CONSTRUCTION PLANNING AND CONTROL

UNIT:1
UNDERSTANDING PROJECT MANAGEMENT, PROJECT MANAGER, ORGANIZATION
STRUCTURES, STAGES OF CONSTRUCTION, ORGANIZING AND STAFFING THE PROJECT
OFFICE AND TEAM

PROJECT MANAGEMENT:

What Is Project Management?

Project management is the practice of initiating, planning, executing, controlling, and closing the work of
a team to achieve specific goals and meet specific success criteria at the specified time. The primary challenge
of project management is to achieve all of the project goals within the given constraints. This information is
usually described in project documentation, created at the beginning of the development process. The primary
constraints are scope, time, quality and budget. The secondary—and more ambitious—challenge is
to optimize the allocation of necessary inputs and apply them to meet pre-defined objectives.

The object of project management is to produce a complete project which complies with the client's objectives.
In many cases the object of project management is also to shape or reform the client's brief to feasibly be able to
address the client's objectives. Once the client's objectives are clearly established they should influence all
decisions made by other people involved in the project – for example project managers, designers, contractors
and sub-contractors. Ill-defined or too tightly prescribed project management objectives are detrimental to
decision making.

A project is a temporary endeavor designed to produce a unique product, service or result with a defined
beginning and end (usually time-constrained, and often constrained by funding or staffing) undertaken to meet
unique goals and objectives, typically to bring about beneficial change or added value. The temporary nature of
projects stands in contrast with business as usual (or operations), which are repetitive, permanent, or semi-
permanent functional activities to produce products or services. In practice, the management of such distinct
production approaches requires the development of distinct technical skills and management strategies.

Project management focuses on planning and organizing a project and its resources. This includes identifying
and managing the lifecycle to be used, applying it to the user-centered design process, formulating the project
team, and efficiently guiding the team through all phases until project completion.

Approaches of project management:

A 2017 study suggested that the success of any project depends on how well four key aspects are aligned with
the contextual dynamics affecting the project, these are referred to as the four P's:

 Plan: The planning and forecasting activities.

 Process: The overall approach to all activities and project governance.
 People: Including dynamics of how they collaborate and communicate.
 Power: Lines of authority, decision-makers, organograms, policies for implementation and the like.

There are a number of approaches to organizing and completing project activities, including: phased, lean,
iterative, and incremental. There are also several extensions to project planning, for example based on outcomes
(product-based) or activities (process-based). Some of the approaches of management is given below:

Benefits realization management

Benefits realization management (BRM) enhances normal project management techniques through a focus on
outcomes (benefits) of a project rather than products or outputs, and then measuring the degree to which that is
happening to keep a project on track. This can help to reduce the risk of a completed project being a failure by
delivering agreed upon requirements/outputs but failing to deliver the benefits of those requirements.

In addition, BRM practices aim to ensure the alignment between project outcomes and business strategies. The
effectiveness of these practices is supported by recent research evidencing BRM practices influencing project
success from a strategic perspective across different countries and industries.

An example of delivering a project to requirements might be agreeing to deliver a computer system that will
process staff data and manage payroll, holiday and staff personnel records. Under BRM the agreement might be
to achieve a specified reduction in staff hours required to process and maintain staff data.

Critical chain project management

Critical chain project management (CCPM) is an application of the theory of constraints (TOC) to planning and
managing projects, and is designed to deal with the uncertainties inherent in managing projects, while taking
into consideration limited availability of resources (physical, human skills, as well as management & support
capacity) needed to execute projects.

The goal is to increase the flow of projects in an organization (throughput). Applying the first three of the five
focusing steps of TOC, the system constraint for all projects, as well as the resources, are identified. To exploit
the constraint, tasks on the critical chain are given priority over all other activities. Finally, projects are planned
and managed to ensure that the resources are ready when the critical chain tasks must start, subordinating all
other resources to the critical chain.
Earned value management

Earned Value chart shows Planned Value, Earned Value, Actual Cost, and their variances in percent. The
approach is used in project management simulation

Earned value management (EVM) extends project management with techniques to improve project monitoring.
It illustrates project progress towards completion in terms of work and value (cost). Earned Schedule is an
extension to the theory and practice of EVM. This theory was introduced in 2019.

Iterative and incremental project management

In critical studies of project management, it has been noted that phased approaches are not well suited for
projects which are large-scale and multi-company, with undefined, ambiguous, or fast-changing
requirements, or those with high degrees of risk, dependency, and fast-changing technologies. The cone of
uncertainty explains some of this as the planning made on the initial phase of the project suffers from a high
degree of uncertainty. This becomes especially true as software development is often the realization of a new or
novel product.

These complexities are better handled with a more exploratory or iterative and incremental approach. Several
models of iterative and incremental project management have evolved, including agile project
management, dynamic systems development method, extreme project management, and Innovation
Engineering.

Lean project management

Lean project management uses the principles from lean manufacturing to focus on delivering value with less
waste and reduced time

Phased approach

The phased (or staged) approach breaks down and manages the work through a series of distinct steps to be
completed, and is often referred to as "traditional" or "waterfall". Although it can vary, it typically consists of
five process areas, four phases plus control:
Typical development phases of an engineering project

1. initiation
2. planning and design
3. construction
4. monitoring and controlling
5. completion or closing

Many industries use variations of these project stages and it is not uncommon for the stages to be renamed to
better suit the organization. For example, when working on a brick-and-mortar design and construction, projects
will typically progress through stages like pre-planning, conceptual design, schematic design, design
development, construction drawings (or contract documents), and construction administration.

While the phased approach works well for small, well-defined projects, it often results in challenge or failure on
larger projects, or those that are more complex or have more ambiguities, issues and risk.

Process-based management

The incorporation of process-based management has been driven by the use of maturity models such as
the OPM3 and the CMMI (capability maturity model integration; see this example of a predecessor)
and ISO/IEC 15504 (SPICE – software process improvement and capability estimation). Unlike SEI's CMM,
the OPM3 maturity model describes how to make project management processes capable of performing
successfully, consistently, and predictably to enact the strategies of an organization.

Project production management

Project production management is the application of operations management to the delivery of capital projects.
The Project production management framework is based on a project as a production system view, in which a
project transforms inputs (raw materials, information, labor, plant & machinery) into outputs (goods and
services).

Product-based planning

Product-based planning is a structured approach to project management, based on identifying all of the products
(project deliverables) that contribute to achieving the project objectives. As such, it defines a successful project
as output-oriented rather than activity- or task-oriented. The most common implementation of this approach
is PRINCE2

Elements of project management:

Traditionally (depending on what project management methodology is being used), project management
includes a number of elements: four to five project management process groups, and a control system.
Regardless of the methodology or terminology used, the same basic project management processes or stages of
development will be used. Major process groups generally include:

 Initiation
 Planning
 Production or execution
 Monitoring and controlling
 Closing

In project environments with a significant exploratory element (e.g., research and development), these stages
may be supplemented with decision points (go/no go decisions) at which the project's continuation is debated
and decided. An example is the Phase–gate model.

Initiating

Initiating process group processes

The initiating processes determine the nature and scope of the project. [35] If this stage is not performed well, it is
unlikely that the project will be successful in meeting the business’ needs. The key project controls needed here
are an understanding of the business environment and making sure that all necessary controls are incorporated
into the project. Any deficiencies should be reported and a recommendation should be made to fix them.
The initiating stage should include a plan that encompasses the following areas. These areas can be recorded in
a series of documents called Project Initiation documents. Project Initiation documents are a series of planned
documents used to create order for the duration of the project. These tend to include:

RACI(Q) chart. At least one Responsible and exactly one Accountable person are designated for each project
and planning activity.

 project proposal (idea behind project, overall goal, duration)

 project scope (project direction and track)
 product breakdown structure (PBS) (a hierarchy of deliverables / outcomes and components thereof)
 work breakdown structure (WBS) (a hierarchy of the work to be done, down to daily tasks)
 responsibility assignment matrix (RACI) (roles and responsibilities aligned to deliverables / outcomes)
 tentative project schedule (milestones, important dates, deadlines)
 analysis of business needs and requirements against measurable goals
 review of the current operations
 financial analysis of the costs and benefits, including a budget
 stakeholder analysis, including users and support personnel for the project
 project charter including costs, tasks, deliverables, and schedules
 SWOT analysis: strengths, weaknesses, opportunities, and threats to the business

Planning

After the initiation stage, the project is planned to an appropriate level of detail (see example of a flow-
chart). The main purpose is to plan time, cost and resources adequately to estimate the work needed and to
effectively manage risk during project execution. As with the Initiation process group, a failure to adequately
plan greatly reduces the project's chances of successfully accomplishing its goals.
Project planning generally consists of

 determining the project management methodology to follow (e.g. whether the plan will be defined wholly
up front, iteratively, or in rolling waves);
 developing the scope statement;
 selecting the planning team;
 identifying deliverables and creating the product and work breakdown structures;
 identifying the activities needed to complete those deliverables and networking the activities in their logical
sequence;
 estimating the resource requirements for the activities;
 estimating time and cost for activities;
 developing the schedule;
 developing the budget;
 risk planning;
 developing quality assurance measures;
 gaining formal approval to begin work.

Additional processes, such as planning for communications and for scope management, identifying roles and
responsibilities, determining what to purchase for the project and holding a kick-off meeting are also generally
advisable.

For new product development projects, conceptual design of the operation of the final product may be
performed concurrent with the project planning activities, and may help to inform the planning team when
identifying deliverables and planning activities.

Executing
 Executing process group processes

While executing we must know what are the planned terms that need to be executed. The
execution/implementation phase ensures that the project management plan's deliverables are executed
accordingly. This phase involves proper allocation, co-ordination and management of human resources and any
other resources such as material and budgets. The output of this phase is the project deliverables.

Project Documentation

Documenting everything within a project is key to being successful. To maintain budget, scope, effectiveness
and pace a project must have physical documents pertaining to each specific task. With correct documentation,
it is easy to see whether or not a project's requirement has been met. To go along with that, documentation
provides information regarding what has already been completed for that project. Documentation throughout a
project provides a paper trail for anyone who needs to go back and reference the work in the past. In most cases,
documentation is the most successful way to monitor and control the specific phases of a project. With the
correct documentation, a project's success can be tracked and observed as the project goes on. If performed
correctly documentation can be the backbone to a project's success.

Monitoring and controlling

Monitoring and controlling process group processes

Monitoring and controlling consists of those processes performed to observe project execution so that potential
problems can be identified in a timely manner and corrective action can be taken, when necessary, to control the
execution of the project. The key benefit is that project performance is observed and measured regularly to
identify variances from the project management plan.

Monitoring and controlling includes:

 Measuring the ongoing project activities ('where we are');

 Monitoring the project variables (cost, effort, scope, etc.) against the project management plan and the
project performance baseline (where we should be);
 Identifying corrective actions to address issues and risks properly (How can we get on track again);
 Influencing the factors that could circumvent integrated change control so only approved changes are
implemented.

In multi-phase projects, the monitoring and control process also provides feedback between project phases, to
implement corrective or preventive actions to bring the project into compliance with the project management
plan.

Project maintenance is an ongoing process, and it includes:

 Continuing support of end-users

 Correction of errors
 Updates to the product over time

Monitoring and controlling cycle

In this stage, auditors should pay attention to how effectively and quickly user problems are resolved.

Over the course of any construction project, the work scope may change. Change is a normal and expected part
of the construction process. Changes can be the result of necessary design modifications, differing site
conditions, material availability, contractor-requested changes, value engineering and impacts from third
parties, to name a few. Beyond executing the change in the field, the change normally needs to be documented
to show what was actually constructed. This is referred to as change management. Hence, the owner usually
requires a final record to show all changes or, more specifically, any change that modifies the tangible portions
of the finished work. The record is made on the contract documents – usually, but not necessarily limited to, the
design drawings. The end product of this effort is what the industry terms as-built drawings, or more simply, "as
built." The requirement for providing them is a norm in construction contracts. Construction document
management is a highly important task undertaken with the aid of an online or desktop software system, or
maintained through physical documentation. The increasing legality pertaining to the construction industry's
maintenance of correct documentation has caused the increase in the need for document management systems.

When changes are introduced to the project, the viability of the project has to be re-assessed. It is important not
to lose sight of the initial goals and targets of the projects. When the changes accumulate, the forecasted result
may not justify the original proposed investment in the project. Successful project management identifies these
components, and tracks and monitors progress so as to stay within time and budget frames already outlined at
the commencement of the project.

Closing

Closing process group processes.

Closing includes the formal acceptance of the project and the ending thereof. Administrative activities include
the archiving of the files and documenting lessons learned.

This phase consists of:

 Contract closure: Complete and settle each contract (including the resolution of any open items) and close
each contract applicable to the project or project phase.
 Project close: Finalize all activities across all of the process groups to formally close the project or a project
phase

Also included in this phase is the Post Implementation Review. This is a vital phase of the project for the
project team to learn from experiences and apply to future projects. Normally a Post Implementation Review
consists of looking at things that went well and analyzing things that went badly on the project to come up with
lessons learned.

PROJECT MANAGEMENT TECHNIQUES

Techniques in project management range from traditional to innovative ones. Which one to choose for running
a project, depends on project specifics, its complexity, teams involved, and other factors. Most of them can be
used in various fields, however, there are techniques that are traditionally used in certain areas of activity, or are
developed specifically for certain fields. Below, we’ve listed the most popular techniques that are used in
project management.
Classic technique

The simplest, traditional technique is sometimes the most appropriate for running projects. It includes preparing
a plan of upcoming work, estimating tasks to perform, allocating resources, providing and getting feedback
from the team, and monitoring quality and deadlines.

Where to use: this technique is ideal for running projects performed by small teams, when it’s not really
necessary to implement a complex process.

