Autocratic leadership, also known as authoritarian leadership, is a leadership style characterized by individual control over all decisions and little input from group members. Autocratic leaders typically make choices based on their ideas and judgments and rarely accept advice from followers.
Parkinson’s Law states that work expands to fill the time allotted for its completion. … We naturally pace ourselves to finish a project in the nick of time. The same task can take one hour or one week depending on how much time we give ourselves to complete it.
Functional, Projectized and Matrix Organizations
- Functional Organization: Functional organizations are organized around the functions the organization need to be performed.
- Functions include: Human Resources, Information Technology, Sales, Marketing, Administration, etc.
- This is the traditional structure of organizations
- The “Project Management” role will be performed by a team member of a functional area under the management of a functional manager
- Resources are controlled and authorized by functional managers
- The “Project Management” role would act more like a “Project Co-ordinator” or “Project Expediter” who do not usually carry the title of “Project Manager”
- Project Management is considered a part-time responsibility
- Authority of the “Project Manager” is very limited
- Projectized Organization: Projectized Organizations are organized around projects for maximal project management effectiveness.
- The Project Manager is given more authority and resources control
- The Project Manager is responsible to the Sponsor and/or Senior Management
- The Project Manager is usually a full-time role
- Team members are usually co-located within the same office / virtually co-located to maximize communication effectiveness
- There can be some functional units within organization, however, those units are having a supportive function only without authority over the project manager
- Matrix Organization: Matrix Organizations are organizations with structures that carries a blend of the characteristics of functional and projectized organizations.
- Matrix organizations can be classified as weak, balanced or strong based on the relative authority of the Functional Manager and Project Manager
- If the “Project Manager” is given a role of more like “Project Co-ordinator” or “Project Expediter”, then the organization is considered “Weak Matrix”
- If the “Project Manager” is given much more authority on resources and budget spending, the organization is considered “Strong Matrix”
- The differentiations between Funcational Organization vs Weak Matrix and also Projectized Organization vs Strong Matrix are not very clear cut
In order to easily differentiate between the different types of organizations, the following table is drawn to provide an overview comparison between Functional, Projectized and Matrix (Weak, Balanced, Strong) Organizations:
|Functional||Weak Matrix||Balanced Matrix||Strong Matrix||Projectized|
|Project Manager Role|
|Supportive Staff||Nil||Nil or Part-Time||Part-Time||Full-Time||Full-Time|
|Authority||Nil||Low||Low to Moderate||Moderate to High||High to Total|
|Project Resource Control|
|Resource Availability||Very Low||Low||Low to Moderate||Moderate to High||High to Total|
|Project Budget I/C||Functional Manager||Functional Manager||Mixed
(Function Manager with
|Project Manager||Project Manager|
In the PMP® Exam, Aspirants are advised to look for the descriptions on the AUTHORITY of the Project Manager in order to help understanding the type of organization structure the project is being performed in.
An S-Curve is a sigmoid function, that is a mathematical process or function that resultsin a S shaped curve also called a Sigmoid Curve. The S-Curve is used in project management as a means of representing the various expenditures of resources over the projected time of the project or as a means of charting the real-time expenditure of resources. This is important to project management in that it can be used to monitor the project as is progresses and compare it to the projected S-Curve to determine whether or the project is being completed within the time and budget limitations. These resources might be the cumulative cost of the project, the number of man hours required at any given stage in the project, the expenditure of raw materials for construction or assembly, etc.
In project management, an s-curve is a mathematical graph or illustration that properly illustrates the appropriate cumulative data for a project or task. This data can cost, or man-hours plotted against time.
The reason why it’s called an S curve is not a very technical one. It’s because of the S-shape that the graph makes. You show know that this shape of the graph totally depends on the genre of project you are working on, so many formations apart from this one, are also possible.
Basically, the s-curve in project management terms is a graph to effectively track the progress of the project you are working on. This comes in very handy, because, in today’s fast-paced business culture, ensuring that the appointed budget is being spent according to schedule to fulfill all of the needs and requirements of the project.
Why an ‘S’?
Well, the ‘S’ shape is nothing forced or developed, it’s just the shape that the graph makes during the early stages of the project when the standard growth of the project is very slow.
