Project Management Lect-3
Project Management Lect-3
Project Management Lect-3
ZG523
PROJECT MANAGEMENT
BITS Pilani Dr. Rajesh Matai, Department of Management, BITS
Pilani
Pilani Campus
BITS Pilani
Pilani Campus
Lecture No. 3
Organization Strategy and
Project Selection
Importance of Strategic Planning
• Aligning projects with the strategic goals of the Org’n is crucial for
project success, esp. in today’s economic climate which is marked
by rapid changes in technology, global competition and financial
uncertainty.
• Ensuring a strong link b/n strategy and projects is crucial to
success.
• More difficult to create and maintain this strong link in larger and
more diverse organizations. Lack of a process that clearly aligns
project selection to the strategic plan results in poor utilization of
the Orgn’s resources.
• An Org’n can ensure this link and alignment thro’ integration of
projects with the strategic plan.
• Integration assumes the existence of a strategic plan and a process
for prioritizing projects by their contribution to the plan.
BITS Pilani, Pilani Campus
Why Project Managers Need
to Understand Strategy
• It is time to expand the traditional role of the Project
Manager (PM) from an operational to a more strategic
perspective.
• Why PM’s need to understand their Organization’s
mission and strategy:
1. So that they can make appropriate decisions and adjustments. Eg.
How to respond to suggestions to modify the design of a product to
enhance performance! How to respond to delays!
2. So that they can be effective project advocates:
• Demonstrate to senior management how the Project contributes to
the firm’s mission. Protection and support come from being aligned
with corporate objectives.
• Explain to team members and other stake holders why certain
objectives and priorities are critical – essential for getting buy-in on
contentious trade-off decisions.
BITS Pilani, Pilani Campus
THE STRATEGIC MANAGEMENT (SM)
PROCESS
• It is the process of evaluating “what we are” and deciding
and implementing “what we intend to be and how we are
going to get there”.
• Strategy describes how an Org’n intends to compete
with the resources available in the existing and
perceived future envn.
• SM provides the theme and focus of the future direction
of the Org’n.
• SM positions the Org’n to meet the needs and
requirements of its customers for the long term.
• SM requires strong links among mission, goals,
objectives, strategy and implementation.
2. ORGANIZATION POLITICS
Non-financial models:
projects of strategic
importance to the firm.
Risk Where does the proposed project fit in our risk profile?
Benefits, value, ROI What is the value of the project to this organization?
FIGURE 2.3
2–24
APPLYING A SELECTION MODEL
• Project Classification
– Deciding how well a strategic or operations project
fits the organization’s strategy.
• Selecting a Model
– Applying a weighted scoring model to align projects
closer with the organization’s strategic goals.
• Reduces the number of wasteful projects
• Helps identify proper goals for projects
• Helps everyone involved understand how
and why a project is selected
2–25
SOURCES OF PROPOSALS
• Non-discounting Criteria
– Return on Investment (ROI)
– Payback Period
[(-1000000)
+ (181818.18 + 165289.2562 + 225394.44
+ 204904.04 + 217322.46)]
= - Rs. 5271.26
PVB = 22,321.43+31,887.76+28,471.21+31,775.90
= 1,14,456.30
BCR = PVB / I = 114456.30 / 100000 = 1.14456 = 1.145
NBCR = BCR – 1 = 0.145 {(114456.30–100000)/100000}
BITS Pilani, Pilani Campus
IRR Method
Advantages
• It Is Simple Both In Concept And Application
• It Favors Projects Which Generate Substantial Cash
Inflows In Earlier Years And Discriminates Against
Projects Which Bring Cash Inflows In Later Years
• It Is Useful When Company Is Pressed With Problems
Of Liquidity
BITS Pilani, Pilani Campus
LIMITATIONS
Thank You!