Project Management: Achieving Competitive Advantage

562 Pages·2015·12.838 MB·English

by  Jeffrey K. Pinto

List of Cases by Chapter
Chapter 1 Chapter 7
Development Projects in Lagos, Nigeria 2 The Building that Melted Cars 224
“Throwing Good Money after Bad”: the BBC’s Bank of America Completely Misjudges Its Customers 230
Digital Media Initiative 10 Collapse of Shanghai Apartment Building 239
MegaTech, Inc. 29 Classic Case: de Havilland’s Falling Comet 245
The IT Department at Hamelin Hospital 30 The Spanish Navy Pays Nearly $3 Billion for a Submarine
Disney’s Expedition Everest 31 That Will Sink Like a Stone 248
Rescue of Chilean Miners 32 Classic Case: Tacoma Narrows Suspension Bridge 249
Chapter 2 Chapter 8
Tesla’s $5 Billion Gamble 37 Sochi Olympics—What’s the Cost of National
Electronic Arts and the Power of Strong Culture Prestige? 257
in Design Teams 64 The Hidden Costs of Infrastructure Projects—The Case
Rolls-Royce Corporation 67 of Building Dams 286
Classic Case: Paradise Lost—The Xerox Alto 68 Boston’s Central Artery/Tunnel Project 288
Project Task Estimation and the Culture of “Gotcha!” 69
Widgets ’R Us 70 Chapter 9
After 20 Years and More Than $50 Billion, Oil is No Closer
Chapter 3 to the Surface: The Caspian Kashagan Project 297
Project Selection Procedures: A Cross-Industry
Sampler 77 Chapter 10
Project Selection and Screening at GE: The Tollgate Enlarging the Panama Canal 331
Process 97 Project Scheduling at Blanque Cheque Construction (A) 360
Keflavik Paper Company 111 Project Scheduling at Blanque Cheque Construction (B) 360
Project Selection at Nova Western, Inc. 112
Chapter 11
Chapter 4 Developing Projects Through Kickstarter—Do Delivery
Leading by Example for the London Olympics— Dates Mean Anything? 367
Sir John Armitt 116 Eli Lilly Pharmaceuticals and Its Commitment to Critical
Dr. Elattuvalapil Sreedharan, India’s Project Chain Project Management 385
Management Guru 126 It’s an Agile World 396
The Challenge of Managing Internationally 133 Ramstein Products, Inc. 397
In Search of Effective Project Managers 137
Finding the Emotional Intelligence to Be a Real Leader 137 Chapter 12
Problems with John 138 Hong Kong Connects to the World’s Longest Natural
Gas Pipeline 401
Chapter 5 The Problems of Multitasking 427
“We look like fools.”—Oregon’s Failed Rollout
of Its ObamacareWeb Site 145 Chapter 13
Statements of Work: Then and Now 151 New York City’s CityTime Project 432
Defining a Project Work Package 163 Earned Value at Northrop Grumman 451
Boeing’s Virtual Fence 172 The IT Department at Kimble College 463
California’s High-Speed Rail Project 173 The Superconducting Supercollider 464
Project Management at Dotcom.com 175 Boeing’s 787 Dreamliner: Failure to Launch 465
The Expeditionary Fighting Vehicle 176
Chapter 14
Chapter 6 Duke Energy and Its Cancelled Levy County Nuclear
Engineers Without Borders: Project Teams Impacting Power Plant 478
Lives 187 Aftermath of a “Feeding Frenzy”: Dubai and Cancelled
Tele-Immersion Technology Eases the Use of Virtual Construction Projects 490
Teams 203 New Jersey Kills Hudson River Tunnel Project 497
Columbus Instruments 215 The Project That Wouldn’t Die 499
The Bean Counter and the Cowboy 216 The Navy Scraps Development of Its Showpiece
Johnson & Rogers Software Engineering, Inc. 217 Warship—Until the Next Bad Idea 500
Fourth Editi on
P M
roject anageMent
a c a
chieving oMPetitive dvantage
Jeffrey K. Pinto
Pennsylvania State University
Boston Columbus Indianapolis New York San Francisco Hoboken Amsterdam
Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi
Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
To Mary Beth, my wife, with the most profound thanks and love for her unwavering
support. And, to our children, Emily, AJ, and Joseph—three “projects” that are definitely
over budget but that are performing far better than I could have hoped!
