Project Management for Small Business: A Streamlined Approach from Planning to Completion

By Joseph Phillips

Project management can help companies become more efficient and profitable. But as a seasoned project management consultant, educator, and writer, author Joseph Phillips teaches that the how of successful project management looks different for every business. Grounded in years of his real-world experience, Project Management for Small Business introduces readers to the core principles and techniques of project management adapted and simplified to be most effective for smaller enterprises. With repeatable practices for planning, executing, and controlling projects in an environment where one team member may be wearing multiple hats, this practical how-to helps you avoid the potentially devastating effects of wasted time and materials. Among many other useful skills, you’ll learn how to define project requirements and scope; create a project schedule based on resource availability; estimate and budget for project costs, identify and minimize project risks; manage workflow; communicate effectively; and control project change. Classic project management models often prove too cumbersome for smaller businesses with limited staff resources, tight budgets, and next to no time to devote to learning a complex new system. Project Management for Small Business skips the complicated theory and goes straight to the heart of what it really takes to make a project--and your business--a success.

• Language: English
• Publisher: Thomas Nelson
• Release date: Nov 7, 2011
• ISBN: 9780814417683

Joseph Phillips

JOSEPH PHILLIPS, PMP is a project management consultant, instructor, and owner of Project Seminars, Inc. and Instructing.com. He is the author of several project management books, including PMP: Project Management Professional Study Guide and IT Project Management: On Track from Start to Finish.

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ISBN: 978-0-8144-1768-3 (eBook)

Library of Congress Cataloging-in-Publication Data

Phillips, Joseph.

Project management for small business : a streamlined approach from planning to completion / Joseph Phillips.

        p. cm.

Includes index.

ISBN-13: 978-0-8144-1767-6

ISBN-10: 0-8144-1767-1

1. Project management. 2. Small business—Management. I. Title.

HD69.P75P4947 2012

658.4′04—dc23

2011033457

© 2012 Joseph Phillips.

All rights reserved.

This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019.

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American Management Association (www.amanet.org) is a world leader in talent development, advancing the skills of individuals to drive business success. Our mission is to support the goals of individuals and organizations through a complete range of products and services, including classroom and virtual seminars, webcasts, webinars, podcasts, conferences, corporate and government solutions, business books and research. AMA’s approach to improving performance combines experiential learning—learning through doing—with opportunities for ongoing professional growth at every step of one’s career journey.

Printing number

10   9   8   7   6   5   4   3   2   1

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Please note that footnotes in this ebook may contain hyperlinks to external websites as part of bibliographic citations. These hyperlinks have not been activated by the publisher, who cannot verify the accuracy of these links beyond the date of publication.

For my parents, Don and Virginia Phillips,

who were entrepreneurs and business owners

for as long as I can remember.

