Saturday, October 31, 2009

What is Cost Plus Incentive Fee (CPIF)?

What is Cost Plus Incentive Fee (CPIF)?
  • Pays all cost an agreed upon fee plus a bonus for beating the performance objective stated in the contract.

What is Cost Plus Fix Fee (CPFF)?

What is Cost Plus Fix Fee (CPFF)?
  • The buyer pays all cost but the fee is at a specific dollar amount.
  • Help to keep the seller's costs in line because a cost overrun will not generate any additional fee or profit.

What is Cost Plus Fee (CPF) or Cost Plus Percent of Cost (CPPC)?

What is Cost Plus Fee (CPF) or Cost Plus Percent of Cost (CPPC)?
  • Requires the buyer to pay for all cost plus a percentage of cost as a fee.
  • Sellers are not motivated to control costs because the seller will get paid profit on every cost without limit.

What is Cost Reimbursable?

Cost Reimbursable:
  • Provides sellers a refund of expenses incurred while providing a service, plus a fee presenting seller profits.
  • Includes incentives for meeting certain objectives.
  • Is most suitable if project parameters are uncertain.

Friday, October 30, 2009

Matrix Organizations, What Are They?

From PMP Resources, they email me a very good article on Matrix Organization and you can find the information below.

Until the 1970's, typical, large organizations tended to function in "silos", logical divisions where essentially isolated groups of workers reported to a line manager or functional manager. Imagine columns on a page with a line manager at the top of each column and a group of workers inside each column under the manager.

As these groups operated autonomously, it was not unusual to find functions replicated in each silo.

In an Information Technology company for example, you might find software programmers in the development area, some more in the customer support area, and yet more in the quality assurance area, because each of these functional units had a programming need.
If your organisation still operates in this manner, give your boss a copy of this article.

And so it was in the 1970s that attempts to improve traditional organization structures, led to the creation of the “Matrix" organizational structure.

In the matrix organisation, considering our IT example above, all programmers are now in a separate programming department and report to a functional manager in charge of programming, and that manager would control almost all of their work. In a matrix we usually refer to the line manager as a functional manager because all of their workers perform similar functions.

So workers in a matrix organisation are compartmentalized by their required skills into silos, like columns in a matrix, each with its dedicated manager. The workers report to and are responsible to their functional manager, who in turn usually has sole responsibility for the advancement of their workers, as well as the administration of their area, including budgeting.

So far the matrix organization sounds much like the traditional organization, except that all workers within a silo (a column in the matrix) are partitioned by a particular skill-set.

The other difference between traditional organisations and matrix organisations is that matrices have rows (lines running across the columns, not fights).

Traditional organizations operated quite well, but they were inefficient, with lots of duplication of skills around the company. But their major weakness was when they tried to manage projects.

The problem was that in the traditional organisation, the concept of a project team, which is my nature cross-functional, did not exist, because the project manager's "team" team comprised of people from different functional areas, managed and controlled by different functional managers -- not by the project manager. And this is not a recipe for successful projects.

So we have our columns of functionally similar workers in each column of our matrix, with a functional manager at the head of each column.
Now picture rows running across the page, with a project manager at the "head" (i.e. the left hand side) of each row. The rows intersect the columns and so intersect the columns of workers. So each row is a silo of workers of differing functionality, headed by a project manager.
In such a matrix structure there is an obvious tension between the project managers at the head of each row (each project) and the managers at the head of each column (each functional area) as they are sharing the same workers, and as each manager (project and functional) has a job to do, we have a conflict of interest.

There are different types of matrix organization, designed to balance the power struggle-struggle between the managers conflicting needs. The main types are listed below.

The Weak Matrix

This type of organizational structure is a bit of a nightmare for Project Managers because they are effectively reduced to being project facilitators. They make plans and monitor the execution, but they have no real authority over staff, and are almost totally reliant upon the functional managers to provide resources.

The workers have little loyalty to the project managers (or the project), because it is the functional managers who decide the advancement of the workers within the organization. And the workers' performance is usually measured only on the work that they do for their functional manager -- not on their project work -- so in fact working on a project may be seen by the worker as undesirable as they will have less time to do their regular work, so the project manager may find them unmotivated.

And as the PM has no real authority over the team members, then they often have to report the problem of workers not performing, to the functional managers in the hope that they will encourage the workers to work more on the project.

But remember that the functional managers are primarily responsible for the performance of their own functional areas, so their workers performing project tasks can actually reduce the productivity of their area (often projects are ignored in the benchmarks). So this leads to a clear conflict of interest between the PM, the functional managers and the various workers.

In this situation the PM usually loses -- and that’s the easy to remember it -- the PM is weak in a weak matrix.

The Strong Matrix

All these problems led to the creation of the “strong matrix” organization

In the strong matrix the tables are turned, it is the project managers that have responsibility for the workers, not the line managers. But the PMs are not responsible for the human resource administration.

This empowers the project managers to manage the workers directly, and thus properly manage the whole project, but without tying the PMs up in HR administration.

I have worked in organizations like this, where I managed my teams and was responsible for everything except the HR functions, and I found it a very satisfying environment from a project point of view. So my teams would have me as project manager and I had sole authority and responsibility to direct their work, but they also had staff managers who looked after anything that was not project-related, i.e. performance reviews (but I provided the key input to these) training, vacation administration, employment contracts etc. And this meant that I could focus on the projects.

So when a project manager starts a new project, they discuss their staffing requirement with the functional managers and the functional managers try to make the resources available (and provide training fro them, where necessary). Usually the functional managers will draw up plans and charts (e.g. Gantt charts) of how “their people” will fit inside projects, and they might move staff between projects and project managers as required (after consulting with the project managers).

Effectively the PM and the functional managers work together, but overall control of everything project-related is the function of the project manager -- so in a strong matrix, the project manager is the stronger party.

The Balanced Matrix

There is an old saying, “power corrupts, and absolute power corrupts absolutely”. In each type of matrix organization there is a struggle for power, and so there needs to be some way to bring this into balance, otherwise one group will dominate the other, to the detriment of the project, and ultimately to the detriment of the organization as a whole (although individual projects or functional areas may blossom for a while). A very dominant project manager for example may bully the functional managers into always giving them the best team members for their projects.

One way of reducing the problem is to make rules within the organization that varies who can manage a worker, depending upon certain circumstances. For example there could be a rule that says if an worker is to work on a project for less than one week then the functional manager (or project manager) has sole control over the worker, but if the requirement is for more than one week, control changes hands.
Or there may be rules that the same worker can’t work for the same PM, on two consecutive projects.

There are many possible rules that could be made of course, but the goal is to balance the power between the PM and the functional managers so that we don’t have a win/lose situation, and I’m sure you can guess that this type of organizational structure is called a “balanced matrix”.

So weak, strong, or balanced, the "strength" is always from the viewpoint of the project manager.

Until the 1970's, typical, large organizations tended to function in "silos", logical divisions where essentially isolated groups of workers would report to a line manager or functional manager. Matrix organisations are an attempt to restructure to make project management possible.

Saturday, October 17, 2009

PMP Exam: The 5 Secret Keys to PMP Exam Success

I received the following tips from PMP Exam Resources and I believe this will benefit all of you.

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Recommended Books on PMP

Suggested Study Materials

  • PMP-Preparation Recommended Books
  • PMP Exam Prep, Fifth Edition: Rita's Course in a Book for Passing the PMP Exam
  • A Guide to the Project Management Body of Knowledge, Third Edition (PMBOK Guides)
  • The PMP Exam: How to Pass On Your First Try (Test Prep series)