During the early stages, the project is starting to unravel, and the team members are just doing the research about the industry or they are just beginning to engage in the first phase of project execution.
This process can take longer at first but when the team gets the hang of it, they quickly work out the kinks and the process becomes seamless as the processes trod along.
As more and more progress is made, the growth suddenly starts to speed up. If you want to this rapid growth in the graph, it will be the middle part of the ‘s’. The point which exhibits the maximum growth is called the point of inflection. These are the most important parts of the curve because this is the place where the growth stagnates.
At this time in the process, the team members are generally working quite heavily on the project tasks and as they ramp up this process, more and more tasks surface and so do their costs.
After passing the point of inflection, the growth plateaus and forms the upper part of the s-curve. This part is called the upper asymptote. Basically, this is the mature phase of the project.
This maturity is because of the fact that most projects are finished at this point and are in the process of winding down. Generally, when the process reaches this point, only the tasks such as finishing touches and the last stage approvals are unfinished.
Types of S-curves
There is a wide variety of s-curves that can be used in the project management application. These are as follows:
- Target S-curve
- Costs versus Time S-curve
- Value and Percentage S-curves
- Baseline S-curve
- Man-Hours versus Time S-curve
- Actual S-curve
What are the common uses of the s curve in project management?
S-curves are useful for many different purposes throughout the project lifespan. Some of the most important uses of s-curves are discussed below:
1. Performance and Progress Evaluation
First and foremost, S-curves are used in evaluating the progress of the project in question and its performance. This is achieved through the use of Earned Value Management.
S-Curve graphs are traditionally generated as a part of the EVMS process and are the basic building block of the evaluation of the project’s progress and performance.
There are a lot of factors that need to be evaluated in the process of finding out the current status of the project and the future forecasts about the project. They are:
- Performance Measurement Baseline (PMB), which is also known as Planned Value
- Earned Value
- Actual Cost
All of these factors need to be compared with the planned S-curve to generate results.
This comparison is very powerful, because, if you want to know if the project is overrunning the budget or some other task is behind schedule, you can take a glance at the graph and it will immediately answer your query.
2. Cash Flow Forecasts
The next use of s-curves is the development of Cash flow and forecasting the changes that the cash flow would bring. What is that? Well, Cash Flow is the timing and the movement of the cash with respect to the tasks and events happening during the project execution.
This cash flow curve is very useful for the stakeholders. The most important benefit of drawing a cash flow curve is that you can evaluate the need for cash and the actual timing when the payment is due under the obligations accepted by the company.
3. Quantity Output Comparison
Another important use of s curves is to evaluate the quantity output that your project will yield. This is used more prominently in the construction and manufacturing industries.
4. Schedule Range of Possibilities a.k.a. Banana Curves
This is probably the most important use of s-curves. As we know, most scheduling software can easily drum up s-curves from schedulers using parameters like
These software can provide us with the following types of s-curves.
- One type can be generated according to the early dates
- The second type of s-curve can be generated according to the late dates
These two types of s-curves generally overlap at the very start and end of the project. The shape they form is like a banana, hence the name, Banana Curves.
Project management is a very tricky business nowadays and there are a lot of factors that need to be monitored if you want your business to be successful. These factors need proper tools and parameters to be explored and the s-curve is just that.
It is an incredible tool at our disposal that can help us monitor our cost in relation to all of the man-hours and other factors.
So, if you want your business or project management activities successful, use s-curve to dive-in and drive all of the kinks out.
There are different types of charts used in project management. The tornado diagram is a special bar chart that is used in sensitivity analysis. The sensitivity analysis is a modeling technique that determines which risks have the most impact on the project. As one of the tools used in sensitivity analysis, the tornado diagram is used to compare the importance (relative) of different variables.
The tornado diagram is one of the methods used to display the sensitivity analysis. It is used to compare the relative importance as well as the impact of variables with a high degree of uncertainty to those that are stable. It is also used in analyzing the risk-taking scenarios at specific risks that can have greater benefits than negative impacts.
As a special type of bar chart, it displays the comparison of the relative importance of different variables. For this particular chart, the Y-axis contains uncertain variables at their base values while the X-axis contains the correlation of the uncertainty to a studied and known output. Thus, the bar contains a horizontal bar but is ordered vertically to show the uncertainties that have decreasing correlation from the base values.
