Yesterday I’ve stumbled upon this website:
and thought to give it a try! All my pictures will be on instagram! Wanna join me?
I’ve been thinking for a while about writing a post on trading. I think trading is a job like any other.
I’ve been trading since 2008, before the stock crash, with different instruments: forex, options, stocks, and futures; and I had the chance to meet some great traders (e.g. my mentor Andrea Unger, who is also an exquisite person) along the way.
What I noticed is that it’s very difficult to be a successful trader, not so much because of not having a good trading system, but because of the emotions related to trading (greed and fear). Greed wants to make you invest too much and increase your risk beyond your emotional threshold, fear wants to leave the market, usually when there are the best opportunities to take.
Every trader has her own strategies, and unluckily very few are willing to share with others both strategies and actual results, and there are many people in the industry who seem to be good traders, but are actually just good teachers (and make a living out of it instead of trading: which is not bad in itself as it reduces the risks of directly losing money in the market, but it seems a bit of a conflict of interest, at least in some cases).
How do I trade? I’m hardly ever a discretionary trader: I prefer systems, especially if automated, so that emotions can be taken away from the table (as much as possible anyways). I trade mainly options (naked puts), but I’m now focusing on developing automated systems for futures and forex to achieve better diversification and less stress.
A few suggestions, some taken from my friend Mario Cesolini here (post in Italian):
- THEORY (trading strategy): each strategy you choose should have an average trade much greater than 0 (minimum 5 times the commissions+slippage), at least while backtesting your strategy (i.e. while you try it on past data). The drawdown (DD, i.e. the greatest overall loss of the strategy) should be below 10% of the initial invested capital while the returns should be on average >20%/year. This way you’re willing to lose 10% to make >20%. It’s not so much the percentage the important part, but the ratio gain/drawdown which should be >2 (e.g. DD of 30% and gain >60%). While backtesting, keep the last 6 months of data as out-of-sample data to make sure that performance is consistent!
- PRACTICE (going live): your strategy will decrease its performance, especially during intraday or swing trading (i.e. trading of few days or less)! This happens for a number of reasons, if you use Automated Trading Systems (ATS), including (I suggest trying your strategy on a demo account for a few weeks to tune all these issues, before investing real money):
- data feed provider: some brokers have different data from others, especially for forex, and feeding your strategy with data not consistent with backtested data is asking for trouble! (iQFeed is a good option if you need intraday data, and if you give my name when you set it up you’ll save the $50 start-up fee.)
- trading platform (broker): some brokers open the forex market on Sunday night at different times from others! Some are more user-friendly, some are more complex but more powerful allowing you to manage very complicated orders and positions (I use Interactive Brokers)
- signal generating SW: the SW gets the data from the data feed provider, elaborates the signals, passes the signal to the broker… and all (almost) in real time! for Murphy’s law, something can easily go wrong if the overall system is not robust (I use MultiCharts, but also Excel and Matlab.
- internet connection: I don’t need to mention that stable electricity and internet connections are key…
- computer clock: this is a subtle one… If there’s a difference between the trading platform clock and the signal generating SW clock (which it’s usually the PC clock), bar creation might not be consistent (e.g. when you reload the data the next day you see signals that didn’t appear, usually because of bad data feed but also for the clock not being synched)!
- time: markets change over time and unluckily so does your strategy performance… 😦 Recurring monitoring is needed, and strategies adjusted…
- Money Management: as the Carnot engine has its physical limits, so does your trading strategy. You can increase performance of your strategy by trading more contracts if you win (anti-martingale approach, which I recommend), but only to a certain point, beyond which the risk that a streak of losses (DD) will hinder your ability to recover becomes too great. Money Management done properly can make an o.k. strategy work well, done poorly can make a good strategy lose money!
- Portfolio: diversification here is key. If you have only one strategy and it works great: awesome! It takes less time to monitor and it’s easier to manage. It’s difficult to have one like that though, so having a few strategies (hopefully not-DD correlated with each other) can help each other in tough times. Not only for better results (or lower DD), but especially for the emotional roller-coaster you’d feel with only one strategy!
- Emotions: This is THE SINGLE MOST important aspect of trading. Everybody hates losing money and I did very not-so-smart things just because I couldn’t think straight during market turmoil. The strategy must be clear and executed (without trying new things on-the-fly), but most of all, if you invest little (i.e. you have many strategies with little capital invested in each of them) you won’t be emotionally attached to money so much and will be able to execute the plan properly.
- Mentor: having a good mentor with a proven track record can give you the confidence that it is actually possible to make money trading in the long-term, and not just for a few years.
- Trading buddies: If You Want To Walk Fast, Walk Alone. If You Want To Walk Far, Walk Together. Especially if some have good ideas and others are good executors.
The time is gone, the post is over, Thought I’d something more to say… so enjoy your trading, I wish you great results! 🙂
PS: feel free to stop by at Skilled Academy and have a look at all the courses I’ve been creating to boost your trading!
As summer finally arrived in my hometown, which is getting packed with tourists, here are some useful links for whom decides to come pay us a visit:
Things to see:
The Opera (100 years of Opera at the Arena):
If you’re travelling by train, you can buy tickets online here:
If you want to visit the area around Verona (Borghetto, Lake Garda, etc.), you can see the bus routes and timetables here:
Have fun and enjoy the summer! =)
Unarguably a guru on persuasion, Robert Cialdini introduces to us the key principles of having people say YES! Have a look at the video, my notes below:
- Reciprocity: be the first to give, and the gift must be personalized and unexpected (e.g. waiter gives you a mint with the check, and then another one because “you’re nice”, and you give him more tip)
- Scarcity: people want more of what there’s less –> talk about benefits of my product & what’s UNIQUE about it and what they’d lose if they fail to consider my proposal
- Authority: people will follow the lead of credible knowledgable experts, or people in uniform (have someone else to introduce your credentials to the prospect, e.g. “let me introduce you to … who has X many years of experience in this field”)
- Consistency: look for and ask for small initial commitments (voluntary, active, and public commitments and get them in writing) that can be made (and they’ll afterwards commit to other things consistent with them, e.g. patients writing their own next appointment details commit to it more often)
- Liking: people say yes to whom they like (people who are similar to us, who pay us compliments, who cooperate with us towards mutual goals) –> before starting negotiating exchange personal info and build common ground of things both of you like + pay compliments, before getting down to business
- Consensus: when uncertain, people look at actions of others to determine their own (point out what SIMILAR others do, e.g. 75% of people in THIS hotel room reuse their towel –> it makes you reuse yours)
Here below another interesting video on human Trigger Features (“because”, “expensive = good”, and the contrast principle)
happiness = climbing toward the peak of the mountain (having a goal + living in the now)
- express gratitude
- cultivate optimism (think of my best possible self in the future, don’t take things for granted)
- avoid over-thinking & social comparison (when mad, don’t ruminate, do something else)
- practice acts of kindness
- nurture social relationships
- develop strategies for coping
- learn to forgive
- increase Flow experiences
- savor life’s joys
- commit to my goals
- practice religion and spirituality
- take care of your body (thru meditation, physical activity, acting like a happy person)
- Wisdom and Knowledge: creativity, curiosity, open-mindedness, love of learning, perspective
- Courage: bravery, persistence, integrity, zest
- Love and Humanity: love, kindness, social intelligence
- Justice: citizenship, fairness, leadership
- Temperance: forgiveness and mercy, humility, prudence, self control
- Spirituality and Transcendence: appreciation of beauty and excellence, gratitude, hope, humor, spirituality
Meaning is then simply using my signature strengths often, in service to something bigger than yourself
Finding your mission:
- what can I and ONLY I do (start small, e.g. w/ my family: good bf, son, friend…)?
