PMP Terms and Concepts

UPDATED for the new PMP® Exam thru 2020. Happy learning!
Introduction: This article provides Aspirants taking the exam in 2018 with
a list of important terms from the latest PMBOK® Guide 6th Edition. The
definitions of the project management terms (often according to PMI’s
definition) are included here for y0ur easy reference. PMP® aspirants need to
learn these well in order to successfully to understand the latter sections of
the PMBOK® Guide as well as to pass the PMP® exam. (Note: The most
important terms are highlighted in bold.)
This series of PMP® study notes is impossible without the
contribution of many Aspirants. Without their feedback and input, I
cannot continually improve and enhance the study notes to cover
the updates in PMBOK® Guide 6th edition. I am so grateful that my
study notes are useful to Aspirants.
Article Highlights
 1 Important PMP® Terms and Concepts (covering Section 1, 2 and 3 of the
PMBOK® Guide 6th Edition)
o 1.1 Project
 o 1.2 Project Management

o 1.3 Role of the Project Manager

o 1.4 Organization System

o 1.5 Project Life Cycle vs Project Management Life Cycle vs Product Life Cycle

o 1.6 Other Important Project Management Terms

 2 Further PMP® Study Resources

Important PMP® Terms and Concepts

(covering Section 1, 2 and 3 of the
PMBOK® Guide 6th Edition)
Project
 Project – a temporary endeavor to create a unique product, service or
result (or enhancement of existing services/products (e.g v.2 development
is a project) ) — may be collectively termed as deliverable — (vs
ongoing operations which manage processes in transforming
resources into output) sometimes may involve handing over the
deliverable to the operation teams for continuous operation
 Project drives changes in the organization and often is a means
to create business values and to achieve organizational
goals — the net quantifiable benefit derived from a business
endeavour which can be tangible or intangible.
 Projects operate in an environment that may have favourable or
unfavourable impacts on them. Two major categories are:
 Organization Process Assets is a major input in all planning
process, which may be kept at PMO, directly related to project
management, including Processes and Procedures (including
templates (e.g. WBS, schedule network diagrams,
etc.), procedures for issuing work authorizations, guidelines,
performance measurements) and Organizational Knowledge
Repositories
 Enterprise Environment Factors (often are constraints) are
influences not under control of the project team that will affect the
 project, either intra-organization and extra-organization, e.g.
organizational culture, organization structure, existing human
resources, work authorization system, PMIS, market conditions,
legal requirements, technology
 EEF are inputs for all initiating, most planning process, not
much in the executing/controlling process, none in closing process
 Projects often involve more risks and uncertainties than operations and
thus require more planning
 The following factors influence the operation of the organization which
may lead to the need for projects:
 Regulatory/legal/social requirements changes
 Stakeholders needs/requests
 Changes in technology/business
 Improvements, rectification and enhancements to
processes/products/services
 A project can be subdivided into phases, each phase is a collection of
logically related project activities that result in the completion of
deliverable(s). Towards the end of each phase is a “Phase Gate” which
determines whether the project will go on or not.
 Process – a package of inputs, tools and outputs, there are 49
processes defined by PMI. Processes are grouped in the PMBOK®
Guide into 5 Process Groups (NOTE: Process groups are not the same as
project phases).
 Portfolio > Program > Project
 Program – a group of coordinated projects, taking operations
into account, maybe with common goals, achieving benefits not
realized by running projects individually, if only the
client/technologies/resource are the same, then the projects should be
managed individually instead of a program
 Portfolio – a group of programs and/or projects to achieve
organizational strategic goals within the organization with a view to
maximizing the value to the organization
  Actively coordinating and managing portfolios, programs and
projects through organizational project management (OPM) best
position the organization to achieve strategic business goals.
 Use of portfolio/program/project management to bridge the gap between
organizational strategy and business value realization
Project Management
 Project Management – the application of (all appropriate)
knowledge, skills, tools & techniques and whatsoever to manage project
activities with a view to meet the project requirements and achieve
customer satisfaction
 The most important task is to align stakeholder expectations with the
project requirements, around 90% of the PM’s work is related
to communication with stakeholders
 PMBOK® Guide is a framework/standard but not methodology
(agile, scrum, PRINCE3, etc.) — A framework allows flexibilities while a
methodology would require the use of a predefined system of practices,
techniques, procedures and rules.
 Project management emphasizes tailoring — selecting the
appropriate project management processes, inputs, tools, techniques,
outputs and life cycle phases according to the unique nature of each
individual project.
 Competing constraints: time, cost, scope, quality, risk, resources
 Project Management Business Documents
 Project Business Case — documents the economic feasibility vs
benefits of the project and is used for authorization of project
management activities.
 Project Benefits Management Plan —describes how and when
the benefits of the deliverables of the project will bring and describes
how to measure the benefits (also including the alignment with
organization strategies, assumptions and risks)
