Project Planning and Cross Functional Teams Learning objectives: • Discuss the benefits and costs associated with the use of cross-functional teams. • Identify task characteristics for which cross-functional teams are appropriate. • Identify a number of common problems in the implementation and operation of cross-functional teams. • Understand the role of the management accountant in cross-functional teams. • Use Gantt Charts and Critical Path Method (CPM) diagrams to plan the duration of projects. • ‘Crash’ projects by focussing investments on appropriate activities to decrease the total project duration. • Use a resource loading diagram to plan and minimise resource requirements by changing the project schedule. • Understand how Gantt charts, CPM (Critical Path Method) diagrams and resource loading can be used to understand, monitor, prioritise and problem solve. Introduction Some organisations are involved in a continuous sequence of individual projects. Particularly those organisations that produce a unique product requiring substantial resources and production time. For example, an organisation that builds bridges or roads. Other organisations may also need to apply project management tools as they engage in projects such as opening a new store or to implement a total quality management program. In this module we will consider the nature and management of cross functional teams. Some specific tools, such as GANTT charts, CPM, and resource loading and levelling, will be provided that can be used to understand, monitor, prioritise and problem solve. Cross functional teams The boundaries between organisational functions, organizational hierarchies, and organisations themselves are blurring as firms seek to generate value from linkages in the value chain. This involves capturing and coordinating expertise from wherever it exists on a timely basis. Rapid response and flexibility are the catchcries as product lifecycles continue to shrink and the rate of change in the external environment increases. Traditional organisational structures have been unable to meet these additional demands. Teams have proven to be an effective coordinative and motivational tool for various tasks in a wide variety of organizations. At the production level work teams have been successful in gaining commitment and empowering workers with consequent increases in productivity. At the senior management level there have been calls to develop a team philosophy. There has also been an increase in the use of cross-functional teams - teams made up of employees from across functional and hierarchal boundaries that bring together the unique skills and expertise demanded by a particular task. It is this type of team that will be the focus of this module. While teams have been very popular, and have achieved remarkable success in a wide variety of organisations, they are not always the answer. Note that teams can take different forms depending on the nature of the task. Consider a cross-functional team that you are, or have been involved in. Work through the following checklist: The Cross-Functional Team Rating Form Think about how your team would rate on a scale of 1-5 (1=low; 5 = high) Criteria Rating Purpose Members describe and are committed to a common purpose. Goals are clear, challenging, and relevant to the team’s purpose. Strategies for achieving goals are clear. Individual roles and responsibilities are clear. Empowerment Members feel a personal and collective sense of power. Members have access to necessary skills and resources. Mutual respect and willingness to help each other is evident. Relationships and Communication Members express themselves openly and honestly. Warmth, understanding, and acceptance are expressed. Members listen actively to each other. Differences of opinion and perspective are valued. Flexibility Members perform different roles and functions as needed. Members share responsibility for team leadership and team development. Members are adaptable to changing demands and requirements. Various ideas and approaches are explored. Optimal Productivity and Accountability There is individual and mutual accountability. There are collective work-products. Team measures performance by assessing its collective work-products. Team discusses, decides, and does real work together. Recognition and appreciation Individual contributions are recognized and appreciated by leader and other members. Team accomplishments are valued and recognized by the organization. Group members feel respected. Team contributions are valued and recognized by the organization. Morale Individuals feel good about their membership on the team. Individuals are confident and motivated Members have a sense of pride and satisfaction about their work. There is a strong sense of cohesion and team spirit. Source: Adapted from Kenneth Blanchard, Donald Carew, and Eunice Parisi-Carew, 1990, 22-23. How did your team score? The purpose of that exercise was to bring your experiences with team work to mind and to focus your attention on some key factors. Throughout the rest of this topic we will be considering ways to improve the performance of cross-functional teams. As you compare what you are reading to your