Waterfall technique

This technique is also considered traditional, but it takes the simple classic approach to the new level. As its
name suggests, the technique is based on the sequential performance of tasks. The next step starts when the
previous one is accomplished. To monitor progress and performed steps, Gantt charts are often used, as they
provide a clear visual representation of phases and dependencies.

Where to use: this technique is traditionally used for complex projects where detailed phasing is required and
successful delivery depends on rigid work structuring.
Agile Project Management

Agile project management method is a set of principles based on the value-centered approach. It prescribes
dividing project work into short sprints, using adaptive planning and continual improvement, and fostering
teams’ self-organization and collaboration targeted to produce maximum value. Agile frameworks include such
techniques as Scrum, Kanban, DSDM, FDD, etc.

Where to use: Agile is used in software development projects that involve frequent iterations and are performed
by small and highly collaborative teams.
Today, many project & work management software tools like actiTIME offer convenient ways to introduce
Scrum and Agile in work process. With them, you can configure multiple levels of your work structure, track
long-term and short-term deadlines, use estimates in planning process, and create Kanban boards to monitor
work progress. Basically, software tools allow to structure your work according to the Agile method, and
visualize the structure.

Rational Unified Process

Rational Unified Process (RUP) is a framework designed for software development teams and projects. It
prescribes implementing an iterative development process, where feedback from product users is taken into
account for planning future development phases.

Where to use: RUP technique is applied in software development projects, where end-user satisfaction is the
key requirement.
Program Evaluation and Review Technique

Program Evaluation and Review Technique (PERT) is one of the widely used approaches in various areas. It
involves complex and detailed planning and visual tracking of work results on PERT charts. Its core part is the
analysis of tasks performed within the project. Originally, this technique was developed by the US Navy during
the Cold War to increase the efficiency of work on new technologies.

Where to use: this technique suits best for large and long-term projects with non-routine tasks and challenging
requirements.

Critical Path Technique

Actually, this technique is an algorithm for scheduling and planning project works that is often used in
conjunction with the PERT method discussed above. This technique involves detecting the longest path
(sequence of tasks) from the beginning to the end of a project and defining the critical tasks. Critical are tasks
that influence the deadlines of the entire project and require closer attention and thorough control.

Where to use: Critical Path technique is used for complex projects where delivery terms and deadlines are
critical, in such areas as construction, defense, software development, and others.

Critical Chain Technique

Critical Chain is a more innovative technique that derives from PERT and Critical Path methods. It is less
focused on rigid task order and scheduling and prescribes more flexibility in resource allocation and more
attention to how time is used. This technique emphasizes prioritization, dependencies analysis, and optimization
of time expenses.

Where to use: like the previous two techniques, it is used in complex projects. As it is focused on time
optimization and wise resource allocation, it suits best for projects where resources are limited.
Extreme Project Management

Extreme project management technique (XPM) emphasizes elasticity in planning, open approach, and reduction
of formalism and deterministic management. Deriving from extreme programming methods, it is focused on the
human factor in project management rather than on formal methods and rigid phases.

Where to use: XPM is used for large, complex and uncertain projects where managing uncertain and
unpredictable factors is required.

PROJECT MANAGEMENT TOOLS

When applying any of the techniques to the project you need to accomplish, you also need to use specific tools
for successfully implementing the technique. Here’s a list of software tools that are used in project management
on different work steps.
Organizing Workflow & Planning

This step is the core part of starting a project: it defines how the project will be performed, and how the quality
of its outcome will be ensured. Large companies often use such comprehensive solutions as MS Project. For
smaller teams, various alternatives are available. They don’t provide all the rich functionality typical to complex
and expensive tools, but they have planning and roadmap features that are sufficient for visualizing future
project progress. There are also free project management solutions that suit best for startups and small
businesses.

Communication

Being the key point in many techniques and methodologies, communication within a project team needs to be
properly organized. While using email for formal communication and important messages, it’s also essential to
have a corporate messenger – Slack and Skype are the most popular ones. And, if your team members use
different tools to communicate, eliminate the pain of having multiple messengers by integrating them.

Scheduling

When allocating resources and planning for the future, it’s crucial to know who on the team is available for
specific dates. Use scheduling software for that! Such tools as actiPLANS provide a clear visual chart of
absences for upcoming dates and allow to see all necessary details to team members’ leaves and time off.

Time management

Knowing where your team’s time goes not just helps to manage current project risks. It also provides valuable
information for future planning and estimating. Time management tools, such as actiTIME, help managers
understand both individual time expenses and team’s results for any period. Informative reports with time &
cost summaries and notes to the logged time provide insights into how time is used and what can be optimized.

Finance & Accounting

For any project manager and business owner, understanding the financial outcome of the projects is crucial for
analysis and future planning. Most used accounting tools – QuickBooks, Zoho, Freshbooks – help collect this
information. For smaller project teams, other accounting solutions can be reasonable. They require less
investment, but also provide insights on project profitability, teams’ performance, and estimation accuracy.

PROJECT MANAGER:

A project manager is a professional in the field of project management. Project managers have the
responsibility of the planning, procurement and execution of a project, in any undertaking that has a defined
scope, defined start and a defined finish; regardless of industry. Project managers are first point of contact for
any issues or discrepancies arising from within the heads of various departments in an organization before the
problem escalates to higher authorities.

Project management is the responsibility of a project manager. This individual seldom participates directly in
the activities that produce the end result, but rather strives to maintain the progress, mutual interaction
and tasks of various parties in such a way that reduces the risk of overall failure, maximizes benefits, and
minimizes costs.

A project manager is the person responsible for accomplishing the project objectives. Key project management
responsibilities include

 defining and communicating project objectives that are clear, useful and attainable
 procuring the project requirements like workforce, required information, various agreements and material or
technology needed to accomplish project objectives
 managing the constraints of the project management triangle, which are cost, time, scope and quality

A project manager is a client representative and has to determine and implement the exact needs of the client,
based on knowledge of the organization they are representing. An expertise is required in the domain the Project
Managers are working to efficiently handle all the aspects of the project. The ability to adapt to the various
internal procedures of the client and to form close links with the nominated representatives, is essential in
ensuring that the key issues of cost, time, quality and above all, client satisfaction, can be realized.

RESPONSIBILITIES:
The Project Manager is accountable for ensuring that everyone on the team knows and executes his or her role,
feels empowered and supported in the role, knows the roles of the other team members and acts upon the belief
that those roles will be performed.[3] The specific responsibilities of the Project Manager may vary depending on
the industry, the company size, the company maturity, and the company culture. However, there are some
responsibilities that are common to all Project Managers, noting:

 Developing the project plans

 Managing the project stakeholders
 Managing communication
 Managing the project team
 Managing the project risks
 Managing the project schedule
 Managing the project budget
 Managing the project conflicts
 Managing the project delivery
TYPES:

Architectural Project Manager

Architectural project manager are project managers in the field of architecture. They have many of the same
skills as their counterpart in the construction industry. And will often work closely with the construction project
manager in the office of the General Contractor (GC), and at the same time, coordinate the work of the design
team and numerous consultants who contribute to a construction project, and manage communication with the
client. The issues of budget, scheduling, and quality-control are the responsibility of the Project Manager in an
architect's office.

Construction Project Manager

Until recently, the American construction industry lacked any level of standardization, with individual States
determining the eligibility requirements within their jurisdiction. However, several Trade associations based in
the United States have made strides in creating a commonly accepted set of qualifications and tests to determine
a project manager's competency.
 The Construction Management Association of America (CMAA) maintains the Certified Construction
Manager (CCM) designation. The purpose of the CCM is to standardize the education, experience and
professional understanding needed to practice construction management at the highest level.
 The Project Management Institute has made some headway into being a standardizing body with its creation
of the Project Management Professional (PMP) designation.
 The Constructor Certification Commission of the American Institute of Constructors holds semiannual
nationwide tests. Eight American Construction Management programs require that students take these
exams before they may receive their Bachelor of Science in Construction Management degree, and 15 other
Universities actively encourage their students to consider the exams.
 The Associated Colleges of Construction Education, and the Associated Schools of Construction have made
considerable progress in developing national standards for construction education programs.

The profession has recently grown to accommodate several dozen Construction Management Bachelor of
Science programs. Many universities have also begun offering a master's degree in Project Management. These
programs generally are tailored to working professionals who have project management experience or project
related experience; they provide a more intense and in depth education surrounding the knowledge areas within
the project management body of knowledge.

The United States Navy construction battalions, nicknamed the SeaBees, puts their command through strenuous
training and certifications at every level. To become a Chief Petty Officer in the SeaBees is equivalent to a BS
in Construction Management with the added benefit of several years of experience to their credit. See ACE
accreditation.

Engineering Project Manager

In Engineering, project management involves seeing a product or device through the developing and
manufacturing stages, working with various professionals in different fields of engineering and manufacturing
to go from concept to finished product. Optionally, this can include different versions and standards as required
by different countries, requiring knowledge of laws, requirements and infrastructure.

Insurance Claim Project Manager

In the insurance industry project managers often oversee and manage the restoration of a clients home/office
after a fire, flood. Covering the fields from electronics through to the demolition and constructions
contractors....

IT Project Manager
IT Project Management generally falls into two categories, namely Software (Development) Project Manager
and Infrastructure Project Manager.

Software Project Manager

A Software Project Manager has many of the same skills as their counterparts in other industries. Beyond the
skills normally associated with traditional project management in industries such as construction and
manufacturing, a software project manager will typically have an extensive background in software
development. Many software project managers hold a degree in Computer Science, Information
Technology, Management of Information Systems or another related field.

In traditional project management a heavyweight, predictive methodology such as the waterfall model is often
employed, but software project managers must also be skilled in more lightweight, adaptive methodologies such
as DSDM, Scrum and XP. These project management methodologies are based on the uncertainty of developing
a new software system and advocate smaller, incremental development cycles. These incremental or iterative
cycles are time boxed (constrained to a known period of time, typically from one to four weeks) and produce a
working subset of the entire system deliverable at the end of each iteration. The increasing adoption of
lightweight approaches is due largely to the fact that software requirements are very susceptible to change, and
it is extremely difficult to illuminate all the potential requirements in a single project phase before the software
development commences.

The software project manager is also expected to be familiar with the Software Development Life
Cycle (SDLC). This may require in depth knowledge of requirements solicitation, application development,
logical and physical database design and networking. This knowledge is typically the result of the
aforementioned education and experience. There is not a widely accepted certification for software project
managers, but many will hold the Project Management Professional (PMP) designation offered by the Project
Management Institute, PRINCE2 or an advanced degree in project management, such as a MSPM or other
graduate degree in technology management.

IT Infrastructure Project Management

An infrastructure IT PM is concerned with the nuts and bolts of the IT department, including computers,
servers, storage, networking, and such aspects of them as backup, business continuity, upgrades, replacement,
and growth. Often, a secondary data center will be constructed in a remote location to help protect the business
from outages caused by natural disaster or weather. Recently, cyber security has become a significant growth
area within IT infrastructure management.
The infrastructure PM usually has an undergraduate degree in engineering or computer science, with a master's
degree in project management required for senior level positions. Along with the formal education, most senior
level PMs are certified, by the Project Management Institute, as a Project Management Professional. PMI also
has several additional certification options, but PMP is by far the most popular.

Infrastructure PMs are responsible for managing projects that have budgets from a few thousand dollars up to
many millions of dollars. They must understand the business and the business goals of the sponsor and the
capabilities of the technology in order to reach the desired goals of the project. The most difficult part of the
infrastructure PM's job may be this translation of business needs / wants into technical specifications.
Oftentimes, business analysts are engaged to help with this requirement. The team size of a large infrastructure
project may run into several hundred engineers and technicians, many of whom have strong personalities and
require strong leadership if the project goals are to be met.

Due to the high operations expense of maintaining a large staff of highly skilled IT engineering talent, many
organizations outsource their infrastructure implementations and upgrades to third party companies. Many of
these companies have strong project management organizations with the ability to not only manage their clients
projects, but to also generate high quality revenue at the same time.

What is Organizational Structure?

Organizational structure refers to the way a company or organization is setup. It is usually defined using a
hierarchy chart that shows how groups or functions report within the organization.

For Project Managers, a company's organizational structure type will affect how resources are allocated to
the project and will be a factor in how much influence the Project Manager will have within the
organization.

Organizational Structure Types

There are three basic types of organizational structures...

 Functional Organizational Structure

 Project-Based Organizational Structure

 Matrix Organizational Structure

FUNCTIONAL ORGANIZATIONAL STRUCTURE

Functional organizations are structured around the organization's primary functions.

Functional Organizational Structure

Examples of functions within a company are:

 Advertising

 Engineering

 Human Resources

 Manufacturing

In a functional organization, every employee is positioned within only one function and has one manager
they report to, the Functional Manager. The Functional Manager assigns and manages the employees work
and handles administrative tasks such as employee compensation.
UNIT:2
CONSTRUCTION PLANNING, PROJECT PLANNING, MILESTONE SCHEDULES, WBS,
NETWORK TECHNIQUES, CPM, PERT AND PRIMA VERA, LINE OF BALANCING
TECHNIQUES, CRITICAL CHAIN METHOD, RESOURCES LEVELING AND
SMOOTHING.

CONSTRUCTION PLANNING:

Construction planning is the first stage of construction management, the discipline of taking a construction
project from conception to completion. Construction management includes several other components that
succeed planning, however: Scheduling is deciding when to start, execute, and complete each
task. Organizing is getting all the moving pieces in position to perform each task. Staffing is assigning people to
duties related to the project. Directing is ensuring that you complete tasks as planned, and monitoring is
ensuring that you meet the requirements and performance benchmarks set during the planning stage. If you
don’t meet these requirements, you’ll devote considerable time to the controlling stage, which involves
managing the budget and meeting contract requirements.