- how can I use my greatest gifts in greatest service to the world?
- if I had all the money+time, what would I do (as my mission)?
- what’d I do if I knew I couldn’t fail?
- what am I most proud of? what will I be most proud of?
3 Ps: optimist perception of (empowering perspective of the Creator: “what do I want?”)
- good things: permanent (it will stay), pervasive (it spreads to other areas of life), personal (it’s because of me) 🙂
- bad things: not permanent, not pervasive, not personal
GROWTH MINDSET of the optimalist: you just try to get better, you don’t care for (just) “being good” –> life as a playground (a GAME) to make as many experiments as possible + lesson learned to improve for next time (benefit finder while embracing reality)
- purpose (and vision)
- self-awareness (know myself)
- wisdom (life as my classroom)
- en*theos (harmony with wholeness) – Areté (living at my fullest potential: excellence, virtue)
- the ultimate currency is happiness (not money, time, energy…)
- intrinsic (relationships, growth, contribution) vs. extrinsic (fame, wealth, hotness) goals + focus on the STEPS of the process (not the outcomes: results are a by-product of the steps I take)
- highest goal: show up to Areté (every moment at my highest self)
- happy archetype = positive orientation to the present & the future (you have goals that inspire you AND enjoy the process)
- dynamic tension (stretch zone): difficult but possible goals (true confidence) using baby steps
- put your virtues in action! (signature strengths, calling description)
- put some fun in my fundamentals (meditation, exercise, nutrition, optimism, creativity, relationships, gratitude –> schedule them!)
- roles & goals (son, friend, citizen, entrepreneur… –> happy relationships, bravery, money)
- creative production goals: focus on giving (getting only as a by-product of giving) = how can I serve?
- best selves diary: think about 5yrs in the future where all is great. now build vertical coherence between that ideal and this reality (integrity)
- willpower: meditation, breathe, exercise, nutrition, small stuff (e.g. sit straight), reduce variability of my behavior (e.g. schedule), be nice to myself, pre-commit, tidy up, bright lines (know what’s important and when I’m not doing it)
- stop doing what brings me down, start doing what brings me up!
- be an optimalist, not a perfectionist (mis-takes and do again, failure goes with success, growth mindset, experiment w/ life)
- make myself proud (+1/-1 to step forward)
- get things done: capture, 1-touch things <2mins, inbox to 0, raise my standards, constrain email/FB/internet/TV time
- Covey’s quadrants: important and not urgent, 1st things 1st
- prioritize my happiness (happiness precedes success) 😉 have fun!
- even if some futures are more preferable than others, striving too much to achieve them brings to unhappiness!
- bounded fears and ambitions bring to more happiness, but we tend to foresee them as unbounded (which ruins us)!
- integrity is more important than getting what we want
Uncertainty (non-monotony) prevents adaptation (and boredom) –> also in relationships: use false adaptation (e.g. don’t see each other for a few days).
Here’s a TED video by Prof. Phil Zimbardo, one of my favorite psychologists, about changing our behavior and be our every-day heroes.
Have fun and be happy! 🙂
Here’s a brief summary of my understanding of the classic book by Sun Tsu: The Art of War.
- know your enemy and know yourself (counterintelligence, understand how the enemy behaves)
- to win it’s not the height of skill, but subduing the enemy without fighting (intellect and preparation over force: never rush)
- avoid what’s strong, attack what’s weak (guerrilla fight, sturmtruppen)
- Game of GO vs. game of chess: in GO you acquire territory with fewest resources instead of eliminating the enemy troops (chess)
- It’s more important to outthink your enemy than to outfight him
- Don’t advance relying on military power, numbers alone confer no advantage
- You don’t win a war by winning battles. Wars are means (breaking the will of the enemy) to an end (strategic goals, often political): the political context is always more important than the military one
- No nation has ever benefitted from prolonged war
- Let your plans be as dark as night (deception, secrecy, spies), then strike as a thunderbolt
- All warfare is deception: dividi et impera (divide the enemy big army into pieces I can win against)
- It’s essential to seek out enemy agents who have come to spy against you and bribe them to serve you (double agents)
- The way to achieve greatness is thru foreknowledge (knowing beforehand: “reading the mind of the enemy”)
- Outmaneuver: use a direct attack to engage, and an indirect attack to win (attack something to draw the enemy attention there while conquering your real objective)
- To move your enemy, entice him with something he’s certain to take (give him a bait): control the enemy movements by your own maneuvers
- Those skilled in war bring the enemy to the field of battle, they’re not brought by him
- Make your enemy prepare on his left and he’ll be weak on his right
- Move only when you see an advantage and there’s something to gain, only fight if a position is critical
- Put your army in the face of death (death ground) where there’s no escape and they won’t flee or be afraid: there’s nothing they cannot achieve (and on the other hand always leave your enemy a way to escape)
- The keys to an attack are (good) timing and (maintaining) momentum
- It’s essential for victory that generals are unconstrained by their leaders (clear chain-of-command, no interference from the leader)
- The winning army realizes the conditions for victory first, then fights; the losing army fights first, then seeks victory (don’t rush into battle without knowing what lies ahead)
- Use an attack to exploit a victory, never use an attack to rescue a defeat
- There are some armies that shouldn’t be fought, some ground that shouldn’t be contested
- If orders are unclear and commands not explicit, it’s the general’s fault; if they’re clear, it’s the fault of his subordinate officers
- When troops flee, are insubordinate, collapse or are routed in battle, it’s the fault of the general
- terrain: when the enemy occupies high ground, don’t confront him; if he attacks downhill don’t oppose him
- military doctrine
- moral influence (most important): have the people willing to fight behind their leader
While working at into consulting last year, I had the chance to work, among others, with Luciano Garagna, a guru in Project Management and coaching, on an e-book related to learning, coaching, and competence development.
I know coaching as a term is nowadays interpreted in very different ways according to who you ask to, to me a coach is simply someone who helps you unleash your full potential (in any area of your life)…
Here’s a brief summary of the e-book (freely available here):
Traditional coaching focuses on specific objectives, to be agreed at the beginning of the coaching relationship. The proposed approach is based on adapting to the needs of the person being coached, as they evolve during the coaching process. For example, one meeting could be dedicated to the preparation of an impending steering committee, while the next session could focus on selecting the right team member between a group of candidates. The coach accompanies the less experienced partner when the latter is feeling the most acute need. Learning happens when it’s needed the most and when immediate results can give the confidence required to support the achievement of long-term goals. Coaching is also a great learning opportunity for the coach, who experiences how to lead in a non-directive way that supports the personal and professional growth of the partner.
