Project Management: A Systems Approach to Planning ...

1 PROJECTMANAGEMENTA Systems Approach toPlanning, Scheduling,and ControllingEIGHTH EDITIONHAROLD KERZNER, of Business AdministrationBaldwin-Wallace CollegeBerea, OhioJohn Wiley & Sons, Kerzner s 16 Points to ProjectManagement Maturity1. Adopt a Project management methodology and use it Implement a philosophy that drives the company toward Project man-agement maturity and communicate it to Commit to developing effective plans at the beginning of each Minimize scope changes by committing to realistic Recognize that cost and schedule management are Select the right person as the Project Provide executives with Project sponsor information, not Project man-agement Strengthen involvement and support of line Focus on deliverables rather than Cultivate effective communication, cooperation, and trust to achieverapid Project management Share recognition for Project success with the entire Project team andline Eliminate nonproductive Focus on identifying and solving problems early, quickly.

2 And cost Measure progress Use Project management software as a tool not as a substitute for ef-fective Planning or interpersonal Institute an all-employee training program with periodic updates basedupon documented lessons Systems Approach toPlanning, Scheduling,and ControllingEIGHTH EDITIONHAROLD KERZNER, of Business AdministrationBaldwin-Wallace CollegeBerea, OhioJohn Wiley & Sons, book is printed on acid-free 2003 by John Wiley & Sons, Inc. All rights reservedPublished by John Wiley & Sons, Inc., Hoboken, New JerseyPublished simultaneously in CanadaNo part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise,except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc.

3 , 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4744, or on the web at Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc.,111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008,e-mail: of Liability/Disclaimer of Warranty: While the publisher and author have used their best effortsin preparing this book, they make no representations or warranties with respect to the accuracy orcompleteness of the contents of this book and specifically disclaim any implied warranties of merchantabilityor fitness for a particular purpose. No warranty may be created or extended by sales representatives orwritten sales materials. The advice and strategies contained herein may not be suitable for your should consult with a professional where appropriate. Neither the publisher nor author shall be liablefor any loss of profit or any other commercial damages, including but not limited to special, incidental,consequential, or other general information on our other products and services or for technical support, please contact ourCustomer Care Department within the United States at (800) 762-2974, outside the United States at (317)572-3993 or fax (317) also publishes its books in a variety of electronic formats.

4 Some content that appears in print may notbe available in electronic books. For more information about Wiley products, visit our web site at of Congress Cataloging-in-Publication Data:Kerzner, management : a Systems Approach to Planning , scheduling, and controlling /Harold bibliographical references and 0-471-22577-0 (cloth : alk. paper)1. Project management . I. K47 04--dc212002028892 Printed in the United States of ToDr. Herman Krier,my Friend and Guru,who taught me well themeaning of the word persistence Project Project Project Manager Line Manager the Project Manager s the Functional Manager s the Functional Employee s the Executive s with Project Manager as the Planning Project The Downside of Project Project -Driven versus Non Project -Driven Marketing in the Project -Driven Classification of Location of the Project Differing Views of Project Concurrent Engineering: A Project management Approach27 Problems27 Case StudyWilliams Machine Tool Company30vii2 Project management GROWTH: CONCEPTS AND Systems management : 1945 management : 1960 management : 1985 to , Programs, and Projects: A versus Project management : A and Excellence: A Project management .

5 A The Many Faces of The Many Faces of The stage - gate Project Life Project management Methodologies: A Change management and Corporate Systems Thinking82 Problems853 ORGANIZATIONAL Work (Classical) Work Integration Staff Organization ( Project Coordinator) Product (Projectized) Organizational of Matrix for Project management Selecting the Organizational Structuring the Small Strategic Business Unit (SBU) Project Transitional Management128 Problems130 Case StudyJones and Shephard Accountants, AND STAFFING THE Project OFFICE Staffing the Project Manager: An Executive Requirements for Program Cases in Project Manager the Wrong Project Generation Project and Job Organizational Staffing Project The Functional The Project Organizational Special Selecting the Project management Implementation Team181 Problems1845 management to Project Team for Handling the Newly Formed Building as an Ongoing in a Project Organizational Employee Manager management Project Review Project management Communication management Policies and Procedures240 Problems243 Case StudiesThe Trophy Project253 ContentsixLeadership Effectiveness (A)254 Leadership Effectiveness (B)

6 259 Motivational Questionnaire2656 TIME management AND Time management Time and Burnout278 Problems280 Case StudyThe Reluctant Conflict Superior, Subordinate, and Functional management of Resolution Modes292 Problems294 Case StudiesFacilities Scheduling at Mayer Manufacturing297 Telestar International299 Handling Conflict in Project Management3008 SPECIAL Compensation and Project management in the Small Business , Ethics, and the Corporate and Product/ Project Teams333 Problems3359 THE VARIABLES FOR Project management Field Learned351 Problems35210 WORKING WITH The Project Handling Disagreements with the The In-House Representatives363 Problems364 Case StudyCorwin General Life-Cycle Proposal Understanding Participants Project The Statement of Project Milestone Work Breakdown WBS Decomposition Role of the Executive in Project Role of the Executive in The Planning Work Planning Why Do Plans Fail?

