I often see that aspirants do not understand the difference between a project and an operation. I regularly receive emails from those who are interested in applying for the PMP exam but are working with operations.
Some aspirants applied for the PMP exam, were selected for audit, and failed it. Afterward they contacted me and I reviewed their application. I found that they have been working in operations, but they thought they were in project management and that was why they failed the audit process.
Therefore, it is important for you to understand the difference between these two terms so you know if you are eligible to apply for the PMP exam.
People get confused between projects and operations because they share some characteristics, such as:
- Both are performed by people.
- Both are planned, executed and controlled.
- Both have resource limitations.
These common characteristics make people confused. However, the differences between projects and operations can be clear.
An organization which deals with projects is known as a projectized organization, and an organization which deals with operational work is known as a functional organization. A matrix organization deals with projects as well as operations.
What is a Project?
A project can be defined in many ways.
For example, PRINCE2 defines a project as:
“A project is a temporary organization that is created for the purpose of delivering one or more business products according to an agreed Business Case.”
And the PMBOK Guide says:
“A project is a temporary endeavor undertaken to create a unique product, service, or result.”
Although the wording of each definitions is different, the meaning is the same. You can conclude that:
- The nature of a project is temporary.
- A project is undertaken to produce a unique output. Output can be a product, service, or result.
What does it mean that a project is temporary by nature?
Once you deliver the final deliverable, your project will cease to exist because its objective has been achieved. A project has a definitive start and end: Ii cannot continue forever. It has to end when the objective is achieved or it is terminated.
The second point says that a project produces an output. If it is construction-related, the output will be any physical structure. If it is a research-related project, it may produce a report; for example, an analysis of the impact of vehicle pollution on the environment.
A project may also produce a service-related output; for example, setting up a call center to help customers solve problems.
What is an Operation?
Operations are the ongoing execution of activities and they follow an organization’s procedures to produce the same result or a repetitive service. Operations are permanent in nature.
Production, manufacturing, and accounting are examples of operations.
There are many definitions of operations. Some are as follows:
- Operations do not produce new things, but they are necessary to maintain and sustain the system.
- Operations are used to run regular business models, achieve the goals of the business, and support the business.
- Operations are different from projects, which are known for their uniqueness.
- Operations are permanent, and their only constraint is to make a profit for the organization.
Any manufacturing or production process can be an example of an operation.
The Difference Between Projects and Operations
There are many differences between projects and operations. Some differences are as follows:
- Projects are unique and temporary, while operations are ongoing and permanent with a repetitive output.
- Projects have a fixed budget, while operations have to earn a profit to run the business.
- Projects are executed to start a new business objective and terminated when it is achieved, while operational work does not produce anything new and is ongoing.
- Projects create a unique product, service, or result, while operations produce the same product, aim to earn a profit and keep the system running.
- There are more risks in projects as they are usually done for the first time, while in operations there are fewer risks as they are repeated many times.
- Projects are performance intensive while operations are efficiency intensive.
- Projects are managed through project management and operations require business process management.
A Real-World Example of Projects and Operations
Assume you were given a project to build a car manufacturing facility.
You build the facility and deliver it to the client. Your job is completed, and the client has started manufacturing cars.
In this example, building the facility is an example of a project, because here you constructed a car manufacturing facility and handed it over to the client and signed off.
However, once the facility starts working and the car manufacturing process begins, this is an example of operations, because here the facility is producing a repetitive output, cars.
Therefore, this is an example of an operation.
Before I conclude this blog post, let me tell you an interesting discussion about projects and operations that my friend and I had.
A few days ago, we argued about the difference between operations and projects.
He was not able to differentiate between the two. He was confused, saying that an organization completed a project to build a school building. This project was completed, and the school building was handed over to the client.
He said that if the same organization got another project to build a similar school building, it would be an operation, because the organization is performing the same task. For him, the construction of a school building was an example of an operation if the organization was building many school buildings for different clients, one after other.
I explained to him that, even though the organization is doing a similar type of project, this is not an operation. The organization may use the experience and template/procedures from previous or similar projects, but they have to start fresh whenever they get a new project, regardless of whether or not they have completed a similar type of project in the past.
Being similar does not mean they can be categorized as operations. Although you are constructing a school building, once you hand it over it to the client, your job is completed, the team is released, and the project is closed.
Whenever you handle a similar type of project in the future, you will start planning from the beginning, develop your project team, execute the plan, etc . Everything starts from scratch. Although your experience will help you manage the project, it is not the same as before.
I explained the definitions of a project and an operation and how he can apply these to his school building example.
I asked him: once the school building is completed, will the project team remain with it, or do they leave? He replied that once the school building is finished, the team will disappear. I said it fulfilled the first condition of a project, which states that it is temporary.
Then I asked him: will this team give you an output and is it repetitive? He replied, yes, they will give output as a school building, but there is no repetition. It fulfills the second condition of a project that they are undertaken to produce a unique service, result, or product.
I also asked him if there is a fixed budget or time duration to complete the construction of the school building. He said yes. I told him these are properties of projects; they have a definite beginning and ending, and have a fixed budget.
Operations don’t have a fixed budget or fixed schedule.
Finally, he understood the difference between a project and an operation.
Why Projects and Operations are Undertaken
Projects are undertaken due to the following reasons:
- An opportunity or business need
- Social need
- Technological advancement
- Customer request
- Market demand
- Legal requirement
On the other hand, operations are performed to run the business and sustain the system.
Projects are temporary in nature and they produce something new, while operations don’t produce anything new; they maintain and sustain a system. Both are an important part of a product life cycle and interact with each other on many occasions. In a project, your aim is to achieve the objective, while operations are metrics-focused.
This topic is very important from a PMP exam point of view. You will see a few scenario-based questions on your PMP exam asking you whether a person is engaged in project work or busy with operational activities.
Are you working in a project or operation? Please share your experience in the comments section.