Friday, October 8, 2010

Project Selection Method

Most organizations have a formal, or at least semi-formal, process for selecting and prioritizing projects. Selection methods measure the value of what the product, service, or result of the project will produce and how it will benefit the organization. Selection methods involve the types of concerns executive managers are typically thinking about. This includes factors such as market share, financial benefits, return on investment, customer retention and loyalty, and public perceptions.

There are generally two categories of selection methods: mathematical models (also known
as calculation methods) and benefit measurement methods (also known as decision models).
Decision models examine different criteria used in making decisions regarding project selection,
while calculation methods provide a way to calculate the value of the project, which is
then used in project selection decision making.

Mathematical Models
Mathematical models uses linear, dynamic, integer, nonlinear, and/or multi-objective programming in the form of algorithms or in other words, a specific set of steps to solve a particular problem. Organizations considering undertaking projects of enormous complexity might use mathematical modeling techniques to make decisions regarding these projects.

Benefit Measurement Methods
Benefit measurement methods employ various forms of analysis and comparative approaches to make project decisions.

The following are different types of the benefit measurement methods:

   Comparative Approaches 
  • Cost-Benefit Analysis, compares the cost to produce the product, service, or result of the project to the benefit that the organization will receive as a result of executing the project.
  • Scoring Models, decides on the criteria for example, profit potential, marketability of the product or service, ability of the company to quickly and easily produce the product or service, and so on. Each of these criteria is assigned a weight depending on its importance to the project committee. More important criteria should carry a higher weight than less important criteria.

   Benefit Contribution Methods
  • Cash Flow Analysis Techniques
    • Payback Period
      Payback period is the length of time it takes the company to recoup the initial costs of producing the product, service, or result of the project. This method compares the initial investment to the cash inflows expected over the life of the product, service, or result.
    • Discounted Cash Flows
      Discounted cash flow uses Present Value (PV) formula for selection purposes or when considering alternative ways of doing the project. It will select project with the highest investment to the company.
    • Net Present Value (NPV)
      The company expects to receive revenues, or cash inflows, from the resulting project. NPV allows you to calculate an accurate value for the project in today’s dollars. Projects with high returns early in the project are better projects than projects with lower returns early in the project.
    • Internal Rate of Return (IRR)
      IRR is the discount rate when the present value of the cash inflows equals the original investment. When choosing between projects or when choosing alternative methods of doing the project, projects with higher IRR values are generally considered better than projects with low IRR values.
  • Economic Models.
    Project selection based on the economic value among the projects.

1 comment:

Anonymous said...


Tag: PM201A57. Let me share all of you about #5 Tips for Project Management Success,, I hope you enjoy it

1. Plan your day using time management techniques

As a project manager, time management skills are essential because you are dealing with a wide range of tasks that demand a quick turnaround time. Planning your day will go a long way in keeping you organized and increasing your productivity. Assist your task planning by using project management software which helps you track the work of you and your team.

If you are not very tech savvy, a simple to-do list can also be a great organizational tool. Prioritize your most important tasks by putting them at the top of the list and less important ones at the bottom. Having a visual plan of your daily tasks helps to keep you on track and aware of time.

Related post: Free ebook 104 secrets to become a great project manager

2. Include stakeholders in important project conversations

While you will have plenty of responsibilities regarding the project, don’t neglect your clients.

Good communication is essential is keeping both parties informed of project progression, curtailing scope creep, and apprised of changing requirements. Some clients may have different expectations when it comes to communication, so make sure to establish the frequency and type of communication (like emails, phone calls, and face-to-face conversations) at the beginning of your project.

Establishing communication expectations early helps alleviate stakeholder uncertainty about communication frequency and delivery.

3. Regularly communicate with your team

Daily team communication helps keep misunderstandings and unclear requirements under control. Keeping your team informed in every step of the project is essential to project management success.

For example, a study published by Procedia Technology found that good communication skills were the cornerstone of project management. The study examined over 300 “construction project managers, architects, construction managers, engineers and quantity surveyors” and their successes and failures on various construction projects.

4. Anticipate project setbacks

Even the best-laid plans often go awry.

Remember that even with a high amount of planning and attention to detail, your project may still encounter some challenges. Pay attention to complaints from stakeholders or colleagues, and other warning signs, like a missed deadline or cost overrun, that there may be a problem.

Preventing a crisis will keep your project running smoothly, save you a lot of time, and keep you, your team, and your stakeholders confident in progressing with the project.

Unfortunately not every complication can be avoided. Crisis management skills are essential for dealing with the unexpected. Project managers need to be flexible and pragmatic. Improvise and make sharp decisions when needed.

Related post: 92 free project management templates

5. Stay focused on the details

A common problem project managers encounter is having the project aims not aligned with the organization’s objectives. A great project manager will strategize a plan for the project to lead back to the overall success of the business.

Know your project’s scope by heart and avoid wandering outside of the project’s requirements. It’s too easy to get lost in minor details and forget what your focus is, so a well-planned project scope is essential for success.

And final, you should use KPI to measure effectiveness of the project, here are full list: 76 project management KPIs