Summary Preparing for the Project Management Professional (PMP
) Certification Exam

Introduction 1 What Is Project Management Anyway? 2 Advantages of Project Management 6 Organizing for Project Management 7 The Projectized Organization 7 The Traditional Organization 9 The Matrix Organization 10 The Project Office 12 How the Project Manager Makes Projects Successful 13 The Project Life Cycle 14 Project Processes 14 Summary 15 1. Scope Management 16 Initiation of the Project 17 Project Charter 17 Constraints and Assumptions 18 Who Are Those Stakeholders? 18 Cost and Its Relationship to Price 19 Overbid or Underbid: Which Is Better for Your Company? 20 Getting to the Scope Baseline 23 Work Breakdown Structure 25 Systems Approach to Work Breakdown Structure 28 Additional Project Breakdown Structures 30 Change Management 30 Project Justifications 31 The Break Even Chart 32 Problems with Break Even Charts 33 Average Rate of Return on Investment 34 Present Value of Money 34 Internal Rate of Return on Investment 39 Summary 44 vii viii Contents 2. Time Management 46 Activity Definition 46 Activity Sequencing 47 Activity on Arrow Diagramming 48 Precedence Diagramming Method (PDM) 49 Logical Relationships 50 Finish-Start Relationship (FS) 50 Start-Start Relationship (SS) 52 Finish-Finish Relationship (FF) 53 Start-Finish Relationship (SF) 53 Leads and Lags 54 Diagramming Relationships 55 Project Start and Project Finish Events 55 Logical Precedence Diagram 56 Activity Durations 56 Building the Network Diagram 57 Buffering the Schedule 63 Reverse Resource Allocation Scheduling 67 Critical Path Method (CPM) 67 Program Evaluation and Review Technique (PERT) 68 Monte Carlo Simulation 73 The Simulation 74 Output from the Monte Carlo Simulation 75 Summary 75 3. Cost Management 77 Why We Need Cost Management 77 Project Life Cycle and Project Cost 78 Using the Work Breakdown Structure 78 Cost Estimating 79 Types of Estimates 80 Top Down Estimates 80 Bottom Up Estimates 80 Analogous Estimates 80 Parametric Estimates 81 Definitive Estimates 81 Cost Budgeting 83 Contents ix Cost Control 85 Earned Value Reporting 85 Cumulative Reporting 85 Earned Value Parameters 86 Difficulties in Data Collection 87 Reporting Work Complete 89 Examples 89 Calculated Values for Earned Value Reports 90 Financial Measures 94 Return on Sales 97 Return on Assets 98 Economic Value Added 99 Depreciation 100 Straight Line Depreciation 100 Accelerated Depreciation 101 Sum of the Years’ Digits 101 Double Declining Balances 102 Summary 102 4. Human Resources Management 104 Project Manager Roles and Responsibilities 104 Strong Matrix, Weak Matrix, and Balanced Matrix 106 Strong Matrix 106 Weak Matrix 106 Balanced Matrix 108 Making Matrix Management Work 109 Personnel and Personal Evaluations 109 Motivation 110 Importance of Motivation 110 Industrial Revolution 110 Scientific Management 111 Learning Curve Theory 111 Depression Era 112 World War II 112 Post–World War II 112 Motivational Ideas 112 Procedures versus Motivation 113 Expectancy Theory 113 Maslow’s Hierarchy of Needs Theory 115 Hertzberg’s Motivation/Hygiene Theory 117 x Contents Supervisory Style and Delegation 118 Job and Work Design 118 Job Enlargement 119 Job Enrichment 120 Quality Circles 121 Power 121 Forms of Power 121 Coercive Power and Reward Power 121 Legitimate Power 122 Referent Power 122 Expert Power 123 Representative Power 123 Leadership 123 Theory X and Theory Y Managers 123 Conflict Resolution 124 Forcing 125 Smoothing 126 Compromise 126 Problem Solving 126 Withdrawal 127 Managing Meetings 127 Managing Meetings Effectively 129 Before the Meeting 129 Beginning the Meeting 129 Summary 130 5. Risk Management 132 When to Do Risk Management 133 The Risk Process 133 Risk Management Planning 133 Risk Identification 134 Documentation Reviews 135 Brainstorming 135 Delphi Technique 135 Nominal Group Technique 136 Crawford Slip 137 Expert Interviews 137 Checklists 138 Analogy 138 Diagramming Techniques 138 Recording of Risks Identified 138 TEAMFLY Contents xi Risk Assessment 140 Risk Tolerance 141 Risk Probability 143 The Addition Rule 145 The Multiplication Rule 147 Risk Impact 149 Expected Value 150 Decision Trees 151 Risk Quantification 155 Comparative Ranking 157 Grouping the Risks 157 Affinity Programming 158 Risk Response Planning 158 Risk Strategies 159 Avoidance 159 Transfer 159 Contracting 160 Acceptance 160 Mitigation 161 Risk Opportunities 161 Budgeting for Risk 162 Risk Monitoring and Control 162 Summary 163 6. Quality Management 165 Quality Planning 166 Quality Assurance 167 Cost of Quality 167 Costs of Prevention 168 Costs of Defects 168 Deming’s Fourteen Points 169 Quality Control 169 Sampling Inspection 170 Acceptable Quality Level (AQL) 171 Buyer’s Risk and Seller’s Risk 171 Other Quality Control