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Holistic decision-making organization in project management
Holistic decision-making organization in project management Matthias Hirzel As the staff and departments participating in a project become familiar with the instruments of project management, so the project manager needs to spend less time reinforcing the understanding of connections and interrelations. This will free him to devote himself to his task of control and monitoring, giving rise to the standardization of project breakdown structure, project flow and project decision up to and including computer-aided procedures. This, in turn, will save time and expenditure, will avoid misunderstandings and will make the entire process more transparent. This paper points out the importance of obtaining an overall view of the project and of taking decisions early on in the hfe of the project to anticipate problems later on. Keywords: decision-making, project phase, decision break
project
management,
The present approach to standardize further project management tools and to formularize the content of the product development process, is based on the recognition that a company’s development projects are not as exclusive as has been assumed. In reality, there are many parallels between product innovation procedures that are not usually recognized and taken into consideration in the planning. Any observations and experiences that have been put down on paper have been insufficiently documented and are inaccessible. The result is that the industry is striving for standardization. One significant development in this direction is the concept of standard process plans (SPP) developed and tested in the 1970s. Here, a complex project schedule is set out as a complete Hirzcl, Lcdcr & Partner, Sozietat flir Managementgestaltung, Arndstrasse 46. D 6000 Frankfurt a.M. I, FRG This paper was first published in the proceedings of the 1985 Internet World Congress, Rotterdam, May IYXS @ North-Holland 1985
I4
0263-7863/86/01001&03
$03.00 @ 1986 Butterworth
including all phases, activities, contingency plan, dependencies and resources, and is adapted for the actual project merely by eliminating the inapplicable details. It was found that there was a consequent reduction in the initial planning expense of almost 80% and in the project completion time of about 25%. MANAGEMENT
OF REPETITIVE
PROJECTS
The following is meant to define more exactly the importance of the holistic decision-making organization (HDO) for the management of repetitive projects.
Decision on project and product To obtain a comprehensive project definition, everything that is indispensible to the success of the product should be outlined. Thus, the definition should include the following areas: l l l
a 0 l
0 0
product concept development concept technology concept production concept quality concept marketing concept service concept spare parts concept
It is the responsibility of the project management ensure that all participating parties see the project being defined in the same way.
Guidelines supplied by appropriation tion of costs
to as
and causa-
Throughout the course of a project, a company incurs costs. Initially, these will be low but they will increase
& Co (Publishers)
Ltd
Project
Management
with time. The costs for planning, conception and development are low compared with the costs incurred during production planning, when obtaining special resources and during initial production. Management’s awareness of this is expressed in the organization of the decision process accompanying the project: upper management is increasingly likely to interfere when costs rise sharply and things may get out of hand. With this in mind, the decision breaks are placed accordingly, with the transitions from development to production planning and from production planning to production itself being the two main breaks. Decision breaks arranged in this way are guided by the causation of costs. Particularly important are those costs representing actual expenditure, i.e. an outflow of funds. However, when one looks into it, it is apparent that at a very early stage of the project, decisions are made that significantly influence the subsequent development of costs. It is in the initial stages of a project, when defining technology, product functions, marketing structures, methods of financing, spare parts service, easy serviceability etc., that decisions on future costs are anticipated. The result of all this is a curve of cost appropriation that has a steep initial gradient which gradually decreases, and the curve finally intersects that of cost causation within the field of the total cost volume (100%). The cost appropriation curve (Figure 1) emphasizes that it is, above all, at the beginning of the project that the governing decisions are made. For this reason, not only should the controlling people of the company give the green light for a project, but the same people should also meet regularly in the early phases of the project to determine the future direction of the project. The decision breaks in the course of the project must be placed such that the decisions made at these points still have a significant influence on the costs and success of the project.
