Success Driven Project Management Methodology

1. Success Driven Project Management Methodology Vladimir Liberzon, PMP Spider Project Team Moscow, Russia PMI Chapter

2. History • Success Driven Project Management (SDPM) methodology was developed in Russia in 90-s and since then was successfully used in many projects, programs, and organizations and not only in Russia • Two years ago its implementation in Petrobras(Brazil) was presented at PMI COS Conference in Chicago • Last year its application for management of 2000 projects portfolio of Romtelecom (Romanian Telecom company) was presented at PMI COS Conference in Boston

3. History • SDPM is supported by Russian PM software Spider Project but its basic approaches can be used with other PM software tools and we will discuss how to apply this methodology using other software packages • Success Driven Project Management methodology has some common features with Critical Chain Project Management approaches but many differences too • Application of SDPM approaches showed very good results and the number of companies that implement SDPM is growing very fast

4. SDPM Ideas • Triple constraint and multiple project success criteria make project management too complicated. There is a need in the single and integrated project success criterion. • Single project schedule and budget for all project stakeholders leads to project failure. There is a need for setting different targets for project work force, for project management team, and project sponsor.

5. SDPM Ideas • Project schedule and budget for project team members shall be optimistic (no reserves included), project targets (scope, time, cost) for project management team shall include contingency reserves, project sponsor targets shall include management reserves for unknown unknowns.

6. SDPM Ideas • Thus project management team shall have time and cost buffers for managing project risks and uncertainties. These buffers are not connected with any activity sequence. Project buffer is a difference between target value and the value for the same parameter in the optimistic schedule. • Targets shall be set using risk simulation. These targets shall have reasonable probabilities to be met. Risk simulation shall calculate necessary project cost and time buffers.

7. SDPM Ideas • Project status information is useful but not sufficient for decision making. Decision making shall be based on the analysis of project trends. • Project buffers will be consumed during project performance. Project management is about managing these buffers. If they will remain positive to the moment of project finish then project management was successful and the targets were reached. • There is a need to have tools for measuring project buffer penetration and project performance analysis. The best indicator of buffer penetration and project performance status is current probability to meet project target.

8. SDPM Ideas • If the probability to meet project target is rising then project buffer was consumed slower than we expected, in other case project buffer was consumed too fast and project success is endangered. • Success probability trends are the best integrated performance indicators – they take into consideration project risks, they depend not only on performance results but also on the project environment.

9. SDPM • SDPM methodology also includes approaches to creating project schedule models and organizing project data. • In this presentation we will discuss: • Organizing project data in the corporate project management system • Resource Constrained Scheduling and Resource Critical Path, • Risk Simulation methods and objectives, • Setting right project goals, • How to set and to manage Project Buffers, • Success Probabilities, • Management by Trends

10. 1 Organizing project data in the corporate project management system

11. Corporate PM requirements • Corporate requirements to the data that are used for the portfolio/project planning and control may be divided into two main groups: • High level requirements based on portfolio management needs, • Low level requirements that shall be applied to creating project schedule models. • High level requirements consider data organization that shall be same for all portfolio projects, • Low level requirements cover details and instructions on creating project schedule models.

12. Corporate PM requirements • The same Project, Phase, Activity, Resource, Material, and Department coding structures shall be used in all projects • Resources that are used in all projects shall belong to the corporate resource pool • Resources of the same type share the same characteristics (like cost, productivities on the same assignments, material consumption per work hour)

13. Corporate PM requirements • WBS structures that are used in similar projects shall be developed based on the same templates • Project costs have the same structure in all projects (same cost components are used) • Cost accounts are the same in all projects

14. Corporate PM requirements • Activities of the same type have the same characteristics in all projects (like unit cost, material requirements per work volume unit, etc.) • Typical resource assignments have the same characteristics in all projects (like productivity, cost and material requirements per work volume unit) • Typical (repeating) processes are modeled in the same way in all projects • Project archives are kept and stored as required

15. Organizing data • These requirements shall be set on the corporate level and are mandatory for all projects in the organization / program / portfolio • Templates, reference-books, coding systems etc. are developed in the Project Management Office • Project Management Office creates Databases (or Reference-books) that contain those parameters that shall be used for planning of all projects of the organization

16. Corporate Databases (Reference-Books) • Corporate Reference-books usually include: • Activity cost and material requirements per volume (quantity of work) unit for all activity types, • Resource assignment cost and material requirements per volume unit for all assignment types, • Resource assignment productivities for all assignment types, • Resource assignment workloads for all assignment types. • Activities, resources and resource assignments belong to the same type if they share the same characteristics.

