MGT400 2

MGT400 – Project Management Chapter 2: Organization Strategy and Project Selection

Lecture Content

• What is an Organization Strategy?

• Why do project managers need to understand strategies?

• What is the role of Projects and Project managers?

• Review of Strategic Management Process.

• Planning and Decision Support.

• Class Reading: Apple Strategy.

• What is Project Portfolio Management?

• Project Selection

• Finish slides

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What is an organizational strategy?

• Organizational strategy means: • Where we are not as a company and

• Where we would like to be in the future

• Given our resources and abilities.

• Characteristics of Organizational strategy requires: • deep understanding of company’s strengths

• deep understanding of company’s weakness

• detailed understanding of company’s competitors.

• and how to maximize the company’s limited resources.

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What is an organizational strategy?

Strategic

Functional

Tactical

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Why Project Manager Need to Understand the Strategy?

•Taking the Decisions that Align with Companies Strategies: • Plan projects that would help to achieve the company’s strategy.

• Prioritize those projects that can maximize chances of achieving the company’s strategy.

• Helps project managers be more focused

• Helps project managers be more effective project advocates.

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The Planning and Decision Process

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Mission

Goals

Organizational strategy

Functional strategies

Finance Marketing Operations

Tactics Tactics Tactics

Finance operations

Marketing operations

Operations operations

Strategic Management Process

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Strategic Management Process

1. Review and define the organizational mission

2. Set long-range goals and objectives (Answer Question, where and when)

3. Analyze and formulate strategies to reach objectives

4. Implement strategies through projects

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Formulating strategy might range around 20% of

management effort, while determining how strategy

will be implemented might consume 80%

Steps designing strategy:

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Mission

Goals & Objectives

Strategies

Set Long-Range Goals and Objectives

• Objectives answer in details; • Where the firm is headed. • When it is going to get there

• Objective should be: • Specific • Measurable • Assignable • Realistic • Time related

• Ex. ‘Achieving 40% increase in Sales volume’

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Snapshot from Practice

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Class reading

A Portfolio Management System

• What is Portfolio Management? • For companies with many projects running, they

develop a portfolio management system.

• This system intends to “prioritize” important projects to

maximize use of limited resources.

• Companies without a portfolio management system

risks wasting their time on projects that either do not

yield enough money or do not align with the

organizational strategy.

• Transparency is at the heart of having a system of this

sort.

• To prioritize the projects that best help an organization,

many companies designed “Selection Criteria”.

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Portfolio of Projects by Type

2–13

A Portfolio Management System

• Selection Criteria

• Financial: Payback and Net Present Value (NPV)

• Payback: Looks exclusively on which project would pay back better or

more. This simply dividing revenue estimates over cost.

• Net Present Value (NPV) is more detailed as it looks at return on

investment over a period of time.

• Lets look at the book’s example on page 37 & 38

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A Portfolio Management System

• Selection Criteria

• Non-financial: projects of strategic importance to the firm.

• To capture larger market share

• To make it difficult for competitors to enter the market

• To develop an enabler product, which by its introduction will increase sales in more profitable products

• To develop core technology that will be used in next- generation products

• To reduce dependency on unreliable suppliers

• To prevent government intervention and regulation 15

Multi-Criteria Selection Models

• Checklist Model • Uses a list of questions to review potential projects and to determine their acceptance

or rejection.

• Fails to answer the relative importance or value of a potential project and doesn’t to allow for comparison with other potential projects.

• Multi-Weighted Scoring Model • Uses several weighted qualitative and/or quantitative selection criteria to evaluate

project proposals.

• Allows for comparison of projects with other potential projects

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Multi-Criteria Project Screening Matrix

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Project Portfolio Matrix

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Examples of PMO