Serbian Project Management Journal

SERBIAN PROJECT MANAGEMENT JOURNAL Volume 3 • Issue 2 SERBIAN PROJECT CONTENTS MANAGEMENT JOURNAL Your project management effort should be Volume 3, Issue 2 planned as well in order to proactively balance December 2013 and scale your project management effort 3 Publisher: Serbian Project Management Morten Fangel Association-YUPMA

Editor in chief: Challenges in developing project offices in the Prof. dr Petar Jovanović, Project Managment manufacturing companies 15 College, Belgrade, Serbia Vladimir Obradović, Sanja Pejić, Sonja Radović Editorial board: Prof. dr Dejan Petrović, Faculty of organizational sciences, University of Belgrade, Serbia Selection of contractors on a single project and Dr Marko Mihić, Faculty of organizational more projects with fixed data on activities 25 sciences, University of Belgrade, Serbia Slobodan Drobnjaković, Ilija Nikolić Dr Vladimir Obradović, Faculty of organizational sciences, University of Belgrade, Serbia Risk appraisal for software projects in Prof. dr Nino Grau, Fachhochschule Giessen- accordance with project management maturity Friedberg University of Applied Sciences, models 35 Germany Prof. dr Brane Semolič, Faculty of logistics, Dragan Bjelica, Marija Todorović, Zorica Mitrović University of Maribor, Slovenia Prof. dr Vladan Devedžić, Faculty of organizational sciences, University of Belgrade, Interest rate gaps and net interest income Serbia 45 Jovo Jednak, Dejan Jednak Prof. dr Mladen Radujković, Faculty of Civil Engineering, University of Zagreb, Croatia Prof. dr Kevin Kane, University of Salford, United Kingdom Project financing in Serbia 55 Vladimir Voropaev, Projects Management Rada Lečić, Miloš Gajić Faculty, State University of Management Sergey Bushuyev, Kiev National University of Construction and Architecture, Kiev, Ukraine Prof. dr Živan Živkovic, Technical faculty in Bor, University of Belgrade, Serbia The projecting basis of the organization Prof. dr Evica Petrović, Faculty of economisc, operational research 63 University of Nis Prof. dr Radoslav Raković, Project Managment Vojislav Đorđević, Nataša Đorđević College, Belgrade, Serbia Technical editor: Sandra Vulović Language editor: Slađana Tanasijević Journal will be available online at Strategic, project and virtual project www.spmjournal.rs two times per year. management 69 ISSN 2217-7256 (Online) Ljiljana Berezljev

1 WORD OF THE EDITOR

On the occasion of celebrating an important anniversary of the Serbian Project Management Association (YUPMA), its 25 years, we are proud to launch a Serbian Project Management Journal, a specialized journal that is to present the most recent knowledge in the fields of project management and other specialzed management disciplines. The development of project managemnt in Serbia, since its beginnings in 1970s, to the establishment of the Project Management Association in the 1980s, until today, went through many a difficulty. Regardless of severe problems that this country and the Project Management Association encountered, project management gradually developed and was implemented in this country, and today it is evident that the implementation of project management is a sine qua non in almost all the areas of human life and work. It is our genuine wish in launching this journal to contribute to the further project management development and implementation in Serbia.

Petar Jovanović President of Serbian Project Management Association YUPMA

SERBIAN PROJECT

MANAGEMENT ASSOCIATION

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www.yupma.rs/yupma/sr/sertifikati Serbian Project Management Journal, Volume 3, Issue 2, December 2013

YOUR PROJECT MANAGEMENT EFFORT SHOULD BE PLANNED AS WELL IN ORDER TO PROACTIVELY BALANCE AND SCALE YOUR PROJECT MANAGEMENT EFFORT

Morten Fangel - Fangel Consulting Ltd, Denmark

Abstract: When managing projects, the focus is on how to perform project management activities, as well as on the execution of project activities themselves. Leading the project management – including planning and evaluation of the effort itself – is primarily carried out intuitively and based on years of experience, or accomplished by following a pre-determined standard for project management. However, a more conscious and systematic planning and evaluation of the project management effort in all its aspects is needed to balance the effort – for several reasons which will be presented at the Congress. The main steps toward achieving a more systematic approach to leading the project management are:  Clarifying the project situation and characteristics as well as the project management challenges and future initiatives.  Extracting activity plans for the project management effort.  Evaluating the performed project management activities, including documenting the performance of the activity in a logbook. This paper is based on the book Proactive Project Management (Fangel, 2013). Key words: Planning project management, Project management complexity, Evaluating project management.

job – I just saw on the web-site that you 1. AN EXAMPLE OF PLANNING PM EFFORT were the lucky guy! How do you intend to approach the management of the new Let us start with an example of project”? “How”? John looks conscious dealing with management speculative and replies: “I have not effort in a project: had time to consider it in detail”. John has just been appointed project While Helen goes on talking about her manager of a new project. He had holiday plans, John wonders why she expected his new project to be asked that question. Later, his thoughts postponed until his current project was return to the start of their common closer to completion, but unfortunately, project, into which he had also rushed it did not turn out that way. “It is a headlong. It really had taken a really exciting project”, and “you are considerable amount of time before he just the right man for the task,” the succeeded in activating the other project owner had said at the just- participants in the project. During the terminated meeting that Paul has just first months, he had done almost all the left. work alone – anyhow, that was how he Later that day at lunch, John meets had felt it. Helen who participates in his current Now John feels very determined. “This project. ”Congratulations on your new project should be different”, he thinks.

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“I must do more to activate the of my new project”. Helen agrees and participants – but how? Everybody is promises to drop by his office in the so busy”. John decides to write an e- afternoon. mail explaining how he suggests the Paul was inspired to start on what we new project should be approached. call “to plan and evaluate the Then, when he has discussed the management effort in a project” – or, in content with the project owner, he will brief, to lead the project management. send the e-mail to the future The leading of the project management participants. takes place consciously or But what should be included in the plan unconsciously in parallel with the for his project management? He process to perform the project chooses to play back his preliminary management, which includes well ideas to Helen: “It sounds as if you are known activities such as planning, going to have a really exciting holiday. arranging meetings and sparring with But I wonder if you – before you leave – the participants. See Figure 1. could spend some time with me to This paper deals with how you can discuss my new project. It seems as if more consciously plan the management you have some ideas – and, in any case, effort in the coming period, or in a I would like to have your views on my current situation in your project – how plans to get a better start of the new to transfer your knowledge of the project. I think you know my points”. project and the situation to concrete While Helen considers his question, managerial initiatives. John reflects – and continues: “And when you come back from the holidays, let’s have a talk about the management

Figure 1: In the overall project management process, we distinguish between: to lead the project management and to perform the project management 2. THREE LEVELS OF planning project management, let us GUIDELINES FOR MANAGING have a look at a three-level division of PROJECTS guidelines for project management that Before presenting a method for you may have in a project-based company. The levels of guidelines

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 correspond to the levels of processes in repetitive. This corresponds literally to Figure 1: Execute the project work, obtaining a “ready-to-wear” project perform the project management, and plan – and making minor adjustments lead the project management. to the current project. Another way of using the project model The relations between the levels of is to treat it as a compilation of guidelines and the levels of the project experiences from which you can pick processes are illustrated in Figure 2: when planning an actual project. See  A classic project model – or project Arrow 2 in the Figure. In this case, the execution model – provides an project plan is “tailored” – but the overview of the project processes and process could be eased by picking from accumulated experience from the type the model. of the project in focus. The project  Another level of guideline is a project model includes, for example, project management model, which provides break-down structure, main an overview of the project milestones, organisation form, task management processes and provides distribution, and structure of generic guidelines for managing documents. several or all types of projects in the One way to use a project model is to company. Typically, the model directly perceive it as a template for indicates the management phases implementing a project process. See marked with main milestones, type of Arrow 1 in Figure 2. This could be management activities and realistic in cases where the project management roles. model is for a specific type of project – and if the current project is rather

Figure 2: Coherence between the levels of the models and levels in the project process.  One way of applying a project Arrow 3 in the Figure. Another way management model is to perceive it is to perceive this model to be a as a template for implementing the frame of reference and a source of project management process. See inspiration for the planning and

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evaluation of project management. There are many reasons for focusing See Arrow 4. more consciously on planning and  A third level consists of a planning evaluating the management effort in model with steps and other guidelines projects. for planning and evaluating the  It is a tendency of the natural law in management itself. This model is dealing with projects that we slide supposed to be so generic that into “content mode” – even when it is generally it can be used directly as a vital to be in the “management template. See Arrow 5. This third mode”. level of guidelines is the topic of the  It serves to promote utilisation of the present article. organisation‟s guidelines for project In actual practice, you do not have the management by raising the questions choice only of one type of guideline or about which parts should be applied another. The company‟s project in the particular project/situation. guidelines will typically be a  Limited time and resources for combination. However, the argument of project management make it this paper is that the focus of guidelines important to focus the management should be shifted from project models on those efforts that create the most over to using project management managerial value for the project. models – and towards models or  Increasing expectations – both from methods for planning and evaluating external and internal parties – the management. regarding the actual management of 3. THE NEED FOR PLANNING the project points at the need for AND EVALUATING verification of the actual management MANAGEMENT EFFORT effort. The core of being a professional project  Description of the requested manager is that you know instinctively management effort makes it easier to the amount and type of management involve both project owner and effort to be used in a specific project project participants in the situation. Add to this that we, by and management activities. large, always work under time-pressure  Demand is increasing for ongoing in projects – so why also spend time for learning and improvement – also planning the management? concerning management of projects. In the area of competence development, Which of these reasons is especially we distinguish among four levels: relevant for you – in your project and unconscious incompetence; conscious your organisation? incompetence; conscious competence; Planning the project management effort and unconscious competence. It might should typically take place at the be felt as a constraint – having to fit critical points of the project – such as, your own intuition into a “method”. for project preparation, project start-up, However, the best advice is to try to project evaluation, and project close- consciously plan project management – down. Of course, it is also relevant not as an alternative, but as a support during the management of the project for the development of your own execution to go through conscious intuition and solid judgement.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 planning and evaluation of the In the example with John and Helen, management effort. STEPs 1, 2, 3 and 4 of the method can be utilised as a simple agenda for their 4. METHODS FOR PLANNING discussion. This is not to say that they PROJECT MANAGEMENT should accomplish the items step-by- EFFORT step without reflecting. The steps The central element in planning the should rather function as a framework project management effort is to for their discussion, and as an consciously realise what the inspiration to allow consideration to managerial problems or challenges will move from the first steps toward the last be during the period in question. In ones – and to a lesser degree vice- other words: Where could managerial versa. value be created? STEP 1: The situation is that Paul has In the example from the introduction, just been appointed project John might have a clear option manager. Other things might regarding this challenge – to activate be added, but let us stick to the project participants earlier than last this information to simplify time. But who can say that John has the example. faced all the challenges? Let’s hope STEP 2: Paul’s feeling is that the that Helen will help him consider any project is more complex than other managerial challenges when they the one he is just about to meet. finish. When the challenges are clarified, a STEP 3: His first reaction to the simple method is to “brainstorm” on challenge is that “I must possible management initiatives – immediately study the new among which might be to visualise the project-- common objectives for the project and STEP 4: -- by examining the available to arrange a project start-up meeting for project description together further clarification. with the project owner in a separate meeting room”. As a method for the overall planning Based on the inspiring talk at the and evaluation of the management meeting with Helen, it is recommended effort in a project, we recommend the that John prepare an activity plan as a 10 steps in Table 1. The basic concept diagram covering the STEPs 5, 6 and 7. is first to clarify the future management STEP 5 with activity initiatives will be effort and to summarize the results in used to examine the available project an overall plan for the project description, STEP 6 with the role management. Based on this, the future initiatives indicates that this management effort is specified as an examination should be made together activity plan for the project with the project owner – and STEP 7 management – and perhaps with method initiatives suggests that the programmes for management meetings. meeting be organised in a separate Later, a stepwise evaluation of the room. performed project management is carried out.

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Table 1: Method for planning and evaluating project management

Clarify upcoming  STEP 1: Where project management Facts of the project and its situation  STEP 2: Characteristics of its management Why complexity  STEP 3: What Challenges for the project management  STEP 4: How Initiatives for handling the challenges Specify upcoming  STEP 5: When management activities Content and timing of the activities  STEP 6: Who Role division of the activities  STEP 7: How Methods/tools for the activities Evaluate performed  STEP 8: When project management Register performed activities

 STEP 9: What Evaluate the specific activities  STEP 10: How Evaluate the entire management effort The method also implies that John – experience shows that an extra effort is for example, in the same document as needed to get the planning of the the activity plan as STEPs 8 and 9 – management effort on the agenda, and should register and evaluate the actual also to maintain focus on the topic management activities. And, after the during a meeting until the up-coming first phase of execution, he should project management has been clarified. arrange as STEP 10 an evaluation and 5. INSTRUMENTS FOR sparring meeting with Helen. FOCUSING ON THE The advantage of using the 10-step PLANNING OF PROJECT method in Table 1 is that it helps you MANAGEMENT keep focus on planning and evaluating In practice, three types of instruments the management – and, consequently, have been proven to promote the prevents distraction into considerations conscious and methodical leadership of that deal with solving project the project management: management tasks – yes, even to entering into project execution.  Tools and related documents Four types of documents can The example with John and Helen promote both planning and seems to be rather straightforward. But

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

evaluation of the management such as the project preparation, project effort: start-up, project evaluations, and project close-down. Natural participants 1. Initial exploration is documented are the project owner/sponsor, the under the title „Clarifying up-coming project manager, and other key persons. project management‟. 2. The clarifying is concluded in an The meeting between Helen and John „Overall plan for project could be considered as a planning management‟ to promote focus on meeting the most important aspects. This 6. DESCRIBING THE STEPS OF document can be arranged according THE PLANNING METHOD to the first four steps of the method. 3. „Activity plan for the project The following sections specify each management‟ converts the overall step of this conscious planning and plan into detailed plans, including evaluation of the project management. deadlines, distribution of tasks and The plan should be elaborated for a method proposals. specific period of the project – because, 4. In the „Logbook for project if the plan is extended to cover the management‟, the performed whole project, the contents might be too management activities are general and will not promote a suitable documented and evaluated according management effort. to STEPs 7, 8 and 9. 6.1 CLARIFYING UP-COMING  Dedicated planning meetings PROJECT MANAGEMENT Some planning meetings should be Planning the project management dedicated to evaluation of the should be initiated by capturing ongoing project management and to information through a brainstorm- like planning of the project management process. This utilises the participants‟ for the next period. STEPs 1, 2, 3 intuition and experiences and gives and 4 make an appropriate agenda them an opportunity to unfold their for such a meeting. creativity. The following scheme can be  Utilise sparring partner used to prepare PM planning for a 1. A perfect solution is for the project coming period – typically one to two owner/sponsor to act as a sparring months. partner for the project manager STEP 1: Facts of the project and its concerning management of the situation project. Project definition and stage – in brief. 2. Another possibility is to use Explain the project aim, process, and/or colleagues for sparring, either ad hoc organisation. (as it was in the case with Helen and Could be extended by a review of the John) or in a more formalised logbook for project management from network. the previous period (see STEPs 8 and 3. A third possibility is to hire an 9). internal or external consultant. STEP 2: Characteristics of its Typically, a planning meeting is held at management complexity the beginning of those phases that Describe conditions which are imply important management effort –

M.Fangel determining the management effort in  Restrict the scope definition to only the project. Examples are environment, one page – it is difficult to stick to cross organisation, etc. the plan‟s intentions during a stressed normal day. STEP 3: Challenges of project  List the contents as items – typically management 3 - 5 items per step in the method. The managerial challenges or problems.  Focus on the most meaningful and How can the project manager contribute significant management efforts – to the project to achieve, for example, a and refrain from describing that part common view or a more positive of management that takes place climate? irrespective of being listed in the STEP 4: Special initiatives for “coping plan. with challenges” Please note that such an overall plan for Management initiatives which make it project management, both in structure easier to cope with challenges. and contents, is similar to an invitation These could be proposals for to a project start-up workshop – for management activities, such as example: analyses, planning, communication and follow-up, or proposals for 1. Facts of the project and its management roles and methods and situation. A brief introduction to the types of meetings. project and a description of the All with the focus on what is to be done direct cause for having the in addition to what would be done by workshop now. routine – that is why the title of the step 2. Characteristics of its management is special initiatives. complexity. Conditions in and about the project indicating that a The first four steps aim at being used as workshop is a relevant initiative. an agenda for a planning meeting 3. Challenges of project management. between the project manager and one or The aims of the workshop and the a few others. expected effect. 6.2 OVERALL PLAN FOR 4. Special initiatives for coping with PROJECT MANAGEMENT challenges. The main programme An overall plan for project management for the workshop, including type of can be established after a creative analysis, planning and co-operation clarification – and can be structured development. Furthermore, it according to the method‟s STEPs 1, 2, should be stated who might prepare 3, and 4. The task is to extract the presentations, and whether items in essence of the clarification steps – not the programme are purely to make a complete documentation of informative or require a broad the clarification that might have been involvement. Also, information made earlier in a separate “interim about facilities and tools for the paper”. entire workshop should be given. As to the overall plan for project A refinement of the planning method management, I recommend the includes supplying a checklist for each following: of the steps. Experience shows that such tools are most helpful for

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 structuring and checking the results be conducted in practice? from a more open debate. Further, the Which methods/tools, examples checklists are useful for editing results or practical hints? from the exploration. If the checklists 6.4 LOGBOOK FOR PROJECT are used as a starting point, the output MANAGEMENT may be too extensive to apply in practical overall plans for project To promote a conscious follow-up and management. evaluation of the project management effort, it is valuable, as STEPs 8 and 9, 6.3 ACTIVITY PLAN FOR to generate a separate logbook for PROJECT MANAGEMENT management of the project – not to be The aim of the overall plan for project mixed up with a logbook for the entire management is to create an overview project. and to hold on to important matters The aim is: concerning interaction in the  to become more conscious regarding management effort during the period in the project management roles, question.  to plan additional management Further, a more operational activity initiatives, and plan for the management effort is  to achieve more learning about necessary. We here recommend issuing project management. a separate plan for the management The best way to achieve this aim is to activities. A simple format is just to list keep the logbook continuously – activity terms, periods, task otherwise you will soon forget the distribution, and practical recalled things “that kept you awake” and the experience. In small projects it can be considerations that crossed your mind part of the detailed project plan for the at a particular time. execution. STEP 5: Content and timing of the The logbook could include columns for: activities. Transform specific  Activities of project management, management activities into a including meetings and other events. chronologically arranged list  Documentation of performed assembled on relevant topics. management roles by activity – and STEP 6: Role division of the activities. perhaps the amount of hours spent per Who is responsible for, or who activity/event. contributes to, these  Evaluation of performed management management activities? What – positive as well as negative. is the role of the project manager in the specific 7. IMPLEMENTING PLANNING activity? Should the project AND EVALUATION OF owners and/or the project PROJECT MANAGEMENT participants be involved in the As project management consultants, planning? Which resources and when acting as a coach for project could be implied? managers, we have applied the STEP 7: Methods/tools for the described methods in our own projects. activities. How could the This has, on the one hand, indicated chosen management activities

M.Fangel how systematic planning and evaluating way of performing project management can promote proactivity of the project in their projects. management effort. Another application of this focus on On the other hand, our applications in level three in a project model – see practice confirm how easily you can Figure 2 - is the development of the forget all about planning and evaluating Danish National Competence Baseline, the management effort, including your NCB (Fangel edit 2010) – based on the own performance – and instead IPMA Competence Baseline, ICB concentrate on performing the project issued by the International Project management activities and events, or Management Association. In this NCB, even project execution activities. we have decided to include planning and evaluation of project management To promote the planning and evaluation as a major component of project of project management, we recommend management competences – shown as that this topic should be included in the Section 1 in Figure 3. guidelines for project management in your organisation. Yes – even to re- The main argument for adding this write your guidelines in order to ensure element to the competence standard is more focus on demands for this issue that the capability to reflect on your and less demand for utilising specific project management, and to be creative models and methods. Initially, project in selecting your project management managers may consider this to be more approach, is one of the major demanding, but the actual essence is differences between being a project that it will ensure more freedom to manager and being a senior project select what they consider to be the best manager!

