ffirs.qxd 12/21/04 1:21 PM Page i TThhee FFaasstt FFoorrwwaarrdd MMBBAA iinn PPrroojjeecctt MMaannaaggeemmeenntt S E ECOND DITION E V RIC ERZUH John Wiley & Sons, Inc. TEAM LinG - Live, Informative, Non-cost and Genuine ! ffirs.qxd 12/21/04 1:21 PM Page ii Copyright © 2005 by Eric Verzuh. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. The publisher is not engaged in rendering professional services, and you should consult a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.Wiley.com. Library of Congress Cataloging-in-Publication Data: Verzuh, Eric. The fast foward MBA in project management / Eric Verzuh.—2nd ed. p. cm.—(The fast forward MBA series) Includes bibliographical references and index. ISBN 0-471-69284-0 (pbk.) 1. Project management. I. Title: MBA in project management. II. Title. III. Series. HD69.P75V475 2005 658.4'04—dc22 2004027080 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 TEAM LinG - Live, Informative, Non-cost and Genuine ! ffirs.qxd 12/21/04 1:21 PM Page iii For Marlene TEAM LinG - Live, Informative, Non-cost and Genuine ! ffirs.qxd 12/21/04 1:21 PM Page iv A C K N O W L E D G M E N T S T There are no unimportant jobs on any project, and there are no unim- portant people on the project team. From concept through completion, many people have been involved in the development of this book. To each of the people who have shaped this book through their advice, encouragement, and hands-on participation, I offer my thanks. To Kymberly Actis, for her persistence and commitment as she turned my handwritten drawings into the many figures in this book. To the professionals who contributed their effort and experience to create the Stellar Performer profiles: Rod Pipinich, Fred Black, J. C. Brummond, Virginia Klamon, John Gaffney, Brian LaMure, Marlene Kissler, and Peggy Jacobson. To my colleagues and clients for their interest and insights: Steve Weidner, Greg Hutchins, Pen Stout, Karl Hoover, Steve Morris, Peter Wynne, Bill McCampbell, Patrick Bryan, John Spilker, and Kristian Erickson. To the team at John Wiley & Sons, Inc. who took a risk and saw it through: Henning Gutmann, Renana Meyers, and Sam Case. To those who put the wheels in motion: Brian Branagan, Linda Vil- larosa, and Barbara Lowenstein. I particularly want to thank two top-notch project managers who have taught me much about project management, business, and life, and with whom I’ve had the privilege to work: Sam Huffman and the late Fred Magness. Finally, I thank my wife, Marlene, who has played many roles on this project: coach, editor, critic, writer, and partner. Her insight and perspective have been of constant value both as I wrote this book and I O N over the years as I built my business. iv TEAM LinG - Live, Informative, Non-cost and Genuine ! ffirs.qxd 12/21/04 1:21 PM Page v A C K N O W L E D G M E N T S F O R T H E S E C O N D E D I T I O N T The privilege of updating this book for a second edition was accompa- nied by some hard work to make sure the result was actually an improvement. My thanks to those who contributed their expertise and energy. To the professionals who shared their hard-won knowledge: Jim Smith, Donna McEwen, T. J. Filley, Rod Pipinich, and Bill Schafer. Once again, to my wife, Marlene, whose talents and contributions permeate this work. A B O U T T H E A U T H O R TEAM LinG - Live, Informative, Non-cost and Genuine ! v ffirs.qxd 12/21/04 1:21 PM Page vi A B O U T T H E A U T H O R ERIC VERZUH Eric Verzuh is president of The Versatile Company, a project manage- ment training and consulting firm based in Seattle, Washington. His company trains thousands of professionals every year in the funda- mentals of successful project management including how to get the most out of Microsoft