- Once a project is selected for execution, the structural project planning approach prescribes that the project get planned in detail prior to the actual start of the project.
- Project planning consists of two main stages: Risk Management and Project Scheduling.
- The goal of the risk management stage is to identify project risks and take the necessary precautions.
- The goal of project scheduling is to make a detailed schedule of all the tasks that need to performed, with specific time frames and resource allocations.
- In projects, there is always some uncertainty about the schedule, the costs and the quality of the end product.
- Project management is to some extent risk management which tries to systematically manage this uncertainty in order to increase the likelihood of meeting project objectives
- Risk management deals with uncertainty, which comes in two flavours:
- Known unknowns: Identified potential problems. One doesn’t know exactly what will happen, but one is aware of the risks and their potential to damage the project. One can prepare for these risks.
- Unknown unknowns: These relate to problems that arrive unexpectedly and cannot be anticipated. However, good project managers still expect these to happen.
- All project management activities can be considered as managing risk, but the risk management process is a specific set of activities performed consciously to identify and manage risks on the project.
- There is a difference between project risk and business risk.
- Business risk relates to creating the right project output. Business risk is seldom the responsibility of the project manager, but rather of the project owner.
- Project risk relates to making sure the project produces the promised results within budget and on time. This is the responsibility of the project manager.
Risk Management Framework
- A possible risk management framework consists of 5 main steps:
- Identify Risks: Find all the factors that threaten project objectives.
- Analyse and prioritize: Assess each risk in terms of its possible damage and likelihood of occurrence.
- Develop a response: Create strategies for reducing the possible damage and/or probability the risk will occur.
- Establish reserves: Set aside additional funding for the project that will be used for known risks and unknown risks.
- Continuous risk management: Implement strategies and monitor the effects of these changes on the project.
Step one: Identify the risks
- Organize brainstorm sessions with stakeholders to gather potential risks. Generate a list as big as possible with potential risks. Once you have a list of potential risks, organize them by combining similar risks and order this list by magnitude and probability of the risk.
- Another approach to identify risks is by means of interviews, which is a more structured approach than brainstorming.
- To support the identification of project risks, one could use a risk profile. This is a list of questions that address traditional areas of uncertainty on projects. Creating such a risk profile should be an ongoing process, such that the end of the project, what has been learned will incorporated into the profile.
- Another source of risk identification is the other main activity during project planning, i.e. the process of estimating schedules and budgets. Activities and tasks which are hard to estimate often imply a substantial amount of uncertainty. Identifying the cause of this uncertainty will most likely reveal project risks.
- Note that the goal of this step is NOT (yet) to identify ways to minimize or eliminate risks. The goal is only to identify risks.
Step two: Analyze and prioritize the risks
- To identify the importance of risks, one has to take two dimensions into account, i.e. the likelihood of occurrence and the impact if the risks becomes reality.
- After creating an initial list of potential risks, a first step is to quickly eliminate risks from your list which are not worth worrying. Next, one should sort the remaining risks in order of importance. This step should be performed quickly and based on intuition.
- A next step could be to concisely describe and analyse the remaining risks by clearly formulating the condition which causes the uncertainty as well as the consequence of this situation in terms of the possible negative outcomes.
- Once the risks are defined, the consequences in terms of cost, schedule and damage to the project must be described as well.
- Finally, each risk must also receive an estimate of the probability that the risk will actually occur.
- Providing an exact estimate of both the impact and the probability of occurrence is often difficult. This should never be an excuse to skip this step. Instead, when exact estimates are difficult to obtain, one could switch to an ordinal scale with e.g. three categories (from 1 to 3, representing respectively a low, medium or high impact/probability).
Step three: Develop Response Plans
- A first step is to identify those risks that are within the control of the project team and those that are not.
- There are five ways to deal with identified risks:
- Accept the risks. This implies that you understand the risk and decide to do nothing about it. This is a common strategy when the impact or the probability are low.
