Chapter 1 Development Projects that are Transforming Africa 1 President Obama Signs the Program Management

Improvement and Accountability Act 8 London’s Crossrail: Europe’s Largest Construction Project 10 MegaTech, Inc. 30 The IT Department at Hamelin Hospital 30 Disney’s Expedition Everest 31 “Throwing Good Money after Bad”: the BBC’s Digital

Media Initiative 32

Chapter 2 The Airbus A 380: A Failure of Strategy? 38 Electronic Arts and the Power of Strong Culture in Design

Teams 67 Rolls-Royce Corporation 71 Classic Case: Paradise Lost—The Xerox Alto 72 Project Task Estimation and the Culture of “Gotcha!” 73 Widgets ’R Us 73

Chapter 3 Project Selection Procedures: A Cross-Industry Sampler 80 Project Selection and Screening at GE: The Tollgate Process 100 Keflavik Paper Company 115 Project Selection at Nova Western, Inc. 116

Chapter 4 NASA Taps a Leader with the Right Stuff to Run Their Mars

2020 Project 120 Leading by Example for the London Olympics—Sir John

Armitt 131 The Challenge of Managing Internationally 138 Brazilian Construction Giant Caught in Wide-Spread

Corruption Scandal 143 In Search of Effective Project Managers 146 Finding the Emotional Intelligence to Be a Real Leader 147 Volkswagen and It’s Project to Cheat Emissions Tests 147 Problems with John 149

Chapter 5 Berlin’s Brandenburg Willy Brandt International Airport 156 Statements of Work: Then and Now 164 Defining a Project Work Package 174 Nicaragua’s Canal and Sustainability Challenges 185 Boeing’s Virtual Fence 188 California’s High-Speed Rail Project 190 Project Management at Dotcom.com 192 The Expeditionary Fighting Vehicle 193

Chapter 6 Team-Building Events – Heli-skiing and Zombie

Apocalypses 203 Tele-Immersion Technology Eases the Use of Virtual

Teams 220 Engineers Without Borders: Project Teams Impacting

Lives 225 Columbus Instruments 232 The Bean Counter and the Cowboy 233 Johnson & Rogers Software Engineering, Inc. 234

Chapter 7 Samsung’s Galaxy Note 7 – Failure to Manage a New

Product for Risk 241 Japan Decommissions a $9 Billion Nuclear Reactor That was

Hardly Used 248 Collapse of Shanghai Apartment Building 257 Classic Case: de Havilland’s Falling Comet 263 The Building that Melted Cars 266 Classic Case: Tacoma Narrows Suspension Bridge 267

Chapter 8 New York City’s Second Avenue Subway—Two Miles

Completed for Only $5 Billion Spent 274 The Hidden Costs of Infrastructure Projects—The Case of

Building Dams 303 Sochi Olympics—What’s the Cost of National Prestige? 305

Chapter 9 Preparing for a Major Golf Tournament—It’s a Long Road to

the First Tee 313 Moving the Historic Capen House 345

Chapter 10 Kiruna, Sweden—A Town on the Move! 350 Project Scheduling at Blanque Cheque Construction (A) 379 Project Scheduling at Blanque Cheque Construction (B) 380

Chapter 11 General Electric—Using Agile Methods to Speed New

Product Delivery 387 Eli Lilly Pharmaceuticals and Its Commitment to Critical

Chain Project Management 405 It’s an Agile World 416 Ramstein Products, Inc. 417

Chapter 12 Environmental Concerns and Political Leadership Impact

Fossil Fuel Project Cancellations 420 The Problems of Multitasking 446 “First Come, First Served”: Resource Challenges For Sunrise

Restoration 447

Chapter 13 U.S. Army Can’t Track Spending on its Spending Tracker

Project 452 Earned Value at Northrop Grumman 471 The IT Department at Kimble College 483 The Superconducting Supercollider 484 “Dear Mr. President—Please Cancel our Project!”: The

Honolulu Elevated Rail Project 485

Chapter 14 Amazon’s Golden Touch Fails with a High-Tech Gadget 496 Aftermath of a “Feeding Frenzy”: Dubai and Cancelled

Construction Projects 508 New Jersey Kills Hudson River Tunnel Project 516 The Project That Wouldn’t Die 517 The Navy Struggles to Avoid Cancellation of its Littoral

Combat Ship Program 518

CVR_PINT0332_06_SE_IFC copy.indd 1 11/15/17 8:38 PM

Project ManageMent achieving coMPetitive advantage

Jeffrey K. Pinto Pennsylvania State University

New York, NY

F i f t h E d i t i o n

A01_PINT0332_06_SE_FM.indd 1 11/15/17 2:47 PM

To Mary Beth, my wife and best friend, with the most profound thanks and love for her unwavering support. And, to our children, Emily, AJ, and Joseph—three “projects” that are

definitely over budget but that are performing far better than I could have hoped!