Since humans have been constructing buildings for thousands of years, construction planning is an ancient
discipline. We can trace some form of construction project planning all the way back to the Neolithic period,
when builders in Western Europe were erecting Stonehenge.

Today, the tools, techniques, and equipment that builders use have changed, but planning remains an integral
part of the construction management process. While construction planning is time consuming, the benefits
greatly outweigh the costs. A 1994 study by the Construction Industry Institute (CII) found a “positive,
quantifiable relationship between effort expended during the pre-project planning phase and the ultimate
success of a project.”

To be effective, you should approach construction planning with logic, thoroughness, and honesty. You will
need knowledge and experience in construction methods and contracting, and planners must visualize the tasks
and activities and understand the relationships between them so that they can carry them out in an efficient
sequence.

Goals of Construction Planners: Time, Cost, Quality, and Safety

The objectives of construction planning are the same for all projects: Builders and owners strive to meet cost,
schedule, quality, and safety requirements. The construction planning process also makes owners’ and builders’
responsibilities clear, laying the groundwork for strong communication and better teamwork.
In the construction planning process, you’ll produce a document called the construction master plan. This spells
out how you will schedule, organize, direct, monitor, and control the project, and aims to meet the project’s
technical, time, and cost requirements. The construction master plan includes three types of planning: strategic
planning, operational planning, and scheduling.

Strategic Planning: This determines, sets, and articulates project objectives. It answers the big questions
concerning a project’s mission, how it will achieve this mission, and how these objectives align with the project
sponsor’s or owner’s larger strategy. In short, strategic planning is the big-picture analysis that the project
sponsor carries out.

Operational Planning: This delves into the details of how the project will meet its strategic objectives — if it
can meet them at all. Construction teams evaluate whether they have the resources they need to meet the
strategic objectives, identify any shortfalls, and seek the sponsor’s approval to cover those shortfalls.

Scheduling: This lays out the operational plan on a projected timescale, including the anticipated completion
date. This type of planning does not involve highly detailed scheduling of every project task (that is a separate
activity that usually follows the planning phase). On large projects, specialist schedulers draw up detailed
schedules.

One critical aspect of construction planning is creating a safety plan for the construction site (this is especially
important for larger projects). Construction is a hazardous industry, and regulators such as OSHA (the U.S.
Occupational Safety and Health Administration) may require safety planning. On site, builders, usually via a
safety representative, must determine what the hazards are and decide how to avoid, mitigate, or manage them.
Safety planning spans a variety of activities, from safety and first-aid training to ensuring that equipment and
workspaces meet safety standards, and encouraging or requiring workers to adopt safe practices on the job.

Construction Planning Steps for a Home Renovation

Let’s look at the stages in a typical home renovation, which is one of the bigger, more costly residential project
types. A home renovation project is a good case study because the steps are similar to much larger commercial
projects, even though the scale is smaller.

Select a Designer: Architects and designers offer services ranging from whole-unit design (for architects) to
color and material selection (for interior designers) to a variety of collaborative solutions in between.
Homeowners will (or should) meet with a number of designers to decide which align most closely with their
design and budget objectives.
Create Schematics: The designer creates a floor plan for the remodel, and they go back and forth with the owner
until both sides agree on a design. For a residential project, the schematic design is effectively the project plan.

Select a Contractor: Contractors interviewing for a job will use the schematics to create preliminary cost
estimates. The homeowner checks references and makes sure they are hiring a contractor with a history of
similar successful projects.

Shop for Finishes and Materials: This step includes identifying the finishes and materials for the remodel. The
contractor can make suggestions based on budget and plan for materials to arrive on time. Meanwhile, the
architect will finalize the construction plan and prepare applications for building permits.

Obtain Permits: Applying for a permit can be a time-consuming, expensive process, so homeowners will need
to account for applying and waiting for permits to arrive when estimating their completion date.

Sign a Contractor: Once the contractor has obtained permits, they are ready to put pen to paper. Before doing
this, the owner and contractor may engage in some value engineering — revising aspects of the project to
reduce costs. By this point, the contractor will also have determined the necessary delivery dates of materials
and items so work can progress.

Like planning for a home renovation, planning for a commercial project includes both the planning activities we
discussed earlier — strategic planning, operational planning, and scheduling — and some high-level elements
of the building’s design. During the design stage for a commercial project, client, architect, and engineers will
work together to come up with a building design that meets the client’s requirements. Pre-construction, which
involves different activities for different projects, may include such things as design evaluation, value analyses,
constructability assessments, and contractor bidding. Procurement consists of buying the materials and services
necessary to complete the project. Construction refers to the process of building the structure according to the
plans. Construction is followed by commissioning, which is the process of verifying that a building’s systems
are in proper working order.

Participants in the Construction Planning Process

Any construction project involves a number of key parties. Here’s what each party is responsible for:

Client and Sponsor: The client and sponsor for a project are more often than not the same party, but the two
roles are distinct: The client is the building’s end user, and the sponsor funds the project. In cases where the
client and the sponsor are separate parties, it’s the sponsor’s prerogative to approve changes to the project. An
example of a separate sponsor and client would be a developer and a building owner.
Contractor: This is an umbrella term for people and firms that undertake a contractual obligation to provide
services for a construction project. Most major projects will have a general contractor with many subcontractors
working under their supervision. The general contractor signs a contract with the client/sponsor and is directly
accountable to the client and sponsor for the project’s success, even though they may not do any of the
construction themselves and instead may contract all the work out to specialized subcontractors. The
subcontractor is typically a specialist who performs a limited part of the overall construction effort. The general
contractor organizes, coordinates, and oversees the subcontractors’ efforts.

Consultants: A consultant is any party whose official responsibility is to provide direction and specialized
knowledge during the planning, design, or construction phases of a project. You’re much more likely to see
consultants on commercial projects since you engage them for their expertise in a specific knowledge area (such
as achieving LEED certification) that is not a standard part of residential projects.

Supplier/Vendor: Vendors or suppliers sell the materials that you use for a project. The term supplier has a
loose definition and can describe those who provide services, not just materials. You might also consider
architects and other design professionals to be suppliers.

Architects and Engineers: Architects come up with a design for the project, and engineers make sure the design
works. The architect is the chief designer of a project. He or she creates an agreed-upon schematic (with the
client and sponsor), and then works with the engineer to finalize technical elements of the design. The architect
also provides the project details required for permits. The engineer might also be considered a design specialist,
but his work focuses on functionality and constructability. Engineers ensure that the architect’s designs are
practical, workable, and structurally sound.

The Benefits of Construction Planning for Owners and Builders

To understand how construction planning benefits projects, we have to understand the concerns of the two main
parties in any construction effort: the owners and the builders.

The owners of any project are ultimately interested in three things: that you deliver the project according to the
agreed scope, that you complete it at or below cost, and that it is ready for use on schedule.

If the project is delayed, you lose revenue because the building isn’t ready for use, whether that use be in the
form of leasing to tenants or manufacturing products. If the costs exceed expectations, you reduce return on
investment. Delays and cost overruns may mean it takes longer to pay off loans, which also makes the project
more expensive. There can also be tax consequences.
Owners also need to know when they must disburse funding, so they don’t become victims of a cash-flow
crunch. In addition, they must be aware of how delays and overages might impact both their image and their
ability to effectively market the project.

Builders, meanwhile, are concerned with their own efficiency and profitability. Some bidding methods require
that they themselves cover certain unbudgeted costs rather than billing these to the project owner. They’re also
responsible for ensuring the ultimate quality of the final product and the safety of the construction site. Both the
former and the latter affect their reputation and the future success of their business.

How Construction Planning Can Save Money and Time

Construction planning can help minimize costs by optimizing resource and equipment utilization. Even for
small residential projects, you may have to lease the necessary equipment. On large commercial projects,
leasing or buying specialized equipment is expensive, and maximizing utilization reduces expenses.

In a complex project, construction planning also organizes and coordinates the many moving parts. The process
improves communication among team members and stakeholders, and it reveals unrealistic assumptions or
weak logic. With a properly planned project, everyone knows when subcontractors are supposed to show up and
what work you need to complete before their arrival. You shouldn’t keep materials and equipment lying around
for days or weeks, taking up space and possibly incurring excess rental costs because they arrived long before
you needed them.

Since, by definition, construction planning takes place before work begins, you have the opportunity to
anticipate problems and plan solutions before they occur. Those benefits translate into time efficiency during
construction itself, as well as a superior solution because you haven’t devised a plan under pressure.
Construction planning can pave the way toward more innovative methods of solving building challenges.

To maximize the benefits of construction planning, follow some best practices:

1. Make sure you’re planning as a team. With more faces at the table, you greatly reduce the chances of
overlooking something important.
2. To simplify things, identify the project’s big tasks first. Then, where necessary, split these tasks into
subtasks.
3. Assign these tasks to individuals and contractors. Then, create a schedule that tells everyone what
they’re supposed to be doing and when they’re supposed to do it.
4. Make sure the schedule has a completion date, and make sure you’re following the schedule.
 5. You can adhere to the completion date and follow the schedule by monitoring progress regularly. Ensure
that you regularly track and update progress so that information keeps flowing among participants.
6. You can also use templates to ease the planning process: Simply list the necessary information in the
spaces provided, and modify the template to fit your project needs. Below are two free, downloadable
templates that you can use to create a construction timeline and daily or weekly inspection report. You’ll
find other useful templates throughout the article, as well.

Basic Concepts in Construction Planning

While construction planning is important, the steps and principles are not complicated. The challenge is to work
through the steps thoroughly and diligently. Experience and education will improve your skills, and you can
also find good classes and texts.

Construction planners make vital decisions about the technologies and construction methods they use on a
project. For example, when preparing concrete on site, what type of concrete mixer will the builders use — one
that two men can wheel around, one that you have to transport by truck, or an actual concrete mixer truck? The
decision depends on project size and relative costs, but technical and efficiency constraints also play roles.
Maybe the building has many floors, but due to space constraints, you would have to park a concrete mixer
truck far away from the lift that transports concrete to the top floor. Would it still be worth opting for a mixer
truck?

For any construction project, the construction planning management methodology passes through three
stages: the tender stage, awarding of the contract, and the construction period.

During the tender stage, the contractor prepares a tender program. Upon the awarding of contracts, project
managers will prepare a second program, the contract program. This is much more detailed than the tender
program. You develop it with input from the architect and the project owner, and it is the basis for project
monitoring.

During construction, you implement the contract program as the construction program. The construction
program guides work in the field, and you may renegotiate it when the project work changes.

PROJECT PLANNING:

Project planning is a procedural step in project management, where required documentation is created to
ensure successful project completion. Documentation includes all actions required to define, prepare,
integrate and coordinate additional plans. The project plan clearly defines how the project is executed,
monitored, controlled and closed.
Project planning requires an in-depth analysis and structuring of the following activities:

 Setting project goals

 Identifying project deliverables
 Creating project schedules
 Creating supporting plans

Step 1: Project Goals

A project is successful when it has met the needs of the stakeholders. A stakeholder is anybody directly, or
indirectly impacted by the project.

As a first step, it is important to identify the stakeholders in your project. It is not always easy to determine the
stakeholders of a project, particularly those impacted indirectly. Examples of stakeholders are:

 The project sponsor

 The customer who receives the deliverables

 The users of the project output

 The project manager and project team

Once you understand who the stakeholders are, the next step is to find out their needs. The best way to do this is
by conducting stakeholder interviews. Take time during the interviews to draw out the requirements that create
real benefits. Sometimes stakeholders will talk about needs that aren't relevant and don't deliver benefits. These
can be recorded and set as a low priority.

The next step, once you have conducted all the interviews and have a comprehensive list of needs is to prioritise
them. From the prioritised list, create a set of easily measurable goals. A good technique for doing this is to
review them against the SMART principle. This way, the achievement of the goal will be easy to identify.

Once you have established a clear set of goals, they should be recorded in the project plan. It can be useful also
to include the needs and expectations of your stakeholders.
Now you have completed the most difficult part of the planning process; it's time to move on and look at the
project deliverables.

Step 2: Project Deliverables

Using the goals you have defined in step 1, create a list of things the project needs to deliver to meet those
goals. Specify when and how to deliver each item.

Add the deliverables to the project plan with an estimated delivery date. You will establish more accurate
delivery dates during the scheduling phase, which is next.

Step 3: Project Schedule

Create a list of tasks that need to be carried out for each deliverable identified in step 2. For each task determine
the following:

 The amount of effort (hours or days) required for completing the task

 The resource who will carry out the task

Once you have established the amount of effort for each task, you can work out the effort required for each
deliverable, and an accurate delivery date. Update your deliverables section with the more precise delivery
dates.

At this point in the planning, you could choose to use a software package such as Microsoft Project to create
your project schedule. Alternatively, use one of the many free templates available. Input all of the deliverables,
tasks, durations and the resources who will complete each task.

A common problem discovered at this point is when you have an imposed delivery deadline from the sponsor
that is not realistic based on your estimates. If you discover this is the case, you must contact the sponsor
immediately. The options you have in this situation are:

 Renegotiate the deadline (project delay)

 Employ additional resources (increased cost)

 Reduce the scope of the project (less delivered)

Use the project schedule to justify pursuing one of these options.

Step 4: Supporting Plans

This section deals with the plans you should create as part of the planning process. These can be included
directly in the plan.

Human Resource Plan

Identify, by name, the individuals and organisations with a leading role in the project. For each, describe their
roles and responsibilities on the project.

Next, specify the number and type of people needed to carry out the project. For each resource detail start dates,
the estimated duration and the method you will use for obtaining them.

Create a single sheet containing this information.

Communications Plan

Create a document showing who is to be kept informed about the project and how they will receive the
information. The most common mechanism is a weekly or monthly status report, describing how the project is
performing, milestones achieved and the work you've planned for the next period.

