TEAMFLY Team-Fly ® Preparing for the Project Management Professional (PMPா) Certification Exam 9618$$ $$FM 09-06-02 14:57:59 PS 9618$$ $$FM 09-06-02 14:57:59 PS This Page Intentionally Left Blank Preparing for the Project Management Professional (PMPா) Certification Exam Second Edition Michael W. Newell, PMP, ENP American Management Association New York • Atlanta • Brussels • Buenos Aires • Chicago • London • Mexico City San Francisco • Shanghai • Tokyo • Toronto • Washington, D.C. 9618$$ $$FM 09-06-02 14:58:00 PS Special discounts on bulk quantities of AMACOM books are available to corporations, professional associations, and other organizations. For details, contact Special Sales Department, AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. Tel.: 212-903-8316 Fax: 212-903-8083 Web site: www.amacombooks.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. ‘‘PMI’’ and the PMI logo are service and trademarks registered in the United States and other nations; ‘‘PMP’’ and the PMP logo are certification marks registered in the United States and other nations; ‘‘PMBOK’’, ‘‘PM Network’’, and ‘‘PMI Today’’ are trademarks registered in the United States and other nations; and ‘‘Project Management Journal’’ and ‘‘Building professionalism in project management’’ are trademarks of the Project Management Institute, Inc. Library of Congress-Cataloging-in-Publication Data Newell, Michael W., 1945– Preparing for the project management professional (PMP) certification exam / Michael W. Newell.—2nd ed. p. cm. Includes bibliographical references and index. ISBN 0-8144-7172-2 (pbk.: alk. paper) 1. Project management—Examinations, questions, etc. I. Title. HD69.P75 N49 2002 658.4Ј04Ј076—dc21 2002010223 ᭧ 2002 Michael W. Newell. All rights reserved. Printed in the United States of America. This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. Printing number 10987654321 9618$$ $$FM 09-06-02 14:58:00 PS This book is dedicated to my wife, Saralee, who corrects my spelling and puts up with all my foolishness. 9618$$ $$FM 09-06-02 14:58:01 PS 9618$$ $$FM 09-06-02 14:58:01 PS This Page Intentionally Left Blank Contents Preface xv Introduction 1 What Is Project Management Anyway? 2 Advantages of Project Management 6 Organizing for Project Management 7 The Projectized Organization 7 The Traditional Organization 9 The Matrix Organization 10 The Project Office 12 How the Project Manager Makes Projects Successful 13 The Project Life Cycle 14 Project Processes 14 Summary 15 1. Scope Management 16 Initiation of the Project 17 Project Charter 17 Constraints and Assumptions 18 Who Are Those Stakeholders? 18 Cost and Its Relationship to Price 19 Overbid or Underbid: Which Is Better for Your Company? 20 Getting to the Scope Baseline 23 Work Breakdown Structure 25 Systems Approach to Work Breakdown Structure 28 Additional Project Breakdown Structures 30 Change Management 30 Project Justifications 31 The Break Even Chart 32 Problems with Break Even Charts 33 Average Rate of Return on Investment 34 Present Value of Money 34 Internal Rate of Return on Investment 39 Summary 44 vii 9618$$ CNTS 09-06-02 14:58:10 PS viii Contents 2. Time Management 46 Activity Definition 46 Activity Sequencing 47 Activity on Arrow Diagramming 48 Precedence Diagramming Method (PDM) 49 Logical Relationships 50 Finish-Start Relationship (FS) 50 Start-Start Relationship (SS) 52 Finish-Finish Relationship (FF) 53 Start-Finish Relationship (SF) 53 Leads and Lags 54 Diagramming Relationships 55 Project Start and Project Finish Events 55 Logical Precedence Diagram 56 Activity Durations 56 Building the Network Diagram 57 Buffering the Schedule 63 Reverse Resource Allocation Scheduling 67 Critical Path Method (CPM) 67 Program Evaluation and Review Technique (PERT) 68 Monte Carlo Simulation 73 The Simulation 74 Output from the Monte Carlo Simulation 75 Summary 75 3. Cost Management 77 Why We Need Cost Management 77 Project Life Cycle and Project Cost 78 Using the Work Breakdown Structure 78 Cost Estimating 79 Types of Estimates 80 Top Down Estimates 80 Bottom Up Estimates 80 Analogous Estimates 80 Parametric Estimates 81 Definitive Estimates 81 Cost Budgeting 83 9618$$ CNTS 09-06-02 14:58:11 PS ixContents Cost Control 85 Earned Value Reporting 85 Cumulative Reporting 85 Earned Value Parameters 86 Difficulties in Data Collection 87 Reporting Work Complete 89 Examples 89 Calculated Values for Earned Value Reports 90 Financial Measures 94 Return on Sales 97 Return on Assets 98 Economic Value Added 99 Depreciation 100 Straight Line Depreciation 100 Accelerated Depreciation 101 Sum of the Years’ Digits 101 Double Declining Balances 102 Summary 102 4. Human Resources Management 104 Project Manager Roles and Responsibilities 104 Strong Matrix, Weak Matrix, and Balanced Matrix 106 Strong Matrix 106 Weak Matrix 106 Balanced Matrix 108 Making Matrix Management Work 109 Personnel and Personal Evaluations 109 Motivation 110 Importance of Motivation 110 Industrial Revolution 110 Scientific Management 111 Learning Curve Theory 111 Depression Era 112 World War II 112 Post–World War II 112 Motivational Ideas 112 Procedures versus Motivation 113 Expectancy Theory 113 Maslow’s Hierarchy of Needs Theory 115 Hertzberg’s Motivation/Hygiene Theory 117 9618$$ CNTS 09-06-02 14:58:11 PS [...]