The project initiation phase is the first phase within the project management life cycle, as it involves starting up a new project. Within the initiation phase, the business problem or opportunity is identified, a solution is defined, a project is formed, and a project team is appointed to build and deliver the solution to the customer. A business case is created to define the problem or opportunity in detail and identify a preferred solution for implementation.
The business case includes:
Following are the possible decisions that comes out of business case study analysis
The success of your project depends on the clarity and accuracy of your business case and whether people believe they can achieve it. The best way to make an objective clear to all the teams involved is to state it in such a way that it can be verified. It is important to provide quantifiable definitions to qualitative terms.
Example: Objective interpretation of different teams
A basic decision matrix consists of establishing a set of criteria for options that are scored and summed to gain a total score that can then be ranked. Importantly, it is not weighted to allow a quick selection process.
A caterer needs to find a new supplier for his basic ingredients. He has four options.
A weighted decision matrix operates in the same way as the basic decision matrix but introduces the concept of weighting the criteria in order of importance.
A weighted decision matrix therefore allows decision makers to structure and solve their problem by:
A caterer needs to find a new supplier for his basic ingredients. He has four options.
|Supplier 1||4||0||0||2||9||16+0+0+4+27 = 47|
|Supplier 2||0||15||2||4||3||0+75+2+8+9 = 94|
|Supplier 3||8||10||1||6||0||32+50+1+12+0 = 95|
|Supplier 4||8||15||3||6||0||32+75+3+12+0 = 122|
This makes it clear to the caterer that Supplier 4 is the best option, despite the lack of flexibility of its payment options.
As an exaggerated example, an organization wouldn’t want to try to put Star Trek’s transporters in their building—currently, this project is not technically feasible.
In many new project endeavors, we need to find out if our project is financially feasible. We do that by using net present value (NPV), rate of return (ROI), and payback analysis.
Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore NPV is the sum of all terms.
t is the time of the cash flow
i is the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk; the opportunity cost of capital)
Rt is the net cash flow (i.e., cash inflow – cash outflow, at time t).
|NPV > 0||The investment would add value to the firm.||The project may be accepted.|
|NPV < 0||The investment would subtract value from the firm.||The project should be rejected.|
|NPV = 0||The investment would neither gain nor lose value for the firm.||We should be indifferent in the decision whether to accept or reject the project. This project adds no monetary value. Decision should be based on other criteria (e.g., strategic positioning or other factors not explicitly included in the calculation).|
Return on investment (ROI) is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. It is one way of considering profits in relation to capital invested.
This is calculated by subtracting the project’s costs from the benefits and then dividing by the costs.
Example: if you invest $100 and your investment is worth $110 next year, the ROI is (110-100)/100 = 0.1 or a 10% return.
Payback analysis is important in determining the amount of time it will take for a project to recoup its investments. This is the point at which the benefits start to outweigh the costs. The best way to see that is by charting the cumulative benefits and costs. Check the following figure where the cumulative benefits outweigh the cumulative costs in the second year.
Market and Demand Analysis is required to meet planning and decision making for the projects undertaken. This is conducted to know about the market in relation with the project.
It involves the following activities:
(i) Situation analysis and specification of objectives
(ii) Collection of Information
(iii) Conducting Market Survey
(iv) Demand Forecasting
It refers to estimation of future demand for a product or service. Forecasting methods may be broadly divided into three categories i.e. Qualitative and Quantitative methods
It involves soliciting the opinions of a group of Managers on expected future sales and combining them into a sales estimate.
It is used for eliciting the opinions of a group of experts with the help of mail survey.
It involves analysis of historical time series.
(i) Trend Projection Method
It works on a linear relationship
Yt = a + b t
Where Yt = demand for a year
t = time variable
a = intercept of relationship
b = slope of relationship
(ii) Exponential smoothing method
In this method forecasts are modified in the light of observed errors using relationship
Ft + 1 = Ft + d et
Where Ft + 1 = forecast for the year t+1
d = smoothing parameter
et = is the error in the forecast for the year t
(iii) Moving Average Method
It uses the phenomenon of change in one parameter due to the change in another parameter to develop a cause effect relationship which can be converted into quantitative method.
(i) Chain Ratio Method
(ii) Consumption level Method
A project charter, project definition, or project statement is a statement of the scope, objectives, and participants in a project. It provides a preliminary delineation of roles and responsibilities, outlines the project objectives, identifies the main stakeholders, and defines the authority of the project manager. It serves as a reference of authority for the future of the project.
Purpose of the Project Charter
The purpose of a project charter is to:
List the project name, the date of the current version of the project charter, the sponsor’s name and authority, and the project manager’s name.
