PMP Exam Prep – Part 15: Project Procurement Management

The PMBOK addresses Project Procurement Management from the buyer’s perspective, in other words, we play the role of the buyer looking to contract some project work to a seller that is external to our Organization. Buyer and seller are common terms that are used in the exam as opposed to contractor and owner. This is not an exam that focuses on the legal aspects of contracting and procurement and questions typically relate back to processes of Project Procurement Management.

Exam questions frequently put the candidate either in the position of the buyer or the seller. Care should be taken to verify which perspective you need to take when answering a question during the exam. For example, you may be asked to identify whether the buyer or the seller bears the most risk when work is performed via a fixed price contract. The answer is that the seller bears the most risk. This is because in a fixed price contract, the seller agrees to do the stipulated work for a fixed sum of money. This means that if there should be any unanticipated increases in costs to the project, the buyer is not obliged to pay any more money to offset these costs and it falls entirely on the seller to  absorb these costs. The seller therefore bears the most risk.

Project Procurement concepts covered in this section

There are several procurement concepts that we will cover in this section

  • Project Procurement Definition
  • Statement of Work (SOW)
  • Contract Categories
  • Solicitation Process
  • Contract Negotiations
  • Contract Clauses

We will take a look at the types of procurement planning and the issues associated with procurement planning and solicitation planning as well. We will also delve further into solicitation when it comes to source selection; contract administration; contract closeout and the Organizational issues relating to procurement.

Plan Procurements

Procurement Planning is the very first step. A lot of Project Managers do not get involved at this stage. According to the PMBOK, however, the Project Manager is responsible for describing the subcontract requirements in terms of the specification, so the Project Manager is responsible for procurement planning. As the buyer, we need to define what we need the seller to perform for us.

  • Specification: A specification is defined as a precise description of a physical item, procedure or result for the purpose of purchase or the implementation or an item or service. It is important that the Project Manager specify exactly what it is that he or she wants. Additionally, we can also use drawings to complement or supplement the specification. For example, when procurement planning is performed in the construction industry, it is common to define out technical specifications as plans and drawings.
  • Delivery dates: The delivery dates of the product or service must be laid out in the specification as well.
  • Independent Estimate: The independent estimate refers to a cost estimate that the project team obtains from a vendor or external stakeholder that is not directly related to the project delivery.  Independent estimates are commonly used when a buyer is trying to obtain a rough idea of how much money a particular work package might cost, or when the buyer is wants to verify that the quoted prices received by potential sellers seem to be reasonable and accurate.
  • Assistance: It is important to note that the project manager has assistance from his team when coming up with the details that support the procurement exercise. For example, technical specifications are developed with some help from the engineers allocated to the project.

Make-or-buy decisions

Essentially we are trying to determine if we should perform the work ourselves or whether should we simply buy the finished product from another party. This is analysis is not always going to result in an either / or decision. It can go into many degrees. For example, we may choose to do some of the work ourselves and go outside of our project team for the rest.

In the PMBOK, the possible outcomes from a make-or-buy analysis include:

  • Procure virtually all goods or services from a single supplier
  • Procure a significant portion of the goods and services and make the rest
  • Procure a minor portion of the goods and services and make the rest
  • Make all of the good and services

Statement of Requirements / Statement of Work

The project team uses the Statement of Work to communicate their requirements in the event that a decision is made to procure a portion of the deliverables of a project. The Statement of Requirements (SOR) or the Statement of Work (SOW) is a document package that describes the specifications and other details required to tell external parties exactly what is needed to fulfill a procurement need.The SOW is an output from the procurement planning process and this is a fundamental document that you have to be very familiar with for the exams. PMI may sometimes use the acronyms SOW or SOR interchangeably in the exam.

Contract Types

In addition to the Make-or-buy decision, we also need to make a decision as to what type of contract we are going to use in order to procure that product or service. For the exam, you will need to be familiar with the various types of contracts that can be used to structure formal business relationships.

  • Fixed Price Contracts: The principle of shared risk applies to Fixed Price Contracts. In this case, the risk of the contract is shared between both the buyer and the seller.
    • Firm Fixed Price Contract (FFP): This is the most common form of Fixed Price contract and is also known as the ‘lump sum’ contract. In this particular type of contract, the seller bears all of the risk because she agrees to provide all of the goods and services for a fixed price and regardless of the costs incurred. There is one upside to a Firm Fixed Price Contract for the seller. The upside is that when the FFP contract type is used, the seller has the greatest chance to make a profit. There also is one other benefit that both buyer and seller will realize from this type of contract, which is that this type of contract has the least amount of administrative hassle.
    • Fixed Price plus Incentive Contract (FPIC): Here, the seller takes on more risk than the buyer. This is because regardless of the incentives put into the contract, the seller has to deliver the work at a fixed price. If that price is exceeded, the seller is going to incur those additional costs. For any range of costs or pricing mechanisms, the seller has the incentive to earn more fees, but generally as specified in a contract, if a particular level of cost is exceeded, then the seller will not realize any profit from performing the work and every dollar that the seller spends to complete the work will come directly out of his or her own pocket. The Point of Total Assumption occurs when the seller starts to take on all the costs of the contract because the seller is close enough to the ceiling of costs as specified in the contract. The seller is not necessarily losing any money at this point but is assuming 100% of the total costs from that point forward within the contract. The ceiling price as set within the contract can be thought of as being the level where buyer has specified that he will not pay any more money that this level for the work to be performed.
  • Cost Reimbursement Contracts: These are the most unfamiliar types of contracts in the exam, particularly for international candidates.
    • Cost plus Percentage of Cost Contract: This contract type has zero risk to the seller and stipulates that the seller is going to pass all of her costs directly on to the buyer. The profit that the seller is going to make out of this contract will be based on a percentage of the costs incurred. In other words, the higher the costs incurred, the greater the profit for the seller. The obvious motivation for the seller would be to incur as much costs as he possibly can, since his profits will be increased as a factor of those costs. This contract type is illegal in the United States Federal Government. The buyer has all of the risks and the seller has no risks for this type of contract.
    • Cost plus Fixed Fee Contract (CPFF): At the outset of a contract, the costs are going to be estimated by the buyer and the seller for the work prior to the work being performed. Based on these cost estimates, a fee is going to be fixed for the seller. For example, if a job is going to cost $2 million dollars to get the work done, the buyer and seller can agree that 8% of the fee or $160,000 is going to be a reasonable fee. In the event that the job was performed under the agreed to cost of 2 million dollars, the seller is still going to get her fee because the fee is fixed. In fact, if the seller incurs a cost above 2 million dollars, he or she will still get the originally agreed upon fixed fee. The cost may vary, however the fee is going to be fixed. However, there might be a clause in the contract that the fee may have to be re-negotiated if the costs go beyond a pre-determined threshold amount.
    • Cost Plus Incentive Fee Contract (CPIF): A CPIF contract is a risk-sharing contract between the buyer and the seller. All CPIF contracts share one common quality known as the sharing ratio. The sharing ratio can be expressed as 70/30 or 60/40 or 50/50, but is always expressed as buyer share/ seller share. You may see questions in the exam that indicate that you have a CPIF contract and you have a 70/30 sharing ratio and then proceed to ask you who has the 30 percent share. The answer in this case would be the seller, because 30 is the second part of the ratio.
  • Unit Price Contracts: A unit price contract is really a derivative of a fixed price contract. The unit price follows fixed pricing but just on a unit-by-unit basis and not the sum total of a number of units. In this case, we are looking towards a fixed price for a single unit of an item or service. The unit price will be fixed, but it is fixed for each particular unit of goods or service that we want to acquire. For example, we are setting up a new office and we need to buy some desktop computer systems. We can go to suppliers and tell them that we need 1,000 computers. We can also give them the specifications in terms of the specific hardware requirements for each computer. We can tell suppliers that we want a fixed price for a particular quantity of a product or service and we can collect bids and we will generally select the supplier who has the lowest price and conforms to the specifications. This is an example of fixed price. Let us say that we have acquired the 1,000 computers and we realize that we need a few more computers but this time we’re not exactly sure how many computers to obtain. We might just want to buy them two or three at a time. In this case, we would like to get a unit price for each computer. This is an example of unit price.

Comparing Cost Plus and Fixed Price Contracts

In cost plus contracts, all of the allowable fixed costs of the seller will be covered in the contract. When it comes to a fixed price contract, all of the allowable costs may not be covered because the seller might exceed what was allowed under the ceiling price of the FP contract. A tip for candidates to identify incentive contracts such as fixed price incentive or cost plus incentive based contracts is to look for terms such as ‘target costs’; ‘target price’; or ‘sharing ratio’ which will denote that the question is referring to an incentive based contract.

Additional Incentives

There are additional incentives that have not been discussed as yet when it comes to contracts. These incentives need not always be financial. These incentives can be thought of as benefits that the buyer will give to the seller or Organization performing the work if they can complete the work ahead of schedule or below costs.

Solicitation Planning

Solicitation planning comes after procurement planning. At this point, we want to take our SOW and other procurement documents and go to the outside world and start obtaining bids and proposals for our work.

We need to solicit bids and proposals from a number of suppliers and we are interested in putting a procurement package together to help potential sellers or vendors. We have a particular process and we need to structure this process in a standardized way that will be easy to follow and well known for potential sellers.

Contract Origination

There are various accepted ways for an organization to go about looking for potential vendors to fulfill their requirements.

  • Unilateral Contract: A purchase order is a good example of a unilateral contract. One party signs the contract. Typically there is no negotiation required and the contract is of low monetary value. We are looking at standardized solicitation and we are buying commodity items. A good way to look at what might be a unilateral contract is to ask yourself if you can send something via a fax. If you have the ability to send a contract via fax and not expect any reply and just expect work to be done after it is sent, then you can look at this document as a unilateral contract.
  • Bilateral Contract: Bilateral contracts are more conventional and have a tendency of being a lot more involved. There are 3 basic forms of bilateral contracts.
    • Invitation for Bid (IFB): An invitation for bid is a form of contracting which is appropriate for routine items. The primary objective as a buyer is to find the best price. The buyer is able to clearly describe what it is that he or she wants and is able to identify the completed product or service when a potential seller presents it to the buyer. There is typically no negotiation involved in this process and the buyer is usually looking for the lowest price. When you see an IFB, the buyer is not looking for any extra qualities aside from what is described in the initial specification.
    • Request for Quote (RFQ): Requests for Quotes are used for generally low monetary purchases of commodity items. Essentially a certain number of items and exact specifications are known to the buyer and the RFQ is going to be sent out to a few pre-selected and pre-qualified suppliers and the objective is to find the best price.
    • Request for Proposal (RFP): The Request for Proposal is generally used for complex or non-standard items. The monetary value of procurement in this case is going to be higher than in an RFQ or and IFB. What distinguishes and RFP from an RFQ or IFB is that there is going to be some discussion between the buyer and the seller. The buyer will attempt to describe what he wants in the clearest terms that he or she possibly can. The buyer is very interested in not only receiving proposals from vendors but also interested in talking to sellers about his or her needs. The seller might have a better idea of how the work can be performed.

For example, if you are involved in a complex software development project for your Organization, you would be issuing an RFP and not an RFQ or IFB. In this particular case, the buyer wants to meet with different sellers and determine from them the best approach to take in order to write the software, implement it and train the people on how to use it.

Proposal evaluation techniques

At the end of the solicitation process, the buyer would have received responses back from interested sellers and we are now interested in putting these responses through some kind of evaluation criteria. The evaluation criteria can be objective or subjective. There may be metrics to measure the different proposals, or sometimes the buyer will simply want to get a feel for how the contractor will meet the requirements of the contract.

Common evaluation criteria are listed below:

  • Management approach
  • Financial health
  • Contractors understanding of buyers requirements
  • Overall/lifecycle costs of proposed solution
  • Type of contract which should be used


Once a number of responses from respective vendors have been received, it is now time to identify which parties to send the solicitation to. Sometimes, it is hard to pick, it is hard to find the right vendors. It is hard to find out who or where you go looking for vendors. You can go looking for a variety of sources. The project manager is heavily involved in this process. The project manager is not working alone in this task, but is instead working with contracting staff. PMI is looking at this from a centralized contracting perspective.

When it comes to solicitation and source qualification, we’re looking in catalogs; we’re looking in contacts, talking to other suppliers, looking at trade journals. We’re looking at anybody that might be able to meet this particular need. The solicitation is issued with the help of the contacting staff.

  • Source Selection: Once we go through the solicitation, we then go through the source selection where we pick those vendors who responded to our original solicitation itself. There are a variety of issues associated with evaluating these contractors. As we evaluate perspective contractors, the PMBOK talks about a number of different ways to do this.
  • Evaluation criteria: We are going to apply our evaluation criteria to the proposals. We are going to use a weighting system.  A weighting system is a method for quantifying qualitative data to minimize the effect of personal prejudice. For example, imagine a group of three to five people sitting around a table and looking at various proposals from a number of vendors. We are attempting to apply our evaluation criteria to the vendors such that we come up with a  number using a scoring system of some type. We are trying to assign numbers to our various evaluation criteria and we are going to weight our criteria. This means that certain criteria would have more importance to us than other criteria.
  • Screening System: According to PMI, we establish minimum performance requirements for one or more of our evaluation criteria. A common example would be that one of the criteria we have in a project is to require a project manager who has significant project management credentials and inexperience in the field. Using the screening system in our criteria, we can say that the project manager that is offered by the vendor must have a PMP or a master’s degree in a relevant profession. If that project manager does not have a PMP or the relevant master’s degree, then we can rate that particular contractor low or kick them out of the whole process.
  • Team aspect of solicitation: All of the above screening criteria work under the premise that everyone is going to be focused on working together to come up with one solution. Sometimes we don’t have the time to sit around and sort through all of the vendors. Sometimes we delegate the task to one person who can do the job and do it well.

Sole Sourcing

Is there ever a time when we skip to the chase and cut out the entire process and simply hire somebody? There are cases where we know that competition is good and competition keeps prices low but we just know at the outset that we have one supplier in mind and we know that because they are so uniquely qualified that we can’t find anyone else to do the job, so why waste all of the time to look for vendors. There are also times where we can go to one contractor which is known as sole sourcing. Or sole source where we might have the in-house expertise to evaluate the contractors for reasonableness and accuracy.  In other words we have significant expertise and we know if the contractor is going to be good for this job and we really don’t need to have multiple vendors come in and give us prices.

When our project is under extreme pressure for time and the procurement process and the planning involved as well as the other steps requires time that we are is short supply of. There are occasions where we simply don’t have time and there are situations where we know of a contractor and we’ve used him before and he has a great track record and for the sake of the project and the sake of the client we are going to go to that contractor and negotiate a price and move forward. So we are going to sole source you need to know that term for the exam. Sole source means going to a vendor without considering other vendors.

Procurement Negotiations

When we get into a lot of these environments to meet with contractors, it very often involves contract negotiation. We need to be comfortable with the contract negotiation process. One of the issues here is that PMI has changed terminology over time and we need to know a variety of terms for the different issues associated with contract negotiation.

There is a series of steps and you can never afford to jump over a step regardless of how the questions in the exam might try to convince you of otherwise.

  1. Protocol or Rapport Setting: Introductions are made and the atmosphere is set and we are trying to get ourselves organized for discussing the pros and cons of working with one vendor and taking a look at their prices and trying to get an understanding from them whether they truly understand the work that we would like to have them do.
  2. Probing: Probing is where we go in and we are trying to ferret out what the contractor is after and what are we after and what we are able to share with them and that they are actually interested in and what they are going to be able to share with us.
  3. Hard-core Bargaining or Scratch Bargaining: This is where we’re starting to make our concessions and both parties are trying to give and we are trying to come up with a good mutual agreement for a situation that both the buyer and the seller are basically unhappy with in some ways and we are both satisfied that we are basically starting to move forward and that each party has gotten what it thinks it needs to move forward. The buyer has gotten the right price and the seller says yes, I am going to benefit by this particular relationship.
  4. Getting to Yes: PMI is pretty big on the concept of getting to yes they are looking for win-win situations when we get into a contract. And if you have a question in negotiations and it implies that your opponent is trying to crush you like a grape and you decide that you are here to try to get to yes. Trying to achieve a win-win situation, this is what PMI wants you to be thinking
  5. Closure: Closure occurs where we are summing up our positions and most times when you go through a negotiation you’ll often get to closure and find that you didn’t understand what they thought they said that they didn’t understand what they thought you said and you’re back into hard-core bargaining. Again,
  6. Agreement: The important thing about this last stage is that it is documented and the parties sign a document and by their signing indicate that yes, they have complete understanding of this particular relationship

Negotiation Tactics

As you go through negotiation, there are many strategies that can be applied. We will look at a situation where a real-estate broker is trying to sell you a house.

  • Deadline strategy: The broker walks up and says that if you sign this deal by 5 o’clock tonight, I am willing to sell the house for this price. If you come back after this time, then the offer price is no longer valid.
  • Surprise: The broker might mention late in the contract that the house comes with gold-plated fixings in all bathrooms in order to lure you into closing the deal.
  • Limited authority or missing man strategy: This is the most ubiquitous tactic. The broker will tell you that he has to go talk to the owners or some higher power in the universe before he can get back to you.
  • Fair and reasonable: Sometimes you will meet brokers who are honest and trustworthy and when you come together they tell you that they are offering you a fair and reasonable price and that they are trying to come up with an agreement.
  • Reason together: Both parties, in this case, the buyer and the representative for the seller or the sellers themselves would sit down and try to come up with a reasonable price that will result in both parties with a win-win strategy
  • Fait accompli: This refers to a done deal. In this instance, the broker acts surprised, indicating that he was under the impression that the deal was agreed upon is surprised that it wasn’t so.

The End of Negotiations

This refers to the moment in negotiation where we have signed the contract, both parties are in obvious agreement and there are a few things that we want to keep in mind at this stage. Our objectives in reaching the end of contract negotiations are to obtain a fair and reasonable price while still trying to get the contract performed within certain time and performance limitations. We also want to ensure that there is a good relationship between the buyer and seller after the contract is sealed and signed. This makes sense because the buyer and sellers may have a relationship over a long period of time and we want to ensure that the working relationship between both parties is good.

Administer Procurements

This is where the work actually gets done. This is where the Project Manager along with the contracting staff watches performance of the vendor to keep the project moving forward. Our focus shifts from finding and selecting a seller to making sure that the seller is performing the work in accordance with the contract specifications.

Terms of the contract

There are a variety of specifications that would define how the work gets performed in a contract. The most commonly used features in contracts are listed below and these are the things that the project manager and the project team should look out for as they are administering the project.

  • Delivery schedule
  • Handling of changes
  • Warranties
  • Inspections
  • Subcontracts


You should be familiar with common clauses found in contracts.

