Professional and Social Responsibility
"If someone with a PMP certification does not act professionally and ethically, it diminishes the credibility of the certification and the practice of project management." states PMP Exam Prep. A project manager must remain responsible, respectful, fair, and honest throughout the entire project life.
Responsibility in regards to the ownership of decisions and actions means making decisions based off the interests of the company, as well as only accepting work you are qualified to do, protect information, and report unethical behavior. Respect includes, "maintaining a mutual cooperation attitude, respecting cultural differences, engaging in good faith negotiations, being direct in dealing with conflict, and not using your power or position to influence others for your own benefit." lists PMP Exam Prep.
Fairness does not include bribery, as it is unethical. If a conflict of interest arises, "you should disclose it to those affected and let them decide how to proceed." suggests PMP Exam Prep. Discrimination should be avoided and dealt with in the proper manner if it should so arise. Fairness includes treating everyone fairly. The last point listed under the fairness category is to not misuse your position. Your position in the project or company should not be used for personal or company gain.
Honesty in relation to Project Management involves accurately understanding the truth and situations, as well as being completely truthful. How can a team put trust in a project if the project manager is stretching the truth or flat out lying. PMP Exam Prep ends honesty with, "The consequences of being untruthful are less accurate information form others and poor cooperation."
Wednesday, November 2, 2011
PMP Exam Prep - Chapter 12
Procurement Management
The procurement management process includes Plan Procurements, Conduct Procurements, Administer Procurements, and Close Procurements. All of these processes occur in different groups. Planning procurements is done during the planning process group, while conducting procurements is done during the executing process group. Administering procurements is done during the monitoring and controlling process group, whereas the closing procurements process is done during the closing process group.
By PMP Exam Prep definition, "Procurement is a formal process to obtain goods and services." A project manager is usually not the one to handle things like managing the procurement process, but it is important for the project manager to understand all aspects of the procurement process. If you are familiar with the procurement process you will know what is happening, can possibly help the procurement manager, and could more easily identify risks. The project manager should be assigned to both parties in the procurement process, the seller's and buyer's sides. It is suggested in PMP Exam Prep to place yourself in the shoes of the buyer if no point of view is clearly defined. PMP Exam Prep also provides very useful tips on answering procurement questions:
Inputs to the Procurement Management Process include, "Enterprise environmental factors, organizational process assets, procurement manager assigned, scope baseline, risk register, procurements already in place, identification of resources not available within the performing organization, project schedule, initial cost estimates for work to be procured, and the cost baseline for the project.", lists PMP Exam Prep.
The Plan Procurements process is part of the planning process group and creates a procurement management plan. A Make-or-Buy analysis allows the company to determine if they would like to do the work themselves, or if they should outsource. If they outsource, it does not have to include all work, it can include portions of the project work. If a company is trying to decide to buy or lease, they can use a formula to calculate the decision. PMP Exam Prep provides the following formula in a buy-or-lease situation where the daily lease cost is $120 and the investment cost is $1,000 plus the daily cost of $20. D represents the number of days, $120D = $1, 000 + $20D. In this situation D would equal 10, so after 10 days the costs would be the same. That is when a company would decide which process would be the most cost efficient for them.
There are three types of procurement statements of work; performance, functional, and design. A performance SOW is about the final product and what it should accomplish. The functional SOW provides a statement of the end result, whereas the design SOW details the work to be done. PMP Exam Prep suggests remembering contract types in three broad categories, "Fixed price (FP), Time and Material (T&M), and cost reimbursable (CR)." A fixed price contract is the most common contract and it is used to acquire services or goods with specific requirements. A Fixed Price Incentive Fee contract falls under the fixed price contract category and includes a target cost, target fee, target price, sharing ratio, ceiling price, actual cost, final fee, and final price. A fixed price award fee differs from a FPIF, in that it includes a predetermined award amount. Fixed Price Economic Price Adjustments create a contract that includes an economic price adjustment. A purchase order is a simple contract that requires a signature of acceptance, in order for it to become an official contract.
A Time and Material contract is best used for small dollar amounts, as it is not based on performance. Cost Reimbursable contracts are used when, "the exact scope of work is uncertain and, therefore, costs cannot be estimated accurately enough to effectively use a fixed price contract." informs PMP Exam Prep. Privity is a word that PMP Exam Prep suggests remembering, as it is a contractual relationship. So if my company (A) were hired by company B, and I hired company C, company B could not discuss things with company C, they would need to go through my company (A).
The Conduct Procurements process is done during the executing process, as it "involves getting the procurement documents that were created in the Plan Procurements process to the sellers, answering the sellers' questions, having them prepare responses, and reviewing the responses to select a seller." explains PMP
A seller may be selected through a weighting system, independent estimates, a screening system, past performance history, or presentations. Negotiations may be necessary in the procurement process and should be focused on getting a fair price, while developing a "good relationship with the seller." states PMP Exam Prep. A contract should create an agreement between both parties. The purpose of a contract is to, "define roles and responsibilities, make things legally binding, and mitigate or allocate risk." explains PMP Exam Prep.
Administering procurements happens during monitoring and controlling. This process involves watching over the buyer and seller to make sure they are abiding by the contract. Any conflict or change in procurement must be approved by the procurement manager, not the project manager. The project manager on the buyer's team will perform a procurement performance review to make sure the procurement manager is on track, and if not, will make suggestions for improvement. Records of the contract should be kept, as it is a legal document and may be needed for future reference. "Contract interpretation is based on an analysis of the intent of the parties to the contract and a few guidelines." defines PMP Exam Prep. Termination of the contract is usually done by the buyer, for convenience or cause. Terminating a contract has lasting effects on a project and negotiations can continue even after the work is stopped.
The Close Procurements process is last in the Procurement Management process and occurs during the closing process group. PMP Exam Prep explains, "Procurements are closed when a contract is completed or when a contract is terminated before the work is completed." During procurement closure all work must be verified, a final settlement must be made, all finances must be closed, and the procurement process must be reviewed. "Record updates, final contract performance reporting, lessons learned, procurement file, and other." are a few more things involved in the close procurements process according to PMP Exam Prep. The procurement is official closed once formal acceptance and closure are made. The seller must receive a formal "sign-off" from the buyer, showing their acceptance of the products of procurement.
The procurement management process includes Plan Procurements, Conduct Procurements, Administer Procurements, and Close Procurements. All of these processes occur in different groups. Planning procurements is done during the planning process group, while conducting procurements is done during the executing process group. Administering procurements is done during the monitoring and controlling process group, whereas the closing procurements process is done during the closing process group.
By PMP Exam Prep definition, "Procurement is a formal process to obtain goods and services." A project manager is usually not the one to handle things like managing the procurement process, but it is important for the project manager to understand all aspects of the procurement process. If you are familiar with the procurement process you will know what is happening, can possibly help the procurement manager, and could more easily identify risks. The project manager should be assigned to both parties in the procurement process, the seller's and buyer's sides. It is suggested in PMP Exam Prep to place yourself in the shoes of the buyer if no point of view is clearly defined. PMP Exam Prep also provides very useful tips on answering procurement questions:
- "Contracts require formality."
