DEPARTMENT OF INDUSTRIAL ENGINEERING AND MANAGEMENT

R.V. COLLEGE OF ENGINEERING, BANGALORE-560059

(An Autonomous Institution Affiliated to VTU, Belgaum)

FUNDAMENTALS OF MANAGEMENT AND

ECONOMICS
Assignment Report
Topic: Project Planning as the Primary Management Function

By

Archana.B.G. USN: 1RV16IM060

 DEPARTMENT OF INDUSTRIAL ENGINEERING AND MANAGEMENT

CERTIFICATE

This is to certify that the Assignment report titled, “Project Planning as the
Primary Management Function” is carried out by Archana.B.G.
(1RV16IM060), who is bonafide student of R.V College of Engineering,
Bengaluru, in partial fulfilment for the award of degree of BE of the
Visvesvaraya Technological University, Belagavi, during the year 2019-2020. It
is certified that all corrections/suggestions indicated for the Internal Assessment
have been incorporated in the report deposited in the departmental library. The
report has been approved as it satisfies the academic requirements in respect of
assignment work prescribed for the course by the department for the said
degree.
Contents
Introduction...........................................................................................................................................4
Purposes of Planning:............................................................................................................................5
Communication.................................................................................................................................5
Foundation for Management Action..................................................................................................5
Problem Definition and Solution...........................................................................................................6
Stages of Project Planning.....................................................................................................................6
Definition of Project Objective..............................................................................................................6
Project Description................................................................................................................................6
Detailed Work Plan...............................................................................................................................8
Elements of Project Planning.................................................................................................................8
Work Breakdown Structure (WBS).......................................................................................................9
Networks.............................................................................................................................................10
Schedules.............................................................................................................................................10
Budgets................................................................................................................................................11
Policies and Guidelines.......................................................................................................................11
Change Control Procedures.................................................................................................................11
Decision-Making in Project Planning..................................................................................................12
Uncertainty..........................................................................................................................................13
Definition:.......................................................................................................................................13
Uncertainty in the Project................................................................................................................13
Conclusion...........................................................................................................................................15
References...........................................................................................................................................15
Introduction
Project planning as a process is output oriented. It is concerned with deciding in advance
what, when, how, and who will take the necessary actions to accomplish established
objectives. In this context planning is a pervasive management function which is
accomplished by all levels in the project hierarchy (l), the difference being scope, detail, and
the magnitude of the effort. Planning forms the foundation for future actions, using the past
as a guide. The purpose of this paper is to examine the project environment for planning, to
consider the purpose of planning, to focus on the stages of project planning, to evaluate the
elements of planning for the project, and to discuss the role of decision-making in project
planning. The first concern is the planning process and environment. The basic planning
process is illustrated in Figure 1.

Figure 1 – The Planning Process

The process involves inductive problem solving. It initially focuses on the “what” and “how”
which are closely related. What is to be accomplished is defined in the project objectives that
must be developed at the beginning of the planning process. These objectives may relate to
new product development, acquisition of market share, maintenance of market share,
anticipated sales volume, profit maximization, some combination of these or some other
desired objective. The objectives become the “reason to be” for project personnel. All
subsequent activity should be devoted to their accomplishment through planned future time
periods. As soon as they are completed, by definition, the project is over. The “how” concern
for planning revolves around the selected objectives and the nature of the product, the state of
technology, the characteristics of the target market, company policy, and available
manufacturing or developmental processes. Needed technical and production skills will be
affected by the how concerns.

Requisite facilities, equipment, supplies, raw materials, and manpower skills have to be
identified and scheduled for purchase or hire. Delivery times must mesh with the product’s
production schedules and timeframes. These resource decisions comprise the input
considerations delineated in Figure 1, and constitute the “who” and “when” aspects of the
planning process. Management of such resources is internal to the project, but acquisition of
them is through external channels. There are two external categories of concerns for project
planning which must be considered, i.e., the organizational environment for the project and
the environment which is external to the company as a whole.

Several organizational approaches to project management may be used for the firm’s
structure, such as matrix, projected, etc. Each has its advantages and disadvantages and will
be suitable in specific instances depending on top management policy, product attributes, and
other factors. Regardless of the organizational format, each project manager will have to
compete with other projects for a share of the firm’s limited resources. Planning facilitates
this competition in that detailed plans of high quality with cost and schedule information
provide credibility and validation to resource requests. The project manager will have to
consider as a part of planning the format and procedures characteristic to the specific
organizational structure and their impact on the acquisition of resources. The project’s
success in obtaining and maintaining resources will be dependent on its relative priority in the
organizational hierarchy and its efficient use of resources as measured by return on
investment or some other financial or managerial criteria . The manager does not control the
environmental variables external to the project even within the firm; however, with proper
planning he should be able to influence budgets and other resource allocation mechanisms.