While we have covered a whole bunch of concepts related to Work Breakdown Structure (WBS), below are 4 other that might come in handy as options of some of the questions in PMP,
This is just another name for Decomposition. Deconstruction of Project is done via the WBS Creation
This is another name for the 10-day rule. WBS follows the 8/80 rule which basically means deliverables are decomposed till they require 8 to 80 hours of work (or 10 days of work)
With WBS think about how easy or difficult it could get to track the progress of the project. It could be difficult to track a project at a very high level in the WBS yet equally difficult at the lowest level too. This is where we take a point between the top most level and the Work Package level and call it the Control Account. Control Account are pre-determined points where scope, cost and schedule are integrated and compared to the earned value for performance measurement. A Control Account usually has one or more work packages
Code of Accounts
Code of Accounts is typically a numbering system that uniquely identifies each component of the WBS
Deconstruction, 8/80 Rule, Control Account and Code of Accounts
Net Present Value (NPV)
Net Present Value (NPV) of the sum of all cash inflows (in Present Value) of the project minus the initial cost, i.e. PV (benefits) – PV (costs)
The formula for Net Present Value formula is:
Net Present Value (NPV) = Σ(Pi / (1+ r) n) – Ci
where Pi is cash inflow; r is interest rate; n is time periods; Ci is initial cost.
Let’s introduce the concept of Present Value (PV) first. Since there are inflation/deflation, $1000 now does not have the same purchasing power as $1000 in four years (i.e. owing to inflation, you can buy less with $1000 four years later). In order to adjust for inflation/deflation, Present Value (PV) is introduced. Present Value (PV) is the future value in terms of today’s money with adjustment for inflation. This would provide an accurate figure to be used in benefit comparison.
Don’t worry, for the PMP® Exam, candidates are not required to calculate the present value or net present value. You will only need to know that:
- NPV is an effective tool to help determining whether a project will be profitable or not;
- NPV > 0 — the project is profitable
- NPV = 0 — the project will break even
- NPV < 0 — the project will lose money
The following would be a mock exam question on net present value:
- For the facility expansion project, $100,000 would be needed which is expected to generate a total of $200,000 (in present value) over 5 years. What is the Net Present Value (NPV) of the project?
D. -$100,000Solution: A
Since the Net Present Value (NPV) is the present value of all benefits minus all costs, i.e. NPV = $200,000 – $100,000 = $100,000.
The larger the Net Present Value (NPV), the more profitable the project is to the organization.
Benefit-Cost Ratio (BCR)
Benefit-Cost ratio is the ratio of the benefits of a project as compared to the costs calculated in terms of Present Value (PV).
As pointed out in the Net Present Value (NPV) section, the use of PV will allow the figures to be calculated more accurately with adjustments for inflation.
using the Net Present Value in calculating the BCR is inflation.
The formula for calculating Benefit-Cost Ratio (BCR) is:
Benefit-Cost Ratio (BCR) = Benefits (in terms of PV) / Costs (in terms of PV)
where benefits are the total value/revenue generated (without consideration for costs). Interpretation of Benefit-Cost Ratio (BCR) :
- BCR > 1 — the project is profitable, and the higher the BCR the better
- BCR = 1 — the project will break even
- BCR < 1 — the project will cause the organization to lose money and is generally considered as not a good investment
The following would be a sample exam question on benefit-cost ratio:
- You are considering a project for the expansion of facilities to increase production owing to rising demands. The cost for the expansion work and equipment would be $1,000,000 (NPV). It is expected that an increase in revenue of $2,000,000 (NPV) would be realized with the expansion. What is the Benefit-Cost Ratio (BCR) of the project?
D. Not enough information to calculationSolution: C
Benefits = $2,000,000 and Costs = $1,000,000. Since BCR = Benefits / Costs = $2,000,000 / $1,000,000 = 2. NOTE: in the PMP® Exam, you will NOT be required to calculate the BCR.
The larger the Benefit-Cost Ratio (BCR), the more favourable the project is financially to the organization.
Internal rate of return (IRR)
Internal rate of return (IRR) is the interest rate at which the cash inflow and cash outflow of the project equals zero.