Risk Management Plan

Risk management is an important part of project management. Although often overlooked, it is important to
identify as many risks to your project as possible and be prepared if something bad happens.

Here are some examples of common project risks:

 Time and cost estimate too optimistic

 Customer review and feedback cycle too slow

 Unexpected budget cuts

  Unclear roles and responsibilities

 No stakeholder input obtained

 Not clearly understanding stakeholder needs

 Stakeholders changing requirements after the project has started

 Stakeholders adding new requirements after the project has started

 Poor communication resulting in misunderstandings, quality problems and rework

 Lack of resource commitment

Milestone schedule
The milestone schedule provides an estimated timeline for the life of the project. The milestones include all project activities and
interim steps needed to implement the project. The schedule should include milestones for the planning, development,
construction, evaluation and reporting of the project’s implementation. The milestone dates are only projected dates based on an
anticipated grant award. Those dates may change depending on the timing of the grant award.
IMPORTANT TERMS IN MILESTONE SCHEDULING:
Schedule Milestone
Within the confines of project management, a schedule milestone, also known as a milestone activity, is
an event of great significance within the project schedule. See also milestone. This major event may be a
number of possible events, both planned and unforeseen by project management. As a result a schedule
milestone may or may not be present on the project schedule prior to the point in time where the schedule
milestone occurs. A few examples of unforeseen schedule milestones would be: a sudden and disastrous
accident halting a major production or construction effort that is a key part of the project, or the failure to
complete a major deliverable. In most cases project management uses schedule milestones to: mark the formal
end of iteration, indicate the completion of a project phase, validate a project’s progression, justify work already
completed, and mark the successful completion of a major deliverable or deliverables. By definition a schedule
milestone has no duration; the completion of the schedule milestone itself takes absolutely no time or work.
This may not always indicate that the next phase of a project can be immediately begun though. Key schedule
milestones may require senior level project management to review project progress up to the schedule milestone
in question before authorization to continue with the next phase of the project can be given.
Master Schedule
In the process of coordinating and keeping track of all of the different components of a project, the project
management team, and specifically the project management team leader, will devise a number of individual
schedules, each of which will maintain track of a specific component of element of the project on a smaller,
more specified scale. However, keeping track of where things rest on the big picture of the project as a whole
can be an arduous process, particularly in light of the number of individual schedules that exist for the various
components mentioned above. As a result, it is important if not essential for the project team leader to compile a
thorough and complete master schedule for the project. This master schedule represents a summary-level
project schedule the purpose of which is to identify all of the major deliverables for the project as well as all
individual work breakdown structure components.
Milestone
Throughout the entire life cycle of a project, there are going to be a number of natural time gradients that exists,
and are more than likely to be defined by the eventual and natural ebbing and flowing of the project workload
and the momentum of the team’s performance and the business of the schedule. However, it is typically helpful
in attempting to assure that the project is moving effectively as well as to allow points in time for the project
team to pause and look back on what has been accomplished to date as well as what may need to be changed in
the future for the project team leader with or without the help of the project team to establish a number or series
of project milestones. These milestones can occur at any point throughout the project and specifically refer to
any significant or substantive point, time, or event in the life cycle of the project. These milestones typically
refer to points at which large schedule events or series of events have been completed, and a new phase ort
phases are set to begin.
Milestone List
A milestone is an important event in a project. It represents a moment in time wherein the team members have
achieved an important event for the project. Thus, it should be assigned zero duration. Milestones are crucial in
project management as they can add value to the project scheduling. It allows project managers to determine if
their projects are on schedule or not. Simply put, they are used to monitor the progress of the project.

This is the reason why project managers need to create a milestone list. It is a list that identifies all the
milestones of the project. It also indicates if a particular milestone is critical which is required by the contract or
optional for the project. Optional milestones are usually based on historical information from a similar project.

It is the responsibility of the project manager to create the milestone list. Since it is a project management
document, it requires the necessary inputs from the project team members. Inputs for this particular project
document include the scope baseline, schedule management plan, organizational process assets, and the
enterprise environmental factors.

Weighted Milestone Method

The Earned Value provides a snapshot of the work progress at a certain point in time. It also reflects the amount
of work that has been accomplished within a given period of time and it is expressed as the planned value for a
particular work. The key to having a good Earned Value Method is to have an accurate estimate of the Earned
Value. To determine this, project managers need to estimate how much task the project team needs to complete
within a specific time and how much of the budget for the task should be spent for the work.

The Weighted Milestone Method is a type of earned value method that allows project managers to divide work
packages to measurable small segments each ending with an observable milestone. The project manager assigns
a weighted value to every milestone achieved. For this particular method, the earned value is zero until an
activity is completed. Once it is completed, the total activity budget becomes 100%.

In project management, the concept of the weighted milestone method is that is often used by project managers
to divide tasks the take longer time periods to complete. With this particular technique, the tasks have
intermediate and tangible outcomes even if they are not fully completed yet.

Work Breakdown Structure (WBS)

A work breakdown structure (WBS) is a key project deliverable that organizes the team's work into manageable
sections. The Project Management Body of Knowledge (PMBOK) defines the work breakdown structure as a
"deliverable oriented hierarchical decomposition of the work to be executed by the project team." The work
breakdown structure visually defines the scope into manageable chunks that a project team can understand, as
each level of the work breakdown structure provides further definition and detail. Figure 1(below) depicts a
sample work breakdown structure with three levels defined.
Why use a Work Breakdown Structure?
The work breakdown structure has a number of benefits in addition to defining and organizing the project work.
A project budget can be allocated to the top levels of the work breakdown structure, and department budgets
can be quickly calculated based on the each project's work breakdown structure. By allocating time and cost
estimates to specific sections of the work breakdown structure, a project schedule and budget can be quickly
developed. As the project executes, specific sections of the work breakdown structure can be tracked to identify
project cost performance and identify issues and problem areas in the project organization. For more
information about Time allocation, see the 100% Rule.

Project work breakdown structures can also be used to identify potential risks in a given project. If a work
breakdown structure has a branch that is not well defined then it represents a scope definition risk. These risks
should be tracked in a project log and reviewed as the project executes. By integrating the work breakdown
structure with an organizational breakdown structure, the project manager can also identify communication
points and formulate a communication plan across the project organization.

When a project is falling behind, referring the work breakdown structure will quickly identify the major
deliverables impacted by a failing work package or late sub- deliverable. The work breakdown structure can
also be color coded to represent sub- deliverable status. Assigning colors of red for late, yellow for at risk, green
for on-target, and blue for completed deliverables is an effective way to produce a heat-map of project progress
and draw management's attention to key areas of the work breakdown structure.

Work Breakdown Structure Guidelines

The following guidelines should be considered when creating a work breakdown structure:

 The top level represents the final deliverable or project

 Sub-deliverables contain work packages that are assigned to a organization’s department or unit
 All elements of the work breakdown structure don’t need to be defined to the same level
 The work package defines the work, duration, and costs for the tasks required to produce the sub-
deliverable
 Work packages should not exceed 10 days of duration
 Work packages should be independent of other work packages in the work breakdown structure
 Work packages are unique and should not be duplicated across the work breakdown structure

Tools to Create a Work Breakdown Structure

Creating a Work Breakdown Structure is a team effort and is the culmination of multiple inputs and
perspectives for the given project. One effective technique is to organize a brainstorming session with the
various departments that will be involved with the project. Project teams can use low-technology tools like a
white board, note cards, or sticky note pads to identify major deliverables, sub-deliverables, and specific work
packages. These cards can be taped to a wall and reorganized as the team discusses the major deliverables and
work packages involved in the project.

The low-technology approach is easy to do; however, it does not work well with distributed teams or translate
easily into an electronic format. There are several tools available that support mind mapping, brainstorming, and
work breakdown structures. MatchWare MindView is an easy-to-use mind mapping software package that
supports work breakdown structures, project outlines, Gantt charts, and exports easily into Microsoft Project for
further schedule definition.

NETWORK TECHNIQUE:

Meaning of Network Technique:

Network technique is a technique for planning, scheduling (programming) and controlling the progress of
projects. This is very useful for projects which are complex in nature or where activities are subject to
considerable degree of uncertainty in performance time.

This technique provides an effective management, determines the project duration more accurately, identifies
the activities which are critical at different stages of project completion to enable to pay more attention on these
activities, analyse the scheduling at regular interval for taking corrective action well in advance, facilitates in
optimistic resources utilisation, helps management for taking timely and better decisions for effective
monitoring and control during execution of the project.

A network analysis has following objectives:

1. Powerful tool of planning, scheduling and control.

2. Shows the inter-relationships of the activities of a project or a programme.

3. Minimises total cost where the cost of delays and cost of resources required to carry out the tasks can be
measured.

4. Minimise total time where required e.g. in maintenance of production-line machinery in a factory.

5. Minimization of idle resources.

6. Minimise production delays.

7. To provide systematic approach in planning and scheduling.

8. Follow an integrated approach and bring about better coordination between the departments.

9. Focusses attention on critical activities of the project.

10. Provides up-to-date status information.

11. Suggest areas for increasing efficiency, and reduction of cost.

Applications of Network Technique:

Applications of network techniques are very wide, but are very common in some of the following fields:
(i) Planning,

(ii) Construction of buildings, bridges, highways, railways, stadiums, irrigation projects, factories, power
projects etc.

(iii) Assembly line scheduling,

(iv) Development and launching of new products,

(v) Strategic and tactical military planning,

(vi) Research and development,

(vii) Market penetration programmes,

(viii) Planning of political campaigns,

(ix) Maintenance and overhauling of complicated or large machineries,

(x) organising big conferences etc.

Advantages of Network Technique:

Main advantages of the network system are as follows:
1. Detailed and thoughtful planning provides better analysis and logical thinking.
2. Identifies the critical activities and focus them to provide greater managerial attention.

3. Network technique enables to forecast project duration more accurately.

4. It is a powerful tool for optimisation of resources by using the concept of slack.

5. It provides a scientific basis for monitoring, review and control, to evaluate effect of slippages.

6. It helps in taking decision;

(i) To over-come delays,

(ii) To crashing programme,

(iii) Optimising resources, and

(iv) On other corrective actions.

7. It helps in getting better co-ordination amongst related fields.

8. It is an effective management tool through a common and simple language, providing common
understanding.

Limitations of Network Techniques:

Network techniques have following limitations:
(i) Network technique is simply a tool to help the management; hence its effectiveness depends on how well it
is used by the management.

(ii) Its accuracy depends on the estimation of the data used in the network.

(iii) It is useful only if it is updated regularly and decisions for corrective actions are taken timely.

CPM & PERT

CPM (Critical Path Method) was the discovery of M.R.Walker of E.I.Du Pont de Nemours & Co. and J.E.Kelly
of Remington Rand, circa 1957. The computation was designed for the UNIVAC-I computer. The first test was
made in 1958, when CPM was applied to the construction of a new chemical plant. In March 1959, the method
was applied to maintenance shut-down at the Du Pont works in Louisville, Kentucky. Unproductive time was
reduced from 125 to 93 hours.

PERT (Project Evaluation and Review Technique) was devised in 1958 for the POLARIS missile program by
the Program Evaluation Branch of the Special Projects office of the U.S.Navy, helped by the Lockheed Missile
Systems division and the Consultant firm of Booz-Allen & Hamilton. The calculations were so arranged so that
they could be carried out on the IBM Naval Ordinance Research Computer (NORC) at Dahlgren, Virginia.

Benefits of PERT/CPM

 Useful at many stages of project management

 Mathematically simple

 Give critical path and slack time

 Provide project documentation

 Useful in monitoring costs

Limitations of PERT/CPM

 Clearly defined, independent and stable activities

 Specified precedence relationships

 Over emphasis on critical paths

Applications of CPM / PERT

These methods have been applied to a wide variety of problems in industries and have
found acceptance even in government organizations. These include
 Construction of a dam or a canal system in a region
 Construction of a building or highway
 Maintenance or overhaul of airplanes or oil refinery
 Space flight
  Cost control of a project using PERT / COST
 Designing a prototype of a machine
 Development of supersonic planes

Basic Steps in PERT / CPM

Project scheduling by PERT / CPM consists of four main steps

1. Planning
 The planning phase is started by splitting the total project in to small projects. These
smaller projects in turn are divided into activities and are analyzed by the department or
section.
 The relationship of each activity with respect to other activities are defined and established
and the corresponding responsibilities and the authority are also stated.
 Thus the possibility of overlooking any task necessary for the completion of the project is
reduced substantially.

2. Scheduling
 The ultimate objective of the scheduling phase is to prepare a time chart showing the start
and finish times for each activity as well as its relationship to other activities of the project.
 Moreover the schedule must pinpoint the critical path activities which require special
attention if the project is to be completed in time.
 For non-critical activities, the schedule must show the amount of slack or float times which
can be used advantageously when such activities are delayed or when limited resources are
to be utilized effectively.

3. Allocation of resources
 Allocation of resources is performed to achieve the desired objective. A resource is a
physical variable such as labour, finance, equipment and space which will impose a
limitation on time for the project.
 When resources are limited and conflicting, demands are made for the same type of
 resources a systematic method for allocation of resources become essential.
 Resource allocation usually incurs a compromise and the choice of this compromise
depends on the judgment of managers.

4. Controlling
 The final phase in project management is controlling. Critical path methods facilitate the
application of the principle of management by expectation to identify areas that are critical
to the completion of the project.
 By having progress reports from time to time and updating the network continuously, a
better financial as well as technical control over the project is exercised.
 Arrow diagrams and time charts are used for making periodic progress reports. If required,
a new course of action is determined for the remaining portion of the project.

The Framework for PERT and CPM

Essentially, there are six steps which are common to both the techniques. The
procedure is listed below:

I. Define the Project and all of its significant activities or tasks. The Project (made

up of several tasks) should have only a single start activity and a single
finish activity.

