Project Management: Achieving Competitive Advantage Fifth Ed

Project Management Achieving Competitive Advantagefifth Editionchapte

Explain six criteria for a useful project selection/screening model.

Understand how to employ a variety of screening and selection models to select projects.

Learn how to use financial concepts, such as the efficient frontier and risk/return models.

Identify the elements in the project portfolio selection process and discuss how they work in a logical sequence to maximize a portfolio.

Paper For Above instruction

Effective project selection and portfolio management are fundamental to the strategic success of organizations. A well-structured project selection model ensures that resources are allocated optimally to initiatives that align with strategic goals and deliver maximum value. Below, six criteria are identified as essential for a useful project selection or screening model:

1. Realism

The model must accurately reflect the organization's operational environment and capabilities. It should consider current market conditions, resource availabilities, and technological feasibility, thereby ensuring that selected projects are achievable within the organization’s constraints (Kerzner, 2017). Realism prevents the selection of projects based on overly optimistic assumptions, which could lead to resource misallocation and project failure.

2. Capability

The screening model should assess whether the organization possesses the necessary skills, technology, and infrastructure to undertake the project successfully (Meredith & Mantel, 2017). It ensures that the selected projects are within the organization's capacity to deliver, thus reducing the risk of overruns and underperformance.

3. Flexibility

The ability to adapt to changing circumstances is vital. A flexible screening model accommodates shifts in market conditions, organizational priorities, or technology, allowing for re-evaluation and adjustment of project choices without substantial procedural overhaul (Crawford & Pollack, 2020).

4. Ease of Use

A practical model facilitates decision-making by being straightforward and user-friendly. Managers and decision-makers should understand and apply the model without extensive training or complex calculations, thus enabling prompt project evaluation (PMI, 2017).

5. Cost-Effectiveness

The model should operate with minimal resource expenditure, providing valuable insights without excessive time or financial investment. An overly complex or resource-intensive model can divert resources from core activities, reducing overall efficiency (Heagney, 2016).

6. Comparability

The model must allow for comparison across multiple projects by using standardized metrics or scoring systems. This comparability ensures that projects are evaluated consistently and objectively, facilitating transparent decision-making (Gray & Larson, 2020).

Employing a variety of screening and selection models enhances the decision-making process. Checklist models, for example, are useful for initial screening based on essential criteria, while weighted scoring models provide a more nuanced evaluation. The Analytic Hierarchy Process (AHP) offers a structured approach by breaking down criteria into subcriteria and assigning weights, thus enabling more rational comparisons (Saaty, 1980). Financial models like Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period incorporate economic considerations and calculate the value or risk associated with projects, aligning investment decisions with financial goals (Brealey et al., 2022). Combining qualitative and quantitative models ensures a comprehensive evaluation aligned with organizational priorities.

Project Portfolio Management and Selection

The process involves selecting, supporting, and managing a collection of projects to optimize organizational value. Initial steps include understanding strategic objectives, establishing evaluation criteria, and conducting pre-screening to filter out non-viable projects. The prescreening phase uses basic filters based on feasibility, strategic fit, and resource availability. Subsequent phases involve detailed analysis of shortlisted projects, applying financial and non-financial evaluation models, and prioritizing based on organizational objectives (Cooper et al., 2016).

The portfolio selection process follows a logical sequence: pre-process, process, and post-process activities. Pre-process involves strategy formulation and defining selection criteria; the process phase includes screening, detailed project analysis, and portfolio assembly; and post-process involves project development, implementation, and ongoing review to ensure alignment with strategic goals (Meskendahl, 2010). Utilizing a portfolio matrix allows organizations to categorize projects into types such as "Bread and Butter," "Pearls," "Oysters," and "White Elephants," facilitating resource allocation based on potential value and feasibility (Riediger & Demeere, 2019).

Maximizing Portfolio Value

By carefully selecting projects that align with organizational strategy, balance risk, and resource constraints, organizations can create a diversified portfolio that maximizes returns. The use of financial models like the efficient frontier helps in understanding the trade-offs between risk and return, guiding organizations to optimize the portfolio's overall performance under various risk scenarios (Markowitz, 1952). Regular review and re-prioritization are crucial as project conditions and organizational strategies evolve. Adaptive portfolio management ensures that projects remain aligned with shifting priorities, market conditions, and resource availabilities (Artto et al., 2011).

In conclusion, a systematic and criteria-driven approach to project screening and portfolio management enables organizations to focus on initiatives that deliver strategic value. Employing a combination of qualitative judgment and quantitative analysis, informed by financial principles like risk/return models, enhances the decision-making process. The end goal is to develop an optimal project portfolio that delivers sustainable competitive advantage by strategically balancing project risks, resources, and returns.

References

  • Artto, K., Martinsuo, M., Dietrich, P., & Kujala, J. (2011). Strategy implementation in project portfolios. International Journal of Project Management, 29(7), 787–799.
  • Brealey, R. A., Myers, S. C., Allen, F., & Mohanty, P. (2022). Principles of Corporate Finance. McGraw-Hill Education.
  • Cooper, R. G., Edgett, S. J., & Kleinschmidt, E. J. (2016). Portfolio Management for New Product Development: Results of an Industry Best Practices Study. Research-Technology Management, 59(4), 41–50.
  • Crawford, L., & Pollack, M. (2020). Developing project management maturity. International Journal of Project Management, 38(3), 137–148.
  • Gray, C. F., & Larson, E. W. (2020). Project Management: The Managerial Process. McGraw-Hill Education.
  • Heagney, J. (2016). Fundamentals of Project Management. AMACOM.
  • Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. Wiley.
  • Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77–91.
  • Meredith, J. R., & Mantel, S. J. (2017). Project Management: A Managerial Approach. Wiley.
  • Project Management Institute (PMI). (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). PMI.
  • Riediger, F., & Demeere, A. (2019). Strategic Portfolio Management. Journal of Business Strategy, 40(4), 19–27.
  • Saaty, T. L. (1980). The Analytic Hierarchy Process. McGraw-Hill.

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