Vice President, Business, Economics, and UK Courseware: Donna Battista

Director of Portfolio Management: Stephanie Wall Director, Courseware Portfolio Management:

Ashley Dodge Senior Sponsoring Editor: Neeraj Bhalla Editorial Assistant: Linda Albeli Vice President, Product Marketing: Roxanne McCarley Product Marketer: Kaylee McCarley Product Marketing Assistant: Marianela Silvestri Manager of Field Marketing, Business Publishing:

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iii

BRIEF CONTENTS

Preface xiii

Chapter 1 Introduction: Why Project Management? 1 Chapter 2 The Organizational Context: Strategy, Structure, and Culture 38 Chapter 3 Project Selection and Portfolio Management 80 Chapter 4 Leadership and the Project Manager 120 Chapter 5 Scope Management 156 Chapter 6 Project Team Building, Conflict, and Negotiation 203 Chapter 7 Risk Management 241 Chapter 8 Cost Estimation and Budgeting 274 Chapter 9 Project Scheduling: Networks, Duration Estimation, and Critical

Path 313 Chapter 10 Project Scheduling: Lagging, Crashing, and Activity Networks 350 Chapter 11 Advanced Topics in Planning and Scheduling: Agile and Critical

Chain 386 Chapter 12 Resource Management 420 Chapter 13 Project Evaluation and Control 452 Chapter 14 Project Closeout and Termination 496

Appendix A The Cumulative Standard Normal Distribution 528 Appendix B Tutorial for MS Project 2016 529 Appendix C Project Plan Template 539 Glossary 543 Company Index 553 Name Index 555 Subject Index 559

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iv

CONTENTS

Preface xiii

Chapter 1 INTRODUCTION: WHY PROJECT MANAGEMENT? 1 PROJECT PROFILE: Development Projects that are Transforming Africa 1

The Need for Projects 3 What is a Project? 3

General Project Characteristics 5 PROJECT PROFILE: President Obama Signs the Program Management Improvement

and Accountability Act 8

Why are Projects Important? 9 PROJECT PROFILE: London’s Crossrail: Europe’s Largest Construction Project 10

Project Life Cycles 12 ? BOX 1.1: Project Managers in Practice 14

Determinants of Project Success 15

? BOX 1.2: Project Management Research in Brief 18

Developing Project Management Maturity 19 Employability Skills 23

Communication 23 Critical Thinking 23 Collaboration 23 Knowledge Application And Analysis 23 Business Ethics And Social Responsibility 23 Information Technology Application And Computing Skills 24 Data Literacy 24

Project Elements and Text Organization 24 Summary 28 • Key Terms 29 • Discussion Questions 29 Case Study 1.1 MegaTech, Inc. 30 • Case Study 1.2 The IT Department at Hamelin Hospital 30 • Case Study 1.3 Disney’s Expedition Everest 31 • Case Study 1.4 “Throwing Good Money after Bad”: the BBC’s Digital Media Initiative 32 • Internet Exercises 35 • PMP Certification Sample Questions 35 • Answers 35 • Notes 35

Chapter 2 THE ORGANIZATIONAL CONTEXT: STRATEGY, STRUCTURE, AND CULTURE? 38

PROJECT PROFILE: The Airbus A 380: A Failure of Strategy? 38

Implementing Strategy Through Projects 40 Projects and Organizational Strategy 41 Stakeholder Management 43

Identifying Project Stakeholders 44 Managing Stakeholders 47

Organizational Structure 49 Forms of Organizational Structure 50 Functional Organizations 50 Project Organizations 53 Matrix Organizations 54 Moving to Heavyweight Project Organizations 57

