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Chapter 5: Project Management

A project is a complex set of business activities coordinated for a singular purpose. Each project has its own unique objective and may involve the coordination of several people, as well as several activities, over, a period of time. If there's a chance it may become a recurring activity, you'll want to document it as a system.

Some project examples include...

  • Year-end company celebrations
  • Public open-house events
  • Opening a new location
  • Renovating your facility
  • Staff parties
  • Large advertising campaigns
  • Company brochures
  • Community events
  • Developing a new product

Essentially, projects consist of unique operations designed to accomplish a specific set of objectives in a limited time frame. Although many projects are one-time occurrences, others are implemented multiple times.

For example, the design and implementation of a new system or the development of a new product are both projects that will most likely occur multiple times. However, even if these projects are highly similar in the way they unfold, they're still not part of the business’ day-to-day operations. Projects are not expected to occur consistently and continuously. They reflect the special strategic objectives of the business. However, the method they are executed and monitored by can be systemized to minimize risk, increase quality and maximize efficiency.

Team Members

Some businesses are involved with projects on a regular basis such as architects, publishers and construction companies. In such businesses, it's not uncommon for some individuals to spend all their time working on projects. These firms are considered “pure project organizations.” Of course, even in this situation, many aspects of the business can be systemized.

However, in most companies a project is staffed with team members who have diverse knowledge and skills and remain associated with the project for less than its full life. Some employees go from project to project as their contributions become needed, others are “on loan” from their regular positions within the business.

Most organizations use a matrix project structure that allows the business to integrate the activities of a variety of specialists in a functional framework. Each staff member works on one or more projects part-time but permanently belongs to his or her department. The project manager and functional managers share the responsibility of assigning priorities and directing the work.

The Project Manager

The designated project manager has the ultimate responsibility for the success or failure of the project; the project is his or her “baby.” The project manager must be capable of working through others to accomplish the required tasks. The main areas a project manager is responsible for include: Work – ensuring the actual tasks of the project are accomplished in the desired sequence and conforming to the standard of qualities.

  1. Human Resources – ensuring that the employees working on the project have direction and motivation.
  2. Communication – ensuring all team member have access to the information they need to do their work.
  3. Quality – ensuring performance objectives are realized.
  4. Time – ensuring the project is completed on schedule.
  5. Costs – ensuring project is completed within the budget.

In essence, project managers have to possess the required skills that any leader has including working with diverse people, motivating employees, resolving conflicts, making trade-off decisions and expediting work when necessary. Furthermore, project managers will often have to oversee team member that have specialized knowledge they don't possess; the manager must nonetheless be able to observe and evaluate their work.

Whenever possible, be sure to place one person in charge of a project. This will help to alleviate any “passing the buck” mentality.


Project Life Cycle

Projects go through a series of stages (a project “life cycle”) with each stage requiring different skills. The stages include:

  1. Initiation – the conceptual stage where owners, upper management and other decision-making stakeholders design strategic objectives and decide which projects need to be executed to meet those objectives.
  2. Planning – one of the largest stages, it involves determining how the project is to be undertaken; breaking down the work into smaller components, determining the resources needed, estimating costs, scheduling activities, subcontracting and outsourcing certain tasks and risk management planning.
  3. Execution – involves purchasing materials, using team members and subcontractors to perform the work and recording information for project KPIs.
  4. Monitoring and Control – monitoring involves observing the progress of the project and issuing periodic performance reports on schedule/cost/quality/risk while control consists of making any necessary changes to project.
  5. Closeout – involves assessing the completion of the project, reviewing the accomplishment of strategic objectives and discussing strengths and weaknesses of the project’s execution.

puppy with tie


Projects come to life in millions of different ways. In most cases, a project will involve more than one person, but even in cases where a project is imagined, planned, executed, controlled and closed out by one individual, it's necessary to lay out the project objectives in an organized fashion.

The central guiding document for a project is the Project Scope. It outlines everything that a project involves, including all the resources needed, the tasks to be performed, the plans to mitigate risk and the overall objectives of the project.