Great coaches can follow the flow of the coachee and reach their objectives even in a non-structured way. However, before reaching that level of mastery, a coach should structure the session in a way that addresses all the main issues the coachee could have. In order to do so, the G.R.O.W. acronym (developed by John Whitmore) in used:
- Goal: the coach starts the session by clarifying, with questions (see the “asking questions” technique further on), the purpose and the objectives of the session itself. A good question could be: what are your objectives?
- Reality: after the objectives are clear, the coach moves on to help the coachee understand the current reality – what is happening in the present. A good question could be: what is currently happening?
- Options: when the future and the present are clear, the coach addresses the options available to go from where we are to where we want to get. A good question could be: what can you do?
- Will: the coachee commits to some actions, chosen from the identified options. A good question could be: what will you do?
Have a look at the following questions, what is the usefulness of each of them?
- Is the budget of the project on track?
- Should we con”rm the budget as it is, adjust it, or ask for a sponsor’s review?
- How can we cover the budget gap on the shipping?
- What is the objective of this budget analysis?
Depending on the context, each of these questions is useful, but they differ in openness and in level of detail.
The first question is asking for a statement (yes/no) useful to put a stick on the ground. You might find it helpful to create a common ground.
The second question is asking for a choice, focusing on alternatives. It can be valuable to keep the pace of the conversation going when you “nd it slows down and threatens the scheduled agenda.
The third one is an open question with a specific focus. It can be helpful to find solutions in the brainstorming phase of the discussion or when you want to bring down to earth a discussion that is becoming too speculative.
The last question is open and broad. It is extremely useful to move the focus at a higher level when the conversation is going into too much detail.
Putting a question mark is not enough; to make a good question there are many factors to be taken into consideration; in the examples above two fundamental ones for coaching have been highlighted: the openness and the level of detail. Notice that asking questions implies active thinking and that way the question is asked drives the answer! Whatever the content of the discussion, the coach’s goal is to influence the quality of the elaboration.
Like the size of a box must match its content, so the coaching questions need to be shaped in a way which is useful for the answer. Only with experience we can balance all the factors to shape the question.
Guess which of the following are coaching feedback:
- You were great today!
- I liked your presentation!
- Your presentation was very professional.
- The limited number of slides and the fact that you were talking slowly with a strong voice made me feel comfortable and confident that I could understand.
These are all examples of feedback, but they provide the receiver with a different quality of information.
The first example tells you that today you did something (perhaps the presentation or maybe the meeting as a whole) I really liked, but you can’t tell
The second example adds the information that it was the presentation that looked good to me.
The third example adds a definition of how I liked your presentation.
The final example is more specific and describes the feeling I had while sitting in your presentation today.
Now, imagine you are going to present to your top management, which feedback would be most useful to you? The first three may help your self-esteem, but only the fourth contains the precious information you need to consciously change your behavior or deliverable. You may receive a lot of feedback, but how much of it is really helpful and allowing you to improve? Using coaching feedback increases accountability within the team because it provides a broader perspective.
Points of view
Let’s try to put ourselves in the following perspectives:
- The Client
- The Sponsor
- The Deliverer
Managing a project means to aim, perhaps succeed, in satisfying the expectations of the Sponsor that pays for the project, of the Client who will use the deliverables of the project and of the Deliverer who will make the effort required to reach the targets. How often have you seen managers loosing track of one of these sides? It can be really useful to have someone that helps us by challenging our perspective. Pretend you’re involved in the project in a different position (changing roles among Sponsor, Client and Deliverer), from that perspective, a lot of things may look different, so a solution that seems impossible to find may just arise. As a coach, driving this exercise and challenging the different roles is very easy when your point of view is external and provides you with the added value that will look remarkable to your coachee.
Perspective is a key to managing a project. Expectations look so complicated when you analyze them only from your own side, but they may turn quite easy to understand and match together when you move away from your point of view.
Giving help or receiving it with this kind of coaching technique can be very simple, nevertheless the real achievement is to uncover something we didn’t think about and that can switch the light on.
The coaching role
The difference between a coaching session and a useful chat that ends with a piece of advice is that the coach doesn’t know the answer and she is not thinking about one.
Milton Erickson used a powerful anecdote to clarify this concept. He described a runaway horse his father found one day on his way home, he didn’t know to whom it belonged and how to bring it back home. He then realized that as soon as he moved the horse away from grazing the grass and back onto the highway, the horse knew its way home and after quite a few miles it naturally reached its owner. It was enough just to push it back on to the main track and focus its attention on the goal of going back home.
We need to manage the focus of the journey otherwise the delivery will be slowed down. The added value of coaching is to ensure the focus of the discussion with the aim of enhancing the level of quality and effciency.
The challenge in keeping the focus is to recognize when exploring a field is becoming a detour. When we help keep focus, we support someone in building their own solution, plus there is an improvement of their awareness of their role.
I recently read a great book by Sergio Pellegrinelli – Thinking and Acting as a Great Programme Manager .
Below a summary of how a great program manager should behave; for more details I suggest you read his book!
I also suggest 4 other books that can definitively increase your world (and business) awareness and help you toward a more effective mindset:
- Peter Senge – The Fifth Discipline 
- Robert Fritz – Path of Least Resistance 
- Edgar Schein – Helping 
- David Hillson – Managing Risk in Projects 
Program management competence framework
Relationship between self and work
|Granularity of focus||Broad view of plan, including understanding of wider impact within the organization; (occasional proactive involvement in detail to experience customers’ perspective); strong orientation towards the future, including awareness of organization-wide and external impacts/benefits|
|Emotional attachment||Professional commitment to delivery of organization-wide and external outcomes|
|Disposition for action||Opportunistic; intuitive ability to reshape, reconfigure and realign|
|Approach to role plurality||Deliberately takes on multiple conflicting roles to integrate divergent interests|
Relationship between self and others
|Engagement with team||Seeks to inspire; charismatic and credible; able to get people to modify their natural behavior|
|Approach to conflict and divergence||Uses subtle facilitation to encourage creative and value-adding solution|
|Development and support||Coaches in context to enable understanding and influence|
|Purpose of enquiry||Own clarification; challenge others; encourage creative thinking; redefine problem or reframe purpose|
|Expectations of others||Extends individuals’ talents, but now burn out|
Relationship between self and environment
|Adaptive intent||Adapts environment to suit organizational purpose|
|Awareness of organizational constraints||Aware of capacity, technical, and cultural constraints; facilitates development and knowledge transfer from outside|
|Approach to risk||Is ready for failure; anticipates wider consequences|
|Approach to communications||Provides analysis and opinions (consistent style); sells vision of outcome (style more sensitive to audience); cultural and audience sensitivity|
|Approach to governance||Seeks to embed program in organizational management structures/processes|
|Attitude to scope||Shaped to meet emerging and changing business needs|
|Attitude to time||Schedule driven based on defined scope; reschedule when necessary; anticipates and plans for possible work, recognizes mobilization time; takes into account the rate at which change can be absorbed or accommodated; conscious of issues of timeliness and maturity|
|Attitude to funding||Creates funding from achievement – self-financing|
Last year I’ve passed the PMI-PMP (Project Management Professional) exam, and for those of you who are interested in achieving this goal, here’s a brief summary on the main concepts I studied in Rita Mulcahy’s PMP exam prep book. Feel free to ask questions!! 🙂
- Project work (temporary, beginning-end, unique) vs. operational work
- Process groups vs. knowledge areas
- Project, program, portfolio
- Project objectives, product objectives, MBO
- Constraints: time, cost, risk, scope, quality, resources, customer satisfaction
- Organizational structures: functional, projectized, matrix (weak, balanced, strong)
- Project expediter, project coordinator
- Product life cycle (conception, growth, maturity, decline, withdrawal) vs. project life cycle (phases, depending on industry)
- PM processes: initiating (start), planning (plan), executing (do), monitoring & controlling (check & act), closing (end)
- Lessons learned
- PM is about identifying requirements, establishing clear and achievable objectives, and balancing competing demands for scope, time, cost, etc.