? BOX 2.1: Project Management Research in Brief 58 Project Management Offices 59

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Contents v

Organizational Culture 62 How Do Cultures Form? 64 Organizational Culture and Project Management 66 PROJECT PROFILE: Electronic Arts and the Power of Strong Culture in Design Teams 67

Summary 68 • Key Terms 70 • Discussion Questions 70 • Case Study 2.1 Rolls-Royce Corporation 71 • Case Study 2.2 Classic Case: Paradise Lost—The Xerox Alto 72 • Case Study 2.3 Project Task Esti- mation and the Culture of “Gotcha!” 73 • Case Study 2.4 Widgets ’R Us 73 • Internet Exercises 74 • PMP Certification Sample Questions 74 • Answers 75 • Integrated Project—Building Your Project Plan 76 • Notes 78

? Chapter?3? PROJECT?SELECTION?AND?PORTFOLIO?MANAGEMENT? 80 PROJECT PROFILE: Project Selection Procedures: A Cross-Industry Sampler 80

Introduction: Project Selection 81 Approaches to Project Screening and Selection 84

Method One: Checklist Model 84 Method Two: Simplified Scoring Models 85 Limitations of Scoring Models 87 Method Three: The Analytical Hierarchy Process 88 Method Four: Profile Models 91

Financial Models 93 Payback Period 94 Net Present Value 95 Discounted Payback 97 Internal Rate of Return 97 Choosing a Project Selection Approach 99 PROJECT PROFILE: Project Selection and Screening at GE: The Tollgate Process 100

Project Portfolio Management 101 Objectives and Initiatives 102 The Portfolio Selection Process 103 Developing a Proactive Portfolio 105 Keys to Successful Project Portfolio Management 108 Problems in Implementing Portfolio Management 108

Summary 110 • Key Terms 111 • Solved Problems 111 • Discussion Questions 112 • Problems 112 • Case Study 3.1 Keflavik Paper Company 115 • Case Study 3.2 Project Selection at Nova Western, Inc. 116 • Internet Exercises 118 • Notes 118

? Chapter?4? LEADERSHIP?AND?THE?PROJECT?MANAGER? 120 PROJECT PROFILE: NASA Taps a Leader with the Right Stuff to Run Their Mars

2020 Project 120

Introduction: Successful Projects Need Leaders 122 Leaders Versus Managers 122 How the Project Manager Leads 124

Acquiring Project Resources 124 Motivating and Building Teams 125 Having a Vision and Fighting Fires 125 Communicating 126

? BOX 4.1: Project Management Research in Brief 129 Traits of Effective Project Leaders 129

Conclusions about Project Leaders 130

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vi Contents

PROJECT PROFILE: Leading by Example for the London Olympics—Sir John Armitt 131

Project Champions 132 Champions—Who Are They? 133 What Do Champions Do? 134 How to Make a Champion 135

The New Project Leadership 136

? BOX 4.2: Project Managers in Practice 137 PROJECT PROFILE: The Challenge of Managing Internationally 138

Project Management Professionalism 138 Project Management and Ethics 140

Unethical Behaviors in Project Management 142 PROJECT PROFILE: Brazilian Construction Giant Caught in Wide-Spread

Corruption Scandal 143 Summary 144 • Key Terms 145 • Discussion Questions 146 • Case Study 4.1 In Search of Effective Project Managers 146 • Case Study 4.2 Finding the Emotional Intelligence to Be a Real Leader 147 • Case Study 4.3 Volkswagen and Its Project to Cheat Emissions Tests 147 • Case Study 4.4 Problems with John 149 • Internet Exercises 152 • PMP Certification Sample Questions 152 • Answers 153 • Notes 153

Chapter 5 SCOPE MANAGEMENT 156 PROJECT PROFILE: Berlin’s Brandenburg Willy Brandt International Airport 156

Introduction: The Importance of Scope Management 158 Conceptual Development 158

The Statement of Work 161 The Project Charter 164 PROJECT PROFILE: Statements of Work: Then and Now 164

The Scope Statement 164 The Work Breakdown Structure 165 Purposes of the Work Breakdown Structure 165 The Organization Breakdown Structure 170 The Responsibility Assignment Matrix 173 PROJECT PROFILE: Defining a Project Work Package 174

