Project Launch

Dick Billows, PMP

Dick Billows, PMP
CEO 4pm.com

The project launch meeting has several purposes. These include:

– establishing expectations for performance and behavior

– explaining how team members’ tasks are connected to the scope and objective of the project

– explaining how the project result will affect the team members’ performance evaluation

– explaining how good performance on their task(s) can benefit the team members’ careers.

– generating enthusiasm and commitment to the project.

To achieve all these benefits, the project sponsor and project manager need to carefully plan the project launch. Depending on the project, there may be certain issues or fears that are affecting the team members’ and stakeholders’ attitudes about the project. The project launch meeting is not the time to “downplay” or try and minimize these concerns. Instead, we should use the launch meeting to directly address people’s concerns about the impact of the project on their departments and their daily work.
Unfortunately, too often launch meetings leave team members wondering how they can avoid being blamed if the project fails.They may also be concerned about finger-pointing when things don’t go right. Watch this video as a sponsor and PM conduct the worst launch meeting in the history of project management. I’ll point out some of the mistakes the project manager and sponsor make. Then we will listen to the project team members privately describe their reaction to the meeting. Finally, I will analyze what went wrong and how to do it better.

You will learn all the right skills in our project management basics courses. Take a look at the basics course in your industry specialty.

IT Projects Business Construction Healthcare Client Projects
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Risk Management

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

We should scale our risk management effort to fit each project or initiative.  It’s difficult to persuade executives to invest time and money on risk management to avoid or mitigate risk. They prefer “being ready to react” when bad stuff happens. They think that is cheaper than spending money on what many see as a bureaucratic process with pointless meetings and lots of paperwork. So their decision is to “keep our eyes open for trouble” rather than waste money, and possibly delay the start, to identify and plan for risks. This is a poor decision. Even a little bit of risk management, say one hour of time, can have a very significant payback if you can avoid a problem or two.

Project managers need to make the case that even a small amount of risk management time, like a lunch meeting with the right people, can repay the investment many times over by avoiding problems. The best way to make this point is to discuss some recent project failures. You can cite the problems that brought those projects down and explain how a little bit of risk response planning and some early problem solving might have saved the day. Risk Management Process

Scaling Risk Management Techniques for Different Size Projects

After you gain approval for a risk management effort, you need to proceed carefully with a barebones program. In the beginning, you need to build your credibility and that of risk management with a handsome return for the risk investment. You also need to use the correct set of risk management techniques to fit the size and scale of each project. One size does not fit all. You need to tailor the approach so it fits the project and yields a high return on the investment. Risk Responses

There are five components in the full Risk Management process. You will rarely use all of them:

  1. Risk identification – identify those positive and negative risks that might affect the projectcomm25
  2. Qualitative risk analysis – fast, low cost risk evaluation with no research or data gathering
  3. Quantitative risk analysis – slower, expensive research into the risk’ probability and impact
  4. Risk response planning – ways to mitigate, avoid, eliminate the risk’s affect
  5. Risk monitoring & control – monitoring so you can launch a risk response when needed.

Depending on the project, you may entirely skip one or two of the steps to reduce the time and expense. You also scale the effort in the process steps you will do. As stated above, quantitative analysis is the most expensive and time consuming step. You will probably skip it on small and medium-sized projects. You will do the less expensive qualitative risk analysis on most projects. On some projects, you will scale it back to a one hour meeting. On other projects, your qualitative risk analysis might deserve 6 hours of work and include getting ideas and data from a dozen stakeholders. You must control how much time and money you spend in each of these steps. On a small project, you can invest as little as an hour in total on risk identification, qualitative risk analysis and risk response planning. You will spend only what it cost to buy coffee for the group. On larger projects with massive risks, you may do all five of the steps and spend weeks or months and thousands of dollars. Small Project Risk Management

Three Example Risk Management Plans

Let’s look at some example risk management processes and see how you might use them for three different size projects:

  1. A project done within a department where the PM and team all report to the project sponsor
  2. A cross-functional project that affects multiple departments within an organization
  3. A strategic initiative for a large organization

Project #1: Project Risk Management – Small Project

In assessing the situation, you remember the boss made a big point about starting fast and avoiding a lot of project management paperwork and unnecessary meetings. So you decide to use a very minimal risk management process. When you finish the discussion about the project scope, you ask the boss, “What are the major risks you think we face in delivering that scope?” The boss gives you three ideas of risks that had damaged similar project efforts. Then you ask, “What do you think we can do on this project to avoid having our efforts hurt by the same kinds of risks?” The boss suggests that you avoid the problems with inter-department cooperation by involving the other departments early in the effort. He also points out that you can avoid delays resulting from people not coming to meetings by letting people attend by video conference. Finally, the boss suggests that you record the video conferences (after letting everyone know you’re doing it) and send the video to the people who couldn’t attend the meeting. You thank the boss without mentioning the fact that the two of you have just completed risk identification, qualitative risk analysis and risk response planning. All you say was that you will add those elements to the project plan and schedule.

In this example of a small project, you asked a couple of open-ended questions to tap into the boss’s experience. You completed a very small risk management process. The project plan would now include risk responses and risk mitigations that may help this project avoid some known risks. Presenting Your Risk Plan

Project #2: Project Risk Management – Cross-functional Project

This somewhat larger project involves stakeholders from several departments. Many of them may also be contributing team members. You begin very simply with identifying the risks during a meeting to which all of the identified project stakeholders and team members were invited. You describe the scope of the project and major deliverables and ask people to think back through their project experience about risks that could affect each of the deliverables. Your project charter has five high level deliverables and you focus the discussion on each of those in turn. You are careful to limit the discussion to the identification of risks and ask people to hold off on identifying the kind of risk response they think is appropriate. You want to hold that off until later. You encourage people to offer their ideas about risks. You also discourage people from criticizing any of the suggestions or evaluating their likelihood. You want as long a list as you can get from the group.

With your list of identified risks, you’re ready to begin qualitative risk analysis. In qualitative risk analysis, you will assemble your group and focus on screening the risks using relatively quick and inexpensive qualitative techniques.  You want to prioritize the risks in terms of their likelihood and potential impact on the project.

You use qualitative risk analysis as the only analysis to support risk response planning. The project’s scale does not justify the cost of quantitative analysis.

  • Two members of the team and the project sponsor will subjectively set the impact and likelihood values for your risk and impact analysis.
  • Neither the boss nor the team members have any experience in risk management. In the beginning, the boss thought the process was a waste of time.

After the group has completed risk identification, you have a list of 14 potential risks. You rejoin the other two members of the risk team in the boss’s office and say, “Here’s a form we’ll use to get everyone’s assessment of the risks we face on the project. We want to describe each risk in terms of two separate dimensions:

  1. The probability or likelihood of the risk event occurring
  2. The impact it will have on the project’s costs or finish date or both, if it occurs.

We’ll use a simple scale with three choices for likelihood and for impact. Low – meaning very unlikely to occur or a small impact.  High – meaning very likely to occur and a large impact. And Medium – meaning between those two extremes.”

Figure 1 Risk Management Qualitative Risk Scores from Three Team Members (

Scale 1-6)

You get ratings from the three team members 1=Low 6=high Then enter them in the form and have the qualitative risk analysis results below.  Using this data, you would select a risk response.

