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Chapter2-ProjectSelectionandPrioritization.pptxCONTEMPORARY PROJECT MANAGEMENT, 4E
Timothy J. Kloppenborg
Vittal Anantatmula
Kathryn N. Wells
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Project Selection and Prioritization
Chapter 2
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Chapter 2 Project Selection and Prioritization
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Explain the strategic planning and portfolio management processes.
Describe how to select, prioritize, and resource projects as an outgrowth of strategic planning.
From a contractor’s viewpoint, describe how to secure projects.
Chapter 2 Core Objectives
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Compare strengths and weaknesses of using financial and scoring models to select projects.
Demonstrate how to select and prioritize projects using a scoring model.
Chapter 2 Technical Objectives
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Explain the strengths an organization might possess that could improve its ability to perform projects.
Chapter 2 Behavioral Objectives
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Strategic Analysis
Guiding Principles
Vision
Mission Statement
Strategic Objectives
Flow-down Objectives
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Strategic Planning Process
Strategic Planning and Portfolio Alignment
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Strategic Analysis
SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats)
Elements within the project team’s control
Elements over which the project team has little/no control
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SWOT Analysis for the Built Green Home at Suncadia
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Breakout session! SWOT analysis
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
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Give students an example project that has been in the news lately and divide them into groups. Have the various groups brainstorm one of the four categories of the SWOT analysis and report to the class when finished.
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Kate Wells () -
Guiding Principles
The vision is one sentence that describes the organization in the future
Requires extra effort to be achieved
Multiyear goals may require need for a new vision
Mission statement - mechanism for achieving the vision
Triple Bottom Line
Social
Environmental
Economic
Organization’s core purpose
Core values
Culture
Beliefs
Primary business
Primary customers
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This approach emphasizes the social, environmental, and economic health of
all of the company’s stakeholders rather than a narrow emphasis only on the economic
return for shareholders.
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Mission Statement Considerations
Purpose
Core values
Beliefs
why an organization exists
how decisions will be made
how people will be treated
what the leaders stand for
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Mission Statement Considerations
Culture
Primary business areas
Primary customers
how members should act
what business the organization engages in
which groups of people need to be satisfied
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Cincinnati Children’s Hospital Medical Center Vision and Mission
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Strategic Objectives
Means of achieving the vision and mission
Objective setting occurs annually
Describe short- term and long-term results
Describe measures of achievement
Effective objectives are
Specific
Measurable
Achievable
Results-based
Time-specific
SMART
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Internet Society Strategic Objectives
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Flow-down Objectives
Enforce strategic objectives
Implemented through ongoing operations
Projects are the primary method for implementing objectives
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Portfolio Management
Portfolios
Programs
Projects and subprojects
Assess organization’s ability to perform projects
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Portfolios
Composed of projects, programs, sub-portfolios, and ongoing operations
Seek a balance between:
Large and small projects
High-risk, high-reward and low-risk projects
Quick completion and substantial time projects
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Programs
Include a group of related projects, subprograms, and activities
Last as long as the organization lasts
Projects within a program are of limited duration
Managed at a level above the project manager
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Project managers should attempt to understand how both portfolio and program decisions impact
their projects and then spend most of their efforts focused on their project.
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The Project Portfolio
A collection of projects grouped to be collectively managed
Portfolio management:
Portfolio of Projects
IDENTIFY
SELECT
PRIORITIZE
RESOURCE
GOVERN
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Projects and Subprojects
A large project may be composed of multiple subprojects
The project manager coordinates subprojects and makes decisions that are best for the overall project
A subproject comes from dividing a project into more manageable pieces
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Portfolio, Program, Project, and Subproject Relationships
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Portfolio of Projects and Operational Work Processes
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Reasons for Project Failure
Not enough resources
Not enough time
Unclear expectations
Changes to the project
Disagreement about expectations
Projects must be aligned with the goals of the parent organization.
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Assess Organization’s Ability to Perform Projects
TEAMWORK
Do we have a teamwork attitude, free and open communication, creativity, and empowered decision-making?
PM Process
Do we have a clearly defined project management process?
ASSOCIATES
Do our associates have the right attitudes, skills, and competencies to use the project management process?
LEADERS
Are our leaders at each level willing to take appropriate personal risk?
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Assess Organization’s Ability to Perform Projects
FOUNDATION
Does senior leadership establish a strong leadership foundation?
LEADERSHIP
Do individuals and teams exhibit leadership at their respective levels?