Work Authorization 175 Scope Reporting 176

? BOX 5.1: Project Management Research in Brief 177 Control Systems 178

Configuration Management 179 Project Closeout 180 Project Management and Sustainability 181

Managing Projects for Sustainability 183 PROJECT PROFILE: Nicaragua’s Canal and Sustainability Challenges 185

Summary 186 • Key Terms 187 • Discussion Questions 188 • Problems 188 • Case Study 5.1 Boeing’s Virtual Fence 188 • Case Study 5.2 California’s High-Speed Rail Project 190 • Case Study 5.3 Project Management at Dotcom.com 192 • Case Study 5.4 The Expeditionary Fighting Vehicle 193 • Internet Exercises 195 • PMP Certification Sample Questions 195 • Answers 196 • MS Project Exercises 196 • Appendix 5.1: Sample Project Charter 196 • Integrated Project—Developing the Work Breakdown Structure 199 • Notes 200

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Contents vii

? Chapter?6? PROJECT?TEAM?BUILDING,?CONFLICT,?AND?NEGOTIATION? 203 PROJECT PROFILE: Team-Building Events – Heli-skiing and Zombie Apocalypses 203

Introduction 205 Building the Project Team 205

Identify Necessary Skill Sets 205 Identify People Who have the required Skills 206 Talk to Potential Team Members and Negotiate with Functional

Heads 207 Build in Fallback Positions 207 Assemble the Team 208

Characteristics of Effective Project Teams 208 A Clear Sense of Mission 208 A Productive Interdependency 209 Cohesiveness 209 Trust 209 Enthusiasm 210 Results Orientation 210

Reasons Why Teams Fail 210 Poorly Developed or Unclear Goals 211 Poorly Defined Project Team Roles and Interdependencies 211 Lack of Project Team Motivation 211 Poor Communication 212 Poor Leadership 212 Turnover Among Project Team Members 212 Dysfunctional Behavior 212

Stages in Group Development 213 Stage One: Forming 213 Stage Two: Storming 214 Stage Three: Norming 214 Stage Four: Performing 214 Stage Five: Adjourning 214 Punctuated Equilibrium 215

Achieving Cross-Functional Cooperation 216 Superordinate Goals 216 Rules and Procedures 217 Physical Proximity 217 Accessibility 217 Outcomes of Cooperation: Task and Psychosocial Results 218

Virtual Project Teams 218 PROJECT PROFILE: Tele-Immersion Technology Eases the Use of Virtual Teams 220

Conflict Management 221 What Is Conflict? 221 Sources of Conflict 222 Methods for Resolving Conflict 224 PROJECT PROFILE: Engineers Without Borders: Project Teams Impacting Lives 225

Negotiation 226 Questions to Ask Prior to the Negotiation 226 Principled Negotiation 227 Invent Options for Mutual Gain 229

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viii Contents

Insist on Using Objective Criteria 230 Summary 231 • Key Terms 232 • Discussion Questions 232 Case Study 6.1 Columbus Instruments 232 • Case Study 6.2 The Bean Counter and the Cowboy 233 • Case Study 6.3 Johnson & Rogers Software Engineering, Inc. 234 • Exercise in Negotiation 236 • Internet Exercises 237 • PMP Certification Sample Questions 237 • Answers 238 • Notes 238

Chapter 7 RISK MANAGEMENT 241 PROJECT PROFILE: Samsung’s Galaxy Note 7—Failure to Manage a New Product for Risk 241

Introduction: What is Project Risk? 243

? BOX 7.1: Project Managers in Practice 245 Risk Management: A Four-Stage Process 246

Risk Identification 246 PROJECT PROFILE: Japan Decommissions a $9 Billion Nuclear Reactor that

was Hardly Used 248

Risk Breakdown Structures 249 Analysis of Probability and Consequences 249 Risk Mitigation Strategies 252 Use of Contingency Reserves 254 Other Mitigation Strategies 255 Control and Documentation 255 PROJECT PROFILE: Collapse of Shanghai Apartment Building 257

Project Risk Management: An Integrated Approach 259 Summary 261 • Key Terms 262 • Solved Problem 262 • Discussion Questions 262 • Problems 262 • Case Study 7.1 Classic Case: de Havilland’s Falling Comet 263 • Case Study 7.2 The Building that Melted Cars 266 • Case Study 7.3 Classic Case: Tacoma Narrows Suspension Bridge 267 • Internet Exercises 269 • PMP Certification Sample Questions 269 • Answers 270 • Integrated Project—Project Risk Assessment 271 • Notes 273