VP, Product Management: Donna Battista VP, Director of Digital Strategy & Assessment:
Editor-in-Chief: Stephanie Wall Paul Gentile
Acquisitions Editor: Dan Tylman Manager of Learning Applications: Paul Deluca
Program Manager Team Lead: Ashley Santora Digital Editor: Brian Surette
Program Manager: Claudia Fernandes Digital Studio Manager: Diane Lombardo
Editorial Assistant: Linda Albelli Digital Studio Project Manager: Robin Lazrus
VP, Marketing: Maggie Moylan Digital Studio Project Manager: Alana Coles
Product Marketing Manager: Anne Fahlgren Digital Studio Project Manager: Monique Lawrence
Field Marketing Manager: Lenny Raper Digital Studio Project Manager: Regina DaSilva
Strategic Marketing Manager: Erin Gardner Full-Service Project Management and Composition:
Project Manager Team Lead: Judy Leale Integra
Project Manager: Nicole Suddeth Printer/Binder: Edwards Brothers
Operations Specialist: Carol Melville Cover Printer: Phoenix Color/Hagerstown
Cover Designer: Lumina Datamatics, Inc Text Font: 10/12 Palatino
Cover Photo: f11photo/Fotolia
Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear
on the appropriate page within text.
Microsoft and/or its respective suppliers make no representations about the suitability of the information contained
in the documents and related graphics published as part of the services for any purpose. All such documents and
related graphics are provided “as is” without warranty of any kind. Microsoft and/or its respective suppliers hereby
disclaim all warranties and conditions with regard to this information, including all warranties and conditions of
merchantability, whether express, implied or statutory, fitness for a particular purpose, title and non-infringement.
In no event shall Microsoft and/or its respective suppliers be liable for any special, indirect or consequential damages
or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or
other tortious action, arising out of or in connection with the use or performance of information available from the
services. The documents and related graphics contained herein could include technical inaccuracies or typographical
errors. Changes are periodically added to the information herein. Microsoft and/or its respective suppliers may make
improvements and/or changes in the product(s) and/or the program(s) described herein at any time. Partial screen
shots may be viewed in full within the software version specified.
Microsoft® Windows®, and Microsoft Office® are registered trademarks of the Microsoft Corporation in the U.S.A.
and other countries. This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation.
Copyright © 2016, 2013, 2010, 2007 by Pearson Education, Inc. All rights reserved. Manufactured in the United
States of America. This publication is protected by Copyright, and permission should be obtained from the publisher
prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means,
electronic, mechanical, photocopying, recording, or likewise. For information regarding permissions, request forms
and the appropriate contacts within the Pearson Education Global Rights & Permissions department, please visit
www.pearsoned.com/permissions/.
Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks. Where
those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been
printed in initial caps or all caps.
Library of Congress Cataloging-in-Publication Data
Pinto, Jeffrey K.
Project management : achieving competitive advantage/Jeffrey K. Pinto.—Fourth edition.
pages cm
Includes index.
ISBN 978-0-13-379807-4 (alk. paper)—ISBN 0-13-379807-0 (alk. paper) 1. Project management. I. Title.