1. Risk event 2. Likelihood 3. Impact 4. Risk Response
Name Medium High Low Medium High Low

Type of Response

Turnover among engineers is over 20%

 2

 5  1  1  6

 1

 Transfer, Mitigate, Avoid 0r Accept with Contingency

Figure 2  P/I Results for Three Risks with

    Magnitude        Low                     Medium                                   HighProbability

High

Engineer turnover
 Medium      Don’t use new procedure

Low

Trouble Reports increase

Then you say, “We all seem to agree that while we have several risks, only one risk has both a high probability and a high magnitude and that’s the risk of engineer turnover. The  other significant risk is that our customers don’t use the new procedure”

The boss says, “I thought this risk stuff was going to be a waste of time, but I’m already thinking of things we can do to educate the customers about the new procedures. That is one surprise I wouldn’t want to hear about right before the end of the project.”

For this department project, you’re ready to move on to risk response planning.  Having engaged the sponsor and the team in risk identification and qualitative analysis, you can carry out the aim of risk management, which is to take action in the form of risk responses before risks do any harm. That doesn’t require fancy or sophisticated risk management techniques, just an effective process.

Project #3: Project Risk Management: Strategic Initiative for a Larger Organization

Project Situation:

  • The project risk management plan calls for using qualitative risk assessment as a screening tool to select the risk that will be put through quantitative analysis. You anticipate analyzing a dozen or more risks with quantitative analysis.
  • Qualitative risk assessment is being done by three committees. Each one is focusing on a particular market segment the company serves.
  • The risk steering committee will make a final determination about which risks go on to quantitative analysis. That committee includes the sponsor, senior VPs and you, the project manager.

You distribute the project risk management qualitative risk assessment form to the three risk committees.  Since the team members are familiar with estimating probabilities and magnitudes, you use a 1-10 scale for the estimates.

Then you give the committee leaders their project risk management instructions, “Here’s what we’re going to do here. Each person will make an independent judgment about the probability of each of our risk events occurring and the impact on the project if they do. We’ll use a 1 to 10 scale for each assessment. So if a risk event is very likely to occur, you should give it a 9 or even a 10.  For a risk event that is very unlikely, give it a score of 1 or 2.  You’ll do the same thing on the impact. When you come to that decision, forget the probability of the risk event occurring. Simply assess how big an impact it will have. If its impact will bury the project and do us irreparable harm, you should score it a 10. If a risk event occurring has minimal impact on the project, give it a 1 or 2.”

One team member asked, “Aren’t we going to discuss each risk first?”

You answered, “No, I think it’s best if each person gives their assessment without being influenced by the others. Remember that we have people whose immediate superior is on the same committee.  If people share their opinions before we each score the risks, the manager’s opinion may count too much.  Let’s everyone make a judgment without knowing what the managers think. We may get better information with independent judgments and avoid some of the politics. For that same reason, we’ll keep the ballots anonymous. You’ll notice there is no place to fill in your name.”

A few days later, you gather the completed forms and tabulate the data into a spreadsheet designed for this purpose. The result is a table of data values and a graph for each committees. You  take the project risk management data and recommendations from each committee to the risk management committee that includes the sponsor and an executive vice president. You select one or two risks from each committee’s qualitative analysis and recommended that a quantitative analysis be conducted.

Because three of the risks on the chart above  have probabilities and impacts above eight, the committee decides that all three warrant quantitative analysis. They are particularly concerned about the risk of customers not using the new trouble report procedure. They ask you exactly what they will get from this quantitative analysis.

You say, “We will start with an influence diagram we developed during risk identification. Then we’ll gather some opinions from industry experts and build a decision network to analyze where we can have our biggest influence in avoiding that risk.”

As the quantitative analysis proceeds, you and the other members sketch out ideas for mitigating, avoiding or transferring these risk to other organizations. Those strategies will be applied when the quantitative data is ready. You will have an expected value for each risk which will tell you how much expense you can justify to avoid each risk.

Project Risk Management Summary

The process above indicates how you can do a worthwhile risk analysis for a small project in a matter of minutes with larger investments in projects with greater scale and significance.

 

 

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Healthcare Project Risk Management

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Convincing healthcare administrators and physicians to participate in Healthcare Project Risk Management is difficult at best. They typically perceive risk management as a lot of meetings, wasted paperwork, money and time. To persuade healthcare leaders that a minimal investment in healthcare project risk management is worthwhile, revisit some previous project failures. Identify the causes of the project failure and discuss them as negative risks which were not properly identified early, assessed and responded to.   If you make a reasonable case to those decision makers, perhaps you can justify a lunch meeting  devoted to healthcare risk management for the next project.  Invite the most knowledgeable project stakeholders attend and contribute their experiences.  The key at this first meeting is to keep things short, and efficient. Aim to complete risk identification, a quick and dirty assessment and the planning of one or two risk responses during the lunch.  Your aim here is not to perform a complete risk management process. You’re simply looking to demonstrate to these decision-makers that a little bit of time and their experience invested in risk management can pay big dividends. Risk Management Main Page

With the right people on our of identifying risks and discussing ways of responding to them to mitigate the impact on the project is always worthwhile. During this session don’t fail to raise the issue of positive risks; that is, the good risks that can shorten the duration and reduce the cost.Risk Responses

Watch the video where Dick Billows, PMP discusses project management techniques focusing on risk management for Healthcare projects. The discussion covers both qualitative and quantitative risk analysis and ways of developing risk responses and justifying them to the users.

The sample lecture from our Advanced Healthcare Project Management course focuses on identifying and analyzing risks that threaten health care projects. The advanced techniques include both qualitative and quantitative analysis as well as the development of risk responses and cost justifying them for physicians and administrators.  Small Project Risk Management

Advanced Healthcare Project Management

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Project Risk Management

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.co

There’s a lot of talk in project management about all-star project managers being great at “putting out fires.” But actually, the all-star project managers are the ones who do risk management and avoid the fire entirely. These PMs don’t need “all-hands” emergency meetings when something unexpected happens. They don’t need to bring all project work to a halt and give people new tasks to respond to a crisis.  Instead, they go through a straightforward risk identification, risk analysis and risk response planning process at the beginning of a project. They identify the most likely risks that will significantly impact the project and they plan for them. Then there is no emergency. There is no frantic reassignment of duties. The project team simply executes the risk response plan they developed months ago. Risk Management Main Page

Project managers who skip the project risk management process do so because the sponsor wants them to start work quickly without “wasting time” wbson things like risk management. This will probably doom the PM to fighting fires for the rest of the project. Even on a small project, you can undertake a simple risk assessment process. By investing as little as an hour at the beginning of the project, you’ll possibly save dozens of hours later on. You can use the project risk management steps below with your team and/or stakeholders.

Project Risk Management in Theory

Risk management is a concept with a very sound foundation. It’s proven that the cost of responding to unanticipated problems is always much higher and more disruptive than the cost of implementing risk responses that you planned in advance. Further, if you keep the scale and cost of your risk management in proportion to the scale of the project and the risks you are avoiding, risk management more than pays for itself. Risk Responses

Project Risk Management in Practice

Project managers routinely feel a great deal of pressure to start work on a project quickly since many executives think planning and risk management are simply bureaucratic paper shuffling processes with no real-world pay off. There is some truth to that assumption, particularly in bureaucratic organizations where any activity like risk management is an opportunity for more papers, more procedures and endless meetings. In addition, there is the fantasy that good project managers are good firefighters and so spending time and money on risk management is a waste of both. When bad risks flare up; you just fight the fires.  Small Project Risk Management

Project Risk Management for Three Different Sized Projects

Small Project Plans- Done within your organization for one manager or your boss.
Medium Project Plans- Affects multiple departments within your organization or done for customers/clients.
Strategic Project Plans- Organization-wide projects with long term effects on the entire organization or its customers.