Figure 3: Five sections of project management competencies in the Danish National Competence Baseline – of which the first section is to plan and evaluate the management effort.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

REFERENCES [2] Fangel, M. (2010). Competencies in Project [1] Fangel, M. (2013). Proactive Management. Danish Project Project Management. Fangel Management Association. Consulting Ltd.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

CHALLENGES IN DEVELOPING PROJECT OFFICES IN THE MANUFACTURING COMPANIES

Vladimir Obradović1, Sanja Pejić1, Sonja Radović1 1Faculty of Organizational Sciences

Abstract: Under modern business conditions, the project approach and effective project management are both widely recognized by the organizations as key factors for achieving the strategic goals. In this paper we will endeavor to point out the benefits that an organization may have from developing a project maturity by establishing and developing the project management office (PMO). The purpose is to develop an understanding of how the project management offices contribute to the development of project maturity within an organization and which are the challenges faced by a manufacturing company. In this paper we point out the fact that project management maturity is one of the strongest change drivers to project management offices. That indicates that the important measure of PMO performance is the ability to improve project management practice and its performance. Key words: Project management, Project Management Office, Project maturity, Manufacturing companies 1. INTRODUCTION arm of senior management in helping the executives meet strategic goals. Today, organizations are facing the fact that the implementation of strategy is more difficult than its Projects and project management are recognized as formalization. Kaplan and Norton argued that the the essential factors for achieving strategic goals, organization can use project management for since the scarcity of resources is one of the most successful translation of strategy into its objectives important characteristics of modern business. and actions and for strategic implementation Project management is seen as a flexible, efficient (Robert S Kaplan, 2008). Therefore, there is a and strategic management system that is used in strong linkage between business strategy, project achieving the planned results in traditional portfolio management and business success. They management structures. However, under modern are used for closing the gap between strategy conditions, the achievement of strategic goals formulation and implementation. It is known that in requires the implementation of a large number of modern business achieving strategic goals requires changes, including: the application of the implementation of a large number of different contemporary management of business processes projects. In these cases, the organization has to in the organization, the introduction of new change and implement different business processes, information and communication systems, the communication systems and organization structure. changes in the organizational structure etc. a successful introduction and implementation of the The concept of the project management office project approach should be supported by the (PMO) has been in use for a number of years but establishment of an appropriate organizational unit recently, as business rules have changed, the PMO for project management – the Project Management has gained a popular organizational role. It is found Office (PMO). By forming this organizational unit in different areas within an organization at the the company provides support for strategic decision departmental level, or on the the enterprise or making and effective project and portfolio corporate levels. Many years ago the PMO used to management. In that way the organization ensures have a responsibility to control a realization of a a sustainable growth and development of the singular project. Nowadays, the PMO does not organization. The project maturity of project- provide support to project management oriented organizations will be represented by a community; it rather seeks data from the project model of project maturity which can measure the management community. The PMO should be an ability of an organization to implement planned projects and present the steps that should be taken

V. Obradović, S. Pejić, S. Radović to achieve an excellence in project management. approach and PMOs into an organization. To This paper reviews the benefits and challenges deliver successful project it is necessary to have it faced by a manufacturing organization in the area aligned with the organizational strategic of establishing and developing the project orientation. If there is a gap between tactical and management office. The paper also highlights the strategic aspect, the PMO will not be effectively role of the project office in definition and implemented. implementation of projects within the company. The identification of PMO’s value is important for The current level of project management maturity a successful implementation of the PMO within the of this manufacturing company will be presented organization. It is not an easy task since its value is along with the actions which should be taken in hidden within improvements and intangibles that order to develop project maturity. are hard to quantify. Each deliverable or service of 2. PROJECT OFFICES the PMO should have a payoff that should be quantified and linked to the stakeholder(s), The most common reason a company starts a showing a logical cause-and-effect relationship project management office is to establish and (Thiry 2008). maintain procedures and standards for project management methodologies and to manage Turner identified several PMO success factors resources assigned to the projects in the PMO (Thiry 2008) (adapted): (Heldman 2003). The PMBOK® Guide (PMI  Link every PMO initiative to organization’s 2004) defines the PMO as: An organizational body business objectives or entity assigned various responsibilities related to decentralized and coordinated management of  Deliver value now. Focus on quick wins with those projects under its domain. The tangible results responsibilities of the PMO can range from  Work on short-term initiatives and long-term providing project management support functions to solutions actually being responsible for the direct  Focus on high value/high impact projects management of a project.  Communicate with the stakeholders of the PMO and identify their interest in projects The goal of organizational project management is  Simplify and improve processes not just to deliver projects on time, within the  Measure, evaluate and reward compliance budget and in line with the desired technical and  Measure and quantify PMO value. quality specifications. The main goal of project management is to create value for the business. The The success and influence of the project PMO supports the accomplishment of business management office depends on its position in the objectives through translating strategy into organizational structure. Other functional units portfolios of projects and programs. Beside this, have often seen the PMO as their enemy or as a the PMOs increase the organizational capacity to powerless entity. A PMO must be able to help deliver successful project performance in terms of executives with the execution of the strategy, as cost, schedule and quality. The role of the PMO is determined by project mix and flow, or the PMO strategic due to the fact that it provides information will not achieve sufficient level of value to sustain for better decision making. itself (Kendall & Rollins, 2003). The implementation of many PMOs has failed in The PMO achieves its objectives by focusing on the absence of a clear purpose and effort to the integration of people, processes and tools (PPT) contribute to different expectations of key PMO (Thiry 2008). There is an opinion that a major role customers and stakeholders. Aubry has found that of the PMO is to focus on tools, by implementing a many organizations implement the PMOs without a project, program or portfolio management system. clear direction and vision of the role they want the However, the PMO could not achieve PMO to play and the organizational needs (Aubry, organizational objectives without emphasizing the Hobbs, Müller, & Blomquist, 2010). Both tactical importance of people and processes. The people and strategic aspects of project management are aspect focuses on providing the human resources important for the implementation of project with required knowledge and skills, training,

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 mentoring and empowerment to deliver successful 1. Project Control Office, PCO projects. The third element, process, links people 2. Project/Program Office and tools and it is considered to be a set of 3. Project Management Center of Excellence practices performed to achieve a given purpose. PMCOE 4. Strategic Project Office SPO Research shows that around 70% of large organizations have some form of PMO (Kendall & The PMOs are developing through five phases and Rollins, 2003). The most common reason for becoming centers of excellence. The first issue the establishing a PMO is to ensure the PMO has to deal with is the lack of standardization implementation of the project on time, within a where project and program management levels are planned cost and quality. The main aim of PMO is inconsistent producing unpredictable results. Based to increase the success of projects and programs in on that, the first stage of developing PMOs is achieving strategic goals. The PMO can contribute standardization where standards and practices are to achievement of strategic goals by a more established through creating project and process efficient use of project resources and a more management framework and providing training in effective use of scarce skills and resources across these standards. The next stage is measurement: projects and programs. monitoring and reporting critical information. At this stage the project metrics and KPIs are defined, The PMO has a several functions. First of all, it is collected and measured, results are in line with responsible for improving project execution and plans and changes and risks are managed. Control performance through improving capacity for is the third stage where the project and programs delivering project efficiently by standardizing are integrated into a portfolio and contingencies are processes, methodologies, tools, templates and well managed. For the PMO it is important to training. The PMO has to align the project, consistently and continuously manage portfolios programs and portfolio with the business strategy where innovations and optimized usage of resource in order to select and implement the right projects are emphasized. When the PMO reaches this level which are crucial for achieving organizational it is at its fourth stage – the stage of improvement. objectives. Governance of the portfolio, as a third As mentioned before, the final stage is the PMO function, includes setting standards and processes, becoming the center of excellence, a key enabler in as well as establishing governance mechanisms like executing business strategies and delivering results stage-gates to ensure that the project or program is aligned to balanced portfolio. still critical to the organization and to adjust or re- align the project as necessary (Thiry, 2008). The The evolution of the PMO is consistent with PMO provides the necessary information for generic process models which are the basis of monitoring and tracking the project progress and project management maturity. That means that quality and provides a platform for communication establishing the PMO means that PM maturity can with various stakeholders. be conducted (REF). The PMO forms in modern business environment are (Jovanović, Petrović, Mihić, & Obradović, 2007):

V. Obradović, S. Pejić, S. Radović

Figure 1: Framework for PMO: areas of focus (Thiry, 2008) and external changes. It is necessary that the The transformation of the PMO is an organization and the PMO are realigned as time organizational project even though research shows passes. Project management offices (PMOs) are that it is not considered to be a real project of dynamic organizational entities, frequently in organizational change (Aubry, et al. 2010). Also, transition from one charter and structure to the there is a significant relationship between next. transformation of the PMO and project portfolio management. The PMO transition can have a 3. PROJECT APPROACH AND MODEL OF positive impact on portfolio management either in PROJECT MANAGEMENT MATURITY the context of a particular issue or as a result of the The purpose of this section is to show the reasons change in PMO functions and supportiveness for adopting a project approach within the (Aubry, et al. 2010). Research also shows that organization as well as the project maturity model, PMO transformation is undertaken as a business which indicates the level of project approach response to solve existing issues and such adopted in an organization. outcomes are expected from this transformation. The particular changes to the PMO are most likely In modern business environment, where changes influenced by the specific organizational context, are unpredictable and grequent, organizations have and no general pattern of change exists. The to adapt their strategic processes very quickly in transformation of the PMO has the assignment to order to face changes in their environment (Hobbs implement project management culture through Brian, 2007). Many organizations have recognized methods, standards and tools. Many authors have the importance of implementing project approach recognized the fact that there is an empting process in the organization. The translation of strategy into as project management becomes embedded in the programs and projects is recognized as a core organization’s routines after the transition of the process (Morris & Ashley, 2004). By performing PMO. But there is a need to update processes in strategic planning for a project management order to improve performance and adjust to internal organizations want to secure a

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

Competitive advantage (Kerzner, 2001). The When we talk about project maturity within an benefit of applying the appropriate project organization, we refer to a certain degree of methodology reduces working hours, expenses and maturity and we make an effort to measure or resource usage without sacrificing quality. characterize the maturity of the organization. Measuring maturity is subjective rather than The gap analysis is a key process for reducing objective. Some authors focus on the operational disadvantages that may exist between the aspect of projects when explaining project organization and its competitors. For an maturity. On the other hand, there is Skulmoski organization there are two important gaps: the gap who explains the organizational project maturity as between the organization and the industry average, the organization’s receptivity to project as well as between the organization and the main management (Skulmoski, 2001). He believes that competitor. With the gap increase, the risk that is competence and maturity are two most important taken also increases. Three critical gaps that are factors for project success. There is also a view that important should be analyzed are : speed of market maturity within the business community is best entry, competitiveness in costs and explained as the sum of action (ability to act and competitiveness in quality. decide), attitude (willingness to be involved), and Applying the appropriate project methodology knowledge (an understanding of the impact of should result in benefits such as the reduction of willingness and action) (Erling S. Andersen, 2003). working hours, expenses and resource usage, Achieving excellence in project management can without sacrificing quality. be described using models of project management Strategic Planning Project Management combined maturity which are comprised of five levels with appropriate project methodology may reduce (Project Management Maturity Model the gap in costs, time and quality. Strategic PMMM)(Kerzner, 2001). Each level represents a planning ensures the excellence in project different degree of maturity in project management, taking into consideration all aspects management. Some of these levels may overlap of the company, starting from the relationship and that depends on organizational risk between employees and management, through the preferences. This involves three levels of risk: low, role of a number of participants, especially project medium and high. A low risk has no impact on the sponsors, to the corporate structure and culture. corporate culture, a medium risk means that the Effective strategic planning and implementation of organization recognized the need to change but is appropriate project methodology may be crucial to not aware of the impact of changes, and a high risk achieve a long-term success or failure. Strategic means the implementation of projects results in the planning for project management involves the corporate changes. development of a standard methodology for project The levels of project management maturity model management that will be continuously used and are (Kerzner, 2001): will provide a more certain achievement of project objectives. Critical success factors of strategic 1. Level 1: Common language planning and project management are the activities 2. Level 2: Common processes that must be accomplished in order to achieve long- 3. Level 3: Singular methodology term goals of the organization success. There are 4. Level 4: Benchmarking three critical factors of success: qualitative, 5. Level 5: Continuous improvement quantitative and organizational factors (Kerzner, 2001).

V. Obradović, S. Pejić, S. Radović

Figure 2: Levels of project maturity (Kerzner, 2001) The first level is the level of common language rather than coincidental. Resistance exists in the where the organization recognizes the need for second level, too. Functional managers feel a fear introducing project management in the of losing authority and there is a fear that the new organization but its implementation is not methodology may lead to rigid policies and completely supported. There is a belief that project procedures. The company has to develop a culture management implementation will cause a cultural that supports project management, enabling people shock. Functional managers will be forced to to see short- term and long- term benefits from surrender some or all of their authority to project incorporating a project approach. Besides culture, managers. In order to resolve problems at this level organization has to develop a project process and a the organization has to arrange training and project methodology. At this level of project education in project management and identify maturity, benefits of using project approach are available project management tools. Characteristic recognized and supported on all levels of of this level is that the top management and the management. Benefits are measurable and tangible. middle management do not provide significant The most common benefits include lower cost, support to the project management and the shortened schedules, no sacrifice of scope or executive level does not exist. Besides, there may quality, and the potential for a higher degree of exist small “pockets” of interest in project customer. The organization is devoted to defining management, with most of the interest existing in unique project processes and methodologies that the project-driven areas of the firm. Managers may can be used continuously. worry that the new project management approach will threaten their authority and power because of Characteristics of the level of singular methodology that, consequently, there is no effort to learn about are that processes are integrated, project the benefits of project management. Due to the management has gained cultural and management previously-mentioned, they make decisions that are support and benefits from project training and the best for the decision maker and not for the education can be described both quantitatively and organization as a whole. Also, on this level of qualitatively. Project management is integrated project maturity, there are no investments and within quality management (Total Management support for the education and training of project Quality TMQ) and competitive engineering. A fear managers (Kerzner, 2001). of losing power and senior management unwilling to share responsibility make the difference between The level of the common process involves the use the third and the fifth level of project maturity. of a unique methodology and processes which Corporate culture at this level requires effective enable the success of a project to be repetitive management support at all levels. A critical

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 problem, in this case, is between the project and PMO is in developing of project maturity of an line managers. organization. Benchmarking project management is a continuous Company Dahlia was founded in 1924 in Belgrade. process of comparing the management practice of a In 2004 the company was privatized and since certain business with that of project leaders in the 2008 it is a part of the Beohemija business system. field. There is a difference between a competitive The company produces a variety of brands benchmarking and a benchmarking process. The including: Dahlia, Brion, Hera, Becollino, Nexill, former focuses on quantitative outputs and critical Dexpantehnol, Whitedent etc. success factors and the latter concentrates on the functioning and performance. On this level the The organizational structure of the Dahlia company project offices or centers of excellence are is functional and it is an integral part of the developed within an organization. All Beohemija business system. Functional managers organizational levels are committed to improving report to the General Director of Dahlia and to project management processes. functional managers from Beohemija. At the level of continuous improvement, the The sector for Strategic Project Management was company realizes that achieving and maintaining established in 2010 due to the need to implement excellence is a never ending process. The important the strategy of the company, and this establishment fact is that strategic planning project management is the result of the top management decision to is recognized as a continuous, ongoing process. introduce a project management approach into the The organization collects knowledge and archives company. the lesson learned after each project. The The PMO is located within the Development companies could learn from successfully Sector. The name of the PMO is Strategic Project completed projects but also from those that were Management and it consists of production projects unsuccessful. We can conclude that the project sectors which are located within Dahlia and the failed only if the company has not learned anything Beohemija factory in Zrenjanin. for future projects. (Kerzner, 2001) When the PMO was established in the In order to develop the project management organization, the top management defined the maturity, the organization has to change and objectives and formulated the strategy for prioritize its projects, change the scope of projects, achieving the desired goals. Also, they defined the plan capacity, adopt unique project methodology, assignments which should be successfully make changes in the organizational structure etc. In conducted. The role of the PMO was to translate this case one of the main tasks is to develop a assignments into projects and to introduce the project office which should ensure the project methodology into business. The initial standardization of processes and operations as well assignment for the PMO was to introduce the as the application of best project management project methodology and all employees who will practices that will contribute to achieving better be responsible for the planned projects to the top business results. management. Introduction and adoption of project 4. INFLUENCE OF PROJECT OFFICES ON methodology is a long process and it leads to PROJECT MATURITY OF AN changes in the way of thinking on every ORGANIZATION organizational level. This methodology is centered on increasing the The project management approach in awareness of employees: they are expected to take manufacturing organizations and the development into account only and strictly the required assets of the project office is shown on a case of company and the value of the project outcomes and should Dahlia as a part of the Beohemija business system. be focused on the needs of the organization as a Throughout this case it is presented how one whole, not the needs of the individual functional manufacturing company has introduced a project units. management approach and what the role of the

V. Obradović, S. Pejić, S. Radović

The sector for Strategic Project Management, until on the construction of infrastructure and systems now, has mainly dealt with planning and initiating for monitoring and reporting, but now there is a projects, while in the areas of implementation and need to focus attention on people’s education monitoring it has not been as active as it was in the regarding the use of these systems. It can be first two. The organization introduced project concluded that the PMO in this company has a methodology, as well as metrics for monitoring supporting role in the implementation of the successful project implementation. The strategies. responsibility of the project leaders is to monitor In order to achieve a higher level of project these metrics and to report to the PMO about the maturity, the main task of the top management is to project performance. define a unique project methodology which will be The project office has recognized that the primary adopted and applied on the level of organization as work is education of employees within the a whole. First of all, it is necessary to integrate organization in order to develop project culture. In project management with total quality management this way, the progressive acceptance of changes by and simultaneous engineering. However, apart employees and the organization is achieved. Also, from these integrations, modern business requires the work of employees who are part of the planning integration with risk management and the changes and implementation project team is integrated. That that would result in a more effective and efficient also reduces the fear of losing the power and management of the organization. authority due to giving a greater authority to the It is important to emphasize that the development project manager. of project culture which needs to be incorporated In Dahlia, project methodology is applied in the into the organization as a part of corporate culture sector for production projects. The sector of plays the key role in the implementation of production projects applies project methods and integrated methodology. In order to build a project techniques for planning and monitoring of projects. culture, the organization has to work on not only This sector is responsible for planning and formal education but also on training to raise coordination of the production of each product. awareness of employees about the benefits that they could have from adopting the project According to the project maturity model, the approach. However, the important fact is that all company Dahlia is “located” within the second activities focused on building a project culture have level of project maturity model, namely, the level to be supported by the top management as well as of common processes. The company has defined managers in all hierarchical levels in order to metrics and has measured performance of ongoing achieve the expected results and delivered projects, so we can conclude that the organization is at the level of common processes. The support of the top management in the Dahlia Through education and trainings a project-oriented company was a key factor for a successful culture is gradually created. One could say that the implementation of project approach and the organization has recognized the need for project establishment of the PMO which should ensure an approach, but there is still a fear that project integrated operation of the project and functional managers could threaten the authority of functional managers. The functional managers need to managers. eradicate the old model where each functional manager is concerted on work of their own Top management has identified problems and has functional units and the achievement of its target formulated a strategy and goals which should and not targets of the organization as a whole. The resolve identified problems and whose foregoing implies that the project and functional achievement should contribute to the planned managers should work in teams in which functional projects. The project team and the manager did not managers do not feel inferior or feel like their participate in the formulation of strategies and authority is threatened if they are required to report projects. That indicates that the project team has a about work on projects to the project managers. role only in creating a plan for the implementation of projects and monitoring their implementation In order to develop a project maturity of Dahlia, the using the defined metrics. The project team worked company needs to think about implementing a

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 project organizational structure. The current Organizations should establish the project organizational structure is functional, which means management offices in order to raise the project that the holders of projects are functional managers maturity on a higher level. The PMO within the and project managers have only a supporting role. manufacturing company has a role to translate We, thereby, may recognize the need to implement production activities into projects and to ensure a a project organizational structure which will ensure successful realization of these projects and to substantial benefits for the organization. In this communicate results to senior managers. The way project managers will get formal authority for highly valued PMO addresses a problem of managing the company projects, and this will also eliminating and deactivating projects that do not reduce the potential conflict and highlight the have high value for the organization. importance of project management in achieving Besides a strategic focus on strategic issues, the strategic goals of the company. PMO should focus on cultural issues. The The top management of the Beohemija business development and implementation of an integrated system has realized the importance of project methodology has a key role in developing implementing the project approach in the project culture which needs to be incorporated organization, but there still exists the employee within an organization as a part of corporate resistance to the acceptance of the project culture. In this paper we described the importance approach. This problem can only be resolved with of creating a project culture on the case of the a strong support from the top management and by Dahlia company. The PMO has a responsibility to granting responsibility and authority to the project educate the top management and other employees managers. Also, the company should strive to see on all organizational levels about project project management not as an operational methodology and benefits of its outcomes in order discipline but as a significant factor of strategy to establish a project culture and increase the level implementation and sustainable growth and of project maturity. On the one hand it is important development. It is important to note that this is a to minimize the manager’s fear of losing the long process that requires change of the authority as important as this is to minimize the organizational culture and involvement of project fear of change. From this we can see that the PMO managers in the process of formulating the strategy, has to incorporate change management, risk as someone who has a key role in the management, concurrent engineering and total implementation of projects which will implement quality management in order that the organization the strategy of the organization and accomplish a should reach the fifth level of project maturity. vision of its future operations. In the presented case we showed that insufficient 5. CONCLUSION top management support could be a huge barrier for project management maturing. Their sympathy This paper has analyzed the project maturity of the has to be gained due to the fact that they are the Dahlia manufacturing company. It can be most important project stakeholders. Top managers concluded that there is a need to recognize project have to give authority to the PMO so that its management as a main tool for achieving strategic function can have a purpose. Implementing and objectives. Based on that, it is very important for improving the PMO has to be viewed as a project an organization to successfully implement the with a high priority. That is the only way that an project approach and develop a project maturity. organization can implement an integrated project Through implementing an integrated project approach in order to achieve strategic goals and methodology a manufacturing organization can competitive advantage. reduce time and costs which are the main critical factors in this industry. In addition, project management approach provides higher quality. But the most important thing is that an organization could use critical resource more efficiently. These benefits are crucial for achieving a competitive advantage.

V. Obradović, S. Pejić, S. Radović

REFERENCES [1] Aubry, M., Hobbs, B., Müller, R., & Blomquist, T. (2010). Identifying Forces

Driving PMO. Project Management Journal, 30-45. [2] Erling S. Andersen, S. A. (2003). Project maturity in organisations. International Journal of Project Management, 457–461. [3] Heldman, K. (2003). PMP : Project Management Professional Exam Study Guide. Indianapolis. [4] Hobbs Brian, A. M. (2007). A research program investigating project management offices (PMOs). Project Management Journal, v. 38, no. 1, 74-86. [5] Jovanović , P., Petrović, D., Mihić, M., & Obradović, V. (2007). Program menadžment. Beograd: Fakultet organizacionih nauka. [6] Kendall, G. I., & Rollins, S. C. (2003). Advanced Project Portfolio Management and the PMO. Florida: J. Ross Publishing. [7] Kerzner, H. (2001). Strategic planning for project management using a project management maturity model. New York: John Wiley & Sons. [8] Morris, W. P., & Ashley, J. (2004). Moving From Corporate Strategy to Project Strategy. In W. P. Morris, & K. P. Jeffrey, The Wiley Guide to Managing Projects (pp. 177-205). John Wiley & Sons. [9] PMI. (2004). A Guide to the Project Management Body of Knowledge (PMBOK guide). Newtow Square: Project Management Institute. [10] Robert S Kaplan, D. P. (2008). Mastering the Management Systems. Harvard Business Review, 63-77. [11] Skulmoski, G. (2001). Project maturity and competence interface. Cost Engineering, 11-18. [12] Thiry, M. (2008). Managing Programmes of Projects, in Gower Handbook of Project Management. Aldershot: Gower Publishing.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

SELECTION OF CONTRACTORS ON A SINGLE PROJECT AND ON A NUMBER OF PROJECTS WITH FIXED DATA ON ACTIVITIES

Ilija Nikolić1, Slobodan Drobnjaković2 1Faculty of Construction Management, Belgrade 2College of Project Management, Belgrade

Abstract: In a complex project, such as in case of the construction industry, it is necessary to hire more contractors who are specialized in certain works. It is understood that some or all of the papers and reports several potential performers are required. However, the work will be awarded to only one contractor. It is usual that contractors require maximizing the value of work performed, i.e. the amount of appropriate activity costs. The same specificities are present in the integrated planning of several projects. Here we consider two types of problems from the viewpoint of data for action: (1) what is known is the fixed duration of activities with corresponding costs when the duration cannot be shortened, and (2) there are activities with more options for duration and associated costs. Problems (1) when considering costs of contractors are described by multi-criteria models of binary linear programming. For this type of problems in this work we will give a general mathematical formula and illustrations with examples of hypothetical projects. More complex problems (2) have been shown in our other works considering a single project with the criteria for the project duration, project costs and contractor’s costs. For this purpose, were need multicriteria models of mixed-integer and binary linear programming. Key words: single project, multiple projects, fixed time activities, more potential contractors, project duration and costs, contractors costs, optimization, multicriteria mathematical models.