- "All product and project management requirements for the procurement work should be specifically stated in the contract."
- "If it is not in the contract, it can only be done if a formal change order to the contract is issued."
- "If it is in the contract, it must be done or a formal change order must be approved by both parties."
- "Changes must be submitted and approved in writing."
- "Contracts are legally binding; the seller has no choice but to perform as agreed in the contract."
- "Contracts should help diminish project risk."
- "Most governments back all contracts that fall within their jurisdiction by providing a court system for dispute resolution."
Inputs to the Procurement Management Process include, "Enterprise environmental factors, organizational process assets, procurement manager assigned, scope baseline, risk register, procurements already in place, identification of resources not available within the performing organization, project schedule, initial cost estimates for work to be procured, and the cost baseline for the project.", lists PMP Exam Prep.
The Plan Procurements process is part of the planning process group and creates a procurement management plan. A Make-or-Buy analysis allows the company to determine if they would like to do the work themselves, or if they should outsource. If they outsource, it does not have to include all work, it can include portions of the project work. If a company is trying to decide to buy or lease, they can use a formula to calculate the decision. PMP Exam Prep provides the following formula in a buy-or-lease situation where the daily lease cost is $120 and the investment cost is $1,000 plus the daily cost of $20. D represents the number of days, $120D = $1, 000 + $20D. In this situation D would equal 10, so after 10 days the costs would be the same. That is when a company would decide which process would be the most cost efficient for them.
There are three types of procurement statements of work; performance, functional, and design. A performance SOW is about the final product and what it should accomplish. The functional SOW provides a statement of the end result, whereas the design SOW details the work to be done. PMP Exam Prep suggests remembering contract types in three broad categories, "Fixed price (FP), Time and Material (T&M), and cost reimbursable (CR)." A fixed price contract is the most common contract and it is used to acquire services or goods with specific requirements. A Fixed Price Incentive Fee contract falls under the fixed price contract category and includes a target cost, target fee, target price, sharing ratio, ceiling price, actual cost, final fee, and final price. A fixed price award fee differs from a FPIF, in that it includes a predetermined award amount. Fixed Price Economic Price Adjustments create a contract that includes an economic price adjustment. A purchase order is a simple contract that requires a signature of acceptance, in order for it to become an official contract.
A Time and Material contract is best used for small dollar amounts, as it is not based on performance. Cost Reimbursable contracts are used when, "the exact scope of work is uncertain and, therefore, costs cannot be estimated accurately enough to effectively use a fixed price contract." informs PMP Exam Prep. Privity is a word that PMP Exam Prep suggests remembering, as it is a contractual relationship. So if my company (A) were hired by company B, and I hired company C, company B could not discuss things with company C, they would need to go through my company (A).
The Conduct Procurements process is done during the executing process, as it "involves getting the procurement documents that were created in the Plan Procurements process to the sellers, answering the sellers' questions, having them prepare responses, and reviewing the responses to select a seller." explains PMP
A seller may be selected through a weighting system, independent estimates, a screening system, past performance history, or presentations. Negotiations may be necessary in the procurement process and should be focused on getting a fair price, while developing a "good relationship with the seller." states PMP Exam Prep. A contract should create an agreement between both parties. The purpose of a contract is to, "define roles and responsibilities, make things legally binding, and mitigate or allocate risk." explains PMP Exam Prep.
Administering procurements happens during monitoring and controlling. This process involves watching over the buyer and seller to make sure they are abiding by the contract. Any conflict or change in procurement must be approved by the procurement manager, not the project manager. The project manager on the buyer's team will perform a procurement performance review to make sure the procurement manager is on track, and if not, will make suggestions for improvement. Records of the contract should be kept, as it is a legal document and may be needed for future reference. "Contract interpretation is based on an analysis of the intent of the parties to the contract and a few guidelines." defines PMP Exam Prep. Termination of the contract is usually done by the buyer, for convenience or cause. Terminating a contract has lasting effects on a project and negotiations can continue even after the work is stopped.
The Close Procurements process is last in the Procurement Management process and occurs during the closing process group. PMP Exam Prep explains, "Procurements are closed when a contract is completed or when a contract is terminated before the work is completed." During procurement closure all work must be verified, a final settlement must be made, all finances must be closed, and the procurement process must be reviewed. "Record updates, final contract performance reporting, lessons learned, procurement file, and other." are a few more things involved in the close procurements process according to PMP Exam Prep. The procurement is official closed once formal acceptance and closure are made. The seller must receive a formal "sign-off" from the buyer, showing their acceptance of the products of procurement.
Tuesday, November 1, 2011
PMP Exam Prep - Chapter 11
Risk Management
The risk management process includes six processes. Plan risk management, identify risks, perform qualitative risk analysis, perform quantitative risk analysis, and plan risk response all occur in the planning process group. Monitor and control risks is the odd process out in risk management, as it occurs in the monitoring and controlling process group. "Through risk management, you work to increase the probability and impact of opportunities on the project (positive events), while decreasing the probability and impact of threats to the project (negative events)." defines PMP Exam Prep. Risk management deals with inputs in coordination with the entire risk management process, and inputs to individual processes involved in risk management. An example PMP Exam Prep provides as an input question is, "What do I need before I can begin..?" and an output question is, "What will I have when I am done with..?" Simple enough. The list of risk management processes I listed above should be remembered in that order, as they are done in that sequence.
Plan risk management is the first of the risk management processes. You need to plan out the structure of risk management before using it. Having a layout of the execution of risk management is going to be beneficial to the project as it creates a clear understanding for every person involved. The output of planning risk management is a risk management plan that may include, "Methodology, roles and responsibilities, budgeting, timing, risk categories, definitions of probability and impact, stakeholder tolerances, reporting formats, and tracking." lists PMP Exam Prep. A list of risk categories should be created to ensure no areas of risk are missed. PMP Exam Prep gives multiple examples of ways to classify risk, for example internal and external, specific categories, or by source. Business risk and pure risk are the two main types of risk listed in PMP Exam Prep.
In the planning process group, under risk management, is identifying risks. Identifying risks mainly occurs in the planning phase, but has the possibility to occur throughout the project. PMP Exam Prep suggests, "Risks should be continually reassessed." Documentation reviews is a helpful tool in identifying risks. Brainstorming, Delphi technique, interviewing, and root cause analysis are information gathering techniques that can also be helpful in the identifying risks process. Strength, Weaknesses, Opportunities, and Threats (SWOT) analysis, checklist analysis, assumptions analysis, and diagramming techniques are a few other risk identification techniques PMP Exam Prep provides. The risk register is the final output of the identify risks process and includes, "List of risks, list of potential responses, root causes of risk, and updated risk categories." lists PMP Exam Prep.
