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Summary

This paper is going to address the issue of management control of projects. The author will use the case of Modern Aircraft Company (MAC) to analyze the concept of project control and management.

The paper will be divided into several sections. The first section will deal with an analysis of the general management control of projects. The nature of projects, project control environment, project planning, project execution, and project evaluation will be addressed in this section. The second section will deal with methodologies that are used by project managers to control projects. Special attention will be paid to the control path method as a strategy used by managers to manage their projects effectively.

The author will then look at the case of the MAC project. The company is planning to produce 100 units of a new model of aircraft for clients in the developing world. The case study revolves around several aspects of this project. The information on sections one and two above will be incorporated in this project.

Finally, the paper provides recommendations to the management regarding the implementation of projects in the future. The recommendations target three levels of the companys employees. These are the executive team of the company, the management team, and finally the operational team. The recommendations aim to help these teams and in extension the whole company in managing future projects effectively. The recommendations were drawn from the analysis of the project that has been carried out.

Introduction

Background

Project management has emerged as one of the most important tasks that are carried out by modern managers in their everyday activities as they run their organization. This is given the fact that at one time or another, the organization is involved in some form of project, and it is the responsibility of the manager to oversee the successful completion of these projects.

A project can be conceptualized as a temporary undertaking by an organization or an individual that is characterized by a defined starting and ending periods (Anthony and Govindarajan 2003). Several factors constrain or limit the period that the temporary endeavor that is the project can run. This includes the time that has been allocated to the project, the funding, or other resources that have been allocated among others. The aim of carrying out a project in an organization is usually to achieve defined goals and objectives, for example, the production of a new item for the market (Dinsmore et al 2005). The underlying objective, according to Dinsmore et al (2005) is to bring about a change that is beneficial to the organization or to add value to the organization.

As already indicated in this paper, these projects or activities need to be managed to ensure that the resources that had been allocated are utilized effectively and the objectives that had been identified are met. This is where the discipline of project management comes in. According to Sebastian (2007), project management can be conceptualized as the planning and organization of the resources that had been allocated to the project. The role of the project manager, in this case, is to plan, organize, mobilize, and manage the resources that are needed for the project. The aim of all these activities by the project manager is to ensure that the goals of the project are achieved and the resources, as earlier indicated, are utilized effectively.

It is important to note that there are different kinds of resources that are needed to complete a project. These include financial resources, human resources, time among others.

It is also pertinent to note at this juncture that projects are distinct from the normal and everyday operations in organizations (Anthony and Govindarajan 2007). What this means is that, for example, a project is different from the everyday activities of the organization such as the production of the same products that the organization has been assembling for the past one year. Whereas the usual operations of the company are repetitive, projects are unique given that they are undertaken for a short period.

Cleland and Gareis (2006) are of the view that the skills and expertise that are needed to manage the everyday operations of a company and the projects that the company is undertaking are distinctively different. This is given the differences between these two operations in the organization. This is the reason why it is important to come up with a different management team to run the project, a team that is distinct from that of the everyday management of the organization.

There are several challenges that the project management team has to contend with within the process of completing the project. One of these is the achievement of the goals of the project in the face of the constraints or limitations that have been envisaged and the new limitations that emerge in the process of implementation, constraints that had not been foreseen (Ireland 2006). Some of these limitations include the scope of the project, the time frame, and the monetary resources that had been allocated to the project. It is up to the project management team to ensure that the objectives of the project are attained in the face of these challenges.

The management as a whole has to ensure that they control the project during the various phases that the project will transit before it is completed. What this means is that it is the overall management of the company that has to hire or appoint the project managers and allocate the resources that are needed for the project (Stevens 2002). It is from this that the concept of management control of projects comes into play. The management in this case controls the planning of the project, the implementation, evaluation, and reporting of the whole process.

This paper is a case study of management control of projects. The paper will take the modern aircraft company (herein referred to as MAC) as its case. The author will start by giving an overview of the management control of projects, where several aspects of this phenomenon will be addressed. This includes the type of project, project planning, project execution, and project evaluation. The methodology that the management control of the project will take in this case study will also be analyzed. This will include a detailed analysis of the critical path method (CPM) control of projects.

After this, the author will provide an analysis of the case of Modern Aircraft Company (MAC). This will include the application of the management control of projects analysis that will already have been covered to the cause of this company. This will be followed by a recommendation for the Modern Aircraft Company (MAC) as far as their cause is concerned.