own experience the content will become more interesting and meaningful. What Are They? A cross-functional team is a group of individuals brought together for the skills and expertise that they can contribute to a specific task. The team will normally exist only for the life of the project. A distinguishing feature of cross-functional teams is that team members are drawn from across departmental and hierarchal boundaries. The teams works together as a unit - interacting frequently, coordinating activities and working together to achieve a common goal by drawing on the skills and capabilities of all team members. Some of the characteristics that are common to successful cross-functional teams include a common, compelling purpose; individual and mutual accountability; a common, agreed work approach; dedication to performance and implementation; and measurable performance goals. Management accountants are often included on cross functional teams. In addition to their technical expertise relative to the task at hand, their understanding of performance measurement and evaluation are often key to the team’s success. Why Cross-Functional Teams? Cross-functional teams bring together the simultaneous application of multiple skills, experience, and judgement. The close working relationships formed within the team fosters interaction so that ideas can develop, and projects can proceed, with continual input from all members. This allows more creative solutions to emerge and increases the rate of communication across functions so the project can quickly overcome obstacles. When Cross-Functional Teams Cross-functional teams are not appropriate for all types of task. The concept of interdependence is useful in identifying those tasks that will benefit most from a team approach. Interdependence refers to the extent of information flows, negotiations, and inter-unit decisions. As a task becomes more interdependent, and so requires greater coordination between various functions, barriers to interaction become a greater problem and so cross-functional teams become an increasingly viable option. In a traditional - hierarchal organisation the various functions act independently to complete their part of a combined product. Output from one function is ‘thrown over the wall’ to become the input into the next function. This form of organisation works well when the contribution of each department is independent. F1  F2  F3  F4 When a task is interdependent function F4 will be influenced by, and will influence, the activities and decisions made in F1. Departmental and hierarchal boundaries inhibit these communication flows and so a cross-functional team becomes a more appropriate organisational form. F1   F2   F3   F4 Furthermore, when individuals measure their success functionally they are unlikely to see their role in terms of their contribution to the overall goals of the project. “The operation was a success but the patient died” might be restated “The product was produced precisely to specifications but its eventual cost made it unmarketable.” Barriers to Effective Team Performance There are a number of forces that can create significant barriers to team performance: * Different points of view * Role conflicts * Power struggles * Groupthink; and * Lack of commitment Different points of view Coming from different departments or even organisations, there is a strong likelihood that team members will see the world from their own points of view. The tendency to stereotype and devalue other views is heightened when the project is highly technical and members speak their own codes and languages. If there is any history of conflict among organisational units, the representatives from these units may carry their prejudices into the team, potentially subverting attempts to create common objectives. Role conflict Team members are in multiple roles and often report to different leaders, possibly creating conflicting loyalties. They often do not know which constituency to satisfy. The “home” group or department has a set of expectations, perhaps including certain benefits from representation on the team. Once it starts on the task, the team develops a life of its own, with norms, values, and expectations that might vary from those departments. Power struggles Individuals who occupy powerful positions elsewhere may try to recreate that influence in the group. Often such attempts to impose ideas or to exert leadership over the group are resisted, especially by others who hold similar positions. There can be subtle attempts to undermine potentially productive ideas with the implicit goal of winning the point rather than looking for what is best for the team. In addition, lower status individual may be ignored, thus eliminating a potentially valuable resource. Groupthink There is a reluctance to examine different points of view, because these are seen as threats to the group’s existence. As a result, group members may censor their opinions, and the group proceeds to compromise the inherent quality and morality of its decisions. Making teams aware of the groupthink phenomenon may help avoid this trap. Groupthink may also exist on a wider scale through entrenched organization philosophies. Lack