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PProjectroject netnetworksworks

ManagingManaging riskrisk 77

MonitoringMonitoring progrprogressess

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TTeamseams 1111

OutsourcingOutsourcing 1212

LeadershipLeadership 1010

StrategyStrategy 22

IntroductionIntroduction 11

OrgOrganizationanization 33

ScheduleSchedule resourresources/costsces/costs

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tion al

Inte rna

tion al

pro ject

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ject s

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OverOvers ightsight

Agile Agile PMPM

CarCareer eer pathspaths

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1616 PProjectroject closureclosure

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EstimatEstimatee 55

ReducingReducing project project durationduration

DefineDefine projectproject

C H A P T E R C H A P T E R T W OT W O

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Organization Organization Strategy Strategy and and Project Project SelectionSelection The The Strategic Strategic Management Management Process: Process: An An OverviewOverview

The The Need Need for for a a Project Project Portfolio Portfolio Management Management SystemSystem

A A Portfolio Portfolio Management Management SystemSystem

Selection Selection CriteriaCriteria

Applying Applying a a Selection Selection ModelModel

Managing Managing the the Portfolio Portfolio SystemSystem

SummarySummary

Appendix Appendix 2.1: 2.1: Request Request for for Proposal Proposal (RFP)(RFP)

Organization Organization Strategy Strategy and and Project Project SelectionSelection

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StrStrategy ategy is is implemented implemented thrthrough ough projectsprojects. . Every Every prproject oject should should have have a a cclear lear link link to to the the orgorganizationanization’s ’s strstraategytegy..

StraStrategy tegy is is fundamentally fundamentally deciding deciding hohow w the the organizaorganization tion will will competecompete. . OrganizaOrganizations tions use use prprojects ojects to to conconvert vert strastrategy tegy into into new new prproductsoducts, , servicesservices, , and and processes processes needed needed ffor or successsuccess. . FFor or exampleexample, , Intel’Intel’s s major major strategy strategy is is one one ofof differ differentiation. entiation. Its Its prprojects ojects tartarget get innovinnovation ation and and time time to to marmarket. ket. CurrCurrentlyently, , Intel Intel is is directing directing its its strastrategy tegy totoward ward specialty specialty chips chips ffor or prproducts oducts other other than than computerscomputers, , such such as as autosautos, , securitysecurity, , cell cell phonesphones,, air air contrcontrolsols. . Another Another goal goal is is to to reduce reduce prproject oject cycle cycle timestimes. . Intel, Intel, NEC, NEC, General General Electric, Electric, and and AAT&T T&T hahave ve reduced reduced their their cycycle cle times times by by 20–50 20–50 percent. percent. PrProjects ojects and and prproject oject management management plaplay y the the key key rrole ole in in supporting supporting strastrategic tegic goalsgoals. . It It is is vital vital for for prproject oject managers managers to to think think and and act act strastrategicallytegically.. Aligning Aligning prprojects ojects with with the the strategic strategic goals goals ofof the the organizaorganization tion is is crucial crucial for for prproj-oj- ect ect successsuccess. . TTodaoday’y’s s economic economic climate climate is is unprecedented unprecedented bby y rapid rapid changes changes in in tech-tech- nologynology, , global global competition, competition, and and financial financial uncertaintyuncertainty. . These These conditions conditions make make strastrategy/project tegy/project alignment alignment eeven ven more more essential essential ffor or successsuccess. . Ensuring Ensuring a a strong strong link link between between the the strastrategic tegic plan plan and and projects projects is is a a difdifficult ficult task task thathat t demands demands constant constant aattention ttention from from top top and and midmiddle dle management.management. The The larger larger and and mormore e diverse diverse an an ororganization, ganization, the the mormore e difficult difficult it it is is to to crcreate eate

and and maintain maintain this this strstrong ong link. link. Companies Companies todatoday y are are under under enorenormous mous pressure pressure to to manage manage a a prprocess ocess that that clearlclearly y aligns aligns prprojects ojects to to organizaorganization tion strastrategytegy. . Ample Ample evi-evi- dence dence still still suggests suggests thathat t many many ororganizations ganizations hahave ve not not devdeveloped eloped a a process process thathat t clearlclearly y aligns aligns project project selection selection to to the the strastrategic tegic plan. plan. The The result result is is poor poor utilization utilization ofof the the organizaorganization’tion’s s resources—peopleresources—people, , moneymoney, , equipment, equipment, and and core core competen-competen- ciescies. . ConConverselyversely, , organizaorganizations tions that that hahave ve a a cohercoherent ent link link ofof pr projects ojects to to strategystrategy hahave ve more more cooperacooperation tion acracross oss the the organizaorganization, tion, perfperfororm m better better on on projectsprojects, , and and hahave ve fewer fewer prprojectsojects.. HoHow w can can an an organizaorganization tion ensure ensure this this link link and and alignment? alignment? The The ansanswer wer requirrequires es

integraintegration tion ofof pr projects ojects with with the the strastrategic tegic plan. plan. Integration Integration assumes assumes the the eexistence xistence ofof a a strategic strategic plan plan and and a a prprocess ocess for for pprioritizing rioritizing prprojects ojects by by their their contribution contribution to to the the plan. plan. A A crucial crucial factor factor to to ensure ensure the the success success ofof integra integrating ting the the plan plan with with proj-proj- ects ects lies lies in in the the creacreation tion ofof a a prprocess ocess that that is is open open and and trtransparent ansparent ffor or all all partici-partici- pants pants to to rereviewview. . This This chapter chapter prpresents esents an an ovoverview erview ofof the the importance importance ofof stra strategic tegic planning planning and and the the prprocess ocess ffor or developing developing a a strastrategic tegic plan. plan. TTypical ypical prproblems oblems en-en- countered countered wwhen hen strategy strategy and and prprojects ojects are are not not linklinked ed are are noted. noted. A A generic generic method-method- ology ology thathat t ensures ensures integraintegration tion by by creacreating ting very very strstrong ong linkages linkages ofof pr project oject selection selection and and priority priority to to the the strastrategic tegic plan plan is is then then discussed. discussed. The The intended intended outcomes outcomes are are clear clear ororganization ganization ffocusocus, , best best use use ofof scarce scarce ororganization ganization rresources esources (people(people, , equip-equip- ment, ment, capital), capital), and and imprimprovoved ed communicacommunication tion across across prprojects ojects and and departmentsdepartments..

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26 26 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

WhWhy y Project Project ManagManagers ers Need Need to to UnderUnderstand stand StrateStrategygy PrProject oject management management historicallhistorically y has has been been preoccupied preoccupied solely solely with with the the planning planning and and exexecution ecution ofof pr projectsojects. . StraStrategy tegy was was considered considered to to be be under under the the purviepurview w ofof se- se- nior nior management. management. This This is is old-school old-school thinking. thinking. NeNew-school w-school thinking thinking recognizes recognizes thathat t project project manamanagement gement is is at at the the aapex pex ofof strategy strategy and and operoperationsations. . Aaron Aaron Shenhar Shenhar speaks speaks to to this this issue issue when when he he stastatestes, , “. “. . . . . it it is is time time to to expand expand the the traditional traditional rrole ole ofof the the prproject oject manager manager frfrom om an an operaoperational tional to to a a more more strastrategic tegic perspectiveperspective. . In In the the modern modern evevolving olving organizaorganization, tion, project project manamanagers gers will will be be ffocused ocused on on business business aspectsaspects, , and and their their role role will will eexpand xpand from from getting getting the the job job done done to to achieachieving ving the the business business rresults esults and and winning winning in in the the markmarket et placeplace.”.” 11

There There arare e two two main main rreasons easons whwhy y project project manamanagers gers need need to to understand understand their their ororganizationganization’’s s mission mission and and strategystrategy. . The The first first rreason eason is is so so they they can can make make aappropri-ppropri- aate te decisions decisions and and adjustmentsadjustments. . FFor or exampleexample, , hohow w a a project project manamanager ger would would rre-e- spond spond to to a a suggestion suggestion to to modify modify the the design design ooff a a product product to to enhance enhance perfperforormance mance will will vary vary depending depending upon upon wwhether hether his his compancompany y strives strives to to be be a a prproduct oduct leader leader thrthrough ough innovinnovation ation or or to to achieachieve ve operaoperational tional exexcellence cellence through through lolow w cost cost solu-solu- tionstions. . SimilarlySimilarly, , how how a a prproject oject manager manager wwould ould respond respond to to deladelays ys mamay y vary vary depend-depend- ing ing upon upon strastrategic tegic concernsconcerns. . A A project project manamanager ger will will authorize authorize ovovertime ertime ifif her her firfirm m places places a a premium premium on on getting getting to to the the marmarket ket first. first. Another Another prproject oject manager manager willwill accept accept the the deladelay y ifif speed speed is is not not essential.essential. The The second second reason reason prproject oject managers managers need need to to understand understand their their ororganizationganization’’s s

strastrategy tegy is is so so they they can can be be effectieffective ve prproject oject advadvocatesocates. . Project Project manamanagers gers hahave ve to to be be aable ble to to demonstrademonstrate te to to senior senior management management hohow w their their project project contribcontributes utes to to their their firm’firm’s s mission. mission. Protection Protection and and contincontinued ued support support come come from from being being aligned aligned with with corporacorporate te objectivesobjectives. . Project Project manamanagers gers also also need need to to be be aable ble to to explain explain to to teamteam members members and and other other stakstakeholders eholders whwhy y certain certain prproject oject objectives objectives and and priorities priorities are are critical. critical. This This is is essential essential ffor or getting getting buy-in buy-in on on contentious contentious trade-oftrade-offf decisions decisions.. FFor or these these reasons reasons prproject oject managers managers will will find find it it vvaluaaluable ble to to hahave ve a a kkeen een under-under-

standing standing ofof strategic strategic manamanagement gement and and project project selection selection prprocessesocesses, , which which areare discussed discussed next.next.

The The Strategic Strategic Management Management Process: Process: An An OverviewOverview StraStrategic tegic management management is is the the prprocess ocess ofof assessing assessing “w“what hat we we arare”e” and and deciding deciding and and imple-imple- menting menting “wha“what t we we intend intend to to be be and and hohow w we we are are going going to to get get therethere.”.” Stra Strategy tegy describes describes how how an an ororganizaganization tion intends intends to to compete compete with with the the resources resources aavailavailable ble in in the the existing existing and and perceivperceived ed future future enenvironment.vironment.

TTwwo o major major dimensions dimensions ofof stra strategic tegic management management are are rresponding esponding to to changes changes in in the the external external enenvironment vironment and and allocaallocating ting scarce scarce rresources esources ofof the the firm firm to to improimprove ve its its competitivcompetitive e position. position. Constant Constant scanning scanning ofof the the external external enenvironment vironment ffor or changes changes is is a a major major requirrequirement ement for for survisurvival val in in a a ddynamic ynamic competitive competitive enenvironment. vironment. TheThe second second dimension dimension is is the the internal internal responses responses to to nenew w action action proprograms grams aimed aimed aat t en-en- hancing hancing the the competitivcompetitive e position position ofof the the firfirm. m. The The nanature ture ofof the the responresponses ses depends depends on on the the type type ofof business business, , envirenvironment onment volavolatilitytility, , competition, competition, and and the the organiza-organiza- tional tional cultureculture.. StraStrategic tegic management management prprovides ovides the the theme theme and and ffocus ocus ofof the the future future dirdirection ection

ofof the the organizaorganization. tion. It It supports supports consistency consistency ofof action action aat t every every levlevel el ofof the the

1 1 ShenharShenhar, , A., A., and and Dov Dov Dvie, Dvie, , , Harvard Harvard Business Business School, School, 2007, 2007, p. p. 5.5.Reinventing Reinventing Project Project ManagementManagement

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 2727

IBM’IBM’s s investment investment in in artificial artificial intelligence intelligence paid paid off. off. In In February February 2010, 2010, millions millions of of people people were were glued glued to to their their television television sets sets to to watch watch IBM’IBM’s s WWatson atson outclass outclass two two former former champion champion con-con-

testants testants on on the the Jeopardy Jeopardy quiz quiz showshow. . Watson Watson performed performed at at hu-hu- man man expert expert levels levels in in terms terms of of precision, precision, confidence, confidence, and and speed speed during during the the Jeopardy Jeopardy quiz quiz showshow.. Does Does WWatson atson represent represent a a new new strategic strategic direction direction for for IBM? IBM? Not Not reallyreally. . The The Watson Watson project project is is simply simply a a manifestation manifestation of of the the move move from from computer computer hardware hardware to to a a service service strategy strategy over over a a decade decade ago.ago.

WAWATSON TSON PROJECT PROJECT DESCRIPTIONDESCRIPTION Artificial Artificial intelligence intelligence has has advanced advanced significantly significantly in in recent recent years. years. WWatson atson goes goes beyond beyond IBM’IBM’s s chess-playing chess-playing supercom-supercom- puter puter of of the the late late 1990s. 1990s. Chess Chess is is finite, finite, logical, logical, and and reduced reduced easily easily to to mathematics. mathematics. WWatson’atson’s s space space is is ill-defined ill-defined and and in-in- volves volves dealing dealing with with abstraction abstraction and and the the circumstantial circumstantial nature nature of of language. language. Since Since WWatson’atson’s s system system can can understand understand natural natural language, language, it it can can extend extend the the way way people people interact interact with with computers.computers. The The IBM IBM Watson Watson project project took took three three intense intense years years of of re-re-

search search and and development development by by a a core core team team of of about about 20. 20. Eight Eight uni-uni- versity versity teams teams working working on on specific specific challenge challenge areas areas augmented augmented these these researchers.researchers. WWatson atson depends depends on on over over 200 200 million million pages pages of of structured structured

and and unstructured unstructured data data and and a a program program capable capable of of running running tril-tril- lions lions of of operations operations per per second. second. With With this this information information backup, backup, it it attacks attacks a a JeopardyJeopardy question question by by parsing parsing the the question question into into small small pieces. pieces. With With the the question question parsed, parsed, the the program program then then searches searches for for relevant relevant data. data. Using Using hundreds hundreds of of decision decision rules, rules, the the program program generates generates possible possible answers. answers. These These answers answers are are assigned assigned a a confidence confidence score score to to decide decide if if Watson Watson should should risk risk offering offering an an answer answer and and how how much much to to bet.bet.

WHAWHAT’S T’S NEXT?NEXT? Now Now that that the the hype hype is is overover, , IBM IBM is is pursuing pursuing their their service service strat-strat- egy egy and and the the knowledge knowledge gained gained from from the the WWatson atson project project to to real real business business applications. applications. WWatson’atson’s s artificial artificial intelligence intelligence design design is is flexible flexible and and suggests suggests a a wide wide variety variety of of opportunities opportunities in in indus-indus- tries tries such such as as finance, finance, medicine, medicine, law law enforcement, enforcement, defense. defense. Further Further extensions extensions to to handheld handheld mobile mobile applications applications that that tap tap

S N A P S H O T S N A P S H O T F R O M F R O M P R A C T I C EP R A C T I C E Does Does IBM’IBM’s s Watson’Watson’s s Jeopardy Jeopardy Project Project Represent Represent a a Change Change in in Strategy?*Strategy?*

into into WWatson’atson’s s servers servers also also hold hold great great potential. potential. IBM IBM identified identified the the obvious obvious lowest lowest hanging hanging apples apples on on the the tree tree as as providing providing healthcare healthcare solutions solutions and and has has begun begun design design of of such such a a program.program. TTo o create create a a “doctor’“doctor’s s consultant” consultant” program program would would likely likely

follow follow a a design design platform platform similar similar to to Watson’Watson’s. s. For For example, example, it it would would be be able able to:to:

• • Data Data mine mine current current medical medical documents documents to to build build a a knowl-knowl- edge edge basebase

• • Integrate Integrate individual individual patient patient informationinformation • • Use Use system’system’s s complex complex analytics analytics to to select select relevant relevant datadata • • Use Use decision decision rules rules to to provide provide physicians physicians with with diagnostic diagnostic

optionsoptions • • Rank Rank options options with with confidence confidence levels levels for for each each option.option.

Creating Creating a a doctor’doctor’s s consultant consultant solution solution will will not not replace replace doc-doc- tors. tors. Although Although the the system system holds holds tremendous tremendous potential, potential, it it is is manmade manmade and and depends depends on on the the database, database, data data analytics, analytics, and and decision decision rules rules to to select select options. options. Given Given the the doctor’doctor’s s consultant consultant input, input, a a trained trained doctor doctor makes makes the the final final patient patient diagnosis diagnosis to to supplement supplement physical physical examination examination and and experience.experience. The The Watson Watson project project provides provides IBM IBM with with a a flexible flexible compo-compo-

nent nent to to continue continue their their decade-old decade-old strategystrategy, , moving moving IBM IBM from from computer computer hardware hardware to to service service products.products.

*Ferrucci, *Ferrucci, et et al. al. “Building “Building Watson,” Watson,” AI AI Magazine. Magazine. vol. vol. 31, 31, no. no. 3. 3. Fall Fall 2010.2010.

ororganization. ganization. It It encouraencourages ges integraintegration tion because because effeffort ort and and resources resources areare committed committed to to comcommon mon goals goals and and strastrategiestegies. . See See Snapshot Snapshot frfrom om Practice: Practice: Does Does IBM’IBM’s s WWaatson’tson’s s JJeopardeopardy y Project Project RRepresent epresent a a Change Change in in StraStrategy? tegy? It It is is a a con-con- tintinuousuous, , iteraiterative tive prprocess ocess aimed aimed aat t developing developing an an integraintegrated ted and and coordinacoordinated ted long-term long-term plan plan ofof action. action. StraStrategic tegic management management positions positions the the ororganization ganization toto meet meet the the needs needs and and requirrequirements ements ofof its its customers customers ffor or the the long long terterm. m. With With thethe

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28 28 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

long-term long-term position position identified, identified, objectives objectives are are set, set, and and strstrategies ategies are are dedeveloped veloped to to achievachieve e objectives objectives and and then then translatranslated ted into into actions actions by by implementing implementing prprojectsojects. . StraStrategy tegy can can decide decide the the survival survival ofof an an ororganization. ganization. Most Most ororganizations ganizations arare e successful successful in in stra strategies tegies ffor or whawhat t course(s) course(s) they they should should pursuepursue. . How-How-formulatingformulating eveverer, , the the probproblem lem in in many many ororganizations ganizations is is stra strategies—that tegies—that isis, , implementingimplementing making making them them happen. happen. IntegrIntegration ation ofof strategy strategy fforormulamulation tion and and implementation implementation often often does does not not exist.exist. The The components components ofof strategic strategic manamanagement gement are are closelclosely y linked, linked, and and all all arare e di-di-

rected rected totowarward d the the future future success success ofof the the ororganization. ganization. StraStrategic tegic management management re-re- quires quires strstrong ong links links among among mission, mission, goalsgoals, , objectivesobjectives, , strategystrategy, , and and implementation. implementation. The The mission mission givgives es the the general general purpose purpose ofof the the ororganization. ganization. Goals Goals givgive e global global tar-tar- gets gets within within the the mission. mission. ObjectivObjectives es give give specific specific tartargets gets to to goalsgoals. . Objectives Objectives gigive ve rise rise to to fforormulamulation tion ofof stra strategies tegies to to reach reach objectivesobjectives. . FinallyFinally, , strastrategies tegies require require ac-ac- tions tions and and tasks tasks to to be be implemented. implemented. In In most most cases cases the the actions actions to to be be taktaken en represent represent prprojectsojects. . Figure Figure 2.1 2.1 shows shows a a schemaschematic tic ofof the the strategic strategic management management prprocessocess and and major major activities activities rrequired.equired.

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InternalInternal envirenvironment—onment— strengths strengths andand weaknessesweaknesses

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ExternalExternal envirenvironment—onment— opporopportutunitiesnities

and and threatsthreats

Set Set strategystrategy and and objectivesobjectives

PPorortfoliotfolio of of strategic strategic choiceschoices

StrategyStrategy implementationimplementation

PProjectroject selectionselection

FIGURE FIGURE 2.12.1 Strategic Strategic Management Management PrProcessocess

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 2929

Four Four Activities Activities of of the the Strategic Strategic Management Management ProcessProcess The The typical typical sequence sequence ofof activities activities ofof the the strastrategic tegic management management prprocess ocess is is outlined outlined here; here; a a description description ofof each each activity activity then then ffolloollows:ws:

1. 1. RReview eview and and define define the the ororganizaganizational tional mission.mission. 2. 2. Analyze Analyze and and fforormulamulate te strastrategiestegies.. 3. 3. Set Set objectives objectives to to achieachieve ve strastrategytegy.. 4. 4. Implement Implement strategies strategies thrthrough ough projectsprojects..

RReview eview and and Define Define the the OrgOrganizational anizational MissionMission The The mission mission identifies identifies “wha“what t we we want want to to becomebecome,,”” or or the the raison raison d’êtred’être. . Mission Mission stastatements tements identify identify the the scope scope ofof the the organizaorganization tion in in terterms ms ofof its its prproduct oduct or or ser-ser- vicevice. . A A written written mission mission statement statement prprovides ovides ffocus ocus for for decision decision making making wwhen hen shared shared by by ororganizaganizational tional managers managers and and emploemployeesyees. . EveryEveryone one in in the the ororganization ganization should should be be kkeenly eenly aawarware e ofof the the organizaorganization’tion’s s mission. mission. FFor or exampleexample, , at at one one larlarge ge consult-consult- ing ing firm, firm, partners partners who who fail fail to to recite recite the the mission mission stastatement tement on on demand demand are are requirrequired ed to to buy buy lunch. lunch. The The mission mission stastatement tement communicacommunicates tes and and identifies identifies the the purpose purpose ofof the the ororganization ganization to to all all stakstakeholderseholders. . Mission Mission statements statements can can be be used used ffor or evaluaevaluating ting ororganization ganization perfperforormancemance.. TTraditional raditional components components ffound ound in in mission mission statements statements arare e major major products products and and

servicesservices, , target target customers customers and and markmarketsets, , and and geogrageographical phical domain. domain. In In addition, addition, stastatements tements frequently frequently include include ororganizaganizational tional philosophphilosophyy, , key key technolotechnologiesgies, , public public imageimage, , and and contribution contribution to to societysociety. . Including Including such such factors factors in in mission mission statements statements relarelates tes directldirectly y to to business business successsuccess.. Mission Mission stastatements tements change change infrequentlyinfrequently. . HoHowevweverer, , when when the the nanature ture ofof the the busi-busi- ness ness changes changes or or shiftsshifts, , revised revised mission mission and and strastrategy tegy stastatements tements may may be be rrequired. equired. See See Snapshot Snapshot frfroom m Practice: Practice: HP’HP’s s Strategy Strategy RRevision evision as as an an eexample xample ofof a a mission mission and and strastrategy tegy revision.revision. More More specific specific mission mission stastatements tements tend tend to to give give better better rresults esults because because ofof a a

tighter tighter ffocusocus. . Mission Mission statements statements decrdecrease ease the the chance chance ofof false false directions directions bby y stakstakeholderseholders. . FFor or exampleexample, , compare compare the the phrasing phrasing ofof the the follofollowing wing missionmission stastatements:tements:

PrProvide ovide hospital hospital design design servicesservices.. PrProvide ovide dadata ta mining mining and and analysis analysis servicesservices.. PrProvide ovide infinforormation mation technolotechnology gy servicesservices.. Increase Increase sharshareholder eholder valuevalue.. PrProvide ovide high-vhigh-value alue prproducts oducts to to our our customercustomer..

ClearlClearlyy, , the the first first twtwo o statements statements lealeave ve less less chance chance ffor or misinterpretamisinterpretation tion than than the the othersothers. . A A rule-of-thumb rule-of-thumb test test ffor or a a mission mission statement statement isis, , ifif the the stastatement tement can can be be ananybody’ybody’s s mission mission statement, statement, it it will will not not prproovide vide the the guidance guidance and and focus focus intended. intended. The The mission mission sets sets the the parameters parameters ffor or devdeveloping eloping objectivesobjectives..