  • Standard Clauses: First and foremost we look at our standard clauses to see how much of the work is covered. If there are gaps, then we should proceed to develop some new clauses ourselves. We take a look at the standard clauses first, because typically, this project will not be the first work that you have done before and therefore you have a lot of information written down to your standard clauses so far. Many organizations also prefer to standardize the standard terms and clauses of their contracts.
  • Change clauses: This is one of the clauses that you can expect to see tested in the exam. This gives us some sense of who initiated the change, where the changes come from, how the changes are  going to be funded, what some of the approval authorities are going to be from. Some of the configuration management issues are going to be addressed in the change control clauses.
  • Pricing Change: This also refers to how we are going to deal with change especially when it comes to the pricing of the contractor.  PMI prefers that we use lump sum or Firm Fixed Price changes. PMI suggests that we use lump sum prices for changes even if we have a cost plus basic contract. This might not have any real practical applications, however, we need to understand the exam from PMI’s perspective.
  • Express warranties: An express warranty is explicitly written out and we have an understanding of exactly what the functions or features a product or service should have.
  • Implied warranty: There are a couple of terms used such as merchantability and fitness of use. For example if we look at a desk that we are sitting at, we will realize that the desk came with an implied warranty. The implied warranty is that the table should be sturdy enough to serve it’s purpose as a desk and that we are going to use this desk is going to hold objects that desks usually hold. For example, if we buy this desk and we put our stationery and notepads on it and the desk collapses, we bought it under the assumption that the desk was going to be strong enough to hold notebooks, which is a reasonable assumption. We don’t need to have an explicit description of that warranty. This desk has collapsed and it obviously isn’t fit for use and we can go and get a replacement for the desk.
  • Doctrine of Waiver: This refers to the fact that if we fail to exercise our contract rights, we lose them. This is a legal doctrine that has a lot of practical applications especially when it comes to the issues of change control. If we do not enforce the change control process, we might not have the change to exercise the change control process.
  • Delays: We need to look at who caused the delays as well as the nature of the interruption and the impact of the delays.
  • Performance Bond: The performance bond secures the performance and fulfillment of the contract for the buyer. In other words, we want to make sure that if we hire a contractor, they are able to do the job and if they cannot do the job, then the bonding company is going to step in and do the necessary work to complete the job.
  • Payment bond: There is guaranteed payment to sub-contractors and laborers by the prime contractor. In many situations, the buyer may pay the prime contractor for the work and the prime contractor may be paying sub-contractors for a former job that the subcontractor had performed for the contractor prior to this contract. We want to ensure that the prime contractor will use our payments to pay the sub-contractor because we want to make sure the sub-contractors and laborers are being paid to do the work and will not walk off due to some issues with the prime contractor.
  • Basic Breach: This is an important issue when it comes to contract administration. Breach of contract says that if it is just a basic breach where we have somehow violated some part of the contract, but this doesn’t mean that the entire contract is invalid.
  • Material Breach: This type of breach is a lot more serious. It means that the breach is so bad that the contract expires at that point in time. Usually, a material breach occurs in a situation where the work to be performed is time sensitive. The buyer needs a particular product or service by a specific date. If he gets the product or service after that date, then he has no more need for that product or service.Therefore, if there is no delivery by the date specified in the contract, the contract is breached.


  1. Procurement Planning
  2. Types of Procurement
  3. Contract Types
  4. Vendor Selection process
  5. Contract Negotiation process
  6. Contract Clauses


In this section on Project Procurement Management, we identified various types of contracts and common clauses of contracts. We also identified the common sequence of procurement activities, to go from procurement planning to solicitation and vendor selection and finally procurement administration.

PMP Exam Prep – Part 14: Project Risk Management

This section covers the essential concepts and elements of contemporary risk management practices. In prior versions of the exam, this was the single most failed section. This is because a lot of people did not have a lot of formal training when it came to risk management; all they did was have some sort of understanding of the formal definition of terms when it came to risk management. As with most of the exam, process is everything. It is very important to know the inputs and tools and techniques and outputs for each one of these processes when it comes to risk management.

Exam Hint: Memorization is a necessary evil for the exam. It’s common to see a question require you to identify an input for a particular process, and then provide distracter answers which can be the tools and techniques for that process.  So you need to invest time in  memorizing the inputs, outputs and tools & techniques for each process. On one hand, this is an arduous and tedious process, but on the other hand, these types of questions represent easy points that you can score as long as you put in the effort.

Risk concepts covered in this section

There are several Risk Management concepts that we will cover in this section

  • Definition of Risk
  • Components of Risk
  • Risk Identification
  • Tools for Quantitative Risk Analysis

The following processes are covered within this knowledge area:

  • Risk management planning: How to approach and plan risk management activities for a project
  • Risk identification: Identifying which risks might affect the project and documenting the characteristics of those risks
  • Qualitative risk analysis: Performing a qualitative analysis of each risk is an easy way to compare among the list of identified risks and assign an order of priority on which risks to address first.
  • Quantitative risk analysis: At a deeper level of analysis, we are now trying to quantify each risk and collectively measure the impact of risks and combinations of these risks.
  • Risk response planning: All of the other factors up to this point are leading to a response plan for either enhancing opportunities which are also known as risks as well as reducing threats.
  • Risk monitoring and control: This refers to an ongoing assessment over the entire life of the project.

Definition of Risk

A risk is an uncertain event that when it occurs, it will have a positive or negative effect on a project objective. Notice how a risk can have either a positive or negative effect on the project, which relates to what we said about how a risk can be seen as an opportunity as well as a threat to the project. Risks can be known or unknown.

  • Known risk: For example when it comes to financial risks, there could be a rate of inflation that exists in a particular country where you are doing your project. We might forecast that the inflation rate will continue to climb during the project.
  • Unknown risks:  Events that may be impossible to anticipate up to the point in time that they occur. For example, most readers would not anticipate being crushed by an asteroid as they read this document. This uncertainty would not have been first and foremost in your mind. But now, it just materialized as a risk, from an unknown into a known. (The odds of this risk happening are astronomically low, unless you’re an astronaut or a space chimp.)

Risk levels over time

The objective of risk management is to reduce the level of uncertainty. When we begin our project, we have the highest level of risk. This is the best time to control the completion of the project and to address risk.

Components of risk

Several of the most commonly referred to types of risks are listed below:

  • Business risks: This risk provides you with an opportunity for gain or loss. When you hire a new team member, you are assuming a business risk because it is uncertain whether the team member will be good or bad at performing the task. The key here is that even if you are hiring a person completely unsuited or unqualified for the job, this is considered as a business risk. The reason is that there still is the possibility that the person is trainable and therefore you have the opportunity of gain. Conversely, if you hire a specialist to your team, this also is a business risk as that individual may not have been as good as you initially thought him to be.
  • Pure risk: A pure risk is a risk that only presents you with an opportunity for loss. Another term that is used for pure risk is insurable risk. An example would be property damage from a car accident.

When it comes to business and pure risks, be sure to use the term insurable risk to help you distinguish  between the two by simply asking if this is something that you would normally buy insurance for. Another important point here is that you do not actually manage pure risks, because you have given that to someone else to do, such as an insurance company. You transfer your risks to the insurance company. As a project manager, you have to concentrate on the business risks because those risks have an opportunity for gain and that is why you are taking the risk.

Risk vs. reward

The only reason why we take a risk is to gain a reward. For example, to enhance profit, to improve market position; ensure customer satisfaction etc. all of these are examples of risk and the reward must be commensurate with the level of risk that we are taking. We undertake risk management in order to do the following:

  • To reduce our level of uncertainty
  • To understand risk
  • To compare the reward that we think we are going to get based on the risk we are going to take in order to get that reward.

Basic components of risk

For every risk there are 3 basic components

  • An event
  • A probability
  • An amount at stake

For example, let us say that you are playing a game of pool. It is your turn at the table and you are down to a tricky shot of getting the last eight ball in at the far end of the table. Your friends have decided to wager a nice dinner if you are able to get the eight ball into the far corner pocket.  By this analogy, the event is you getting the eight ball in the corner pocket. The probability of you clearing the table would depend on your skills at the game of pool and the amount at stake would be the value of the meal that your friends have wagered you.

Probability tends to be the one thing that Project Managers are the worst at estimating. It is the one thing that we are worst at calculating. We need assistance when it comes to calculating probabilities.

Timing of risk

Early in the project risk is inevitable. The probability of us encountering risk is extremely high early on in the project. As we progress through the project, the probability will be reduced. This happens because as we work through the project and risks do not occur then there is an available time left at the end of the project that we can identify the remaining risks in the project. So the probability of risk should decrease over time.

Impact of risk

At the very beginning of a project the impact of risk is very insignificant. This is largely because we haven’t accomplished much work yet and we have very little to lose. As we progress through the project, the impact of a risk goes up dramatically.  As we reach the final phases of our project we have a lot invested in the project and if a serious risk were to occur at that time, we could lose a great deal of time, money, morale, market position or whatever criteria we are using to measure the success of the project

Risk management should be an iterative process that continues throughout the project. As probability decreases throughout the lifetime of the project, impact increases. It should be noted that while one decreases and the other increases in the project, there will be the time where they cross over in the projects in the middle section a the development and implementation phases. PMI considers this to be the stages with the greatest degree of risk.

Risk management planning

Risk management planning the process of trying to figure out how we’re going to manage risk activities. Many Organizations have their own risk management methodology. These are procedures which are put in place to identify, analyze, identify responses and monitor risks.

Roles and responsibilities

The assignment of roles and responsibilities are very important and must be clearly defined. Specific team assignments should be documented in order to ensure that responsibilities are clearly understood. Specific risk-related tasks include identifying who does the risk budget, who creates the schedule of the risk management activities, as well as who documents risk procedures and who monitors the risk audit schedules.

Risk identification

Risk identification is the process of trying to spot as many of the risks as possible. We want to look at all of the risks that enhance our opportunities in a project as well as the risks which might threaten the success of the project. It is important to look broadly and widely for potential risks at the very beginning of the project. This can be achieved by brainstorming or referring to identified risks from previous projects.

Exam questions might ask the candidate when it is appropriate to perform risk identification. The correct answer is to perform risk identification at the very onset of the project. A similar question on the exam would ask candidates when the risk identification process should be performed during the project. The answer is that risk identification is an iterative process and even though it should commence at the onset of the project, the process of risk identification should continue throughout the life of the project.

Categories of risk

PMI also looks at the categories of risk as a source of risk identification. These categories could include the following

  • Technical risks
  • Quality risks
  • Performance risks
  • Project management risks (Who should be the Project Manager)
  • Organizational risks (lack of skilled personnel, size of team)
  • External risks (inflation, war riots, labor unrest, material shortages)

It is important to understand some examples of the types of risk that fall into each category. it should also be noted that there is no definitive categorization of risks and this is because each project environment looks at risks differently.

Sources of risk

There are many sources where we can get our data for the different types of risk

  • Past data from lessons learned
  • WBS
  • The people involved in the project
  • The procurement Organization

Risk identification Tools

Our goal is to obtain as exhaustive a list of identified risks as possible and there are a number of tools and techniques at the disposal of the Project Manager that can be used to assist in the identifying risks.

  • Brainstorming: Any ideas are valid when it comes to brainstorming, no matter how absurd or irrelevant the ideas may be. There is no evaluation or judgment associated with those ideas at this stage of the process
  • Expert interviews: This involves going around and garnering information about experts such as gathering some of the assumptions or issues that the experts consider to be as risks
  • SWOT analysis (Strengths/ Weaknesses/ Opportunities/ Threats): SWOT tends to look more at the Organizational and less at the project or product. It looks at the Organization’s strengths and weaknesses and then compares them against the project context or threats and opportunities.  We strive to see how we can use the Organization’s strengths to offset the project’s threats and how the Organization’s weaknesses can be offset by the opportunities within a project.
  • Checklists: Checklists are widely used tools. Many Organizations have developed extremely comprehensive checklists based on historical information and knowledge from previous projects. The advantage to using risk identification with a checklist is that it is a simple and effective tool. We look at a list of risks from the past and go down the list, checking those risks that are relevant to this project. The disadvantage of a checklist is that it is sometimes impossible to list all of the possible risks on a checklist and this might limit the use of the checklist to some users. The checklist should be updated over time as projects are completed in an Organization and lessons learned are gradually obtained.
  • Assumptions: A distinction should be noted between an assumption and a risk. PMI makes the decision that assumptions are potential risks if the assumptions are incorrect. In other words, an assumption can turn into a risk if the assumption is wrong. Assumption analysis will be performed to determine whether a particular assumption is correct.
  • Cause and Effect: The Ishikawa diagram previously mentioned in Project Human Resource Management can be used to identify risks. The causes here lead to potential risks for the project.
  • Diagramming techniques: Many of the diagramming techniques that we have learnt so far in this course such as the Gantt chart and Network diagrams can be used to help us determine some of the risks involved in the project in lieu of the dependencies, relationships and tasks involved in the project.
  • Delphi technique: The Delphi technique is used to collect the ideas of an independent panel of experts without imposing any peer pressure among members of the panel.The Delphi method is often used to establish probability levels based on the insight of experts.This involves going out to the experts in such a way that they don’t have to come over to you. Each expert is consulted for his or her opinion privately and is not aware of the identity of other experts. The benefit is to ensure that the experts would not try to modify their stand in the presence of other experts. We collect the information from other experts and return this information back to them to find out what they think, making sure not to name the source of this new information. We repeat this process several times.  Ultimately, we try to achieve some sort of consensus among the experts. This consensus generally occurs after at least three iterations of the Delphi process. The added benefit of the Delphi technique is that the information can be gathered from a team of experts that may be spread out geographically.

At the end of all of these tools and techniques, what we want is a list of risks as well as their warning signs. For example, low morale and dissatisfaction may be a warning sign of significant schedule delay since people may leave the project.

Risk Qualification

Qualitative risk analysis involves sitting down and finding specific thresholds for the project. We refer to this as trying to determine what constitutes a high risk, a medium risk and a low risk for the project.

The whole key here is to be able to offset the impact and the probability of a risk. We also need to know what constitutes a high impact risk and what constitutes a low impact risk. A good example scenario to illustrate this would be trying to get something delivered across town after a snowfall. If the town in question were Miami, the odds of having snowfall would be less than 1 percent. But what about the impact? Let us look at the impact of 12-inches of snow. If there was a foot of snow in Miami, when it came to traffic, there would be a tremendous amount of gridlock, no one would be moving. When it comes to probability, the probability of snowfall is so remote that this risk would be classified as a low risk.

If travel up to Colorado, the odds of a foot of snow in January would be probably 95 percent. The impact of that foot of snow in Colorado would be minimal because the inhabitants of that part of the country are very used to moving in snow. In this case, the snowfall is not that high a risk.

If we looked at the Washington D.C. area, the odds of 12-inches of snowfall somewhere in January are about 40 – 50 percent. The impact of 12-inches in the greater Washington area would be very severe in this case and people may be asked to abandon their cars if such an event were to occur.

Tradeoffs between impact and probability

The examples highlighted above lead us to an understanding of impact versus probability and the tradeoffs when we are looking at when we perform a qualitative analysis. We want to look at the items on our list that constitutes the highest risk.

PMI’s perspective is that the highest order risks are a combination of high probability and high impact. The next highest risks are of moderate probability and high impact. Next comes the risks that are of high probability and moderate impact. We want to look at our risks this way because as project managers we always want to prioritize impact over probability.

Risk Metrics

We need to have consistent metrics for categorizing high, medium (moderate) and low risks. For example, it is a common practice to monetize risks into dollar amounts. In the case of a large multi-million dollar project, a five thousand dollar risk may be classified as low because it has a low impact on the project considering the project’s overall budget. On a much smaller project this five thousand dollar risk may have catastrophic consequences. It is important to recognize that for each project, we need to set thresholds and let our team members know what would be considered to be a high risk and what a moderate and a low risk are.

Prioritizing Risks

Ideally what we want to do with our risks when we are performing a qualitative risk analysis is to come up with a list of prioritized risks in order of impact on the project. Once we have this list, we can perform more detailed analysis for the most significant risks. We want to determine the overall risk ranking and then based on this ranking, we are going to look at how we are going to respond to those risks. We also can determine which of the risks need further analysis based on quantitative risk analysis methods.

Quantitative Risk Analysis

We need to look quantitatively at the degrees of risk in terms of the impact of the risk  This is extremely useful when we are looking at strategies to respond to those risks, we can compare how much we are going to spend on those risks based on the quantification of those risks to get a sense of which risks we should actively try to manage.

Tools for Quantitative Risk Analysis

We can go to those who have performed this kind of risk analysis before and have experience in making such calculations in a similar environment in which we are working.

  • Delphi Technique: The Delphi technique is an excellent way to get expert input on estimating certain risks because it generally requires some expertise to come up with accurate estimates.
  • Sensitivity analysis: This is a simple process that simply looks at how much of an impact is a risk going to have.
  • Statistical independence: Two events are said to be independent if the occurrence of one event is not related to the occurrence of another.
  • Mutual exclusivity: The notion of mutual exclusivity denotes that two particular conditions cannot exist at the exact same time. For example, a light switch cannot be both in the on as well as the off position at the same time. You cannot be late, on time and early for a meeting at the same time. The probabilities of all states that are mutually exclusive should sum up to the value of 1. For example, the probability of us being late is 10 percent, the probability of us being early is 20 percent and the probability of us being on time for the meeting is 70 percent.
  • Expected Monetary Value (EMV): Expected value is determined by multiplying the probability by the outcome. For example, I am conducting a raffle. I sell one hundred tickets for a dollar each and there is one grand prize of 50 dollars. You have a one percent chance (1/100) of winning the raffle if you buy one raffle ticket. The expected value of the ticket is 50 cents (1/100 x $50). Suppose we added a second tier of prizes with 10 prizes of 2 dollars each. There is a 10 percent chance of one of the raffle ticket holders winning the 2-dollar prize (10/100). The expected value of one of those tickets would be 20 cents (10/100 x $2).  For the remaining 89 tickets, the expected value is 0. The expected value of buying a ticket in the lottery would be by adding up the expected values of all possible outcomes which are 50 cents plus 20 cents plus 0 cents. This gives us a total expected value of 70 cents. We are spending a dollar for a ticket in order to get 70 cents in value. This is not a good buy because the value of the reward is less than the cost of a ticket.

Questions may appear in the exam relating to both risk and opportunity as we need both to assess the expected value.

Decision Tree analysis

A decision tree is a tool that visually depicts a number of interrelated decisions and their expected values. We see a tree with branches of mutually exclusive events.  For example, if we look at a scenario of us winning heads or tails on a coin toss, the decision tree would list heads on one branch and tails on another branch; with 50% odds of each branch.

We need to identify the components of a decision tree. We look at a little box with two branches coming out of it. The branches represent a decision. At the end of each decision, there is a circle. That is an event. For example, you toss heads or tails. If the ‘heads’ branch is 50 percent and the ‘tails’ branch is 50 percent.

If there was a cost associated with tossing ‘heads’ of 100 dollars, the expected value of that branch of the tree would be 50 dollars (50% x $100). You would sometimes be asked to calculate the expected value of a particular branch in the exam.

Event trees

Event trees are a series of events that are cascading off one another. All you have to do is to multiply the probabilities until you reach the desired branch. For example, if you are trying out to be the contestant

Risk Appetite

We need to determine which of our team members are risk seeking and which are risk averse. We want to determine which of the team members generally have a gung-ho attitude when it comes to taking risks and which team members are more conservative or more risk averse. If our customer is risk averse, then we may not want team members who are extremely risk seeking. An important point to note is that the determination of whether an individual is risk seeking or risk averse may vary depending on their emotional reactions across a number of situations. Risk management should always be performed in a group context because individuals react differently than when they are in groups.

Summary:  Project Risk Management.

1.     Definition of Risk
2.     Components of Risk
3.     Risk Identification
4.     Tools for Quantitative Risk Analysis


In this section, we looked into the definition of risk, components of risk and how we generally approach risks. In the next section, we will look into Project Procurement Management


PMP Exam Prep – Part 13: Project Communications Management

Historically, most candidates find this section on Project Communications Management to be the easiest to pass. This is the time and place where you can gain a lot of ground in your exam score, particularly if you don’t have a lot of knowledge and experience in other sections on Cost and Risk management.

Project Communications concepts covered in this section

There are several Communications concepts that we will cover in this section

  • Informal vs. Formal Communications.
  • Conflict Resolution
  • How differing and different management styles represent the form of communications.
  • Communications Model
  • Communications Channels
  • Kickoff meeting
  • Barriers to Communication
  • What Role the PM should play in Communications Management

The following Project Management processes are covered in this knowledge area:

  • Identify Stakeholders: We need to be able to assemble our project team with the right mix of skill sets.
  • Plan Communications: We need a systematic and repeatable process that helps stakeholders gain access to key information, both in the right place and at the right time.
  • Distribute Information: This process covers the systems and tools for disseminating information to the appropriate stakeholders, as well as covering issues of confidentiality and security.
  • Manage Stakeholder Expectations: A project manager should always be attuned to the varying expectations among different stakeholder groups and work to ensure that these expectations are being met in order to minimize conflict.
  • Report Performance: We refer to the formal and informal processes of communicating information about project performance to stakeholders.
Exam Hint – Look out for questions in the exam pertaining to teamwork. You should look for the ‘rah-rah’ type answers, in other words the answers that seem most like cheerleading. Also, when it comes to Roles and Responsibilities as relating to Communications in this exam, the Project Manager is one of the most common examples.

Communications Model

The Communications Model is a Basic Model for Communications in which you have a communicator, who is actually conveying something and the recipient, who receives the message.

  • Communicator: The Communicator conveys the message. As I deliver this lecture to you, my message is coming to you off the particular medium of live presentation.
  • Recipient: The Recipient is the person for whom the message is intended. The recipient must accept and understand the message before communication has taken place.