of commitment Team leaders should deal with lack of commitment from members early in the life of the project and attempt to change negative views immediately. Insecurity is often a major reason for lack of commitment. Team leaders should try to determine why insecurity exists and work on reducing team members’ fears. A Balanced View Forming and supporting cross-functional teams is a costly exercise for organisations and the potential problems must be recognised. It can be argued, however, that for many tasks strong, visionary leadership by one individual can’t substitute for the expertise and experience of various individuals captured through the interaction of a cross-functional team. The costs of a team approach can be summarised as conflict and coordination. These costs must be compared to the benefits that have been previously discussed when determining whether a team will be appropriate and the nature of that team. As the size of the team increases the skills and expertise brought to the team increase, but so do the costs of coordination and conflict. Most authors recommend teams of between 4 and 10 members but this will vary according to the demands of the task. The Role of the Management Accountant Management accountants play a significant role in the success of cross-functional teams. The management accountant will often be a member of a number of teams. This allows him or her to increase the communication and coordination across teams. Being a member of multiple teams also allows the management accountant to identify things that work and introduce them to other teams. Management accountants also bring a set of capabilities that are critical to the team’s success: * training and skills in measuring, analyzing, and reporting information focused on user needs; * an organization-wide or business-process-wide perspective; and * organizational credibility and an attitude that focuses on issues or problems Tools to help understand, monitor, prioritise and problem solve No matter what the project, time is usually critical. Time directly influences the cost of a project, such as the costs of the employees that are involved, or machinery that is committed. Furthermore, severe penalties often exist for not completing a project on time. Gantt charts are a useful tool to manage the many activities involved in a project and will be considered first. Projects involve a number of interdependent tasks. Various levels of interdependency can be identified. Of particular interest to us is that some activities require other activities to be performed before they can commence (ie., they are dependent activities). On the other hand, there may be numerous activities that can be performed at the same time (ie., concurrently). One way to increase awareness of these interdependencies is to create a CPM diagram of the project in which activities are linked by arrows. The Gantt Chart The Gantt chart lists the activities involved in a project and shows their timing and duration. Just the process of developing the Gantt chart can be important in planning because it forces the manager to identify the activities involved. The Gantt chart can also be used to monitor the progress of the project by comparing actual completion times with projected times. Exhibit 1 – Gantt Chart From Microsoft Project As an activity is completed a bar within the activity is shown. This provides a clear indication of the project’s progress. It is common to see Gantt charts on the wall of the project manager’s office because they provide such a powerful visual tool. Computer-based Gantt charts also allow you to specify the resources (perhaps a specialised machine or a particular skilled employee). Including this on the chart highlights any conflicts that will affect the completion of the project. For our purposes, an awareness of the general form of the Gantt chart and its value in terms of project management are sufficient. Critical Path Method (CPM) GANNT charts have the benefit of being simple and clear. When there are significant interdependencies between activities, however, a more sophisticated approach may be warranted. You may recall the Critical Path Method or CPM (sometimes referred to as Program Evaluation Review technique, PERT). We will quickly revise some of the basic principles and then consider the implications for managing time and cost. When we have finished you will be able to determine how long a project will take under normal circumstances and how to reduce the time for the project in the most cost effective way. This will be a very valuable tool when timely or expedited completion of the project is important. The critical path method involves identifying interrelationships between activities. While some activities can be completed concurrently, others cannot be started until a preceding activity has been completed, ie they are dependent on the preceding activity. The longest sequence of dependent activities can be identified. As a simple example, the roof of a house can’t be built until the walls are up which can’t be put up until the foundation has been set. While other activities can be performed concurrently, these activities cannot be commenced until the predecessor is