Chapter 3

3-1Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd

Pearson, Larson, Gray, Project Management in Practice, 1e

CHAPTER 3

Organisational Strategy and Project Selection



Learning Elements3.1 Further develop and understand the

importance of the methods that define and align an organisation’s project activity.

3.2 Understand the features of portfolio management systems and the role of a typical Project Management Office (PMO).



Learning Elements (cont)

3.3 Be able to identify what information and support a PMO should be providing to your project environment.

3.4 Understand the project manager’s responsibilities in relation to supplying information to a PMO.



Why Project Managers Need to Understand Strategy

• Project managers must respond to changes with appropriate decisions about future projects and adjustments to current projects.

• Project managers who understand their organisation’s strategy can become effective advocates of projects aligned with the firm’s mission.



Common Mistakes• Focusing on problems or solutions with low strategic

priority.

• Focusing on the immediate customer rather than the whole market place and value chain.

• Overemphasising technology that results in projects that do not fit the strategy or customer need.

• Trying to solve customer issues with a product or service rather than focusing on the 20% with 80% of the value.

• Engaging in a never-ending search for perfection only the project team really cares about.



The Strategic Management Process: An Overview



Key stages

1. Define and review the organisational mission, vision and values.

2. Set the organisation’s strategic objectives.

3. Analyse the strategic objectives and identify the ‘ideal’ investment mix.

4. Implement strategies through portfolios, programs and projects.



Stage 1

Define and review the organisational mission, vision and values

• The mission identifies ‘what we want to become’ or the raison d’être.

• A written mission statement provides focus for decision making when shared by organisational managers and employees.



Stage 1 Tools• SWOT• PESTEL• Porter’s 5 Forces• Blue Ocean Strategy• Strategy Maps• Balanced Scorecard

2–9



Stage 2Set the organisation’s strategic objectives

• Strategic objectives translate the organisation’s mission and vision into specific, concrete, measurable terms. Strategic objectives set targets for all levels of the organisation.

• Remember SMARTA!



Stage 2 (cont)



Stage 3Analyse the strategic objectives and identify

the ‘ideal’ investment mix

• The portfolio of investments identified in support of the strategic objectives is a result of a complex process.

• This potentially involves business managers, program managers and other subject-matter experts.



Stage 3 (cont)

The business case includes:• Strategic alignment criteria• Definition of the business problem• Benefits identification and analysis• Options analysis, do-nothing option,

deferred option and three other options• Business risk analysis• Funding summary• Milestone summary



Stage 4Implement strategies through portfolios,

programs and projects

• Implementation answers the question of how strategies will be realised, given available resources, equipment, change tolerance and a host of other factors.



Stage 4 (cont)

These factors include:

1. Completing tasks requires allocation of resources

2. Authority, responsibility and performance – the organisation’s structure

3. Planning and control systems must be in place

4. Motivating project contributors will be a major factor for achieving project success

5. Prioritising projects



The Need for an Effective Portfolio Management System

Problems in implementing include:

• The implementation gap

• The organisation’s politics

• Resource conflicts and multitasking.



Benefits of Portfolio Management Systems



A Portfolio Management System



Selection CriteriaFinancial• BCR• NPV• Payback

Non financial• To make it difficult for competitors to enter

the market• To develop an enabler product, which by its

introduction will increase sales in more profitable products



Selection Criteria (cont.)

Checklist models•The most frequently used method in selecting

projects has been the checklist.

•This approach basically uses a list of questions to review potential projects and to determine their acceptance or rejection.




Multi-weighted scoring models• A weighted scoring model typically uses several

weighted selection criteria to evaluate project proposals.

• Weighted scoring models will generally include qualitative and/or quantitative criteria.



Multi-weighted Scoring Models (cont.)




• Pair-wise criterion (Analytic Hierarchy Process)

• Nominal Group Technique (NGT)



Applying a Selection ModelC

ontinued on next slide



Applying a Selection Model (cont)



Project Portfolio Management (PPM)

Benefits include:• Strategic alignment across project portfolios• Better collaboration across organisational silos• Improved decision making and accountability• Streamlined PMO processes and templates• Improved organisational productivity



Key Terms• Analytic Hierarchy Process (AHP)• Benefit Cost Ratio (BCR)• bottom-up• implementation gap• innovation process• investment business case• mission• Net Present Value (NPV)• Nominal Group Technique (NGT)• pair-wise criterion• payback model• portfolio management

Continued on next

slide



Key Terms (cont)• priority system• priority team/project portfolio office• Project Management Information Systems

(PMIS)• Project Portfolio Management (PPM) systems• project sponsor• sacred cow• SMARTA• strategic objectives• strategic planning• top-down• vision

Chapter 3

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