Analyze Analyze and and FFormulate ormulate StrateStrategiesgies FForormulamulating ting strastrategy tegy answanswers ers the the question question ofof wwhat hat needs needs to to be be done done to to reach reach ob-ob- jectivjectiveses. . StraStrategy tegy fforormulamulation tion includes includes deterdetermining mining and and evevaluating aluating alternaalternativestives thathat t support support the the organizaorganizationtion’’s s objectives objectives and and selecting selecting the the best best alternaalternativtivee. . The The first first step step is is a a realistic realistic eevaluavaluation tion ofof the the past past and and current current position position ofof the the enterpriseenterprise. .

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30 30 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

August August 18, 18, 2011, 2011, Hewlett Hewlett Packard Packard announced announced a a dramatic dramatic change change in in strategystrategy. . Leo Leo ApothekerApotheker, , CEO CEO of of the the world’world’s s largest largest seller seller of of personal personal computers, computers, decided decided to to exit exit the the low low margin margin PC PC

unit. unit. He He wanted wanted to to redirect redirect HP HP to to business business software, software, network-network- ing, ing, and and storage, storage, which which carry carry higher higher margins. margins. UnfortunatelyUnfortunately, , Apotheker Apotheker failed failed to to communicate communicate the the strategic strategic change change effec-effec- tivelytively, , lost lost credibility, credibility, and and was was dismissed. dismissed. He He was was replaced replaced by by Meg Meg Whitman, Whitman, while while controversy controversy over over the the company’company’s s haphaz-haphaz- ard ard direction direction continued.continued.

THE THE PC PC MARKETMARKET FundamentallyFundamentally, , the the PC PC has has become become a a commodity. commodity. Although Although the the HP HP personal personal computer computer unit unit represents represents nearly nearly a a thirdthird of of total total revenue revenue and and about about 19 19 percent percent of of HP’HP’s s profit, profit, growth growth and and profits profits are are slowing. slowing. Increased Increased competition competition from from Asia, Asia, for for example, example, Lenovo, Lenovo, will will continue continue to to erode erode margins. margins. More More importantlyimportantly, , in-in- creasing creasing use use of of smartphones smartphones and and tablets tablets is is already already cannibaliz-cannibaliz- ing ing the the PC PC market.market.

FUTURE FUTURE MARKETSMARKETS In In HP’HP’s s words, words, their their new new corporatewide corporatewide mission mission is is to to provide provide seamless, seamless, secure, secure, context-aware context-aware experiences experiences for for a a con-con- nected nected world.world.* * Business Business software, software, networking, networking, and and storage storage can can be be nicely nicely connected connected for for a a grand grand corporate corporate strategy strategy to to meet meet the the new new mission.mission. IBM, IBM, Google, Google, Oracle, Oracle, and and Microsoft Microsoft already already dominate dominate the the

software software industryindustry. . They They and and others others are are all all moving moving to to collect collect and and use use unstructured unstructured data data to to enhance enhance decision decision making making and/or and/or client client requests requests across across numerous numerous industries. industries. All All are are developing developing better better search search engines engines to to sort sort through through any any manner manner of of data data for for information information relevant relevant to to the the search. search. These These dominant dominant players players leave leave HP HP in in a a catch-up catch-up mode.mode. HP’HP’s s plan plan to to compete compete requires requires quick quick action. action. Executing Executing the the

software software strategy strategy will will require require purchasing purchasing smaller smaller firms firms or or

S N A P S H O T S N A P S H O T F R O M F R O M P R A C T I C EP R A C T I C E HP’HP’s s Strategy Strategy Revision*Revision*

developing developing collaborative collaborative relationships relationships to to acquire acquire specific specific expertise. expertise. HP HP has has made made two two purchases purchases to to buttress buttress the the new new strategystrategy. . Autonomy Autonomy Corporation, Corporation, UK, UK, will will concentrate concentrate on on min-min- ing ing and and searching searching large large structured structured and and unstructured unstructured data. data. Their Their purchase purchase of of VVertica ertica provides provides an an analytics analytics platform platform for for large large structured structured and and unstructured unstructured data. data. WWe e can can expect expect to to see see more more purchases purchases that that connect connect software, software, storage, storage, and and network-network- ing, ing, which which will will complement complement HP’HP’s s current current expertise expertise in in the the server server business.business.

EXECUTING EXECUTING STRASTRATEGYTEGY HP HP faces faces risks. risks. HP HP has has bet bet the the farm farm on on this this revised revised strategy strategy that that looks looks similar similar to to what what IBM IBM started started over over a a decade decade ago. ago. IBM IBM has has spent spent billions billions and and ten ten years years of of development development to to perfect perfect their their systems systems (see (see previous previous WWatson atson Snapshot). Snapshot). HP HP is is in in a a “follower” “follower” position. position. This This means means gaining gaining market market share share from from tough tough rivals rivals such such as as IBM, IBM, Apple, Apple, Google, Google, Oracle, Oracle, and and Cisco. Cisco. Can Can HP HP afford afford to to gogo face-to-face face-to-face with with others others in in stronger stronger cash cash positions? positions? Can Can HP HP sell sell off off its its PC PC division division at at a a reasonable reasonable price?price? HP HP must must move move quickly quickly to to catch catch up. up. Executing Executing the the new new

mission mission statement statement presents presents numerous numerous leadership leadership chal-chal- lenges. lenges. The The changes changes in in HP HP strategies strategies over over the the last last 15 15 years years have have caused caused confusion confusion and and a a loss loss of of employee employee loyaltyloyalty. . Addi-Addi- tional tional changes changes in in organizational organizational culture, culture, along along with with many many new new mission mission critical critical projects, projects, will will place place further further stress stress on on the the organization. organization. HP HP must must be be vigilant vigilant in in selecting, selecting, prioritizing, prioritizing, and and balancing balancing organizational organizational risk risk for for all all projects. projects. HP HP needs needs to to communicate communicate a a coherent coherent strategy strategy that that can can be be executed executed consistently consistently over over time.time. Although Although there there are are outsiders outsiders who who have have praised praised or or criti-criti-

cized cized the the new new strategystrategy, , we we must must wait wait and and see see how how the the details details unfold. unfold. HP’HP’s s strategic strategic moves moves will will make make interesting interesting case case stud-stud- ies ies for for years years to to come.come.

** HP HP newsroom.newsroom.HP HP website,website,

This This step step typically typically includes includes an an analanalysis ysis ofof “w “who ho are are the the customers”customers” and and “wha“what t are are their their needs needs as as they they (the (the customercustomerss )) see see them.”them.” The The next next step step is is an an assessment assessment ofof the the internal internal and and external external enenvirvironmentsonments. . WhaWhat t are are the the internal internal strstrengths engths and and weaknesses weaknesses ofof the the enterprise? enterprise? Examples Examples ofof internal internal strengths strengths or or wweaknesses eaknesses could could be be core core competenciescompetencies, , such such as as technologytechnology, , product product qualityquality, , management management talent, talent, lolow w debt, debt, and and dealer dealer netwnetworksorks. . Managers Managers can can alter alter internal internal strengths strengths and and wweaknesseseaknesses. . Opportunities Opportunities and and threathreats ts usually usually rrepresent epresent ex-ex- ternal ternal fforces orces ffor or change change such such as as technologytechnology, , industry industry structurestructure, , and and competition. competition. CompetitivCompetitive e benchmarking benchmarking tools tools are are sometimes sometimes used used here here to to assess assess currcurrent ent and and future future dirdirectionsections. . Opportunities Opportunities and and threathreats ts are are the the flip flip sides sides ofof each each otherother. . That That isis, , a a threat threat can can be be perperceived ceived as as an an opportunityopportunity, , or or vice vice versa. versa. Examples Examples ofof per- per- ceivceived ed external external threathreats ts could could be be a a slowing slowing ofof the the economyeconomy, , a a maturing maturing life life cycyclecle, ,

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exexchange change ratesrates, , or or govgovernment ernment regulation. regulation. TTypical ypical opportunities opportunities are are incrincreasing easing demand, demand, emeremerging ging markmarketsets, , and and demogrademographicsphics. . Managers Managers or or individual individual firms firms hahave ve limited limited opportunities opportunities to to influence influence such such external external enenvirvironmental onmental factors; factors; howhoweverever, , in in recent recent years years notanotable ble exexceptions ceptions hahave ve been been nenew w technologies technologies such such as as Apple Apple using using the the iPiPod od to to creacreate te a a markmarket et to to sell sell music. music. The The kkeys eys are are to to attempt attempt to to fforecast orecast fun-fun- damental damental industry industry changes changes and and stastay y in in a a prproactive oactive mode mode rarather ther than than a a reactireactive ve oneone. . This This assessment assessment ofof the the external external and and internal internal enenvironments vironments is is knoknown wn as as the the SWSWOT OT analanalysis ysis (strengths(strengths, , weaknessesweaknesses, , opportunitiesopportunities, , and and threathreats).ts). FFrrom om this this analysisanalysis, , critical critical issues issues and and strategic strategic alternaalternatives tives are are identified. identified. Criti-Criti-

cal cal analysis analysis ofof the the strastrategies tegies includes includes asking asking questions: questions: Does Does the the strategy strategy taktake e advadvantage antage ofof our our core core competencies? competencies? Does Does the the strastrategy tegy exploit exploit our our competitivcompetitive e advadvantage? antage? Does Does the the strastrategy tegy maximizmaximize e meeting meeting customers’customers’ needs? needs? Does Does the the strastrat-t- egy egy fit fit within within our our acceptaacceptable ble risk risk range? range? These These strstrategic ategic alternaalternatives tives arare e winnowed winnowed dodown wn to to a a critical critical few few that that support support the the basic basic mission.mission. Strategy Strategy fforormulamulation tion ends ends with with cascading cascading objectivobjectives es or or projects projects assigned assigned to to

lolower wer divisionsdivisions, , departmentsdepartments, , or or individualsindividuals. . FForormulamulating ting strastrategy tegy might might range range araround ound 20 20 percent percent ofof management’ management’s s effeffort, ort, while while determining determining strstrategy ategy will will be be how how implemented implemented might might consume consume 80 80 percent.percent.

Set Set Objectives Objectives to to AchievAchieve e StrateStrategiesgies ObjectivObjectives es translate translate the the ororganizaganization tion strategy strategy into into specific, specific, concrconcreteete, , measurameasurable ble termsterms. . OrganizaOrganizational tional objectives objectives set set tartargets gets ffor or all all levels levels ofof the the organizaorganization. tion. Ob-Ob- jectivjectives es pinpoint pinpoint the the direction direction managers managers beliebelieve ve the the ororganization ganization should should momove ve totoward. ward. ObjectiObjectives ves ansanswer wer in in detail detail wwhere here wwhen hen a a firm firm is is headed headed and and it it is is going going to to get get therethere. . TTypicallyypically, , objectives objectives ffor or the the organizaorganization tion cocover ver markmarketsets, , prproductsoducts, , inno-inno- vavation, tion, productiproductivityvity, , qualityquality, , financefinance, , prprofitabilityofitability, , employemployeesees, , and and consumersconsumers. . In In evevery ery casecase, , objectives objectives should should be be as as operaoperational tional as as possiblepossible. . That That isis, , objectivesobjectives sshould hould include include a a time time frameframe, , be be measurameasurableble, , be be an an identifiaidentifiable ble statestate, , and and be be real-real- istic. istic. DoranDoran created created the the memory memory dedevice vice shown shown in in Exhibit Exhibit 2.1, 2.1, wwhich hich is is useful useful when when writing writing objectiobjectivesves..22

Each Each levlevel el below below the the ororganizational ganizational objectiobjectives ves should should support support the the higher-lehigher-level vel objectivobjectives es in in more more detail; detail; this this is is frequentlfrequently y called called cascading cascading ofof objectives objectives. . FFor or ex-ex- ampleample, , ifif a a firfirm m making making lealeather ther luggage luggage sets sets an an objectivobjective e ofof achieving achieving a a 40 40 percent percent increase increase in in sales sales thrthrough ough a a researresearch ch and and development development strastrategytegy, , this this charge charge isis passed passed to to the the markmarketing, eting, prproduction, oduction, and and R&D R&D departmentsdepartments. . The The R&D R&D depart-depart- ment ment accepts accepts the the firm’firm’s s strastrategy tegy as as their their objectiveobjective, , and and their their strategy strategy becomes becomes the the design design and and devdevelopment elopment ofof a a new new “pull-type “pull-type luggaluggage ge with with hidden hidden retractaretractable ble wheelswheels.”.” At At this this point point the the objectivobjective e becomes becomes a a project project to to be be implemented—to implemented—to de-de- velop velop the the rretractaetractable ble wheel wheel luggaluggage ge ffor or markmarket et within within six six months months within within a a budget budget ofof $200,000. $200,000. In In summarysummary, , organizaorganizational tional objectives objectives drivdrive e yyour our projectsprojects..

2 2 Doran, Doran, G. G. TT., ., “There’“There’s s a a Smart Smart Way Way to to Write Write Management Management Goals Goals and and Objectives,” Objectives,” Management Management ReviewReview,, November November 1981, 1981, pp. pp. 35–36.35–36.

EXHIBIT EXHIBIT 2.12.1 Characteristics Characteristics ofof Objectiv Objectiveses

SS SpecificSpecific Be Be specific specific in in targeting targeting an an objectiveobjective MM MeasurableMeasurable Establish Establish a a measurable measurable indicator(s) indicator(s) of of progressprogress

AA AssignableAssignable Make Make the the objective objective assignable assignable to to one one person person for for completioncompletion RR RealisticRealistic State State what what can can realistically realistically be be done done with with available available resourcesresources TT TTime ime relatedrelated State State when when the the objective objective can can be be achieved, achieved, that that is, is, durationduration

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32 32 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

Implement Implement StrStrategies ategies through through PrProjectsojects ImplementaImplementation tion answanswers ers the the question question ofof hohoww strategies strategies will will be be rrealizealized, ed, givengiven aavailavailable ble resourresourcesces. . The The conceptual conceptual framewframework ork ffor or strastrategy tegy implementation implementation lacks lacks the the structure structure and and discipline discipline ffound ound in in strategy strategy fforormulamulation. tion. Implementation Implementation rre-e- quires quires action action and and completing completing tasks; tasks; the the lalatter tter frequentlfrequently y means means mission-critical mission-critical prprojectsojects. . TherefThereforeore, , implementation implementation mmust ust include include attention attention to to seseveral veral kkey ey areasareas.. First, First, completing completing tasks tasks requires requires allocaallocation tion ofof resour resourcesces. . RResources esources typically typically rrep-ep- resent resent fundsfunds, , peoplepeople, , management management talentstalents, , technological technological skillsskills, , and and equipment. equipment. FFre-re- quentlyquently, , implementation implementation ofof pr projects ojects is is treated treated as as an an “ad“addendum”dendum” ra rather ther than than an an integral integral part part ofof the the strategic strategic manamanagement gement prprocessocess. . HoHoweverwever, , multiple multiple objectiobjectives ves place place conflicting conflicting demands demands on on organizaorganizational tional resourcesresources. . Second, Second, implementaimplementation tion requirrequires es a a formal formal and and infinforormal mal organizaorganization tion that that complements complements and and supports supports strastrat-t- egy egy and and prprojectsojects. . AAuthorityuthority, , responsibilityresponsibility, , and and perfperforormance mance all all depend depend on on organi-organi- zazation tion structure structure and and cultureculture. . Third, Third, planning planning and and contrcontrol ol systems systems must must be be in in place place to to be be certain certain prproject oject activities activities necessary necessary to to ensure ensure strastrategies tegies are are effectieffectively vely perper-- fforormed. med. FFourth, ourth, motivamotivating ting prproject oject contributors contributors will will be be a a major major factor factor ffor or achiev-achiev- ing ing prproject oject successsuccess. . FinallyFinally, , areas areas receireceiving ving more more aattention ttention in in recent recent years years are are portfportfolio olio management management and and prioritizing prioritizing prprojectsojects. . Although Although the the strastrategy tegy implemen-implemen- tatation tion process process is is not not as as clear clear as as strastrategy tegy formulaformulation, tion, all all managers managers realize realize thathat, t, without without implementaimplementation, tion, success success is is impossibleimpossible. . Although Although the the four four major major steps steps ofof strastrategic tegic management management prprocess ocess hahave ve not not been been altered altered significantlsignificantly y ovover er the the yearsyears, , the the view view ofof the the time time horizon horizon in in the the strastrategy tegy formulaformulation tion process process has has been been alteraltered ed radi-radi- cally cally in in the the last last twtwo o decadesdecades. . Global Global competition competition and and rapid rapid innoinnovavation tion require require be-be- ing ing highly highly adaadaptive ptive to to short-run short-run changes changes wwhile hile being being consistent consistent in in the the longer longer run.run.

The The Need Need for for a a Project Project Portfolio Portfolio Management Management SystemSystem ImplementaImplementation tion ofof pr projects ojects without without a a strong strong link linked ed to to strategystrategy prioritypriority systemsystem creacreates tes prproblemsoblems. . Three Three ofof the the most most obvious obvious prproblems oblems are are discussed discussed belobeloww. . A A prproject oject portfolioportfolio system system can can go go a a long long waway y to to reducereduce, , or or even even eliminaeliminatete, , the the impact impact ofof these these probproblemslems..

Problem Problem 1: 1: The The Implementation Implementation GapGap In In ororganizations ganizations with with short short prproduct oduct life life cyclescycles, , it it is is interesting interesting to to note note thathat t fre-fre- quently quently participaparticipation tion in in strategic strategic planning planning and and implemimplementaentation tion includes includes partici-partici- pants pants frfrom om all all levels levels within within the the ororganizaganization. tion. HoweHoweverver, , in in perhaps perhaps 80 80 perpercent cent ofof the the remaining remaining prproduct oduct and and service service ororganizationsganizations, , top top management management pretty pretty mmuch uch fforormulamulates tes strategy strategy and and lealeaves ves strastrategy tegy implementaimplementation tion to to functional functional managersmanagers. . Within Within these these brbroad oad constraintsconstraints, , more more detailed detailed strastrategies tegies and and objectivobjectives es are are devel-devel- oped oped by by the the functional functional manamanagersgers. . The The fact fact that that these these objectiobjectives ves and and strastrategies tegies are are made made independentlyindependently a at t different different lelevels vels bby y functional functional groups groups within within the the ororganiza-ganiza- tion tion hierarchhierarchy y causes causes manifold manifold prproblemsoblems.. Some Some symptoms symptoms ofof organiza organizations tions struggling struggling with with strastrategy tegy disconnect disconnect and and un-un-

clear clear priorities priorities are are prpresented esented herehere..

• • Conflicts Conflicts frequentlfrequently y occur occur among among functional functional managers managers and and cause cause lack lack ofof trust. trust. • • FFrequent requent meetings meetings are are called called to to estaestablish blish or or renegotiarenegotiate te prioritiespriorities.. • • PPeople eople frequentlfrequently y shift shift from from one one prproject oject to to anotheranother, , depending depending on on currentcurrent

prioritypriority. . EmploEmployees yees are are confused confused aabout bout which which prprojects ojects are are important.important.

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• • People People arare e worworking king on on multiple multiple prprojects ojects and and feel feel inefficient.inefficient. • • RResources esources are are not not adequaadequatete..

Because Because clear clear linkages linkages do do not not eexist, xist, the the organizaorganizational tional enenvirvironment onment becomes becomes dys-dys- functional, functional, confused, confused, and and ripe ripe ffor or ineffectiineffective ve implementaimplementation tion ofof or organization ganization strastrategy tegy and, and, thusthus, , ofof pr projectsojects. . The The refers refers to to the the lack lack ofof under under--implementation implementation gapgap standing standing and and consensus consensus ofof organiza organization tion strategy strategy among among top top and and midmiddle-level dle-level managersmanagers.. A A scenario scenario the the authors authors hahave ve seen seen repearepeated ted severseveral al times times follofollowsws. . TTop op manage-manage-

ment ment picks picks their their top top 20 20 prprojects ojects ffor or the the next next planning planning period, period, without without prioritiespriorities. . Each Each functional functional department—markdepartment—marketing, eting, financefinance, , operationsoperations, , engineering, engineering, infinfor-or- mamation tion technologytechnology, , and and human human resources—selects resources—selects prprojects ojects from from the the list. list. UnfUnfortu-ortu- nanatelytely, , independent independent departmdepartment ent priorities priorities acracross oss projects projects arare e not not homogenoushomogenous. . A A prproject oject that that rarates tes first first in in the the IT IT department department can can rate rate 10th 10th in in the the finance finance depart-depart- ment. ment. ImplementaImplementation tion ofof the the prprojects ojects represents represents conflicts conflicts ofof interest interest with with animos-animos- ities ities devdeveloping eloping ovover er organizaorganization tion resourcesresources.. IfIf this this condition condition existsexists, , how how is is it it possible possible to to efeffectivelfectively y implement implement strategy? strategy? The The prproblem oblem is is seriousserious. . One One study study ffound ound that that onlonly y aabout bout 25 25 percent percent ofof ForFortunetune 500500 exexecutives ecutives believbelieve e there there is is a a strstrong ong linkagelinkage, , consistencyconsistency, , and/or and/or agreement agreement betwbetween een the the strastrategies tegies they they fforormulamulate te and and implementation. implementation. In In another another studstudy y ofof Deloitte Deloitte Consulting, Consulting, JJeffeff MacIntyre MacIntyre rreportseports, , “Only “Only 23 23 percent percent ofof nearly nearly 150 150 global global eexecu-xecu- tivtives es considered considered their their prproject oject portfolios portfolios aligned aligned with with the the corcore e businessbusiness.”.”33 Middle Middle managers managers considerconsidered ed organizaorganizational tional strastrategy tegy to to be be under under the the purview purview ofof others others or or not not in in their their realm realm ofof influence influence. . It It is is the the responsibility responsibility ofof senior senior management management to to set set policies policies thathat t show show a a distinct distinct link link betwbetween een organizaorganizational tional strategy strategy and and objectiobjectives ves and and prprojects ojects that that implement implement those those strastrategiestegies. . The The researresearch ch ofof Fusco Fusco suggests suggests the the implementaimplementation tion gap gap and and prioritizing prioritizing prprojects ojects are are still still ooverlookverlooked ed by by manmany y organi-organi- zazationstions. . He He surveyed surveyed 280 280 prproject oject managers managers and and ffound ound thathat t 24 24 percent percent ofof their their organizaorganizations tions did did not not eveven en publish publish or or circulacirculate te their their objectives; objectives; in in addition, addition, 4040per-per- cent cent ofof the the respondents respondents reported reported thathat t priorities priorities among among competing competing projects projects wwere ere not not clearclear, , while while onlonly y 17 17 percent percent reported reported clear clear prioritiespriorities..44

Problem Problem 2: 2: Organization Organization PoliticsPolitics PPolitics olitics exist exist in in eevery very organizaorganization tion and and can can hahave ve a a significant significant influence influence on on which which prprojects ojects receivreceive e funding funding and and high high prioritypriority. . This This is is especially especially true true wwhen hen the the criteria criteria and and prprocess ocess ffor or selecting selecting projects projects arare e ill-defined ill-defined and and not not aligned aligned with with the the mission mission ofof the the firfirm. m. Project Project selection selection mamay y be be based based not not so so much much on on facts facts and and sound sound reason-reason- ing, ing, but but rrather ather on on the the persuasipersuasiveness veness and and powpower er ofof people people advadvocating ocating prprojectsojects..