 Project Charter — authorizes the project and names the project
manager
  Project Management Plan — how the project will be performed
and managed – documents assumptions & decisions, helps
communication between stakeholders, goals, costs & time scheduling
(milestones), project management system and subsidiary
management plans and documents
 Project Success Measures — project success is now more
inclined to be measured by considering the achievement of project
objectives as documented in this document
Role of the Project Manager
 Project Manager: an individual assigned by the organization to lead the
team and is responsible for achieving project objectives
 is the leader of the project irrespective of the authority
 should consider every process to determine if they are needed for
individual projects (tailoring)
 the exact role of project manager is to be tailored to suit the needs
of individual organizations and projects
 may report to the functional manager, program manager, PMO
manager, operation manager, senior management, etc., maybe part-
time or devoted
 identifies and documents conflicts of project objectives with
organization strategy as early as possible
 Skills required of project managers:
 Technical project management — process tailoring,
planning, managing schedule/cost/resources/risk
 Leadership — communication (within team and with
stakeholders), team building, motivation, influencing, coaching,
trust building, conflict management, negotiation
 Strategic and business management — be aware of
the high-level strategies of the organization and effectively implement
decisions/actions that align with strategic goals (Organization Strategy
may be expressed through mission and vision)
 Project Manager must balance the constraints and tradeoffs, effectively
communicate the info (including bad news) to the sponsor for informed
decisions
 Project Manager needs to involve project team members in the planning
process
 Project Manager needs to perform integration at process level, cognitive
level and context level
 Project Team includes Project Manager, project management staff,
project staff, PMO, SME (subject matter experts can be outsourced),
customer representative (with authority), sellers, business partners, etc.,
maybe virtual or collocated
 Senior management must be consulted for changes to high-level
constraints
 Leadership vs Management:
 Lead: guide through interactive discussion from one point to
another
 Manage: direct a person to perform a set of expected behaviour
 Leadership styles:
 Laissez-faire
 Transactional
 Servant leader
 Transformational
 Charismatic
 Interactional
Organization System
 The organizational system determines the power, influence,
competence, leadership and political capabilities of the people who can
act within the system. e.g.
 Management Elements — general management principles/rules
of the organization, e.g. disciplinary action, division of skills,
authorization model/practices, communication channels
 Organizational Governance Frameworks — framework/processes
describing how authority within the organization is exercised
  Organizational Structure Types
 Organic or Simple
 Virtual
 Projectized (project manager has the ultimate authority
over the project, team members are often collocated)
 Matrix (Strong, Balanced, Week)
 Functional
 Composite/Hybrid – a combination of different types,
depending on the actual need
 PMO
 Tight Matrix = co-location, nothing to do with the organization type (not
necessarily a matrix org.)
 Functional organizations => the project manager has little authority,
often called project expeditor (no authority) or coordinator  (little authority),
project coordination among functional managers
 Matrix organization => multiple bosses and more complex
 Project Management Office (PMO) – standardizes governance,
provides training, shares tools, templates, resources, etc. across
all projects/programs/portfolios
 3 forms: supportive, controlling and directive (lead the project as
PM)
 functions: training, resource coordination, methodology, document
repository, project management oversight, standards, career
management of PMs
 may function as a stakeholder / key decision maker (e.g. to
terminate the projects)
 control shared resources/interdependence across projects at the
enterprise level
 play a decisive role in project governance
Project Life Cycle vs Project
Management Life Cycle vs Product Life
Cycle
 Project Life Cycle: includes: initiating, planning and organizing,
carrying out/executing work, closing the project. Project life cycles are
independent of a product life cycle.
 Within a project life cycle, there can be one or more phases of the
development of the product, service, or result (a.k.a. development life
cycles) with the following models:
 Predictive [plan driven/waterfall] – scope, time and cost
determined early in the lifecycle, may also employ rolling wave
planning
 Iterative – repeat the phases as understanding of the project
increases until the exit criteria are met, similar to the rolling wave
planning, high-level objectives, either sequential/overlapping phase,
scope/time/resources for each phase may be different
 Incremental – features/scope are added to each incremental cycle
 Adaptive [change driven/agile] – for projects with high levels of
change, risk and/or uncertainty, each iterative is very short (2-4
weeks), work is decomposed into product backlog, each with a
production-level product, scrum is one of the most effective agile
methods, stakeholders are involved throughout the process, time and
resources are fixed, allow low change cost/keep stakeholder
influence high
 Hybrid
 The life cycle chosen must be suitable for the intended deliverable and
flexible enough to deal changes.
 each project phase within the product lifecycle may include all the five
project management process groups
 Product life cycle: development > production > adoption & growth >
maturity > decline > end of life
