Managing ProjectsBusiness Case

Case Study: Hotel Nest

Christine Ndwiga

October 2014

Content Introduction

Project Scope, Aims and Objectives

Project Scope

Project Aims and Objectives

Stakeholder Analysis

Types of Stakeholders

Stakeholder Issues

Stakeholder Management Strategies

Project Management Planning Tools

Work Breakdown Structure: Outline View (WBS) and Tree Structure View

Gantt Chart

Project Performance

Balanced Scorecard for Hotel Nest

Budget Template

Project Risk Management

Risk in Projects

Risk Identification, Impact and Mitigation

Conclusion

References

Introduction Project management is defined by Fewings (2013) as ‘The art of directing and co-ordinating human and

material resources through the life of a project by using modern management techniques to achievepredetermined goals of scope, cost, time, quality and participant satisfaction’

People sometimes want to get away from the bustle of their day-to-day life. Sometimes, you desire anexperience that is more than just a bed, or a meal and less than a grand hotel with lots of conferences andevents.

Consumers have switched from the Coastal and Mediterranean holidays to having their vacations intimateboutique hotels.

Hotel Nest will be such an intimate place to unwind and relax away from the noise; a breath of fresh airwithout the trappings of a formal hotel.

Luxury will be key; Budget will be friendly. Hotel Nest cares for what the customer wants

With 25 standard rooms and 15 luxury suites to choose from, Hotel Nest will be a haven for vacationers andupscale business travelers who wish to be at close proximity to the city centre.

Purpose

The purpose of this project is to acquire, refurbish and launch a new boutique hotel under the parent group of hotels.

The owners want to reinvest funds from the closure of a hotel in the city by acquiring a suitable building within reasonable travelling distance of the capital city.

This is a project viewed as

A production function

‘An endeavor undertaken to create a unique product or service’ (PMI 2000)

An agency for change

‘ An organization designed to deliver a specific set of change (Murray-Webster, Thiry 2000)

Project Scope, Aims and Objectives

t

Project ScopeHow is this different from any other hotel in the city?

We are selling intimacy; we are selling the “being tucked-away” from the hustle of the capital

The proposal entails the establishment of a medium scale boutique hotel in the outskirts of the city via acquisition.The option of buying a new building or acquiring an existing old hotel and refurbishing it to our taste are both up fordebate.

As to which solution is acceptable to the owners, it will be decided once the risks involved are analyzed.

Deliverables

An exquisite boutique hotel that caters for what the customer wants; and not just what the owners want.

To have a great and well-trained staff team to deliver our services

A private and serene location for upscale travelers to relax

Destined to tap on the limited accommodation options where there is no existence of such a boutique hotel. Most arefound in the capital. This will be a unique product to take to the outskirts

Provide a convenient but executive commute for our patrons to the capital for their daily business

The stakeholders to benefit financially from this investment in the long term.

Constraints and Dependencies

Lack of or limited buildings available for acquisition in the selected city

Long process to close on a building buy deal

Possible delays in the transportation of materials to the site once the refurbishment commences

Use existing resources from the closed hotel. This is a constraint as perhaps the resources that already exist may notnecessarily match with the design of the new premises.

Project Aims and Objectives To Deliver an exclusive Boutique Hotel in a city not far from the capital with the trimmings of a personal touch.

To invest in a venture using the resources gained from the sale of a previously successful hotel in the capital riding onits already existing reputation.

Acquire a suitable building, plan the capacity, services, décor and branding to launch the new hotel with thepotential for between 25 and 40 up-market rooms and suites in an area that assures a high level of occupancy.

Measurable Objectives:

Increase the availability of boutique accommodation in the outskirt city within a 1 year window

Conduct a market research on similar hotels that could be possible competition and provide a competitive pricingpackage for our rooms.