The The term term “sacred “sacred cow”cow” is is often often used used to to denote denote a a prproject oject that that a a popowerful, werful, high-ranking high-ranking ofofficial ficial is is advadvocating. ocating. Case Case in in point, point, a a marmarketing keting consultant consultant confidconfided ed thathat t he he was was once once hired hired bby y the the markmarketing eting director director ofof a a large large firm firm to to conduct conduct an an in-in- dependent, dependent, external external marmarket ket analanalysis ysis ffor or a a new new prproduct oduct the the firfirm m was was interested interested in in devdeveloping. eloping. His His extensive extensive rresearch esearch indicaindicated ted that that therthere e was was insufinsufficient ficient demand demand to to warrwarrant ant the the financing financing ofof this this new new prproduct. oduct. The The markmarketing eting director director chose chose to to bbury ury the the report report and and made made the the consultant consultant prpromise omise nevnever er to to share share this this infinforormation mation with with ananyyoneone. . The The director director explained explained thathat t this this new new prproduct oduct was was the the “pet “pet idea”idea” of of the the new new

3 3 MacIntyre, MacIntyre, J., J., vol. vol. 20 20 (11) (11) November November 2006, 2006, pp. pp. 32–35.32–35.PM PM Network,Network, 4 4 Fusco, Fusco, J. J. C., C., “Better “Better Policies Policies Provide Provide the the Key Key to to Implementing Implementing Project Project Management,” Management,” Project Project Management Management Journal,Journal, vol. vol. 28 28 (3) (3) 1997, 1997, pp. pp. 38–41.38–41.

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34 34 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

CEOCEO, , who who sasaw w it it as as his his legacy legacy to to the the firfirm. m. He He went went on on to to describe describe the the CEO’CEO’s s irra-irra- tional tional obsession obsession with with the the prproject oject and and how how he he rreferred eferred to to it it as as his his “new “new bababyby.”.” Like Like a a parent parent fierfiercely cely prprotecting otecting his his child, child, the the markmarketing eting director director believbelieved ed that that he he wwould ould lose lose his his job job ifif such such critical critical informainformation tion ever ever became became knoknown.wn. Project Project sponsors sponsors plaplay y a a significant significant role role in in the the selection selection and and successful successful imple-imple-

mentamentation tion ofof pr product oduct innovinnovation ation prprojectsojects. . PrProject oject sponsors sponsors are are typicallytypically high-ranking high-ranking manamanagers gers who who endorse endorse and and lend lend political political support support ffor or the the completion completion ofof a a specific specific project. project. They They arare e instrumental instrumental in in winning winning apprapprovoval al ofof the the prproject oject and and in in prprotecting otecting the the project project during during the the critical critical dedevelopment velopment stastagege. . The The importance importance ofof prproject oject sponsors sponsors should should not not be be taken taken lightllightlyy. . FFor or exampleexample, , a a PMI PMI global global survey survey ofof oover ver 1,000 1,000 prproject oject practitioners practitioners and and leaders leaders oover ver a a variety variety ofof industries industries ffound ound those those ororganizations ganizations hahaving ving active active sponsors sponsors on on aat t least least 80 80 percent percent ofof their their projects/projects/ prprograms ograms hahave ve a a success success rarate te ofof 75 75 percent, percent, eleeleven ven percentapercentagge e points points aabovbove e the the survey survey aaveraverage ge ofof 64 64 percent. percent. ManMany y promising promising prprojects ojects hahave ve failed failed to to succeed succeed due due to to lack lack ofof strong strong sponsorshipsponsorship..55

The The significance significance ofof corpora corporate te politics politics can can be be seen seen in in the the ill-fated ill-fated ALALTO TO computer computer prproject oject at at XerXerox ox during during the the mid-1970smid-1970s..66 The The prproject oject was was a a tremendous tremendous technolotechnological gical success; success; it it devdeveloped eloped the the first first worworkakable ble mousemouse, , the the first first laser laser printerprinter, , the the first first user-friendluser-friendly y softwaresoftware, , and and the the first first local local area area networnetwork. k. All All ofof these these devdevelopments elopments werwere e five five years years ahead ahead ofof their their nearest nearest competitorcompetitor. . Over Over the the next next fivfive e years years this this opportunity opportunity to to dominadominate te the the nascent nascent personal personal computer computer markmarket et was was squandered squandered because because ofof internal internal in-fighting in-fighting at at XerXerox ox and and the the aabsence bsence ofof a a strstrong ong prproject oject sponsorsponsor. . (Apple’(Apple’s s MacIntosh MacIntosh computer computer was was inspired inspired bby y manmany y ofof these these developmentsdevelopments.).) PPolitics olitics can can play play a a rrole ole not not only only in in prproject oject selection selection but but also also in in the the aspiraaspirations tions

behind behind prprojectsojects. . Individuals Individuals can can enhance enhance their their powpower er within within an an organizaorganization tion by by managing managing eextraordinary xtraordinary and and critical critical prprojectsojects. . PPowower er and and status status nanaturallturally y accrue accrue to to successful successful innoinnovavators tors and and risk risk takers takers rrather ather than than to to steadsteady y prproducersoducers. . ManMany y ambi-ambi- tious tious managers managers pursue pursue high-prhigh-profile ofile projects projects as as a a means means ffor or moving moving quicklquickly y up up the the corporacorporate te ladderladder.. ManMany y would would arargue gue thathat t politics politics and and project project manamanagement gement should should not not mix. mix. A A

more more prproactivoactive e response response is is that that prprojects ojects and and politics politics ininvariavariablbly y mix mix and and that that efeffec-fec- tivtive e project project manamanagers gers recorecognizgnize e that that anany y significant significant project project has has political political rramifica-amifica- tionstions. . LikLikewiseewise, , top top management management needs needs to to dedevelop velop a a system system ffor or identifying identifying and and selecting selecting prprojects ojects that that rreduces educes the the impact impact ofof internal internal politics politics and and ffosters osters the the selec-selec- tion tion ofof the the best best projects projects ffor or achieving achieving the the mission mission and and strastrategy tegy ofof the the firfirm.m.

Problem Problem 3: 3: Resource Resource Conflicts Conflicts and and MultitaskingMultitasking Most Most prproject oject organizaorganizations tions exist exist in in a a mmultiproject ultiproject enenvironment. vironment. This This enenvirvironment onment creacreates tes the the prproblems oblems ofof pr project oject interdependency interdependency and and the the need need to to share share rresourcesesources. . FFor or exampleexample, , whawhat t would would be be the the impact impact on on the the lalabor bor resource resource pool pool ofof a a construc-construc- tion tion compancompany y ifif it it should should win win a a contract contract it it wwould ould liklike e to to bid bid on? on? Will Will existingexisting lalabor bor be be adequate adequate to to deal deal with with the the new new prproject—given oject—given the the completion completion dadate? te? Will Will current current prprojects ojects be be deladelayed? yed? Will Will subcontrsubcontracting acting help? help? Which Which prprojects ojects will will hahave ve priority? priority? Competition Competition among among prproject oject managers managers can can be be contentiouscontentious. . All All project project managers managers seek seek to to hahave ve the the best best people people ffor or their their projectsprojects. . The The probproblems lems ofof sharing sharing resourresources ces and and scheduling scheduling resources resources acracross oss prprojects ojects grogrow w exponentiallexponentially y as as the the

55 PMI, PMI, “PMI’“PMI’s s Pulse Pulse of of the the Profession,” Profession,” March March 2012, 2012, Project Project Management Management Institute, Institute, p. p. 7.7. 6 6 Smith, Smith, D. D. K., K., and and R. R. C. C. AlexanderAlexander, , Fumbling Fumbling the the Future: Future: How How Xerox Xerox Invented, Invented, Then Then Ignored Ignored the the First First Personal Personal ComputerComputer (New (New YYork: ork: Macmillan, Macmillan, 1988).1988).

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 3535

nnumber umber ofof pr projects ojects risesrises. . In In multiprmultiproject oject enenvironments vironments the the stakstakes es are are higher higher and and the the benefits benefits or or penalties penalties ffor or good good or or bad bad resource resource scheduling scheduling become become eeven ven more more significant significant than than in in most most single single prprojectsojects.. RResource esource sharing sharing also also leads leads to to mmultitasking. ultitasking. Multitasking Multitasking ininvolves volves starting starting and and stopping stopping wwork ork on on one one task task to to go go and and wwork ork on on another another prproject, oject, and and then then returning returning to to the the wwork ork on on the the original original task. task. People People wworking orking on on severseveral al tasks tasks concurrently concurrently arare e far far less less efefficient, ficient, especially especially wwhere here conceptual conceptual or or phphysical ysical shutdoshutdown wn and and startup startup are are significant. significant. Multitasking Multitasking adds adds to to deladelays ys and and costscosts. . Changing Changing priorities priorities exacerbaexacerbate te the the multitasking multitasking prproblems oblems eveven en moremore. . LikeLikewisewise, , multitasking multitasking is is more more eevident vident in in ororganizations ganizations thathat t hahave ve too too manmany y projects projects ffor or the the resources resources they they command.command. The The nnumber umber ofof small small and and large large prprojects ojects in in a a portfolio portfolio almost almost alalwaways ys exexceeds ceeds the the aavailavailable ble resourresources ces (typically (typically bby y a a factor factor ofof three three to to ffour our times times the the aavailavailable ble rre-e- sources). sources). This This cacapacity pacity ovoverload erload inevitainevitably bly leads leads to to confusion confusion and and inefinefficient ficient use use ofof scarce scarce organizaorganizational tional resourresourcesces. . The The presence presence ofof an an implementation implementation gagapp, , ofof popower wer politicspolitics, , and and ofof m multitasking ultitasking adds adds to to tthe he prproblem oblem ofof w which hich projects projects arare e allocated allocated rresources esources first. first. EmploEmployee yee morale morale and and confidence confidence sufsuffer fer because because it it is is difficult difficult to to makmake e sense sense ofof an an ambiguous ambiguous system. system. A A multiprmultiproject oject organizaorganization tion enenvi-vi- rronment onment faces faces major major probproblems lems without without a a priority priority system system that that is is clearclearly ly linklinked ed to to the the strastrategic tegic plan.plan. In In essenceessence, , to to this this point point we we hahave ve suggested suggested thathat t manmany y organizaorganizations tions hahave ve no no

meaningful meaningful prprocess ocess ffor or addressing addressing the the prproblems oblems we we hahave ve described. described. The The first first and and most most important important change change thathat t will will go go a a long long waway y in in addressing addressing these these and and otherother prproblems oblems is is the the devdevelopment elopment and and use use ofof a a meaningful meaningful prproject oject priority priority process process ffor or prproject oject selection.selection. How How can can the the implementaimplementation tion gap gap be be narrnarroowed wed so so that that understanding understanding and and con-con-

sensus sensus ofof organiza organizational tional strategies strategies run run thrthrough ough all all levels levels ofof management? management? HoHow w can can popower wer politics politics be be minimized? minimized? Can Can a a process process be be dedeveloped veloped in in which which prprojects ojects are are consistentlconsistently y prioritizprioritized ed to to support support ororganizational ganizational strastrategies? tegies? Can Can the the priori-priori- tized tized projects projects be be used used to to allocaallocate te scarce scarce organizaorganizational tional resources—fresources—for or exampleexample, , peoplepeople, , equipment? equipment? Can Can the the process process encouraencourage ge bottom-up bottom-up initiainitiation tion ofof projects projects thathat t support support clear clear organizaorganizational tional targets?targets? WWhat hat is is needed needed is is a a set set ofof integra integrative tive criteria criteria and and a a prprocess ocess ffor or evaluaevaluating ting and and

selecting selecting prprojects ojects that that support support higherhigher-level -level strastrategies tegies and and objectivesobjectives. . A A single-prsingle-projectoject priority priority system system thathat t ranks ranks projects projects bby y their their contribution contribution to to the the strstrategic ategic plan plan wwould ould make make life life easiereasier. . Easily Easily said, said, bbut ut difficult difficult to to accomplish accomplish in in practicepractice. . Organi-Organi- zazations tions that that manamanaged ged independent independent projects projects and and allocaallocated ted resources resources ad ad hoc hoc hahave ve shifted shifted ffocus ocus to to selecting selecting the the right right portfportfolio olio ofof pr projects ojects to to achieve achieve their their strastrategic tegic objectivobjectiveses. . This This is is a a quickquickening ening trend. trend. The The advadvantages antages ofof successful successful prproject oject port-port- ffolio olio systems systems are are becoming becoming well well rrecognized ecognized in in prproject-driven oject-driven ororganizationsganizations. . See See Exhibit Exhibit 2.2, 2.2, which which lists lists a a fefew w key key benefits; benefits; the the list list could could easileasily y be be extended.extended. A A prproject oject portfolio portfolio system system is is discussed discussed nenext xt with with emphasis emphasis on on selection selection criteria, criteria, which which is is wwhere here the the popower wer ofof the the portfolio portfolio system system is is estaestablished.blished.

EXHIBIT EXHIBIT 2.22.2 Benefits Benefits ofof Pr Project oject PPortfolio ortfolio ManagementManagement

• • Builds Builds discipline discipline into into project project selection selection process.process. • • Links Links project project selection selection to to strategic strategic metrics.metrics. • • Prioritizes Prioritizes project project proposals proposals across across a a common common set set of of criteria, criteria, rather rather than than on on politics politics or or emotion.emotion. • • Allocates Allocates resources resources to to projects projects that that align align with with strategic strategic direction.direction. • • Balances Balances risk risk across across all all projects.projects. • • Justifies Justifies killing killing projects projects that that do do not not support support organization organization strategystrategy.. • • Improves Improves communication communication and and supports supports agreement agreement on on project project goals.goals.

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36 36 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

A A Portfolio Portfolio Management Management SystemSystem Succinctly Succinctly put, put, the the aim aim ofof portf portfolio olio management management is is to to ensurensure e that that prprojects ojects are are aligned aligned with with strastrategic tegic goals goals and and prioritizprioritized ed apprappropriatelopriatelyy. . As As FFoti oti points points out, out, portfportfolio olio management management asks asks “W“Whahat t is is strategic strategic to to our our ororganization?”ganization?” (2002) (2002) PPortfortfolio olio management management prproovides vides informainformation tion that that alloallows ws people people to to make make betterbetter business business decisionsdecisions. . Since Since prprojects ojects clamoring clamoring for for funding funding and and people people usuallusually y out-out- nnumber umber aavailavailable ble resourresourcesces, , it it is is important important to to follofollow w a a logical logical and and defined defined prprocess ocess ffor or selecting selecting the the prprojects ojects to to implement.implement. Design Design ofof a a project project portfportfolio olio system system should should include include classification classification ofof a a project, project,

selection selection criteria criteria depending depending upon upon classificaclassification, tion, sources sources ofof pr proposalsoposals, , evevaluating aluating prproposalsoposals, , and and managing managing the the portfportfolio olio ofof pr projectsojects..

Classification Classification of of the the ProjectProject ManMany y organizaorganizations tions find find they they hahave ve three three basic basic kinds kinds ofof projects projects in in their their portfportfolio: olio: compliancecompliance (emer (emergency—must gency—must do), do), operoperational,ational, strategicstrategic and and pr projectsojects. . (See (See Figure Figure 2.2.) 2.2.) Compliance Compliance prprojects ojects are are typicalltypically y those those needed needed to to meet meet regularegulatory tory con-con- ditions ditions requirrequired ed to to operate operate in in a a rregion; egion; hencehence, , they they are are called called “must “must do”do” projects projects. . EmerEmergency gency projectsprojects, , such such as as building building an an auto auto parts parts factory factory destrdestroyed oyed bby y tsunami, tsunami, is is an an example example ofof a a must-do must-do prproject. oject. Compliance Compliance and and emeremergency gency projects projects usuausualllly y hahave ve penalties penalties ifif they they are are not not implemented. implemented. OperOperational ational prprojects ojects are are those those thathat t are are needed needed to to support support current current operaoperationstions. . These These prprojects ojects are are designed designed to to imprimprovove e effi-effi- ciency ciency ofof delivery delivery systemssystems, , reduce reduce prproduct oduct costscosts, , and and improimprove ve perfperforormancemance. . Some Some ofof these these projectsprojects, , given given their their limited limited scope scope and and cost, cost, rrequire equire only only immediaimmediate te man-man- ager ager aapprpprovoval, al, while while biggerbigger, , more more expensivexpensive e projects projects need need eextensive xtensive rrevieweview. . Choos-Choos- ing ing to to install install a a new new piece piece ofof equipment equipment wwould ould be be an an example example ofof the the lalatter tter while while modifying modifying a a prproduction oduction process process wwould ould be be an an example example ofof the the fforormermer. . TTotal otal quality quality management management (TQM) (TQM) prprojects ojects are are examples examples ofof opera operational tional projectsprojects. . FinallyFinally, , strastrate-te- gic gic prprojects ojects are are those those thathat t directly directly support support the the ororganizaganization’tion’s s long-run long-run mission. mission. They They frequentlfrequently y are are directed directed totowarward d increasing increasing revrevenue enue or or marmarket ket sharsharee. . Examples Examples ofof strategic strategic prprojects ojects are are new new prproductsoducts, , research, research, and and dedevelopment. velopment. FFor or a a good, good, complete complete discussion discussion on on classificaclassification tion schemes schemes found found in in prpracticeactice, , see see CraCrawforwford, d, HobHobbsbs, , and and TTurneurne.. FFrequentlyrequently, , these these three three classifications classifications arare e further further decomposed decomposed by by prproduct oduct typetype, ,

ororganization ganization divisions divisions and and functions functions thathat t will will require require difdifferent ferent criteria criteria ffor or prproject oject selection. selection. FFor or exampleexample, , the the same same criteria criteria for for the the finance finance or or legal legal didivision vision would would

ComplianceCompliance (must (must do)do) projectsprojects

OperationalOperational projectsprojects

StrategicStrategic projectsprojects

FIGURE FIGURE 2.22.2 PPortfolio ortfolio ofof Projects Projects by by TTypeype

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 3737

not not applapply y to to the the IT IT (inf(inforormation mation technolotechnology) gy) department. department. This This often often requires requires difdif-- ferent ferent prproject oject selection selection criteria criteria within within the the basic basic three three classificaclassifications tions ofof stra strategic, tegic, operaoperational, tional, and and compliance compliance projectsprojects..

Selection Selection CriteriaCriteria Although Although there there arare e many many criteria criteria ffor or selecting selecting prprojectsojects, , selection selection criteria criteria are are typitypi-- cally cally identified identified as as and and . . A A short short description description ofof each each is is givgiven en financialfinancial nonfinancialnonfinancial next, next, ffollowollowed ed by by a a discussion discussion ofof their their use use in in practicepractice..

Financial Financial CriteriaCriteria Financial Financial ModelsModels FFor or most most managers managers financial financial criteria criteria arare e the the preferred preferred method method

to to evevaluate aluate prprojectsojects. . These These models models are are aappropriappropriate te when when therthere e is is a a high high level level ofof confidence confidence associaassociated ted with with estimates estimates ofof future future cash cash flowsflows. . TTwo wo models models and and eexam-xam- ples ples are are demonstrademonstrated ted here—here— and and paybackpayback net net prpresent esent valuevalue (NPV). (NPV).

PrProject oject AA has has an an initial initial invinvestment estment ofof $700,000 $700,000 and and prprojected ojected cash cash inflows inflows ofof $225,000 $225,000 ffor or 5 5 yearsyears.. PrProject oject BB has has an an initial initial invinvestment estment ofof $400,000 $400,000 and and prprojected ojected cash cash inflows inflows ofof $110,000 $110,000 ffor or 5 5 yearsyears..

1. 1. The The papayback yback model model measures measures the the time time it it will will take take to to rrecoecover ver the the prproject oject ininvestment. vestment. Shorter Shorter papaybacks ybacks are are mormore e desiradesirableble. . PaPayback yback is is the the simplest simplest and and most most widely widely used used model. model. PPaayback yback emphasizemphasizes es cash cash flowsflows, , a a key key factor factor in in bbusinessusiness. . Some Some managers managers use use the the papayback yback model model to to eliminate eliminate ununusually usually riskrisky y prprojects ojects (those (those with with lengthlengthy y papayback yback periods). periods). The The major major limitations limitations ofof pa payback yback are are that that it it igig-- nores nores the the timtime e value value ofof money money, , assumes assumes cash cash inflows inflows ffor or the the ininvestment vestment periodperiod (and (and not not beybeyond), ond), and and does does not not consider consider prprofitabilityofitability. . The The papayback yback fforormula mula isis

PaPayback yback period period (yrs) (yrs) Estimated Estimated PrProject oject Cost/AnnCost/Annual ual SaSavingsvings55

Exhibit Exhibit 2.3 2.3 compares compares the the papayback yback for for PrProject oject A A and and Project Project BB. . The The papayback yback ffor or PrProject oject A A is is 3.1 3.1 years years and and ffor or Project Project B B is is 3.6 3.6 yyearsears. . Using Using the the papayback yback method method both both prprojects ojects are are acceptaacceptable ble since since both both return return the the initial initial ininvestment vestment in in less less than than fivfive e years years and and hahave ve returns returns on on the the invinvestment estment ofof 32.1 32.1 and and 27.5 27.5 percent. percent. PPaybackayback prprovides ovides especiallespecially y useful useful infinforormation mation ffor or firfirms ms concerned concerned with with liquidity liquidity and and hahavv-- ing ing sufsufficient ficient resources resources to to manamanage ge their their financial financial obligaobligationstions.. Exhibit Exhibit 2.3 2.3 A A prpresents esents the the payback payback method.method.

2. 2. The The net net present present vvalue alue (NPV) (NPV) model model uses uses management’management’s s minimum minimum desirdesired ed rarate-of-return te-of-return (discount (discount raratete, , ffor or exampleexample, , 20 20 percent) percent) to to compute compute the the present present valuvalue e ofof all all net net cash cash infloinflowsws. . IfIf the the result result is is positipositive ve (the (the prproject oject meets meets the the minimini-- mum mum desirdesired ed rate rate ofof return), return), it it is is eligibeligible le for for further further considerconsideration. ation. IfIf the the result result is is neganegativetive, , the the prproject oject is is rerejected. jected. ThusThus, , higher higher positivpositive e NPV’NPV’s s are are desiradesirableble. . Excel Excel uses uses this this fforormulamula

PP roject roject NPVNPV II55 00 11 aa nn

tt 1155

FFtt11 11 11 kk22tt wherwheree I I00 Initial Initial ininvestment vestment (since (since it it is is an an outflooutfloww, , the the nnumber umber will will be be negatinegative)ve)55 FFtt Net Net cash cash inflow inflow ffor or period period 55 tt k k R Required equired rarate te ofof return return55

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38 38 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

Exhibit Exhibit 2.3B 2.3B presents presents the the NPV NPV model model using using MicrMicrosoft osoft Excel Excel softwsoftwareare. . The The NPV NPV model model accepts accepts prproject oject A, A, which which has has a a positivpositivee NPV NPV ofof $54,235. $54,235. PrProject oject B B is is rere-- jected jected since since the the NPV NPV is is negnegativeative $31,263. $31,263. Compare Compare the the NPV NPV rresults esults with with the the papayy-- back back resultsresults. . The The NPV NPV model model is is more more realistic realistic because because it it considers considers the the time time vvalue alue ofof money money, , cash cash flowsflows, , and and prprofitabilityofitability.. When When using using the the NPV NPV model, model, the the discount discount rrate ate (r(return eturn on on invinvestment estment hurdle hurdle

rarate) te) can can differ differ ffor or differdifferent ent projectsprojects. . FFor or exampleexample, , the the expected expected RROI OI on on strategicstrategic prprojects ojects is is frequently frequently set set higher higher than than operoperational ational prprojectsojects. . SimilarlySimilarly, , RROI’OI’s s can can difdiffer fer for for riskier riskier vversus ersus safer safer projectsprojects. . The The criteria criteria ffor or setting setting the the RROI OI hurdle hurdle rarate te should should be be clear clear and and applied applied consistentlconsistentlyy..