1. INTRODUCTION with the aim to plan individual projects and multiple projects simultaneously. A complex project execution is carried out with the participation of more contractors Problems (2). Some or all of the project needed as specialists in the relevant works. activities have several options for duration This is particularly evident in the construction and associated costs. This case is considered industry. Therefore it raises the problem of in the literature as Crashing Analysis choosing the most suitable contractors (Hendrickson, 2008). The starting point is the keeping in mind the objectives of the project. maximum duration of activity with minimal At the same time, contractors can express cost, which determine the maximum duration their own partial interests, which can be set as of the project and the minimal cost of the the criteria and considered equal to the criteria project. Then an iterative process of of the project, or to lower priorities. In shortening the necessary activities is carried addition, it is extremely important to out to achieve a shorter project duration with introduce priorities to the contractors for their minimum additional project costs. In this way equal treatment. the variants of the project duration and the corresponding optimal costs are determined. In accordance with the characteristics of the The final result is the minimum project project activities, two types of multi-criteria duration and an optimal project cost. In problems may occur when selecting the addition, all activities on the critical paths are contractors. reduced to their minimum time, while others The problems (1). Each project activity has a may be partially shortened or retain maximum unique/fixed duration with a corresponding durations. Important are the two sub cost and this duration cannot be shortened. problems: minimization of project cost for a This defines the duration and cost of the given maximum project duration and a project. The selection of contractors can be minimization of project duration with a given done by considering their costs. The problems maximum project cost. Times and costs of of this type will be presented in this paper activities can be considered in two ways.

I. Nikolić, S. Drobnjaković

Firstly, known are only the costs of the i  I, j  Ji maximum and the minimum times. A linear approximation of costs for other permissible when: n – number of project activities A , times must be calculated. Secondly, the costs i of all allowable times should be known. I  {1,...,n} – set of indices i at with i  I , (t ,c ) – duration ad cost of , m – These problems have been thoroughly i i considered in cases of planning a single number of potential contractors B j on project project and maximizing costs for several with indices jJ {1,...,m}, mi – number of participants, with the following project criteria potential contractors to A with and requirements: (a) minimization of project i costs for a given project duration (Nikolić and j Ji  J and , and hij – binary Drobnjaković, 2013a), (b) minimization the variables with values of hij  1 only if Ai is project time and cost (Nikolić et al., 2013b), (c) minimization of project duration with selected on (otherwise hij  0 , Ai is not limited project costs (Nikolić et al., 2013c), selected on ) with i  I and j  Ji . and (d) minimization the project time and cost Criterion functions (4.j) are the costs of some (Nikolić et al., 2013d). Linear approximations or all contractors , j  J . Constraints (2) of costs of activities are used in (a) and (c), and the known costs in (b) and (d). ensure that for any only one can be Planning of several participants, either on a chosen. With (3) natural conditions of binary single project or on several projects, require variables are specified. the application of a multi-criteria 2.2. MODEL OF SEVERAL PROJECTS optimization. Depending on the characteristics of activities it is necessary to use two types of maxC j    cikhikj , ...... (4.j) multi-criteria mathematical models, i.e. iNk kK models of multi-criteria programming (MCP): s.t. (1) binary linear programming models if  hikj 1, iNk , k K ...... (5) activites have a fixed time (which will be jJik shown further on), and (2) mixed integer and 1, if on Ai at Pk is selected B j binary linear programming models if activies hikj   ... (6) have variants of time (presented in the above 0, otherwise mentioned papers). It is possible to identify all iIk , k K, jJik Pareto-optimal solutions, which is not rational, or only selected Pareto-optimal wher: p – number of projects Pk , solutions. A further analysis of such solutions K {1,...,p} – set of indices k at P with must be performed in order to select one k solution for implementation, one that is seen k K , nk – number of activities Aik on as the most appropriate under given business with i  Ik  {1,...,nk} and , ( tik,cik ) – conditions. On the basis of such a solution, a duration and cost of on , – number project plan using standard Project of potential contractors on all projects Management software will be created. with , m – number of 2. MATHEMATICAL MODELS (1) ik potetntial on at with i Nk and This section presents the modeling of problems with fixed activities time. so that j  Jik  J , and hikj – binary 2.1. MODEL OF SINGLE PROJECT variables with values of hikj 1 only if is selected on (otherwise ) with maxC j   cihij , j  J ...... (1.j) iIk , k K, jJik . iI s.t. Using (4.j) are maximized costs of contractors  hij  1, i  N ...... (2) , . Conditions (5) defined for any jJi only one . Binary variables hijk are 1, if on Ai is selected B j hij   ...... (3) described in (6). 0, otherwise

26 Serbian Project Management Journal, Volume 3, Issue 2, December 2013 3. SOLVING OF MODELS MCP Table 1. Starting analysis of MCP model C ... C The MCP model in a general case can be 2 m solved in two stages using the corresponding maxC1 C12 ... C1m models with one criterion. The solution of maxC (2) model MCP in the mathematical sense is 2 x * C21 C2* ... C2m ::: ::: ::: ::: ::: ::: X eff - the set of all Pareto-optimal solutions (m) or efficient solutions. However, in case of real maxCm x * Cm1 Cm2 ... Cm* problems it is not easy to determine such a set Best (max) ... or it is not necessary. The models with smaller    dimensions (the number of criteria, constraints Lowest (min) C1 C2 ... Cm and unknown) can have many Pareto-optimal Note 4. If some criterion C has a multiple variables, so they may have a lot of Pareto- j optimal solutions. Therefore, it is appropriate marginal solution x( j)*, it is necessary to to define a narrower subset of such solutions, determine the best values C of other among which a final solution (Stage 3) is jk selected as the best in the given conditions of criteria according to their priorities (see e.g. business. Nikolić and Borović, 1986).

Note 1. If model MCP has a solution x* that The best values C j* of criteria and lowest gives maximum values C * to all criteria C , j j  values C j  minCsj , , determined j 1,...,m, then is perfect solution. The s criteria are not conflicting and the problem is Ceff - the criterion space of model MCP. solved. Unfortunately, this does not happen frequently to real MCP problems. Values form the ideal point Note 2. Any two Pareto-optimal solutions C*[C1*,...,Cm*] . If does not exist, have the characteristics that each of them has already x* X eff , then C*Ceff . a better (higher) value of at least one criterion, and, at the same time, a worse (lower) value Note 5. One final solution may be selected for at least one of the remaining criteria. from a set of marginal solutions or after determining some new Pareto-optimal Note 3. If an observed solution does not have solutions. a better value for at least one criterion compared to another solution, then the Note 6. New Pareto-optimal solutions can be observed solution is not Pareto-optimal (it is determined only with the values of criteria in dominated by solutions with which it is the criterion space . compared). Stage 2. Finding the new Pareto-optimal Stage 1. Starting analysis of MCP model solutions. The easiest way is to perform the (Table 1). Optimizes each criterion separately optimization of Cv as one of the most and independently of other criteria. First, to important criteria and a set other criteria model with C1 needs to determine the optimal (1) to constrain such forms as C j  C0 j , solution x * and maximum value C1*. This solution is called the marginal optimal j 1,...,m , j  v (Method -Constraints). solution of or the first of extreme Pareto- Borders C0 j are required values to with optimal solution of the model MCP (Ehrgott,  conditions [C j ,C j *]. At the same 2000). is called the ideal value of . time, cannot have any values in these Then, using the values for other criteria sets. Among them there are the certain (1) are calculated: C1k = Ck (x *) , k  2,...,m . dependencies. Many high values may These values are called the consequences of prevent finding allowable solutions. marginal solution , ie. consequences of Note 7. If with required limits no ideal value . The process continues with admissible solution is found, lower limits for and ends with . C2 Cm criteria with lower priorities must be

I. Nikolić, S. Drobnjaković introduced, to provide an acceptable solution A1 A6 A8 (it will be Pareto-optimal). And vice versa. If B B B ,B there is an acceptable solution, it may be 1 3 3 4 possible to examine whether higher limits A2 A4 A7 A9 C0 j for C j with a higher priorities to B1,B2 B2,B3 B2,B3,B4 B4 provide a new acceptable and Pareto-optimal solution. A3 A5 4. ILUSTRATIVE EXAMPLES B B ,B 2 2 3 This section presents planning a single project and planning three projects on hypothetical Figure 1.1. ND of project with potential cases. The duration of the phases of the B j to Ai , j  Ji projects is given in months and costs are presented with appropriate monetary units. Starting analysis. Determine the marginal Competitors on the project are m  4 solutions x(1)* - x(4)* (Table 1.2) and ideals performers B j , jJ {1,...,4}. of criteria: C1*=27, C2* =69, C3*=71 i 4.1. EXAMPLE OF SINGLE PROJECT C4* =42 (Table 1.2). The worst values of    Some consider a project of n  9 phase criteria are: C1 =14, C2 =15, C3 =16 i marked Ai , iI {1,...,9}, in order to be  C4 =15. After examining the effects of displayed as nodes on a network diagram marginal solutions it is established that there (ND). All dependences of phases on the is no perfect solution x* . It can be seen that diagram arches are of type Finish to Start. All (3) (4) required input data of phases are determined each of x * and x * generate two ideal on the basis of information about their values, for their own criteria and for C1 . So, activities (Table 1.1, Figure 1.1). these are marginal solutions for as well. Table 1.1. Initial data of phases on project Table 1.2. Marginal solutions Ai ti ci Ji hij x(2)* x(3)* x(4)* A1 4 14 1 h11 B A2 3 13 1,2 h21,h22 1 B A3 5 15 2 h32 2 A 2,3 h ,h 4 4 14 42 43 A and i B A5 4 14 2,3 h52,h53 chosen 3

A6 6 16 3 h63 B j with A 3 13 2,3,4 h ,h ,h 7 72 73 74 hij* 1 B A8 4 14 3,4 h83,h84 4

A9 5 15 4 h94 ∑ 38 128 h 2 1 2 2 The time analysis determines the project Number 1 h 4 5 1 3 duration Tp =19. It is not important for the of to 2 selection of contractors, but for forming of the h3 2 2 5 1 project plan with the adopted solution. The h3 1 1 1 3 total project cost is C p =128 and costs C j of For each x( j)* the number of phases can individual contractors , j 1,...,4 may be be calculated, and then awarded to individual considered. contractors B are such values h  h *, j j i ij j 1,...,4 A further detailed analysis of these solutions, and especially the possible selection of a final

28 Serbian Project Management Journal, Volume 3, Issue 2, December 2013 solution, can be appropriately conducted if is , since in addition to it provides the percentage realization of ideals C * j only 51.85% . (Table 1.3.2) is considered. The solution that can be considered to be the best is the one that Let us assume that it is not possible to select a achieves the highest ideals of criteria. The final solution on the basis of marginal solutions, and it is necessary to determine x(3)* will be selected, if they are acceptable some new Pareto-optimal solutions. values 21.74% of C2* and 35.71% of C4* . Following are two illustrations with higher Or, x(4)* will be adopted if they satisfy priorities to and (Table 1.4).

62.32% and 22.54% C3 . The new Pareto-optimal solutions. Solution (5) Table 1.3.1. Starting analysis of criteria x maximizes , requesting that must be received at least C =75% . On phases C C C 20 1 2 4 i = 1,...,9 contractors j = 1, 2, 2, 3, 2, 3, 2, 3, maxC (1) 1 x * 27 56 30 15 4 are chosen. Only 51.85% is carried out. maxC (2) 2 x * 14 69 30 15 It significantly exceeds C20 and achieves (6) maxC3 27 15 71 15 81.16% . The next x is using a special condition so that the contractor B can be maxC4 27 43 16 42 2 assigned highest h20=3 phases Ai . For this C j * 27 69 71 42 purpose an additional constraint h + h  22 32 C j 14 15 16 15 + h42 + h52 + h72  3 is necessary. Maximi- Table 1.3.2. zation of gives . Further maximization of , keeping with constraint C  C  C *, determine the best conditioned 27 56 30 15 1 10 1 value 62.32% to . 100% 81.16% 42.25% 35.71% 14 69 30 15 Table 1.4. 51.85% 100% 42.25% 35.71%

27 15 71 15 C10 - = 27

100% 21.74% 100% 35.71% C20 75.00%C2* - 27 43 16 42 = 51.80

Required h20 - 3 100% 62.32% 22.54% 100% 14 = 27 = Note 8. For the selection of a final solution the 51.85% 100% criteria priorities are of fundamental 55 = 43 = importance. 81.16%C2* 62.32% It follows that is acceptable and the best 44 = 43 = solution if priority is given to and . The Achieved 61.97%C3* 60.56%C3* 15 = 15 = solution is the best if and have 35.71%C4* 35.71%C4* the priority. However, if and are Selection a final solution. A conclusion can preferred over and , or will be reached that the best is . It gives be chosen as the final solution. Now the question arises about priorities between and approximate values for the two criteria: 62,32% i 60,56%C *. and . If they are not the same priorities, a 3 marginal solution for criteria with higher Project plan with a final solution. The plan is priority will be selected. If they have the same formed with the assigned stages for priority, it is necessary to choose which contractors (Table 1.6). Software MS Project allows to determine the required elements of achieves C1* and 81.16% . Less favorable

I. Nikolić, S. Drobnjaković the plan based on a defined project start A A A (Figure 1.2). 11 61 81 B1 B3 B3,B4 Table 1.6. Plans of contractors with x(6)

A A41 A A91 B j Ai ti ci 21 71 B1,B2 B2,B3 B2,B3,B4 B4 B1 A1 4 14 A 3 13 2 A31 A51 B B ,B  7 27 2 2 3

B2 A3 5 15 Figure 2.1.1. Project and B j , j  Ji1 A4 4 14 Contractors A5 4 14 B j and A A A A  13 43 12 42 62 82 assigned B1 B2,B3 B3 B4 phases B3 A6 6 16 A 7 3 13 A22 A72 A8 4 14 B1 B2,B3,B4  14 43 A32 A52 B4 A9 5 15 B2 B2,B3  5 15 Figure 2.1.2. Project P and , j  J 4.2. EXAMPLE OF THREE PROJECTS 2 i2

We will consider p  3 projects Pk with A13 A23 A43 A63 m1  9 , m2  8 and m3  7 phases Aik , B1,B2 B1 B1,B2,B3 B2,B3 respectively i 1,...,mk , k 1,2,3 (Table 2.1.1). A33 A53 A73 B2 B ,B ,B B ,B Table 2.1.1 Initial data of phases Aik on Pk 1 2 3 2 3

P P P 1 2 3 Figure 2.1.3. Project P3 and , j  Ji3 Ai1 ti1 ci1 Ai2 ti2 ci2 Ai3 ti3 ci3 A11 4 14 A12 4 14 A13 4 14 The data tik on phases determine the A21 3 13 A22 3 13 A23 2 12 durations of projects Tp1 =19, Tp2 =17 and A 5 15 A 5 15 A 5 15 31 32 33 Tp3 =20. Using cik gives the total cost of all A 4 14 A 2 12 A 2 12 41 42 43 projects which is C pp =128 +112 +100 = A51 4 14 A52 3 13 A53 7 17 440. What can still be done is to optimize the A61 6 16 A62 6 16 A63 6 16 costs C1 - C4 of contractors B1 - B4 . A 3 13 A 5 15 A 4 14 71 72 73 Starting analysis (Table 2.2). It can be A81 4 14 A82 4 14 - - - observed that there is no perfect solution. (4) A91 5 15 ------With x * two ideal values are determined: ∑ 38 128 - 32 112 - 30 100 C4* =70 for its own criterion and C * =109 for C . Other marginal solutions Dependencies of stages and potential 1 1 (1) (3) contractors are shown on the next ND (Figure x * - x * achieve the ideals for their own 2.1.1 - 2.1.3). Note that P1 is considered criteria: =109, C2* =212 and C3*=186. above in Example 4.1. For mathematical modeling of the problem, the appropriate binary variables will be used (Table 2.1.2).

30 Serbian Project Management Journal, Volume 3, Issue 2, December 2013

Table 2.1.2. Binary variables hikj =109, we start with maximization of under the condition C  =88. This P1 P2 1 determines C =92, =173, C =46 and Aik hi1 j hi2 j hi3 j 1 3 C4 =29. The achieved higher values for A1k h111 h121 h131,h132 and than their required values allow us to A2k h211,h212 h221 h231 further maximize C3 with limits A3k h312 h322 h332 =88 and C2  C20=143. It occurs to h431,h432, A4k h412,h413 h422,h423 be the Pareto-optimal solution x(5) . The best h433 value for is 63=33.87% and the h ,h , A h ,h h ,h 531 532 required initial value is achieved with 5k 512 513 522 523 h 533 only 53.39%. Priority criteria C and A h h h ,h 1 6k 613 623 632 533 achieve greater values than their required h712,h713, h722,h723, h732,h733 limits: =92> =88 and = A7k h714 h724 156> =149. Criterion C4 has the lowest A8k h813,h814 h824 -  value C 4 =29. A9k h914 - - The next Pareto-optimal solution x(6) is Table 2.2. Results of starting analysis determined by analogy with , examining C C C C 1 2 3 4 stricter boundaries: =85% 93 and maxC1 109 156 46 29 =75% 160. It appears that the best x(1)* 100% 73.58% 24.73% 41.43% value of is 46=24.73% . The preferred

maxC2 53 212 46 29 criteria have values =97> =83 and x(2)* 48.62% 100% 24.73% 41.43% =168> =160. The criterion , as the lowest preferred, keeps its lowest value maxC3 80 45 186 29 x(3)* 73.39% 21.23% 100% 41.43% =29.

maxC4 109 128 32 70 Table 2.3. x(4)* 100% 60.38% 17.20% 100% 80.00% 85.00% C j * 109 212 186 70  = 87.20 = 92.65 C j 53 45 32 29 Requi- C20 70.00% 75.00% red = 148.40 = 159.40 Let it be considered that the above solutions C 60,00% - do not allow the selection of the final solution. 30 Consequently, two new Pareto-optimal = 111,50 solutions are found (Table 2.3). 92 = 97 = 84.40% 88.90% New Pareto-optimal solusions. First, it 156 = 168 examines the possibility that the criteria Achie- 73.58% 79.25% establish the values that are not lower than ved 63 = 46 = the borders C10=80%C1* 88, 33.87% 24.73% C20=70% C2* 149 and C30=60% C3*112. 29 = 29 = A strict lexicographical order of priorities is 41.43%C4* 41.43%C4* assumed concerning the criteria Selection of a final solution. Let’s assume C1 >>> C2 >>> C3 >>>C4 . There is no solution to the required limits of the criteria. It that is the best solution. is necessary to carry out the progressive Plans of projects with final solution. Plans optimization of two steps. Bearing in mind can be formed from the standpoint of the that the maximization of gives and contractors (Table 2.4). In addition, to each

I. Nikolić, S. Drobnjaković contractor B j are determined the values is exposed in other our works on the examples of single projects. This is considered to be a h  h * and h  h as numbers kj i ikj j k kj class (1). Given are general mathematical of phases Aik on individual projects Pk and formulations for the two types of problems as the total on all the projects. By using the MS a multi-criteria binary linear programming: (a) Project software, we determine the project selection of contractors on a single project, plans, in accordance with the terms set out at and (b) selection of contractors on several their beginnings (Figure 2.2). projects. The maximization of costs of contractors is performed. Next, illustrative (6) Table 2.5. Plans of contractors with x examples are presented. P1 P2 P3 h j The multi-criteria optimization was applied to B1 A11, A12 , A13 , h1 determine the characteristic Pareto-optimal A A A , =  h solutions. Then, for each problem, a final 21 22 23 k1 solution is selected that is considered to be A53 = 2+2+3 most suitable for the application. With the = 7 h11=2 h21=2 h31=3 adopted solutions plans of projects were B A , A , A , h devised and contractors were selected using 2 31 32 33 2 the MS Project software. Based on the A41, A42, A43, =  hk2 required beginning of projects specific time A51, A52 , A63, = 4+4+4 schedules for activities and costs are given. = 12 A71 A72 A73 REFERENCES

h12=4 h22=4 h32=4 [1] Hendrickson, C., Project Management for B3 A61, A62 - h3 Construction, Department of Civil and Environmental Engineering, Carnegie A81 = 2+1+0 = 3 Mellon University, Pittsburgh, 2008. h13=2 h23=1 h33=0 http://pmbook.ce.cmu.edu/ (Chapter 11. B4 A91 A82 - h4 Advanced Sheduling Techicues, Part 11.4. = 2 Crashing and Time/Cost Tradeoffs). h14=1 h24=1 h34 =0 [2] Ehrgott, M., Multicriteria optimization – Note 9. Projects can have the same or Lecture notes in economics and different beginnings. mathematical systems, Springer-Verlag Berlin Heidelberg, 2000. Note 10. In accordance with the resource capacities of the appropriate contractor, a [3] Nikolić, I., Borović, S., Višekriterijumska limit may be set to a maximum number of optimizacija – Metode, primena u logistici phases (or the total amount of work) in each i softver, Centar vojnih škola, Beograd, time unit of projects. 1996. (in Serbian) Note 11. When necessary, the conditions may [4] Nikolić, I., Drobnjaković, S., be set for the terms of the beginnings or "Minimizacija ukupnih troškova za dato endings of the given contractors’ engagement. trajanje projekta sa optimizacijom troškova ili/i vremena učesnika", YUPMA 5. CONCLUSION 2013, XIV Internacionalni simpozijum iz This paper has discussed the selection of projektnog menadžmenta, Zlatibor, 7-9 contractors for activities on a single project June 2013., pp. 338-343. (in Serbian) and on a number of projects. Two classes of [5] Nikolić, I. at al., (Plenary Lectures) problems from the standpoint of data for "Minimization the duration and cost of activities are discussed: (1) known are the project with maximization of the value or unique time of activities that cannot be works to favored participants on project", shortened and the corresponding costs, and (2) Proceedings, 4th International there are activities with more options for Conference - Life Cycle Engineering and duration and associated costs. For the same Managemant, June 27-28, 2013, p. 77-87. activity a number of performers can apply, but such activity must be assigned to only one [6] Nikolić, I. i dr., "Minimizacija trajanja contractor. It was pointed out that the class (2) projekta i maksimizacija vrednosti radova

