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Simulation Overview

Global Supply Chain Strategies (University of Dallas)

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Project Management Simulation Overview

For the next few weeks we will be using a project management simulation
provided by Harvard Business Publishing. We will work through three
scenarios in the simulation (Scenarios A through C). This document
provides an introduction to the simulation and discusses some of the
concepts we will address in the coming weeks.

Introduction to the Project Management Simulation:

Scope, Resources, Schedule
The simulation offers you a hands-on opportunity to explore the complexities
of managing projects through rapid — and, in comparison with real project
experience, safe and inexpensive — experimentation. By setting and
changing project parameters and observing effects on project outcomes, you
can discover how scope, resources, and schedule — the three main levers of
project management (see Figure 1), together with team dynamics —
combine to produce project success or failure.

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Top-Down vs. Bottom-Up Objectives: A Fundamental Tension in

Project Management

A fundamental tension inherent in managing most real-world projects arises

from the two distinct ways of setting project objectives. Both ways reflect
legitimate concerns, but they sometimes (perhaps often) conflict. Project
objectives may be set top down, as when executives derive ideas about what
a project needs to accomplish from an analysis of the conditions in which an
organization operates. Or, project objectives may be set bottom up, as when
project staff arrives at objectives based on their understanding of the
amount of work required to achieve target outcomes. Tension arises when
the top-down objectives set by executives don’t jibe with what the project
team considers realistic, based on their bottom-up analyses. A more detailed
look at an example, this one from product development, will demonstrate
how such a tension might arise (see Figure 2).

A Project to Answer a Competitive Threat

Suppose that executives at company — call it ProductCo — learn that a

competitor will soon release a new product that will eclipse ProductCo’s main
product and, thus, drastically reduce the company’s sales. These executives

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conclude, reasonably enough, that they must answer the competitor’s moves
with moves of their own. They decide, therefore, to create their own new
product. They set out to decide when they’ll need their new product, what
the new product will need to do in order to be competitive, and how much
the company can afford to spend to develop it. Let’s consider these decisions
in turn.

To decide when to release their new product, ProductCo executives estimate

when the competitor will release its new product. They might conclude that
the ProductCo new product should appear sooner or, at worst, not too much
later, than the competitor’s product, to minimize the competitor’s
opportunity to win market share. If ProductCo executives believe the
competitor’s product will appear in nine months, then ProductCo’s
development deadlines should be consistent with delivery of a new product
in about that same amount of time. Working backward from a nine-month
delivery date yields a product development deadline for the new product: a
top-down–derived project deadline.

These same executives must also decide what their new product should be
able to do — i.e., how much of an improvement it should be over the
company’s current product. Again looking to the competitive landscape,
ProductCo executives might determine what the competitor’s new product
will include. Following from that, executives might decide what they need
from their own new product. They can aspire to avoid falling behind, to
maintain parity, or to leapfrog the competitor. To avoid falling behind is
likely to require less project work than leapfrogging the competitor would.
Let’s say the executives decide to maintain parity with the competitor:
Estimates of the features of the competitor’s product then determine what
the ProductCo project must accomplish, resulting in a top-down–derived
project scope.

Finally, the executives might perform a cost analysis. Imagine that

ProductCo is a publicly traded company and that its stock price is therefore
related to the firm’s profit margin. A slip in the profit margin might have an
adverse effect on the company’s stock price and thereby hurt investors.
Concerns about this eventuality may help the executives decide how much
they can afford to spend to develop the new product. Too expensive a
development effort might hurt profits, and the stock market might punish
the company for that. Conversely, developing the product at a low cost
might lead to better profit margins and a higher stock price. Following this
reasoning, executives at ProductCo can determine what they consider a
reasonable budget for the development project: a top-down–derived project
cost target.

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Notice that even though these top-down objectives seem to have been
arrived at reasonably, they do not at all reflect the practical challenges of
actually doing the work. Top-down objectives reflect what the business
needs competitively, not what is practical or even possible. Note also that
executives might well be tempted to 1) preempt the competitor’s
announcement, 2) with a product that leapfrogs the competitor’s new
offering, 3) and that is developed at a very low cost. In other words, the
most attractive project from a competitive standpoint is quite likely to
challenge feasibility.

When top-down–derived schedule, scope, and cost targets are conveyed to

project staff, the project manager and his team will use the techniques of
project planning (breaking down required work into tasks, identifying task
dependencies, and so on) to determine whether the work can be
accomplished within the time allotted and for the cost specified. Often initial
project planning analyses reveal that the project objectives are not realistic.
The ProductCo project team might realize, for example, that because of
dependencies between vital tasks, which force some tasks to be completed
before others begin, a realistic development schedule will deliver a new
product in no fewer than 12 months.