17. Typical Fragment Library • Project fragments usually describe typical processes and technologies that are used more than once as small projects. • Creating project schedule models using the library of typical fragments helps to avoid inconsistencies and assures that the project model follows corporate standards. • A library of typical fragments is very important tool for the development of common culture and management standards.

18. Project Archives • It is necessary to keep project schedule archives to be able to restore and to analyze trends of project parameters. • If project schedule archives are available it is possible to compare current project schedule with the schedules created one week ago, one month ago, etc.

19. 2 Project Resource Constrained Scheduling and Resource Critical Path

20. Scheduling Tasks • Project scheduling without resource limitations taken into the consideration, • Project/Portfolio resource constrained scheduling (resource leveling), • Calculation of feasible activity floats and those activities that are critical, • Calculation of the Project/Portfolio cost, material and resource requirements for any time period.

21. Critical Path Method • The problem of project schedule development without allowing for resource constraints has a correct mathematical solution (Critical Path Method), which would be the same for all PM packages, provided that initial data are identical. • Other tasks are solved using different approaches and yielding different results.

22. Resource constrained scheduling • Resource constrained schedules produced by different PM software are different. The software that calculates shortest resource constrained schedules may save a fortune to its users. • That is why we pay most attention to resource-constrained schedule optimization.

23. Resource constrained scheduling • The schedule stability is no less important, especially at the project execution phase. • That is why our project management software Spider Project features an additional leveling option - the support of the earlier project version schedule (keeping the order of activity execution the same as in selected earlier project schedule).

24. Sample Project before leveling • Traditional notion of Critical Path works only in case of unlimited resources availability. • Let us consider a simple project consisting of five activities, presented at the next slide. • Activities 2 and 5 are performed by the same resource.

25. Sample Project after leveling • Please pay attention to activities that became critical. Now delaying each of the activities 1, 2 and 5 will delay the project finish date. • We call these activities Resource Critical and their sequence comprises Resource Critical Path.

26. Resource Critical Path • In many projects it is necessary to simulate financing and production, and to calculate project schedules taking into account all limitations (including availability of renewable resources, material supply and financing schedules). • True critical path should account for all schedule constraints including resource and financial limitations. • We call it Resource Critical Path (RCP) to distinguish it from the traditional interpretation of the critical path definition.

27. Resource Critical Path • The calculation of RCP is similar to the calculation of the traditional critical path with the exception that both early and late dates (and corresponding activity floats) are calculated during forward and backward resource (and material, and cost) levelling. • This technique permits to determine feasible resource constrained floats. • Activity resource constrained float shows the period for which activity execution may be delayed within the current schedule and with the set of resources available in this project without delaying project finish.

28. Resource Critical Path • As you may notice in our example, Resource Critical Path may include activities that are not linked with logical dependencies. • Resource Critical Path is actually not the path but the longest sequence of activities in the current schedule. • One activity may depend on another because these activities are performed by the same resources. We call these dependencies as Resource dependencies. • Resource dependencies may be shown in the project schedule with the dotted arrows but they are the result of the project levelling and not initial information like logical dependencies.

29. 3 Success Criteria

30. Project Success Criteria • If project success criteria are set as finishing project on time and under budget then proper decision making will be complicated. • For example, project managers will not be able to estimate if their decisions to spend more money and finish the project earlier are reasonable. • We suggest to set one integrated criterion of the project/program success or failure.

31. Project Success Criteria • Many projects can be considered as business oriented: • construction of roads, power plants, bridges, ports, telecommunication networks, new product development and production etc. brings economic results and generate future profits, • Implementation of the corporate information system will improve organization processes, etc. • In any case the delay of project finish date usually increases project indirect cost, and acceleration means saving some money.

32. Project Success Criteria • So each day of project delay means some money losses and finishing project earlier means additional profit • We can define cost of a project day (maybe separate and different for acceleration and delay) estimating these profits and losses • This way we define the rules of the game that is called Project Management

33. Project Success Criteria • Another option – to set the profit that should be achieved at some point in time basing on the forecast of the revenues that will be obtained after the project will deliver its results. • Such success criteria will permit to weight time and money making managerial decisions. • At the next slide you may see the project schedule that is calculated without allowing for project financing and supply restrictions. There are periods when project has no money and necessary materials (wall frames) to proceed.

