How does a truly global company with fewer than 200 associates achieve noteworthy results and market leadership? Certainly strong and talented people are a key part of the answer. A good set of leadership and management tools and processes, and the discipline to use them, is another key. A small, privately held company in Louisville, Kentucky has been fortunate to use both talent and process to achieve success by any measure. That company is D. D. Williamson.
D. D. Williamson was founded in 1865 and today is a global leader in non-artificial colors. Operating nine facilities in six countries and supplying many of the best-known food and beverage companies around the world, D. D. Williamson has more complexity to manage than most companies, regardless of their size.
CHAPTER OBJECT I V ES
After completing this chapter, you should be able to:
• Describe the strategic planning and portfolio alignment processes.
• Itemize strengths and weaknesses of using financial and scoring models to select projects.
• Describe how to select and prioritize projects as an outgrowth of strategic planning.
• Given organizational priorities and several projects, demonstrate how to select and prioritize projects using a scoring model.
• From a contractor’s viewpoint, describe how to secure projects.
Ro be rt Ll ew
el ly n/ Im ag e St at e/ Al am
Late in 2004, the company was embarking on a new vision to double growth and profitability in five years and identified the need to improve project management as a key strategy to achieve the vision. Our weakness was twofold—we had too many projects that were championed as important, and the projects that were active were sometimes late, over budget, and not achieving the predicted results. We began with prioritization, creating a prioritization matrix to select 16 “critical projects” that would have senior leadership sponsors and be assigned trained and capable project managers to improve our execution.
The prioritization matrix was a great initial step to narrow our focus and improve our results—overall project completion improved. However, 16 projects meant that the scope and impact of projects still had wide variation. Smaller, more simple projects were likely to be executed brilliantly and improve our total percentage of “on time and on target” projects, but if the project that was late or over budget was very high impact, we were still leaving opportunities for growth and profitability “on the table.”
In 2009, we made more changes to our prioritization process, selecting no more than five “Vision Impact Projects” (VIPs) that would get high-level focus and attention—monitoring and asking for corrective measures in weekly senior management meetings, tracking online in our project management system for our Continuous Improvement Manager, and funneling time and resources to help when projects get off course.
The results are dramatic—large and complicated projects are getting the attention and resources and are hitting our strategic target of “on time, on budget and on target” regularly. Our successes have positioned D. D. Williamson to continue to do what we do best—serve customers effectively, grow our business, and return strong financial results to ensure a solid future for the business.
Elaine Gravatte, Chief People Officer and North American President, D. D. Williamson
Selecting & Initiating
Charter Kick-off Project result
Planning Executing Closing &Realizing
GU IDE TOP I CS
• Portfolio management
• Program management
• Projects and strategic planning
• Source selection criteria
• Project statement of work
• Business case
2.1 Strategic Planning Process One of the tasks of a company’s senior leadership is to set the firm’s strategic direction. Some of this direction setting occurs when an organization is young or is being re- vamped, but some needs to occur repeatedly. Exhibit 2.1 depicts the steps in strategic planning and how portfolio management should be an integral part.
Strategic Analysis The first part of setting strategic direction is to analyze both the external and internal environments and determine how they will enhance or limit the organization’s ability to perform. This strategic analysis is often called strengths, weaknesses, opportunities, and threats (SWOT). The internal analysis (elements within the project team’s control) consists of asking what strengths and weaknesses the organization possesses in itself. The external analysis (elements over which the project team has little or no control) consists of asking what opportunities and threats are posed by competitors, suppliers, customers, regulatory agencies, technologies, and so on. The leaders of an organization often need to be humble and open to ideas that are unpleasant when conducting this analysis. Per- formed correctly, a strategic analysis can be very illuminating and can suggest direction for an organization. An example of SWOT analysis for the Built Green Home at Sunca- dia is shown in Exhibit 2.2. (The Built Green Home at Suncadia, Washington, was devel- oped using advanced sustainability concepts and a large degree of stakeholder involvement. A more detailed description of this house appears in Chapter 5.)
Guiding Principles Once the SWOT analysis is complete, the organization’s leadership should establish guiding principles such as the vision and mission. Some organizations break this step into more parts by adding separate statements concerning purpose and/or values. Often,
STRATEGIC PLANNING AND PORTFOLIO ALIGNMENT
Guiding Principles: Vision & Mission
28 Part 1 Organizing Projects
these sections are included in the mission. For simplicity’s sake, they will be treated as part of the mission in this book. It is more important to understand the intent of each portion and achieve it rather than worry about the exact format or names of individual portions.
VISION The vision should present a “vivid description of a preferred future.”1 It should be both inspiring and guiding, describing the organization as it can be in the future, but stated in the present tense. A clear and compelling vision will help all members and all stakeholders of an organization understand and desire to achieve it. Visions often require extra effort to achieve but are considered to be worth the effort. Visions are often multi- year goals that, once achieved, suggest the need for a new vision.
One of the visions most often cited, because it was so clear and compelling, was Presi- dent John F. Kennedy’s goal of placing a man on the moon before the end of the 1960s. Kennedy set this goal after Russia launched Sputnik and the United States found itself behind in the space race. His vision was very effective in mobilizing people to achieve it.
A more recent example was in 2009 when hundreds of community leaders in Cleve- land, Ohio, decided to use a systems approach to guide many interrelated social and eco- nomic efforts in their region. The vision they stated is to become the “green city on the blue lake.”2 They use this vision to guide regional leaders as they choose where to invest their time and resources in bettering the region and life for its residents.
Increasingly companies are incorporating the triple bottom line into their vision state- ments. This approach emphasizes the social, environmental, and economic health of all of the company’s stakeholders rather than a narrow emphasis only on the economic re- turn for shareholders. This stated desire to be a good corporate citizen with a long-term view of the world can motivate efforts that achieve both economic return for share- holders and other positive benefits for many other stakeholders.
SWOT ANALYSIS FOR THE BUILT GREEN HOME AT SUNCADIA
Green building has a buzz
Seattle has a strong green building community support
Strong community support
Growth in green building projects that demonstrate value
Need to provide numbers on green building value
Committed developer and builder
Green building has not reached mainstream
Limited project resources community
Distance away from Seattle
Green building is perceived to be costly
High cost of green projects
Uniqueness of product
Community surrounding house
Lack of data on green building (wealth) value
Existing thinking on green building and its niche focus
Source: Brenda Nunes, developer, BuiltGreen Home at Suncadia.
Chapter 2 Project Selection and Prioritization 29
MISSION STATEMENT The vision should lead into the mission statement, which is a way to achieve the vision. The mission statement includes the “organization’s core purpose, core values,”3 beliefs, culture, primary business, and primary customers. Several of these sections may flow together in the mission statement and, sometimes, an overall statement is formed with expanded definitions of portions for illustration. The rationale for including each section (either as one unified statement or as separate statements) is as follows:
• By including the organization’s purpose, the mission statement communicates why the organization exists.