And the formula for Internal rate of return (IRR) is:
0 = F0 + F1/(1+IRR) + F2/(1+IRR)2+ F3/(1+IRR)3+ . . . +Fn/(1+IRR)n
where N is number of periods; F is cash flow.
The formula looks sooooooooooooo difficult. The good news here is that you will NOT be asked to calculate the internal rate of return (IRR) in the PMP® Exam. The only thing you need to know about Internal Rate of Return is that, the higher the IRR, the better.
The following would be a mock exam question on internal rate of return:
- There are three projects for the organization to choose from: Project A has an internal rate of return of 10%, Project B 20% while Project B -20%. Based on the information provided, which is the best project?
A. Project A
B. Project B
C. Project D
D. Not enough information providedSolution: B
Project B has the largest internal rate of return, therefore it is deemed most profitable.
The larger the Internal Rate of Return (IRR), the more favourable the project is financially to the organization.
Depreciation is the decrease in value of assets over time.
The decrease in value can be attributed to many factors, take production machines as an example, the depreciation may be due to loss of efficiency, becoming out of date, new model coming out, etc.
There are three type of depreciation calculation techniques:
- Straight Line Depreciation — the same amount is reduced in value over each year (the simplest depreciation calculation method).
- Double-declining Balance — (accelerated depreciation) reduction in value is higher at first and lower later on (twice that for straight line depreciation in the first year with 40% less than the previous year later on).
- Sum of Year Depreciation — (accelerated depreciation) greater depreciation in the earlier years of an asset’s useful life and less in the later years (e.g. for a machine with 5 years of service life, the sum of digit years = 1 + 2 + 3 + 4 + 5 = 15 and the depreciation for the first year is 5 / 15, the second year is 4 / 15 and so on).
Assets for a project will reduce in its value over time (depreciation).
Sunk Cost is the cost that has already been spent which cannot be recovered.
The emphasis here is sunk cost is not recoverable. For example, if the organization has spent $100,000 on installation of a software on all workstations in preparation for an expected change in technology, the $100,000 spent is the sunk cost. This cost cannot be recovered even though the organization later changed its mind to use another software package.
For the PMP® Exam, candidates should understand that sunk cost should NOT influence future decisions.
Take the software installation example further, suppose a new software package has come to market which is much much more suited to the organization needs, the management should decide whether to continue with the staff training and documentation ($100,000) of the originally installed software package or opted for the new software ($200,000 including training and documentation). The decision should now be made based solely on which software package is the best for the current moment and disregard the $100,000 spent on the original software package (i.e. the sunk cost).
In addition to sunk cost, there are also other costs which may appear in the exam:
- Fixed Cost — take the software installation as an example, the fixed cost would be the monthly maintenance fee for buy fixes and upgrades
- Variable Cost — that would be the electricity bill used to power the workstations as this would be different each month depending on actual usage
- Direct Costs — expenses that are billed to the project directly, e.g. wages, material cost, etc.
- Indirect Costs — costs that are shared among several projects, e.g. taxes, fringe benefits, PMO, etc.
The following would be a mock exam question on sunk cost:
- In a project, the organization has purchases a machine for $100,000 which was later found to be not suitable. What is the $100,000 termed as?
A. Fixed Cost
B. Sunk Cost
C. Indirect Cost
D. Opportunity CostSolution: B
The $100,000 has already been spent which is not recoverable, so it is sunk cost. Note: The cost can also be termed as “direct cost” as the machine is purchased with the sole purpose for the project, but this is not one of the choices for the question.
Do not let sunk costs to affect decisions as sunk costs are costs that are not recoverable. Focus on choosing the most feasible and beneficial action as the next step.
Payback Period is the time it takes for the organization to earn back the initial investment (in terms of monetary cost) to the project and begin making profits.
If the income generated from the project is constant, the payback period can be calculated using the simplified formula:
Payback Period = Initial Investment / Periodic Cash-flow
For example, if the organization need to invest US$10,000 into a project that is expected to generate US$1,000 per month, the payback period would be:
Payback Period = US$10,000 / US$1,000/month = 10 months
In the actual exam, candidates are seldom required to calculate the payback period for projects (after all, the exam is not an accounting exam). The exam inclines more on testing Aspirants’ conceptual knowledge, i.e. whether the candidate understands the meaning behind payback period or other terms.