7 Stopping Handling Project Phaseouts and Detailed Schedules and Master Production Program Total Project The Project management The Project Manager Line Manager Configuration Management437 Problems43812 NETWORK SCHEDULING Network Graphical Evaluation and Review Technique (GERT) Slack Network Estimating Activity Estimating Total Program Total PERT/CPM Crash PERT/CPM Problem Alternative PERT/CPM Precedence Understanding Project management Software Features Software Implementation Problems485 Problems486 Case StudyCrosby Manufacturing Corporation494xiiCONTENTS13 Project Customer Bar (Gantt) Other Conventional Presentation Logic Diagrams/Networks509 Problems51014 PRICING AND Global Pricing Types of Pricing Organizational Input Labor Overhead Materials/Support Pricing Out the Smoothing Out Department The Pricing Review Systems Developing the Supporting/Backup The Low-Bidder Special Estimating Estimating High-Risk Project The Disaster of Applying the 10 Percent Solution to Project Life-Cycle Costing (LCC) Logistics Economic Project Selection Criteria.

8 Capital Payback The Time Value of Net Present Value (NPV) Internal Rate of Return (IRR) Comparing IRR, NPV, and Risk Capital Rationing559 Problems560 Contentsxiii15 COST Understanding The Operating Cost Account Variance and Earned Recording Material Costs Using Earned Value The Material Accounting Material Variances: Price and Summary Status Cost Control Problems610 Problems612 Case StudyThe Bathtub Period62316 TRADE-OFF ANALYSIS IN A Project Methodology for Trade-off Contracts: Their Influence on Industry Trade-off Conclusion64917 RISK Definition of Tolerance for Definition of Risk Certainty, Risk, and Risk management Risk Risk Risk Risk The Monte Carlo Risk Selecting the Appropriate Response Risk Some Implementation The Use of Lessons Dependencies between The Impact of Risk Handling Risk and Concurrent Engineering699 Problems703 Case StudiesTeloxy Engineering (A)709 Teloxy Engineering (B)

9 71018 LEARNING General The Learning Curve Graphic Key Words Associated with Learning The Cumulative Average Sources of Developing Slope Unit Costs and Use of Selection of Learning Follow-on Manufacturing Learning Curve Prices and Competitive Weapon730 Problems73319 MODERN DEVELOPMENTS IN Project The Project management Maturity Model (PMMM) Developing Effective Procedural Project management Continuous Capacity Competency Managing Multiple End-of-Phase Review Meetings75520 QUALITY Definition of The Quality Comparison of the Quality The Taguchi The Malcolm Baldrige National Quality ISO Quality management The Cost of The Seven Quality Control Process Capability (Cp) Acceptance Operating Characteristic Implementing Six Quality Responsibility for Quality Just-in-Time Manufacturing (JIT) Total Quality management (TQM)80621 CONTRACTS AND Requirement Requisition Solicitation Award Types of Incentive Contract Type versus Contract Administration Using a Proposal-Contractual Summary83322 CRITICAL CHAIN Project Anatomy of a Task Task Protection in a Critical Chain Buffer Managing the Execution of a Critical Chain Critical Chain Multiproject Problem and Implementing Multiproject Critical How Critical Chain Extends Critical Path852xviCONTENTSP roblems854 Case StudiesLucent Technologies855 Elbit Systems Ltd.

10 857 Seagate Technology 860 Appendix to the Project management Conflict Exercise863 Appendix to Leadership Exercise869 Author Index875 Subject Index877 ContentsxviiPrefaceAs we enter the first decade of the twenty-first century, our perception of Project manage-ment has changed. Project management , once considered nice to have, is now recognizedas a necessity. Organizations that were opponents of Project management are now advo-cates. management educators of the past, who preached that Project management could notwork, are now staunch supporters. Project management is here to text discusses the principles of Project management . Students who are interestedin advanced topics in Project management , as well as in best practices in implementation,may wish to read one of my other texts,Applied Project management (New York: Wiley,2000).This book is addressed not only to those undergraduate and graduate students whowish to understand and improve upon their Project management skills, but also to thosefunctional managers and upper-level executives who must provide continuous support toall projects.