- All projects should help meet strategic objectives: analysis to choose the ones who can reach strategic objectives with least cost, time, resources, and risk
- Initiating (what do we want to create?):
- project charter (document that formally authorizes a project or a phase and documenting initial requirements that satisfy the stakeholders’ needs and expectations)
- stakeholders identification (influence, interest, relationship, cross-relations, risk tolerance) and stakeholders mgmt. strategy
- high-level (needs into) requirements, constraints, assumptions, and risks
- high-level planning
- project & product objectives, final product scope & acceptance criteria
- business case (to be reevaluated if many changes occur)
- progressive elaboration (continuous defining of estimates and scope over time)
- PM assigned
- Planning (can the project be done? how?):
- Should lead to a realistic, bought into, approved, and formal PM plan that is updated throughout the project to reflect approved changes
- Process order: PM plan, requirements, project scope statement, make-or-buy, determine team, WBS & WBS dictionary, activity list, network diagram, resource requirements, time & cost, critical path, schedule, budget, quality standards, process improvement plan, roles & responsibilities, communications, risk, iterate, procurement documents, change mgmt. plan, execution & control parts of all plans, realistic & final PM plan and performance measurement baseline, formal approval, kickoff (lessons learned from past projects and establish the way people will communicate as the project work goes on)
- rolling wave planning (in phases)
- Executing (do the work):
- Manage people, follow processes, distribute information
- Work the PM plan, be proactive, manage, guide
- Monitoring & controlling (measure [non-HR] performance against PM plan, check changes from plans, forecasts):
- Control scope, schedule, costs, quality, risks; report performance, administer procurements
- Control & request changes, impacts, analyze variances, measure performance against baselines, earned value analysis, workarounds, contingency & fallback plans, inspections, payments, trying to improve quality, manage time & cost reserves, formal acceptance of interim deliverables
- When closure (not product scope) is complete: paperwork, handover, verify formal acceptance, feedback on customer satisfaction, celebration, final lessons learned, add new skills acquired to team members’ HR records, etc.
- Project charter, PM plan, direct & manage project execution, monitor & control project work, perform integrated change control, close project or phase
- Charter: project title & description, Project Manager assigned & authority level, business case, resources pre-assigned, stakeholders, stakeholders requirements as known, product description/deliverables, measurable project objectives, project approval requirements, high-level project risks, sponsors’ signature
- Project selection:
- benefit measurement methods (comparative): murder board, peer review, scoring models, economic models (PV, NPV, IRR, payback period, cost benefit analysis)
- constrained optimization (programming) methods (mathematical): linear, integer, dynamic, multi-objective
- economic value added, opportunity cost, sunk costs, law of diminishing returns (after a certain point adding more input will not produce a proportional increase in productivity), working capital, depreciation (straight line, accelerated [double declining balance, sum of the years digits])
- Constraints and assumptions
- Project Statement of Work, Charters with Work Under Contract (for the seller)
- Enterprise Environmental Factors: company culture and existing systems (PM information system, change control system, configuration mgmt. system, work authorization system)
- Organization Process Assets: processes, procedures, policies, corporate knowledge base, historical information
- 13+3 Mgmt. plans: PM processes, scope/schedule/cost (these 3 plans are developed in the Integration Mgmt. process, and not in the knowledge areas), quality, HR, communications, risk, procurement, requirements, process improvement (done as part of quality mgmt.), configuration, change + scope, schedule, and cost baselines
- Deviation from baselines are usually due to incomplete risk identification & mgmt.