Cost appropriation 4
l
l
l l
l
l
l l
Phase of study. The product idea is described and brought into line with the company’s objectives and potential and with the sales possibilities Phase of conception. The individual concepts of a product innovation are described and joined in one project definition Phase of planning. Size and volume of the project are outlined as to target and cost and are scheduled Phase of feasibility. Re-examination of those problems considered in the concepts to be critical; without the solution of these the project is endangered Phase of functions. Representation of the function and effectiveness of all components/aspects and safeguarding a smooth interplay Phase of maturation. Development and consolidation of the detailed conditions for the product to be manufactured and introduced on the market Phase of utilization. Optimization of all measure and activities for maximum success Phase of release. Safeguarding of the presence of the product on schedule regarding to supply, service, spare parts, advertising etc.
Figure
2. Phases involved
in simultaneous
FORMATION OF PROJECT DECISION BREAKS
nn
n
A Time
Figure I. Cost appropriation tion-oriented decision breaks; decision breaks.
Vol 4 No 1 February
1986
A
A
End of project
curve, A cost appropriaA cost causation-oriented
work
AND
Phases and decision breaks are established to reduce the risks of a project. It has so far been emphasized that decision breaks should be provided primarily near the beginning of a project. But how should the phases be established and what criteria are to be observed in setting them up? If the project is to be understood as a performance of the whole enterprise, the areas and departments involved will have to make their respective contributions during appropriate phases of the project. It would be negligent of, say, the marketing and production departments to remain inactive while intensive development work is underway. Rather, all the various project concepts should be coordinated within one time schedule. This method is called simultaneous project work and is reflected in the formation of the project phases (Figure 2). In defining the phases. consideration should be given simultaneously to all departments involved, and the decision breaks should be placed in such a way that all departments are able to make integral decisions, i.e. to assess all concepts and aspects of the project on an individual basis as well as from an overall viewpoint.
COMMUNICATION DURING MAKING AND REALIZATION
25
PHASES
project
DECISION-
Often a company tends to be authoritative in decisionmaking and democratic in realization. This can lead to sluggish decision-making because of substantive or personal obstructions. In many companies, the management task, i.e. convincing and motivating, seems to begin after a decision has already been made. Such an approach offers little stimulation, while the entire process from problem formulation to solution takes longer, is more expensive and loses on quality. It would therefore seem desirable that for good decisionmaking and swift realization, the parties affected by the project should be included in the process as early as possible, their arguments should be considered, they should be involved in the decision-making as far as
1.5
Project
I
course
II -
1 Phase section
Organization
0 0
- 0
Executive management unit
0
0
Phase section decisions
Project
Figure
3. Project course
and organization
possible, and all parties should be responsible for fast realization of what has been decided. This philosophy can be used in setting up the organization of decision-making and control as follows. Decisions due in the course of a project phase will be passed as resolutions by a unit of experts. This is composed of people from groups and departments with a major involvement in the project. The expert unit is called in by the project manager and will pass preparatory recommendations for the phase-to-phase decisions, i.e. the decision breaks. The project manager, having a certain authority, will support the recommendation of the expert unit when the decision comes before the executive management unit. The executive management unit represents the functional fields such as marketing/distribution, development, production and finance. Being the top management panel, it will supervise the project from beginning to end and will also be responsible for the decision breaks. The project manager, the expert unit and the executive management unit will be appointed at the beginning of the project. Both the expert unit and the executive management unit make decisions on the basis of unanimous resolutions. Any ambiguity and the case is delegated to the next higher echelon (Figure 3). The benefits of this project organization are as follows.
16
The project manager can turn to the expert unit; the cooperative interaction has been established. The existence of the expert unit means that technical competence is integrated into the decision-making process at a very early stage. The project is not the ‘baby’ of the project manager or of any specific field but is understood as one common task throughout the enterprise. Due to the unanimity of the decisions, they will be balanced and more impartial; the ambient conditions are receiving increased consideration. Common interests of the parties involved will ease the implementation of the resolutions; the project manager is no longer left alone. Upper management is more able to delegate comDetent staff and thus will have more time for strategic deliberations.
l l
l
l
l
l
r-Matthias Hirzel has a master’~ degree in economics. For mow than ten yews he has worked as a
consultant and trainer negotiating and evaluating possible methods of increusing the effectiveness of project management. He has contributed decisively to the conception and realization of standard process plans -for the control of innovation projects.
