Stage of project preparation - Theory - Project Management

This article discusses the theoretical foundations of the most important stage in project management - namely its preparation. This should be interesting both for beginners in such a difficult business, as project management, and for novice start-ups, and possibly experienced managers.

A project is a one-time, non-repetitive activity or a set of actions, as a result of which clearly defined goals are achieved in a certain time.

In a sense, all projects are the same. Everyone has a consumer(s) and/or patron(s) who expect the project to achieve results at a certain time. Projects are often implemented with the aim of creating something new or making big changes that can be thought of as a completed activity. A project can arise based on new needs of consumers or users of services, or from the opportunity to obtain benefits for the organization, or on the basis of new needs of the organization.

A project is a practical activity that is carried out in a certain context and is subject to its influence. General characteristics of the projects:

they are targeted, i.e. all activities are aimed at achieving certain results or outputs;
they have a clear beginning and end;
they have certain restrictions that limit and define the process;
the results achieved can be measured through agreed indicators.

Each project has 3 key dimensions – budget, time and quality – that must be balanced for successful project management. Therefore, the main task in project management is to maintain a balance of these measurements - to meet the allocated budget, while not going beyond time limits and ensuring acceptable quality. Hence the 3 main signs of project failure:

the project did not meet the budget;
the project took longer than planned;
the project was completed within the budget and the scheduled time, but does not meet the quality.

There is no one "right" way to manage a project. Traditional approaches to project management focus on technical aspects, and the influence of people on the implementation of the project is often given less attention. However, it is the people who order and support the projects, so the leadership, motivation and management of the people involved in the project are just as important as the use of appropriate planning, control and monitoring methods.

Common shortcomings in the implementation of projects:

the team had doubts about the goals of the project;
the team wasn't sure what needed to be done;
by the end of the project, the objectives had been only partially achieved;
the work was carried out later than scheduled;
the planned budget had been exceeded;

Based on their research, Albake and Thomas pointed out 10 factors that many identify as critical to the success of the project (arranged according to priorities):

clearly defined goals;
clear planning and control;
high qualification of the project manager;
good administrative support;
sufficient time and resources;
fulfillment of their obligations by all participants;
wide involvement of consumers;
good communications;
good organization and structure of the project;
the ability to terminate the project.

Define project boundaries

The project begins with an idea and arises with the aim of satisfying human needs. The idea is to do something that seems necessary. Transforming an idea into a project begins with understanding the nature of need as a driving force. Therefore, needs are the main driving force behind the project.

3 phases in determining needs:

Needs afflicted – all stakeholders must anticipate and anticipate needs by responding proactively;
Recognition of needs – awareness of needs through information gathering and discussion with the AP. The main task at this stage is to turn the emerging need into goals that will begin to determine the results of the project;
Formulation of needs – clarifying the understanding of the need through a more accurate description of its characteristic features. The wording of what needs to be done, i.e. the definition of boundaries, the wording of the draft.

Problems of insufficiently precise definition of needs:

unclear goals;
unrealistically wide scale;
solving incorrectly posed problems;
contradictory goals of change for people, systems, organizations;

loss of time to perform tasks that are not part of people's responsibilities, are optional or impossible.

In order to understand the scope of the project, it is necessary to have the following information:

Who are the stakeholders (AP) and what are their needs in the project?
What are the goals and objectives of the project and how are they going to be implemented within the relevant resource and time constraints? (purpose and purpose)
What are the opportunities of the project and the threats for its successful implementation?

AP and their needs

The most important APs for the project are:

Project Patron – a person or group of people who initiate and support the project, provide resources and entrust you with its implementation;
Project team – a group of people who are ready to perform the tasks and carry out the necessary activities; 3.Functional managers and other people who manage the resources you need and have experience and knowledge useful for you;
Influential people or groups who are likely to be affected by the project or its results

Depending on the specifics of the project, many other groups or individuals may be interested in it:

consumers, buyers, users of goods and services;
other employees of the organization (from this or another unit);
managers and personnel of partner organizations;
top management of your organization;
shareholders and their representatives;
MASS MEDIA;
competitors;
public and public figures, if the project arouses wide public interest.

Once the main APCs have been established, this information should be used in order to provide the project with the greatest possible support. It is imperative to check how people react to the project before other options for its implementation are excluded in the planning process. If this opportunity is fully exploited, the project team will become aware of many potential obstacles and will be well informed about each group's priorities. One way to understand the reactions of different AAs is to analyze their perspectives on each of the key dimensions of the project – budget, time and quality.

Definition of the purpose and objectives of the project

The purpose of the project is a broad concept and can be correlated with the mission and values of the organization, while the goals of the project define more precisely what they seek to achieve when implementing the project, and how its success can be determined.

Objectives must meet smart criteria:

specific – i.e. you must be clear about what you want to achieve;
measurable – you must develop criteria to measure the process of achieving the goals;
achievable – i.e. you must be confident in achieving your goals in the existing environment and with the available resources;
realistic – i.e. you should not try to achieve the impossible;
timebound – i.e. the deadlines for achieving the set goals should be dictated by real needs

The goals set make it possible to identify the steps by which the purpose of the project can be realized and not to allow you to stray from the right path; be used to make sure that the project fits well into the activities of the organization.

Clarity of purpose is important for understanding what needs to be done. If clear goals are set, it means that there is a certain system of views on the final result. Based on the objectives set, the project is structured so that it can be effectively monitored and managed, but sometimes there is a need to revise the objectives, since new circumstances may arise during the implementation of the project that are unknown at the planning stage. Therefore, the goals should not be "stone".

Opportunities and threats

Exploring opportunities and threats at the initial stage of a project can be important to determine its scope. Ongoing discussions with the AP can reveal many potential opportunities and threats associated with a project. Risk management (possible threats to the project) will be discussed below.

Checking the feasibility of the project

The purpose of feasibility testing is to determine whether the required outputs or results will be achieved using available resources. During the verification process, the following aspects are considered:

financial - conducting a comparative analysis of the resource costs of the project along with the estimated profit and costs that may appear if the project is not implemented;
technical – determining how the new system will relate to existing systems, whether the organization and employees will be prepared to work with the new technology, and how to manage the transition process.
the influence of the external environment and society - the concern of the AP about the influence of the external environment, the impact of the project on the internal environment and local social conditions;
management - the study of resources for new practical activities, including the need for new employees or training of existing personnel, changes in terms and conditions of work, as well as the principle of equal opportunities;
value – the study of motivational and cultural issues in order to make sure that the project
will be supported both in terms of the processes used and in the sense of the expected results.
Determine the value of the project for the organization will help the following questions:
what is the business reason to complete the project?
how will the project contribute to the overall goals of the organization?

Costs and benefits for project evaluation

To prepare a project budget, financial costs are divided into two main categories:

development cost - costs that arise in the period between the beginning of the project and the moment when production is started. They are common to all projects and usually involve the cost of the project team.

operating costs - the costs that arise with the start of production and ensure the maintenance of this process (for example, daily consumables, capital used). They do not occur in a project in which a product is sold once immediately after the project is completed.

The benefits in project management are divided in the same way as in financial accounting into:
tangible benefits – direct, visible, and measurable benefits, usually based on cash flows that enter the organization or no longer leave the organization.

intangible benefits – indirect, uncertain and less easily measurable from a financial point of view benefits (higher quality of service, increased range).

Your grades should include:

costs and revenues that entail monetary exchange;
alternative income and costs, such as the sale of assets that could bring a certain income;
loss of revenue or increased costs due to the diversion of staff or consumers of the service that have appeared in connection with the project;
savings resulting from the replacement of less efficient systems with new ones envisaged in the project.

Evaluating a project provides an opportunity to clarify whether the cost of project deliverables will exceed the cost of resources used for the project. However, it is very important to evaluate the project not only from an economic point of view – the project should be considered in the context of the purpose of the organization, its political and social responsibilities and concerns, its strategic direction and how the market or public opinion will react to the organization's decision to start the project.
Despite the fact that projects have certain unique characteristics, most of them have a similar financial structure – the cost of development must be paid before receiving revenue, i.e. a temporary source of money is needed.

In short-term projects, the question of costs and benefits is solved quite simply. In more complex cases, especially in the presence of intangible benefits, it is necessary to make judgments based on a comparison of values. Many projects have either a large interval between payments and receipts, or the need for a large advance, or both. With the financial t.z. money, more precisely the capital that needs to be invested in the project to pay for the cost of development, can be established, since it is usually attracted from external or internal sources. Its cost is included in the feasibility assessments of the project, as well as in the budgets and reports for the project. To assess the financial cost of the project, there is no need to distinguish between profit and cash flows, you can concentrate only on the analysis of cash flows.

There are several methods for estimating cash flows for a project (they will not be discussed in detail here):

Net Present Value (NPV);
Internal rate of return (IRR);
Payback period;
Cost-effectiveness analysis.

Risks and situational planning

Risk – the possibility of an adverse impact on a project, OR an event or situation that could endanger all or part of the project. Risks can be internal, i.e. arising within the project, and external, arising from the very context or environment of the project.

There are 4 stages of risk management:

Risk identification – determining which risks may affect the project and describing the characteristics of each of them.
Impact assessment – An assessment of risk in terms of the range of possible outcomes relating to projects and the potential impact of each.
Plan backup options to reduce the impact of the most likely risks.
Ensuring that risks are always in sight.

The main risk categories are:

material risks – the possibility of loss or damage to information, equipment or buildings due to an accident, fire or natural disaster;
technical risks that arise when systems do not work or do not work well enough to obtain the necessary results;
personnel risks – the likelihood of non-participation of key employees in the implementation of the project or the lack of qualified personnel;
socio-political risks arising when a project is deprived of support due to a change of power, changes in the policy of the top management of the organization or protests from the public, the media, service users or staff;
legal risks – the threat of legal action due to the fact that some aspects of the project may be considered illegal.

There are several ways to identify risk. This is primarily a discussion of the project with the AP and consideration of various prospects, during which individual AIs may see threats to their interests. It is very important to assess the risk at each stage of the project and plan possible ways to reduce its impact. Where risk can be foreseen, it is necessary to develop a situational plan that can be applied if the risk situation is realized.

Risk Assessment and Impact Analysis: Key Questions

Risk assessment – measurement of the probability of turning risk into reality; Impact analysis – measuring the sensitivity of a project to each specific risk. The key questions are as follows:
what is a risk – how do i know it if it arises?
what is the probability of its implementation - high, medium or low? how serious a threat does it pose to the project – high, medium or low?
what are the signs or causes of risk that we should look for?

Risk management strategies:
Avoidance of risk – for example, refusal of the contract;
Risk reduction – for example, regular inspections can reduce the likelihood of producing a low-quality product;
Risk protection – for example, insurance against possible accidents;
Risk management – for example, the use of written agreements in those areas of activity where disagreements are possible;
Risk transfer – for example, transferring responsibility for performing a risky task within a project to another organization that has more experience.

At the initial stage of the project, it is necessary to keep a risk log, in which you need to indicate the description of the risk, the degree of its impact (strong, weak), the probability of occurrence (high, medium, low) and the action that must be taken when the risk occurs.
The situational plan is precisely what is needed in order to foresee in advance the response to potential crisis situations. Its goal is to ensure compliance with the balance of the budget, timeliness and quality of work on the project.

Basis for project actions

After the purpose and objectives of the project have been considered and discussed, as well as after checking its feasibility, it is necessary to develop a document that is the basis for project actions. This document should indicate the starting point for all future work on the project and will be the basis for conclusions on whether the project was successful in the end or not. Sometimes this document is called a project contract, but often it contains specific information in the form of a summary of the project. It is usually created by the project manager, but it is very important that it is discussed with the patrons of the project and all the main AIs. It should fix an agreed point of view on the key characteristics of the project:

expected results;
the resources that will be invested to achieve these results;
the time it takes to achieve these results.

A typical project summary provides a detailed description of both the objectives of the project and practical recommendations for achieving its results. It should briefly state the agreements on which the project is based, and thus it offers a rationale for spending time and effort.

List of summary headings:

Name of the project;
Patron of the project;
Location – patron's address, project location, contact addresses;
The name of the project manager and the name of his organization, if it is different from the organization sponsoring the project;
Date of approval of the resume with the patron of the project;
The start and end date of the project;
Justification and purpose of the project with an overview of the main ideas;
Main objectives with quality and success criteria;
A detailed description of how achieving these goals will benefit the business or organization sponsoring the project;
Scope and boundaries of the project;
Limitations;
Assumptions;
Project schedule;
Key results and their corresponding dates (project milestones);
Cost estimation;
Mechanisms for securing resources;
Reporting and monitoring mechanisms;
Decision-making mechanisms – powers and accountability of the project manager and renegotiation;
Mechanisms and channels of communication;
Signature of the patron of the project indicating the date, rank and position

Conclusion

In this article, as briefly and specifically as possible, the theoretical foundations of the project preparation stage were considered. For this purpose, the literature of the MIM LINK School of Business, of which the author is a graduate, was used. In the training course of this school, the six-stage project management model is studied in detail, and if there is interest from the hub industry, it will be possible to continue the series of articles on this topic.