Republic of the Philippines

Laguna State Polytechnic University

Province of Laguna

College of Business Administration and Accountancy

Name: Sanchez, Nadeen L.

Section & Year: 4BSOA4
Subject: ELEC 4 – Project Management
Instructor: Mrs. January Jalbuena
Module No. 02 – Engaging Activities

Direction: Given is the study for you to read, scan and analyze. Answer the questions provided
in the given situations.
Communication
Failures

BACKGROUND

Herb had been with the company for more than eight years and had worked on various R&D
and product enhancement projects for external clients. He had a Ph.D. in engineering and had
developed a reputation as a subject matter expert. Because of his specialized skills, he worked
by himself most of the time and interfaced with the various project teams only during project
team meetings. All of that was about to change.

Herb’s company had just won a two-year contract from one of its best customers. The first year
of the contract would be R&D, and the second year would be
manufacturing. The company made the decision that the person best qualified to be the project
manager was Herb because of his knowledge of R&D and manufacturing. Unfortunately, Herb
had never taken any courses in project management, and because of his limited involvement
with previous project teams, there were risks in assigning him as the project manager. But
management believed he could do the job.

THE TEAM IS FORMED

Herb’s team consisted of 14 people, most of whom would be full time for at least
the first year of the project. The four people Herb would be interfacing with on a
daily basis were Alice, Bob, Betty, and Frank.
● Alice was a seasoned veteran who worked with Herb in R&D. She had been with the company
longer than Herb and would coordinate the efforts of the R&D personnel.
● Bob also had been with the company longer that Herb and had spent his career in engineering.
Bob would coordinate the engineering efforts and drafting.
● Betty was relatively new to the company. She would be responsible for all reports, records
management, and procurements.
● Frank, a five-year employee with the company, was a manufacturing engineer. Unlike Alice,
Bob, and Betty, Frank would be part time on the project until it was time to prepare the
manufacturing plans.

For the first two months of the program, work seemed to be progressing as planned. Everyone
understood their role on the project, and there were no critical issues.

FRIDAY THE 13TH

Herb held weekly teams’ meetings every Friday from 2:00 to 3:00 p.m. Unfortunately, the next
team meeting would fall on Friday the 13th, and that bothered Herb because he was somewhat
superstitious. He was considering canceling the team meeting just for that week but decided
against it. At 9:00 a.m. on Friday the 13th, Herb met with his project sponsor, as he always did.
Two days before, Herb casually talked to his sponsor in the hallway and the sponsor told Herb
that on Friday, he would like to discuss the cash flow projections for the next six months and
ways to reduce some of the expenditures. The sponsor had seen some expenditures that
bothered him. As soon as Herb entered the sponsor’s office, the sponsor said: “It looks like you
have no report with you. I specifically recall asking you for a report on the cash flow projections.”

Herb was somewhat displeased over this. He specifically recalled that this was to be a discussion
only, and no report was requested. But Herb knew that “rank has its privileges” and questioning
the sponsor’s communication skills would be wrong. Obviously, this was not a good start to
Friday the 13th. At 10:00 a.m., Alice came into Herb’s office, and he could see from the
expression on her face that she was somewhat distraught. Alice then said: “Herb, last Monday I
told you that the company was considering me for promotion and the announcements would be
made this morning. Well, I did not get promoted. How come you never wrote a letter of
recommendation for me?” Herb remembered the conversation vividly. Alice did say that she was
being considered for promotion but never asked him to write a letter of recommendation. Did
Alice expect Herb to read between the lines and try to figure out what she really meant? Herb
expressed his sincere apologies for what happened. Unfortunately, this did not make Alice feel
any better as she stormed out of Herb’s office. Obviously, Herb’s day was getting worse.

No sooner had Alice exited the doorway to Herb’s office than Bob entered. Herb could tell that
Bob had a problem. Bob then stated: In one of our team meetings last month, you stated that
you had personally contacted some of my engineering technicians and told them to perform this
week’s tests at 70°F, 90°F, and 110°F. You and I know that the specifications called for testing
at 60°F, 80°F, and 100°F. That’s the way it was always done, and you were asking them to
perform the tests at different intervals than the specifications called for.