EXHIBIT EXHIBIT 2.3A 2.3A Example Example Comparing Comparing TTwo wo Projects Projects Using Using PPayback ayback MethodMethod

EXHIBIT EXHIBIT 2.3B 2.3B Example Example Comparing Comparing TTwo wo Projects Projects Net Net PrPresent esent VValue alue MethodMethod

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 3939

UnfUnfortunatelortunatelyy, , pure pure financial financial models models fail fail to to include include manmany y projects projects wwhere here finan-finan- cial cial return return is is impossibimpossible le to to measure measure and/or and/or other other factors factors are are vital vital to to the the accept accept or or reject reject decision. decision. One One rresearch esearch study study bby y FFoti oti showed showed thathat t companies companies using using predom-predom- inantly inantly financial financial models models to to prioritize prioritize prprojects ojects yielded yielded unbalanced unbalanced portfportfolios olios and and prprojects ojects that that araren’en’t t strastrategically tegically oriented oriented (2003).(2003).

Nonfinancial Nonfinancial CriteriaCriteria Financial Financial return, return, wwhile hile important, important, does does not not alwaalways ys reflect reflect strastrategic tegic importanceimportance. . The The sixties sixties and and sevseventies enties sasaw w firfirms ms become become oovereverextended xtended by by divdiversifying ersifying too too much. much. NoNow w the the prevprevailing ailing thinking thinking is is that that long-term long-term survival survival is is dependent dependent upon upon devdeveloping eloping and and maintaining maintaining core core competenciescompetencies. . Companies Companies hahave ve to to be be disciplined disciplined in in sasaying ying no no to to potentially potentially prprofitabofitable le projects projects thathat t are are outside outside the the realm realm ofof their their cocore re mission. mission. This This rrequires equires other other criteria criteria be be considered considered beybeyond ond direct direct financial financial return. return. FFor or exampleexample, , a a firfirm m mamay y support support projects projects thathat t do do not not hahave ve high high prprofit ofit mar-mar- gins gins ffor or other other strastrategic tegic reasons reasons including:including:

TTo o capture capture larlarger ger markmarket et shareshare TTo o make make it it difdifficult ficult ffor or competitors competitors to to enter enter the the markmarketet TTo o develop develop an an enaenabler bler prproduct, oduct, which which by by its its intrintroduction oduction will will increase increase sales sales in in more more prprofitaofitable ble prproductsoducts TTo o develop develop core core technolotechnology gy that that will will be be used used in in nenext-generaxt-generation tion productsproducts TTo o reduce reduce dependency dependency on on unreliaunreliable ble supplierssuppliers TTo o prevent prevent gogovernment vernment intervention intervention and and regularegulationtion

Less Less tangible tangible criteria criteria mamay y also also applapplyy. . OrOrganizations ganizations mamay y support support prprojects ojects to to re-re- store store corporacorporate te image image or or enhance enhance brand brand recorecognition. gnition. ManMany y organizaorganizations tions are are committed committed to to corporacorporate te citizcitizenship enship and and support support community community dedevelopmentvelopment prprojectsojects.. Since Since no no single single criterion criterion can can reflect reflect strastrategic tegic significancesignificance, , portfportfolio olio manage-manage-

ment ment requirrequires es multi-criteria multi-criteria screening screening modelsmodels. . These These models models often often weight weight individ-individ- ual ual criteria criteria so so those those prprojects ojects that that contribcontribute ute to to the the most most important important strastrategic tegic objectivobjectives es are are given given higher higher considerconsideration.ation.

TTwo wo Multi-Criteria Multi-Criteria Selection Selection ModelsModels Since Since no no single single criterion criterion can can reflect reflect strastrategic tegic significancesignificance, , portfportfolio olio management management requirrequires es multi-criteria multi-criteria screening screening modelsmodels. . TTwo wo modelsmodels, , the the checklist checklist and and multi-multi- weighted weighted scoring scoring modelsmodels, , are are described described next.next.

Checklist Checklist ModelsModels The The most most frequentlfrequently y used used method method in in selecting selecting prprojects ojects has has been been the the checklist. checklist. This This apprapproach oach basically basically uses uses a a list list ofof questions questions to to reviereview w po-po- tential tential prprojects ojects and and to to deterdetermine mine their their acceptance acceptance or or rejection. rejection. SevSeveral eral ofof the the typ-typ- ical ical questions questions ffound ound in in practice practice are are listed listed in in Exhibit Exhibit 2.4. 2.4. One One larlargege, , multiprmultiproject oject ororganization ganization has has 250 250 difdifferent ferent questions!questions! A A justification justification ofof checklist checklist models models is is that that they they alloallow w greagreat t flexibility flexibility in in se-se-

lecting lecting among among manmany y differdifferent ent types types ofof pr projects ojects and and are are easily easily used used acracross oss differdiffer-- ent ent divisions divisions and and localocationstions. . Although Although manmany y projects projects arare e selected selected using using some some variavariation tion ofof the the checklist checklist apprapproach, oach, this this apprapproach oach has has serious serious shortcomingsshortcomings. . Major Major shortcomings shortcomings ofof this this apprapproach oach are are thathat t it it fails fails to to answanswer er ththe e relarelative tive im-im- portance portance or or value value ofof a a potential potential prproject oject to to the the organizaorganization tion and and fails fails to to allowallow

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40 40 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

ffor or comparison comparison with with other other potential potential prprojectsojects. . Each Each potential potential prproject oject will will hahave ve a a difdifferent ferent set set ofof positiv positive e and and negatinegative ve ansanswerswers. . How How do do yyou ou compare? compare? RRanking anking and and prioritizing prioritizing prprojects ojects by by their their importance importance is is difdifficult, ficult, ifif not not impossibleimpossible. . This This apprapproach oach also also lealeaves ves the the door door open open to to the the potential potential opportunity opportunity ffor or powpower er plaplaysys, , politicspolitics, , and and other other ffororms ms ofof manipula manipulation. tion. TTo o oovercome vercome these these seriousserious shortcomings shortcomings experts experts rrecommend ecommend the the use use ofof a a multi-wmulti-weighted eighted scoring scoring model model to to select select prprojectsojects, , which which is is eexamined xamined next.next.

Multi-WMulti-Weighted eighted Scoring Scoring ModelsModels A A weighted weighted scoring scoring model model typically typically uses uses seseveral veral weighted weighted selection selection criteria criteria to to eevaluavaluate te project project prproposalsoposals. . WWeighted eighted scoring scoring models models will will generallgenerally y include include qualitatiqualitative ve and/or and/or quantitatiquantitative ve criteria. criteria. Each Each selection selection crite-crite- rion rion is is asssigned asssigned a a weight. weight. ScorScores es are are assigned assigned to to each each criterion criterion ffor or the the project,project, based based on on its its importance importance to to the the prproject oject being being evaluaevaluated. ted. The The weights weights and and scores scores are are multiplied multiplied to to get get a a total total wweighted eighted score score ffor or the the prproject. oject. Using Using these these multiple multiple screening screening criteria, criteria, prprojects ojects can can then then be be compared compared using using the the wweighted eighted scorescore. . Proj-Proj- ects ects with with higher higher weighted weighted scorscores es are are considered considered betterbetter.. Selection Selection criteria criteria need need to to mirror mirror the the critical critical success success factors factors ofof an an organizaorganization. tion.

FFor or exampleexample, , 3M 3M set set a a target target thathat t 25 25 percent percent ofof the the company’company’s s sales sales wwould ould come come frfrom om products products fefewer wer than than ffour our years years old old versus versus the the old old tartarget get ofof 20 20 percent. percent. Their Their priority priority system system ffor or prproject oject selection selection stronglstrongly y reflects reflects this this new new tartarget. get. On On the the other other hand, hand, failure failure to to pick pick the the right right factors factors will will rrender ender the the screening screening prprocess ocess “useless”“useless” in in short short orderorder. . See See Snapshot Snapshot frfrom om Practice: Practice: Crisis Crisis ITIT.. Figure Figure 2.3 2.3 rrepresents epresents a a prproject oject scorinscoring g matrix matrix using using some some ofof the the factors factors ffound ound

in in practicepractice. . The The screening screening criteria criteria selected selected are are shoshown wn acracross oss the the top top ofof the the mamatrix trix (e(e.g., .g., stastay y within within core core competencies competencies . . . . . . RROI OI ofof 18 18 percent percent plus). plus). ManaManagement gement weights weights each each criterion criterion (a (a vvalue alue ofof 0 0 to to a a high high ofof, , saysay, , 3) 3) by by its its relarelativtive e importance importance to to the the ororganizationganization’’s s objectives objectives and and strastrategic tegic plan. plan. Project Project prproposals oposals are are then then sub-sub- mitted mitted to to a a prproject oject or or project project ofofficefice..priority priority teamteam

EXHIBIT EXHIBIT 2.42.4 Sample Sample Selection Selection Questions Questions Used Used in in PracticePractice

TTopic opic QuestionQuestion

Strategy/alignment Strategy/alignment What What specific specific organization organization strategy strategy does does this this project project align align with?with? Driver Driver What What business business problem problem does does the the project project solve?solve?

Success Success metrics metrics How How will will we we measure measure success?success? Sponsorship Sponsorship Who Who is is the the project project sponsor?sponsor?

Risk Risk What What is is the the impact impact of of not not doing doing this this project?project? Risk Risk What What is is the the project project risk risk to to our our organization?organization? Risk Risk Where Where does does the the proposed proposed project project fit fit in in our our risk risk profile?profile?

Benefits, Benefits, value, value, ROI ROI What What is is the the value value of of the the project project to to this this organization?organization? Benefits, Benefits, value, value, ROI ROI When When will will the the project project show show results?results?

Objectives Objectives What What are are the the project project objectives?objectives? Organization Organization culture culture Is Is our our organization organization culture culture right right for for this this type type of of project?project?

Resources Resources Will Will internal internal resources resources be be available available for for this this project?project? Approach Approach Will Will we we build build or or buy?buy? Schedule Schedule How How long long will will this this project project take?take? Schedule Schedule Is Is the the time time line line realistic?realistic?

TTraining/resources raining/resources Will Will staff staff training training be be required?required? Finance/portfolio Finance/portfolio What What is is the the estimated estimated cost cost of of the the project?project?

Portfolio Portfolio Is Is this this a a new new initiative initiative or or part part of of an an existing existing initiative?initiative? Portfolio Portfolio How How does does this this project project interact interact with with current current projects?projects?

TTechnology echnology Is Is the the technology technology available available or or new?new?

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 4141

In In May May 2007, 2007, Frontier Frontier Airlines Airlines Holdings Holdings hired hired Gerry Gerry Coady Coady as as chief chief information information officer officer (CIO). (CIO). Nearly Nearly a a year year later later the the airline airline filed filed for for bankbank-- ruptcy ruptcy under under Chapter Chapter 11. 11. In In an an interviinterview ew Coady Coady

describes describes how how he he managed managed IT IT projects projects during during the the bankruptcy bankruptcy and and recession recession crisis crisis of of 2008–2009.2008–2009. Fundamentally, Fundamentally, Coady Coady faced faced a a situation situation of of too too many many projproj--

ects ects and and too too few few resources. resources. Coady Coady used used a a strategy strategy of of focusing focusing on on reducing reducing the the number number of of projects projects in in the the portfolio. portfolio. He He put put together together a a steering steering committee committee of of senior senior management management that that rere-- viewed viewed several several hundred hundred projects. projects. The The end end result result was was a a reducreduc-- tion tion to to less less than than 30 30 projects projects remaining remaining in in the the portfolio.portfolio.

How How Can Can YYou ou Get Get to to a a Backlog Backlog of of over over 100 100 Projects?Projects? “There “There are are never never enough enough resources resources to to get get everything everything done.” done.” Backlogs Backlogs build build over over time. time. Sacred Sacred cow cow projects projects get get included included in in the the selection selection system. system. Projects Projects proposed proposed from from people people who who have have left left the the airline airline still still reside reside in in the the project project portfolio. portfolio. Non-value-Non-value- added added projects projects somehow somehow make make their their way way into into the the project project portfoportfo-- lio. lio. Soon Soon the the queue queue gets gets longerlonger. . With With everyone everyone in in IT IT working working on on too too many many projects projects concurrentlyconcurrently, , project project completion completion and and producproduc-- tivity tivity are are slowslow..

Which Which Projects Projects Remain?Remain? TTo o cut cut the the number number of of projects, projects, the the steering steering committee committee used used a a weighting weighting scheme scheme that that reflected reflected the the airline’airline’s s priorities, priorities, which which were: were: fly fly safe, safe, generate generate revenue, revenue, reduce reduce costs, costs, and and customer customer service. service. The The weighting weighting scheme scheme easily easily weeded weeded out out the the fluff. fluff.

S N A P S H O T S N A P S H O T F R O M F R O M P R A C T I C EP R A C T I C E Crisis Crisis ITIT

Coady Coady noted noted that that “by “by the the time time you you get get to to the the 20s 20s the the margin margin of of differentiation differentiation gets gets narrower narrower and and narrowernarrower.” .” Of Of the the remaining remaining projects, projects, project project sponsors sponsors had had to to hhave ave solid solid justification justification why why their their project project is is important. important. Reduction Reduction of of the the number number of of projects projects places places emphasis emphasis on on high high value value projects.projects.

What What Advice Advice Does Does Coady Coady Have Have for for Crisis Crisis Management?Management? In In times times of of crisis, crisis, it it is is easieasier er to to take take bold bold steps steps to to make make changes. changes. But But you you need need to to have have a a clear clear vision vision of of what what you you should should be be focusing focusing on on with with the the resources resources available. available. CoadCoady y suggests, suggests, “It “It comes comes back back to to really really having having a a good good idea idea of of what what the the initial initial business business case case for for a a project project is is and and what what resources resources it it is is consuming, consuming, both both people people and and otherwise.”otherwise.”

Source:Source: Worthen, Worthen, B., B., “Crisis “Crisis ITIT,” ,” , , April April 20, 20, The The Wall Wall Street Street JournalJournal 2009, 2009, p-Rp-R6.6.

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42 42 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

Each Each prproject oject proposal proposal is is then then eevaluavaluated ted by by its its relarelativtive e contribution/value contribution/value adadded ded to to the the selected selected criteria. criteria. VValues alues ofof 0 0 to to a a high high ofof 10 10 are are assigned assigned to to each each criterion criterion ffor or each each prproject. oject. This This value value reprrepresents esents the the project’project’s s fit fit to to the the specific specific criterion. criterion. FFor or exampleexample, , prproject oject 1 1 appears appears to to fit fit well well with with the the strastrategy tegy ofof the the organizaorganization tion since since it it is is givgiven en a a value value ofof 8. 8. ConvConverselyersely, , prproject oject 1 1 does does nothing nothing to to support support reducing reducing defects defects (its (its value value is is 0). 0). FinallFinallyy, , this this model model applies applies the the manamanagement gement weights weights to to each each criterion criterion by by importance importance using using a a vvalue alue ofof 1 1 to to 3. 3. FFor or exampleexample, , RROI OI and and strastrategic tegic fit fit hahave ve a a weight weight ofof 3, 3, while while ururgency gency and and core core competencies competencies hahave ve weights weights ofof 2. 2. ApplApplying ying the the weight weight to to each each criterion, criterion, the the priority priority team team derivderives es the the weighted weighted totaltotal points points ffor or each each project. project. FFor or exampleexample, , prproject oject 5 5 has has the the highest highest value value ofof 102 102 [(2 [(2 1) 1) 33 11 (3 (3 10) 10) (2 (2 33 11 33 5) 5) (2.5 (2.5 10) 10) 11 33 11 (1 (1 0) 0) (1 (1 33 11 33 8) 8) (3 (3 9) 9) 11 33 55 102] 102] and and prproject oject 2 2 has has a a low low vvalue alue ofof 27. 27. IfIf the the resources resources aavailavailable ble crcreate eate a a cutofcutofff threshold threshold ofof 50 50 pointspoints, , the the priority priority team team wwould ould eliminate eliminate prprojects ojects 2 2 and and 4. 4. (Note: (Note: PrProject4 oject4 aappears ppears to to hahave ve some some ururgencygency, , but but it it is is not not classified classified as as a a “must”“must” prproject. oject. TherefThereforeore, , it it is is screened screened with with all all other other prproposalsoposals.) .) Project Project 5 5 wwould ould receivreceive e first first prioritypriority, , project project second, second, and and so so on. on. In In rare rare cases cases wwhere here resourresources ces nn are are seseverelverely y limited limited and and project project prproposals oposals are are similar similar in in weighted weighted rank, rank, it it is is pru-pru- dent dent to to pick pick the the prproject oject placing placing less less demand demand on on resourcesresources. . WWeighted eighted multiple multiple criteria criteria models models similar similar to to this this one one are are rarapidly pidly becoming becoming the the dominant dominant choice choice ffor or pprioritizing rioritizing prprojectsojects.. At At this this point point in in the the discussion discussion it it is is wise wise to to stop stop and and put put things things intointo

perspectivperspectivee. . While While selection selection models models liklike e the the one one aabovbove e may may yield yield nnumerical umerical solutions solutions to to prproject oject selection selection decisionsdecisions, , models models should should not not make make the the finalfinal decisionsdecisions—the —the people people using using the the models models should. should. No No model, model, no no matter matter hohoww sophisticated, sophisticated, can can cacapture pture the the total total reality reality it it is is meant meant to to rrepresent. epresent. Models Models are are tools tools ffor or guiding guiding the the evevaluation aluation prprocess ocess so so thathat t the the decision-makers decision-makers will will con-con- sider sider relerelevant vant issues issues and and reach reach a a meeting meeting ofof the the minds minds as as to to which which prprojects ojects should should be be supported supported and and not not supported. supported. This This is is a a much much mormore e subjective subjective prprocess ocess than than calculacalculations tions suggest.suggest.

Applying Applying a a Selection Selection ModelModel Project Project ClassificationClassification It It is is not not necessary necessary to to hahave ve exactlexactly y the the same same criteria criteria ffor or the the

difdifferent ferent types types ofof pr projects ojects discussed discussed aabovbove e (stra(strategic tegic and and operations). operations). HoHoweweverver, , experience experience shoshows ws most most organizaorganizations tions use use similar similar criteria criteria across across all all types types ofof pr proj-oj- ectsects, , with with perhaps perhaps one one or or twtwo o criteria criteria specific specific to to the the type type ofof pr project—eoject—e.g., .g., strastrategic tegic breakthrbreakthrough ough versus versus operaoperational.tional. RRegardless egardless ofof criteria criteria difdifferences ferences among among difdifferent ferent types types ofof pr projectsojects, , the the most most

important important criterion criterion ffor or selection selection is is the the prproject’oject’s s fit fit to to the the organizaorganization tion strastrategytegy. . TherefThereforeore, , this this criterion criterion should should be be consistent consistent acracross oss all all types types ofof pr projects ojects and and carry carry a a high high priority priority relarelative tive to to other other criteria. criteria. This This unifuniforormity mity acracross oss all all prior-prior- itymodels itymodels used used can can keep keep departments departments frfrom om suboptimizing suboptimizing the the use use ofof organiza- organiza- tion tion resourresourcesces. . AnAnyyone one generating generating a a prproject oject proposal proposal should should classify classify theirtheir prproposal oposal by by typetype, , so so the the apprappropriate opriate criteria criteria can can be be used used to to eevaluavaluate te their their prproposal.oposal.

Selecting Selecting a a ModelModel In In the the past, past, financial financial criteria criteria were were used used almost almost to to the the eexclu-xclu- sion sion ofof other other criteria. criteria. HoweHoweverver, , in in the the last last twtwo o decades decades we we hahave ve witnessed witnessed a a dra-dra- mamatic tic shift shift to to include include multiple multiple criteria criteria in in prproject oject selection. selection. Concisely Concisely put,put,

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 4343

prprofitaofitability bility alone alone is is simply simply not not an an adequaadequate te measure measure ofof contribution; contribution; hohoweverwever, , it it is is still still an an important important criterion, criterion, especially especially ffor or prprojects ojects that that enhance enhance rerevenvenue ue and and markmarket et share share such such as as brbreakthrough eakthrough R&D R&D prprojectsojects.. TTodaodayy, , senior senior management management is is interested interested in in identifying identifying the the potential potential mix mix ofof pr proj-oj- ects ects thathat t will will yield yield the the best best use use ofof human human and and capital capital rresources esources to to maximize maximize return return on on ininvestment vestment in in the the long long run. run. FFactors actors such such as as researching researching nenew w technologytechnology, , public public imageimage, , ethical ethical position, position, protection protection ofof the the enenvironment, vironment, corcore e competenciescompetencies, , and and strastrategic tegic fit fit might might be be important important criteria criteria ffor or selecting selecting projectsprojects. . WWeighted eighted scoring scoring criteria criteria seem seem the the best best alternaalternative tive to to meet meet this this need.need. WWeighted eighted scoring scoring models models result result in in bringing bringing prprojects ojects to to closer closer alignment alignment with with

strastrategic tegic goalsgoals. . IfIf the the scoring scoring model model is is published published and and aavailavailable ble to to everyeveryone one in in the the ororganization, ganization, some some discipline discipline and and credibility credibility arare e attached attached to to the the selection selection ofof pr proj-oj- ectsects. . The The nnumber umber ofof wasteful wasteful prprojects ojects using using resources resources is is reduced. reduced. PPolitics olitics and and “sacred “sacred cocow”w” projects projects arare e exposed. exposed. PrProject oject goals goals are are more more easileasily y identified identified and and communicacommunicated ted using using the the selection selection criteria criteria as as corroboracorroboration. tion. FinallyFinally, , using using a a weighted weighted scoring scoring aapproach pproach helps helps prproject oject managers managers understand understand hohow w their their project project was was selected, selected, hohow w their their prproject oject contributes contributes to to ororganization ganization goalsgoals, , and and how how it it com-com- pares pares with with other other prprojectsojects. . PrProject oject selection selection is is one one ofof the the most most important important decisions decisions guiding guiding the the future future success success ofof an an organizaorganization.tion. Criteria Criteria ffor or project project selection selection arare e the the area area wherwhere e the the powpower er ofof y your our portfportfolio olio

starts starts to to manifest manifest itselfitself. . New New prprojects ojects are are aligned aligned with with the the strastrategic tegic goals goals ofof the the ororganization. ganization. WWith ith a a clear clear method method ffor or selecting selecting projects projects in in placeplace, , prproject oject proposals proposals can can be be solicited.solicited.