Chapter?8? COST?ESTIMATION?AND?BUDGETING? 274 PROJECT PROFILE: New York City’s Second Avenue Subway – Two Miles Completed for

Only $5 Billion Spent 274

Cost Management 276 Direct Versus Indirect Costs 277 Recurring Versus Nonrecurring Costs 278 Fixed Versus Variable Costs 279 Normal Versus Expedited Costs 279

Cost Estimation 279 Learning Curves in Cost Estimation 283 Software Project Estimation—Function Points 286

? BOX 8.1: Project Management Research in Brief 287 Problems with Cost Estimation 289

? BOX 8.2: Project Management Research in Brief 290 Creating a Project Budget 291

Top-Down Budgeting 292 Bottom-Up Budgeting 293 Activity-Based Costing 293

Developing Budget Contingencies 295 Summary 297 • Key Terms 298 • Solved Problems 298 • Discussion Questions 299 • Problems 300 • Case Study 8.1 The Hidden Costs of

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Infrastructure Projects—The Case of Building Dams 303 • Case Study 8.2 Sochi Olympics—What’s the Cost of National Prestige? 305 • Internet Exercises 307 • PMP Certification Sample Questions 307 • Answers 308 • Integrated Project—Developing the Cost Estimates and Budget 309 • Notes 311

Chapter 9 PROJECT SCHEDULING: NETWORKS, DURATION ESTIMATION, AND?CRITICAL?PATH? 313

PROJECT PROFILE: Preparing for a Major Golf Tournament – It’s a Long Road to the First Tee 313

Introduction 315 Project Scheduling 315 Key Scheduling Terminology 317 Developing A Network 319

Labeling Nodes 319 Serial Activities 320 Concurrent Activities 320 Merge Activities 321 Burst Activities 321

Duration Estimation 324 Constructing the Critical Path 328

Calculating the Network 328 The Forward Pass 329 The Backward Pass 331 Probability of Project Completion 333 Laddering Activities 335 Hammock Activities 336 Options for Reducing the Critical Path 337

? BOX 9.1: Project Management Research in Brief 338 Summary 339 • Key Terms 340 • Solved Problems 340 • Discussion Questions 342 • Problems 342 • Case Study 9.1 Moving the Historic Capen House 345 • Internet Exercises 347 • MS Project Exercises 347 • Answers 348 • PMP Certification Sample Questions 348 • Notes 349

Chapter?10?? PROJECT?SCHEDULING:?LAGGING,?CRASHING,?AND?ACTIVITY? NETWORKS? 350

PROJECT PROFILE: Kiruna, Sweden – A Town on the Move! 350

Introduction 352 Lags in Precedence Relationships 352

Finish to Start 352 Finish to Finish 353 Start to Start 353 Start to Finish 354

Gantt Charts 355 Adding Resources to Gantt Charts 356 Incorporating Lags in Gantt Charts 357

? BOX 10.1: Project Managers in Practice 357 Crashing Projects 359

Options for Accelerating Projects 359 Crashing the Project: Budget Effects 364

Contents ix

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Activity-On-Arrow Networks 367 How Are They Different? 367 AOA Versus AON 372

Controversies in the Use of Networks 373 Conclusions 374

Summary 375 • Key Terms 375 • Solved Problems 376 • Discussion Questions 377 • Problems 377 • Case Study 10.1 Project Scheduling at Blanque Cheque Construction (A) 379 • Case Study 10.2 Project Scheduling at Blanque Cheque Construction (B) 380 • MS Project Exercises 380 • PMP Certification Sample Questions 381 • Answers 382 • Integrated Project—Developing the Project Schedule 383 • Notes 384

?Chapter?11? ADVANCED?TOPICS?IN?PLANNING?AND?SCHEDULING:? ?AGILE AND CRITICAL?CHAIN? 386

PROJECT PROFILE: General Electric – Using Agile Methods to Speed New Project Delivery 387

Introduction 387 Agile Project Management 388

What Is Unique About Agile PM? 389 Tasks Versus Stories 391 Key Terms in Agile PM 391 Steps in Agile 393 Sprint Planning 393 Daily Scrums 393 The Development Work 394 Sprint Reviews 394 Sprint Retrospective 395 Keys to Success with Agile 395 Problems with Agile 396

