Program Management vs Project Management

Have you ever thought that your project would be a program?. “If all you have is a hammer, everything looks like a nail” [Bernard Baruch]. Is your problem a nail or a screw?. Is it possible that you see your needs as a project because you know about project management?. According with the PMBoK© of the PMI®, a big project can be divided in sub-projects. According with “The Standard of Program Management”© of the PMI®, a program is a “group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually”. I think that sometimes to manage related “components” as a project or as a program is simply a decision. You can manage it in both manners, but probably this will be the most important decision you will take in this process and it is going to increase or decrease significantly your probabilities of success.

In Program Management there are “components” that can be “projects” or other kind of work, like “ongoing services”. If you need to manage something that can’t be defined as a project because of its continuous nature, then you doesn’t have a big project, you have a program.

In Program Management you decide to start components if some conditions are satisfied. You are not going to start to build something that nobody can maintain or operate. In Program Management this is always an explicit concerned and in Project Management it depends on the project plan. If you need to review the start and finish of components according with superior reasons, you probably have a Program.

In Program Management the promise to the sponsors and stakeholders is more related with benefits than scope. Of course a program has a scope but the emphasis is put in benefits instead of scope. If your promise sounds as “give dwelling to a hundred people” and you are designing a solution for that; or your promise sounds as “generate green energy in an innovative way” and you are visiting innovative facilities in order to decide, then you probably have a program, not a project.

Many Programs are reviewed in decision gates every year and receive new funds after that revision. That’s why a Program manager needs to be prepared for regular auditing processes. If the Program is still useful and is creating benefits is probably going to be extended. This sounds opposed to the definition of project and is very common in Program Management.

It’s sad to say that very often I see managers fail trying to manage programs as if they were projects. I hope you have seen this article before that moment and you are at time to decide if your need a hammer or a screwdriver.

Behind schedule since project planning

If you have two parallel activities preceding one, your project will be probably late. This is not rhetoric and certainly not ironic. It’s a mathematical fact.

Let’s take a plan of two activities ending at the same time. Let’s suppose the time estimation for the activities was made so that it’s equally probable to finish each activity before or after the estimated ending time t (the common way). The probability that both activities end in a moment less or equal to t, will be the product P( x <= t )P( y <= t), hence ½ * ½ = ¼. It means it is improbable that activities end on time.

The most likely finish time can be calculated adding the mean duration to the start time. The duration is a non deterministic variable. It has a probability distribution that depends on the activity nature. Nevertheless, I’m going to show this simple fact doing mathematics with two activities with different exponential distributions starting at different times. The result can be seen in the following image. The two activities can be modeled as one. The most probable ending time of the composite activity can be obtained adding delta (δ) to the ending of the parallel activities.

What is the importance of this?. This is a common problem doing plans. There are projects condemned to be late since the planning. Make the plan using feeding buffers as it is recommended by the people of “critical chain”. This is a good manner to avoid this problem. Of course you can ask consultants like me, to help you with these issues.

Proof

Let's calculate the most probable finish time of the composite activity.

The density function has the following probability:

The formula is:

The inferior limit d is because the function has value zero before the limit:

Replacing with the exponential probability functions:

Reordering:

Integrating:

The result is the finish of the activities plus delta (δ):

Risk in Project Management

Project appraisers have the tendency to be over optimistic. There are two clear tendencies that govern this behavior. One comes from a natural human characteristic and the other comes from voluntary, deliberate and ethically reprehensible actions.

Wishful thinking is the formation of beliefs and making decisions according to what might be pleasing to imagine instead of appealing to evidence, rationality or reality. Holding all else equal, subjects will predict positive outcomes to be more likely than negative outcomes. In one straightforward experiment, all other things being equal, participants assigned a higher probability to picking a card that had a smiling face on its reverse side than one which had a frowning face.

In other way, planners may deliberately underestimate costs and overestimate benefits in order to get their projects approved, especially when projects are large and when organizational and political pressures are high.

No matter the origin of over optimism, you need to overcome it. The result of a project will be always better if you work with reality. Let me say something important: risk is part of reality. Even more, risk is part of the cost. That part of the cost is named “Expected Monetary Value of Risk” (EMV) and it exists.

Let’s make a physical analogy. Quantum mechanics, also known as quantum physics or quantum theory, states a fundamental limit on the accuracy with which certain pairs of physical properties such as the position and momentum of a particle, can be simultaneously known. This is also known as the uncertainty principle.

