Project selection is always one item that opens up discussions from different professionals. There are plenty of tools and techniques out there that aims to have a scientific approach to this process. It is a subject that I personally am interested in. In my current role, I work with share holders, senior executives and decision makers to ensure that a strategy is in place. My contribution is facilitate this activity to all of them and make it smooth, enjoyable and facts driven.
Companies are different. Even when they deliver the same product or service, they still are different. That is because the context of an organisation plays an important role. What works for one organisation does not necessarily works for another. That is why Context is core competency in the frame work of the Chartered Quality Institute for Quality Professionals. Project Management Institute covers stakeholders management in depth as a key knowledge area in the frame work. Understanding your stakeholders Power and Influence will help you understand the organisational context, and thus choose an approach that would work best.
There are several ways an organisation can select a project. By that we are not talking about that “Here, you have a project to work on” kind of conversation that a manager has with their team members. This is about a properly defined project that will have an impact with its deliverables. It is about transforming an idea into potential reality.
So according to Kathy Schwalbe’s book “An Introduction to Project Management”, there are 5 different ways projects can be selected. But before this step takes place, organisations should have a clearly defined strategy on what they want to achieve. Strategic planning could be the result of a SWOT analysis. The strategy defines the end game of that company in the next year, three of five.
On a very smaller scale, you decide you want to go on holidays, then you start looking for destinations, and book your logistics (flights and hotels). You do not book a random flight ticket to a city and then decide, let me see if these dates/ times suit me. If this is the type of city I want to travel to.
Taking this context to a larger scale, it is important that organisation know what they want to achieve in order to process. In this case, on the assumption that a strategy is established, top management come to the stage to operationalising the strategy. Projects have to be selected, defined and work has to commence to make this strategy a success.
Here are 4 of the 5 different methods that organisations can follow according:
- Focusing on Competitive Strategy:
This approach points out that an organisation would choose projects that will attract customers primarily based on products and services. The focus is to develop those products based on a particular market niche. For this to move forward there has to be a broad organisational consensus. Management agree that this is a feasible project and funds will be made available.
- Performing Financial analysis:
This approach tends to be the most “scientific” method. Scientific being used loosely here. This mainly because all the selection criteria are based on future assumptions all together. So there is so much science that can be put into it. But when you speak to the financial benefit, any stakeholder would give you the attention you need. This is company money that will be invested after all. There are several calculations and approaches to follow: Net Present Value, Payback analysis and Return on Investment. The one I am most comfortable to work with is the Return on Investment (ROI).
Return on Investment basically lets you measure how much will you get out of what you spent. So when you have a list of projects you want to select from (assuming they all fit within your strategy), you can apply the ROI approach.
How long will this project take> How much will resources cost? what is the benefit at the end of this project? how much will money will I make out of selling this product / service? how much efficiency will there be when the project completes? will there be any cost savings? If you answer all of these questions and relate them to how much the overall project will cost, you will be able to see which project will give you the most return on investment and then select accordingly.
- Weighted scoring model:
This method is what I refer to it as the most engaging method with your stakeholders. Going through an organisation’s strategy is a very serious matter, but that does not mean it should be a boring matter. This model is about asking all Top Management to select criteria on which projects will be scored.
Currently, I am working with our executives to agree on the criteria. This could like:
Process Improve-ment Quick release to customer Employee Engagement Compliance
In this scenario, the project you would select is project #2. With this approach the Portfolio Manager, or whoever is facilitating the strategy set up in the organisation must be very careful setting up the criteria in a balanced way to avoid bias while scoring.
- Implement Balanced score card:
This method is used to combine financial with non financial measures to a strategy. What it normally aims at is to change the organisational value drivers into financial factors. The major pillars are financials, Customer perspective, Employee Perspective and Learning & Growth. Here is an interesting article:
Published by Harvard Business Review, 2007 hbr.org
Are you involved in project selection in your organisation? I would like to hear from you. Get in touch or leave a comment.