Active Listening

A good presenter should be able to offer a message that his audience will accept and understand occasionally. The reason why we use the term occasionally is because of the concept of Active Listening. You can’t always be Actively Listening. Active Listening is when you are participating even by just sitting there and paying attention in the communications process.

You might have experienced this phenomenon before in your car. You are driving along and you are listening intently for the traffic report on the radio. You are focusing on trying to find out about the traffic conditions on the way to work. The report is coming, you hear the music coming on for your traffic report but all of a sudden, someone almost cuts you off and you have to swerve to avoid him on the road. You suddenly realize that you have missed the traffic report which you have been trying to catch for the past fifteen minutes. Even though you were attempting to actively listen, you got distracted.

On the exam, you have to understand that the concept of Active Listening is that the recipient has to  be an active participant in the communications process.

Tools for Active Listening – Feedback

The person who is getting the message is going to get back to the communicator. We also use para-phrasing as a good form of feedback. As you are listening, you want to go back to the speaker and say, I really want to make sure that I know what you are saying. Here’s what I think you said and I want to know if that was the message that you meant to communicate. There’s the feedback to the communicator that you’ve taken in the information, you’ve digested the information and you’re now trying to make sure that you have in fact gotten the message as intended.

Communications Channels

The topic of Communications Channels is a big deal these days. You have to be able to calculate Communications Channels in the exam based on the following formula:

Number of Channels = n (n-1)/2

Where n is the number of participants in the communications model. For example, if 2 people are talking and we substitute n for 2 in the formula, we can calculate that the number of channels is 1. If we have 4 people, then we are going to have 6 channels. If we have 6 people we are going to have 16 channels. It is very interesting to note that as each additional person is added into our communications loop, the number of channels does not rise in a linear manner; it rises in a geometric manner.

Significance of Communications Channels

With an understanding of communications channels, we start to gain an appreciation of how an organization or project needs to structure itself to maximize communications.

  • We need to think about the division of labor within our project Organization
  • We need to think about our types of communications. If we have 1 or 2 or 3 people in our team, we can resort to very informal communications. When our team gets up to 15 or 20 people, informal communications is less effective in getting the same message across to every member of the team. We need to start thinking about using formal communications as our predominant means of communicating to larger groups.

Hint: If you get brain freeze on the exam you have that moment where you forget the formula, the thing to do is to take the scrap paper that you are given and start drawing little circles, one for each person, and then connecting the circles with lines. You draw one circle for every participant in your project and start connecting all the circles with lines. You simply have to count the number of lines and this will give you the result that you are looking for.

Another notion is regarding the way PMI is presenting some of the communications questions is not to ask how many communications channels there are, but to ask how many more channels will be created if we add another 3 people into the group. You have a team of 4 members, and the team is about to be increased to 10 members, how many more channels will you have to deal with? You will have to perform calculations twice to find out the answer.

Different Types of Communications

Communication does not always have to occur verbally, it can occur in different ways. Numerous studies have shown that most of a message is relayed to the recipient though vocal intonations and facial expressions than the actual content of the message, so the verbal component is actually a very small piece of the message. Communication can be formal, or informal. Communication can also be written or verbal and you need to be able to break all of these down as well.

Communications can occur in a variety of formats, some of which are listed below:

  • Formal written: project charter or management plan
  • Informal written: engineers notes and memos
  • Formal verbal: presentations with PowerPoint
  • Informal verbal:  conversations, run-ins in the hallways

Remember that if it is formal, it is part of the project record. Oral presentation would still be part of the formal project presentation, if people think about it, they are still going to reflect back and acknowledge that it is part of the formal presentation itself, whereas a hallway conversation is generally forgotten over time

Why do we need to know this? You will be asked to give examples of these in the exam and you will most likely encounter examples of the four types of communications.

Communication Requirements

The project plan is really a series of plans, there is the risk plan, the schedule plans the quality plan and there is the communications plan. In order to develop the communications plan we need to understand what the requirements for communications are.

This task is the Project Managers responsibility. Communications requirements are the identified needs of the project stakeholders. We need to define the requirements of all of our stakeholders for a particular project and then put a process into place in order to provide these stakeholders with relevant information. This is typically done with a project management information system (PMIS).

The things we need to look at in assembling our project communications requirements are our project Organization and the stakeholder responsibility relationships, our disciplines, our departments and any specialties involved in the project, by discipline, we are referring to a mechanical engineer, a software programmer, we have a marketing expert. Those will be the kind of disciplines that we refer to.

We need to look at the logistics of the number of individuals who will be involved with the project at each location because we are going to collect information and we are going to distribute information to each stakeholder. We also need to identify any external information needs. For example we may have to be involved with the media in very large projects especially where the Government is involved and when the media is very interested. So it is important for a Project Manager to see outside of the Organization and and identify external stakeholders and manage their requirements accordingly.

Timing of Communications

We want to create the communications plan early on in a project. We want this to occur in the planning phase and not wait until it comes to the implementation. Communications planning is really part of stakeholder management.

The Kickoff Meeting

There are multiple objectives for the kickoff meeting, some of which are listed below:

  • The kick off meeting is going to save us time and not cost us time.
  • The kickoff meeting really builds the team’s identity.
  • The kickoff meeting also allows team members to get to know each other.

Furthermore, the project team needs to have an understanding of the various working relationships and lines of communication. We can also reach a common agreement on the goals of our project. We can identify some problem areas and we are hoping to define the objectives of our project to our stakeholders. As we can see, there are multiple things going on in the kickoff meeting.  Essentially underlying all of these activities is the notion that we are going to build the team for the project as we move forward.

One of the things that the kickoff meeting is not intended to do is discuss any hard technical issues you may encounter into the project. It is not a status meeting of the project, you are not trying to explore alternatives to performing tasks in the project its really a get to know one another and establish a common framework of moving forward with the project

For example, I was involved in a pretty large project for the construction of a hangar and we had about 55 people in the room. I had just finished delivering the project objectives and administrative processes to the group and I asked if there were any questions.  Our construction contractor raised his hand and he started to give me a verbal proposal of the change order on the very first day of the project. I had to tell the contractor that the kickoff meeting was not a place to discuss such things and that we would address his issues offline. During the kickoff meeting, we don’t talk about the content of the work, but how together we’re going to get the work done.

When it comes to the exam, you want to look at the answer which says ‘rah rah’ when it comes to the kickoff meeting. PMI will sometimes try to lure you from this question on the exam by saying that the project is a great deal of time pressure from the customer, the project is time constrained, everybody is feeling the weight and the everybody is so stressed out and has no time available. PMI may ask you to consider foregoing the kickoff meeting since you are in a very simple project with a small team. In all these cases, we cannot do without the Kickoff Meeting.

Barriers to Communications

There are a number of barriers to communications and these things stand in the way of active communications.

  • Ineffective Communications Plan: A poorly written or ineffective communications plan with poorly defined communications requirements can result in a lot of wasted time getting information to people who were not initially informed.
  • Time: Time can be an impediment to open communications. We need to have open communications channels in order to be effective in serving our projects. This occurs especially in environments where team members are in different geographical locations.
  • Technical Jargon: It is common for projects to involve team members from different disciplines. Each discipline has its own jargon or terminology. The people who are not familiar with your profession or industry will not have effective communications.  A lack of a consistent set of commonly used terms in a particular industry can also have a negative impact on communications. For example, the term WBS as used in project management is not consistently used in all Organizations. In fact, there are Organizations that choose to use other terms such as Project Breakdown Structure (PBS). We can really get carried away with our own jargon and start confusing those around us. There is a barrier that the Project Manager always has to look at when dealing with the client
  • Noise: Most people think of noise as background noise, or an audio sound such as the clicking of a pen or the hum of the air-conditioning in the background, when in fact noise is a lot more than that. Noise refers to any external environmental factor that is interfering in your ability to communicate. You may have been in a meeting where you were sitting right under the air vent and it was so cold that you wished that you had brought a sweater into the meeting. For example, there was a huge construction project across the street during a meeting and the construction workers were constantly swinging these huge barrels back and forth and the students stood with their eyes focused outside of the window, watching the construction crews swinging the barrels back and forth. For the exam, you need to know what noise is and be sure to be able to distinguish noise from a detrimental attitude or a barrier to communication.

Communications Barriers and Conflict

Communications barriers increase the level of conflict. If you can’t understand the language or terms that other people are using in a room, you will not be able to communicate with them effectively and that will raise your level of stress. Any person who has worked overseas or been in an overseas environment for any length of time will understand the stress of not being able to speak the language. This occurs regardless of whether we are referring to a technical language or a physical language.

Unresolved conflict is a real detriment, and well structured communications will help to eliminate conflict. Conflict may not be entirely eliminated by good communications, since the nature of projects themselves contribute to conflict.

Stakeholder communications

The Project Manager’s role is the key to all project communications. The Project manager must be skilled with communications with the following parties involved in the project

  • Management (Project and Functional): The Project Manager acts as liaison between management and project team. An effective project manager should act as the go-between for management and the project team and prevent management from bothering the project team and getting in their way. The Project Manager has to be able to communicate effectively to management so that they feel that everything is going well and won’t have to bother the team. PMI has found that when people are uncertain about the status of a particular project, that is when they will bypass the project manager and go straight to the team. If you want your top management to stay out of your hair and not bother your team, then you have to think of the best way of communicating with top management and top management as well. So we have to be able to communicate with management and the customer as well
  • Client: It is very important that the Project Manager act as a representative to the customer. It is not always desirable for  project team members to discuss all aspects of the project with the client due to confidentiality concerns. PMI is looking for a single point of contact between the project team and client. It makes it easier for the customer to give feedback because they know who to go to in order to complement or give complaints. It allows the team to designate and train one person who is skilled in client relations; this becomes very important as the project team grows in size. It also eliminates the confusion when many team members talk about to the customer at the same time. PMI’s perspective is that the Project Manager is responsible for establishing good communications between the client and the team. In the exam, you might see questions where the Project Manager is asked to communicate horizontally, vertically and diagonally.

Time invested in Communications

PMI would like the Project Manager to invest a total of 90% of his time invested in acquiring and communicating information to stakeholders. For the exams, if presented with a range of percentages for how much time the project manager should devote to communications, we should look for the answer with the highest percentage, with the exception of 100%, because this value is not realistic. The project manager needs time to breathe, so to speak.

Skills for effective Communications

A project manager should possess the following skills in order to be an efficient facilitator for communications in the project environment.

  • Set up Networks: The Project Manager needs to be ready to share information with his team and be willing to build the networks that go there. PMI Actually makes references to informal networks as well. Informal networks are commonly known as the grapevine. This is a term that occasionally shows up in the exam as a possible form of informal communications. A grapevine is an idiomatic term, which we use to convey the idea of an informal network.
  • Communications Expeditors: This is someone who makes things happen and is very active in bringing people together for effective communications. This involves initiating relationships between stakeholders in a project and establishing communications links and also making people understand what the formal communications channels are and encouraging good informal communications as well.

Communications Blockers

Blockers impede our communications and refer to anything that kills or inhibits innovative ideas. For example, someone brings up an idea in a meeting and someone else tries to assert that the idea will never work. Common statements uttered throughout meetings take on the tone of “That will never work.”; or “We’ve tried that already.

There are some examples of great communications blockers that have occurred throughout history:

  • ‘I think there is a world market for maybe 5 computers.’ – Tom Watson, Chairman IBM 1943
  • Who the hell wants to hear actors talk’Harry Warner, founder Warner Bros Studios (1927) when asked if silent movie audiences would like to hear actors talk.

As the communications expeditor, the project manager takes on the responsibility of trying to eliminate the occurrence of such communications blockers and encourage more open communications.

Tight Matrix

The tight matrix refers to putting all members of the project team into the same office space if at all possible. Studies have shown that when people are physically working together on a project team, better results will occur.

The tight matrix occurs as one way of ensuring more open communications within the team. A tight matrix is not related to the weak or strong matrices that occur in the Project Human Resources section.  A lot of companies have attempted to place all of the members of a team into the same office, or at least the same office space. This practice is popular in the automotive industry where the designers and fabricators are located right next to one another.

In circumstances where it is not possible to place team members in the same location, such as having project team members collaborating from different countries across the globe, then a virtual environment has to be created where team members still have the ability to interact with one another. Weak or Strong matrices might appear as distracter answers in the exam. Loose Matrix is another term that might come up as a distracter answer. The loose matrix does not exist.

Project War Room

One of the best methods of getting project team members working in close proximity with one another is the use of the Project War Room. This term originates from a war-like setting where we have a central location for the military to collect and analyze information on the tactical situation of battle. You can imagine a room filled with maps and charts where senior military officers huddle around a table to come up with winning strategies. The most important thing about the project war room is that it provides the project team with a sense of team identity. A lot of Organizations are starting to realize that the cubicle office spaces that most office workers work in are not conducive to establishing a strong project team identity.

The war room is a place that the project team members can hang up all of their gantt charts and responsibility matrices and could be a conference room or even a temporary office space designated for the members of the project team to interact in. The virtual project war room can be a web page on a company portal that serves as a common repository of information and provides a venue for people to interact specifically regarding the project.

Effective Meetings

The Project Manager is is responsible for organizing and coordinating a variety of meetings. There are staff meetings; status review meetings; schedule meetings and budget meetings. The project manager has to be able to conduct these meetings in an effective fashion such that people will want to attend the meetings.

The Project Manager can establish a meeting policy. For example, only certain people may be allowed to call a meeting; or meeting notes need to be circulated the day before the meeting; or that an agenda must be prepared and followed. Participation should be encouraged throughout the meeting. Finally, all meetings, regardless of purpose, should always be thought of as having some element of team building, as meetings are an excellent opportunity to build the team.

Minutes should also be prepared and circulated. There should be a formal record of the meeting prepared as a means to follow up for what was initially discussed during the meeting. This is an effective tool to ensure and track that the meeting actually resulted in some forward progress for the project.

Time wasted in Meetings

PMI performed a study to investigate the amount of time that is actually productive during a meeting. The results of their survey indicated that up to 25% of the time spent during a meeting was devoted to non-productive or irrelevant issues.

This can be attributed to the following reasons

  • Poor planning
  • Bad leadership during the meeting
  • Unruly or undisciplined participants

Management Styles

These management styles are situational and are neither better nor worse than one another. PMI wants the project manager to realize that there would be certain situations where is would actually be desirable for the project manager to adopt a particular style.

  • Authoritarian management: You have project team members, stakeholders and functional managers associated with a project and they typically want to know why they are here and what you want them to do. There is nothing wrong with being direct with these people to let them know what their level of participation is on the project and what you would like them to do.
  • Combative management: This can be very useful under certain circumstances where you want to generate conflict. Not all conflict is bad and you can be with a group of people and you think that everything is going okay but what you really need is someone to step in and give some feedback.
  • Conciliatory:  You are basically ready to give in based on what is being said across the table. Anything that can be done to keep the brevity going in a certain situation.
  • Disruptive: This style tends to disrupt unity and cause disorder. Sometimes this is going to be very important in a project situation where we need a very different line of thinking on how to conduct our project. Disruptions all and all can be very important which communicates a style or form which a project manager can use.
  • Ethical: Applying fair even-handed judgment as you work through a project
  • Facilitating: The Project Manager can play an important role in supporting the team with resources and helping to take away barriers or obstacles.
  • Intimidating: The tough guy image where you say that it is your way or the highway. In particular situations, intimidating style can be very useful.
  • Judicial: Generally applying sound judgment
  • Promotional: Someone who is out there trying to cheer on the team, trying to motivate the team with the proper types of actions
  • Secretive: Not open or outgoing in speech; activity or purpose. There are times where things are going on in an Organization where the Project Manager knows that he or she may not want to share with the project team because they cause disharmony or loose morale in some way. So the project manager may not at that particular moment in time care to reveal some of that information and that may be good.
  • Management skills:  Recall the five components of general management that are required by a good Project Manager [PLINC] and covered in the section under Project Integration Management.
    • Problem Solving
    • Leading
    • Influencing
    • Negotiating
    • Communicating

The project manager wants to be acutely aware of these concepts when it comes to using his management skills.

Organization Structure

We looked at this previously in the Project Human Resources section. There are some specifics that we have to look in to when addressing the communications aspects of project management in an Organization. Each Organization structure is going to have some impact or ramification on communications.

  • Projectized Organizations:  Very strong group communications boundaries because everyone is working for the project manager in one established team.
  • Strong matrix: Good, strong team identity. Perhaps the team is collocated, making the team’s communication generally straightforward.
  • Weak matrix and functional organizations: complicated group communications because as team members are spread around the Organization, they generally do not have the team identity that we find in the strong matrix.

There is also less face-to-face interactions causing a higher opportunities for misunderstandings. Remember that in both functional and weak matrix Organizations, the orientation is to the functional Organization and not to the project Organizations.

Summary: Project Communications Management

  1. Communications model
  2. Formal and informal as well as written and verbal communications
  3. Barriers to communications
  4. Kickoff meeting
  5. Documentation


In this section, we covered topics such as the communications model, the role of a project manager, effective communications; barriers to communications as well as the importance of the Kickoff Meeting.

In the next section, we will cover Project Risk Management.




PMP Exam Prep – Part 12: Project Human Resource Management

This section of the PMBOK explores issues of teaming and working together and getting people moving towards common goals. A lot of the content is weighted heavily towards team development and dealing with conflict and behavioral issues that tend to arise in project situations.

Human Resource Management concepts covered in this section

There are several Human Resource concepts that we will cover in this section

  • Forms of Organizations
  • Project Manager’s roles and responsibilities
  • Power that a project manager can exercise
  • Project conflict – definition; how do we manage it?
  • Team building – motivation theories
  • Personnel issues

I’ve also included a quick overview of the Project Management processes relating to this knowledge area:

  • Develop Human Resource Plan: This process involves identifying; documenting and assigning project roles and responsibilities and reporting relationships, as well as creating a staffing management plan. In other words, we are trying to put a Project Organization in place in order to support our projects.
  • Acquire Project Team: This is the process of getting the right people to do the job. It involves us actually going out and tracking down people and bringing them onboard the project team. Take note that it is not necessarily the project manager’s responsibility and that this task is commonly done by Human Resources teams with the Project Manager providing guidance on the appropriate skill sets required for the project.
  • Develop Project Team: We need to develop our individual and group skills in order to enhance our overall team performance. We want to foster and improve the skills of each individual, but ultimately the goal here is to enhance team performance, thereby contributing to our overall project performance.
  • Manage Project Team: This process covers all of the necessary managerial activities necessary to ensuring project success, including tracking individual and team performance; providing feedback; as well as resolving issues and conflicts that may arise during the course of a project.

Functions and Roles of the Project Manager

Project managers are often asked to define what it is exactly that they do at their jobs and PMI has chosen to include clear definitions on the functions and roles of the project manager.

Functions performed by the Project Manager

The activities listed in Section 1.3 of the PMBOK, entitled ‘What is Project Management?’ are commonly performed by the project manager and listed below:

  • Identifying Requirements
  • Addressing the various needs, concerns, and expectations of the stakeholders as the project is planned and carried out.
  • Balancing the competing project constraints including, but not limited to Scope; Quality; Schedule; Budget; Resources and Risk.

Interface Management

This is defined as the process of identifying, documenting, scheduling, communicating and monitoring the personnel and the Organizational and system interfaces relating to the project.

System interfaces refers to the interfaces of the Organization. For example,  you might have to deal with the legal department within the Organization. You might also have to deal with the manufacturing group or the personnel group. Anytime the Project Manager goes outside of the project team and interacts with the support functions within an Organization then she is said to be interfacing with these various functions and she needs to be able to manage these relationships effectively in order to get the job done.

Our efforts are directed towards the integration of the project sub-systems of a project. PMI expects us to plan, lead, organize and control the project. The project sub-systems are all of the various and peripheral processes encountered within a project and can be thought of as what we need to plan, lead, organize and control throughout the project.

