Although desirable, it is quite difficult to start with a dictionary definition of project management, mainly because of the complexity involved in the process, a complexity impossible to cover with a simple two-line definition. Hence, it is probably best to describe the process, underlining thus the main characteristics of project management.
A company's strategic perspective may, perhaps, be amply resumed to two strategic concepts around which everything else revolves: objectives and projects. Any company will start building its analysis around a series of drivers and objectives that the company may have for the next few years. These objectives need to be only a couple, because we may assume that if the company had 15 objectives for the next years, its resources will be too split and it will not be bale to fulfill any of them efficiently.
Once the company has defined its list of goals, it needs to define a portfolio of projects that best serve the respective goals. These projects will be defined, evaluated, analyzed (from a strategic and value-added perspective) and tracked throughout their entire lifespan. If the goals that the company has set out will generally remain the same for a period of time, the projects will be under constant supervision and some may be suspended if they have achieved their goal or are not performing as well as they should. Hence, if we are to resume, project management deals with the entire lifespan of a project and everything related to it.
I have divided the project management process into three major phases, as I see them: select, manage and track.
The Select part of the process is perhaps one of the most important, because it sets the base for what is to come. This phase has two steps. The first one consists of building a large set of projects that the company believes will serve its strategic objectives. The question that a company should always ask itself is whether a project has a significant impact on the drivers it has established. The set of projects is usually done in a brainwashing manner, in the sense that each department will come up with a set of projects, significant for each department in part, the set being then analyzed at the company level. It is obvious that some of the projects that may be significant at a department level may subsequently prove less so at company level. As such, a first selection is already made when putting together each departmental set of projects and deciding which can have a significant impact on the company drivers.
The second part of the selection phase is perhaps the trickiest of all, because this is where the portfolio of projects is set in place and the company decides on a strict set of projects it will complete in the following years. I have already discussed the importance of the project's scope and of the impact each project must have on the company's strategic objectives. There are, however, a series of other elements to be taken into consideration when making the selection. "Most literature on project management speaks of the need to manage and balance three elements: people, time, and money." This assertion is quite true: after the initial selection, related to scope, a company will need to take into consideration each of these elements in part. Let's have a look at each.
People is a very important element, because the quality and quantity of human resource allocated for each project will ensure both that it will be done in time and that the project will be properly completed. The selection of the to-be-done projects needs to take into consideration the availability of human resource. There is no use on deciding that there are 100 projects that will serve the strategic interests of the companies if the company does not have enough people working on these projects. Additionally, each human resource should be analyzed in part. For example, let's take several information technology and software related projects. Each of these projects usually has working on it a team formed from one project manager, several programmers and one or two application testers. If there are not enough project managers for all the projects the company decides upon, there is no point in selecting all of them, because they will not be done properly.
As for time, some of the projects need to be completed by a certain date or a certain time in the future. If the project cannot be completed by that time, then there is no point in allocating any resource for it and in starting working on it. For example, some of the European companies have taken several measures to ensure that the passing on to the EURO will have no impact on the company's business. However, as the EURO was introduced in 1999, if the project could not be completed by then, there was no point in starting it at all.
Money again plays a crucial role in project selection and I am referring here to the entire financial analysis that needs to be performed before a project is selected. Of course, cost, related to the budget of the company, needs to be taken into consideration first. If the cost of the project is too high, then one cannot reasonably start work on it. However, we may find ourselves in a situation where the project with the high cost is of utmost importance for many of the company's strategic drivers. In this case, the company needs to evaluate carefully whether the cost of the project is justified, taken into consideration additional elements, such as the capacity of completing it on time
The second money-related issue regards the future benefit of the project to be completed. There are several financial formulas that can be used, the most notable being the Net Present Value and the Internal Rate of Return. The net present value calculates the actualized future cash flows of a project in the next years and compares it to the initial cost (it is assumed that the project generates future cash flows). If the net present value is greater than the cost of the project, then the project is viable from a NPV perspective, because it generates positive cash flows surpassing the cost of the projects.
As for the internal rate of return, this is a measure that estimates the return rate of the project by calculating the rate for which the NPV is zero. Why is this important? We are to assume that the company has a certain cost of capital, that is, the cost of equity and debt. If the return of a project is lower than this rate, the company should ask itself why this project should be included in the portfolio, because it means that the project brings less benefit than the company's cost of capital.
We may assume now that the company has made a selection in the set of projects and that it now has a definite portfolio of projects that it will pursue in the next years. The second phase of project management refers to managing that portfolio and its resources.
The most important part of the manage phase is managing the human resources. We should always keep in mind the fact that a project will most likely span a longer period of time, during which many things can happen. In terms of human resource, people may be subsequently fired, may go on vacation or may go on maternity leaves. All these can influence substantially work on the project, to a degree where some of the projects from the portfolio may be suspended in time, because there aren't enough people to work on it. However, suspending these projects is a tough job as well. Several specialized software programs, like Microsoft Project, are used to best allocate resources when such situations do occur. Of course, it is preferable that these situations are recognized and dealt with when the initial selection is made, however, as I have said, project life span is a couple of years in average and it is to be assumed that changes can occur during this period.
Another thing related to human resource that needs to be taken into consideration is work migration, from one project to another. This may be a successful mean to cover the work teams that are left without some of its members, by using some of the projects where there is an extra amount of human resource.
The money element needs to be carefully looked into when managing a project. We may assume that the project had an initial estimated budget. We may also assume that that budget may often be too small or that additional problems may arise on the way, problems which will mean increasing the project budget. However, it is to be decided whether this decision can actually be made or not. How can this be done?
Well, for once, we have to look at how much time there is…