• By including the organization’s core values, a mission statement communicates how decisions will be made and the way people will be treated. True organizational va- lues describe deeply held views concerning how everyone should act—especially when adhering to those values is difficult.
• By including beliefs, a mission statement communicates the ideals for which its lea- ders and members are expected to stand. Beliefs are deeply held and slow to change, so it is quite useful to recognize them as they can either help or hinder an organi- zation’s attempt to achieve its vision.
• By including the organization’s culture, the mission statement instructs members to act in the desired manner.
• By including the primary business areas, everyone will know in what business the organization wishes to engage.
• By identifying the primary customers, everyone will understand which groups of people need to be satisfied and who is counting on the organization. The mission needs to be specific enough in describing the business areas and customers to set direction, but not so specific that the organization lacks imagination. An example of a vision and mission statement from Cincinnati Children’s Hospital Medical Center is shown in Exhibit 2.3.
CINCINNATI CHILDREN ’S HOSPITAL MEDICAL CENTER VISION AND MISSION
Vision Cincinnati Children’s Hospital Medical Center will be the leader in improving child health. Mission Statement Cincinnati Children’s will improve child health and transform delivery of care through fully integrated, globally recognized research, education and innovation. For patients from our community, the nation and the world, the care we provide will achieve the best: • Medical and quality of life outcomes • Patient and family experiences and • Value today and in the future.
Source: Cincinnati Children’s Hospital Medical Center, http://www.cincinnatichildrens.org/about/corporate/mission. htm, accessed June 28, 2007.
30 Part 1 Organizing Projects
Strategic Objectives With the strategic analysis, mission, and vision in place, leaders turn to setting strategic objectives, which should be means of achieving the mission and vision. For most organi- zations, this strategic alignment of objective setting occurs annually, but some organiza- tions may review objectives and make minor revisions at three- or six-month intervals. While the planning is normally performed annually, many of the strategic objectives identified will take well over one year to achieve. The objectives describe both short- and long-term results that are desired along with measures to determine achievement. Organizations that embrace a triple bottom line in their guiding values will have objec- tives promoting each bottom line, and projects that are selected will contribute toward each. These objectives should provide focus on decisions regarding which projects to select and how to prioritize them since they are an expression of the organizational focus. Many writers have stated that for objectives to be effective, they should be “SMART—that is specific, measurable, achievable, results-based, and time-specific.”4 An example of strategic objectives from Midland Insurance Company is shown in Exhibit 2.4.
Flow-Down Objectives Once an organization’s strategic objectives are identified, they must be enforced. Some objectives may be implemented by work in ongoing operations. However, projects tend to be the primary method for implementing many objectives. If the organization is rela- tively small, the leaders may proceed directly to selecting projects at this point. Larger or- ganizations may elect a different route. If the organization is so large that it is impractical for the overall leaders to make all project selection decisions, they might delegate those decisions to various divisions or functions with the stipulation that the decisions should be aligned with all of the organization’s strategic planning that has taken place to this point. Regardless of whether the organization is small and the top leaders make all project selection decisions or whether the organization is large and some of the decisions are cas- caded one or more levels down, several methods of project selection may be used.
2.2 Portfolio Alignment Companies that use a strategic project selection process to carefully align projects with their organizational goals will find they tend to be more successful at completing their
MIDLAND INSURANCE COMPANY STRATEGIC OBJECTIVES
ofi t Grow
“COMPETE ON VALUE, NOT ON PRICE”
“TARGET NICHES WHERE COMPETITION IS FRAGMENTED
“ATTRACT, RETAIN, ALIGN, INVEST”
Source: Martin J. Novakov, American Modern Insurance Group.
Chapter 2 Project Selection and Prioritization 31
projects and deriving the expected benefits from them. Project success at these compa- nies is measured by how much the project contributes to the organization’s objectives (business needs) as well as the traditional measures of staying within budget and sched- ule and achieving the specific technical goals promised at the start of the project so as to obtain a desired return on investment.
This project portfolio alignment is very similar to financial portfolio alignment from a company’s perspective. In a financial portfolio, efforts are made to diversify investments as a means of limiting risk. However, every investment is selected with the hope that it will yield a positive return. The returns on each investment are evaluated individually, and the entire portfolio is evaluated as a whole.
For ease of understanding how various work is related, many organizations utilize an approach of classifying portfolios, programs, projects, and subprojects. Not all companies use all four classifications, but understanding how they are related helps one see where any particular portion of work fits in the organization.
Portfolios Organizations require many work activities to be performed, including both ongoing op- erational work and temporary project work. Large organizations often have many pro- jects underway at the same time. A portfolio is “a collection of projects or programs and other work that are grouped together to facilitate effective management of that work to meet strategic business objectives. The projects or programs of the portfolio may not necessarily be interdependent or directly related.”5 Each project in the portfolio should have a direct impact on the organization. Put another way, an organization’s lea- ders should identify the organization’s future direction through strategic planning. Then multiple possible initiatives (or projects) can be identified that might help further the organization’s goals. The leaders need to sort through the various possible projects and prioritize them. Projects with the highest priority should be undertaken first. Organiza- tions typically try to have a sense of balance in their portfolios. That is, an organization includes in its portfolio:
• Some large and some small projects • Some high-risk, high-reward projects and some low-risk projects • Some projects that can be completed quickly and some that take substantial time to
Programs A program is “a group of related projects managed in a coordinated way to obtain ben- efits and control not available from managing them individually. Programs may include elements of work outside of the scope of discrete projects in the program.”6 Programs often last as long as the organization lasts, even though specific projects within a pro- gram are of limited duration. For example, the U.S. Air Force has an engine procure- ment program. As long as the Air Force intends to fly aircraft, it will need to acquire engines. Within the engine program are many individual projects. Some of these projects are for basic research, some are for development of engines, and others are for purchas- ing engines. Each project has a project manager, and the entire program has a program manager. While the project managers are primarily concerned with the tradeoffs of cost, schedule, scope, and quality on their individual projects, the program manager is con- cerned with making tradeoffs between projects for the maximum benefit of the entire program. To avoid confusion, programs deal with a specific group of related projects, while a portfolio deals with all of an organization’s projects. A portfolio can include mul- tiple programs as well as multiple projects.
32 Part 1 Organizing Projects
While the leadership group of a company may make portfolio decisions and delegate the program management decisions to a program manager, both portfolios and pro- grams are managed at a level above the typical project manager. For practical purposes, project managers should attempt to understand how both portfolio and program deci- sions impact their projects and then spend most of their efforts focused on their project.