Perform Qualitative Risk Analysis occurs in the planning process group and in the risk management knowledge area, of course. This process involves figuring out which risks warrant a response and then creating a list of them. To do this you must rate the probability of each risk occurring and rate the impact of each risk occurring. This can be done using a standard 1 to 10 scale. A probability and impact matrix can be used to rate each risk, with probability on one side and impact on the lower portion of the graph. This matrix is useful in that it can be recycled throughout the project. A risk data quality assessment assesses the "accuracy and reliability of the data and determines whether more research is necessary to understand the risk before a qualitative assessment can be done." defines PMP Exam Prep. Categorizing risks can be a helpful tool in performing qualitative risk analysis, as it groups risks together and therefore allows you to eliminate an entire cause, instead of individual risks. A risk urgency assessment classifies risks on their urgency. The risk's probability and impact rating, as well as it's urgency can be helpful to a project manager in determining which risks are more severe than others.
As stated previously, the output of the identify risks process is a risk register, whereas the output of the perform qualitative risk analysis is updates to the risk register. Once qualitative risk analysis is complete, the following can be added to the risk register. "Risk rating for the project compared to other projects, list of prioritized risks and their probability and impact ratings, risks grouped by categories, list of risks for additional analysis and response, list of risks requiring additional analysis in the near term, watchlist, and trends." lists PMP Exam Prep.
The forth process in the risk management knowledge area is Perform Quantitative Risk Analysis. According to PMP Exam Prep, this process can be skipped over if it is not worth the time and money of your project. If you do perform quantitative risk analysis, PMP Exam Prep suggests remembering the following actions:
Like performing qualitative risk analysis, performing quantitative risk analysis results in the output of updates to risk register. Once quantitative risk analysis is complete, the risk register will be updated with, "Prioritized list of quantified risks, amount of contingency time and cost reserves needed, possible realistic and achievable completion dates and project costs, with confidence levels, versus the time and cost objectives for the project, the quantified probability of meeting project objectives, and trends in quantitative risk analysis." lists PMP Exam Prep.
The Plan Risk Responses process is part of the planning process group. It focuses on what should be done to take care of the risks involved. "Avoid, mitigate, or transfer." are the three risk response strategies PMP Exam Prep lists for threats. As for response strategies for opportunities, PMP Exam Prep includes, "Exploit (the reverse of avoid), enhance (the reverse of mitigate), or share." Accept is the one strategy for threats and opportunities.
The Plan Risk Responses process comes with two outputs: risk register updates and project management plan and project document updates. Updates to the risk register, once planning risk responses is complete, include, "Residual risks, contingency plans, risk response owners, secondary risks, risk triggers, contracts, fallback plans, and reserves (contingency)" lists PMP Exam Prep.
Monitor and Control Risks is the last process in Risk Management and it falls into the monitoring and controlling process group. Monitoring and controlling risks includes many processes, including noticing new risks and creating new responses. In this process you are monitoring the effectiveness of the risk management processes and correcting them, or taking action, when need be. Workarounds, risk reassessments, risk audits, reserve analysis, status meetings, and closing of risks that are no longer applicable are all part of the Monitor and Control Risks process and should be remembered. Workarounds are "unplanned responses developed to deal with the occurrence of unanticipated events or problems on a project." defines PMP Exam Prep. Reserve analysis is checking the amount of reserve available, and possibly, how much may be needed. Closing risks allows the team to focus on present risks. Monitoring and controlling risks results in risk register, project management plan, project document and organizational process assets updates, and change requests, recommended preventive and corrective actions.
Many people make mistakes when it comes to risk management. A few of these errors listed in PMP Exam Prep include, "risk identification ending too soon or being completed without much knowledge of the project, contracts being signed long before risks to the project are discussed, project managers not explaining the risk management process to their team during project planning, or the processes of Identify Risks through Perform Quantitative Risk Analysis are blended, resulting in risks that are evaluated or judged as they come to light." The last error, "decreases the number of total risks identified and causes people to stop participating in risk identification." reports PMP Exam Prep.
The risk management process includes six processes. Plan risk management, identify risks, perform qualitative risk analysis, perform quantitative risk analysis, and plan risk response all occur in the planning process group. Monitor and control risks is the odd process out in risk management, as it occurs in the monitoring and controlling process group. "Through risk management, you work to increase the probability and impact of opportunities on the project (positive events), while decreasing the probability and impact of threats to the project (negative events)." defines PMP Exam Prep. Risk management deals with inputs in coordination with the entire risk management process, and inputs to individual processes involved in risk management. An example PMP Exam Prep provides as an input question is, "What do I need before I can begin..?" and an output question is, "What will I have when I am done with..?" Simple enough. The list of risk management processes I listed above should be remembered in that order, as they are done in that sequence.
Plan risk management is the first of the risk management processes. You need to plan out the structure of risk management before using it. Having a layout of the execution of risk management is going to be beneficial to the project as it creates a clear understanding for every person involved. The output of planning risk management is a risk management plan that may include, "Methodology, roles and responsibilities, budgeting, timing, risk categories, definitions of probability and impact, stakeholder tolerances, reporting formats, and tracking." lists PMP Exam Prep. A list of risk categories should be created to ensure no areas of risk are missed. PMP Exam Prep gives multiple examples of ways to classify risk, for example internal and external, specific categories, or by source. Business risk and pure risk are the two main types of risk listed in PMP Exam Prep.
In the planning process group, under risk management, is identifying risks. Identifying risks mainly occurs in the planning phase, but has the possibility to occur throughout the project. PMP Exam Prep suggests, "Risks should be continually reassessed." Documentation reviews is a helpful tool in identifying risks. Brainstorming, Delphi technique, interviewing, and root cause analysis are information gathering techniques that can also be helpful in the identifying risks process. Strength, Weaknesses, Opportunities, and Threats (SWOT) analysis, checklist analysis, assumptions analysis, and diagramming techniques are a few other risk identification techniques PMP Exam Prep provides. The risk register is the final output of the identify risks process and includes, "List of risks, list of potential responses, root causes of risk, and updated risk categories." lists PMP Exam Prep.
Perform Qualitative Risk Analysis occurs in the planning process group and in the risk management knowledge area, of course. This process involves figuring out which risks warrant a response and then creating a list of them. To do this you must rate the probability of each risk occurring and rate the impact of each risk occurring. This can be done using a standard 1 to 10 scale. A probability and impact matrix can be used to rate each risk, with probability on one side and impact on the lower portion of the graph. This matrix is useful in that it can be recycled throughout the project. A risk data quality assessment assesses the "accuracy and reliability of the data and determines whether more research is necessary to understand the risk before a qualitative assessment can be done." defines PMP Exam Prep. Categorizing risks can be a helpful tool in performing qualitative risk analysis, as it groups risks together and therefore allows you to eliminate an entire cause, instead of individual risks. A risk urgency assessment classifies risks on their urgency. The risk's probability and impact rating, as well as it's urgency can be helpful to a project manager in determining which risks are more severe than others.
As stated previously, the output of the identify risks process is a risk register, whereas the output of the perform qualitative risk analysis is updates to the risk register. Once qualitative risk analysis is complete, the following can be added to the risk register. "Risk rating for the project compared to other projects, list of prioritized risks and their probability and impact ratings, risks grouped by categories, list of risks for additional analysis and response, list of risks requiring additional analysis in the near term, watchlist, and trends." lists PMP Exam Prep.