Management Control of Projects

Anthony and Govindarajan (2007) are of the view that the starting and ending of any project are points that are distinct in the lifespan of the project. The project commences after the management has approved the provisions and requirements of the project. This includes ratification or approval of the resources that will be required and the nature of the project or the course that the project is going to take.

Similarly, the ending of the project is also distinct. It happens when the objectives that had been set are achieved, or when it is terminated (Kelley 2001). The latter takes place when, for one reason or the other, the management feels that the project is not worth the resources and the planning that goes into it. As such, the management cancels the project, bringing it to an end before the goals have been attained, or before the time that had been set out has elapsed.

Management control of projects as a concept has many facets. In this section, the author is going to look at each of these facets. This means that this section will cover the following aspects of management control of projects:

Nature of projects
The control environment of projects
Project planning
Project execution
Project evaluation

Nature of Projects

As already indicated in the introduction section of this paper, a project can be conceptualized as a set of activities that are undertaken by an organization or an individual to attain a set of defined objectives. The objectives that are envisaged, according to Anthony and Govindarajan (2007), are of sufficient significance to the management to warrant their attention.

Projects can be seen as undertakings such as the construction of a structure such as a road or a monument, the production of significant pieces of machinery or technology such as a nuclear device, and such as other activities (Sebastian 2007). It is noted that while project management may be a fairly recent development, man has engaged in projects since early civilization. For example, structures in early societies such as the temples revealed by archeological excavations can be conceptualized as projects undertaken by the residents of such communities (Reynolds 2011). However, project management as a discipline started in the 1950s (Lester 2007). This is when scholars such as Henry Gantt and Henri Fayol engaged in this field and turned it into a distinct sphere of the academic world that is worth attention from intellectuals in the society (Lester 2007).

A project is to be differentiated from an ongoing operation in the organization. Anthony and Govindarajan (2007), to distinguish between the two concepts, use the analogy of a building. According to them, the construction of a building from scratch, from the foundation to the roofing of the uppermost floor, is a project. This is given the fact that such an undertaking can only be carried out once. On the other hand, the regular maintenance work that is carried out on this building is not a project but an ongoing operation. A case in point is the construction of the Burji Khalifa building in Dubai. It is one of the tallest buildings in the world. The construction of this building from the drawing of the architectural designs to the shaping of the roof spire on top of the sky scrapper was a project in itself. However, the maintenance that is carried out on the building, such as cleaning of the glass walls and such others, are operations.

As much as a project is different from an ongoing operation, it is to be noted that a link does exist between the two concepts. For example, the successful completion of a project may lead to an ongoing project, according to Anthony and Govindarajan (2007). A case in point is the Burji building that was analyzed above. The completion of the project led to ongoing operations such as the maintenance of the building.

It is erroneous to assume that projects are universal. Instead, according to Anthony and Govindarajan (2007), they do vary greatly. This difference can be conceptualized in form of a continuum. At one extreme of the continuum are the projects that involve one or a few individuals engaged for a short duration of time performing tasks that are not unlike those carried out severally in the past. A case in point is an annual stock-taking in the factory. On the other extreme of the continuum are those projects that bring together a large number of people engaged for a long period performing tasks that are unlike those that have been carried out in the past. This is, for example, the construction of the sky scrapper in Dubai that is given in this paper.

Differences between Projects and ongoing Operations in an Organization

The following are some of the differences between these two concepts:

Objectives

According to Harrison and Lock (2004), a project more often than not has a single objective that the project manager tries to make sure that it is achieved. It is unlike an ongoing operation, which has several objectives. The manager of a project plans objectively for the future, a future that is defined by the endpoint of the project. As such, the single objective of such a manager is to ensure that the future of the project is taken care of within this period. Contrast this with the manager of an ongoing operation, such as the running of an organization, who has to plan for a more or less infinite future.

Organization Structure

More often than not, the organizational structure of a project is superimposed or to be found within the organizational structure of an ongoing operation (Anthony and Govindarajan 2007). Similarly, the management control system of the project is to be found within that of an ongoing operation. It is especially so because projects are usually undertaken by organizations that are already in existence. For example, the project organization and management control system of the construction of the Dubai sky scrapper described above was superimposed on that of the construction firm that was contracted for the project.