Techniques 172 Flowcharts and Diagrams 172 Cause and Effect Diagrams 172 Pareto Charts 172 Control Charts 175 Checklists 178 xii Contents Kaizen 179 Benchmarking 179 Summary 179 7. Contract and Procurement Management 181 Contract Management 182 Make or Buy 182 Contract Life Cycle 183 Requirement Process 183 Requisition Process 184 Solicitation Process 185 Award Process 185 Contract Process 185 Contract Types 185 Fixed Price Contract 186 Firm Fixed Price Contract 186 Fixed Price Plus Economic Adjustment Contract 187 Fixed Price Plus Incentive Contract 188 Cost Plus Contract 188 Cost Plus Fixed Fee Contract 189 Cost Plus Award Fee Contract 190 Cost Plus Incentive Fee Contract 190 Procurement Management 190 Commodities 190 Unique Products and Services 191 Forward Buying 192 Blanket Orders 192 Split Orders 193 Summary 193 8. Communications Management 195 General Model of Communications 195 Thinking 196 Encoding 196 Symbols 196 Transmitting 197 Perceiving 197 Decoding 197 Understanding 197 Contents xiii Barriers to Communications 198 Distorted Perceptions 198 Distrusted Sources 198 Transmission Errors 198 Improving Communications 199 Make the Message Relevant for the Receiver 199 Reduce the Message to Its Simplest Terms 199 Organize the Message into a Series of Stages 199 Repeat the Key Points 199 Verbal and Written Communications 200 Formal and Informal Communications 201 Formal Communications 201 Informal Communications 201 Improving Listening 202 Don’t Interrupt 202 Put the Speaker at Ease 204 Appear Interested 204 Cut Out Distractions 204 Periodically Sum Up What Was Said 204 Networking 204 Circular Networks 205 Chain Networks 205 The Wheel 205 Free and Open Communications 206 Management by Walking Around 207 Performance Reviews 209 Summary 210 9. Professional Responsibility 211 Task 1 212 Task 2 213 Task 3 214 Task 4 214 Task 5 215 Code of Professional Conduct 216 10. What Is the PMP Exam Like? 218 Domain 1: Initiating the Project 219 Domain 2: Planning the Project 220 xiv Contents Domain 3: Executing the Project 221 Domain 4: Controlling the Project 222 Domain 5: Closing the Project 222 Domain 6: Professional Responsibility 223 Types of Questions on the Exam 224 Taking the Exam 225 Use of Practice Questions 226 The Application for PMP Certification 228 The Education Qualification 229 Joining PMI 230 Recertification 230 Practice Questions 233 Practice Questions Answer Key 317 Appendix: Probability Distributions 375 Glossary 383 Bibliography 403 Index 405 PREFACE This book has been written to help those preparing for the Project Management Professional Examination. It is intended to cover all of the material that the Project Management Institute (PMI) considers important enough to be included in the exam. This book has been revised to reflect the changes in the Project Management Professional Examination put into effect as of March 2002 and reflects the Guide to the Project Management Body of Knowledge, 2000 edition. I have been working in the field of project management for the past twenty-five years and was managing projects long before that and long before there was a methodology called project management. Once I became aware of the work that PMI was doing in this area and started to consider project management as a profession and a disciplined methodology, it became clear to me what had gone wrong with some of my projects in the past. From that point on I began applying the tools and techniques of project management, and slowly the unification and completeness of the methodology became clear. Project management works as a unified body of knowledge, but all of the tools and techniques depend on one another to succeed. You cannot do a good job of cost estimating if you have not developed a good set of requirements and deliverables for the project any more than you can produce a good schedule without taking the time necessary to develop good estimates of the task durations. If project management is practiced using the methodology outlined in this book and the Project Management Institute’s Guide to the Project Management Body of Knowledge, you will become a good project manager. Learning project management is more than studying a book or even a group of books. Project management must also be learned in the field with experience and exposure to real responsibility on real projects. The Project Management Professional (PMP) certification is designed to certify project managers who meet the criteria for both knowledge and experience. To qualify for certification you must have both. PMI requires that you have at least 4,500 hours of experience if you have a bachelor’s degree. Some of this experience must extend past more than the last three years but not more than past the last six years. There is a criterion for people not holding a