Masaryk University
Faculty of Economics and Administration
Field of Study: Business Management
PROJECT MANAGEMENT
DIPLOMA THESIS
Thesis Supervisor Author
Sylva Žáková Talpová, Ph.D. Dize Devrim Hacioglu
BRNO 2017
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Project Risk Management in Agile Environments: A Case Study of Morphin Company Brno, Lecture notes of Project Management
The handbook of project management : a practical guide to effective policies, techniques and processes. Rev. 2nd ed. London: Kogan Page, 2007.
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Masaryk University
Faculty of Economics and Administration
Field of Study: Business Management
PROJECT MANAGEMENT
DIPLOMA THESIS
Thesis Supervisor Author
Sylva Žáková Talpová, Ph.D. Dize Devrim Hacioglu
BRNO 2017
MASARYK UNIVERSITY
Faculty of Economics and Administration
MASTER’S THESIS DESCRIPTION Academic year: 2016/
Student: Dize Devrim Hacioglu
Field of Study: Business Management (Eng.)
Title of the thesis/dissertation: Project Management
Title of the thesis in English: Project Management
Thesis objective, procedure and methods used: The goal of the thesis is to analyze particular issue within project ma- nagement, either as a case study in a company, or qualitative or quan- titative study among larger sample of companies, or combination of both. Procedure and techniques used: The thesis will consist of two parts. Theoretical part will be devoted to introduction and discussion of concepts and methods that will be used in the practical part in order to achieve the goal of the thesis. In the practical part, these methods will be applied to a real MNE (case study) or qualitative/quantitative research will be conducted. Specifically, it will focus on a particular aspect of project management in organisations (e.g. risk manage- ment). Student is expected to define the problem and choose ap- propriate methods to reach the goal of the thesis, as well as to find a suitable company to cooperate with.
Extent of graphics-related work: According to thesis supervisor’s instructions
Extent of thesis without supplements: 60 – 80 pages
Literature: SANDØY, M., T. AVEN and D. FORD. On Integrating Risk Perspectives in Project Management. Risk Management , Vol.7, 2005, No. 4, s. 7-21. PICH, M.T., C.H. LOCH, A DE MEYER and Arnoud de MEYER. On Uncertainty, Ambiguity, and Complexity in Project Management. Journal of Advanced Management Science , 2002, Vol. 48, No.8, s. 1008-1023. ISSN 1526-5501. MAYLOR, Harvey. Project management. 4th ed. New York: Financial Times Prentice Hall, 2010. xxiv, 414. ISBN 9780273704324. MARCELINO-SÁDABA, S., A. PÉREZ-EZCURDIA, A.M.E. LAZCANO and P. VILLANUEVA. Project risk management methodology for small firms. International Journal of Project Management , 2014, Volume 32, Issue 2, s. 327-340. ISSN 0263-7863. YOUNG, Trevor L. The handbook of project management : a practical guide to effective policies, techniques and processes. Rev. 2nd ed. London: Kogan Page, 2007. viii, 295. ISBN 9780749449841.
Thesis supervisor: Ing. Bc. Sylva Žáková Talpová, Ph.D.
Thesis supervisor’s department: Department of Corporate Economy
I hereby declare that I worked out the Diploma work “Project Management” myself, under the
supervision of Sylva Žáková Talpová, and that I stated in it all the literary resources and other
specialist sources used according to legislation, internal regulations of Masaryk University and
internal management acts of Masaryk University and the Faculty of Economics and
Administration.
Dize Devrim Hacioglu
I would like to say thank you to my supervisor and all participants in the experimental part of the
present work. I would also like to thank my dear parents, Kutlu Tunca Hacioglu and Funda
Hacioglu and flat-mates, Denis and Stasya for supporting me throughout the duration of creating
my diploma thesis…
- INTRODUCTION................................................................................................................................
- PROJECT MANAGEMENT
- 1.1 Project and Project Management
- 1.2 Project Management Standards
- 1.3 Fundamental Project Management Approaches
- 1.4 Phases of Project Management Life Cycle
- PROJECT RISK MANAGEMENT
- 2.1 Role of Project Managers on Project Risk Management
- 2.2 Classification of Project Risks
- 2.3 External Risks of Today`s World............................................................................................................