The forth process in the risk management knowledge area is Perform Quantitative Risk Analysis. According to PMP Exam Prep, this process can be skipped over if it is not worth the time and money of your project. If you do perform quantitative risk analysis, PMP Exam Prep suggests remembering the following actions:
- "Further investigate the highest risks on the project."
- "Determine the type of probability distribution that will be used, such as triangular, normal, beta, uniform, or log normal distributions."
- "Perform sensitivity analysis to determine which risks have the most impact on the project."
- "Determine how much quantified risk the project has through expected monetary value analysis or Monte Carlo analysis."
- "Is usually done with a computer based program because of the intricacies of the calculations."
- "Evaluates the overall risk in the project."
- "Determines the probability of completing the project on any specific day, or for any specific cost."
- "Takes into account path convergence."
- "Translates uncertainties into impacts to the total project."
- "Can be used to assess cost and schedule impacts."
- "Results in a probability distribution."
Like performing qualitative risk analysis, performing quantitative risk analysis results in the output of updates to risk register. Once quantitative risk analysis is complete, the risk register will be updated with, "Prioritized list of quantified risks, amount of contingency time and cost reserves needed, possible realistic and achievable completion dates and project costs, with confidence levels, versus the time and cost objectives for the project, the quantified probability of meeting project objectives, and trends in quantitative risk analysis." lists PMP Exam Prep.
The Plan Risk Responses process is part of the planning process group. It focuses on what should be done to take care of the risks involved. "Avoid, mitigate, or transfer." are the three risk response strategies PMP Exam Prep lists for threats. As for response strategies for opportunities, PMP Exam Prep includes, "Exploit (the reverse of avoid), enhance (the reverse of mitigate), or share." Accept is the one strategy for threats and opportunities.
The Plan Risk Responses process comes with two outputs: risk register updates and project management plan and project document updates. Updates to the risk register, once planning risk responses is complete, include, "Residual risks, contingency plans, risk response owners, secondary risks, risk triggers, contracts, fallback plans, and reserves (contingency)" lists PMP Exam Prep.
Monitor and Control Risks is the last process in Risk Management and it falls into the monitoring and controlling process group. Monitoring and controlling risks includes many processes, including noticing new risks and creating new responses. In this process you are monitoring the effectiveness of the risk management processes and correcting them, or taking action, when need be. Workarounds, risk reassessments, risk audits, reserve analysis, status meetings, and closing of risks that are no longer applicable are all part of the Monitor and Control Risks process and should be remembered. Workarounds are "unplanned responses developed to deal with the occurrence of unanticipated events or problems on a project." defines PMP Exam Prep. Reserve analysis is checking the amount of reserve available, and possibly, how much may be needed. Closing risks allows the team to focus on present risks. Monitoring and controlling risks results in risk register, project management plan, project document and organizational process assets updates, and change requests, recommended preventive and corrective actions.
Many people make mistakes when it comes to risk management. A few of these errors listed in PMP Exam Prep include, "risk identification ending too soon or being completed without much knowledge of the project, contracts being signed long before risks to the project are discussed, project managers not explaining the risk management process to their team during project planning, or the processes of Identify Risks through Perform Quantitative Risk Analysis are blended, resulting in risks that are evaluated or judged as they come to light." The last error, "decreases the number of total risks identified and causes people to stop participating in risk identification." reports PMP Exam Prep.
Friday, October 28, 2011
PMP Exam Prep - Chapter 10
Communications Management
Identifying stakeholders is done in the initiating process group. "The project manager is the orchestra leader, and work cannot be done without stakeholder involvement." reminds PMP Exam Prep. As a project manager you should identify all stakeholders in the initiating process and then reassess the list during project planning and executing. If any stakeholders are missed in initiating, they may be found later in the project, and this could have a negative affect on the project. Determining all stakeholder requirements is a very important process to complete because, like identifying stakeholders, undetermined requirements can have a negative impact on the project.
To define stakeholder requirements, as a Project Manager, you have a few strategies to use. You can simply ask if you have all requirements, use requirements reviews, or informing people of possible negative effects if requirements are not found until later in the project. Expectations differ from requirements because, "Expectations tend to be much more ambiguous than stated requirements, or they may be undefined requirements." states PMP Exam Prep. Each stakeholder is going to have an interest in the project and the project manager needs to determine what those interests are. PMP Exam Prep suggests implementing the stakeholders interests in the project or as a reward.
Stakeholders level of influence should be determined and managed as it can negatively or positively affect the project. The last three things PMP Exam Prep says a project manager should do with stakeholders are, "Plan how you will communicate with them, communicate with them, and manage their expectations and influence." Identifying stakeholders is in the initiating process group of communications management. Stakeholder analysis, "..involves both identifying stakeholders and analyzing their impact or influence on the project." defines PMP Exam Prep.
The list of stakeholders from the project charter is a useful tool to a project manager when trying to identify the stakeholders involved in the project. The project manager should analyze each stakeholder's potential impact, as well as figuring out the best ways to manage these impacts. A stakeholder register contains all of the information about stakeholders. A few things the stakeholder register may include are the stakeholder's name, title, and role in the project. A stakeholder management strategy should be implemented as a tool for the project manager. Making a plan to manage stakeholders ahead of time will make it easier on the project manager when dealing with them.
Plan communications is the next communications management process and this is done in the planning process group. When planning communications you want it to be efficient and effective, so you must remember everything that is involved in the planning process. PMP Exam Prep explains that you should, "..take into account the performing organization's established processes and procedures for communicating about projects, its historical records and lessons learned from previous projects, and other stored information (organizational process assets), as well as the stakeholder register and stakeholder management strategy described previously." Communication should be planned vertically and horizontally, and should include the different levels of organization and your peers, as well as communications between projects. It is crucial to remember that there needs to be communication between other projects, as they could have an affect on your project.
There are four types of communication listed in PMP Exam Prep - formal written, formal verbal, informal written, and informal verbal. Each communication type is used in a certain situation. Formal written communication is used for "Complex problems, project management plan, project charter, memos, and communicating over long distances." informs PMP Exam Prep. Formal speech is used when giving a speech, or any formal presentation. Informal written communication is used in any informal manner, for example, text messaging or notes. Lastly, informal verbal communication is used when having a conversation.
PMP Exam Prep explains, "Communication models are comprised of three parts: the sender, the message, and the receiver." Communication needs to be effective and include effective listening. When communicating you need to decide how you are going to communicate the information, whether it be via telephone or in person. This is known as communication technology. PMP Exam Prep groups communication methods into three categories, "Interactive communication, push communication, and pull communication." Interactive communication is between multiple people. Push communication is when a person sends necessary information without expectations of a response. The project manager is in charge of pull communication because they will put all of the information in one location and expects the recipients to "retrieve" it.
PMP Exam Prep provides a formula to calculate the number of communication channels. The formula is as follows:
"The primary output of the Plan Communications process is a communications management plan." states PMP Exam Prep. It will be outline of what needs to be communicated, why, who is involved, etc. This is a very useful tool, as it clearly shows who, what, when, where, and why communication is taking place. Distribute Information takes place in the executing process group under the communications management knowledge area. The communications management plan is implemented in this process.