I
Project
Management
project
management,
The present approach to standardize further project management tools and to formularize the content of the product development process, is based on the recognition that a company’s development projects are not as exclusive as has been assumed. In reality, there are many parallels between product innovation procedures that are not usually recognized and taken into consideration in the planning. Any observations and experiences that have been put down on paper have been insufficiently documented and are inaccessible. The result is that the industry is striving for standardization. One significant development in this direction is the concept of standard process plans (SPP) developed and tested in the 1970s. Here, a complex project schedule is set out as a complete Hirzcl, Lcdcr & Partner, Sozietat flir Managementgestaltung, Arndstrasse 46. D 6000 Frankfurt a.M. I, FRG This paper was first published in the proceedings of the 1985 Internet World Congress, Rotterdam, May IYXS @ North-Holland 1985
I4
0263-7863/86/01001&03
$03.00 @ 1986 Butterworth
including all phases, activities, contingency plan, dependencies and resources, and is adapted for the actual project merely by eliminating the inapplicable details. It was found that there was a consequent reduction in the initial planning expense of almost 80% and in the project completion time of about 25%. MANAGEMENT
OF REPETITIVE
PROJECTS
The following is meant to define more exactly the importance of the holistic decision-making organization (HDO) for the management of repetitive projects.
Decision on project and product To obtain a comprehensive project definition, everything that is indispensible to the success of the product should be outlined. Thus, the definition should include the following areas: l l l
a 0 l
0 0
product concept development concept technology concept production concept quality concept marketing concept service concept spare parts concept
It is the responsibility of the project management ensure that all participating parties see the project being defined in the same way.
Guidelines supplied by appropriation tion of costs
to as
and causa-
Throughout the course of a project, a company incurs costs. Initially, these will be low but they will increase
& Co (Publishers)
Ltd
Project
Management
with time. The costs for planning, conception and development are low compared with the costs incurred during production planning, when obtaining special resources and during initial production. Management’s awareness of this is expressed in the organization of the decision process accompanying the project: upper management is increasingly likely to interfere when costs rise sharply and things may get out of hand. With this in mind, the decision breaks are placed accordingly, with the transitions from development to production planning and from production planning to production itself being the two main breaks. Decision breaks arranged in this way are guided by the causation of costs. Particularly important are those costs representing actual expenditure, i.e. an outflow of funds. However, when one looks into it, it is apparent that at a very early stage of the project, decisions are made that significantly influence the subsequent development of costs. It is in the initial stages of a project, when defining technology, product functions, marketing structures, methods of financing, spare parts service, easy serviceability etc., that decisions on future costs are anticipated. The result of all this is a curve of cost appropriation that has a steep initial gradient which gradually decreases, and the curve finally intersects that of cost causation within the field of the total cost volume (100%). The cost appropriation curve (Figure 1) emphasizes that it is, above all, at the beginning of the project that the governing decisions are made. For this reason, not only should the controlling people of the company give the green light for a project, but the same people should also meet regularly in the early phases of the project to determine the future direction of the project. The decision breaks in the course of the project must be placed such that the decisions made at these points still have a significant influence on the costs and success of the project.
Cost appropriation 4
l
l
l l
l
l
l l
Phase of study. The product idea is described and brought into line with the company’s objectives and potential and with the sales possibilities Phase of conception. The individual concepts of a product innovation are described and joined in one project definition Phase of planning. Size and volume of the project are outlined as to target and cost and are scheduled Phase of feasibility. Re-examination of those problems considered in the concepts to be critical; without the solution of these the project is endangered Phase of functions. Representation of the function and effectiveness of all components/aspects and safeguarding a smooth interplay Phase of maturation. Development and consolidation of the detailed conditions for the product to be manufactured and introduced on the market Phase of utilization. Optimization of all measure and activities for maximum success Phase of release. Safeguarding of the presence of the product on schedule regarding to supply, service, spare parts, advertising etc.
