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PROJECT MANAGEMENT METHODS AND TECHNIQUES

The PMI methodology describes various tools and techniques, the practical application of which allows the project manager to increase the efficiency of project execution, anticipate risks, calculate optimal project routes, assess the situation sensibly and make the right decision from the start, etc. These tools and techniques exist on their own and have long been used in various areas of human activity. The following is a list of basic methods and techniques applicable to specific processes.

Decision Tree Analysis

Decision Tree Analysis is a method describing decision making by considering alternatives and the consequences of their choice. This method is used if predicted scenarios and results of actions are probabilistic. Decision Tree Analysis is displayed as a chart and reflects the probabilities and magnitudes of costs, the benefits of each logical chain of events and future decisions, and uses an analysis of the expected monetary value to determine the relative cost of alternative actions.

Diagram: “Decision Tree Analysis”

When forming a tree, the following four types of graphic symbols are used:

• Squares – decision places.

• Circles – the places where the outcomes appear.

• Dotted lines – possible solutions.

• Triangles or straight lines – possible outcomes.

Expected Monetary Value (EMV) for each alternative should be estimated. It mostly consists of the sums of the winnings estimates to be multiplied by the likelihood of the winnings realization, for all possible options.

SWOT Analysis

Strengths Weakness Opportunities Threats (SWOT) Analysis is a method for evaluating the internal and external factors affecting the development of a company. It will help assess the strengths and weaknesses of your business, find new opportunities and identify possible threats. SWOT analysis divides the influence factors into four categories, identifying company’s strengths, weaknesses, opportunities and threats:

•S-strengths (the sale of goods directly to the buyer, the profit is greater than that of competitors, customer service is the best on the market, etc.);

•W-weaknesses (insufficient partners, ineffective advertising, small target audience);

•O-opportunities (potential customers will find out everything they need about your product from the Internet, purchases are made 24 hours a day, regardless of whether you work or not);

•T-threats (your competitors’ brand is better known in the market, the quality of products offered by competitors is higher).

SWOT analysis is often used in strategic planning. It can start any action of the company, such as the study of new initiatives, new development strategies, and possible changes. Internal factors are strengths and weaknesses relating to internal factors, which can be easily evaluated:

• Financial resources (financing, income opportunities);

• Physical resources (your equipment, buildings, location);

• HR (employees, sometimes volunteers, target audience);

• Access to natural resources, copyrights, patents;

• Current processes (all events taking place in the company, motivational programs, training programs, a system of departmental hierarchy, etc.)

Answer the following questions in order to find the strengths of your business:

• What are the benefits of your business?

• What are you doing better than everyone else is?

• What are your strengths seen by your customers?

• What is your Unique Selling Proposition (USP)?

• How can you increase your profits?

Consider your strengths from your point of view and from your clients’ point of view. Assess your strengths relative to competitors. External factors – the influence of external circumstances on each organization and individual person is very strong. External factors are, as a rule, the circumstances that cannot be controlled by you and your company:

• Market trends (new products, technologies, changes in the needs of the target audience);

• Economic trends (local, national, international financial areas);

•Financing (donations, government influence, taxes, etc.);

• Demographic information (age, gender, race, nationality, cultural values of the target audience);

• Relations with suppliers and partners;

• The political, environmental, economic situation in the country.

Program Evaluation and Review Technique (PERT)

The Program Evaluation Review Technique (PERT) method is often used in project management and production analysis. The PERT method is a tool that calculates the expected duration of the project or an individual process. When managing projects, the PERT method usually used in conjunction with the critical path method Critical Path Method (CPM).

The PERT method and the critical path method are fundamentally different in their application area. The critical path method is used to estimate the completion time of the entire project or groups of interrelated tasks, while the PERT method is used to estimate the duration of individual tasks. The very idea of the method is extremely simple, i.e. in order to estimate the time it takes to complete a task or process, one needs to know the optimistic, pessimistic, and most likely estimate of the duration of this task. The PERT formula is:

Picture of « Critical path method”

O – optimistic estimate of the task duration,

M – the most likely estimate of the duration of the task,

P – pessimistic estimate of the problem duration.