Sources Sources and and Solicitation Solicitation of of Project Project ProposalsProposals As As yyou ou wwould ould guessguess, , projects projects should should come come frfrom om anyanyone one who who believbelieves es his his or or her her prproject oject will will add add value value to to the the ororganizaganization. tion. HoweHoweverver, , manmany y organizaorganizations tions restrict restrict prproposals oposals from from specific specific lelevels vels or or grgroups oups within within the the organizorganizaation. tion. This This could could be be an an opportunity opportunity lost. lost. Good Good ideas ideas are are not not limited limited to to certain certain types types or or classes classes ofof organi- organi- zazation tion stakeholdersstakeholders. . Encourage Encourage and and kkeep eep solicitasolicitations tions open open to to all all sources—internal sources—internal and and external external sponsorssponsors.. Figure Figure 2.4A 2.4A prprovides ovides an an eexample xample ofof a a prproposal oposal form form ffor or an an automaautomatic tic vehic-vehic-

ular ular tracking tracking (A(Automatic utomatic VVehicle ehicle Location) Location) public public trtransportation ansportation prproject.oject. FigurFigure e 2.4B 2.4B presents presents a a preliminary preliminary risk risk analanalysis ysis ffor or a a 500-acre 500-acre wind wind farfarm. m. ManMany y organizaorganizations tions use use risk risk analysis analysis templatemplates tes to to gain gain a a quick quick insight insight ofof a a prproject’oject’s s inherent inherent risksrisks. . Risk Risk factors factors depend depend on on the the organizaorganization tion and and type type ofof prprojectsojects. . This This informainformation tion is is useful useful in in balancing balancing the the project project portfportfolio olio and and identifying identifying major major risks risks wwhen hen executing executing the the prproject. oject. PrProject oject risk risk analysis analysis is is the the subject subject ofof Chapter Chapter 7.7. In In some some cases cases ororganizations ganizations will will solicit solicit ideas ideas ffor or projects projects wwhen hen the the knowledge knowledge

requirrequirements ements for for the the prproject oject are are not not aavailavailable ble in in the the ororganization. ganization. TTypicallyypically, , the the ororganization ganization will will issue issue an an RFP RFP (R(Request equest ffor or Proposal) Proposal) to to contrcontractors/vendors actors/vendors with with adequaadequate te experience experience to to implement implement the the prproject. oject. In In one one exampleexample, , a a hospital hospital published published an an RFP RFP thathat t askasked ed for for a a bid bid to to design design and and bbuild uild a a new new operaoperating ting rroom oom thathat t uses uses the the latest latest technolotechnologygy. . Several Several ararchitecture chitecture firfirms ms submitted submitted bids bids to to the the hospital. hospital. The The bids bids ffor or the the prproject oject were were evevaluaaluated ted internally internally against against other other potential potential prprojectsojects. . When When the the prproject oject was was accepted accepted as as a a gogo, , other other criteria criteria were were used used to to select select the the best best qualified qualified bidderbidder. . See See Appendix Appendix 2.1 2.1 ofof this this chapter chapter ffor or a a complete complete descrip-descrip- tion tion ofof requests requests ffor or proposal proposal (RFP).(RFP).

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44 44 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

Ranking Ranking Proposals Proposals and and Selection Selection of of ProjectsProjects Culling Culling thrthrough ough so so manmany y proposals proposals to to identify identify those those thathat t add add the the most most vvalue alue re-re- quires quires a a structurstructured ed processprocess. . Figure Figure 2.5 2.5 shows shows a a floflow w chart chart ofof a a screenscreening ing prprocess ocess beginning beginning with with the the creacreation tion ofof an an idea idea ffor or a a project. project. See See templatemplate te ffor or evaluaevaluating ting contractors contractors in in AAppendix ppendix 2.1.2.1. Data Data and and infinforormation mation arare e collected collected to to assess assess the the value value ofof the the proposed proposed prproject oject

to to the the ororganization ganization and and ffor or future future backupbackup. . IfIf the the sponsor sponsor decides decides to to pursue pursue the the prproject oject on on the the basis basis ofof the the collected collected dadata, ta, it it is is forwforwarded arded to to the the prproject oject priority priority team team (or (or the the prproject oject office). office). Note Note thathat t the the sponsor sponsor knoknows ws which which criteria criteria will will be be

FIGURE FIGURE 2.4A2.4A A A PrProposal oposal Form Form for for an an AAutomatic utomatic VVehicularehicular TrTracking acking (A(AVL) VL) PublicPublic TrTransportation ansportation Project.Project.

PProject roject PProposal roposal FormForm

PProject roject classification?classification?

What What bbusiness usiness problem problem does does the the prproject oject solve?solve?

Increase Increase custcustomer omer satisfaction satisfaction through through kiosk kiosk and and Web Web site site ffor or bus, bus, strstreetcareetcar, , and and fast fast railrail Enhance Enhance driver driver and and tratraveler veler safsafetetyy

StrategicStrategic InfrastructureInfrastructure ComplianceCompliance

DateDate:: PProposal roposal ## SponsorSponsor Jan Jan 22, 22, 2xxx2xxx 1111

J.J. Moran Moran

Hyperlink Hyperlink to:to: AAVL.tri-met.orgVL.tri-met.org

Increase Increase custcustomer omer rridership idership thrthrough ough bettbetter er passenger passenger travel travel planning planning & & scheduling scheduling decisionsdecisions FFaster aster response response tto o accidentsaccidents

How How does does this this prproject oject align align with with our our organization organization stratstrategy? egy?

What What arare e the the major major deliverabdeliverables les of of the the project?project?

What What is is the the impact impact of of not not doing doing this this prproject?oject?

What What arare e the the three three major major risks risks for for this this prproject?oject?

Increased Increased ridershipridership Customer Customer satisfsatisfactionaction Meeting Meeting budget budget and and scheduleschedule

How How will will we we measurmeasure e success?success?

What What is is the the estimatestimated ed cost cost of of the the project? project?

How How long long will will this this prproject oject take?take?

OverOversight sight action:action:

SignatureSignature

AcceptAccept

XXXXXXXXXXXX DateDate:: FebFeb.. 7 7, , 2xxx2xxx

ReturnReturn

2222 WeeksWeeks

$1$10 0 millionmillion

Will Will this this prproject oject require require intinterernal nal resources?resources?

AAvailable?vailable?

YeYess NoNo YeYess

Not Not meeting meeting ridership ridership goalsgoals

Cost Cost ovoverrunserruns Hacking Hacking ssystemystem

IntegrIntegration ation of of fast fast rail, rail, bbus, us, and and streetcar streetcar ssystemsystems

GPS GPS vehicle vehicle trtracking acking sysystem, stem, Internet Internet access, access, schedule schedule screenscreen

NoNo

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 4545

FIGURE FIGURE 2.4B2.4B Risk Risk Analysis Analysis for for a a 500-Acre 500-Acre Wind Wind FFarmarm

Brief Brief Risk Risk AAssessmentssessment

Risk Risk Intensity Intensity RatingRating

PurPurpose: pose: TTo o draw draw atattention tention to to apparapparent ent project project risks risks that that will will need need management management attattention.ention.

Rank Rank risks risks aboabove ve by by “probability”“probability” and and “impact”“impact” on on the the chart chart below below by by High,High, Medium Medium or or LowLow..

What What are are the the ffour our major major risks risks of of this this project?project?

1.1.

2.2.

3.3.

GoverGovernment nment incentives incentives curtailedcurtailed

Land Land use use injunctioninjunction

EnergEnergy y price price decreasedecrease

4.4. New New import import ttaxax

RiskRisk PrProbabilityobability ImpactImpact

1.1.

2.2.

3.3.

GoverGovernment nment incentives incentives curtailedcurtailed

Land Land use use injunctioninjunction

EnergEnergy y price price decreasedecrease

4.4. New New import import ttaxax

HighHigh

MediumMedium

LowLow

HighHigh

MediumMedium

HighHigh

Check Check other other prproject oject risk risk factors:factors:

ComplexityComplexity

ResourResource ce skillsskills

TTechnologyechnology

LowLow

GoodGood

LowLow

AAverageverage

OkaOkayy

AAverageverage

HighHigh

LackingLacking

HighHigh

ReReviewed viewed byby DateDate

RacRachelhel April April 1,1, 2xxx 2xxx

used used to to accept accept or or reject reject the the prproject. oject. GivGiven en the the selection selection criteria criteria and and current current port-port- ffolio olio ofof pr projectsojects, , the the priority priority team team rejects rejects or or accepts accepts the the prproject. oject. IfIf the the prproject oject is is accepted, accepted, the the priority priority team team sets sets implementaimplementation tion in in motion.motion. Figure Figure 2.6 2.6 is is a a partial partial example example ofof an an evevaluation aluation ffororm m used used by by a a larlarge ge company company

to to prioritize prioritize and and select select new new prprojectsojects. . The The form form distinguishes distinguishes between between mmust ust and and want want objectiobjectivesves. . IfIf a a prproject oject does does not not meet meet designated designated “m“must”ust” objectives objectives, , it it is is not not considered considered and and rremovemoved ed from from consideraconsideration. tion. OrganizaOrganization tion (or (or division) division) objectivobjectives es hahave ve been been rankranked ed and and weighted weighted by by their their rrelatielative ve importance—fimportance—for or exampleexample, , “Impr“Improvove e external external customer customer service”service” carries carries a a relarelative tive wweight eight ofof 83 83 when when com-com- pared pared to to other other wwant ant objectivesobjectives. . The The want want objectivobjectives es are are directldirectly y linked linked to to objec-objec- tivtives es found found in in the the strstrategic ategic plan.plan. Impact Impact definitions definitions represent represent a a further further rrefinement efinement to to the the screening screening system. system. They They are are dedeveloped veloped to to gauge gauge the the predicted predicted impact impact a a specific specific prproject oject wwould ould hahave ve on on meeting meeting a a particular particular objectivobjectivee. . A A nnumeric umeric scheme scheme is is created created and and anchoranchored ed by by de-de- fining fining criteria. criteria. TTo o illustrate illustrate hohow w this this wworksorks, , let’let’s s examine examine the the $5 $5 million million in in new new sales sales objectivobjectivee. . A A “0”“0” is is assigned assigned ifif the the project project will will hahave ve no no impact impact on on sales sales or or less less than than $100,000, $100,000, a a “1”“1” is is given given ifif predicted predicted sales sales are are mormore e than than $100,000 $100,000 but but less less than than $500,000, $500,000, a a “2”“2” if if grea greater ter than than $500,000. $500,000. These These impact impact assessments assessments are are com-com- bined bined with with the the relarelative tive importance importance ofof each each objectivobjective e to to deterdetermine mine the the predicted predicted ooverall verall contribcontribution ution ofof a a prproject oject to to strategic strategic objectiobjectivesves. . FFor or exampleexample, , prproject oject 26 26

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46 46 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

creacreates tes an an opportunity opportunity to to fix fix field field prproblemsoblems, , has has no no efeffect fect on on salessales, , and and will will hahave ve major major impact impact on on customer customer serviceservice. . On On these these three three objectivobjectiveses, , project project 26 26 wwould ould receireceive ve a a score score ofof 265 265 [99 [99 0 0 (2 (2 83)]. 83)]. Individual Individual weighted weighted scorscores es are are totaled totaled 11 11 33 ffor or each each prproject oject and and are are used used to to prioritize prioritize projectsprojects..

RResponsibility esponsibility for for PrioritizingPrioritizing Prioritizing Prioritizing can can be be an an uncomfuncomfortaortable ble exexercise ercise ffor or managersmanagers. . But But prioritizing prioritizing prprojects ojects is is a a major major responsibility responsibility ffor or senior senior management. management. Prioritizing Prioritizing meansmeans disciplinediscipline, , accountabilityaccountability, , responsibilityresponsibility, , constraintsconstraints, , reduced reduced flexibilityflexibility, , and and loss loss ofof power power. . TTop op management management commitment commitment means means mormore e than than giving giving a a bless-bless- ing ing to to the the priority priority system; system; it it means means management management will will hahave ve to to rank rank and and wweigh, eigh, in in concrete concrete termsterms, , the the objectives objectives and and strstrategies ategies they they beliebelieve ve to to be be most most critical critical to to the the ororganization. ganization. This This public public declardeclaration ation ofof commitment commitment can can be be riskrisky y ifif the the rankranked ed objectives objectives lalater ter proprove ve to to be be poor poor choiceschoices, , but but setting setting the the course course ffor or the the ororganization ganization is is top top manamanagement’gement’s s jobjob. . The The good good news news isis, , ifif management management is is trultruly y trying trying to to direct direct the the ororganization ganization to to a a strstrong ong future future position, position, a a good good prproject oject pri-pri- ority ority system system supports supports their their efefforts forts and and dedevelops velops a a culture culture in in wwhich hich everyeveryone one is is contributing contributing to to the the goals goals ofof the the ororganization.ganization.

Managing Managing the the Portfolio Portfolio SystemSystem Managing Managing the the portfportfolio olio taktakes es the the selection selection system system one one step step higher higher in in that that the the merits merits ofof a a particular particular project project arare e assessed assessed within within the the context context ofof existing existing prprojectsojects. . At At the the same same time time it it ininvolvvolves es monitoring monitoring and and adjusting adjusting selection selection criteria criteria to to reflect reflect

FIGURE FIGURE 2.52.5 PrProject oject Screening Screening PrProcessocess

PPeriodiceriodic reassessmentreassessment

of of prioritiespriorities

Return Return forfor moremore

informainformationtion

AbandonAbandon

RejectReject AcceptAccept

PPursueursue

PProjectroject proposalproposal

ideaidea

DatDataa collectioncollection

and and backupbackup

Self-evSelf-evaluationaluation of of projectproject by by criteriacriteria

PPriorriority ity teamteam evevaluates aluates prproposaloposal

and and rereviews views porportftfolioolio for for risk risk balancebalance

NeedNeed strategic strategic ffitit

ROI/paROI/paybackyback riskrisk

Assign Assign prioritpriorityy Assign Assign resourresourcesces

Assign Assign project project managermanager

EvaluatEvaluate e progrprogressess

Hold Hold forfor resourresourcesces

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 4747

the the strastrategic tegic ffocus ocus ofof the the organizaorganization. tion. This This requires requires constant constant efefffort. ort. The The priority priority system system can can be be managed managed bby y a a small small grgroup oup ofof k key ey employees employees in in a a small small ororganiza-ganiza- tion. tion. OrOr, , in in larlarger ger organizaorganizationstions, , the the priority priority system system can can be be managed managed bby y the the proj-proj- ect ect ofoffice fice or or a a govgovernance ernance team team ofof senior senior managersmanagers..

Senior Senior ManagManagement ement InputInput Management Management ofof a a portfportfolio olio system system requires requires twtwo o major major inputs inputs from from senior senior manamanage-ge- ment. ment. First, First, senior senior management management mmust ust prprovide ovide guidance guidance in in estaestablishing blishing selection selection cri-cri- teria teria thathat t stronglstrongly y align align with with the the current current ororganization ganization strastrategiestegies. . Second, Second, senior senior management management mmust ust annannually ually decide decide hohow w they they wish wish to to balance balance the the aavailavailable ble organiza-organiza- tional tional resourresources ces (people (people and and capital) capital) among among the the difdifferent ferent types types ofof pr projectsojects. . A A pre-pre- liminary liminary decision decision ofof balance balance must must be be made made by by top top manamanagement gement (e(e.g., .g., 20 20 percent percent compliancecompliance, , 50 50 percent percent strastrategic, tegic, and and 30 30 percent percent operaoperational) tional) beforbefore e project project selec-selec- tion tion taktakes es placeplace, , although although the the balance balance mamay y be be changed changed when when the the prprojects ojects submitted submitted are are rreviewed. eviewed. GiGiven ven these these inputs inputs the the priority priority team team or or prproject oject office office can can carry carry out out its its

FIGURE FIGURE 2.62.6 Priority Priority Screening Screening AnalysisAnalysis

Must Must objectivesobjectives

All All activities activities meet meet currentcurrent legal, legal, safsafetetyy, , andand envirenvironmental onmental standardsstandards

All All new new prproducts oducts will will havehave a a complete complete marketmarket analyanalysissis

WWant ant objectivesobjectives Single Single projectproject

impact impact definitionsdefinitions

PProvides rovides immediatimmediatee response response tto o fieldfield probproblemslems

RelativeRelative

ImportanceImportance

1-1-110000

WeightWeighteded

scorescore

WeightWeighteded

scorescore

WeightWeighteded

scorescore

WeightWeighteded

scorescore

9999

8888

8383

9999

yesyes

n/an/a

161666

0 0 Does Does not not addressaddress 1 1 = = OpporOpportuntunity ity to to fixfix 2 2 Urgent Urgent prproblemoblem

0 0 < < $1$100,00000,000 1 1 = = $1$100,000–500,00000,000–500,000 2 2 > > $500,000$500,000

0 0 Minor Minor impactimpact 1 1 = = Significant Significant impactimpact 2 2 Major Major impactimpact

CreatCreate e $5 $5 million million inin new new sales sales bby y 20xx20xx

TTotal otal weightweighted ed scorescore

PPriorriorityity

ImproImprove ve extexterernalnal customer customer serviceservice

YYes-Meets es-Meets objectiveobjective No-Does No-Does not not meet meet objobj N/AN/A-No -No impactimpact

Must Must meet meet if if impactsimpacts ...26...26 2727 2828 2929

PrProject oject numbernumber

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48 48 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

manmany y responsibilitiesresponsibilities, , which which include include supporting supporting prproject oject sponsors sponsors and and representing representing the the interests interests ofof the the total total organizaorganization.tion.

The The GoGovernance vernance TTeam eam ResponsibilitiesResponsibilities The The gogovernance vernance team, team, or or prproject oject officeoffice, , is is responsible responsible ffor or publishing publishing the the priority priority ofof every every prproject oject and and ensuring ensuring the the prprocess ocess is is open open and and free free ofof po power wer politicspolitics. . FFor or exampleexample, , most most organizaorganizations tions using using a a govgovernance ernance team team or or project project ofoffice fice use use an an elec-elec- trtronic onic bulletin bulletin board board to to disperse disperse the the currcurrent ent portfportfolio olio ofof pr projectsojects, , the the current current sta-sta- tus tus ofof each each project, project, and and currcurrent ent issuesissues. . This This open open communicacommunication tion discouradiscourages ges popower wer plaplaysys. . Over Over time time the the gogovernance vernance team team evevaluates aluates the the prprogrogress ess ofof the the prprojects ojects in in the the portfportfolioolio. . IfIf this this wwhole hole process process is is manamanaged ged well, well, it it can can hahave ve a a prprofofound ound im-im- pact pact on on the the success success ofof an an organizaorganization.tion. Constant Constant scanning scanning ofof the the external external enenvironment vironment to to determine determine ifif organiza organizational tional

ffocus ocus and/or and/or selection selection criteria criteria need need to to be be changed changed is is imperaimperative! tive! PPeriodic eriodic priority priority re-re- view view and and changes changes need need to to kkeep eep current current with with the the changing changing enenvironment vironment and and kkeep eep aa unified unified vision vision ofof organiza organization tion ffocusocus. . RRegardless egardless ofof the the criteria criteria used used ffor or selection, selection, each each prproject oject should should be be evaluaevaluated ted by by the the same same criteria. criteria. IfIf projects projects arare e classified classified by by must must dodo,, operaoperation, tion, and and strastrategic, tegic, each each project project in in its its class class should should be be eevaluavaluated ted by by the the same same cri-cri- teria. teria. EnfEnforcing orcing the the prproject oject priority priority system system is is crucial. crucial. KKeeeping eping the the whole whole system system open open and and aaboboveboarveboard d is is important important to to maintaining maintaining the the integrity integrity ofof the the system system and and keeping keeping newnew, , young young eexecutivxecutives es from from going going araround ound the the system. system. FFor or exampleexample, , communicacommunicatingting which which prprojects ojects are are apprapprovoved, ed, project project ranksranks, , current current status status ofof in-pr in-process ocess projectsprojects, , and and anany y changes changes in in priority priority criteria criteria will will discourage discourage people people frfrom om bypassing bypassing the the system.system.

Balancing Balancing the the Portfolio Portfolio for for Risks Risks and and TTypes ypes of of ProjectsProjects A A major major responsibility responsibility ofof the the priority priority team team is is to to balance balance prprojects ojects by by typetype, , risk, risk, andand resourresource ce demand. demand. This This requires requires a a total total ororganization ganization perspectiperspectiveve. . HenceHence, , a a proposed proposed prproject oject that that ranks ranks high high on on most most criteria criteria mamay y not not be be selected selected because because the the organiza-organiza- tion tion portfportfolio olio alreadalready y includes includes too too manmany y projects projects with with the the same same characteristics—echaracteristics—e.g.,.g., prproject oject risk risk level, level, use use ofof k key ey resourcesresources, , high high cost, cost, nonrevnonrevenue enue prproducing, oducing, long long dura-dura- tionstions. . Balancing Balancing the the portfportfolio olio ofof pr projects ojects is is as as important important as as project project selection. selection. OrOrga-ga- nizanizations tions need need to to evaluaevaluate te each each new new prproject oject in in terms terms ofof wha what t it it adds adds to to the the prproject oject mix. mix. Short-term Short-term needs needs need need to to be be balanced balanced with with long-terlong-term m potential. potential. RResource esource us-us- age age needs needs to to be be optimized optimized acracross oss all all prprojectsojects, , not not just just the the most most important important project.project. TTwwo o types types ofof risk risk are are associaassociated ted with with projectsprojects. . First First are are risks risks associaassociated ted with with

the the total total portfportfolio olio ofof pr projectsojects, , which which should should rrefeflect lect the the ororganizationganization’’s s risk risk profileprofile. . Second Second are are specific specific prproject oject risks risks thathat t can can inhibit inhibit the the execution execution ofof a a project, project, such such as as scheduleschedule, , cost, cost, and and technical. technical. In In this this chapter chapter we we look look onlonly y to to balancing balancing the the orga-orga- nizanizational tional risks risks inherent inherent in in the the prproject oject portfolioportfolio, , such such as as markmarket et risk, risk, aability bility to to exexecuteecute, , time time to to markmarket, et, and and technology technology adadvancesvances. . PrProject-specific oject-specific risks risks will will be be cocovered vered in in detail detail in in ChaChapter pter 7.7. DaDavid vid and and Jim Jim Matheson Matheson studied studied R&D R&D ororganizaganizations tions and and developed developed a a classifi-classifi-

cacation tion scheme scheme that that could could be be used used ffor or assessing assessing a a project project portfportfolioolio..77 They They separaseparated ted prprojects ojects in in terterms ms ofof degree degree ofof difficulty difficulty and and commercommercial cial value value and and came came up up with with ffour our basic basic types types ofof pr projects:ojects:

BrBread ead and and butter butter projects projects arare e relarelativeltively y easy easy to to accomplish accomplish and and produce produce mod-mod- est est commercial commercial vvaluealue. . They They typictypically ally ininvolvvolve e evolutionary evolutionary imprimprovovements ements to to

7 7 Matheson, Matheson, D., D., and and J. J. Matheson, Matheson, (Boston: (Boston: Harvard Harvard Business Business School School Press, Press, 1998), 1998), pp. pp. 203–209.203–209.The The Smart Smart OrganizationOrganization

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 4949

current current prproducts oducts and and servicesservices. . Examples Examples include include softwarsoftware e upgrades upgrades and and manu-manu- facturing facturing cost cost reduction reduction efefffortsorts.. PPearlsearls ar are e low low risk risk devdevelopment elopment projects projects with with high high commercommercial cial papayofyoffsfs. . They They reprrepresent esent revrevolutionary olutionary commercial commercial advadvances ances using using prprovoven en technologytechnology. . Exam-Exam- ples ples include include next-generanext-generation tion integrated integrated circircuit cuit chip chip and and subsurface subsurface imaging imaging to to localocate te oil oil and and gasgas.. OysterOysters s are are high high risk, risk, high high value value prprojectsojects. . These These prprojects ojects invinvolve olve technological technological breakthrbreakthroughs oughs with with tremendoustremendous, , commercial commercial potential. potential. Examples Examples include include em-em- brybryonic onic DNA DNA trtreatments eatments and and new new kinds kinds ofof metal metal alloalloysys.. White White elephants elephants are are prprojects ojects thathat t at at one one time time shoshowed wed prpromise omise but but arare e no no longer longer viaviableble. . Examples Examples include include products products ffor or a a satursaturated ated markmarket et or or a a potent potent enerenergy gy source source with with toxic-side-eftoxic-side-effectsfects..

The The MaMathesons thesons report report thathat t organizaorganizations tions often often hahave ve too too manmany y white white elephantselephants and and too too few few pearls pearls and and ooystersysters. . TTo o maintain maintain strategic strategic adadvantavantage ge they they recom-recom- mend mend thathat t organizaorganizations tions capitalize capitalize on on pearlspearls, , eliminate eliminate or or rreposition eposition white white ele-ele- phantsphants, , and and balance balance resources resources devdevoted oted to to bread-and-bbread-and-butter utter and and oyster oyster prprojects ojects to to achievachieve e alignment alignment with with ovoverall erall strastrategytegy. . Although Although their their research research centers centers onon R&D R&D ororganizationsganizations, , their their observaobservations tions appear appear to to hold hold true true ffor or all all types types ofof pr proj-oj- ect ect ororganizationsganizations..

