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PROJECT
MANAGEMENT
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Dr. Kerzner’s 16 Points to Project
Management Maturity
1. Adopt a project management methodology and use it consistently.
2. Implement a philosophy that drives the company toward project
management maturity and communicate it to everyone.
3. Commit to developing effective plans at the beginning of each project.
4. Minimize scope changes by committing to realistic objectives.
5. Recognize that cost and schedule management are inseparable.
6. Select the right person as the project manager.
7. Provide executives with project sponsor information, not project
management information.
8. Strengthen involvement and support of line management.
9. Focus on deliverables rather than resources.
10. Cultivate effective communication, cooperation, and trust to achieve
rapid project management maturity.
11. Share recognition for project success with the entire project team and
line management.
12. Eliminate nonproductive meetings.
13. Focus on identifying and solving problems early, quickly, and cost
effectively.
14. Measure progress periodically.
15. Use project management software as a tool—not as a substitute for
effective planning or interpersonal skills.
16. Institute an all-employee training program with periodic updates based
upon documented lessons learned.
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PROJECT
MANAGEMENT
A Systems Approach to
Planning, Scheduling,
and Controlling
ELEVENTH EDITION
HAROLD
KERZNER,
Ph.D.
Senior Executive Director for Project Management
The International Institute for Learning
New York, New York
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Cover illustration: xiaoke ma/iStockphoto
This book is printed on acid-free paper.
Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any
means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under
Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA
01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should
be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax
(201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they
make no representations or warranties with the respect to the accuracy or completeness of the contents of this book and specifically
disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by
sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation.
You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for damages arising
herefrom.
For general information about our other products and services, please contact our Customer Care Department within the United
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Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print
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Library of Congress Cataloging-in-Publication Data:
Kerzner, Harold.
Project management : a systems approach to planning, scheduling, and controlling / Harold Kerzner, Ph. D. Senior Executive
Director for Project Management, the International Institute for Learning, New York, New York. — Eleventh edition.
pages cm
Includes bibliographical references and index.
ISBN 978-1-118-02227-6 (cloth); ISBN 978-1-118-41585-6 (ebk); ISBN 978-1-118-41855-0 (ebk); ISBN 978-1-118-43357-7
(ebk); ISBN 978-1-118-48322-0 (ebk); ISBN 978-1-118-48323-7 (ebk) 1. Project management. 2. Project management—Case
studies. I. Title.
HD69.P75K47 2013
658.4’04 —dc23
2012026239
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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To
Dr. Herman Krier,
my Friend and Guru,
who taught me well the
meaning of the word “persistence”
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Contents
Preface
1
xxiii
OVERVIEW
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
1.16
1.17
1.18
1.19
1.20
1.21
1.22
1.23
1
Introduction 1
Understanding Project Management 2
Defining Project Success 7
Success, Trade-Offs, and Competing Constraints 8
The Project Manager–Line Manager Interface 9
Defining the Project Manager’s Role 14
Defining the Functional Manager’s Role 15
Defining the Functional Employee’s Role 18
Defining the Executive’s Role 19
Working with Executives 19
Committee Sponsorship/Governance 20
The Project Manager as the Planning Agent 23
Project Champions 24
The Downside of Project Management 25
Project-Driven versus Non–Project-Driven Organizations 25
Marketing in the Project-Driven Organization 28
Classification of Projects 30
Location of the Project Manager 30
Differing Views of Project Management 32
Public-Sector Project Management 34
International Project Management 38
Concurrent Engineering: A Project Management Approach 38
Added Value 39
Studying Tips for the PMI® Project Management Certification Exam
Problems
40
42
Case Study
Williams Machine Tool Company
44
vii
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CONTENTS
2
PROJECT MANAGEMENT GROWTH: CONCEPTS
AND DEFINITIONS
47
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.15
2.16
2.17
2.18
2.19
2.20
2.21
2.22
Introduction 47
General Systems Management 48
Project Management: 1945–1960 48
Project Management: 1960–1985 49
Project Management: 1985–2012 55
Resistance to Change 59
Systems, Programs, and Projects: A Definition 64
Product versus Project Management: A Definition 66
Maturity and Excellence: A Definition 68
Informal Project Management: A Definition 69
The Many Faces of Success 70
The Many Faces of Failure 73
The Stage-Gate Process 76
Project Life Cycles 78
Gate Review Meetings (Project Closure) 83
Engagement Project Management 84
Project Management Methodologies: A Definition 85
Enterprise Project Management Methodologies 87
Methodologies Can Fail 91
Organizational Change Management and Corporate Cultures 94
Project Management Intellectual Property 100
Systems Thinking 101
Studying Tips for the PMI® Project Management Certification Exam
Problems
107
Case Study
Creating a Methodology 108
3
ORGANIZATIONAL STRUCTURES
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
111
Introduction 111
Organizational Work Flow 113
Traditional (Classical) Organization 114
Developing Work Integration Positions 117
Line-Staff Organization (Project Coordinator) 121
Pure Product (Projectized) Organization 122
Matrix Organizational Form 125
Modification of Matrix Structures 132
The Strong, Weak, or Balanced Matrix 136
Center for Project Management Expertise 136
Matrix Layering 137
104
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3.11
3.12
3.13
3.14
3.15
3.16
3.17
Selecting the Organizational Form 138
Structuring the Small Company 143
Strategic Business Unit (SBU) Project Management 146
Transitional Management 147
Barriers to Implementing Project Management in Emerging Markets 149
Seven Fallacies that Delay Project Management Maturity 156
Studying Tips for the PMI® Project Management Certification Exam 159
Problems
161
Case Studies
Jones and Shephard Accountants, Inc.
