Project Management Steps

Like many things in life, project management is an art form as well as a science.  But fortunately also like most things in life, a strong knowledge of the science helps you practice the art form with considerably more skill.  Some people are naturally good at the art side of things, and if that’s you then excellent.  But even it’s not I believe that most people can become great project managers by learning and implementing the science.  The art, in fact, will come by itself.

In this article I will give you a crash course on the “science” of project management.

The Project Management Body of Knowledge

My reference will be the Project Management Body of Knowledge (PMBOK) by the Project Management Institute.  This is the standard for project management in most of the world.  In the UK the APM Body of Knowledge by the Association for Project Management is slightly more popular, but the content is very similar.

Project Phases

According to the PMBOK, projects are neatly divided into 5 phases:

1. Initiation
2. Planning
3. Execution
4. Monitoring & Controlling
5. Closing

These are called “process groups” instead of phases because they are the logical groupings of “processes” and they don’t necessarily happen in chronological order.  Generally they do, but sometimes projects occur in phases whereby you return back to the Initiation or Planning step midway.  For most projects, however, you can assume the five phases occur in chronological order with the exception of step 4, Monitoring & Controlling, which happens simultaneously with step 3, Execution.

Project Management Documents

In each phase the project manager, or their designate produces certain documents which assist them in managing the project and communicating the project information.  Because it is a textbook, the PMBOK mentions many specialty documents, but for most small projects a simple document list can look like this:

Phase	Document
Initiating	Project Charter
Planning	Project Management Plan
Execution	Project Status Reports Stakeholder communication Change Logs
Monitoring & Controlling	Variance Reports (earned value analysis) Change Logs
Closing	Project Closure Report

Step 1: Initiation

The first step in the PMBOK is the project initiation phase.   This phase includes the creation of the project and definition of lines of authority.  It is separate from planning.

There is only one major project management document that is created during the project initiation phase.

Phase	Document
Initiation	Project Charter

I have included the project charter in this article but in fact, for small projects you might not need it.  In the engineering firm I founded, it is pretty clear when we receive a project that the project is ready to start, funded, and who the major stakeholders are.  We have to assign a project manager internally, but this is also very clear so there is usually no formal project charter needed.  I believe the project charter applies mainly to projects which are being undertaken internally, by the same organization who is receiving the deliverables.

Step 2: Planning

The second step is planning the project, and it is tremendously underrated.  The Project Management Institute’s research over and over again suggests that problems could have been avoided with a little extra planning.

Once again, there is one major project management document that is generated during the planning phase, but unlike initiation it is a big one.

Phase	Document
Planning	Project Management Plan

The project management plan is the project manager’s guiding document.  It communicates to everyone, internal or external, how the project will be managed.  It includes the two all-important items of schedule and budget.

It is circulated to the project sponsor for approval, and then it becomes the official project plan.  Changes to the plan are required to be noted in the Change Log and reapproval from the project sponsor must be obtained.  I believe the four minimum essential parts of a functioning project management plan are as follows:

1. Scope statement.  This is a statement which identifies the work the project will perform, the deliverables it will produce, and the applicable boundaries of the project.
2. Work Breakdown Structure.  The WBS is a task breakdown of the project.  It can be a simple listing of tasks, or in graphical (fancy) format.
3. Project Schedule.  The project management plan must include a schedule.  For microprojects this could be as simple as a specified completion date, but for most projects a listing of completion dates for each task is the norm, or even better, a graphical bar chart showing the completion dates for each task.  Since projects, by definition, have a finite start and end date, the project schedule is a core component of the plan and must be specified.
4. Project Budget.  Again, since projects have a finite start and end date they must have a finite budget.  As a minimum, for microprojects you could specify a budget for the whole project, but ideally each task in the work breakdown structure has a cost associated with it, which in turn is rolled up into the overall project budget.

The following items can be added depending on the type and size of project, and its individual needs:

1. Critical Success Factors.  This is the definition of project success.  Usually meeting the deadline and coming in under budget are the top two, but most projects have others as well, like whether the client was satisfied or environmental regulations were met.
2. Quality Management Plan.  This is the component of the project management plan that defines quality.  It lists the minimum standards that the project must meet, how it will be obtained, and how it will be measured.  Almost every industry contains written quality standards which can be used as quality targets, like ISO 9001, ASTM, or IEEE.
3. Risk Management Plan.  This is the component of the project management plan that deals with risk.  Known potential risks are identified in a risk register, then prioritized based on the two variables of Likelihood and Impact, and response plans drawn up for those risks that pose a significant or existential threat to the project.
4. Human Resource Management Plan.  This component of the project management plan identifies the people requirements to complete the project, and specifies how they will be obtained and managed.
5. Communications Management Plan.  This component of the project management plan identifies the communications needs of the project.  It identifies the people and organizations that require regular communication updates and what those updates will contain.  For stakeholders that require ongoing informal communications, these requirements are spelled out in as much detail and possible.
6. Procurement Management Plan.  This component of the project management plan identifies the external purchasing needs of the project, how they will be acquired, and how the vendors will be managed.

