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69-413: The hurdle rate is frequently used as a synonym of cutoff rate, benchmark and cost of capital . It is used to conduct preliminary analysis of proposed projects and generally increases with increased risk. The hurdle rate is usually determined by evaluating existing opportunities in operations expansion, rate of return for investments, and other factors deemed relevant by management. As an example, suppose

138-414: A cartridge replaced the manual loading. Now, with standardized production of both the high-precision rifle and its cartridge, the marksman's accuracy became the bottleneck. With different qualities and specifications on rifles and ammunition, there grew a need to test both. The rifled weapon was fixed in a bench, making it possible to fire several identical shots at a target to measure the spread. In 2008,

207-489: A comprehensive survey on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centres representing 22 countries. There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to the emergence of benchmarking methodologies. One seminal book is Boxwell's Benchmarking for Competitive Advantage (1994). The first book on benchmarking, written and published by Kaiser Associates,

276-658: A drastic decrease in costs for each company (by cost sharing) and the development of efficient tools (standards, software). Benchmarking can be internal (comparing performance between different groups or teams within an organization) or external (comparing performance with companies in a specific industry or across industries). Within these broader categories, there are three specific types of benchmarking: 1) Process benchmarking, 2) Performance benchmarking and 3) Strategic benchmarking. These can be further detailed as follows: Benchmarking software can be used to organize large and complex amounts of information. Software packages can extend

345-421: 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,

414-486: A manager knows that investing in a conservative project, such as a bond investment or another project with no risk, yields a known rate of return. When analyzing a new project, the manager may use the conservative project's rate of return as the MARR. The manager will only implement the new project if its anticipated return exceeds the MARR by at least the risk premium of the new project. A risk premium can also be attached to

483-431: A peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices. In project management benchmarking can also support

552-406: A positive net present value using the MARR as the discount rate. The MARR is the target rate for evaluation of the project investment. This is accomplished by creating a cash flow diagram for the project, and moving all of the transactions on that diagram to the same point, using the MARR as the interest rate. If the resulting value at that point is zero or higher, then the project will move on to

621-426: 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 in shorter times with reduced errors. Under BRM, the agreement might be to achieve a specified reduction in staff hours and errors required to process and maintain staff data after the system installation when compared without the system. Critical path method (CPM)

690-417: 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 of a project's success Monitoring and controlling consist 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

759-459: 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 . Project management relies on a wide variety of meetings to coordinate actions. For instance, there is the kick-off meeting, which broadly involves stakeholders at

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828-454: A significant impact on benchmarking. Here are some of the benefits associated with this. Project management Project management is the process of supervising the work of a team to achieve all 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 and budget . The secondary challenge

897-430: A very different discipline. For example, project managers have a key role in improving the translation even when they do not speak the language of the translation, because they know the study objectives well to make informed decisions. Similarly, research study management can also apply a project manage approach. There is public project management that covers all public works by the government, which can be carried out by

966-422: Is PRINCE2 . 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: In project environments with

1035-412: Is a practical guide and offers a seven-step approach. Robert Camp (who wrote one of the earliest books on benchmarking in 1989) developed a 12-stage approach to benchmarking. The 12 stage methodology consists of: The following is an example of a typical benchmarking methodology: The three main types of costs in benchmarking are: The cost of benchmarking can substantially be reduced through utilizing

1104-522: Is a significant factor in determining the payback period for the capital project when discounting forecast savings and spending back to present-day terms. Most companies use a 12% hurdle rate, which is based on the fact that the S&;P 500 typically yields returns somewhere between 8% and 11% (annualized). Companies operating in industries with more volatile markets might use a slightly higher rate in order to offset risk and attract investors. The hurdle rate

1173-415: Is always higher (usually significantly) than the cost of capital - since generally no project is undertaken by a for profit entity that does not have an expected rate of return higher than the cost of capital (i.e., a profit) and every project has risk ( which must be compensated for). When a project has been proposed, it must first go through a preliminary analysis in order to determine whether or not it has

