How to Choose the Right Project? But are they the right ones? However, it is not possible to execute every project in an organization. Why there must be a project selection in the organizations?
Project selection is the first important Project selection methods of project portfolio management. Who is responsible for the selection and review of projects? The responsibility is with the leadership team of the organization. Typically, they establish a steering committee that overlooks the process of selecting projects, including project monitoring, and directly reporting to the CEO — if the CEO is not a member of that steering committee already.
The leading question is: This strategy identifies areas where the organization Needs to improve or change in terms of organizational structure, research and development capacity, development of products, office space, manufacturing capacity, etc.
Wants to serve customers in order to earn money. Then, our leading question for the selection of projects turns into: All these projects need resources partially or fully provided by the organization itself. Since these resources are limited not all of the projects we would like to pursue can be staffed or funded adequately.
So, projects in different areas will compete with each other in order to get support of the organization in terms of staffing and funding. The generic process of project selection looks as follows.
The best option would be to set up a strategy development process that contains project identification and project selection as an integral part cf. In fact, we observe that most organizations identify investment projects within their strategy development process, but delegate the identification of customer projects to their key account and sales departments.
Like in strategy development, we find four different ways to identify projects.
We categorize them in the following table. The following examples may illustrate these four basic approaches. Example 1 intuitive identification: The family who owns our company wants to add a new product to our portfolio.
Therefore, they tell our CEO to start a development project for this new product. Example 2 evolutionary identification: Quite a few of our colleagues in our engineering department find it necessary to have a more efficient knowledge management system. In their coffee and tea breaks, they discuss some basic ideas for requirements of such a system, and, some weeks later, propose to start a project to purchase a software package with the necessary functionality and adapt it to our needs.
Example 3 holistic identification: Example 4 expert oriented identification: Our CEO invites an external consultancy firm to benchmark our customer service organization. There are a couple of methods available: We need to know Project life cycle duration, in number of accounting periods, Expected project cost per accounting period, Expected project revenue per accounting period, Overall risk values of the projects to be evaluated.
Usually, we do this whole evaluation in definition or early planning phase. Then, we only have estimates of those values and should make sure that the estimation accuracies are comparable. The Net Present Value NPV of a project is defined as the difference between present value of cash inflow revenue, PV in and present value of cash outflow cost, PV out of that project over the project life cycle time.
Here is the formula to calculate the present value PV for given future value FVinterest rate rand number of accounting periods n: Project Selection, Example 1: Project Selection, Example 2: If we would have to choose between project "Blue" and project "Red" we would choose the one with the higher NPV, i.
The internal rate of return of a project is defined as the interest rate at which the net present value of that project equals zero. Again, we choose project "Blue", the one with the higher IRR.
In project selection, we usually account for an overall view of benefits and costs of proposed projects, trying to express all benefits and all costs in monetary terms of present values at given interest rates.The Value of Project-Selection Methods.
Outside of the project charter, the other topic that is greatly emphasized by PMI within the Initiating process is project-selection methods.. PMI feels strongly that organizations should have a formal process for deciding projects to sponsor and for ensuring that projects are supportive of the organization's strategic objectives.
Jan 28, · Project Selection Methods - Project selection methodologies provide a systematic approach for selecting the project with maximum value to the leslutinsduphoenix.com: Avantika Monnappa. Project selection methods help guide an organizations decisions and weigh them against alternative projects.
As a project manager or owner, you will inevitably have to make decisions regarding which projects to implement. As a team, you will need to carefully Read More. Project selection techniques help you select a project which could provide you with a better return on investment and recognition.
There are various methods to select a project; however, if the project is small and not very complex, you will go for the benefits measurement model.
Which are the most common project selection methods?
In this article we are going to overview the different project selection methods and when is the best occasion for using each project selection method. More detailed information about project selection can be found in the PMP training.
Project Selection Methods: A Primer for the Project Manager The success of an enterprise often hinges on the projects it selects, so this is an area of project management - and indeed business management - that should not be overlooked.