32 Serbian Project Management Journal, Volume 3, Issue 2, December 2013 favorizovanih izvođača na projektu sa content/uploads/Zbornik_radova_SYMOP ograničenim troškovima", Zbornik IS2013.pdf radova, SYM-OP-IS 2013, XL Simpozijum [7] Nikolić, I. i dr., "Neke specifičnosti iz operacionih istraživanja, Zlatibor, 09– planiranja trajanja i troškova projekta sa 12 September, 2013. godine, pp. 215-220, više izvođača", SPIN 2012, VIII Skup (in privrednika i naučnika, 05-06 November, Serbian)http://www.symopis2013.fon.bg. 2013, Beograd, pp. 161-168, (in Serbian) ac.rs/wp- http://www.spin.fon.bg.ac.rs/doc/Zbornik %20radova%20SPIN%202013.pdf

Figure 1.4. Project plan from the point of view of contractors, project start 7.4.2014

Figure 2.4. Plans of projects from the point of view of contractors, starts of projects 7.4.2014 (hidden phases of B1 , B3 and B4 )

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

RISK APPRAISAL FOR SOFTWARE PROJECTS IN ACCORDANCE WITH PROJECT MANAGEMENT MATURITY MODELS

Dragan Bjelica, Marija Todorović, Zorica Mitrović Faculty of Organizational Sciences, University of Belgrade

Abstract: In this study, we analyze the key risk factors for software projects in the context of project management maturity models. Many risks are involved in software development and risk management has become one of the key components in software projects. Risk management of software development projects includes various risk management practices. However, a large number of the present research on software risk analysis focuses on finding the correlation between risk factors and project outcome and project results. Insufficient and ineffective risk and issue management is the key factor for software project failures. To obtain proper and effective risk mitigation and risk control, risk planning should be performed based on risk causality, which can provide more risk information for decision-making. Key words: Software projects, maturity models, project risks. 1. INTRODUCTION the potential to impact the outcome of the software process via the project mechanism Between this moment and 2025, the ability through which the software artefact is of companies and their products, systems and usually delivered. Risk and risk management services to compete, adapt and survive will are also important because IT projects depend to a great and continually increasing (including software projects) can be drivers extent on the software they will be using of delivering informational technologies (Boehm, 2006). Software project risk enabled organizational change, so achieving appraisal can provide competitive business objectives can be critically differentiation and quick adaptation to dependent upon their success (Bannerman, competitive changes for today's products and 2008). However, software success depends services. Consequently, risk and risk on software quality (Gorla & Lin, 2010), management are strategic and organizational effectiveness and completeness (Nienaber & issues that usually involve a compromise: a Cloete, 2003). Software quality is frequently risk averse strategy can limit a specific determined by the software development achievement; also, a risk embracing strategy process quality (Nienaber & Cloete, 2003), can increase project costs and losses. Trying which is defined through specially developed to set the balance is often underplayed or control metric. overlooked in the pursuit of desired goals. At the project level, software projects have long 2. PROJECT RISK MANAGEMENT been recognized as high risk ventures to PROCESSES implement organizational strategy. There are Wang, Dulaimi, & Aguria, (2004) indicated two classes of software project risks: generic that risk management is a formal and orderly risks common to all projects, and project process of systematically identifying, specific risks. Some of these risks are easy to analyzing and responding to risks throughout identify and manage. Others are less obvious the lifecycle of a project to obtain the or it is more difficult to predict their impact optimum degree of risk elimination, and resolution. This is related to multiple mitigation and/or control. Project risk project dimensions including size, structure, management implementation would improve complexity, composition, context, novelty, project performance through assuring the long planning and execution horizons, and achievement of project objectives and volatile change. Therefore, risk management pursuing opportunities to increase the in software projects is important to: help positive impacts on these objectives. The avoid disasters; avoid rework; focus and project risk management process consists of balance effort; and stimulate win–win risk management planning, risk situations. While not all risks have their identification, qualitative and quantitative source in software practices, they all have

D.Bjelica, M. Todorović, Z. Mitrović risk analysis, risk response planning, and risk are different. Based on the comparative study monitoring and control(Hwang, Zhao, & described in Table 1, common risk Toh, 2013). management processes can be recognized to include risk management planning, risk According to the comparison of the risk identification, risk analysis and assessment, management process against those standards risk response, risk monitoring, and risk (see Table 1), it has been found that there are management reporting (Grant & similarities among those given processes, Pennypacker, 2006). although proportions of essential risk management processes in several standards Table 1: Risk management processes in accordance with different professional recognition Risk Professional recognition management PMI OGC ISO IRM HM treasury process Risk x x management planning Risk x x x x identification Risk analysis x x Risk x x x x assessment Risk responses x x x x Risk x x x x monitoring Risk control x x Risk review x x x and reporting 3. METHODS AND TECHNIQUES FOR Uncertainties about developers’ motivation, SOFTWARE RISK APPRAISAL error generation, discovery, and correction rates due to the use of a particular software The main risk effects that were analyzed in development method cannot be represented the literature for software projects are: in a conventional activity network (Barros, budget exceed, time exceed, project stop, Werner, & Travassos, 2004). poor business performances, inadequate system reliability and stability, low Each method has its unique advantages and organizational process fitting, low user the possibility of applying. Decision trees are friendliness, low degree of integration and simple and easy to understand, while neural flexibility, low strategic goals fitting and bad networks can capture the non-linear financial/economic performances. The interdependence among variables. literature was then reviewed to identify the Association rules can find rules that can relevant risk factors and to emphasize the satisfy user specified minimum support and key influence factors on software confidence based on (conditional) frequency development projects. The traditional counting. The regression analysis can management techniques cannot directly establish the dependence between variables capture every kind of uncertainty. These and can be used for prediction. Fuzzy logic techniques are unable to describe other can aggregate the scores of risk factors into sources of uncertainty than those elements to an overall project risk score based on the which they were originally developed, yet fuzzy set theory, which is convenient for constrained by the information they hold for inexact risk assessment. The clustering these elements. For instance, PERT diagrams analysis groups a set of observations into can only analyze uncertainties about activity subsets based on the mutual duration, cost, and activities that are similarity/dissimilarity of observations, executed according to predefined conditions. without manually pre-defining specific

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 categories. Unfortunately, none of these representations such as growth curves, series methods and techniques were developed to and histograms, risk maps use mathematical– capture the causality relationships in the statistical elements, particularly probability form of “A influences B.” These methods values, tabular format and Cartesian may (unintentionally) discover some genuine coordinate system of x and y axes. At the cause–effect relationships, but they are same time, however, the traffic light unable to distinguish causality from qualification can be read as indicating past correlation (Hu, Zhang, Ngai, Cai, & Liu, and current performance of the project. 2012). Hu et al., (2013) in their study adopt 4. PROJECT SUCCESS AND PROJECT random forest algorithm which was usually RISK MANAGEMENT APPROACH shown to be more accurate than the decision tree. Also, successful projects are regarded Belli et al., (2006), in contrast with the as positive samples, whereas the failed ones traditional definition of project success, are regarded as negative samples. A large found that project managers saw success in number of authors use true positive, false the delivery of a system that met customer positive, true negative and false negative requirements at work (resulting in improved segments to evaluate software project risks quality and personal achievement). In the 26 according to their business goals and project publications on the relation between risk results. management and project success that were investigated, the traditional manner of Also, the commonly used tools for graphical defining and determining project success is presentations are risk maps. In the studied still very common. About two third of the context, risk maps are employed as part of a publications dealt with in this paper refer to wider set of project management project success in terms of compliance with technologies. Risk maps are prognostic time limits, cost limits and meeting images in the sense that the dimensions of requirements (see Fig. 1) (de Bakker, probability and impact are estimates of Boonstra, & Wortmann, 2010). potential future events. As other prognostic

Figure 1. Risk management approach in relation to project success definition (de Bakker et al., 2010)

D.Bjelica, M. Todorović, Z. Mitrović

Agarwal & Rathod, (2006) identified two 10. Ineffective project management different perspectives of success: internal, techniques linked to time, cost and scope that 11. Inadequate change management emphasized the value of project monitoring 12. Inadequate legacy system management and control processes and external, focused 13. Ineffective consulting services on customer satisfaction and system quality. 14. Poor leadership Most research on software project risk 15. Inadequate IT system issue analysis focuses on the discovery of 16. Inadequate IT system maintainability correlations between risk factors and project 17. Inadequate IT supplier stability and outcomes and results of projects. At present, performances studies on risk analysis of software projects 18. Ineffective strategic thinking and involve two approaches in network planning construction: one, experts manually specify 19. Inadequate financial management the network to reflect expert knowledge; the 5. PROJECT MANAGEMENT other, they use data mining algorithms that MATURITY MODELS AND automatically learn the network from PROJECT RISK SOFTWARE observational data in risk prediction. APPRAISAL Conceptually, from the organizational and project perspective, risk arises when Achieving maturity in project management, organizations pursue opportunities in the the leaders or managers of the organizations face of uncertainty, constrained by capability should know how to plan and manage and cost. The challenge is to find a position projects. Project management is used in on each of these dimensions that, in many areas including a very limited extent of combination, represents a risk profile that is education and it involves the planning and appropriate to the initiative and acceptable to control of the three variables of time, cost internal and external stakeholders. For and performance (Blenchard and Cook, intelligent risk analysis of software projects, 1973). A maturity model provides a many works have used these methods, systematic framework for carrying out including regression analysis, association benchmarking and performance rules, decision trees, fuzzy logic, clustering improvement (Lianying, Jing, & Xinxing, analysis, and neural networks (Hu et al., 2012).Software Engineering Institute (SEI), 2012).ERP project failure classification started to develop a process maturity includes four levels: framework for software development and it 1. Process failure, when the project is not resulted in the publication of the Capability completed within the time and budget. Maturity Model with five levels, in 1991. 2. Expectation failure, when the IT systems Maturity models have their origin in the field do not match user expectations. of total quality management (TQM). They 3. Interaction failure, when users’ attitudes drive strategically linked continuous towards IT are negative. improvement and so require a thorough 4. Correspondence failure, when there is no understanding of an organization’s current match between IT systems and the planned position and the position of the organization objectives. in the future (Brookes and Clark, 2009). It turns out that the Capability Maturity Model The 19 ERP risk factors are listed below is quite robust and has its application beyond (Aloini, Dulmin, & Mininno, 2007): software engineering for which it was 1. Inadequate selection originally developed. There are two areas of 2. Poor project team skills application that it has spawned. They are the 3. Low top management involvement People Capability Maturity Model (P- 4. Ineffective communication system CMM)(Curtis, Hefley, & Miller, 1995), 5. Low key user involvement which is a five-level model patterned after 6. Inadequate training and instruction the five levels of the Capability Maturity 7. Complex architecture and high number of Model, and the Project Management implementation modules Maturity Model (PMMM) (Demir & 8. Inadequate BPR Kocabaş, 2010). The Project management 9. Bad managerial conduct maturity model is regarded as a useful tool to

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 evaluate the organizations’ current project shortly the PM2, developed by Young Hoon management capability. The project Kwak et al, not only covers all the nine management maturity model, as the project management knowledge areas, but framework and tool to evaluate the level of also expands beyond them in accordance organizational project management with the five stages of the project life cycle, capability has aroused widespread concern of and discusses the key processes of each scale experts in recent years. In 1987, the Software in those stages (Kwark and William, 2002). Engineering Institute (SEI) of Carnegie The American Project Management Institute Mellon University took the lead of proposing (PMI) proposed the three-dimensional model the Capability Maturity Model from the OPM3, which not only provides a systematic standpoint of the software process evaluation and improvement method for the capabilities (Paulk, Curtis, Chrissis, & enterprise from a single project to Weber, 1993). The model offers five entrepreneur portfolio projects, but also for maturity levels for the assessment of the the first time introduces and solidifies the ability of contractors in 18 process areas, 52 Best Practice in each of the commercial objectives and more than 300 key practices, procedures (Simangunsong & Da Silva, in order to help software companies 2013). The project management team from continually improve their software process the Vienna School of Business capability. Administration Economics has developed a six-dimension project management model The successful application of the Capability from the viewpoint of the self-assessment Maturity Model in the software industry and benchmarking management of project inspired the experts internationally from management, referred to as the Cobweb project management fields in the heated Model. It is different from the PMMM in research on and the development of the that it uses a cobweb model which has six maturity evaluation model of project aspects (Turner 2004). The Cobweb model management. As a result, there have been does not adopt the procedures of the many valuable project management maturity traditional maturity model, but has the models since then. Harold established a five- advantage of a multi-dimensional display of scale project management maturity model, the project management capabilities, referred to as K-PMMM. The model uses a visualizing the different sub-processes of questionnaire survey method to evaluate the project management maturity. Yu proposed a project management level of the enterprise project management maturity evaluation by dividing different scores sections index system for the project tender (Kerzner, 2013). The K-PMMM analyzes evaluation based on the Project management more deeply the consideration of project maturity, and introduced the grey theory to management in the establishment of the evaluate them (Lin, Huang, & Burn, 2007). maturity model, but establishes the maturity Through the literature review, it is obvious model on the level of strategic planning that the use of the current maturity model is (Peng, 2003). The Project Management often limited to the software project and the Solution Software in the United States industrial engineering project. Furthermore, integrated the 5 processes proposed by the combination of evaluation and the whole Software Engineers Company (SEI)(Kan, project management process is not sufficient 2002), with the nine knowledge areas of (Lianying et al., 2012). project management put forward by the Project Management Institute (PMI) to In the past decade, there has been an produce a comprehensive, easy to accept, increasing research interest in the maturity of and project management maturity improving risk management and applicable models for model called the PMS-PMMM (Guo, practice, and two issues were addressed for Lianying, Jing, & Xinxing, 2012). In risk management maturity assessment: comparison with the previous model, the 1. Methodology of risk management - It PMS-PMMM is more closely connected to has been found that although the project management, and has a stronger process oriented management operability. The Berkeley Project method has been mostly adopted in Management Process Maturity Model, those risk management maturity

D.Bjelica, M. Todorović, Z. Mitrović

models, there was no particular good management processes are the first example in terms of the use of a parameter to be removed from the project system engineering method to deal activities when the project schedule slips. with the complex situation of risk The free-spirited culture in many software management. development firms is in conflict with the 2. Contents of risk management amount of control often required to develop maturity - It has been found that complex software systems in a disciplined although evaluation oriented risk way. Many software projects and programs management maturity models were involve multiple entities such as companies, built up, there was a lack of an in- divisions, strategic business units, etc., that depth description of risk problems may have certain interests. There is often a by using a systematic structure with feeling of disconnection and regard to risk management misunderstandings between software capabilities, maturity factors, and developers and their management team, each maturity ascension (Jia et al., 2013). believing that the others are out of touch with reality resulting in communication 6. RISK MANAGEMENT INFLUENCE problems and lack of trust. Research shows ON PROJECT PERFORMANCE that 45% of all the causes of delayed Grant & Pennypacker, (2006) performed a software deliverables are related to benchmarking study of 126 organizations organizational issues (Kwak & Stoddard, across 17 different industries. Their results, 2004). determined from a web-based survey that Hwang et al., (2013) emphasize risk studied 42 components of maturity, indicated management implementation index (RMII), a median level of project management which describes the extent of risk maturity at level 2 with no significant management implementation in a company, difference across the industries studied. Most and can be calculated using the following software developers and project managers equation: perceive risk management processes and activities as extra work and expense. Risk

No. of projects with risk management implementation 푅푀퐼퐼 = 푥100 Total no. of projects of a company

Hwang et al. (2013)indicate that 40.5% and none felt risk management had no impact, 40.1% of the projects costing less than $0.1 while 64.7% of the companies with the RMII million and between $0.1 million and $1 below 50% revealed that risk management million implemented risk management, improved quality by only 1% to 3% and respectively. For those worth between $1 11.8% reported that risk management had no million and $5 million, the proportion was a impact (Hwang et al., 2013). little higher, reaching 44.6%. (Hwang et al., Rabechini & de Carvalho, (2013) analyzed 2013)indicate that the management teams of 415 projects at different levels of complexity larger projects attached more importance to in different industrial sectors in several states risk management implementation and risk of Brazil. The results demonstrate that management was implemented in 63.8% of adopting project software risk management the projects worth more than $5million. This practices has a significant positive impact on suggested that the risk management project software success. They also show a implementation level in small projects was positive impact of the presence of a risk relatively low, and that risk management was manager on project success. Paying attention more likely to be implemented in the projects to uncertainties during the project, making with higher costs(Hwang et al., 2013). In use of the risk management techniques and a terms of quality performance, 41.2% of the deeply understanding of the business companies with the RMII of 50% or more environment are critical success factors, reported that risk management had an impact demanding attention of project managers and on quality improvement by 4% to 6% and risk managers.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

7. CONCLUSION [2] Aloini, D., Dulmin, R., & Mininno, V. (2007). Risk management in ERP project This paper presents a project software introduction: Review of the literature. management approach, analyzing key risk Information & Management, 44(6), 547– factors with different project management 567. doi:10.1016/j.im.2007.05.004 maturity models. Although software risk management is a daunting task, [3] Bannerman, P. L. (2008). Risk and risk organizations that implement effective management in software projects: A processes proved to be successful, while reassessment. Journal of Systems and those that fail in this effort will be Software, 81(12), 2118–2133. unsuccessful. The nature of software projects doi:10.1016/j.jss.2008.03.059 creates many risks and issues that must be [4] Barros, M. D. O., Werner, C. M. L., & managed and controlled industriously to Travassos, G. H. (2004). Supporting avoid the common mistakes of many risks in software project management. projects. Protecting the value of a project Journal of Systems and Software, 70(1- involves dealing with the uncertainty that 2), 21–35. doi:10.1016/S0164- will be associated with its delivery. The role 1212(02)00155-3 of Project Management is to assist in turning uncertain events and efforts into certain [5] Belli, F., Cai, K.-Y., DeCarlo, R., outcomes and promises. The perceptions and Mathur, A., Procaccino, J. D., & Verner, attitudes towards risk management activities J. M. (2006). Software project managers comprise difficult challenges for and project success: An exploratory implementing a risk management strategy. A study. Journal of Systems and Software, formal risk management process is 79(11), 1541–1551. Retrieved from recommended to manage complex issues http://www.sciencedirect.com/science/art associated with software development icle/pii/S0164121206000070 projects. Many risk management processes [6] Curtis, B., Hefley, W. E., & Miller, S. have been created to aid organizations, but (1995). Overview of the People integrating the processes into organizations Capability Maturity Model. Retrieved has not been not successful. The theoretical from aspects of the process must be reconciled http://oai.dtic.mil/oai/oai?verb=getRecor with the practical challenges of the d&metadataPrefix=html&identifier=AD organization to implement risk management A301167 successfully. An effective risk management process will succeed by changing the [7] De Bakker, K., Boonstra, A., & organizational culture to motivate the Wortmann, H. (2010). Does risk individual. management contribute to IT project success? A meta-analysis of empirical ACKNOWLEDGEMENTS evidence. International Journal of This paper is a result of the Project No. Project Management, 28(5), 493–503. 179081 funded by the Ministry of Education doi:10.1016/j.ijproman.2009.07.002 and Science of the Republic of Serbia: [8] Demir, C., & Kocabaş, İ. (2010). Project Researching Contemporary Tendencies of Management Maturity Model (PMMM) Strategic Management Using Specialized in educational organizations. Procedia - Management Disciplines in the Function of Social and Behavioral Sciences, 9, Competitiveness of Serbian Economy. 1641–1645. REFERENCES doi:10.1016/j.sbspro.2010.12.379 [1] Agarwal, N., & Rathod, U. (2006). [9] Gorla, N., & Lin, S.-C. (2010). Defining “success” for software projects: Determinants of software quality: A An exploratory revelation. International survey of information systems project Journal of Project Management, 24(4), managers. Information and Software 358–370. Retrieved from Technology, 52(6), 602–610. Retrieved http://www.sciencedirect.com/science/art from icle/pii/S0263786305001250

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http://www.sciencedirect.com/science/art from icle/pii/S0950584909002122 http://books.google.com/books?hl=sr&lr =&id=QgQQC5qRtzgC&pgis=1 [10] Grant, K. P., & Pennypacker, J. S. (2006). Project management maturity: an [18] Kwak, Y. H., & Stoddard, J. (2004). assessment of project management Project risk management: lessons learned capabilities among and between selected from software development industries. IEEE Transactions on environment. Technovation, 24(11), Engineering Management, 53(1), 59–68. 915–920. doi:10.1016/S0166- doi:10.1109/TEM.2005.861802 4972(03)00033-6 [11] Guo, H., Lianying, Z., Jing, H., & [19] Lianying, Z., Jing, H., & Xinxing, Z. Xinxing, Z. (2012). The Project (2012). The Project Management Management Maturity Model and Maturity Model and Application Based Application Based on PRINCE2. on PRINCE2. Procedia Engineering, Procedia Engineering, 29, 3691–3697. 29(Sei 1994), 3691–3697. Retrieved from doi:10.1016/j.proeng.2012.01.554 http://www.sciencedirect.com/science/art [20] Lin, C., Huang, Y.-A., & Burn, J. icle/pii/S1877705812005644 (2007). Realising B2B e-commerce [12] Hu, Y., Du, J., Zhang, X., Hao, X., Ngai, benefits: the link with IT maturity, E. W. T., Fan, M., & Liu, M. (2013). An evaluation practices, and B2BEC integrative framework for intelligent adoption readiness. European Journal of software project risk planning. Decision Information Systems, 16(6), 806–819. Support Systems, 55(4), 927–937. doi:10.1057/palgrave.ejis.3000724 doi:10.1016/j.dss.2012.12.029 [21] Nienaber, R., & Cloete, E. (2003). A [13] Hu, Y., Zhang, X., Ngai, E. W. T., Cai, software agent framework for the R., & Liu, M. (2012). Software project support of software project management, risk analysis using Bayesian networks 16–23. Retrieved from with causality constraints. Decision http://dl.acm.org/citation.cfm?id=954014 Support Systems, 56, 439–449. .954017 doi:10.1016/j.dss.2012.11.001 [22] Paulk, M. C., Curtis, B., Chrissis, M. B., [14] Hwang, B.-G., Zhao, X., & Toh, L. P. & Weber, C. V. (1993). Capability (2013). Risk management in small maturity model, version 1.1. IEEE construction projects in Singapore: Software, 10(4), 18–27. Status, barriers and impact. International doi:10.1109/52.219617 Journal of Project Management, 32(1), [23] Peng, M. W. (2003). INSTITUTIONAL 116–124. TRANSITIONS AND STRATEGIC doi:10.1016/j.ijproman.2013.01.007 CHOICES. Academy of Management [15] Jia, G., Ni, X., Chen, Z., Hong, B., Chen, Review, 28(2), 275–296. Y., Yang, F., & Lin, C. (2013). doi:10.5465/AMR.2003.9416341 Measuring the maturity of risk [24] Rabechini Junior, R., & Monteiro de management in large-scale construction Carvalho, M. (2013). Understanding the projects. Automation in Construction, Impact of Project Risk Management on 34, 56–66. Project Performance: An Empirical doi:10.1016/j.autcon.2012.10.015 Study. Journal of technology [16] Kan, S. H. (2002). Metrics and Models management & innovation, 8, 11–12. in Software Quality Engineering. doi:10.4067/S0718-27242013000300006 Retrieved from [25] Simangunsong, E., & Da Silva, E. N. http://dl.acm.org/citation.cfm?id=559784 (n.d.). Analyzing Project Management [17] Kerzner, H. R. (2013). Project Maturity Level in Indonesia. The South Management: A Systems Approach to East Asian Journal of Management. Planning, Scheduling, and Retrieved from Controlling (Google е-book). Retrieved

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http://journal.ui.ac.id/index.php/tseajm/a developing countries. Construction rticle/view/1521/1319 Management and Economics, 22(3), 237–252. [26] Wang, S. Q., Dulaimi, M. F., & Aguria, doi:10.1080/0144619032000124689 M. Y. (2004). Risk management framework for construction projects in

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

INTEREST RATE GAPS AND NET INTEREST INCOME

Jovo Jednak, Dejan Jednak PM College, Belgrade

Abstract: Measuring and managing the risk of interest rate changes in financial institutions (banks), through repricing gap is directed towards the output of interest rate changes onto the net interest income. Interest rate gap represents the difference between the interest income and the interest expense of a bank. Basically, interest rate gaps measure the gap between the financial value of assets and liabilities that come to maturity or that are revalorised in a defined period of time. Interest rate gaps connect interest income to interest rate changes, which are not perfectly correlated (that is why they usually flow in the same direction. Therefore, in the analysis of the interest rate output to net interest income, it is necessary to determine the effect of interest spread (margin) on the current value of the cash flow, i.e. the value of assets and liabilities. In order to determine the output of different conventions embedded into the calculation of interest rate gaps and their relatively limited application, financial derivatives (both explicit and implicit), that is, swaps and simulations are mainly used.