- PM plan vs. project documents
- Work authorization system: authorize start of WP and activities
- Work performance information: status of deliverables being produced (output of direct & manage project execution process: deliverable status, schedule progress, costs incurred, etc.; input to Control Scope/Schedule/Cost, quality assurance, report performance, monitor & ctrl risks, administer procurements)
- Work performance measurements: output of Control Scope/Schedule/Cost (monitoring & controlling: planned vs. actual), they’re documented & communicated to stakeholders (input to perform quality ctrl & report performance)
- Corrective action: bring back expected future performance in line with PM plan (measure, find root cause, implement action, check if solved)
- Preventive action: activity to reduce probability of negative consequences associated with project risks
- Defect repair: formal identification of defect (deliverable that doesn’t meet its req.) with recommendation to repair the defect or replace the component
- Change control board: usually with PM, customer, experts, sponsor, functional managers
- Process of making changes (only for changes within the project charter and not already in the risk mgmt. plan)
- evaluate impact (on time, cost, quality, risk, resources, customer satisfaction), create options, approve change request internally, customer buy-in
- more in detail: prevent root cause, identify change, impact, create a change request, integrated change control (assess [part of charter?], look for options, change approved/rejected [thru change ctrl board], update status in change control system), adjust PM plan, manage stakeholders’ expectations, manage the project
- (Verify) formal acceptance, final report, final lessons learned, archive project records
- Scope mgmt. plan (part of “develop PM plan” in Integration Mgmt.): plan in advance how to determine, manage, and control scope (defined, clear, formally approved before execution: what’s in & out of the project)
- WBS is always required
- No gold plating (adding unrequested features to please the customer) nor scope creep (uncontrolled unapproved changes added without impact analysis) allowed
- Scope changes cannot be allowed for work outside project charter
- Project scope (work to deliver the product: how to manage) vs. product scope (end result: what to do)
- Scope baseline (final, approved version of scope in PM plan):
- project scope statement: product & project scopes, deliverables, product acceptance criteria, what’s out of scope, constraints, assumptions (figure out exactly what your stakeholders need, and turn those needs into exactly what work the team will do to give them a great product)
- WBS: all the project scope broken down to manageable deliverables (nouns instead of actions, deliverable-oriented) up to work packages level (4 to 40 hrs. of work)
- WBS dictionary (at WP level)
- Scope mgmt. process:
- Determine requirements (and assumptions) in support of the business case: they relate to solving problems or achieving objectives
- Sort and balance needs to determine product & project scope
- Scope acceptance by customer
- Measure scope performance & adjust
- Stakeholders register
- data gathering techniques: interviewing, focus groups, facilitated workshops, brainstorming, nominal group technique (ranking brainstormed ideas), Delphi technique (anonymous experts consensus), mind maps, affinity diagrams, questionnaires & surveys, observation, prototypes
- group decision-making: unanimously, dictatorship, plurality, majority, consensus
- Requirements documentation & target for validation
- Balancing stakeholders’ requirements & resolving competing requirements (based on business case, project charter, project scope statement, project constraints)
- Requirements traceability matrix (+ links to objectives, other req., req. attributes, owner…)
- Requirements mgmt. plan: how to identify, analyze, prioritize, manage, track changes
- Product analysis: analyze the objectives and description of the product and turn them into deliverables
- Control account: level of WBS below which I’m not interested in managing costs
- Decomposition/deconstruction: what I’m doing to break down (WBS: means of doing it)
- Verify scope: formal acceptance of interim deliverables by customer/sponsor (inputs: validated deliverables [quality ctrl], scope mgmt. plan, requirements documentation & traceability matrix; output: accepted deliverables, change requests, project docs updates)
- Control scope: proactively check for scope creep & impact of scope changes
- Schedule mgmt. plan (part of “develop PM plan” in Integration Mgmt.): methodology, how estimates are stated, baseline, performance measurements to be used, how variances are managed, schedule change ctrl procedures, reporting formats
- Activities are usually defined together with WBS (activity list + activity attributes), then are sequenced (network diagram), resources estimated, duration estimated, and critical path + schedule
- Milestone list: events of duration = zero (output of Define Activities)
- Sequencing: Precedence Diagramming Method (PDM or AON: FS, SS, FF, SF), ADM, GERT
- Dependencies: mandatory (hard), discretionary (soft), external
- Leads (start in advance) and lags (waiting time)
- The person who does the work estimates (the estimate is not just accepted by management) + historical info + sanity check; record estimates assumptions + formulate a reserve (estimates can be decreased by reducing risks)
- no padding allowed
- RBS (resource breakdown structure): resources to be used, organized by category & type
- Estimating techniques:
- 1-point estimating
- analogous estimating (top-down)
- parametric estimating (regression analysis [scatter diagram], learning curve]), heuristics (rule of thumb)
- PERT (3-point estimating [for cost and time]): EAD ± SD; total SD = √Σvar on critical path
- Reserve analysis (revised after risk mgmt. is performed): contingency reserves + mgmt. reserves
- Schedule network analysis:
- CPM (critical path method): critical path (can be more than one but increases risk; it’s where the PM focuses his attention during the project), near-critical path, float (total, free, project; total float = LS – ES = LF – EF); the PM manages the float!
- Schedule compression (if negative float, without changing project scope): fast tracking (parallel activities: chance of rework and more risk & more communication), crashing (extra cost and resources); never use overtime, try to 1st look for risks and reestimate
- What-if scenario analysis: Monte Carlo
- Resource leveling: resource-limited schedule
- Critical chain method (takes into account activities and resources, it usually changes the critical path): manage buffers and bottlenecks (path convergence) starting as late as possible
- Schedule baseline: network diagram (interdependencies), milestone chart (senior mgmt.), bar chart (Gantt [no interdependencies]: report to team & track progress)
- Control schedule: measure + correcting & preventive actions (if completion date is not achievable anymore, project might be terminated beforehand), adjust future work rather than ask for an extension, adjust metrics
- Cost mgmt. plan (part of “develop PM plan” in Integration Mgmt.): how estimates are stated, level of accuracy, reporting formats, rules for cost performance measurements, direct/indirect costs, baseline, ctrl thresholds (amount of variation allowed before taking action), cost change ctrl procedures
- Life cycle costing: reduce overall project + operations + maintenance costs
- Value analysis: find the less costly way to do the same work
- Cost(-related) risk: used to assign risk in procurements (e.g. FP: seller has the cost risk)
- Cost of quality
- only the cost
- inputs: scope baseline, project schedule, HR plan (labor rates, rewards…), risk register, organizational process assets, enterprise environmental factors, PM costs
- same techniques as Time, + bottom-up estimating (very detailed)
- Types of cost: variable/fixed, direct/indirect
- Reserve analysis
- Accuracy of estimates:
- Rough Order of Magnitude (ROM): in project initiating (±50%)
- Budget: in project planning (–10% ÷ +25%)
- Definitive: in project execution (–5-10% ÷ +10%)
- Cost budget: time-phased spending plan + cash flow (funding limit reconciliation); (from activities to WP to control account to project costs) + sanity check of budget (experts, historical records, parametric estimates…) & justify significant differences in estimates
- Budget = cost baseline (cost + contingency reserves) + mgmt. reserves
- Cost control:
- progress reporting
- 50/50 or 20/80 or 0/100 rule
- Earned Value Measurement (EVM): EV, PV, AC, BAC, EAC, ETC, VAC; SV, SPI, CV, CPI, (negative and <1 is bad), TCPI (<1 is good: it’s the minimum CPI to stay within budget). EV comes first in every formula
- Trainings are part of the project costs
- Understanding what is considered acceptable (procedures [assurance], requirements and standards [ctrl]) and making sure you produce and deliver according to metrics
- Quality = degree to which the project fulfills requirements
- Planning: determine how I’ll assure and control quality on product & project + plan for continuous improvement on processes; define quality & how it’ll be achieved (outputs: quality mgmt. plan, metrics, checklist, process improvement plan)
- Assurance: follow quality processes as planned
- Control: make sure deliverables are checked to fulfill req. & standards
- Juran (80/20 principle, fitness for use), Deming (plan-do-check-act cycle), Crosby (prevention over inspection, conformance to req.)
