KEY CONCEPTS YOU NEED TO KNOW FOR THE PMP® EXAM

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FOUNDATION KEY CONCEPTS

Project: a temporary endeavor undertaken to create a unique product, service, or result
Program: a group of related projects that are coordinated allowing for more control
Portfolio: a collection of projects and programs that are aligned to achieve strategic business objectives
Phases: a group of related project activities that allows for more control and often completes a major deliverable
Project Life Cycle: a group of project phases defined by an organization into a framework allowing for more control
Baseline: the original approved plan plus/minus all approved changes; the current approved version of the plan
System: a set of formal policies, procedures, rules, or processes that defines how things are done
Progressive Elaboration: an iterative approach to planning; plans are created in multiple passes rather than all at once
Historical Information: documents or data from previous projects which are used to assist in future project decisions
Enterprise Environmental Factors: the environment you work in that can impact your project; corporate culture, industry standards, infrastructure, political climate, market conditions, etc
Organizational Process Assets: any documented processes and procedures; corporate knowledge base (e.g. project archives)
Functional Organization Structure: a departmentalized structure where employees work for only one manager; project manager has little or no power
Matrix Organization Structure: employees report to both a functional manager and a project manager (power is shared); in a weak matrix the PM has little power, in a balanced
matrix the PM has moderate power, and in a strong matrix the PM has nearly full power and authority
Projectized Organization Structure: employees work directly for and report only to the project manager; project manager has full power and authority
Stakeholder: a person or organization who is actively involved in the project, or whose interests may be positively or negatively impacted by the project, or who might exert influence
over the project
Business Case (reasons to do a project): market demand, business need or strategic opportunity, customer request, technological advance, legal requirement, ecological
impact, social need
Project Expeditor: staff assistant to the executive who has responsibility for the project; can make few if any decisions; primary responsibility lies in assuring the timely arrival of
resources
Project Coordinator: reports to a higher level in the hierarchy; has authority to assign work to individuals, but lacks full authority of project manager
Project Manager: tasked with achieving the project objectives; lead person responsible for communicating with all stakeholders including sponsor; may report to a functional manager
or program or portfolio manager

INTEGRATION MANAGEMENT SCOPE MANAGEMENT

Project Charter: formally authorizes the project to exist, establishes
the project manager's authority, and documents high-level
requirements, milestones, budget, risks, and success criteria
Project Management Plan: a formal, approved document that
defines how the project is executed, monitored, and controlled; PM
Plan Components: Change Management Plan, Configuration
Management Plan, Scope Management Plan, Schedule Management
Plan, Cost Management Plan, Quality Management Plan, Process
Improvement Plan, Human Resource Plan, Communications
Management Plan, Risk Management Plan, Stakeholder Management
Plan, Procurement Management Plan, Requirements Management
Plan, Scope Baseline, Schedule Baseline, Cost Performance Baseline
Lessons Learned: things learned on the current or previous projects
that can be used to improve current or future project performance
Work Authorization Systems: defines how project work will be
authorized to ensure that work is done by the right organization, at the
right time, and in the right order
Change Request: a formal request for a change to the project; can
be a change to scope, cost/budget, schedule, policies, procedures,
processes, or to any of the project plans
Issue: a point or matter in question, in dispute, or over which there are
disagreements
Preventive Actions: take actions to reduce the probability of
negative impacts associated with project risks (prevent/minimize
impact of potential problems)
Corrective Actions: take actions to align expected future project
outcomes to the project management plan (correct the problem)
Value Engineering: an approach used to optimize project life cycle costs, save time, increase
profits, improve quality, expand market share, solve problems, and/or use resources more
efficiently; see Product Analysis Tool and Technique
Group Creativity Techniques: Brainstorming, Nominal Group Technique (voting and ranking
ideas), Delphi Technique (blind/anonymous), Idea and Mind Mapping, Affinity Diagrams
(grouping into categories)
Group Decision Making Techniques: Unanimity (all agree), Majority (over 50%), Plurality
(largest block), Dictatorship (one person decides), Consensus (all agree to go along, even if it's
not their first choice)
Project Scope Statement: describes in detail the project's deliverables and the work required
to create those deliverables; it contains explicit project inclusions and exclusions, acceptance
criteria, assumptions, and constraints
Project vs Product Scope: Project scope is measured against the project management plan,
whereas product scope is measured against the product requirements.
Decomposition: the process of continually breaking down project deliverables into small parts
to the point where activity costs and durations can be reliably estimated and managed
WBS: a deliverable-oriented hierarchical decomposition of the work to be completed on a project;
each lower level represents an increasingly detailed definition of the work;lowest level is the work
package; each node has a unique identifier;WBS Dictionary: provides a detailed description of
each WBS component
Work Breakdown Structure (WBS)
1
1.1 1.2 1.3
1.1.1 1.1.2 1.3.1 1.3.2 1.3.3
Scope Baseline: includes the WBS, WBS Dictionary, and Project Scope Statement
 TIME MANAGEMENT
Project Schedule Network Diagram: a graphical depiction of dependencies among project activities
Precedence Diagramming Method: a network diagramming method that uses rectangles (nodes) to represent activities and arrows to show logical PDM or AON
relationships between the activities; also known as Activity-On-Node (AON)