Key words: interest rate gap, net interest income, interest sensitive assets and liabilities, gap calculation, financial derivatives and simulations sensitive assets and interest sensitive 1. INTRODUCTION liabilities. Interest rate gaps are the simplest interest rate Static interest rate gaps (just like liquidity risk measurement in relation to net interest gaps) are the projections of the existing assets income, which is the main variable for and liabilities, while dynamic gaps include managing assets and liabilities. Interest rate new transactions as well. Both of them are gaps are defined as projected time profiles of finite time profiles, which are the results of difference between assets and liabilities that the projected balance sheets. The analysis share the mutual reference interest rate. The rests on static gaps, since nowadays there is gap model connects the interest income to the no need to hedge any future transactions. changes in interest rates. Accordingly, the gap Moreover, static gaps are often updated and model provides the basic rules for interest rate include any new transactions within risk management of a balance sheet. Since consecutive dates. these gaps are open, the projected liquidity gaps should also be open and included into Variable interest rate gaps are defined interest rate gaps, so that the gap model could according to variable reference interest rates be consistent with the changes in the net (1 month Libor, 1 year Libor, or Euro Libor, interest income. Due to deficiencies and etc.). They are calculated for a specified limitations of interest rate gaps that primarily management time horizon, but the projections depend on different scenarios of annual report should not exceed the horizon, in order to (balance sheet) for examining the outcomes of prevent the projected assets and liabilities different conventions embedded into the from generating unsustainable positions (or calculation of interest rate gaps, the most extremely big gaps). widely used method is simulation. A typical time horizon in economic analyses 2. INTEREST RATE GAPS is one month through the management horizon that can be extended to 1 – 3 years, or even Interest rate gaps are standard measurements much longer (5 years or more). The treasury of the exposure to interest rate risk, and they deals with much shorter time horizons, since it appear in two basic forms: manages daily cash flows and possibly uses  fixed interest rate gaps, for a given period, short-term hedging. as the difference between fixed rates of In this paper, a future period is defined by the assets and fixed rate of liabilities and initial and final date (t and t + 1), where the  variable interest rate gaps, for a given interest rate gap is calculated from the period, as the difference between interest beginning of the period. The conclusion of

J. Jednak, D. Jednak this paper is that an interest rate gap is somewhat easier to calculate fixed rate gaps, calculated as the difference between assets since there is no need to define reference and liabilities that either have known fixed interest rates beyond the time horizon. In rates or are interest rate sensitive (IRS), that these circumstances, interest rates related to is: assets and liabilities remain fixed. It is  fixed interest rate gap (t, t + 1) = fixed implicit that interest-free assets and liabilities assets rate (t) – fixed liabilities rate (t) and are not included in interest rate gaps. Figure 1  variable interest rate gap (t, t + 1) = presents an intersection point for a certain Interest rate sensitive assets (t) – interest period of the balance sheet, where t represents rate sensitive liabilities (t) a date in the future. All known rates beginning with that date are “fixed”, so assets and 3. CALCULATIONS OF INTEREST liabilities in balance sheets can be represented RATE GAPS as a point in time or the average time A precise calculation can be done only when limitation the gap is related to. “the real interest rate” has been defined. It is

Figure 1. Interest rate gap

4. INTEREST RATE GAP AND  variable rate gap before the liquidity gap = LIQUIDITY GAPS 80 – 70 = +10 and If there is no liquidity gap, the fixed rate gap  variable rate gap after the liquidity gap = and the variable rate gap are identical in their +10 – 80 = -70. absolute values. Consequently, any kind of Basically, post funding a variable rate gap is liquidity gap generates an interest rate gap. the variable rate gap before the liquidity gap Therefore, surplus assets will be invested, and minus the liquidity gap, that is: deficits will be funded at a future date, at an Post funding variable rate gap = variable rate unknown rate. Thus, the projected assets gap pre funding deficit is equivalent to interest rate sensitive – liquidity gap = -70 = +10 – 80 . liabilities, and surplus assets are equivalent to interest rate sensitive assets. Table 1 presents a simplified report submitted by the KBC group banks in the year 2010, In this paper, it is noticed that variable rate which is at the same time the indicator of gap changes before and after the deficit, in what banks usually disclose in their annual relation to liquidity gap that is here equivalent reports (balance sheets). to variable assets rate, that is:

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

Table 1. Sample interest rate gap report Interest sensitivity of the ALM book (including derivatives), KBC group banks Non- In millions of ≤ 1 1-3 3-12 1-5 5-10 > 10 interest- Total EUR month months months years years years bearing 31.12.2009. Assets* 122,036 61,129 132,459 129,444 53,211 18,665 29,212 546,156 Liabilities* 133,087 70,243 128,777 121,596 45,780 14,845 31,829 546,156 Interest sensitivity gap -11,051 -9,114 3,682 7,848 7,431 3,820 -2,617 0 31.12.2010. Assets* 103,677 62,313 90,596 127,750 54,969 22,803 28,574 490,683 Liabilities* 121,298 56,509 86,747 131,423 46,633 17,885 30,187 490,683 Interest sensitivity gap -17,621 5,804 3,849 -3,673 8,336 4,918 -1,614 0 * Including derivatives Source: KBC Annual Report 2011. and calculation of author liquidity gaps, fixed rate gaps show only the Internal models can provide more detail, as existing assets and liabilities. The upper part illustrated in Figure 2, where average assets shows the assets, and the lower part shows the and liabilities balance shees are used for each liabilities, while the difference is offset by a period of time. The horizontal axis x shows fixed rate gap. Furthermore, Figure 2 presents the dates, and the calculation is done on a the projected average rates of the fixed rates monthly basis or for a shorter time interval. of assets and liabilities. The presented assets and liabilities have fixed interest rates as seen from today. Similar to

Figure 2. Interest rate risk and dates of flows

5. THE GAP MODEL vice versa, in the case where the variable Interest rate gaps are very popular, since they rate gap is negative. When the variable measure how sensitive the net interest income rate gap equals zero NII, it is not subject (NII) is to rate changes. This phase of the to changes in interest rates. Then it is said analysis allows us to suppose that all the rates that NII is “immune” to interest rate are unknown and that from the running day on changes. A variable rate gap represents the they move for the same amount (parallel sensitivity of NII to interest rate change [1] change). (Notations are: • - NII = net interest In the circumstances where a variable rate income, • - IRSA and IRSL are interest gap (interest rate sensitive assets minus rate sensitive assets and liabilities and • - r interest rate sensitive liabilities) is – interest rate). positive, the volume of interest rate A change in the net interest income (NII) due sensitive assets is greater than the volume to the change in the interest rate ∆r is: of interest rate sensitive liabilities. If the ∆NII = (IRSA - IRSL) ∆r . assets and liabilities have the same index, NII grows along with interest rates, and

47 J. Jednak, D. Jednak

Suppose that the variable rate gap is +300. changes, but at the same time it provides a The change in NII in the above example is 2, solid basis for determining the cost of capital when the rate changes by 1% or 100 x 1 %. in the interbank market. On the other hand, The basic pattern that connects a variable rate hedging NII against interest rate risk is very gap and net interest income is as follows: simple, since it implies a gap change, which ∆NII = (IRSA - IRSL) ∆r = (interest rate gap) can be done using hedging instruments ∆r. (financial derivatives), such as interest rate Using a global gap implies that there is only swaps or forward contracts. one reference and accordingly, a significant 6. NET INTEREST INCOME AND parallel change of all rates. The regulations INTEREST RATE GAPS ask for testing the effects parallel changes have on NII, using 1% or 3% changes. Table 2 presents the NII for two interest rate However, since there are several interest rate scenarios, along with checking the gap model references, there is the same number of suitability. In order to simplify the interest rate gaps. Dividing an interest rate gap calculations, let us start with the assumptions into gaps by interest rate references makes NII that are not restrictive: constant commercial sensitive to these references (for example, spread and a change in fixed structure of rates. interest rates relative to the rates with different A simplified balance sheet is projected for the maturity dates). first date – one year from the running date, so there is no need to use a zero date for gap A gap is calculated through a time limit (for calculations. All subsequent calculations of example, a month). Every interest rate change interest incomes and expenses are done calculated according to the gap implies that through annual financial statement. Suppose the beginning of a time limit is taken as the there are no hedging contracts for the reset date. If the reset date is near the end of following year, and the projected balance the month, the change in interest income or sheet is such that interest rate gaps and expense would be overrated. The precise liquidity gaps are open. We take both of them calculation of NII is obtained when interest into account while calculationg the interest rate gap is zero (reset dates differ), and NII rate gap, because open liquidity gaps generate remains sensitive to interest rate changes. the position of interest rate. The gap model is very useful since it measures the NII sensitivity to interest rate Table 2. Balance sheet projections for the banking portfolio Date I Interest rate insensitive assets (a) 38 Interest rate sensitive assets (b) 34 Total assets (c = a + b) 72 Interest rate insensitive resources (d) 30 Interest rate sensitive resources (e) 18 Total liabilities (f = d + e) 48 deficit is 24, while the variable rate gap pre a) Projected Gaps funding is +16. The deficit of 24 is calculated The annual projected gap of balance sheet is as a variable liability rate, unless the rate has presented in Table 3. All the gaps are been closed beforehand, so the variable rate algebraic differences between assets and gap post funding equals -8. [2] liabilities. The liquidity gap shows that the Table 3. Gap calculations Dates I Banking portfolio Fixed rate assets (a) 38 Interest sensitive assets (b) 34 Total assets (c = a + b) 72 Fixed rate resources (d) 30

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

Interest sensitive resources (e) 18 Total liabilities (f = d + e) 48 Liquidity gap (c – f)a 24 Variable interest rate gap (b – e) 16 Variable interest rate gap after funding (b - e) – (c - f)c -8 Liquidity gapb 24 Interest rate gapc 8 a Liquidity gaps are algebraic differences between assets and liabilities. b Interest rate gaps are interest sensitive assets minus interest sensitive liabilities, or “variable rate” interest rate gaps. c Funding is assumed to be a variable rate before any hedging decision is made. b) Projected Net Interest Income entire life cycle of assets and liabilities, although reference rates do not have to be The net interest income depends on identical to market rates. In this case, we commercial margins that stand as a suppose that they change along with the connection between reference rates that are market rates. In Table 4, a simple solution has used internally and reference rates for clients. been applied that consists of two scenarios of Therefore, NII changes depend on the changes a flat yield curve, at possible levels of 7 % in these interest rates and the size of reference and 10 %. rates. Such connections are mostly fixed from the start, and they do not change through the Table 4. Interest rate scenarios Scenarios Rate ( % ) 1 (stability) 7 2 (increase) 10 Note: Flat term structure of interest rates c) Commercial Spreads 72 x 10 % - 48 x 4 % = 7,20 – 1,92 = 5,28 Commercial spreads represent a difference Bank NII differs from commercial margins, between client rates and market rates. They since it is derived after taking into account the are expressed in the volume percentage of cost of funding. The cost of funding is the assets and liabilities. Negative commercial market rate (plus any credit spread relating to margins for liabilities imply that client rates the bank, which is included in the rates are below market rates. scenario). Since the yeald curve is flat, the funding costs do not depend on maturity In this paper, commercial spreads are 2% for dates. The NII before funding the liquidity assets and -3% for liabilities, which implies gap represents a commercial NII minus deficit that average client rate for assets is 3% above funding costs of 24. This cost is 7 % x 24 = the market rate, i.e. that the client rate for 1,68. Therefore, the bank NII is 5,28 – 1,68 = demand and term deposits is, on average, 3% 3,60. below the market rate. When the market rate is 7%, these rates are 10 % and 4% (the d) The Sensitivity of NII and Interest Rate numbers are defined in this way in order to Gap simplify the example. Certainly, real margins The percentage of commercial spreads differ according to different items of assets remains the same when the interest rate and liabilities). In practice, the percentage of changes, because they are fixed at the margins varies depending on the kind of assets beginning of transactions. Therefore, for all and liabilities, but the calculations are the items that are not interest sensitive, client identical. The commercial margin, before rates do not change when market rates do. For closing the liquidity gap, is derived from the interest sensitive items, a client rate changes client rate and a favourable balance of assets along with the market rate due to constant and liabilities of the bank portfolio, as commercial spreads. The NII value after the follows: interest rate change of 7% to 10% stems from

49 J. Jednak, D. Jednak new client rates and should be in accordance growth of up to 3%. According to the gap with the previously calculated interest rate model, the change is also equal to the interest gap, as presented in Table 5. The values of rate gap multiplied by the change of the commercial margins, before and after interest interest rate. The interest rate gap of rate growth are 5.28 and 5.76. This change is commercial portfolio is +16, and the change in accordance with the gap model. The change of margin is 16 x 3 % = 0.48, in accordance of commercial margin is 0.48, for the rate with direct calculation. Table 5. NII and interest rates Revenues / Revenues / Volume Initial rate Final rate costs costs Fixed rate assets 38 10 % 3.80 10 % 3.80 Interest sensitive assets 34 10 % 3.40 13 % 4.42 Revenues 7.20 8.22 Fixed rate resources 30 4 % 1.20 4 % 1.20 Interest sensitive resources 18 4 % 0.72 7 % 1.26 Costs 1.92 2.46 Commercial NII 5.28 5.76 Liquidity gap 24 7 % 1.68 10 % 2.40 Net interest income 3.60 3.36

After funding costs, the NII drops by 3,60 – 7. LIMITATIONS OF INTEREST RATE 3,36 = -0,24, because the funding costs of GAPS liquidity gap are indexed in the market rates There are several limitations concerning and increase by 24 x 3 % = 0.72. A interest rate gaps.[2] Yet, gap reports remain the commercial margin growth of 0.48, minus same, and the regulations stipulate the growth of funding costs, yields a change of - monitoring of gaps and specification of all the 0.24. Alternatively, post funding interest gap assumptions that calculations rest upon. is only the commercial portfolio minus the funding amount, or +16 -24 = -8. This gap, a) Embedded Options in Banking Products multiplied by 3%, also yealds a margin Most serious gap limitations exist due to the change of -0.24. options embedded in bank products, like Static gaps are important for the needs of explicit options, i.e. loans with a fluctuating hedging, since they influence the NII rate that have a cap interest provision paid by sensitivity to reference interest rates. When the client. Other kinds of options are implicit. new transactions pile upon the existing assets They give opportunity to the client, project and liabilities, static gaps are updated and the manager and others to negotiate about fixed hedges can be adjusted. Hedging is done by rates for their loans when interest rates drop. applying derivatives for controlling the size In this case, a bank can impose a fine for and appearance of interest rate gaps. If we altering the terms of crediting, although many suppose that there is a positive interest rate banks observe the clients‟ demands, because gap change that exceeds the limit, it indicates they are not willing to give up other products that there is a surplus of variable rates of they sell to their clients. assets in comparison to the variable rates of Embedded options, whether explicit or liabilities. The surplus can be offset by a implicit, change the nature of interest rates. [3] contract that generates income from the fixed For example, if the rate of a cap option used rates, rather than income from the variable to be variable, it now becomes fixed, and rates. An adequate instrument for this is the during the renewed negotiations about fixed interest rate swap, and the very exchange loan rate, the rate is initially fixed, and then implies obtaining a fixed rate and paying a becomes variable. Since interest rate gaps rest variable rate. upon the very nature of interest rates, that is, turning variable rates into the fixed ones, or vice versa, there is always a need to examine and define optional risk.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 b) Mapping Interest Rates to Selected Risk European countries, it is the rate of regulated Factors saving deposit that represents a linear function of the inflation rate and the short term It has to be stressed that banks usually define quarterly rate. Such liabilities are divided into specific points along the yeald curve, or the two parts, where one part is Libor indexed, risk factors. All rates that do not coincide with and the other one is inflation indexed. Since the chosen reference interest rates correlate there is a sensitivity to inflation rate, inflation with them, but not to perfection. By choosing indexed hedges are used, because they usually a small number of interest rates, mapping of stem from the government bonds that are all the items of a balance sheet can be defined inflation indexed. Such techniques do not in relation to them. The very process creates solve the problem completely, insomuch as the basic risk, or the remaining risk, due to the the defined rates gradually move, i.e. only difference between the chosen and real rates. when the composite index moves by at least One of the solutions is to make real rates (by 0.5%. the product segment) relate to the chosen reference rates, and to use the sensitivity to d) Mark-ups and Mark-downs over the calculation of „standardised gaps‟. [4] Reference Rates Statictical techniques provide that the average The simplest interest rate gaps imply that the yield rate for sub-portfolio (for a range of varialble rate of assets and liabilities has rates products) is the ratio of interest income (or that follow the indexes chosen for modeling expense) in relation to the final debit in the NII changes using gaps. Mapping percentage balance sheet. It is feasible even to create in relation to the market rates changes in the time spans of average rates, which enable the same way as the rates for new transactions. connection between the average rate of When ALM (asset-liability management) is portfolio and the selection of the chosen rates. being used to fill the budget, the projections The linear dependence can be explained as of new transactions are necessary to project follows: balance sheet and NII. Gaps and projections rate = β + β index + ε , 0 1 1 of the NII use commercial margins as where: β1 represents the the coefficient of investment funds. sensitivity rate of the credit portfolio in view e) Intermediate Flows and NII of index x . The remainder ε is a random 1 Calculations deviation between the real data and the embedded model. The 1% variation of the Periodical gaps generate irregularities in the market index generates a change in the credit NII calculation. The gap model does not date portfolio rate for β1 x 1 %. It shows the basic the flows precisely within a time interval. The risk, except for the remainder of error. gap model does not include the effect of reinvestment or cash flows during the period. A standardised gap defines assets and In some cases, both estimates can liabilities according to their sensitivity to the significantly influence the NII. In reality, there chosen reference rates. For example, if the are different reset dates for liquidity flows and yield of a credit part has the sensitivity of 0.8, for interest rates. They generate interest in view of the short term market rate, 0.8 will income and expense that are not adequately be measured in the gap calculation. valued in the relation between a gap and the The alternative solution is to directly use NII. reference rates from the contract on the level Figure 3 presents the way revenues and of individual transactions. Software expenses stemming from mid-term manufacturers dedicated to the management reinvestments and loans depend on the length of assets and liabilities, provide opportunities of the time elapsed between the flow date and to calculate the exact reset dates with multiple the final horizon. reference rates, all until banks own information. The reset date at the end of the period has a negligible influence on the current margin. In c) Regulated Rates the opposite case, when a reset happens at the The same methodology is applied for beginning of the period, it can significantly regulated rates (that are not market rates). In influence the margin. For example, suppose

51 J. Jednak, D. Jednak that the 100,000 flow happens at the entire period. Nevertheless, the NII of that beginning of the period and another 100,000 period will be interest sensitive, since the first flow with the opposite sign, happens at the flow generates interest income throughout the end of the period. These flows are indexed in period, and it does not correlate to the minor current rates that are variable. The periodical interest expense of the other flow, as gap of variable rate will equal zero during the presented in Figure 4.

Figure 3. Interest rate risk and Figure 4. Zero gap interest sensitive dates of flows margin

Figure 5 presents the error when the ultimate period of 91 days at a lower rate for 289 days. objective is immunisation of interest margin. On the other hand, a negative flow generates The gap is different from zero, but the interest debt that costs less in the remaining 180 days. margin is immune to interest rate changes. Since the NII is interest rate sensitive, we can The gap is negative, which implies that NII calculate interest incomes and expenses using has to be increased if interest rates drop, for the exact flow dates. Interest incomes and example, from 10% to 8%. Yet, it ignores the expenses are: reinvestment of a positive middle flow for the Inflow for 91 days: 100,000 x (1.10269/360 – 1.08269/360) = -1,468.00 and Outflow for 182 days: -153,600 x (1.10182/360 – 1.08182/360) = +1,468.00 .