Other variables which the project manager must include in planning exist outside the overall
organization. As in the case of the organizational climate, the project manager usually cannot
control these variables, but with proper planning he possibly can influence them or minimize
their impact on his project. These variables include factors such as the firm’s competition in
the market place, governmental regulations, technological change, and various social
constraints. Thus it can be seen that planning is critical to the probable success of the project.
Its several contributions in this area will be considered next.

Purposes of Planning:

Communication
Project planning is a form of communication and a source of information for project
personnel. Once the project’s overall objectives have been formulated and approved, they
must be transmitted to the project staff. Through their involvement in the process of
developing specific objectives, the hope is that congruence will be attained between personal
goals and the objectives of the project. As the details of the plans are scheduled and costed,
information for action is provided to all levels of the project staff.

Foundation for Management Action

Planning also furnishes the foundation for all other management action. Knowing what is
required, who is to perform certain tasks, how they are to be performed, and when the events
should be scheduled allows managers to organize their activities in a more efficient manner.
Inherent in the planning function is the need for control. With the plan’s implementation,
feedback is obtained relative to progress in objective and goal completion. Evaluation of
actual compared to planned figures permits the manager to assess progress objectively, to
make necessary adjustments to the master plan and to take corrective action for on-going
operations. Also the plan provides the manager with information as to deadlines and
scheduled events, providing a cue as to when decisions have to be made and as to when
feedback systems need to be activated and monitored.

Problem Definition and Solution

Planning is a form of problem solving and as such promotes problem definition and solution.
The delineation of objectives and the subsequent breakdown into goals and objectives help to
identify problems and aid in the formulation and analysis of alternate strategies to meet
objectives. Each alternative must be evaluated in terms of schedule and cost and requisite
product quality of performance. Trade-off between these critical variables may be necessary
in the initial planning phases and later can be used to create work-around plans as difficulties
are encountered. This approach requires the development of a detailed action plan which will
be the topic of subsequent paragraphs.

Stages of Project Planning

Probably the most difficult stage of any project is the beginning. Often times there exists a
vague or poorly defined objective and getting started presents a problem, since a clear sense
of direction does not exist. At other times the decision of how to get there is confused with
deciding where; the project is specified prior to a clear delineation of objectives. This concern
in the Department of Defense (DoD) led to the implementation of OMB Circular A-109
which requires a statement of need preceding any action. Too often the availability of
technology defined the need, instead of the need determining the required technology.

Definition of Project Objective

The first stage of successful project planning, therefore, is a clear definition of the project
objective. Ideally this should be a single sentence, e.g., “The objective of this project is to
simplify the tax return so that an ordinary citizen with an eighth grade education can
complete the short form in three hours or less without professional help.” This objective is
clear, attainable, measurable, and specific.

Project Description
The next stage is to describe the project. The better a project can be described, the more
likely it is to be a success

WHAT is to be done? This question is addressed in the goals and objectives. The terms goals
and objectives are often used interchangeably, but for our purposes objectives will be defined
as the end result of the project, and the goals sequential steps, which, if completed, will result
in successful project accomplishment. Both must be clearly stated to assure that all project
efforts are directed to the correct outcome.
WHEN will it occur? Schedules must be constructed to time-phase the selected goals and
tasks and to identify interrelationships. There is a Master Schedule, as a minimum, and
usually some subordinate schedules are created to define the limits of the project and some of
the intermediate steps.

HOW much will it cost? Although the initial planning estimates are just that, it is important to
scope the project very early. A preliminary estimate was used to evaluate the project in terms
of other alternatives. As the planning progresses, budgets must be developed in order to
translate this estimate into the specific resources needed to accomplish a given task.

WHO will do it? Deciding what functional department will support the project manager can
be a very political decision and a highly significant factor in the success or failure of a
project. Sometimes the most knowledgeable person is not the best at coordinating the efforts
of a diverse team. In addition, few projects are a one-man show, and manpower availability
must be considered carefully.