II. Develop the relationships among the activities. Decide which activities must precede
and which must follow others.

III. Draw the "Network" connecting all the activities. Each Activity should have unique event
numbers. Dummy arrows are used where required to avoid giving the same numbering
to two activities.

IV. Assign time and/or cost estimates to each activity

V. Compute the longest time path through the network. This is called the critical path.
Worked Examples on CPM
Example 1

Determine the early start and late start in respect of all node points and identify critical path for the following
network.

Solution

Calculation of E and L for each node is shown in the network

Activity(i, j) Normal Earliest Time Latest Time Float Time (Li -

 Time Start Finish Start Finish
Dij ) - Ei
(Dij) (Ei) (Ei + Dij ) (Li - Dij ) (Li)

(1, 2) 10 0 10 0 10 0

(1, 3) 8 0 8 1 9 1

(1, 4) 9 0 9 1 10 1

(2, 5) 8 10 18 10 18 0

(4, 6) 7 9 16 10 17 1

(3, 7) 16 8 24 9 25 1

(5, 7) 7 18 25 18 25 0

(6, 7) 7 16 23 18 25 2

(5, 8) 6 18 24 18 24 0

(6, 9) 5 16 21 17 22 1

(7, 10) 12 25 37 25 37 0

(8, 10) 13 24 37 24 37 0

(9, 10) 15 21 36 22 37 1

Network Analysis Table

From the table, the critical nodes are (1, 2), (2, 5), (5, 7), (5, 8), (7, 10) and (8, 10)

From the table, there are two possible critical paths

i. 1 → 2 → 5 → 8 → 10

ii. 1 → 2 → 5 → 7 → 10
Example 2

Find the critical path and calculate the slack time for the following network

Solution

The earliest time and the latest time are obtained below

Normal Earliest Time Latest Time

Time Float Time (Li -

Start Finish Start Finish
Activity(i, j) Dij ) - Ei
(Dij) (Ei) (Ei + Dij ) (Li - Dij ) (Li)

(1, 2) 2 0 2 5 7 5

(1, 3) 2 0 2 0 2 0

(1, 4) 1 0 1 6 7 6

(2, 6) 4 2 6 7 11 5

(3, 7) 5 2 7 3 8 1

(3, 5) 8 2 10 2 10 0

(4, 5) 3 1 4 7 10 6
 (5, 9) 5 10 15 10 15 0

(6, 8) 1 6 7 11 12 5

(7, 8) 4 7 11 8 12 1

(8, 9) 3 11 14 12 15 1

From the above table, the critical nodes are the activities (1, 3), (3, 5) and (5, 9)
The critical path is 1 → 3 → 5 → 9

Example 3

A project has the following times schedule

Activity Times in weeks Activity Times in weeks

(1 – 2) 4 (5 – 7) 8

(1 – 3) 1 (6 – 8) 1

(2 – 4) 1 (7 – 8) 2

(3 – 4) 1 (8 – 9) 1

(3 – 5) 6 (8 – 10) 8

(4 – 9) 5 (9 – 10) 7

(5 – 6) 4

Construct the network and compute

TE and TL for each event

Float for each activity

Critical path and its duration

Solution
The network is

Event No.: 1 2 3 4 5 6 7 8 9 10

TE: 0 4 1 5 7 11 15 17 18 25

TL: 0 12 1 13 7 16 15 17 18 25

Float = TL (Head event) – TE (Tail event) – Duration

Activity Duration TE (Tail event) TL (Head event) Float

1 – 2) 4 0 12 8

(1 – 3) 1 0 1 0

(2 – 4) 1 4 13 8

(3 – 4) 1 1 13 11

(3 – 5) 6 1 7 0

(4 – 9) 5 5 18 8

(5 – 6) 4 7 16 5

(5 – 7) 8 7 15 0

(6 – 8) 1 11 17 5
 (7 – 8) 2 15 17 0

(8 – 9) 1 17 18 0

(8 – 10) 8 17 25 0

(9 – 10) 7 18 25 0

The resultant network shows the critical path

The two critical paths are

i. 1 → 3 → 5 →7 → 8 → 9 →10

ii. 1 → 3 → 5 → 7 → 8 →10

UNIT:3
PROJECT MANAGEMENT INFORMATION SYSTEM, MIS REPORTING, DAILY, WEEKLY AND
MONTHLY REPORTING, ACTUAL VS. PLANNED REPORTING, PLANNING & COST
CONTROL DOCUMENT, QUALITY AND SAFETY DOCUMENTS AT SITE. MATERIAL
MANAGEMENT- PURCHASES MANAGEMENT AND INVENTORY CONTROL, ABC ANALYSIS.

PROJECT MANAGEMENT INFORMATION SYSTEM (PMIS)

Project Management Information System (PMIS) are system tools and techniques used in project management
to deliver information. Project managers use the techniques and tools to collect, combine and distribute
information through electronic and manual means. Project Management Information System (PMIS) is used by
upper and lower management to communicate with each other.
Project Management Information System (PMIS) help plan, execute and close project management goals.
During the planning process, project managers use PMIS for budget framework such as estimating costs. The
Project Management Information System is also used to create a specific schedule and define the scope
baseline. At the execution of the project management goals, the project management team collects information
into one database. The PMIS is used to compare the baseline with the actual accomplishment of each activity,
manage materials, collect financial data, and keep a record for reporting purposes. During the close of the
project, the Project Management Information System is used to review the goals to check if the tasks were
accomplished. Then, it is used to create a final report of the project close.
To conclude, the project management information system (PMIS) is used to plan schedules, budget and execute
work to be accomplished in project management.

COMPONENTS OF PMIS

The components of a project management information system are:

 Scheduling
 Estimating
 Resources
 Project documents and data
 Portals and dashboards
 Collaborative work management tools
 Social media
 Project control
Scheduling
Because schedules are such a core component of project management as a whole, almost all project
management information systems contains scheduling tools. The project schedule is communicated
to stakeholders and forms the baseline for project control, that is, the project is continuously measured on the
basis of its adherence to the schedule.

In project management, the development of a project schedule contains 5 steps:

1. Divide the project into tasks

All of the project management functions are based on the division of the project into constituent tasks, for
example,
Tas
Name
k

100 Dig hole

200 Pour concrete

2. Estimating the task duration

The duration of each task must be estimated to determine a realistic project schedule.
Task Name Start End

Mar.
100 Dig Hole Mar. 4
1

Mar.
200 Pour Concrete Mar. 10
3

3. Determining the task dependencies

Each task is related to at least one other task, else it would not be part of the project. For example, Task
200 cannot start until Task 100 is 50% complete.
Task Name Start End Dependencies

100 Dig Hole Mar. 1 Mar. 4

200 Pour Concrete Mar. 3 Mar. 10 100

4. Developing the Network Diagram and Gantt chart

Once the durations and dependencies are known, the network diagram is used to determine the critical
 path, that is, the tasks which must complete on time or they will affect the overall project completion date.
Once the critical path is determined, the gantt chart is the most useful and intuitive tool to the project
manager.

5. Resource leveling
The network diagram and gantt chart do not take into account resource usage. In this last step, resources
are assigned to each task and the schedule is adjusted to accommodate the availability or cost of resources.

It is rare that the project schedule is not one of the most important aspects of project success. Therefore,
software scheduling tools are a critical component of project management information systems as they allow the
scheduling function to be performed quickly and efficiently. They also allow for easy projection of the impact
of potential schedule changes mid-project. But we know that never happens!

In addition, a strong function of a PMIS is the ability to track actual vs. planned completion dates. This can
then be analyzed to determine the likelihood of future project delays using earned value analysis indicators like
the Estimate at Completion (EAC), Variance at Completion (VAC) or To Complete Performance Indicator
(TCPI).

Estimating

Project estimating involves assigning a price to each of the project tasks. Each task is then rolled up into an
overall project estimate. In a perfect world, the actual project cost will always fall within the estimate, but we
know that is only an ideal to be strived for.

Each project task should have a budget, for example:

Tas
Name Budget
k

100 Dig Hole $3,000

200 Pour Concrete $5,000

A good project management information system will track the estimated cost of each task as well as the
justification for the estimate. For example a parametric estimate based on a unit rate taken from an industry
source, or an analogous estimate from another project. The estimator can enter the information so that it can be
referenced later.

Tas
Name Budget Budget Justification Actual
k

100 Dig Hole $3,000 Avg. of last 2 projects –

200 Pour Concrete $5,000 From sidewalk project, scaled up –

Even better is an information system that tracks all tasks throughout all of the organization’s projects, so that it
is very easy to call up and compare past actual data with new estimates. Many project-based organizations or
programs (series of many projects) track data this way:

Task Avg.
Task ID Number of Projects Avg. Budget Avg. Actual
Name Duration

315400 Dig Hole 4 3 days $6,000 $5,500

Resources

Almost all tasks require resources for their completion. The simplest tasks often have only a project team
member for a specified period of time, but that is still a resource that needs to be available and managed in order
to complete the task.

Hence, a good project management information system will allow the assignment of resources to tasks. These
resources should also come with meta data such as their cost per unit, efficiency rate, or maintenance
requirements.

Tas
Name Resources Efficiency
k

100 Dig Hole Jon, Backhoe 25 ft3 / hour

Jon, Bob,
200 Pour Concrete 5 ft3 / hour
Concrete
This allows for ease of project tracking when the project management team must acquire the resources to ensure
the task completes on its expected end date. It also ensures the resource requirements are adequately planned
into the project, for example maintenance requirements or efficiency rate.

More sophisticated project management information systems can utilize components such as resource calendars,
which specify when a resource is available, or resource breakdown structures, that specify a hierarchical matrix
of resources which can be chosen from and coordinated with other projects.

Project Documents and Data

Virtually all projects produce documents as part of their scope, for example design reports or product
documentation. Most projects also import documents and data for use in project work, for example databases.
Still other projects have a reference library data set that is consulted by the project. For these reasons, project
document control has become a specialty in and of itself.

Every document tracked by the project is cataloged and the requirements are defined. Variables used to track
documents include:

 Owner
 Storage location
 Format
 Scheduled dates: Creation, approval, and submission
 Actual dates
 Review / Approval team members
 Status
Large projects like engineering or industrial projects utilize comprehensive project document control software
systems run by dedicated document control staff. However, for most small and medium sized projects, a
smaller document control system will suffice consisting of a web based portal that allows the upload and
tracking of project documents.

Portals and Dashboards

There are many web based project management software tools that provide a centralized dashboard for the
project. Their features includes many of the other categories, like scheduling, documents, and project team
messaging. This technology is becoming relatively advanced and provides strong feature sets without major
investments in software training.
In addition, project stakeholders often require information dissemination tools such as web sites and project
portals. For example, governmental regulatory agencies often have department-specific document upload and
project information sites, which are then communicated to the stakeholder group on the other side who’s needs
are being balanced with the project.

Collaborative Work Management Tools

Nowadays many projects utilize internal communication tools like project chat rooms, messaging apps, and so
forth. This technology allows project team members to quickly and confidentially record critical
project communications with other members of the team.

Often these software tools are located within larger web based project management tools, but they can also be
standalone apps.

Social Media

Many project also use social media to communicate with stakeholders. This technology is very easy to set up
and use, and most stakeholders already know how to navigate the software.

For example, project facebook pages or twitter accounts can be used to rapidly communicate project
information to stakeholders, but they are dependent on the stakeholder checking for new messages.

Hence, critical messages should probably be communicated via a “push” method rather than social media,
which is a “pull” method.

Project Control

Project control refers to the tasks undertaken by the project management team to measure the project’s progress
and ensure it conforms to the project management plan. Usually project control is dominated by the two uber-
important factors of schedule and budget. But there are other, smaller aspects.

Project control involves the following components:

 Schedule: Ensure the project is on track to complete on time.

 Cost: Ensure the project is on track to complete within its budget.
 Scope: Ensure the scope has not changed, and that additional, unauthorized work is not being performed.
 Quality: Ensure the quality of the products being produced is according to the specifications within the
plan.
 Resources: Ensure the resources are still available and they are not overextended.
 Procurement: Ensure the required subconsultants, suppliers, and materials are still available and are
performing their work as planned.
 Risks: Ensure the risks to project success are still being adequately mitigated.
 Communications: Ensure the stakeholder communications are conforming to the communications plan.
An effective project management information system provides a place for the project manager to track these
items, thereby ensuring a project that sticks like glue to its project management plan.

Because a project is defined as temporary and unique, the first two (schedule and cost) are virtually always a
central consideration in project success. They are tracked using a system called earned value management. In
this system, the budget and schedule status are calculated based on the percent complete of each task. This
status is calculated and reported in the following four variables:

1. Schedule Variance (SV): The amount that the project is ahead or behind schedule expressed as a project
budget, for example, SV = $1,000 means that the project is ahead of schedule.
2. Cost Variance (CV): The amount that the project is under or over budget. For example, CV = $1,500
means that the project under budget by this amount.
3. Schedule Performance Index (SPI): The schedule efficiency, or the amount that the project is ahead or
behind schedule as a percentage of the overall project size. For example, SPI = 1.1 means the project is
10% ahead of schedule.
4. Cost Performance Index (CPI): The cost efficiency, or the amount that the project is under or over
budget as a percentage of the overall project size. For example, CPI = 0.8 means the project is 20% over
budget.
Benefits and Expectations

The PMIS should enable a project team to pinpoint the variances in terms of time, money and resources and see
if they can find the reason why these have occurred. It should enable the team to track the status of each part of
the project and assess the work that is completed and the work that remains to be done. When this information
is available the project team will be able to reallocate the necessary resources to see that each part of the project
contributes to the success of the project. It should be able to help the project leaders to assess the impact on the
project from any future risks caused by time and cost overruns, and also to ensure that the quality of the project
does not suffer. It should help the team to understand which of the parts of the project require revised guidelines
and how they are to be implemented.For an effective PMIS, it is necessary that the preliminary estimates and
technical specifications are very precise and all encompassing. Cost control and feedback systems have to be
always up to date. Project milestones need to be very clearly identified and linked to the resources that are
required to reach them. Vendor selection, materials management, human resources have to be individually
looked into to ensure that each of these areas fits within the parameters for the project. Document control
including its coding and movement is another vital area of PMIS.
MANAGEMENT INFORMATION SYSTEM (MIS)

A management information system (MIS) is an information system used for decision-making, and for the
coordination, control, analysis, and visualization of information in an organization.