complete and so they determine the minimum time for the project. Constructing a CPM diagram When the activities involved in the project, and their dependent activities, have been identified it is possible to prepare the CPM diagram. To illustrate, the activities involved in opening a new location, their normal times and the activities upon which they are dependent, are presented below. Exhibit 2 – Opening a New Location – Dependent Activities Activity Normal Time (days) Dependent on preceding activities A. Develop plans 16 - B. Interview applicants 2 - C. Obtain council approval 6 A D. Select staff 1 B E. Complete the building 15 C F. Build the parking lot 14 C G. Complete training in equipment use 8 D,E H. Stock the shelves 5 F,G A CPM diagram allows us to visualise the interdependencies between activities. For our purposes the diagram will be provided to you. You will, however, need to understand it in order to make judgements about which activities must be managed most carefully because they are critical to completing the entire project on time. If you wish to reduce the time for the project you will also need to know which activities to focus your attention on. We will use boxes in our CPM diagram to represent activities and to highlight some of the important activity parameters. Let’s take a moment to understand each of the terms relating to an activity: Duration: This is the normal time that it takes to complete the activity. Early Start: This is the earliest time that the activity can commence, recognising that there may be preceding activities (connected by arrows from the left) that must be completed before this activity can start. Early Finish: The earliest time that the activity can be completed if it starts on the early start date. It can be calculated as the early start date plus the duration, less one because the days are inclusive. Late Start: The latest time that this activity can start without delaying the project. It can be calculated as the late finish date less the duration, plus 1. Late Finish: The latest time that this activity can finish without delaying the project. Slack: The amount of time by which the activity can be delayed without delaying the total time for the project. Exhibit 3 – Activity information in a CPM diagram Exhibit 4 – CPM Diagram for Opening a New Location Follow the arrows to determine each ‘PATH’ (ie., each sequence of activities that must be performed in a particular order). For example, A is followed by C, which is followed by F, which is followed by H. Thus, ACFH is one path. The two other paths are ACEGH and BDGH. Consider the early start and finish times by working your way along the paths simultaneously from left to right. The earliest time that an activity can commence is the day after the latest early finish date of all of the activities connected to it from the left. So, for ‘G – Conduct training in equipment use’, the earliest start time is day 38 (not day 4) because, in addition to selecting staff (D), the building also has to be completed which will not be finished until Day 37. Then you can work your way backwards to determine the latest time that an activity can start and finish without delaying the total time for the project. So the latest finish time for the preceding activity will always be the day before the latest start time. You will notice that for one path (ACEGH) the early start and finish times will be the same as the late start and finish times. This means that they have to commence immediately upon the completion of the previous activity – otherwise the project will be delayed. Another way to say this is that there is no SLACK for those activities. These activities form the CRITICAL PATH. The activities on the critical path must be managed carefully, as noted, any delay in the start or finish times will delay the entire project. Sounds complicated, don’t worry too much about calculating early and late times, etc. Our emphasis is on determining the critical path and focussing efforts on reducing the time for the project at minimum cost (ie crashing the project). The Critical Path Having previously determined all of the paths, we can now determine the length of each path (ie each sequence of dependent activities). Exhibit 5 – Paths and their times Path Time for each activity Total time ACFH 16+6+14+5 41 days ACEGH 16+6+15+8+5 50 days BDGH 2+1+8+5 16 days Note that the estimated completion time for the project is 50 days, under normal conditions. This can also be seen in the diagram where the early and late finish time for the final activity (H- Stock the shelves) is Day 50. Crashing (ie expediting) the project Now that we know the critical path, we can focus our efforts on activities along that path in order to reduce the total project time. Perhaps we will authorise overtime, or focus our creative energies on finding some other way to accomplish an activity on the critical path in less time (we refer to this as ‘crashing’). However it is achieved, it is important to note that reducing the time for the project can only be achieved by reducing the activities along the critical path, crashing other activities will not reduce the duration of the project. To reduce the total project time most