Projects and Subprojects Just as a program is made up of multiple projects, a large project may be composed of multiple subprojects. A subproject is “a smaller portion of the overall project created when a project is subdivided into more manageable components or pieces.”7 If the proj- ect is quite large, individuals may be assigned as subproject managers and asked to man- age their subproject as a project. Some of those subproject managers may even work for another company. The project manager needs to coordinate the various subprojects and make decisions that are best for the overall project. Sometimes this may require that a particular subproject be sacrificed for the greater project good. The relationships among a portfolio, programs, projects, and subprojects are illustrated in Exhibit 2.5.
Because projects are frequently performed in a fast-paced environment, it is helpful if they can be guided by organizational priorities. Some of the most typical reasons for project failure are:
• Not enough resources • Not enough time • Unclear expectations • Changes to the project • Disagreement about expectations
The first step in overcoming these problems is to carefully align potential projects with the parent organization’s goals. While many companies are motivated to align pro- jects with organizational goals for these benefits, an additional reason for companies that sell to the government is that the U.S. Federal Office of Management and Budget in 2003 mandated that “federal agencies show that IT projects align with top-level goals for
PORTFOLIO, PROGRAM, PROJECT, AND SUBPROJECT RELATIONSHIPS
Program Alpha Program Beta
Chapter 2 Project Selection and Prioritization 33
government efficiency and service.”8 This was the introduction of the Sarbanes-Oxley re- quirements. All publicly traded companies must now follow certain guidelines that re- quire some sort of financial decision model to be made in deciding to do a project.
A project portfolio is a collection of projects grouped so they can be collectively man- aged. A project portfolio is similar to the set of classes a student takes in a given term. Each class contributes toward degree requirements. Most students will choose to take a mix of some easy and some hard classes rather than all hard classes at the same time. In the same way, all projects in a portfolio are selected to contribute toward the organiza- tion’s goals, and a mix of some high-risk, high-reward projects and some easy projects is normal.
When managers assess the organization’s ability to perform projects and then iden- tify, select, and prioritize a portfolio of projects and other work that they believe will help the organization achieve its strategic goals, they are performing portfolio alignment. Portfolio alignment helps an organization achieve its goals by “removing duplicated proj- ect efforts, ironing out inconsistencies between project scopes, and improving the mix and scheduling of projects.”9 While the majority of the portfolio alignment activities may be conducted by a team of senior executives, project managers should understand how their specific projects are aligned with the organization’s objectives since they will need to either make or provide input on many decisions.
When companies consider their entire portfolio of work, they sometimes envision projects as means of developing knowledge that can be capitalized upon in ongoing work processes to provide profit, as shown in Exhibit 2.6.
In times when the economy is poor, many companies straggle to get enough business. In such an environment, some firms might accept almost any work they can get. Even during bleak economic times, however, one should be careful how internal projects are selected since selecting one project limits resources (money, people, etc.) available to
PORTFOLIO OF PROJECTS AND OPERATIONAL WORK PROCESSES
Kn to $SKn to $SLittle Kn Reliable Kn Knowledge ContinuumKnowledge Continuum
Examples: Basic R&D; Customer Research M&A Due Diligence
Examples: Competitive Strategy; Product Development; Market Entry; Channel Strategy
ta l P
Option Execution Projects
Knowledge Building Projects
Projects Inbound Logistics
Sales and Marketing
Projects PortfolioNew Kn
Both projects and processes are intertwined to create sustainable value.
Source: Chinta, Ravi and Timothy J. Kloppenborg, “Projects and Processes for Sustainable Organizational Growth,” SAM Advanced Management Journal 75 (3) (Spring 2010), p. 24.
34 Part 1 Organizing Projects
other projects. During good or bad economic times, people should take the same care with external projects—ensure that they are consistent with the organization’s goals.
Assessing an Organization’s Ability to Perform Projects Assessing an organization’s strengths and weaknesses is an essential part of aligning projects with the organization; if an organization does not have the right capabilities, a project that may otherwise support organizational goals may be too difficult to success- fully complete. Some questions to ask regarding a firm’s ability to support projects are as follows:
• Do we have a teamwork attitude, free and open communication, creativity, and empowered decision making?
• Do we have a clearly defined project management process? • Do our associates have the right attitudes, skills, and competencies to use the project
management process? • Are our leaders at each level willing to take appropriate personal risk? • Does senior leadership establish a strong leadership foundation? • Do individuals and teams exhibit leadership at their respective levels? • Do we monitor and understand our external environment?
Identifying Potential Projects The second part of aligning projects with the firm’s goals is to identify potential projects. These potential projects can be in response to a market demand, business need, customer request, legal requirement, or technological advance.10 Ideally, this is accomplished in a systematic manner—not just by chance. Some opportunities will present themselves to the organization. Other good opportunities will need to be discovered. All parts of the organization should be involved. This means people at all levels, from front-line workers to senior executives, and people from all functional areas need to help identify potential projects. For example, salespeople can uncover many opportunities by maintaining open discussions with existing and potential customers, and operations staff may identify po- tential productivity-enhancing projects. Everyone in the firm should be aware of industry trends. Many industries have trade journals such as Elevator World or Aviation Week and Space Technology that can be read regularly for potential project ideas. One reason- able goal is to identify approximately twice as many potential projects as the organiza- tion has time and resources to perform. Under close examination, some potential projects may not be a good fit. Any company that accepts practically every potential project will probably waste some of its resources on projects that do not support its or- ganizational goals.
Once potential projects are identified, the next step is to develop a brief description of each. The leadership team that will select and prioritize projects needs to understand the nature of the projects they are considering. While the level of documentation different firms require varies greatly, a bare minimum can be called the elevator pitch. This is when a person meets another waiting for an elevator and asks “I hear you are on XYZ Project. What is it all about?” The responder may have only a brief time to give a reply before the elevator arrives and must be prepared to answer quickly with simple state- ments about the project work and why it is important to the organization. The work is often summarized in a brief statement of work, which is a “narrative description of pro- ducts or services to be provided by the project.”11 Why the project is important is often summarized as a business case, which “provides the information needed from a business standpoint to determine if the project is worth the investment.”12 The business case
Chapter 2 Project Selection and Prioritization 35
generally includes both why the project is needed and, if the firm uses financial justifica- tion as part of project selection, an estimate of costs and benefits. Armed with this “ele- vator pitch,” the series of processes that collectively are used to select, prioritize, and initiate projects begins as shown in Exhibit 2.7. The rectangles represent work processes and the documents represent inputs into and deliverables out of the work processes. Some of this work will be described in Chapters 4 and 5.