Types of Dependencies: Mandatory (hard logic), Discretionary (preferred, arbitrary, soft logic), External and Internal
Logical Relationships: dependencies between two activities where one activity must be started or finished before the other can be started or finished; Four Types: Finish-to-start
(FS), Finish-to-finish (FF), Start-to-start (SS), Start-to-finish (SF)
Lead: starting an activity prior to the completion of the preceding activity; getting a head-start on an activity
Lag: delaying the start of an activity after the completion of a preceding activity; delaying an activity
Bottom-Up Estimating: breaking a project or activity down into smaller components that are easier to estimate, then aggregating (rolling-up) those costs or durations
Analogous Estimating: using a previous project (historical information) as a starting point to estimate activity costs or activity durations; also known as top-down estimating
Parametric Estimating: using a statistical relationship to calculate cost or duration; typically involves multiplying the number of units by a cost or duration per unit; time example: 4
hours per server x 20 servers = duration of 80 hours; cost example: $100 cost per square foot x 2,000 square feet = $200,000 construction cost
Three-Point Estimating: a weighted average method used to increase estimation accuracy; uses Optimistic, Pessimistic, and Most Likely estimates to calculate the estimated
activity cost or duration; Beta Distribution Formula (PERT): ( O + 4xML + P ) / 6; Triangle Distribution Formula: (O + M + P) / 3
Reserve Analysis: contingency reserves (buffers) used to account for schedule or cost uncertainty (risks)
Critical Path: the path of activities along which any delays will cause the project to be delayed; the longest duration path through the schedule network diagram; the chain of tasks
which all have 0 float
Total Float (Slack): the amount of time an activity can be delayed without delaying the project completion date
Free Float: the amount of time an activity can be delayed without delaying the following (successor) activity
Critical Path Method: a schedule analysis method that calculates the critical path for the project, float for each activity, and possible start and finishes dates for each activity
Critical Chain Method: takes the Critical Path Method and factors in resource constraints and schedule buffers
Schedule Compression: used to shorten the project schedule; two-methods: Crashing (adds extra resources, results in higher costs) or Fast-tracking (doing activities in parallel,
which increases risk)
Resource leveling: used to adjust the resource schedule when resources have been over-allocated; often lets the schedule slip in order to smooth out resource utilization; a
histogram (bar chart) is the tool used to do this
What-if Analysis: a statistical analysis method used to predict the schedule based on various possible scenarios; example: Monte Carlo Analysis is a computer software that attempts
thousands of random scenarios to predict likely possible outcomes
Milestone Schedule: a summary schedule which only shows key points in the project
Gantt Chart: a type of bar chart used to display the project schedule with bar lengths representing activity durations
Schedule Baseline: the accepted and approved version of the project schedule

COST MANAGEMENT
Funding Limit Reconciliation: adjustments made to project expenditures to account for funding limits (e.g. quarterly budgets)
Cost Baseline: Authorized, time-phased, total project Budget used to measure, monitor and control cost performance of the project; appears as an S-curve on a graph
Variance Analysis: measuring the difference between planned and actual (used for both costs and durations)
Earned Value Management (EVM): an objective mathematical approach to measure cost and schedule performance
Contingency Reserves: Amounts set aside by PM to cover known risks (included in Cost Baseline)
Management Reserves: Amounts management sets aside to cover unknown risks (not included in Cost Baseline)
Net Present Value (NPV): Present value of a future income stream, offset against initial investment amount
Benefit Cost Ratio: Compares financial yield to the cost of doing the project
Payback Period: The amount of time needed to recoup the project’s investment