Figure 5. Negative gap and fixed NII The obtained results exactly correspond, the NII is interest sensitive, which is not in because interest incomes and expenses are accordance with the gap of zero. In the second proportional to the size of flows and to the example, the gap model suggests ithat the remaining period of reinvestment and funding. second flow of 53,600 should be included in The first flow is smaller than the second, but it order to hedge NII, but this procedure would generates interest incomes during a longer put the margin at risk. The exact condition period of time. The calculation shows that under which the margin is not interest rate errors are possible with gaps. In the first case, sensitive is relatively easy to get for any set of

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 flows and it differs from the rules for the gap rates. This opens the door to using bihavioural of zero. This condition uses the concept of models when making decisions for the clients. duration,[5] that is, risk management of a Furthermore, the uncertainty of debiting the balance sheet economic value. projected assets and liabilities creates a “business risk” that is combined with the 8. CONCLUSION interest rate risk. Therefore, certain Changes in interest rates through a balance methodology should be defined in order to gap do not affect the net interest income if the solve the double uncertainty. bank owns the same amount of interest REFERENCES sensitive assets and liabilities. Still, if the bank owns a greater amount of interest [1] Saunders, A. α Corrnett M.M., Financial sensitive assets and liabilities, its balance gap Institutions Management – A Risk is positive and it is exposed to the risk of Management Approach, McGraw Hill, decreasing interest rate in the market (NII 2011, pp. 208-212. decreases more than contract obligations), so [2] Gibson R., Lhabitant F.S, Pistre N., Talay NII decreases. Reversely, when interest rates D., Interest rate model risk : an overview, increase, the return on assets increase more Working paper Risk net vol. 1, No.3 , 37- than the return on liabilities, so the NII grows. 62. When the balance gap is negative, the NII http://www.risk.net/digital_assets/4983/v1 decreases. n3a4.pdf. Due to the fact that gaps have many [3] DeYoung R., Yom C., 2008, On the limitations, it is necessary to use simulations. independence of assets and liabilities: Simulations project a balance sheet for the Evidence from U.S. commercial banks, future dates under different scenarios. They 1990-2005, Journal of Financial Stability are also used to include different interest rate 4, 275-303. scenarios. The NII calculation should also include the effect of options and delays [4] Bessis., J., Risk management in Banking, between time points of gaps and real dates for Wiley, 2012, str. 290-296. beginning the calculation of interest incomes [5] Armeanu D., Balu F.O.,Obreja C., 2008, and expenses. Simulations cannot solve all the Interest rate risk management using problems, but the balance sheet changes duration gap methodology, Theoretical according to the client‟s behaviour. For and Applied Economics, 3-10. example, if the rates do not decrease significantly under the fixed credit rate, the clients will not initiate renewed contracting of

53 Serbian Project Management Journal, Volume 3, Issue 2, December 2013

PROJECT FINANCING IN SERBIA

Rada Lečić, Miloš Gajić PM College, Belgrade

Abstract: The purpose of the paper is to point out the characteristics of the mutual business enterprise of a financial institution and investor, through specific sorts of credit placement in the project financing. The project financing is different from the classic credit financing by many characteristics. The basic difference relates to the fact that the return of invested funds is expected from the project monetary inflow and not from the debtor. So, the project income and cash flow are the only guarantee for the investors and financiers for the return of the invested capital. Only a successful project may guarantee a cost-effective investment. Such a concept of project financing means a separation of project from the mother company and defining a special entity – a legal person. In that sense, this paper consists of a thesis with the premises in the theoretical propositions, which are relevant for the justification of project financing implementation. The stress is put on specific characteristics of this project financing model, as the expression of a solution to the insufficient investment issue. The genesis of project financing implementation refers to its significance for the economic development through the history. The technique used in building this model of financing of major projects has positive implications in the field of the living standard of the population. Key words: project, project financing, economic entity – legal person, project sponsor. 1. INTRODUCTION and sustainability. The paper refers to project financing in Serbia. In order to review the set Project financing is a very favorable technique issue, to begin with, the concept of project which is applied in the major and capital financing is defined and then the rudimentary demanding infrastructure and industrial presumptions for structuring of this model are projects, and is successfully used both in provided. The postulates which are important developed and developing countries. Project for looking into the concept are presented and financing is a modern banking product for the refer to the distribution of risk to all project economy. The new concept of financing participants up to the acceptable level and to originated at the moment when the the direct link between the project cash flow conservative banking in the global world and investment returns. Therefore, the project economy was abandoned. The term project financing constitutes a new possibility for a financing is used to denote a wide scope of later realization of investment projects. financial structures, which relate to the project performances. The concept of project 2. DEFINITION OF PROJECT financing has a structure that is suitable for FINANCING the projects which are long-term, complex The getting familiar with this concept begins and financially demanding. The requirement with the explanation, what is the project is that the project may be structured in such a financing? way as to provide both a market justification

Figure 1: Project financing [1]

55 R. Lečić, M. Gajić

Related Definitions: sponsors, conditional on what accounting rules permit;  Cash Flow  Off – Balance – Sheet Financing  Investors and creditors have a clear claim  Reallocating Free Cash Flow on project assets and cash flows,  Non – Recourse Vehicle /Entity independent from sponsors’ financial  Combination Bond condition;  Infrastructure  Debt is either limited (via completion  Non – Recourse project debt guarantees) or non-recourse to the  Project Valuation sponsors.  Analyzing project Viability Professor Hoffman of Cambridge University  Build – Operate – Transfer Contract states that the term project financing is  Scope. generally used for financing without right to According to the authors Campbell R. Harvey, recourse or with a partial recourse and Aditya Agarwal and Sandeep Kaul (Duke represents such a structure in which own University), the structure project financing capital and debt are combined for the purpose highlights [10]: of construction, use and refinancing of some capital-intensive object, where lenders base  Highly concentrated equity and debt the credit approval on the planned income ownership: from the use of property, including all the – One to three equity sponsors. contracts that produce the income and other cash flow. – Syndicate of banks and/or financial institutions that provide credit. According to the above-stated, it may be said that project financing is a financial modality – Governing Board comprised of mainly where the lenders lean on the project cash affiliated directors from sponsoring flows as the source of debt repayment and on firms. project property as a security for this. Also,  Extremely high debt levels: we cannot neglect the fact that quantitative methodologies support project financing and – Mean debt of 70% and as high as include simulation and techniques of financial nearly 100%. engineering. They optimize the capital – Balance of capital provided by structure and validate the financial variability sponsors in the form of equity or quasi of project in the risky circumstances, equity (subordinated debt). particularly when the project realization is followed by a system risk, risk of potential – Debt is non-recourse to the sponsors. bankruptcy and economic crisis, as well as by – Debt service depends exclusively on all other limitations, which occur as a project revenues. consequence of the capital deficit. – Has higher spreads than corporate 3. HISTORY debt. Project financing is not a new technique of  Independent, single purpose company financing. The ancient Greeks used to lend formed to build and operate the project. money to merchants for overseas trips, by which they have equipped their ships and  Extensive contracting. provided merchandise for trade. There are Major characteristics: Economically and many examples. One of them date to the year legally independent project company [10]: 1299 A.D., when the English Crown has agreed on a loan from Frescobaldi, the leading  Founded extensively on a series of legal Italian banker from that period, to develop a contracts that unite parties from input silver mine in Devon. Such arrangement is suppliers to output purchaser; nowadays recognized as project financing.  Project assets/liabilities, cash flows, and This is also the example of affirmation of the contracts are separated from those of the basic principle of this model of financing because the loan was repaid through the mine

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exploitation. There was no discontinuity of  The debt crisis in many countries became project financing in the historic prospective. most apparent in the sector of investments On the contrary, its application was (the consequence is that many developing particularly present in the development of countries have entered the phase of high road infrastructure in England, which was indebtdetness); renewed in the 18th and at the beginning of 19th century by private capital, on the basis of  The leading international construction tolls. The railways, waterworks, gas pipelines, companies looked for new challenges; electrical networks and telephony were  The competition between the main suppliers th developed towards the end of the 19 century and operators at the world market resulted mostly by investments from the private sector. in them becoming the chief promoters of The major projects, such as Suez Canal and projects. the Trans-Siberian railway, were developed in the 19th century by private capital. For the above reasons, many initiated projects from that period, were not fully implemented After the First World War, the role of private due to the lack of capital. In such conditions, capital in financing of major infrastructure the new modalities of financing of projects are projects has weakened, and the state started to appearing, known under the name of project play the dominant role. After the Second financing. World War, the majority of infrastructure projects in industrial countries were carried 4. PRESUMPTIONS OF PROJECT out under the supervision of state and were FINANCING financed from the budget or by multilateral The key factors of project financing include loans. The important role was that of the their sponsors and financiers (lenders). The multilateral financial institutions such as the sponsors are the job carriers and they include World Bank, the IMF and the International major multinational companies and other Bank for Reconstruction and Development. economic sector entities, the government of The private capital has returned to the some country, local authority entities, future infrastructure projects during last 20 years. buyers of the project output. The project The mutual influence of a large number of financiers are mostly the financial institutions factors in the early 80s led to the searching for (banks and bank consortia, then international alternative ways of financing infrastructure organizations for development financing, projects all over the world. One of the recent investment funds, contractors, buyers of examples is the development of Euro project products and services). Disneyland in Paris, which is the unique park of that sort in Europe. Actually, project Therefore, the most important participants in financing is not anything new in the world of the concept of project financing are: project financial services. It has always been an sponsors, financiers (lenders), project instrument for financing short-term and long- company (Special Purpose Vehicle, SPV), term needs for capital in the range of several contractors, suppliers, operators, financial million USD to several billion USD. company, government of the country where The accelerating factors of project financing the project is performed, financial advisors, development are: technical expert and consulting companies, legal advisors, insurance companies, credit  Economic growth as well as the growth of rating agencies, multilateral agencies. population (it causes the need for additional According to Finnerty,J., the illustration of infrastructure objects); complexity of concept of project financing looks like this (figure 2):

57 R. Lečić, M. Gajić

Figure 2: Complexity of project financing [3] Project financing is constructed on the set of projects. The mutual interests, confirmed by contracts, which define business and financial firm contracts, based on financial engineering relations between various parties in the secure the risk distribution and a relative project. Usually, the project companies have predictability of market movements (price and to repay the debt after the loan contract demand), and therefore the income from the expiry. The legal significance of the project project. financing is linking cash flow and investment The reasons for the establishment of an return with the establishment of an independent economic entity – legal person, independent entity. are the following:

Therefore, project financing presumes the 1) Securitization: project companies (SPVs) following activities: are frequently used for securing the loan. 1. Conclusion of an agreement on credit/loan; 2) Risk distribution: the legal way to isolate 2. Establishment of special purpose company high risk projects from the mother company for the realization of a particular project; and to divide the risk between the investors – 3. Financing from the economic entity job carriers; capital; 4. Conclusion of various supportive 3) Competition purposes: for instance, when commercial agreements etc. companies establish a special purpose entity in order to transfer particular intelectual For the studying of project financing, the technology and supress the competitors in that corporate tools available to company way. managers are used. Such tools are relevant for making the decisions that influence the value 4) Financial engineering: the purpose is to of the company and without them the avoid the tax or manipulation with financial performance of managerial functions would reports, because it enables the investment not be possible. These tools are: banks and other financial institutions to create the securities in accordance with the  Analysis of present net value. investors’ demands; it is a new creative  Selection of capital structure. implmentation of financial technology.  Selection of dividend policy.  Negotiations on loan agreements. 5) Regulatory reasons: the project company  Collections of funds. may be established within a separate structure in order to avoid some regulatory limitations  Solution of financial stress when payment in relation with the ownership of a particular of capital amount and interest becomes fixed property. impossible. A response to the question of why project The analysis of discounted cash – flows has financing represents an alternative to the the main role in determining the expected classic financing of investment projects profitability of the project. Potential would be that project financing is more cost participants in project financing will carefully effective because it provides a higher financial analyze projections (cash flow statement, leverage and tax shield in comparison with sources-and-uses and of-funds-statement, the direct way of financing. analysis of the present value and so on) before they invest thein funds. 5. PROJECT FINANCING IN SERBIA The protection of own property enables the The host country in which the funds are project carriers to undertake higher risks in invested provides the basic guarantees for a the realization of the complex structure of regular servicing of obligations to the

58 Serbian Project Management Journal, Volume 3, Issue 2, December 2013 creditors and other investmens from the addition to the already existing, the country and abroad. It is also obliged to adopt classification of claims on the basis of plans the appropriate regulations, which are meant of the project cash flow. Designing project to enable the implementation of requirements financing in our baking market appeared for from the guarantee. The “Law on Foreign the first time in 2004, as a form of financing Investments” enabled the implementation of housing construction. project financing in Serbia during the 90s of Thanks to the adopted laws, the property-legal the last century. framework was created in Serbia for: With the development of market economy, it a) objects in the ownership of the special is possible to distinguish three models of purpose legal persons, established for the financing for construction, maintenance and needs of project financing and use of infrastructure facilities: b) objects in the ownership of the 1. Public ( state) funding investors – mortgage. 2. Private financing 3. Mixed partnership between the public From the point of view of the purpose of the and the private sectors. object and repayment of funds, this model of financing of projects is in compliance with the According to the Basel regulations [2], the Serbian development intentions for the special financing of legal persons is divided construction of objects by investors for the into project financing and IPRE (Income purpose of further sale or exploitation. Producing Real Estate). In our practice, the special financing means the project financing There are two directions in development of of entities, which are registered as Legal project financing in Serbia, as follows: persons. The most recent "Law on public- a) project financing in construction private partnership and concessions" (ZJPPK) industry and foresees that for the realization of public- private partnership model realization the b) project financing of infrastructure and technique of project financing is used, as well industrial projects. as inclusion of concession to the project Project financing in the construction industry company – newly established company of found its affirmation in recent years. On the special purpose (SPV – Special Purpose Sebian banking market, one of the first offers Vehicle). of loans to legal persons for construction In accordance with the modern tendencies in affairs concept for project funding is primarily the banking development, the banks in Serbia designed for financing the construction of have widened the range of their services, residential and business facilities for the which incorporated not only the conventional futher sale or renting, then financing purchase segments, such as the role of creditor, but also of land. There is an estimation than in the the sublimation of owner and financial following years 30.000 apartments should be manager. So, the banks have included the jobs built for the purpose of solving the housing of financial engineering in our market. The issues and reducing the price of square meter faster development of the real estate market in entire Serbia. Serbia has foreseen many and the increase in the number of investors in locations suitable for the implementation of Serbia revealed the need for an offer of a form this modality of financing. Investors have at of financing which is not based on the history their disposal “good” locations for of financial reports of the company nor on on construction of “marketable” objects, by the conservative instruments of collaterals, but the sale of which they can recover the invested acceptability of an investment is estimated on capital and earn profits. The services of the basis of the analysis of the project itself. project financing have been introduced so far Also, the legal framework for the by several domestic banks, considering it is a implementation of a new form of financing – safe placement guaranteed by a high-quality project financing has been created. The Law collateral – mortgage. Some significant on Mortgage introduced the concept of construction projects were realized through mortgage on object under construction and the the implementation of project financing: National Bank of Serbia introduced, in Trade center UŠĆE – Belgrade and HIPO

59 R. Lečić, M. Gajić

model Residential – communal complex of part of the gas pipeline through Serbia is Belville in New Belgrade, etc. defined and its implementation has started. It shall be realized by modalities of project The project financing of infrastructure and financing and crediting of mutual company of industrial projects has not really become a a corporate type, South stream Serbia. The reality, there were several attempts of route of the South stream is presented in implementation but due to the effect of Figure 3. various factors, some projects were not realized. However, the project of construction

Figure 3: The rout of South stream [12] The South stream gas pipeline has a strategic meters of gas annually; while the route significance, both for Russia and for the through Serbia includes 1.7 billion EUR ad European Union. The works on the pipeline valorem investments and 422.4km [12]. started in December 2012. The gas pipeline The basis for a wider implementation of started from the southern part of Russia, from project financing in Serbia has been created the city of Anapa in Krasnodar Krai. The by the increased interest of foreign investors South stream project is very important, not and by the establishment of the legal only for the economic development of Serbia, framework. but for the whole region. The gas supply of Serbia becomes secure and safe by this Nowadays, project financing is one of the project. Besides, there are other benefits, most frequently applied models of financing, which are reflected in a more favorable above all, of infrastructure projects, for which transport, price of gas, big development experts predict a further growth. It is mostly possibilities, interconnection with the used during the construction of infrastructure Republic of Srpska, Croatia, Romania and objects (transport infrastructure, roads, Bulgaria. The initial agreement foresees that bridges, power supply networks, waterworks the gas pipeline should be financed according and sewerage systems, telecommunications, to the principles of project financing i.e. oil pipelines an gas pipelines), then the mutual capital from Russia and Italy, later industrial plants (factories, electric power joined by companies from Germany and plants, logistics centers) and public France. The gas pipeline owner – job carrier infrastructure objects (hospitals, schools, shall be the newly established company South prisons). In all the above-mentioned fields of stream transport, in which the Russian implementation, the basic characteristic of the Gazprom will have a share of 20%, the Italian project is that it operates as a special power company Eni 20%, German economic unit, with the status of a legal Wintershall and French EDF 15% each[13]. person, separated from the mother company, The statistics of the South stream provides which provides multiple advantages for the information that the main gas supplier is project carriers (sponsors) and other Russia, the value of the investment project is participants, and consequently a lower risk for 16 billion EUR, the total length of gas all the protagonists in the project. Project pipeline is 2.380km, the maximum capacity is financing is not used in Serbia at a larger designed for the level of 63 billion cubic scale, except for financing of the construction

60 Serbian Project Management Journal, Volume 3, Issue 2, December 2013 of several residential and business objects. In [5] Dabić, L.: „Ugovor o finansiranju projekta order to intensify its development, Serbia (BOT sistem), magazine: Pravni život, No.11., should attract the "greenfield" investments 1996. with the help of this concept of financing, [6] http://www.gds.rs, Građevinska direkcija which is a good placement for a bank, a Srbije, March 2011. smaller participation of capital for the investor in comparison with the conventional sources [7] http:/www. Karanovic-Nikolic.com /wp- of financing and a bigger trust for the third content /upload: ”Analiza mogućnosti i parties – buyers, lessees etc. modaliteta finansiranja i mera finansijske podrške javno-privatnog partnerstva u Srbiji”. REFERENCES [8] http: / www.ubs-asb.com [1] Aydemir 2006,ppt [9] http://www.singipedia.com/content/269- [2] Bazel II- Međunarodna saglasnost o Projektno-finansiranje-u-Srbiji, mart, 2010 merenju kapitala i standardima kapitala, Udruženje banaka Srbije, Beograd, 2007. [10] Project finance introduction.ppt [3] Finnerty,J.:“Project financing: Asset-based [11] Project finance international, Published financial engineering“, John Wiley & Sons, by Thomson Reuters, Aldgate House, London, Inc, 2007. January 1997, 1998, 1999, 2000, 2001 and 2002. [4] Esty, B.: „Modern Project Finance“: A Casebook, John Wiley & Sons, 2004. [12] www.srbijagas.com/projekat/juzni- tok.51.html [13] www.sr.wikipedia.org /sr /juzni tok

61 Serbian Project Management Journal, Volume 3, Issue 2, December 2013

THE PROJECTING BASIS OF THE ORGANIZATION OPERATIONAL RESEARCH

Vojislav Đorđević, Nataša Đorđević PM College, Belgrade

Abstract: The research and projecting of the organization fasilitate its operationalization. The application of the operational research is based on theoretical and practical knowledge of the organizational basis of the organization, relations and connections of its factors in the process of functioning and adapting to business operations and actions. Operational research is based on the internal and synergetic interactions of structural, functional and operative criteria of properties, relations and connections of the organization. This work also presents certain operational models and examples of the operational design of the organization. Keywords: projecting, organization, properties, criteria, design of organization, goal. 1. INTRODUCTION 2.1. SYSTEMIC BASES OF THE ORGANIZATION Each organization is an organizational system (OrgSy), which is characterized by: the field The organization can be projected as an of organizational operative activity organizational system of elements, or groups (FiOrgOpa), the domain of action reality of elements in a specific order with certain (DoActReal) and organizational phenomena functional properties in regard to the goal (OrgPhen). The organization is manifested in (Anton, 1989). the form of properties (Pr), relations (Rel), Systems are manifested through the connections (Conn). The operational method organization, and the organization maintains is knowledge and operational way of continuous processes and changes (Kukoleča, describing, explaining and projecting one 1972). organization. It is the need and the possibility of their design, operational modeling and ( Sys↔Org(Proc↔Chg)) skilled practice. Therefore, an appropriate Process (Proc) - means the change of the approach is required to the basis of the system by decomposing and simultaneous organization operational research. In constructing structural parts of the accordance with the existing scientific, organization. doctrinal, normative and action achievements, the first chapter discusses the organizational Changes in the system (Chg) happen with bases of the operational approach to the changes in the organizational structure and organization. The second chapter analyzes state of the system (Anton, 1989). the aspects of operational shaping of an Structure (Str[n(el↔el)]) is a certain number organization. The third chapter analyzes the of elements in one entirety and their criteria of the organization operational interconnections, realized by the linking research, which are corroborated by specific structure concept (Đorđević, 2006). models and examples. The work ends with concluding observations and used extracts There are two concepts expressed through from the extensive literature. projecting connecting structures: organizational and functional. By the nature 2. PROJECTING BASES OF of the relations and connections between OPERATIONAL APPROACH TO THE elements as basic, relatively isolated or ORGANIZATION particular parts, organization can be projected As a system, the organization is a totality of via hierarchical structure (Figure 1). the elements, which are interconnected with relations (Kukoleča, 1972).