SummarySummary Multiple Multiple competing competing prprojectsojects, , limited limited skilled skilled resourcesresources, , dispersed dispersed virtual virtual teamsteams, , time time to to markmarket et pressurpressureses, , and and limited limited capital capital serve serve as as fforces orces ffor or the the emergence emergence ofof prproject oject portfportfolio olio management management thathat t proprovides vides the the infrastructure infrastructure ffor or managing managing mmul-ul- tiple tiple prprojects ojects and and linking linking business business strastrategy tegy with with prproject oject selection. selection. The The most most im-im- portant portant element element ofof this this system system is is the the creationcreation of of a a ranking ranking system system thathat t utilizutilizes es multiple multiple criteria criteria thathat t reflect reflect the the mission mission and and strategy strategy ofof the the firm. firm. It It is is critical critical to to communicacommunicate te priority priority criteria criteria to to all all organizaorganizational tional stakeholders stakeholders so so thathat t the the crite-crite- ria ria can can be be the the source source ofof inspira inspiration tion for for nenew w project project ideasideas.. Every Every significant significant prproject oject selected selected should should be be rankranked ed and and the the results results published. published.

Senior Senior management management mmust ust taktake e an an active active rrole ole in in setting setting priorities priorities and and supporting supporting the the priority priority system. system. Going Going araround ound the the priority priority system system will will destrodestroy y its its effectieffectivenessveness. . The The prproject oject govgovernance ernance team team needs needs to to consist consist ofof seasoned seasoned managers managers wwho ho are are ca-ca- papable ble ofof asking asking tough tough questions questions and and distinguishing distinguishing facts facts from from fiction. fiction. RResources esources (people(people, , equipment, equipment, and and capital) capital) ffor or major major prprojects ojects must must be be clearlclearly y allocated allocated and and not not conflict conflict with with daily daily operaoperations tions or or become become an an ovoverload erload task.task. The The govgovernance ernance team team needs needs to to scrutinizscrutinize e significant significant prprojects ojects in in terterms ms ofof not not

only only their their strstrategic ategic vvalue alue but but also also their their fit fit with with the the portfportfolio olio ofof pr projects ojects currentlcurrently y being being implemented. implemented. Highly Highly rranked anked prprojects ojects may may be be deferrdeferred ed or or even even turned turned dodown wn ifif they they upset upset the the current current balance balance among among risksrisks, , resourcesresources, , and and strastrategic tegic initiatiinitiativesves. . PrProject oject selection selection must must be be based based not not onlonly y on on the the merits merits ofof the the specific specific prproject oject but but also also on on whawhat t it it contributes contributes to to the the current current prproject oject portfolio portfolio mix. mix. This This rrequires equires a a holistic holistic apprapproach oach to to aligning aligning projects projects with with ororganizaganizational tional strategy strategy and and rresourcesesources.. The The importance importance ofof aligning aligning prprojects ojects with with organizaorganization tion strategy strategy cannot cannot bebe

ooverstaverstated. ted. WWe e hahave ve discussed discussed twtwo o types types ofof models models ffound ound in in practicepractice. . Checklist Checklist models models are are easy easy to to dedevelop velop and and are are justified justified primarilprimarily y on on the the basis basis ofof flexibility flexibility acracross oss differdifferent ent divisions divisions and and localocationstions. . UnfUnfortunatelortunatelyy, , questionnaire questionnaire checklist checklist models models do do not not alloallow w comparison comparison ofof the the relarelative tive vvalue alue (rank) (rank) ofof alterna alternative tive prproj-oj- ects ects in in contributing contributing totoward ward ororganization ganization strstrategyategy. . The The lalatter tter is is the the major major reason reason

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50 50 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

the the authors authors prefer prefer mmulti-weighted ulti-weighted scoring scoring modelsmodels. . These These models models kkeep eep project project se-se- lection lection highly highly ffocused ocused on on alignment alignment with with organizaorganization tion strastrategytegy. . WWeighted eighted scoring scoring models models requirrequire e major major effeffort ort in in estabestablishing lishing the the criteria criteria and and weightsweights..

Key Key TTermserms ImplementaImplementation tion gapgap, , 3333 Net Net present present vvaluealue, , 3737 OrOrganization ganization politicspolitics,,3333

PaPayback, yback, 3737

Priority Priority system, system, 3232 Priority Priority team, team, 4040 PrProject oject portfportfolio, olio, 3232 PrProject oject screening screening

mamatrix, trix, 4141

Sacred Sacred cocoww, , 3333 StraStrategic tegic management management prprocessocess, , 2828

Review Review QuestionsQuestions

1. 1. Describe Describe the the major major components components ofof the the strastrategic tegic management management prprocessocess.. 2. 2. Explain Explain the the role role prprojects ojects play play in in the the strstrategic ategic manamanagement gement processprocess.. 3. 3. How How are are prprojects ojects linked linked to to the the strstrategic ategic plan?plan? 4. 4. The The portfportfolio olio ofof pr projects ojects is is typically typically reprrepresented esented by by compliancecompliance, , strategic, strategic, and and

operaoperations tions prprojectsojects. . WWhat hat impact impact can can this this classificaclassification tion hahave ve on on prproject oject selection?selection? 5. 5. WhWhy y does does the the priority priority system system described described in in this this chapter chapter rrequire equire thathat t it it be be open open

and and published? published? Does Does the the prprocess ocess encourage encourage bottom-up bottom-up initiainitiation tion ofof pr projects? ojects? Does Does it it discouradiscourage ge some some projects? projects? WWhhy?y?

6. 6. WhWhy y should should an an ororganization ganization not not relrely y only only on on RROI OI to to select select prprojects?ojects? 7. 7. Discuss Discuss the the pros pros and and cons cons ofof the the checklist checklist versus versus the the wweighted eighted factor factor method method ofof selecting selecting prprojectsojects..

ExercisesExercises 1. 1. YYou ou manamanage ge a a hotel hotel resort resort localocated ted on on the the South South Beach Beach on on the the Island Island ofof Kauai Kauai in in HaHawaii. waii. YYou ou are are shifting shifting the the ffocus ocus ofof y your our resort resort frfrom om a a traditional traditional fun-in-fun-in- the-sun the-sun destinadestination tion to to eco-tourism. eco-tourism. (Eco-tourism (Eco-tourism focuses focuses on on enenvirvironmental onmental aawareness wareness and and educaeducation.) tion.) How How wwould ould yyou ou classify classify the the ffollowing ollowing prprojects ojects in in terms terms ofof compliance compliance, , strastrategic, tegic, and and operational?operational?

a. a. ConConvert vert the the pool pool heaheating ting system system from from electrical electrical to to solar solar popowerwer.. bb. . Build Build a a 4-mile 4-mile naturnature e hiking hiking trail.trail. c. c. RRenovenovate ate the the horse horse barn.barn. d. d. Launch Launch a a nenew w promotional promotional campaign campaign with with HaHawaii waii AirlinesAirlines.. ee. . ConConvert vert 12 12 adjacent adjacent acres acres into into a a wildlife wildlife preservpreservee.. ff. . UpdaUpdate te all all the the bathrbathrooms ooms in in condos condos thathat t are are 10 10 years years old old or or olderolder.. g. g. Change Change hotel hotel brbrochures ochures to to reflect reflect eco-tourism eco-tourism iimamagege.. h. h. TTest est and and revise revise disaster disaster rresponse esponse plan.plan. i. i. IntrIntroduce oduce wireless wireless Internet Internet service service in in café café and and lounge lounge areasareas..

How How easy easy wwas as it it to to classify classify these these projects? projects? WWhat hat made made some some prprojects ojects more more dif-dif- ficult ficult than than others? others? WWhat hat do do yyou ou think think you you nonow w know know thathat t would would be be useful useful ffor or managing managing prprojects ojects at at the the hotel?hotel?

2.2.** TTwwo o new new softwarsoftware e projects projects arare e proposed proposed to to a a yyoung, oung, start-up start-up compancompanyy. . The The Alpha Alpha prproject oject will will cost cost $150,000 $150,000 to to develop develop and and is is eexpected xpected to to hahave ve annannual ual net net cash cash flow flow ofof $40,000. $40,000. The The Beta Beta prproject oject will will cost cost $200,000 $200,000 to to develop develop and and is is eex-x- pected pected to to hahave ve annannual ual net net cash cash fflolow w ofof $50,000. $50,000. The The compancompany y is is very very concerned concerned aabout bout their their cash cash flowflow. . Using Using the the papayback yback period, period, which which prproject oject is is better better frfrom om a a cash cash flow flow standpoint? standpoint? WWhhy?y?

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 5151

3. 3. A A fivfive-year e-year prproject oject has has a a projected projected net net cash cash floflow w ofof $15,000, $15,000, $25,000, $25,000, $30,000, $30,000, $20,000, $20,000, and and $15,000 $15,000 in in the the next next fifive ve yearsyears. . It It will will cost cost $50,000 $50,000 to to implement implement the the prproject. oject. IfIf the the requirrequired ed rate rate ofof return return is is 20 20 percent, percent, conduct conduct a a discounted discounted cash cash flow flow calculacalculation tion to to deterdetermine mine the the NPVNPV..

4. 4. YYou ou worwork k ffor or the the 3T 3T companycompany, , which which expects expects to to earn earn aat t least least 18 18 percent percent on on its its ininvestmentsvestments. . YYou ou hahave ve to to choose choose betwbetween een two two similar similar prprojectsojects. . Below Below is is the the cash cash infinforormamation tion for for each each prproject. oject. YYour our analysts analysts prpredict edict that that inflainflation tion rarate te will will be be a a stastable ble 3 3 percent percent oover ver the the next next 7 7 yearsyears. . Which Which ofof the the twtwo o projects projects wwould ould youyou fund fund ifif the the decision decision is is based based only only on on financial financial infinforormamation? tion? WhWhy?y?

* * The The solution solution to to these these exercises exercises can can be be found found in in Appendix Appendix One.One.

Omega Omega AlphaAlpha YYear ear Inflow Inflow Outflow Outflow Netflow Netflow YYear ear Inflow Inflow Outflow Outflow NetflowNetflow

Y0 Y0 0 0 $225,000 $225,000 22225,000 225,000 Y0 Y0 0 0 $300,000 $300,000 22300,000300,000 Y1 Y1 0 0 190,000 190,000 22 22190,000 190,000 Y1 Y1 $ $ 50,000 50,000 100,000 100,000 50,00050,000

Y2 Y2 $ $ 150,000 150,000 0 0 150,000 150,000 Y2 Y2 150,000 150,000 0 0 150,000150,000 Y3 Y3 220,000 220,000 30,000 30,000 190,000 190,000 Y3 Y3 250,000 250,000 50,000 50,000 200,000200,000 Y4 Y4 215,000 215,000 0 0 215,000 215,000 Y4 Y4 250,000 250,000 0 0 250,000250,000 Y5 Y5 205,000205,000 30,000 30,000 175,000 175,000 Y5 Y5 200,000 200,000 50,000 50,000 150,000150,000 Y6 Y6 197,000 197,000 0 0 197,000 197,000 Y6 Y6 180,000 180,000 0 0 180,000180,000

Y7 Y7 100,000 100,000 30,000 30,000 70,000 70,000 Y7 Y7 120,000 120,000 30,000 30,000 90,00090,000 TTotal otal 1,087,000 1,087,000 505,000 505,000 582,000 582,000 TTotal otal 1,200,000 1,200,000 530,000 530,000 670,000670,000

5.5. ** YYou ou arare e the the head head ofof the the prproject oject selection selection team team at at SIMSOSIMSOX. X. YYour our team team is is con-con- sidering sidering three three difdifferent ferent prprojectsojects. . Based Based on on past past historyhistory, , SIMSOSIMSOX X expects expects aat t least least a a rarate te ofof return return ofof 20 20 percent. percent. YYour our financial financial advisors advisors predict predict inflainflation tion to to remain remain aat t 3 3 percent percent into into the the fforeseeaoreseeable ble futurefuture..

Given Given the the ffollowing ollowing infinforormation mation ffor or each each project, project, wwhich hich one one should should be be SIMSOSIMSOX X first first priority? priority? Should Should SIMSOSIMSOX X fund fund anany y ofof the the other other prprojects? ojects? IfIf so so, , whawhat t should should be be the the order order ofof priority priority based based on on return return on on ininvestment?vestment?

PrProject: oject: Dust Dust DevilsDevils

YYear ear Investment Investment Revenue Revenue StreamStream

0 0 $500,000 $500,000 00 1 1 50,00050,000 2 2 250,000250,000 3 3 350,000350,000

PrProject: oject: OspryOspry

YYear ear Investment Investment Revenue Revenue StreamStream

0 0 $250,000 $250,000 00 1 1 75,00075,000 2 2 75,00075,000 3 3 75,00075,000 4 4 50,00050,000

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52 52 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

PrProject: oject: VVooyagersyagers

YYear ear Investment Investment Revenue Revenue StreamStream

0 0 $75,000 $75,000 00 1 1 15,00015,000 2 2 25,00025,000 3 3 50,00050,000 4 4 50,00050,000 5 5 150,000150,000

6.6. YYou ou are are the the head head ofof the the prproject oject selection selection team team aat t BrokBroken en ArrArrow ow rrecordsecords. . YYour our team team is is considering considering three three difdifferent ferent recorrecording ding projectsprojects. . Based Based on on past past historyhistory, , BrBroken oken ArrArrow ow eexpects xpects at at least least a a rarate te ofof return return ofof 20 20 percent. percent. YYour our financial financial advisors advisors prpredict edict inflation inflation to to remain remain aat t 2 2 percent percent into into the the fforeseeaoreseeable ble futurefuture..

GivGiven en the the follofollowing wing informainformation tion for for each each prproject, oject, which which one one should should be be BrBro-o- kken en ArroArrow’w’s s first first priority? priority? Should Should BrokBroken en ArroArrow w fund fund anany y ofof the the other other prprojects? ojects? IfIf so, so, wwhat hat should should be be the the ororder der ofof priority priority based based on on return return on on ininvestment?vestment?

RRecording ecording PrProject: oject: Time Time FFades ades AAwawayy

YYear ear Investment Investment Revenue Revenue StreamStream

0 0 $600,000 $600,000 00 1 1 600,000600,000 2 2 75,00075,000 3 3 20,00020,000 4 4 15,00015,000 5 5 10,00010,000

RRecording ecording PrProject: oject: On On the the BeachBeach

YYear ear Investment Investment Revenue Revenue StStreamream

0 0 $400,000 $400,000 00 1 1 400,000400,000 2 2 100,000100,000 3 3 25,00025,000 4 4 20,00020,000 5 5 10,00010,000

RRecording ecording PrProject: oject: TTonight’onight’s s the the NightNight

YYear ear Investment Investment Revenue Revenue StreamStream

0 0 $200,000 $200,000 00 1 1 200,000200,000 2 2 125,000125,000 3 3 75,00075,000 4 4 20,00020,000 5 5 10,00010,000

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Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 5353

7. 7. The The Custom Custom Bike Bike CompanCompany y has has set set up up a a weighted weighted scoring scoring mamatrix trix ffor or evaluaevaluation tion ofof potential potential projectsprojects. . Below Below are are fifive ve prprojects ojects under under consideraconsideration.tion.

a.a. Using Using the the scoring scoring mamatrix trix belowbelow, , which which prproject oject would would yyou ou rate rate highest?highest? LoLowest?west?

bb. . IfIf the the weight weight ffor or “Str“Strong ong Sponsor”Sponsor” is is changed changed from from 2.0 2.0 to to 5.0, 5.0, will will the the prproject oject selection selection change? change? WWhat hat arare e the the three three highest highest weighted weighted prproject oject scores scores with with this this new new wweight?eight?

c. c. WWhhy y is is it it important important that that the the wweights eights mirrmirror or critical critical strategic strategic factors?factors?

Project Project Screening Screening MatrixMatrix

PProject roject 11

C riteria

W eight

PProject roject 22

PProject roject 33

PProject roject 44

PProject roject 55

1010

2.02.0

S tr

o n

S tr

o n

g s

p o

n s o

r s p

o n

s o

U rg

e n

c y

U rg

e n

c y

11 0

0 %

o f

s a

le s

s a

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References References AdlerAdler, , PP. . SS., ., et et al., al., “Getting “Getting the the Most Most Out Out ofof Y Your our PrProduct oduct Development Development PrProcessocess,,”” HarvHarvarard d BusinessBusiness ReReviewview, , vol. vol. 74 74 (2), (2), pppp. . 134–52.134–52.

BenkBenko, o, CC., ., and and FF. . WW. . McFMcFarlan, arlan, Connecting Connecting the the Dots: Dots: Aligning Aligning PrProjects ojects With With Ob-Ob- jectivesjectives in in UnprUnpredictable edictable Times Times (Boston: (Boston: HarvHarvard ard Business Business School School PressPress, , 2003).2003).

BigeloBigeloww, , DD., ., “W“Want ant to to Ensure Ensure Quality? Quality? Think Think PrProject oject PPortfortfolio olio Management,Management,”” PM PM NetwNetwork,ork, v vol. ol. 16 16 (1) (1) April April 2002, 2002, pppp. . 16–17.16–17.

BloomberBloomberg g Businessweek,Businessweek, “IBM “IBM WWants ants to to Put Put WWatson atson in in YYour our PPocket,ocket,”” September September 17–23, 17–23, 2012, 2012, pppp. . 41–42.41–42.

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Cohen, Cohen, DD., ., and and R. R. Graham, Graham, The The Project Project ManagManager’s er’s MBMBAA (San (San FFrancisco: rancisco: JJossey-Bassossey-Bass, , 2001), 2001), pppp. . 58–59.58–59.

CraCrawfwford, ord, L., L., BB. . HobbsHobbs, , and and JJ. . R. R. TTurneurne, , ““Aligning Aligning CapaCapability bility with with StraStrategy: tegy: CaCategorizing tegorizing ofof Pr Projects ojects to to Do Do the the Right Right Projects Projects and and Do Do Them Them Right,Right,”” PrProject oject Management Management JJournal,ournal, vol. vol. 37 37 (2) (2) JJune une 2006, 2006, pppp. . 38–50.38–50.

DescampsDescamps, , JJ. . PP., ., “Mastering “Mastering the the Dance Dance ofof Change: Change: InnoInnovavation tion as as a a WWaay y ofof Life Life,,”” Prism,Prism, Second Second QuarterQuarter, , 1999, 1999, pppp. . 61–67.61–67.

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Doran, Doran, GG. . TT., ., “There’“There’s s a a Smart Smart WWay ay to to WWrite rite Management Management Goals Goals and and ObjectivObjectiveses,,”” ManagManagement ement ReviewReview,, No November vember 1981, 1981, pppp. . 35–36.35–36.

FloFloyd, yd, SS. . WW., ., and and BB. . WWoolridgeoolridge, , “Managing “Managing StraStrategic tegic Consensus: Consensus: The The FFoundaoundation tion ofof Effectiv Effectiveness eness Implementation,Implementation,”” Academy Academy ofof Manag Management ement ExecutivesExecutives,, vol. vol. 6 6 (4) (4) 1992, 1992, pppp. . 27–39.27–39.

FFoti, oti, R., R., “Louder “Louder Than Than WWordsords,,”” PM PM NetworNetwork,k, December December 2002, 2002, pppp. . 22–29. 22–29. Also Also see see FFoti, oti, R., R., “Make “Make YYour our CaseCase, , Not Not All All PrProjects ojects Are Are Equal,Equal,”” PM PM NetworNetwork,k, vvol. ol. 31(7) 31(7) 2003, 2003, pppp. . 35–43.35–43.

FFrank, rank, L., L., “On “On Demand,Demand,”” PM PM NetworNetwork,k, vol. vol. 18 18 (4) (4) AApril pril 2004, 2004, pppp. . 58–62.58–62.

FFriedman, riedman, Thomas Thomas L., L., Hot, Hot, Flat, Flat, and and CrCrowowdedded (New (New YYork: ork: FFarrararrar, , StrausStraus, , and and GirGiroux, oux, 2008).2008).

FuscoFusco, , JJ. . CC., ., “Better “Better PPolicies olicies ProProvide vide the the Key Key to to Implementing Implementing PrProject oject Management,Management,”” Project Project ManagManagement ement JJournal,ournal, vol. vol. 28 28 (3) (3) 1997, 1997, pppp. . 38–41.38–41.

Helm, Helm, JJ., ., and and K. K. RRemington, emington, “Effecti“Effective ve PrProject oject Sponsorship: Sponsorship: An An EvaluaEvaluation tion ofof the the Executive Executive Sponsor Sponsor in in CompleComplex x Infrastructure Infrastructure PrProjects ojects by by Senior Senior PrProject oject ManagersManagers,,”” Project Project ManagManagement ement JJournal,ournal, vol. vol. 36 36 (1) (1) September September 2005, 2005, pppp. . 51–61.51–61.

HutchensHutchens, , GG., ., “Doing “Doing the the NumbersNumbers,,”” PM PM NetworNetwork,k, vol. vol. 16 16 (4) (4) MarMarch ch 2002, 2002, pp. . 20.20.

JJohnson, ohnson, R. R. E., E., “Scrap “Scrap CaCapital pital Project Project EvEvaluationsaluations,,”” ChiefChief Financial Financial OfficerOfficer, , MaMay y 1998, 1998, pp. . 14.14.

KaKaplan, plan, R. R. SS., ., and and DD. . PP. . Norton, Norton, “The “The Balanced Balanced ScorecarScorecard—Measures d—Measures ThaThat t DrivDrive e PerfPerforormancemance,,”” HarvHarvarard d Business Business ReviewReview,, Jan January–Fuary–February ebruary 1992, 1992, pppp. . 73–79. 73–79. Also Also see see KaKaplan, plan, RRobert, obert, http;//balancedscorecard.orhttp;//balancedscorecard.org.g.

KKennennyy, , JJ., ., “Effecti“Effective ve PrProject oject Management Management ffor or StraStrategic tegic InnovInnovation ation and and Change Change in in an an OrOrganizational ganizational Context,Context,”” Project Project ManagManagement ement JJournal,ournal, vol. vol. 34 34 (1) (1) 2003, 2003, pppp. . 45–45–53.53.

Kharbanda, Kharbanda, OO. . PP., ., and and JJ. . K. K. PintoPinto, , What What Made Made Gertie Gertie Gallop: Gallop: Learning Learning frfrom om PrProject oject FailurFailureses (New (New YYork: ork: VVan an Nostrand Nostrand RReinhold, einhold, 1996), 1996), pppp. . 106–11, 106–11, 263–83.263–83.

KKorteorte, , R. R. FF., ., and and TT. . JJ. . CherChermack, mack, “Changing “Changing OrganizaOrganizational tional Culture Culture with with Scenario Scenario Planning,Planning,”” FuturesFutures,, vol. vol. 39 39 (6) (6) AAugust ugust 2007, 2007, pppp. . 645–56.645–56.

LeiferLeifer, , R., R., CC. . M. M. McDerMcDermott, mott, GG. . C. C. O’ConnorO’Connor, , L. L. SS. . PetersPeters, , M. M. PricePrice, , and and R. R. WW. . VVeryzeryzerer, , Radical Radical InnoInnovation: vation: How How MaturMature e Companies Companies Can Can Outsmart Outsmart UpstarUpstartsts (Boston: (Boston: HarvarHarvard d Business Business School School PressPress, , 2000).2000).

MacIntyreMacIntyre, , JJ., ., PM PM NetworNetwork,k, vol. vol. 20 20 (11) (11) NoNovember vember 2006, 2006, pppp. . 32–35.32–35.

MagrMagretta,etta, JJoan,oan, Understanding Understanding MicMichael hael PPorterorter: : The The Essential Essential Guide Guide to to Competition Competition and and StrStrategyategy (Boston: (Boston: HarvarHarvard d Business Business Press Press Book, Book, 2011).2011).

