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Lesson 1: Understanding Project Management Basics

Last edited 478 days ago by Makiel [Muh-Keel].

Project Life Cycle

Project management aims to deliver work in an efficient, orderly manner, and you would use project management to travel from Point A to Point B as efficiently as possible.

Project Budget - The total financial sum available to pay for a project’s expenses; includes the cost estimates and additional reserves to cover issues.

Project Life Cycles start with a great idea and ends with a successfully delivered project.

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Concept or Discovery Phase

Projects are conceived and reviewed during this phase and if approved, move on to the next phase.

Financial returns, feasibility, and implementation options are analyzed.

This phase filters out the unfeasible projects, and a lot of projects die here.

Initiation Phase

Only approved projects reach this phase.

Everybody will learn and understand their role during this phase.

Project Kickoff officially occurs during this phase.

Planning Phase

The team will define all activities needed to be completed.

The PM will manage team logistics and ensure the project has adequate resources or procure additional resources.

PM will create plans for keeping the project on track and sharing it’s progress.

This is done by creating a project work schedule and performance metrics for tracking progress.

At the end of the planning phase, the team has everything they need to begin delivering the work.

Execution Phase

The team delivers the work during the execution phase, but the work also varies by project.

Examples:

Team could write code.

Configure systems.

Build a house.

Busiest phase of the project life cycle

Along the way, they create supporting materials and coordinate with each other to complete the work. It is the busiest project phase, and everybody has work to do.

The PM will also monitor progress and measure performance, enabling you to find and solve problems, maintain records, and create reports.

By the end of the execution phase, the team has finished implementing the plan.

As a result, the project should meet the goals set in the initiation phase.

Closing Phase

When the PM ensures everything that needs to be closed, is closed.

Ensures project was thorough, documentation was updated, and an accurate financial summary is created.

The PM requests official approval to close the project.

The Team also reflects on their work and disbands.

Project Management Skills

The Project Management roles heavily emphasizes planning and organization.

Team members must often find and solve problems before they occur.

Team must be willing to follow the plan yet also adapt to change.

Applying Project Management

Good project management helps companies save money and optimize results.

Example:

A construction company could not build a library without a PM.

People would show up at all hours and in the wrong order.

Funding would probably run out long before the building was complete.

Project management brings order to the work.

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Develop the Business Case

The Business Case aka the Business Justification, summarizes the information about the project and serves as the first project proposal.

The Business Case will be shared with leaders so you can obtain approval to start the project and begin securing funding and resources.

The Business Case should also provide a compelling reason for funding the project.

This presents an objective analysis of the business problem, potential solutions, and overall financial impact.

Helps sponsors and stakeholders determine if the project is an overall good investment.

Sections of a Business Case

The Business Case should also provide a compelling reason for funding the project. It should be clear, concise, visually appealing, and easy to follow/read.

There is no standard format, so you can select the format and presentation option that makes the most sense for your audience.

The Business Case outlines the reasons a project should be funded, beginning with the high-level executive summary, the business case provides detailed information based on the project’s context.

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Executive Summary

The Executive Summary is a brief synopsis of the rest of the business case.

Usually indicates

Short problem statement

solution

expected result

Problem Statement

The Problem Statement shares more details about the problem.

It presents a more thorough analysis of the current situation and the business problem, opportunity, or unmet need.

Problem Analysis

It provides more context about why the project should be a priority.

It can include historical performance data, an environmental assessment, or other evidence to support the business case.

Options

Options describes several approaches to solving the problem; it should contain at least three and no more than five options.

It compares the solutions against each other with pros and cons.

Project Definition

The Project Definition includes additional relevant information about the proposed project.

Contain details about

Project Scope

Resources Needed

Milestones

Implementation Timeline

Financial Overview

This covers the relevant economic impacts of the project.

Could include project budget

Where the budget will come from

What the company has to gain

Contains a cost-benefit-analysis or ROI analysis

Recommendation

Narrows down the options to the best solution and justifies why this approach is the best business case.

Current State and Future State

The Business Case should include and element of storytelling. The goal is to convince business leaders to allocate resources to the project you’re managing.

It’s important they understand exactly why they should invest the budget in your project instead.

Comparing the Current State (where we are now) and the Future State (where we want to go) is an excellent way to do this.

Current state: describes what is happening now.

The business case template describes the current state in the problem statement and analysis sections.

Future state: describes what the business will look like after implementing the project.

The business case template describes the future state in the recommendation and financial overview sections.

An ideal comparison shows a clear comparison between the current and future state of two of the same performance metrics.

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For example, if you created a multi-page business case, consider adding a side-by-side summary of the current and future state to highlight the stark differences.

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Assessing Financial Impact

Financial benefit is a primary business justification reason for working on a project.

Therefore, when deciding which projects to invest in, the company is more likely to invest in a project with strong financial returns, assuming all else is equal.

ROI (Return on Investment)

ROI compares the financial benefit of the project to the cost and is written as a percentage.

Positive Number (+) represents a profitable project

Negative Number (-) means the project will or has lost money.

ROI is presented in the following three formulas and all three will generate the same result.

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ROI Examples

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ROI values

ROI has three main values:

Benefit - is the money generated or explicitly saved due to the project.

Often referred to as "financial value" or "revenues," this variable is the money flowing into the company.

Cost - represents all the money spent on this project.

Usually called "project cost" or "project expense," this variable is the money flowing out of the company.

Expenses will include direct and indirect expenses, such as labor, equipment, and

contracts⁠

Net Profit - the difference between the benefit and the cost. While it often isn't named in formulas, it is the numerator.

ROI represents the profitability of a project as a percentage.

However, it is also helpful to understand the actual net profit of a project as well.

ROI and Project Approval

A Positive ROI doesn’t automatically mean a project will move forward.

A Negative ROI doesn’t automatically mean a project will be canceled.

Instead the ROI % is merely put into a larger decision.

Business Context, regulations, and environmental requirements are among the many other factors that influence project approval.

Financial Risks and Assumptions

Assumptions

Assumptions are statements that must be taken to be true in order to begin project planning.

Ex. You might include an assumption that revenues will grow at 5% per year, which represents the industry average.

Stating this within the business case can help others have more confidence in your data.

Risks

Risks are any unexpected event that can affect your project.

The effect might be either positive or negative, and the impact might be on any aspect of the project from personnel, processes, technology, and resources.

These unexpected events are difficult or impossible to predict.

Risk are events you think could happen.

Environmental, Social and Governance (ESG) Factors

Environmental, Social, and Governance (ESG) factors are considered during project planning, execution, and evaluation to ensure that projects align with broader sustainability and ethical goals.