Having learnt about the Project selection process, project selection models and various other aspects in the course of PMM; we as a group of project managers tried to relate the knowledge gained so far with the practical implementation using our experience. Working in an organization of the core manufacturing industry, we observed that project selection plays a key role in making decisions in the whole project management. Every project has to be evaluated before accepted and based on various views from the senior staff, methods and techniques to assess the financial flexibility and viability of the project and in many other ways a project or a set of projects are selected or accepted. We observed that the whole selection process practically also follows all the sequential steps as discussed in the PMM course and not a particular model but a combination of these models are applied depending on the type of project. With the help of this report we try to relate our experience with the OMM course details so that it would be helpful in understanding the importance of the course and its objectives. The following sections drive through the concepts of Project Selection Process and the implication of each of them practically by relating with our knowledge learnt from our experience.
Project selection process refers to the evaluation process of many individual or groups of projects so that some projects or a set of projects can be selected for implementation. The projects are selected and implemented accordingly to meet the main objectives, mission and vision of the parent organization.
It is a systematic process and is applicable to any area (or) sector (or) type of industry. It is the key area of project management where effective and efficient decisions have to be taken so that appropriate projects are selected and are implemented leading towards the growth of the firm. Project selection process includes methods/ techniques adopted by the firm while making decisions towards various aspects like: In a manufacturing firm, when to make a decision of replacing existing machinery with new updated machinery (or) to repair the old machinery. In software firm, when decision have to be taken while choosing projects evaluating various things including technical viability, resource availability, profit attaining to the firm, and so on.
As mentioned above it is a systematic process which includes the following steps in sequence:
Project Management Office
Project Portfolio Process
Acceptance of Project
With experience, we state that all these steps have to be properly taken care of for making an effective decision in any industry. The above numerous activities involved in the project selection process can be explained as below:
Numerous Sequenced Activities
PMO: Project Management office refers to that step where the corporate needs, organization goals are aligned with the project goals and specifications. This brings down the selection criteria by focusing its radar by reducing the scope and increasing the success.
PS: Based on the above selection or evaluation criteria, project or set of projects are selected for further analysis. This stage refers to those activities where the meeting criteria and the matching projects are selected.
RA: Risk Analysis refers to dealing with the uncertainty involved in the selected projects. Risk under each project is analyzed and the return is expected and depending on the firm and industry projects are further narrowed down. The projects that are narrowed down would depend on the risk perception and capability of the firm.
PPP: Project Portfolio Process refers to the strategic selection of best possible projects.
PA: This stage refers to final locking stage to a particular project or set of projects. Project proposal are written down in this stage. Activities related to project proposal to design the cover letter, write the executive summary, explaining the details with minimal technical language and others are undergone in this stage.
From the PMM course it is learnt that project selection models are mainly categorized into two types. They are: Non-numerical and Numerical models.
Non-numerical models include Sacred Cow model, Operating Necessity model, Competitive Necessity model, Product Line extension, and Comparative Benefit model. These are qualitative decision based models like in the sacred cow model, a senior official or powerful person in the organization suggests a project and the projects is continued till it is a success or till the official realized it should be terminated. So are the other models where in the role and experience of the senior management is given the highest priority.
Numerical models include Profitability and scoring models. Under profitability models, capital budgeting methods like Payback period, IRR, NPV, Average rate of return are considered. Scoring models include weighted and un-weighted models.
Though the models are classified and projects are shown to be evaluated by any one of the models; practically both of them are used while selecting a project. Initial project selection might be based on the decision of the senior management but it is further sent for the risk analysis and the techniques of numeric models are applied to identify the feasibility of the project. If it is identified to be proper for the firm then only the project is accepted else it is sent with the verification reports to consider again and the senior staff would provide the required details if he wants to get the project accepted.
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For example, senior management might support the decision of getting an older machine repaired keeping in mind its effectiveness and operational success provided by the machine in the previous performances. But with the technological advancements taken place, replacing the old machinery with the new ones might improve the performance to a large extent compared to the cost involved. So, the decision might not be that effective to have the old machinery repaired.
Also before going for new machinery, senior staffsâ€™ view on the machinery to purchase is equally important as they know the critical processes involved, critical problematic areas and the required design and other aspects. So a mix of Sacred cow and numerical model might suffice at this purpose. So it is not just a specific or particular model that would be leading to an effective project selection. But, a combination of models depending on the type of project would lead to a profitable project selection.
Scope, Budget and Other Resources
Any project manager goes for a project feasibility study before going for the project selection or implementation. Project feasibility study acts as the pre-required step before the actual process of project selection or planning. This stage involves steps which include:
Studying the Technical viability
Understanding the commercial viability
Identifying the resource availability
Scheduling the delivery date and competitive edge
These steps have been observed from our past experience in dealing with many projects. Technical viability refers to the technology used and its sustainability. In our organization it refers to the machinery, tools and equipments we use and their performances in handling the project well.