WHAT product or service will be delivered as a result of the effort? It is relatively easy to
lose sight of the true purpose of a project. As an example, in an automatic data processing
(ADP) project, the product should not be the computer program, but rather the output it is
supposed to generate. The output of the programmer might be the program itself, but he
should not lose sight of the overall project objective. The use of elaborate programming
techniques may not add anything to the overall project, and actually may defeat the purpose
of it.

WHAT is the responsibility of both the developer and the user? Some projects originate from
the bottom up -that is, the user identifies the need, and an analyst must work with him to
develop the solution. In other projects, the top management determines a need that is not
being met. The developer must still find the solution, but in addition the user must be
educated so that the system is used correctly.

WHAT determines task completion? It has been said that engineers never know when to quit.
An optimum solution is never reached, only a “good” one, so work continues as long as funds
are available. There are exceptions to the saying, “Anything worth doing is worth doing
well.” Sometimes it is sufficient to do it adequately. If a man is being sent to the moon, the
specifications must be more rigidly adhered to than if the annual Christmas party is being
planned. Many individuals have had the experience of working a project to death, long after
the basic problem had been solved. The increased return is marginal to the increased
investment, both in money and manpower, and the project should be terminated. To avoid
this situation, the criteria for task completion should be determined before the project is
begun.

WHO is responsible for accepting the product as completed? Many people will have an
opinion as to what should be done and how it should be accomplished. Others have a
legitimate interest in the project and will have to work with its output. The project manager
must always keep in mind that is the final authority. The project must be completed to his
(her) satisfaction first. If, in the process, other people’s needs can be accommodated, that is a
desirable side effect. Efforts to satisfy everyone will cause resources to be needlessly
consumed.

WHAT mechanics will be employed to deal with formal changes? Change is an environmental
constant. Recognize immediately that it will take place, and design a procedure to deal with
it. This may be a review committee, an appeals process, a coordination chain, or some
combination of them. Tracking changes, and recognizing their implications, can keep a
project from an out-of-control condition.

HOW will actual progress be measured? Very few projects are anything but right on
schedule when measured subjectively. If the project leaders have not defined achievable
intermediate milestones that can be quantitatively measured, it is difficult to estimate
progress. Many projects are identified as “level of effort” because they represent excursions
into new territory. Most projects represent new undertakings. What is required is to break the
project into small segments which have been done before, e.g., engineering drawings; and
testing steps; etc. A number of quantifiable activities exist even in the most innovative
undertakings.

Detailed Work Plan

Once the project has been adequately described, the steps required to achieve the objective
must be documented. This is the appropriate stage for a discussion of technology application.
If you’re building an aircraft, and you have described its performance objectives, one of the
subsystems is the engine. Is there an available engine or will new technology be required to
satisfy the stated performance specifications? Are the activities to be simply modifications of
existing equipment, or do they involve research and development of new equipment?

As activities are identified, the planner must begin to program resources for accomplishment
of those activities. At this stage make-or-buy decisions enter the process, as availability of
skills and technology in-house are traded off against the costs of contracting out the effort.
Budget estimates are built and personnel requirements defined.

A very significant step is the identification of the project control system. What measures and
means of communicating information will be most useful in assessing project progress?

Several project documents should be developed to formalize the information generated. The
next section will define these documents and present examples.

Elements of Project Planning

In order to define the elements of project planning, it is important to visualize their
interrelationships. The three major resources that must be managed for a successful project
are time, manpower, and money. The major criteria for success are measured in terms of
performance goals, schedule, and cost. If we think of the project as a balancing act it might be
visualized as a three legged footstool (Figure 2). Project success should be measured not by
achieving stability, but by keeping the surface level, its desired objective.
 Figure 2 – Balance in Project Management

If the performance requirements are increased, the schedule and the budget must be increased
proportionately to keep the project in balance. If one parameter must be kept constant, the
other two can be broadened, but not elongated. For example, to increase performance, but
maintain schedule, additional resources will have to be applied. The point is that these three
factors must be kept in balance or a new measure of project success should be developed.
Many projects tighten performance goals, or stretch out time by reducing allocated manpower
and don’t adjust the budget so that cost “overruns” are inevitable. In order to keep a project in
scope, it is important to use project documents that define and control the different areas.

Work Breakdown Structure (WBS)

Figure 3 illustrates a Work Breakdown Structure (WBS) which is a hierarchically structured
listing of the end item, i.e., hardware, software, and/or services, to be generated as a result of
project efforts. The first level represents the entire system, whether it is a weapon system, a
day-care centre, or the transfer of a plant from one location to another. Subsequent levels
consist of subsystems, and finally, individual components of the overall system. Some
subsystems may be subdivided further than others, so that the final WBS probably will not be
symmetrical, but should always sum from lowest level through to highest level.