Step 3: Execution

In this step the project deliverables are produced by the project team.

Naturally, the PMBOK cannot address the technical details of every project in every industry.  But there are several standard processes that happen during all projects which the project manager must be familiar with and apply to their project as necessary.

Phase	Document
Execution	Project Status Reports Stakeholder communication Change Logs

1. Manage Project Team.  The project team that is identified during the planning stage must be acquired and managed.  Training and development of the project team is continually assessed to ensure the team has the knowledge required to complete the project.
2. Perform Quality Assurance.  The project manager or project management team must audit and inspect the processes which are creating the deliverables, to ensure that the quality standards identified within the project management plan are achieved.
3. Manage Communications.  The important project communication, such as e-mail, letters, memos, updates, press releases, etc. are made and filed in the master project communication registry.
4. Conduct Procurements.  The vendors are secured and their work is managed as per the project management plan.
5. Manage Stakeholder Engagements.  The stakeholders’ expectations are actively managed to ensure they are satisfied with the results produced by the project.

As part of the project’s communications management plan, the project manager or their designate produces the applicable project updates and circulates them to the necessary stakeholders.  Often this includes the earned value data, which is part of the next step, Monitoring & Controlling.

Step 4:  Monitoring & Controlling

As mentioned earlier, this step occurs chronologically at the same time as step 3, Execution.

This is the step where project managers earn their money.  It separates the wheat from the chaffe.  If you want to be a good project manager, you need to read the following part very carefully and learn how to do it.

Phase	Document
Monitoring & Controlling	Variance Reports (earned value analysis) Change Logs

The earned value method calculates the project’s status on two fronts:

• Schedule (time)
• Cost

There are 7 steps to performing earned value analysis effectively.  It may seem like alot at first glance, but for small projects this takes five minutes once you learn how to do it:

1. Determine the percent complete of each task.
2. Determine Planned Value (PV).
3. Determine Earned Value (EV).
4. Obtain Actual Cost (AC).
5. Calculate Schedule Variance (SV).
6. Calculate Cost Variance (CV).
7. Compile the results.

Before you get started, the project manager must choose appropriate project “status points” at which time this calculation is performed.  Weekly status points work well for most projects, followed by a status meeting where the results are shared with the project team.  Whatever system you use make sure it is adhered to rigorously.

Determine Percent Complete

To start the process, the percentage complete of each task needs to be determined.  Whether you get the number from the project team or determine it yourself, each task in the project needs to be assigned a percent complete.

It is often advantageous to base it from some sort of repetitive metric, like the number of drawings complete, or number of piles driven.

Determine Planned Value (PV)

Planned Value, also known as Budgeted Cost of Work Scheduled (BCWS), is defined as the amount of the task that is supposed to have been completed.  It is in monetary terms as a portion of the task budget.  For example,

• The task budget is $5,000,
• The task start date is January 1, and
• The task finish date is January 10.

If it’s January 6 today, the task is supposed to be 60% complete.  PV = $5,000 x 60% = $3,000.

Determine Earned Value (EV)

Earned Value, also known as Budgeted Cost of Work Performed (BCWP), is the amount of the task that is actually complete.  It is, again, in monetary terms as a portion of the task budget.  For example,

• The task budget is $5,000, (same as above)
• The task start date is January 1, and (same as above)
• The task finish date is January 10.  (same as above)

Let’s say the actual percent complete of the task (step 1) is 40%.  EV = $5,000 x 40% = $2,000.

Obtain Actual Cost (AC)

The Actual Cost, also known as Actual Cost of Work Performed (ACWP), as you might guess, is the actual cost of the work.  Generally employee hours need to be converted into a cost, and all project costs need to be added up, such as the following items:

• Labor
• Materials
• Equipment
• Fixed cost items, like subcontractors

Since most projects have these well defined via accounting or project management software, I will not go into great detail here.  For the purposes of the next section, let’s say the actual cost of the example task is $1,500.