Project Risk Management Step #1: Risk Management Plan

Small Project Plans- You may limit the entire risk management effort to 30-60 minutes. The tasks are to identify risks and plan risk responses for 2-3 major risks.
Medium Project Plans- You would add qualitative risk analysis on 10 to 20 significant risks. Perhaps do quantitative risk analysis of the 2 to 3 biggest risks. The aim of the risk analyses is to develop cost data as justification for your risk responses.
Strategic Project Plans- The scale of the project and the consequences of failure justify extensive risk management. Spending several weeks and over $10,000 on risk analysis is routine. It is normal to hire outside experts to assess the risks quantitatively.

Project Risk Management Process #2: Identify Risks

Small Project Plans- Risk identification could be done over coffee with the sponsor and a few key stakeholders identifying key threats and opportunities. Remember that not all risks are bad.
Medium Project Plans- Risk identification is usually broken up by major project deliverables with separate groups working through the identification process for each. The project manager provides each group with the risk categories they should address.
Strategic Project Plans- The project scale justifies the use of multiple teams with each assigned one or more categories of risk. These are grouped by risk type (regulatory, competitive, technological, etc.) or the risks associated with a specific deliverable (facility construction, systems development, personnel etc.).

Project Risk Management Process #3: Qualitative Risk Analysis

Small Project Plans- None
Medium Project Plans- Use qualitative analysis for all risks.
Strategic Project Plans- Use qualitative analysis as a screening and prioritizing tool to identify risks with large expected value and to justify more expensive quantitative analysis.

Project Risk Management Process #4: Quantitative Risk Analysis

Small Project Plans- None
Medium Project Plans- Only for very significant risks or opportunities.
Strategic Project Plans- Used to justify risk responses that cost a great deal of time or money.

Project Risk Management Process #5: Risk Response Plan

Small Project Plans- Short statement of how you will respond to each risk if it occurs.
Medium Project Plans & Strategic Project Plans- More detailed set of risk responses using one or more of the following strategies: avoidance, mitigation, transference or acceptance with a contingency plan. You may combine all four of these risk reduction strategies in sophisticated responses. You will implement careful monitoring of the project using risk triggers for early warning.  Presenting Your Risk Plan

Project Risk Management & “Best Practices” In the Real World

A slow gradual education approach with executives works best. Savvy project managers make a case for limited risk management using examples from previous projects where delays and cost overruns could have been avoided with some risk management. Wise executives respond well to those examples, particularly with data from previous projects. Even the most skeptical sponsor will usually listen to arguments about the specific risks’ damage to project completion dates and budgets.

 

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Risk Analysis

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

After you have identified the risks your project faces, you need to decide which ones warrant a risk response and which do not. That’s the purpose of risk analysis. You use it to prioritize the list of identified risks.  You focus your analysis on qualitatively assessing the probability that the risk will occur and the magnitude of its impact if it does. You will use the qualitative analysis to decide which risks are important enough to warrant a risk response. Risk Management Main Page

You may also decide that one or two risks are so significant they should have a quantitative risk analysis.  The cost of the higher-level quantitative risk analysis probably requires the sponsor’s approval. Risk Responses

How To Do Qualitative Risk Analysis

The risk management plan stated you would do a qualitative risk assessment with the sponsor, one stakeholder and your project team. For each of the meeting attendees, you prepared a list of the identified risks from the risk register. You included a form for noting the probability and impact of each risk to assess the magnitude. They would use a scale of high, medium or low. They would also assess the likelihood of the risk occurring, on a scale of high, medium or low.  Small Project Risk Management

Next you scheduled a meeting with the attendees identified in the risk management plan. When you assembled the group, you explained that the only purpose of the meeting was to assess the probability and magnitude of each risk. You would address their risk responses at another session.  Presenting Your Risk Plan

Each member of the risk assessment group took 10 minutes to rank the 12 risks on your list. You aggregated the results from each member. Then you applied the rule that only risks the group rated as high on both magnitude and probability would go on to risk response planning.

This process gave you a list of risks for which you would develop risk response plans.

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IT Project Risk Management

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Bad things can and do happen on system development and implementation projects. That’s why IT Project Risk Management is a must on all projects, even if you can only spend 10 minutes on it. If you can anticipate one significant risk and make plans for preventing it, that 10 minutes is worthwhile. On even a small IT project, risk management is often worth the time and expense of a lunch, particularly if you get the user manager and a few knowledgeable users to attend. You start by tapping everyone’s experience from similar or related projects.  Then you record their ideas about good and bad risks. We all know that bad risks can make the project take longer or cost more. And good risks can make the project finish sooner and cost less. Risk Management Main Page

Watch the video where Dick Billows, PMP discusses project management techniques focusing on risk management for IT projects. The discussion covers both qualitative and quantitative risk analysis and ways of developing risk responses and justifying them to the users. Risk Responses

The discussion covers both qualitative and quantitative risk analysis of systems development risks and the ways of developing risk responses and justifying them to the user Small Project Risk Management

IT Project Risk Management

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Risk Management For Small Projects

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Solving Problems Before They Occur

Let’s say your project has just two team members so you will be completing tasks as well as doing project management work. And your boss is the sponsor. That is not a justification for skipping risk management for small projects.  Most projects are the same size as yours and all of them should have risk management. Risk Management Main Page

Now don’t tell anyone that you are starting the risk management process. That will make them think you’re going to waste hours and hours doing fancy mathematics, having all kinds of useless meetings and generating worthless paperwork.  wbsBut you’re not going to do that fancy, expensive stuff. You’re just going to solve some problems early in the project. In fact, you’re even going to solve some problems before they start. Risk Responses

This early problem solving begins during the planning phase of your project to reorganize the division’s supply room. First you identify the risks (problems) that may affect the project. Then you think about how likely each of those problems is to occur and what the damage will be if they do. The ones that are likely to seriously affect the project are the ones you should do something about. Next, you analyze the identified problems and think about how you might avoid each one. In other words, you think about how you might dodge them completely.  Presenting Your Risk Plan

 

Early Problem Solving Examples 

Let’s say that when you think about the problems your supply room project will face, you come up with two of them that are likely to occur and will have a big impact if they do. The first problem is that people may not keep the supply room well organized after you finish the cleanup. The second problem is that it will take people longer to find what they want than it does now because the supplies will probably be in different places. Let’s tackle each of these problems (risks) separately.

The first risk comes down to making sure that the new organization of supplies is maintained. You and your two project team members discuss possible incentives for the people who stock the supply room shelves. You believe this problem can be avoided if these people are involved in the design and then held accountable for maintaining it. You agree to that task and add it to the project plan.

You go on to the second risk of people not being able to find the supplies they want because the supplies have been moved to different locations. You certainly don’t want complaints about your reorganization. So you discuss what would make it easy for people to find things. You finally agree that the high-volume supplies, the ones that are most often retrieved, should be near the door to the supply room. After you’ve covered the supplies that cause two thirds of the trips to the supply room, you agree to organize the remaining items by category (paper products, writing instruments, clips and staples, etc.).

Small project risk management is a 3-5 step process, depending on the scale of a project. On a very small project the risk management effort might be completed over a lunch with the project manager, the sponsor and some team members. Here’s what that discussion will do:

  1. Identify the risks the project faces
  2. Qualitatively assess the likelihood of the risk occurring and the magnitude of its impact on cost and duration, if it does
  3. Develop risk responses to mitigate or avoid the impact of the risk.

On larger projects, you might add fourth and fifth risk management steps. The fourth is quantitative analysis of the risks. This will yield a mathematical measure of the probability of each risk occurring and actual numbers impact to the cost and duration. The fifth is adding on-going risk monitoring to the project plan. This will watch for the onset of the known risks as well as identify new risks.