1242-402: Is an algorithm for determining the schedule for project activities. It is the traditional process used for predictive-based project planning. The CPM method evaluates the sequence of activities, the work effort required, the inter-dependencies, and the resulting float time per line sequence to determine the required project duration. Thus, by definition, the critical path is the pathway of tasks on

1311-401: Is an extension to the theory and practice of EVM. 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

1380-523: 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 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

1449-414: 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

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1518-470: Is famous for his use of the Gantt chart as a project management tool (alternatively Harmonogram first proposed by Karol Adamiecki ); and Henri Fayol for his creation of the five management functions that form the foundation of the body of knowledge associated with project and program management. Both Gantt and Fayol were students of Frederick Winslow Taylor 's theories of scientific management . His work

1587-407: Is frequently used as a synonym of cutoff rate, benchmark and cost of capital . Different organizations might have slightly different interpretations, so when multiple organizations (e.g., a startup company and a venture capital firm ) are discussing the suitability of investing in a project, it is important that both sides' understanding of the term are compatible for this purpose. The hurdle rate

1656-426: 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) i.e. project success but failing to deliver the benefits (outcomes) of those requirements i.e. product success. Note that good requirements management will ensure these benefits are captured as requirements of the project and their achievement monitored throughout

1725-521: Is referred to as IT project management and which specializes in the delivery of technical assets and services that are required to pass through various lifecycle phases such as planning, design, development, testing, and deployment. Biotechnology project management focuses on the intricacies of biotechnology research and development. Localization project management includes application of many standard project management practices to translation works even though many consider this type of management to be

1794-479: Is the forerunner to modern project management tools including work breakdown structure (WBS) and resource allocation . The 1950s marked the beginning of the modern project management era, where core engineering fields came together to work as one. Project management became recognized as a distinct discipline arising from the management discipline with the engineering model. In the United States, prior to

1863-472: Is to optimize the allocation of necessary inputs and apply them to meet predefined objectives. The objective of project management is to produce a complete project which complies with the client's objectives. In many cases, the objective of project management is also to shape or reform the client's brief to feasibly address the client's objectives. Once the client's objectives are established, they should influence all decisions made by other people involved in

1932-525: 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. 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

2001-505: Is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others. Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management in which organizations evaluate various aspects of their processes in relation to best-practice companies' processes, usually within

2070-426: The management of such distinct production approaches requires the development of distinct technical skills and management strategies. Until 1900, civil engineering projects were generally managed by creative architects, engineers, and master builders themselves, for example, Vitruvius (first century BC), Christopher Wren (1632–1723), Thomas Telford (1757–1834), and Isambard Kingdom Brunel (1806–1859). In

2139-415: The methodology employed, careful consideration must be given to the overall project objectives, timeline, and cost, as well as the roles and responsibilities of all participants and stakeholders . 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

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2208-408: The 1950s, organizations started to apply project-management tools and techniques more systematically to complex engineering projects. As a discipline, project management developed from several fields of application including civil construction, engineering, and heavy defense activity. Two forefathers of project management are Henry Gantt , called the father of planning and control techniques, who

2277-413: The 1950s, projects were managed on an ad-hoc basis, using mostly Gantt charts and informal techniques and tools. At that time, two mathematical project-scheduling models were developed. The critical path method (CPM) was developed as a joint venture between DuPont Corporation and Remington Rand Corporation for managing plant maintenance projects. The program evaluation and review technique (PERT),

2346-531: The Iron Triangle or Triple Constraint in order for projects to be considered a success or failure. For each type of project management, project managers develop and utilize repeatable templates that are specific to the industry they're dealing with. This allows project plans to become very thorough and highly repeatable, with the specific intent to increase quality, lower delivery costs, and lower time to deliver project results. A 2017 study suggested that

2415-412: The bow and arrow from the archer, who now had to learn to handle a gun. The new weapon left only a mark on the target, where the arrow used to be visible, and with the bow gone, the soldiers title changed to marksman , the man who put the mark. The gun improved in the early beginning with rifled barrels. With the industrialization of the weapon industry in the mid-1800s, the mass production of ammunition as