Methods for Selecting Projects The people in charge of selecting projects need to ensure overall organizational priorities are understood, agreed upon, and communicated. Once this common understanding is in place, it is much easier to prioritize potential projects. The degree of formality used in selecting projects varies widely. In a small company, it can be straightforward. The prioritization should include asking questions such as these:
• What value does each potential project bring to the organization? • Are the demands of performing each project understood? • Are the resources needed to perform the project available? • Is there enthusiastic support both from external customers and from one or more
internal champions? • Which projects will best help the organization achieve its goals?
There are several different methods of systematically selecting projects. The methods include both financial and scoring models. The primary reason for including financial analysis—either to make the project selection decisions directly or to at least assist in the decision making—is that, from management’s perspective, projects are investments. Therefore, proper selection should yield a portfolio of projects that collectively contribute to organizational success.
Three different approaches are commonly used to ensure both financial and nonfi- nancial factors are considered when selecting projects. First, some organizations use fi- nancial analysis as the primary means of determining which projects are selected, and management merely tempers this with informal inclusion of nonfinancial factors. Sec- ond, some organizations use financial models as screening devices to qualify projects or even just to offer perspective; qualified projects then go through a selection process using a scoring model. Third, at still other organizations, financial justification is one factor used in a multifactor scoring model. The common thread in all three of these approaches
PROJECT SELECTION, PRIORITIZATION, AND INITIATION
Select & Prioritize Projects (Ch. 2)
Develop Project Charter (Ch. 4)
Identify Stakeholders (Ch. 5)
Plan Communications (Ch. 5)
Draft Scope Overview & Business Case, Project Priority
36 Part 1 Organizing Projects
is that both financial and nonfinancial factors are considered when selecting projects. Let us consider both financial and scoring models. Financial models will be covered in con- cept, but the calculations will not be shown since they are explained in depth in most required finance courses. Scoring models will be covered in both concept and calculation since many students might not have them in another course.
Using a Financial Model to Select Projects Financial models generally compare expected project costs to expected project benefits. Several financial models can be used in making project selection decisions.
NET PRESENT VALUE (NPV) Net present value (NPV) is the most widely accepted model and will be covered first. When using net present value, the analyst first discounts the expected future value of both the project costs and benefits, recognizing that a dollar in the future is worth less than a dollar today. Then the analyst subtracts the stream of discounted project costs from the stream of discounted project benefits. The result is the net present value of the potential project. If the net present value is positive, then the organization can expect to make money from the project. Higher net present values pre- dict higher profits. See the summary in Exhibit 2.8.
BENEFIT-COST RATIO (BCR) A second financial model sometimes used is benefit-cost ratio (BCR). The ratio is obtained by dividing the cash flow by the initial cash outlay. A ratio above 1.0 means the project expects to make a profit, and a higher ratio than 1.0 is better.
INTERNAL RATE OF RETURN (IRR) The third financial model is internal rate of return (IRR). In this model, the analyst calculates the percentage return expected on the project investment. A ratio above the current cost of capital is considered positive, and a higher expected return is more favorable.
PAYBACK PERIOD (PP) The fourth financial model that is sometimes used is the pay- back period (PP). In this analysis, a person calculates how many years would be required to pay back the initial project investment. The organization would normally have a stated period that projects should be paid back within, and shorter payback periods are more desirable.
FINANCIAL MODELS FOR PROJECT SELECTION
NET PRESENT VALUE (NPV)
BENEFIT-COST RATIO (BCR)
INTERNAL RATE OF RETURN (IRR)
PAYBACK PERIOD (PP)
Calculation PV revenue � PV cost
Cash flow/Project investment
Percentage return on project investment
Project costs/ Annual cash flows
Neutral Result NPV ¼ $0 Ratio ¼ 1.0 IRR ¼ Cost of capital Payback period ¼ Accepted length
If used to screen projects or to select projects outright
NPV > Acceptable amount
Ratio > Acceptable amount
IRR > Acceptable amount
Payback period < Acceptable length
If used to compare projects
Higher NPV better Higher ratio better Higher IRR better Shorter payback period better
Chapter 2 Project Selection and Prioritization 37
ADVANTAGES AND DISADVANTAGES OF EACH METHOD Financial models are useful in ensuring that selected projects make sense from a cost and return perspective. Several models have weaknesses that need to be understood before they are used. For example, payback period models do not consider the amount of profit that may be gen- erated after the costs are paid. Thus, two projects with a similar payback period could look equal, but if one has substantially higher revenue after the payback period, it would clearly be superior. BCR would not be acceptable unless all costs and benefits were cal- culated in present dollars (in which case it is similar to NPV except it is a ratio of ben- efits to cost instead of the difference between revenue and cost). IRR and BCRs have problems if used for choosing between mutually exclusive projects because they can favor smaller projects that create less total value for the firm but have high percentage returns. For example, a huge project with a medium rate of return would create a lot of value for a firm but might not be picked over a smaller project with a higher return if only one can be chosen. Additionally, it is sometimes quite difficult to calculate an IRR if a project has nonconventional cash flows. For the most part, the finance field recommends using net present value. The other measures can be calculated to provide perspective on whether a project passes a minimum financial return threshold or to communicate with people who might not understand NPV.
However, none of the financial models ensure alignment with an organization’s stra- tegic goals. Therefore, financial analysis, while very useful, is normally not enough. Deci- sion makers need to also consider how well a project fits according to additional factors. They will often use a scoring model for this purpose. Sometimes, a scoring model used in this fashion is called a project selection and prioritization matrix.
Using a Scoring Model to Select Projects In addition to ensuring that selected projects make sense financially, other criteria often need to be considered. A tool called a scoring model helps to select and prioritize poten- tial projects. It is useful whenever there are multiple projects and several criteria to be considered.
IDENTIFYING POTENTIAL CRITERIA These criteria should include how well each potential project fits with the organization’s strategic planning. The criteria may also include such items as risk, timing, resources needed, etc. A normal practice is for the company’s leadership team to jointly determine what criteria will be used to select pro- jects. Midland Insurance Company uses the three objectives of profit, growth, and people as shown in Exhibit 2.4. A list of questions executives may use to develop their list of criteria is shown in Exhibit 2.9.
DETERMINING MANDATORY CRITERIA Once the leadership team agrees on a list of criteria that are important, the next step is to determine whether any of the criteria are mandatory. That is, are there any situations that dictate a project must be chosen regard- less of any other considerations? Examples of this include government mandates and clear safety or security situations. This list of “must do” projects should be kept as small as possible since these projects automatically get selected and can crowd out other worthwhile projects.