cost-effectively we identify the activity on the critical path with the least cost slope (i.e., the activity that can most cheaply be reduced per day). To do this we need some more information about our project – See Exhibit 6 – Normal and Crashed Times, Cost slopes. The activities on the critical path are in bold. Exhibit 6 – Times and Costs for Opening a New Location Normal Crash Cost Slope ($/ Day) Activity Time (days) Cost ($) Time (Days) Cost ($) A. Develop Plans 16 1500 5 11,400 900 B. Interview applicants 2 1000 1 2200 1200 C. Obtain council approval 6 4800 3 7200 800 D. Select staff 1 1 500 1 500 n/a E. Complete the building 15 9000 5 12000 300 F. Build the parking lot 14 300 10 1300 250 G. Complete training in equipment use 8 1600 2 2800 200 H. Stock the shelves 5 1000 2 2200 400 Total2 $19700 $33450 1. This activity cannot be crashed 2. Don’t try to total the time, remember that some of these activities can be performed concurrently. Consider activity A, for example. It costs $1,500 to complete the activity in 16 days. We can reduce that time at a cost of $900 for each day saved, to a minimum of 5 days. If we reduce it all the way to 5 days the cost of the activity will be $1500 + 11 days at $900 per day = $11,400. From the information in Exhibit 6 we can prepare a table to work through the process of crashing the project. We will start by reducing the project duration by one day. From Exhibit 7 we can see that the cheapest activity on the critical path, at $200 per day, is G. Exhibit 7 Crashing the Project by One Day. Path Normal Duration Crash Activity G Cost = $200 Revised duration ACFH 41 41 ACEGH 50 -1 49 BDGH 16 -1 15 Note that crashing Activity G also reduced the total time for the path BDGH. Crashing multiple paths It is important to keep track of the revised duration for each path because it is possible that another path will become critical. It may also be necessary to crash in ‘stages’. Assume now that we wish to crash the project by 11 days, ie., we want to finish the project within 39 days to get a $5,000 bonus. Note that ACEGH is only 8 days longer than ACFH – so we need to be careful! We will start from the normal times (ignore the previous crash of one day and start from scratch). Recall that Activity G is the cheapest activity to crash on the critical path. The maximum time that can be crashed is 6 days – from 8 to 2 days. Exhibit 8- Crashing the Project – Stage 1 Path Normal Duration Crash G 6 days ($1200) Revised duration ACFH 41 41 ACEGH 50 -6 44 BDGH 16 -6 10 The next cheapest activity on the critical path to crash is E at $300 per day. We could crash E by as much as 10 days, but to do so would mean that it is no longer on the critical path (E is not on the path ACFH, so crashing it would not reduce the project completion time below 41 days). This will become obvious to you if your critical path is no longer critical. That would mean that you have spent money to reduce the time for that path without reducing the time for the project, because the new critical path would now be determining the minimum time. (Take a moment to think about this, it is important!) So we crash E by 3 days and two paths are now critical. Exhibit 9 – Crashing the Project – Stage 2 Path Normal Duration Crash G 6 days ($1200) Revised duration Crash E by 3 days ($900) Revised duration ACFH 41 41 41 ACEGH 50 -6 44 -3 41 BDGH 16 -6 10 10 Now that we have two critical paths we need to consider our options. To reduce the project time we need to be sure that both critical paths will be reduced simultaneously. We can either crash an activity that is common to both paths, or two activities at once (the cheapest on each path). If we crash two activities it will be E (at $300 per day) on path ACEGH and F (at $250 per day) on path ACFH (for a total cost of $550 per day). This can be compared with crashing H (at $400 per day), which is the cheapest activity that is common to both paths. Since crashing the common activity is cheaper we will go with that. Exhibit 10 – Crashing the Project – Stage 3 Path Normal Duration Crash G 6 days ($1200) Revised duration Crash E by 3 days ($900) Revised duration Crash H by 2 days ($800) Revised Duration ACFH 41 41 41 -2 39 ACEGH 50 -6 44 -3 41 -2 39 BDGH 16 -6 10 10 -2 8 The total cost of reducing the project from 50 to 39 days has been $2,900, which is less than the $5,000 bonus that we will receive, so it has been worth it. The project could be crashed further, there are still reductions possible for H, A and C, but there is no point in spending money to reduce the project beyond 39 days. Take a moment to think about how understanding, monitoring, prioritising and improving projects can be facilitated by preparing a CPM diagram. Resource Loading “Resource loading describes the amount of individual resources an existing schedule requires during specific time periods… Resource loading gives a general understanding of the demands a project will make on a firm’s resources. It is an excellent guide for early, rough project planning. Obviously, it is also a first step in attempting to reduce excessive demands on certain resources….” (Meredith and Mantel, 1995, p. 398) The following excerpt has been adapted from Briers et