Roles of the Project Manager

A project manager wears many hats and performs multiple roles on a project. Some of the key roles performed by the project manager are listed below:

  • Integrator: The Project Manager is responsible for integrating the various aspects of the project into a consolidated end-result as defined by the key deliverables and requirements of the project. Integration involves coordinating all of the knowledge areas defined in the PMBOK into a concerted effort aimed at completing the project objectives.
  • Communicator: The Project Manager is also responsible for the process of facilitating the flow of information between the various elements of the project. Examples would include any communications between project team members and the functional components of the Organization or even the client Organization.
  • Team-leader: Leadership is the act of providing direction and guidance and this is one of the primary roles of the Project Manager.
  • Decision Maker: The Project Manager may typically be assigned the responsibility for making decisions relating to the multitude of issues that fall under the umbrella of the project management knowledge areas.
  • Climate-Creator / Climate-Builder: The Project Manager is responsible for setting the environment or the tone of the project on a regular basis. If the Project Manager walks into a meeting excited and motivated about the project, she will in turn set the tone of the meeting.

Qualifications of the Project Manager

PMI recommends specific skill sets and attributes that are desirable for the Project Manager.

  • Works well with others: This is one of the most important qualifications from PMI’s perspective. This concept of ‘works well with others’ is very similar to a comment that you would find in a child’s report card at a very young age.
  • Supervisory Experience: Supervisory Experience is beneficial to a Project Manager and bears particular relevance to the activity of leading and managing a team.
  • Technical Expertise: Depending on the specific technical area of the project, some technical expertise may be beneficial to the Project Manager.
  • Contract Administration Experience: Some experience in contract administration would be beneficial to the Project Manager. This ties in to the later section on Project Procurement Management.
  • Profit/Results Oriented: The Project Manager should be focused on achieving the goals and objectives of the project.
  • Skilled Negotiator: This refers not only to the context of contract negotiation but also to how skillfully a Project Manager can build the team and manage negotiations between various stakeholders throughout the project in order to enhance overall team performance.
  • Education and Experience Requirements: PMI has indicated that a college education would be desirable, but not required during the PMP application process. PMI also requires that the candidate have some project management experience. This can be project experience as a functional manager or even as the Project Manager’s assistant. PMI however prefers to see some management experience on an applicant’s profile. This is because PMI wants candidates to have prior experience managing people before they apply for the PMP certification.

Power of the Project Manager

PMI recognizes various forms of power that can be harnessed to resolve issues and drive a project towards the attainment of key objectives. You should be familiar with these various forms of power and how they can be appropriately used.

  • Legitimate Power: Legitimate Power refers to power that is derived from a person’s formal position within an organization and is best illustrated by their official job title or position. For example, the Vice President of Procurement within a company would hold a certain amount of power simply by virtue of her position.The title of Project Manager also holds a degree of legitimate power within an Organization, particularly if the position is formally acknowledged by the Project Sponsor in the Project Charter.
  • Coercive Power: Coercive Power is predicated on fear. There are moments within a project where this type of power must be exercised. For example, if you are dealing with an errant supplier who has to be brought back in line, threatening that supplier with contract claims and other penalties is a form of coercive power. As a general rule, PMI feels that a Project Manager should not go about threatening stakeholders and generally frowns on the practice of coercive power. However in certain circumstances, Coercive Power can be extremely effective. For the exam, remember that coercive power should only be used as a last resort.
  • Reward Power: Reward Power does not only refer to financial rewards. There are other instances where rewards can be given, such as rewarding a person for a job well done through a formal letter of commendation, or simply via a pat on the back. Reward Power is the practice of reinforcing good behavior. In most instances, this takes places as a form of encouragement of a job well done or acknowledging achievement. PMI cautions that Reward Power can be used to excessive limits. For the most part, reward power is based on our willingness to share rewards with our team members.
  • Expert Power: Expert Power refers to an individual’s treatment by other team members due to the exceptional quality of her work. Experts tend to possess the qualities of a person of sound mind and moral character and a very high degree of technical expertise. Expert Power exists when people value what an individual can bring to the table. The expert does not need to have a very impressive formal title, or be in charge of many people.Expert Power comes directly from the work performed in the past by this person plus the reputation that they have established over time.
  • Referent Power: Referent Power is based on the action of referring to the authority of a more powerful person as the basis for their own authority. From time to time, we have all run into individuals who use the authority of a superior to assign work to others. This type of power is short lived.
  • Purse-string Power: Purse-string power simply states that the person who controls the finances in a project will have authority over the project. This form of power lasts as long as there is money. Once the finances run out, then the power will no longer hold sway.
  • Bureaucratic Power: This pertains to a situation where the individual knows every aspect of the system and is able to utilize the system to enforce his or her authority. In many cases, an Executive Secretary to the President can be thought of as the gatekeeper and is in possession of bureaucratic power.
  • Charismatic Power: In this case, Charismatic Power refers to an individual who has the ability to draw and attract other people by virtue of an innate characteristic that they possess. Charisma does not always pertain to good looks. An individual who has the ability to listen and empathize with others can also possess great charisma.
  • Penalty Power: Penalty Power exists when an individual withholds things simply to get something done.
Exam Hint – PMI wants us to use Reward and Expert Power as much as possible. Also, most questions on Legitimate Power in the exam refer to an Organizational Chart. The project manager’s role is not commonly formally depicted in a position of formal authority.Most of the examples relating to formal authority would be titles like General Manger, Vice President, Director, CEO, CIO and CEO. All of the people within a company can be said to have formal authority simply by virtue of their title.

Project Conflict

Conflict is unavoidable from a Human Resource point of view and we must learn to deal with it. We need to understand why conflict is unavoidable. Projects are generally performed in high-stress environments, with deadlines and budgetary constraints  as well as an amalgamation of people who may have never worked with one another prior to the commencement of the project.

Another factor contributing to conflict is the ambiguity of roles that exist on a project. Team members generally have to figure out the roles and responsibilities of the various team members at the inception of the project. Good project management practice dictates that we always define the roles and responsibilities of the Project Manager at the beginning of the project.

In matrix-type organizations, project team members tend to report to multiple bosses and this can be very stressful. We should also be aware that the introduction of new technology within a project also raises conflict. According to PMI, technology causes risk and scope creep and so there are numerous of technology-related conflicts when it comes to managing a project.

Sources of Conflict

Project conflict can arise from a variety of sources:

  • Priorities: Conflicts can arise from different priorities between team members in the group.
  • Administrative Procedures: Conflicts can arise between differences between project methodologies and organizational procedures in the same company.
  • Technical Procedures and Performance tradeoffs: A project team is often confronted with the question of whether performing a task one way is worth the amount of time or energy is required to do so.
  • Personnel: The Project Manager experiences conflict in deciding which members are going to join the team.
  • Costs: Conflicts can arise from the costs incurred during the project.
  • Schedules: Scheduling conflicts can arise when project team members are associated with more than one project and the project manager also has to juggle the amount of time he has been allocated for each project team member.
  • Personalities: PMI recognizes personality conflicts to be one of the most difficult sources of conflict arising in a project.

Managing Conflict

Since conflict is practically unavoidable, a project manager must be proficient in how to resolve situations of conflict. PMI acknowledges several strategies for conflict resolution:

  • Problem Solving and Confrontation: These two terms are used interchangeably from PMI’s perspective. Confronting means to approach a problem head on.
  • Compromising: This is the most favored approach to dealing with team conflict. The approach involves bargaining and coming up with a solution that benefits both parties. In essence, both parties will not win completely, but each side gets some satisfaction. The key here is that if a win-win situation cannot be found then getting both parties to gain something through mutual give-and-take is the next best thing. PMI believes that this is the second best form of Conflict Management after Problem Solving and Confrontation.
  • Smoothing: Smoothing de-emphasizes the opponent’s differences and tries to establish some sort of commonality over the issue in question. We do not focus on our differences but on what we have in common. Smoothing keeps the atmosphere friendly, but does not really address the root causes of the conflict. Smoothing will help to move both conflicting parties closer to the next level of resolution, which is problem solving and confrontation. The key here is that Smoothing can be thought of as a way to transition into problem solving and confrontation.
  • Withdrawal: This occurs where one or both parties back down from conflict and do not want to deal with the conflict. We can liken this action to the ostrich sticking its head underneath the ground, believing that since it cannot see its problems, the problems have vanished. PMI believes that this conflict management methodology does not solve anything and delays any possible outcome. However, Withdrawing can be used very effectively when conflict first occurs and there is a great deal of emotion in the room. Withdrawing allows parties to ‘cool down’ and also to indulge in rational thought before re-engaging.
  • Forcing: Forcing occurs when we try to exert out own viewpoint on our counterparts  This is where we are going into a win-lose situation, also known as a ‘Zero-sum game’ or distributive outcome. For one party to gain something, the other party must inevitably lose. In fact, mutual benefit is not a likely outcome when using forcing as a tactic to resolve issues. Using a forcing strategy to end conflict typically ends up with soured relations between parties.

Exam Hint – Questions involving Forcing strategies have been seen in past exams: If two parties use ‘forcing strategies’ to resolve conflict, what is the end result? The answer is that a stalemate occurs. In other words, the conflict will never be resolved. Using Forcing as a tactic will end up with one party getting hurt.


Sample Question– 

If the project manager is confronted with a customer that is extremely upset with him, what method should the Project Manager use to resolve the issue?

a. Confrontation
b. Compromising
c. Smoothing
d. Withdrawal
Answer: The Project Manager resolves this issue by using confrontation. The term confrontation here refers to problem solving and facing the problem. The goal here is to find a win-win solution.


Team Building

We want to utilize team building as a positive force in countering the negative aspects of conflict. PMI’s philosophy on team building relates largely to a concerted effort within the Organization. PMI wants the project manager to look for opportunities to build a team throughout the project.

There are many positive outcomes to team building:

  • Interdependence of Team Members: PMI believes that the team members should be able to depend and rely on one another. Team members should work together to understand each other’s roles and responsibilities and know how each role fits in to the overall scope of the project.
  • Common Consensus: The team should have consensus regarding the defined project goals and objectives.
  • Group Work Commitment: Team members should be committed to working together in order to achieve a common end goal or objective. The team members should not feel that they have been coerced into working together.
  • Accountable as a Functional Unit: Team members should understand that they are accountable as a functional unit within a larger Organization and they should understand the project’s role in achieving the Organization’s goals.
  • Acknowledgement of Conflict: Team members should be aware that conflict may arise during the project and that it should be managed in a fair and equitable manner.

Symptoms of Poor Performance

The project manager should be ever vigilant of conflicts that can arise during a project. There are some symptoms that a manager can look out for when it comes to detecting poor performance in a project.

  • Frustration
  • Unhealthy Competition
  • Unproductive meetings
  • Lack of Trust or Confidence in Project Management

Ground Rules for Team Building

PMI states that the fundamental ground rule for team building is to start early.  You cannot afford to skip team building early on in the project. There are many crucial elements especially in the early stages of the project such as tight deadlines and demanding customers that need to be managed; however team building has to be accounted for from the very beginning of the project as a crucial ingredient for project success.

One of the priorities when it comes to assembling the team is getting the best people for the team. PMI does not refer to the most technically skilled people for the job in this case. We are looking at the best complement of skill sets to give us the best possible outcome for the project as a whole. We want to make sure that all stakeholders working on the project recognize that they are a part of a team. A lot of project managers frequently leave out the part timers and vendors, much to the detriment of the project.

One way of identifying stakeholders is to draw a network diagram that we discussed in the section on Project Time Management. We can identify all of the stakeholders responsible for performing each task in the network diagram. These are the people that need to be included in the team and they need to feel that they are contributing to the success of the project and that they are part of the team.  For example if you have a project and five months into a project, you’re going to need the help of the legal people, then the legal department should be made aware of this need at the very beginning of the project and they should be kept informed of the project status. They should also agree that when the time comes for them to participate, they will buy-in to the project and perform the work that is required of them.

Team Building Mantras:

  • Role Model: It is very important for the project manager to act as a role model. PMI states that if a project manager wants team members to act in a certain way, then the project manager has to lead by example.
  • Delegation builds teams:  The best way to ensure commitment from team members is to delegate responsibility, and to entrust and empower the individual team member. It is important for the Project Manager to have confidence in the abilities of the team that she has chosen. You shouldn’t force or manipulate team members to achieve a desired outcome.
  • Evaluations: The project manager must always evaluate team performance regularly.

Team building process

The project manager must use every possible opportunity for team building. A team building process can occur at a meeting, part of a social gathering, or part of a project audit. We need to use a process to consistently build a team. We go through the following steps for every project that we are involved in.

  • We plan ahead for team building: We make sure that everybody is aware of their assigned roles and responsibilities.
  • We negotiate with our team members: We go out and try to get the best possible talent for the team.
  • We organize the team: We organize the team members, we let them know what their roles and responsibilities are.
  • We have our kickoff meeting: We hold a kickoff meeting to make sure that everyone knows who is who; and who is talking to whom and when.

Team Building Exercises

Project teams need team building exercises to get motivated. Any opportunity that the Project Manager sees to build the team must be taken. Getting the project team to buy into the project and commit to a desired outcome is important to the success of any project. One of the things that can be done in order to accomplish this is to use team-building exercises.

Motivational Theory

Motivational theories attempt to explain what it is that motivates people to perform well at their jobs, in other words, what makes them tick. For the exam, you are required to understand several motivational theories that are currently observed and adopted in the management world.

Mazlow’s Pyramid

Mazlow’s hierarchy of needs has been around since 1943. Essentially there are 5 levels of needs as defined in his Pyramid:









The highest level of need is self-actualization. Knowledge of the pyramid can be asked in the exams, for example, what is the highest level for which the project manager can use to motivate his team members? Self-actualization.


Macgregor established a model on how to categorize individuals in the workplace and how the varying types would interact with each other.

  • Theory X:  The classic Theory X employee is unmotivated and uninspired. Somebody who you have to kick to get moving.








  • Theory Y: The classic Theory Y employee is somebody who is Gung-ho, excited and willing to get work done.








  • Theory Z: This is an improvement over theory Y. If you put a supportive environment around a group of theory Y workers, then you can create even greater enhancements in performance. You can get theory y workers very excited by giving them a good solid environment to work in.

So what happens when you put a theory X manager together with a theory Y employee? You will have a lot of conflict. The theory Y worker will not accept poor treatment from the manager. In the case where a theory Y manager supervises a theory X worker, there will be relationship issues initially between the worker and the manager. Over time, the theory X worker will learn to welcome the new type of management style and possibly turn into a theory Y worker.

Theory X and Y are 2 extremes. The question to ask is where along the range of extremes does the Project Manager fall and where do the workers fall and how do they interact with one another; and how the Project Manager, depending on which theory type the team members belong to, can motivate the team to do a job.


Hertzberg identified two sets of activities that satisfy a person’s needs. The first set of activities relates to job dissatisfaction and the second relate to job satisfaction .

  • Hygiene Factors: The activities that relate to job dissatisfaction are called hygiene factors. Examples would include pay and working conditions. Hertzberg’s theory states that a person requires sufficient pay and treatment as well as fairly decent working conditions to stay motivated. But paying this individual more and giving them better working conditions or a better supervisor does not necessarily motivate the individual any further.
  • Motivators: Most workers require a minimal level of hygiene factors in order to be able to work productively but in order to get energized, we need motivators, which are factors relating to job satisfaction. Motivators could be greater freedom on the job, or greater responsibility or even more recognition on the job.

Hygiene factors relate to job dissatisfaction and motivators relate to job satisfaction. The application of this knowledge is to find ways to retain and motivate team members. Your team members need to have their hygiene factors, but to really get your team members juiced up, you need to think of motivators.

Expectancy theory

Expectancy theory states that people will tend to be highly productive and motivated if the following two conditions are satisfied.

  • People believe that their efforts will likely lead to successful results.
  • People believe that they will be rewarded for their success.

In other words, if a person believes that a project will succeed then they are going to have an optimistic outlook and this will lead to better results.

Personnel benefits

Benefits a non-pay component of an employee’s salary and can be used to encourage productive behavior

  • Fringe benefits: These are the benefits that all employees in the same company receive. Things such as training, profit sharing and medical benefits that are over and above pay.
  • Perquisites: Also known as perks, common examples can be a company allowing you to work at home for a few days a week, or giving you that office in the corner that you always desired. Anything that the company feels is going to keep you motivated. Perks tend to be a lot more individualized than fringe benefits. Fringe benefits are generally given across the Organization to employees.

HR Roles and Responsibilities

Beyond the role of managing hiring for an Organization, HR performs a number of crucial functions. For example, training;  career planning and team building count as HR functions and have a direct impact on project team member performance. We look towards HR to fulfill these needs for our teams.

Summary:  Project Human Resource Management.

  • Develop Human Resource Plan
  • Acquire Project Team
  • Develop Project Team
  • Manage Project Team


In this section, we looked into the importance of team building, the need to motivate and encourage team members, roles and responsibilities of the Project Manager and ways to effectively deal with conflict.

In the next section, we will cover Project Communications Management

Thanks for sticking with me so far, and thanks for the comments and likes. They’ve been very encouraging!

Ook. Chimp out.

PMP Exam Prep – Part 11: Project Quality Management

Philip Crosby, one of the forefathers of modern-day quality management, titled his seminal work on quality management, “Quality is free.”  When we say that quality is free, we mean to say that quality shouldn’t be thought of as an additional expense. If we are willing to make that initial commitment to quality from day one, we will see the returns immediately.

There is a significant investment to be made from day one, but this is not necessarily measured in monetary terms. However, once that investment is made, then there are processes in place for quality and people generally have a mindset to do extremely good work and satisfy the requirements set forth by the client, whether that be an internal or external client.

Quality Concepts covered in this section

There are several Quality management concepts that we will cover in this section

  • Quality Management
  • Quality Planning
  • Quality Assurance
  • Quality Control
  • Quality Control Tools
  • Continuous Improvement
  • Just in time
  • Impact of Poor Quality
  • Cost of Quality

Quality Management

PMI’s Project Quality Management knowledge area is firmly grounded in several well-known and commonly adapted philosophies relating to quality. We will cover these concepts in this section.

Zero Defects

The concept of zero defects is that there is no deviation that is acceptable when it comes to quality. In other words, we cannot deviate from our requirements or specifications. According to Crosby, “Quality is Conformance to the Requirements and Specifications.”

The key term to look for in the exam is ‘Zero Deviations’. It is not a slogan, but rather a standard to aspire to. The questions might want to distract you by offering options such as “goal” or “objective”. Zero Defects is neither a goal nor an objective, but rather a standard by which we live. We will not accept anything less when it comes to quality from Crosby’s point of view.

Gold Plating

We must also understand that we should not give the customer more than they expect. If you give someone more than they asked for, you are essentially ‘Gold-plating’ and that is wasteful in terms of time and money and more importantly, the customer is not expecting it. If you define your requirements correctly and accurately, then the customer should be 100% satisfied when you give them exactly what they ask for and nothing more.

Fitness for Use

One additional factor to consider when evaluating quality is fitness for use. We must consider whether the product or service is fit for the use for which it was originally intended.

Quality Planning

Prior to W.E. Deming, it used to be thought that all processes had defects and the only way to eliminate the defects in a finished product was to hire quality inspectors to stand by a production line and look for these defects. Known as quality by inspection, this antiquated approach towards quality management was in use for many years and ultimately found to be extremely expensive, since there was no way to realistically inspect every item that came off the production line.

Conventional thinking has fundamentally changed how we approach quality.  We now believe that defects can be avoided and we can reach zero defects for any process. The major focus here is that we plan for quality at the inception of a project in rather than try to work quality in to the project later on. Quality should be planned into the project rather than being inspected in.

Quality Assurance

The concept of Quality Assurance can be thought of as a holistic, company-wide approach towards quality. We tend to see large-scale quality assurance programs in organizations that permeate through all of the levels of hierarchy within a business, including the project and its supporting elements within the organization. Quality assurance when done properly typically starts off as a managerial initiative. It is important for management to build up a culture that chooses to focus on quality in all things that the company does. We call this a top-down approach towards quality.

Audits and Evaluations

You need to be able to distinguish between audits and evaluations in the exam. What kind of quality audits are you going to use?  It includes all of our resources or processes that we bring together that we use to ensure that we produce a quality product.

  • Formative Quality Evaluation: This happens during the Project Lifecycle. The evaluation is going on as the project is progressing or forming.
  • Summative Quality Evaluation: This happens at the end of a project. This can also be known as lessons learned for all intents and purposes. Our goals are to look at how we functioned during the project; and also to evaluate what processes we used and whether they were effective.  We also look at the product or service that we created and we examine how close we were able to get to our quality requirements.