WEIGHTING CRITERIA Next, the leadership team determines the relative importance or weight of each decision criteria. While more complex methods of determining criteria weights and project evaluations have been used in the past, many firms now use the simple methods described here for determining criteria weights. See Exhibit 2.10 for an example of project evaluations. First, executives determine which criterion is most
38 Part 1 Organizing Projects
important and give that a weight of 10. Then they ask how important in comparison each of the other criteria is. For example, if the executives in a consumer products com- pany thought development of new products was most important, it would be assigned a weight of 10. If the customer relations factor was deemed almost as important as new product development, maybe it would be assigned 8. If the factors of supplier relations and probability of project success were each deemed to be half as important as new product development, each would be assigned 5. Perhaps other criteria such as cost re- duction, safety, and so forth were also considered but determined to not be as important. The resulting criteria with weights are shown in Exhibit 2.10 in the top row of the selec- tion and prioritization matrix. Most organizations will decide to use about three to five criteria. Lesser-rated criteria can be used as tie breakers if needed.
EVALUATING PROJECTS BASED ON CRITERIA Now the leadership team evaluates each project on each criterion. The most efficient and accurate method is to concentrate on one criterion at a time, going down each column in turn. An easy method for this is to rate each project on that particular criterion with scores ranging from 1 (potential
EXAMPLES OF PROJECT SELECTION CRITERIA
How well does this project fit with at least one organizational objective? How many customers are there for the expected results? How competitively can the company price the project results? What unique advantages will this project provide? Does the company have the resources needed? What is the probability of success? Are the data needed to perform the project available or easily collected? Do the key stakeholders agree that the project is needed? What is the expected return on investment? How sustainable will the project results be? How does this project promote (or hinder) our corporate social responsibility? What risks are there if we do not perform this project?
PROJECT SELECTION AND PRIORITIZATION MATRIX
Weighted Total Score
Chapter 2 Project Selection and Prioritization 39
project has very little or even negative impact on this criterion) to 5 (project has excel- lent impact on this criterion). The upper left portion of each cell in the matrix can dis- play the rating, representing how well that project satisfies that criterion.
Once a project has been rated on a particular criterion, that rating should be multi- plied by the weight assigned to that criterion and displayed as the weighted score in the main body of each cell. The total for each project should be added across the row. The highest-scoring projects would ordinarily be selected. If several projects have close scores (virtual ties), either other criteria or discussion can be used to break the tie. For example, in Exhibit 2.11, there is a virtual tie between Projects A and B.
SENSITIVITY ANALYSES Scoring models allow leadership teams to perform sensitivity analyses—that is, to examine what would happen to the decision if factors affecting it were to change. Selection criteria may be added or altered. Participants may decide that some criteria are more important than others and weight them accordingly. Missing cri- teria or new alternatives can be added and the decision revisited. For example, if the ex- ecutive team evaluating the projects in Exhibit 2.11 had a bad experience with an unsuccessful project and decided to reevaluate their decisions with success probability now weighted a 9 for very important, the new project selection and priority matrix would be calculated as shown in Exhibit 2.12.
Decision makers can ensure that they use very solid ratings for each potential project. For example, if one criterion was the number of customers, the marketing department could interview some potential customers to gauge their level of interest.
A company might want to select several projects. If so, the scores from the selection matrix could serve as one method of prioritizing the projects.
Prioritizing Projects Once all projects have been selected, they will need to be prioritized—that is, the deci- sion makers will need to determine which ones will get assigned resources and be sched- uled to begin first. If a company selects a number of projects for a year (or even for a fiscal quarter), it cannot possibly expect to start all of them at the same time. The scoring models are very useful in providing input into the starting order of projects. Most lead- ership teams will consider the weighted scores of each project as a starting point in
COMPLETED PROJECT SELECTION AND PRIORITIZATION MATRIX
Weighted Total Score
40 Part 1 Organizing Projects
assigning resources to projects and determining their start dates. The leadership team members, however, also generally discuss other issues such as:
• The urgency of each project • The cost of delaying the expected benefits from various projects • Practical details concerning the timing
For example, an important process improvement project may be far less disruptive to perform when the factory is shut down for routine maintenance. One more discussion frequently occurs in the prioritizing process—if there is a conflict between resource needs for two projects, which one gets the needed resources first? Often, this is left to the proj- ect sponsors to iron out; for especially important projects, it may be formally decided by the leadership team. In that way, the probability of the critical project being held up by a misunderstanding is greatly decreased.
Exhibit 2.13 shows how the Alternative Breaks (AB) planning committee at a univer- sity ranked spring break projects. This exhibit shows four of the twenty-six projects that were selected for trips. This book will include multiple examples of the AB project to illustrate how various project planning tools work together. Each trip is a small project while the combination of all twenty-six trips form the overall project.
REVISED PROJECT SELECTION AND PRIORITIZATION MATRIX
Weighted Total Score
Source: Chris Bridges.
ALTERNATIVE BREAKS PROJECT SELECTION AND PRIORITIZATION MATRIX
ACTIVE SERVICE OPPORTUNITY ISSUE ITSELF
ORGANIZATION TO WORK WITH COST
9 10 6 5 Total
New York Vegan Farm 5 45
West Virginia Sustainability 4 36
Chicago Halfway House 2 18
El Salvador Cultural Immersion 1 9
Chapter 2 Project Selection and Prioritization 41
2.3 Securing Projects The discussion above pertains to projects that are internal to an organization. This sec- tion deals with projects a company (called the client) wants performed, but for which it may hire external resources (called contractors) to execute significant parts or all of the work. External projects can be viewed either from the perspective of the client com- pany that wants the project to be executed or from the perspective of the contractor company that wants to perform the work. Client companies may first put prospective external projects through a selection and prioritization process as described above and, if selected, then decide whether to perform the work internally (make) or hire the project to be performed by others (buy). If the decision is to buy, then the client company needs to plan and conduct the procurement.
Contractor companies need to identify potential project opportunities, determine which they will pursue, submit proposals, and be prepared to either bid or negotiate to secure the work. We consider the client company’s perspective in Chapter 12, Project Supply Chain Management. We consider the contractor’s perspective next.
Identify Potential Project Opportunities Contractors seeking external projects to perform should pursue this in a fashion similar to that of any company considering internal projects, as described in the portfolio alignment section on identifying potential projects earlier in this chapter. Additionally, since they need to look externally, contractor companies should have representatives at trade shows, profes- sional conferences, and anywhere information on the intentions of potential customers and competitors may surface. Contractor companies should also actively practice customer rela- tionship management by establishing and nurturing personal contacts at various levels and functions. Contractor companies can also practice customer relationship management by linking information systems to the extent practical so as to identify any useful information concerning potential future projects and improve management of current projects.