- Do not gold plate, prevention over inspection
- Marginal analysis: point where benefits from improving quality = incremental cost to achieve it (limit where extra quality doesn’t produce added value)
- Continuous improvement (kaizen): continuous small improvements
- Just in Time: 0 inventory
- Responsibility for Quality: senior mgmt. is responsible for the organization quality, the PM is ultimately responsible for the quality of the product of the project, team members should inspect the work done before submitting the deliverable
- Poor quality: increases costs, low morale, low customer satisfaction, increased risk, rework, schedule delays
- Tools to plan quality:
- Cost benefit analysis: also used in project selection, planning, assessing procurements
- Cost of quality (COQ): cost of conformance (training on quality, studies, surveys, processes) / nonconformance (rework, scrap, inventory & warranty costs, lost biz). The cost of conformance should be lower than the cost of nonconformance
- Benchmarking: measure against benchmark
- Design of experiment (DOE): to statistically determine all the variables (important factors) that will improve quality (or have the lower impact)
- Tools to plan (determining how to measure) and control (measuring) quality:
- Control charts: (organizations’) upper & lower control limits < (customer’s) specification limits, mean. Assignable cause/special cause variation (out of control): data outside control limits, rule of 7
- Statistical sampling: if it takes too much, costs too much, or is too destructive
- Quality control (also on PM deliverables) tools: cause & effect (fishbone) diagram, histogram, Pareto chart, run chart (for trends), scatter diagram
- Quality assurance (also on PM processes) tools: all the others from planning and from controlling + quality audits (to improve effectiveness & efficiency of policies, practices, and procedures) & process analysis (improving future processes by analyzing past ones)
- mutual exclusivity, 6-sigma (68%, 95%, 99%, etc.)
- Done in executing process, related to training, recognition & rewards, roles & responsibilities, motivating, conflict resolution, resource availability, team building, team performance
- Roles & responsibilities:
- sponsor: provides financial resources, protector of the project, provides req., SoW, initial scope, milestones, and priorities between constraints & in projects, gives PM authority (charter), provides risks, monitors progress, approves final PM plan, enforces quality, provides expert judgment, evaluates trade-offs, resolves issues, approves changes, formal acceptance
- team (PM + PM team + project team): complete the work, identify stakeholders, req., constraints & assumptions, create the WBS & activities & their dependencies, time & cost estimates, risks, comply with quality & comm. plans, enforce ground rules, attend meetings, process improvement, recommend changes
- stakeholders: who can influence the project (customer, users, PM, team, sponsor, PMO, functional mgr., program & portfolio mgrs., etc.), involved in planning, charter, scope, PM plan, constraints, req., risk & risk response owners
- functional mgr.: owns resources, assigns them to projects, approves final schedule
- PM (and PM team): manages the project to meet project objectives, in charge of project (but not of resources), influences the interactions, selects processes, analyses constraints & assumptions, leads planning, enforces responsibilities, delivers quality, measures performance, variances & trends, focused on risks, integrates the project, proactive, accountable for success/failure, project closing, delegates
- portfolio mgr.: governance, strategy
- program mgr.: manages a group of related projects, adjusts them to program’s benefits
- Organization charts & position descriptions (activities to be completed, reporting req., attendance to meetings…):
- RAM (responsibility assignment matrix: team vs. activities) and RACI (only 1 is accountable)
- Organizational Breakdown Structure (responsibilities by department: WBS rearranged by dept.)
- Resource Breakdown Structure (WBS rearranged by type of resource)
- Staffing mgmt. plan: plan for staff acquisition (where from), resource calendars (when), staff release plan, training needs, recognition & rewards (what they are & criteria), compliance (of project to HR rules), safety (policies), resource histogram (number of resources used per time period: where spikes need to level)
- HR plan: roles & responsibilities + project organization charts + staffing mgmt. plan
- Motivate the person, not the team; have non-competitive rewards
- Each (new) project team member should give inputs to what needs to be done, when, cost, and risks BEFORE starting to work
- Pre-assignment, confirm availability of resources during execution, negotiate best (w.r.t. project needs [not best overall if not needed]) resources (what’s in it for the functional mgr.?), hire, outsource, virtual teams & war room/co-location, halo effect (good in technical assumed to be good in managing)
- Team-building activities (e.g. WBS creation, parties, celebrations)
- Forming, storming, norming, performing, adjourning
- Ground rules: honesty, conflict resolution, interruptions, meetings attendance, consequences, comm. to customer/mgmt., etc.
- Team performance assessment: effectiveness of team as a whole (during executing, done by PM in Develop Team)
- Project performance appraisals: individual (during executing, done by supervisors in Manage Team)
- Lack of trust, poor recognition & reward system, no involvement in planning cause low cooperation
- Observation and conversation (to manage team)
- Issue log: to manage stakeholders (list of their needs to be considered)
- Powers of PM: formal/legitimate (as PM), reward (as PM: greater power), penalty/coercive (as PM: worst power), expert (from expertise: greatest power), referent (from respect, trust, fame & charisma)
- Mgmt. & leadership styles: directing (at the beginning), facilitating + coaching + supporting (during execution), autocratic, consultative, consultative-autocratic, consensus, delegating, bureaucratic, charismatic, democratic/participative, laissez-faire, analytical, driver, influencing
- Conflict mgmt.: conflict is inevitable and can be beneficial, resolved thru openness (identifying causes & problem solving [in the best interest of the customer] by people involved [don’t escalate except for professional & social responsibility conflicts]). PM must try to avoid conflict by informing the team clearly, planning properly, and S.M.A.R.T. goals
- Sources of conflict (in order): schedules, project priorities, resources, technical opinions, admin procedures, cost, personality
- Conflict resolution techniques: confronting/problem solving (usually best), compromising (some satisfaction only), withdrawal/avoidance (postpone), smoothing/accommodating (emphases agreement), collaborating (multiple view points to consensus), forcing (worst)
- Problem solving method: define real or root problem, analyze, solutions, choose one, implement, review the solution to confirm the problem is solved
- Expectancy theory (productive if believed that efforts lead to performance and rewards meet expectations), arbitration (neutral party to resolve conflict), perquisites/perks (special rewards), fringe benefits (standard benefits: indirect [overhead] costs)
- Motivation theories
- McGregor’s theory of X (L incapable employees) and Y (J employees want to achieve)
- Maslow’s hierarchy of needs: physiological, safety, social, esteem, self-actualization
- David McClelland’s theory of needs (acquired needs theory): achievement (want recognition), affiliation (seek approval), power (like to organize and influence others)
- Herzberg’s theory: hygiene factors (working condition, salary, personal life, relationship at work, security, status: needed only up to a fair level to not demotivate) and motivating agents (responsibility, self-actualization, professional growth, recognition: needed to motivate)
- PM spend up to 90% of their time communicating (and managing expectations)
- PM = orchestra leader, stakeholders: provide technical expertise and req.