- 2.3.1 High Economic Uncertainty in United States and Europe After 2008 Economic Crisis
- 2.3.2. Terrorism...........................................................................................................................................
- 2.3.3. Political Unexpected Events..............................................................................................................
- 2.4 Life Cycle of Project Risk
- 2.4.1 Identifying Risks (Phase 1)
- 2.4.2 Risk Analysis (Phase 2)
- a) Qualitative Analysis Method
- b) Quantitative Analysis Method to Estimate Probability
- c) Risk Prioritizing and Risk Exposure Determining
- 2.4.3 Risk Response/ Contingency Planning (Phase 3)
- 2.4.4 Monitoring (Tracking and Controlling) Risk (Phase 4)
- 2.4.5 Risk Response (Phase 5)
- 2.4.6 Closure of Risk
- AGILE
- 3.1 Agile Teams
- 3.2 Risks and Sprint Concept in Agile
- 3.3 Agile Trainings
- METHODS TO BE USED...............................................................................................................
- INTRODUCTION OF MORPHIN CO. AND PROJECTS IN THE COMPANY
- SURVEY RESULTS AND ANALYSIS
- 6.1 Agility on Project Risk Management Methods
- 6.1.1 Life Cycle of the Project Risks in the Company
- 6.1.2 Flexibility of Project Life-Cycle
- 6.1.3 Iteration Use on the Projects
- 6.1.4 Frequency of Team Meetings
- 6.1.5 General Team Meetings Schedule
- 6.1.6 Training Programs
- 6.2 External Risks
- Practices 6.3. Summary of the Advantages and Disadvantages of Morphin CO. Brno on Project Management
- RECOMMENDATIONS.................................................................................................................
- 8.1 Recommendations for First Line Managers
- 8.1.1 Mandatory Agile Educations
- 8.1.2 Practical In-Class Education Problem on Agile
- 8.1.3 Mandatory Implications
- 8.1.4 Motivation of Employees
- 8.2 Recommendations to Improve the Current Project Management Practices
- 8.2.1 Kick-Off Meetings...............................................................................................................................
- 8.2.2 Risk Analysis and Team Meeting Frequency Phase Improvements
- 8.2.3 Improvements on Flexibility of Project Life Cycle Through Early Detection of Project Risks
- 8.2.4 Improvements on Risk Responding Phase and Risk Tracking/ Monitoring
- 8.2.5 Risk Closure Phase Improvements
- COSTS AND BENEFITS
- 9.1 Costs
- 9.2 Benefits
- 9.2.1 Benefits on the Budget Use
- 9.2.2 Increase in Client Satisfaction
- 9.2.3 Productivity Rise
- 9.2.4 Shared Fund of Knowledge through Lessons Learned on Projects
- CONCLUSION
- BIBLIOGRAPHY
- LIST OF FIGURES.............................................................................................................................
- LIST OF GRAPHS
- LIST OF DIAGRAMS.........................................................................................................................
- LIST OF CHARTS..............................................................................................................................
- ABBREVIATION LIST........................................................................................................................
- APPENDICIES
- Appendix A: HPI in US between 2000 to 2016 (Seasonally Adjusted)
- Appendix B: Unemployment, Total (% of total labor force) (ILO Estimate)
- Appendix C: Risk Register Example
- Appendix D: Risk Register Example
- Appendix E: Task Board...............................................................................................................................
- Appendix F: Sprint Backlog
- Appendix G: Phases of Sprint
- Appendix H: Advantages and Disadvantages of PEST Analysis
- Appendix I: Risk & Issue Log in Morphin CO.
INTRODUCTION
Imagine it’s late after midnight and your car is the only one left in the parking lot. It’s there because you’re still in the office in the dark and a light beam reflects on your face, shoulders slumped, palm pressed to your forehead, deep in thought. Even though it sounds like a mysterious scene from a David Lynch^12 movie, actually it summarizes the life of a project manager. Then let`s continue with the story: You’re in the middle of a project, consumed with worry, and the fact that you’ve barely seen your bed in the past week is one indication that things aren’t going so well. Your project is a little bit out of control; you’re not sure you’ll make your deadline. Too many loose ends still need to be pinned down. Moreover, your boss has expressed reservations about how things are going. You feel isolated, the clock is ticking and you’re uncertain about what to do next.