Manage Stakeholder Expectations is part of the executing process group, in the communications management knowledge area. Stakeholders, like every other person, wants to feel trusted and wants to feel as if their expectations and concerns will be dealt with properly. In order to do this, a project manager must first figure out what these expectations, and possible concerns, may be. "The project manager reviews the stakeholder register, stakeholder management strategy, communications management plan, issue logs, and changes to determine what to do to manage stakeholder expectations." says PMP Exam Prep. Don't let statements like, "Getting down to the nitty gritty." affect communication in your project. The previous statement is known as a communication blocker. Try to avoid communication blockers and if they are used take care of them immediately.
PMP Exam Prep. Once you have delivered the performance reports and the stakeholders have reviewed them, you should ask them for feedback so that you can compare it to the project and its goals.
Identifying stakeholders is done in the initiating process group. "The project manager is the orchestra leader, and work cannot be done without stakeholder involvement." reminds PMP Exam Prep. As a project manager you should identify all stakeholders in the initiating process and then reassess the list during project planning and executing. If any stakeholders are missed in initiating, they may be found later in the project, and this could have a negative affect on the project. Determining all stakeholder requirements is a very important process to complete because, like identifying stakeholders, undetermined requirements can have a negative impact on the project.
To define stakeholder requirements, as a Project Manager, you have a few strategies to use. You can simply ask if you have all requirements, use requirements reviews, or informing people of possible negative effects if requirements are not found until later in the project. Expectations differ from requirements because, "Expectations tend to be much more ambiguous than stated requirements, or they may be undefined requirements." states PMP Exam Prep. Each stakeholder is going to have an interest in the project and the project manager needs to determine what those interests are. PMP Exam Prep suggests implementing the stakeholders interests in the project or as a reward.
Stakeholders level of influence should be determined and managed as it can negatively or positively affect the project. The last three things PMP Exam Prep says a project manager should do with stakeholders are, "Plan how you will communicate with them, communicate with them, and manage their expectations and influence." Identifying stakeholders is in the initiating process group of communications management. Stakeholder analysis, "..involves both identifying stakeholders and analyzing their impact or influence on the project." defines PMP Exam Prep.
The list of stakeholders from the project charter is a useful tool to a project manager when trying to identify the stakeholders involved in the project. The project manager should analyze each stakeholder's potential impact, as well as figuring out the best ways to manage these impacts. A stakeholder register contains all of the information about stakeholders. A few things the stakeholder register may include are the stakeholder's name, title, and role in the project. A stakeholder management strategy should be implemented as a tool for the project manager. Making a plan to manage stakeholders ahead of time will make it easier on the project manager when dealing with them.
Plan communications is the next communications management process and this is done in the planning process group. When planning communications you want it to be efficient and effective, so you must remember everything that is involved in the planning process. PMP Exam Prep explains that you should, "..take into account the performing organization's established processes and procedures for communicating about projects, its historical records and lessons learned from previous projects, and other stored information (organizational process assets), as well as the stakeholder register and stakeholder management strategy described previously." Communication should be planned vertically and horizontally, and should include the different levels of organization and your peers, as well as communications between projects. It is crucial to remember that there needs to be communication between other projects, as they could have an affect on your project.
There are four types of communication listed in PMP Exam Prep - formal written, formal verbal, informal written, and informal verbal. Each communication type is used in a certain situation. Formal written communication is used for "Complex problems, project management plan, project charter, memos, and communicating over long distances." informs PMP Exam Prep. Formal speech is used when giving a speech, or any formal presentation. Informal written communication is used in any informal manner, for example, text messaging or notes. Lastly, informal verbal communication is used when having a conversation.
PMP Exam Prep explains, "Communication models are comprised of three parts: the sender, the message, and the receiver." Communication needs to be effective and include effective listening. When communicating you need to decide how you are going to communicate the information, whether it be via telephone or in person. This is known as communication technology. PMP Exam Prep groups communication methods into three categories, "Interactive communication, push communication, and pull communication." Interactive communication is between multiple people. Push communication is when a person sends necessary information without expectations of a response. The project manager is in charge of pull communication because they will put all of the information in one location and expects the recipients to "retrieve" it.
PMP Exam Prep provides a formula to calculate the number of communication channels. The formula is as follows:
Manage Stakeholder Expectations is part of the executing process group, in the communications management knowledge area. Stakeholders, like every other person, wants to feel trusted and wants to feel as if their expectations and concerns will be dealt with properly. In order to do this, a project manager must first figure out what these expectations, and possible concerns, may be. "The project manager reviews the stakeholder register, stakeholder management strategy, communications management plan, issue logs, and changes to determine what to do to manage stakeholder expectations." says PMP Exam Prep. Don't let statements like, "Getting down to the nitty gritty." affect communication in your project. The previous statement is known as a communication blocker. Try to avoid communication blockers and if they are used take care of them immediately.
PMP Exam Prep. Once you have delivered the performance reports and the stakeholders have reviewed them, you should ask them for feedback so that you can compare it to the project and its goals.
Thursday, October 27, 2011
PMP Exam Prep - Chapter 9
Human Resource Management
The human resource management process involves Develop Human Resources plan, Acquire Project Team, Develop Project Team, and Manage Project Team. All, except Develop Human Resource Plan, are done during the executing process group. Develop Human Resource plan is part of the planning process group. The beginning of chapter 9 lists the different responsibilities of all people involved in a project. The information PMP Exam Prep provides is very helpful because it provides a list for each individual job. I am not going to list each one, but wanted to make note of it for reference.
There are many management and leadership styles involved in Project Management, and yours will most likely change throughout the project. The leadership and management styles listed in PMP Exam Prep include "directing, facilitating, coaching, supporting, autocratic, consultative, consultative-autocratic, consensus, delegating, bureaucratic, charismatic, democratic or participative, laissez-faire, analytical, driver, and influencing. Conflict should not always be viewed as negative. At times, conflict can be beneficial, as it likely requires a resolution. PMP Exam Prep provides seven sources of conflict and suggests, "memoriz(ing) the top four, and remember(ing) that personality is last." The seven conflict sources PMP Exam Prep lists, in order of frequencing, are "schedules, project priorities, resources, technical opinions, administrative procedures, cost, and personality."
PMP Exam Prep provides techniques to know for the exam in regards to conflict resolution and they are as follows: "confronting (problem solving), compromising, withdrawal (avoidance), smoothing (accommodating), collaborating, and forcing." When problem solving, try to remember what the real problem is, and not what the problem may clearly seem to be. There are a few other terms PMP Exam Prep provides and suggests remembering them. These terms include Expectancy Theory, Arbitration, Perquisites, Fringe Benefits, and Motivation Theory. Expectancy Theory involves the expectations of rewards by the employee. PMP Exam Prep explains that arbitration is when, "..a neutral party hears and resolves a dispute." Perquisites, or perks, are special rewards given to employees. Education benefits and insurance are known as Fringe benefits, as they are the "standard" benefits.