Key Success Criteria (KSC)

To the Customers

The Feeling of a personalized touch and that they are all that matter

To the Shareholders

A quantifiable return on investment with huge profit margins

To the Staff

A satisfying feeling of a workplace that is friendly and worth their every effort

To the project team

Deliver a 360◦ Product that will satisfy the desires of the shareholders and the targeted consumer

Place mitigation mechanisms to handle unexpected time and budgetary overflows

Stakeholder Analysis

Types of Stakeholders A Stakeholder is an individual or a group, or an organization that may be involved directly or indirectly on a

project process from initiation to closure (Cleland, 1995) or have a vested interest its outcome (Boddy &Buchanan, 1999)

Primary Stakeholders

The Project Team

Government

Local communities

Secondary Stakeholders

Supplier/ Vendor

Sub-contractors

Media

Key Stakeholders

The Executive

Project Sponsor

The End userA generic illustration of project stakeholders (Walker, 2003)

Stakeholder Issues: problems that may arise with various stakeholders A good Project manager will practice the art of reflection; Self awareness goes a

long way in identifying issues even before they are blown out of proportion.

Understanding teams is one way of curbing problems before they grow beyond control. You will need know what is their attitude, what you expect of them, and what they want from you as their leader.

Problems that may arise could include:

1. Poor Communication Channels between the project teams and the executive, or the local community and the teams etc.

2. Executive Shelving required approvals.

3. Reallocating resources to other projects that may be deemed more important

4. Engaging in back-room politics to destabilize the project. This could arise from the local community or government apparatus.

5. Poor Leadership Culture. For instance if the Executive leads in a power culture style(Handy,2007), it will be difficult to empower the project sponsor and the project manager who see to the daily progress of the project. This in turn will cause huge delays in execution. Stakeholder’s Issues (Bourne 2006)

Stakeholder Management Strategies: a plan to address stakeholder issues At the end of the day, the strategy is to have some hold or power over the key

players. This may involve

1. Directing: Like an arbitrator

2. Accommodating: to encompass rational decision making.

3. Compromising: Something’s got to give.

4. Collaborating: Coming together to find a mutually acceptable decision that will leave all the key stakeholders

5. Withdrawing and Accepting: Once the solution is found, the Project manager takes a step back to let it sink in. It will go a long way in keeping the emotions down in case of a conflict.

Its worth noting there is no “right answer” to a problem. The fact that you are able to run through the process of problem solving and finding a solution that is agreeable to most if not all, places you as a better project manager and ultimately pushing for the success of the project.

Project Management Planning Tools

Project Planning Tools Project Planning is ‘the establishment of formal plans to accomplish the project’s

goals (Meredith & Mantel 1995)

Chapman & Ward(2003) were keen to point out that

‘Uncertainty results from vagueness, ambiguity and contradictions associatedwith lack of clarity because of lack of data, incomplete and inaccuratedetail, lack of structure to consider issues, the working and framingassumptions being used to consider the issues, known and unknown sourcesof bias, limited control of relevant project players, and ignorance about howmuch effort it is worth expending to clarify the situation.’

For Hotel Nest, we undoubtedly want to have mitigation for uncertainties.

This will be achieved by employing the relevant tools for project planning. Whattools are relevant to the Hotel Nest Project?

1. Work Breakdown Structure

2. Gantt Chart

3. Analogous Estimate

4. Reserve Analysis

Work Breakdown Structure: Outline View (WBS) This is the starting point as it defines the scope of the project and the

deliverables. It is able to break these deliverables into smaller work packages that makes the project easier to execute, control, predict outcomes and prioritize tasks.