Project Planning

Project planning is one of the most involved stages in a project’s life. In general, it involves the following key areas:

i. Risk Management Planning – the identification, analysis and response plans for what may go wrong.

ii. Estimating Activity Resources – forecasting the use of employees, equipment, materials and subcontractors.

iii. Cost estimation.

iv. Budgeting – calculating total cost per unit timeframe, including subcontracting costs.

v. Human Resource Planning – assigning team members roles and responsibilities.

vi. Project Scheduling – estimating activity durations, sequencing and scheduling.

vii. Quality Planning – determining how project quality will be assessed and ensured. Involves deciding quality policy, objectives, responsibilities, metrics and quality tools. The extent of this will depend on the complexity and the value or priority or your project.

viii. Communication Planning – determining the nature of information needed by stakeholders and how to satisfy those needs. Involves plans for information collection and storage, what technology and media will be used, the medium used to distribute information (reports, bulletins, emails, etc.) and methods for accessing and updating information.

ix. Purchase Planning – determining what to purchase, contract statement of work (the portion of the project scope document dealing with the specific purchase), the type of contract to be used and supplier evaluation/selection. The actual purchasing and monitoring of supplier performance is part of the execution stage.

Time invested in planning will often save you multiples of time spent in execution.

Risk Management Planning

Risks are inherent in all projects; they relate to occurrence of events that can have undesirable consequences such as delays, increased costs and the failure to meet technical specifications. Although careful planning may reduce risks, no amount of planning will completely eliminate risks from a project.

The probability of occurrence of risk events is highest during the beginning of a project and lowest toward its end. However, the costs associated with the occurrence of risk events have the opposite relationship; it's highest toward the end of the project and lowest in the beginning stages. This stems from the fact that the occurrence of risk events is easier to deal with, as there's more flexibility in the beginning stages of a project.

Although Risk Management Planning should take place primarily in the planning phase of a project, it's not unusual for the process to occur during the execution phase as expertise and new information becomes available.

structure lunch

The first step in the Risk Management Planning process is to identify the risks. Everyone associated with a project should be responsible for identifying risks, especially if an individual has a highly specialized skill or knowledge they are bringing to the effort. There are many methods to identifying risks, including brainstorming sessions, questionnaires and the review of documents as well as assumptions to look for inaccuracies, inconsistencies and incompleteness. A list of risks should be compiled and documented in the risk register, which is made available to all those involved with a project.

The second step is to evaluate each risk to determine the probability of its occurrence and the potential consequences if it does occur. This should be approached from both a qualitative and quantitative perspective and all stakeholders (and possibly even outside experts) should be consulted. Experience from previous projects is especially useful during this stage. Some common risk analysis methods include scenario analysis, simulation, decision trees and sensitivity analysis.

After risks have been identified and evaluated, a “risk response” should be designed for each item on the “risk register.” A risk response can take many forms, and identifying the root cause of the risk helps in determining which from of risk response to apply. Examples of risk responses include:

  • Back-up System – redundant responses, for example: a back-up electrical generator.
  • Simplifying a process.
  • Using a more stable supplier.
  • Increased monitoring of high-risk areas.
  • Transferring risks – for example: outsourcing a high-risk task.
  • Risk Sharing – splitting the potential damage caused by a risk with other parties, for example: a joint-venture.
  • Reducing project scope.
  • Creating contingency funds.
  • Improving communication.

Break Your Project Down Into Tasks

Most of the projects that happen in your business are complex. They involve more than one interrelated component. Bringing a new product to market is a good example of this, from market research, to design, sample production, beta testing, marketing and sales, there can be any number of components involved in a project. Even simple projects benefit from being broken down into their working components for planning purposes.

To get started, you will need to identify the major components of your project. From there, you'll need to identify all of the subcomponents that support your major components. Continue this process until you have distilled each component down into a work package that can be performed by a worker, team, or subcontractor. From this point, break each work package down into a list of supporting activities that will have to happen to accomplish an individual work package.

Use your past experience here. No one knows your business like you do. Don’t feel like you have to get every last detail right the first time you plan a project. Just break it down into understandable segments. As the project unfolds, and the work packages that were further away become closer, it will be easier to see the details. People refer to this as Rolling Wave Planning, and it simply means that you only make a detailed plan for the segments that are close enough that they makes sense to plan now, and the distant segments whose details are too far away to plan with any certainty will be planned at a future date. This planning process inside of rolling waves is referred to as progressive elaboration.