HD69.P75P5498 2016
658.4'04—dc23
2014036595
10 9 8 7 6 5 4 3 2 1
ISBN 10: 0-13-379807-0
ISBN 13: 978-0-13-379807-4
BrIEF COnTEnTS
Preface xiii
Chapter 1 Introduction: Why Project Management? 1
Chapter 2 The Organizational Context: Strategy, Structure, and Culture 36
Chapter 3 Project Selection and Portfolio Management 76
Chapter 4 Leadership and the Project Manager 115
Chapter 5 Scope Management 144
Chapter 6 Project Team Building, Conflict, and Negotiation 186
Chapter 7 Risk Management 223
Chapter 8 Cost Estimation and Budgeting 256
Chapter 9 Project Scheduling: Networks, Duration Estimation,
and Critical Path 296
Chapter 10 Project Scheduling: Lagging, Crashing, and Activity Networks 330
Chapter 11 Advanced Topics in Planning and Scheduling: Agile
and Critical Chain 366
Chapter 12 Resource Management 400
Chapter 13 Project Evaluation and Control 431
Chapter 14 Project Closeout and Termination 477
Appendix A The Cumulative Standard Normal Distribution 509
Appendix B Tutorial for MS Project 2013 510
Appendix C Project Plan Template 520
Glossary 524
Company Index 534
Name Index 535
Subject Index 538
iii
COnTEnTS
Preface xiii
Chapter 1 IntroduCtIon: Why ProjeCt ManageMent? 1
Project Profile: Development Projects in Lagos, Nigeria 2
Introduction 4
1.1 What Is a Project? 5
General Project Characteristics 6
1.2 Why Are Projects Important? 9
Project Profile: “Throwing Good Money after Bad”: the BBC’s Digital
Media Initiative 10
1.3 Project Life Cycles 13
◾ Box 1.1: Project Managers in Practice 15
1.4 Determinants of Project Success 16
◾ Box 1.2: Project Management Research in Brief 19
1.5 Developing Project Management Maturity 19
1.6 Project Elements and Text Organization 23
Summary  27  •  Key Terms  29  •  Discussion Questions  29
•  Case Study 1.1 MegaTech, Inc.  29  •  Case Study 1.2 The IT
 Department at Hamelin Hospital  30  •  Case Study 1.3 Disney’s Expedition
 Everest  31  •  Case Study 1.4 Rescue of Chilean Miners  32  •  Internet 
Exercises  33  •  PMP Certification Sample Questions  34  •  Notes  34
Chapter 2 the organIzatIonal Context: Strategy, StruCture,
and Culture 36
Project Profile: Tesla’s $5 Billion Gamble 37
Introduction 38
2.1 Projects and Organizational Strategy 39
2.2 Stakeholder Management 41
Identifying Project Stakeholders 42
Managing Stakeholders 45
2.3 Organizational Structure 47
2.4 Forms of Organizational Structure 48
Functional Organizations 48
Project Organizations 50
Matrix Organizations 53
Moving to Heavyweight Project Organizations 55
◾ Box 2.1: Project Management Research in Brief 56
2.5 Project Management Offices 57
2.6 Organizational Culture 59
How Do Cultures Form? 61
Organizational Culture and Project Management 63
Project Profile: Electronic Arts and the Power of Strong Culture in Design Teams 64
Summary  65  •  Key Terms  67  •  Discussion Questions  67  •  Case
Study 2.1 Rolls-Royce Corporation  67  •  Case Study 2.2 Classic Case:
Paradise Lost—The Xerox Alto  68  •  Case Study 2.3 Project Task Estimation
and the Culture of “Gotcha!”  69  •  Case Study 2.4 Widgets ’R Us 70
•  Internet Exercises  70  •  PMP Certification Sample Questions  70 
•  Integrated Project—Building Your Project Plan  72  •  Notes  74
iv
Contents v
Chapter 3 ProjeCt SeleCtIon and PortfolIo ManageMent 76
Project Profile: Project Selection Procedures: A Cross-Industry Sampler 77
Introduction 78
3.1 Project Selection 78
3.2 Approaches to Project Screening and Selection 80
Method One: Checklist Model 80
Method Two: Simplified Scoring Models 82
Limitations of Scoring Models 84
Method Three: The Analytical Hierarchy Process 84
Method Four: Profile Models 88
3.3 Financial Models 90
Payback Period 90
Net Present Value 92
Discounted Payback 94
Internal Rate of Return 94
Choosing a Project Selection Approach 96