Coronado Communications 168
4
ORGANIZING AND STAFFING THE PROJECT OFFICE
AND TEAM
171
4.0
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
Introduction 171
The Staffing Environment 172
Selecting the Project Manager: An Executive Decision 174
Skill Requirements for Project and Program Managers 178
Special Cases in Project Manager Selection 184
Selecting the Wrong Project Manager 184
Next Generation Project Managers 188
Duties and Job Descriptions 189
The Organizational Staffing Process 193
The Project Office 199
The Functional Team 204
The Project Organizational Chart 205
Special Problems 208
Selecting the Project Management Implementation Team 210
Mistakes Made by Inexperienced Project Managers 213
Studying Tips for the PMI® Project Management Certification Exam
Problems
5
166
216
MANAGEMENT FUNCTIONS
5.0
5.1
5.2
5.3
5.4
5.5
5.6
223
Introduction 223
Controlling 225
Directing 225
Project Authority 230
Interpersonal Influences 237
Barriers to Project Team Development 240
Suggestions for Handling the Newly Formed Team 243
214
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CONTENTS
5.7
5.8
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16
5.17
5.18
5.19
5.20
5.21
5.22
5.23
5.24
5.25
5.26
5.27
5.28
5.29
5.30
Team Building as an Ongoing Process 246
Dysfunctions of a Team 247
Leadership in a Project Environment 250
Life-Cycle Leadership 252
Value-Based Project Leadership 255
Organizational Impact 257
Employee–Manager Problems 259
Management Pitfalls 262
Communications 265
Project Review Meetings 274
Project Management Bottlenecks 275
Cross-Cutting Skills 276
Active Listening 277
Project Problem-Solving 278
Brainstorming 288
Project Decision-Making 293
Predicting the Outcome of a Decision 301
Facilitation 303
Handling Negative Team Dynamics 306
Communication Traps 307
Proverbs and Laws 309
Human Behavior Education 311
Management Policies and Procedures 312
Studying Tips for the PMI® Project Management Certification Exam 313
Problems 318
Case Studies
The Trophy Project 327
Communication Failures 329
McRoy Aerospace 332
The Poor Worker 333
The Prima Donna 334
The Team Meeting 335
Leadership Effectiveness (A) 337
Leadership Effectiveness (B) 341
Motivational Questionnaire 347
6
MANAGEMENT OF YOUR TIME AND STRESS
6.0
6.1
6.2
6.3
Introduction 355
Understanding Time Management 356
Time Robbers 356
Time Management Forms 358
355

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6.4
6.5
6.6
Effective Time Management 359
Stress and Burnout 360
Studying Tips for the PMI® Project Management Certification Exam 362
Problems
363
Case Study
The Reluctant Workers
7
CONFLICTS
7.0
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
364
365
Introduction 365
Objectives 366
The Conflict Environment 367
Types of Conflicts 368
Conflict Resolution 371
Understanding Superior, Subordinate, and Functional Conflicts 372
The Management of Conflicts 374
Conflict Resolution Modes 375
Studying Tips for the PMI® Project Management Certification Exam 377
Problems
379
Case Studies
Facilities Scheduling at Mayer Manufacturing 382
Telestar International 383
Handling Conflict in Project Management 384
8
SPECIAL TOPICS
8.0
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
8.10
8.11
8.12
8.13
391
Introduction 392
Performance Measurement 392
Financial Compensation and Rewards 399
Critical Issues with Rewarding Project Teams 405
Effective Project Management in the Small Business Organization 408
Mega Projects 410
Morality, Ethics, and the Corporate Culture 411
Professional Responsibilities 414
Internal Partnerships 417
External Partnerships 418
Training and Education 420
Integrated Product/Project Teams 422
Virtual Project Teams 424
Breakthrough Projects 427
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8.14 Managing Innovation Projects 427
8.15 Agile Project Management 430
8.16 Studying Tips for the PMI® Project Management Certification Exam 431
Problems