This development poses a unique problem to the management structure of a project. It is given that satisfactory and cordial ties must be developed between the two organizations. The management control system of the project must also be synchronized with that of the ongoing organization, a fact that is crucial to the success of the project (Kerzner 2003).

Focus on the Project

Project control, according to Anthony and Govindarajan (2007), is solely concerned with the project. It is as opposed to control in ongoing operations. The latter is concerned with the activities that are taking place within the organization within a specified period. It is also concerned with the control of all the products of the organization within that period, as opposed to projecting control that is solely interested in the outputs of the projects alone.

Need for Trade-Offs

Lester (2007) notes that a lot of tradeoffs take place within the course of a project. It is especially between the scope of the project, its time frame, and the costs that are involved. For example, the running costs of the project can be reduced by cutting back on the scope of the project. Similarly, the timeframe of the project can be reduced by incurring more costs and vice versa.

Tradeoffs that are more or less the same do take place in ongoing organizations. However, Hamilton (2004) notes that these tradeoffs are not the norm in these organizations; rather, they are exceptions.

Less Reliable Standards

The performance standards for projects, according to Anthony and Govindarajan (2007), tend to fluctuate and vary greatly from one project to the other. The design of the project is usually used once and specifically for that particular project, after which it is discarded. It is unlike ongoing operations, which have a more or less reliable standard that is used for the operations within the organization for a long period.

Frequent Changes in Plans

It is the nature of the projects to change and alter their plans and blueprints with high frequency and drastically (Wideman 2001). It is given the fact that the project has a lot of unseen conditions that crop up in the course of implementation. For the project to succeed, it must adapt to these conditions, and this is where it becomes necessary to change the plans of the project. For example, in a construction project, there might be an unforeseen shortage of one form of building material. The initial plan, in this case, maybe altered so that the material can be substituted with another one. The changes are as frequent as the managers feel is necessary.

On the other hand, the plans and blueprints of ongoing organizations rarely change, and when they do change, the change is rarely drastic. This is given the fact that the operations of such an organization have been going on for a long period, and few unknowns may crop up in the process.

Different Rhythm

It is another element that sets the project apart from ongoing operations. Most projects have different rhythms depending on the stage at which the project is operating (Anthony and Govindarajan 2007). Normally, in the beginning, the rhythm is small. This builds up to a peak in the middle of the project. This then tapers off as completion nears. It is unlike the case of an ongoing operation, where the rhythm tends to be more or less constant.

Greater Environmental Influence

According to the Malaysian Institute of Accountants (2009) projects are affected more by the external environment than the ongoing operations are. For example, the project tends to be affected by storms and other elements of the other given that they are usually carried out in the open, for example in the case of a construction project. However, the walls and roofs of an ongoing organization tend to protect the activities going on within from the vagaries of the external environment.

Exceptions

There are many exceptions in a project than in an ongoing operation. For example, the specific expertise that is needed for a given project may necessitate the hiring of workers from without the organization, workers that are not affiliated in any way to the organization. It is unlike in ongoing operations that involve the utilization of the same labor force from one day to the other (Anthony and Govindarajan 2007).

The outcomes of a project are also distinct from those of an ongoing operation. For example, a research project may lead to a new form of technology, distinct from those of the ongoing operations in the firm. The products of the project can be described as an exception from the norm in the organization.

The Control Environment

Project Organization Structure

Kerzner (2003) is of the view that a project organization is temporary. This is given the fact that the management usually assembles a team that is charged with the running of the project. This team is then disbanded when the project comes to an end.

There are instances when an organization finds it necessary to outsource the running of the project partially or entirely. When this happens, cordial relationships need to be established between the outsourcing firm and the contracted firm (Kousholt 2007). The relationship, between the two parties, is usually defined by the terms of the contract that was agreed upon by the two.

Matrix Organizations

These forms of organizations take place where the team working on the project has been drawn from within the organization carrying out the project (Anthony and Govindarajan 2007). When this happens, the members of the project team are under the authority of two individuals. One is the project manager or the leader of the team, while the other is the head of the department within which the employees normally operates (Kousholt 2007). It is the matrix organization as far as project implementation, and evaluation is concerned.