Project Profile: Project Selection and Screening at GE: The Tollgate Process 97
3.4 Project Portfolio Management 98
Objectives and Initiatives 99
Developing a Proactive Portfolio 100
Keys to Successful Project Portfolio Management 103
Problems in Implementing Portfolio Management 104
Summary  105  •  Key Terms  106  •  Solved Problems  107 
•  Discussion Questions  108  •  Problems  108  •  Case Study 3.1
Keflavik Paper Company  111  •  Case Study 3.2 Project Selection at Nova
Western, Inc.  112  •  Internet Exercises  113  •  Notes  113
Chapter 4 leaderShIP and the ProjeCt Manager 115
Project Profile: Leading by Example for the London Olympics—Sir John Armitt 116
Introduction 117
4.1 Leaders Versus Managers 118
4.2 How the Project Manager Leads 119
Acquiring Project Resources 119
Motivating and Building Teams 120
Having a Vision and Fighting Fires 121
Communicating 121
◾ Box 4.1: Project Management Research in Brief 124
4.3 Traits of Effective Project Leaders 125
Conclusions about Project Leaders 126
Project Profile: Dr. Elattuvalapil Sreedharan, India’s Project Management Guru 126
4.4 Project Champions 127
Champions—Who Are They? 128
What Do Champions Do? 129
How to Make a Champion 130
4.5 The New Project Leadership 131
◾ Box 4.2: Project Managers in Practice 132
Project Profile: The Challenge of Managing Internationally 133
4.6 Project Management Professionalism 134
vi Contents
Summary  135  •  Key Terms  136  •  Discussion Questions  136 
•  Case Study 4.1 In Search of Effective Project Managers 137
•  Case Study 4.2 Finding the Emotional Intelligence to Be a Real Leader 137
•  Case Study 4.3 Problems with John  138  •  Internet Exercises  141
•  PMP Certification Sample Questions  141  •  Notes  142
Chapter 5 SCoPe ManageMent 144
Project Profile: “We look like fools.”—Oregon’s Failed Rollout of Its Obamacare
Web Site 145
Introduction 146
5.1 Conceptual Development 148
The Statement of Work 150
The Project Charter 151
Project Profile: Statements of Work: Then and Now 151
5.2 The Scope Statement 153
The Work Breakdown Structure 153
Purposes of the Work Breakdown Structure 154
The Organization Breakdown Structure 159
The Responsibility Assignment Matrix 160
5.3 Work Authorization 161
Project Profile: Defining a Project Work Package 163
5.4 Scope Reporting 164
◾ Box 5.1: Project Management Research in Brief 165
5.5 Control Systems 167
Configuration Management 167
5.6 Project Closeout 169
Summary  170  •  Key Terms  171  •  Discussion Questions  171 
•  Problems  172  •  Case Study 5.1 Boeing’s Virtual Fence 172
•  Case Study 5.2 California’s High-Speed Rail Project  173  •  Case
Study 5.3 Project Management at Dotcom.com  175  •  Case Study 5.4
The Expeditionary Fighting Vehicle  176  •  Internet Exercises  178 
•  PMP Certification Sample Questions  178  •  MS Project Exercises  179 
•  Appendix 5.1: Sample Project Charter  180  •  Integrated Project—
Developing the Work Breakdown Structure  182  •  Notes  184
Chapter 6 ProjeCt teaM BuIldIng, ConflICt, and negotIatIon 186
Project Profile: Engineers Without Borders: Project Teams Impacting Lives 187
Introduction 188
6.1 Building the Project Team 189
Identify Necessary Skill Sets 189
Identify People Who Match the Skills 189
Talk to Potential Team Members and Negotiate with Functional Heads 189
Build in Fallback Positions 191
Assemble the Team 191
6.2 Characteristics of Effective Project Teams 192
A Clear Sense of Mission 192
A Productive Interdependency 192
Cohesiveness 193
Trust 193
Enthusiasm 193
Results Orientation 194
Contents vii
6.3 Reasons Why Teams Fail 194
Poorly Developed or Unclear Goals 194
Poorly Defined Project Team Roles and Interdependencies 194
Lack of Project Team Motivation 195
Poor Communication 195
Poor Leadership 195