In practice, it means that we work with the probability of being at a position in a determined moment. It does not mean that matter doesn't exist. It means that there are properties that can't exactly be known, in certain conditions. Try to kick a brick of quantic matter without shoes. You are going to realize that matter exists. You are going to feel exactly the same if you ignore the Expected Monetary Value of Risk when calculating ETC (estimate to complete) of a project. The same is valid to calculate the budget of a project.

How is EMV calculated?

Program Overseeing

Let's remember first that a Program is "a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually". Interpreting the definition, there are actions that could be taken in order to improve the whole result, even though some of these actions could be bad for a project in particular. In this article, I'm going to explore the basic actions for a program.

I have used certain common graphs to oversee programs for years that I'm going to change in this article, in order to present a new graph that bears in mind concepts of "earned schedule".

In the following graph, every bubble is a project. As it was explained at definition, I have replaced the x-axis by SPI, calculated as ES/AT instead of EV/PV. Otherwise, using the classical definition of SPI, every project is going to finish over the y-axis. Using SPI=ES/AT, the final position of a project will be determined by the time performance.

In this graph, the size of a bubble is determined by ETC. According to this, every project is going to end as a point.

In the following quadrant, we see the result of a bad estimation or a remarkable execution. In any case, it's better to analyze details because there is an opportunity of improvement. If the EAC confirms the tendency, my recommendation is to cut budget of the yellow project as a formal change control and increase the budget of the red project in the opposite quadrant. With the increment of budget, the red project should "buy time" that means to use the new economic resources to improve the time performance.

In the following quadrant, we see a more common situation. The blue project has a bad cost performance with a good time performance. If the EAC confirms the tendency, my recommendation is to "sell services" to the green project in the opposite quadrant. It means that blue project is going to be delayed because of a new charge of work, but this is not a problem. In return, the green project is going to release the economic resources that the blue project needs. Both changes need to be formal; otherwise we are going to patronize a bad practice: scope creep.

The last recommended actions are only ideas for an hypothetical ideal situation. Not always the proposed changes can be done. Naturally, the program manager needs to apply his own criteria after consider the real conditions.

EVM Forecasting Analysis

It's good reviewing graphically EVM forecasting in order to understand possibilities and limitations. The EVM most known formulas need certain corrections to be used in practical applications. These corrections came from the practice of "earned schedule". Let's remember the definition of Earned Schedule (ES), projecting the current value of EV over the PV curve. We could use the "t" following the acronym to differentiate the Schedule Performance Index calculated with ES from the classical Schedule Performance Index calculated as EV/PV, as you can see at following picture.

Click to maximize

Using triangles similarities, it’s possible to obtain the Estimate At Completion (EAC) in the time dimension, as you can see at following picture.

Click to maximize

 

Now we can remember that the maximum value of EV is BAC. Then we have an end point and with it we can trace a linear forecasting of EV.

Click to maximize

 

Analogically, Cost Performance Index can be used as a ratio to forecast the Estimate At Completion in the dimension of cost. Using EAC it's possible to have a forecasting for AC.

Click to maximize

 

This way, we can have a forecast for cost and time. This way of forecasting EV and AC is taking the past as enough information to predict the future. A better result is obtained if we categorize activities such way that the past performance is applied only to similar activities in the future.

EVM Web

I have created Earned Value Management Web (http://evmweb.com), a collaborative system based on EVM. It has an "Integrated Changes Control" too. It is free for majority of users. Temporally the system is available in English and Spanish and is open to beta testers.

Like many other professionals, I discovered EVM while I was preparing my PMP certification test. I found that it is possible to implement an EVM system over many common project management systems even datasheets, possible but not probable. I had been slave of the datasheet for years. The efforts of implementing the system were comparable with benefits. I have found that those systems are not focused on EVM and I decided to create something more specialized. Sign up now. I hope to receive your opinion and your help to improve it.

EVM for Small Projects and Big Projects

Have you ever managed a small project?. Off course, small projects are the rule and big ones are the exception. Nevertheless, all of us have learned about how to manage big projects and only a few of us have learned how to manage small ones.

If you only have experience in small projects, don’t be ashamed of that. Small projects have small budgets and go very fast. If you don’t think that fast projects with small budgets are difficult, probably you don’t know too much about projects. Sometimes, I have thought that good project managers really are tested in small projects.

It’s easy to say what a kick-off meeting needs to have, when you have weeks and even more to prepare it. When you have only a couple of days to prepare it, you don’t have too much time to think about philosophy. In that case, you better know today what is necessary to say, because you will not have another opportunity.