Determine Which Opportunities to Pursue Just as all companies should decide which internal projects to select, as previously described in the meth- ods for selecting projects, most contractor companies are best served by targeting the projects they wish to pursue. Some companies have a policy that they will bid on every potential project, knowing that if they do not bid, they will not be awarded the project. More companies find that if they target their opportunities, their “hit rate” or probability of securing the work on any given proposal increases. It takes time and re- sources to put together a good proposal, so it makes sense to increase the acceptance rate by developing a bid/no-bid decision strategy.
Each company has strengths and weaknesses com- pared to its competitors. Hence, a quick SWOT anal- ysis could be used to decide whether to pursue a
potential project, just as a more involved version of SWOT analysis was described earlier and depicted in Exhibit 2.2. Decision makers can also ask how well a potential project will help achieve their objectives. If they determine a project will help achieve their objectives, the next considerations are the cost to pursue the work and the probability of successfully
Er ic Au dr as /J up ite r Im ag es
Many companies find that targeting their opportu- nities is a better use of their time and resources than bidding on every potential project.
42 Part 1 Organizing Projects
securing the project given the likely competition. A company frequently considers risks both of pursuing and not pursuing a potential project. Finally, does the company have the capability to perform the work if it is awarded?
Prepare and Submit a Project Proposal When a firm prepares to submit a proposal, it is really conducting a small project with the primary deliverable of the project being an accurate and complete proposal. The con- tractor should understand the source selection criteria the client will use to decide to whom they will award the project. While criteria will vary extensively from one project to another, generally four main areas will be considered—technical, management, finan- cial, and operational factors. In other words, a client will likely want to be convinced that the potential contractor is technically, managerially, financially, and operationally com- petent. Successful project managers try very hard to convince potential clients that they are capable on all three dimensions. A short list of these factors is shown in Exhibit 2.14.
Negotiate to Secure the Project Once all proposals have been delivered and evaluated, the client company may elect to either award the project or enter into negotiations with one or more potential contrac- tors. On more routine projects, the contract may be awarded at this point. Further clar- ifications and negotiations may follow for complex projects.
A client company and a contractor company may negotiate the amount of money to be paid for a project. They may also negotiate the contractual terms, schedule, specific personnel to be assigned to work on the contract, quality standards, reporting mechan- isms, and various other items. A project manager may need to make arrangements with potential suppliers to secure the products and services needed to perform the project. All of these considerations will be covered in subsequent chapters.
Successful project managers understand that they need to prepare well for negotia- tions. This starts with a clear understanding of what is most important to their manage- ment. Often, it includes fact-finding with the client company to understand its needs and abilities. Armed with understanding of both perspectives, a project manager attempts to find a solution that allows the organization to secure the project work with enough profit potential and with the start of a good working relationship with the client. In the end, the client company will select the contractor(s) and award the contract(s).
Summary Project selection does not occur in isolation. Ideally, it begins with the organization’s strategic planning. This planning begins with a strategic analysis of the organiza-
tion’s internal strengths and weaknesses as well as the external threats and opportunities it faces. The organiza- tion should then develop its guiding principles such as
TYPICAL SOURCE SELECTION CRITERIA
TECHNICAL MANAGEMENT FINANCIAL OPERATIONAL
Technical experience Management experience Financial capacity Production capacity
Needs understanding Project charter Life cycle cost Business size and type
Technical approach Planning and scheduling Cost basis and assumptions Past performance
Risk mitigation Project control Warranties References
Chapter 2 Project Selection and Prioritization 43
mission and vision statements. Most companies will have an annual planning session in which strategic ob- jectives are developed. Larger organizations will continue this effort with one or more levels of planning in which the overall objectives are flowed down to determine ob- jectives that are appropriate for each organizational level.
Once the strategic planning is accomplished, the or- ganization’s leadership team engages in portfolio align- ment. The first part of the organizational alignment is an open and honest assessment of the organization’s ability to perform projects. The decision makers need to under- stand how many resources are available, the organiza- tion’s overall capabilities, and the capabilities of the individuals who will be assigned to projects. An ongoing portfolio alignment activity is for everyone in the firm to identify possible opportunities that they feel might help the organization achieve its goals. Each potential project should be described at least by stating in a sentence or two what work is involved and how it would help the organization achieve one or more of its goals.
Once potential projects are identified and briefly de- scribed with statements of work and business cases,
they should be put through a process to determine which will be selected and what their relative priorities are. Both financial and scoring models are frequently used to evaluate potential projects. Net present value is the preferred financial method, although others are sometimes used. Financial analysis tells the leadership team how much each potential project is worth from a benefits-versus-cost comparison, but does not tell how each potential project may help to achieve the organi- zation’s goals. Scoring models can incorporate various goals and should also be used. Once a project list is selected, the projects need to be prioritized so some can start right away and others can start later.
Contractor companies need to be constantly on the lookout for potential project opportunities. Once po- tential projects are identified, companies need to decide which ones they pursue. Just as for internal projects, some external projects will be better at helping an or- ganization reach its goals because they are a better fit. The contractor needs to prepare and submit proposals for desired projects and be prepared to follow up and often negotiate in order to secure them.
Key Terms from the PMBOK ® Guide statement of work, 35 business case, 35
Chapter Review Questions 1. List and describe each step in the strategic plan-
ning process. 2. Why are multiple-criteria project selection mod-
els preferred? 3. What happens to a project proposal that does not
meet a “must” objective in a project selection system?
4. What does the strategic analysis acronym SWOT stand for?
5. Which parts of SWOT are internal? Which parts are external?
6. What are some examples of guiding principles an organization’s leaders might develop after they have completed strategic analysis?
7. In what tense should a vision be written? 8. Name at least four things a mission statement
should include. 9. Why should a mission statement be neither too
specific nor not specific enough?
10. In addition to short- and long-term results, what should strategic objectives include?
11. What does the acronym SMART mean with re- gard to goals?
12. What is the primary method of implementing organizational objectives?
13. What is the first step in avoiding common rea- sons for project failure?
14. Who should be involved in the second part of aligning projects with the firm’s goals, which is identifying potential projects?
15. How many potential projects should be identified in comparison to how many the organization plans to actually implement? Why?
16. What is the most common financial analysis technique used in project selection? Why?
17. Which type of financial model would you nor- mally use in project selection? Why?
44 Part 1 Organizing Projects
Discussion Questions 1. Describe how to prioritize projects to ensure top
management involvement. 2. Describe all of the issues management must
consider when determining priorities of projects. 3. Tell why gaining top management support is
vital to project success. 4. List and describe the steps in strategic direction
setting. 5. Describe how to conduct each portion of a
SWOT analysis. 6. Describe what knowledge is gained from each
portion of a SWOT analysis and how it helps project managers.
7. Describe the interaction between vision and mission statements.
8. List and describe the steps in prioritizing projects with a scoring model. Why are they performed in this order?
9. Describe advantages and disadvantages of finan- cial and scoring models in project selection.
10. Describe three different ways decision makers might select projects while considering both financial and nonfinancial factors.