Picture of “PERT Chart”

This equation is nothing more than a weighted average, where the most likely estimate of the duration is 4 times greater than the optimistic and pessimistic estimates. This approach prevents too much bias in one direction.

Gantt Chart

A Gantt Chart is a popular type of bar charts (histograms), used to illustrate the plan, schedule of work on a project. It is one of the project planning methods and used in project management applications. Currently, the Gantt chart is the de facto standard in the theory and practice of project management, at least to display the structure of the list of works on the project.

“Gantt chart” diagram

A Gantt chart is a segment placed on a horizontal time scale. Each segment corresponds to a separate project, task or subtask. Projects, tasks and subtasks that make up the plan are placed vertically.

The beginning, end, and length of a segment on the time scale correspond to the beginning, end, and duration of the task.

Earned Value Analysis (EVA)

Earned Value Analysis (EVA) is the calculation of project performance indicators within the scope of the acquired volume. EVA is based on the same principles as cost trend analysis and is usually used in large projects. The basis is taken from the figures: The earned value, planned and actual costs. Let’s consider the following example:

The task 1 must be completed by one performer (P1) within two days (2 x 8 hours = 16 hours), the cost of work of the performer is $ 10.00 per hour (planned expenditure = $ 10.00 x 16 hours = $ 160.00).

In fact, the performer finished work on the third day, having spent additional two hours. The indicators are the fact of time (2 x 8 hours +2 hours = 18 hours), while actual expenses = $ 10.00 x 18 hours = $ 180.00.

The result is:

On the morning of the third day the result of the task 1 = 16 / (16 +2) * 100% = 89% and the cost of the Task 1 = $ 180.00

Conclusion: Common sense tells us that we spend money faster than we get the result.

Main method indicators:

Planned Value (PV) is an amount of planned work within basic prices. In our example, PV is equal to $ 160, since the basic amount of work to be completed by Wednesday is 16 person-hours, and the base price is $ 10 per hour.

Earned Value (EV) is a completed part of the work of the planned amount. It is percentage of completion of work, multiplied by the base task budget. This indicator used to be called BCWP (base cost of work performed). In our example, EV is equal to $ 142, since the percentage of the task carried out is equal to 89%, and its base budget is $ 160.

Actual Cost (AC) is a real cost of work performed. It is measured by the amount of money that is actually available for the work performed. In our example, AC is equal to $ 160, because in fact, the performer spent 16 hours, and every hour costs $ 10.

Budget at Completion (BAC) is fixed at the start of the project as the amount of the approved budget for the entire project. In our case, it is equal to $ 160.

Cost Variance (CV) is a value deviation (formula: CV = EV-AC). $142.00 – $160.00 = – $18.00. Negative value means that the budget has been exceeded, while a positive implies that the budget has been saved. In our case, the budget has been overspent.

Schedule Variance (SV) is a time deviation (formula: SV = EV-PV). $142.00 – $160.00 = – $18.00. Negative value means that estimated deadlines are due, while positive one means that the deadlines have been outpaced. We are behind schedule.

Cost Performance Index (CPI) is a cost performance index (formula: CPI = EV / AC). If the index is greater than 1 the budget is saved, if it is less than 1, the budget has been exceeded. In our case, $142.00 / $160.00 = 0.89. The budget over expenditure is 11%.

Schedule Performance Index (SPI) is a deadline index (formula: SPI = EV / PV). If the index is more than 1 the schedule is overtaken, if it is less than 1, the base schedule is outpaced. In our case: SPI = $142.00/$160.00 = 0,89. The schedule is 11% outpaced.

Estimate at Completion (EAC) represents the expected total cost of the project after the completion of the remaining work (Formula: EAC = BAC / CPI). In our case: $160.00 / 0.89 = $180.00. The current estimated cost of the project task is $ 180.00.

Estimate to Complete (ETC) calculates how much more money is required to complete a project (Formula: ETC = EAC-AC). In our case: ETC = EAC-AC = $180.00 – $160.00 = $20.00 are still required to complete the task.

Variance at Completion (VAC) indicates expectations for cost over expenditure or budget savings (formula: VAC = BAC-EAC). In our case: VAC = BAC-EAC = $160.00 – $180.00 = – $20.00. The budget over expenditure is $20.

Formulas for calculating the project status: EAC = AC + Button-up ETC, EAC = AC + BAC – EV, EAC = BAC / Cumulative CPI, EAC = AC + [(BAC – EV) / Cumulative CPI x Cumulative SPI], EMV = probability x impact, EV = BAC /% of completion, TCPI = (BAC – EV) / (BAC – AC).

Cost trend analysis

Cost trend analysis is a method of monitoring a project and the distribution of its costs. It is to align the budget for milestones, the entire project and the timely control of cost increases. Permanently monitored values are:

• Planned costs – what was originally planned for implementation.

• Actual expenses – what was actually spent on the work done.

• The cost of the work done is what was planned and actually spent on the work done. This includes the cost of work, materials, and external services.

• Space remaining is what is left to do and calculated as the difference between the amount of work planned and what was actually made by a certain time. Space remaining = planned costs – the cost of the work done.

• Additional expenses are the difference between actual and planned costs. Additional expenses = actual expenses – planned expenses.

“Cost trend analysis” diagram

V-fact is preliminary actual cost and a signal of overspending. V-fact = budget + additional expenses + space remaining.

Milestone trend analysis

Milestone trend analysis is a method of project monitoring, as well as its backlog or proceeding ahead of schedule. The method allows detecting deviations in the early stages and responding appropriately to improve the situation. The method is based on the analysis of current and planned milestones status. Each milestone has an estimated deadline, which is planned at the project planning stage. This time is the starting point of regular reconciliation. Upon the milestones completion those responsible report to the project manager on the work done. The report should answer the following questions:

• What has been done?

• What should be done to complete the milestone?

• Is the work due?

“MILESTONE TREND ANALYSIS” Diagram

The visual trend analysis is often displayed graphically.

Horizontal: reporting periods, for example, every week.

Vertical: the same scale with milestones marked. The milestones mark at X = 0, corresponds to the planned milestone indicators at the stage of project start.

The bisector indicates the position of the milestones reached.

During the reporting period, the chart is updated and analyzed. The chart indicates new forecast dates for milestones completion. Each milestone has a trend line (curve). When it reaches the bisector, it finishes.

The ideal state is when the line is clear and unchanged along the Y axis.

Vertical deviations (deviation of the predicted period from the originally planned):

Up: due deadline

Down: ahead of schedule.

Project Management Triangle

The Three Constraints are:

• Time required carrying out the project;

• Cost (money, people, budget);

• Scope (goals, tasks, quality).

An example of a good project development – The scope of work is met and even exceeded at lower costs and deadlines.

“PROJECT MANAGEMENT TRIANGLE” Diagram

An equilateral triangle with equal sides indicates the planned values for cost, time, and scope. The picture changes depending on the deviation from the baseline values.

Project results are measured at regular intervals.

Time is measured by the time spent on the project.

Actual expenses measure costs.

Scope is measured as a percentage of the planned and completed work.

Measured values on the reporting date are applied to the axes and generate a new triangle, which is different from the original equilateral triangle. Project Management Triangle is applicable to demonstrate intermediate and general project results.

Other Methods and Techniques

Assumptions Analysis is a method used for the accuracy analysis of the assumptions and the identification of project risks, caused by inaccuracy, incompleteness or contradictory assumptions. Any project and any specific project risk is initiated and executed based on a number of hypotheses, scenarios and assumptions. Assumptions analysis explores the validity of the assumptions applied to the project. This analysis allows identifying project risks arising from inaccuracies, instabilities, inconsistencies or incompleteness of assumptions.