- Stakeholders: identify ALL of them, determine ALL req., determine their expectations, interests, level of influence, plan how to communicate with them, communicate with them, manage their expectations & influence
- Stakeholder analysis, register, mgmt. strategy: influence, interest, relationship, cross-relations, req., risk tolerance, agreement, expectations, expertise, comm. preferences, R&R, activity/risk owner/supervisor
- Comm. should be efficient (only the info needed) and effective (info in right format/time): ask stakeholders what they prefer & when, confirm info is received & understood
- Types of comm.: formal/informal written/verbal
- Comm. model: sender, message (encoded/decoded), receiver, noise, feedback
- Comm. factors: verbal, nonverbal, paralingual
- Effective listening: watching speaker’s gestures, thinking before speaking, confirming message, expressing agreement/disagreement, clarifying
- Means of comm.: verbal, phone, e-mail…
- Comm. methods: interactive (reciprocal, feedback), push (broadcast, 1-way, no feedback, e.g. status reports, e-mailed updates), pull (download, unknown if read, e.g. large documents)
- Meetings: time limit, agenda (beforehand & stick to it), schedule, purpose, R&R in advance, only the right people, regularly but not too often, ground rules, deliverables assigned with time limits, document minutes
- Status meetings: not about what people is doing, but about risks & new project info
- Comm. channels: N x (N-1) / 2
- Comm. mgmt. plan: what, why, who, method, responsible, when/how often
- Comm. blockers (miscommunication): noise, distance, hostility, language, culture…
- Performance reports: status (where’s the project), progress (what’s been accomplished), trend (results over time to see improvement), forecasting (predicts future), variance (comparison actual-baselines), earned value (project performance), lessons learned
- Solicit feedback on reports (so they’re read) to ensure the project still meets the biz need
- PM focuses on preventing problems, not on dealing with them
- Risk = uncertain event (threats & opportunities)
- 90% of threats can be eliminated if identified & investigated, 10% are unforeseeable
- Risk factors: probability, impact, timing, frequency
- Risk averse, risk tolerance & thresholds
- With a risk mgmt. plan the PM can instead focus on: monitor & control deviations & trends, implement a reward system, keep stakeholders informed, stay ahead (instead of fire-fighting)
- Risk process: plan risk mgmt., identify risk, analyze (qualitative, quantitative), response plan (contingency + fallback), monitor & control
- Risk mgmt. plan: methodology (also based on project priority), R&R (who will do what), budgeting (cost of risk mgmt.), timing, risk categories (internal, external, technical, unforeseeable; or by cause: customer, PM effort, stakeholders, suppliers, culture, etc.; or by source: schedule, cost, quality, scope, resources, customer satisfaction), definition of probability & impact (matrix: to be standardized), stakeholder tolerances (to be uncovered), reporting formats, tracking (audits & documentation)
- RBS (risk breakdown structure): risks organized (WBS-like)
- Types of risk: business risk (gain or loss), pure (insurable) risk (only loss, e.g. fire)
- Everyone should be involved in risk identification: documentation reviews, info gathering techniques (brainstorming, Delphi, interviewing, root cause analysis), SWOT (risks in OT), checklist analysis (specific risks in each category), assumptions analysis, diagramming techniques (Ishikawa & flowcharts)
- Risk register: where all the risk info (identification, analysis, response plan) is kept (it’s the only output of these risk processes: identify, plan responses)
- Identification: List of risks, List of potential responses, Root cause of risks (due to the fact… this event might occur… that will have this impact…), Updated risk categories
- Qualitative analysis: Overall project risk ranking compared to other projects (used also to see whether to select, continue, or terminate project), List of prioritized risks, List of risks for quantitative analysis/response plan, Watchlist (non-critical risks), Trends
- Quantitative analysis: Prioritized list, Contingency (time & cost) reserves, Milestones & costs with confidence levels, Probability of meeting project objectives, Trends
- Risk response plan: Residual risks, Contingency plans, Risk response owners, Secondary risks, Risks triggers (early warning signs), Contracts (PM is involved before procurement signature), Fallback plans, Reserves (contingency)
- Qualitative risk analysis (subjective judgments): standardized matrix needed + risk data quality assessment (sanity check) –> short-list of prioritized risks to be quantitatively analyzed or to plan responses
- Risk categorization: regroup by categories, WP, causes…
- Risk urgency assessment: which should go thru the process first
- Quantitative risk analysis (numbers): risk assessment of probability distribution, sensitivity analysis (which risks have most impact), value of risks
- Determining probability & impact: interviewing, cost & time estimating, Delphi, historical records, experts, expected monetary value analysis (EMV = P x I), Monte Carlo analysis, decision trees
- After the response plans, overall project analysis can be redone to see how effective PM is!
- Risk response/mitigation strategies:
- Avoid: eliminate the cause
- Mitigate: decrease probability/impact
- Transfer (deflect, allocate): insurance, bonds, warranties, outsourcing (procurement)
- Accept: active (contingency plans), passive (workarounds if occurs)
- Exploit: add work to make it happen
- Enhance: increase probability/impact
- Share: allocate ownership to a 3rd party (partnership, joint venture)
- Contingency plan: activities if the risk happens + risk trigger + risk owner
- Fallback plan: activities if contingency plans are not effective
- Workaround: if risk occurred, we make up a response on-the-fly
- Residual risk: not eliminated/eliminable risks (risk response strategy: accept passively)
- Secondary risk: new risk created by a response plan
- Accepted risks must be communicated to stakeholders
- Don’t spend more money preventing than if it occurs (EMV)
- More than one responses can be used per risk, one response can eliminate many risks, involve all in selecting a strategy
- Known unknowns: contingency reserves (managed by PM) are calculated
- Unknown unknowns: management reserves (approved by management) are estimated (e.g. 5% of project cost)
- Risk reassessments (of risk mgmt. plan), risk audits, reserve analysis (a contingency reserve can be used only for the specific risk it was set aside for), status meetings (focus on risks), closing of risks no longer applicable (return reserve to company)
- Be specific in risk identification, facts are not risks, use combinations of techniques to identify risks, look for many responses to same risk, sign contracts after risk mgmt.