QUALITY MANAGEMENT
Customer Satisfaction: keep customer happy by conformance to requirements (ensure the project produces what it's supposed to) and fitness for use (the product must satisfy real
needs)
Prevention over Inspection: it's usually less expensive to prevent mistakes than it is to fix them
Precision: the values of repeated measurements are clustered and have little scatter.
Accuracy: the measured value is very close to the true value.
Quality Assurance: looking to see if we are using the quality procedures as planned; auditing the process
Control Quality: testing the quality of the product or deliverable
Cost-Benefit Analysis: High quality results in less rework, higher productivity, lower costs, and increased stakeholder satisfaction
Cost of Quality: includes all costs over the life of the project; two categories: Conformance and Nonconformance
Cost of Conformance: money spent during the project to avoid failures; two categories: Prevention and Appraisal
Prevention Costs: build a quality product; includes training, document processes, maintaining equipment, and allowing enough time to do it right
Appraisal Costs: assess the quality; includes testing, destructive testing loss, and inspection
Cost of Non-Conformance: money spent during and after the project because of failures
Internal Failure Costs: failures found by the project; includes scrap and rework
External Failure Costs: failures found by the customer; includes liabilities, warranty work, and lost business
Design of Experiments (DOE): a statistical technique that analyzes several variations (product bundles or feature combinations) at once
Kaizen: Japanese word for "continuous improvement"; a type of Plan Do Check Act Philip Crosby: believed in conformance to requirements and zero defects
(PDCA) cycle ISO 9000: a quality management certification that requires documenting and following
W. Edwards Deming: developed the 14 points of Total Quality Management (TQM); processes
said quality is a management problem 85% of the time Quality vs. Grade: Low Grade is OK; Low Quality is always bad
Joseph Juran: defined quality as “fitness for use”; promoted conformance and quality
by design
"Standard Deviation: also known as sigma; Normal Probability Distribution (Bell curve)
represents variation (dispersion) from the average (mean);
formula: Standard Deviation = (Pessimistic - Optimistic) / 6
1 Sigma = 68.26% ( 317,500 defects per million)
34.1% 34.1%
2 Sigma = 95.46% ( 45,000 defects per million)
3 Sigma = 99.73% ( 2,700 defects per million) 2.1% 2.1%
6 Sigma = 99.999% (3.4 defects per million) 0.1% 13.6% 13.6% 0.1%

Probability Distributions: graphical representation of probabilities -3σ -2σ -1σ µ 1σ 2σ 3σ

Mutually Exclusive: two events can’t occur at the same time (if one event occurs,
then the other event cannot)
Statistical Independence: the occurrence of one event makes it neither more nor
less probable that the other occurs; past coin flips of heads do not change the
probability of the next coin flip being heads
Statistical Sampling: choosing a small random sample, and the sample's properties
should represent the entire group
Control Chart: displays process stability and performance
Rule of 7: seven consecutive data points on a control chart on one side of the mean;
signifies that the process is headed out of control
Benchmarking: comparing your project or process to a known standard
Flowcharting: visual depiction of a process
Control Chart Infuence Diagram Pareto Chart
upper limit
PMP
Bootcamp
Types of Variances: Special Cause (also known as assignable cause; not inherent in
the system, not predictable, and is intermittent; includes non-random data points or
points outside the control limits) and Common Cause (also known as random cause;
inherent in the system and predictable; normal or not unusual; includes random patterns
within the control limits)
Pareto Chart: a type of chart that contains both bars and a line graph, where individual
values are represented in descending order by bars, and the cumulative total is
represented by the line; 80/20 rule says 80% of problems are from 20% of the causes,
and dictates you should focus most of your attention on those top few causes
Scatter Diagram: plots data points to show the relationship between 2 variables (X,Y)
Cause and Effect (Ishikawa or Fishbone) Diagram: shows how various
factors might be linked to potential problems or effects
Scatter Diagram Tornado Diagram Fishbone Diagram
HR risk

