2. Project Selection

2.1 Why Project Leaders Need to Understand Business Strategy and Goals

Organizations exist to fulfill a purpose. This purpose is expressed in an organization’s vision statement. The vision statement is often very broad, describing what the leaders want the organization to accomplish. The mission statement is more specific, describing how the organization is going to fulfill its vision.

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Exhibit 2.1: The strategy cycle 
^{Rice University, OpenStax}

Successful organizations are intentional about the actions they take to fulfill their vision and mission. These organizations analyze their external and internal environments to understand the opportunities and threats present in the environments in which they operate. An organization also must analyze and work with its strengths and weaknesses. These analyses can be used to inform the decision-making that follows. In particular, the organization must develop objectives. These objectives are usually some sort of performance goal. Examples of performance goals include increasing market share for a product/service, improving profitability, and improving client satisfaction. For an objective to be effective, it has to be “SMART.”

.Exhibit 2.2: The “SMART” criteria acronym.

• Specific
  • Get into the details.
  • Objectives are specific and written in clear, concise, and understandable terms.
• Measurable
  • Use quantitative language.
  • Outline the criteria that must be met in order to achieve the objectives.
• Acceptable
  • All stakeholders must understand the organizational value of the objectives and accept them.
  • Objectives can then be assigned to and completed by specific team members.
• Realistic
  • Objectives must be centred in reality.
  • Objectives that are impossible to accomplish are unattainable.
• Time-based
  • Objectives have time frames and end dates assigned to them.

Once the objectives are developed, the organization determines how they will be achieved. This leads to the creation of specific strategies. These strategies are directly linked to the objectives being pursued and will vary widely depending on the industry and maturity of the organization. Examples of strategies an organization may implement include the launch of new products and services, the introduction of new technology, the streamlining of operational processes, and/or employee development initiatives.

Then, organizations move into the strategy implementation stage. Depending on the complexity of the changes being introduced, the strategies may be implemented as individual projects or integrated programs.  Project and program managers apply their expertise to the implementation domain and play a vital role in helping organizations achieve their vision and mission.

It is critically important that project and program leaders understand an organization’s strategies and objectives. This knowledge allows them to ensure that the decisions being made in their projects and programs are aligned with the organization’s strategic direction. A simple example of how this alignment is maintained relates to decisions about project scope. If an organization is attempting to increase its market share in a particular product or service, the project leader should ensure that information related to customer’s preferences with features/functionality is shared with the project team and included in the solution design.

Organizations often consider the project and program leader’s organizational knowledge when making resource assignment decisions. This knowledge can include an understanding of the particular industry/sector that the organization is operating in, the products and services provided by the organization, the existence of competitors and allies, and/or the expectations of clients/customers. Understanding customer/client expectations are particularly helpful because project/program success often contains measures of customer/client success. Project and program leaders need to ensure that the solutions are very customer-centric.

Project and program leaders often lead change in a variety of industries/sectors throughout their professional careers. A commitment to life-long learning and a willingness to seek out formal and informal mentors help ensure project and program managers are able to gain the organizational knowledge needed to keep their change initiatives aligned with their organization’s strategies and objectives.

Lastly, project and program leaders are increasingly part of project selection decisions. They offer unique and valuable knowledge about what it takes to implement strategic initiatives. In particular, project and program leaders are able to assess the complexity of a change initiative. Generally, more complex initiatives are risker. They also require a longer implementation and business benefit realization period.  Therefore, project selection decisions will weigh the benefits offered with the timeframe required to realize these benefits.  Projects that offer significant benefits that can be realized in a relatively short time period are more likely to be approved. These considerations can be viewed as selection criteria in the project portfolio management process. Section 2.2 will examine project selection criteria and decision-making models more closely.

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Exhibit 2.3: Balancing these two variables (benefits of change and realization time) is crucial. If the benefits do not outweigh the realization time period, project and program leaders will not initiate the change effort. This is especially true today given the disruptive pace of advancements in technology.
^Pixabay

2.2 Project Portfolio Creation and Ongoing Management

A portfolio is “projects, programs, subsidiary portfolios, and operations managed as a group to achieve strategic objectives.”¹

Portfolio management is defined as “the centralized management of one or more portfolios to achieve strategic objectives.”¹

Understanding why change initiatives were selected is helpful because it guides future decision-making. These reasons can be non-financial and financial in nature. The non-financial reasons are often viewed as strategic considerations; they include everything from ending a dependency on an unreliable vendor to restoring the image of an organization. Many organizations also use financial criteria to ensure that an investment will deliver value to the organization. Three common financial criteria used are net present value (NPV), return on investment (ROI), and payback period. Since little may be known about the specific solution at the time of project selection, financial evaluations are based on high-level estimates only. Once a project is selected, a more detailed financial analysis is often performed. Project justification will be discussed further in Section 4.1.