al. (2003, p150-154). Planning resource provision and usage In addition to planning cash flows, project management is concerned with planning other resources to be used in the various activities of a project. For example, it is necessary to receive inputs from suppliers, and to schedule the organisation’s personnel and plant and equipment. A particular difficulty arises when the organisation has limited resources which must be used on various activities within a single project and perhaps across several projects. Resource loading is the process of establishing a project schedule which shows the demand placed on resources committed to that project, period by period throughout the project duration. As we have seen, when an activity has some slack, there is some discretion about when that activity should be scheduled to commence. Within the available slack, start times can be manipulated to change the timing of resource requirements. Of course, any activities which lie on the critical path have no slack time and their start times cannot be delayed without extending the duration of the project. Perhaps, however, you may want to consider crashing activities on the critical path. For the moment, however, we will keep it simple. Example of Resource Loading Estimates for a project are shown in Exhibit 11. This project comprises four activities (A, B, C, and D). Activities A and B can be performed simultaneously, Activity C can be started once Activity B is completed and may be performed simultaneously with A, and Activity D cannot commence until both activities A and C are completed (see exhibit 12). In addition to other resources which are freely available, each activity requires a certain number of skilled supervisors to oversee the work. The number of weeks to complete each activity is shown, along with the number of skilled supervisors per week needed for each activity. Exhibit 11 Activities Predecessors Time (Weeks) No. of supervisors required per week A 2 3 B 2 5 C B 2 1 D A,C 2 2 We can draw a CPM network diagram to represent this information: Exhibit 12 We can see that there are two possible paths: A-D, and BCD. The latter (BCD) is the critical path as its duration is 6 weeks, whereas A-D’s duration is only 4 weeks. Why do we go to the trouble of finding out what the critical path is when we want to construct a resource loading diagram? We cannot delay the start of any activity on the critical path without extending the project’s duration. Hence, we always load activities on the critical path first. Assuming that each activity is scheduled to start as soon as possible, we can establish the scheduling of activities and the demand for skilled supervisors, as shown in Exhibit 13. Exhibit 13 Resource Loading (earliest Start Times) Establishing resource requirements for a project using the earliest start time schedule (with activities on the critical path shaded) Notice in Exhibit 13 that activities B, C and D have been loaded first since they lie on the critical path. Also notice that this schedule produces a very uneven demand for skilled supervisors. There may be problems and costs associated with such an uneven pattern including: • The need to have a minimum of 8 supervisors • The possibility of idle time when fewer supervisors are required • Scheduling supervisors to move to the project when required • Scheduling work for supervisors when they are no longer required on the project • Employee morale problems if the ‘excess’ supervisors are released when no longer required Resource levelling is the process of smoothing out the demand for resources committed to a project period by period throughout the duration of the project. We can do this by re-scheduling when activities are to be done without extending the duration of the project. To do this, we exploit slack time to manipulate when activities are scheduled to start. Follow along on the diagrams in exhibits 13 and 14 – it is actually quite simple but gets confusing in the description…. In this case Activity A is scheduled to be completed at the end of Week 2, but the following Activity D cannot start until the beginning of Week 5, since C must also be completed before D can start. We can delay the start of A. If we schedule A to start at the beginning of Week 3, (utilising the two weeks of slack) it will still be completed at the end of Week 4, so that D can be started at the beginning of Week 5, and hence the project can still be completed at the end of Week 6. Notice in this example that Activity A is the only non-critical activity, and as such it will be the only one with float time which can be exploited. If we were to delay any of the critical activities, then the project duration would increase, which is undesirable. The revised scheduling of activities and the demand for skilled supervisors is shown in Exhibit 14. Exhibit 14 Resource Levelling (Latest Start Times) Compared to the original schedule, we can note the following improvements: • A minimum of 5 (rather than 8) supervisors are required • There is less movement of supervisors to and from the project. The aim of scheduling may differ from situation to situation. In some cases, it may be to reduce variability, especially when there are heavy costs