This out-of-control project scenario plays out often in companies large and small. Halfway into a project, risks that should have been apparent start emerging. Some typical pitfalls include e.g. higher than expected risk, variable scope, need for status reports, inadequate planning, inadequate administration, poor team organization, communication problem in the team, cost problem implementing phase, countering resistance to change (Goodman, Major, Greenwood, Nokes 2008).
These pitfalls require companies to be more prepared for the risks in the projects. Even though, companies have been trying to be more prepared for the external risks in the projects recently by trying to improve the traditional project risk management methods that they have been using, this change was not enough and a more radical change is needed. On the other hand, Agile as a concept has been influencing risk management methods which makes the project managers, project management teams and project management methods more flexible during last years. When traditional methods focus on one variable in a system and hold the other variables constant, Agile methods take everything into consideration as variables in the projects. Especially, sprint concept which is based on the system of iterations throughout the project life cycle and so the project risk management life cycle is a common concept that is used as part of Agile methodology on the projects.
Agile methods are important because we are not living in an environment that everything is stable. Higher instability means higher number of factors with uncertainty and higher risk in the
(^1) David Keith Lynch (born January 20, 1946) is an American director, screenwriter, producer, painter, musician, and photographer. Known for his surrealist films, he has developed a unique cinematic style. The surreal and, in many cases, violent elements contained within his films have been known to "disturb, offend or mystify" audiences. His films aren't necessarily realistic, they are real in their representation of what life is: a confusing, irrational series of events that have little purpose, and one makes one's own interpretation of each event, giving life one's own purpose (Source: www.imdb.com, Lynch and Rodley, 2005)
traditional Waterfall project risk management and Agile risk management methods will be introduced and discussed with clarification of the differences between them. However, the main focus is going to be on Agile practices.
The next step then will to clarify the methods to be used during the practical part.
After that, the practical part of the research will structure as follow: The introduction chapter will represent introduce the Morphin CO. Brno and project management process in the company. Then the survey results and analysis chapter will show my findings during the interviews with the 25 project managers in the company and will analyze these findings. By the knowledge that is going to be obtained throughout the first three chapters, I am going to end up with the recommendations and costs & benefits of the recommendations for the company subsidiary.
Key words: Agile; external risk; iteration; project; project management; project risk management; Scrum; Sprint
1. PROJECT MANAGEMENT
1.1 Project and Project Management
Projects are important tasks for the both big and small companies but there is sometimes a tendency on people to be confused about the definitions of the four important words which are used in project management commonly: project, subproject, program and portfolio. Therefore, it is better to define these terms and understand the difference between them.
When the project and project management are needed to be defined, we see some common characteristics between the different definitions in different sources: there must be a goal to achieve; the goal would be satisfying the expectations of stakeholders in general or it can be about providing service and creating a product, they have start and end dates. For instance, a project can be defined as a temporary endeavor with a beginning and an end and it must be used to create a unique product, service or result and temporary means that every project has a definite beginning and a definite end (A Guide to the Project Management Body of Knowledge, PMI,1996). On the other hand, Weiss and Wysocki (1992) follows an explanation that defines the characteristics of a project separately as follow:
- Complex and numerous activities
- Unique – a one-time set of events
- Finite – with a begin and end date
- Limited resources and budget
- Many people involved, usually across several functional areas in the organizations
- Sequenced activities
- Goal-oriented
- End product or service must result
Finally, IPMA Competence Baseline (2006) defines a project as a time and cost-constrained operation to release a set of defined deliverables (the scope to fulfil the project’s objectives) up to quality standards and requirements.
After understanding what the project is, then next step should be to define what the project management is. According to project management is the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder objectives and expectations from a project (A Guide to the Project Management Body of Knowledge, PMI , 1996).
IPMA Competence Baseline (2006) makes a more detailed project management definition and defines it as the planning, organizing, monitoring and controlling of all aspects of a project and the
Similarly, projects and programs are different this difference has been being either ignored or sometimes confused. From the very beginnings of modern project management, the terms have been used interchangeably; for example, the Manhattan Project create two completely different atom bombs involved numerous major elements such as the construction of factories and the operation of those plants. The Manhattan Project was by all modern definitions a full blown program of work. This confusion in terms continues in many quarters to the current day (Weaver, 2010).