Figure 3 – Work Breakdown Structure

Figure 4 shows the intersection between the WBS and the organization. The final level
defined should be assignable to a single organizational unit. It is at this level that work
packages should be developed, and reporting mechanisms structured.

Figure 4 - Intersection of WBS and Organization

Networks
The WBS serves as the basis for cost accounts, work packages, schedules and budgets, and
life cycle cost estimates. Once the end products have been defined and the organizational
units identified at the lowest level, the next step is the construction of a network of the tasks
required to complete the work packages and the interrelationships between them. Whether the
best networking approach is a Programmed Evaluation and Review Technique (PERT) type
with three estimates or a CPM (Critical Path Method) with a single estimate, a more
specialized Graphical Evaluation and Review (GERT), or a Decision-Event-Logic-Time-
Activity (DELTA) (5) approach depends on several factors. These include: the magnitude
and complexity of the project; the skill and experience level of others preparing it; the length
of the project; the type of project (whether R&D or production or services oriented); and the
available analytical tools to be used in conjunction with it.

In most projects, networks are used extensively in this stage to assess the impact of varied
resource applications, and the use of automated systems in the process can be extremely
valuable. In large projects it would be almost impossible to assess the impact of program
changes without an automated system and many commercial software packages are available
for this purpose. These networks and their associated resource tracking capabilities then
become the basis for the control system required throughout the life of the project.

Schedules
From the networks, tiers of schedules are developed and assigned to the appropriate
management level. Again, the number of tiers should be driven to the level at which
responsibility for a given schedule is within one organizational unit. This simplifies reporting
procedures and assures that higher level schedules, which should be a summation of the
levels below them, reflect measurable progress traceable to specific managers, as opposed to
subjective evaluations.

Schedules are necessarily interrelated with the application of personnel and money so that the
initial time phasing is usually a “straw man” and subsequent iterations establish the project
schedule baseline, constrained by the assignment of resources. A preliminary manpower
projection should reflect the requirements over the life cycle of the project. Personnel
inventories, which identify available resources that can be applied, should be used to match
skills and levels required for the project staffing. A project must compete for personnel with
other projects within the organization and if it surpasses current capabilities of an
organization, must compete in the market place for additional resources. A clear projection of
needs over the life of the project allows for better utilization of existing resources and the
proper lead time for training and hiring new people. Many of the project control software
packages have manpower-levelling capabilities which allow planners to shift activities not on
the critical path to allow optimum use of available personnel. These methods can identify
bottlenecks far enough in advance to allow careful evaluating of alternate solutions to the
problem.

Budgets
Budgets are time-phased allocations of financial resources which match the allocation of
facilities, equipment, and personnel to the project schedule. There are usually several levels
which include short-term or day-today operating budgets; mid-term, or budgets which reflect
the current fiscal year; and long-range, which are generally defined for the life of the project.
A very short-term project may, of course, require a single budget for its operation.

In a well-designed and documented project, the interrelationship and phasing of these

elements should occur somewhat like Figure 6. Because planning is an iterative process this
cycle occurs continually throughout the life of the project.

Policies and Guidelines

Policies and guidelines are formulated as plans are made, but failure to document them can
cause many problems, particularly in a long-term project. Decisions are made throughout the
planning process — to complete this segment in-house, to buy that component off the shelf,
to schedule this work for the months of July and August -these all have some underlying
assumptions that are being acted upon. In order to convey these constraints to those making
the day-to-day decisions, they should be documented and communicated to the level required
for decision making.

Change Control Procedures

The establishment of change control procedures is a vital part of the planning stage, since it
insures adherence to the original project baseline where possible, and a controlled departure
from it where necessary. The responsibility for making decisions should be clearly
delineated, and the requisite information made available at the same level. Before
implementing the plan developed, the project manager must determine its feasibility in the
environment and he must specifically identify the level of uncertainty which exists.

Decision-Making in Project Planning

Decision making as a key component of the management function of directing is significant
and critical to project success. A cardinal factor which impacts decision making is the amount
of uncertainty which exists in the project environment. This uncertainty variable often leads
managers to delay decisions, which is a decision in itself. Such inaction in a dynamic and
changing environment can lead to problems which can affect project success. Thus, there is a
need for project managers to understand uncertainty and how to cope with it in the project
environment.