incurred by the firm in increasing (hiring) additional resources when the load demanded is high and decreasing (firing) excess resources when the load demanded is low. In other cases, it may be to reduce peak demand for resources, especially where there is a limit on the amount of resources held or obtainable. In the latter case, critical activities may have to be delayed, hence extending project duration. Ideally we might perform a cost/benefit analysis to identify the optimum revised schedule. Alternatively, we might use non-financial measures such as: • Standard deviation of periodic load • Number of transactions involved in moving the critical resource into and out of the project • Increase in duration of the project (especially if additional resources cannot be obtained) Control of Project Time Meeting the planned completion date for a project is important. The essential features of time control will now be reviewed. Suppose that an activity has been completed and that actual time has differed from estimated time so that, now, the elapsed time on the path differs from the estimated time. The following generalisations may be made, subject to appropriate interpretation in each individual case. 1. If an overrun (that is, excess of actual time over estimated time for an activity) has occurred for an activity on the critical path then the revised project duration will exceed the original critical path duration by the amount of the overrun to date. In this case, it may be necessary or desirable to expedite some subsequent activity lying on that path so as to achieve the original estimated project duration. If there are additional costs, such as penalties or liquidated damages, associated with the project overrunning, we may compare such additional costs with the cost of possible subsequent time reductions to select the appropriate course of action. There may, of course, be implicit costs associated with such project overruns (for example, damage to commercial reputation) and we should include these in the analysis even though they are not directly quantifiable. 2. If the overrun has occurred on a previously non-critical path, it may cause that path to become critical, so that there may now be more than one critical path or this path may become the new critical path. If the new estimated project duration is the same as that on the previous critical path, there is no need at this stage to expedite subsequent activities although we may seek to ensure, so far as reasonably possible, that subsequent activities on this path do not overrun. If the revised estimated duration of this path exceeds that of the former critical path, corrective action as discussed in (1) may be appropriate. 3. If the overrun has occurred on an activity on a non-critical path and is not sufficient to make that path critical, no corrective action is needed at this stage. However, if a similar activity is scheduled to be performed at some later time in the project, additional effort to monitor progress of the later activity may be appropriate to reduce the risk of similar overrun on the subsequent activity. In other words, management should learn from their mistakes. 4. If actual duration is less than estimated duration, management might search for opportunities for cost reduction. For example, a planned subsequent crashing of an activity may, perhaps, be avoided, or it may be possible to transfer resources from this path to some other path on this project or another project to reduce costs. In addition, such an underrun may open up the opportunity to earn bonuses from early completion of the project (provided quality is not compromised for a reduction in time). From the above discussion, it should be appreciated that the use of CPM in project planning and control is an input to creative managerial thinking. We must perceive the opportunities for cost reduction or increased earnings. Once perceived, they may be incorporated, formally or informally, into the analysis. Questions Question 1. Briefly describe the major advantages and disadvantages of Gantt charts and CPM diagrams as project planning and analysis tools. In your answer refer to the four aims of process analysis (understanding, monitoring, prioritising and problem-solving). Question 2. A construction program consists of certain activities which follow defined paths as follows: Path Activities 1 A- D - H 2 A- C - F - H 3 B- F -H 4 B- E-G 5 A- C - E –G Estimated times and costs of each activity are as follows: Program estimates Normal Crash Time Cost Time Cost Cost Slope Activity Days $ Days $ $ A 4 420 3 560 140 B 8 800 6 1120 160 C 6 1000 4 1200 100 D 9 1080 7 1200 60 E 4 1000 1 2200 400 F 5 300 4 480 180 G 3 300 3 300 n/a H 7 1200 6 1500 300 Total 6100 17 8560 Required: 1. Which path is the critical path? Why? 2. If you had to reduce the program time by one day, which activity would you target for crashing and why? Question 3. The following information relates to a project. Normal Crash Time Cost Time Cost Activity Days $’000s Days $’000s A 3 23 3 n/a B 2 38 2 n/a C 5 54 3 66 D 6 62 4 76 E 4 76 3 81 F 3 13 3 n/a G 6 58 3 67 H 2 15 2 n/a I 6 28 4 36 J 7 91 5 109 The project manager gives you the following information regarding