As part of my reading and reflection on the chapters Project Initiation and Overview of project planning, I would like to elaborate on a few insights I have deduced through my comprehension of this chapter. Before a project is initiated, a business case needs to be prepared which captures the business opportunity, need for the project and an explanation of what the project is trying to accomplish (Watt,2019). The business case for a project should also capture the savings and ROI that would be achieved through implementation and other benefits/risks that the project holds. Once the business case is presented, the project sponsor approves it and allocates funds for the project. Following this, a feasibility study is initiated to investigate whether the project is worth undertaking and if it is financially rewarding for the organization. This is also determined by the project sponsor. It is important to be very clear on the need for the project and the objective of the project. The customer’s expectations need to be translated into the right deliverables for any work is started and this should be encapsulated in the project objective. All stakeholders should be aligned on their understanding of what the project is trying to accomplish. It is common to see projects achieving the wrong deliverables and developing products or services out of sync with the customer’s expectations, due to their incorrect framing of the business case. The quality of the business case determines the likelihood of the project being granted approval and its overall success as well. An unhappy customer is the most undesirable outcome for any project manager.
When dealing with several different criteria when determining customer requirements, a tool called the weighted decision matrix can be used to zero in on the most important ones. This tool helps in assigning weights to different parameters based on their degree of importance and relevant to the solution of the project or the customer’s needs (Watt,2019). Following this exercise based on the weighted project scores, the project manager and team can make an informed decision about the project objective and the best solution to adopt for the business case. Cost savings and profitability need to be judged for the all new projects and there are many ways of doing this. The tools mentioned in the chapter are the net present value method, the rate of return method and payback analysis method. This method is used to factor in discounted cash flows and is based on the principle that a dollar earned todays is worth more than a dollar earned in the future due to the decreasing time value of money. The factor ‘R’ is used to represent the difference between cash inflow and outflows at any point of time ‘t’. A positive net present value would imply that a project would make sense financially and can help build a case for approval and a negative one would imply financial losses. The return on investment method is used to calculate returns earned on money invested by representing this mathematical quantity as a ratio. It’s a very commonly adopted framework by companies globally to do a quick financial evaluation of projects. When comparing money invested to money earned through the project, one needs to remember that costs incurred could be in the form of direct labor costs, material costs, overhead, taxes, facility costs etc. and miscellaneous items need to be factored in for the analysis to hold relevance in the future.
If a project team is interested in determining the time taken for a project’s benefits to start outweighing the costs, then they can use the payback analysis method. This is a good technique for long term projects where benefits may not be immediately realized and in cases where the initial investment is very high. All three methods can be used based on the complexity of the project involved and the financial personnel on the team and the project manager should use their discrimination in selecting the right method to evaluate projects. In my own experience, an example that comes to mind is in the automotive sector where a new car is launched and the design concept and production process for the car is initiated. Before product launch, the company evaluates the returns earned through sales by releasing the car in the market towards a target customer and also evaluates the size of the market also.
References
Watt, A. (2019). Project Management, 2nd Edition. BCcampus Open Education
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