7/14/2019 PM587 Week 3 Lecture

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7/11/13 Advanced Program Management

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Week 3: Strategic Decision Management - Lecture

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Program Management

Program Management | Program Manager| Project Cost

For the past 2 weeks we have looked at strategic business management of multiple projects, we have examined

corporate strategy and its relationship to project strategy, and last but not least we have linked projects to the

strategic goals of the organization. This week we are studying program management. We cannot understand

program management unless we understand its relationship to portfolio management.

Program Management

Let's look at a portfolio as an umbrella that covers multiple projects or programs. Now, these projects and/or

programs may not be related and they may not be dependent on each other. These projects or programs do have a

common threadthey are supporting a common strategic plan or goal of the organization. Portfolio management is

the process of managing these projects through the use of identification, prioritization, authorization, managing,

and so on. As we study portfolios and portfolio management, it becomes clear that the portfolio's main objective is

to achieve the organization's strategic goals.

The program differs from a portfolio in that the program is made up of projects that are related. This group of

projects benefit in some way by being managed in a coordinated effort. The goal of the program is to ensure that

the projects meet the strategic objectives of the program. Not only is program management responsible for

changes directed by the portfolio and changes within the projects, but it is also responsible for the planning,

managing, monitoring, and success of the projects within the program. The success of the program is measuredby the degree to which it satisfies its goals and objectives. The program management office is responsible for

coordinating project interdependencies by resolving resource issues between projects, handling change

management, and ensuring that the program goals and objectives stay aligned with the organization's strategic

direction. Table 1.1 in PMBOK gives an excellent overview comparing projects, programs, and portfolio

management characteristics.

Program management is similar to project management, although the skills, while similar, are slightly different.

What does this mean? The program manager needs the same skills used by the project manager, as well as the

same tools, which include earned value, risk management, Pareto, CPM, and PERT, among others. The difference

is the level at which the program manager manages.

Program Manager

The program manager is looking at a program that is a coupling of projects that lead to a larger end product. For

example, take an aircraft. The program manager ensures that the final product is a plane that is within budget,

schedule, and scope (quality). Within the airplane program, there are numerous projects, including aircraft engines,

landing gear, wings, electronics, and so on. The project manager responsible for aircraft engines, in theory, does

not care about any other area of the program. The program manager must constantly assess what each individual

project is doing and how it affects the rest of the parts.

For example, say that the aircraft engine's original design specified that the engines must weigh no more than 200

pounds. However, once the detailed designs were accomplished and the parts ordered, it was realized that each

engine would now weight 202 pounds. On its own, this is not a big deal. However, for the overall program it may be.

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7/14/2019 PM587 Week 3 Lecture

2/2

7/11/13 Advanced Program Management

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What if every part weighed two pounds more than designed? Would the aircraft

now be too heavy? Would the wingspan have to be changed to accommodate the

extra weight? This is the type of analysis the program manager would have to

apply. The program manager must be more strategic than the project manager

needs to be. Again, the same tools are used, just at a different strategy level.

As a project manager you are only concerned with the risk, cost, schedule, and

quality of that projectthat alone can be an all-consuming job. As a program

manager you have the same concerns with risk, cost, schedule, and quality but

they encompass all the projects within the program. Because each project isinterrelated and/or interdependent on another project within the program, a change

to one project may lead to changes in other projects. It is the responsibility of the

program manager to monitor and control all projects within the program in order

for the strategic objectives to be achieved.

Project Cost

Whether you are the project manager or the program manager, you will be monitoring and controlling project costs.

As a project manager, you will be responsible for and concerned with the cost of your individual project. The

program manager will be looking at the project costs for all the projects in the program. Instead of micromanaging

each project's budget, the program manager will be looking for ways to conserve funds across projects. This may,for example, involve the coordination of resources or purchasing in bulk because several projects need the same

material and buying in bulk is more cost efficient. The Program Manager is looking for ways to be cost efficient and

cost effective. As you work with MS Project and fill in the cost on the resource sheet, you will be able to start

calculating many of the formulas listed below. Take a few minutes to review these formulas and get a general

understanding for them. There are several links in the Webliography that give more in-depth information on these

formulas.

Earned Value Management ------ EVM

Planned Value ------ PV = SV / (SPI - 1)

Actual Cost ------ AC = CV / (CPI -1)

Earned Value ------ EV = PV - AC

Budget at Completion ------ BAC = SUM of PV at project completionEstimate at Completion ------ EAC = AC + Bottom-up ETC, or

EAC = BAC / Cum. CPI

EAC = AC / %Complete

EAC = AC + (BAC - EV)

EAC = AC + [(BAC - EV) / (Cum CPI * Cum SPI)]

Cost Variance ------ CV = EV - AC > 0 good

Schedule Variance ------ SV = EV - PV > 0 good

Cost Performance Index ------ CPI = EV/AC > 1 good

Schedule Performance Index ------ SPI = EV/PV > 1 good

TCPI ------ Remaining Work / Remaining Budget

Estimate to Complete ------ ETC = EAC - AC

Variance at Completion ------ VAC = BAC - EAC