Well, it seems that the engineering technicians forgot the conversation you had with them and
did the tests according to the specification criteria. I assumed that you had followed up your
conversation with them with a memo, but that was not the case. It seems that they forgot. When
dealing with my engineering technicians, the standard rule is “If it’s not in writing, then it hasn’t
been said.” From now on, I would recommend that you let me provide the direction to my
engineering technicians. My responsibility is engineering, and all requests of my engineering
personnel should go through me. Yes, Friday the 13th had become a very bad day for Herb.
What else could go wrong? he wondered. It was now 11:30 a.m. and almost time for lunch. Herb
was considering locking his office door so that nobody could find him and disconnecting his
phone. But in walked Betty and Frank, and once again he could tell by their expressions that
they had problems. Frank spoke first.
I just received confirmation from procurement that they purchased certain materials which we
will need when we begin manufacturing. We are a year away from beginning manufacturing,
and, if the final design changes in the slightest, we will be stuck with costly raw materials that
cannot be used. Also, my manufacturing budget did not have the cash flow for early
procurement. I should be involved in all procurement decisions involving manufacturing. I might
have been able to get it cheaper than Betty did. So, how was this decision made without me?
Before Herb could say anything, Betty spoke up.

Last month, Herb, you asked me to look into the cost of procuring these materials. I found a
great price at one of the vendors and made the decision to purchase them. I thought that this
was what you wanted me to do. This is how we did it in the last company I worked for.

Herb then remarked: “I just wanted you to determine what the cost would be, not to make the
final procurement decision, which is not your responsibility.” Friday the 13th was becoming
possibly the worst day in Herb’s life. He decided not to take any further chances. As soon as
Betty and Frank left, Herb immediately sent out e-mails to all team members canceling the team
meeting scheduled for 2:00 to 3:00 p.m. that day.

QUESTIONS
1. How important are communication skills in project management?

Any project's success is dependent on effective communication. Internal and external

communication is critical to the project's success. Internal communication is the interaction of
employees within an organization, and external communication is essential for managing the
flow of information to meet the demands of stakeholders. The most common method of project
communication is through reports, messages, and reminders, among other things (Atkinson &
Crawford, 2006). Poor communication may cause contact to be lost when unexpected issues
such as changing plans arise in the project; if there is no appropriate communication in the
organization at such a time, it will affect the organizational decision-making policy.

2. Was Herb the right person to be assigned as the project manager?

According to the case study, before actually making any project-related decisions. Herbs'
selection as project manager for this new project will always require calculation. Before allocating
that to the right person, the two factors, R&D and Manufacturing, must be evaluated. Based on
these two factors, Herb is an excellent fit for this position because he has been with the company
for over eight years and has worked in Manufacturing and R&D. He has a Ph.D. in engineering.
He has established himself as a subject matter expert. Because of his expert skills, he worked
alone most of the time and only interacted with the numerous project teams through project team
gatherings (Kerzner, 2017). As a result, they are appointing him as Project Manager was the
correct decision.
3. There were communications issues with Alice, Bob, Betty, and Frank. For each
communication issue, where was the breakdown in communications: encoding,
decoding, feedback, and so on?

According to the case study, all team members had communication gaps. Betty, Alice, Bob, and
Frank could not maintain their communication skills with Herb. Due to a lack of appropriate
communication with the project manager, most missed out on opportunities to advance to the
next level. Both unraveling and encoding were not done logically, as the communiqué is affected
when it is collected, regardless of whether it is an electronic mail, an inform, or even content in
the project meeting (Kerzner H. R., 2013). In Alice's case, it was an encoding issue; she didn't
mention the proposal letter for her advancement, and she recognized that Herb would give her
that letter even if she didn't ask. Sway's case is complicated because he misunderstood Herb's
message about taking the test this week.