Hotel Nest Project

1.1 Commencement

1.1.1 Feasibility

1.1.2 Develop Business Case

1.1.3 Deliverable: Submit Business Case

1.1.4 Executive Reviews Business Case Charter

1.1.5 Project Business Case Approved

1.2 Planning

1.2.1 Define Scope, Objectives, Risk Assessment

1.2.2 Select Project Team

1.2.3 Select Contractors

1.2.4 Team and Leadership Meet. Commission Project

1.2.5 Complete the Design and Site Blueprints

1.2.6 Submit Project Plan Document

1.2.7 Deliverable: Project Plan Approved

1.3 Execution

1.3.1 Contractor Mobilization on Site

1.3.2 Verify Delivery of Materials on site

1.3.3 Construction Begins

1.3.4 Continuous Procurement of Material

1.3.5 Deliverable: Completion of Site Works

1.3.6 Inspection by Team Leadership

1.3.7 Interior Deco Team Commence Works

1.3.8 Deliverable: Completion of Interior works

1.3.9 Site Visit by Executive for Recommendations

1.4 Control

1.4.1 Project Review team and Contractor Sit-down

1.4.2 Status Meetings with the Executive

1.4.3 Risk Assessment and Mitigation

1.4.4 Execution of Recommendation Before Hand-over Plan

1.4.5 Deliverable: Hand-Over By Contractor to Executive and Project Leadership

1.5 Completion

1.5.1 Project Audit Meetings

1.5.2 Hotel Staff Orientation

1.5.3 Update Project Documentation

1.5.4 Deliverable: Hand-Over of Project to Executive

1.5.5 Hotel Grand Opening

Tree Structure View (WBS)Hotel Nest Project

1

Commencement1.1

Feasibility1.1.1

Develop Business Case1.1.2

Deliverable: Submit Business Case

1.1.3

Executive Reviews Business Case Charter

1.1.4

Project Business Case Approved

1.1.5

Planning1.2

Define Scope, Objectives, Risk Assessment

1.2.1

Select Project Team1.2.2

Select Contractors 1.2.3

Team and Leadership Meet. Commission

Project1.2.4

Complete the Design and Site Blueprints 1.2.5

Submit Project Plan Document

1.2.6

Deliverable: Project Plan Approved

1.2.7

Execution1.3

Contractor Mobilization on Site1.3.1

Verify Delivery of Materials on site

1.3.2

Construction Begins1.3.3

Continous Procurement of Material

1.3.4

Deliverable: Completion of Site Works

1.3.5

Inspection by Team Leadership

1.3.6

Interior Deco Team Commence Works

1.3.7

Deliverable: Completion of Interior works

1.3.8

Site Visit by Executive for Recommendations

1.3.9

Control1.4

Project Review team and Contractor Sit-down

1.4.1

Status Meetings with the Executive

1.4.2

Risk Assessment and Mitigation

1.4.3

Execution of Recommendation Before

Hand-over Plan1.4.4

Deliverable: Hand-Over By Contractor to

Executive and Project Leadership

1.4.5

Completion1.5

Project Audit Meetings1.5.1

Hotel Staff Orientation1.5.2

Update Project Documentation

1.5.3

Deliverable: Hand-Over of Project to Executive

1.5.4

Hotel Grand Opening1.5.5

Gantt Chart A Gantt chart is an illustration of the tasks to be executed during a project’s life cycle.

It has a bar that shows the duration of a certain task in the project. Each task has to be presented in a certain order.Interdependencies are evident in this tool. The completion of a task will initiate the onset of another.

It is a super tool for scheduling and monitoring or tracking project progress.

It will be particularly of interest to this hotel project as I will be able to plan the schedule of activities throughoutthe construction process.

Gantt Chart for Hotel Nest Project (pg2)

Project Performance

Balanced Scorecard for Hotel NestBSC Area of Interest Criteria(KPI) Measure/MetriCustomer Satisfaction Time Minimal Community interference

Budget Marketing Expenses $Efficiency Satisfied customer index %Meets Specifications Customer Loyalty index %Effectiveness No. of client Complaints

Customer Traffic in numbers

Financial Efficiency Time Funds Released on time Reports produced at the requisite time

Budget Asset Value $ Revenue(investment) $ Total Cost $

Efficiency Cash Flow $ Solvency % Reduction in Total cost of Ownership %

Meets Specifications Market Value $ Return on investment %

Effectiveness Profit Margins % Return on investment %

Internal Processes Time Activity/task time

Average Lead time

No. of Employees

Decision making time

Budget Administrative ExpensesEfficiency Environmental Effect

Inventory TurnoverMeets Specifications Average Lead time

Contract managementEffectiveness Improved productivity %

Impact of error in administrative decisions %

External Processes Time On-time delivery of materials Activity/task time

Budget Operational CostsEfficiency Quality Workmanship

Site Accident reportsMeets Specifications Industrial Safety record

Quality WorkmanshipEffectiveness Service Level Agreement (SLA)

Sustainability (Learning and Growth) Time Training man hoursBudget Investment on research and development $