Commercial viability would refer to the yield that the project would produce and it could be estimated with the help of numerical models discussed above. The NPV, IRR and other techniques would help in determining the financial advantage that this project or set of projects would provide to the organization.
Resource availability refers to the funding provision, capital required, location availability, human resource availability, other requirements and necessities to handle the project. All these things have to be taken care of before moving forward to the project selection so that the decision made would be effective and productive meeting the goals and objectives of the organization.
Based on all the above requirements study, delivery date, estimated budget and the competitive edge that it would provide are determined. Project manager handles all the above functionalities and activities. Depending on all the above discussed details, project manager makes his decision regarding the selection or rejection of the project.
A detailed report (or) proposal is submitted to the senior staffs that analyze further the uncovered aspects and provide with the final decision to select or to reject the project.
All the above discussed details with our experience regarding project selection process, involves individuals with various skills and knowledge. Project teams with project leaders; all headed by project managers with senior management above all would be the various individuals involved while making decision. The hierarchy is also maintained and the decisions are also taken accordingly. Every once in a while meetings are scheduled where every project member is given a chance to raise his voice on the issues he find while handling the project. In case of a large team, project leaders are allowed to represent their team and pose their views. In this way all the individuals work in the form of teams headed by various project managers depending on the type of project led by the senior management. Now-a-days quality circles are also encouraged in many firms to increase the participation from employees to make effective decisions. Also while selecting a project, project manager should also need to note the human resource requirement and has to recruit individuals as per the requirement and need. Individuals with the needed skills and knowledge have to be employed so that they act as an asset instead of liability to the organization. Thus, project manager has to play different roles depending on the project demand and need at that moment.
From the study in the course of PMM, the project selection decision is based as shown in the figure below:
Objectives and weights refer to that section where the goals of the organization are considered. Practically also, any project with the help of the Project Management Office, tries to align the project goals or requirements with the organizational goals and designs the selection criteria. In our experience also in the organization we found that the senior management gives the instruction regarding the criteria to be verified and points to be considered while making a choice among the projects. They being highly involved in the organization understand the goals and objectives and instruct the project manages to evaluate on some criteria.
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A project selected as discussed above with the combination of the selection models, support of the senior management and calculations related to financial flexibility; on implementation would lead to an effective and efficient outcome or deliverable that would produce profitable incomes and provide the organization a good yield and high growth. For example, a project to replace the machinery with the new machinery as supported by the senior expertise had led to a result of 8% yield and also has reduced the cost of wastage, time and increased the performance, improved skilled labor and also has made the organization effective to the changes in the competitive environment.
Though in the above discussion, every section is explained with the help of numerous examples based on our experience; this section further illustrates all the above points with the help of a small case study that deals with the selection of a particular project.
Going through different projects to understand and get acquainted with the project selection process; we studied the project selection process applied by KDOT (Kansas Department of Transportation) for choosing and making decision about major construction highway road projects. In the year 2008, when Kansas City was developing a Long range Transportation plan, the stakeholders took help of KDOT for modernizing important elements to choose major and relevant productive projects. KDOT formed T-LINK task force (Transportation- Leveraging Investments in Kansas), which has got a team to understand various qualitative factors that help in choosing projects. So this team comprising of skilled, local, and experienced members is formed so that project decisions, organizations goals and changing needs would be well aligned. This is the first step, formation of Project Management Office.
Project Selection being the second step, KDOT has got a numbers-driven computer application known as â€œPRIORITY FORMULAâ€ based on which project selection would be made. This application handles large data related to different factors based on which projects are prioritized and KDOT makes a decision. Thus, the numerical selection model of SCORING is applied to prioritize and make decision on project selection. Though Priority Formula handles engineering and general factors resulting as a good tool in making decision, it doesnâ€™t consider qualitative factors like economic impacts, regional factors and others. So, as mentioned above, it formed the T-LINK task force to handle the above mentioned qualitative aspects and make effective decisions. Thus, it has followed the UNIQUE approach of mixing traditional selection models to meet the changing needs and make an appropriate choice of project selection.
In the Long Range Transportation Plan, it has established a program structure which is 3-part multi modeled in nature as: Preservation Projects, Modernization Projects and Expansion/ Enhancement Projects. Depending on the nature of project and understanding the requirement, estimation of resources, budget and other requirements are done. Staff is recruited accordingly and teams are formed. Several workgroups are also formed to discuss the progress, issues involved and innovations that can be made in the projects.
In this way, KDOT has come up with the T-LINK task force and updated scoring system by upgrading its application to meet the changing needs and make an effective project selection. The project selection model can be discussed even with the help of capital budgeting decisions by illustrating the methods of Net Present Value, Internal Rate of return and other profitability methods which also help in project selection. These numerical aspects are involved in every project and are implemented through many computer applications. The above case study helped us in understanding various other steps involved in project selection process and actions to be taken to make it adaptable and flexible to changing needs in the external environment.
Thus a project selected with all the sequential steps properly evaluated and estimated would lead not just a productive outcome oriented deliverable but also provides added advantages and competitive edge to the firm.
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