CASE STUDY / PROBLEM SOLVING

Direction: Choose at least three (3) case studies. Read, scan, and analyze the given scenarios
and situations on each case.
1. Greyson Corporation
Greyson Corporation was formed in 1970 by three scientists from the University of California.
The major purpose of the company was research and development for advanced military
weaponry. Following World War II, Greyson became a leader in the field of research and
development. By the mid-1980s, Greyson employed over 200 scientists and engineers. The fact
that Greyson handled only research and development (R&D) contracts was advantageous. First
of all, all of the scientists and engineers were
dedicated to R&D activities; they did not have to share their loyalties with production programs.
Second, a strong functional organization was established. The project management function was
the responsibility of the functional manager whose department would perform the majority of the
work. Working relationships between departments were excellent. By the late 1980s, Greyson
was under new management. Almost all R&D programs called for establishment of qualification
and production planning. As a result, Greyson decided to enter into the production of military
weapons as well and capture some of the windfall profits of the production market. This required
a major reorganization from a functional to a matrix structure. Personnel problems occurred, but
none that proved a major catastrophe.
In 1994, Greyson entered into the aerospace market with the acquisition of a subcontract for the
propulsion unit of the Hercules missile. The contract was projected at $200 million over a five-
year period, with excellent possibilities for follow-on work. Between 1994 and 1998, Greyson
developed a competent technical staff composed mainly of young, untested college graduates.
The majority of the original employees who were still there were in managerial positions.
Greyson never had any layoffs. In addition, Greyson had excellent career development
programs for almost all employees. Between 1997 and 2001, the Department of Defense
procurement for new weapons systems was on the decline. Greyson relied heavily on their two
major production programs, Hercules and Condor II, both of which gave great promise for
continued procurement. Greyson also had some 30hirty smaller R&D contracts as well as two
smaller production contracts for hand weapons. Because R&D money was becoming scarce,
Greyson’s management decided to phase out many of the R&D activities and replace them with
lucrative Production contracts. Greyson believed that it could compete with anyone in regard to
low-cost production. Under this philosophy, the R&D community was reduced to minimum levels
necessary to support in-house activities. The director of engineering froze all hiring except for
job shoppers with special talents. All nonessential engineering personnel were transferred to
production units. In 2002, Greyson entered into competition with Cameron Aerospace
Corporation for development, qualification, and testing of the Navy’s new Neptune missile. The
competition was an eight-motor shoot-off during the last 10 months
of 2003. Cameron Corporation won the contract owing to technical merit. Greyson Corporation,
however, had gained valuable technical information in rocket motor development and testing.
The loss of the Neptune Program made it clear to Greyson’s management that aerospace
technology was changing too fast for Greyson to maintain a passive position. Even though
funding was limited, Greyson increased its technical staff and soon found great success in
winning R&D contracts.

By 2005, Greyson had developed a solid aerospace business base. Profits had increased by 30
percent. Greyson Corporation expanded from a company with 200 employees in 1994 to 1,800
employees in 2005. The Hercules Program, which began in 1994, was providing yearly follow-
on contracts. All indications projected a continuation of the Hercules Program through 2002.
Cameron Corporation, in contrast, had found 2005 a difficult year. The Neptune Program was
the only major contract that it maintained. The current production buy for the Neptune missile
was scheduled for completion in August 2005 with no follow-on work earlier than January 2006.
Cameron Corporation anticipated that overhead rates would increase sharply prior to next buy.
The cost per motor would increase from $55,000 to $75,000 for a January procurement, $85,000
for a March procurement, and $125,000 for an August procurement. In February 2005, the Navy
asked Greyson Corporation if it would be interested in submitting a sole-source bid for production
and qualification of the Neptune missile. The Navy considered Cameron’s position uncertain and
wanted to maintain a Greyson Corporation 183 qualified vendor should Cameron Corporation
decide to get out of the aerospace business. Greyson submitted a bid of $30 million for
qualification and testing of 30 Neptune motors over a 30-month period beginning in January
2006. Current testing of the Neptune missile indicated that the minimum motor age life would
extend through January 2009. This meant that production funds over the next 30 months could
be diverted toward requalification of a new vendor, and production requirements for 2009 still
could be met.

In August 2005, on delivery of the last Neptune rocket to the Navy, Cameron Corporation
announced that without an immediate production contract for Neptune follow-on work, it would
close its doors and get out of the aerospace business. Cameron invited Greyson Corporation to
interview all of its key employees for possible work on the Neptune Requalification Program.
Greyson hired 35 of Cameron’s key people to begin work in October 2005. The key people would
be assigned to ongoing Greyson programs to become familiar with Greyson methods. Greyson’s
lower-level management was very unhappy about bringing in these employees for fear that they
would be placed in slots that could have resulted in promotions for some of Greyson’s people.
Management then decreed that these 35 people would work solely on the Neptune Program,
and other vacancies would be filled, as required, from the Hercules and Condor II programs.
Greyson estimated that the cost of employing these 35 people was approximately $150,000 per
month, almost all of which was being absorbed through overhead. Without these 35 people,
Greyson did not believe that it would have won the contract as sole source procurement. Other
competitors could have grabbed these key people and forced an open-bidding situation.
Because of the increased overhead rate, Greyson maintained a minimum staff to prepare for
contract negotiations and document preparation. To minimize costs, the directors of engineering
and program management gave the Neptune program office the authority to make decisions for
departments and divisions that were without representation in the program office. Top
management had complete confidence in the program office personnel because of their past
performance on other programs and years of experience.