Other Important Project Management
Terms
 The Configuration Management Knowledge Bases contain baselines
of all organization standards
 Lessons Learned – focus on the deviances from plan (baseline) to
actual results and how to solve these discrepancies
 The work authorization system (WAS) is a system used during project
integration management to make sure that the right work gets done at the
right time
 PMIS includes configuration system and change control system
 Never accept a change request to trim down one element of the triple
constraint without changing the rest.
 Sponsor – provides resources/support to project, lead the process
through initiation (charter/scope statement) through formally authorized,
later involved in authorizing scope/budget change/review
 Customer – NOT necessarily provide the financial resources, may be
external to the organization, final acceptance of the product
 Business Partners – certification body, training, support, etc.
 Project Statement of Work (SOW): describes the business need, high-
level scope of deliverables and strategic plan of the organization, created
by the sponsor/initiator/buyer
 Project Charter is not a contract
 Project Management Plan is NOT a project schedule
 Project Management System: includes a list of project management
processes, level of implementation (what actions to take in the
management processes), description of tools and techniques, resources,
procedures, change control system [forms with tracking systems,
approval levels]
 Requirement Traceability Matrix (RTM) – a matrix connecting
deliverables to requirements and their sources (for managing scope)
 Work Breakdown Structure (WBS) – a hierarchal chart of
decomposing deliverables into work packages
 Activity List – a full list of all activities with indication of relationship to
the work packages
 Activity Attributes – further information (duration, start date, end date,
etc.) of all the activities in the list (for scheduling)
 Roles and Responsibilities (RAR) – a document listing all the roles
and description of their responsibilities in the project (often by category)
 Responsibility Assignment Matrix (RAM) – a matrix connecting
people to work packages/activities, e.g. the RACI matrix (responsible,
accountable, consult, inform), usually only one person is accountable for
each activity
 Resources Breakdown Structure (RBS) – a hierarchical chart listing
all the resources by categories, e.g. marketing, design, etc.
 Risk Breakdown Structure (RBS) – a hierarchical chart listing all risks by
categories
 Project Management Data and Information
 Work Performance Data – raw data collected
 Work Performance Info – analyzed in context and integrated
data, e.g. some forecasts
 Work Performance Reports – work performance information
compiled in report format
 Sunk costs – money already spent, not to be considered whether to
terminate a project, similar to committed cost (often through contracts)
 Direct costs, indirect (shared) costs, Fixed costs, Variable costs
 Law of diminishing returns – beyond a point, the more input, the less
return
 Working capital – assets minus liability, what the company has to
invest in the projects
 Payback period – a time to earn back capital investment
 Benefit-cost ratio (BCR) – an indicator, used in the formal discipline of
cost-benefit analysis, that attempts to summarize the overall value for
money of a project
 Depreciation – straight-line depreciation vs accelerated depreciation
(the amount of depreciation taken each year is higher during the earlier
years of an asset’s life)
 Under double declining balance, the asset is depreciated twice as fast
as under straight line. Using the example above, 10% of the cost is
depreciated each year using a straight line. Doubling the rate would mean
 that 20% would be depreciated each year, so the asset would be fully
depreciated in 5 years, rather than 10.
 Under sum-of-the-years-digits, the asset is depreciated faster than the
straight line but not as fast as declining balance. As an example of how
this method works, let’s say an asset’s useful life is 5 years. Adding up the
digits would be 5+4+3+2+1 or a total of 15. The first year, 5/15 is
expensed; the next year 4/15 is expensed, and so on. So if the asset’s
cost is $1000, 5/15, or $333.34 would be expensed the first year, $266.67
the second year, and so on.
 Economic value added – the value of the project brought minus the
cost of project (including opportunity costs) e.g. for a project cost of $100,
the estimated return for 1st year is $5, assuming the same money can be
invested to gain 8% per year, then the EVA is $5 – $100 * 8% = -$3
 Net present value (NPV) – the sum of the present values (PVs) of the
individual cash flows of the same entity
 Present value (PV) – or called present discounted value, is a future
amount of money that has been discounted to reflect its current value, as
if it existed today (i.e. with inflation, etc.)
 Future value (FV) – is the value of an asset at a specific date
 Internal Rate of Return (IRR) – The inherent discount rate or
investment yield rate produced by the project’s deliverables over a pre-
defined period of time.
 Forecast (future) vs Status Report (current status) vs Progress Report
(what have been done/delivered)
 Journey to Abilene (Abilene’s Paradox) – committee decisions can
have a paradox outcome, the joint decision is not welcome by either party
(because of fear of raising objections)
 when something unusual happens, always refer to the PM Plan/Charter
for instruction on how to proceed; if not found, ask for direction from the
management
 unresolved issues will lead to conflicts
Further PMP® Study Resources
  47+ Commonly Confused PMP® Term Pairs with
detailed explanations (updated for the new PMP® Exam) — there
are many PMP® term pairs that look very similar but are quite different in
meaning. The PMP® Exam questions may test Aspirants’ understanding
of these terms and how to distinguish between them.