PMBOK ® Guide Questions 1. Work that is grouped together to facilitate effec-
tive management of that work to meet strategic business objectives is called a: a. portfolio b. program c. project d. subproject
2. Projects may be undertaken as a result of any of the following strategic reasons except: a. business need b. customer request c. executive preference d. technological advance
3. Program management includes all of the follow- ing except: a. aligning organizational and strategic direction b. managing shared client relationships
c. resolving issues and change management d. resolving resource constraints
4. Typical source selection criteria for projects in- clude all of the following capabilities except: a. financial b. management c. marketing d. technical
5. A narrative description of products or services to be provided by the project is a: a. business case b. project proposal c. project statement of work d. subproject
Exercises 1. Complete the following scoring model. Show all
your work. Tell which project you would pick first, second, third, and last. How confident are you with each choice? If you lack confidence regarding any of your choices, what would you prefer to do about it? Project A
Weighted Total Score
Criteria 1 Criteria 2 Criteria 3 Project\
Criteria & Weight 4610
Chapter 2 Project Selection and Prioritization 45
2. Complete the following scoring model. Show all your work. Tell which project you would pick first, second, third, and last. How confident are you with each choice? If you lack confidence regarding any of your choices, what would you prefer to do about it?
Weighted Total Score
Criteria 1 Criteria 2 Criteria 3 Project\
Criteria & Weight 3710
3. Pretend you are on the leadership team for a pharmaceutical company that is in a difficult finan- cial situation due to patents that have died on two of your most profitable drugs. Brainstorm a list of criteria by which you would select and prioritize projects. Weight the criteria.
4. Pretend you are on the leadership team of a manufacturing company that is currently chal- lenged by low-cost competition. Brainstorm a list of criteria by which you would select and prioritize projects. Weight the criteria.
Example Project Your instructor will probably bring example projects to class and facilitate the assignment of students to the various project teams. Therefore, you will probably not be involved in the project selection. However, one of the first things you should do when assigned to a project is to learn about the company or other organi- zation that wants the project to be completed. Why did they select this project? Is it a “must do” project or did
it get picked over other competing projects? By under- standing what makes the project so important, you will make better decisions and will be more motivated through the term. If your project is a “must do” project, explain why. If it is not a “must do” project, explain how it was selected. Explain where it fits in priority with other work of the organization.
References A Guide to the Project Management Body of Knowledge
(PMBOK® Guide) 4th ed. (Newtown Square, PA: Project Management Institute, 2008).
Aldag, Ramon J. and Loren W. Kuzuhara, Mastering Management Skills: A Manager’s Toolkit (Mason, OH: Thomson South-Western, 2005).
Barclay, Colane and Kweku-Muata Osei-Bryson, “Toward a More Practical Approach to Evaluating Programs: The Multi-Objective Realization Approach,” Project Management Journal 40 (4) (December 2009): 74–93.
Brache, Alan P. and Sam Bodley-Scott, “Which Imperatives Should You Implement?” Harvard Management Update, Article reprint no. U0904B (2009).
Cannella, Cara, “Sustainability: A Green Formula,” 2008 Leadership in Project Management 4: 34–40.
Caron, Franco, Mauro Fumagalli, and Alvaro Riga- monti, “Engineering and Contracting Projects: A Value at Risk Based Approach to Portfolio Balanc- ing,” International Journal of Project Management 25 (2007): 569–578.
Chinta, Ravi and Timothy J. Kloppenborg, “Projects and Processes for Sustainable Organizational Growth,” SAM Advanced Management Journal 75: 2 (Spring 2010): 22–28.
Cooper, Robert G., “Winning at New Products: Path- ways to Profitable Innovation,” Proceedings of PMl Research Conference 2006 (Newtown Square, PA: Project Management Institute, 2006).
46 Part 1 Organizing Projects
Daft, Richard L., Management, 9th ed. (Mason, OH: South-Western Cengage Learning, 2010).
Eager, Amanda, “Designing a Best-in-Class Innovation Scoreboard,” Technology Management (January–February 2010): 11–13.
Essex, David E., “In Search of ROI,” PMNetwork 19 (10) (October 2005): 46–52.
Evans, R. James and William M. Lindsay,Managing for Quality and Performance Excellence, 8th ed. (Mason, OH: South-Western Cengage Learning, 2011).
Fretty, Peter, “Find the Right Mix,” PMNetwork 19(9) (September 2005): 26–32.
Kenny, John, “Effective Project Management for Stra- tegic Innovation and Change in an Organizational Context,” Project Management Journal 34 (1) (March 2003): 43–53.
Kloppenborg, Timothy J., Arthur Shriberg, and Jayashree Venkatraman, Project Leadership (Vienna, VA: Management Concepts, 2003).
Labuschagne, Les and Carl Marnewick, “A Structured Approach to Derive Projects from the Organiza- tional Vision,” Proceedings of PMI Research Con- ference 2006 (Newtown Square, PA: Project Management Institute, 2006).
Mais, Andy and Sam Retna, “Decision Time,” PMNetwork 20 (3) (March 2006): 58–62.
Milosevic, Dragan Z. and Sabin Srivinnaboon, “A Theoretical Framework for Aligning Project Management with Business Strategy,” Project Man- agement Journal 37 (3) (August 2006): 98–110.
Organizational Project Management Maturity Model Knowledge Foundation, 2nd ed. (Newtown Square, PA: Project Management Institute, 2008).
Reginato, Justin and C. William Ibbs, “Employing Business Models for Making Project Go/No Go Decisions,” Proceedings of PMI Research Conference 2006 (Newtown Square, PA: Project Management Institute, 2006).
Senge, Peter, Bryan Smith, Nina Kruschwitz, Joe Laur, and Sara Schley, The Necessary Revolution: How Individuals and Organizations Are Working Together to Create a Sustainable World (New York: Broadway Books, 2008).
Smallwood, Deb and Karen Furtado, “Strategy Meets the Right Projects at the Right Time,” Bank Systems & Technolgy 46 (4) (June–July 2009): 34.
Thamhain, Hans J., “Developing Winning Proposals,” Field Guide to Project Management, 2nd ed., edited by David I. Cleland (Hoboken, NJ: John Wiley & Sons, Inc., 2004): 180–201.
The Standard for Portfolio Management, 2nd ed. (Newtown Square, PA: Project Management Institute, 2008).
Wheatley, Malcolm, “Beyond the Numbers” PMNetwork 23 (8) (August 2009): 38–43.