A program differs from a project in the two ways: First of all, a program achieves a strategy or mission by some different projects and ongoing activity. Secondly, and related to the first reason, its scope can be broadly defined or specific. Whereas, a project achieves a single set of defined objectives, has a start and a finish, and is a tactical initiative. It would consist of different sub- projects. Then it can be said that project, as a concept can be defined under a program (Buttrick, 2009). Similarly, Weiss and Wysocki (1992) clarifies the difference between a project and program by pointing out the fact that a program is larger in scope and may comprise multiple projects and supports this definition by giving an examples as follow:
- The US government had a space program that includes several projects such as the Challenger project.
- A construction company contracts a program to build an industrial technology park with several separate projects.
Related to the project, project management^3 is the planning, organizing, monitoring, and controlling of all aspects of the project in a continuous process to achieve its objectives.
Likewise, Weiss and Wysocki (1992) enlarges the definition of a project management through defining it is as a method and set of techniques based on the accepted principles of management used for planning, estimating, and controlling work activities to reach a desired end result on time, within budget, and according to specification.
Therefore, we can see that the definition of project management is made based on the different phases of a project.
Projects are managed by the project managers. Project manager is responsible from the customizing the different methods of project management but should be careful about the boundaries/ constraints of the current policy to make appropriate decisions for every single different project.
(^3) Source: International Organization for Standardization Web-site (www.iso.org)
1.2 Project Management Standards
In the world of project management, there are several standards. The Project Management Institute, Project Management Professional, International Project Management Association (IPMA), and PRINCE 2 are the most influential ones. These certifications are fundamentally different from each and moreover, they are affiliated with different accreditation boards. A serious applicant should know the differences between each certification and must plan their next step keeping their career goals in mind (Viergever, 2015).
The Project Management Institute ( PMI ) is a US nonprofit professional organization for project management. PMI published "A Guide to the Project Management Body of Knowledge" (PMBOK Guide) where they described a number of principles of project management. According to the PMI this document should be seen as "a basic reference and the world's de facto standard for the project management profession". In the Framework the Context describes the major demands set to project management and what the prerequisites are. The PMBOK processes describe very high level the activities for the project manager. The PMBOK also is used as the basic reference for certification of PMP (Viergever, 2015). PMP stands for Project Management Professional and Many companies in varied industries use PMP as a standardized requirement for project managers and the processes and knowledge areas that are taught in preparation for the exam have been integrated into the work that is done by the project managers in these companies. The PMP has an even more illustrious reputation in the IT sector. The certification body for PMP is the PMI (Project Management Institute) which is the world’s leading professional membership association for the project management profession. Although the PMP is recognized all over the world, it is mainly seen as a North American certification for two reasons: all the test prep material and exams are in English and it is advantageous when working with/for North American partners. There is however, a drawback of sorts to pursuing this certification; PMP is considered to be more knowledge-based where there is a higher focus on theoretical knowledge than on methodology. This is also reflected in the amount of material that an applicant is required to go through in order to prepare for this exam (Findlay, 2016).
The International Practice Management Association (IPMA) is a membership-based professional organization that promotes the development, professional standing and visibility of paralegal and legal practice support management professionals. Its membership consists of paralegal managers and other practice support managers (those who manage non-attorney fee earners in law firms and legal departments^4.
(^4) Source: http://www.theipma.org/about-the-ipma
Project managers can learn to integrate the flexibility and responsiveness of Agile methodologies into the PRINCE2 framework. PRINCE2 Practitioners can achieve this with the PRINCE2 Agile tutor-led classroom course^8.
Due to these reasons, even though I use all PMBOK, IPMA, and PRINCE2 standards as sources of my work, PRINCE2 will be more important for the chapter that I will explain Agile concept.
1.3 Fundamental Project Management Approaches
There have been different project management approaches being used on project management discipline. Some of them are called traditional, sequential approaches and others are relatively new approaches and get together under Agile methodology. The most popular traditional approach which is still used by many companies is Waterfall methodology^9.