Even though the summative quality evaluation is carried out after the project ends, there should be little or no wait time before the summative evaluation is carried out. This is because relevant information would lose its significance to team members over time. We want to document all experiences while they are fresh in the minds of our team members.

It is also better to meet after each phase or key milestone in a project in order to take a look at what has been completed to date  and whether the objectives for that particular part of the project have been achieved.

Responsibility for Quality

When it comes to taking responsibility for quality, we should be aware that responsibility varies depending on the scale or level of activity being performed.

  • Q: At the task level, who has the responsibility for quality?
  • A: The team member doing the task has the responsibility for quality.
  • Q: When it comes to the project, who has the responsibility to quality at the project level?
  • A: The project manager now has the responsibility for ensuring quality across the entire project.

The candidate has to be very careful when it comes to tackling such questions in the exam. A subtle change in the question can result in two very different answers.

Cost of Quality

There is a way to measure the cost of attaining and maintaining a certain level of quality for any organization. We can look at this Cost of Quality from a number of dimensions:

  • Cost of Conformance: The Cost of Conformance is a proactive means to ensure that a quality product or service is produced by conforming to quality standards. It involves such activities as planning; training and process control. Other costs such as process validation and even the choice of how testing is to be performed are important factors to consider.
  • Cost of Non-Conformance: The Cost of Non-Conformance is cost of failure. For example we have rework and repair for a product that did not meet a customer’s level of acceptance. Additional factors such as complaint handling or the damage to reputation can also be considered under the cost of non-conformance.  Product recalls are yet another example.
  • Internal Costs: The internal cost is the cost of repairing work that you have found yourself.
  • External Costs: The external cost is the cost of repair after your client finds the defects. A product recall is a good example of an external cost.

Real or True Cost of Quality

The true Cost of Quality is the cost of Non-Conformance. When asked to pick between the cost of conformance or the cost of non-conformance as the real cost of quality, the answer should be the cost of non-conformance.

Responsibility for the Costs

The Project Manager or the Organization that is performing the work is responsible for paying for the costs of quality.  The costs of quality ultimately fall as a responsibility of management. Deming wrote that 85% of the cost of quality was a direct responsibility of management; he later increased that percentage to 90% prior to his death. PMI likes to use figures or statistics in the exam, because that is a great opportunity for them to insert distractor answers. 85% or 90% of the cost of quality is the direct responsibility of our management.

Quality Control

PMI describes quality control as a technical function and not a managerial function. It involves first establishing a technical baseline for the project and then collecting specific data to measure conformance to that baseline.

The quality baseline entails all of the specifications and requirements of what it is that we are going to do.

For example, we might have a list of specifications or requirements or tolerances. This encompasses everything that describes to the greatest detail what the product or service should look like.

Nature of Variables, Attributes and Probability

The following terms are frequently used in relation to experiments and statistical analysis, all relating to Quality Control activities.

  • Variable: An example of a variable is a person’s weight can fluctuate over time. Every morning when I step on my bathroom scale, I notice that my weight can go up or down on a daily basis. We can plot those variables and watch my weight go up and down and up and down over time.
  • Attribute: Is there a way to turn a variable into an attribute? Yes. The number of times that a person has weighed more than 180 pounds. The variable known as weight now turns into an attribute. Where it was seen previously as a variable, it now is either less than or greater than a specific figure. Your attribute now can take on one of two states, either on or off.
  • Probability: For example what are the odds of getting heads or tails when I flip a coin? When I flip a coin three times and I get heads each time, on the forth flip of the coin, what are the odds of getting heads again? My odds are unchanged at fifty-fifty. Because each flip of the coin is an independent event. The outcome of one event does not affect the outcome of a subsequent event. The rule here is not to string together a number of probabilities because they happen to be laid together in the exam.

Relationship between Probability and Distribution

Probabilities are commonly related to some sort of distribution. We refer to a commonly used example where a number of students would bring in candy bars to class, in particular Hershey almond bars. Sometimes when you eat a Hershey Almond bar, it is full of almonds; at other times you find that the entire bar might only have a handful of almonds. This is what we call a distribution. When Hershey bars are made, if you were to randomly sample some of the bars and count the number of almonds in them, you would find that the number of almonds in each bar would almost certainly vary.  If you were to count a very large number of candy bars and plot the results, you would get a bell-shaped curve. This is called a normal distribution.

An experiment was conducted where students coming to class would count the almonds in their candy bars and plot the number of almonds found in a bar over several months. The students noticed that during the spring months and summer months, the Almond bars had a very clean, even distribution. There were generally anywhere between thirteen and fifteen almonds per Hershey bar. When it got close to Halloween, they started to see a much larger variation in the number of almonds found in each Hershey bar.

The reason was that the Hershey’s chocolate factory had increased its production levels to anticipate increased demand during Halloween. Due the increased quantity of bars produced, the Hershey’s production lines were not as fastidious with their quality. Sometimes students would find as few as six or seven Almonds per bar and sometimes they would find as many as eighteen or nineteen Almonds per bar.

So the distribution became much broader and flatter as the manufacturer was going through much higher rate of production.

Statistical terms

You are required to become familiar with several statistical terms and concepts.

  • Mode: The one number that comes up the most often
  • Mean: The number that is the average for that distribution. (14 Almonds)
  • Median: The middle value in a distribution, of which above and below lie an equal number of values.

Bell Curve Shapes

A tall thin bell curve represents a process that is under control, because all of our samples or population are very close to our mean. This is a good thing. A long flat bell curve represents a process that is under less control, because we have much greater deviation from our mean.

Standard Deviation

Standard Deviation (S.D.) describes how much of your population you have captured within the diagram and how far they fall from the mean. When it comes to standard deviation, you need to memorize the percentages for the various standard deviations from the mean, depicted by the term sigma (σ). Candidates also should be aware of normal and skewed standard deviations.

1 S.D. : 68%
2 S.D. : 95%
3 S.D. : 99.7%
4 S.D. : 99.99%
5 S.D. : 99.9999%
6 S.D. : 99.999999%

As we look at one standard deviation from the mean, we capture 68% of all of the candy bars. As we move three standard deviations from the mean, we capture a vast majority of the candy bars at 99.73%. This represents most of the Candy Bars manufactured. When we say that a process follows 6σ, we’re indicating that over 99.999999% of our population (i.e. production output) falls within our quality specifications.

Process Control

The Control Chart gives us our “current capability”. We are measuring our process and we are taking those measurements periodically throughout the project. The measurements serve to tell us how well our process is performing in accordance with our specifications. This is an indicator of how reliable and predictable the process that we established is working.

You might see the following term in the exams. ‘The Voice’ of the process is defined as what your process is telling you it can do. The voice of the customer represents the specifications. The voice of the process determines what we are doing to meet those specifications.


When you have a process that produces a huge number of outputs, it’s sometimes impractical to be able to inspect the population, in other words every single item that is produced. A sample is a smaller subset of your entire population, but is large enough that you feel confident that the results of testing the sample will be the same as testing the entire population.

If you are told you have a valid sample. That is just as good as doing a 100% inspection. A lot of people are uncomfortable with that. They would rather do a 100% inspection. However, if it is a valid sample, it is just as good as a 100% sample.

  • Attribute Sampling: The questions you might ask when performing attribute sampling are: Is it on or off, is it heads or tails, and is it one way or the other? Is it above or below 200?
  • Variable Sampling:  The questions you might ask when performing variable sampling are: Does it fall above or below the range? Where does it fall within the range or general curve and how does that compare to our general population.
  • Tolerance:  The result in variable sampling that will be acceptable if it falls within a particular range specified. This is called tolerance and tolerance relates to variable sampling.

Quality Control Tools

There are seven tools that are frequently used for Quality Control. You must be familiar with how these tools are used and deployed.

Flowcharts and Diagrams

Questions on flowcharts are fairly easy to answer in the exam. The approach taken by PMI is to ask what advantages there are for each tool and you would use one over the other, etc. You are not required to construct these flowcharts.

We use flowcharts to better understand relationships in a process. A flowchart is a schematic or picture that serves to create a common language or common understanding about a specific sequence. A flowchart looks at a number of events in a sequence and there a number of different types of flowcharts listed in the PMBOK

  • Top-Down Flowchart:  This represents the management perspective on reality. Life is always moving forward, there is no turning back. There aren’t any looping processes. Fundamentally, a top-down flowchart moves in one direction and it does not allow for looping.
  • Classic Detail Flowchart: This is a very valuable and widely used tool in the re-engineering business nowadays. A detail flowchart provides very specific information on a process. In a detail flowchart we have every decision point and every feedback route and every process step. For the exams, know that for the detail flowchart, the box represents the step and a diamond represents a decision point and coming out of the diamond there should be a yes or a no arrow leading down to other elements such as another step or decision.

Work-flow diagram

This is a graphical representation of how work flows through a physical space or facility. Imagine an automobile assembly plant and picture that assembly plant in the form of a graphic with individual workstations and arrows indicating the direction to where the products are flowing. It is just the movement of stuff through physical space. So you can do a workflow diagram on a highway or on just about anything. You can think of how the work moves from point A to point B and what is involved in the process.

From a quality perspective, the work-flow diagram is good for analyzing the flow processes and for planning process flow improvements. This tends to be the angle that PMI takes regarding workflow diagrams in the exam.  You may have a scenario which is presented to you and then you are asked which type of flowchart or diagram you should use to analyze this particular scenario. Knowing the value and objective of each of these will lead you to the correct objective.  The Ergonomics issue stems from the work-flow diagrams. It deals with ergonomics or human motion in physical space. There are specialized work-flow diagrams associated with particular processes.

Just-In-Time (JIT)

Just In Time allows for the movement and storage for small amounts of inventory in a physical space. The entire purpose of the Just-in-time concept is that you do not want to have too much inventory on hand since excess inventory freezes up cash and costs money to store. So you want to build up only as much enough inventory as you consume.

KAN-BAN area

The kan-ban area or system prevents over-production by allowing work to move forward only when the next work area is ready to receive. An actual physical area on the assembly-line or production floor where people have an understanding that this work is coming down but it is not going to come down if I am not ready to receive it. KAN-BAN relates to just-in-time inventory.

Pareto Diagrams (80/20 rule)

Vilfredo Pareto was an Italian economist who said that 80% of the wealth rests with 20% of the population. His concept of 80 versus 20 has been applied generally to almost anything, including quality management. Dr. Joseph Duran took Pareto’s idea and formulated the Pareto principal for quality and he called it the law of the vital few. This is the 80-20 rule and it states that we are going  to have 80% of our problems coming from 20% of our items or processes. For anyone who has worked with an inventory application the movement of the inventory you will find that 80% of the activity in an inventory system will be in 20% of the portion of that inventory.

The central concept to the 80/20 rule is that if you can change that one big problem, you are going to have the biggest influence overall on how your process looks and feels in the long term. There are almost limitless numbers of examples when it comes to a Pareto chart. The key to the Pareto chart is which bar you want to fix when it comes to the Pareto chart. Imagine if you will a chart in front of you with a number of vertical bars, one is taller than all of the rest. Which one do you want to fix? It is always the tall one. Do not let any way the question is worded dissuade you from the idea that it always the tall bar which represents the lion’s share of your concerns. That is the one that you really have to go in there and solve in a Pareto chart.

Ishikawa Diagram/ Fishbone Diagram/ Cause & Effect diagram

This tool comes in a variety of names and widely used. It is named very aptly the fishbone diagram because it looks just like the skeleton of a fish. Fishbone diagrams are useful for brainstorming, for examining processes and for sequencing activities.

The cause and effect diagram basically drills down for causes, causes and more causes all driving toward one single, focused effect. We’re always looking for causes and breaking things down into further causes. What is the cause for the heat in the room, it may be some machinery. What is the cause for the machinery, it may be something and what is the cause of that something and we keep going down until you find the entire minutia that can be possibly associated with the effect at the very root of your fishbone diagram.

It is great for brainstorming and looking at problems that you have with quality but it can also be used in a prospective mode, here is an effect that you want to have happen and so what causes do we have to put in place in order to reach that effect. So in quality it can be “let’s see what has occurred and why” or it can be “we want something to occur and what do we need to do in order to make it happen.


The PMP exam will test you on some basic graph styles such as pie charts; line graphs or bar charts. If you see a pie chart and ¾ of it is one thing and you are asked which one of the elements in the chart should you be dealing with first, the answer is simply the large one. Graphs are very powerful forms of communication. PMI says that they should be used liberally in the workplace. Graphs are very helpful for planning improvement processes. Instead of trying to read tables of data, it is much easier to interpret data in graphical form and therefore graphs can become a very popular tool in quality.

Control Chart

This tool may be difficult for some candidates because they’ve had little experience dealing with control charts. There are a few fundamental terms that you need to be aware of:

  • UCL – Upper Control Limit
  • LCL – Lower Control Limit

To construct a control chart, we take readings of a number of items in our sample and plot them on the chart. If the items fall within the Upper and Lower control limits, they have met our quality standards. In some cases, several patterns emerge that might give us cause to investigate our process. For example, if we take a number of readings and after plotting the data points, we see that these points lie outside of our control limits. These data points are out of control. But is the entire process out of control? Well, we might have cause for investigation.

Rule of Seven:

Let’s say that you have a control chart and you plot seven data points in a row. All seven data points are recorded above the mean. Does that mean a: our process is in perfect control; b: our process is out of control c: there is cause for investigation; d: the process is functioning normally? The answer is that we have cause for investigation. This is because the probability of seven consecutive data points all falling on one side of the mean are extremely low. Imagine flipping a coin and getting heads seven times in a row. Something just doesn’t feel right. For a normal distribution, you would expect to get readings both above and below the mean, since the mean is statisically at the middle of your readings. Seven points on one side is not normal and this should cause us to stop for a minute and take a look at what’s going on.

We also want to know about upper and lower control limits is where the customer’s tolerance limits fits in the whole process. We need to know that the customer’s tolerance fits outside the upper and lower control limits. For example, next time you go into a fast-food place, you might see that they have posted a notice of the mean temperature of what they expect the temperature of their burgers to be.  Let’s say that the temperature 185 degrees. Now their system or process will enable burgers to be stored between 180 and 190 degrees consistently. They will always produce burgers within that range. Now you as the customer, if your tolerance limits at that you want a burger between 184 and 186 degrees, then the process may sometimes not serve you. But if you always want your burgers between 175 and 195 degrees, then it is the range you deem acceptable every single time then their process is going to deliver a process that you will eat.

These are the basics of control limits and tolerance limits. The point to remember is that tolerance limits are outside the control limits.

Natural Variation

There is a practical question that we want to ask ourselves when designing a process. Can we expect our outputs to be identical in nature no matter how long we keep doing the process? Our outputs will all vary slightly because there is something called natural variation that says it is impossible to make any product with absolute consistency. This is why we have our upper control limits and our lower control limits and understand where our tolerances are. As long as we are within this range, we can have variation and still conform to requirements.

Relationship between sample size and control limits.

If we are doing the assessment of our process on say a hundred units produced, that is going to give us a sample size one set of numbers. What if we do ten thousand numbers? Is it going to change the control limits at all? It is quite possible that the control limits will change, but the good thing is that the larger the sample size, the greater the degree of control we have on that particular process. The larger the process is or the larger the sample size, then the tighter the controls get. This is because the more we are looking at our total population there are fewer outliers in that far end of the process.

Check sheets

You might have gotten one of these the last time you went to rent a car. The pilot and copilot in a commercial air-liner also make frequent use of a checklist before they taxi off onto the runway.

A check sheet differs from a checklist in that it looks at physical flaws. It is looking at specific things that could have gone awry and that a checklist is looking at the specifics of what are the tasks that have to be performed or done. You have to be able to distinguish between the two for the exam. The check sheet also has the name of a measles sheet or measles diagram.

Kaizen – Continuous Improvement

Kaizen is the Japanese word for continuous improvement. Improving quality is not a discrete, one-time event. It happens every time we perform a service or we create a product. We want to do everything incrementally better. It is the small incremental steps, the little things that we can do along the way that can contribute to significant progress.


Sometimes to improve our Organization, we look at other Organizations. We look at the big companies, or the people that have been doing it well. This involves comparing your practices to the practices of other projects or other companies for the purposes of improvements

  • Internal benchmark: this is an activity internal to a company, where one branch or department compares its processes to another
  • Competitive benchmark: you are comparing your processes to your toughest competitor.
  • Functional benchmark: comparing a similar process to your non-competitors.

The human aspect of quality

People need to get really involved about quality. When a person gets highly motivated, then they do a better job in terms of quality. For a time, Ford motorcar company’s primary motto was ‘quality is job one’

When it comes to project management, we have to look at quality against the cost and schedule. We need to ask ourselves, which is more important, quality, cost or schedule? This is very difficult for many people to answer in the exam because many candidates might have taken quality training prior to the exam where they would be introduced to quality with a certain philosophy. Now, that philosophy would be different than what they are used to. According to PMI, modern thinking should emphasize that quality should share equal priority with cost and schedule as it applies to project management. The 3 sides of the triple constraint are time, cost and if you want to look at your requirements (scope) as quality, all bear equal weight.

The impact of poor quality

We need to be prepared for poor quality. What are some of the effects of poor quality? People get less productive, less excited about their work, we increase our costs, there is non-conformance. We wind up spending a lot more money, time and energy on monitoring and evaluation. This is a big problem.

R&M (Reliability / Maintainability)

This is a special category of quality and they are expressed and you will see this in the exam with 2 acronyms, which are MTBF (Mean time between failures) and MTTR (Mean Time To Repair). We’re attempting to measure the reliability by using MTBF which literally asks how long we are going to go before this thing breaks down and when it eventually does break down, MTTR will ask how long it will take before we can bring it back up and running.

Summary:  Project Quality Management.

  1. Quality Management
  2. Quality Planning
  3. Quality Assurance
  4. Quality Control
  5. Quality Control Tools
  6. Continuous Improvement
  7. Just in time
  8. Impact of Poor Quality
  9. Cost of Quality


In this section we looked at the concepts of Quality, which is defined as conformance to your requirements. We analyzed the various approaches towards modern-day quality thinking, including Zero Defects and Kaizen. We also looked at how quality assurance should be a managerial initiative and how quality control is more of a technical function, involving the use of tools such as the Quality Control Chart.

In the next section, we will go into Project Human Resource Management

Ook! Time for a banana!

PMP Exam Prep – Part 10: Project Cost Management

In this Section, we will address issues relating to cost at a project management level. It is very helpful to have as broad a background as possible in addressing questions on cost, as questions on cost in the exam are rather diverse, ranging from Earned Value Analysis (EVM) to Accelerated Depreciation, Cost Risk and Contract Types and so on.

Cost Activities throughout the Project Lifecycle

There are three processes that relate to cost when it comes to the Project Lifecycle:

  • Estimate Costs
  • Define Budget
  • Control Costs

Questions really focus on how we build our cost, structure our cost, map our cost, and keep track of our cost.

Estimate Costs

There are a number of different ways to estimate costs and they are tested in the exam. We can build estimates from the bottom-up or from the top-down.

Where do we start looking at when we come up with the estimates for a project’s costs? If you are building an estimate from the bottom-up with the very tiny, finite details, then you will use the WBS. We look directly at where all the work is done, at the work package level.

We would do this because we have the work already broken down into small amounts and it is always easier to estimate something that is smaller in magnitude rather than something that is larger. We typically do not report out our costs to the organization at the granular level of the work package. We commonly do so at one level above the work package, known as  the Cost Account level. Our estimates tend to be pretty accurate when we start at the work package level.

Definitive estimates

The definitive estimate is what you would have if you created an estimate starting at the work package level. The definitive estimate is also known as a bottom-up estimate; a grass-roots estimate or even an engineering estimate. The order of accuracy here is from (–5 to +10%)†. The range of percentages used by PMI to describe the range of accuracy of the various estimates has been used for many years and this range comes primarily from the construction industry.

Definitive estimates are the ideal, but the big down side is that a large amount of time that has to be invested in creating this estimate. Furthermore, Customers and Management may also want estimates in earlier stages of the project, where the project team hasn’t yet defined the WBS at the work package level.