Turnover Among Project Team Members 196
Dysfunctional Behavior 196
6.4 Stages in Group Development 196
Stage One: Forming 197
Stage Two: Storming 197
Stage Three: Norming 198
Stage Four: Performing 198
Stage Five: Adjourning 198
Punctuated Equilibrium 198
6.5 Achieving Cross-Functional Cooperation 199
Superordinate Goals 199
Rules and Procedures 200
Physical Proximity 201
Accessibility 201
Outcomes of Cooperation: Task and Psychosocial Results 201
6.6 Virtual Project Teams 202
Project Profile: Tele-Immersion Technology Eases the Use
of Virtual Teams 203
6.7 Conflict Management  204
What Is Conflict? 205
Sources of Conflict 206
Methods for Resolving Conflict 208
6.8 Negotiation 209
Questions to Ask Prior to the Negotiation 209
Principled Negotiation 210
Invent Options for Mutual Gain 212
Insist on Using Objective Criteria 213
Summary  214  •  Key Terms  214  •  Discussion Questions  215  •  Case
Study 6.1 Columbus Instruments  215  •  Case Study 6.2 The Bean Counter
and the Cowboy  216  •  Case Study 6.3 Johnson & Rogers Software
Engineering, Inc.  217  •  Exercise in Negotiation  219  •  Internet 
Exercises  220  •  PMP Certification Sample Questions  220  •  Notes  221
Chapter 7 rISk ManageMent 223
Project Profile: The Building that Melted Cars 224
Introduction 225
◾ Box 7.1: Project Managers in Practice 227
7.1 Risk Management: A Four-Stage Process 228
Risk Identification 228
Project Profile: Bank of America Completely Misjudges Its Customers 230
Risk Breakdown Structures 231
Analysis of Probability and Consequences 231
Risk Mitigation Strategies 234
viii Contents
Use of Contingency Reserves 236
Other Mitigation Strategies 237
Control and Documentation 237
Project Profile: Collapse of Shanghai Apartment Building 239
7.2 Project Risk Management: An Integrated Approach 241
Summary  243  •  Key Terms  244  •  Solved Problem  244  •  Discussion 
Questions  244  •  Problems  244  •  Case Study 7.1 Classic Case: de
Havilland’s Falling Comet  245  •  Case Study 7.2 The Spanish Navy Pays
Nearly $3 Billion for a Submarine That Will Sink Like a Stone  248  •  Case
Study 7.3 Classic Case: Tacoma Narrows Suspension Bridge  249  •  Internet 
Exercises  251  •  PMP Certification Sample Questions  251  •  Integrated 
Project—Project Risk Assessment  253  •  Notes  255
Chapter 8 CoSt eStIMatIon and BudgetIng 256
Project Profile: Sochi Olympics—What’s the Cost of National Prestige? 257
8.1 Cost Management 259
Direct Versus Indirect Costs 260
Recurring Versus Nonrecurring Costs 261
Fixed Versus Variable Costs 261
Normal Versus Expedited Costs 262
8.2 Cost Estimation 262
Learning Curves in Cost Estimation 266
◾ Box 8.1: Project Management Research in Brief 270
Problems with Cost Estimation 272
◾ Box 8.2: Project Management Research in Brief 274
8.3 Creating a Project Budget 275
Top-Down Budgeting 275
Bottom-Up Budgeting 276
Activity-Based Costing 276
8.4 Developing Budget Contingencies 278
Summary  280  •  Key Terms  281  •  Solved Problems  282 
•  Discussion Questions  283  •  Problems  284  •  Case Study 8.1 The
Hidden Costs of Infrastructure Projects—The Case of Building Dams 286
•  Case Study 8.2 Boston’s Central Artery/Tunnel Project  288  •  Internet 
Exercises  290  •  PMP Certification Sample Questions  290  •  Integrated 
Project—Developing the Cost Estimates and Budget  292  •  Notes  294
Chapter 9 ProjeCt SChedulIng: netWorkS, duratIon eStIMatIon,
and CrItICal Path 296
Project Profile: After 20 Years and More Than $50 Billion, Oil is No Closer to the Surface:
The Caspian Kashagan Project 297
Introduction 298
9.1 Project Scheduling 299
9.2 Key Scheduling Terminology  300
9.3 Developing a Network 302
Labeling Nodes 303
Serial Activities 303
Concurrent Activities 303
Merge Activities 304
Burst Activities 305
9.4 Duration Estimation 307