Training investment $Efficiency Motivational index

Budget TemplateProject: Hotel Nest

Location: Outskirts of the City of Nairobi, Kenya

Construction Period: October 2014 - October 2015

Assumptions:

Hotel Square Footage 20,000Sq.Ft ( 40 hotel rooms each measuring approximately 325 sq.ft, Kitchen, Lobby, Restaurant, Garden, Pool Area and Recreation Room)

Hard Construction CostsPer Square FootageCurrencyUS Dollar $

Expected Overheards 5%General Contractor's Fees 7%

Incidentals 8%

INDEXITEM PARTICULARS COST TOTALS1 PRELIMINARY COSTS

1.1 Survey (Market/Ecological) 80,000.00

1.2 Building acquisition 35,000,000.001.3 Permits and Fees 200,000.001.4 Research and Business Case development 20,000.001.5 Legal Fees 33,000.001.6 Design and Blueprint Fees 17,000.00

SUB-TOTAL 35,350,000.00 35,350,000.00

2 CONSTRUCTION COSTS HARD COSTS

2.1 Demolitions 1.00 20,000.00

2.2 Renovations (Flooring, Walling and Roofing) 7.50 150,000.00

2.3 Plumbing and Electrical Works 0.50 10,000.00

2.4 Fire and Security System Installation 1.15 23,000.00

2.5 Telecoms wiring 0.60 12,000.00

2.6 Insulation and Heating 0.75 15,000.00

2.7 Carpentry Works 1.00 20,000.00

2.8 Masonery Works 0.50 10,000.00

2.9 Fixtures and furnishings 5.00 100,000.00

2.10 Fencing, Paving and Landscaping 0.90 18,000.00

Budget Template (Pg2)2.11 Temporary Utilities 0.35 7,000.00 2.12 Site Cleanup 0.25 5,000.00

SUB-TOTAL 19.50 390,000.00

3 EQUIPMENT AND APPLIANCES3.1 Executive Room Furniture 188,000.00 3.2 Kitchen Appliances 80,000.00 3.3 Swimming Pool Pump 10,000.00 3.4 Back-up Generator 10,000.00 3.5 Lobby Piano 15,000.00 3.6 Restaurant Furniture and Equipment 66,000.00 3.7 Electronics ( TV, Computers, Housekeeping Equipment) 200,000.00 3.8 Carpeting and other Deco Accents 90,000.00 3.9 Other Furnishings 35,000.00

SUB-TOTAL 694,000.00 694,000.00

4 OTHER COSTS CONSULTANCY FEES AND SALARIES4.1 Business Consultant Engagement Fees 20,000.00 4.2 Principle Architect and Engineer Fees 30,000.00 4.3 Internal Deco Consultant Fee 25,000.00 4.4 Project Team Salaries 345,000.00 4.5 Recruitment budget for Hotel Staff 38,000.00

SUB-TOTAL 458,000.00OTHER EXPENSES

4.6 Travel and Per Diem 44,000.00 4.7 Training and Development 15,000.00 4.8 Publicity and Advertising 120,000.00 4.9 Gratuities 10,000.00

4.10 Miscellaneous (Petty Cash) 5,000.00SUB-TOTAL 194,000.00 652,000.00

SUB-TOTAL COST OF PROJECT 37,086,000.00Overheads 8% 2,966,880.00

General Contractor's Fee 6% 2,225,160.00 - Incidental/Contingency 5% 1,854,300.00

GRAND TOTAL 44,132,340.00

Project Risk Management

Risk in Projects Any project undertaking is bound to be exposed to risks. The more complex

the project, the higher the risk involved. That complexity is a risk itself. (Marle & Vidal: 2011)

A project risk is defined by PMI (2008) as “an uncertain event or condition that, if it occurs, has a positive or negative effect on a project's objectives”. PMI breaks the process of Project Risk Management into four stepwise activities that run sequentially:

risk identification

risk analysis

risk response planning

risk monitoring and Control (PMI 2008)

Foerster et al (2013) propose a framework that would be suitable for construction projects with regard to managing risks. Theirs is an approach that guides the project manager through the risk response planning practice which aims at modelling and applying pre-emptive and corrective mitigation. Ultimately, the idea is to elude, lessen or handover project risks to the production phase.

