The chapters in this document are displayed in reversed order, with the last chapter appearing first.
This change ensures all chapters are included in the manuals. Chap 1 to 16 Included
Service Management 10e
Chapter 16 Instructor’s Manual
Teaching Note CHAPTER 16: MANAGING SERVICE PROJECTS
With the emphasis on teamwork in organizations, project management skills will be expected of
future leaders. Once a project manager has been selected and a team formed, management
activities involve planning, scheduling, and controlling. Computer software such as Microsoft
Project make these activities easier. Using this software, visual displays such as Gantt charts and
PERT charts can be produced and revised with ease. Performing critical path analysis no longer is
a tedious process. Project managers are freed to focus on completing the project on time and
within budget.
Supplementary Materials
Case: Paymor Shopping Center (Stanford University case)
The owner of a shopping center is preparing for the construction of a tire store on his property. He
is interested in learning how long the project will take and what activities could be expedited to
complete the construction in 58 days at minimum additional cost.
Software: Microsoft Project
This commercial software program automatically constructs Gantt charts and project network
diagrams (both using color to highlight the critical path) based on inputs of project activity times
and precedence requirements. Other features include managing resources, workloads, and
calendars. Controlling the project cost, scheduling task constraints, and tracking project progress
are made easy.
Lecture Outline
1. The Nature of Project Management
Characteristics of Projects
Project Management Process (Figure 16.1)
Selecting the Project Manager
Building the Project Team
Principles of Effective Project Management
2. Techniques for Project Management
Gantt Project Charts (Figure 16.2)
,320 Service Management 10e
Chapter 16 Instructor’s Manual
A Critique of Gantt Charts
Constructing a Project Network (Table 16.1)
Critical Path Method (Figures 16.3, 16.4, 16.5, 16.6, 16.7 and Table 16.2)
Microsoft Project Analysis (Figures 16.8 and 16.9)
3. Resource Constraints (Figures 16.10 and 16.11)
4. Activity Crashing (Figures 16.12, 16.13 and Tables 16.3, 16.4, 16.5)
5. Incorporating Uncertainty in Activity Times
Estimating Activity Duration Distribution (Figure 16.14)
Project Completion Time Distribution (Table 16.6 and Figure 16.15)
A Critique of the Project Completion Time Analysis (Figure 16.16)
6. Problems With Implementing Critical Path Analysis
7. Monitoring Projects (Table 16.7)
Earned Value Chart (Figure 16.17)
Project Termination
Project History Report
Topics for Discussion
1. Give an example that demonstrates the trade-off inherent in projects among cost, time, and
performance.
The development of a military fighter best illustrates the trade-off found in projects. The
government is interested in a fighter that will not exceed budget allocations but the military desires
a plane that will push the performance envelope. Achieving outstanding performance requires the
use of exotic materials and results in additional expenses. Both the military and the government
are interested in having the final product yesterday but accelerated development requires
additional manpower and associated cost. Engineers know that with additional time the design can
be improved and meet higher levels of performance.
2. Illustrate the four stages of team building from your own experience.
As a young boy I played shortstop on a school baseball team. The forming stage began the first
day we all showed up for tryouts with the expected excitement and anticipation, and some anxiety.
After the team members were selected, positions were assigned and we took to the field for the
first time; this storming stage began with the reality that we did not work well together. Fly balls
were dropped, throws to first base were off the bag, and the shortstop did not cover second base
,321 Service Management 10e
Chapter 16 Instructor’s Manual
when needed or flubbed an opportunity for a double play. After more practice and a few
competitive games we began to relate to one another. As we entered the norming stage of our
activity, we learned to anticipate each other’s moves and trust each other to field the ball. Finally,
the team began to perform and play well enough that we took pride in our performance and
actually won some games with appropriate celebration.
3. Are Gantt charts still viable project management tools? Explain.
A Gantt chart is a useful visual representation of project activities against a time schedule with
progress easily displayed. For small-scale and repetitive projects (e.g., airplane turnaround
between flights), a posted Gantt chart describes for everyone what needs to be accomplished and
the expected time for each activity. Gantt charts also can be used for training new personnel.
4. Explain why the PERT estimate of expected project duration always is optimistic. Can we get
any feel for the magnitude of this bias?
Analysis of projects with uncertain activity times proceeds with the assumption that the critical
path activities based on expected activity durations actually determine the expected project
completion time. However, the completion times of every path in the network are random
variables. Paths whose expected durations are close to that of the critical path can, in fact,
determine the project completion time owing to excessive variance in some activities. By focusing
on only the critical path and ignoring other paths, the calculation of project completion time
becomes an optimistic estimate. A better estimate of the project completion time distribution can
be obtained using Monte Carlo simulation of the network by taking a sample of each activity time
from its Beta distribution and determining the critical path. Repeated sampling will result in
realizations of project durations that can be displayed as a completion time distribution. The mean
of this empirical distribution then can be compared to the expected project duration (using only the
critical path activities) to arrive at a measure of the bias.