Have you ever tried to oversee a small project using EVM?. Well, tell me if this doesn’t sound familiar to you: It’s is almost impossible to know how the cost that has being spent. If you are not agreeing with last statement, think again. A few of main reasons for this are:

• The first report of accountability probably is going to be as late as the project.
• The majority of bills are received close to the end of the project.
• Human resources efforts are controlled counting (with the fingers of your hands) how many people you can see and comparing with how many people have you planed.

Receive a few suggestions of an expert in small projects (me):

1. Maintain it as simple as possible
2. Is there a simpler form of EVM that can be used in small projects? Yes, there is. EVM doesn’t mean you need to measure every hour spent in your project. A good way to avoid the task of oversee each hour, is to define mean values and big units of efforts, like month-person.
3. EVM's standard measurement methods include the alternative of LOE (Level of Effort). It means you can measure human resources efforts, like project management, to be accounted automatically when the time goes on.
4. Another simplification is possible. The Accounting Principles say that a cost is accounted when it occurs. No matter if the bill was printed and, certainly it doesn't matter if it was in your hands. Define at the beginning of project a mechanism to formalize the cost, even though the accounting could go slower.

Off course, using a good and simple EVMS will be a big help to diminish the efforts to oversee a project. Let's remember that I promised to launch a web based EVMS in July 2011. I’m working on it.

NASA proposed to reduce requirements for Earned Value Management System for firm-fixed price (FFP) contracts

According to the Federal News Radio, recently NASA proposed to scale back its requirements for establishing and maintaining an Earned Value Management System for firm-fixed price (FFP) contracts. It means that for small FFP contracts, there is not going to exist the need of a complete application of the known technique.

I have used EVM in small projects for many years with a spreadsheet and an assistant. The Practice Standard for Earned Value Management of the PMI has 50 pages and is very easy to read and apply. The ANSI/EIA-748-B-2007 has less than 25 pages and is equally easy to apply. Nevertheless, I have reviewed some public documents of NASA about EVM and I think that the system is big and complex. Probably, the processes of NASA were designed for projects larger than US$ 50 millions.

EVM is a good technique that combines measurements of scope, schedule, and cost in a single integrated system. When properly applied, it provides an early warning of performance problems even for small projects. It is clear that the majority Project Management Systems are not focused in EVM and are not a very good help. That’s why I’m building a simple web based EVM system that is going to be launched on July of this year. Please, send me a message if you want to become a beta tester for it.

Externalities of Deepwater Horizon platform of BP and the Fukushima Daiichi nuclear plant

An externality is a positive or negative effect of some economic agents, not transmitted through any charge or payment, affecting consume or production of other agents. Pollution and risks generated by dangerous activities are some examples of negative externalities.

Many projects are economically feasible because of the lack of control over negative externalities. The Deepwater Horizon platform of BP and the Fukushima Daiichi nuclear plant have something in common: the time has showed that the externalities were underestimated.

How to estimate externalities of risks of a project?. A not graduated student of engineering can do it. The cost of externalities is the sum of different risks multiplied by the impact of those risks. The problem is not how to estimate risks; the problem is the lack of will to do it.

The overall cost and benefit to society is defined as the sum of the economic benefits and costs for all parties involved (the stakeholders). Simplifying, the society has to avoid participate in any way in projects with an overall expected cost bigger than expected benefit. A good way to do this is charging a bad project with the expected cost of externalities, converting that project in an economically unfeasible one.

Projects are my passion. I'm not proposing to stop doing projects. I'm proposing to work with social responsibility, performing a good Stakeholder Management.

Propose projects with clear negative externalities, is a matter of extremely incompetent engineers and bad persons. A good Project Manager has to be conscious of the externalities of his projects. The Code of Ethics and Professional Conduct of PMI declares that "We make decisions and take actions based on the best interests of society, public safety, and the environment".

The Project CityTime at New York Shows Importance of Overseeing Projects

The CityTime Project has as main deliverable, an automated system designed to streamline employee timekeeping in New York City. Federal prosecutors in Manhattan charged some CityTime consultants with an $80 million fraud scheme that began in 2005. Gerard Denault, an executive of the company that is overseeing CityTime, was charged with receiving over $5 million in kickbacks for his work as the project’s senior manager. The project has had large cost overruns and delays. The administration of mayor Bloomberg is handling this situation as a big scandal that is threating to sink their credibility.

In situations like this, I remember that one of the main objectives of following a recognized methodology is protecting the Project Manager. Another thing that comes to my mind is the importance of following an ethic code like the one of PMI. Finally, I remember something that I heard from a company's president: a good system deployment is not important, but a bad one could sink the company's president. My conclusion is that spend some money in a good system to overseeing projects is always a good investment. Consider an EVMS in your core strategy to avoid this kind of risks.