PMP Exam Prep provides four motivation theories that need to be understood for the exam. The first motivation theory is McGregor's Theory of X and Y. McGregor's theory of X says that employees need to be watched at all times and are incapable. Theory Y is a much more positive theory as it is the belief that employees are capable and want to achieve. The second motivation theory is Maslow's Hierarchy of Needs. This theory involves "self-actualization" and uses a pyramid to show how people move through the different levels of needs. David McClelland's Theory of Needs is the third motivation theory and believes that people are motivated by either achievement, affiliation, or power. The fourth theory is Herzberg's Theory and it involves motivating agents and hygiene factors.
Chapter 9 of PMP Exam Prep ends with this, "So the lesson here is that motivating people is best done by rewarding them and letting them grow." Every person is different, and therefor may be motivated by something completely separate from another team member.
The human resource management process involves Develop Human Resources plan, Acquire Project Team, Develop Project Team, and Manage Project Team. All, except Develop Human Resource Plan, are done during the executing process group. Develop Human Resource plan is part of the planning process group. The beginning of chapter 9 lists the different responsibilities of all people involved in a project. The information PMP Exam Prep provides is very helpful because it provides a list for each individual job. I am not going to list each one, but wanted to make note of it for reference.
Roles and responsibilities should be defined in the Develop Human Resource Plan process. Remember that enterprise environmental factors are company culture and existing systems the project will deal with or make use of. Organizational assets, such as processes, should be considered when developing the human resource plan. Organization charts and position descriptions are a great tool to record and communicate roles and responsibilities. You can use a responsibility assignment matrix, organizational breakdown structures, resource breakdown structures, and position descriptions. A responsibility assignment matrix, "cross-references team members with the activities or work packages they are to accomplish." defines PMP Exam Prep. The organizational breakdown structure breaks responsibilities down by department, whereas the resource breakdown structure breaks work down by resource. Lastly, a position description is pretty self-explanatory, it is a description of the project work.
PMP Exam Prep states, "Large projects with hundreds of resources require a staffing management plan. This plan, which is part of the human resource plan, includes:"
- Your plan for staff acquisition ("Where will they come from?")
- Resource calendars ("When are people available? When will they be used?")
- Staff release plan ("When will resources be released and no longer be charged to the project?")
- Staff training needs ("What training do the resources need?")
- Recognition and rewards ("What are they? What are the criteria for their use?")
- Compliance ("How will the project comply with any rules related to human resources?")
- Safety ("What policies protect the resources?")
Acquiring the project team is done in the executing process group, under the human resource management knowledge area. According to PMP Exam Prep, it involves:
- Knowing which resources are preassigned to the project and confirming their availability
- Negotiating for the best possible resources
- Hiring new employees
- Hiring resources through the contracting process from outside the performing organization - outsourcing
- Understanding the possibilities and problems with using virtual teams - teams made up of people who never or rarely meet
- Managing the risk of resources becoming unavailable
Negotiation is used when resources are not preassigned. You can negotiate from within your organization, in procurement situations, and from external vendors, suppliers, contractors, etc. If negotiating resources from within the organization PMP Exam Prep writes, "the project manager should:
- "Know the needs of the project and its priority within the organization."
- "Be able to express how the resource's manager will benefit from assisting the project manager."
- "Understand that the resource's manager has his or her own work to do and that the individual may not gain benefits from supporting the project."
- "Do not ask for the best resources if the project does not need them."
- "Be able to prove, by using project management tools such as the network diagram and project schedule, why the project requires the stated quantity and quality of resources."
- "Use the negotiation as an opportunity to discover what the resource's manager will need from the project manager in order to manage his or her own resources."
- "Build a relationship so the project manager can call on the resource's manager's expertise later in the project if necessary."
- "Work with the resource's manager to deal with situations as they arise."
The halo effect happens when team members are rated high or low in all factors, because they were rated high or low on one specific factor. When a team member is rated, and it is incorrect, it can have a negative affect on the project. This should be avoided.
"The Develop Project Team process is done as part of project executing. This process should result in decreased turnover, improved individual knowledge and skills, and improved teamwork." informs PMP Exam Prep. Team-building activities are a part of developing a project team, and can be a very beneficial tool when used correctly. "It is an attitude, as well as an action." says PMP Exam Prep. In team-building, it is the job of the project manager to guide interactions between team members and should be started in the beginning stages of the project. If a team puts trust in one another, they will work better as a cohesive whole. When there is a lack of trust in a team structure, the project will not be as successful. Team building even has formally identified stages. PMP Exam Prep provided a list of these stages, "Forming, Storming, Norming, Performing, and Adjourning." These stages are pretty self-explanatory, and I bet you can figure them out without even referencing to the book.
Ground rules should be set in order to eliminate conflicts and problems that may arise throughout the project. A co-location (or War room) may be set up by the project manager. This location is useful for teams that are spread out in different cities. The co-location acts as a central meeting place for the team. Recognition and rewards are given out during the Develop Project Team process to appraise performance. Lastly in the Develop Project Team phase, team performance assessments are done. These assessments are used to simply assess the team and it's effectiveness.
The Manage Project Team is part of the executing process group in the Human Resource Management knowledge area. PMP
The difference between a project performance appraisal and a team performance assessment should be noted. A project performance appraisal is focused on the performance of a team member, whereas a team performance assessment is focused on the team performance. The appraisal is for the individual team member, and the assessment is for the entire team as a whole. Issue logs are helpful tools because it will help track any issues that arise and can be referred back to.
PMP Exam Prep includes a list of the different powers of a project manager. I have listed them below.
- Formal - based on your position. Derived from position in the company.
- Reward - based on giving rewards. One of best powers. Derived from position in the company.
- Penalty - based on penalizing team members. Worst form of power. Derived from position in the company.
- Expert - based on expertise. One of best powers. Earned on your own.
- Referent - based on the power of fame and charisma.
PMP Exam Prep provides techniques to know for the exam in regards to conflict resolution and they are as follows: "confronting (problem solving), compromising, withdrawal (avoidance), smoothing (accommodating), collaborating, and forcing." When problem solving, try to remember what the real problem is, and not what the problem may clearly seem to be. There are a few other terms PMP Exam Prep provides and suggests remembering them. These terms include Expectancy Theory, Arbitration, Perquisites, Fringe Benefits, and Motivation Theory. Expectancy Theory involves the expectations of rewards by the employee. PMP Exam Prep explains that arbitration is when, "..a neutral party hears and resolves a dispute." Perquisites, or perks, are special rewards given to employees. Education benefits and insurance are known as Fringe benefits, as they are the "standard" benefits.
PMP Exam Prep provides four motivation theories that need to be understood for the exam. The first motivation theory is McGregor's Theory of X and Y. McGregor's theory of X says that employees need to be watched at all times and are incapable. Theory Y is a much more positive theory as it is the belief that employees are capable and want to achieve. The second motivation theory is Maslow's Hierarchy of Needs. This theory involves "self-actualization" and uses a pyramid to show how people move through the different levels of needs. David McClelland's Theory of Needs is the third motivation theory and believes that people are motivated by either achievement, affiliation, or power. The fourth theory is Herzberg's Theory and it involves motivating agents and hygiene factors.