- Avoid the risk. You can try to avoid a risk by choosing not do to specific parts of the project or by selecting a lower-risk option for meeting the project goals.
- Contingency plans. When you cannot ignore, nor avoid the risk and have no impact on the probability, you can try to reduce the negative impact and have a fall-back plan in place when the risk becomes reality. Note that contingency plans require a continuous monitoring of the risks, such that you can activate the continuous plans on time. This implies that this strategy can only be efficient if there is a way to detect the risk on time.
- Transfer the risk. This strategy typically boils down to paying for insurance. Another approach is setting up a fixed-price contract that will get the work done on time for a fixed price. Note that this could however introduce new risks as more external parties get involved.
- Mitigate the risk. This strategy tries to reduce the risk and more particularly the probability that the risk occurs. This often implies taking extra actions.
Step four: Establish Contingency and Reserve Funds
- Once the strategies are determined, (financial) reserves must be set aside to allow the strategies to be implemented. Such contingency and reserve funds serve the purpose to account for known un-knowns.
- Unknown unknowns are never accounted for by such reserves. Instead, management reserves must be used for risks that cannot be anticipated. Risk management only deals with anticipated risks.
Step five: Continuous Risk Management
- The initial risk plan is based on all known information at the start of the project. However, as the project progresses, more information is gained, also on potential risks. Therefore, risk management should be a continuous effort. This includes:
- Monitoring known risks.
- Checking for new risks.
- Repeating the risk management framework for newly identified risks.
- A second element of the project planning stage is the development of a detailed project schedule.
- The classical approach of project management relies heavily on upfront planning. We first plan everything prior to execution.
- Developing a project schedule can be broken down in following steps:
- Develop a work breakdown structure.
- Identify task relationships.
- Estimate work packages.
- Calculate initial schedule.
- Assign and level resources.
Work Breakdown Structure
- A first step is to break down the work into smaller pieces of work which make it easier to accurately estimate the required time and resources. This is typically achieved by developing the Work Breakdown Structure (WBS) of a project, which is a tool for breaking down a project into its component parts.
- The work breakdown structure identifies all the tasks/deliverables in a project and can be set up graphically or as an textual outline. Traditionally, a WBS focussed on tasks, more recently there has been a shift towards deliverables.
- Building a WBS helps to:
- Provide a detailed illustration of project scope.
- Monitor progress. The tasks on the WBS become the basis for monitoring progress, because each is a measurable unit of work.
- Create accurate cost and schedule estimates.
- Build project teams as it provides clear work assignments to the team members and provides an overview how his or her work fit into the overall effort.
- A WBS breaks all the work into separate tasks of which two types exist:
- Summary tasks. A summary tasks includes several subordinate tasks and is not actually executed. Its purpose is to summarize more detailed tasks, called work packages.
- Work packages. These are the tasks that actually require execution.
- E.g. Creating manual can be the summary tasks which consists of the work packages writing content, setting layout, proofreading and printing manual.
- Developing a WBS typically follows three steps:
- List the major deliverables or high-level tasks.
- Name all the tasks required to produce deliverables.
- Organize the WBS.
WBS Step One: Start from the top
- A WBS is typically developed in a top-down approach. You can start from the deliverables mentioned in the statement-of-work and turn them into the major summary tasks.
WBS Step Two: Identify all tasks required to produce deliverables
- The next step is to break down each task into lower-level, more detailed tasks required to produce the deliverable.
- This is often the most difficult step in the planning process and requires a good understanding of how to produce the project outcome.
- Give each task (work package and summary task) a name that describes an activity which produces some specific output. Therefore, the naming of activities typically follow the “verb-noun” format.
- Try to avoid open-ended tasks such as “read literature” as these could go on indefinitely.
- Try to avoid tasks that don’t clearly describe the action which is required, such as e.g. “literature”.
- To ensure that the work packages are the correct size, following rules can be applied as rule of thumb.
