Term
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Definition
theprocess of evaluating individual projects or groups of projects and then choosing to implement a set of them so that the objectives of the parent organization are achieved. |
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Term
| Project Selection and Criteria: Project Maturity and Reality |
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Definition
lMany projects fall outside company mission
lProjects without organizational goal/objective “fit”
lProject budgets not tied to cost-benefit analysis.
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| Project Selection and Criteria: Multiple Project Management Issues |
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Definition
lDelays in one project impacting others
•Resource conflicts
•Technology dependencies
lLack of resource “smoothing”
•Peaks and valleys of resource utilization
lBottlenecks with scarce resources
•Lack of workarounds
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Term
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Definition
lManagers use decision-aiding models that may answer:
•Is the project potentially profitable?
•Capability- Does the firm have, or can it easily acquire, the knowledge and skills to carry out the project?
•Does the project involve building competencies that are consistent with the firm’s strategic plan?
•Does the organization have the capacity to carry out the project to the given schedule? |
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Definition
•All models are only partial representations of reality
•Represent the problem’s structure.
•Reduce complexity.
•Aid in evaluating risks and options.
•Models are only as good as the data they receive.
•Models do not make decisions- People do! |
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Term
| Nature of Project Selection Models |
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Definition
•Basic Types of Models
1.Nonnumeric: use other factors that make for “obvious” choices (e.g. senior management mandates, regulatory necessities).
2.Numeric: attempt to reduce the evaluation process to numbers. |
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Term
| Project Selection Models: Nonnumeric Models |
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Definition
lSacred Cow - project is suggested by a senior and powerful official in the organization
lOperating Necessity - the project is required to keep the system running
lCompetitive Necessity - project is necessary to sustain a competitive position
lComparative Benefit Model – Often used to select from a list of projects that are complex, difficult to assess and often non-comparable. The one with the most benefit to the firm is selected. |
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Term
| Numeric Selection Methods |
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Definition
qFinancial Assessment Methods
lpayback period
ldiscounted cash flow
qScoring Methods
lunweighted 0-1 factor method
lweighted factor scoring method |
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Term
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Definition
Advantages:
lSimple to use and to understand.
lData available from accounting system.
lBusiness decision-makers are familiar with the output formats.
lSeen as less ambiguous regarding the appropriate decision.
lMay account for the amount, timing and risk of a project’s cash flows. |
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Definition
Disadvantages:
lIgnores nonmonetary factors.
lSome do not evaluate timing of cash flows.
lPresent-value models have a short-term bias
lPayback models ignore cash flows beyond the time needed to recover the original investment.
lSensitive to data input errors
lDifficult to recognize the impact of errors in and changes to the values of parameters.
lDeterminations made about the economic future may turn out to be invalid. |
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Term
| What uncertainties are encountered in project management? |
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Definition
lTime required to complete a project
lAvailability and cost of key resources
lTiming of solutions to technological problems
lMacroeconomic variables
lWhims of clients
lActions taken by competitors
Uncertainty cannot be eliminated, but if managed properly, it can be minimized. |
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Term
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Definition
qEstimate probabilities or distributions associated with key parameters
qDevelop analytic or simulation model
qAnalyze distribution of outcomes generated by model |
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Term
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Definition
1.Identifying the potential risk events
2.Perform analysis to determine the probability and impact
3.Determine appropriate responses to those events deemed worthy of response
4.Monitor the response plans to insure performance |
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Term
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Definition
The Mars Climate Orbiter was lost because invalid data was used to estimate its distance from the planet’s surface during the orbital insertion process. The spacecraft’s navigation team believed that the software they were using was producing results in the metric system. Even though the software specification did call for metric, the software actually used imperial units. The software performed its calculations predictably, but the results were invalid to the users.
•Validity: A piece of information actually means what we believe it to mean.
•Reliability: A demonstration of consistent performance that is stable and predictable. |
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Term
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Definition
■Analyst wants to be certain the model is internally correct and that all operations are logical and mathematically correct.
■Testing procedures for validity:
§ Run a small number of trials of the model and compare with manually derived solutions.
§ Divide the model into parts and run parts separately to reduce complexity of checking.
§ Simplify mathematical relationships (if possible) for easier testing.
§ Compare results with actual real-world data. |
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Term
| Decision-Making Under Risk |
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Definition
lHigher profits are usually tied to higher risks and higher probable losses
lA probability must be assigned to each state of nature. |
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Term
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Definition
Graphical tool used when a decision cannot be viewed as a single isolated occurrence, but rather as a sequence of several interrelated decisions.
1.Build a logic tree from left to right, including all decision points and chance points.
2.Put the probabilities of the states of nature on the branches, forming a probability tree.
3.Add the conditional payoffs. |
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Term
| Project Portfolio Process - Purpose |
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Definition
Process of strategically selecting, monitoring and controlling the best set of projects for implementation.
•Identify Projects that Meet Strategic Needs
•Support Multiple Goals
•Direct Organizational Improvement
•Enhance/Enable Key Areas
•Prioritize Potential Projects
•Limit Active Projects to Manageable Level
•Identify Risk-intensive Efforts
•Balance Short, Medium, Long-term Returns
•Reduce Projects from Getting in via “Backdoor” |
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Term
| Steps In The Project Portfolio Process |
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Definition
1.Establish a Project Council (Governance)
2.Identify Project Categories and Criteria (Tied to Strategic Vision, Mission, Goals, Objectives)
3.Collect Project Data
4.Assess Resource Availability
5.Reduce the Project and Criteria Set
6.Prioritize the Projects within Categories (Balance of Portfolio: Avoid Overabundance of Similar Projects)
7.Select the Projects to be Funded and Held in Reserve
8.Implement the Process |
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Term
| Ethical Decision Making Tests: A Review from FYE |
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Definition
nREVERSIBILITY: Would I think this is a good choice if I where among those affected by it?
n“Put yourself into the other person’s shoes”
§ PUBLICITY: Would I want or mind if this choice is published in the newspaper
n“What the eyes don’t see is not heartfelt”
§ HARM: Does the action cause harm? Does it do less harm than the alternatives?
n“The remedy is worse than the illness” |
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Term
| Project Selection: Ethical Issues |
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Definition
lBidding low with the intention of cutting corners or forcing subsequent contract changes.
lCollaborating with the competition.
l“Wired” bids and contracts (the winner has been predetermined).
lConfidential Knowledge of Competitor Data.
lManagement arbitrarily cutting X % from project budgets.
lPadding potential project budgets on the expectation they will be cut. |
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Term
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Definition
Only incrementally different in both product and process from existing offerings. Often meant to replace current offerings or add an extension to current offerings |
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Term
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Definition
Major departures from existing offerings in terms of the product/service or the process used to make and deliver it or both. Platforms for the next generation: e.g. a new model of automobile or a new type of insurance plan. |
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Definition
Involves newer technology than platform projects. It may be “disruptive technology” known to the industry or something proprietary. E.g.: cash-balance pension plans, hybrid gasoline-electric automobiles |
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Definition
Visionary endeavors, oriented toward newly developed technologies or existing technologies in a new manner. |
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