Chapter 9 of PMP Exam Prep ends with this, "So the lesson here is that motivating people is best done by rewarding them and letting them grow." Every person is different, and therefor may be motivated by something completely separate from another team member.
Wednesday, October 26, 2011
PMP Exam Prep - Chapter 8
Quality Management
The quality management process involves planning quality, performing quality assurance, and performing quality control. The planning is done in the planning process group. Whereas the quality assurance is performed in the executing process group, the quality control is done in the monitoring and controlling process group. Quality is defined in PMP Exam Prep as, “The degree to which the project fulfills requirements.” The project manager must make sure there are requirements for the project and its many aspects. How is one supposed to know what quality is for the project if the customer does not outline it? Below is a helpful list of quality related “PMI-isms” outlined in PMP Exam Prep:
· The project manager should recommend improvements to the performing organization’s standards, policies, and processes. Such recommendations are expected and welcomed by management.
· Quality should be considered whenever there is a change to any of the project constraints.
· Quality should be checked before an activity or work package is completed.
· The project manager must spend time trying to improve quality.
· The project manager must determine metrics to be used to measure quality before the project work begins.
· The project manager must put in place a plan for continually improving processes.
· The project manager must make sure authorized approaches and processes are followed.
· Some quality activities may be done by a quality assurance or quality control department.
It is the job of the project manager to plan quality, and not inspect it. The project manager should be continuously looking for improvements to quality. A Just in Time system, or JIT, requires suppliers to deliver materials when they are needed, instead of ahead of time. This decreases inventory to almost zero. PMP Exam Prep describes Total Quality Management (TQM) as, “(TQM) encourages companies and their employees to focus on finding ways to continuously improve the quality of their products and their business practices at every level of the organization.” It is both the project manager’s and team members’ responsibility to check quality. Quality in the organization is ultimately the senior management’s responsibility. Poor quality relates to a list of things. For example, poor quality could create increased costs, low morale, and schedule delays. Increases in quality could decrease costs, boost morale, and help schedule effectiveness.
Plan Quality defines quality and identifies how it will be achieved. The stakeholder register, scope baseline, schedule baseline, cost baseline, and risk register are all items needed for the project manager to perform Plan Quality. They serve as guides in this process. I created some steps that outline the Plan Quality process below.
Step 1: Identify Standards (External and Internal)
· External Standards
· Organizational and departmental policies, standards, and procedures
· Customer Quality Standards
Step 2: Create Project-Specific Standards
· Do not violate relevant standards
Step 3: Determine Work Required to Meet Standards
· Determine specific measurements
o Each week, month, or per deliverable
Control charts are generally used for monitoring. These charts create a range and show whether the variables are within acceptable limits or not. Control limits are the performing organization’s quality standards and are represented by dashed lines. The customer’s expectations or requirements are known as specification limits. PMP Exam Prep suggests assuming specification limits are outside the upper and lower control limits on the exam. The rule of seven is a heuristic and means that there is a group of seven data points on one side of the mean. They are not random and this process may be out of control, so the project manager should look into it and figure out what is going on. Quality Management Plan, Quality Metrics, checklist, Process Improvement Plan, Project Management Plan and Project document updates are all outputs of Plan Quality.
Perform Quality Assurance ensures that the team is following the processes to produce the deliverables. Quality Audits is a tool used in Perform Quality Assurance to make sure the policies and procedures that are in place are effective and efficient, and that the project team is complying with them. The quality assurance department or project manager can perform quality audits when needed. Process analysis is another tool used in Perform Quality Assurance as it focuses on identifying improvements in processes and should be planned at certain points in the project.
Perform Quality Control looks at the deliverables produced to ensure they are correct and at the level of quality that was planned. Perform Quality Control is all about measuring. PMP Exam Prep provides a list of the terms that relate to Perform Quality Control and should be remembered.
· Mutual Exclusivity – two events cannot occur in a single trial.
· Probability – likelihood that something will occur.
· Normal Distribution – bell curve used to measure variations.
· Statistical Independence – probability of one event does not affect probability of another event occurring.
· Standard Deviation (or Sigma) – measure of a range.
· 3 or 6 Sigma – level of quality a company decided to try to achieve. PMP Exam Prep suggests remembering the following for the exam in regards to Sigma:
o Sigma is taken on both sides of the mean. Half the curve is to the right of the mean, and half is to the left.
o +/- 1 sigma = 68.27%, which is the percentage of occurrences to fall between the two control limits.
o +/- 2 sigma = 95.45%
o +/- 3 sigma = 99.73%
o +/- 6 sigma = 99.9999998%
The Perform Quality Control process uses Ishikawa’s seven basic tools of quality.
· Cause and Effect Diagram (Fishbone)
· Flowchart
· Histogram
· Pareto Chart
· Run chart
· Scatter diagram
· Control cart
fishbone diagram, creates a layout of defects and possible causes of the defects. A flowchart shows the flow of the process from beginning to end. This is a helpful tool because you can see how everything is working together and find the problem areas. Although I thought the chart displayed in the book was a bar chart, it is actually called a histogram. It displays data in columns or bars, just as a bar chart does. I had never heard of a Pareto Chart before reading PMP Exam Prep. A Pareto chart is a histogram, but is differentiated by its arrangement of results from most frequent to least frequent. The exam will ask about Pareto charts and so PMP Exam Prep provides three key aspects of them; they focus attention on the most critical issues, prioritize potential causes of the problems, and separate the critical few from the uncritical many. A run chart is a chart of progress that shows trends. This is a helpful tool in quality because it allows you to see if there is a pattern of variation. A scatter diagram charts two variables to see if they relate. Last but not least, control charts. I previously explained these, so please refer to my earlier explanation of a control chart.
Tuesday, October 18, 2011
PMP Exam Prep - Chapter 7
Cost Management
The cost management plan is also known as the "budget management plan" or the "budget plan" on the PMP exam. PMP Exam Prep provided the following list, "The cost management plan includes:"
Following cost risk in chapter 7 is estimate costs. This process creates the cost estimates for each activity, individually. Two types of cost are variable costs and fixed costs. Variable costs include the cost of supplies, and wages, which are costs that change with production and work. Fixed costs include the cost of rent, and set up, which are costs that do not change throughout production. These two costs should be remembered in the same category. Not only can a cost be variable or fixed, but it is either direct or indirect. Direct costs are, "directly attributable to the work on the project." according to PMP Exam Prep. These costs include recognition, costs of materials, etc. Indirect costs are "overhead items or costs incurred for the benefit of more than one project." defines PMP Exam Prep. Indirect costs would be something like taxes.