Project Name: Rice University Computer Store Creation
Project Sponsor: Jane Ungam, Facilities Manager
Date: Jan 12, 2010
Project Manager: Fred Rubens
Overview of the Project
Provide a simple but precise statement of the project.
Example: Rice University is planning to create a store to sell computer supplies.
State the objectives of the project clearly and ensure they contain a measure of how to assess whether they have been achieved. The statement should be realistic and should follow the SMART protocol:
Example: The objective of this project is to implement a campus store that is ready to sell computer supplies such as memory sticks, mouse pads, and cables, when class starts in August 2010, with enough inventory to last through the first two weeks of classes.
Specify the scope of the project by identifying the domain or range of requirements.
Example: The scope of the Rice’s school supplies store project includes the activities listed below:
It is equally important to include in the scope what is not included in the project.
Example: The scope of the project does not include:
List all major milestones needed to ensure project completion successfully.
List and describe the major deliverables that will result from the project.
Outline the assumptions made in creating the project. An assumption is a fact you are unsure of but can either confirm at a later time or are simply stating so that the project can proceed as if the statement were true.
Define any and all constraints on the project or those working on the project. This is an important part of the project charter. A constraint is anything that limits the range of solutions or approaches.
Business Need or Opportunity (Benefits)
Provide a concise statement of the business need or opportunity that led to the creation of the project. Why was it created? What are the benefits? How does the project contribute to organizational objectives?
Example: The goal of this project is to provide income for the Rice Student Center while supplying necessary items to students and faculty at competitive prices. The school store will be a convenience to students since necessary supplies will be available on campus. This will help students learn to manage their personal supplies.
Preliminary Cost for the Project
Provide a statement indicating how the cost of the project will be defined and controlled.
Example: The procurement team will assemble a proposal based on expected costs for review by the Dean of Undergraduate Studies.
This type of organization is grouped by different areas of specialization within different functional areas such as accounting , marketing , purchase , etc . Projects in these type of organizations are usually taken up in a single department and the team members may be loaned to these projects from time to time . Team members are expected to take up departmental work in addition to their project work . Each department in a functional organization will do its project work independently of other departments . If any information is needed from another department , request is sent by the head of the department which is implementing the project to the head of the department from whom the information is needed.
Advantages : Some of the advantages of a functional type of organization are
Disadvantages : Some of the disadvantages of a functional type of organization are
In a projectized organization , the entire company is structured according to projects instead of functional departments . Team members are often collocated and most of the company’s resources are allocated to project work . In these types of organizations , the project manager is highly empowered . These are mostly found in consulting environments . People are assigned and report to a project manager . Once the projects are over , the team members are assigned to another project or they need to find work with a different employer . All the communication occurs within the project
In a projectized organization , team members only belong to a project – not to a functional area
In a matrix type of an organization , individuals report to both the functional manager for human resources and a project manager for projects . Team members are required to perform project work in addition to departmental work . Matrix organizations are classified as weak , balanced and strong depending upon the relative level of power and influence between functional managers and project managers .
In a weak matrix , the functional manager has more authority . In such a type of organization , the project manager’s role is more of a project expeditor or a project coordinator. The project expeditor acts primarily as a staff assistant and communications coordinator. The expeditor cannot personally make or enforce decisions. The project coordinator is similar to the project expeditor except that the project expeditor has some power to make decisions and reports to a higher level manager.
In these types of organizations , overheads could be more due to duplication of many tasks .
The project manager identifies the central problem to solve and determines, with input from the sponsor and stakeholders, how to tackle it: what the project’s objectives and scope will be and which activities will deliver the desired results. He then plans and schedules tasks, oversees day-to-day execution, and monitors progress until he evaluates performance, brings the project to a close, and captures the lessons learned.
Project manager responsibilities and duties using the four functions of management as a framework…
Planning is an essential duty of a project manager. Determining what needs to be done, who is going to do it, and when it needs to be done are all part of the planning process. Keep in mind that planning is an iterative process that takes place throughout the life of the project.
Some key planning duties include,
Organizing is about setting up the project team’s structure. A major driver in this aspect is the company’s existing structure. Companies are usually set up as functional, matrix, or projectized organizations. When organizing your project, you will need to take the company’s structure into account.
Some of the key organizing duties include…
Leading refers to carrying out the project plan in order to achieve the project objectives. Leading the project is one of the more challenging aspects for new project managers because it involves a lot of “soft skills.” Skills such as communicating clearly, team motivation, and conflict resolution.
Some key duties for leading projects include…
Controlling is all about keeping the project on track. Project control can be performed using a three-step process.
Some key controlling duties include…