Project Versus Operations Management – Comparative Analysis

Jun 29, 2010
Melvin Tandoc

Project Management or Operations Management? - Anita of Klagenfurt

This provides a critical look at the differences and similarities of Project Management versus Operations Management.

The differences between Project Management and Operations Management are a matter of perspective. From the point of view of the Project Management Institute, the differences are clear and distinct. However, from a practitioner's view, it appears to be a matter of management style where the best practices from project management and operations management can be combined for better efficiencies and effectiveness.

The Project Management Institute's PMBOK Guide provides the following differences between Project Management and Operations Management:

Temporariness vs Permanence

Definite Beginning and End vs Repetitive Cycle

Scope, Time and Budget Constraints vs Supply Chain Constraints

Project vs Operations – Scope Constraints

The typical view of project management is that a project is temporary while operations have more permanence or business as usual. For instance, renovating a store is a project while procuring goods and selling these are operations.

Considering management style perspective, from the point of view of the store owner who hires a contractor to renovate a store, the renovation is a project. However, from the point of view of the contractor who specializes in store renovations, the contract for the store's renovation is part of its operations as a service suite.

Consider this: the contractor who specializes in renovation will most likely have 3-4 renovation 'projects' a year. Meanwhile, the store owner will most likely renovate his/her store after 5 years.

Realize also that the store owner will replenish his/her goods for sale many times in a given year. Similarly, the renovation contractor will procure the same type or category of goods many times in a year which are necessary to complete several renovation contracts during the period.

Project vs Operations – Time Constraints

Projects have definite beginnings and endings while operations are typically repeated over time. For instance, a business owner who hires a systems integrator to install, customize and roll-out a customer relationship management system or CRM in several of his/her office branches in 4 states will usually require a definite date of deployment and a definite date of turnover after the roll-out.

From the point of view of the business owner, the CRM is a project. Meanwhile, from the point of view of the systems integrator, the CRM deployment is operations as the system integrator has deployed similar CRMs in a number of clients.

For the business owner, consider that each customer transaction has a definite beginning and end. With several thousand customers, the business owner will have developed expertise in addressing those transactions.

For the systems integrator who specializes in CRM, each installation and roll-out cycle will also have a definite beginning and end. Naturally, the systems integrator will have developed expertise in the installation and roll-out of the CRM.

Project vs Operations – Budget Constraints

The traditional view of the budget in project management is that a project has to stick with a definite budget while operations have to maintain a specific profit margin.

For instance, an institutional client who hires a consulting firm to implement a specialized system for its operations will allot a specific cost for the project as detailed in its Request for Proposals. On the other hand, the consulting firm will need to ensure a 30% profit margin on the project and work on the remaining 70% as its cost of operations with taxes and all as part and parcel of its cost structure.

Project Management versus Operations Management – Critical Analysis Questions

Note that the real difference between project management and operations management appears in the perspective whether an organization is doing an activity for the first time or whether it is doing an activity for the nth time.

For the business owner, is it safer to hire a company who has done several 'projects' of the same nature with clients that he/she can verify with or to undertake the project for the first time and instead hire personnel who have several experiences in doing similar projects?

For the service providers who specialize in 'projects,' is it better to use certain principles in operations management with the project management templates they have?

Management Points on Project Management and Operations Management

(1) A team experience is crucial to the success of any undertaking versus individual experiences. Individuals have to gel as an efficient and effective team in a specialized knowledge area. Otherwise, each individual with different experiences will do their own thing.

On the other hand, a project manager who has sufficient experience in handling several different teams successfully can make different individuals gel to work as a team. Factors such as culture, specialized knowledge integrity and sound project management and operations management skills are necessary though for project managers tasked with handling new teams.

(2) Process experience in the specialized knowledge area is important but most significantly, process experience in the operations of the business owner hiring a projects service provider is crucial.

For instance, the CRM systems integrator may be well-versed in installation, customization and roll-out and yet it would lack experience in the actual processing of customer transactions. The operations management perspective of the business owner is significantly different from the operations management perspective of the hired systems integrator.

(3) Project managers should have operations management skills. In creating project budgets, project managers should first ensure the project company's ideal profit margins and work on the remainder.

Moreover, project managers should be well-versed in the supply chain and efficient management of logistics.

(4) New products development should be seen mainly as Project Management rather than Operations Management. If management uses the same team with the same members over and over again to develop new products, it is less likely to survive a disruptive innovation or even make one.

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