Such realizations typically trigger cycles of re-planning and adjustment, in

which numerous questions are raised: Can ambitions for project scope be
scaled back? Can dependencies be eliminated? Similar analyses and
questions arise when realistic costs are out of line with targets: Can we save
money by outsourcing some work? Can we use lower-skill staff, who cost
less to employ? After project planning adjustments, objectives may be more
realistic but still challenging. Because estimates of what can be
accomplished on time or within budget are not perfect, projects often begin
with “stretch” objectives. Adjustments to scope, resources, and schedule
continue during the project itself, as the project manager seeks to configure
the project in a manner that has the best chance of achieving the objectives.

Top-Down vs. Bottom-Up Tension in the Simulation Scenarios

In the simulation, different scenarios begin with different degrees of this top-
down versus bottom-up tension. In Scenario A, the project objectives are
realistic. Some of you will succeed in delivering this project on time and
under budget. You will be able to explore, in a relatively relaxed manner, the
causal factors that relate management decisions to outcomes. You will
compete to see who can beat project objectives by the greatest margin — by
delivering a better than expect product, finishing faster, or spending less
than was planned.

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In Scenarios B through E, the degree of tension increases. In Scenarios B

and C, unexpected events intercede to require mid-project adjustments. In
Scenarios D and E, executives’ objectives are unrealistic; managing these
projects will be an exercise in making unpleasant tradeoffs and limiting
damage.

You will best arrive at a thorough understanding of the fundamental tension

in project management after you have managed different scenarios. The job
of a project manager is very different in Scenario A than in Scenario
C. Even if you do not at first fully appreciate the differences in management
principles that can arise when objectives are more or less realistic, it is
useful to think about such differences in the context of the different
scenarios. You should start to think in terms of contingency — i.e., what is
most appropriate in which circumstance. Such contingency is a vital part of
project management thinking.

Some of you might find even the relatively straightforward Scenario A quite
challenging. You will experience the tension inherent in being told what
competitive project targets need to be achieved. In the early stages, by
focusing on Scenario A, you can build confidence, learn to interact with the
simulation software, and explore how the following factors relate to project
outcomes:

 Target scope
 Team size, skill level, and degree of outsourcing
 Target completion date
 Reliance on overtime
 Amount of time spent on different types of meetings
 Effect of changing any of the above during the course of a project
 Relative effects of actions taken early or late in a project
 Effects of conditions that arise from the project manager’s decisions —
e.g., team stress and the team’s rate of mistakes

Even though you are given targets, you are free to depart from these in
setting project parameters. You can, for example, decide to aim for a more
ambitious scope or a completion date earlier than the target specified by
executives, if you think those are potentially good project management
practices. Such decisions will have consequences in the simulation. Opting
for a more ambitious scope or schedule, for example, will increase team
stress, which will have a favorable effect up to a point and then begin to
cause difficulties (e.g., more mistakes).

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“People Factors” in Project Management

Of all the determinants of project outcomes, those related to people, teams,
politics, and other “people factors” are perhaps the most important and
elusive. This simulation is designed to facilitate learning about such people
factors, at least to some degree. By experimenting within the simulation,
especially within Scenarios A and B, you can gain insight into issues such as
these:

 How stress levels and team morale change when deadlines become
less realistic
 How stress and morale affect team productivity
 How stress and morale affect the quality of a project
 How changing team membership influences team productivity
 How communicating with outsourcing vendors affects team
productivity

Questions to Think About Throughout All of The Simulation Scenarios

1. As you play the simulation, try to discover how varying decision

parameters (target scope, team size, team skill level, amount of
outsourcing, target completion date, overtime allowed, time in
meetings) affects project outcomes (tasks completed, cost incurred,
productivity, new problems discovered, projected completion date) and
team attributes (morale, stress level, rates of mistakes). What causes
each effect? What might explain the causal relationships you’ve
discovered?

2. What strategies did you attempt in managing your projects? What

worked? What didn’t?

3. What assumptions underlie your emerging ideas about managing

projects in the simulation? In other words: What might change that
would prompt you to reconsider the approach you’re discovering is
best for managing projects?

Parts of this document were excerpted and adapted from the Facilitators
Guide to the Project Management Simulation: Scope, Resources, Schedule
by Robert D. Austin.

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Your next thought is probably along the lines of: “How do I win/increase my
score in the simulation?” To find the answer, study the causal diagrams that
define the relationships built into the simulation and watch the brief
accompanying video.

Good Luck!

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