The
Fast Forward
MBA in Project
Management
SECOND EDITION
ERIC VERZUH
John Wiley & Sons, Inc.
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Copyright © 2005 by Eric Verzuh. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Verzuh, Eric.
The fast foward MBA in project management / Eric Verzuh.—2nd ed.
p. cm.—(The fast forward MBA series)
Includes bibliographical references and index.
ISBN 0-471-69284-0 (pbk.)
1. Project management. I. Title: MBA in project management.
II. Title. III. Series.
HD69.P75V475 2005
658.4'04—dc22
2004027080
Printed in the United States of America
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For Marlene
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ACKNOWLEDGMENTS
T
There are no unimportant jobs on any project, and there are no unimportant people on the project team. From concept through completion,
many people have been involved in the development of this book. To
each of the people who have shaped this book through their advice,
encouragement, and hands-on participation, I offer my thanks.
To Kymberly Actis, for her persistence and commitment as she
turned my handwritten drawings into the many figures in this book.
To the professionals who contributed their effort and experience to
create the Stellar Performer profiles: Rod Pipinich, Fred Black, J. C.
Brummond, Virginia Klamon, John Gaffney, Brian LaMure, Marlene
Kissler, and Peggy Jacobson.
To my colleagues and clients for their interest and insights: Steve
Weidner, Greg Hutchins, Pen Stout, Karl Hoover, Steve Morris, Peter
Wynne, Bill McCampbell, Patrick Bryan, John Spilker, and Kristian
Erickson.
To the team at John Wiley & Sons, Inc. who took a risk and saw it
through: Henning Gutmann, Renana Meyers, and Sam Case.
To those who put the wheels in motion: Brian Branagan, Linda Villarosa, and Barbara Lowenstein.
I particularly want to thank two top-notch project managers who
have taught me much about project management, business, and life,
and with whom I’ve had the privilege to work: Sam Huffman and the
late Fred Magness.
Finally, I thank my wife, Marlene, who has played many roles on
this project: coach, editor, critic, writer, and partner. Her insight and
perspective have been of constant value both as I wrote this book and
over the years as I built my business.I O N
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ACKNOWLEDGMENTS FOR
THE SECOND EDITION
T
The privilege of updating this book for a second edition was accompanied by some hard work to make sure the result was actually an
improvement. My thanks to those who contributed their expertise and
energy.
To the professionals who shared their hard-won knowledge: Jim
Smith, Donna McEwen, T. J. Filley, Rod Pipinich, and Bill Schafer.
Once again, to my wife, Marlene, whose talents and contributions
permeate this work.
ABOUT THE AUTHOR
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ABOUT THE AUTHOR
ERIC VERZUH
Eric Verzuh is president of The Versatile Company, a project management training and consulting firm based in Seattle, Washington. His
company trains thousands of professionals every year in the fundamentals of successful project management including how to get the
most out of Microsoft Project. Versatile’s consulting practice focuses on
helping firms establish consistent, practical methods for managing
their projects and implementing Microsoft’s enterprise project management solution. The company’s client list includes large corporations
such as Adobe Systems, Lockheed Martin, and Nordstrom, as well as
government agencies and small companies. Verzuh has been certified
as a project management professional (PMP) by the Project Management Institute and is a frequent speaker at project management conferences. His other publications include articles, conference papers
and The Portable MBA in Project Management (2003), also published
by John Wiley & Sons, Inc. Verzuh can be reached via his company’s
site on the Internet, www.versatilecompany.com.
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CONTENTS
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PREFACE
PART 1
INTRODUCTION
CHAPTER 1—PROJECT MANAGEMENT IN
A CHANGING WORLD
Introduction
Project Management Is the New Critical Career Skill
The Increasing Pace of Change
Everyone Benefits from Understanding Project
Management
Downloadable Forms for Project Management
Project Management: Art Informed by Science
Project Management Magnifies Other Strengths
End Point
CHAPTER 2—THE PROJECT ENVIRONMENT
Introduction
Projects Require Project Management
The Evolution of a Discipline
The Definition of Success
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CONTENTS
The Cost-Schedule-Quality Equilibrium
The Ultimate Challenge: No Damage
Project Management Functions
Project Life Cycle
Organizing for Projects
Project Managers Are Leaders
End Point
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PART 2
DEFINING THE PROJECT
CHAPTER 3—PROJECT STAKEHOLDERS
Introduction
Stakeholders Are the Heart of a Successful Project
Stakeholder Roles: Project Manager
Stakeholder Roles: Project Team
Stakeholder Roles: Management
Stakeholder Roles: Sponsor
Stakeholder Roles: The Customer
Lead the Stakeholders
End Point
CHAPTER 4—MAKING THE RULES
Introduction
Project Rules Are the Foundation
Publish a Project Charter
Write a Statement of Work
Statement of Work: Minimum Content
Responsibility Matrix
Creating a Communication Plan
The Project Proposal Launches the Project
End Point
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PART 3
THE PLANNING PROCESS
CHAPTER 5—RISK MANAGEMENT
Introduction
The Risk Management Advantage
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CONTENTS
All Project Management Is Risk Management
The Risk Management Framework
Step One: Identify the Risks
Step Two: Developing a Response Strategy
Step Three: Establish Contingency and Reserve
Step Four: Continuous Risk Management
End Point
CHAPTER 6—WORK BREAKDOWN STRUCTURE
Introduction
Defining the Work Breakdown Structure
Building a Work Breakdown Structure
Criteria for a Successful Work Breakdown Structure
Work Package Size
Planning for Quality
Breaking Down Large Programs
Watch for Different Terminology
Contractors or Vendors Can Provide a WBS
End Point
CHAPTER 7—REALISTIC SCHEDULING
Introduction
Planning Overview
Planning Step Two: Identify Task Relationships
Planning Step Three: Estimate Work Packages
Planning Step Four: Calculate an Initial Schedule
Planning Step Five: Assign and Level Resources
End Point
CHAPTER 8—THE DYNAMICS OF ACCURATE
ESTIMATING
Introduction
Estimating Fundamentals
Estimating Techniques
Building the Detailed Budget Estimate
Generating the Cash Flow Schedule
End Point
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CONTENTS
CHAPTER 9—BALANCING THE PROJECT
Introduction
Three Levels of Balancing a Project
Balancing at the Project Level
Balancing at the Business Case Level
Balancing at the Enterprise Level
End Point
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PART 4
CONTROLLING THE PROJECT
CHAPTER 10—BUILDING A
HIGH-PERFORMANCE PROJECT TEAM
Introduction
A Framework for Building High-Performance Teams
Leadership Responsibilities
Building a Positive Team Environment
Ground Rules
Team Identity
Team Listening Skills
Meeting Management
Summary of Building a Positive Team Environment
Collaborative Problem Solving
Problem Analysis
Decision Modes
Conflict Management
Continuous Learning
Summary of Collaborative Problem Solving
Job Satisfaction
End Point
CHAPTER 11—COMMUNICATION
Introduction
Project Communication
Communicating within the Project Team
Communicating with Management and Customers
Control Documents
The Change Management Process
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CONTENTS
Configuration Management
Change Management Guidelines
Are Essential for Managing Expectations
Closeout Reporting
End Point
CHAPTER 12—MEASURING PROGRESS
Introduction
Measuring Schedule Performance
Measuring Cost Performance
Earned Value Reporting
Cost and Schedule Baselines
End Point
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PART 5
PUTTING THE DISCIPLINE TO WORK
CHAPTER 13—ENTERPRISE PROJECT
MANAGEMENT
Introduction
Defining Enterprise Project Management
Three Tiers of Management within EPM
The Four Components of EPM
Establish Consistent EPM Processes
Technology Enables EPM Processes
The People Who Deliver Projects
Support Project Management: The Project Office
Organize for Project Management
Managing the Change to Enterprise Project
Management
End Point
CHAPTER 14—APPLICATION IS THE ART:
SOLVING COMMON PROJECT PROBLEMS
Introduction
Responsibility Beyond Your Authority
Disaster Recovery
Reducing the Time to Market
When the Customer Delays the Project
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CONTENTS
The Impossible Dream
Fighting Fires
Managing Volunteers
Achieving the Five Project Success Factors
End Point
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APPENDIX: THE DETAILED PLANNING MODEL
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NOTES
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INDEX
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P R E FA C E
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“What makes the second edition different?” That’s my first question
when I see a second edition. Project management hasn’t changed too
much since the first edition, so this edition is primarily justified with
additional content.
• Chapter 10, “Building a High-Performance Project Team,” is brand
new. It assembles proven team management techniques for transforming a group of people who happen to be assigned to the same
project into a cohesive unit committed to a common goal.
• Chapter 13, “Enterprise Project Management,” has been significantly revised to incorporate lessons learned in the past five years
as firms attempt to institutionalize project management.
• Several chapters have added content. Chapter 5, “Risk Management,” includes additional proven risk management techniques.
Chapter 4 describes the content for a project proposal. Chapter 12
has more advice on using earned value management techniques.
• Stellar performers—profiles of companies that put project management principles to work—have been added in Chapters 1 and 11. A
new feature of this edition is the Fast Foundation for Project Management, a series of templates and checklists designed to make it just a
little easier to put the concepts to work on your project. You’ll find
these tools located at the end of the chapters in which the concepts
were presented. The templates are available for download at www.
versatilecompany.com/forms, and called out in text with an icon.
It is pretty exciting to have a book that is popular enough to justify
a second edition. More than anything, I am proud of how many people
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P R E FA C E
have said this book is practical—it makes project management make
sense. The book is intended to present a realistic look at the challenges of the project environment and the skills you need to successfully bring a project to fulfillment. On the way, you will learn the tools
necessary to achieve each of the five essential success factors. Part 1
lays the groundwork. In addition to simple terminology, it contains
global concepts that tie project management to other disciplines, such
as quality and product development. Part 1 also includes examples of
the organizational changes companies are making to take advantage
of project-oriented work.
Parts 2, 3, and 4 present the tools and techniques—the real science—of project management. Because this is a how-to book, the techniques in these chapters are described in detail. These techniques
start with simple examples, then progress to tips for managing larger
projects. In these sections, you will learn the major responsibilities of
a project manager, the definition of a project, and the best ways to
plan and control projects. Part 2 deals specifically with setting the
goals and constraints of the project. Part 3, “The Planning Process,”
offers the most effective techniques for managing budgets, monitoring
a project’s scope, and keeping on schedule. Many of these techniques
are features of popular project management software. After reading
this section, you will know how to make better use of this software.
Part 4 offers methods for controlling a project and keeping it on track.
This section focuses on the many tools used to keep a project on track
and bring it to successful completion, regardless of whether everything
goes as planned. Together, these three sections provide the tool set
every project manager needs.
Part 5 describes how the tools presented in this book can be used
by organizations and by project managers. We look at the ways in
which project management techniques are being adopted by a growing number of organizations. Finally, we look at the kind of problem
situations that project managers are likely to face—and how to deal
with them using the tools presented in this book.
Eric Verzuh
Seattle
January 2005
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PA R T
Introduction
1
What are projects, and why are so many businesses reorganizing to include them? Why has project management
become such a popular career track? In Part 1 of this book,
you will find answers to these questions and more.
Because projects differ from the ongoing operations of a
firm, managing them presents a new set of challenges. Over
the past 50 years, a number of tools and techniques have
evolved to deal with these challenges. Chapters 1 and 2
include an overview of these techniques, along with the five
factors that make a project successful.
We live in a world where change—and the rate of
change—is constantly increasing. In order to survive and
prosper, organizations need to continually modify their
products and services. Projects are the means by which
these innovations are effected. Greater change = more
innovations = more projects.
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CHAPTER
1
Project Management
in a Changing World
INTRODUCTION
Project managers are changing the world.
• A World Health Organization (WHO) “vaccination army” runs a blitz
to attack polio, vaccinating 4.2 million children in a 50,000-squaremile area in three days in southern India.1
• A commercial aircraft manufacturer is designing a new model aircraft to be built from lightweight composites, resulting in fuel savings of 20 percent over similar-sized airplanes.
• NASA teams send sophisticated robots and probes to other planets
in our solar systems, furthering our understanding of Earth and its
origins.
• Nanotechnology researchers manipulate matter at the molecular
level, developing materials that hold incredible potential to revolutionize manufactured products, from building bridges to transmitting electricity to the clothes we wear.
Project managers are all around us, too: building a custom home,
opening a medical clinic, installing an updated accounting system, or
writing a book. Everywhere that people are leading change they are
managing projects.
No wonder the project management discipline has leapt from a
neglected corner to center stage. Government and industry are
embracing the project management discipline as leaders recognize
that they are increasingly managing project-driven organizations. But
change and projects have been around for thousands of years; what is
different now? Just what is project management?
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PROJECT MANAGEMENT
Before we understand the new interest in project management and
project-driven organizations, we must first understand the concept of
projects. Projects are all the work we do one time. Whether it’s
designing an aircraft, building a bakery display case, or creating a
business logo, every project produces an outcome and every project
has a beginning and an end. Fundamental to understanding the
importance of projects is realizing that each one produces something
unique. So designing and tooling up to build a new sports car is a
project (actually a lot of projects), but manufacturing thousands of
them is not. Manufacturing and other repetitive processes are defined
as ongoing operations.
PROJECT MANAGEMENT IS THE NEW
CRITICAL CAREER SKILL
Given this description, we can find projects—and project managers—
everywhere. Every graphic artist, systems analyst, carpenter, engineer,
attorney, and scientist who is creating a unique product is faced with
the challenges of leading a project. As more repetitive jobs are
replaced by automation, it is increasingly a necessity to be able to lead
change. Economically, the arguments for understanding project management are even stronger. People and companies that innovate, that
create and lead change, enjoy higher incomes and profit margins than
those that compete based on economies of scale and efficiency.