The study of management information systems examines people, processes and technology in an organizational
context. In a corporate setting, the ultimate goal of the use of a management information system is to increase
the value and profits of the business.

TYPES OF MIS

The following are types of information systems used to create reports, extract data, and assist in the decision
making processes of middle and operational level managers.

 Decision support systems (DSS) are computer program applications used by middle and higher
management to compile information from a wide range of sources to support problem solving and decision
making. A DSS is used mostly for semi-structured and unstructured decision problems.

 Executive information systems (EIS) is a reporting tool that provides quick access to summarized reports
coming from all company levels and departments such as accounting, human resources and operations.

 Marketing information systems are management Information Systems designed specifically for managing
the marketing aspects of the business.

 Accounting information systems are focused accounting functions.

 Human resource management systems are used for personnel aspects.

 Office automation systems (OAS) support communication and productivity in the enterprise by
automating workflow and eliminating bottlenecks. OAS may be implemented at any and all levels of
management.

 School Information Management Systems (SIMS) cover school administration, often including teaching and
learning materials.
 Enterprise resource planning (ERP) software facilitates the flow of information between all business
functions inside the boundaries of the organization and manage the connections to outside stakeholders. [8]

 Local Databases, can be small, simplified tools for managers and are considered to be a primal or base level
version of a MIS.

ADVANTAGES & DISADVANTAGES OF MIS

The following are some of the benefits that can be attained using MIS:[9]

 Improve an organization's operational efficiency, add value to existing products, engender innovation and
new product development, and help managers make better decisions.[10]
 Companies are able to identify their strengths and weaknesses due to the presence of revenue reports,
employee performance records etc. Identifying these aspects can help a company improve its business
processes and operations.
 Giving an overall picture of the company.
 Acting as a communication and planning tool.
 The availability of customer data and feedback can help the company to align its business
processes according to the needs of its customers. The effective management of customer data can help the
company to perform direct marketing and promotion activities.
 MIS can help a company gain a competitive advantage.
 MIS reports can help with decision-making as well as reduce downtime for actionable items.

Some of the disadvantages of MIS systems:

 Retrieval and dissemination is dependant on technology hardware and software.

 Potential for inaccurate information.

DAILY, WEEKLY & MONTHLY FINANCIAL REPORTS

Top Daily Financial Reporting Examples

A daily financial report is a method to track the previous day’s activities that have an impact on your financial status. It
can keep you apprised of all the requisite data management used to track and measure potential errors, internal production,
and revenue loss.
 As we mentioned above, these reports provide a limited vision, but you can use the examples beneath to see how some
daily actions on problematic factors that can impact your final results.

a) Tracking Potential Staff Errors

Maintaining an efficient, productive work environment, and ensuring that you can identify any employee discrepancies or
issues is critical to being proactive about business growth. Monitoring employees working hours and productivity levels
can help you detect potential staff errors quickly, control these errors, and avoid negative impacts on your financial results
at the end of the day, and ultimately, the month.

Real-time management live dashboards offer clear visuals regarding employee management processes with the following
metrics and KPIs:

Organizational Performance: These are key metrics for tracking and evaluating some factors impacting your
performance.

 Employee Overtime: Overtime per Employee = Total Overtime Hours / FTE

 Absenteeism: Number of employees absent today

Work Quality: These metrics help companies determine the quality level of their employees’ work performance.

 Amount of errors
 Product defects

Work Quantity: These metrics indicate the employee performance related to quantity, such as sales figures, or the
number of codes a programmer can create in a given amount of time. Quantity does not, of course, mean quality, but on
monitored daily, it can reveal bottlenecks or under-production problems.

 Sales Numbers: the number of client contacts, the number of calls an employee makes, the amount of active sales leads.
 Units Produced: lines produced during coding, number of keys a nurse receptionist can hit per minute, etc.
 Customer Handling Time: how many customer calls are answered during a specific time period, for example.

b) Measure Revenue Loss

By tracking staff errors, you can track the money it costs your company (having a problem in production, finding the
problem and fixing it), which will inevitably end up in your financial statements, as the money you lost. Tracking revenue
 loss can be especially beneficial for those companies with customer accounts or recurring revenue. A daily report helps
businesses quickly monitor revenue-related factors, so they can increase their revenue. Revenue loss can also originate
from one-time purchases, customers who move to your competitor, or customers who move out of the area. Metrics used
to measure these factors can include:

 Number of daily transactions

 Average gross margin
 Average cost per order

2. Weekly Financial Report Examples

A weekly financial report serves to help your business monitor all your short-term financial activities in weekly
increments. It should be created and reviewed each week and provides a comprehensive look at the short-term
performance of your business.

Now we will take a look at some financial statements examples to get a clearer picture of what can be tracked in weekly
intervals.

a) Operating Cash Receipts, Disbursements, Balance

Part of a business’s budgeting process may include cash receipts and disbursements, which uses actual data for cash
collection to design a budget, or create income statements, for example. Weekly reports can help companies gain insights
from accurate reporting based on using cash receipts and disbursements. Metrics and KPIs can include:

Cash Flow Report: indicates the changes in cash versus its fixed counterparts, such as exactly where cash is used or
generated during the week.

 Operating Activities: measures a business’s operating cash movements, whereby the net sum Operating Cash flow is
generated.
 Financing Activities: tracks cash level changes from payments of interest and dividends, or internal stock purchases.
 Investing Activities: tracks cash changes derived from the sale or purchase of long term investments, like property, for
example.

Operating Activities: indicated any activities within a business that affect cash flows, such as total sales of products
within a weekly period, employee payments, or supplier payments.
 Direct Method: This metric obtains data from cash receipt and cash disbursements related to operating activities. The sum
of the two values = the Operating Cash Flow (OCF).
 Indirect Method: This metric uses the net income and adjusts items that were used to calculate the net income without
impacting cash flow, therefore converting it to OCF.

b) Any Generated Current Receivables

Weekly financial reports can help businesses stay on top of invoicing, billing procedures, cash basis of accounting,
accounting records, and ensure that they don’t fall behind on being paid for services and goods that are owed to you from
customers or suppliers. Weekly report metrics and KPIs include:

 Days Sales Outstanding (DSO): This measures how fast your business collects money that you’re owed following a
completed sale.
DSO = (Accounts receivable / total credit sales) x number of days in period.
 DSO vs. Best Possible DSO: Aligning these two numbers indicates the collection of debts in a timely fashion.
Best Possible Days Sales Outstanding = (Current receivables x number of days in a week) / weekly credit sales.
 Average Days Delinquent: Indicates how efficient your business processes are in your ability to collect receivables on
time.
ADD= Days Sales Outstanding – Best Possible Days Sales Outstanding

3. Top Monthly Financial Report Examples

Monthly financial reports are a management way of obtaining a concise overview of the previous month’s financial status
to have up-to-date reporting of the cash management, profit and loss statements while evaluating future plans and
decisions moving forward.

This example of financial report offers a more panoramic view of an organization’s financial affairs, serving up elements
of information covered in our daily and weekly explanations. By offering the ability to drill down into metrics over a four-
week period, the data here is largely focused on creating bigger, more long-term changes, strategies, and initiatives.

These reports offer detailed visual insights into the following areas:

 Cash management: A comprehensive overview of your organization’s liquidity and existing cash flow situation.
 Profit and loss: A critical glimpse into your company’s income statement and profits in a number of critical areas of the
business.
 The bigger picture: A financial report format that offers a full overview of the company’s core financial activities over a
monthly period, providing data geared towards developing sustainable strategies and improvements that will foster growth
and increased profitability.

PLANNING & COST CONTROL MANAGEMENT AND RELATED DOCUMENTS

What Is Project Cost Management?

Cost management refers to the activities concerning planning and controlling a project’s budget. Effective cost
management ensures that a project is completed on budget and

Cost management activities are conducted throughout the project life cycle, from planning and budget
allocation to controlling costs during project execution and assessing a project’s cost performance upon
completion.

Although cost management includes a whole ensemble of activities, it is sometimes referred to in terms of more
specific functions, such as spend management, cost accounting, and cost transparency. Cost managers
sometimes use these terms as loose synonyms for the broad cost management function.

Cost Management: Four Major Steps

The Project Management Body of Knowledge (PMBOK), the bible of project management theory, says cost
management is made up of four processes. These generally adhere to the sequence that follows — as a project
goes from the planning board to reality.
Resource Planning: Part of the initiation stage of a project, resource planning uses a work breakdown
structure — a hierarchical representation of all project deliverables and the work required to complete them —
to calculate the full cost of resources needed to complete a project successfully. Managers typically determine
required resources for each work breakdown structure component and then add them to create a total resource
cost estimate for all project deliverables.

Cost Estimating: Cost estimating is an iterative process that uses a variety of estimating techniques to determine
the total cost of completing a project. Cost estimating techniques vary widely in their approaches to computing
project costs, and stretch from conceptual techniques that draw mainly from historical experience and expert
judgment to determinative techniques that estimate costs on a component-by-component basis. We will discuss
these techniques in detail later, as they vary in their levels of accuracy. Determinative techniques are the most
accurate; however, while the estimator’s job is always to create the most accurate estimate possible,
determinative estimating techniques are only an option if you’ve reasonably finalized a project’s scope and
deliverables. As such, you use the less accurate estimating techniques during the earliest stages of project
planning, and then revise and update estimates as the project continues to be defined.

Key Components of the Cost Management Plan

The cost management plan guides these four processes. Created during the project planning phase, the cost
management plan is a document that defines how you manage, control, and communicate a project’s costs in
order to complete the project on budget.

Among other things, a cost management plan identifies the individual or group responsible for cost
management, details how you will assess a project’s cost performance, and sets rules for how to communicate
cost performance to project shareholders. It also establishes the methodologies by which you will control
project cost variations.

While you can customize a cost management plan to fit your organization’s needs, they generally follow a
standard format. Sections often include the cost variance plan, the cost management approach, information on
cost estimation, the cost baseline, cost control, and reporting processes, the change control process, the project
budget, and approvals. You may also want to include the spending authority levels for key project personnel,
specifying which roles can approve costs up to specific thresholds.
Let’s look at the sections in greater depth:

Cost Variance Plan: Cost variance is when the actual amount differs from the budgeted amount. In your cost
management plan, you’ll need a section that details the actions you should take, including who is held
responsible in the case of a cost variance. The size of the variance usually necessitates different action: a cost
variance of less than five percent might result in an explanation of that variance, while a 95-percent-or-greater
variance could force the project to be abandoned. To learn how to calculate cost variance, read Hacking the
PMP: Studying Cost Variance. For a more detailed template on tracking schedule and budget variances, see this
template:

Cost Management Approach: This section outlines the approach a manager uses for cost management. The level
of rigor can vary, but this describes how to establish a cost baseline and how to compare actual costs. You
usually track and report costs through control accounts, where you roll up costs of subtasks. This often occurs at
the third level of the work breakdown structure, a tool that breaks a project into small components or chunks of
work to determine the resources needed to complete a job or project. However, the point at which you track and
report depends on the scope of the project.

Cost Estimation: Here you will define the methods used for estimating project costs, the levels of variation, and
the expected precision, accuracy, and risk.

Cost Baseline: This has a specialized meaning in project management and represents the authorized, time-
phased spending plan against which you measure cost performance. It’s the sum of the estimated project cost
and contingency reserves.

Cost Control and Reporting Process: This section establishes how you measure costs and their key metrics
during the project. We’ll provide greater detail on this later.

Change Control Process: This describes the process for making changes to the cost baseline and how to approve
those proposed changes.
Project Budget: The budget builds on the cost baseline by totalling the cost of executing the project (including
contingencies for possible risks). It also adds in management reserves, which is an amount to cover
unanticipated risks or unidentified events that may arise. An organization will usually set a policy for this, and
the amount is often five to 15 percent of the total budget.

Cost Management Activities: Essential Functions at Each Phase

Here are some key terms and stages relevant to cost management:
Planning: Using the work breakdown structure to determine the resources needed to complete a job or project.

Estimating: The act of calculating or predicting the expected total cost of completing a project.

Budgeting: The authorization of a budget based on a cost estimate to complete the project. You typically
authorize budgets in tandem with schedules, so you can assess cost performance at specific points.

Financing and Funding: The process of requesting, authorizing, and receiving money for a project.

Cost Management: The general practice of overseeing project expenditures and making cost-related decisions
throughout the project life cycle.

Controlling: Addressing cost variations to avoid cost overruns.

Job Control: Controlling project expenditure by comparing costs predicted by the cost estimate and costs
actually being incurred.

Scheduling: You can determine a project’s cost performance by using a schedule that compares the expected
expenditure to the actual costs the project is incurring at any point in time.

Accounting: The practice of recording expenditures and reconciling transactions.

How Accurate Project Cost Estimating Aids Cost Management Efforts

The first step towards robust cost management is having a clear idea of your project’s likely costs. However, it’s
futile to track and control costs if you base your spending on unrealistic estimates.

Project estimating considers several variables, including the method you use to create the estimate, the stage at
which you build your estimate, and the types of cost you include.

The first variable is the method you employ. You can produce cost estimates using a variety of estimating
techniques, depending on the extent to which you define a project and the type of information you have access
to. Here are some common estimation techniques:

Analogous Estimating: This uses historical data from similar past projects to create estimates for new projects.
This method works if you have experience with projects of the same type.