Inputs to estimating costs include scope baseline, project schedule human resource plan, risk register, policies and historical records relate to estimating, templates, processes, procedures, lessons learned, and historical information, company culture and existing systems that the project will have to deal with or can use, and project management costs. The scope baseline is used in estimating because you need to know what is out of scope and the constraints placed on the project. Project schedule is a key element in estimating costs because it contains the activities, the resources, and the timing of work. The human resource plan comes in to play in estimating cost because reward systems, labor rates, and the human resources intended for project use, are all cost items and must be estimated. As far as risk register goes, it is considered an estimating costs input, as well as an output. Historical records and organizational records should be considered in estimating costs because they provide information from other projects. Using company culture and existing systems as tools for estimating cost can be beneficial because they provide different sources of supply procurement. Lastly, project management costs should also be included in estimating costs because project management efforts do incur costs, through status reports, the project manager efforts, etc.
Not only can costs be estimated using one-point estimating, analogous estimating, parametric estimating, and three-point estimating, but you can also calculate using bottom-up estimating. Bottom-up estimating involves each part of an activity or work package and creating estimates for them.
Project management software, determining resource cost rates, reserve analysis, cost of quality, and accuracy of estimates are all used in the process of creating estimates. Project management software can be helpful in speeding up calculations and can be used for estimating. On the exam, it is important to remember that resources are not just internal human resources, like cost of labor. When determining resource cost rates, consider ALL resource costs, including work of suppliers and consultants, for example. As far as cost of quality goes, PMP Exam Prep suggests, "The cost of work added to the project to accommodate quality efforts should be included in the project estimate.". the accuracy of estimates will vary throughout a project. When the project is just beginning, you generally provide a wide range of estimates and as the project progresses you can narrow the estimates because you gain more information and are better able to do so. PMP Exam Prep states that the following three ranges are frequently seen on the exam, and should be memorized.
PMP Exam Prep provides a diagram outlining the creation of a budget. I recreated it below. A budget is created like this:
Once everything is estimated, the project manager should then compare their estimates with one of three things: parametric estimates, expert judgement, or historical records. Determining which to compare against depends upon your industry and preference. Checking cash flow is next on the list. If you don't know the amount and availability of cash, how can you plan accordingly? Once the estimates are compared and the cash flow is reconciled, another reconciliation must take place. This reconciliation involves looking for any cost constraints and then resolving them. The cost baseline is established when the Determine Budget process is complete.
Progress reporting involves figuring out where the project is, and the perecent complete. Generally, a project manager will ask team members for an estimate of percent complete for the activities, individually. This method is time-consuming and unreliable because the team members are simply making a guess. Earned value is a much more realiable method of measuring the progress of your project. It measures project performance against the scope, schedule, and cost baselines. These three baselines combined are known as the performance measurement baseline. PMP Exam Prep provides a list of terms that need to be remembered on page 241. As well as formulas and interpretations to memorize for the exam on pages 241 and 242. PMP Exam Prep advises you to "understand and memorize the following:"
The cost management plan is also known as the "budget management plan" or the "budget plan" on the PMP exam. PMP Exam Prep provided the following list, "The cost management plan includes:"
- Specifications for how estimates should be stated (in what currency)
- The level of accuracy needed for estimates
- Reporting formats to be used
- Rules for measuring cost performance
- Whether costs will include both direct costs (those costs directly attributable to the project) and indirect costs (costs not directly attributable to any one project, such as overhead costs)
- Establishment of a cost baseline for measuring against as part of project monitoring and controlling
- Control thresholds
- Cost change control procedures
Following cost risk in chapter 7 is estimate costs. This process creates the cost estimates for each activity, individually. Two types of cost are variable costs and fixed costs. Variable costs include the cost of supplies, and wages, which are costs that change with production and work. Fixed costs include the cost of rent, and set up, which are costs that do not change throughout production. These two costs should be remembered in the same category. Not only can a cost be variable or fixed, but it is either direct or indirect. Direct costs are, "directly attributable to the work on the project." according to PMP Exam Prep. These costs include recognition, costs of materials, etc. Indirect costs are "overhead items or costs incurred for the benefit of more than one project." defines PMP Exam Prep. Indirect costs would be something like taxes.
Inputs to estimating costs include scope baseline, project schedule human resource plan, risk register, policies and historical records relate to estimating, templates, processes, procedures, lessons learned, and historical information, company culture and existing systems that the project will have to deal with or can use, and project management costs. The scope baseline is used in estimating because you need to know what is out of scope and the constraints placed on the project. Project schedule is a key element in estimating costs because it contains the activities, the resources, and the timing of work. The human resource plan comes in to play in estimating cost because reward systems, labor rates, and the human resources intended for project use, are all cost items and must be estimated. As far as risk register goes, it is considered an estimating costs input, as well as an output. Historical records and organizational records should be considered in estimating costs because they provide information from other projects. Using company culture and existing systems as tools for estimating cost can be beneficial because they provide different sources of supply procurement. Lastly, project management costs should also be included in estimating costs because project management efforts do incur costs, through status reports, the project manager efforts, etc.
Not only can costs be estimated using one-point estimating, analogous estimating, parametric estimating, and three-point estimating, but you can also calculate using bottom-up estimating. Bottom-up estimating involves each part of an activity or work package and creating estimates for them.
Project management software, determining resource cost rates, reserve analysis, cost of quality, and accuracy of estimates are all used in the process of creating estimates. Project management software can be helpful in speeding up calculations and can be used for estimating. On the exam, it is important to remember that resources are not just internal human resources, like cost of labor. When determining resource cost rates, consider ALL resource costs, including work of suppliers and consultants, for example. As far as cost of quality goes, PMP Exam Prep suggests, "The cost of work added to the project to accommodate quality efforts should be included in the project estimate.". the accuracy of estimates will vary throughout a project. When the project is just beginning, you generally provide a wide range of estimates and as the project progresses you can narrow the estimates because you gain more information and are better able to do so. PMP Exam Prep states that the following three ranges are frequently seen on the exam, and should be memorized.
- Rough Order of Magnitude (ROM) Estimate: During project initiating. +/- 50 percent from actual is the typical range for this estimate.
- Budget Estimate: During project planning. -10 to +25 percent from actual range.
- Definitive Estimate: As the project progresses. Dependent on your preference, +/-10 percent or -5 to +10 percent from actual.
PMP Exam Prep provides a diagram outlining the creation of a budget. I recreated it below. A budget is created like this:
Progress reporting involves figuring out where the project is, and the perecent complete. Generally, a project manager will ask team members for an estimate of percent complete for the activities, individually. This method is time-consuming and unreliable because the team members are simply making a guess. Earned value is a much more realiable method of measuring the progress of your project. It measures project performance against the scope, schedule, and cost baselines. These three baselines combined are known as the performance measurement baseline. PMP Exam Prep provides a list of terms that need to be remembered on page 241. As well as formulas and interpretations to memorize for the exam on pages 241 and 242. PMP Exam Prep advises you to "understand and memorize the following:"
- EV comes first in every formula.
- If it is a variance, the formula is EV minus something.
- If it is an index, it is EV divided by something.
- If the formula relates to cost, use AC.
- If the formula relates to schedule, use PV.
- For variances interpretation: negative is bad and positive is good.
- For indices interpretation: greater than one is good; less than one is bad.
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