Contents

INTRODUCTION

CHAPTER 1: THE BUSINESS OF PROJECT MANAGEMENT

Defining Projects

The Triple Constraints of Project Management

Moving Through a Project Life Cycle

Exploring the Project Management Life Cycle

Linking Quality to Profit

The Possibility of Very Profitable Projects

CHAPTER 2: INITIATING A PROJECT

Defining the Project Purpose

Considering the Internal Costs of Project Initiation

Evaluating and Selecting Projects

Completing Projects for Others

Managing Projects for Customers

Creating a Project Statement of Work

How Procurement Works

Choosing a Contract Type

CHAPTER 3: PLANNING A PROFITABLE PROJECT

Gathering the Project Requirements

Creating the Project Scope Statement

Developing the Work Breakdown Structure

Producing the Project Activity List

Selecting Your Project Management Software

Building a Project Management Plan

CHAPTER 4: MANAGING PROJECT COSTS

Building a Cost Management Framework

Creating Project Cost Estimates

Creating a Chart of Accounts

Utilizing Estimating Methods

Spending the Project Budget

Controlling Project Costs

Examining the Cost of Quality

CHAPTER 5: SCHEDULING PROJECT WORK

Linking Schedule, Costs, and Scope

Creating the Project Schedule

Sequencing Activities

Developing the Schedule

Compressing the Schedule

Controlling the Schedule

CHAPTER 6: CONTROLLING THE PROJECT

Protecting the Project Scope from Changes

Controlling Costs

Managing the Schedule

Creating a Project Change Control System

Controlling Project Quality

CHAPTER 7: MANAGING PROJECT RISK

Exploring Risk and Reward

Identifying and Documenting Project Risk

Analyzing Risk Events

Creating Risk Responses

Monitoring and Controlling Project Risks

CHAPTER 8: COMMUNICATING WITH PROJECT STAKEHOLDERS

Identifying Project Stakeholders

Analyzing Stakeholders

Establishing a Communications Management Plan

Tracking and Reporting Project Performance

Conferring with Stakeholders

CHAPTER 9: MANAGING PROJECT WORKFLOW

Exploring Your Project Work

Identifying the Phases of the Project

Identifying and Managing Cost-Laden Project Phases

Managing the Project Team

Coordinating Efforts

CHAPTER 10: CLOSING A PROJECT

Completing Scope Verification

Managing Project Claims

Closing Project Procurements

Officially Closing the Project

Rewarding the Project Team

Managing Invoices and Project Payments

INDEX

Acknowledgments

Books, projects, and small businesses are rarely a solo act. So many people contribute to the final deliverable, the final product. Thank you to my editor Robert Nirkind for having faith in me and this book. I appreciate your guidance and keen direction. Thank you also to James Bessent for his hard work and organization in this book. Thank you to Alice Manning for helping my writing shine.

I’m so fortunate to have so many friends and colleagues who have cheered me on in my businesses, my writing, and in my life. Many of my friends, like me, own small businesses and we’ve collaborated and commiserated on the life of a business owner. Thank you to Jo, Andy, and Mike Diaczyk for your friendship, business talks, and lots of good wine. Thank you to Andrea Hancock Deer for your spark. A big thanks for my friends that have cheered me on during the writing of this book: Curt Farris, Angela and Carl Richter, Duane Schoon, Fred and Carin McBroom, Greg and Mary Huebner, Lamont Hatcher, Jonathan Acosta, Jennifer Real, Jennifer Hatfield, Greg Kirkland, John and Cara Sutherland, Don Kuhnle, Norm and Paulette Tarantola, and many more than what’s reasonable to include here. Finally, thanks for my brothers Steve, Mark, Sam, and Ben for listening, reading, and being fairly good brothers.

Introduction

Managing a project isn’t that different from managing a small business. There are objectives to accomplish, employees to manage, costs and schedules to control, and customers to keep happy while keeping a constant eye on the budget as well. But projects are also different from small businesses in the sense that they are temporary: You get the contract, do the work, close the project, and get paid. Your vision, expertise, and dedication to quality all contribute to the success of each project and, ultimately, to the profits realized by the company.

If managing projects was easy, they wouldn’t be late, over budget, or plagued by issues and defects. It’s frustrating and disappointing, I know, when you believe that you and your team have created a solid plan, only to have it unravel during its execution, leading to wasted materials, activities taking longer than necessary to complete, and project profitability shrinking along with the customer’s confidence in your business. What was once seen as an opportunity can morph into a situation in which you’re just hoping to finish the job and break even.

Good projects can be challenging and stimulating, and can provide a tremendous sense of accomplishment for all involved. Successful projects don’t happen by accident, however. They are the result of a knowledgeable project manager, a mature project team, and a clear vision of what the project is intended to achieve.

Most project management philosophies are rife with processes, forms, paperwork, meetings, and analysis. While these approaches are often necessary for large, unwieldy projects, they are not practical for small businesses. If you are reading this book, chances are that your business doesn’t have the resources to implement a complex methodology. You just need the essentials—a streamlined approach that strips out all of the fat that is inherent in the operations of large, slow-moving companies and arms you with the project management muscle that you’ll need to get the project done and then move on to the next opportunity.

Project Management for Small Business offers a proven system that will help you launch and complete more profitable projects. Written specifically for small-business owners, project managers, and project team members, it shows you how to plan the project quickly, manage the costs involved, schedule the work, deal with potential risks, communicate with stakeholders, control the workflow, and close the project when the work is completed.

While the approach that I offer in this book is simple, that doesn’t necessarily mean that it’s easy. What I recommend will take some time to implement. You can tackle the entire framework proposed, or you can pick and choose the tools that you believe will work for you or your company. I’ve identified the most essential project management duties to implement in order to ensure more successful projects. Embrace this approach, and you’ll be able to spend more time growing your business, leading more efficient and effective project teams, and working as a project team member on well-run projects.