? BOX 11.1: Project Management Research in Brief 397 Extreme Programming (XP) 397 Theory of Constraints and Critical Chain Project Scheduling 398

Theory of Constraints 398 The Critical Chain Solution to Project Scheduling 399

Developing the Critical Chain Activity Network 402 Critical Chain Solutions Versus Critical Path Solutions 404 PROJECT PROFILE: Eli Lilly Pharmaceuticals and Its Commitment to Critical Chain Project

Management 405

Critical Chain Solutions to Resource Conflicts 406 Critical Chain Project Portfolio Management 407

? BOX 11.2: Project Management Research in Brief 410 Critiques of CCPM 411

Summary 411 • Key Terms 413 • Solved Problem 413 • D iscussion Questions 414 • Problems 414 • Case Study 11.1 It’s an Agile World 416 • Case Study 11.2 Ramstein Products, Inc. 417 • Internet Exercises 418 • Notes 418

?Chapter?12? RESOURCE?MANAGEMENT? 420 PROJECT PROFILE: Environmental Concerns and Political Leadership Impact Fossil Fuel

Project Cancellations 420

Introduction 422 The Basics of Resource Constraints 422

Time and Resource Scarcity 423

x Contents

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Resource Loading 425 Resource Leveling 426

Step One: Develop the Resource-Loading Table 430 Step Two: Determine Activity Late Finish Dates 430 Step Three: Identify Resource Overallocation 432 Step Four: Level the Resource-Loading Table 432

Resource-Loading Charts 435

? BOX 12.1: Project Managers in Practice 438 Managing Resources in Multiproject Environments 439

Schedule Slippage 439 Resource Utilization 439 In-Process Inventory 440 Resolving Resource Decisions in Multiproject Environments 440

Summary 442 • Key Terms 443 • Solved Problem 443 • Discussion Questions 444 • Problems 444 • Case Study 12.1 The Problems of Multitasking 446 • Case Study 12.2 “First Come, First Served”: Resource Challenges for Sunrise Restoration† 447 • Internet Exercises 448 MS Project Exercises 448 • PMP Certification Sample Questions 449 • Answers 450 • Integrated Project—Managing Your Project’s Resources 451 • Notes 451

?Chapter?13? PROJECT?EVALUATION?AND?CONTROL? 452 PROJECT PROFILE: U.S. Army Can’t Track Spending on its Spending Tracker Project 452

Introduction 453 Control Cycles—A General Model 454 Monitoring Project Performance 454

The Project S-Curve: A Basic Tool 455 S-Curve Drawbacks 457 Milestone Analysis 457 Problems with Milestones 459 The Tracking Gantt Chart 459 Benefits and Drawbacks of Tracking Gantt Charts 460

Earned Value Management 460 Terminology for Earned Value 461 Creating Project Baselines 462 Why Use Earned Value? 462 Steps in Earned Value Management 464 Assessing a Project’s Earned Value 465

Using Earned Value to Manage a Portfolio of Projects 470 Flow of Earned Value System 470 PROJECT PROFILE: Earned Value at Northrop Grumman 471

Issues in the Effective Use of Earned Value Management 472 Human Factors in Project Evaluation and Control 474

Critical Success Factor Definitions 476 Conclusions 477

Summary 478 • Key Terms 479 • Solved Problem 479 • Discussion Questions 480 • Problems 481 • Case Study 13.1 The IT Department at Kimble College 483 • Case Study 13.2 The Superconducting S upercollider 484 • Case Study 13.3 “Dear Mr. President—Please cancel our project!”: The Honolulu Elevated Rail Project 485 • Internet Exercises 487 • MS Project Exercises 487 • PMP Certification Sample Questions 488 • Answers 489 • Appendix 13.1: Earned Schedule 489 • Notes 494

Contents xi

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Chapter 14 PROJECT CLOSEOUT AND TERMINATION 496 PROJECT PROFILE: Amazon’s Golden Touch Fails with a High-Tech Gadget 496

Introduction 497 Types of Project Termination 498

? BOX 14.1: Project Managers in Practice 498 Natural Termination—the Closeout Process 500

Finishing the Work …

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