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Milosevic, Milosevic, DD. . Z., Z., and and SS. . SrivannaSrivannaboon, boon, ““A A Theoretical Theoretical FFramewramework ork ffor or Aligning Aligning PrProject oject Management Management with with Business Business StraStrategytegy,,”” Project Project ManagManagement ement JJournal,ournal, vvol. ol. 37 37 (3) (3) AAugust ugust 2006, 2006, pppp. . 98–110.98–110.

MorrisMorris, , PP. . WW., ., and and A. A. JJamieson, amieson, “Moving “Moving frfrom om Corporate Corporate StraStrategy tegy to to ProjectProject StraStrategytegy,,”” PrProject oject Management Management JJournal,ournal, vol. vol. 36 36 (4) (4) December December 2005, 2005, pppp. . 5–18.5–18.

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PMI, PMI, “PMI’“PMI’s s Pulse Pulse ofof the the PrProfession,ofession,”” March March 2012, 2012, PrProject oject Management Management InstituteInstitute, , pp. . 7.7.

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Schwartz, Schwartz, PPetereter, , and and Doug Doug RRandall, andall, ““An An Abrupt Abrupt Climate Climate Change Change Scenario Scenario and and its its ImplicaImplications tions for for United United StaStates tes National National SecuritySecurity,,”” Global Global Business Business NetwNetwork, ork, Inc., Inc., October October 2003.2003.

ShenharShenhar, , A., A., “Stra“Strategic tegic Project Project Leadership: Leadership: FFocusing ocusing YYour our PrProject oject on on Busi-Busi- ness ness SuccessSuccess,,”” PrProceedings oceedings ofof the the Project Project ManagManagement ement Institute Institute Annual Annual SeminarSeminars s & & Symposium,Symposium, San San Antonio, Antonio, TTexasexas, , October October 3–10, 3–10, 2002, 2002, CDCD. . AlsoAlso see see ShenharShenhar, , AarAaron, on, ReinReinventing venting PrProject oject ManagementManagement (Harv (Harvard ard BusinessBusiness School, School, 2007).2007).

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Hector Hector Gaming Gaming CompanyCompany Hector Hector Gaming Gaming CompanCompany y (HGC) (HGC) is is an an educational educational gaming gaming compancompany y specializ-specializ- ing ing in in yyoung oung childrenchildren’’s s educational educational gamesgames. . HGC HGC has has just just completed completed their their fourth fourth year year ofof operation. operation. This This yyear ear was was a a banner banner year year ffor or HGCHGC. . The The company company rreceived eceived a a larlarge ge infinflux lux ofof ca capital pital ffor or grogrowth wth by by issuing issuing stock stock priprivavately tely thrthrough ough an an ininvest-vest- ment ment banking banking firm. firm. It It appears appears the the return return on on ininvestment vestment ffor or this this past past year year will will be be just just oover ver 25 25 percent percent with with zerzero o debt! debt! The The grgrowth owth rarate te for for the the last last twtwo o years years has has been been apprapproximaoximately tely 80 80 perpercent cent each each yearyear. . Parents Parents and and grandpargrandparents ents ofof y young oung children children hahave ve been been bbuying uying HGC’HGC’s s prproducts oducts almost almost as as fast fast as as they they are are developed. developed. Every Every member member ofof the the 56-person 56-person firfirm m is is enthusiastic enthusiastic and and looking looking fforward orward to to help-help- ing ing the the firm firm grogrow w to to be be the the largest largest and and best best educaeducational tional gaming gaming company company in in thethe wworld. orld. The The ffounder ounder ofof the the firm, firm, Sally Sally PetersPeters, , has has been been written written up up in in YYoung oung Entre-Entre- prpreneurseneurs as as “the “the yyoung oung entrepreneur entrepreneur to to wwatch.”atch.” She She has has been been aable ble to to devdevelop elop an an ororganization ganization culture culture in in wwhich hich all all stakstakeholders eholders arecommitted arecommitted to to innoinnovavation, tion, con-con- tintinuous uous improimprovement, vement, and and ororganization ganization learning.learning. Last Last yearyear, , 10 10 top top managers managers ofof HGC HGC wworkorked ed with with McKinley McKinley Consulting Consulting to to de-de-

velop velop the the ororganizationganization’’s s strastrategic tegic plan. plan. This This year year the the same same 10 10 managers managers had had a a rretreaetreatt

CaseCase

56 56 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

CaseCase

in in Aruba Aruba to to fforormulamulate te next next year’year’s s strategic strategic plan plan using using the the same same prprocess ocess suggested suggested by by McKinley McKinley Consulting. Consulting. Most Most exexecutives ecutives seem seem to to hahave ve a a consensus consensus ofof where where the the firm firm should should go go in in the the intermediate intermediate and and long long term. term. But But there there is is little little consensus consensus on on hohoww this this should should be be accomplished. accomplished. PetersPeters, , nonow w president president ofof HGC HGC, , feels feels she she mamay y be be losinglosing contrcontrol. ol. The The frequency frequency ofof conf conflicts licts seems seems to to be be increasing. increasing. Some Some individuals individuals arare e al-al- waways ys requested requested ffor or anany y new new prproject oject creacreated. ted. When When rresource esource conflicts conflicts occur occur among among prprojectsojects, , each each prproject oject manager manager believbelieves es his his or or her her project project is is most most important. important. MorMoree prprojects ojects are are not not meeting meeting deadlines deadlines and and are are coming coming in in oover ver bbudget. udget. YYesterdaesterday’y’s s man-man- agement agement meeting meeting rrevealed evealed some some top top HGC HGC talent talent hahave ve been been wworking orking on on an an interna-interna- tional tional business business game game ffor or college college studentsstudents. . This This project project does does not not fit fit the the ororganizaganizationtion vision vision or or markmarket et nicheniche. . At At times times it it seems seems everyeveryone one is is marching marching to to his his or or her her own own drummerdrummer. . Somehow Somehow mormore e ffocus ocus is is needed needed to to ensure ensure everyeveryone one agragrees ees on on stra strategy tegy howhow should should be be implemented, implemented, givgiven en the the resources resources aavailavailable ble to to the the organizaorganization.tion. YYesterdaesterday’y’s s meeting meeting alaralarmed med PetersPeters. . These These emerging emerging prproblems oblems are are coming coming aat t a a bad bad timetime. . Next Next week week HGC HGC is is ramping ramping up up the the size size ofof the the organizaorganization, tion, nnumber umber ofof new new prproducts oducts per per yearyear, , and and markmarketing eting effeffortsorts. . Fifteen Fifteen new new people people will will join join HGC HGC next next month. month. Peters Peters is is concerned concerned thathat t policies policies be be in in place place that that will will ensure ensure the the nenew w peoplepeople are are used used most most prproductivoductivelyely. . An An additional additional potential potential prproblem oblem looms looms on on the the horizon. horizon. Other Other gaming gaming companies companies hahave ve noticed noticed the the success success HGC HGC is is hahaving ving in in their their niche niche mar-mar- kket; et; one one compancompany y tried tried to to hire hire a a kkey ey product product dedevelopment velopment emploemployee yee aawaway y frfrom om HGCHGC. . Peters Peters wants wants HGC HGC to to be be rready eady to to meet meet anany y potential potential competition competition head head on on andand to to discouradiscourage ge any any nenew w entries entries into into their their markmarket. et. PeterPeters s knoknows ws HGC HGC is is prproject oject driven; driven; hohoweverwever, , she she is is not not as as confident confident that that she she has has a a good good handle handle on on hohow w such such an an organiza-organiza- tion tion should should be be managed—especiallmanaged—especially y with with such such a a fast fast grgrowth owth rarate te and and potential potential com-com- petition petition closer closer to to becoming becoming a a realityreality. . The The magnitude magnitude ofof emer emerging ging probproblems lems demandsdemands quick quick aattention ttention and and resolution.resolution. Peters Peters has has hired hired yyou ou as as a a consultant. consultant. She She has has suggested suggested the the ffollowing ollowing fforormat mat ffor or yyour our consulting consulting contract. contract. YYou ou arare e free free to to use use another another fforormamat t ifif it it will will imprimprovove e the the efeffectiveness fectiveness ofof the the consulting consulting engagement.engagement.

WWhat hat is is our our major major prproblem?oblem? Identify Identify some some symptoms symptoms ofof the the probproblem.lem. WWhat hat is is the the major major cause cause ofof the the probproblem?lem?

PrProvide ovide a a detailed detailed action action plan plan thathat t attacks attacks the the prproblem. oblem. Be Be specific specific and and prproovide vide examples examples thathat t relarelate te to to HGC.HGC.

Film Film PrioritizationPrioritization The The purpose purpose ofof this this case case is is to to give give yyou ou experience experience in in using using a a prproject oject priority priority sys-sys- tem tem thathat t ranks ranks proposed proposed prprojects ojects by by their their contribcontribution ution to to the the organizaorganizationtion’’s s objec-objec- tivtives es and and strategic strategic plan.plan.

COMPCOMPANY ANY PROFILEPROFILE The The compancompany y is is the the film film division division ffor or a a larlarge ge entertainment entertainment conglomerateconglomerate. . The The main main ofoffice fice is is located located in in Anaheim, Anaheim, CalifCalifornia. ornia. In In addition addition to to the the featurfeature e film film divi-divi- sion, sion, the the conglomeraconglomerate te includes includes theme theme parksparks, , home home videosvideos, , a a television television channel, channel,

Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 5757

interactivinteractive e gamesgames, , and and theatrical theatrical prproductionsoductions. . The The compancompany y has has been been enjoenjoying ying steadsteady y grogrowth wth oover ver the the past past 10 10 yearsyears. . Last Last year year total total rerevenvenues ues increased increased by by 12 12 perper-- cent cent to to $21.2 $21.2 billion. billion. The The compancompany y is is engaged engaged in in negotianegotiations tions to to expand expand its its theme theme park park empirempire e to to mainland mainland China China and and PPoland. oland. The The film film division division generagenerated ted $274 $274 mil-mil- lion lion in in rerevenvenuesues, , which which wwas as an an increase increase ofof 7 7 percent percent oover ver the the past past yearyear. . PrProfit ofit margin margin was was dodown wn 3 3 percent percent to to 16 16 perpercent cent because because ofof the the poor poor response response to to three three ofof the the five five major major film film releases releases ffor or the the yearyear..

COMPCOMPANY ANY MISSIONMISSION The The mission mission ffor or the the firfirm:m:

Our Our ooverriding verriding objective objective is is to to crcreate eate shareholder shareholder vvalue alue by by contincontinuing uing to to be be the the world’world’s s premier premier entertainment entertainment compancompany y frfrom om a a creaticreativeve, , strategic, strategic, and and financial financial standpoint.standpoint.

The The film film division division supports supports this this mission mission bby y producing producing ffour our to to six six high-qualityhigh-quality, , fam-fam- ily ily entertainment entertainment films films ffor or mass mass distribution distribution each each yearyear. . In In recent recent yearsyears, , the the CEO CEO ofof the the company company has has adadvocavocated ted that that the the firm firm take take a a leadership leadership position position in in champi-champi- oning oning enenvirvironmental onmental concernsconcerns..

COMPCOMPANY ANY “MUST” “MUST” OBJECTIVESOBJECTIVES Every Every prproject oject must must meet meet the the must must objectiobjectives ves as as determined determined by by exexecutive ecutive manamanage-ge- ment. ment. It It is is important important thathat t selected selected film film projects projects not not violaviolate te such such objectivobjectives es ofof high high strastrategic tegic prioritypriority. . There There are are three three mmust ust objectives:objectives:

1. 1. All All projects projects meet meet currcurrent ent legal, legal, safetysafety, , and and enenvirvironmental onmental standardsstandards.. 2. 2. All All film film projects projects should should rreceive eceive a a PG PG or or lolower wer adadvisory visory rating.rating. 3. 3. All All prprojects ojects should should not not hahave ve an an advadverse erse effect effect on on currcurrent ent or or planned planned operations operations

within within the the larlarger ger companycompany..

COMPCOMPANY ANY “WANT” “WANT” OBJECTIVESOBJECTIVES WWant ant objectives objectives arare e assigned assigned weights weights ffor or their their relarelative tive importanceimportance. . TTop op manamanage-ge- ment ment is is responsibresponsible le for for fforormulamulating, ting, ranking, ranking, and and weighting weighting objectiobjectives ves to to ensure ensure thathat t projects projects support support the the compancompany’y’s s strastrategy tegy and and mission. mission. The The ffollowing ollowing is is a a list list ofof the the compancompany’y’s s want want objectivobjectives:es:

1. 1. Be Be nominanominated ted for for and and win win an an academacademy y aaward ward ffor or Best Best Animated Animated FFeatureature e or or Best Best Picture Picture ofof the the YYearear..

2.2. Genera Generate te additional additional merchandise merchandise rrevenevenue ue (action (action figuresfigures, , dollsdolls, , interactivinteractive e gamesgames, , music music CDs).CDs).

3. 3. RRaise aise public public consciousness consciousness aabout bout enenvironmental vironmental issues issues and and concernsconcerns.. 4. 4. Generate Generate prprofit ofit in in excess excess ofof 18 18 percent.percent.

5. 5. AdvAdvance ance the the state state ofof the the art art in in film film animation, animation, and and prpreserve eserve the the firm’firm’s s reputareputation.tion. 6. 6. ProProvide vide the the basis basis for for the the dedevelopment velopment ofof a a new new ride ride aat t a a company-ocompany-owned wned theme theme park.park.

ASSIGNMENTASSIGNMENT YYou ou arare e a a member member ofof the the priority priority team team in in charcharge ge ofof ev evaluating aluating and and selecting selecting film film prproposalsoposals. . Use Use the the proprovided vided evaluaevaluation tion ffororm m to to fforormally mally evevaluate aluate and and rrank ank each each prproposal. oposal. Be Be prepared prepared to to rreport eport your your rrankings ankings and and justify justify your your decisionsdecisions..

58 58 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

Assume Assume thathat t all all ofof the the prprojects ojects hahave ve passed passed the the estimaestimated ted hurdle hurdle rarate te ofof 14 14 per-per- cent cent RROI. OI. In In addition addition to to the the briefbrief film film synopsissynopsis, , the the proposals proposals include include the the ffol-ol- lolowing wing financial financial prprojections ojections ofof thea theater ter and and video video sales: sales: 80 80 percent percent chance chance ofof R ROI, OI, 50 50 percent percent chance chance ofof R ROI, OI, and and 20 20 percent percent chance chance ofof R ROI.OI. FFor or exampleexample, , ffor or proposal proposal #1 #1 (Dalai (Dalai Lama) Lama) therthere e is is an an 80 80 percent percent chance chance that that

it it will will earn earn aat t least least 8 8 percent percent return return on on ininvestment vestment (R(ROI), OI), a a 50-50 50-50 chance chance the the RROI OI will will be be 18 18 percent, percent, and and a a 20 20 perpercent cent chance chance that that the the RROI OI will will be be 24 24 percent.percent.

FILM FILM PROPOSALSPROPOSALS PROJECT PROJECT PROPOSAL PROPOSAL 1: 1: MY MY LIFE LIFE WITH WITH DALAI DALAI LAMALAMA An An animaanimated, ted, biograbiographical phical account account ofof the the Dalai Dalai Lama’Lama’s s childhood childhood in in Tibet Tibet based based on on the the popular popular childrenchildren’’s s book book TTales ales from from Nepal.Nepal. The The Lama’Lama’s s life life is is told told thrthrough ough the the eyes eyes ofof “Guoda, “Guoda,”” a a field field snakesnake, , and and other other local local animals animals who who befriend befriend the the Dalai Dalai and and help help him him understand understand the the principles principles ofof Buddhism. Buddhism.

Probability Probability 80% 80% 50% 50% 20%20% ROI ROI 8% 8% 18% 18% 24%24%

PROJECT PROJECT PROPOSAL PROPOSAL 2: 2: HEIDIHEIDI A A remakremake e ofof the the classic classic childrenchildren’’s s story story with with music music written written bby y aawarward-winning d-winning composers composers Syskle Syskle and and Obert. Obert. The The big-budget big-budget film film will will feafeature ture top-name top-name stars stars and and breabreathtaking thtaking scenery scenery ofof the the Swiss Swiss AlpsAlps..

Probability Probability 80% 80% 50% 50% 20%20% ROI ROI 2% 2% 20% 20% 30%30%

PROJECT PROJECT PROPOSAL PROPOSAL 3: 3: THE THE YEAR YEAR OF OF THE THE ECHOECHO A A lolow-budget w-budget documentary documentary thathat t celebracelebrates tes the the career career ofof one one ofof the the most most influen-influen- tial tial bands bands in in rrock-and-roll ock-and-roll historyhistory. . The The film film will will be be dirdirected ected by by new-wnew-waave ve director director Elliot Elliot Cznerzy Cznerzy and and will will combine combine concert concert ffootage ootage and and behind-the-scenes behind-the-scenes intervieinterviews ws spanning spanning the the 25-year 25-year history history ofof the the rock rock band band the the EchosEchos. . In In addition addition to to greagreat t mu-mu- sic, sic, the the film film will will ffocus ocus on on the the death death ofof one one ofof the the founding founding members members frfrom om a a heroin heroin ooverdose verdose and and rreveal eveal the the underwunderworld orld ofof sex, sex, lieslies, , and and drugs drugs in in the the music music industryindustry..

Probability Probability 80% 80% 50% 50% 20%20% ROI ROI 12% 12% 14% 14% 18%18%

PROJECT PROJECT PROPOSAL PROPOSAL 4: 4: ESCAPE ESCAPE FROM FROM RIO RIO JAPUNIJAPUNI An An animaanimated ted featurfeature e set set in in the the Amazon Amazon rainfrainforest. orest. The The story story centers centers araround ound PaPabloblo, , a a yyoung oung jaguar jaguar wwho ho attempts attempts to to conconvince vince warring warring jungle jungle animals animals thathat t they they must must unite unite and and escaescape pe the the devdevastation astation ofof local local clear clear cutting.cutting.

Probability Probability 80% 80% 50% 50% 20%20% ROI ROI 15% 15% 20% 20% 24%24%

Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 5959

PROJECT PROJECT PROPOSAL PROPOSAL 5: 5: NADIA!NADIA! The The story story ofof Nadia Nadia Comaneci, Comaneci, the the famous famous RRomanian omanian gymnast gymnast who who wwon on three three gold gold medals medals aat t the the 1976 1976 Summer Summer Olympic Olympic GamesGames. . The The low-blow-budget udget film film will will docu-docu- ment ment her her life life as as a a small small child child in in RRomania omania and and how how she she wwas as chosen chosen by by RRomanian omanian authorities authorities to to join join their their eliteelite, , state-run, state-run, aathletic thletic prprogram. ogram. The The film film will will highlight highlight hohow w Nadia Nadia maintained maintained her her independent independent spirit spirit and and lovlove e for for gymnastics gymnastics despite despite a a harsh, harsh, regimented regimented training training prprogram.ogram.

Probability Probability 80% 80% 50% 50% 20%20% ROI ROI 8% 8% 15% 15% 20%20%

PrProject oject Priority Priority Evaluation Evaluation FFormorm

Must Must objectivesobjectives

Meets Meets all all safety safety andand

envirenvironmental onmental standardsstandards

No No adveradverse se effeffectect

on on other other operationsoperations

PG PG or or G G ratingrating

WWantant

objectivesobjectives Single Single projectproject

impact impact definitionsdefinitions

Win Win Best Best PicturPicturee of of the the YYearear

RelativeRelative

ImportanceImportance 1–11–10000

WeightedWeighted ScoreScore

7070

6060

5555

7070

4040

1010

0 0 = = No No potentialpotential 1 1 = = Low Low potpotentialential

2 2 = = High High potentialpotential

0 0 = = No No potentialpotential

1 1 = = Low Low potpotentialential

2 2 = = High High potentialpotential

1010 0 0 = = No No potentialpotential 1 1 = = Low Low potpotentialential

2 2 = = High High potentialpotential

0 0 = = No No potentialpotential

1 1 = = Low Low potpotentialential

2 2 = = High High potentialpotential

0 0 < < 118%8% 1 1 = = 118–22%8–22%

2 2 > > 22%22%

0 0 = = No No impactimpact

1 1 = = Some Some impactimpact

2 2 = = Great Great impactimpact

0 0 = = No No potentialpotential

1 1 = = Low Low potpotentialential 2 2 = = High High potentialpotential

TTotal otal weightweighted ed scorescore

PPriorriorityity

Win Win BestBest AnimatedAnimated

FeaturFeature e FilmFilm

GenerateGenerate

additionaladditional merchandisemerchandise

RaiseRaise

envirenvironmentalonmental

concernsconcerns

Generate Generate prprofitofit

greatgreater er than than 18%18%

Y Y = = yesyes

N N = = nono

N/A N/A = = not not applicableapplicable

Y Y = = yesyes

N N = = nono N/A N/A = = not not applicableapplicable

Y Y = = yesyes

N N = = nono

N/A N/A = = not not applicableapplicable

Must Must meetmeet

if if impactsimpacts 1 2 3 4 5 6 71 2 3 4 5 6 7

AdvAdvance ance state state ofof

film film animationanimation

PProvide rovide basis basis fforor new new theme theme rideride

60 60 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

CaseCase

Fund Fund Raising Raising Project Project Selection Selection casecase The The purpose purpose ofof this this “case “case exercise”exercise” is is to to proprovide vide yyou ou with with experience experience in in using using a a prproject oject selection selection process process thathat t ranks ranks proposed proposed prprojects ojects by by their their contribcontribution ution to to an an ororganizationganization’’s s mission mission and and strategystrategy..

FUND FUND RAISING RAISING PROJECTPROJECT Assume Assume yyou ou are are a a member member ofof a a class class on on project project manamanagement. gement. Each Each student student will will join join a a team team ofof 5–7 5–7 students students who who will will be be responsibresponsible le for for crcreating, eating, planning planning and and exexecuting ecuting a a fund fund raising raising project project ffor or a a designated designated charitycharity. . The The fund fund raising raising prproject oject has has twtwo o goals: goals: (1) (1) raise raise money money ffor or a a worthworthy y cause cause and and (2) (2) proprovide vide an an opportunity opportunity ffor or all all team team members members to to practice practice prproject oject management management skills skills and and techniquestechniques.. In In addition addition to to completing completing the the prproject oject a a nnumber umber ofof deliv deliveraerables bles are are requirrequired ed to to

complete complete this this assignment. assignment. These These delivdeliveraerables bles include:include:

a) a) PrProject oject PrProposal oposal d) d) Status Status RReporteport b) b) Implementation Implementation Plan Plan e) e) Project Project RRefeflections lections PresentaPresentationtion

c) c) Risk Risk Management Management Plan Plan f) f) PrProject oject RRetretrospective/Aospective/Auditudit

ApprApprovoved ed projects projects will will rreceive eceive $250 $250 seed seed money money to to be be rreimbursed eimbursed upon upon comple-comple- tion tion ofof the the project.project.

“MUST” “MUST” OBJECTIVESOBJECTIVES Every Every prproject oject must must meet meet the the “must”“must” objectives objectives as as determined determined by by the the instructorinstructor. . There There arare e four four mmust ust objectives:objectives:

1. 1. All All projects projects mmust ust be be safesafe, , legal legal and and comply comply with with uniuniversity versity policiespolicies.. 2. 2. All All projects projects mmust ust be be capacapable ble ofof earning earning at at least least $500.$500.

