Project Management 201

Chapter 2
Organization Strategy and Project Selection

Introduction
If organization selects the projects not related to its
strategic goals, consequences in poor utilization of its
resources, people, money and core competencies,
resulting in failure of projects. Reversely, if the projects
are selected related to its strategic goals, results in its
success.

This chapter explains how the strategic plan of an

organization is linked to its project selection and
subsequently project success.

Two school of thoughts

Old School of Thought
Project Managers should be associated with Planning and
Execution of projects, Strategic Management should be taken
by Senior Management.

New School of Thought

Project Managers role should be expanded from Operations to
Strategic Management.

New Role of Project Manager

Operatio
nal

Project
Manag
er
Strategic

If project managers job becomes more

strategic in nature, they are equipped to
make better decisions and adjustments.
They can better respond to project delays.
Project Advocates

It helps the project managers to respond to

external environment
Allocation of scarce resources

Project Manager and Strategic

Management Process

Portfolio Analysis
There are three main problem concerning Portfolio
Analysis:
1)Implementation Gap-Lack of Understanding of
Strategy between Senior Management and
Functional Managers.
2)Organization Politics Sometimes project
selection is based on the persuasiveness and
power of Project Advocates.
3)Resources

Conflicts

and

Multitasking

Portfolio Management System

Aim of portfolio management system is to ensure that
the projects are aligned to the strategic goals of
organization.
Steps of Portfolio Management System
Classificati
on of
Projects

Selection
Criteria

Sources of
Proposals

Evaluating
Proposals

Managing
the
portfolio of
projects

Step 1: Classification of Projects

Classification
of Projects
Compliance
and
Emergency
Projects

Operational
Projects

Strategic
Projects

Step 2: Selection Criteria

Selectio
n
Criteria
Financial
NPV

NonFinancial

Payback
Period

Financial Criteria-PAYBACK ANALYSIS

Year 0
AED
Development cost:(125,000.00)

Cash Flow Description

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

AED
AED
AED
AED
AED
AED
Operation & maintenance cost
(10,000.00)
(12,500.00)
(15,000.00)
(17,000.00)
(15,000.00)
(10,000.00)
Discount factors for 10%
1 0.909090909 0.826446281 0.751314801 0.683013455 0.620921323
0.56447393
AED
AED
AED
AED
AED
AED
AED
Time-adjusted costs(125,000.00) (9,090.91)
(10,330.58)
(11,269.72)
(11,611.23)
(9,313.82)
(5,644.74)
AED
AED
AED
AED
AED
AED
AED
Cumulative time-adjusted costs(125,000.00) (134,090.91) (144,421.49) (155,691.21) (167,302.44) (176,616.26) (182,261.00)

Benefits

AED
AED
AED
AED
AED
AED
AED
Benefits derived:
20,000.00
45,000.00
60,000.00
90,000.00
120,000.00
150,000.00
Discount factors for 10%
1 0.909090909 0.826446281 0.751314801 0.683013455 0.620921323
0.56447393
AED
AED
AED
AED
AED
AED
AED
Time-adjusted benefits
18,181.82
37,190.08
45,078.89
61,471.21
74,510.56
84,671.09
Cumulative time-adjusted AED
AED
AED
AED
AED
AED
AED
benefits
18,181.82
55,371.90
100,450.79
161,922.00
236,432.56
321,103.65
AED
AED
AED
AED
AED
AED
AED
Cumulative Benefits & Costs
(125,000.00) (115,909.09) (89,049.59)
(55,240.42)
(5,380.44)
59,816.30
138,842.65
Payback Analysis

0.0825262
12 4.082 YRS

Financial Criteria-NPV
IR
Year
0
1
2
3
4
5

10%

CashFlow

Present Value

AED
(125,000.00)
AED
9,090.91
AED
33,809.17
AED
49,859.98
AED
65,196.74
AED
79,026.35

$
(125,000.00)
$
8,264.46
$
27,941.46
$
37,460.54
$
44,530.25
$
49,069.15

NPV

$
42,265.86

Multi-Criterial Selection Process

As a project manager, you should follow the combination of Financial and Non-Financial
Model to select the model. This is called Multi-Criterial Selection Process.

MultiCriterial
Selection
Process
Checklist
Process

Weighted
Score Card
Model

Checklist Model

Weighted Score Model

Step 3: Sources of Proposals

Sources
of
Proposal
s
Internal

External

Monitor and Control Project Work

This step requires TRACKING, REVIEWING and REGULATING
project progress in order to meet project objectives.
INPUT

Project
Management
Plan

TOOLS AND TECHNIQUES

OUTPUT

Change
Requests

Performance
Reports

Expert
Judgement
Project
Management
Plan Updates

Project
Document
Updates

Step 4: Evaluating Proposals

Step 5: Managing the portfolio of

Projects
Managing the
portfolio of
projects
Senior
Management
Input

Priority Team
Responsibiliti
es