Project. Versatile’s consulting practice focuses on helping firms establish consistent, practical methods for managing their projects and implementing Microsoft’s enterprise project man- agement solution. The company’s client list includes large corporations such as Adobe Systems, Lockheed Martin, and Nordstrom, as well as government agencies and small companies. Verzuh has been certified as a project management professional (PMP) by the Project Manage- ment Institute and is a frequent speaker at project management con- ferences. His other publications include articles, conference papers and The Portable MBA in Project Management (2003), also published by John Wiley & Sons, Inc. Verzuh can be reached via his company’s site on the Internet, www.versatilecompany.com. vi TEAM LinG - Live, Informative, Non-cost and Genuine ! ftoc.qxd 12/21/04 1:21 PM Page vii C O N T E N T S PREFACE xiii PART 1 INTRODUCTION CHAPTER 1—PROJECT MANAGEMENT IN A CHANGING WORLD 2 Introduction 2 Project Management Is the New Critical Career Skill 3 The Increasing Pace of Change 5 Everyone Benefits from Understanding Project Management 6 Downloadable Forms for Project Management 6 Project Management: Art Informed by Science 7 Project Management Magnifies Other Strengths 9 End Point 10 CHAPTER 2—THE PROJECT ENVIRONMENT 12 Introduction 12 Projects Require Project Management 12 The Evolution of a Discipline 15 The Definition of Success 18 TEAM LinG - Live, Informative, Non-cost and Genuine ! vii ftoc.qxd 12/21/04 1:21 PM Page viii CONTENTS The Cost-Schedule-Quality Equilibrium 19 The Ultimate Challenge: No Damage 20 Project Management Functions 20 Project Life Cycle 22 Organizing for Projects 25 Project Managers Are Leaders 29 End Point 30 PART 2 DEFINING THE PROJECT CHAPTER 3—PROJECT STAKEHOLDERS 36 Introduction 36 Stakeholders Are the Heart of a Successful Project 37 Stakeholder Roles: Project Manager 37 Stakeholder Roles: Project Team 38 Stakeholder Roles: Management 39 Stakeholder Roles: Sponsor 41 Stakeholder Roles: The Customer 42 Lead the Stakeholders 44 End Point 44 CHAPTER 4—MAKING THE RULES 46 Introduction 46 Project Rules Are the Foundation 46 Publish a Project Charter 48 Write a Statement of Work 51 Statement of Work: Minimum Content 52 Responsibility Matrix 58 Creating a Communication Plan 61 The Project Proposal Launches the Project 67 End Point 71 PART 3 THE PLANNING PROCESS CHAPTER 5—RISK MANAGEMENT 85 Introduction 85 The Risk Management Advantage 86 viii TEAM LinG - Live, Informative, Non-cost and Genuine ! ftoc.qxd 12/21/04 1:21 PM Page ix CONTENTS All Project Management Is Risk Management 86 The Risk Management Framework 88 Step One: Identify the Risks 90 Step Two: Developing a Response Strategy 94 Step Three: Establish Contingency and Reserve 105 Step Four: Continuous Risk Management 106 End Point 107 CHAPTER 6—WORK BREAKDOWN STRUCTURE 113 Introduction 113 Defining the Work Breakdown Structure 113 Building a Work Breakdown Structure 117 Criteria for a Successful Work Breakdown Structure 120 Work Package Size 122 Planning for Quality 126 Breaking Down Large Programs 128 Watch for Different Terminology 128 Contractors or Vendors Can Provide a WBS 130 End Point 130 CHAPTER 7—REALISTIC SCHEDULING 131 Introduction 131 Planning Overview 132 Planning Step Two: Identify Task Relationships 133 Planning Step Three: Estimate Work Packages 136 Planning Step Four: Calculate an Initial Schedule 143 Planning Step Five: Assign and Level Resources 155 End Point 162 CHAPTER 8—THE DYNAMICS OF ACCURATE ESTIMATING 166 Introduction 166 Estimating Fundamentals 167 Estimating Techniques 172 Building the Detailed Budget Estimate 182 Generating the Cash Flow Schedule 189 End Point 190 TEAM LinG - Live, Informative, Non-cost and Genuine ! ix