In December 2005, the Department of Defense announced that spending was being curtailed
sharply and that funding limitations made it impossible to begin the qualification program before
July 2006. To make matters worse, consideration was being made for a compression of the
requalification program to 25 motors in a 20-month period. However, long-lead funding for raw
materials would be available. After lengthy consideration, Greyson decided to maintain its
current position and retain the 35 Cameron employees by assigning them to in-house programs.
The Neptune program office was still maintained for preparations to support contract
negotiations, rescheduling of activities for a shorter program, and long-lead procurement.

In May 2006, contract negotiations began between the Navy and Greyson. At the beginning of
contract negotiations, the Navy stated the three key elements for negotiations:
1. Maximum funding was limited to the 2005 quote for a 30-motor/30- month program.
2. The amount of money available for the last six months of 2006 was limited to $3.7 million.
3. The contract would be cost plus incentive fee.

After three weeks of negotiations there appeared a stalemate. The Navy contended that the
production man-hours in the proposal were at the wrong level on the learning curves. It was
further argued that Greyson should be a lot “smarter” now because of the 35 Cameron
employees and because of experience learned during the 2001 shoot-off with Cameron
Corporation during the initial stages of the Neptune Program. Since the negotiation teams could
not agree, top-level management of the Navy and Greyson Corporation met to iron out the
differences. An agreement was finally reached on a figure of $28.5 million. This was $1.5 million
below Greyson’s original estimate to do the work. Management, however, felt that, by tightening
their belts, the work could be accomplished within budget. The program began on July 1, 2006,
with the distribution of the department
budgets by the program office. Almost all of the department managers were furious. Not only
were the budgets below their original estimates, but the 35 Cameron employees were earning
salaries above the department mean salary, thus reducing total man-hours even further. Almost
all department managers asserted that cost overruns would be the responsibility of the program
office and not the individual departments.

By November 2006, Greyson was in trouble. The Neptune Program was on target for cost but
35 percent behind for work completion. Department managers refused to take responsibility for
certain tasks that were usually considered to be joint department responsibilities. Poor
communication between program office and department managers provided additional
discouragement. Department managers refused to have their employees work on Sunday. Even
with all this, program management felt that catch-up was still possible. The 35 former Cameron
employees were performing commendable work equal to their counterparts on other programs.
Management considered that the potential cost overrun situation was not in the critical stage and
that more time should be
permitted before considering corporate funding. In December 2006, the Department of Defense
announced that there would be no further buys of the Hercules missile. This announcement was
a severe blow to Greyson’s management. Not only was the company in danger of having to
Greyson Corporation lay off 500 employees, but overhead rates would rise considerably. There
was an indication last year that there would be no further buys, but management did not consider
the indications positive enough to require corporate strategy changes. Although Greyson was
not unionized, there was a possibility of a massive strike if Greyson career employees were not
given seniority over the 35 former Cameron employees in the case of layoffs.

By February 2007, the cost situation was clear:

1. The higher overhead rates threatened to increase total program costs by $1 million on the
Neptune Program.
2. Because the activities were behind schedule, the catch-up phases would have to be made in
a higher salary and overhead rate quarter, thus increasing total costs further.
3. Inventory costs were increasing. Items purchased during long-lead funding were approaching
shelf-life limits. Cost impact might be as high as $1 million.

The vice president and general manager considered the Neptune Program critical to the success
and survival of Greyson Corporation. The directors and division heads were ordered to take
charge of the program. The following options were considered:
1. Perform overtime work to get back on schedule.
2. Delay program activities in hopes that the Navy can come up with additional funding.
3. Review current material specifications in order to increase material shelf life, thus lowering
inventory and procurement costs.
4. Begin laying off noncritical employees.
5. Purchase additional tooling and equipment (at corporate expense) so that schedule
requirements could be met on target.

On March 1, 2007, Greyson gave merit salary increases to the key employees on all in-house
programs. At the same time, Greyson laid off 700 employees, some of whom were seasoned
veterans. By March 15, Greyson employees formed a union and went out on strike.