Budgetary estimates

Budgetary estimates are also known as top-down estimates; or analogous estimates. An analogous estimate can be created when we look at past projects or elements of past projects and we try to draw an analogy or parallel between how costs looked like at that time and how the costs might look like in our current situation for similar projects. The range of accuracy here is from (–10 to +25%)†.  The range of accuracy has expanded more compared to the definitive estimate because we do not have a lot of the detailed information that we need in order to come up with a more accurate estimate from a work breakdown structure.

There are many things to consider with the analogous estimate and one of the things we need to capture are the lessons learned. If your organization had not captured the lessons learned previously, then you might not have this data. We look at past projects and we look at what was similar to the projects that we are doing now and what are the differences that would be significant to the cost differences between the previous project and what we are doing today. This is a kind of estimate that can be done much earlier on in the project.

Order of Magnitude Estimates

Order of magnitude estimates are also referred to as classic estimates; ballpark estimates; ‘guesstimates’ or S.W.A.G.s (Scientific Wild Anatomical Guesses). A simple situation where a project manager is asked to come up with this type of estimate is when the boss calls you in and says, “I have a meeting that is starting in 10 minutes and I need an estimate from you and don’t worry, I won’t hold you to it.” The order of accuracy here is from (–25 to +75%)†.  Remember that this range had an order of magnitude that is a 100%.

†A note on the ranges of accuracy

As we look at the range of estimates, you will notice that the ranges tend to be of higher magnitude on the positive site and lower on the negative side. In other words, we tend to assume that we are going to foul things up and so we build our estimates that tend to be more accurate on the downside. People tend to be optimistic and therefore we see a greater range of accuracy on the positive side than on the negative side.

Parametric Estimates

When coming up with a parametric estimate, we look at the parameters or dimensions of the estimate itself. By looking at the parameters of the estimate, we can come up with the Parametric Estimate fairly quickly. This is an estimation method that takes specific values; combines them with other values and then uses this relationship to come up with an estimate.

For example, a contractor was asked to give a quotation for some construction work on a site. He was observed to do the following: He went to the site, looked at the site, paced around the site in a square area by taking broad steps across the site, looked at the customer and then subsequently offered an estimate of forty-five thousand dollars. When asked for where that figure came from, he said that was his basic parametric estimate of $225 per square foot.

The contractor was using his experience and his knowledge to come up with the estimate, but there are a lot of formal parameters.

For example, in construction, if you are building an office in a particular location, you may use a parametric estimate in terms of dollars per square foot. In the software business, it could be dollars for lines of code. In the construction engineering business if you were building a highway for example, a common parametric estimate would be based on dollars per lane mile or kilometer.

Ultimately, you are comparing one variable to another variable and finding a relationship between the two. Such that when a variable moves in one direction, the other variable is going to move along with it.

Parametric estimating is something that is very commonly used for order of magnitude estimates or for budget estimates. Parametric estimating is something that is very commonly used for budgetary estimates as well.

Function Point Analysis

Function Point Analysis is a type of parametric estimate. Function Point Analysis is commonly used when estimating the costs of software application development. Specific functions or features are determined and are aligned with cost factors associated with building these features.

The functions are things that the software is going to do. It is a function of the software application itself and the software engineer will determine the number of functions that a particular software application will have and then come up with an estimate based on the number of functions.

Function Point Analysis is one of the more common types of cost estimating methods where software is being developed as opposed to using a parametric of lines of code.

Learning Curve

The Learning Curve is a concept that states that over time, the costs of doing more work should decrease because we’ve gotten more proficient at performing the work. For example, when I first started learning how to roller blade, it took me about three weeks of practice to be able to roller blade a complete mile. It took me another three hours of practice to rollerblade a two mile distance and the third mile came down to another thirty minutes. As you can see, we are getting better at doing things as we move along. This is the meaning of the Learning Curve.

Law of Diminishing Returns

The Law of Diminishing Returns identifies a basic economic situation where as you put more and more of anything into something you get proportionately less out of it. For example if it costs you a million dollars to get 99% of quality out of a process, it might cost you another million dollars to get to 99.9%, the question is if it is really worthwhile to do that?

Different types of Costs

In the exam, you will be given a scenario and then asked what type of cost the question is referring to.  One such example is to distinguish between variable and fixed costs

  • Variable Costs: Variable costs rise in proportion to the amount of work done. For example the costs associated with skilled labor or materials consumed directly by the project are variable costs. As you progress through the project, you consume more materials and you expend more labor. If you stop working, then you don’t consume any more materials or labor.
  • Fixed Costs: Fixed costs are a non-recurring cost and relate to one-time expenditures.  PMI likes to use equipment as an example of fixed costs in the exams.
  • Direct Costs: Direct Costs are the costs that are directly ascribable to a given project. You can point to a component and say that it is one of your costs and you are paying for it. When you are painting a room, the paint is a direct cost. It is something that you have to incur when doing that project
  • Indirect Costs: Indirect Costs can be defined as the cost of doing business aside from the actual cost of conducting the business itself. Commonly known as overheads, lighting, heating and rental costs are examples of indirect costs.

Defining a Budget

Cost Accounting

Cost Accounting is a fundamental notion that transfers over from the section on Project Scope Management. Recall that the Cost Account or Control Account exists at one level above the work package in the WBS. The Control Account is commonly used for tracking the finances of a project by the functional organization.

At the project level, we can monitor our costs at the work package level. At the functional level or the organizational level, we want to track costs one level higher at the Cost Account level. This is because it is not efficient for management to monitor costs at the detailed level of the individual work packages.

Cost Management Plan

Cost management is a subsidiary element of the project plan. The cost management plan describes how cost variances will be managed in the project. Variances can occur on both the positive side and as well as the negative side.  Candidates must understand the difference between the Cost Management Plan and a Budget.

From a practical point of view we cannot address variances as something which is ‘one size fits all’; We can have major variances and then minor variances depending on the nature of the related work packages. The cost management plan describes how each of these will be managed.

Cost Control

The Cost Control Process is similar to the Scope and Schedule control processes in that it is concerned with the factors that can potentially change the cost baseline. We need to determine if changes have occurred to the cost baseline and we need to manage those changes when they occur.

You need a cost management plan in place to address issues of cost control. It is one of the key inputs to the actual cost control effort. All project team members should know how the project manager is going to handle such variances when they occur.

Stakeholders don’t like to get caught off guard with variances and if we are looking at some cost reports and we have a cost overrun of %200, then there has to be a plan in place in order to address that.

Earned Value

Earned value is tested extensively in the exam. This is is a difficult concept for many candidates because Earned Value is commonly not used by many candidates prior to studying for the exam. There are a number of questions on the exam relating to Earned Value, but they tend not to ask you to perform any calculation, but require you to understand the various formulas and identify which formula to apply in a given situation.

Cost Schedule Control Systems Criteria (CSCSC)

Earned Value is a component of CSCSC. This came out of the US Federal Government back in the 60s and 70s when an entire system of cost control and reporting was formed. So there might be an example of that in the exam.

Example calculations for EV

The examples given on the exam are rudimentary. However, if you do not know what the formulas are, then you might not be able to answer the questions correctly.

    • Planned Value (PV): This is also known as the Budgeted cost for the Work that was scheduled (BCWS). Planned Value refers to how much money has been planned into the project at one point in time. How much money has been set aside for the project as of a given data-date. The ‘data-date’ is a point in time we are looking at in evaluation. It is an estimate. When you are estimating the work that has to be done for a job, you are really estimating the Planned Value for the work. This can be figured out at any given point in time for the project.
    • Actual Cost (AC): Also known as the Actual Cost for the Work Performed (ACWP). The Actual Cost is how much work we have actually spent on so far. In other words, it is the actual cost for the work done.
    • Earned Value (EV): Also known as the Budgeted Cost set aside for the Work Performed. (BCWP) How much we had planned to spend for the work that we had actually gotten done.

Budget at Completion (BAC)

    :  BAC represents the total cost of the project. The total of all the planned value estimates

  • Estimate at completion (EAC):  EAC is what we now expect the total job to cost based on our performance to date.
  • Estimate to Complete (ETC):  How much more do we expect the project to cost based on our performance to date. We are not concerned with what you have spent so far. You are only concerned with how much you have left to spend to complete the project.

Candidates tend to find some confusion between EAC and ETC. Make sure you can distinguish between these terms.

Earned Value Formulas

You will be required to understand and apply the following formulas. Exam focuses on the basic formulas. EV is always the first acronym in any equation when it comes to calculating cost. All values are expressed in dollars and not days or weeks. Also, be wary as to how negative numbers are represented in the exam. For example, negative 200 can be expressed either by (200) or “-200”.


Negative Variances are bad and Positive Variances are good

  • Cost Variance (EV – AC):How much you planned to spend less how much you actually spent at that point in time.
    Positive Cost Variance: Earned Value (Budgeted Cost) is greater than Actual Costs.
    Negative Cost Variance: Spent more than you budgeted for.

    • Is a negative cost variance bad? Typically a negative value is bad, but depending on where you are in the project you might be able to recover. The earlier in the project where you find the cost variance, the more time that you will have to correct the problem. If you are on the last activity for a project and you find out that you are having a negative cost variance, then that is not good news.
  • Schedule Variance (EV – PV):The work that we scheduled and we are subtracting from that the work that we have done.
    Positive Schedule Variance: I have performed $200 dollars of work and I had planned to do $400 of work done by now. Scheduled variance is -$200. I am behind by $200 worth of work. That is BAD

Cost Performance Index

We want to be able to look at how we are performing on this project. Is everything going as planned? We want to find out how much we are extracting from each dollar that we had invested. Most of the questions tend to have nice round numbers when it comes to CPI questions. PMI is not trying to test your mathematical abilities. They are trying to test your understanding of the concepts behind the Earned Value management system.

  • Cost Performance Index (CPI) (EV /AC):  If I have an earned value of $200 and I have an Actual cost of $400, then I have a CPI of 50 cents.  For every dollar of effort that you are putting into this particular effort or activity, you are only getting back 50 cents worth of work. That is BAD
  • Total Budget (BAC) PV ): The sum of all the Planned Value amounts in the project a.k.a. total budget
  • Estimate to Complete (ETC) (ETC = EAC – AC):ETC is the Estimate At Completion minus the Actual Costs. How much more money we need to complete the project at this point in time.
  • Estimate at Completion (EAC): What the job is going to cost based on a number of different factors. We may see a variety of formulas to come up with different ways to calculate EAC, all of which will give you varying answers to the same question. They will describe a prospective situation for which the EAC will be:


For Example:

EAC = (AC + Remaining Budget) / CPI

The first formula for EAC is used when the current variances are seen as typical of future variances.

EAC = (AC + New Estimate for All Remaining Work)

The Second formula is based on the fact that when past performance shows that original estimates were not only flawed or are no longer relevant because of a change in the conditions.

EAC = (AC + Remaining Budget)

The third formula for EAC is based on the fact that when our current variances are seen as atypical.

The key in knowing which formula to apply is by looking at the question and looking at the descriptive clues as to what formula should be used to determine the value of EAC.

The fundamental idea behind EAC is in what we now expect the total job to cost. We have to understand that the value of the Earned Value Management System is in collecting this information to help us to look to the future.

  • Variance at completion (VAC) (VAC = BAC – EAC):Variance is a measure of how far off the mark we are. It is the one thing that management is always concerned about.

We are looking into the future and assuming that based upon our current performance, how much our variance is going to be at the end. i.e. continuing at this rate, given our actual costs, what are the variances going to be at the end? Positive is good in this case.

Applying Earned Value concepts

How do we go about applying Earned Value and how we go about tracking our progress? A question that we might often find ourselves asking team members is ‘how far along are you with the work?’ and Earned Value may help us to answer that question to a certain degree.

For Example: You are painting a room. According to Earned Value estimates, how far along are you in this Painting project?

  • 50/50 rule
    If I had started the project, I would report 50% complete. In other words, once I start the project, I would report 50% of the work complete. So my earned value is 50% of whatever the planned value is. This applies even though I just put my brush to the wall. I opened up a paint can. I am 50% complete for earned value purposes.
    Conversely, if I have almost finished painting the room and I have completed 99% of the work, according to Earned Value, I have still only completed 50% of the work. Only when I have completely finished the job, can I report the other 50% complete for Earned Value purposes.
  • 20/80 rule
    When I start a project or activity, I report 20% done and only when I complete the job, I report the other 80%.
  • 0/100 rule
    This is the most conservative among the 3 reporting rules. I cannot report any of the work as being complete until the work has been completed 100%. This is normally reported at the work package level.

Present Value

Present Value represents the value to us today of future cashflows. Payment today is worth more than payment sometime in the future. For example getting a thousand dollars in your hand today is more valuable than getting the same sum tomorrow or 2 years from now, because we could spend the money today or simply invest it and get some interest back from the original sum. Conversely, at 10% interest, the sum of $1000 a year from now is worth nine hundred and ninety dollars today.

While you don’t have to do many calculations on present value for the exam, you will have to be aware of the fundamental concepts behind Present Value. Present Value is a way where we can try to determine which projects have to be done. It is the context generally in which present value will be used.

Benefit Cost Ratio (BCR) (Benefit / Cost)

BCR is used as a project selection technique. A BCR value of ‘one’ means that we are at a breakeven point in the project. If the BCR is smaller than one, it means that we are spending more money than we are investing into the project. A BCR of ‘greater than one’ means that our project is profitable.

Example: We are going to make 2 million dollars on this project but it will cost us a million dollars. The BCR is calculated as follows:

BCR = Benefit / Cost

= $2m / $1m

= 2

The BCR is a ratio and has no units. This means that it’s not a good tool to compare between different projects. For example, another project costs promises a return of $200 in return for an investment of $50.

BCR = $200/$50 = 4

On paper the BCR of this second project seems much higher than the first project which has a BCR of 2. However one project provides us with a return of $1m and the other with a return of $200. It is misleading to compare between the two.

Internal Rate of Return

IRR is not a simple mathematical calculation-based concept like EV. You won’t have to calculate it on the exam because there is no ready formula to use in the examination environment. IRR is standard way of calculating the return on an investment or project and is calculated the same way regardless of which company we are looking at. Different companies do NOT come up with their own ways of calculating IRR. IRR is based on the concept of Present Value. A larger percentage value of IRR is more desirable. It is similar to a basic investment.

Key points to be aware of when it comes to the exam: IRR is consistent across organizations. It is a basic financial measure. There is no ready formula for use when it comes to calculating IRR.

Payback Period

A Payback Period is measured in terms of time and not dollars. When you look at your project, you look at the number of time periods up to where your cumulative revenues exceed your cumulative costs, i.e. your project has turned a profit. The Payback period is the amount of time it takes for us to turn a profit.

The shortest payback period is usually the best answer. The most attractive is to have it shorter because we want to see those returns as soon as possible. We don’t want our investment to be hanging there and want a return as soon as is reasonable or possible.

Opportunity Cost

Opportunity Cost refers not so much to what we didn’t do, but more about what we could have gained had we done so. A simple example to illustrate this concept can be derived from a dollar bill.

The dollar bill that I hold in my hands is here because I forgot to pick up a lottery ticket. I was supposed to pick up the lottery ticket yesterday and I always make it a point to pick up a lottery ticket. By virtue of opportunity cost, I have a dollar that I could have invested in a lottery ticket. Because I know that this would have been the time that I won the lottery, I missed out on winning the lottery prize that is 100 million dollars.

My opportunity cost associated with this dollar bill is ninety nine million nine hundred and ninety nine thousand, nine hundred and ninety-nine dollars, of course less what ever I would have to pay in taxes.

If you see a question that involves opportunity costs, then expect to see these terms – ‘would have’,  ‘should have’, ‘could have’, ‘might have’, or ‘may have’. If the question uses these terms, then it might be leading you towards opportunity cost.

For example: “We could have gone after this work; we should have gone after this work; our competition went after this work. If we had done this, then it would have made us this much money or generated us this much revenue.”

Sunk Cost

Sunk Cost requires you to forget the past or the money that you have spent to date as you are looking forward towards the end of the project and this is very difficult for a lot of people to do.

Example: A co-worker has a nasty habit of buying beat up cars and putting a lot of money into them in order to restore them. In the process of maintaining his 1959 vintage Ford Truck, he sunk a total of $40,000.00 before finally giving up the car. A lot of people asked why he was throwing so much money into this car.

The answer to that lies in Sunk Cost.  The notion is that you forget about the money that you sunk into something and you look ahead and you make an evaluation based on how much additional investment you make from this point forward.

Instead of looking at the 38 or 39 thousand dollars that he had spent so far, he asked questions such as how much was this little piece of equipment such as a water pump or air filter.

We apply this to projects when we look at a project that we invested four million dollars into in order to get one million dollars return out of it. We ask ourselves if it is worth it to spend the last two hundred thousand dollars’ worth of work. The answer is that we have to complete this project. The rationale here is that we are almost at the end of the project and for a couple more hundred thousand dollars we will see the final return of a million dollars and at the very least minimize our losses.

Emotionally, people are tied to the amount of money that they have already spent and they have to get over that barrier to realize the benefits.

Contingency reserve

Contingency Reserve is defined for something like a risk generally that has been planned for and some money has been set aside to take care of that risk should that occur A contingency reserve is something that you had on hand as a contingency in case anything happened. You also usually have the contingency reserve as part of your budget and you would probably show that as part of your overall project budget

Management reserve

Management Reserve is a pot of money or time set aside to address risks that turned into problems that you did not plan for. I.e. Murphy ’s Law would be a type of risk that would be covered by management reserve. Management reserve is where you usually have to go around begging for money from the powers that be. So you have to supplant yourself to management because you had to go spend this money.

PMI is trying to get away from their term of management reserve, they are trying to work their way towards the term reserve as being a more generic term. You may still run into management and contingency reserve during the exam.

Working Capital

Working Capital is defined as Current Assets less the Current Liabilities. You need to know the fundamental definition of working capital and what it is. This is generally good for one question in the exam.

Depreciation of Capital

For accounting purposes, a company may want to depreciate the value of an asset over time. This has a direct impact on the amount of tax that a company has to file in its return. You need to know of the various types of depreciation.

  • Straight-line Depreciation: Things that we are willing to make  a long term investment in. for example if you see that Dark Cherry furniture in your Boss’s office, then chances are they are using that straight line depreciation because they don’t mind taking their time writing that stuff off.
  • Accelerated depreciation: We perform accelerated depreciation on things that we want to get our return out of very quickly. For example, computers and hardware or some of the large-scale software are generally depreciated using accelerated depreciation. For example, I am buying a used piece of equipment. I should use accelerated depreciation, because I want to depreciate my investment fast and get the potential tax benefits from the depreciation itself.

For the exams, one of the examples that you are going to see on accelerated depreciation is in items such as technology that become quickly obsolete. And if it is a very old building, then you want to use accelerated depreciation. The terms Double Declining Balance and Sum of the Years-digits may come up in the exam. These are various methods of performing depreciation on an asset.

Value Analysis

Value Analysis can be defined as simply looking at an item and trying to establish if it is worth paying for.

For example, if you were to buy a new car and I told you that it would cost $400 for a full set of the cup holders that went into your car, would you be willing to spend that amount of money? Most people would not want to pay that money. I would be willing to pay that amount of money in a heartbeat and that is a classical example of value analysis. I put a high value on those cup holders. I know how much it is going to cost me to clean the stains on the carpets because there were no cup holders.

Life-cycle cost

Life-cycle costs are different from project costs because it includes every cost associated with the project, including acquiring, operating and maintaining and disposing of the final project deliverables over the lifecycle of the project.

Summary:  Project Cost Management

  1. Accuracy of estimates
  2. Values of estimates
  3. Benefit cost ratios
  4. Internal rate of return
  5. Payback period
  6. Different types of cost estimating
  7. Earned value


In this section, we looked at the different ways of coming up with a cost estimate and then using that estimate to build a budget, which is another baseline in the project. When it comes to controlling costs, we need to be very familiar with the concepts of Earned Value, and also some basic cost accounting concepts such as IRR and depreciation.

In the next section, we will cover Project Quality Management.

Ook! Road Chimp, reaching for a banana.

PMP Exam Prep – Part 9: Project Time Management

In this section, there will be a large focus on Scheduling. By the end of the section, you should develop an understanding of how networks are used to solve resource allocation; scheduling issues and leveling issues. You should expect to see PERT, CPM and Network diagrams in great detail during the exam. You should know how they are constructed and how schedules are computed.

