The Project Selection Process
Session 3
Presented by Chris Upfold and Mark Maritz
Acknowledgements
Project
Management in Practice, Mantel, J., Meredith, J., Shafer, S., and
Sutton, M., (2011)
Information
Technology Project Management, Revised 6th edition,
Schwalbe, K., (2011)
Effective
Project Management, Clements and Gido, (2006)
Project
Management, A Systems Approach to Planning, Scheduling and
Controlling, Kerzner, H., 2002
Basic
PAGDP 2014
Business Calculations, Zidel, D., (2001)
Your Turn to Throw!
PAGDP 2014
Methods for Selecting Projects
• Focus on competitive strategy and broad organizational
needs.
• Perform net present value analysis or other financial
projections.
• Use a weighted scoring model.
• Implement a balanced scorecard.
• Address problems, opportunities, and directives. (maybe no
choice)
• Consider project time frame.
• Consider project priority.
PAGDP 2014
Aligning Projects with Business Strategy
• Most organizations cannot undertake most of the potential
projects identified because of resource limitations and other
constraints.
• An organization’s overall business strategy should guide the
project selection process and management of those projects.
PAGDP 2014
Pyramid for the Project Selection Process: 4 stages
We need to
start here first!
PAGDP 2014
Focusing on Competitive Strategy and Broad
Organizational Needs
Competitive strategies:
 Cost leadership: Attract customers primarily because products
or services are inexpensive. Examples include Macro,
McDonalds, Pep stores.
 Focus: Develop products and services for a particular market
niche. Examples include Bang & Olufsen, Bentley
Broad organizational needs: People agree there is a need for a
project, they will make funds available, and there is a strong will
to make the project succeed.
PAGDP 2014
Performing Financial Projections
Financial considerations are often an important aspect of the project
selection process, BUT, not in isolation.
Three important methods include:
 Net Present Value analysis (NPV)
 Return on Investment (ROI)
 Payback analysis (how long to break even / make money)
PAGDP 2014
Some alternative evaluation methods:
Weighted Scoring
A weighted scoring model is a tool that provides a systematic
process for selecting projects based on many criteria.
To create a weighted scoring model:
 Identify criteria important to the project selection process.
 Assign a weight to each criterion (so they add up to 100
percent).
 Assign numerical scores to each criterion for each project.
 Calculate the weighted scores by multiplying the weight for
each criterion by its score and adding the resulting values.
PAGDP 2014
Weighted Scoring
PAGDP 2014
Problems, Opportunities, and Directives
Problems are undesirable situations that prevent an organization from
achieving its goals. These problems can be current or anticipated.
(Equipment Breakdown: Walmer Park substation)
Opportunities are chances to improve the organization.
Directives are new requirements imposed by management, government, or
some external influence. Financial Intelligence Centre Act (FICA) / National
Credit Act (NCA) or new environmental legislation
PAGDP 2014
What about the program mix?
Aggregate Plan deals with product and process development
projects
Not a single project that determines the organisations long term
success BUT a series of aligned projects that make-up the
project portfolio.
3 classifications
-Derivative Projects (incremental improvements)
-Breakthrough Projects (new generation)
-Platform Projects (new platform but existing technology)
-R&D (basic technology to develop new knowledge)
PAGDP 2014
Aggregate Project Plan
Extensive product
changes
Minor product
changes
R&D
Projects
Extensive
process
Change
Breakthrough
Projects
e.g. new
generation
products
Platform
Projects
somewhere inbetween
derivative and
breakthrough
Minor
Process
Change
PAGDP 2014
Derivative
projects
Aggregate Project Plan
Extensive product
changes
Minor product
changes
Internal
Project
(circles)
Extensive
process
Change
Size
indicates
Project
size
Minor
Process
Change
PAGDP 2014
Strategic
Alliance
Projects
(squares)
Session Summary
An organization’s overall business strategy should guide the project selection
process and management of those projects.
The four-stage planning process helps organizations align their projects with
their business strategy.
Several methods are available for selecting projects:
 Financial methods (net present value, return on investment, and payback)
 Weighted scoring models
 Aggregate Planning
 Balanced scorecards
 Addressing problems, opportunities, and directives
 Project time frame
 Project priority
PAGDP 2014