437
Case Study
Is It Fraud? 440
9
THE VARIABLES FOR SUCCESS
9.0
9.1
9.2
9.3
9.4
9.5
9.6
9.7
443
Introduction 443
Predicting Project Success 444
Project Management Effectiveness 448
Expectations 449
Lessons Learned 450
Understanding Best Practices 451
Best Practices versus Proven Practices 458
Studying Tips for the PMI® Project Management Certification Exam
Problems
459
460
Case Study
Radiance International 460
10
WORKING WITH EXECUTIVES
10.0
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
463
Introduction 463
The Project Sponsor 464
Handling Disagreements with the Sponsor 474
The Collective Belief 475
The Exit Champion 476
The In-House Representatives 477
Stakeholder Relations Management 478
Politics 486
Studying Tips for the PMI® Project Management Certification Exam 487
Problems
488
Case Studies
Corwin Corporation 491
The Prioritization of Projects 499
The Irresponsible Sponsors 500
Selling Executives on Project Management
502
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Contents
11
PLANNING
11.0
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
11.9
11.10
11.11
11.12
11.13
11.14
11.15
11.16
11.17
11.17
11.19
11.20
11.21
11.22
11.23
11.24
11.25
11.26
11.27
11.28
11.29
11.30
11.31
11.32
11.33
11.34
11.35
11.36
Introduction 505
Validating the Assumptions 508
Validating the Objectives 509
General Planning 510
Life-Cycle Phases 513
Proposal Preparation 516
Kickoff Meetings 516
Understanding Participants’ Roles 519
Project Planning 519
The Statement of Work 521
Project Specifications 526
Milestone Schedules 528
Work Breakdown Structure 529
WBS Decomposition Problems 536
Work Breakdown Structure Dictionary 540
Role of the Executive in Project Selection 541
Role of the Executive in Planning 546
The Planning Cycle 546
Work Planning Authorization 547
Why Do Plans Fail? 548
Stopping Projects 549
Handling Project Phaseouts and Transfers 550
Detailed Schedules and Charts 551
Master Production Scheduling 554
Project Plan 556
Total Project Planning 561
The Project Charter 565
Project Baselines 566
Verification and Validation 570
Requirements Traceability Matrix 571
Management Control 572
The Project Manager–Line Manager Interface 575
Fast-Tracking 577
Configuration Management 578
Enterprise Project Management Methodologies 579
Project Audits 582
Studying Tips for the PMI® Project Management Certification Exam 583
Problems
12
505
586
NETWORK SCHEDULING TECHNIQUES
12.0 Introduction 597
12.1 Network Fundamentals
600
597
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12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10
12.11
12.12
12.13
12.14
12.15
12.16
12.17
12.18
12.19
12.20
12.21
Graphical Evaluation and Review Technique (GERT) 604
Dependencies 605
Slack Time 606
Network Replanning 612
Estimating Activity Time 616
Estimating Total Project Time 617
Total PERT/CPM Planning 618
Crash Times 620
PERT/CPM Problem Areas 623
Alternative PERT/CPM Models 626
Precedence Networks 627
Lag 630
Scheduling Problems 632
The Myths of Schedule Compression 632
Understanding Project Management Software 634
Software Features Offered 634
Software Classification 636
Implementation Problems 637
Critical Chain 638
Studying Tips for the PMI® Project Management Certification Exam
Problems
640
643
Case Studies
Crosby Manufacturing Corporation
The Invisible Sponsor 658
13
PROJECT GRAPHICS
13.0
13.1
13.2
13.3
13.4
13.5
661
Introduction 661
Customer Reporting 662
Bar (Gantt) Chart 663
Other Conventional Presentation Techniques 670
Logic Diagrams/Networks 673
Studying Tips for the PMI® Project Management Certification Exam
Problems
14
675
PRICING AND ESTIMATING
14.0
14.1
14.2
14.3
14.4
14.5
656
677
Introduction 677
Global Pricing Strategies 678
Types of Estimates 679
Pricing Process 682
Organizational Input Requirements
Labor Distributions 686
684
674
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14.6
14.7
14.8
14.9
14.10
14.11
14.12
14.13
14.14
