.  In the situation where an individual team member holds expert power, the project manager should find ways to encourage and embrace that power.
  • Referent – this type of power comes from being well liked or respected.  This type of power may come from the desire of others to be like the leader holding this type of power.      

 Another type of power usually not included with the above is “representative power.”  Representative power is power that comes from being appointed or elected to lead the group by the group itself.  This power is different that formal power because it may not be formally recognized.  In project management, a project manager may not hold representative power.

What type of power is the best type of power to have?  The answer, of course, is: “it depends.”  Generally, having expert power or reward power provides more influence over a team.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

 

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Projects, Programs and Portfolios

Posted on March 14, 2016 by Administrator

Project vs. Program vs. Portfolio

A project is a temporary effort (has a specific beginning and an end) undertaken to achieve a specific product, service or result.  A project may be part of a program or portfolio but a program or portfolio cannot be part of a project.  Exhibit A (see below) shows the relationships between projects, programs, and portfolios.  Exhibit B below demonstrates the relationship of strategy to portfolios, programs and projects.

 

Programs

Projects and types of projects are sometimes grouped together or managed together as a program.  A program is a group of projects managed in order to obtain some shared benefit.  Consider an engineering firm specializing in providing construction engineering services to large commercial clients.  Projects in this organization may be grouped by commercial client in order to maximize resources and knowledge; both the firm and the client benefit from this grouping.  The firm will most likely assign a program manager to manage the grouped projects for each major client.

Projects may also be grouped into programs because of specialty knowledge or other linkages. For example an Information Technology department may group its projects into programs based on the type of software, application or technology.  The advantages of managing projects in a program include but are not limited to the following:

  • Provides opportunities to leverage resources
  • Provides opportunities to leverage specialty knowledge
  • Provides opportunities to synchronize projects for maximum benefit
  • Improves quality of the product, service or result being produced
  • Improves overall control of the projects within the program
  • Provides opportunities for additional benefits not available if the projects were managed independently.

Project Portfolio Management

A Project Portfolio is a group of projects and/or programs grouped together in order to achieve strategic business objectives.  Project portfolios may differ by goal.  A consulting firm may group its projects by geographical region into separate portfolios; each portfolio may then have its own set of business objectives or goals.

Tips for the exam

  • Know the difference between projects, programs and portfolios
  • Know that a project may be initiated to meet a program or portfolio objective
  • Know that a project may be independent of a program or portfolio.
  • Know that a portfolio may be comprised of projects and programs.
  • Know that a program is comprised of projects.
  • Know that managing a program or portfolio requires a different set of skills and management such as the prioritization of projects and maximization of benefits.

For additional clarification, please refer to the 5th edition of the PMBOK®.

Eddie Merla, PMI-ACP, PMP

DuendePM.com

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Stakeholders

Posted on March 8, 2016 by Administrator

Stakeholders Defined

In project management, you will hear the term “stakeholders.”  Stakeholders include more than the project team.  They include anyone impacted by the project either positively or negatively.  They also include anyone who can influence the project outcomes.  The following are some typical stakeholders on a project:

  • Project Sponsor – the individual sponsoring the project or the individual representing the group or organization sponsoring the project.  Project sponsors usually also provide funding for the project either directly or indirectly.  A project sponsor may or may not be a product owner (see below).  A project sponsor may or may not have a role on the project other than executive oversight.
  • Product Owner – usually the individual owning the product to be produced by the project. Here’s an example where the product owner could be different than the Project Sponsor:

The CIO has decided to sponsor a project which will provide a new automated Human Resource system.  In this case, the Human Resource department manager would serve as the Product owner but the CIO would serve as the project sponsor, providing resources and funding to deliver the project.

  • Customer – this type of stakeholder is the individual or group of individuals expected to use the product of the project.  A project can, of course, have multiple types of customers.  In the example of the project to provide a new automated Human Resource system, customers can include the employees, the Human resource department, the Accounting department, etc.
  • Client – a client is usually a formal customer.  The term “client” is often used when there is a contractual relationship between the organization delivering the project and the customer of the project.
  • Project Team – the project team members, or the individuals participating in the project in some capacity, are also stakeholders.
  • PMO – the PMO (Project Management Office), if one exists, will most likely be a stakeholder on projects.The list above is meant to serve as just a short list of typical stakeholders on a project.  Every organization may develop or has developed typical stakeholders for most projects and these, of course, can vary by type of project.  By the way, you may come across the term, “performing organization.”  The performing organization in project management speak is the organization performing the work of the project.  This could be an internal department, such as an IT department, or a third party, such as a consulting organization.  The performing organization is responsible for ensuring that the project meets or exceeds the expectations of the client or customer. 

Eddie Merla, PMI-ACP, PMP

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