This process is called the Work Breakdown Structure (WBS), and the process really is crucial during the planning phase of any project. It's especially helpful when identifying risk.

work breakdown structure

Organizing Project Tasks

While the Work Breakdown Structure outlines the packages of work that need to be accomplished to fulfil a project, a Precedence Network Diagram (PND) takes those work packages and defines their dependent relationships. For example, if you were having guests to your house for dinner, and you made a WBS that broke the elements down into work packages that had to be accomplished, some of them might be; invite guests, purchase groceries, set the table, cook dinner, serve dinner, etc. If you were to make a Precedence Network Diagram for this same event, it would spell out for you which items were dependent on other items. This is an extremely simplistic example for the sake of clarity, but you can easily see that you would be unable to serve dinner before it was cooked. A PND will tell you how long each item is expected to take, and therefore, how long the entire project should take. It would tell you that setting the table and cooking dinner could possibly be happening simultaneously and so those two items are not dependent on each other. Serving dinner is dependent on those two items, but the completion time of the entire project is only dependent on the longer of the two items.

The Critical Path

Activities that need to be accomplished sequentially to complete a project form a path. There can be many paths in any particular project. The PND allows a project manager to analyze how long each path will take by summing up the duration of the specific activities. Naturally, the path with the longest duration has specific importance since it governs project completion time. The longest path is therefore known as the "critical path" because any attempt at shortening the project’s duration must focus on that path. If any of the activities along this path takes longer than planned, the entire project will take longer than planned. If any of these activities are not accomplished, the entire project will be derailed.

Paths other than the critical path and can be delayed without affecting the completion of the overall project, so long as they are not delayed past the time of the critical path. The difference in duration between a path and the critical path is known as "path slack" and governs the allowable slippage in activity durations before the entire project is delayed.

Below is an example of a simple PND for the opening of a bank branch.

bank pnd

PND’s always have a starting node that you can see is labeled with the “S.” It's just there as a visual placeholder. There are two labels associated with each activity. One is the number of the activity (always placed inside the activity circle), and the other signifies it’s duration (always placed outside the activity circle). Relatively simple projects with few activity nodes are sometimes labelled alphabetically rather than numerically. Units used with the time labels can be days, weeks, minutes, hours, or months. Any unit will work as long as you consistently use the same units on a single PND.

In this case, of the three paths, the critical path is S-1-5-7 because it will take a full 20 weeks, whereas the other paths will take 18, and 14. "Path Slack" is the difference in time between the critical path, and any other path. In this instance, the path that involves interviewing candidates, hiring and training them, and then moving in is projected to be 14 weeks long. That is 6 weeks shorter than the 20-week long critical path of locating the facility, remodeling and moving in. The path slack in this case is 6 weeks.

The PND is your visual tool to illustrate activity relationships. Some paths have overlapping activities, meaning a specific activity has to be completed before both paths continue. This allows a project manager to spot important activities that can offset multiple paths by being delayed. These activities can be considered potential bottlenecks and deserve special attention.

Some activities can’t start until you complete the activity that comes before it.

pnd 1

Some activities can’t start until more than one preceding activity has been completed.

pnd 2

Some activities, upon completion, enable more than one activity to start.

pnd 3

Relationships between activities can be much more complex. Sometimes, multiple activities are awaiting the completion of other multiple activities.

pnd 4

These simple examples are easy enough to look at and see what is going on. Analyzing them doesn’t take any special skills. In the real world, most PNDs will be much larger and more complex than these examples. They may have hundreds or even thousands of interconnected and interdependent activities. To keep large and complex PNDs under control, and to provide analysis that you can use in the real world, they are made using software specifically designed for that purpose.

Project Scheduling

A few pages back we discussed the Work Breakdown Structure. A WBS is used to break a project down into manageable pieces.

Project scheduling takes those pieces and puts them on a timeline. It Identifies each task, and gives you the opportunity to label some as milestones. Those milestones are triggers that, when reached, will prompt a review or test, or let you know that it's time for an approval decision.

At this point, you look at each piece of the project to discover which resources you'll need to make it happen. If you're looking at a "manageable piece" of a project, but can't tell what resources will be necessary, it's a good sign that you've not broken the project down into small enough pieces.

Once you have a project broken down into manageable bite-sized pieces, you know which resources will be necessary. Plus you'll know the methods you'll use to accomplish each task and you will have an estimate of how long it will take to accomplish each bite-sized task. There are a number of ways to go about making these estimates, which we will discuss in the following pages.