The following would be a sample PMP® Exam question on payback period:
- You are the project manager of the organization and you are tasked with the responsibility of selecting a project from two proposals A and B based on the business values with the information on hand: Project A has a payback period of 20 months while Project B has a payback period of 30 months. Which one should you recommend?
A. Project A
B. Project B
C. Neither one is beneficial to the organization.
D. Ask the project sponsor to choose.
Based on the fact that only the payback period is provided, we should rely solely on this information to make the selection. Since Project A has a shorter payback period, it is considered financially more beneficial for the organization. NOTE: since you are tasked with the responsibility, it is not appropriate for you to escalate the decision making back to the project sponsor. Project Managers are expected to should responsibilities according to PMI, though in reality it is always the senior management / project sponsor to make the project selection.
The shorter the Payback Period, the more favourable the project financially to the organization.
However, Project Managers should note that Payback Period is rarely used solely as a project selection criterion. The organization would need to consider an array of different metrics in order to selection the projec with the best value realization to the organization. common project selection criteria include:
- Return on Investment
- Cost-benefit Ratio
- Net Present Value , etc.
Return on Investment (ROI)
Return on investment (ROI) is the benefit an investment bring about, by comparing profits in relation to capital invested.
The formula for calculating Return on Investment for a project is (note that the PMP® Exam does not require candidates to calculate ROI):
Return on Investment = Net profit / Capital Invested
Net profit (usually expressed as net present value [NPV]) is the total capital invested minus all expenditure. If ROI is larger than 1, the project is deemed to be profitable. If ROI is smaller than 1, the project loses money.
A sample PMP® Exam question on return on investment:
- The organization is considering several projects with the following return on investment:
ROI of Project A = 1.1
ROI of Project B = 0.4
ROI of Project C = 1.8
ROI of Project D = 1.0
By judging on ROI alone, which project is the most favourable choice?
A. Project A
B. Project B
C. Project C
D. Project D
Project C has the largest ROI. If ROI is the only metric to compare, Project C would be the best project to undertake.
Aspirants would only need to remember that:
The higher the Return on Investment, the more favourable the project financially to the organization.
However, in reality, ROI is not only project selection criteria. Let’s look at the mock question above again, if we further know that Project C is such a small project that the net gain from the project is US$8 while that for Project A is US$800,000. If you are the senior management, how will you choose again? It is really difficult to tell. Other factors must be considered.
But one thing is clear is that in the exam, the questions are usually simplified enough to ask you to make the choice based on a single metric which is never the case in real life situations.
Opportunity Cost is the value of the best alternative given up when a choice is made, in which the choices must be mutually exclusive owing to limited resources.
In simpler terms, opportunity cost is the highest value a person needs to give up for the chosen choice. For example, if you have US$10, you can either buy a coffee or 2 muffins. When you purchased the coffee, your opportunity cost is 2 muffins as you don’t have the money to purchase the muffins.
For the PMP® Exam, Aspirants should only need to know that owing to limited resources (money, human, space, etc.), the organization will often need to select one project over the others. The Opportunity Cost is the single best alternative NOT chosen(NOTE: Opportunity Cost is not the sum of the values of all project given up). For most cases, the chosen project is believed to deliver the best values among all the project choices.
There is no calculation required for getting the opportunity cost.
A mock exam question on opportunity cost:
- You are the working in the PMO of your organization and there are three project proposals submitted. However, owing to the limitation of capital, only one project can be chosen. Project A would have a NPV of US$100,000, Project B would have a NPV of US$120,000 while Project C would have a NPV of US$50,000. What is the opportunity cost of choosing the project with the highest NPV?
Project B has the highest NPV and hence it is chosen. Based on the definition of opportunity cost, the second best NPV would be the best value given up. So the NPV of Project A would be the opportunity cost, i.e. US$100,000.
Project Benefit Analysis Concepts for the PMP Exam (Part 2)
82. The Make or Buy Decision83. The Rule of Seven84. The Virtual Team85. Total Productive Maintenance86. Total Quality Management87. Traditional Project