Risk Management Template: 5 Steps

  1. Project manager and team members begin by reviewing the risk register, a list of identified risks. Then they qualitatively assess each risk. That is, for each risk, they individually assign a rating of high, medium or low to the likelihood of the risk occurring and the size of the impact if it does.
  2. Project manager gathers the individual assessments of likelihood and magnitude, correlates them and calculates averages for each of the risks identified in the risk register.
  3. Project manager and team members review the average ratings and select those risks that are sufficiently important to warrant a response.
  4. Project manager presents the qualitative risk analysis to the project sponsor and principal stakeholders. The objective is to secure their approval for planning the responses to the recommended risks
  5. Project manager and team develop risk responses for both the positive and negative risks. For positive risks, the response should be designed to increase the probability and/or the magnitude of the beneficial impact. For negative risks, the response should decrease the probability or magnitude of the adverse impact.
  6. Project manager presents the recommended risk responses along with an analysis of their impact on the cost, schedule and budget. For those risk responses the sponsor approves, the PM makes changes to the project plan, schedule and budget to reflect the risk responses that have been approved by the sponsor.
  7. Summary of Small Project Risk ManagementUsing either of these two templates you can accomplish a great deal of problem solving before you start work on your project. This will allow your success rate on projects to improve appreciably.

 

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Risk Responses

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Risk Responses

You’ve gone through the risk identification process. You have done qualitative analysis of those risks and possibly quantitative analysis on a few major risks. Risk Management Main Page

Now you have your data on the probability of each risk occurring and the magnitude of the impact (on duration and/or cost) if it does happen. Let’s say that each project has two risks.

  • Risk A is that turnover among the project engineers will exceed 15% year.
  • Risk B is that serious flooding during the spring will require the project team to relocate.

If you’re basing your risk response planning on qualitative data, you will have asked your team to subjectively evaluate the probability and magnitude of each risk. It will be in the form of:

  • Risk #A has a high probability of occurring and a high impact on the project if it does.
  • Risk #B has a low probability of occurring and a medium impact on the project if it does occur.

If you’re quantifying the probability and impact, you will have gathered data from historical records or experiments and be able to summarize it like this:

  • Risk #A has a 14% probability of occurring and a $20,000 impact if it does.comm24 The expected value of the risk is $2,800 (.14 x $20,000).
  • Risk #B has a 5% probability of occurring and a $1,000 impact if it does. The expected value of the risk is $50 (.05 x $1,000).

The quantitative risk analysis is much more usable than the qualitative analysis.  It also costs a great deal more. The numbers are particularly useful because they allow us to calculate the expected value of the risk. That expected value, which we get by multiplying the probability times the magnitude of the impact, puts a ceiling on what we can spend to completely avoid the risk. We don’t have this information when we limit ourselves to qualitative analysis. But we need to plan our risk responses regardless of the limitations of our information.  Small Project Risk Management

How Do We Respond to Each Risk?

A reasonable project manager, the sponsor and stakeholders might decide to focus their risk effort on risk #A – engineer turnover.  Presenting Your Risk Plan

They would accept risk #B – relocation due to flooding because its probability and magnitude are small, based on both the qualitative and quantitative data. That means the project manager will not plan any specific risk mitigation, avoidance or transfer to avoid the risk’s effect. No money will be spent trying to avoid or mitigate the risk. However, the PM will develop a contingency plan for this accepted risk. That plan will detail how to respond to the flooding risk. The contingency plan might focus on identifying two nearby office locations that are available.

Then we would focus our attention on the more significant risk. Because risk #A – engineer turnover is a negative risk we can use three strategies, individually or in combination.

  1. Avoid the risk. We alter the project plan to completely eliminate the source of risks. In this example, we might purchase the deliverable “off-the-shelf” so we don’t have to develop it ourselves. Thus, we would not be hurt by engineer turnover.
  2. Transfer the risk. This strategy is similar to buying insurance for the risk. If we were concerned about a tornado we might buy tornado insurance. In the situation of our engineer turnover risk, we might contract with an engineering consulting firm to provide the hours of engineer work we require.
  3. Mitigate the risk. This strategy requires that we act to reduce the probability of the risk occurring and/or the magnitude of the risk if it does occur. These mitigation actions usually require that we spend money and the limitation is the expected value of the risk we calculated above. One mitigation might be to raise the salaries of our engineers to reduce the probability of their being hired elsewhere. We might also hire two additional engineers which would lower the impact of turnover because we would have the extra staff immediately available. We often can’t completely eliminate the risk with mitigation. We simply reduce the probability and/or the magnitude of its impact. We have a remaining portion of the risk which we have to accept and for which we would develop a contingency plan.

Risk Strategies

Remember that the expected value of that risk is $2,800. That means we can’t spend more than that amount, even if we eliminate the risk. That is the spending ceiling on the risk response. The PM would gather the risk management team together and ask for ideas that would reduce project engineer turnover to 15% or less.

One team member might suggest that all the engineers working on the project receive a $200 bonus if they stay until the project is completed. With 14 engineers, there would be sufficient money to pay that the bonus amount but then we would have to completely eliminate turnover above 15%. A number of members of the team say that engineers offered substantial pay increases to move to a new company would not stay on the project for as little as $200. The PM also noted that if other members of the project team didn’t receive a similar bonus that might create even larger morale problems. The PM asked for other ideas for holding down turnover. A team member suggested hiring additional engineers for the project team. This would provide the capacity to absorb turnover above 15%.

A few minutes of risk management on even the smallest project gets a good return for the effort. In proportion to the cost. Here’s our 3 tier approach for projects of different scale and significance.

A 3-Tier Approach to Risk Responses

Project managers often skip the risk management process because the sponsor wants them to start quickly without wasting time on “useless paperwork” like risk management. This dooms the PM to non-stop fire fighting for the life of the project. On even a small project, we can undertake a simple risk assessment process, investing as little as an hour and possibly saving days of lost time. That’s why we use 3 tiers of risk techniques so we can match them to the scale and significance of the project. Examples of these 3 tiers are:

  1. A project done within a department or small company where the PM and team all report to the project sponsor
  2. A cross-functional project which affects multiple departments in the same organization
  3. A strategic initiative or consulting engagement that includes both technical expertise and project management services for an outside client or customer.

We can begin very simply with identifying risk events and doing a “fast and dirty” qualitative assessment of the risk’s effects.

Risk Management Template

Here are the 5 Risk Management steps leading to our risk response planning:

  • Identify the risks that threaten delivering the scope on time
  • Qualitatively assess the probability of the risk occurring
  • Qualitatively assess the magnitude of the impact if the risk occurs
  • Select the most significant risks
  • Plan how to avoid them or minimize the damage if we can’t avoid them.

In risk identification, we are simply harvesting as many risks as we can without making judgments about their significance. When we have the list of risks, we’re ready to begin qualitative risk analysis. That’s where we focus on assessing the significance of each risk using relatively quick and inexpensive techniques. Specifically, we are assessing the likelihood a risk will occur and the impact (cost and time) if it does occur. We use these assessments to prioritize our risks in terms of their significance.

Tier #1 In-department Risk Management Template

Project Situation:

  • The PM and two team members spend 30 minutes on risk identification with a limit of 7 risks in two risk categories that threaten project success.
  • The PM and two team members spend 30 minutes on qualitative/subjective risk analysis as the only support for the risk response plan. The project’s scale does not warrant the cost or time for quantitative analysis. The two members of the team and the project sponsor will subjectively set the impact and likelihood values for risk and impact analysis.
  • The PM and sponsor will agree on the risk response plan in 30 minutes.