Waterfall traditional project management methods are sequential and follow a progression such as defining, planning, managing, and closing. In the waterfall method, the gates are one-way gates. This implies that, once a gate has been passed, the project cannot return to the work that was being carried out prior to passing through the gate. This can make it difficult to pass through gates.” (Orr, 2004). The power of this methodology is that every step is preplanned and laid out in the proper sequence. While this may be the simplest method to implement initially, any changes in customers’ needs or priorities will disrupt the sequence of tasks, making it very difficult to manage^10.
Agile management , or agile process management , or simply agile refers to an iterative, incremental method of managing the design and build activities of engineering, information technology, project management and other business areas that aim to provide new product or service development in a highly flexible and interactive manner; an example is its application in Scrum, an original form of agile software development (Moran, 2015). In project management, Agile techniques use iterations of defining, planning, managing, and testing throughout the life cycle of the project until stakeholder value is achieved. Continuous collaboration is key, both within the project team members and with project stakeholders (Orr, 2004).
I will make a more comprehensive comparison between Waterfall and Agile later in the third chapter of my work.
(^9) Source: https://www.wrike.com/project-management-guide/methodologies/
1.4 Phases of Project Management Life Cycle
There can be different ways to separate the different phases of a project. However, there is usually a tendency to separate it into five or six different phases. For example, Baars (2006) collocates six different phases of a project as follows: Initiation phase, Definition phase, Design phase, Development phase, Implementation phase, Follow-up phase (please see Figure 2).
Figure 2. Six Phases of Project Management with Their Central Themes
Source: Baars (2012)
According to Figure 2, during the initiation phase, the idea is created. Later on, what is going to be made during the project should be defined. It has to be followed by the design phase and the ways that will make the project come into life should be researched. After that implementation phase should be started which content the planning od implementation and the implementation of the project itself. Finally, follow-up phase concludes the project with the maintenance of it.
On the other hand, Weiss and Wysocki (1992) defines the phases project management life-cycle in five groups respectively: Define, Plan, Organize, Control, Close ; and twenty-five action steps under the five main phases (please see Figure 3 ).
Then all the projects should have initiation and start-up, definition and planning/controlling/designing phases which can generally be included in planning part of the project. Next, they should be followed by implementation part which should include the development of implementation and implementation phase itself. Implementation phase would consist of organizing, controlling and closing of the project.
2. PROJECT RISK MANAGEMENT
You step out of your office for lunch and approach the curb. Before you cross the street, you look to the left and right. Then you proceed. This routine activity is actually an example of risk management. While checking for traffic doesn’t guarantee you will safely reach the other side of the street, it greatly improves your chances. However, you have one chance to use to cross the street and it should be done in the best way possible after all. van Well-Stam and Lindenaar van Kinderen (2004) emphasizes this chance by stating that “When managing a project, you get one chance to get it right.”
When applying risk management principles to an upcoming project, it is critical to understand that risk management is actually something people do every day, whether by fastening their seat belt or checking the rear view mirror twice before they change lanes. Risk is part of life, and managing risk is part of a reasonable life. As people delve into the intricacies of risk management, it’s occasionally useful to return to this starting point: risk management may appear complex, but it’s actually an element of daily routine.
Managing the risk involved in a major project, however, is an issue of an entirely different scale. Every project has risk, but human nature tends to avoid looking at risk and to focus on goals, such as completing the project. There is only one opportunity to get a project right, yet newspapers daily offer many examples of overruns, setbacks, delays and even projects that grind to a halt until problems can be solved. These reports suggest that proper risk management planning is not always the normal course of business. Another thing is to think about in this case whether the characteristic of the risk defined involves internal or external features.
Risk is definable in many different ways. It can be tried to defined in terms of the possibility of bad events. Also, it can be taken as an approach of decision making by using the probability of good and bad outcomes. (Damodaran, 2007). Similarly, risk can be defined as the chance of loss or an unfavorable outcome associated with an action. Uncertainty is not knowing what will happen in the future. The greater the uncertainty, the greater the risk (Crane, Gantz, Isaacs, Jose, 2013).
Related to the definition of risk, it is a necessity to obtain what the risk management is. There is a general consensus about the definition of risk management. For instance, Douglas (2009) defines risk management as the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. In a similar manner, van Well-Stam, Lindenaar and van Kinderen, (2004) emphasizes the importance of risk management by stating that “The strength of risk management lies in being able to think ahead about all of the things that could possibly go wrong in a project.”