Parametric Estimating: This method estimates time and cost by multiplying per unit or per task amounts by the
total number expected in the project. The rates are often standard or publicly published rates and can be
expressed in hours of work, amount of data entered, or the number of units of a product manufactured. This
technique has a reputation for good reliability, but it’s less relevant when output isn’t uniform, such as when
writing computer code. Some projects have widely varying or unprecedented tasks, so they do not lend
themselves to this method.

Bottom-Up Estimating: This is a determinative estimating technique that estimates costs for work breakdown
structure components and adds them together to create a cost estimate for an entire project. The project team
members help create the estimate. Since the people who are going to be doing the work are engaged in
estimating, professionals consider this method highly accurate, as well as a team commitment builder.

Three-Point Estimating: This is a PERT-related statistical method that uses the optimistic (lowest), pessimistic
(highest), and most likely cost estimates to create expected values and standard deviations for project
expenditures.

Software-Based Estimating: You can use software-based estimating techniques, such as Monte Carlo
simulation, to model the effects of risk events on project costs.

Another factor influencing the cost estimating is the stage at which you build your cost estimate. As a project
progresses, you discover more variables and actual costs, so project estimates become more refined. You can
classify cost estimates based on how well you define the project scope at the time of estimation and on the type
of estimation technique you use - the latter generally determines the accuracy of an estimate. In order of
accuracy, the main classes of cost estimates are:

Order of Magnitude Estimates: These are very rough cost estimates based on expert judgment and on adjusting
the costs of the current project to reflect the costs of similar, past projects. Created before fully defining
projects, they are only used in high-level project screening.

Preliminary Estimates: A preliminary estimate uses somewhat-detailed scope information to form estimates
based on unit costs. These estimates are accurate enough to use as the basis for budgeting.

Definitive Estimates: Created when you’ve fully defined a project’s scope, a definitive estimate uses
deterministic estimating techniques, such as bottom-up estimating. Experts agree that definitive estimates are
the most accurate and reliable.

The final variable affecting project estimation is the type of cost included. Of course, your project budget must
include all the relevant costs for labor and materials, but whether you include a portion of your organization’s
indirect costs depends on the policies of your organization and the type of project. Here are the terms experts
use to distinguish between various types of costs:

Direct Costs: Direct costs are those which you can directly associate with a specific cost object. They are
billable to specific projects.

Indirect Costs: You cannot associate indirect costs with a specific cost object, and you typically incur indirect
costs by a number of projects at the same time. They are not billable to specific projects.

Fixed Costs: Fixed costs are costs you incur during manufacturing that are not associated with the volume of
produced output.

Variable Costs: Variable costs are costs you incur during manufacturing that are directly associated with the
volume of produced output.

Sunk Cost: A sunk cost is an expense you cannot recoup once it is incurred.
Opportunity Cost: When selecting a course of action, its opportunity cost is the loss of potential benefits from
all alternative courses of action.

UNIT:4

MANAGEMENT: INTRODUCTION FOR MANAGEMENT, HISTORY OF MANAGEMENT

THEORY, LEADERSHIP, MOTIVATIONAL THEORIES, PROJECT CONTROLS.
CONSTRUCTION LABOUR, PAYMENT OF WAGES ACT, WORKMEN’S COMPENSATION ACT,
MINIMUM WAGES ACT.

MANAGEMENT: INTRODUCTION FOR MANAGEMENT:

DEFINITION OF MANAGEMENT

Although management as a discipline is more than 80 years old, there is no common agreement
among its experts and practitioners about its precise definition. In fact, this is so in case of all social
sciences like psychology,sociology, anthropology, economics, political science etc. As a result of
unprecedented and breath-taking technological developments, business organizations have grown in
size and complexity, causing consequential changes in the practice of management. Changes in
management styles and practices have led to changes in management thought. Moreover,
management being interdisciplinary in nature has undergone changes because of the developments
in behavioural sciences, quantitative techniques, engineering and technology, etc. Since it deals with
the production and distribution of goods and services, dynamism of its environments such as social,
cultural and religious values, consumers' tastes and preferences, education and information
explosion, democratization of governments, etc., have also led to changes in its theory and practice.
Yet, a definition of management is necessary for its teaching and research, and also for improvement
in its practice.

Many management experts have tried to define management. But, no definition of management has
been universally accepted. Let us discuss some of the leading definitions of management:
Peter F. Drucker defines, "management is an organ; organs can be described and defined only
through their functions".

According to Terry, "Management is not people; it is an activity like walking, reading,

swimming or running. People who perform Management can be designated as members,
members of Management or executive leaders."

Ralph C. Davis has defined Management as, "Management is the function of executive leadership
anywhere."

According to Mc Farland, "Management is defined for conceptual, theoretical and analytical

purposes as that process by which managers create, direct, maintain and operate purposive
organization through systematic, co-ordinated co-operative human effort."

Henry Fayol, "To mange is to forecast and plan, to organize, to compound, to co-ordinate and to
control."

Harold Koontz says, "Management is the art of getting things done through and within
formally organized group."

William Spriegal, "Management is that function of an enterprise which concerns itself

with direction and control of the various activities to attain business objectives.
Management is essentially an executive function; it deals with the active direction of the
human effort."

Kimball and Kimball, "Management embraces all duties and functions that pertain to the
initiation of an enterprise, its financing, the establishment of all major policies, the
provision of all necessary equipment, the outlining of the general form of organization
under which the enterprise is to operate and the selection of the principal officers."

Sir Charles Reynold, "Management is the process of getting things done through the
agency of a community. The functions of management are the handling of community
with a view of fulfilling the purposes for which it exists."
CHARACTERISTICS OF MANAGEMENT

Management is a distinct activity having the following salient features:

Economic Resource :
Management is one of the factors of productiontogetherwithland,labourandcapital.As

industrialization increases, the need for managers also increases. Efficient management is the most
critical input in the success of any organized group activity as it is the force which assembles and
integrates other factors of production, namely, labour, capital and materials. Inputs of labour, capital
and materials do not by themselves ensure production, they require the catalyst of management to
produce goods and services required by the society. Thus, management is an essential ingredient of
an organization.

1. Goal Oriented : Management is a purposeful activity. It coordinates the efforts of workers to

achieve the goals of the organization. The success of management is measured by the extent to
which the organizational goals are achieved. It is imperative that the organizational goals must be
well-defined and properly understood by the management at various levels.

2. Distinct Process : Management is a distinct process consisting of such functions as planning,

organizing, staffing, directing and controlling. These functions are so interwoven that it is not
possible to lay down exactly the sequence of various functions or their relative significance.

3. Integrative Force : The essence of management is integration of human and other resources to
achieve the desired objectives. All these resources are made available to those who manage.
Managers apply knowledge, experience and management principles for getting the results from the
workers by the use of non-human resources. Managers also seek to harmonize the individuals' goals
with the organizational goals for the smooth working of the organization.

4. System of Authority : Management as a team of managers represents a system of authority, a

hierarchy of command and control. Managers at different levels possess varying degree of authority.
Generally, as we move down in the managerial hierarchy, the degree of authority gets gradually
reduced. Authority enables the managers to perform their functions effectively.

5. Multi-disciplinary Subject : Management has grown as a field of study (i.e. discipline)

taking the help of so many other disciplines such as engineering, anthropology, sociology and
psychology. Much of the management literature is the result of the association of these disciplines.
For instance, productivity orientation drew its inspiration from industrial engineering and human
relations orientation from psychology. Similarly, sociology and operations research have also
contributed to the development of management science.

6. Universal Application : Management is universal in character. The principles and techniques

of management are equally applicable in the fields of business, education, military, government and
hospital. Henri Fayol suggested that principles of management would apply more or less in every
situation. The principles are working guidelines which are flexible and capable of adaptation to
every organization where the efforts of human beings are to be coordinated.

MANAGEMENT FUNCTIONS /PROCESS OF MANAGEMENT

There is enough disagreement among management writers on the classification of managerial

functions. Newman and Summer recognize only four functions, namely, organizing, planning,
leading and controlling.

Henri Fayol identifies five functions of management, viz. planning, organizing, commanding,
coordinating and controlling. Luther Gulick states seven such functions under the catch word
"POSDCORB' which stands for planning, organizing, staffing, directing, coordinating, reporting and
budgeting. Warren Haynes and Joseph Massie classify management functions into decision-making,
organizing, staffing, planning, controlling, communicating and directing. Koontz and O'Donnell
divide these functions into planning organizing, staffing, directing and controlling.

For our purpose, we shall designate the following six as the functions of a manager: planning,
organizing, staffing, directing, coordinating and controlling.

7. Planning : Planning is the most fundamental and the most pervasive of all management
functions. If people working in groups have to perform effectively, they should know in advance
what is to be done, what activities they have to perform in order to do what is to be done, and when
it is to be done. Planning is concerned with 'what', 'how, and 'when' of performance. It is deciding in
the present about the future objectives and the courses of action for their achievement. It thus
involves:

(a) determination of long and short-range objectives;

(b) development of strategies and courses of actions to be followed for the achievement of these
objectives; and

(c) formulation of policies, procedures, and rules, etc., for the implementation of strategies, and
plans.

The organizational objectives are set by top management in the context of its basic purpose and
mission, environmental factors, business forecasts, and available and potential resources. These
objectives are both long-range as well as short-range. They are divided into divisional, departmental,
sectional and individual objectives or goals. This is followed by the development of strategies and
courses of action to be followed at various levels of management and in various segments of the
organization. Policies, procedures and rules provide the framework of decision making, and the
method and order for the making and implementation of these decisions.

Every manager performs all these planning functions, or contributes to their performance. In some
organizations, particularly those which are traditionally managed and the small ones, planning are
often not done deliberately and systematically but it is still done. The plans may be in the minds of
their managers rather than explicitly and precisely spelt out: they may be fuzzy rather than clear but
they are always there. Planning is thus the most basic function of management. It is performed in all
kinds of organizations by all managers at all levels of hierarchy.

8. Organizing : Organizing involves identification of activities required for the achievement of

enterprise objectives and implementation of plans; grouping of activities into jobs; assignment of
these jobs and activities to departments and individuals; delegation of responsibility and authority
for performance, and provision for vertical and horizontal coordination of activities. Every manager
has to decide what activities have to be undertaken in his department or section for the achievement
of the goals entrusted to him. Having identified the activities, he has to group identical or similar
activities in order to make jobs, assign these jobs or groups of activities to his subordinates, delegate
authority to them so as to enable them to make decisions and initiate action for undertaking these
activities, and provide for coordination between himself and
his subordinates, and among his subordinates. Organizing thus involves the following sub-
functions :

(a) Identification of activities required for the achievement of objectives and implementation of
plans.

(b) Grouping the activities so as to create self-contained jobs.

(c) Assignment of jobs to employees.

(d) Delegation of authority so as to enable them to perform their jobs and to command the
resources needed for their performance.

(e) Establishment of a network of coordinating relationships.

Organizing process results in a structure of the organization. It comprises organizational positions,

accompanying tasks and responsibilities, and a network of roles and authority-responsibility
relationships.

Organizing is thus the basic process of combining and integrating human, physical and financial
resources in productive interrelationships for the achievement of enterprise objectives. It aims at
combining employees and interrelated tasks in an orderly manner so that organizational work is
performed in a coordinated manner, and all efforts and activities pull together in the direction of
organizational goals.

9. Staffing : Staffing is a continuous and vital function of management. After the objectives
have been determined, strategies, policies, programmes, procedures and rules formulated for their
achievement, activities for the implementation of strategies, policies, programmes, etc. identified
and grouped into jobs, the next logical step in the
management process is to procure suitable personnel for manning the jobs. Since the efficiency and
effectiveness of an organization significantly depends on the quality of its personnel and since it is
one of the primary functions of management to achieve qualified and trained people to fill various
positions, staffing has been recognized as a distinct function of management. It comprises several
sub- functions :

(a) Manpower planning involving determination of the number and the kind of personnel
required.

(b) Recruitment for attracting adequate number of potential employees to seek jobs in the
enterprise.

(c) Selection of the most suitable persons for the jobs under consideration.

(d) Placement, induction and orientation.

(e) Transfers, promotions, termination and layoff.

(f) Training and development of employees.

As the importance of human factor in organizational effectiveness is being increasingly recognized,

staffing is gaining acceptance as a distinct function of management. It need hardly any emphasize
that no organization can ever be better than its people, and managers must perform the staffing
function with as much concern as any other function.
10. Directing : Directing is the function of leading the employees to perform efficiently, and
contribute their optimum to the achievement of organizational objectives. Jobs assigned to
subordinates have to be explained and clarified, they have to be provided guidance in job
performance and they are to be motivated to contribute their optimum performance with zeal and
enthusiasm. The function of directing thus involves the following sub-functions :

(a) Communication

(b) Motivation

(c) Leadership
11. Coordination : Coordinating is the function of establishing such relationships among various
parts of the organization that they all together pull in the direction of organizational objectives. It is
thus the process of tying together all the organizational decisions, operations, activities and efforts
so as to achieve unity of action for the accomplishment of organizational objectives.

The significance of the coordinating process has been aptly highlighted by Mary Parker Follet. The
manager, in her view, should ensure that he has an organization "with all its parts coordinated, so
moving together in their closely knit and adjusting activities, so linking, interlocking and
interrelation, that they make a working unit, which is not a congeries of separate pieces, but what I
have called a functional whole or integrative unity". Coordination, as a management function,
involves the following sub-functions:

(a) Clear definition of authority-responsibility relationships

(b) Unity of direction

(c) Unity of command

(d) Effective communication

(e) Effective leadership

12. Controlling : Controlling is the function of ensuring that the divisional, departmental,
sectional and individual performances are consistent with the predetermined objectives and goals.
Deviations from objectives and plans have to be identified and investigated, and correction action
taken. Deviations from plans and objectives provide feedback to managers, and all other
management processes including planning, organizing, staffing, directing and coordinating are
continuously reviewed and modified, where necessary.