Calculate Schedule Variance (SV)

The Schedule Variance is the first earned value metric that is calculated.  It represents the schedule status of the project.

In our above example the schedule variance is:  SV = $2,000 – $3,000 = -$1,000.

A negative schedule variance means the task is behind schedule.  A positive schedule variance means it is ahead of schedule.  The amount can be compared to worker charge out rates or similar metrics to get an idea of how difficult it would be to recover.

Calculate Cost Variance (CV)

The Cost Variance represents the cost status of the project.

In our above example the cost variance is:  CV = $2,000 – $1,500 = $500.

A negative cost variance means the task is over budget.  A positive cost variance means it is under budget.

Compile the Results

Once the individual task SV’s and CV’s have been calculated, they need to be added up into overall project variances.  This represents the total variance of the project and can be reported to management, clients, and stakeholders.

Other Project Status Indicators

Although the SV and CV are the minimum requirement and work well for small projects, there are other variables that are derived from them which you might want to calculate:

• Schedule Performance Index (SPI):  The schedule variance expressed in percentage terms, for example, SPI = 1.3 means the project 30% ahead of schedule.
  SPI = EV / PV
• Cost Performance Index (CPI): The cost variance expressed in percentage terms, for example, CPI = 1.2 means the project is 20% under budget.
  CPI = EV / AC
• Estimate at Completion (EAC):  The expected budget at the end of the project given the variances that have already taken place.
  EAC = AC + BAC – EV
• Estimate to Complete (ETC):  The expected cost to finish the rest of the project.
  ETC = EAC – AC
• To Complete Performance Index (TCPI):  The required CPI necessary to finish the project right on budget.  For example, TCPI = 1.25 means you need to find 25% efficiencies to finish on budget.
  TCPI = (BAC – EV) / (BAC – AC)

Interpreting the Results

The earned value method is a fantastic way to get an early warning signal of project distress.  This is because it gives you up to the minute results.  The only restriction is up to date timesheets and expense reports from your project team.  But you can calculate the schedule and cost status to the exact minute your input data is valid.  I’ve seen many people track projects on spreadsheets or complex charts they hang on the wall, and I commend them for the effort.  But it really only takes a quick earned value calculation to find out if (and how far) the project is ahead or behind right up to the point of analysis, and no other method comes close to providing that critical early warning signal.

If SV is negative, you are behind schedule.  If the CV is negative, you are over budget.  With these two metrics, negative is bad and positive is good.

If SPI is below 1, you are behind schedule.  If CPI is below 1, you are over budget.  With these two metrics, less than 1.0 is bad and greater than 1.0 is good.

In our example the schedule variance was -$1,000 and the cost variance was $500.  This means that the project is behind schedule, but it is being performed efficiently and the tasks that were completed were under budget.  Check out our completely worked earned value example.

Step 5: Project Closing

Project closure is one of the most visible aspects of a project to senior managers and executives, yet it is also the phase that is most often skipped.  I realize that project budgets are often used up (or seriously stretched) in the final phases, but the visibility with clients, bosses, executives, and contractors is invaluable.

Closing the project is the fifth (and last) process group within the PMBOK.  As such, it contains the knowledge areas that are involved with closing well.

Phase	Document
Closing	Project Closure Report

Here is a list of items that most project have to deal with in order to finish well:

• Project Closure Report:  This report is specified by the PMBOK.  It includes final budget and schedule information, final scope statement, discussion of any scope changes, and lessons learned for future projects.
• Formal Closure:  The contract with the client must be closed and a completion certificate issued.
• Procurements:  Most sub-contracts will require a completion certificate to give assurances that work under the contract has been completed.
• Final Details:  Most projects must organize the project data in a format that can be referenced in the future, i.e. As-built plans, project document archives, and the like.
• Liabilities:  Warranties, insurance coverage, and bonds must be put in place as needed depending on the project.
• Release of Resources:  All project resources, such as people, equipment, and tools, must be formally released to their respective organizations.

All of these items should be scaled to the project size.  For example, a $4,000 environmental study might contain a memo which includes the final budget number and actual completion date, together with quick write-up of how the project went and any issues encountered or lessons learned.  Thus, if someone wanted to see how the project went, years down the road, the important information is there, even for the smallest of projects.  As the size of the project increases, make the project closure phase bigger as appropriate.

I hope this overview of the science of project management will help you in your project management career.  It is only when you apply the science that the art form will start to grow and blossom, and after a while it will become effortless.  Good luck in your project management career!