Project management is not new. The pyramids and aqueducts of
antiquity certainly required the coordination and planning skills of a
project manager. While supervising the building of Saint Peter’s Basilica in Rome, Michelangelo experienced all the torments of a modernday project manager: incomplete specifications, insufficient labor,
unsure funding, and a powerful customer. But only in the twentieth
century did the title and the discipline emerge.
Much of modern project management was defined in the 1950s, on
the major cold war defense programs. As a result, the discipline grew
up within the aerospace and defense industries, but in the 1990s project management broke out of its traditional boundaries. It is now a
recognized and valued skill set in organizations across the spectrum,
from health care to manufacturing, software to natural resources. The
evidence is everywhere:
• As recently as 1990, your search for a college course on project
management would have turned up one or two classes within the
industrial engineering school. Not so anymore. Project management
is a required course in MBA programs, and universities across the
country offer advanced degrees in project management.
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INTRODUCTION
• By 2004 nearly every Fortune 500 company had attempted to
implement a project management office (PMO) in one or more parts
of their organization. A PMO is responsible for instilling consistent
project management practices. Only a decade earlier, most executives in these companies hadn’t even heard of such an entity.
• The use of formal project management cost and schedule reporting techniques—required for decades on Department of Defense
programs—is now required of all federal agencies.
• Since 1990, the Project Management Institute, the professional
association for project managers, has seen its membership rise
from 7,700 to over 100,000 in 2004.2
More important, the factors that have driven project management
to center stage are not receding.
• Competition from a global economy is so pervasive it has become
cliché. That competition is forcing firms to collaborate across organizational and geographic boundaries, introducing the term virtual
teams to our business vocabulary.
• Evolving technology has put every one of us on ever-faster upgrade
cycles. At a personal level, our phones, computers, and cars
become out of date faster. For businesses and governments, the
upgrade cycles include refineries, chemical plants, medical clinics,
and weapons systems.
• The availability of a highly skilled temporary labor force is a perfect
match for the projectized economy, providing the ability to rapidly
increase or decrease staffing as projects begin and end.
The response to these pressures is reflected in the views of management experts.
• Oren Hararai, professor of management at the University of San
Francisco and the author of two books on the changing business
environment, sees the project-oriented employment trend growing.
“The future of business is fluid networks of unaffiliated organizations, multiple careers simultaneously, work revolving around
projects, as fluid as the external environment. Routine work can be
automated or outsourced—the real value of an organization will be
based on how quickly people can come together and focus on problems and solutions and then disband.3
• Tom Stewart, writing in Fortune magazine, says companies “have
redrawn their boundaries, making them both tight (as they focus on
core competencies) and porous (as they outsource noncore work).4
• Pen Stout, author, instructor, and project management consultant,
sees a symbiotic relationship between the independent worker and
the major corporations. “There will be strong ‘big big’ companies,
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PROJECT MANAGEMENT
strong ‘small small’ companies, not much in the middle. Project
management works because it’s a way for the bigs to use the
strengths of the smalls.”5
• Best-selling authors Ram Charan and Larry Bossidy make the connection between strategy and success by emphasizing the “discipline of getting things done.” “If your business has to survive
difficult times, if it has to make an important shift in response to
change—and these days just about every business does—it’s far, far
more likely to succeed if it’s executing well.”6
Projects are all around us. Project management skills transcend corporate and industry boundaries, enabling us to do the same. The people who lead projects—who turn visions of what might be into tangible
products and services—stand out. Further, the biggest driver of the
growth in project management is getting even bigger. As we will see in
the next section, change is everywhere, and change means projects.
THE INCREASING PACE OF CHANGE
The most irrepressible trend favoring project management
is the increasing pace of change. We embrace change as it gives us
increased quality of life, as with advances in medical technology or
fuel economy. We may resist or resent change, particularly when it is
forced upon us in the form of new regulations or new competition. But
change cannot be denied and its pace is faster than ever.
New products and services are exploding onto the scene overnight,
while current products are becoming obsolete faster than ever. The
recent Internet boom and bust showed in dramatic fashion how
rapidly the world economy can assimilate and adapt. Technology is
not the only evidence of change. Pressure to increase the quality, availability, and affordability of health care keeps medical professionals
and administrators restructuring their organizations. Corporate mergers in banking, insurance, telecommunications, computers, and media
bring the challenges of integrating cultures and systems.
As businesses scramble to keep up with fast-moving competitors,
riding the tsunami of change becomes critical to success. This emphasis on change increases the importance of project management,
because a rapid rate of change brings a greater need for projects. In
response to a rapidly changing marketplace, a company might reengineer itself, develop new products, or form alliances with other firms.
Each of these innovations is brought about by one or more projects.
Greater change = more innovations = more projects.
At a personal level, the pace of change carries the same significance. What career can we expect in 10 or 20 years, when the careers
that existed 10 or 20 years ago have so often disappeared? What skills
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