Controlling implies that objectives, goals and standards of performance exist and are known to
employees and their superiors. It also implies a flexible and dynamic organization which will permit
changes in objectives, plans, programmes, strategies, policies, organizational design, staffing
policies and practices, leadership style, communication system, etc., for it is not uncommon that
employees failure to achieve predetermined standards is due to defects or shortcomings in any one
or more of the above dimensions of management.

Thus, controlling involves the following process :

(a) Measurement of performance against predetermined goals.

(b) Identification of deviations from these goals.

(c) Corrective action to rectify deviations.

It may be pointed out that although management functions have been discussed in a particular
sequence-planning, organizing, staffing, directing, coordinating and controlling – they are not
performed in a sequential order. Management is an integral process and it is difficult to put its
functions neatly in separate boxes. Management functions tend to coalesce, and it sometimes
becomes difficult to separate one from the other. For example, when a production manager is
discussing work problems with one of his subordinates, it is difficult to say whether he is guiding,
developing or communicating, or doing all these things simultaneously. Moreover, managers often
perform more than one function simultaneously.

LEVELS OF MANAGEMENT

An enterprise may have different levels of management. Levels of management refer to a line of
demarcation between various managerial positions in an enterprise. The levels of management
depend upon its size, technical facilities, and the range of production. We generally come across two
broad levels of management, viz. (i) administrative management (i.e., the upper level of
management) and (ii) operating management (i.e., the lower level of management). Administrative
management is concerned with "thinking" functions such as laying down policy, planning and
setting up of standards. Operative management is concerned with the "doing" function such as
implementation of policies, and directing the operations to attain the objectives of the enterprise.

But in actual practice, it is difficult to draw any clear cut demarcation between thinking function and
doing function. Because the basic/fundamental managerial functions are performed by all managers
irrespective of their levels or, ranks. For instance, wage and salary director of a company may assist
in fixing wages and salary structure as a member of the Board of Directors, but as head of wages and
salary department, his job is to see that the decisions are implemented.

The real significance of levels is that they explain authority relationships in an organization.
Considering the hierarchy of authority and responsibility, one can identify three levels of
management namely:

(i) Top management of a company consists of owners/shareholders, Board of Directors, its

Chairman, Managing Director, or the Chief Executive, or the General Manager or Executive
Committee having key officers.

(ii) Middle management of a company consists of heads of functional departments viz. Purchase
Manager, Production Manager, Marketing Manager, Financial controller, etc. and Divisional and
Sectional Officers working under these Functional Heads.

(iii) Lower level or operative management of a company consists of Superintendents, Foremen,

Supervisors, etc.

1. Top management : Top management is the ultimate source of authority and it lays down
goals, policies and plans for the enterprise. It devotes more time on planning and coordinating
functions. It is accountable to the owners of the business of the overall management. It is also
described as the policy making group responsible for the overall direction and success of all
company activities. The important functions of top management include :

(a) To establish the objectives or goals of the enterprise.

(b) To make policies and frame plans to attain the objectives laid.

(c) To set up an organizational frame work to conduct the operations as per plans.

(d) To assemble the resources of money, men, materials, machines and methods to put the plans
into action.

(e) To exercise effective control of the operations.

(f) To provide overall leadership to the enterprise.

2. Middle management : The job of middle management is to implement the policies and plans
framed by the top management. It serves as an essential link between the top management and the
lower level or operative management. They are responsible to the top management for the
functioning of their departments. They devote more time on the organization and motivation
functions of management. They provide the guidance and the structure for a purposeful enterprise.
Without them the top management's plans and ambitious expectations will not be fruitfully realized.
The following are the main functions of middle management :
1. To interpret the policies chalked out by top management.
2. To prepare the organizational set up in their own departments for fulfilling the objectives implied
in various business policies.
3. To recruit and select suitable operative and supervisory staff.
4. To assign activities, duties and responsibilities for timely implementation of the plans.
5. To compile all the instructions and issue them to supervisor under their control.
6. To motivate personnel to attain higher productivity and to reward them properly.
7. To cooperate with the other departments for ensuring a smooth functioning of the entire
organization.
8. To collect reports and information on performance in their departments.
9. To report to top management
10. To make suitable recommendations to the top management for the better execution of plans and
policies.

3. Lower or operative management: It is placed at the bottom of the hierarchy of management,

and actual operations are the responsibility of this level of management. It consists of foreman,
supervisors, sales officers, accounts officers and so on. They are in direct touch with the rank and
file or workers. Their authority and responsibility is limited. They pass on the instructions of the
middle management to workers.

They interpret and divide the plans of the management into short-range operating plans. They are
also involved in the process of decisions-making. They have to get the work done through the
workers. They allot various jobs to the workers, evaluate their performance and report to the middle
level management. They are more concerned with direction and control functions of management.
They devote more time in the supervision of the workers.

MANAGERIAL SKILLS

A skill is an individual's ability to translate knowledge into action. Hence, it is manifested in an

individual's performance. Skill is not necessarily inborn. It can be developed through practice and
through relating learning to one's own personal experience and background. In order to be able to
successfully discharge his roles, a manager should possess three major skills. These are conceptual
skill, human relations skill and technical skill. Conceptual skill deals with ideas, technical skill with
things and human skill with people. While both conceptual and technical skills are needed for good
decision-making, human skill in necessary for a good leader.

The conceptual skill refers to the ability of a manager to take a broad and farsighted view of the
organization and its future, his ability to think in abstract, his ability to analyze the forces working in
a situation, his creative and innovative ability and his ability to assess the environment and the
changes taking place in it. It short, it is his ability to conceptualize the environment, the
organization, and his own job, so that he can set appropriate goals for his organization, for himself
and for his team. This skill seems to increase in importance as manager moves up to higher positions
of responsibility in the organization.

The technical skill is the manager's understanding of the nature of job that people under him have to
perform. It refers to a person's knowledge and proficiency in any type of process or technique. In a
production department this would mean an understanding of the technicalities of the process of
production. Whereas this type of skill and competence seems to be more important at the lower
levels of management, its relative importance as a part of the managerial role diminishes as the
manager moves to higher positions. In higher functional positions, such as the position of a
marketing manager or production manager, the conceptual component, related to these functional
areas becomes more important and the technical component becomes less important.

Human relations skill is the ability to interact effectively with people at all levels. This skill
develops in the manager sufficient ability (a) to recognize the feelings and sentiments of others; (b)
to judge the possible actions to, and outcomes of various courses of action he may undertake; and (c)
to examine his own concepts and values which may enable him to develop more useful attitudes
about himself. This type of skill remains consistently important for managers at all levels.

PRINCIPLES OF MANAGEMENT
A body of principles of management has been developed by Henri Fayol, the father of modern
management. Fayol wrote perceptibly on the basis of his practical experience as a manager.
Although, he did not develop an integrated theory of management, his principles are surprisingly in
tune with contemporary thinking in management theory.

Fayol held that there is a single "administrative science", whose principles can be used in all
management situations no matter what kind of organization was being managed. This earned him
the title of "Universality". He, however, emphasized that his principles were not immutable laws but
rules of thumb to be used as occasion demanded.

Fayol held that activities of an industrial enterprise can be grouped in six categories : (i) technical
(production), (ii) commercial (buying, selling and exchange), (iii) financial (search for and optimum
use of capital), (iv) security (protection of property and persons), (v) accounting (including
statistics); and (vi) managerial. However, he devoted most of his attention to managerial activity. He
developed the following principles underlying management of all kinds of organizations :

1. Authority and Responsibility are Related : Fayol held that authority flows from
responsibility. Managers who exercise authority over others should assume responsibility for
decisions as well as for results. He regarded authority as a corollary to responsibility. Authority is
official as well as personal. Official authority is derived from the manager's position in
organizational hierarchy and personal authority is compounded of intelligence, experience, moral
worth, past services, etc.

A corollary of the principle that no manager should be given authority unless he assumes
responsibility is that those who have responsibility should also have commensurate authority in
order to enable them to initiate action on others and command resources required for the
performance of their functions. This aspect of relationship between responsibility and authority is
particularly relevant in India where authority tends to be concentrated in higher echelons of
management.
2. Unity of Command : This principle holds that one employee should have only one boss and
receive instructions from him only. Fayol observed that if this principle is violated authority will be
undermined, discipline will be jeopardy, order will be disturbed and stability will be threatened.
Dual command is a permanent source of conflict. Therefore, in every organization, each subordinate
should have one superior whose command he has to obey.

3. Unity of Direction : This means that all managerial and operational activities which relate a
distinct group with the same objective should be directed by "one head and one plan. According to
Fayol, there should be, "one head and one plan for a group of activities having the same objective".
It, however, does not mean that all decisions should be made at the top. It only means that all related
activities should be directed by one person. For example, all marketing activities like product
strategy and policy, advertising and sales promotion, distribution channel policy, product pricing
policy, marketing research, etc., should be under the control of one manager and directed by an
integrated plan. This is essential for the "unity of action, coordination of strength and focusing of
effort". Violation of this principle will cause fragmentation of action and effort, and wastage of
resources.
4. Scalar Chain of Command : According to Fayol scalar chain is the chain of superiors ranging
from the ultimate authority to the lowest ranks. The line of authority is the route followed via every
link in the chain by all communication which start from or go to the ultimate authority.
5. Division of Work : This is the principle of specialization which, according to Fayol, applies to
all kinds of work, managerial as well as technical. It helps a person to acquire an ability and
accuracy with which he can do more and better work with the same effort. Therefore, the work of
every person in the organization should be limited as far as possible to the performance of a single
leading function.

6. Discipline : Discipline is a sine qua non for the proper functioning of an organization.
Members of an organization are required to perform their functions and conduct themselves in
relation to others according to rules, norms and customs. According to Fayol, discipline can best be
maintained by : (i) having good superiors at all levels; (ii) agreements (made either with the
individual employees or with a union as the case may be) that are as clear and fair as possible; and
(iii) penalties judiciously imposed.

7. Subordination of Individual Interest to General Interest : The interest of the organization is

above the interests of the individual and the group. It can be achieved only when managers in high
positions in the organization set an example of honesty, integrity, fairness and justice. It will involve
an attitude and a spirit of sacrificing their own personal interests whenever it becomes apparent that
such personal interests are in conflict with organizational interests. It may, however, be emphasized
that social and national interests should have precedence over organizational interests whenever the
two run counter to each other.

8. Remuneration : Employees should be paid fairly and equitably. Differentials in remuneration

should be based on job differentials, in terms of qualities of the employee, application,
responsibility, working conditions and difficulty of the job. It should also take into account factors
like cost of living, general economic conditions, demand for labour and economic state of the
business.

9. Centralisation : Fayol believed in centralisation. He, however, did not contemplate

concentration of all decision making authority in the top management. He, however, held that
centralisation and decentralisation is a question of proportion. In a small firm with a limited number
of employees, the owner-manager can give orders directly to everyone. In large organizations,
however, where the worker is separated from the chief executive through a long scalar chain, the
decision making authority has to be distributed among various managers in varying degrees. Here
one generally comes across a situation of decentralisation with centralised control. The degree of
centralisation and decentralisation also depends on the quality of managers.

10. Order : Order, in the conception of Fayol, means right person on the right job and everything
in its proper place. This kind of order, depends on precise knowledge of human requirements and
resources of the concern and a constant balance between these requirements and resources.

11. Equity : It means that subordinates should be treated with justice and kindliness. This is
essential for eliciting their devotion and loyalty to the enterprise. It is, therefore the duty of the chief
executive to instill a sense of equity throughout all levels of scalar chain.

12. Stability of Tenure of Personnel : The managerial policies should provide a sense of
reasonable job security. The hiring and firing of personnel should depend not on the whims of the
superiors but on the well-conceived personnel policies. He points out that it takes time for an
employee to learn his job; if they quit or are discharged within a short time, the learning time has
been wasted. At the same time those found unsuitable should be removed and those who are found
to be competent should be promoted. However, "a mediorce manager who stays is infinitely
preferable to outstanding managers who come and go".

13. Initiative : It focuses on the ability, attitude and resourcefulness to act without prompting
from others. Managers must create an environment which encourages their subordinates to take
initiative and responsibility. Since it provides a sense of great satisfaction to intelligent employees,
managers should sacrifice their personal vanity in order to encourage their subordinates to show
initiative. It should, however, be limited, according to Fayol, by respect for authority and discipline.

14. Esprit de Corps : Cohesiveness and team spirit should be encouraged among employees. It is
one of the chief characteristics of organized activity that a number of people work together in close
coopearation for the achievement of common goals. An environment should be created in the
organization which will induce people to contribute to each other's efforts in such a way that the
combined effort of all together promotes the achievement of the overall objectives of enterprise.
Fayol warns against two enemies of esprit de corps, viz. (i) divide and rule, and (ii) abuse of written
communication. It may work to the benefit of the enterprise to divide its enemy but it will surely be
dangerous to divide one's own workers. They should rather be welded in cohesive and highly
interacting work-groups. Overreliance on written communication also tends to disrupt team spirit.
Written communication, where necessary, should always be supplemented by oral communication
because face-to-face contacts tend to promote speed, clarity and harmony.

The other important principles of management as developed by pioneer thinkers on the subject are :

(a) Separation of planning and execution of business operations.

(b) Scientific approach to business problems.
(c) Adoption of technological changes.
(d) Economizing production costs and avoiding the wastage of resources.

(e) Fuller utilization of the operational capacity and emphasis on higher productivity.

(f) Standardisation of tools, machines, materials, methods, timings and products.

(g) Evaluation of results according to criteria of standard levels of performance.