V. Đorđević, N. Đorđević

2.2 . ORGANIZATIONAL-FUNCTIONAL Activity - the process of unifying and BASES OF THE ORGANIZATION directing actions which achieve effect - the result (Anton, 1989). An organization is a social and technical creation of people which operates with certain Operative activity – presents all activities in resources, in particular with space and time, one system (Đorđević, 2006). according to the specific program in order to The result is qualitatively and quantitatively achieve a certain goal. expressed as a value of some work in certain Functions are relations and impacts or effects, time based on the defined goal and the given the factors that the organization (its elements task. Activities of job holders are manifested and components) achieves on its specific through functions on an elementary, sectional structure entirety (Šešić, 1982). and general levels of the organization. The organization acts like a force achieving 3. ASPECTS OF ORGANIZATION the goal, which exists as a creation by OPERATIONAL DESIGN IN maintaining and developing itself. In fact, the PROJECTING organization accomplishes its goals by performing certain task(s) (Kukoleča, 1972). Shaping the organization is based on its dimensioning and structuring. Operational Operational research tends to support the dimensioning of the organization is possible projecting of monitoring, assessment and with the qualitative-quantitative prediction of survival - sustainability of the determination of its structure and properties. organization as an operative creation from It is possible to project two types of structure: various aspects (stability, efficiency, etc.). organizational (OrgStr) and functional The objects of operational research can be (FunStr). Structuring the organization is elements, parts, and organizational entirety in realized in relation to activity holders and terms of properties (pr), relations (rel) and operative activity. The process of shaping connections (conn) of organizational includes organizational subjects as regional coherence. They are often manifested, and procedural realities, modalities and analyzed and projected in space, time, quality, equivalents. Operational coverage is possible quantity. They can be projected as relations of at: quality (ql) , quantity (qt) and modality phenomena, states, structures and operative (mod - according to the type and degree of the activities (Petrić, 1989). necessity and importance of connection regulations – properties of items) (SYMOPIS, Operative organization is characterized by 2010). tasks holders’ relations and connections, which are integrated into the organizational 3.1. THE ORGANIZATIONAL DESIGN strength of the goal (Figure 1) . OF ORGANIZATIONS (OrgOrg) is possible on the basis of activity holder (J, The strength of the organization is based on Opa, A; Table 1.). The basis of target adapted forms-entireties that make it organizational dimensioning of the divided into: managing part (Mp) , executive organization is a projected organizational part (Ep) and security part (Secp) of structure of personnel, resources, facilities functioning. and procedures. Organizational subjects may From the project standpoint, operational include: individuals, departments, divisions, research is an important facitity of groups (permanent and temporary) by discovering the potential and the ability to operative activities: a) management, b) adapt the organization by its target structural executive and c) security operative activities and functional changes. (Table 2). Elements of the organizational structure are 3.2. FUNCTIONAL DESIGN OF THE people and resources, and the functional ORGANIZATION (FunOrg) is for the structures of activities and actions. purpose of process dimensioning and Action is a comprehensive activity element, structuring of operative organization. It is which generates a specific task - the goal. based on the relations and connections of regional and process factors activities (Figure

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

2). They reflect the internal stability and a.1. Elementary. Criteria that state the basic sustainability of the organization. factors of the organization: personnel (P), facilities (Fa), other resources (Res). Regional structuring regulates the activity holder’s relations and connections, while Example 1. Quality properties of people, process structuring regulates relations and from individuals to organization - as an connections of tasks (Z1. .... Zn) and goal entirety, they can be evaluated on the basis of (G) (Figure 3). relevant quality of personnel, ranked by the importance of organizational effectiveness: In the process of its target dimensioning and will (will), expertise (es), capacity (cap), structuring, it includes perpetrators of the experience (exp), responsibility (re) and other function and target strength. Operational qualities. design is possible as realities, modalities and equivalents. The author of this work researched the quality of people in one organization, which can be 1) As reality (creation) it includes relatively considered as reprensentative for any permanent relations and connections of organization in relation to impact criteria on elements, parts, and organizational entirety the state of the organization (Đorđević, 2006). and their need for efficient perpetrators by the Differences in coefficients influence of the quality and quantity of the functional tasks in quality (ql); relative value of influence from relation to the effects of the environment. 0.01 to 2.00 were considered: 2) Modality is a feature design by I) determining quality (ql >1.01 to 2.00) 1) competence holders connection types and will- 63.9%=1.92, 2) capacity- 41.8%=1.25, relations by specialties of organization etc. elements, parts and the entirety. II) decisive quality (ql >0.50 to 1.00): e.g.: 3) As the equivalent, they are designed 5) experience- 24.59%=0.74, 6) age- according to the organizational needs for 18.03%=0.55, etc. effective perpetrators by the quality and quantity of the special tasks for the III) existential quality (0.01< ql <0.50) ): management, operative action, and their e.g: standard- 8.20%=0.25, 10) motivation- security in relation to the business 6.55% = 0.20, etc. organization content through parts and Example 2. The state of facilities can be entirety. estimated and evaluated on the basis of 4. CRITERIA OF THE PROJECTING IN general properties: ORGANIZATION OPERATIONAL occupancy (o ) in relation to a prescribed RESEARCH c number and correctness (co) of facilities These are the internal and synergistic according to the requirements of the project. interactional structural, functional, and General state of facilities can be evaluated on operative criteria of properties, relations and the basis of their general characteristics, such connections of the organization. as model 1., as parts, as well as entirety of 4.1. RELEVANT ORGANIZATIONAL organization by type ( eg, transport PROPERTIES, RELATIONS AND organizations : fa1-buses, fa2 – off-road CONNECTIONS vehicles m/v, fa3 – freight vehicles m/v,....fan – special transport vehicles m/v, etc.), A common coverage of their essential according to the laws of probability based on relations and connections is possible the availability and accuracy: according to the levels of the organization, which may affect elementary, special and general criteria. 1/ Sfa = ( ΣП Sfai (oc× co))/n = n(Sfa1+ Sfa2+Sfa3+ ...... + Sfan) (1.) Evaluation of general state of organization facilities SfaOrg= kSfaMd + kSfaOp + kSfaSeb (2.) Σk

V. Đorđević, N. Đorđević where: Example: (2 × 2.8 + 3 × 2.9 + 2 × 2.6)/7 = (5.6 + 8.7 + 5.2)/7 = 19.5/7 = 2.78. According  k- coefficient of relevancy for facilities to this example, the state of facilities of state business operations (can be 1, 2, 3, organization is preferable. for exp. for organization of transport, transport vehicle and desk has different a.2. Special. States criteria of the organization significance), divided on: organizational parts by operative activities domain (management, operations,  SfaMd – state of management facilities serving part), their content operative activities (eg, 2.80); (activities: e.g. governance, transport) and  SfaOp – operative state of facilities (eg, secure business operations. 2.90); Example 3. The structure of the  SfaSeb- state of facilities for secure organization (Sst). Structure state of business opeartions (eg, 2.60) and organizations (Sst) can be shown by the general model:  Σk – the sum of the number of all applied coefficients of relevancy for overall state (eg, 2+3+2=7). n  Sou

i=1

Sst = ------(3.) n where: a.3. General. State organization criteria as an entirety Sou - is the sum of organizational units states, n - number of members analysis, and i Operative states reflect synergetic relations – analyzed number of members. and connections of the organization and the environment through assignments. In relation to the required efficiency, where the criterion relative coverage of the function Operationalization of operative state of the units holders of operative activities is, organization (Ostorg) reflects relations of its particulary, special and general structural efficiency of functioning with respect to tasks state of organization can be: preferable, (required effects of work), which is possible partial or unsatisfactory. to express with the model:

Ostorg = FEforg x SmSebOr (4.) where SmSebOr is the success of measures implementation of activities, which can be in the preparation, organization and modelled by the general formula:

SmSebOr = (SpOr+ScontentSebactivities)/n (5.)

The knowledge of operational state of any Depending on the segmental and overall organization, particularly companies, and the operational state of the organization, state knowledge of application of the quantifying operationalization of its capacity is possible, method is required. in relation to shorter or longer periods.

Example: Ostorg=FEforg x SmSebOr = FEforg 4.2. COMMON CRITERIA x(SpOr+ScontentSebactivity)/n = (2.721 × CONNECTIONS AND RELATIONS ((2.89+2.78)/ 2)= (2.721 × 2.835) = 90.7% × Common criteria connections and relations 94.5%= 0.907 × 0.945= 0.857 or 85.7% or for all forms of state are degree of factors’ 2.57, which is preferable.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 impact on the state of the organization, such REFERENCES as a company, that is possible to express with [1] Anton, Miloš: Organization for leaders, different coefficients of relevancy (cr), which may include: deciding-large (cr-3), opting- SA, Belgrade, 1989. medium (cr-2) or influence-small (cr-1). [2] Đorđević, Vojislav: 'Assessment of own forces in the process of making the 5. CONCLUSION decision for the operation', doctoral Operational design of the organization with dissertation, Military academy, Belgrade, qualitative-quantitative properties has an 2006. integrative influence on projecting its effectiveness and efficiency within certain [3] Hovard, I: Organizational design, elementary limits, both by organizational NewYork, 2008. units and organization in general. [4] Kukoleča, Stevan: Basic theories about organizational systems, FON, Belgrade, With the operationalization, projected quantity can be partially compensated with 1972. the necessary quality of the organization and [5] Marković, Mihajlo: Logics, Institute for vice versa. Developing operational projecting publishing textbooks, Belgrade, 1962, VI of the organization, researching its properties, edition connections and relations between the [6] Petrić, Jovan: Operational research, NK, organization and the functionality Belgrade, 1989. significantly improves the optimization of the organization adjustment to challenges of time, [7] Šešić, Bogdan: Methodology basis of conditions, needs, missions, tasks and limited social sciences, Science Book, Belgrade, resourses for various actions. 1982, Collection of works SYMOPIS- 2010, Zlatibor.

ADDITION

Org. strength

Entirety Organizational parts Parts

Elements Personnel, facilities, resources

Figure 1. The hierarchical structure of the levelled organization

Organization functioning Management Or

снага

Process tasks

Executive part

tasks

дејство Security goal Domain alal Interaction between domain and process tasks

Figure 2. The functional structure of the organization

V. Đorđević, N. Đorđević

High Medium tendencies Low Critical Stage i phase tasks

Z1 Z2 Zk Zn Target F

Time (t)

Figure 3. Possible states of levels and tendencies of the organization functionality

Table 1. Levelled access to the structure of activities, effects and states of the organization

Organization level (Lo) Activities(Ac) Effect (Ef) State – problems (Sp)

E Elementary J Jobs Et Elem. tasks E Elementary S Sectional Opa Operative activity Gt General tasks P Parts G General A Action Gef Goal G Goal

Structure of the S

StAc Structure Ac StEf Structure Ef StSp Structure Sp

Or g tO r St Organization

Table 2. Levelled access to the organizational structure of elements, parts and entirety of the organization

Organization level (Lo) Personnel (P) Facilities (Fa) Resources (Res)

E Org Mp Ep SecP Or Mp Ep SecP E Mp Ep SecP Elementary Oc

S Org Mp Ep SecP Or Mp Ep SecP P Mp Ep SecP Sectional Oc

G Org Mp Ep SecP Or Mp Ep SecP G Mp Ep SecP

General Oc

Or Org. occupancy Oc P Oc Fa Oc Res

Oc Oc

StOr Org

Org Org Org

St g

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

STRATEGIC, PROJECT AND VIRTUAL PROJECT MANAGEMENT

Ljiljana Berezljev – PM College, Belgrade

Abstract: Management project activity in starting a new business or remodelling of the current falls is, as a rule, the most complex and the most delicate management of ventures and activities. Depending on the type of the project and the conditions under which it is running, management project activity is implemented by particular, specific procedures that employ respective material and financial capabilities, as well as personal subjective performance of entrepreneurs committed to a successful project outcome. Project management is scientifically based and practice confirms that the concept that using the appropriate methods of organization, planning and control rationally harmonizes all the necessary resources and coordinating the performance of necessary activities to a project implemented in the most efficient manner . Key words: project, project management, project implementation, virtual project management. 1.INTRODUCTION 3.Extent and nature of tasks: It is a unique and unrepeatable venture or task: it is a one-off The word "project" is an ambiguous term that project with whose completion the project has several specific terminology meanings. ends; it is an undertaking that requires a The construction of each building object special commitment and support. precedes the production of a specific project. 4.Complexity: It is a complex undertaking First, it is the preliminary design (drawing) in with usually a large number of participants; it which it is presented, perceived, and assessed is a complex project which involved and the technical and functional ideas participants who perform a variety of the jobs, asserted. If the preliminary design approach is but they are also centralized and harmonized. adopted then a construction project is made, which typically has several parts: the main 5.Terms: It is a project that is being design project for water and sewerage project implemented in the future, for the future. It is energy, pro-lighting project, project a venture that has a shelf life and the life telecommunications. and other projects. cycle; - it is an endeavor timed with the start According to another definition of the word, date and the end of the implementation; it is design means a specific goal or project of a an endeavor in which each phase (sequence) complex and atypical character, which should and the performance of the implementation is be implemented or performed. According to time determined. our expert in project management, professor 6. Organizational structure: It is a project that Peter Jovanovic, "project is a complex unique has all the elements of a rounded business business venture that is undertaken in the processes; - it is an endeavor that consists of future, in order to achieve certain objectives interconnected phases and activities - it is an committed within the allotted time and the undertaking that requires coordination projected costs”. (functional adaptation) of all participants in The basic features of the project are as the implementation; - it is an endeavor that is follows: usually performed on a particular type of network plan. 1.Objective: It is a venture with one or more precisely focused objectives to be achieved. 7. Risk: Due to the uncertainty and the future, which is always unpredictable, the project is, 2.Significance: This is a special project, as a rule, immanent to a degree of risk and usually of exceptional significance - it is an uncertainty; - during planning and during endeavor whose realization achieves big project implementation these parameters developmental effects of a business that is should be incorporated into the project to commercial and financial, social and / or reduce the risk to a minimum potential others. measure.

Lj. Berezljev

8.Information system: It is a venture that  Projects investing in scientific research, requires special and jagged information the development of information-system, system; - it is an endeavor for which the staff training, and other development information is obtained from various sources. activities. 9. Control system: It is a venture that should III. According to the length of the project, be permanently controlled in all phases of the complexity of the project, engaged work and by involved perpetrators; it is an resources, applied methods of endeavor that, due to the unpredictability of implementation and char-TERU the relevant events, must be revised. organization, projects can be divided into A typical example of the entrepreneurial two basic groups: business project is the establishment of a new  The projects are new construction or program or restructuring of existing reconstruction (expansion, modernization) enterprises. The realization of this type of of existing plants, business centers and enterprise is coming to the fore all of the other commercial properties; following basic characteristics of the project.  These are projects of spatial expansion and / An entrepreneur who runs this endeavor to a or dislocation of the business unit into new pecified finish, has all the above areas; - in business and entrepreneurship characteristics of the project asserted into they are construction projects associated account. Neglecting only one of the (secondary) infrastructure, access roads, characteristics (determinants) of the project power lines, telecommunications, water and can result into big problems with the price that sewerage and other infrastructure. the project fails. Types of projects - enterprise accounts. There are several classifications of Characteristics of ongoing business projects projects as enterprise strategic charts show. also include: I. According to the functional areas of  Project analysis and expertise of the business to which they relate, these projects existing business of the company; can be classified according to the following  Making planning (design) documentation definition: of various character,  Introduction of the new business;  Projects in the field of production: the  Introduction of quality - the introduction introduction of new production, of a new or modernization of an existing modernization of existing production, etc. information system (inform-situational  Projects in marketing: establishing new System) channels of procurement of modern  Analysis of opportunities for marketing systems of logistics, the introduction of and penetration into new markets; new or expansion of existing sales  Explanation of new methods and contents channels, creating a new system of (displays, exhibits) in promoting, promotion, etc.  Organized knowledge innovation  Projects in the field of investment and concerning both managers and employees; development: the construction of new  Implementation of new import and / or plants and offices, reconstruction of the export enterprise; existing capital stock, and other projects of a functional nature.  Establishing new channels of investments;  The start of production of new articles and II. According to the object and purpose the other current development projects. projects can be classed into the following groups: IV. According to their purpose, projects can  Investment projects in new areas and have surely different options. In this sense, we buildings can differentiate among the following various  Projects for investing in the reconstruction projects. and expansion;  Investigative character: marketing  Investment projects in the dislocation of research, product research, technology the existing facilities and resources research, research policy and legal businesses and other research projects,

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

 Project of planning and development of  Restructuring Project existing business character and detailed design, production system or parts of the system, mergers, and other plans and programs of the mid acquisitions, or separation of individual and long-term nature - Projects and organizational units and other projects of a Development conquest: conquest and similar nature; - environmental projects technology development; conquest and and projects for rehabilitation and product development; conquest and market protection of the endangered working development (channel acquisition and environment: - Projects of social character channel placement) and other conquests that can be related to the hiring of women and developments, workers within the company of a particular  Projects of investment character: the area, and other projects. construction and equipping of new spaces After allocating strategic and business and buildings, reconstruction and development and approval of business plans modernization of the existing facilities and and other related planning documents with structures; sanation and / or technological which the necessary dynamic, contents and remodelling of threatened and / or obsolete details specifically define a determined abusive space, facilities, installations and business, follows the fifth stage, the fifth step equipment. in the procedure of strategic management. The V. The strategic orientation business projects fifth phase of the strategic management to can be developed to: build new or remodel existing business is achieved through the implementation of the  Project positioning a new business - when preparatory and operational activities that entering into new business subcatch. (activities) are usually of investment and post  Projects repositioning the existing investment character. The preparatory and businesses which ( repositioning) may be operational investment and post - investment made in the direction of expansion activities are performed by relevant task (expansion towards revitalization entrepreneurs and top managers of the modernisation and improvement); toward company, who provide realistic, documentary recovery (healing) of the company, (programs and projects operating performance rehabilitation facility (department), of the investment ), institutional (municipal rehabilitation of canal traffic reduction permits and approvals ), financial ( money ) , (narrowing) or in the direction of gas- material ( fixed and current assets ), location ( learning unprofitable and nonprofitable space ) personnel (human resources) and other business. investment securities and conditions for the VI. According to a separate (specific) initiation and successful implementation of definition of projects, they can be the asserted business. differentiated by very different grounds. In A successful realization of preparatory and this sense we can talk about the following operational investment and post - investment projects: activities requires special skills and Projects of cooperation and / or integration - qualifications of management. Ability in this which can be classed as follows: specific case means the willingness and commitment of management to achieve opting  Business and technical cooperation investment and post investment objectives projects, and implement the project . Qualifications , on  Projects of commercial cooperation, the other hand, refer to the technological and  Joint appearance on third markets organizational knowledge with which to  The realization of joint ventures and other dispose of the processes and procedures of cooperation projects and / or integration of keeping the asserted business. the resource potential of different character Software operationalization of the determined Project organization and reorganization of investment, if the investments are complex in the company or certain parts of the company character, as a rule, is carried out through involves as follows: special operative term plans. Operational  Project of building a new organization, plans of the company are made by an

Lj. Berezljev entrepreneur (top manager), or on a special planning and implementation of the project assignment and authorization: suitably enterprise. The project usually implies qualified management of sector (secondary) undertaking the activities in order to achieve level. In large and complex organizations, defined goals - in the allotted time , within the entrepreneurial , operational plans with which foreseen resources and projected costs . In this to implement development investments - at sense the definition of project management the level of the entire business -system , often and project management can be defined as the result of coordinated synthesis of follows: operational plans for individual papers and / "Project management is the business of or other organizational units that constitute the insurance to the ultimate goals of the project operating system organization. with all the risks and problems that arise in The entire procedure of investment and the implementation". Our probably most operating post investment activities that informed expert in project management, precede the commencement of work and the professor Petar Jovanovic, proposes another current implementation (commercialization) definition of project management, which may of the asserted business can be in general define the term project management more divided into two groups, functionally and accurately. According to him: "Project temporally separated, the business stages. management is scientifically based and These are : practically confirmed concept of using the appropriate methods of organization, planning The preparation phase of investment and and control and rationally harmonizing all the investment , and post investment phase of the necessary resources and coordinating the preparatory activities related to the performance of necessary activities so that a management of resistance to starting up project should be implemented in the most regular current planned work. efficient manner." For the performance of the first and the Project management and project second phases of investment activities the implementation are usually performed by a entrepreneur or top manager must have the network - precision level with which it is appropriate financial and successful business primarily determined by : and investment. Investment preparation and the investment is  Holders (executives, operators) of the realized through a specific procedure in which project the activity of management in theory and  Technologically separate phases of work practice of business is called Project  The beginning and end of individual management. Conceptually expressed, project phases. management means a special kind of The network plans to be used in the management relating to the management of implementation of the projects can be shared the project. Bearing in mind that starting a while in the two groups. These are : new business or remodelling the existing business is serious business venture and is a  Global network maps of the entire project specific type of project, we will keep the  Partial (segmental; detailed) network maps reader's attention briefly to explain the of individual parts of the projects. concept of project management that just The development and implementation of the applies to investment preparation and business plan of a new and complex business implementation of specific investment which needs to be run, can be treated as an projects. Investment preparation and example of a global project. Bearing in mind implementation of investment in most cases is that the development and implementation of the investment into the asserted the business plan, its implementation should implementation of the business plan - certainly be carried out in phases and some certainly if the implementation of the plan is characteristic functional segments, where we based on investment can distinguish: separate conceptually distinct Project Management is a special type of and rounded segments, such as segment management relating to the designing of management and organization; segment technological processes and technology,

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 segment marketing (procurement, sales, the course of the project the right people find promotion, logistics) and other segments. For the right place and at the right time ; the development and implementation of each 8th Managing change in the project includes of these segments of the business plan can be not only constructive and eventive attitude created and also a special partial network towards the changes that the implementation plan, according to which people and activities of business conditions, but also moves to that are associated with specific business execute certain changes and wisely manage segments will be organized and led. them - when certain (determined plan or Project Management involves the principle of spontaneously arising) circumstances require; defining the next project parameters, and 9th Risk management project is the ability and performing the following procedures and willingness of management for CSOs to activities of the project activity: project the probable risks which can appear 1st Management of objectives and content of during the project, properly and timely the project involves precisely taking the identify them and, based on the available objectives and content of the project and opportunities premanifested, either take continuing care charge (charge) management measures to eliminate risks. for CSOs to achieve the adopted objectives 10th Conflict management in the project and activities; means that the entrepreneur or manager who 2nd Management of the project scope means is leading the project builds and develops their that the project is defined to the extent (global own emotional intelligence, to become and local) to be in the situation to be optimal emotionally capable, able to manage wisely for achieving the projected business goals; and solve conflicts that are ongoing with the 3rd Time management project involves the implementation of the project and can be precise time established for all the phases of manifested among the interested differently the project - which usually determines the motivated actors (people, agencies and firms) corresponding dynamics or network plan, and in the course of project implementation. a consistent observing of these during the 2. PROCEDURES FOR PROJECT implementation of the project; MANAGEMENT 4th Quality management of the project Project management activity of starting a new involves the management that develops and business or remodelling the current falls is , as implements the project permanently a rule, the most complex and the most delicate concerned that the qualitative side of the management venture and activity. Depending project is satisfied - in all relevant aspects of on the type of the project and the conditions the content and implementation. under which it is running, project 5th Managing the cost of the project means management activity is implemented through that the adopted project is implemented in a a particular, specific procedures that rational manner, which ensures both the (procedure) and be sure to choose the material quality of the project plan and the cost and financial capabilities , as well as personal effective execution; subjective performance of entrepreneurs committed to a successful project report. 6th Marketing management project involves the procurement activities, logistics, Viewed globally , the basic stages (sequence) promotion and communication , as well as the in the implementation of development sales achieved in a meaningful and quality projects that are of investment character, may manner that will ensure the achievement of be determined and structured as follows: optimal effects projected for a business ; Phase I: Design and Development (Analysis) 7th Management of the staff of the project of project ideas; involves responsibility scope of involvement Phase II : Identification and definition of the and responsible attitude of top managers and project; sector managers who manage the project in relation to human resources involved. The Phase III: Decision making, planning and above engagement (and relationship) should preparation of the project: not promise misery to every situation - during

