First Stage in Project Management Process

Auckland University of Technology College of Engineering

A Presentation of Prof. Tomas Ganiron Jr

1st Stage of Project Management Process: Initiation

3/20/2008

Session Objectives Project initiation Selecting Projects Project Charter Washington Mercy Hospital case study 3/20/2008

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Project Management Processes & IT PM Phases

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Project Initiation: Strategic Planning First step in initiating projects: look at the big picture, organization’s strategic plan Strategic planning involves determining long-term business objectives IT projects should (must) support strategic & financial business objectives 3/20/2008

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Schwalbe: Why Firms Invest in IT

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Identifying Potential Projects Many organizations follow a planning process for selecting IT projects First develop an IT strategic plan based on organization’s overall strategic plan Then perform business area analysis Then define potential projects Then select IT projects & assign resources 3/20/2008

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IT Planning Process

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Selecting Projects  Usually more projects than time & resources available to implement them  Important to follow logical process for selecting IT projects to work on  Methods include focusing on broad needs, categorizing projects, financial methods & weighted scoring models 3/20/2008

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Focus on Broad Organizational Needs  Often difficult to provide strong justification for many IT projects, but everyone agrees they have a high value  “It is better to measure gold roughly than to count pennies precisely”  Three important criteria for projects:  There is a need for project  There are funds available  There’s a strong will to make project succeed 3/20/2008

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Financial Analysis of Projects Financial considerations are often an important consideration in selecting projects Three primary methods for determining the projected financial value of projects:  Net present value (NPV) analysis  Return on investment (ROI)  Payback analysis 3/20/2008

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Net Present Value Analysis Net present value (NPV) analysis: method of calculating expected net monetary gain or loss from project by discounting all expected future cash inflows & outflows to present point in time Projects with positive NPV should be considered if financial value is key criterion The higher the NPV, the better 3/20/2008

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Schwalbe: Net Present Value Example

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Excel file

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Weighted Scoring Model  Weighted scoring model: provides systematic process for selecting projects based on multiple criteria  First identify criteria important to project selection process  Then assign weights (percentages) to each criterion so they add up to 100%  Then assign scores to each criterion for each project  Multiply the scores by weights and get total weighted scores

 The higher the weighted score, the better 3/20/2008

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Schwalbe: Sample Weighted Scoring Model for Project Selection

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Excel file

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Selecting Projects (cont.)  Buss’ Grid Approach  project selection team  grids with criteria, high-medium-low  criteria generally financial, technical, enhancing core competencies, organizational fit against cost  review proposals, then quick collective judgment

 Poor Man’s Hierarchy  grid with criteria  compare each project against each other project  assign 1 or 0, sum results Frame

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Project Charters  After deciding what project to work on, it’s important to formalize projects  Project Charter is document formally recognizing existence of project & provides direction on project’s objectives & management  Key project stakeholders should sign project charter to acknowledge agreement on need & intent of project 3/20/2008

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Project Charters Unfortunately authors disagree on the details:  Schwalbe  Marchewka  Verzuh

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Schwalbe: Sample Project Charter Project Title: Information Technology (IT) Upgrade Project Project Start Date: March 4, 200 Projected Finish Date: December 4, 2002 Project Manager: Kim Nguyen, 691-2784, knguyen@abc.com Project Objectives: Upgrade hardware and software for all employees (approximately 2,000) within 9 months based on new corporate standards. See attached sheet describing the new standards. Upgrades may affect servers and midrange computers as well as network hardware and software. Budgeted $1,000,000 for hardware and software costs and $500,000 for labor costs.

Approach:  Update the IT inventory database to determine upgrade needs  Develop detailed cost estimate for project and report to CIO  Issue a request for quotes to obtain hardware and software  Use internal staff as much as possible to do the planning, analysis, and installation

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Schwalbe: Sample Project Charter (cont.)

Roles and Responsibilities: Name Walter Schmidt, CEO Mike Zwack

Role Project Sponsor CIO

Kim Nguyen Jeff Johnson Nancy Reynolds

Project Manager Director of IT Operations VP, Human Resources

Steve McCann

Director of Purchasing

Responsibility Monitor project Monitor project, provide staff Plan and execute project Mentor Kim Provide staff, issue memo to all employees about project Assist in purchasing hardware and software

Sign-off: (Signatures of all above stakeholders) Comments: (Handwritten comments from above stakeholders, if applicable) This project must be done within ten months at the absolute latest. Mike Zwack, CIO We are assuming that adequate staff will be available and committed to supporting this project. Some work must be done after hours to avoid work disruptions, and overtime will be provided. Jeff Johnson and Kim Nguyen, Information Technology Department 3/20/2008

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Purpose of Project Charter (Marchewka) more comprehensive approach

Document the project MOV Define project infrastructure Summarize details of project plan Define roles and responsibilities Show explicit commitment to project Set out project control mechanisms 3/20/2008

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What Should be in a Project Charter? Project Identification Project Stakeholders Project Description Measurable Organizational Value (MOV)

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What Should be in Project Charter?

– cont’d Project Scope Project Schedule Project Budget Quality Issues Resources 3/20/2008

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What Should be in a Project Charter?

– cont’d Assumptions and Risks Project Administration Acceptance and Approval References Terminology 3/20/2008

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Project Rules (Verzuh #4)  Project success demands  goals agreed by all stakeholders  control of scope  management support

 Project charter  brief, high level document formally establishing project  understood & signed by all key stakeholders

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Project Rules (cont.) Statement of Work (SOW)       3/20/2008

NOT usual usage of term per Verzuh establishes rules of game goals, constraints, success criteria negotiate, formally agree ahead of game? why not part of planning phase?

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Project Planning Framework

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Scope Planning and the Scope Statement  A scope statement is a document used to develop and confirm a common understanding of the project scope. It should include  a project justification  a brief description of the project’s products  a summary of all project deliverables  a statement of what determines project success 3/20/2008

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Establish

Initiate

 Charter establishes project  Next must compete with other projects for scarce resources  Prioritize – go or no go?  Go ahead  Begin Analysis Phase  needs requirements  detailed SOW 3/20/2008

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Washington Mercy Hospital Case Study  Hospital contract with DCS  State of art patient info system  <3 sec response

 Add ambulatory surgery center  Goes to arbitration  Management & project issues  Technical issues  Blame – responsibility?

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