Let’s look in on how the process would work.

For our in-department project, risk identification and qualitative analysis is all we’ll do before planning our risk responses. On the cross-functional and strategic/consulting projects, we’ll use qualitative analysis as a screening tool before applying more sophisticated quantitative analyses. Let’s start with our in-department project.

The PM and the two team members take a short lunch and talk about the risk events that could cause them to fail to deliver the project scope. Then they discuss events that would affect finishing the project on time. They return with a list of 7 risks to consider. Six are negative risk events. The last is a positive risk event that would let them finish a week early.

After they’ve completed the risk identification, the PM and the two members of the team go to the PMs cubicle. The PM smiles at them and says, “We’re 1/3 done. Now let’s spend about 30 minutes analyzing the risks we identified.

Slide2

Here’s a form we’ll use to get everyone’s assessment of the risks we face on the project. We want to describe each risk in terms of two separate dimensions; 1.) the probability or likelihood of the risk event occurring and 2.) the impact it will have on the project if it occurs. We’ll use a simple scale with three choices for probability and for impact:

  • low – meaning very unlikely to occur or a small impact
  • high – meaning very likely to occur or a large impact and
  • medium – between those two extremes.”

Following the risk assessment, the project manager charts the results and displays the simple grid for the group.

Risk Management Template

Then the PM says, “We all seem to agree that while we have several risks, only one risk has both a high probability and a high magnitude and that’s the risk of customers not using the new procedure.”
The boss says, “I thought this risk stuff was going to be a waste of time, but I’m already thinking of things we can do to educate the customers about the new procedures. That is one problem I would not want to hear about at the end of the project.”
Following the boss’ comments, the group begins to assemble a strategy. First, they discuss possibilities for changing the project plan in a way that allows them to completely avoid this risk. But it doesn’t take long before they realize there’s no way to avoid the customers having to learn the new trouble ticket procedures. They also briefly discuss being able to transfer this risk to another party and “buy insurance” to avoid the consequences. The boss brings that discussion to an end by telling them no training firm would undertake responsibility without charging them tens of thousands of dollars. With limited strategies for avoiding and transferring the risk, the group focuses on mitigation. One mitigation that everyone likes is distributing professionally designed instruction manuals for the customer. That includes a laminated one page crib sheet to help them easily follow the new procedure.
The boss agrees that wouldn’t cost very much and welcomes the idea of adding that mitigation to the project plan. They spend a few more minutes discussing other options including writing profiles of customers who did well with the new procedure and including it in the company magazine. No one likes that idea, however, so they stick with the customer instruction manual mitigation idea. That brings their risk response planning to an end.
Tier #2: Cross-functional Risk Management Template
Project Situation:
The risk management plan calls for using qualitative risk assessment as a screening tool for quantitative analysis. The PM anticipates that they will analyze 12 or more risks in an intensive quantitative analysis.
Three committees will perform qualitative analysis. Each one is focusing on a particular category of risk within the categories supplied by the organization.
The sponsor will decide which risks go to quantitative analysis.
The cross-functional project manager distributes the qualitative risk assessment form to each of the three risk committees to use in assessing the project’s risks. The team members are quite familiar with estimating probabilities and magnitudes so the project manager uses a 1-10 scale for the estimates. The first page of one committee’s form looks like this:

Slide4

Then the project manager gives the committee leaders their instructions, “Each person will make an independent judgment about the probability of each risk event occurring and the impact on the project if it does. We’ll use a 1 to 10 scale for each assessment. So if a risk event is very likely to occur you should give it a 9 or even a 10. For a risk event that is very unlikely, give it a score of 1 or 2. We will do the same thing on the impact. When you come to that decision, forget the probability of the risk event occurring. Simply assess how big an impact it will have if it occurs. If its impact will bury the project and do us irreparable harm, you should score it a 10. If a risk event has minimal impact on the project, give it a 1 or 2.”

One of the team members says, “Aren’t we going to discuss each risk first?”

The project manager answers, “No. I think it’s best if each person gives their assessment without being influenced by the others. Remember that we have people whose immediate superior is on the same committee. If people reveal their opinions before we each score the risks, the manager’s opinion may count for too much. Let’s have everyone make a judgment without knowing what the managers think. We may get better information with independent judgments and avoid some of the politics. For that same reason, we’ll keep the ballots anonymous; you’ll notice there is no place to fill in a name.”

A few days later, the project manager gathers the completed forms from the committees and tabulates the data into a spreadsheet designed for this purpose. The result is a table of data values and a graph for each of the committees.

The cross-functional project manager takes the committees’ data and recommendations to the risk management committee which is made up of the sponsor and an executive vice president. The project manager selects one or two risks from each committee’s qualitative analysis and recommends quantitative analysis.

Three of the risks have probabilities and impacts above eight so the committee decides that all three warrant quantitative analysis. They are particularly concerned about the risk of customers not using the new trouble ticket procedure. They ask the project manager exactly what they will get from this quantitative analysis.

The project manager says, “We will start with an influence diagram that we developed during risk identification. Then we’ll gather some opinions from industry experts and build a decision network to analyze where we can have our biggest influence in avoiding that risk.” On this larger and more significant tier #2, cross-functional project, the decision-making about risk response strategies can be much more extensive. It can also involve substantially larger costs than the tier #1, in-department project.

Tier # 3: Strategic Project Risk Management Template

Project Situation:

  • A committee of executives will make final risk decisions based on detail work developed by risk committees focusing on special categories of risks.
  • The size of the project budget and its strategic significance for the client warrant elaborate quantitative analysis, which has been included in the risk-management plan.
  • The budget for quantitative risk analysis includes funds to pay experts’ fees and for research and data gathering.

The project manager presents the qualitative risk analysis information to the client’s management. Because these executives are familiar with making decisions based on data, the PM consultant includes qualitative measures of probability and impact and as well as data precision value. One of the executives asks, “What is the significance of that data precision score? Didn’t our people do a good job in the risk assessment?”

Slide5

Our consulting project manager answers, “No, that’s not the case at all. That data precision score is reflective of the accuracy and validity of the data we have about each of the risks. It reflects our understanding of the risk, the amount of information we have available about it and the reliability and integrity of that data. The score is based on my firm’s collective experience with projects of this type. As you can see, there are a number of risks about which we know a great deal. As an example, the quality of the data we have about the third risk on the list is quite good. We have very reliable data from the company’s own quality control and quality assurance processes and I have given that risk a data precision score of 80 to reflect the quality of that data. On the other hand, the risk we are most concerned about is that the customers will not utilize the new trouble ticket procedure. I’ve given that a low data precision score because your organization has very little information. What we have is about other segments and is of questionable reliability. We are concerned about the risk because of its high probability and high magnitude. But frankly, the absence of good data is equally important. For that reason, I’m going to suggest we do a Monte Carlo simulation so we can more accurately assess the impact of that risk on the project’s overall duration and budget.”

The client executives accept the consulting PM’s recommendations and the list of prioritized risks. They authorize the project team to move on to quantitative risk analysis. For this very large strategic initiative level project, the quantitative analysis process can easily take months and include substantial and expensive data-gathering efforts. They will provide a better assessment of customer behavior and how it could be changed. From that data-gathering phase, the decision-makers will have sophisticated simulation information which would trigger the brainstorming process on the risk response strategy.

Risk Management Template: Summary

We can apply risk management at various levels of intensity, scaling it so the effort is appropriate to the project at hand. You can learn these techniques in our online individual project management training classes or in in-person seminars for companies.