Armed with all of this information, you will make a schedule for your proposed project.

Activity Crashing

There will be times when it would be beneficial to complete a project sooner than it was originally scheduled. It may be that your project consists of the development of a new product, and speeding up a project may have strategic benefits like getting your product to market before your competitors.

One way of doing this is by activity crashing. Often, it may be possible to reduce the length of an activity and therefore the path and the project as whole by allocating more resources. Many times, this can be due to avoiding the payment of late penalties, freeing resources up for other projects or to avoid indirect costs of the project such as managerial time and facility use.

The process of allocating more resources such as personnel or technology to speed up the project to avoid indirect costs or to gain a benefit is known as activity crashing. To decide on activity crashing, a project manager should analyze the time-cost tradeoff to see if the project and the overall business will benefit.

Naturally, activities that would be considered the best to crash would be those on the PNDs critical path because other activities would not shorten the life of the entire project. From an economic perspective, activities should be crashed according to crashing cost per period: crash those with the lowest crash cost per period first. Additionally, crashing should continue as long as the cost to crash is less than the benefits derived from crashing.

Activity crashing analysis assumes that indirect costs are a linear function of project length; the longer the project takes, the higher the indirect costs such as management’s time in overseeing the project and facility space being taken up when it could be put to better use. The other assumption is that crashing costs per time period increase faster the more you crash the project.

Following is a project planning system that will help you organize your projects or campaigns.

  1. Project Objective — The purpose of the project. This is the outcome you expect to achieve.

  2. Start date — The date work on the project must start in order to be completed on time.

  3. Planned completion date — The date the project must be completed. It's often a good idea to set this a little sooner than necessary, just in case something goes wrong.

  4. Actual completion date — The date the project is actually completed. If this is later than the planned completion date, you will want to study the project to ensure that this doesn’t happen again.

  5. Activity List — This is a list of each activity that needs to be completed in order to achieve the desired result. Break the project down into its individual components and determine how long each activity will take to complete.

  6. Persons accountable — If there is more than one person accountable for any part of the project, be sure to have them commit to specific deadlines.

  7. Reporting benchmarks — These are the check-in points that keep everyone on track. Always be specific. Since the success of the project relies on the ability of everyone involved to stay on schedule, reporting benchmarks make it possible for an individual, and/or the group, to keep abreast of everyone’s progress. Should things go astray, benchmarks make people aware of the problem while there is still time to do something about it.

An example of a Staff BBQ is below.

staff bbq

You can also use an electronic based project planner. There are several on the market and most time management computer programs include one as well.

Reporting benchmarks may be identified with an “R” on the chart.

Execution, Monitoring and Control

At this point, you've planned and scheduled your project. You've assembled your team, you know the resources needed, and the deliverables your project will produce. It's now time to get down to brass tacks and execute your plan. To do this, you will need to establish a method to monitor your project.

Your focus during the execution portion of a project is to make sure everything is going according to plan. To do this you will need to track and monitor your team's progress. This will help you to navigate through unforeseen risks and obstacles, and provide data for future project plans.

Execution is generally made up of the processes used to complete the work that's defined in your project plan. You monitor your progress throughout according to the plan and schedule you laid out, and you adjust your plan as you go based on the results of your monitors. Repeat this cycle until the project is complete.

Depending on the size and scope of your project, execution will look something like the following.

execution monitoring control

Larger, or repeating projects will require systemized KPIs for monitoring progress. Refer back to the Performance Management section to review KPIs.

“The best laid plans of mice and men go often astray.”

- Robert Burns, To a Mouse, 1785


Depending on your business, and your industry, closeout can be formal or informal. For a small project, this could be as simple as an email to the project's initiator saying that the project has been complete, with a few notes about the success or failure of the project.

For a larger project, closeout can include the producing and delivering of a final report, and the acceptance of that report.

In both cases, closeout marks the end of a project and is a vital piece of communication in every project.


The first of this two-parter on management has been devoted to managing the inanimate working parts your business. It's designed as an overview of your managerial systems. Of course, none of this works without people to run them, and managing people is a skill all to itself.

Either of these topics could fill thousands of pages without coming close to exhausting them. As a business owner, we understand that you need the highlights in an easily digestible format. With that in mind, we've designed the following section to to cover the fundamental and most important aspects of managing what really is the life blood of your business.