34. Project Success Criteria • If project manager finds enough money and materials then project total profit to the imposed date will be close to $219,000.

35. Project Success Criteria • If we calculate project resource, supply and cost constrained schedule then it become clear that the project will loose $25,000 due to necessary delays.

36. Project Success Criteria • Maybe it is reasonable to borrow money or to find some other solution? • To be able to weight options and to select the best it is necessary to consider not only expenses but also future profits. • Proper project (program, portfolio) schedule model is the powerful tool that helps to select the best decisions.

37. 4 Risk Analysis & Success Driven Project Management

38. Why risk analysis • Our experience in project planning shows that the probability of successful implementation of deterministic project schedules and budgets is very low. Therefore project and portfolio planning technology should always include risk simulation to produce reliable results.

39. Risk Simulation • Risk simulation may be based on Monte Carlo simulation or use three scenarios approach. • We prefer 3 scenario approach for the reasons explained further.

40. Risk Simulation – three scenarios approach • A project planner obtains three estimates (optimistic, most probable and pessimistic) for all initial project data (duration, volumes, productivity, calendars, costs, etc.). • Risk events are selected and ranked using the usual approach to risk qualitative analysis. • Usually we recommend to include risk events with the probability exceeding 90% in the optimistic scenario, exceeding 50% in the most probable scenario, and all selected risks in the pessimistic scenario.

41. Risk Simulation – three scenarios approach • Most probable and pessimistic project scenarios may contain additional activities and costs due to corresponding risk events and may employ additional resources and different calendars. • As the result project planner obtains three expected finish dates, costs and material consumptions for all project phases and the project as a whole. • They are used to rebuild probability curves for the dates, costs and material requirements.

42. Risk Simulation – three scenarios approach • If probability curve is known the required probability to meet project target defines the target that shall be set. • The area under the probability curve to the left of the target value determines the probability to meet the target. • P=S(blue)/S(whole)

43. Project/Program Targets • Target dates of most projects usually are predefined. They may be set not only for the whole program/project but also for its major phases. • Project planning includes determining how to organize project/program execution to be able to meet required target dates with the reasonable probability.

44. Success Probabilities • Probabilities to meet approved project targets we call Success Probabilities. These targets may be set for all project parameters that will be controlled (profit, expenses, duration, material consumption). • Target dates do not belong to any schedule. Usually they are between most probable and pessimistic dates. • A set of target dates and costs for project phases (analogue of milestone schedule) is the real project baseline. • But baseline schedule does not exist!

45. Performance Measurement problems • It means that application of usual project performance measurement approaches (like Earned Value Analysis) is complicated. • Without certain schedule and cost baselines it is impossible to calculate Planned and Earned Value. • If we select some schedule (Optimistic or Most Probable) as the project management baseline the values of Performance Indices that are lower than 1 do not mean that the performance is worse than expected.

46. Buffers • We recommend to use optimistic schedule for setting tasks for project work force and manage project reserves. • The schedule that is calculated backward from the target dates with most probable estimates of activity durations we call Critical schedule. • The difference between start and finish dates in current and critical schedules we call start and finish time buffers (contingency reserves). • The difference between activity (phase) cost that has defined probability to be met and optimistic cost of the same activity (phase) we call cost buffer.

47. Sample Critical Schedule • There are time, cost and material buffers that show contingency reserves not only for a project as a whole (analogue of Critical Chain project buffer) but also for any activity in the optimistic project schedule.

48. Monte Carlo and 3 Scenarios • Let’s look at the difference between accuracy and precision. • Accuracy: Precision:

49. Monte Carlo and 3 Scenarios • Monte Carlo means Accuracy but lack of Precision. • 3 Scenarios means Precision but lack of Accuracy. • The choice depends on management approach. • Our approach may be called “Management by Trends”. • We think that trends supply management with most valuable information on project performance. • We think that trend analysis helps to discover performance problems ASAP and to apply corrective actions if necessary.

50. Monte Carlo and 3 Scenarios • It is the main reason why 3 scenarios approach was selected. • We think that the quality of initial data for project risk simulation is never good enough but Monte Carlo risk simulation creates an impression of accuracy that is actually dangerous for project managers. • In any case we need Optimistic schedule and budget for project performance management. • We need to understand what happens with success probability during project performance and so we need data precision.