2484-668: The comparison of technical products. This process is usually referred to as "technical benchmarking" or "product benchmarking". Its use is well-developed within the automotive industry ("automotive benchmarking"), where it is vital to design products that match precise user expectations, at minimal cost, by applying the best technologies available worldwide. Data is obtained by fully disassembling existing cars and their systems. Such analyses were initially carried out in-house by car makers and their suppliers. However, as these analyses are expensive, they are increasingly being outsourced to companies who specialize in this area. Outsourcing has enabled

2553-790: The concept of benchmarking and competitive analysis by allowing individuals to handle such large and complex amounts or strategies. Such tools support different types of benchmarking (see above) and can reduce the above costs significantly. The emerging technology of benchmarking engines automates the stage of going from data to noteworthy comparative insights, sometimes even expressing the insights in English sentences. Another approach to making comparisons involves using more aggregative cost or production information to identify strong and weak performing units. The two most common forms of quantitative analysis used in metric benchmarking are data envelopment analysis (DEA) and regression analysis . DEA estimates

2622-552: The cost level an efficient firm should be able to achieve in a particular market. In infrastructure regulation, DEA сan be used to reward companies/operators whose costs are near the efficient frontier with additional profits. Regression analysis estimates what the average firm should be able to achieve. With regression analysis, firms that performed better than average can be rewarded while firms that performed worse than average can be penalized. Such benchmarking studies are used to create yardstick comparisons, allowing outsiders to evaluate

2691-405: 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

2760-471: 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 include: Two main mechanisms support monitoring and controlling in projects. On the one hand, contracts offer a set of rules and incentives often supported by potential penalties and sanctions. On the other hand, scholars in business and management have paid attention to

2829-642: The first integrated process for portfolio, program, and project management ( total cost management framework). In 1969, the Project Management Institute (PMI) was formed in the USA. PMI publishes the original version of A Guide to the Project Management Body of Knowledge (PMBOK Guide) in 1996 with William Duncan as its primary author, which describes project management practices that are common to "most projects, most of

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2898-409: The government agencies or contracted out to contractors. Another classification of project management is based on the hard (physical) or soft (non-physical) type. Common among all the project management types is that they focus on three important goals: time, quality, and cost. Successful projects are completed on schedule, within budget, and according to previously agreed quality standards i.e. meeting

2967-413: The hurdle rate if management feels that specific opportunities inherently contain more risk than others that could be pursued with the same resources. A common method for evaluating a hurdle rate is to apply the discounted cash flow method to the project, which is used in net present value models. The hurdle rate determines how rapidly the value of the dollar decreases out in time, which, parenthetically,

3036-672: The initiation stage, the project is planned to an appropriate level of detail (see an example of a flowchart ). 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 Additional processes, such as planning for communications and for scope management, identifying roles and responsibilities, determining what to purchase for

3105-422: The many internet resources that have sprung up over the last few years. These aim to capture benchmarks and best practices from organizations, business sectors and countries to make the benchmarking process much quicker and cheaper. The technique initially used to compare existing corporate strategies with a view to achieving the best possible performance in new situations (see above), has recently been extended to

3174-475: The network diagram that has no extra time available (or very little extra time)." 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 the limited availability of resources (physical, human skills, as well as management & support capacity) needed to execute projects. The goal

3243-462: The next stage of analysis. Otherwise, it is discarded. The MARR generally increases with increased risk. The MARR is often decomposed into the sum of the following components (range of typical values shown): Benchmarking Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies. Dimensions typically measured are quality, time and cost . Benchmarking

3312-405: The objective, participant list, and facilitation methods. The initiating processes determine the nature and scope of the project. 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

3381-512: 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 risks - see

3450-442: The other hand, allows for stochastic activity times; the times at which each activity will be carried out are uncertain or varied. Because of this core difference, CPM and PERT are used in different contexts. These mathematical techniques quickly spread into many private enterprises. At the same time, as project-scheduling models were being developed, technology for project cost estimating , cost management and engineering economics

3519-511: The parodying 'six phases of a big project'. 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 Image:Capability Maturity Model.jpg Project production management is the application of operations management to the delivery of capital projects. The Project production management framework