5. Discuss the difference between time variance, cost variance, and schedule variance.
Variance represents a measure of deviation of actual performance from planned performance.
Time variance looks at work performed and compares actual with scheduled times to identify
whether the project is behind or ahead of schedule. Cost variance is concerned with a comparison
of the accumulation of expenses to date with budgeted cost to signal the potential of a project cost
overrun in time to make adjustments, if necessary. Schedule variance is another measure of cost
performance but relates budgeted cost (baseline) to budgeted cost of work performed to date. Cost
variance and schedule variance will be identical only when the actual cost equals the baseline cost.
However, in this case the project could still be in trouble because the value completed could be
less than budgeted cost.
6. Go to http://www.people.hbs.edu/besty/projfinportal/index.htm and find employment
opportunities in project finance. What role does finance play in projects?
Finance plays at lease three roles in projects: (1) arranges for project financing using debt,
partnerships, and/or government financing, (2) challenges the project plan for possible financial
risks, and (3) challenges host government, joint venture, and supplier contracts for possible
schedule and performance risks during project execution and keeps track of the costs against
budget (cost variance) to avoid cost overruns.
, 322 Service Management 10e
Chapter 16 Instructor’s Manual
Interactive Exercise
Prepare a work breakdown structure (WBS) for a homecoming dance.
The following is a possible WBS for the homecoming dance project plan. Using WORD, the
outline is numbered automatically.
1.0 Homecoming Dance
1.1 Ballroom
1.1.1 Find an available ballroom
1.1.2 Sign a contract for a date
1.2 Band
1.2.1 Decide on the type of band
1.2.2 Find an available band
1.2.3 Sign a contract for a date
1.3 Food service
1.3.1 Find a caterer
1.3.2 Sign a contract for a date
1.4 Decorations
1.4.1 Purchase balloons and streamers
1.5 Announcement
1.5.1 Print flyer
1.5.2 Post announcement in school paper
1.6 Dance day
1.6.1 Have committee show up early
1.6.2 Identify cleanup crew
Exercise Solutions
16.1 (a)
A4 D6 G4
E3 I2
B3
C4 F5 H6
This change ensures all chapters are included in the manuals. Chap 1 to 16 Included
Service Management 10e
Chapter 16 Instructor’s Manual
Teaching Note CHAPTER 16: MANAGING SERVICE PROJECTS
With the emphasis on teamwork in organizations, project management skills will be expected of
future leaders. Once a project manager has been selected and a team formed, management
activities involve planning, scheduling, and controlling. Computer software such as Microsoft
Project make these activities easier. Using this software, visual displays such as Gantt charts and
PERT charts can be produced and revised with ease. Performing critical path analysis no longer is
a tedious process. Project managers are freed to focus on completing the project on time and
within budget.
Supplementary Materials
Case: Paymor Shopping Center (Stanford University case)
The owner of a shopping center is preparing for the construction of a tire store on his property. He
is interested in learning how long the project will take and what activities could be expedited to
complete the construction in 58 days at minimum additional cost.
Software: Microsoft Project
This commercial software program automatically constructs Gantt charts and project network
diagrams (both using color to highlight the critical path) based on inputs of project activity times
and precedence requirements. Other features include managing resources, workloads, and
calendars. Controlling the project cost, scheduling task constraints, and tracking project progress
are made easy.
Lecture Outline
1. The Nature of Project Management
Characteristics of Projects
Project Management Process (Figure 16.1)
Selecting the Project Manager
Building the Project Team
Principles of Effective Project Management
2. Techniques for Project Management
Gantt Project Charts (Figure 16.2)
,320 Service Management 10e
Chapter 16 Instructor’s Manual
A Critique of Gantt Charts
Constructing a Project Network (Table 16.1)
Critical Path Method (Figures 16.3, 16.4, 16.5, 16.6, 16.7 and Table 16.2)
Microsoft Project Analysis (Figures 16.8 and 16.9)
3. Resource Constraints (Figures 16.10 and 16.11)
4. Activity Crashing (Figures 16.12, 16.13 and Tables 16.3, 16.4, 16.5)
5. Incorporating Uncertainty in Activity Times
Estimating Activity Duration Distribution (Figure 16.14)
Project Completion Time Distribution (Table 16.6 and Figure 16.15)
A Critique of the Project Completion Time Analysis (Figure 16.16)
6. Problems With Implementing Critical Path Analysis
7. Monitoring Projects (Table 16.7)
Earned Value Chart (Figure 16.17)
Project Termination
Project History Report
Topics for Discussion
1. Give an example that demonstrates the trade-off inherent in projects among cost, time, and
performance.