Expected Monetary Value (EMV) Analysis is a statistical method that calculates the average result with future scenarios that might occur. Typically, this method is used as a part of decision tree analysis.

Variance Analysis is an analysis of total variance of content variables, cost, and schedule as variance of individual elements linked to certain factors and affecting the variables of content, cost, and schedule.

Schedule Network Analysis or Network Analysis is a method for determining early and late starts and early and late finishes for incomplete project operations. See also Critical Path Method, Critical Chain Method, analysis of available scenarios and resource leveling.

Trend Analysis is an analytical method using mathematical models to predict future results based on historical data. This method allows determining the variance from the base plan by cost, time or content using data from previous reporting periods and predicting the variance of this parameter at a certain point in the future, if no changes are made to the project.

Reserve Analysis combines analysis methods to identify the essential characteristics and interrelationships of the elements in a project management plan for establishing a reserve for the duration of the schedule, budget, estimated cost or project funds.

Sensitivity Analysis is a method of quantitative risk analysis and modeling used to determine the risks with the greatest likelihood to affect the project. The analysis establishes the impact of uncertainty of each project element within the studied project objective, if the remaining indefinite elements have basic values. Usually these results are presented as a tornado diagram.

Fast tracking is a special method for compressing a project schedule that changes the network logic by overlaying phases that would have been performed sequentially, for example, the design and construction phases, or parallel performance of planned operations.

Resources Leveling is a method of optimizing the load of project resources by arranging the optimal project performance, taking into account task priority, deadlines for implementation and limited resources.

Decomposition is a method of splitting the project content and project delivery results into smaller and easily manageable elements as long as the performance related activities on the project content and ensuring the delivery results are not sufficiently specified to perform, track and monitor these activities.

Precedence Diagramming Method (PDM) is a method for creating network diagrams in which planned operations are represented by rectangles (or nodes). Scheduled operations are graphically related to one or more logical relationships that show the sequence of operations.

Network Diagram Method is a common group of visual graph display. Unlike Gantt chart, the network diagrams graphically display the dependencies between the operations, as well as the duration of each of them and resources assigned. It is then determined which tasks are critical and which ones are not. There are two types of network diagrams, i.e. Critical Path Method (CPM) and Meta Potential Method (MPM).

Critical Path Method (CPM) is a step-by-step (network diagram) method used in the implementation of interdependent tasks. The activities are listed, their decomposition structure, time scale, dependencies, reference points and results are determined. Critical and non-critical activities are distinguished by calculating the greatest (on the critical path) and the smallest (floating) execution time of various tasks. The critical path method is often used in construction and characterized by a clearly defined project path; this path is formed by the longest project activities. The critical path determines the duration of the entire project. By defining and identifying the most important tasks, one can estimate completion dates, dependencies, key milestones, and final results. Any delays in activities within a critical path lead to increasing duration of further activities. If the project duration reduced, the terms of critical activities should also be reduced. Using the critical path method allows you to compare planned and actual indicators (how the situation should develop and what is actually happening) every day. The method consists of four planning stages:

• Goals and limitations (considering the project in several aspects – duration, quality, etc.);

• Duration of activity;

• Network schedule;

• Gantt chart.

Critical Chain Method (CCM) differs from the critical path method by focusing on the use of project resources, rather than project activities. Potential problems with resources, are resolved via buffers to ensure the timely implementation of projects in compliance with all required safety measures. Critical chain method helps avoid delays in the project, determining the critical path of activities, as well as resource reserves (lead-time) for these activities. Since the charts consider the availability of resources, the project may take longer, but the likelihood of failure to meet key events may be reduced. The basis of critical chain method is the formation of the main critical activities of the project and the retention of the terms of activity, as well as the project’s final completion date. Critical activities of the project are logically linked, taking into account resource and administrative constraints. If project resources are not limited, the estimated indicators will be similar to PERT. If the project still has limited resources, it is necessary to:

• determine near-critical work in the schedule, such work very often runs parallel to the main “red” chain, but being reduced, they may easily become critical if they are ignored.