CHAPTER 1

The Business of Project Management

BUSINESSES EXIST FOR ONE PRIMARY PURPOSE: to make money. They may have lofty goals and vision statements, and they may want to do good while earning a profit, but the fundamental reason for their existence is to make money. Successful businesses provide goods and services that people and other companies will willingly pay for. The culture of business is an exciting blend of competition, accuracy, risk, and a concerted effort to achieve more than just profit.

Projects have a purpose as well: to get things done. They are temporary creative endeavors that have a definite beginning, action, and an ending. Projects are a conduit that enables businesses to reach their goals, achieve their visions, and increase their market share. It’s not difficult to see the connection between successful projects and profit. When projects are managed properly, profits increase, businesses can grow, and stress diminishes. There’s a distinct difference between simply managing a project and managing a profitable project.

Massive, bulky companies follow stodgy, cumbersome methodologies for project management. In this book, I am sharing my lean, mean, and proven approach to project management for small businesses. When I talk about project management for small businesses, what I’m really talking about is people and the four specific roles they play in a project. Each role owns a portion of the project, and it’s possible for a single person to play more than one role.

The most important role that is played in a project is that of the project customer. Customers are the reason why businesses and projects exist. Customers ask businesses for products and services in exchange for money—it’s a simple concept. In project management, it’s all about keeping the customer happy by doing what was promised. If you want profitable projects, and I know you do, then focus on what the customer wants to buy.

The second role in project management for small businesses is played by the people on the project team. The team members are the employees who do the work on the project. They are the people who have the most sway over the quality of the project, the project schedule, and the project costs. As a project team member doing the actual work, you have considerable responsibility on your shoulders, because people are depending on you to do the work properly. You are a direct link between what the project customer receives and the profitability of the company.

The third role is played by the project manager. The project manager is the person who oversees the coordination of all the project activities. She is the hub of planning, decisions, communication, and project discipline. She is the intermediary among the project customer, the project team, and the business owner. As the project manager, you’ll work with the project team, help the project customer, and report the performance of the project to the business owner.

The final role in the project is played by the business owner. The business owner carries the stress and responsibility of dealing with payroll, taxes, insurance, and overhead costs, and is always looking for new sales to keep the business afloat and growing. As the business owner, you’ve identified a need for your product or service, you’ve marketed your ability to satisfy that need, and you’re doing the work—all while balancing the opportunity against the cost of that opportunity. In other words, you don’t want to work for free and keep pouring revenue into a business that’s not creating a profit.

And, of course, you’ve invested more than just cash into your venture; you’ve invested your energy, your passion, and yourself. You’re taking energy that could be spent with your family and friends, from hobbies and leisure, and often from everything else you have, and you’re investing it all in your business. Remember when you first started? All you could think of was the opportunity to be your own boss, enjoy the freedom, and control your destiny. Now, however, running a business is more than a personal passion and a dream come true; people are counting on you and depending on you, and they’re demanding that you deliver on your promises. Owning and operating a business isn’t easy; if it were, everyone would do it.

The project customer may pay for the project, but the project team members, the project manager, and the business owner all contribute to its success or failure. The project team members, project manager, and business owner must work together if the project is to be a success. The integrated efforts of these three roles allow a project to be profitable, allow people to earn wages, and allow a business to grow and be sustainable. Get this lesson right away: In project management, there must never be an us-against-them mentality. Harmony and respect among these project roles will contribute to far greater project success than the best of plans laced with blame, contempt, and spite.

In this book, I’m addressing you the business owner, you the project manager, and you the project team member. You must understand and acknowledge how projects operate, how your roles are interdependent, and how the project customer is depending on you. Each person involved in the project has responsibilities that affect how well other people can do their jobs. There must be a commitment to do the correct work correctly, and a determination to be dependable, and to depend on others. While it’s easy to see these three roles in project management as a chain of command, it’s better to see them as pieces in a jigsaw puzzle. The business owner, the project manager, and the project team are all reliant on one another.

In your company, you might call your projects jobs, assignments, contracts, or some other name. Let’s be clear: A project is a temporary endeavor to create products, provide a service, or create a desired condition for other people. Projects have a definite beginning and a definite ending. They are unique in that they are not part of the day-to-day grind of operations, like bookkeeping and assembly lines. Projects are about creating. At the end of the project, you can step back, admire your work, and see the project’s vision realized and utilized. You’ve ushered the endeavor from concept, through execution, and finally to closing. Projects allow you to take an idea and move it from the ether into reality.

Projects can go to the heart of your company: The project work allows you and others to earn a living. When you’re completing the project work, there’s passion linked to the energy that the project requires. Most people love the actual creation of the project, but often despise the minutiae of project management.