- Procurement mgr. (the only one with authority to change the contract): type of procurement document (RFP [detailed], IBF [price], RFQ [quotation], RFI [info])
- PM (both of buyer and of seller!) involved in the negotiations (after risk analysis), to protect the relationship with the seller
- All contract req. (product, project, legal, etc.) must be met, final procurement audit + lessons learned
- Contract change control system included in the contract, contracts should diminish project risk
- Centralized/decentralized contracting (expertise vs. availability)
- Procurement mgmt. process: plan (make-or-buy, plan, SoW, type of contract, documents, source selection criteria), conduct, administer, close
- Make-or-buy: “make” if idle workforce, to retain control, if IPR
- Types of SoW: performance (what product should accomplish), functional (end purpose of product), design (precisely what needs to be done: for construction & equipment purchasing)
- Contract types:
- Fixed price (FP: clear SoW, low buyer risk, issue of seller cutting scope or quality for cost overruns, check for overprice and understanding of SoW, less mgmt.): FPIF (extra on performance, e.g. to do things ASAP), FPAF (capped), FPEPA (future economic changes), PO (unilateral [acceptance by performance of seller], for commodities)
- Time and material (T&M: get concrete deliverables, needs day-to-day direction): unit price, quick to create, no incentives to do it quickly, buyer oversights work daily (used for a small time)
- Cost reimbursable (CR: unclear SoW, high buyer risk, for R&D, more mgmt., costs auditing, less cost than FP, check for useless gold plating and changes in resources): CC (only cost), CPF/CPPC (worst), CPFF (fixed fee), CPIF (fixed fee + shared extra cost/saving), CPAF (fixed fee + bonus on performance [capped])
- Incentives: used to align buyer’s (cost, performance, schedule) and seller’s (profit) objectives
- Risk (from low to high for the buyer): FP, FPIF, FPEPA, T&M, CPIF, CPAF, CPFF, CPPC
- Terms: price, profit (fee), cost, target price, sharing ratio, ceiling price, point of total assumption (PTA, for FPIF: when sellers bears all the loss of a cost overrun)
- Procurement doc/contract type/SoW:
- RFP – CR – performance/functional
- IFB – FP – design
- RFQ – T&M – performance/functional/design
- Nondisclosure agreement, teaming agreement (joint venture), master service agreement/retainer contract (framework contract for future work), standard contract, special provisions (special conditions to standard contract)
- Terms & conditions (PM must know what’s in the contract and why): acceptance, agent, arbitration, assignment, authority, bonds, breach/default, changes, confidentiality, dispute resolution, force majeure (delay by buyer, costs by seller + insurance), incentives, indemnification (liability), independent contractor, inspection, intellectual property, invoicing, liquidated damages, mgmt. req., material breach (so big the contract is terminated), notice, ownership, payments, procurement SoW, reporting, retainage (5-10% of payment not done to guarantee completion), risk of loss, site access, termination, time is of essence, waivers (giving away rights), warranties, work for hire (work owned by buyer)
- Letter of intent (before contract is signed, NOT binding: the buyer will hire the seller), privity (contractual relationship)
- Noncompetitive forms of procurement (when in a hurry, or unique): single source (seller already known, risk he’s not able to perform), sole source (only 1 seller, with lots of negotiation power)
- Conducting procurements: advertising, (pre)qualified seller list, bidder conference, seller proposal/bid/price quote, proposal review, weighting system, independent estimates (PM makes sure the proposed bids are acceptable: costs under control), screening system (eliminating sellers below minimum req.), past performance history, presentations
- Negotiations (obtain a fair & reasonable price, develop a good relationship with the seller): attacks, personal insults, good guy/bad guy, deadline, lying, limited authority, missing man, fair & reasonable, delay, extreme demands, withdrawal, fait accompli
- Main items to negotiate:
- in order of importance: scope, schedule, price (what by when for how much)
- responsibilities, authority, applicable law, PM processes, payment schedule
- Contract = agreement between parties, to define R&R, mitigate/allocate risk, to make it binding. A contract needs: an offer, acceptance, consideration (something of value), legal capacity, legal purpose (nothing illegal)
- Conflict: procurement mgr. controls the contract, PM proposes changes to SoW
- Procurement performance review (during Administer Procurements in Monitoring & Controlling), claims administration (buyer hurt the seller who asks for compensation = seller change request), records mgmt. system (needed especially for insurance)
- Payments to seller are made during Administer Procurements
- Contract interpretation (based on the intent of the parties): contract language supersedes memos prior to signature & SoW, common definitions over intended meaning, industry use of term over common, special provision over general, handwritten initialed over typed-over, words over numbers, detailed terms over general
- Termination: buyer can terminate contract when he wants or for seller’s default. Seller paid for work completed, for work in progress only if terminated by convenience
- Close procurement: buyer provides formal notice the contract is completed, verifies & accepts work & deliverables (procurement audit + issue formal acceptance [seller asks for customer satisfaction]), financial closure, finalizes claims, lessons learned, contract performance reporting, procurement files
Professional & Social responsibility
- Responsibility (ownership of decisions and actions): best interests of the company, accept only what I’m qualified for, protect IP (don’t copy without permission), report unethical behavior
- Respect: attitude of mutual cooperation, respect cultural differences, engage in good faith negotiations (negotiate what you intend to honor), be direct in dealing with conflict, don’t influence others with my position power for my benefit
- Fairness: act impartially without bribery (permissible if without it you can’t do biz AND doesn’t violate fundamental international rights), look for conflicts of interest, don’t discriminate, don’t use my position for personal gain
- Honesty: try to understand the truth, be truthful in communications and create an environment where others tell the truth
- Ethics: always have a charter & a WBS, loyalty to PMI
PMP exam tips
- Functional manager = people-related issues
- Change = scope, stakeholders, requirements not defined
- Risk process: identify, analyze, response plan + fallback plan
- Generalizations are usually incorrect
- Answers saying that PM is good/great/experienced are usually correct
- Assume large projects and proper PM is done
- Guess where you are in the process before answering
- Status reports are usually a wrong answer (PM is not about reporting status)
- When in doubt: evaluate impact (risk-related), look for options, choose the action more proactive and ethical and with the least (negative) impact. Determine the immediate problem to address, deal with the root cause first, deal with the problem with the greatest negative impact first, solve the problem that occurred the earliest, look for a proactive solution
My bullet-summary of Richard Carlson – Don’t sweat the small stuff 
Gratefulness & perspective
- Peacefulness = accepting imperfections.
- Life isn’t an emergency (concentrate on my values).
- My in-basket will never be empty. Nor it will be empty when I die…
- Purpose of life: NOT getting all thing done, but ENJOYING each step along the way and live a life filled with love.
- Don’t interrupt others. Be a listener. Communicate.
- Become extremely patient: nothing can bother me.
- Ask myself: “will this make a difference a year from now?” (perspective)
- Life ISN’T fair: ACCEPT IT –> do MY BEST with what I have and try to improve.
- Allow myself to be bored (few mins/day), to do nothing –> I’ll relax.
- Write a heartfelt letter to someone once a week: express love and gratitude.
- Choose my battles WISELY + accept imperfections.
- Don’t have everything perfect, don’t fight/argue on small stuff.
- “This too shall pass”: everything changes, it’s just a matter of when! –> be grateful for what you have BEFORE it’ll go away: maintain my perspective!
- Be kind more than insisting on being right.
- In doubt, it’s my turn to take out the garbage. I won’t be taken advantage of.
- Say something nice to someone (praise) at least once a day.
- Find the BEAUTY in EVERY situation.
- Don’t criticize and if I do, do it with style…
- Be grateful when I feel good. And when I feel bad: accept it because those bad feelings too shall pass!
- Concentrate on what we have, not only on what we want: think positive, be grateful.
- You’ll become what you practice –> BECOME AWARE and pay attention to what you practice!
- It’s ok not to be perfect: you make mistakes and it’s ok. You’ll do better next time. Have no regrets: stay calm!
- Have “my time” with no one to bother me, every day.
- In a 100 yrs, all new people…
- Nurture a plan: love unconditionally.
- Do small things, without wanting anything in return.
- Don’t always try to solve others’ problems.
- Give love more than wanting to receive it.
- Ask yourself “What’s REALLY important?”
- Mind my own business (don’t judge).
- Look for the EXTRAORDINARY in the ordinary. We see what we want to see in reality. Be GRATEFUL!
- Live this day as if it was my last, it might be. My to-do list will never be empty.
- Life is PRECIOUS. LIFE IS TOO IMPORTANT TOO TAKE TOO SERIOUSLY.
- Don’t sweat the small stuff… And it’s all small stuff!