Paradigm shift for practice
Project management language and actions have been governed by critical path for the last 60+ years. The notion of managing a critical path to ensure success was appropriate when projects were predominantly local and had a majority of the resources dedicated. However, the language and actions have not significantly changed with resources being stretched across multiple projects and with more projects being distributed. The objective of this presentation is to equip project managers with a “critical chain” developed by Dr. Goldratt based on the Theory of Constraints to deal with new demands and challenges. The concept of efficiency traps due to methodologies is discussed, laying out the case for new project management paradigms. The process of making uncertainty in the form of hidden estimates is made tangible to improvise risk management. Additionally, the statistical approach for calculating confidence to achieve target dates is discussed, augmenting stakeholder management. Behavioral challenges during execution and risk impact along with mitigation choices are discussed. Change management aspects to institute critical chain are also briefly discussed.
At the end of the session participants will be able to:
- Recognize efficiency trap with methodologies
- Make uncertainty tangible
- Calculate project confidence
- Recognize behavioral challenges
- Uncover the critical chain
- Effectively use buffers
- Prepare for gradual change from critical path to critical chain
Attendees will be split into three groups and each assigned a portion of the case study with business objectives, work breakdown structure and known assumptions. Teams will solve the problem using traditional critical path, identifying inherent limitations; templates will be provided to accelerate the discussions. New concepts will be introduced as limitations are identified; enabling the teams to solve the same problem subsequently with critical chain.
Project Management Context
Project management approaches have matured over the years (see Exhibit 1), moving from traditional structured approach to modern adaptive approach. Traditional project management approach focused on the triple constraints: on time, on budget, on meeting requirements (with quality). The project work was known, less complex, mostly staffed by dedicated resources and detached from the parent environment. Control mechanism was to monitor and protect the critical path. Modern project management has expanded and integrated itself into the business domain, unlike the triple constraint, the recommendations are to focus on five dimensions: project efficiency (time and budget), impact on the customer, impact on the team, business results (ROI, Market Share), and preparation for future. As documented in Global project management (Binder, 2007), “increasing trend for outsourcing, off-shoring and globalization, many organizations are taking advantage of geographically distributed skills, round-the-clock operations and virtual teams.” The project work is less known, more complex, staffed by matrix resources and very much dependent on the parent environment. Anecdotally, control mechanism continues to monitor and protect the critical path. Seven global trends expected to influence and shape project management by 2025 are: (1) From Development to Redevelopment (dewealth vs. rewealth); (2) From Silos to Integration; (3) From Decree to Engagement; (4) From Flying Blind to Envisioning Renewal; (5) From Dewealth Defaults to Renewal Cultures (policymaking); (6) From Going It Alone to Partnering and (7) From Project-based to Programmatic Revitalization Using Renewal Engines. The challenge facing the project management community: will control mechanism continue to monitor and protect the critical path or evolve new paradigms to keep up with the global trends? A Guide to the Project Management Body of Knowledge (PMBOK® Guide) – Fifth Edition offers an alternate scheduling/controlling method called critical chain to deal with resource constraints and uncertainty. The acknowledgement of the critical chain topic with a one page write up in 2013 was significant progress from PMBOK® Guide 2000 Edition, where critical chain was not recognized and documented.
Exhibit 1–Maturing of project management discipline (Anderson, Merna)
Revenue – Cost = Profit/Loss. Revenue as a leadership responsibility is focused on macro environment, while cost as a managerial responsibility is focused on organizational environment. External factors that influence an organization's decision-making include economic, demographic, legal, political, social, technological and natural forces. Internal factors that influence an organization's response include size, structure, culture, etc. as evidenced by Exhibit 2: Managers across America have done more with less, i.e. increasing productivity while lowering cost. Cost reduction is achieved through adoption of business processes over a period of time leading to increased efficiency. When such institutionalized business processes do not adapt to changing business needs due to macro environment changes, organizations often get trapped. Critical path is one such process that has been entrenched with the project management community. As business process improvement literature suggests, continuous improvement is critical, and it is recommended to set expiration dates on processes, procedures and templates.