• define a critical project chain using resource links.

Monte Carlo Analysis is a method that recalculates (or iterates) of a project cost or project duration using input values randomly taken from possible values of cost or duration in order to obtain the distribution of value likelihood of the total project cost or project completion dates.

Value Engineering (VE) is a creative approach to optimizing cost at the stages of the project life cycle, reducing time costs, increasing profits, improving quality, expanding the market, solving problems and / or improving the efficiency of resource use.

Earned Value Technique (EVT) (also named as earning rules and crediting method) is a special method for measuring work performance for an element of a hierarchical work structure, a control account or a project.

Bottom-up Estimating is a work element estimating method. Activity is divided into actions. Requirements for each actions are estimated, and these estimates are summarized for this element of activity. The accuracy of the bottom-up estimates is determined by the size and complexity of the actions at the lower levels. Usually lesser activities increase the accuracy of estimates.

Top-down Estimating is a work element estimating method opposite to the bottom-up method.

Rolling Wave Planning is a type of planning for sequential development, in which the activity to be done in the near future is planned in detail with a deep disclosure of work breakdown structure, while far distant activity is planned with a relatively small disclosure of the work breakdown structure, but as work progresses the activities to be done in the coming time periods are clearly planned.

Earned Value Management (EVM) is a methodology for the integration of content, time and resources, as well as an objective measurement of project performance and efficiency achieved. The efficiency of the project implementation is measured by determining the planned cost of the work performed (i.e., the used capacity) and its subsequent comparison to the actual cost of the work performed (i.e. the actual cost).

Risk Breakdown Structure (RBS) is a breakdown presentation of project’s known categorized and subcategorized risks, indicating the different areas and causes of potential risks. The risk breakdown structure is often adjusted to specific types of projects.

Probability and Impact Matrix is a conventional approach adopted to classify risk as high, medium or low by comparing two risk parameters: likelihood and impact on the project objectives.

Responsibility Assignment Matrix (RAM) is a structure aligning the organizational structure of the uses the Work Breakdown Structure and helping designate the persons responsible for each project element.

Milestone Schedule is a summary level schedule displaying the timing of major project related milestones.

Analog Method is an analysis of all available data relating the implementation of previous similar projects in order to estimate the likelihood of loss. This method involves such key action aspects as an attempt to compare with a previous similar project. Information on the planned and actual deadlines is collected. If the terms did not match, the causes are analyzed, countermeasures are developed and the project is planned. The Analog Method is most widely used in risk assessment of frequently repeated projects, for example, in construction.

Expert Judgment refers to a technique in which judgment is made based upon a specific expertise that has been acquired in a specific knowledge area, or product area, a particular discipline, an industry, etc. Judgment is carried out using different methods with a focus on various aspects. The expertise can be carried out by an external group or person with a specific relevant education, skill set or knowledge. There can be several resources of expert including other divisions of executing organization, consultants, project members, including customers, professional and technical organizations and other miscellaneous industry groups.

Indicator Approach uses indicators of completed projects. For example, the interest rate method fully distributes costs in different phases. If the actual costs of the first phase are known, the rest is calculated according to the percentage distribution:

Analysis – 20%

Project – 35%

Implementation – 30%

Verification – 15%.

Poker Estimate implies the following key aspects of action:

• create a work group (developers, analysts, business representatives, and so on);

• Voice task;

• let each participant evaluate the project timeline based on his/her experience and level;

• hear each member’s opinion;

• choose the shortest and longest project term to discuss by the work group;

• correlate opinions during discussion, and make a common decision with the whole work group.