Evolution of the Organization Structure

The project calls for different types and models of management depending on the stage that the project is at. For example, designers may be the dominant personnel at the conceptualization of the project (Wideman 2001). Production managers may be needed at the production stage of the project, while marketing managers may be required at the end of the project.

Contractual Relationships

This form of contract is to be found in instances where external contractors have been engaged in the implementation of the project (Kerzner 2001). In this case, an additional hierarchy of project control is called for, leading to a contractual relationship between the outsourcing firm and the contracted firm. The following are some of the types of contracts that are in existence, depending on the nature of the project and the agreements between the two parties:

Fixed Price Contract

In this form of contract, the agreement is for the contractor to complete the project within a specified period and within a stipulated budget (Anthony and Govindarajan 2007). The contract is set by either a bid or a proposal that is submitted by the contractor to the outsourcing company.

The agreement in the contract stipulates that a penalty is to be applied if the work does not meet the specified quality or it is late. Wideman (2001) notes that in the course of the project, some changes may be needed in the contract. These may touch on the cost of the project or the duration of time, among others. These changes must be agreed on by both parties.

Cost Reimbursement Contract

This form of contract is entered into if the scope and cost to be incurred by the project cannot be estimated before the project begins (Hamilton 2004). This is for example in the case of complex and large-scale projects such as the construction of a railway line. The contract stipulates that the contractor is to be paid the cost of the project plus a profit rate that has already been agreed upon by the two parties. However, it is to be noted that the cost reimbursement is fixed, meaning that an upper limit is set, beyond which the contractor is not allowed to go.

The costs incurred during the project are to be closely monitored. This means that a control system has to be established, a system that should be followed by the contractor (Kerzner 2003).

Incentive Contract

In this form of contract, the two parties define and agree on factors such as completion dates and cost targets (Reynolds 2011). The contractor is then rewarded by the outsourcing firm if they happen to beat the deadline or complete the project by incurring less than the targeted costs (Anthony and Govindarajan 2007). However, if the contractor fails to meet those targets of time and costs, the bonus system is not effective.

Project Planning

A lot of activities take place in the planning stage of the project. A team that is tasked with the planning for the project comes up with a comprehensive schedule for the project, together with an estimation of the budget that is likely to be incurred by the project (Hamilton 2004). It is at this juncture that the planning team develops a management control system together with an organizational chart that will be followed in the implementation of the project.

Anthony and Govindarajan (2007) are of the view that the project planning can be viewed as a project on its own, a sub-project within the larger project that is being undertaken. As such, the significance of the activities that take place within this phase of the project is not lost to the discerning observer.

Nature of the Project Plan

According to Anthony and Govindarajan (2007), a project plan is made up of three parts. These areas detailed below:

Scope

This involves the specification of each of the work package in the project (Harrison and Lock 2004). It is then aligned with the person, unit, or department that is responsible for the work package that has been specified.

Schedule

This is an estimation of the duration of time that is required to complete a given work package that has been identified (Anthony and Govindarajan 2007). Itis together with the interrelationship that exists among the various work packages in the project. Anthony and Govindarajan (2007) are of the view that a set of these relationships can be conceptualized as a network.

Cost

It is the cost that is estimated to be incurred by the project, from the start to the end. this is the project budget, and according to Anthony and Govindarajan (2007), it is also called a controlled budget.

Network Analysis

These are the tools that are envisaged to be used to come up with the schedule for the project under consideration (L. ester 2007). These are usually two; Program Evaluation and Review Technique (herein referred to as PERT). The other is the critical path method (CPM).

According to Anthony and Govindarajan (2007), each of these two techniques is composed of three basic steps as outlined below:

An estimation or approximation of the time that will be taken by each of the work packages for the project
Identification of the interdependencies between these work packages
Calculation of the critical path that will be followed during the implementation of the project

A network diagram, according to Anthony and Govindarajan (2007), is composed of the following aspects:

a collection of nodes which represent the milestones that are to be achieved in the project
Lines that join the nodes to each other. These lines represent the activities to be carried out or the work packages that are to be undertaken

Critical Path and Slack

In this diagram, the aim is to reach point B from X either directly, which is 4 weeks, or through A. according to this diagram, getting to point B from X via A is going to take 7 weeks. This means that there is a slack time of 3 weeks between the two options (Anthony and Govindarajan 2007).