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3588-442: The performance of operators in an industry. Advanced statistical techniques, including stochastic frontier analysis , have been used to identify high and weak performers in industries, including applications to schools, hospitals, water utilities, and electric utilities. One of the biggest challenges for metric benchmarking is the variety of metric definitions used among companies or divisions. Definitions may change over time within

3657-549: 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 uses

3726-523: The principles from lean manufacturing to focus on delivering value with less waste and reduced time. There are five phases to a project lifecycle; known as process groups. Each process group represents a series of inter-related processes to manage the work through a series of distinct steps to be completed. This type of project approach is often referred to as "traditional" or " waterfall ". The five process groups are: Some industries may use variations of these project stages and rename them to better suit

3795-572: The project into compliance with the project management plan. Project maintenance is an ongoing process, and it includes: 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

3864-488: The project management plan's deliverables are executed accordingly. This phase involves proper allocation, coordination, and management of human resources and any other resources such as materials and budgets. The output of this phase is the project deliverables. 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

3933-446: The project's initiation. Project meetings or project committees enable the project team to define and monitor action plans. Steering committees are used to transition between phases and resolve issues. Project portfolio and program reviews are conducted in organizations running parallel projects. Lessons learned meetings are held to consolidate learnings. All these meetings employ techniques found in meeting science , particularly to define

4002-466: 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. While executing we must know what are the planned terms that need to be executed . The execution/implementation phase ensures that

4071-404: The project. In addition, BRM practices aim to ensure the strategic 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. These wider effects are called the strategic impact. An example of delivering

4140-423: 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 an order for the duration of the project. These tend to include: After

4209-723: The project– for example, project managers, designers, contractors and subcontractors. Ill-defined or too tightly prescribed project management objectives are detrimental to the decisionmaking process. A project is a temporary and unique endeavor designed to produce a product, service or result with a defined beginning and end (usually time-constrained, 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,

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4278-532: The role of integrators (also called project barons) to achieve a project's objectives. In turn, recent research in project management has questioned the type of interplay between contracts and integrators. Some have argued that these two monitoring mechanisms operate as substitutes as one type of organization would decrease the advantages of using the other one. In multi-phase projects, the monitoring and control process also provides feedback between project phases, to implement corrective or preventive actions to bring

4347-442: The same organization due to changes in leadership and priorities. The most useful comparisons can be made when metrics definitions are common between compared units and do not change so improvements can be changed. Social media is beginning to penetrate more and more into existing business processes. In this sense, benchmarking is no exception. Because of their inherent characteristics, it can even be argued that social media will have

4416-421: The school year to monitor student progress in some area of the school curriculum. These also are known as interim government. In 1994, one of the first technical journals named Benchmarking was published. The term benchmark , originates from the history of guns and ammunition, in regards to the same aim as for the business term: comparison and improved performance. The introduction of gunpowder arms replaced

4485-668: The selection, planning and delivery of projects. In the process of best practice benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compares the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful. According to National Council on Measurement in Education, benchmark assessments are short assessments used by teachers at various times throughout

4554-454: 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 : 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). Regardless of

4623-574: The time." Project management methods can be applied to any project. It is often tailored to a specific type of project based on project size, nature, industry or sector. For example, the construction industry, which focuses on the delivery of things like buildings, roads, and bridges, has developed its own specialized form of project management that it refers to as construction project management and in which project managers can become trained and certified. The information technology industry has also evolved to develop its own form of project management that

4692-535: Was developed by the U.S. Navy Special Projects Office in conjunction with the Lockheed Corporation and Booz Allen Hamilton as part of the Polaris missile submarine program. PERT and CPM are very similar in their approach but still present some differences. CPM is used for projects that assume deterministic activity times; the times at which each activity will be carried out are known. PERT, on

4761-601: Was evolving, with pioneering work by Hans Lang and others. In 1956, the American Association of Cost Engineers (now AACE International ; the Association for the Advancement of Cost Engineering ) was formed by early practitioners of project management and the associated specialties of planning and scheduling , cost estimating, and project control. AACE continued its pioneering work and in 2006, released

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