14.15
14.16
14.17
14.18
14.19
14.20
14.21
14.22
14.23
14.24
14.25
14.26
14.27
14.28
14.29
14.30
Overhead Rates 690
Materials/Support Costs 692
Pricing Out the Work 695
Smoothing Out Department Man-Hours 696
The Pricing Review Procedure 698
Systems Pricing 700
Developing the Supporting/Backup Costs 701
The Low-Bidder Dilemma 705
Special Problems 705
Estimating Pitfalls 706
Estimating High-Risk Projects 707
Project Risks 708
The Disaster of Applying the 10 Percent Solution to Project Estimates
Life-Cycle Costing (LCC) 714
Logistics Support 719
Economic Project Selection Criteria: Capital Budgeting 720
Payback Period 720
The Time Value of Money 721
Net Present Value (NPV) 722
Internal Rate of Return (IRR) 723
Comparing IRR, NPV, and Payback 724
Risk Analysis 724
Capital Rationing 725
Project Financing 726
Studying Tips for the PMI® Project Management Certification Exam
Problems
730
Case Study
The Estimating Problem
15
COST CONTROL
15.0
15.1
15.2
15.3
15.4
15.5
15.6
15.7
15.8
15.9
15.10
15.11
734
737
Introduction 737
Understanding Control 741
The Operating Cycle 744
Cost Account Codes 745
Budgets 750
The Earned Value Measurement System (EVMS) 752
Variance and Earned Value 754
The Cost Baseline 773
Justifying the Costs 775
The Cost Overrun Dilemma 778
Recording Material Costs Using Earned Value Measurement 779
The Material Accounting Criterion 782
712
728
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15.12
15.13
15.14
15.15
15.16
15.17
15.18
15.19
15.20
15.21
15.22
15.23
15.24
Material Variances: Price and Usage 783
Summary Variances 784
Status Reporting 785
Cost Control Problems 792
Project Management Information Systems 793
Enterprise Resource Planning 793
Project Metrics 794
Key Performance Indicators 800
Value-Based Metrics 806
Dashboards and Scorecards 812
Business Intelligence 815
Infographics 816
Studying Tips for the PMI® Project Management Certification Exam 816
Problems
820
Case Studies
The Bathtub Period 838
Franklin Electronics 839
Trouble in Paradise 841
16
TRADE-OFF ANALYSIS IN A PROJECT ENVIRONMENT
16.0
16.1
16.2
16.3
16.4
16.5
17
Introduction 845
Methodology for Trade-Off Analysis 848
Contracts: Their Influence on Projects 865
Industry Trade-Off Preferences 866
Conclusion 869
Studying Tips for the PMI® Project Management
Certification Exam 869
RISK MANAGEMENT
17.0
17.1
17.2
17.3
17.4
17.5
17.6
17.7
17.8
17.9
17.10
17.11
17.12
845
871
Introduction 872
Definition of Risk 873
Tolerance for Risk 875
Definition of Risk Management 876
Certainty, Risk, and Uncertainty 877
Risk Management Process 883
Plan Risk Management (11.1) 884
Risk Identification (11.2) 885
Risk Analysis (11.3, 11.4) 892
Qualitative Risk Analysis (11.3) 897
Quantitative Risk Analysis (11.4) 903
Probability Distributions and the Monte Carlo Process 904
Plan Risk Response (11.5) 913
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17.13
17.14
17.15
17.16
17.17
17.18
17.19
Monitor and Control Risks (11.6) 919
Some Implementation Considerations 920
The Use of Lessons Learned 921
Dependencies Between Risks 925
The Impact of Risk Handling Measures 930
Risk and Concurrent Engineering 933
Studying Tips for the PMI® Project Management Certification Exam 936
Problems 940
Case Studies
Teloxy Engineering (A) 948
Teloxy Engineering (B) 948
The Risk Management Department 949
18
LEARNING CURVES
18.0
18.1
18.2
18.3
18.4
18.5
18.6
18.7
18.8
18.9
18.10
18.11
18.12
18.13
18.14
18.15
953
Introduction 953
General Theory 954
The Learning Curve Concept 954
Graphic Representation 956
Key Words Associated with Learning Curves 958
The Cumulative Average Curve 958
Sources of Experience 960
Developing Slope Measures 963
Unit Costs and Use of Midpoints 964
Selection of Learning Curves 965
Follow-On Orders 966
Manufacturing Breaks 966
Learning Curve Limitations 968
Prices and Experience 968
Competitive Weapon 970
Studying Tips f …
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