EXTERNAL ENVIRONMENT
Do we monitor and understand our external environment?
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Identifying Potential Projects
Social need
Customer Request
Legal requirement
Technological advance
All should participate
Identify twice the projects
Brief description of project
(“elevator pitch”)
Market demand
Strategic opportunity
Environmental consideration
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Identifying Potential Projects
Summarize the work
Why the project is important
business case – why is this project worth the organization’s investment?
statement of work – what will be done and/or produced?
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Project Selection, Prioritization, and Initiation
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Methods for Selecting Projects
What value does each potential project brings to the organization?
Are the demands of performing each project understood?
Are the resources needed to perform the project available?
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Methods for Selecting Projects
Is there enthusiastic support both from external customers and from one or more internal champions?
Which projects will best help the organization achieve its goals?
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Methods for Selecting Projects
Include financial and scoring models
Projects are investments
Three different approaches
Financial analysis as the primary means of selection
Financial models as screening devices
Financial justification as one factor in a multi-factor scoring model
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Using a Cost-Benefit Analysis Model to Select Projects
Most widely accepted model
Discount the expected future value
Subtract discounted costs from discounted benefits
Divide the cash flow by the initial cash outlay
A ratio above 1.0 means the project is expected to profit
Net Present Value (NPV)
Benefit-Cost Ratio (BCR)
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Using a Cost-Benefit Analysis Model to Select Projects
Percentage return expected on the investment
A ratio above the current cost of capital
Higher IRR is better
Time required to pay back the initial project investment
Shorter payback periods are desirable
Internal rate of return (IRR)
PAYBACK PERIOD (PP)
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Using a Cost-Benefit Analysis Model to Select Projects
Financial models ensure the cost and return perspective.
Financial models DO NOT ensure alignment with strategic goals.
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Financial Models for Project Selection
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Using a Scoring Model to Select Projects
Scoring models often used when multiple important criteria exist
Identify potential criteria
Determine mandatory criteria
Weight criteria
Evaluate projects
Sensitivity analyses
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Examples of Project Selection Criteria
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Project Selection and Prioritization Matrix
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Completed Project Selection and Prioritization Matrix
Evaluate
Rate
Weight
Display
Select
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Breakout session!
First, brainstorm criteria you would use to create a scoring model
Next, complete a selection/prioritization model like the one in Exhibit 2.10
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For this breakout session, you can use an example such as buying a new car. You can also see Exercises 1 & 2 in the text for examples of the matrix.
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Sensitivity Analysis
What would happen if factors were to change?
Some criteria may be deemed more important than others
Add missing criteria or new alternatives
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Revised Project Selection and Prioritization Matrix
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Prioritizing Projects
Which projects assigned resources and scheduled to begin first
Scoring models provide input
Other considerations:
Urgency of each project
Cost of delaying the expected benefits
Practical details of timing
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Alternative Breaks Project Selection and Prioritization Matrix
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Resourcing Projects:
Leaders should start assigning resources from highest priority project down until resources become limited
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Securing Projects
The client perspective
Selection and prioritization process
Make versus buy decision
The contractor perspective
Identify potential project opportunities
Determine which opportunities to pursue
Prepare and submit project proposal
Negotiate to secure the project
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Identify Potential Project Opportunities
Perform portfolio alignment exercise
Attend trade shows and professional conferences
Practice customer relationship management
Establish & nurture personal contacts
Link information systems
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Determine Which Opportunities to Pursue
Target projects to pursue
Use SWOT analysis
Determine if project will help achieve contractor objectives
Consider cost to pursue the work
Consider probability of securing the project
Consider capability to perform the work
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Prepare and Submit Project Proposal
Understand the source selection criteria
Consider technical, managerial, and financial factors in contractor selection
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Typical Source Selection Criteria
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Schedule
Negotiate to Secure the Project
PM to find a solution to secure project work with enough profit potential
Negotiate money to be paid for a project and...
Contractual terms
Personnel
Quality standards
Reporting mechanisms
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Summary
Selection begins with strategic planning
Use SWOT analysis
Develop mission and vision statements as guiding principles
Use portfolio management to consider:
Resources
Organizational capabilities
Individual capabilities
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Summary
Evaluate potential projects through financial and/or scoring models
Prioritize selected projects for completion
External project may be a better fit
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Prioritizing Projects at LADD
Outcomes not always predictable
Some projects nonnegotiable—and would pave way for other, larger projects
Focused on 12 top-ranked projects and quarterly results
PM IN ACTION
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