At the planning stage, it is noted that the critical path should be the shortest time in the slack diagram. As per the diagram above, this is X to B to C. it is also important to note that the critical time at this stage can be further reduced by increasing the overtime, which means higher cost for the project.

Estimating Cost

It is noted that cost estimation in projects is less accurate than in other endeavors such as the production of goods. It is given that, as earlier indicated in this paper, projects are less standardized than ongoing operations. The cost of past projects that were similar to the current one is used to estimate the cost of the current one. This is however inaccurate given that it is not always possible to tell exactly what may happen in the future and which may affect the current project (Anthony and Govindarajan 2007).

Preparing the Control Budget

It is done close to the inception of the project. It is to give time for the approval of the decision-makers, after whose approval the project can continue. This form of the budget is significant since it provides the connection between planning and the control of the projects performance (Anthony and Govindarajan 2007).

Project Execution

Some questions are posed by stakeholders such as financiers and the managers at this stage. These touch on issues to do with whether or not the project will be completed within the time specified and whether the specifications that have been set will be met by the finished product (Sebastian 2007). The stakeholders also address the issue of whether it will be possible to complete the project using the budget that has been set aside for it (Sebastian 2007).

Nature of Reports

There are several types of reports in the implementation of a project. These are as follows:

Trouble Report

This reports on both the troubles that have already occurred in the project and those that are anticipated in the future (Anthony and Govindarajan 2007).

Progress Report

It is largely a form of a comparative report. It compares the actual schedules and costs that have already been incurred with what had been anticipated and planned for at the beginning of the project (Anthony and Govindarajan 2007).

Financial Report

This form of the report gives an accurate depiction of the costs that are incurred or expected to be incurred by the project. The preparation of this report is necessary for payment for the progress of the project.

Project Evaluation

According to Dinsmore et al. (2005), evaluation of a project has two distinct aspects as outlined below:

An evaluation performance. It is carried out after the completion of the project
An evaluation of the results of the project. It is carried out several years after the project has been completed

Methodology

As earlier indicated, several methods can be used in the management control of projects. The methodology that is selected depends largely on the type of project that is being implemented and the preferences of the management team.

This paper is going to focus on the critical path method the methodology that is used by Modern Aircraft Company (MAC) in the cause that will be analyzed in the following section of this paper.

The Critical Path Method

According to Kelley (2001), CPM is a method that involves an algorithm or a set of mathematical steps that are aimed at scheduling or planning a set of undertakings or steps that will be carried out in the project. According to this author, the critical path method is one of the indispensable tools in the kit of a project manager.

Critical Path Method: an Overview

This methodology can be traced back to the late 1950s. It is credited to two scholars, Morgan Walker and James Kelley (Kelley 2001).

This form of methodology can be used on all forms of projects, making it one of the most significant methodologies in project management. The projects that this method can be used on range from construction, software to research-oriented projects. In a nutshell, any form of project that is composed of interdependent tasks can incorporate this methodology.

It is important to note at this juncture that the original critical path methods tenets as conceptualized by the two scholars above is rarely used today (Newell and Grashina 2003). This notwithstanding, the term is still used to refer to any form of approach that is used in the analysis of a project using logic diagrams (Newell and Grashina 2003).

Benefits of Using CPM

Certain attributes are inbuilt in this methodology that makes project managers prefer it over other methodologies in the field of project management. This includes the following:

Graphical Presentation of the Project

This methodology provides the manager with a graphical view of the project (Milosevic 2003). This helps the managers to easily identify bottlenecks where they are likely to occur. This helps in coming up with contingency plans in the implementation of the project.

Time Prediction

This methodology enables the project manager to predict the time that is needed to complete the project, from the start to the end (Milosevic 2003). Additionally, the manager can tell the time that will be needed to undertake each of the activities in the project. This helps in comprehensive planning for the project.

Critical Activities

Using this methodology, the manager can tell which of the activities and tasks are crucial and critical to the completion of the project (NetMBA 2010). These are differentiated from those that are not critical, and the manager can accordingly allocate resources to these critical activities.

This method conceptualizes the tasks and events that will be involved in a project in form of a network (NetMBA 2010). This means that the link between one activity and the other is depicted. Activities are represented as nodes on the graphical representation. On the other hand, events that represent the commencement and termination of activities are represented by arcs or lines between the nodes (Klastorin 2003). The diagram below vividly depicts this representation: