2Abdullah Dasci, Ph.D. At York since August 2005 Previously taught at McGill University, University of Alberta, and UNC at CharlotteResearch: Competitive location, dynamic pricing, supply chain management, production-distribution systemsOn with the course introduction…
311/29/100Project ManagementA project is a one-time endeavor undertaken to create a unique product or service.Project management is the discipline of organizing and managing resources to complete a project within defined scope, time, and cost constraints.1
7What Is a Project? Project Defined A complex, nonroutine, one-time effort limited by time, budget, resources, and performance specifications designed to meet customer needs.Major Characteristics of a ProjectHas an established objective.Has a defined life span with a beginning and an end.Typically requires across-the-organizational participation.Involves doing something never been done before.Has specific time, cost, and performance requirements.
8Comparison of Routine Work with Projects Writing a term paperSetting up a sales kiosk for a professional accounting meetingDeveloping a supply-chain information systemDesigning an iPod that is approximately 2 X 4 inches, interfaces with PC, and stores 10,000 songsWire-tag projects for GE and Wal-MartRoutine, Repetitive WorkTaking class notesDaily entering sales receipts into the accounting ledgerResponding to a purchasing requestRoutine manufacture of an Apple iPodAttaching tags on a manufactured productTABLE 1.1
9Programs versus Projects Program DefinedA series of coordinated, related, multiple projects that continue over an extended time and are intended to achieve a goal.A higher-level group of projects targeted at a common goal.Example:Project: completion of a required course in project management.Program: completion of all courses required for a business major.
11The Challenge of Project Management The Project ManagerManages temporary, non-repetitive activities and frequently acts independently of the formal organization.Marshals resources for the projectProvides direction, coordination, and integration to the project teamManages a diverse set of project stakeholdersDependent upon others for technical answersIs responsible for performance and success of the projectMust induce the right people at the right time to address the right issues and make the right decisions.
12The Importance of Project Management Factors Leading to the Increased Use of Project Management:Compression of the product life cycleGlobal competitionKnowledge explosionCorporate downsizing/business-process-re-engineeringIncreased customer focus
14Integrated Project Management Systems Problems Resulting from the Use of Piecemeal Project Management Systems:Do not tie together the overall strategies of the firm.Fail to prioritize selection of projects by their importance of their contribution to the firm.Are not integrated throughout the project life cycle.Do not match project planning and controls with organizational culture to make appropriate adjustments in support of project endeavors.
19Why Project Managers Need to Understand the Strategic Management Process Changes in the Organization’s Mission and StrategyProject managers must respond to changes with appropriate decisions about future projects and adjustments to current projects.Project managers who understand their organization’s strategy can become effective advocates of projects aligned with the firm’s mission.
20The Strategic Management Process: An Overview Provides the theme and focus of the future direction for the firm.Responding to changes in the external environment—environmental scanningAllocating scarce resources of the firm to improve its competitive position—internal responses to new action programsRequires strong links among mission, goals, objectives, strategy, and implementation.
21Strategic Management Process (cont’d) Four of Activities of the Strategic Management ProcessReview and define the organizational mission.Set long-range goals and objectives.Analyze and formulate strategies to reach objectives.Implement strategies through projects.
22Project Portfolio Management Problems The Implementation GapThe lack of understanding and consensus on strategy among top management and middle-level (functional) managers who independently implement the strategy.Organization PoliticsProject selection is based on the persuasiveness and power of people advocating the projects.Resource Conflicts and MultitaskingThe multiproject environment creates interdependency relationships of shared resources which results in the starting, stopping, and restarting projects.
23Benefits of Project Portfolio Management Builds discipline into project selection process.Links project selection to strategic metrics.Prioritizes project proposals across a common set of criteria, rather than on politics or emotion.Allocates resources to projects that align with strategic direction.Balances risk across all projects.Justifies killing projects that do not support organization strategy.Improves communication and supports agreement on project goals.EXHIBIT 2.2
25A Portfolio Management System Selection CriteriaFinancial: payback, net present value (NPV), internal rate of return (IRR)Non-financial: projects of strategic importance to the firm.Multi-Weighted Scoring ModelsUse several weighted selection criteria to evaluate project proposals.
26Financial Models The Payback Model Measures the time it will take to recover the project investment.Shorter paybacks are more desirable.Emphasizes cash flows, a key factor in business.Limitations of payback:Ignores the time value of money.Assumes cash inflows for the investment period (and not beyond).Does not consider profitability.
27Financial Models (cont’d) The Net Present Value (NPV) ModelUses management’s minimum desired rate-of-return (discount rate) to compute the present value of all net cash inflows.Positive NPV: the project meets the minimum desired rate of return and is eligible for further consideration.Negative NPV: project is rejected.
28Net Present Value (NPV) and Internal Rate of Return (IRR): Example Comparing Two Projects EXHIBIT 2.3
29Non-financial Criteria To capture larger market shareTo make it difficult for competitors to enter the marketTo develop core technology that will be used in next-generation productsTo reduce dependency on unreliable suppliersTo prevent government intervention and regulation
30Checklist Selection Model Strategy alignment: What specific organization does this project align with?Driver: What business problem does the project solve?Success metrics: How will we measure success?Sponsorship: Who is the project sponsor?Risk: What is the impact of not doing this project?Risk: What is the project risk to our organization?Benefits: What is the value of the project to this organization?Organization culture: Is our organization culture right for this type of project?Approach: Will we build or buy?Training/resources: Will staff training be required?Finance: What is estimated cost of the project?Portfolio: How does the project interact with current projects?
32Applying a Selection Model Project ClassificationDeciding how well a strategic or operations project fits the organization’s strategy.Selecting a ModelApplying a weighted scoring model to bring projects to closer with the organization’s strategic goals.Reduces the number of wasteful projectsHelps identify proper goals for projectsHelps everyone involved understand how and why a project is selected
33Project Proposals Sources and Solicitation of Project Proposals Within the organizationRequest for proposal (RFP) from external sources (contractors and vendors)Ranking Proposals and Selection of ProjectsPrioritizing requires discipline, accountability, responsibility, constraints, reduced flexibility, and loss of powerManaging the PortfolioSenior management inputThe priority team (project office) responsibilities
34Managing the Portfolio Senior Management InputProvide guidance in selecting criteria that are aligned with the organization’s goalsDecide how to balance available resources among current projectsThe Priority Team ResponsibilitiesPublish the priority of every projectEnsure that the project selection process is open and free of power politicsReassess the organization’s goals and prioritiesEvaluate the progress of current projects
36Project Portfolio Matrix Dimensions Bread-and-Butter ProjectsInvolve evolutionary improvements to current products and services.PearlsRepresent revolutionary commercial advances using proven technical advances.OystersInvolve technological breakthroughs with high commercial payoffs.White ElephantsProjects that at one time showed promise but are no longer viable.