 

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Risk tradeoffs

Executives do not like project managers to mention risk (or planning for it) because they prefer executing the project without any uncertainty. They also do not want to pay any price for risk planning. However, this is a real impossible mission without considering risk tradeoffs. The Project Manager’s mission is to use their risk management plan, including risk tradeoffs, to convince executives of the benefits of planning for risks. Risk Management Main Page

One of the Project Manager’s accountabilities is to spread the project management culture in the organization and risk tradeoffs are part of that effort. First the PM should identify the potential positive or negative risks that might occur. Second, the PM should specify the level of risk – low, medium, or high – based on the PM Office criteria, if available. If not, the PM should specify these criteria in their risk management plan. The possibility of a risk occurring should be shown as a percentage. The value of the risk might be estimated as hours or money and should also be included in the plan. Look at the two examples of risk categories below. Risk Responses

Risk\Duration Category

mohtable1

There should be a plan for responding to the risk once it occurs. For example, executives might accept increasing the project duration by 148 hours. Or they might want a different response plan such as increasing the project cost or lowering the scope.  Small Project Risk Management

mohtable2

In the example above, the PM is showing the executives the list of positive and negative risks and their impact on the project. The Project Manager is asking to add $7,000 to the project cost to mitigate the uncertainty.
Once the Project Manager provides executives with all risk possibilities, their impacts, and suggested responses, they frequently accept the PM’s plan. Or they may discuss other ideas for the PM to analyze.  Presenting Your Risk Plan

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PMP® Certification Training

What do I Need To Qualify to Take the PMP test

After you have 3 to 4 years of experience managing projects, you should consider adding the PMP® (Project Management Professional) to your previous certifications.  you will need PMP® Certification Training  to earn the PMP certification, which is the most widely recognized credential in project management and is a door-opener when you hunt for a new job anywhere in the world. It’s also a very good credibility builder within your organization. Certification requires you to document, with references, 4,500 hours (3 years total experience) of project management experience if you have a college degree and 7,500 hours (5 years total experience) if you don’t have a degree.

The PMP certification also requires, 35 hours of project management training. All of that makes you eligible to take, and hopefully pass, the 4 hour 200 question multiple-choice exam. The test is exceedingly difficult and PMI reports that approximately half the people who take it worldwide fail. Taking a formal PMP exam preparation course where you learn all of the best practices in project management is not only useful for your career but the best way to pass the exam.

How Do I Pass The PMP Exam

The challenge in the PMP exam comes into areas. First, you need to understand all of the best practices in project management and when to use them. But you can’t pass the exam just by memorizing that information. You need to know when to apply a certain technique based on the situation you are in. A very large proportion of the questions on the exam are situational questions.  They tend to be lengthy for two reasons. First they detail the situation of a project.  That situation is defined by;

  • what sort of organization you’re working in
  • what kind of project
  • what sort of project team you have
  • What project process for output you have just  completed.
  • There are many other variables

Then you have to choose from four multiple choice answers.  Each of those answers may be correct to some degree.  So you have to decide which is the most correct answer in the particular context of the question. This is enormously challenging because you have a very large body of knowledge you have to learn in a very complicated set of situations in which you have to be able to decide what to do.

Multi-media Learning

You need to select the correct learning methodology to master all of the information you need to learn to pass the PMP. You need to learn about the various contexts including organizational type and the impact on what sort of organization has on the  challenges a project manager faces. Which techniques to use our function of the situation of the project, the environment  in which it is taking place,  and where in the project management process the project managers and stakeholders are.  You can’t learn the interplay between those elements by memorizing.

The best way to learn all this information and how to apply it in situations is to have study materials that actually give you scenarios of project  managers executing various size projects. As you read these scenarios, you see the logic the project manager uses to pick the appropriate technique. You’ll also read about the explanations the project manager gives to project sponsors and stakeholders about the risk management or estimating techniques the PM decided to use. By reading about how project managers operate in these different situations you will learn to interpret a situation and pick the right techniques when you answer a question on the exam.

Our PMP prep courses give you a multimedia learning experience. You aren’t just reading and rereading the same dictionary over and over again instead you are learning the material in a multimedia sequence:

  • first you read about a process and its inputs and outputs.
  •  Then you hear a lecture about the correct way  to execute that process
  •  you have an opportunity to talk with your instructor about the process and its techniques
  •  then you watch a video of a project manager actually doing the particular process with the sponsor and project team

we find that this multimedia learning embeds the knowledge much more effectively and is also a much more pleasant learning experience. You also add to your personal tools and understanding of which techniques to use when which is invaluable in your project management career.  With our PMP prep we give you  the best passing guarantee available.  Your instructor will  continue to work with you  if you fail the exam  after completing our course in its entirety. We also give you  the maximum flexibility in scheduling the course because you’re not tied to a rigid schedule set by the instructor. Instead you set your own schedule and your instructor adapts to it.   You may wish to take advantage of our free instructor assessment which will help you gauge  the level of your project management knowledge.

 

PMP® Certification Training Summary

The PMP exam is exceedingly difficult pass and the experience and education requirements are enforced with audits of the projects applicants to take the exam claim to have managed. The combination of those two requirements is what makes the PMP credential so valuable as a job-hunting tool. It’s also the reason that many organizations use the PMP credential as a screening tool when they are recruiting for project managers. People without the PMP are simply not considered for the positions.

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Project Management Training

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Project management training must prepare you for all of the following challenges. They start when the boss calls you into his office and says something like, “We’ve got a big problem with the supply room. Our people are wasting dozens of hours every day because they can’t find the office supplies they need to do their jobs. I want you to run a project to fix the supply room problem.” That’s when you may do a Google search on “project management “to find out what the heck to do. Well, here’s the answer. The first thing you do is pin the boss down about exactly what he means by “fix the supply room problem.” To do project management the right way, you need to have a definition of the project’s scope, the goal that defines success. The boss’ “fix the problem” statement is way too vague. It will be a moving target and your goal will change each week because everybody can interpret it differently. . So you must ask the boss questions about how he will measure your work at the end of the project. When he says something like, “People will be able to find the supplies they need in less than 2 minutes,” you have a clear scope. Project managers know how to ask the right questions to pin down the scope. The second thing you do is subdivide that scope into the major deliverables that will take you from where you are now to the end result the boss wants. You will usually have 4 to 7 major deliverables and each one must be defined with a metriproject managementc like, “fewer than two stock-outs a week in the supply room.” That’s a measured deliverable and it defines success before you and your team start work. The third step in project management is to write your project charter. That can be a one page document that tells the boss: your understanding of the project goal, the resources you need to do the work on the major deliverables and the risks you see in the project. When the boss signs off on the charter, you can start work creating the project plan. The fourth step is to develop your project plan and schedule. To do that, you work with your team to estimate how much work each of the deliverables and tasks will require and lay out the sequence in which you will do them. Then you make the work breakdown structure (WBS) which is a hierarchy of the deliverables in your project. It’s easiest to use project software to develop your schedule. One of the best programs is Microsoft Project®, but it’s expensive. There are less expensive options like Gantter which is a free project management scheduling software that you use with your browser. (I don’t think it’s going to be free forever.) The fifth step is to get the sponsor to approve the project schedule. Then you and the team can start work on the tasks in your project plan. The sixth step is to track actual progress on those tasks and compare them to your approved schedule. You will give the sponsor status reports on how things are going and what problems you’re encountering.
When the project is complete, the seventh step is to archive all the information about the project. That data will make doing the next project a lot easier.
That’s what project management is in a nutshell.