PROJECT PROJECT PROPOSAL PROPOSAL 6: 6: KEIKO—ONE KEIKO—ONE WHALE WHALE OF OF A A STORYSTORY The The story story ofof Keik Keikoo, , the the famous famous killer killer whalewhale, , will will be be told told by by an an imaimaginary ginary offspring offspring SeikSeiko, o, wwho ho in in the the distant distant future future is is telling telling her her children children aabout bout their their famous famous grandfa-grandfa- therther. . The The big-budget big-budget film film will will integraintegrate te actual actual footafootage ge ofof the the wwhale hale within within a a realis-realis- tic tic animaanimated ted envirenvironment onment using using state-of-the-art state-of-the-art computer computer imaimagerygery. . The The story story will will rereveal veal how how KKeikeiko o responded responded to to his his treatreatment tment by by humanshumans..

Probability Probability 80% 80% 50% 50% 20%20% ROI ROI 6% 6% 18% 18% 25%25%

PROJECT PROJECT PROPOSAL PROPOSAL 7: 7: GRAND GRAND ISLANDISLAND The The true true storstory y ofof a a group group ofof junior-high junior-high biolobiology gy students students who who discodiscover ver thathat t a a fertil-fertil- izer izer plant plant is is dumping dumping toxic toxic wwastes astes into into a a nearby nearby rivriverer. . The The moderate-bmoderate-budget udget film film depicts depicts how how students students ororganize ganize a a grassrgrassroots oots campaign campaign to to fight fight local local bureaucracy bureaucracy and and ultimaultimately tely fforce orce the the fertilizer fertilizer plant plant to to restore restore the the local local ecosystem.ecosystem.

Probability Probability 80% 80% 50% 50% 20%20% ROI ROI 9% 9% 15% 15% 20%20%

Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 6161

3. 3. All All projects projects mmust ust be be aable ble to to be be completed completed within within nine nine weeksweeks.. 4. 4. All All prprojects ojects must must prproovide vide an an opportunity opportunity for for eevery very member member ofof the the project project team team

to to experience experience and and learn learn aabout bout project project manamanagement.gement.

Among Among the the factors factors to to consider consider ffor or the the last last objective objective wwould ould be be the the extent extent there there is is meaningful meaningful wwork ork ffor or every every member member ofof the the team, team, the the degree degree ofof coordina coordination tion re-re- quired, quired, the the eextent xtent the the team team will will hahave ve to to wwork ork with with external external stakstakeholderseholders, , and and the the complexity complexity ofof the the prproject.oject.

“W“WANT” ANT” OBJECTIVESOBJECTIVES In In addition addition to to the the mmust ust objectivesobjectives, , there there are are “w“want”ant” objectiv objectives es that that the the instructor instructor wwould ould like like to to achieachieveve. . The The ffollowing ollowing is is a a list list ofof these these objectives:objectives:

1. 1. Earn Earn more more than than $500 $500 ffor or a a charitycharity 2. 2. Increase Increase public public aawareness wareness ofof the the charitycharity 3. 3. ProProvide vide a a resume resume wworthorthy y experience experience ffor or studentsstudents 4. 4. Be Be featurfeatured ed on on local local TV TV newsnews 5. 5. Be Be fun fun to to dodo

ASSIGNMENTASSIGNMENT YYou ou arare e a a member member ofof the the class class priority priority team team in in charcharge ge ofof ev evaluating aluating and and aappropprov-v- ing ing fund fund raising raising prprojectsojects. . Use Use the the proprovided vided proposal proposal eevaluavaluation tion ffororm m to to formallyformally evevaluate aluate and and rank rank each each prproposal. oposal. Be Be prepared prepared to to rreport eport your your rrankings ankings and and justify justify yyour our decision. decision. YYou ou should should assume assume thathat t these these prprojects ojects would would be be held held aat t yyour our uni-uni- versity versity or or collegecollege..

FUND FUND RAISING RAISING PROPOSALSPROPOSALS PROJECT PROJECT PROPOSAL PROPOSAL 1: 1: HOOPS HOOPS FOR FOR HOPEHOPE The The prproject oject is is a a three-on-three three-on-three baskbasketball etball tournament tournament to to raise raise money money ffor or the the DoDown wn Syndrome Syndrome AssociaAssociation. tion. The The tournament tournament will will consist consist ofof three three brbrackets:ackets: Co-ed, Co-ed, MaleMale, , and and Female Female teamsteams. . There There will will be be a a $40 $40 entry entry fee fee per per teateam m and and addi-addi- tional tional funds funds will will be be derivderived ed from from the the sale sale ofof commemora commemorative tive TT-shirts -shirts ($10). ($10). Win-Win- ning ning teams teams will will receireceive ve gift gift baskbaskets ets consisting consisting ofof donations donations frfrom om local local businesses businesses and and restaurantsrestaurants. . The The event event will will be be held held aat t the the univuniversity ersity recrearecreational tional centercenter..

PROJECT PROJECT PROPOSAL PROPOSAL 2: 2: SINGING SINGING FOR FOR SMILESSMILES The The prproject oject will will hold hold a a karaokkaraoke e competition competition with with celebrity celebrity judges judges aat t a a popular popular campus campus night night spot. spot. Funds Funds will will be be raised raised by by $5 $5 admission admission aat t the the door door and and a a rafrafffle le ffor or prizes prizes donated donated bby y local local businessesbusinesses. . Funds Funds will will be be donadonated ted to to Smile Smile TTrain, rain, an an internainternational tional organizaorganization tion that that perfperfororms ms cleft cleft lip lip surgery surgery aat t a a cost cost ofof $250 $250 per per child. child. The The evevent ent will will feature feature picturpictures es ofof children children born born with with cleft cleft lips lips and and with with eev-v- ery ery $50 $50 earned earned a a piece piece ofof a a picture picture puzzle puzzle will will be be added added until until the the original original picture picture is is cocovered vered with with a a smiling smiling faceface..

PROJECT PROJECT PROPOSAL PROPOSAL 3: 3: HALO HALO FOR FOR HEROESHEROES The The prproject oject will will be be a a Halo Halo video video game game competition competition to to be be held held ovover er the the weekweekend end utilizing utilizing the the College’College’s s big big screen screen electrelectronic onic classroomsclassrooms. . TTeams eams ofof 4 4 plaplayers yers will will plaplay y each each other other in in a a single single elimination elimination tournament tournament with with the the grgrand and prizprize e being being a a SonSony y PlaPlay y Station Station 3 3 donadonated ted by by a a local local video video game game storstoree. . Entry Entry fee fee is is 24$ 24$ per per team team

62 62 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

and and individual individual plaplayers yers will will be be aable ble to to plaplay y in in a a loser’loser’s s bracket bracket ffor or 5$. 5$. All All proceeds proceeds will will go go to to the the NaNational tional Military Military FFamily amily AssociaAssociation.tion.

PROJECT PROJECT PROPOSAL PROPOSAL 4: 4: RAFFLE RAFFLE FOR FOR LIFELIFE OrOrganizganize e a a rafrafffle le contest. contest. RRaffle affle ticktickets ets will will be be sold sold for for 3$ 3$ a a piece piece with with the the winning winning tickticket et worth worth $300. $300. Each Each ofof the the six six team team members members will will be be responsible responsible ffor or selling selling 50 50 rafraffle fle ticketstickets. . All All profits profits will will go go to to the the American American Cancer Cancer SocietySociety..

PROJECT PROJECT PROPOSAL PROPOSAL 5: 5: HOLD’EM HOLD’EM FOR FOR HUNGERHUNGER OrOrganizganize e a a TTexas exas Hold’em Hold’em pokpoker er tournament tournament at at a a campus campus dining dining facilityfacility. . It It will will cost cost 20$ 20$ to to enter enter the the tournament tournament witwith h a a $15 $15 buy-in buy-in in in feefee. . PrizPrizes es include include $300, $300, $150, $150, and and $50 $50 gift gift certificacertificates tes to to a a large large department department storestore. . Gift Gift certificates certificates purpurchased chased from from en-en- try try feesfees. . All All plaplayers yers will will be be eligible eligible to to win win twtwo o donated donated ticktickets ets to to Men Men and and WWomen omen baskbasketball etball gamesgames. . Funds Funds raised raised will will go go to to local local county county ffood ood sheltershelter. .

PROJECT PROJECT PROPOSAL PROPOSAL 6: 6: BUILD BUILD YOUR YOUR OWN OWN BOXBOX The The purpose purpose ofof this this project project is is to to raise raise aawareness wareness ofof plight plight ofof homeless homeless. . Students Students will will donadonate te ten ten dollars dollars to to participate participate in in bbuilding uilding and and living living in in a a cardboarcardboard d city city on on the the univuniversity ersity quad quad for for one one night. night. Building Building mamaterials terials will will be be proprovided vided by by local local rre-e- cycling cycling centers centers and and harharddware ware storesstores. . Hot Hot soup soup will will be be prprovided ovided bby y the the team team at at midnight midnight to to all all participantsparticipants. . PrProceeds oceeds for for go go to to the the local local homeless homeless sheltershelter..

PrProject oject Priority Priority Evaluation Evaluation FFormorm Must Must objectivesobjectives

Be Be safesafe, , legal,legal, & & comply comply with with UnivUniversityersity PPoliciesolicies

Can Can be be completcompleted ed withinwithin 9 9 weeks weeks

Earn Earn at at least least $500$500

WantWant

objectivesobjectives

Single Single projectproject

impact impact definitionsdefinitions

Earning Earning potentialpotential

Relat iveRelat ive Import anceImport ance

1–1001–100

9090

3030

4040

0:0: 500–750 500–750 1:1: 750–1500 750–1500 2:2: >$1500 >$1500 3:3: >$2000 >$2000

0:0: None None 1:1: Some Some funfun 2:2: A A lot lot of of funfun

3030

0:0: No No potentialpotential 1:1: Low Low potentialpotential 2:2: High High potentialpotential

TTotal otal weighted weighted scorscoree

PPrr iorityiority

FuFunn

IncreaseIncrease awarawarenesseness of of charitycharity

Resume Resume worthyworthy

Be Be featurfeatured ed onon local local TV TV newsnews

Y Y = = yesyes N N = = nono

OpportunitOpportunit y y to to learnlearn PProject roject ManagementManagement

Y Y = = yesyes N N = = nono

Must Must meetmeet

if if impactsimpacts 1 2 3 4 5 6 71 2 3 4 5 6 7

Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 6363

Appendix Appendix 2.12.1

Request Request for for Proposal Proposal (RFP)(RFP) Once Once an an ororganization ganization selects selects a a prproject, oject, the the customer customer or or prproject oject manager manager is is fre-fre- quently quently rresponsible esponsible ffor or developing developing a a rrequest equest ffor or proposal proposal (RFP) (RFP) ffor or the the project project or or sections sections ofof the the project.project. The The responsible responsible prproject oject manager manager will will rrequire equire input input dadata ta from from all all stakstakeholders eholders

connected connected to to the the activities activities cocovverered ed in in the the RFPRFP. . The The RFP RFP will will be be announced announced to to external external contractors/vcontractors/vendors endors with with adequate adequate eexperience xperience to to implement implement the the project. project. FFor or exampleexample, , govgovernment ernment projects projects frfrequently equently advadvertise ertise with with a a “request “request ffor or prpro-o- posal”posal” to to outside outside contractors contractors ffor or roadsroads, , buildingsbuildings, , airportsairports, , military military hardhardwareware, , space space vehiclesvehicles. . SimilarlySimilarly, , bbusinesses usinesses use use RFPs RFPs to to solicit solicit bids bids for for bbuilding uilding a a clean clean rroom, oom, developing developing a a nenew w manufacturing manufacturing prprocessocess, , delivering delivering softwsoftware are ffor or insurance insurance billing, billing, conducting conducting a a markmarket et surveysurvey. . In In all all ofof these these examplesexamples, , requirements requirements and and feafeatures tures must must be be in in enough enough detail detail thathat t contractors contractors hahave ve a a clear clear description description ofof the the final final delivdeliveraerable ble thathat t will will meet meet the the customer’customer’s s needsneeds. . In In most most cases cases the the RFP RFP also also specifies specifies an an expected expected fforormat mat ffor or the the contractor’contractor’s s bid bid proposal proposal so so the the rresponses esponses ofof difdifferent ferent contractors contractors can can be be fairlfairly y evaluaevaluated. ted. Although Although we we typicalltypically y think think ofof RFPs RFPs ffor or external external contractorscontractors, , in in some some organizaorganizations tions RFPs RFPs are are used used internally; internally; thathat t isis, , the the ororganization ganization sends sends out out an an RFP RFP to to difdifferent ferent divisions divisions or or departmentsdepartments.. The The content content ofof the the RFP RFP is is extremelextremely y important. important. In In practicepractice, , the the most most common common

errerror or is is to to offer offer an an RFP RFP thathat t lacks lacks sufsufficient ficient detail. detail. This This lack lack ofof detail detail typically typically results results in in conflict conflict issuesissues, , misunderstandingsmisunderstandings, , often often legal legal claims claims between between the the con-con- tractor tractor and and oownerwner, , and, and, in in addition, addition, an an unsatisfied unsatisfied customercustomer. . All All RFPs RFPs are are difdiffer-fer- ent, ent, but but the the outline outline in in FigurFigure e A2.1 A2.1 is is a a good good starting starting point point ffor or the the development development ofof a a detailed detailed RFPRFP. . Each Each step step is is briefbriefly ly described described nenext.xt.

1. 1. Summary Summary ofof needs needs and and rrequest equest for for action.action. The The backgrbackground ound and and a a simple simple de-de- scription scription ofof the the final final project project delideliveraverable ble are are gigiven ven first. first. FFor or exampleexample, , through through sim-sim- ulaulated ted war war gamesgames, , the the UU.S.S. . NaNavy vy has has ffound ound their their giant giant warships warships ofof the the past past are are too too vulneravulnerable ble against against todatoday’y’s s technology technology (an (an eexample xample is is the the Silkworm Silkworm antiship antiship mis-mis- siles). siles). In In addition, addition, the the NaNavy’vy’s s mission mission has has shifted shifted to to supporting supporting grground ound fforces orces and and peacekpeacekeeping eeping missionsmissions, , which which requirrequire e getting getting closer closer to to shoreshore. . As As a a result, result, the the NaNavy vy is is rerevamping vamping ships ships ffor or near-shore near-shore dutyduty. . The The NaNavy vy will will select select three three designs designs ffor or ffur-ur- ther ther refinement refinement frfrom om the the responses responses to to its its RFPRFP. . In In general, general, it it is is expected expected thathat t the the new new ship ship will will be be cacapapable ble ofof a at t least least 55 55 knotsknots, , measure measure between between 80 80 and and 250 250 feet feet in in length, length, and and be be fitted fitted with with radar radar aabsorbing bsorbing panels panels to to thwart thwart guided guided missilesmissiles..

1. 1. Summary Summary of of needs needs and and request request for for actionaction 2. 2. Statement Statement of of work work (SOW) (SOW) detailing detailing the the scope scope and and major major deliverablesdeliverables 3. 3. Deliverable Deliverable specifications/requirements, specifications/requirements, features, features, and and taskstasks 4. 4. Responsibilities—vendor Responsibilities—vendor and and customercustomer

5. 5. Project Project scheduleschedule 6. 6. Costs Costs and and payment payment scheduleschedule 7. 7. TType ype of of contractcontract 8. 8. Experience Experience and and staffingstaffing

9. 9. Evaluation Evaluation criteriacriteria

FIGURE FIGURE A2.1A2.1 RRequest equest for for PrProposaloposal

64 64 Chapter Chapter 2 2 OrOrganization ganization StrStrategy ategy and and Project Project SelectionSelection

2. 2. Statement Statement ofof work work (SO(SOW) W) detailing detailing the the scope scope and and major major delivdeliverables.erables. F For or ex-ex- ampleample, , ifif the the prproject oject invinvolves olves a a marmarket ket rresearch esearch surveysurvey, , the the major major delivdeliveraerables bles could could be be design, design, dadata ta collection, collection, data data analanalysisysis, , and and proproviding viding recommendarecommendations tions by by FFebruary ebruary 21, 21, 2014, 2014, ffor or a a cost cost not not to to exexceed ceed $300,000.$300,000. 3. 3. DelivDeliverable erable specifications/rspecifications/requirements, equirements, featurfeatures, es, and and tasks.tasks. This This step step should should

be be very very comprcomprehensive ehensive so so bid bid prproposals oposals frfrom om contractors contractors can can be be validavalidated ted and and lalater ter used used for for contrcontrol. ol. TTypical ypical specifications specifications cocover ver phphysical ysical features features such such as as sizesize, , quantityquantity, , materialsmaterials, , speed, speed, and and colorcolor. . FFor or exampleexample, , an an IT IT prproject oject might might specify specify requirrequirements ements for for harharddwareware, , softwarsoftwaree, , and and training training in in greagreat t detail. detail. TTasks asks required required to to complete complete delivdeliveraerables bles can can be be included included ifif they they are are knoknown.wn. 4. 4. RResponsibilities—vendor esponsibilities—vendor and and customercustomer.. F Failing ailing to to spell spell out out the the responsibilities responsibilities ffor or both both parties parties is is notorious notorious ffor or leading leading to to serious serious probproblems lems when when the the contractor contractor implements implements the the prproject. oject. FFor or exampleexample, , who who papays ys for for wwhat? hat? (If(If the the contractor contractor is is to to be be on on sitesite, , will will the the contractor contractor be be required required to to papay y for for ofoffice fice space?) space?) WhaWhat t are are the the limits limits and and exexclusions clusions ffor or the the contractor? contractor? (F(For or exampexamplele, , who who will will supplsupply y test test equip-equip- ment?) ment?) WWhat hat commcommunication unication plan plan will will be be used used bby y the the contractor contractor and and owner? owner? IfIf escalaescalation tion ofof an an issue issue becomes becomes necessarynecessary, , whawhat t process process will will be be used? used? HoHow w will will prprogress ogress be be eevaluavaluated? ted? WWell-defined ell-defined responsibilities responsibilities will will aavoid void manmany y unforunforeseen eseen prproblems oblems lalaterter.. 5. 5. Project Project schedule.schedule. This This step step is is concerned concerned with with getting getting a a “har“hard”d” schedule schedule which which can can be be used used ffor or contrcontrol ol and and evaluaevaluating ting prprogressogress. . Owners Owners are are usually usually vvery ery demand-demand- ing ing in in meeting meeting the the prproject oject scheduleschedule. . In In todatoday’y’s s business business enenvirvironment, onment, time-to- time-to- markmarket et is is a a major major “hot “hot button”button” that that influences influences markmarket et shareshare, , costscosts, , and and profitsprofits. . The The schedule schedule should should spell spell out out whawhat, t, whowho, , and and when.when. 6. 6. Costs Costs and and payment payment schedule.schedule. The The RFP RFP needs needs to to set set out out vvery ery clearly clearly hohoww, ,

when, when, and and the the prprocess ocess ffor or deterdetermining mining costs costs and and conditions conditions for for prprogressogress papaymentsyments.. 7. 7. Type Type ofof contr contract.act. Essentially Essentially there there arare e two two types types ofof contracts—fixed-price contracts—fixed-price

and and cost-pluscost-plus. . Fixed-price Fixed-price contracts contracts aagree gree on on a a price price or or lump lump sum sum in in advadvanceance, , and and it it remains remains as as long long as as therthere e are are no no changes changes to to the the scope scope prprovisions ovisions ofof the the agragreement. eement. This This type type is is preferred preferred in in prprojects ojects that that are are wwell ell defined defined with with predict-predict- aable ble costs costs and and minimal minimal risksrisks. . The The contractor contractor must must exexercise ercise care care estimaestimating ting cost cost because because anany y underestimating underestimating ofof costs costs will will cause cause the the contractor’contractor’s s prprofit ofit to to be be reduced. reduced. In In cost-plus cost-plus contracts contracts the the contrcontractor actor is is reimbursed reimbursed ffor or all all or or some some ofof the the expenses expenses incurrincurred ed during during performance performance ofof the the contract. contract. This This fee fee is is negoti-negoti- aated ted in in advance advance and and usuallusually y ininvolvvolves es a a percent percent ofof total total costscosts. . “Time “Time and and mate-mate- rials”rials” plus plus a a profit profit factor factor arare e typical typical ofof cost-plus cost-plus contractscontracts. . Both Both types types ofof contracts contracts can can include include incentivincentive e clauses clauses ffor or superior superior performance performance in in time time and and cost, cost, or or in in some some casescases, , penalties—for penalties—for eexamplexample, , missing missing the the opening opening date date ofof a a new new sports sports stadium.stadium. 8. 8. Experience Experience and and staffing.staffing. The The aability bility ofof the the contractor contractor to to implement implement the the prproj-oj-

ect ect mamay y depend depend on on specific specific skills; skills; this this necessary necessary experience experience should should be be specified, specified, along along with with assurance assurance such such stafstafff will will be be aavailavailable ble ffor or this this project.project. 9. 9. Evaluation Evaluation criteria.criteria. The The criteria criteria ffor or evevaluating aluating and and aawarwarding ding the the projectproject

contract contract should should be be specified. specified. FFor or exampleexample, , selection selection criteria criteria frequently frequently includeinclude methodologymethodology, , priceprice, , scheduleschedule, , and and experience; experience; in in some some cases cases these these criteria criteria areare weighted. weighted. Use Use ofof the the outline outline in in Figure Figure A2.1 A2.1 will will help help to to ensure ensure kkey ey items items in in the the prproposal oposal are are not not omitted. omitted. A A well-prwell-prepared epared RFP RFP will will prprovide ovide contractors contractors withwith sufsufficient ficient guidelines guidelines to to prepare prepare a a prproposal oposal thathat t clearly clearly meets meets the the prproject oject and and customer’customer’s s needsneeds..

Chapter Chapter 2 2 OrgOrganization anization Strategy Strategy and and PrProject oject SelectionSelection 6565

FIGURE FIGURE A2.2A2.2 Contractor Contractor Evaluation Evaluation TTemplateemplate

Contractor Contractor Maximum Maximum Proposal Proposal Proposal Proposal Proposal Proposal ProposalProposal Evaluation Evaluation TTemplate emplate Weight Weight 1 1 2 2 3 3 44

Contractor Contractor qualifications qualifications Weight Weight 10 1055

TTechnical echnical skills skills available available WWeight eight 20 2055

Understanding Understanding of of contract contract Weight Weight 5 555 and and conditionsconditions

Financial Financial strength strength to to Weight Weight 15 1555 implement implement projectproject

Understanding Understanding of of proposal proposal Weight Weight 10 1055 specifications specifications

Innovativeness Innovativeness and and Weight Weight 5 555 originality originality of of proposalproposal

Reputation Reputation for for delivering delivering Weight Weight 15 1555 on on time time and and budgetbudget

Price Price Weight Weight 55 20 20

TTotal otal 100100

SELECTION SELECTION OF OF CONTRACTOR CONTRACTOR FROM FROM BID BID PROPOSALSPROPOSALS Interested Interested contractors contractors rrespond espond to to project project RFPs RFPs with with a a written written bid bid prproposal. oposal. It It is is liklikely ely thathat t severseveral al contractors contractors will will submit submit bid bid proposals proposals to to the the customercustomer.. The The final final step step in in the the RFP RFP prprocess ocess is is to to select select the the contractor contractor wwho ho best best meets meets the the

requirrequirements ements requested requested in in the the RFPRFP. . The The selection selection criteria criteria gigiven ven in in the the RFP RFP are are used used to to evevaluate aluate wwhich hich contractor contractor is is aawarded warded the the contrcontract act to to implement implement the the proj-proj- ect. ect. Losing Losing contractors contractors should should be be givgiven en an an explanaexplanation tion ofof the the kkey ey factors factors that that led led to to the the selection selection ofof the the winning winning contractor/vendor; contractor/vendor; aappreciappreciation tion ffor or their their participa-participa- tion tion and and efeffort fort should should be be acknoacknowledged. wledged. See See Figure Figure A2.2, A2.2, Contractor Contractor EvaluaEvaluation tion TTemplateemplate, , adapted adapted frfrom om one one used used in in practicepractice..