Time Processes throughout the Project Lifecycle

There are five processes that relate to time when it comes to the Project Lifecycle:

  • Define Activities
  • Sequence Activities
  • Estimate Activity Resources
  • Estimate Activity Durations
  • Develop Schedule
  • Control Schedule

PMI wants us to be comfortable with each of the activities and the role that they play throughout the Project Lifecycle.

Exam Hint – Document original calculations in earlier questions as there is a good possibility that you might see the same example later in the question set. You should also be able to look at a PDM Method Diagram and calculate the Critical Path. For example, the question might ask you to calculate a new critical path based on new information provided by the question.

Define Activities

This process adheres to the concept of decomposition that was discussed in the previous section on Project Scope Management. By this stage of project planning, we have created the scope baseline a.k.a the WBS and we now want to decompose the WBS into a greater level of detail, such that we can define the activities that need to be completed in order for the total project to be considered complete.

For the exam, you will have to familiarize yourself with some of the various practices and techniques for defining activities. Some of these techniques are well established and have been around for a long time.


The PERT or Program Evaluation and Review Technique was developed in the late 1950s by the consulting firm Booz, Allen and Hamilton for the US Navy during the Polaris Submarine Program. The PERT technique was developed together with the Work Breakdown Structure or WBS.  The PERT works best in situations when an organization performs lot of projects that are similar in nature or repeats similar activities using a standardized process. For example, the US military used a well-defined and repeatable processes to build each submarine in the Polaris program. They could compare the durations that it took to perform a specific activity, such as installing a hatch or cover, across a number of different projects. PERT  is also best suited to situations where there  is flexibility when it comes to costs or budgets.

There are 3 Time Estimates found in PERT:

  • Pessimistic Time Estimate
  • Most Likely Time Estimate
  • Optimistic Time Estimate

PERT is a Probabilistic Time Estimate. The purpose of these calculations is to determine the likelihood of completing a particular path activity or even the entire project based on that activity. While PERT used to be a dominant activity estimation tool, it is not used that frequently today. We tend to see PERT used a lot in Precedence Diagrams, which will be discussed later in this section. Two calculations used by PERT that you will need to know for the exams are listed below:

(A) Most Likely Time Estimate (PERT Mean):

{Pessimistic Estimate + (4 x Most Likely) + Optimistic Estimate} /6

(B) PERT Standard Deviation:

(Pessimistic Estimate – Optimistic Estimate) /6

You are not required to calculate PERT in the exam, just need to know how to find the PERT standard deviation, which is by subtracting the optimistic estimate from the pessimistic estimate and dividing the result by six. A lot of people tend to get confused with the different formulas. For example, in the exam you might be presented with some duration estimates and asked to choose the PERT Standard Deviation from a number of formulas. One of the answers they give you will be the answer for the PERT mean and not the Standard Deviation.

Critical Path Method (CPM)

The DuPont corporation and Remington Rand developed CPM or the Critical Path Method in the 1950s. The application of CPM in those days was for planning and scheduling Plant maintenance and construction programs. The emphasis in this case was with controlling costs while leaving the schedule flexible.

We don’t need the Pessimistic and the Optimistic time estimates for calculating CPM. We just need one data point for CPM and that is the most likely time estimate. In other words, your best guess is good enough as far as coming up with the duration required for a particular activity or time. We use CPM when building Activity-On-Arrow diagrams.

CPM is not that popular today, and while we tend to use one time estimates per activity in most instances, we typically use the PERT formula to obtain the most likely time estimate.

Precedence Diagramming Method

The PDM or Precedence Diagramming Method is considered to be more commonly used today for formulating activity duration estimates when compared to either CPM or PERT techniques.  PDM was developed by a professor in Stanford University in the early 1960s and this method is also called Activity on Node.

To visualize an Activity on Node diagram, think of a picture of a network and you see boxes connected by lines and within the boxes are the activities. The lines between the boxes simply define the sequence of activities from one activity to the next.

Note that Activity on Node diagrams differ from Activity on Arrow or Activity on Line methods. Activities in the latter cases are depicted by lines in between the nodes. The activity is actually on the line and the nodes connecting the lines are simply identifiers of the activity itself.

Sequence Activities

For the exam, you will need to know the fundamental ways which networks are represented and how to construct and use network diagrams to calculate various characteristics of a project. Activity Sequencing follows up on the previous process, Activity Definition, by focusing on the appropriate sequence of performing activities now that they have been listed out.

At this point in the project, the planning team will be asking questions such as how particular tasks should be performed and in which sequence they should be carried out and if the tasks can be performed sequentially, in parallel or a combination of the two. The sequence could be linear, one after the other; or in parallel with certain tasks overlapping each other in certain cases. This largely depends on the nature of the work to be performed and how the various activities interact with one another..


When we do the sequencing, there are both hard and soft logics or Mandatory and Discretionary Dependencies that we need to pay attention to.

  • Mandatory Dependency or hard logic typically involves a physical or technological limitation of the work. For example, a prototype must be built before it can be tested. There is no overlap of activities here, there is a clearly defined sequence. You have to build a prototype before you can test it.
  • Discretionary Dependency or soft/ preferential logic is defined by a preference of how you would like to do something; how you might have done something in the past; or how your organization might dictate how a task is performed.

Examples of Discretionary Dependencies: We can find examples whenever there is a desire to sequence in a way that is desirable and customary. For instance, if you were doing plumbing and electrical work in sequence rather than in parallel, some people would prefer to perform one task and then move on to the other. However, it is not necessary to do so because of some mandatory dependency between the two. It is simply a matter of preference.

Another example is that some project management practitioners believe that the correct sequence in a project is that you must complete the concept phase before you can move to the design phase of the project lifecycle. This is not hard logic and is in fact preferential or soft logic.

Exam Tip – External dependencies are defined as anything that is needed from outside sources other than the project team. For example, prototype and test results that you rely on an external organization to perform. A example PMI likes to use is in regulatory environments, where you are waiting for the vendor, the client, the regulator or anybody external to the project to move it forward.

Activity on Arrow Method

The activity on arrow diagramming method involves the creation of a network of nodes and joining these nodes are arrows. All activities flow in one direction, typically from the left to the right and the actual activities and their durations are listed in the arrows. The nodes represent milestones, where there isn’t any work performed. All relationships are finish to start in an activity on arrow diagram.

Finish to start: Events occur in serial. You cannot start one activity until another activity finishes. Example, you cannot make the coffee until the water has boiled. There are many activities that can be done in parallel or overlap one another and as such, we see a case where Activity-On-Line diagrams don’t represent the real world that well.

Dummy Activities

How do you show complex dependencies when you cannot draw them on paper in activity on line diagrams? It may be impossible to draw an arrow from activity AC to activity AD due to tremendous complexity. The solution is to use dummy activities. These are activities that consume no time or resources and are displayed to show dependencies between different activities that would otherwise not be drawn. A dashed or dotted line represents a dummy activity

Precedence Diagramming Method (PDM/AON)

The precedence diagram method was developed to overcome some of the limitations of Activity-On-Line Diagrams. There are no dummy activities in this case. PDM is one of the most commonly used network diagramming techniques and you need to be familiar with how to construct and analyze these diagrams for the exam.

Exam Tip –Definitions and terms: In studying for the exam, it is important to look at lists of terms and memorize those terms. Many questions require you to know the definitions of a term such as Float in order to correctly answer the questions. For example, there is a distinction between Lag and Slack that should be noted for the exam. 

The following list defines some of the most frequently used terms in network diagramming. You should develop a thorough understanding of these terms.

  • Lag: Imposed Waiting Time. For example, when you paint a room, you will have to wait for the paint to dry once you paint the room. No resources are consumed in this case, while the paint is drying. Lag adds to the Duration of an activity.
  • Negative Lag (Lead): The opposite of lag, this is the ability to jump ahead before you start the next activity in a Finish to Start Relationship.
  • Critical Path: The critical path is the path through the network that takes the most amount of time. It represents the least amount of time with which the project can be completed. (see section below for full explanation)
  • Slack (Float): Slack is the amount of time whereby a particular activity can be delayed without delaying the entire project.  Slack is a function of the network and is calculated by looking at the network.
  • Zero Slack: Activities on the Critical Path generally have zero slack, this doesn’t always have to be the case. Sometimes, the critical path is the path with the least float or slack. For example, if you have an imposed end date, it is possible to have a float of perhaps one or two days.
  • Total Float: The Total Float is calculated by analyzing the network of a project. The Total Float does not affect the end date of the project. Typically, the Total Float can be defined by the Late Start minus the Early Start or the Late Finish minus the Early Finish. 
  • Free Float: This is an activity’s Float that does not have an impact on the next task in the network. Free float looks at how much this task can be delayed without impacting the very next task, also known as the nearest successor in the network.

Critical Path

The Critical Path is probably the most important concept when it comes to Project Time Management. The total duration of all the activities in a single path from start to finish is summed up to a number and expressed in days or hours. That number traces the longest path through the network and is also the shortest time in which the project can be completed. There can also be more than one Critical Path for a network in many projects. So don’t be fooled by a question that leads you to believe that there is only one Critical Path.

  • Q: How do you determine if a task is critical?
  • A: There is no slack or float for a particular activity.

PDM Relationships

There are different types of relationships connecting the activities depicted in Precedence Diagrams. The knowledge of these relationships is very important when we look at PDM.

  • Finish-to-Start – Activity A must be 100% complete before Activity B starts. If you were to impose lag, then it would occur between these 2 activities. E.g. Activity “A” would finish and then n days later, “B” would start.
  • Finish-to-Finish – We can use a Christmas family dinner as an example. Good cooks tend to time the preparation the various side dishes such that they finish at the same time as the main dish. This way all of the dishes can appear on the table at the same time, in a finish-to-finish relationship.
  • Start-to-Start – Both events can start at the same time and can therefore run in parallel. There is no time lapse between the two activities. A time lapse might occur if there is lag time or an imposed waiting time.
  • Start-to-Finish – For example, in some organizations, the selection process for Project Manager role has to be underway for at least 2 weeks before the proposal phase may finish. This is a way to ensure that all the candidates for the PM role have a chance to look at a proposal before it goes out the door. In this case, the Project Manager Selection Phase Starts with a  lag time of 2 weeks, then the Proposal phase may finish for a project.

You will not be required to distinguish between different scenarios for the 4 types of relationships in the exam. Rather, you will have to determine how they are expressed. The terminology used in the question is what you have to pay attention to. For example, you need to know the precise terms, i.e. Finish-to-Finish and Start-to-Start and not “Beginning to End” or “End to Finish”


Crashing represents a need to accelerate the schedule or reduce the duration of a project or phase within the project. Crashing almost always increases your cost, illustrating the interplay of the Triple Constraint we had discussed in the section on Project Integration management.  The increase in costs can be due to a need to add more Human Resources or Equipment to the project or even allocating more salaried personnel in order to perform the work. Note that there is a cost for salaried project personnel. For example, as more of a project manager’s time is allocated to a project, there will be a cost relating to a loss in productivity due to fatigue.

When it comes to selecting the activities to crash, we only want to crash activities on the Critical Path. It is these activities that are directly impacting the duration of the Project. All other activities that do not lie on the Critical Path should have inherent float or slack and so expending resources to crash these non-critical path activities will result in comparatively less dramatic results to the duration of the total project. If you want to accelerate the project schedule, then you will have to find a way to reduce the duration of the critical path.

We want to look into crashing the activities where we are going to gain the most amount of time for the least amount of cost. You may also want to look at the rest of your network and try to determine the activities that are close to the critical path. If you crash your critical path too much, a new critical path may appear or you might end up adding these tasks onto your critical path as well.


For fast-tracking, we are attempting to do the project with the same defined amount of resources that we estimated, but we are trying to achieve the same work in less time. The way to do this is by running tasks in parallel. Such that once a particular task starts, we might start another task immediately. We are trying to work on more tasks at the same time. There is a disadvantage to Fast-tracking, which is the increase in level of risk and complexity: As you increase the complexity of a project, you inherently increase the risk and this increases the probability that the project might fail.

Concurrent Engineering: There is a technique that is similar to Fast-tracking and has appeared in the exams. Some people call this Fast-tracking. But it really is a planning technique or an approach to a project, where when be begin the project we have all the parties that will be somewhat involved in the project to be part of the initial project planning team.

The objective in this case is to become aware of all of the tasks in the project and plan for the tasks that have to be performed. This way, we are concurrently analyzing the work that we need to do and we are preparing for the work that has to be done. This can significantly help a project complete sooner as more people have been made aware of what they have to do earlier in the project. The key difference in this case is that while Fast-tracking looks at overlapping tasks, Concurrent Engineering looks at overlapping entire Phases.

Gantt chart

What is the best tool for planning and analyzing your project schedule? If you said Gantt Chart, that you answered incorrectly! Gantt charts are great presentation tools, however the PDM and Network Diagrams are the best tools to use for analysis because they show us relationships between different activities.

01 Gantt






Fig 5-1. Gantt chart

The Gantt chart does not show all of the interrelationships between the activities. While Project Management software applications such as Microsoft Project and commonly provide us with a Gantt Chart view of our project, not all of the relationships are displayed in the Gantt chart. We use the network diagram to see how every activity relates to every other activity for the project. This is the best tool to use for comprehensively planning out a project schedule.

The entire notion of a Gantt chart does not include dependency lines such as the arrows we see in Activity on Node diagrams. Technically, once we add Arrows to a Gantt chart, it is no longer a Gantt Chart, but instead a time-scale dependency diagram.


A milestone is an activity with a duration of zero. It exists at a particular juncture in time that you have identified as being significant to the project and that you want to communicate to stakeholders. I.e. it could be the end of a phase or task or the delivery of a work result or even the expenditure of a certain sum of money. Milestones are very effective in communicating with upper management or the customer. The reason is that these parties may not be interested in looking at the technical details of the project. They may not even be able to understand some of the details at the lower levels of the WBS.

Exam Tip –You may be asked in the exam if a kickoff meeting is a milestone. The answer is No. The kickoff meeting in its raw state takes a lot of time and resources. The kickoff meeting can be converted to a milestone as follows “Kickoff meeting complete.” Or “Kickoff meeting underway,”


Develop Schedule

In this process, we develop the schedule by analyzing activity durations and sequences, related resource requirements and related dependencies. We will go through several techniques that can be used to develop an efficient schedule.

Types of Schedules

There are several classifications of schedules that can be created. Several are listed below:

  • Heuristic Scheduling: This is also known as rule of thumb estimating; learning by discovery; or learning by trial and error. PERT is a good example of a form of heuristic scheduling.
  • Resource-constrained Schedule: In a situation where there is competing demand between projects for a scarce resource, you end up updating and scheduling your project around the availability of this resource. An example could be the leasing of shared equipment or facilities; or the use of a subject-matter expert. The impact of varying resource availability is that the project has the potential to extend or shrink in duration.
  • Time-constrained Schedule: This occurs in a scenario where the network schedule is fixed. In other words, there exists a fixed, hard coded date which we must adhere to by all means. For example during the Y2K readiness programmes for many businesses, December 31st 1999 was a hard set date of completion that could not vary.


We want to ensure that we do not exhaust the resources that are working on our project. For example, if we try to crash a project or particular task, a particular resource might end up working 18 hours straight, which is not a sustainable level of effort. The objective of leveling is to establish a schedule where a resource is used in a pretty much consistent manner over time. A situation where there might be a bad allocation of resources is when a resource is utilized heavily in one period of time and not utilized at all in another period. Ideally, we want to find a way where the resource is used in a pretty much consistent manner over the duration of the project.

We recognize that our resources might be overworked and by performing leveling, we reduce the overcommitment of resources. Leveling inherently lengthens the project schedule, especially if the resource is required to perform a task on the critical path. However, if we have adequate float, or the resource is involved in an activity that is not on the critical path, then we may not lengthen the schedule.

Schedule Conflicts

Conflicts can arise between the project team and the client due to scheduling issues such as tasks or objectives being unable to be reached by a predetermined time. You need to be aware of certain tools which can aid the Project Manager in the process of resolving these conflicts.

  • Resource Histogram: This is a bar chart that displays which resources are being used and across what time they are utilized.
  • Resource Gantt: This is a Gantt chart that displays the tasks and responsibilities of individual resources. It shows the utilization of resources across a Gantt view. In the exam, you will be tested more on your knowledge the definition of this tool rather than on your ability to create or work with one.
  • Responsibility Matrix: This is a list of the tasks and activities together with assigned resources for performing each particular task in the project.

Monte Carlo Simulation

There is very little emphasis on the exam for the technical details of Monte Carlo. Monet Carlo is an iterative process and is performed many times, usually on a computer.  Monte Carlo takes the individual activities in a project and looks at what the range of variability is for each activity. Each time we run a simulation, we vary an individual activity slightly to see how it impacts the overall project. By running thousands of simulations, patterns start to emerge and we can start prioritizing activities that have the greatest impact on the project that we want to look out for.

For example, Activity A may take between 3 to 5 days to complete and activity B may take between 4 and 6 days. We input these possible combinations of activities into a model and run a simulation to see how changes to these activity durations may impact the overall project finish date. The first time we run the simulation, we might come up with a duration of 3 days for Activity A and 6 days for activity B. The next iteration might result in 4 days for Activity A and 5 days for Activity B. The process may be repeated many thousands of times in order to build a statistical regression of possible outcomes.

All that we need to know is that Monte Carlo Simulations are run iteratively based on parameters of a particular activity to see where the schedule will generally fall out. Monte Carlo also tends to be a lot more pessimistic in nature than CPM and PERT. This is because Monte Carlo accounts for all of the near-critical paths. PERT is more pessimistic than CPM because CPM works on a single data point duration whereas PERT includes the most pessimistic duration estimates.

Summary:  Project Time Management.

  1. Activity Estimation
  2. Activity Sequencing
  3. PERT and CPM
  4. AON and AOA Diagrams
  5. Crashing and Fast Tracking
  6. Leveling


In this section, we looked at another component of the Triple Constraint, Project Time Management. We learnt that Project Time Management typically takes place after we build a WBS and utilizes the concepts of decomposition to build an activity list, sequence these activities and build up duration estimates for these activities. We build project schedules using tools such as our Activity on Arrow and Precedence Diagramming Methods a.k.a. Activity on Node diagrams. We use concepts such as the Critical Path to focus our efforts in managing potentially complex networks that could have thousands of paths. Finally we use concepts such as Crashing, Fast-tracking and Leveling to manage our networks.

In the next section, we will review the third Triple Constraint, Project Cost Management.

The Chimp says, “Have a drink, you deserve it!”


PMP Exam Prep – Part 8: Project Scope Management

In this section we will learn how to define, measure and control the amount work to be performed in order to achieve the goals or objectives of a project.

Project Scope Management involves some of the earliest activities that a PM will manage on a project. Logically, you need to first figure out the total amount of work you need to accomplish in order to complete a project before you can calculate how long the project will take and also how expensive the project will be. You might also recall from earlier sections that Scope is a component of the Triple Constraint and therefore Scope is the first of the triple constraints that we focus on.

Scope Activities throughout the Project Lifecycle

There are five processes that relate to scope when it comes to the Project Lifecycle:

  • Collecting Requirements
  • Defining Scope (Planning)
  • Creating the WBS
  • Verify Scope
  • Control Scope

PMI wants us to be comfortable with each of these processes and the role that they play throughout the Project Lifecycle.

Collecting Requirements

PMI’s approach towards Project Scope Management is to start off by collecting requirements. Here, we first perform a needs analysis as well as some initial data gathering. The focus here is on starting some of the very preliminary processes of the project. Some of the activities performed include:

  1. Performing the initial Risk assessment.
  2. Conducting Focus Groups and Workshops
  3. Working through Questionnaires and Surveys
  4. Evaluating Prototypes

At this point in the project, we’re still trying to identify what the requirements are and how we can measure the success of a project. It’s important to note that we should have a copy of the Project Charter to refer to at this point, as the Charter is listed as an input to the project.

Define Scope

We go through a process known as decomposition. We start with some of the preliminary bit of information that we have assembled in the project to date, such as a Project Charter, Statement of Work and Business Plans and we’re trying to break down the requirements into a greater level of detail. In other words, we are trying to build a detailed description of the project and its final deliverables.

