Project Management Lecture 2 Project Selection

Lecture 2: Project selection Project selection overview: A number of project you want to execute. Project selection is the process of evaluating and choosing which projects an organization should undertake from a pool of different options. Sources of new projects:  New technology: advancements in technology can inspire new technology  Market demand: changes in market demands and customer expectations  Competitive pressure: competitive dynamics in the industry can drive organizations to start new projects, to keep up with competitors or differentiate their offerings.  Social, environmental and ethical consideration: increasing focus on corporate social responsibility and sustainability drives projects aimed at reducing environmental impact, improving social outcomes, or enhancing corporate ethics.  Laws and regulations: new or changing government regulations, industry standards, or compliance requirements can necessitate the creation of projects to ensure that the organization adheres to legal and regulatory frameworks.  Leadership vision: leaders with a strong vision often initiate projects that align with their goals for the company, shaping the organization´s trajectory. Project proposal Def: is a document that outlines a planned project and seeks approval or support from stakeholders, such as management, clients, investors etc. It provides an overview of the projects objectives, scope, time, budget, resources, etc. Criteria for assessing project proposals 1. Strategic assessment: How well does the project align with the organization’s strategic objectives and vision? Projects that directly support key goals should be prioritized (growth, innovation, cost reduction) 2. Return on investment: The financial turn or value that the project is expected to generate compared to its cost. 3. Risk assessment: Evaluating the risks associated with the project, including financial, operational, market and technical risks. Methods/ techniques of ranking proposals A) Payback method: Measure time it will take to recover the project investment. This is the simplest model. Payback emphasizes cash flows, a key factor in business. The formula: Y + (A/B) B) Net present value: Uses managements minimum desired rate-ofreturn to compute the present value of all net cash inflows. CAPM and WACC may be used to calculate. Net present value is the value of all future cash flows. C) Scoring method: Involves assigning scores to various projects based on predefined criteria (Return on investment (ROI), risk, strategic alignment). The project is ranked based on their total scores. D) Project portfolio matrix: Is a tool used in project management to help organizations prioritize and manage their portfolio of projects.