The development of a military fighter best illustrates the trade-off found in projects. The
government is interested in a fighter that will not exceed budget allocations but the military desires
a plane that will push the performance envelope. Achieving outstanding performance requires the
use of exotic materials and results in additional expenses. Both the military and the government
are interested in having the final product yesterday but accelerated development requires
additional manpower and associated cost. Engineers know that with additional time the design can
be improved and meet higher levels of performance.
2. Illustrate the four stages of team building from your own experience.
As a young boy I played shortstop on a school baseball team. The forming stage began the first
day we all showed up for tryouts with the expected excitement and anticipation, and some anxiety.
After the team members were selected, positions were assigned and we took to the field for the
first time; this storming stage began with the reality that we did not work well together. Fly balls
were dropped, throws to first base were off the bag, and the shortstop did not cover second base
,321 Service Management 10e
Chapter 16 Instructor’s Manual
when needed or flubbed an opportunity for a double play. After more practice and a few
competitive games we began to relate to one another. As we entered the norming stage of our
activity, we learned to anticipate each other’s moves and trust each other to field the ball. Finally,
the team began to perform and play well enough that we took pride in our performance and
actually won some games with appropriate celebration.
3. Are Gantt charts still viable project management tools? Explain.
A Gantt chart is a useful visual representation of project activities against a time schedule with
progress easily displayed. For small-scale and repetitive projects (e.g., airplane turnaround
between flights), a posted Gantt chart describes for everyone what needs to be accomplished and
the expected time for each activity. Gantt charts also can be used for training new personnel.
4. Explain why the PERT estimate of expected project duration always is optimistic. Can we get
any feel for the magnitude of this bias?
Analysis of projects with uncertain activity times proceeds with the assumption that the critical
path activities based on expected activity durations actually determine the expected project
completion time. However, the completion times of every path in the network are random
variables. Paths whose expected durations are close to that of the critical path can, in fact,
determine the project completion time owing to excessive variance in some activities. By focusing
on only the critical path and ignoring other paths, the calculation of project completion time
becomes an optimistic estimate. A better estimate of the project completion time distribution can
be obtained using Monte Carlo simulation of the network by taking a sample of each activity time
from its Beta distribution and determining the critical path. Repeated sampling will result in
realizations of project durations that can be displayed as a completion time distribution. The mean
of this empirical distribution then can be compared to the expected project duration (using only the
critical path activities) to arrive at a measure of the bias.
5. Discuss the difference between time variance, cost variance, and schedule variance.
Variance represents a measure of deviation of actual performance from planned performance.
Time variance looks at work performed and compares actual with scheduled times to identify
whether the project is behind or ahead of schedule. Cost variance is concerned with a comparison
of the accumulation of expenses to date with budgeted cost to signal the potential of a project cost
overrun in time to make adjustments, if necessary. Schedule variance is another measure of cost
performance but relates budgeted cost (baseline) to budgeted cost of work performed to date. Cost
variance and schedule variance will be identical only when the actual cost equals the baseline cost.
However, in this case the project could still be in trouble because the value completed could be
less than budgeted cost.
6. Go to http://www.people.hbs.edu/besty/projfinportal/index.htm and find employment
opportunities in project finance. What role does finance play in projects?
Finance plays at lease three roles in projects: (1) arranges for project financing using debt,
partnerships, and/or government financing, (2) challenges the project plan for possible financial
risks, and (3) challenges host government, joint venture, and supplier contracts for possible
schedule and performance risks during project execution and keeps track of the costs against
budget (cost variance) to avoid cost overruns.
, 322 Service Management 10e
Chapter 16 Instructor’s Manual
Interactive Exercise
Prepare a work breakdown structure (WBS) for a homecoming dance.
The following is a possible WBS for the homecoming dance project plan. Using WORD, the
outline is numbered automatically.
1.0 Homecoming Dance
1.1 Ballroom
1.1.1 Find an available ballroom
1.1.2 Sign a contract for a date
1.2 Band
1.2.1 Decide on the type of band
1.2.2 Find an available band
1.2.3 Sign a contract for a date
1.3 Food service
1.3.1 Find a caterer
1.3.2 Sign a contract for a date
1.4 Decorations
1.4.1 Purchase balloons and streamers
1.5 Announcement
1.5.1 Print flyer
1.5.2 Post announcement in school paper
1.6 Dance day
1.6.1 Have committee show up early
1.6.2 Identify cleanup crew
Exercise Solutions
16.1 (a)
A4 D6 G4
E3 I2
B3
C4 F5 H6