... serve the purpose for which it was intended The project team needs to understand the customer as well The team should not be frustrated if the customer seems to know less about the project than the project team After all, the reason that the project team is doing the project is because they are expert at accomplishing the project The customer is not expert in doing the project That is why the project. .. successful project? A successful project is one that meets or exceeds the expectations of the stakeholders in the project By organizing the project in a way that concentrates the efforts of the project team in the direction of accomplishing the project, a great deal of motivation is achieved This allows for the project teams to concentrate on the project and not be distracted by all of the other projects... that you have with all of the stakeholders, the sounder the project will be This will start with the definition of the scope of the project Initiation of the Project There are several ways that a project may come into existence A project comes into existence with the creation of the project charter The project charter is a formal document that brings the project into existence The project charter is a small... organization In operation, the project manager puts together the project plans and develops a need for people to work on the team He or she then meets with the functional manager and negotiates for the people that are available and have the proper skills to work on the project Together, they develop the staff that will work on the project The functional managers do this with all of the project managers that... phase there is the greatest chance that the project will never be completed Many projects reach this phase only to be discontinued when it is determined that the cost of doing the project does not meet or exceed the benefits received from doing the project At this phase of the project there is little known about the project Project Processes In the Guide to the Project Management Body of Knowledge, the. .. help project managers learn more about the Guide to the Project Management Body of Knowledge (PMBOK௡) and pass the Project Management Professional (PMP௡) examination If the professional organization for project managers, the Project Management Institute (PMI௡), has been instrumental in promoting project management, we should be able to get some idea of the growth of project management by looking at the. .. responsible for the work that is done by the individuals who do it The project managers are not responsible for the administrative work that must be done for the employees This allows the project managers to form teams that can concentrate on the project at hand and not be bogged down by administrative work It allows the project team to focus on the customer, the stakeholders, and the project much as in the projectized... balance of power between the project managers and the functional managers If there is not, one group will dominate the other If the project managers become too powerful, they can force the functional managers to allocate the best people to their projects and even more people than necessary to their projects The result of this is that all of the people report to project managers, and the project managers trade... that both the project team and the customer have the same goal for the project That is that the goal of the project is to give the customer something 16 Scope Management 17 that is useful and something that does what is wanted in the first place There is no point in having an adversary relationship between the customer and the project team Both want the project to succeed, and both want the project to... the project team can be formed specifically for the purpose of that project In modern project management, project teams bring together resources as they are required One of the great advantages of project management is its ability to form multidisciplined project teams of the right people at the right time The obvious advantage of this is that scarce skills can be brought to a project when needed Projects . 6 Organizing for Project Management 7 The Projectized Organization 7 The Traditional Organization 9 The Matrix Organization 10 The Project Office 12 How the Project Manager Makes Projects Successful 13 The. reflects the Guide to the Project Management Body of Knowledge௡, 2000 edition. I have been working in the field of project management for the past twenty-five years and was managing projects long before. Team-Fly ® Preparing for the Project Management Professional (PMPா) Certification Exam 9618$$ $$FM 0 9-0 6-0 2 14:57:59 PS 9618$$ $$FM 0 9-0 6-0 2 14:57:59 PS This Page Intentionally Left Blank Preparing for