Zhang, Weiyong, Arthur V. Hill, Roger G. Schroeder, and Kevin W. Linderman, “Project Management Infrastructure: The Key to Operational Performance Improvement,” Operations Management Research 1 (1) (September 2008): 40–52.
http://en.wikipedia.org/wiki/Triple_bottom_line, accessed February 2, 2010.
Endnotes 1. Aldag, Ramon J. and Loren W. Kuzuhara, Master-
ing Management Skills: A Manager’s Toolkit (Mason, OH: Thomson South-Western, 2005): A10.
2. http://www.gcbl.org, accessed March 3, 2010. 3. Lussier, Robert N. and Christopher F. Achua,
Leadership: Theory, Application, Skill Development, 4th ed. (Mason, OH: Thomson South-Western, 2010): 425.
4. Lussier, Robert N. and Christopher F. Achua, Leadership: Theory, Application, Skill Development, 4th ed. (Mason, OH: Thomson South-Western, 2010): 426.
5. PMBOK® Guide 441. 6. PMBOK® Guide 442. 7. PMBOK® Guide 450. 8. Essex, David E., “In Search of ROI,” PMNetwork
19 (10) (October 2005): 49. 9. Mais, Andy and Sam Retna, “Decision Time,”
PMNetwork 20(3) (March 2006): 60. 10. PMBOK® Guide 10. 11. PMBOK® Guide 75. 12. PMBOK® Guide 75.
Chapter 2 Project Selection and Prioritization 47
PROJECT MANAGEMENT I N ACT I ON
Prioritizing Projects at D. D. Williamson
One of the most difficult, yet most important, lessons we have learned at D. D. Williamson surrounds project prioritization. We took three years and two iterations of our prioritization process to finally settle on an ap- proach that dramatically increased our success rate on critical projects (now called VIPs, or “Vision Impact Projects”).
Knowing that one of the keys to project management success is key management support, our first approach at prioritization was a process where our entire senior management team worked through a set of criteria and resource estimations to select a maximum of two pro- jects per senior management sponsor—16 projects in to- tal. Additionally, we hired a continuous improvement manager to serve as both our project office and a key resource for project facilitation. This was a great move forward (the year before we had been attempting to monitor well over 60 continuous improvement projects of varying importance). Our success rate improved to over 60 percent of projects finishing close to the ex- pected dates, financial investment, and results.
What was the problem? The projects that were not moving forward tended to be the most critical—the heavy-investment “game changing” projects. A review of our results the next year determined we left signifi- cant money in opportunity “on the table” with projects that were behind and over budget!
This diagnosis led us to seek an additional process change. While the criteria rating was sound, the num- ber of projects for a company our size was still too many to track robustly at a senior level and have re- sources to push for completion. Hence, we elevated a subset of projects to highest status—our “VIPs.” We simplified the criteria ratings—rating projects on the level of expected impact on corporate objectives, the cross-functional nature of the team, and the perceived likelihood that the project would encounter barriers which required senior level support to overcome.
The results? Much better success rates on the big projects, such as design and implementation of new equipment and expansion plans into new markets. But why?
The Global Operating Team (GOT) now has laser focus on the five VIPs, reviewing the project plans progress and next steps with our continuous improve- ment manager in every weekly meeting. If a project is going off plan, we see it quickly and can move to real- locate resources, provide negotiation help, or change priorities within and outside the organization to man- age it back on track. Certainly, the unanticipated bar- riers still occur, but we can put the strength of the entire team toward removing them as soon as they happen.
A couple of fun side benefits—it is now a develop- ment opportunity for project managers to take on a VIP. With only four to six projects on the docket, they come with tremendous senior management interaction and focus. Additionally, we have moved our prioritization process into our functional groups, using matrices with criteria and resource estimations to prioritize cus- tomer and R&D projects with our sales, marketing, and science and innovation teams, as well as IT projects throughout the company. The prioritization process has become a foundation of our cross-functional success!
Following are excerpts from the spreadsheet D. D. Williamson used to select and prioritize our VIP projects last year. Exhibit 2.15 shows the five criteria used to prioritize the projects. Exhibit 2.16 shows how associate time when assigned to a project is not avail- able for other projects. Projects can also be limited by the amount of funds. Finally, Exhibit 2.17 defines terms used in project selection.
48 Part 1 Organizing Projects
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TERMS USED IN PROJECT SELECTION
DEFINITIONS OF KEY TERMS
Project Ownership Defines the functional area with primary responsibility for the project
Global vs. Local Global projects will be implemented or impact on more than one location in the year defined; otherwise projects are defined as local
Prioritization The five weighted criteria on worksheet one were used to put projects in rank order—used to assign resources and identify the cut off
CI Project An improvement effort which is not part of an associate’s daily work requirements
Team Charter The plan for completing CI projects, often in seven-step format for problem resolution, though formats vary according to project type and complexity. Includes the plan for communicating progress and results
Project Roles The defined roles on an improvement team—not all teams will have all roles, but each project will have at least a project manager and sponsor
Project Manager (PM) The owner of a project—will be expected to charter the team, ensure the forward movement of the project, and report on progress, completion of the project, and closure/celebration of successes and learnings. Also responsible for the communication plan within the charter. Must be a leadership program graduate, and typically a functional manager, either global or local
Sponsor (S) Typically a senior manager/GOT member—responsible for ensuring assignment of appropriate resources, clearing any barriers, and otherwise championing the project
Team Member (TM) An associate who has a significant contribution to make to the improvement effort, often a representative of an involved function. Attends all team meetings and shares responsibility for completion of the project
Subject Matter Expert (SME)
An associate with needed knowledge for project outcome—may not be significantly affected by changes. Attends only when knowledge is required, but commits to sharing knowledge when it is needed.
Level of Difficulty The estimated human resource effort that will be required to complete a project (estimated on a per quarter basis)
Level 1 Low investment of hours required (may require capital); solution is known and implementation of solution is predictable; likely only 2–3 people involved
Level 1 projects—estimated hours for resource allocation: PM: 10 hours; S: 2 hours; SME: 5 hours
Level 2 Medium investment of hours required; may require upfront measurement and multiple solutions, but solutions and implementation are still expected to be simple. Probably requires 3–5 team members
Level 2 projects—estimated hours for resource allocation: PM: 60 hours; S: 15 hours; TM: 30 hours; SME 15 hours
Level 3 High investment of hours required; trying to solve complex and/or ongoing problems. Likely to in- volve a behavior change in others—solutions or implementation outcomes may be unknown or less simple. Likely a team of 4–8 people, perhaps cross-functional/cross location
Level 3 projects—estimated hours for resource allocation: PM: 120 hours; S: 30 hours; TM: 60 hours; SME: 30 hours
Source: Elaine Gravatte, Chief People Officer and North American President, D. D. Williamson
Chapter 2 Project Selection and Prioritization 51