Exhibit 2–Productivity and compensation (Fleck, Glaser and Sprauge)
Estimation techniques such as program evaluation and review technique (PERT) are used to make uncertainty with each activity more tangible. The inherent assumption with the PERT formula = (a+4m+b)/6 is often ignored, i.e. estimates are made at 99% confidence. When estimates are made at 95% confidence level, the formula would need to be adjusted to (a+4m+b)/3.29; and for 90% confidence level, the formula will need to be adjusted to (a+4m+b)/2.56. In most environments, there is little positive incentive to finish ahead of time or under budget. Estimates are based on pessimistic experiences and each level of management adds its own contingency, leading to inflated time and cost estimates across the project. Dr. Goldratt in his Theory of Constraints argues that teams try to protect the performance of each step by padding, while leaving the project as a whole exposed and fundamentally challenging the way we estimate and address risk. Delay in any one step is fully passed on to the next step, while advances in one step are typically lost. Safety from each activity is recommended to be removed and applied to the project as a whole in the form of a project buffer. An additional tool to bolster communication with stakeholders is to compute the project confidence as and when estimates are revised. A detailed walk-through of Exhibit 3 will be done during the presentation.
Exhibit 3–Measure of variance and confidence calculation
Starting an activity late even if it's within the float time does increase the amount of risk exposure; this tendency to squander away the lead time or safety is known as student syndrome. Similarly, multitasking with different projects (an organizational problem) or within the project (a scheduling problem) also increases the amount of risk as lead time is reduced. Ramp up/ ramp down of the resource across projects/tasks delays the business result, increasing the opportunity cost. To protect the project from behavioral challenges feeding buffers and resource buffers are recommended.
The safety estimates from the critical path are removed to serve as the project buffer where uncertainties are dampened. Similarly to protect the original critical path from the uncertainties in other paths, the concept of feeding buffer is introduced. It is recommended to put feeding buffers where the free float is significantly smaller. The feeding buffers also minimize the ramp up/ramp down issue of resources due to multi-tasking. The resource management buffer, unlike the project and feeding buffer, is a communication tool. When several projects are being done by a small pool of resources, proactive notification helps identify the risks before they become active issues and addresses the student syndrome problem. When critical resources become the bottleneck, a simple leveling will not solve the problem, as leveling in a strictly technical sense is done within the available slack. The longest path due to the network and resources is uncovered to show the critical chain removing the time/resource contention, quite possibly resulting in a project end date much later than the critical path end date. The critical chain approach provides management with more realistic information on end date, project demands, and resource availability—a fundamental reason for the paradigm shift.
Binder, J. (2007). Global project management—Communication, collaboration and management across borders. Burlington, VT: Gower Publishing Company.
Project Management Institute. (2013). A guide to the project management body of knowledge (PMBOK® guide) – Fifth edition. Newtown Square, PA: Author.
Meredith, J. R. & Mantel, S. J. (2012). Project management (8th ed.). Hoboken, NJ: John Wiley & Sons.
Fleck, S., Glaser, J., & Sprague, S. (2011). The compensation-productivity gap: A visual essay. Monthly Labor Review. Retrieved from www.bls.gov/opub/mlr/2011/01/art3full.pdf
Cleland, D. & Bidanda, B. (2009). Project management circa 2025. Newtown Square, PA: Project Management Institute.
Shenhar, A. J. & Divir, D. (2007). Reinventing project management: The diamond approach to successful growth and innovation. Boston, MA: Harvard Business Press.
Anderson & Merna. (2005). Project management is a capital investment process. Journal of Management in Engineering, 21(4), 175–178.
Goldratt, E. M. (1997). Critical chain. Great Barrington, MA: The North River Press.
This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.
© 2014, Murugappan Chettiar, PMP
Originally published as a part of the 2014 PMI Global Congress Proceedings – Dubai, UAE