- No task should be smaller than 8 labour hours or larger than 80. (These limits might need adjustment depending on the kind of project and availability of non-stop working time).
- No task should be longer than the time between two reporting meetings.
- Break work packages down to smaller tasks if:
- It makes the task easier to estimate.
- It makes the task easier to assign.
- It makes the task easier to track.
WBS Step Three: Organize the WBS
- Once all the work packages are identified, rearrange them in the most appropriate way.
- In this step, one often creates new summary tasks and put work packages in new/other summary packages.
- Different ways of organizing work packages emphasizes different aspects of a project.
- Make sure that summary tasks are meaningful as their sole purpose is for communication or visibility. These summary tasks communicate what your project is about.
- Also make sure that the work packages underneath the summary task add up to the summary task. When one has completed all the work packages, the result automatically be that the summary task is completed.
Identify task relationships
- The sequence in which detailed tasks - work packages - are performed is determined by the relationship between the tasks.
- Any time a series of tasks is performed, there will be sequence constraints, i.e. some tasks need to be performed before others.
- To visualize these constraints, tasks and sequential constraints can be visualized as a graph. When doing so, two basic rules are important:
- Task relationships (arrows) should only be shown between work packages (and not summary tasks).
- Task relationships should only reflect sequence constraints between work packages, not resource constraints.
- When visualizing task relationships in a graph, it can be useful to identify significant events in the project, as known as milestones. Such milestones are events and have no duration. They serve following purpose:
- Milestones are useful anchors. They provide a quick overview how the project progresses.
- Milestones can be used to mark input from one party to another. It illustrates when the project delivers something to its stakeholders.
- Milestone allows visualization of events that aren’t represented by a work package or summary task.
- The sequential constraints between tasks, visualized by graphs, can further be separated into different categories:
- Finish-to-start relationship. The subsequent activity can only start when then preceding activity finished.
- Start-to-start relationship. The subsequent activity can already/only start when the preceding activity started.
- Finish-to-finish relationship. The subsequent activity can start independently of its predecessor, but cannot finish before the predecessor finishes.
Estimate Work Packages
- Now that the project is broken down into smaller, estimable work packages, the goal is to estimate the duration of each work package.
- Note that the duration is the time between initiation to completion.
Calculate an Initial Schedule
- Now that the work packages and their duration and interdependencies are identified, one can start estimating the duration of the project.
- The first step is to perform a forward pass. This will allow you to determine the earliest starting point (ES) and finish time (EF). The EF of a task equals the ES plus its duration. The ES of a task equals the latest EF of all its direct predecessors. The forward pass starts with the first task, whose ES equals the starting time of the project.
- The next step is to perform a backward pass. This allows one to determine the latest start time (LS) and latest finish time (LF) of each task. The LS time equals the LF minus its duration. The LF of a task equals the earliest LS of all its direct successors. The backward pass starts with the last task, whose LF equals the project deadline.
- Next, it is important to calculate the float of each task. The float of an activity is the difference between its ES and LS (or EF and LF) and represents to what extent the start of an activity can be postponed in relation to its ES. Float provides flexibility in a schedule.
- The set of tasks which zero or negative float is the critical path. Any delay in the critical path will automatically result in a delay in the project (unless corrective actions are taken).
Assign and level resources.
- Now that the schedule is made, it is time to assign resources to the schedule. It’s goal is to do so in order to optimize the use of people and equipment to the project.
- It begins with the assumption that, whenever possible, it is most productive to have consistent, continuous use of the fewest resources possible. In other words, try to avoid repeatedly adding and removing resources time and again throughout the project.
- This goal is achieved by the act of resource levelling which focusses only on people and equipment, not materials. The amount materials needed is dictated by the specifications.
- Resource levelling follows a four-step process:
- Forecast the resource requirements throughout the project for the initial schedule.
- Identify the resource peaks.
- At each peak, delay non-critical tasks within their float.
- Eliminate the remaining peaks by re-evaluating the work package estimates.