EMGT 807, Project Management

Chapter 2
Organization Strategy &
Project Selection
 Strategic Management

 Provides the theme and focus of the future

direction of the organization
 Positions the organization to meet the needs
and requirements of customers
 Objectives are set, strategies are developed
 Strategies often implemented via projects
Strategic Management Process
Fig 2.1
p. 33
 Project Portfolio Management

 Set priorities
 At the implementation level, the priority of a
project is often not clear
 Management needs to assist in assigning
project priorities
 Different departments may have very different
reasons for being interested in a given project
 PM must not abuse a high priority
 Project Portfolio Management

 Organization Politics
 They exist everywhere
 You must understand them, and react properly
 Do not act like politics don’t exist
 Sacred Cows exist
 Project Portfolio Management

 Resource Conflicts
 If there are several projects in a given area,
some people may serve on more than one
 Many engineers work on several projects at the
same time
 PM may not be interested in the time you are
spending on a different project
 Can be a time or resource conflict for you and
the PM
 Project Selection

 In a typical organization, there are more

ideas than there are resources to implement
them

 How do you decide which ones will be

worked on?
Project Evaluation Factors

 Production factors
 Marketing Factors
 Financial Factors
 Personnel Factors
 Administrative and
Miscellaneous
Portfolio of Projects By Type
 Non-Numeric Models

 Operating Necessity (Compliance).

 Replacement after a crisis.
 Response to a Regulatory requirement.
 Often quickly funded, high visibility, but not
glamorous. Can not win, only break even.
 Non-Numeric Models

 Strategic
 Reactions to market conditions
 Reactions to financial conditions
 High visibility, often glamorous
 Product Line extension
 Market share, sales, added profits

 Emerald Ice was a successful line extension,

which created a new market

 Non-Numeric Models

 Operational Projects
 Quality improvements
 Cost Savings
 Efficiency improvements
 Capacity increases
 Technology improvements
 Phase Gate Model
sometimes call a Stage Gate model

 A series of gates that a project must pass through in

order to be completed.
 To ensure that the organization is investing time and
resources on worthwhile projects that contribute to its
mission and strategy.
 Each gate is associated with a project phase and
represents a decision point.
 A gate can lead to three possible outcomes: go
(proceed), kill (cancel), or recycle (revise and
resubmit).
 The 4-Phase Model

Phase 1 Phase 2 Phase 3 Phase 4

Execution
Plan Startup
Management Decision

Funding Funding

Management Decision
Request Approval
Transition
Contract
Project Charter

Approval to
Project Manager proceed Closeout
Assigned

Concept Development Concept Design Project Delivery Verification & Closeout

 Selection Criteria

 Financial Criteria
 Payback
 Net present value (NPV)
 Nonfinancial Criteria
 Projects of strategic importance to the firm
 Two Multi-Criteria Selection Models
 Checklist Models
 Multi-Weighted Scoring Models
 Nonfinancial Criteria

 Examples of strategic objectives are:

• To capture larger market share.
• To make it difficult for competitors to enter the
market.
• To develop core technology that will be used
in next-generation products.
• To reduce dependency on unreliable suppliers.
 Two Multi-Criteria Selection Models

 Checklist Models
• Use a list of questions to review potential projects and to determine their
acceptance or rejection.
• Allow greater flexibility in selecting among many different types of projects
and are easily used across different divisions and locations.
• Fails to answer the relative importance or value of a potential project to the
organization and does not allow for comparison with other potential projects.
 Multi-Weighted Scoring Models
• Use several weighted selection criteria to evaluate project proposals.
• Include qualitative and/or quantitative criteria.
• Allow for comparison with other potential projects.
Checklist Models: Sample Selection
Questions
 Scoring Models

 Begin with a list of attributes.

 Assign each attribute a weight, reflecting its
importance.
 Evaluate the project against each attribute,
score its performance.
 The final score is the sum of the attribute-
weight times attribute-score products.
 Select the project from the highest score.
 Example - Siting a Factory

Attribute Wt Site A Site B

Room for expansion 10 8 7
Prevailing wage rate in area 4 10 5
Utility rates in area 3 5 10
Distance to airport 7 6 10
Access to supporting businesses 10 10 7
State and local taxes 3 3 5
Local quality of living 10 8 10
================================================
Total score 366 375
Close calls like this one generally prompt reconsideration of
other factors, possible adjustment of weights
Regardless of the outcome, it is subjected to a “gut check”
Project Screening Matrix
 Applying a Selection Model

 Decide if the project fits the organization strategy.

 Select a Model
 Weighted scoring criteria often the best alternative because:
 They help to identify project goals that can be communicated
using the selection criteria as corroboration.
 They help project managers understand how their project was
selected, how their project contributes to organization goals, and
how it compares with other projects.
 Applying a Selection Model

 Sources and Solicitation of Project Proposals

• Within the organization
• Request for Proposal (RFP) from external sources
(contractors/vendors)
 Ranking Proposal and Selection of Projects
• Evaluate each proposal in terms of feasibility, contribution to
strategic objectives, fit within portfolio of current projects.
• Reject or accept projects based on given selection criteria and
current portfolio.
• Prioritize projects by senior management.