As a project management consultant, I’ve often heard people say, Who has time for project management? Let’s just get in there and get the work done. But then, when planning isn’t handled properly, or when risks creep into the project, or when team members don’t understand their assignments, the project begins to fall apart. Yes, you can complete projects without project management, but project management increases the odds of successful, repeatable, and profitable projects. Project management takes time and energy, but it rewards you with control, documented plans, and an organized, focused attack. Do you want to increase profits, achieve more, and reduce frustration? Embrace project management.

Are you scared of project management? I’ve consulted with plenty of businesses where the underlying problem isn’t project management itself, but the fear of it. I have some good news for you: I understand that you don’t have the time or the desire for an elaborate, complicated approach to project management. My approach is a logical system that creates quick results, builds momentum, and increases profits. Small businesses can use this streamlined approach to get more done, win more projects, have more energy while they’re doing the work, and spend less time managing the work, frustration, and stress of project management.

When you and the members of your project team know what activities will occur and in what order, projects can get done faster and more efficiently. When you have more control, better communication, and more effective project organization, projects become more profitable. You’ll find you’re capable of doing more, delegating more, and earning more. Yes, it takes some time to adapt the project management processes, but you’ll begin to see benefits right away.

Defining Projects

What types of projects do you deliver? Are you providing a service, like hosting conferences and trade shows? Or are you providing products, like manufacturing special equipment? Or are your projects more of a hybrid, where you’re both providing a service and building a product, such as wiring a building for network connectivity, installing the computer hardware, and selling the IT equipment? All projects, regardless of your industry, can use this streamlined approach to project management.

The Triple Constraints of Project Management

At the foundation of all projects is the project scope. The project scope is a document that defines all the things the project must create in order for it to be considered done and acceptable to your customer. In some projects, the scope may be in the form of a statement of work, while in others, it may be an actual document called the project scope statement. In either case, it’s a document that defines what the customer expects your company to do for it. Complete what’s in the scope and your customer will be happy and you’ll be paid.

PROJECT COACH: I’m providing an overview right now; I’ll go into detail on the project scope statement in Chapter 3. Just know that the project scope defines all the project work that you’ll complete for the customer.

Once you and the customer have finalized the project scope, you’ll need to factor in two other facets of project management: time and cost. You and your customer will negotiate both of these project constraints, but basically there must be enough time and enough money to fulfill the obligations of the project scope. It’s unreasonable for a customer to demand a project scope to build a mansion with a toolshed budget and an afternoon-long schedule.

The balance of time, cost, and scope is called the triple constraints of project management, although some people call it the iron triangle of project management. In Figure 1–1, notice how the three constraints are in balance with one another. If any constraint isn’t in balance with the others, you won’t have a successful, profitable project. If any constraint grows, you’ll need to add more to the others; for example, if there are additions to the project scope, you’ll need to add more time and probably more money to maintain the balance.

Figure 1–1. The Triple Constraints of Project Management. Projects must balance time, cost, and scope if they are to be successful.

Figure 1–1. The Triple Constraints of Project Management. Projects must balance time, cost, and scope if they are to be successful.

Moving Through a Project Life Cycle

Projects are like snowflakes: No two are alike. Sure, projects can be similar, and you may do the same type of projects over and over for various clients, but there are different characteristics that make each project unique. The project requirements, the customer, the location, and even the team completing the work are all distinctive elements that distinguish one project from another. It’s the uniqueness of each project that demands your attention.

Consider the sorts of projects handled by an IT integrator, a furniture manufacturer, and a construction company. All of the projects carried out by these businesses have countless combinations of requirements, people, and objectives. All of them move through a unique project life cycle. A project life cycle describes the phases that a project moves through that are unique to that project: the project launch, project work, and project conclusion. For example, consider the phases in a construction project to build a new home, as shown in Figure 1–2:

Preconstruction: planning, design, and approval of the construction project

Site work: preparing the construction site for the actual build

Foundation: creating the construction foundation as planned

Framing: building the skeleton of the home

Rough-ins: installing the heating and cooling systems, electrical work, and plumbing systems

Figure 1–2. Project Phases. Projects are made up of phases that move the project toward completion.

Figure 1–2. Project Phases. Projects are made up of phases that move the project toward completion.

Interior finishes: finishing the walls, doors, trim, cabinets, flooring, fixtures, and appliances

Exterior finishes: siding such