You learn all of those skills in our project management basics courses. Take a look at the basics course in your specialty.

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PMP® Training

PMP Training Is a necessary step in every project managers career. With that training you will learn a wide array of project management techniques that you can apply to the projects you manage. With three or four years of experience managing projects,  PMP training will also equip you to pass the project management professional certification exam. The PMP credential is the most recognized project management certification in the world. It gives you substantial credibility in your own organization and if you decide to look elsewhere it is a very potent job-hunting tool.

Companies are looking for project managers with a certain mindset and sighting project skillset, because they don’t want to spend a lot of time and money on basic education for a new PM. They need someone who, in theory, can hit the ground running. However, the problem is to find someone like that with only the limited time HR departments have to pick and choose. Being certified does not guarantee that you are a good project manager. But it shows a third party that you have a certain theoretical knowledge about a subject, in our case, Project Management. Being certified shows someone else that you have followed a certain process and that you possess a certain vocabulary. And if the certification requires proof of experience, like the PMP does, the certification also shows that you already have experience. Are there flaws in the process? Sure. But in general, a certification gives a third party a bit more confidence in what you claim to be. Hence, if you are certified, you already look better than someone that isn’t.

Moreover, every year that passes without you getting a certification means, that it will be harder for you to actually get the certification. When I first thought about getting PMP certified, the PMBOOK 2000 was released, and it was about two fingers thick. Get the latest PMBOOK and you know what I mean when I say: I was shocked when I finally decided to get certified in 2012. Don’t wait it out. You get older and the PMBOOK gets thicker. You can do it. Just do it.

So, if you think to yourself: OK, I want to get certified, but where to start? Well, let me tell you that you are already in the right place. I tried other preparation methods, and you certainly have to find yours. But I can tell you from first hand experience, that 4PM.com’s Certification Package is the way to go. Why? Well, because unlike some other “trainings” Dick Billows wants you to pass the exam because you understood the subject and speak the same language. We all know how to manage projects, but we don’t speak the same language, and sometimes, PMP’s approach needs explanation.

With our 4pm.com PMP prep we give you  the best PMP passing guarantee available.  Your instructor will  continue to work with you  if you fail the exam  after completing our course in its entirety. We also give you  the maximum flexibility in scheduling the PMP course because you’re not tied to a rigid schedule set by the instructor. Instead you set your own schedule and your instructor adapts to it.   You may wish to take advantage of our free instructor assessment which will help you gauge  the level of your project management knowledge

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Earned Value Management

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Earned Value Management  is an integrated set of tools for managing project progress and spotting variances from the plan.  These tools help you identify variances between actual performance in the project’s schedule and variances between actual costs in the project’s budget. Earned value can also provide forecasts of the likely completion date and final cost of the project.  What is particularly useful about earned value data is that it gives you information about “where we are as of today” versus “where we should be as of today.” In that sense, earned value data is much more valuable to a project manager than simple variance information.  It can provide insights and forecasts on even small projects.  However, it is a particularly useful tool on larger projects. Although many project management software programs automatically calculate earned value data for you, it’s worth learning how to do the manual calculations. That’s because the Project Management Institute (PMI®) certification examinations often ask questions about earned value calculations. Yet many people who have passed the PMP® exam don’t have an understanding of how earned value works. So let’s dig into it. Project Tracking & Status Reports

A Simple Earned Value Management Example 

An amusement park entrepreneur hires you to manage a project to build 1,000 miles of railway track.  earned value exampleThe client wants it done in 10 days for a cost of $10 per mile, or $1,000. Because tracking progress and spotting variances in the project’s cost and duration are important, you review the basics of earned value analysis and the three variables we always use. We always calculate each of the three variables as a dollar amount. That includes the schedule data, which seems unusual at first. Let’s look at the three variables:

Planned value is our perfect world number. In our railway track example, we would lay 100 miles of track every day at a cost of $10 per mile and would spend $1,000 a day, if everything goes perfectly according to plan. So the planned value is the “perfect world number” of how many units we should have produced and the cost for those units.

Earned value in our railway example is the number of miles of track we actually laid times the $10 planned cost per mile. So we base the earned value on what we actually delivered at the planned cost for delivering it.

Actual cost is what we actually spent producing what we’ve delivered as of today. It comes from the invoices we pay vendors and the payroll we have to fund.  This table shows each of the 10 days of the project and the daily totals for the miles of track laid per day and the actual cost amount of what we spent for the track we laid that day. Overall, we should have laid 100 miles of track each day and we should have spent $1,000 each day. As we see on day 1, we only laid 80 miles of track, which is under the plan. But we spent $1,200, which is more than we should have spent if we had laid 100 miles of track. The variance is very bad because we only laid 80 miles of track instead of 100 and we were still over budget.

Things got even worse on the second day. We only laid 60 miles of track and we spent $1,400. We’re digging quite a hole for ourselves here.

On the third day, we recovered a little bit. We laid 130 miles of track and we only spent $190. You can follow the ups and downs of a project by looking at this data in any project management variance report.

The table shows the same data on the mileage and the actual costs but we’ve added a calculation for the earned value and the planned value of the project. Let’s go back and look at the unhappy results from the first day of the project. We know we should have laid 100 miles and we should have spent $1,000. So we know that the 80 miles of laid track is bad and so is the $1,200 cost. Now let’s look at it from the earned value perspective. On the first day, our earned value was $800, which is calculated by multiplying the miles of track we actually laid by the planned cost per mile. We see that there’s a $400 difference between the actual cost and the earned value. In fact, that $400 difference is the amount that we’re over budget.

The last row of numbers is the planned value which is the perfect world number. We calculate it by multiplying the planned cost times the planned mileage. And as you can see, the amount is the same every day because we planned to lay the same miles of track each day at the same cost per mile.

So on the first day, the planned value was $1,000 and our earned value was

$800. Why? Well on the first day we only laid 80 miles of track when we should have laid 100 miles at a cost of $10 per mile. So we are $200 behind schedule. We have produced $200 less value than we planned to produce. So how are   we able to express schedule variance in dollar terms? Here’s the way earned value works: it rests on the fact that we have produced less than we should have by quantifying the value (in dollars) of what we didn’t produce. That’s the $200.

We also see that the planned value on day 1 was $1,000 and the actual cost was

$1,200. So we spent $200 more than we planned to spend/ But more importantly, we also produced less than we planned. A better way to calculate how much over budget we are is to compare the earned value to the actual cost. We see that the actual cost is $1,200 and the earned value is $800 so we have been much less efficient from a cost point of view. We can measure that inefficiency as the difference between the actual cost and the earned value, which is $400.

So by using the data our project software calculates for us, we can figure out that we’re $200 behind schedule and we’re $400 over budget because we’ve been less efficient than planned.

Everything in earned value is a comparison of what we actually did to what we planned to do.

Let’s look at earned value report information.

I’ve added two more rows at the bottom on this version of our earned value table where
we calculate the project’s schedule variance and the cost variance. We can express the schedule variance as the earned value (EV) minus the planned value (PV).  We can express the cost variance as the earned value (EV) minus the actual cost (AC). Most project software calculates this data for you but you need to know what all of it means.

Forecasts Let’s add one more set of numbers

The last row of numbers deals with our estimate at completion (EAC), which the earned value table calculates.  We start calculating an estimate of the cost to complete the project based on how things have been going to date. Then we add to that the actual cost to date and come up with our estimate at completion. That’s data the project sponsors always like to see.

If you can remember the information in this brief summary, you can use earned value management to quickly quantify where you are on your project and to estimate how things are going to finish. To master these techniques and the way to present them to the project sponsor, take a look at our advanced techniques courses in your specialty.