QUESTIONS
1. What are the critical issues in the case?

A. Following Cameron's announcement that it would exit the aerospace industry, Grayson was
appointed to take over the project. Grayson would have to redirect all production funds for the
next 30 months to requalify a new vendor for this project.

B. Grayson has a limited budget to commission the Neptune program's operation.

C. Grayson's lower management was unhappy with the company's decision to hire Cameron's
key personnel, fearing that they would be placed in positions that would lead to promotions for
some of Grayson's employees.
2. How would you resolve each issue?

To deal with Grayson's financing constraints, I would either sell the company's stock in the
money market and borrow the cash, or I would seek financial institutions' help in lending the
funds to manage the company's working capital in the early days. When all of the programs are
stable, and the firm has achieved equilibrium in terms of program management and program
funding, the funds will be returned to the financial institutions or shareholders.

The firm would try to assuage lower management's concerns by engaging with them and
informing them of their secure positions and advancements within the company. The corporation
would also notify them of their contribution to the company's other initiatives. The company would
work hard to restore its faith in its management.

2. Teloxy Engineering (A)

Teloxy Engineering has received a onetime contract to design and build 10,000 units of a new
product. During the proposal process, management felt that the new product could be designed
and manufactured at a low cost. One of the ingredients necessary to build the product was a
small component that could be purchased for $60 in the marketplace, including quantity
discounts. Accordingly, management budgeted $650,000 for the purchasing and handling of
10,000 components plus scrap. During the design stage, your engineering team informs you that
the final design will require a somewhat higher-grade component that sells for $72 with quantity
discounts. The new price is substantially higher than you had budgeted for. This will create a
cost overrun. You meet with your manufacturing team to see if it can manufacture the component
at a cheaper price than buying it from the outside. Your manufacturing team informs you that it
can produce a maximum of 10,000 units, just enough to fulfill your contract. The setup cost will
be $100,000 and the raw material cost is $40 per component. Since Teloxy has never
manufactured this product before, manufacturing expects the following defects: % defective 0
10 20 30 40 probability of occurrence (%) 10 20 30 25 15 All defective parts must be removed
and repaired at a cost of $120 per part.

QUESTIONS
1. Using expected value, is it economically better to make or buy the component?

Economically, it is preferable to manufacture the component because the cost of the element
can be determined by management, who can use less expensive materials to stay within their
budget.

2. Strategically thinking, why might management opt for other than the most economical
choice?

Strategically, management should pursue this contract and purchase the component because
they are a new product and want to make their mark in the industry. They cannot afford to take
risks, so risk management should be prioritized.
3. Teloxy Engineering (B)
Your manufacturing team informs you that it has found a way to increase the size of the
manufacturing run from 10,000 to 18,000 units, in increments of 2,000 units. However, the setup
cost will be $150,000, and defects will cost the same $120 for removal and repair.

QUESTIONS
1. Calculate the economic feasibility of make or buy.

Economic feasibility depends upon the return on investments (ROI) which is given by:

ROI = Present Value of Benefits / Present Value of Cost

So, if the roi is higher, more the process is economical feasible and vice versa. So, it is not
economically feasible because the value of cost is higher than the benefits range.

2. Should the probability of defects change if we produce 18,000 units as opposed to 10,000
units?

Yes, the probability od defects will change as it depends upon the number of products, so as it
increases the probability.

3. Would your answer to question 1 change if Teloxy management believes that follow-on
contracts will be forthcoming? What would happen if the probability of defects changes to 15
percent, 25 percent, 40 percent, 15 percent, and 5 percent due to learning-curve efficiencies?

Yes, the economic feasibility could change in a positive way if the contact goes bigger as there
is more chance of getting higher rate of return on each component so it will change.

References:

Question. (n.d.). Chegg. Retrieved October 28, 2022, from https://www.chegg.com/homework-

help/questions-and-answers/part-teloxy-engineering-received-onetime-contract-design-build-10-
000-units-new-product-pr-q69668210
Question: PMC205. (n.d.). Chegg. Retrieved October 28, 2022, from
https://www.chegg.com/homework-help/questions-and-answers/pmc205-assignment-1-case-
study-greyson-corporation-greyson-corporation-formed-1970-three-s-q54819492
yourhomeworksolutions. (2019, October 31). How important are communication skills in project
management. yourhomeworksolutions.com.
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