Risk Identification,Impact and Mitigation Risk Impact Mitigation

Exploring a new location which has had no boutique hotel previously.Unavailability of a building for acquisition No Project Initialized Have a business case exploring both acquisition and new

construction.

Local Government laws and regulations No project is initialized Meet the local licensing conditions prior to breaking ground

Proximity to the target market (Travel Time to the Capital City

Longer time to build a business case/survey document Adequate time allocation in the WBS needed for trips to the said town from the capital

Delays due to Executive/Owner late decisionsDelayed supply of materials Delay in the actual construction and renovations

ultimately delaying the projectHave a contractor’s contract draft and approved by the ownership in good time to kill delays by suppliers

Security concerns of material already on the ground (Vandalism) due to construction interruption

Cost overruns. Have a security provision in the project plan to handle physical security

Unclear communication channels between the Project team and its leadershipDelayed milestone achievement Unsuccessful project Make it part of the project plan to have meetings to

review and exchange ideas. Also to review each milestone as per the WBS.

Low Morale of Project players High turnover of project team Find motivation incentives like bonuses if an activity is performed under the specified timeline in the WBS

Misuse of resources allocated Requirements not achieved. Cost Overruns A clear plan on issue of resources. Who to go to for what. This way you will be able to have a clear line of communication

Poor Project Documentation No tracking model to measure progress Review meetings to be included in the WBS for various inputs

Inadequate financial support – perhaps funding is cut off by the ownershipPremature closure of project Unsuccessful rating on project Clear budget allocation and approval from ownership

prior to project initiation.

Legal action from the parties affected e.g project team and contractors on their payments

Project overruns Clear payment modes and periods. Also Clear contracts highlighting such eventualities and actions to take agreed by both ownership and contractor

Unsatisfactory/Poor Planning of the projectOwnership not understanding their Return on investment

Possible cancellation of the project ( not taking-off) Develop a solid business case and have the ownership approve it prior to initializing the project.

Running out of resources allocated Massive delays in project completion Make sure you have a responsibility matrix for the resources intended for the project

Inexperienced Project Manager Project Manager’s Integrity compromised Have a detailed presentation of the project plan approved and show work previously completed successfully in past undertakings

Lessons Learnt It is very important to document each milestone and to make sure your project plan is laid out from the word go.

Most of the projects I have headed as the project manager have involved initialization before having a clear action plan due to management pressure to get the project going. Down the line you find that perhaps there was no clear responsibility matrix, no clear work breakdown structure. Call it vague planning. With this knowledge, a prerogative to streamline future undertakings.

It's said there are no new project management sins, just old ones repeated.

‘If we don't take time to learn the lessons of past projects, and moreover act upon them, we will continue to commit the same project management sins again and again.’ ~ Duncan Haughey

Steve Jobs was a successful entrepreneur. Why? His constant push to keep projects moving while communicating with his team to ensure they were working toward a shared vision is what made Apple ® a success.

Communication between project stakeholders is also an important lesson learnt from this module. As the Project manager, the coordination function between the business owners, the sponsor, and teams is your prerogative. In my various job placements, I have explored the agile project management approach. Working collaboratively brings more ideas to the table, some of which wouldn’t have been thought by only one person.

Integrating different Project management models and techniques give your project lifecycle flexibility and wriggle room for unseen incidences. Some structures can be very rigid. Combining them helps in taking care of the unexpected and places the project manager at a better place to handle them

Securing Funding To guarantee that the project is funded, the business case is a good place to

start.

A solid business argument that shows a clear projection of the project’s lifecycle will give the executive/owner confidence to release that money.

The following must be presented convincingly to the owner:

Demonstrate a need for the project by defining the scope, Objectives and Deliverables

The project manager must be able to display a detailed project plan; Cost, time and Performance from initiation to completion

Incorporate risks and mitigation strategies in the plan to assure the ownership that their investment will not be run down

Demonstrate a pattern of project successes that you have handled in the past. This will give them the confidence to trust that you are a person of integrity and reliable.

Maintain constant communication with the executive to keep them in the loop on every milestone to avoid premature closure of project.

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