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Video – Project Planning Turf Wars

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Watch this project team from hell make every project planning mistake you have ever seen a team make. These people have a feudal turf war going and the project manager and sponsor can’t seem to tame it. Just in case you miss a few, I’ll detail the mistakes they made and talk with you about the right way to plan projects with people from multiple departments.

You’ll see these executives  make it number of project planning mistakes including bringing in their existing political and turf wars into the project planning process. They also are unable to agree on project goals, timeframe or budget. That leaves the project manager with a lap full of project planning mistakes to cope with during the remainder of this project from hell’s lifecycle

 Watch this project team from hell make every project planning mistake you have ever seen a team make. These people have a feudal turf war going and the project manager and sponsor can’t seem to tame it. Just in case you miss a few, I’ll detail the mistakes they made and talk with you about the right way to plan projects with people from multiple departments. 

You’ll see these executives  make it number of project planning mistakes including bringing in their existing political and turf wars into the project planning process. They also are unable to agree on project goals, timeframe or budget. That leaves the project manager with a lap full of project planning mistakes to cope with during the remainder of this project from hell’s lifecycle

See the main Planning Page

The way to avoid these project planning mistakes is to learn how to do project planning the right and control your stakeholders in our basic project classes

 

You learn all of those skills in our project management basics courses. Take a look at the basics course in your specialty.

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Duration Reduction – Video

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Project managers frequently receive demands to cut the project’s duration. For some project managers these demands occur once a week or even daily. There’s a right way and a wrong way to handle cuts in duration. If handled improperly, the stakeholder will go over your head to the sponsor or a senior manager who will arbitrarily change the duration. Then you’re stuck with an earlier finish date without getting any resources to help you finish the work faster. You’ll see how this happens in the first part of the video where the project manager handles the request poorly, leading to what truly will be a project from hell.Project Tracking & Status Reports

In the second half of the video, you’ll see how to properly handle requests to cut the duration. The project manager does not flatly refused to change the duration. Instead, he gives the stakeholders choices and options for finishing earlier. Each one is feasible and leaves the project manager with a plan that is achievable. Modeling those choices requires the right kind of project schedule and a thorough understanding of techniques like critical path, fast tracking and crashing the project plan.
To develop the data you need to be able to model options and tell the stakeholders what it will cost to finish one week earlier or two weeks earlier, etc. You present each option as a trade-off like, “I can finish two weeks earlier if I have one more engineer for three weeks.” Notice the trade-off has two sides; the positive side of finishing earlier the negative side of needing more people.
Skilled project managers present a number of options for cutting duration and go out of their way to try to accommodate the stakeholder’s requests. However, every option has a trade-off. Here are some examples:
– spending more money to finish early
– adding more people to finish early
– lowering the project scope to finish early.
You give the stakeholders several choices, each of which preserves the feasibility of the project.

That’s the key to correctly handling duration change requests. You don’t resist changes or try to fight making them. On the contrary, you’re willing and eager to discuss possible options for finishing early. But each of the options you present has a trade-off that you modeled in the software.

You learn all of those skills in our project management basics courses. Take a look at the basics course in your specialty.

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Status Report Template

Dick Billows, PMP

DicK Billows, PMP
CEO 4pm.com

Project sponsors expect project managers to know what’s going on in the projects they are managing. While some sponsors expect you to know the project status on a daily basis, most are satisfied with a weekly assessment of what’s happening. In the status report template, we’ll talk about the sponsor’s expectations, the raw materials you’ll need to make a professional status report and the way to deliver it. The combination of these ingredients builds your credibility with the project stakeholders and sponsors. Project Tracking & Status Reports

Project Sponsors’ Expectations

Let’s start by considering what project sponsors expect of their project managers. First, they want you to know what’s going on with the project. Most are satisfied with weekly data on the project team’s performance, results and problems. Second, they expect you to anticipate problems and solve them. They don’t expect to hear about surprise problems you did not anticipate, particularly late in the project. Third, they expect you to deliver concise and well-organized status reports that give them the data they want without wasting a lot of time on technical details or project management minutia.

With those expectations in mind, you must avoid trying to impress executives with long-winded technical details or excessive detail on individual tasks in the project. You impress your sponsor and stakeholders by simply giving them the data they want. comm25What they want is information about whether the project will finish on time and within budget. You need to plan your status reports, whether they are written or in-person, to answer those questions in the first 60 seconds. If you launch into a 30 slide Power Point presentation, don’t be shocked if they interrupt you after the fifth slide and ask the questions they want answered. It’s much wiser to give them the information they want in the first minute; don’t make them drag it out of you. This is particularly true if things aren’t going well. If you don’t talk about the problems early, they will think you’re hiding them.

The Raw Materials You Need for the status report template

You need data to make a good status report. That will allow you to compare where you should be on the project, as of that day, to where you actually are. So good status reports start with good project plans and schedules. That doesn’t mean they have to be long. A one-page project plan and a 20-line project schedule are more than sufficient for a small project. Here’s what the project plan has to include:

  • a measurable scope definition. It can be as little as one sentence like, “Less than 3% of our customers are on hold for more than 30 seconds.”
  • a list of major deliverables to carry you from where you are now to the above defined scope
  • a work breakdown structure (WBS) where those major deliverables are decomposed into tasks lasting between one and seven days that are an assignment for one of your team members
  • a project schedule that has estimates on the amount of work for each task in the WBS. It also includes information on which tasks must finish before other tasks can start.

If you have that kind of project plan, you can assemble your status report. Here’s what you need each week:

  • information from each team member telling you how many hours they worked on their task and how many hours remain
  • after you put this team member data into your scheduling software, you have one-on-one discussions with every team member whose tasks are not following the plan.

With this information, you can begin to assemble your status report. Following the guidelines above on what you want to present and how you want to present it, you would prepare the following data:

  • forecast of the project completion date and final costs
  • tasks experiencing major variances (good and bad) from the plan
  • corrective action you recommend for bringing those tasks back into compliance with the plan
  • cost of your recommended corrective action
  • reforecast of the project completion date and final costs after implementation of your corrective action.

Problems You Want to Avoid

Executives do not like project surprises. They particularly don’t like bad news surprises. So when you deliver expected results every week that coincide with the plan, the executives feel comfortable with the project.  If you suddenly communicate an enormous variance to the plan, the executives don’t believe this developed unexpectedly. They suspect you were hiding the problem. Executives expect you to give them early warning about problems that will affect the project’s completion date and total cost. They also expect you to identify problems early, when you can solve them quickly and cheaply, rather than waiting until disaster strikes.

However, many PMs are not equipped to identify problems early, when they’re small. We discussed above how you should plan your projects to be able to give a professional status report. Now let’s talk about why you have to do it that way. The short answer is because those project-planning techniques let you spot problems early. Project managers who don’t have that type of plan have no ability to track week to week the actual work versus the planned work on a task. Those project managers may receive “thumbs up” status reports from team members on their tasks when actually they have not done any work on them. That’s why you need to track the actual work completed each week versus the plan. That lets you find out about a problem when it’s small and you have time to fix it. In addition to that technical problem, many project managers improperly handle bad news from their team members. This makes the team members not report problems as early as they could (and should). If you greet bad news on a team member’s task with anger, you won’t hear about future problems early. The team member won’t tell you until they can’t hide the problem any longer. That’s why it’s best to be appreciative when people tell you about problems they’re having. Then you and the team member have time to work out a solution.

You learn all of those skills in our project management basics courses. Take a look at the basics course in your specialty.

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