Since decision-making models often consider numerous criteria when evaluating the change alternatives, tools such as the weighted scoring model are very helpful. Weighted scoring models introduce objectivity in what would otherwise be a very subjective decision-making process.

Creating a weighted scoring model starts with careful consideration of decision-making criteria. In the case of project selection, many organizations refer to their strategic plans in order to identify important factors.  As previously discussed, this is often a mix of financial and non-financial criteria. Once the criteria have been selected, we give each criterion a value, called a weight, in order to illustrate its relative importance. The more important the criterion, the higher its weight. Each of the potential change initiatives is evaluated against the weighted criteria and given a score. Weighted scoring models have lots of applicability in everyday life.

Let us see how a weighted scoring model can help us introduce more objectivity into our decision-making with a real-life example. Imagine you have decided to take a vacation and want to get away to a gloriously warm and welcoming resort outside of your home country. The options are endless! How do you decide? For some, things like a sandy beach, diverse food and drink options, and a rich nightlife are the most important factors in their decision. For others, the length of the airplane trip and the cost are the most important factors. The length of the airplane trip is particularly important to those who have limited time for a vacation. Attempting to weigh all these factors into our decision can be overwhelming. We can simplify our decision-making by turning this into a weighted scoring model. All the things we deem important will become our criteria. Recognizing that some of the criteria are more important than others, we assign weights to the criterion. For example, we assign the following weights using a 5-point scale:

Our list of resort destinations is very long. After considering our criteria, we were able to narrow it down to 5 locations.  Here is the list:

1. Dassia, Greece
2. San Jose del Cabo, Mexico
3. Serra Negra, Brazil
4. Nabq Bay, Egypt
5. Sanya, China

Let us build our weighted scoring model (accessible versions of the three tables below can be found here). It could look like this:

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Now we have to evaluate each of these locations according to our criteria. These evaluations are somewhat subjective. We assign each location a score between 1 and 10, with 1 being the lowest and 10 being the highest. These scores could result in the following matrix:

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Evaluating vacation alternatives is a matter of personal taste. For instance, those who enjoy the foods of the Mediterranean are more likely to rate locations like Greece higher than the locations where the food is spicy. In addition, the cost is also dependent on the activities someone would choose to pursue while on vacation. Scuba diving, mountain climbing, and shopping excursions may have greater appeal to some travellers and lesser appeal to others. If you were to use the weighted scoring model in your own vacation planning, you would have the opportunity to assess your chosen locations from the perspective of your own personal taste.

The last step is to calculate the weighted score for each location. As an example, when considering the Dassia, Greece vacation, we would multiply the score of 8 for Sandy Beach by the weight of this criterion which is 5 since this criterion was of the utmost importance. We would then multiply the score of 7 for Food & Drinks by the weight of this criterion which is 3. This continues for all 5 criteria and would result in the following equation:

The Weighted Score for Dassia, Greece =

(8×5) + (7×3) + (8×5) + (4×4) + (6×3) = 40 + 21 + 40 + 16 + 18 = 135

The completed weighted scoring model would appear as follows:

In this case, our traveler may choose San Jose del Cabo in Mexico as this location is best able to meet their personal tastes. The second choice would be Dassia in Greece.

2.3 The Project Management Office

Many large and medium-sized organizations have created a department to oversee the project selection process and support project delivery throughout the organization. This is an attempt to reduce the high number of failed projects. These offices are usually called the project management office or PMO.

The PMO may be the home of all the project leaders in an organization, or it may simply be a resource for all Project Leaders, who reside in the functional departments.

Typical objectives of a PMO are:

• Help ensure that projects are aligned with organizational objectives
• Provide effective templates and procedures to project teams
• Provide training and mentorship to Project Leaders
• Provide facilitation in stakeholder meetings
• Stay abreast of the latest trends in project management
• Serve as a repository for project reports and lessons learned

The existence and role of PMOs tend to be somewhat fluid. If greater success is not experienced as a result of the PMO’s efforts, it is at risk of being disbanded as a cost-saving measure. If you are a project leader or a project team member in an organization with a PMO, try to make good use of the resources available. If you are employed as a resource person in a PMO, remember that your role is not to get in the way and create red tape, but to enable and enhance the success of project leaders and their projects within the organization.

References

¹ Project Management Institute. (2017). A guide to the project management body of knowledge (PMBOK guide) (6th ed.). Project Management Institute.