Figure
2. Phases involved
in simultaneous
FORMATION OF PROJECT DECISION BREAKS
nn
n
A Time
Figure I. Cost appropriation tion-oriented decision breaks; decision breaks.
Vol 4 No 1 February
1986
A
A
End of project
curve, A cost appropriaA cost causation-oriented
work
AND
Phases and decision breaks are established to reduce the risks of a project. It has so far been emphasized that decision breaks should be provided primarily near the beginning of a project. But how should the phases be established and what criteria are to be observed in setting them up? If the project is to be understood as a performance of the whole enterprise, the areas and departments involved will have to make their respective contributions during appropriate phases of the project. It would be negligent of, say, the marketing and production departments to remain inactive while intensive development work is underway. Rather, all the various project concepts should be coordinated within one time schedule. This method is called simultaneous project work and is reflected in the formation of the project phases (Figure 2). In defining the phases. consideration should be given simultaneously to all departments involved, and the decision breaks should be placed in such a way that all departments are able to make integral decisions, i.e. to assess all concepts and aspects of the project on an individual basis as well as from an overall viewpoint.
COMMUNICATION DURING MAKING AND REALIZATION
25
PHASES
project
DECISION-
Often a company tends to be authoritative in decisionmaking and democratic in realization. This can lead to sluggish decision-making because of substantive or personal obstructions. In many companies, the management task, i.e. convincing and motivating, seems to begin after a decision has already been made. Such an approach offers little stimulation, while the entire process from problem formulation to solution takes longer, is more expensive and loses on quality. It would therefore seem desirable that for good decisionmaking and swift realization, the parties affected by the project should be included in the process as early as possible, their arguments should be considered, they should be involved in the decision-making as far as
1.5
Project
I
course
II -
1 Phase section
Organization
0 0
- 0
Executive management unit
0
0
Phase section decisions
Project
Figure
3. Project course
and organization
possible, and all parties should be responsible for fast realization of what has been decided. This philosophy can be used in setting up the organization of decision-making and control as follows. Decisions due in the course of a project phase will be passed as resolutions by a unit of experts. This is composed of people from groups and departments with a major involvement in the project. The expert unit is called in by the project manager and will pass preparatory recommendations for the phase-to-phase decisions, i.e. the decision breaks. The project manager, having a certain authority, will support the recommendation of the expert unit when the decision comes before the executive management unit. The executive management unit represents the functional fields such as marketing/distribution, development, production and finance. Being the top management panel, it will supervise the project from beginning to end and will also be responsible for the decision breaks. The project manager, the expert unit and the executive management unit will be appointed at the beginning of the project. Both the expert unit and the executive management unit make decisions on the basis of unanimous resolutions. Any ambiguity and the case is delegated to the next higher echelon (Figure 3). The benefits of this project organization are as follows.
16
The project manager can turn to the expert unit; the cooperative interaction has been established. The existence of the expert unit means that technical competence is integrated into the decision-making process at a very early stage. The project is not the ‘baby’ of the project manager or of any specific field but is understood as one common task throughout the enterprise. Due to the unanimity of the decisions, they will be balanced and more impartial; the ambient conditions are receiving increased consideration. Common interests of the parties involved will ease the implementation of the resolutions; the project manager is no longer left alone. Upper management is more able to delegate comDetent staff and thus will have more time for strategic deliberations.
l l
l
l
l
l
r-Matthias Hirzel has a master’~ degree in economics. For mow than ten yews he has worked as a
consultant and trainer negotiating and evaluating possible methods of increusing the effectiveness of project management. He has contributed decisively to the conception and realization of standard process plans -for the control of innovation projects.
I
Project
Management