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Summary - Financial and Project Management
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Summary for Financial and Project Management.
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Guest LectureRelevance of this course:
- Societal relevance: projectivization of society / economy (production/innovation/social
change/development/wicked problems.)
- Professional and personal relevance:
- Professional skill development.
- Learning financial and project management language, skills, and tools.
- High chance you will work on projects.
Projectivization of society: everything is built up from projects.
- Even self-employed work in projects.
Temporary systems:
- Project: an organizational form; distinctions among organizational forms reflect social
processes and boundary creation.
- An organizational form is an entity comprising multiple people and resources with a
particular collective purpose/goal/aim.
In any organizational form two aspects of work exist:
- Project are defined as unique, temporary endeavors with a specific beginning and end
(they are time-bound).
- Operations constitute an organizations ongoing, repetitive activities, such as accounting
or production.
What is project management?
- The process and activity of planning, organizing, motivating, and controlling resources,
procedures, and protocols to achieve specific goals.
- The primary challenge of project management is to achieve all the project goals and
objectives while honoring the preconceived constraints.
- The primary constraints are scope, time, quality, and budget.
Technical skills (hard skills): scope, WBS, schedules, resource allocation.
Social science (soft skills): leadership, problem solving, teamwork, negotiations.
- Both are needed to make the project run successfully.
Temporary systems in business, science, and society are typically defined as collaborative
endeavors that are carefully planned to achieve a particular aim or task. They can be further
defined as temporary rather than permanent social systems that are constituted by teams within
or across organizations to accomplish tasks under time constraints.
- Pre-defined end point in time.
- They end once completed.
Degree of preparedness of Individual based Organization based
actors in temporary systems:
Ad hoc or spontaneous: Hastily formed
Limited Voluntary actions by (inter)organizational:
individuals and informal Initiated by non-temporary
groups. organizations.
Profession-based: Structurally prepared:
Extensive Formed by contracting Based on forecasted plans,
individual experts. tasks and resources.
PBO: project-based organization (intra organizational):
- An independent organizational form in which the project (and not a functional
department) is the primary organizational unit for economic or societal activities.
1
, - You find them in private manufacturing enterprises, also in other organizations both
public and private.
Typical PBO characteristics:
- Appropriate for complex, non-routine tasks.
- Competences and capabilities built from project to project.
- Help to adapt to uncertain, risky, and changing environments.
- Populated by integrators (commercial and technical) and brokers (to external clients).
- Project managers have high status and control over functions, personnel, and resources.
- PBO is flexible and reconfigurable.
- PBO is a series of projects.
- Often there is a close interaction between the user and producer.
Advantages of PBO:
- Well suited for innovation and learning, coping with emerging properties and demands
from clients.
- Flexibility is high and the response time to changing circumstances is relatively low.
- High employee loyalty to project goals due to short lines with project manager.
Disadvantages of PBO:
- Ill-suited for coordination of resources and capabilities across projects, routine production
activities, achieving economies of scale.
- Organizational learning often suffers.
- Danger of resource duplication across multiple projects.
- Due to across project mobility, careers and development of employees might suffer.
A project is a planned temporary endeavor undertaken to create a unique product or service or
another complete and definite outcome (deliverable) within a limited time scale a budget.
Project characteristics (the 4 t’s):
- Time: have a forecasted determined start and end.
- Objective: linear, natural, continuous.
- Subjective: cyclical, socially constructed, local.
- Temporal embeddedness (time-oriented markers used to demarcate and organize
activities).
- Chronological pacing.
- Event-based pacing.
- Entrainment-based pacing.
- Shadow of the future.
- Shadow of the past.
- Task.
- Team.
- Transition: focus on accomplishments and progression. Action orientation:
- Transforming input into output.
- Team mental models (how can we do the job).
Interorganizational temporary organizations (IOTO):
Temporary interorganizational systems of legally autonomous but functionally interdependent
firms that interact to coordinate their efforts for the accomplishment of a joining outcome in a
limited amount of time.
What is financial management?
Manufacturing (permanent organization) Construction (temporary organization)
- No designated purchaser. - Designated purchased.
- Design and production before mass - One-off design and production after
sell. sell.
2
, - Expectation (indirect) sell. - Certainty of sell.
- Producer risk: market is not - Producer risk: complexity and interest
competitive enough. of many stakeholders.
- Cash flow refers to the net balance of cash flowing in and out of an organizational unit
at a specific point in time.
- Liquidity: indication of the extent to which an organization can meet its short-term
financial obligations (influenced by cash flows).
- Solvency: indication of the extent to which an organization can meet its obligations
towards its creditors in the event of bankruptcy (value assets > value debts).
The cash flow:
- Links to the income statement and balance sheet by showing how much money was
generated or spent on operating, investing, and financing activities over a given period.
- Patterns of projects are very different from for example manufacturing.
- Impacts liquidity and solvency.
- It decides the performance and survival of the organization.
Project cash flow problems:
- Client does not pay on time during project phases.
- Suppliers can’t be paid on time.
- Not delivering quality as promised.
- Cash flow problems one project impacts another project.
- These project-specific cash flow problems impact liquidity and solvency.
Intra-organizational is between 2 or more organizations.
Inter-organizational is within one organization.
FM and PM are important for each other because:
- Project involve high levels of uncertainty.
- Thus, planning and cost estimation are difficult.
- Consequence: many projects tend to fail to achieve their goals, overrun, and are too
expensive.
- Therefore, it is essential to not only think about operational or project management but
also understand the financial picture.
- As a result, uncertainty levels can be lowered, countered, or even eliminated.
PM Lecture 1
A project is a temporary endeavor undertaken to create a unique product, service, or other result
of value.
- Temporary: definite beginning and end and using temporary team to create the
deliverables.
- Unique: different in some distinguishing way (deliverables provided, stakeholder influences,
resources, constraints, etc.).
- Result: the deliverable of the project that must be provided within a limited time scale
and budget.
- Value: deliverables must be fit for the purpose and provide benefits.
3
, Measure projects in time, cost, and deliverables (what is delivered and how well they are
understood and used) + scope (what is part of the project and what is not a part of the project).
- Quality can refer to the quality of scope and the quality of deliverables.
Often one of the three has the priority, this is often (but not always) scope and deliverables.
- Money is not a resource, but it’s a way of managing resources.
Who do projects fail?
- Organizational issues (attitudes, practices, and structure), we have little influence on this.
- Poor identification and management of needs and requirements.
- Poor planning and control..
- Manageable deliverables: created mainly for the management of the project (like a
budget).
- Specialist deliverable: deliverable is in your area of specialty.
Value creation framework:
- You need to evaluate the opportunities to select the best and most feasible ones.
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