Figure 5 - Management Information Systems for Program Control

Uncertainty

Definition:
Uncertainty is inversely related to information. The more uncertainty the manager has, the
less information, and vice versa. These relationships are illustrated in Figure 6 by use of a
continuum.

At one pole is certainty. This condition is characterized by the presence of all necessary
information needed for a given decision situation. There is no need for a wrong decision to be
made. However, such a condition seldom exists and, therefore, is of limited value to the
decision maker. At the other end of the spectrum is the condition of general uncertainty.
Again this is an extreme situation in that no information is available.

From a pragmatic standpoint any situation other than certainty is an uncertain one — an area
of specific uncertainty related to a unique decision making context. Risk is a special case of
uncertainty characterized by the availability of specific probabilities related to the outcomes
of events, such as the probability of a head when a fair coin is flipped. Thus, it can be seen
that the decision maker makes decisions in the area of specific uncertainty, which basically is
an area of partial information. Decisions are complicated by the inability of the decision
maker to determine the range of the spectrum that applies to a given decision. He generally
will cope with uncertainty by means of information acquisition. Several other methods exist
but are not necessarily applicable to this paper.

Uncertainty in the Project

Uncertainty can exist in many forms in the internal and external environments of the project.
It is a multidimensional concept. For example, decision-makers deal with business, financial,
project, environmental, and other types of uncertainty; however, three basic concerns emerge
in this area for the project manager. The individual is concerned with cost, schedule, and
performance or technical uncertainty.

Figure 6 – The Uncertainty Spectrum

In the planning process the various alternative strategies are costed and the decision made to
use a given strategy based on low-cost and other quantitative factors. These costs, however,
are estimates which may be erroneous. Costs may be affected by inflation, high interest rates,
labour strikes, material shortages, and other environmental variables. To avoid overruns cost
uncertainty can be reduced by the acquisition of valid and accurate information. Since perfect
information is never available, the planner can use sensitivity analyses to determine the
degree of error that his project can survive. In doing so he identifies the range of the
uncertainty spectrum in which he must operate. If he cannot acquire sufficient information at
reasonable cost, he should reassess his total plan.

Networking and schedules deal with the sequence of events and their timing. The
development of these time estimates occurs in the same environment of uncertainty as the
cost estimates. The project manager is dealing with the future events whose timing can be
impacted by any number of factors, such as labour strikes, and supply or equipment non-
availability. The project manager deals with time uncertainty by use of the three time
estimates for PERT or a similar assessment to identify risks associated with schedule errors.

Decision making in planning also is complicated by multiple constraints arising from the
internal and external environments. Internal limitations involve budgetary matters, such as
funds to pay personnel and procure supplies, equipment and other resources. Adequate
planning will aid in the identification of these limitations and the subsequent trade-offs
between resource categories to insure project success. External variables as mentioned before
cannot generally be controlled by the project manager; however, they must be identified so as
to possibly be influenced and accommodated. These variables include top management
policies, environmental changes stemming from political and legislative actions, the
strategies of competitors, and the vagaries of the market place.
Conclusion
Planning provides a nexus between the managerial functions required to activate a project
and the elements needed for successful project completion. It is concerned with deciding in
advance what, when, how and who will take the necessary actions to accomplish established
objectives. This paper has examined the project environment for planning, considered the
purposes of planning, focused on the stages of project planning, evaluated the elements and
stages of planning and discussed the role of decision making in project planning. Project
managers seeking success should master these concepts.

References
1. Koontz, Harold and Cyril O'Donnell, Principles of Management, New York: McGraw-Hill
Book Company, 1964, pp. 58, 69.

2. Adams, John R., Stephen E. Barndt, and Martin D. Martin, Managing by Project
Management, Dayton, Ohio: Universal Technology Corporation, 1979, pp. 3848, 64-73.

3. Vinson, Donald E. and Donald Sciglimpaglia, the Environment of Industrial Marketing,

Columbus, Ohio: Grid, Inc., 1975, pp. 189-202.

4. Stern, Mark E., Market Planning, New York: McGraw-Hill Book Company, 1966, pp. 59-
81.

5. Warfield, J. N. and J. D. Hill “Correction to The Delta Chart: A Method for R&D Project
Portrayal,’ " IEEE Transactions on Engineering Management, May 1972, pp. 132-139.

6. Gido, Jack, An Introduction to Project Planning, Schenectady, New York: McGraw-Hill

Book Company, 1964, p. 69.