PMBOK
cumulative %
Variable 2

Competency

Quality risk
Defects

Study
mean Hard
Technical risk

Supplier risk
Exam
Success
Exam
Tactics

lower limit *Additional Quality Charts Shown

Cause Variable 1 -$50k -$25k 0 $25k $50k
at PMBOK, pg. 246

HUMAN RESOURCE MANAGEMENT

Maslow's Hierarchy of Needs (triangle): people can only ascend to a higher level after fulfilling each of the lower levels; the 5 levels are Physiological (food water, shelter),
Safety (security, stability, freedom from harm), Social (friends, family, love), Esteem (respect, appreciation), Self-Actualization (optimal performance, growth, learning)
Herzberg's Motivation-Hygiene Theory: certain factors in the workplace cause job satisfaction, while a separate set of factors cause dissatisfaction; Hygiene factors (status, job
security, salary and fringe benefits) do not cause satisfaction, but if they are missing it causes dissatisfaction
McGregor's Theory-X: people dislike work, and thus employees must be watched closely
McGregor's Theory-Y: people are self-motivated, and thus can be trusted to work hard on their own
Fiedler's Contingency Theory: effectiveness of a leader's management style (task-oriented vs. relationship-oriented) is dependent on the situation
McClelland's Theory of Needs: people are motivated by either (1) achievement, (2) affiliation, or (3) power and are managed accordingly
Expectancy Theory: employees are motivated by the expectation of realistic positive outcomes and related rewards
Responsibility Assignment Matrix (RAM): a grid that shows the relationship between work packages (rows) and team members (columns)
RACI Chart: Responsible (does the work), Accountable (ensures the work is done), Consult (input required from SME), Inform (updated on status); a type of RAM
Staffing Management Plan: includes information on staff acquisition & release, resource calendars, recognition & rewards, compliance (unions, regulations, legal, etc), and safety
(training, policies, and procedures)
Constructive Team Roles: clarifiers, encouragers, information givers, information seekers, initiators, gate keepers, harmonizers, and summarizers
Destructive Team Roles: aggressors, blockers, dominators, devil's advocate, recognition seekers, topic jumpers, withdrawers
Forms of Power: Formal/Legitimate (power based on position or title), Expert (BEST; power based on knowledge or expertise, such as an SME), Reward (you reward desirable
behavior with incentives, aka the carrot method), Referent (power based on respect or adornment), Punishment/Penalty (WORST; threats of punishment, aka the stick method)
Methods of Conflict Resolution: Collaborating (examine various perspectives; cooperate), Compromising (both parties give something up), Forcing (pushing one’s viewpoint at
the expense of others; win-lose), Smoothing/Accommodating (emphasis on areas of agreement, but ignore the true problem; lose-lose), Withdraw/Avoiding (retreating from conflict;
lose-lose)
Team Development: Forming (team is shy), Storming (not seeing eye-to-eye), Norming (begin to work together), Performing (well-organized), Adjourning (team disbands)
Interpersonal Skills: leading, influencing, effective decision-making; aka soft skills
Primary Sources of Conflict: Schedule, Resources and Priorities account for 50% of project conflicts

COMMUNICATIONS MANAGEMENT
Communications Management Plan: documents who sends info, who receives info, what info is sent, how info is sent, when and how often info is sent
Number of Communication Channels: n(n-1) / 2
Communication Methods: Interactive (multi-directional, such as a meeting), Push (one-way outbound, such as an email), Pull (one-way inbound, such as a download from a
website; self-service)
Communication Types: Formal Written (complex problems, project management plans, memos, contracts), Formal Verbal (presentations, speeches), Informal Written (email,
handwritten notes), Informal Verbal (meetings, conversations)
Nonverbal Communications: body language, posture, facial expressions, hand motions, etc
Para-lingual: pitch and tone of your voice to convey emphasis and importance
 KEY CONCEPTS YOU NEED TO KNOW FOR THE PMP® EXAM
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RISK MANAGEMENT PROCUREMENT MANAGEMENT