Tools and techniques

  1. Product Analysis
  2. Alternatives Identification
  3. Facilitated Workshops

The output of this process is the Project Scope Statement. The scope statement is a written document and it contains a project justification; the product or end result of the project; as well as the overall objectives of the project being undertaken. The Scope Statement is often an attachment to the Project Charter and not part of the Project Charter itself.

The Project Scope Statement commonly contains the following components:

  • Project Scope Description
  • Acceptance Criteria or what must be completed in order for the project to be considered a success
  • Deliverables which can be thought of as the end result of the project
  • Exclusions which typically identify the areas that are out of scope for the project
  • Constraints which are externally imposed restrictions on the project, such as deadlines, budgets and limited resources
  • Assumptions relating to the scope of the project and the potential impact of these assumptions if they are not valid.

Create WBS

The WBS is a Product oriented (no longer task oriented) family tree of activity according to PMI.  The US Military was responsible for many advances in Project Management, including the development of the WBS as well as the PERT technique (A concept we will cover in the section under Project Time Management) that was developed during the Polaris Submarine Missile Program.

Decomposition and the 100% rule

Decomposition is the process of breaking down project deliverables into smaller, more manageable components, as the WBS is constructed in a hierarchical fashion and gets into progressively greater detail as we move from the upper levels of the WBS into the lowest levels of the WBS, also known as the work package level.

The 100% rule states that the WBS should capture all of the deliverables, both internal and external to the project. This follows the concepts of MBO, which were highlighted in the section on Project Integration Management. MBO or Management By Objective  defines an approach where all of the efforts in a project are directed solely towards the achievement of project objectives and that absolutely no effort should be focused on tasks that are superfluous to the project.

WBS Coding Scheme

You should be familiar with the WBS coding scheme for the exam. A coding scheme refers to the numbering format that is attached to the various levels of the WBS. An example of the WBS scheme is listed below:

152.1.1   Hardware Build-out  Requirements Definition  Scheduling and Procurement  Assembly  Closeout

152.1.2   Product Training  Training Requirements  Scheduling and Logistics

Cost Account – Work Package Relationship

The cost account is a term used when analyzing or constructing the WBS and is deemed to be just one level up from the lowest level, also known as the work package level in the WBS. The cost account is considered to be a summary activity with the work package as its child.

Exam Hint – Distractor answers in the exam. You will be presented with several options that are similar to “Cost Account”. For example, Code of Accounts: Defined in the WBS as any numbering system that is used to uniquely identify each WBS element. Chart of Accounts: Defined as any numbering system used to identify project costs by category and does not appear on the WBS. You might be asked to distinguish between these terms on the exam.


80 Hour Rule

This is a generally accepted rule when it comes to assembling the WBS. No discrete activity or series of activities should consume more than 80 hours of effort to accomplish a deliverable. This is equivalent to two 40-hour work weeks. This was a common practice especially in environments where reporting periods are conducted once every two weeks. This rule defines a level of work effort as compared to duration of a particular activity. For example, you can get 80 hours of work completed in one day if you hire enough people.

WBS Benefits

The WBS can provide many benefits to a project, we have listed several below:

  • Team Building
  • Creating a Framework
  • Clarifies Responsibility
  • Clarifies Objectives

In addition, the WBS can be used to help with all of the configuration management processes, including planning; budgeting; funding; estimating and scheduling.

Other Breakdown Structures

For the exam, you will be required to distinguish between the WBS and other breakdown structures. Several common breakdown structures have been listed below:

  • CWBS or contractual work breakdown structure: This is the customer’s perspective of the work breakdown structure.
  • OBS or organizational breakdown structure: The work tied into the hierarchy. We look at the individual elements of the WBS and tie that into the organization. We look at the tasks and refer to the departments in the organization that should be performing the work.
  • RBS or resource breakdown structure: We break down the tasks at the resource level.
  • PBS or project breakdown structure: This is simply another name for the WBS.

Scope Baseline

The WBS lays down the scope baseline for the project and that is because if a task is not in the project, it will not appear in the WBS.  We can have multiple baselines in a project, including a quality baseline; a cost baseline (budget) and a time baseline (schedule). The WBS is still considered to be the primary baseline.

Verify Scope

The scope verification process involves formalizing the acceptance of the Project Scope by Stakeholders.Before we commence on a project, it makes good sense to make sure that everyone agrees on the objectives defined by the project scope before we start investing all of our resources such as time and money.

Similarly, as we complete our work, we also need to obtain acceptance of our work results. As part of our process within the entire project or for each individual phase in the project life-cycle, we need to continuously gain and get acceptance before we move onwards.

In simple terms, we perform verification to ensure that what we have done so far is close to what we had initially planned. We are trying to minimize our level of risk by performing verification. In other words, as the complexity of a project increases, so then does the degree of risk involved in the project.

A good example would be to try to take a shortcut that you’re not familiar with as you’re driving toward a destination. As you turn off the highway, you realize that there is the possibility that you might encounter construction, get lost or even run into bad traffic. The complexity increases as you select this additional route, and hence the risk or the possibility of affecting the outcome of the journey increases.


In this section, we reviewed several concepts relating to Project Scope Management. We reviewed the need to collect requirements and define our scope through a Project Scope Statement and we also looked into the concept of Decomposition, where we break down information into it’s component parts and seek to explain or describe a task in greater detail. We looked at the WBS and examined some of its structural components.

In the next section, we will look at Project Time Management, another element of the triple constraint.

Hope you found this article interesting. As always, show some love by leaving your comments or likes.

Road Chimp signing out.

PMP Exam Prep – Part 7: Project Integration Management

This section is relatively easy to study for. If you’ve worked on a number of sizable projects, you probably would have participated in some of these processes, even if your Organization called them something else. Most candidates will not find Integration Management too difficult, as there aren’t any complex mathematical formulas to apply, nor any sophisticated tools to use in the exam. There is a lot of material to cover, however.

Things to be tested on

  1. Develop Project Charter
  2. Develop Project Management Plan
  3. Direct and Manage Project Execution
  4. Monitor and Control Project Work
  5. Perform Integrated Change Control
  6. Close Project or Phase

This section of the PMBOK is more concentrated on project plan development. Most people don’t spend a huge amount of time digging into this part of the class. If you actively practice project management this will be okay.

HINT: Don’t focus solely on the PMBOK as your only study guide. It provides an excellent frame of reference, but it doesn’t cover all of the concepts in detail that you need learn to pass the exam.

Develop Project Charter

According to PMI, the Project Charter is a crucial document that should be created at the inception of every project. The Charter is a formal document that serves to fulfill the following needs:

  • Project Statement of Work (SOW): In many cases, this document would have been created in a pre-sales phase of the engagement. It can be thought of as a document that reflects a mutual understanding between the customer (entity paying for the work) and contractor (entity doing the work).
  • Business Case: What was the business rationale for this project? In other words, why are we doing this?
  • High Level Goals and Objectives: What do we hope to accomplish by performing this project?
  • Identify of the Project Manager: The Project Manager can use this document as recognition of his formal authority pertaining to a specific project and this comes useful when the Project Manager needs to marshal resources in the latter stages of the project.
  • Formal sign-off by a project stakeholder: Probably the most important function of the Charter, this indicates that someone in Senior Management has formally sanctioned this project and also that the Project Manager should be empowered to perform actions necessary to get the project moving forward.

It’s important to note that because the Charter is a document that is created in the very early stages of a project, many key elements that come on to define the project may not have been discovered yet. For example, at the creation of a Charter, we may not yet know how exactly we will be going about doing the actual work to accomplish our high level goals and objectives.  We probably wouldn’t have even assembled a project team yet. Many of the constraints and assumptions may not be defined either. It therefore makes sense that the Project Charter is deliberately kept at a very high-level, meaning to say that the Charter shouldn’t go into too much detail.

Develop Project Plan

According to PMI, the development of the Project Plan involves using the outputs of the other project planning processes to create a coherent, consistent document that is used as a guide for project execution and control. Note that the plan is used for guiding execution and control and does not actually do execution or control processes. It also helps to clarify the notion of constraints and assumptions


Assumptions are factors that for planning purposes might be considered to be true, real or certain. This can be considered to be a risk. Assumptions should always be evaluated for accuracy later on!


Constraints are factors that might restrict a team’s options. For example, constraints can come in the order of Contract fixed costs, or schedules.

The Triple Constraint –This is an important concept that you will be required to understand for the exam. The triple constraint basically indicates that there are three forces that are imposed on a project, namely Time (Schedule), Cost (Resources) and Scope (Requirements). These three forces work in tandem to influence how a project can progress.  Typically when one of the triple constraint changes, it will impact the other two constraints and a project manager should be aware of this.

Stakeholders and Stakeholder Management

One of the primary responsibilities of a Project Manager is in managing the interests of all the related stakeholders in a project. Stakeholders can be defined as any person or entity that has an interest in the project. This also includes people who have a negative interest in the project

  • Customers
  •  Management
  • Team
  • Project Sponsor
  • Performing Organization (especially in Matrix organization)
Exam Hint: Stakeholder ResponsibilitiesIn the exam, you will be frequently asked to define the responsibilities for the various stakeholders. For example, the project team is responsible for assembling the project plan. Exam: Who is responsible for the project plan? A: Project Team is.

Project Management Information System

Any method that is used to identify information, review information, make information easier to understand for stakeholders.  This could also be even a form on a sheet of paper.

Direct and Manage Project Execution

This is can be seen as putting the plan into practice. Remember execution is one of the 5 project process groups, which also relates to control.  It is important to note that execution and control go together.In the execution phase of a project, the majority of a budget is spent as well the majority of time in the project. Whenever you hear most of the time or all of the time in the exam, you can start looking for the execution phase.

General Management skills

A good project manager should possess good Management qualities overall. PMI indicates the following five general management skills that can be memorized by the mnemonic – PLINC, like the sound the keys make on a piano

  • Problem solving: Defining a problem, making a decision and influencing a company to make things get done. Power- potential ability to influence behavior and get people to do things they otherwise might not do. Politics- getting collective action from different people who might have different interests.
  • Leading: A leader provides direction and guides the team towards achieving project results.  This involves establishing direction and aligning, motivating and inspiring people.Note that managing isthe act ofconsistently producing results that stakeholders expect. Note: The project manager is designated officially as the manager, but at any time, any member of the team can display leadership skills.
  • Influencing:  This refers to theability to get the results that you want, to influence actions or behavior in an organization.
  • Negotiating:  Dealing with team members, functional managers and customers.
  • Communicating: Making sure that accurate information is provided to appropriate parties at the right time.

Management by Objective (MBO)

Peter Drucker, one of the fathers of modern management, developed MBO. Basically, as we look at a project, we need to define what kind of work we need to achieve and how does the work align with the objectives or strategy of the organization. Here, PMI is looking for a link back to the organization. PMI wants us to be aware of how senior management sets objectives and how they are executed lower down in the hierarchy and how our projects contribute to these corporate objectives.

According to MBO, the objectives must be measurable and unambiguous, realistic and mutually accepted by the performing organization as well as the functional organization or sponsor organization. For example, if we use the analogy of painting a room, we might initially use the statement of  ‘I would like to paint my room a pleasing color’. This statement is not specific enough. With the application of MBO to this task would be as follows: ‘Management wants this room painted Aspen 101 Grey, Aspen 102 Gray, Sherwin Williams semi-gloss latex and they want it no later than by Friday with a color to match the chip precisely’ – this is a precise objective that is easier to carry out and less susceptible for misinterpretation.

There is a process involved in achieving Management By Objective organizationally. The steps can be listed below:

  1. Establish unambiguous and realistic objectives. (This means that multiple people can read an objective and have the same idea of what this objective means.) We know what there is to be done for an objective and we know we have the skills and tools necessary to perform the objective as well.
  2. Periodically evaluate if project objectives are being achieved. Looking at the project lifecycle, plenty of opportunity to look back at the beginning and end of each phase to see if we are meeting the objective that we had set forth.
  3. After the evaluation, we should act on the results of the evaluation.
    1. If we’re doing great, then we should maybe adjust our schedule
    2. If we are not doing so well, then perhaps we should bring in some people.

The key takeaways of MBO are that good metrics will determine if you have a good way to measure how well the objectives are being reached. Getting Management to buy into your metrics is also important to the success of your project.

Work Authorization System

The Work Authorization System becomes a formal process in which a person says ‘Okay, this work is supposed to be done and I release this.’ Some important points for an organization to look out for are as follows:

  1. Who is approving the work and how it is being authorized.
  2. Someone who has to sanction the work. The scope cannot be changed so easily.
  3. In a lot of Organizations, this step is skipped.


Monitor and Control Project Work

This is the process of measuring and identifying project progress. In other words, how are we doing so far? This can take place at different times throughout the project. For the exam, you will need to be aware of 2 types of evaluations.

  1. Mid-project Evaluation. This can occur more than once throughout the project. At some throughout the project, such as at the end of a project life-cycle phase or when a critical milestone has been done, it is time to see if the project is meeting its objectives. AKA – Project Audit.  Analogy – auditor is someone who shows up after a battle and shoots the wounded.
  2. Final (Post)-project evaluation. When the project is complete, you find lessons learned for the purposes of sharing the information with other project teams.

Exam Hint: Purpose of evaluations
Exams would ask if these evaluations are used to ascribe blame or to punish. The answer is NO. Simply for the purposes of understanding where the project has been, where the project is going and what went right or wrong. To analyze the systems and see how they were applied successfully or badly.

PMI wants us to conduct the evaluations with all teams and treat each team fairly and consistently every time.

Customer satisfaction

The concept of customer satisfaction ties back into setting the right expectations. By definition, customer satisfaction is satisfying the requirements as opposed to exceeding expectations.  Several points that should be noted as follows:

  • It doesn’t take extras to satisfy the customer
  • Objective is to tie-in back to expectations.
  • Relates to an accurate needs analysis of how customer expectations are satisfied.

Progress Reports

Evaluations and Progress Reports are not the same. Progress reports are defined as the gathering of information and the establishing of what decisions need to be made in the future. Looking at the past, but looking at it in the present to realize what decisions will be made to affect our future. You need to know the difference between the kinds of reports.

  • Status Report – tells us where are we today at this point in time
  • General progress report – tells us where we have been
  • Trend Analysis Report – how these things are going to project us into the future
  • Variance Analysis
  • Exception Reports
  • Cost reporting (Cost Management)
  • General Types of reports such as – Gant Charts, Network Diagrams, Milestone Charts. (Time Management)

Work Results

This is defined as an output of the project plan execution or as the results of the project plan. We want to see if work was performed according to what was planned in the WBS.  When results are different from what was planned, then we need to create a change request

Perform Integrated Change Control

PMI recommends that a formal be adopted by an organization to manage changes. For instance, a change request should be made whenever modification of scope/schedule/resources occurs in some way or another during the project. This is because any change has the potential to impact the triple constraint and may have far reaching implications on the success of the project.. Therefore Integrated Change Control puts down some ground rules to manage these changes.

  1. The project team cannot willingly make changes to a project without formal authorization (See next point).
  2. Changes will only occur with the sanction of a Change Control Board (CCB) or Systems Configuration Control Board (SCCB).
  3. The CCB can comprise of members from your organization as well as the customer’s organization. This works to the Project Manager’s advantage in being able to turn down requests from a customer if the CCB has turned down the request.
  4. There may be more than one CCB in a large project or and for very small projects,  a single person might be the CCB.

Don’t concern yourself with the size or scale of the change, but instead focus on the function. Questions can be asked to aid in this process. For example, ‘How is this change going to affect our scope, resources and requirements?’ Ultimately, the key point to take note of here is that a customer requires a change and there is a formal process whereby that change is evaluated.

Implementing Change

Practically speaking, when it comes to change, each project can either stand on its own or have multiple dependencies on other projects. The change process can be protracted or it can be very short. Some projects have a threshold of change, meaning to say that the Project Manager has within his remit certain thresholds for change that he is authorized to approve. Anything beyond that threshold would require submitting the changes to a CCB for approval.

Configuration Management

This occurs in large organizations, which follow rigid change management processes. When you try to change anything, you are asked to ‘use a form’. While typically thought of as time consuming, a properly managed configuration management system is not necessarily a bad thing. Good configuration management systems typically follow a small set of rules:

  • The deliverable has to be defined with great clarity
  • We have to rigorously control change to that deliverable
  • We have to make sure that the deliverable is consistent with the existing system

The concept of internal consistency or traceability applies, as we migrate from the detailed design, to the general design and to the specifications, over to the WBS and then back and forth across all of the processes, we should still come up with the same answer. This is also a principle benefit of the paradigm of Management by Objective or MBO, that there isn’t any wasted effort or work performing activities or functions that will not drive the completion of the project’s objectives.

The WBS is born from the requirements, the requirements are developed from customer needs, and these should be evident in the general design and the detailed specifications.


Audits are crucial in a configuration management environment. This is because we need to ensure that our strict standards are being adhered to. We need to be very thorough and the way to achieve this is through audits.

Lessons Learned

Project lessons learned is a process where we explicitly try to identify that we have learned something from a project. We want to focus on the end result of a project plus the process that we used to get to that end result.  Lessons learned are documented and kept in a centralized repository where it can be accessed by other users and readily accessible

The rationale here is that an organization is doomed to repeat the same mistakes unless it can find a way to document these lessons and transmit them to others who can benefit in the future.

Summary:  Project Integration Management.

“Project management is supposed to be at one with the organization.”

  1. Project definitions.
  2. 5 Basic Process Groups.
  3. Constraints and Assumptions
  4. PMIS
  5. Project Plan and Project Plan execution fundamentals
  6. General management skills
  7. MBO – Establishing Unambiguous Objectives
  8. Reports  – Types of reports and audits and the evaluations that go along with them
  9. Change Control – All the forms that go along with this.


In this section, we covered Project Integration Management, a crucial aspect of project management, where the diverse elements of the project are coordinated together in order to achieve the objectives of the project.

In the next section, we will start to cover the first of the Triple Constraints: the Project Scope Management knowledge area.

Hope this has been useful and thanks for all the great comments!

Ook! Road Chimp, signing out.

PMP Exam Prep – Part 6: Project Management Knowledge Areas

I like to use the analogy of a house under construction to go about explaining the structure of the PMBOK and how we can approach the learning process much as we would the building of a house.

Chimp’s Story of a House

I remember the spring of 2001 very well. I just put down a big chunk of my life savings into the down payment of a house. It was in the countryside, pristine wilderness and meadows much much alien to the city ‘chimp’ who had grown up in a concrete jungle.

There’s something about being a first-time homeowner that is special. I recall driving hours every weekend to see the construction of the house. At first, it look very much like the picture below:


I would walk through the structure (I probably wasn’t supposed to.) and try to imagine where all of the rooms were. The flooring wasn’t completed yet and the insulation hadn’t been put into the walls yet. I remember walking from the living room to the kitchen and I could almost figure out what the house would look like, but I had to fill in the details on my own, in my mind.

The previous parts of this Prep Guide up to this point can be thought of like the skeletal structure of a house that is in the early stages of construction. As you walk up to this structure, you can make out that the building has two floors, you can see where the door is going to be and how the various rooms of the house are laid out. The frame work and all the process diagrams therein contained function like the skeleton frame of the house. You get to see all the components of a project that you as the Project Manager should be looking out for and actively managing, just like you see where the various rooms are going to be laid out in the house.

Following our analogies, we will spend a good part of the rest of this guide covering the Knowledge Areas, which can be thought of as the actual ‘stuff’ in the house, or the building materials that you would use to fill in the gaps in the walls, the flooring and the roof. It’s the details that go in to the house, the insulation and dry walls that you erect and the floors that you lay and the plumbing and wiring that goes into these components of the house. The Project Management Knowledge Areas perform precisely this function, as they help to give additional details to how the various elements of a project can be run.

In the subsequent parts of this guide, we will be covering each of the Nine Project Management Knowledge Areas in the following sequence:

  • Project Integration Management
  • Project Scope Management
  • Project Time Management
  • Project Cost Management
  • Project Quality Management
  • Project Human Resources Management
  • Project Communications Management
  • Project Risk Management
  • Project Procurement Management

Under Each Section, we will cover the relevant project management processes and important concepts that you will need to know going into the PMP Examination.

I hope that you’ve liked reading this guide so far! Please leave your comments and requests, they mean a lot to me!

Ook, Road Chimp Signing out!