the sequence of events: Path Activities 1 A-C-G 2 A- C- F- I 3 A -C- F- H- J 4 A- D- H- J 5 A- D- I 6 B- E- H- J 7 B- E- I The customer for whom the project is being done has offered $600,000 for the project if it is completed within 19 days, $614,000 within 18 days and $625,000 within 17 days. Required: 1. In order to maximise profit, when should the builder plan to complete the project? Show calculations. Question 4. A builder estimates the time for the following activities, which are required to complete a project: (Note the different format – the principles remain the same but read it carefully) Days required for completion Expected cost Activities Normal Crash Normal Crash A 8 6 3000 3600 B 6 3 2400 4800 C 13 8 4900 6900 D 6 5 1500 2000 E 5 5 1800 1800 F 3 2 1000 1650 Required: 1. Determine the critical path, project duration and expected cost assuming normal program. 2. What is the minimum time, and minimum cost for that time, to complete the project? 3. Assume that the project must be completed in 16 days. Is this possible? If so, what is the minimum additional cost of doing this? Question 5 The following network diagram and table illustrate the time and cost associated with a particular project. Activity Normal Activity Time (in weeks) Normal Activity Cost Total Crashed Time (in weeks) Crashed Activity Cost A 2 1000 2 1000 B 1 800 1 800 C 2 1500 2 1500 D 5 5100 3 10200 E 4 2500 3 3500 F 1 600 1 600 G 4 1700 4 1700 H 3 1200 2 2600 I 3 1400 2 2100 J 3 1300 3 1300 Required: 1. Determine the project’s critical path 2. Compute the total cost of the project as planned 3. Calculate the cost slope for each activity (where appropriate) 4. Compute the incremental cost of completing the project in 12 weeks Question 6 Cashman Industries manufactures steel storage sheds for commercial use. John Cashman, chairman of Cashman Industries, is contemplating producing sheds for home use. The activities necessary to build an experimental model and related data are given in the accompanying table. Activity Normal Time Crash Time Normal Cost Crash Cost A 3 2 1000 1600 B 2 1 2000 2700 C 1 1 300 300 D 7 3 1300 1600 E 6 3 850 1000 F 2 1 4000 5000 G 4 2 1500 2000 The paths are ABDFG and ACEFG. Required: 1. Identify the critical path, expected project duration and total normal cost. 2. Can the project be completed in 12 weeks? If so, how? At what cost. Question 7 Green Hotel has a project to design and implement a wage incentive program. The following table identifies information about the project and its component activities. Activity Normal time (in weeks) Crash time (in weeks) Cost to expedite ($/wk) A (project planning) 3 3 - B (job analysis) 5 2 500 C (performance analysis) 4 2 500 D (market wage survey) 7 6 300 E (structure internal wage program) 3 2 1000 F (finalise incentive program) 4 4 - Required: 1. Identify the critical path. Calculate the expected project duration. 2. You have $1,000 to spend expediting. Which activities would you spend it on? Why? Question 8. The following CPM diagram relates to one phase of a reengineering project. There are seven major activities labelled A to G on the diagram. The number of engineers required is given in brackets. For example, activity B requires 2 engineers. Required: 1. Indicate the duration (in weeks) for paths ACEG, BDEG, and BFG . 2. What is the normal time (in weeks) it will take to complete this phase? 3. What is the latest start time (in weeks from the start) for activity E? 4. If management wishes to reduce the time to complete this phase by one week, which activities would you suggest they examine for possible improvement? 5. Assume the activities are to be performed as per the above diagram. Determine the resource loading week by week, assuming that each activity starts as soon as possible. Identify each activity and the number of engineers required in the chart below. 6. Then, in the second table, show how you would schedule the activities to minimise the variability in the number of engineers required over the duration of this phase without changing the phase’s minimum completion time. # Eng. 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 # Eng. 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Question 9 Consider the group assignment for this course. a. What features of the assignment make it suitable for a cross functional team? b. Identify the skills and expertise that each team member would be expected to contribute. c. Given the nature of the task, and the individuals assigned to the team, what problems do you foresee? d. Outline the specific considerations and actions that should be taken to facilitate the team’s success. Question 10. Outline the costs and benefits of cross-functional teams. Question 11. Some would argue that traditional relationships of hierarchy should be abandoned within teams. What benefits do you think come from ‘leaderless’ teams and when do you think leadership is essential. References Briers, M., M. Dyball, J. Macmullen, and H. Mahama, eds. 2003. Management Accounting for Change: Process Improvement and Innovation. 3rd ed. Sydney: School of Accounting, University of New South Wales. Meredith, J. R., and S. J. J. Mantel. 1995. Project Management. 3rd ed. Brisbane: Wiley.