Risk: uncertainty; an unknown future event; positive risks are opportunities, negative risks are threats Types of Contracts: Fixed Price (seller bears all risk):
Residual Risk: any risk that remains after the risk response strategy has been implemented; FFP = Firm Fixed Price (most common, seller covers any cost
left-over risk increases),
FPIF = Fixed Price Plus Incentive Fee (includes an extra
Secondary Risk: risks that occur as a result of implementing a risk response strategy performance bonus),
Qualitative Risk Analysis: a quick and easy risk assessment method that combines the FP-EPA = Fixed Price with Economic Price Adjustment (used on
probability and impact to assign a risk score long-term projects, buyer covers inflation costs);
Cost-Plus (buyer assumes some risk):
Quantitative Risk Analysis: a more rigorous risk assessment which numerically analyzes the CPPC = Cost Plus Percentage of Cost (seller reimbursed for costs,
effect of identified risks on overall project objectives plus a % commission),
Probability and Impact Matrix: a matrix used during qualitative risk analysis that multiplies the CPFF = Cost Plus Fixed Fee (seller reimbursed for costs, plus a
risk probability (high, medium or low) by the impact to come up with a risk score, which is then used fixed $ commission),
to create a prioritized list of risks CPIF = Cost Plus Incentive Fee (seller reimbursed for costs, plus
Expected Monetary Value (EMV): formula: EMV = Probability X Impact an objective bonus),
CPAF = Cost Plus Award Fee (seller reimbursed for costs, plus a
Sensitivity Analysis: graphically shows which variables have the greatest impact on the project, subjective bonus);
e.g. tornado diagram T&M = Time & Material (hybrid, moderate risk to buyer, often used
Threat Strategies: Avoid (change something so that the threat no longer exists), Transfer (shift the for staff augmentation and consultants)
risk to a third party, perhaps via a contract), Mitigate (reduce the probability or impact, an alternate Procurement Documents: RFP = Request for Proposal, RFB =
plan), Accept (live with it) Request for Bid, RFQ = Request for Quote, RFI = Request for
Opportunity Strategies: Exploit (change something to ensure the opportunity occurs), Share Information, IFB = Invitation for Bid
(share with a third party, perhaps via a joint venture), Enhance (increase the probability or impact, Point of total assumption: the point where the seller has to pay for
an alternate plan), Accept (live with it) any further cost overruns;
Workarounds: used only when an unidentified (unknown-unknown) risk event occurs formula: PTA = Target Cost + ((Ceiling Price - Target Price) / Buyer's
Share)
Reserves: money or time set aside in case a risk occurs; contingency reserves are for identified
Teaming Agreements: a standardized contract between two parties
risks, management reserves are for unidentified risks
to simplify procurements; aka master service agreements

STAKEHOLDER MANAGEMENT
Stakeholder Register: Lists stakeholders and relevant details for each
Stakeholder Management Plan: Outlines strategies for managing various stakeholders’ expectations/involvement
Issue Log: Tracks disagreements and/or unresolved matters and outlines plan for resolving
Change Log: Shows all changes made during a project along with their impact on various constraints
Analytical Techniques: Ways of predicting/assessing potential outcomes in light of various project variables

Earned Value Management Formulas & Meanings Earned Value Management

Terms & Definitions
Abbr Terminology Formula Explanation
CV Cost Variance EV - AC Negative is bad, Positive is good Abbr Terminology Definition
SV Schedule Variance EV - PV Negative is bad, Positive is good
PV Planned Value Budgeted value of work planned to
CPI Cost Performance Index EV / AC Under 1 is bad, Over 1 is good be done
SPI Schedule Performance Index EV / PV Under 1 is bad, Over 1 is good EV Earned Value Budgeted value of work completed
AC + (BAC-EV) AC plus work remaining, use
budget rate (atypical) AC Actual Cost (total) Actual cost of work completed
EAC Estimate at Completion BAC / CPI Assumes same rate of spending BAC Budget at Completion Cost Baseline
will continue (typical)
EAC Estimate at Completion Expected total cost (forecast)
BAC-EV Assumes poor cost performance
AC +
CPI * SPI & schedule performance will cont. ETC Estimate to Complete Expected remaining cost (now until
ETC Estimate to Complete EAC - AC Value of work remaining end)
VAC Variance at Completion BAC - EAC Negative is bad, Positive is good VAC Variance at Completion Expected variance over/under
(BAC - EV) Optimal rate to complete within budget
TCPI To Complete Performance Index (BAC - AC) budget
(BAC - EV) Assumes original budget cannot
(EAC - AC) be achieved

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