Lj. Berezljev

Phase IV: Investment performance (primary Multiproject management is particularly implementation) of the project: implemented in case of the design and construction of entrepreneurial firms, whose Phase V : Completion and assessment (test) basic task is the realization of business project - pilot production and / or test projects. According to the business (project operations; team) and according to the available people Phase VI : Commercialization (current and the available material resources, the business use) the completion of the project, company's owner (entrepreneur) and top that is, the so-called secondary project managers issue work orders with which they implementation ; borrow and authorize certain sector managers Phase VII: Permanent control and, where and executive staff to engage and work on necessary and possible, revision (change) of specific projects. project that is in the business (commercial) We have to keep in mind that the management exploitation. of complex projects is typically a teamwork . The above procedure implementation and Turn on positive grounds of our own advisers operation of the development (investment) and co-workers: technicians, financial project is called the theory of management planners, bankers, accountants, attorneys. "project life cycle ". From what we have 4. VIRTUAL MANAGEMENT PROJECT pointed out above it can be concluded that a In situations where the project (planning and comprehensive project management includes performing arts) activity is very complex and all phases of project activities - from the highly uncertain, the system of virtual project development of the project idea, to primary management i.e., Virtual project management and secondary implementation of the for CSOs is often applied in the practice of economic and technological " death " of the project business. Such a system, as the word project and its replacement with other says , is based on a virtual project assignment modern, profitable and prosperous projects. and virtual project team, who are computer 3. MULTIPROJECT MANAGEMENT simulated and networked with each other and Large and complex entrepreneurial in managerial and executive project organizations, which carry out certain interactions. The aim of the virtual creation investment works as a specialized design and and implementation of the project lies in the construction organizations involved in the fact that there is a knowledge and solutions design, construction of buildings , installation that will then be used in a real applicative of equipment and other project and investment project practice. activities are often carried out as more Virtual project management was used in the strategic and development projects at the same management practices of ancient times. It was time. The aforementioned plurality of project first used in the army through a virtual activities and conditions of the management simulation of war and battles to be delivered. of such organizations. One feature of Later it was also used in business : maps, multiproject management is that, according to figures, drawings, various algorithms and the nature and dynamics of the kinds of the other funds, displays (exhibits), presentations. project tasks, forms of project teams, each With the development of computer team is responsible for the management and technology and the Internet affirmation implementation of a specific project . Each managers who virtually designed some individual project team has its own terms of complex business tasks get a powerful tool for reference and their managers (Executive planning and testing their management aims Manager) who take care of the realization of and objectives and a verification of the the project of which his team was in charge . intended projects. We must be sure that there are no Virtual design is beneficial because it reduces impediments to individual project managers the risks of the business which can be and that business executives also participate in devastating to both the business and the the implementation of a number of different entrepreneurs. The fact is that in the virtual projects. design and virtual realization of the project in

Serbian Project Management Journal, Volume 3, Issue 2, December 2013 certain business ventures and in some areas of business certainly if it precedes a planned business, risk can be significantly reduced business investment , an approach to the because before the start of the real work operational phase, following preparatory previously virtually illuminated and checked work. This stage refers to the activities of is (tests) the uncertainty which is the main project management related to creating and enemy of project management. providing conditions for starting a determined job and enter a phase of regular production Virtual project management in particular and the phase of regular serving and transport proved useful in application programs and ( in case of service transport business ) . The multiproject management preparatory activities prior to commencement The implementation of large and complex of work and its subsequent successful projects especially those of investment implementation include the following tasks of characters requires the inclusion of not only project management that is: different managers and specialists, executors 1stChoice, followed by the introduction of of the project, but also sometimes of different appropriate organizational structure (schema) types of specialized organizations. Sometimes on which to base the distribution of powers it also requires the inclusion of business and responsibilities of employees and direct partners (companies or individuals) which can perpetrators of the work as well as the internal occur in various investment and business organization of the newly formed business status. systems; The fact is, that the implementation of large 2ndSelection of personnel, training and and complex projects, of business investment introduction of officers for allocated business; character, in addition to an entrepreneurial firm that is an investor and principal 3rdSecuring financial resources for starting (responsible) system, the implementation of and maintaining a current job; these projects also include to a greater or 4th Provision of material resources lesser extent: propagating material of merchandise small  Project organization (preparation of project tools and other resources that are material in documentation); the assumption and condition of asserted  Performing Organization (performing business; various types of works); 5thDevelopment of operational plan  Assembling companies (construction and implementation, monitoring and control of the installation of equipment and devices); business and its application;  Consulting and engineering firm th (management of technical and / or financial 6 Launch of trial production and operations, supervision, consulting, engineering monitoring implementation, and possible services) ; revision of the running process;  Financial institutions (ie, co-investors and 7th Realization of a planned venture, which is creditors) and / or achieved through the regular operation of the  Other organizations. installed capacity and human resources Some of these organizations may have a status involved. of business partners (partners, coinvestors), a The organizational structure reflects the major contractor status, as well as company or division of labor and the division comprehensive project activity is then of powers and responsibilities within the coordinated (functionally aligned) and company . We must be technologically and synchronized (time adjusted), in order to logically connected, entirely composed of design quality and time desirable and appropriate organizational units in which acceptably performed and then successfully technologically connected and functionally - business commercialized. rounded operations are performed . Having successfully completed all Depending on the size , type and complexity preinvestment and investment activities, of the organization, as well as depending on which are material, location, program, the content of its work organizational chart, technology and the other based on ordinated entrepreneurial firms may be differently

Lj. Berezljev determined and structured. Most usually: 7thProject delivery system, used by inline, functional, manufacturing, process, organizations that deal with multi project territorial division mixed project; innovation, activities design , construction, installation, contingency, re-engineering and ad hoc consulting engineers and other similar system of organization, which is in practice companies. Any major work , which is treated most applied. as a separate project, is the basis for the establishment and organization of special 1st Line system of organization based on strict project and resource entity, human, financial subordination (dominance and subordination) and other, that are assigned to the project and includes business perpetrators, each executive implemented . job manager or employee operating accurately knows who he is superiour and 8thMatrix system to organize the system, who is subordinate to the subject business. which is also based on the combinations. This system is primarily a combined functional and 2nd The functional organization of the system project organization chart. is based on the basic functions of the firms in which they perform. With this system, the 9thThe innovative system of organizing the organization of the company is divided into original schematic model of organizing that is sectors or other organizational units, sectors based on the unusual ( non-standard ) and that perform various business functions within atypical approaches to structuring personnel the company. Depending on the activities that and other resources with which to implement may include the sectors of production, some given resourses to perform certain tasks, marketing sector, the sector of financial for which the company is founded. affairs, the Legal and General activities and 10thContingency system of organization is other sectors. somewhat similar to the previous innovative 3rdThe production system of organization system. Unlike the previous (innovation), shows that the company is organizational which is more research and avantgarde in fractionated by basic products ( items ) that character , the contingency system is formed are produced in the company or that the also as an atypical but precisely allocated company sells. For example, a holding according to specific task, specific terms of company engaged in the production and / or business operations of a specific time and sales of sports equipment can have a special runtime. pre rapture : the manufacture of boats , for the 11th Ad- hoc system of organization also has manufacture of tents , camping equipment for some similarities and contingency model of the production of the other. organization. Since these models are 4thProcess system of organization, as the word distinguished by the degree of improvisation , says, is based on the patterns of business which is in an ad- hoc system, much more processes that are materially and functionally pronounced. An ad- hoc system presupposes separate, but which are still technologically the establishment. connected because they represent certain 12th Reengineering is a model of organization technological and commercial complex. based on the demolition of the existing system 5thThe territorial organization of the and building a new one. geographic system implemented includes The conditions for business have their companies operating in the wider contextual specifics that need to be taken into geographical area of the country and / or account when allocating the constitution and abroad. With this system, the city or state in mode of organization schemes of all resources which business is done and the seats are for business. Benefits of good choice of organizational units (separate technological models and real scheme of organization can units). be multiple. Also, the damage from the wrong 6thDivision (mixed) system is an organization choice of models and patterns of organization designed as a combination of the previously can be very large or even ruin the company mentioned systems of functional, production, and the job, especially if the model and process-up or geographical models of pattern of organization have not been tested. organization.

Serbian Project Management Journal, Volume 3, Issue 2, December 2013

Tactics is part of a strategy. In a well run each other whiled the actor is not. These are management tactic is precisely aligned with the standard management of each sequence, the strategy, and, in terms of technology, and that in the operation plane of derived from it. In contrast to the strategy, administration of action is defined as : which is typically a long-term development in  Planning (operations), character , the tactics is short-termed or possibly medium in targeting and  Implementation (operational) and implementation. Tactics never stands for  Control with a possible revision itself, and only serves a longterm strategic (operational). goals. As the strategy is a means to achieve Each of these sequences implementing certain goals of business owners or top man- business - planning, implementation and ager, so the tactics means to achieve a control is done through three distinct phases particular strategy. The basic purpose of the associated with each other too, and this in turn tactics is to ensure the realization of the phases: planning, implementation and control. adopted strategy . In the excellent book "Managing projects, The operational part of the tactics and is a Professor Petar Jovanovic presented a draft way, and sometimes a phase of tactical action. cycle implementation of business, which in an Operatcs is a temporally and spatially specific original way shows a functional set of technological operations aimed at a interdependence between these phases. particular job, primarily tactical, and possibly The operational phase of implementation of strategic (development) in character. It is business represents in fact a concrete usually performed by lower managers and implementation opting strategy or strategies, executive staff . from the moment of commitment of "It is not a trick to formulate business entrepreneurs to business through direct strategies. The trick is to achieve it”, said the preparation to direct operational American management theorist Igor Ansof . implementation. Igor Ansof is absolutely right. Quality is a The operating current implementation of the concept and the quality of implementation is business, as a rule carried out by the second something else entirely. The differences management scheme, in a different manner, between the successful and unsuccessful and commonly with the other persons with entrepreneurs and successful and unsuccessful respect to the investment implementation or top managers are not only in the field of preparation of the investment, which preceded design quality business procedures but also in the current realization. the field of skill to be determined procedures successfully implemented . If the investment preparation consists of tasks and activities including the design and Implementation and commercialization of the construction of buildings, installation of current business represents the sixth stage, the equipment and devices , and similar tasks and sixth step procedure of global strategic activities , the special scheme of organization management, aimed at launching a new or in these activities involves the designer, remodelling of existing businesses. The above builders, installers and other professionals in phase is achieved through having to carry all the design and the performance of the of the relevant investment and post - construction and installation work. These investment activities of the organization and professionals are, as a rule, involved technology empower business system of temporarily to perform the tasks until the normally present operations. The current investment project is complete. implementation of the business is the fact implementation opting the target strategy and The operational implementation of the current focusing the strategy if there are more, to be business involves mainly full-time employed implemented effectively to achieve goals and managers and workers. Their job is, if it is progress of companies . Implementation of production, sale or provision of services, Business - speaking in terms of technology is repeatable and continuous and is performed carried out through three basic sequences of by the program scheme that has been management activities, which are related to carefully technologically determined.

Lj. Berezljev

Implementation of the development strategy [2] Jonas Riderstrale i Kjel Nordstrom: of the company is very important. “Fanky biznis“, Plato, Beograd, 2004 Implementation of the current business is [3] John Hartley: “Creative Industries“ , carried out in a manner that translates Blackwell Publishing Ltd, Oxford, 2005 strategic goals and objectives into practical [4] Alvin i Hajdi Tofler: “Rat i antirat”, operational (technological and organizational) Paidea, Beograd, 1998 activity and are achieved through the [5] Terry Flew: “Creative Economy“, in the implementation of the adopted tactical and book “Creative Industries”, /under 3./ operational plans and other documents. [6] Larry Todd Wilson and Diane Asay: “Putting Quality in Knowledge Depending on the nature of entrepreneurial Management“, Learner First Inc. USA, firms, market situation, and the ambitions and 1998 objectives of the top management, strategic [7] Kenneth A.Megill: “Corporate Memory“, implementation of business process can be 2nd Edition, K.G.Saur, München, 2005 realized in different ways. The general [8] Jonas Riderstrale i Kjel Nordstrom: strategy of implementation of the business “Karaoke kapitalizam”, Plato, Beograd plan asserted to start up a new business, [9] Group of authors: “Is the World Ready remodelling an existing business, include the following technologically connected and for Knowledge Management”, functionally differentiated steps: Marketing Science Institute, Cambridge, MA, 2005 1. Analysis and evaluation of information [10] David Garwin, Jeremy Hope and Tony obtained or based assumptions as to certain Hope: “Competing in the Third Wave - parts of the organization and / or the The Ten KeyManagement Issues of the company as a whole - if it exists and Information Age“, Harvard Business operates , changes have to be committed to School Press, Boston, USA,1997 the business plan and the adopted strategies [11] Robert Kiosaki: “Bogati otac i siromašni based on it successfully implemented. otac“, Finesa, Beograd, 1997 2. Analytical anticipation (looking ahead) and [12] Entoni J. Mejo i Natan Noria: “Njihovo assessment of planned changes to the vreme”, Adižes, Novi Sad, 2006 existing already constituted a formal and [13] 15. A. Penntcost: “TQM”, Harvard informal organizational structure of the Business school Press, Boston, 2001 company as a whole as well as the [14] Darrel K. Rigbu, Frederik P. Reichhold organizational structure of individual parts and Phil Schefter: “Avoid the Four from which the company is made. Perils of CRM”, Harvard Business 3. Analytical anticipation and implementation Review, February, 2002 of planned changes to the corporate (or the [15] Branko Maričić: “Ponašanje potrošača”, organizational ) culture and climate of Savremena administracija, Beograd, corporate firms. 2002 4. Selecting the right attitude and approach to [16] Rusel L. Ackoff: “The Art of Problem the management of affiliation and Solvimg’*, John Willey and Sons, New implementation of the target current York, 1988 business strategy. [17] Hertz D. B.: “Practical Risk Analysis”, 5. Preparation and implementation of opting John Willey and Sons, New York, 1984 target strategies - strategies in the system. [18] George A. Steiner: “Strategic Planning: 6. The implementation of the current business What Every Manager Must Know“, The strategy. Free Press,1979 7. Evaluation of the results and possible [19] H. Igor Ansoff et al.: “From Strategic revision of management practices and Planning to Strategic Management“, John procedures. Wiley and Sons, 1976 REFERENCES: [20] Petar Jovanović: “Menadžment - teorija i praksa”, Grafoslog, [1] Schreiber J.J.Servan: “Svijetski izazov”, Globus, Zagreb Beograd,2001.

NEW BOOK PUBLICATION Proactive Project Management How to make common sense common practice

By Morten Fangel List of contents:

• It is common sense to be proactive 1 How to use the book – but project management often takes place reactively 2 Projects and project management • Methods for leading the project 3 Leading project management management, including planning and evaluating the effort 4 Facilitate the management activities • Procedures for project management phases: preparation, start-up, manage 5 Project preparation execution, and close-out 6 Project analyses • Focus on promoting a shared perception 7 Master project planning when analyzing and planning the project 8 Project anchoring • In total, a tool for the reflecting project manager – who wants to be more proactive 9 Project start-up 10 Detailed project planning • Get the essence of the book by signing up for a free introduction session. Register at www.fangel.dk 11 Manage project execution 12 Ongoing project leadership Price DKK 480 / € 65 VAT excl. – 460 pages Ordering at www.nyttf.dk 13 Stepwise project follow-up Discount when buying sets for classroom Ordering at www.fangel.dk 14 Project close-out

To be published September 2013

Saettedammen 4 , 3400 Hilleroed, Denmark Phone +45 4826 7877 www.fangel.dk [email protected] Proactive Project Management How to make common sense common practice

By Morten Fangel

We all know what it takes for a project to be inspiring to be a part of and to lead efficiently to the requested outcome. It is common sense to be proactive in the management of a project! This book claims that it is a kind of natural law that we immerse ourselves into the project execution – even at stages when proactive project management is needed for creating suitable conditions for the project execution. The consequence is that the project management takes place reactively, after the problems have already occurred during the execution. This book aims at shifting the project management from taking place reactively – towards, to a greater extent, taking place proactively. To be proactive implies that the management initiatives takes place where managerial challenges have not yet occurred or been recognized by the participants and parties. A shift from recognizing what is common sense – towards making it common practice implies a conscious and persistent effort by the project manager and other partners involved in the management of the project. The book supports such a shift by presenting a variety of mindsets and related methods and tools. One mindset is that the project management process itself should be lead. You promote proactive project management by planning and evaluating relevant management initiatives – and by adapting the level of effort and the tools for the project’s degree of complexity. The entire book can be considered as a method with tools for such planning and evaluating the project management. Another mindset is that the project management is not only a task for the project managers. The project owners, the participants and other parties must also be proactively involved in the management process. Such co-management means that the analyses and plans created will become more relevant– and have more impact on the project process. The general tool for such an approach, as presented in this book, is to facilitate the management activities. The entire book is a supplement to the existing literature on project management. The new mindsets and methods promote the idea of being a more reflective project manager – and thereby gaining even more benefit from knowledge obtained from other books and from personal experiences.

Saettedammen 4 , 3400 Hilleroed, Denmark Phone +45 4826 7877 www.fangel.dk [email protected]

VISOKA ŠKOLA ZA PROJEKTNI MENADŽMENT

NASTAVNI PLAN OSNOVNIH AKADEMSKIH STUDIJA - PROJEKTNI MENADŽMENT I GODINA I Semestar II Semestar • Menadžment • Teorija upravljanja projektom • Osnove ekonomije • Matematika • Informatika I • Informatika II • Engleski jezik I • Engleski jezik II

II GODINA III Semestar IV Semestar • Strategijski menadžment • Osnove marketinga • Alati za upravljanje projektima • Softverski paketi za upravljanje projektima • Teorija organizacije • Upravljanje ljudskim resursima - Izborni • Osnove finansija • Upravljanje promenama u projektu - Izborni • Upravljanje rizikom projekta - Izborni (Studenti biraju dva izborna predmeta) Praksa

III GODINA V Semestar VI Semestar • Upravljanje investicionim projektima • Projektni portfolio menadžment • Projektni menadžer i timski rad • Upravljanje informatičkim projektima • Program menadžment – Izborni • Projektna organizacija - Izborni • Upravljanje projektima u javnom sektoru - Izborni • Izrada biznis plana - Izborni • Preduzetništvo – Izborni • Upravljanje komunikacijama u projektu - Izborni (Studenti biraju dva izborna predmeta) (Studenti biraju dva izborna predmeta) Završni rad

NASTAVNI PLAN MASTER AKADEMSKIH STUDIJA - PROJEKTNI MENADŽMENT I GODINA

I Semestar II Semestar • Savremeni menadžment • Upravljane znanjem • Metodologije projektnog menadžmenta • Projektno liderstvo • Pravci razvoja projektnog menadžmenta • Upravljanje kvalitetom projekta

II GODINA

III Semestar IV Semestar • Upravljanje kapitalnim projektima – Izborni • Praksa • Upravljanje biznis i društvenim projektima – Izborni • Završni rad • Upravljanje ugovaranjem u projektu - Izborni • Finansijska tržišta i institucije - Izborni • Krizni menadžment - Izborni • Projektno finansiranje - Izborni (Studenti biraju tri izborna predmeta)

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VISOKA ŠKOLA ZA PROJEKTNI MENADŽMENT

NASTAVNI PLAN OSNOVNIH AKADEMSKIH STUDIJA - POSLOVNI I INOVACIONI MENADŽMENT I GODINA I Semestar II Semestar • Menadžment • Teorija upravljanja projektom • Osnove ekonomije • Matematika • Informatika I • Informatika II • Engleski jezik I • Engleski jezik II

II GODINA III Semestar IV Semestar • Strategijski menadžment • Inovacioni menadžment • Proizvodni menadžment • Menadžment tehnologije • Teorija organizacije • Upravljanje ljudskim resursima - Izborni • Poslovne finansije • Marketing menadžment - Izborni • Upravljanje promenama - Izborni (Studenti biraju dva izborna predmeta) Praksa

III GODINA V Semestar VI Semestar • Ekološki menadžment • Upravljanje inovacionim projektima • Investiciono odlučivanje • Savremeni menadžer • Biznis inovacije - Izborni • TQM - Izborni • Preduzetništvo – Izborni • Izrada biznis plana - Izborni • Upravljanje komunikacijama - Izborni • Menadžment MSP - Izborni (Studenti biraju dva izborna predmeta) (Studenti biraju dva izborna predmeta) Završni rad

NASTAVNI PLAN MASTER AKADEMSKIH STUDIJA - POSLOVNI I INOVACIONI MENADŽMENT I GODINA

I Semestar II Semestar • Savremeni menadžment • Elektronsko poslovanje • Liderstvo • Upravljanje znanjem • Inovacije i preduzetništvo • Operativni menadžment

II GODINA

III Semestar IV Semestar • Upravljanje finansijskim rizikom - Izborni • Praksa • Finansijski menadžment - Izborni • Završni rad • Menadžment u javnom sektoru- Izborni • Finansijska tržišta i institucije - Izborni • Upravljanje rizikom - Izborni • Upravljanje tehnološkim inovacijama - Izborni (Studenti biraju tri izborna predmeta)