Chapter 2: Strategic Management and Project Selection

Learning Objectives:
2.1 Explain how to evaluate the project management maturity of an organization.
2.2 Discuss the criteria for choosing projects.
2.3Identify the basis for choosing types of projects.
2.4Discuss the importance and dangers of risk in projects and ways to reduce the risk.
2.5Explain how to employ, use, and evaluate project portfolio management.

Concept Check: Section 2.1

1. Common problems in managing projects include which of the following?

a. Making profits
b. Following specifications
c. Satisfying customers
d. Staying within budget, within time constraints, and within scope

Ans: d

2. A project begins with a _______ being presented to a funding entity. This document typically
includes monetary cost and benefit elements as well as nonmonetary factors such as the
strategic justification for the project, expected behavioral impacts, increases in efficiency, service
improvements, competitiveness effects, and so on.
a. project charter
b. business case
c. project description
d. portfolio

Ans: b

3. It is recommended for an organization to have a ______ that is charged with improving the
“maturity” or overall effectiveness of the organization’s project management processes.
a. Coordinating Project Office
b. Central Project Office
c. Project Management Office
d. Portfolio Office

Ans: c
Concept Check: Section 2.2

1. Firms usually have two or more projects, and this collection of projects is referred to as _____.
a. a portfolio
b. initiation
c. a program
d. a stochastic model

Ans: a

2. What is the Sacred Cow model?

a. Upper management’s favorite model
b. Secret of the company
c. Most focused onorganization goals
d. Expected to be “profitably milked” for a long time
Ans: a
3. Which of the following project selection models focuses strongly on the long-term success of
the firm?
a. The US military model
b. Product line extension
c. Competitive necessity
d. Sustainability model

Ans: d

4. Numeric project selection models generally focus on:

a. keeping the workforce numbers stable.
b. profits and profitability.
c. management salary stability.
d. maintaining stock price and ROI.

Ans: b
5. The Weighted Factor Scoring Model has the advantage of:
a. Simplicity.
b. Increased attention to relative importance of each selection criterion.
c. Greater worldwide acceptance
d. Ease of calculation.

Ans: b

6. Risk is generally believed to focus on profits, but:

a. very few projects fail financially.
b. about 50 percent of projects fail financially.
c. risk in projects is primarily focused on timely completion.
d. uncertainty plagues all aspects of the work and is present in all stages of PM.

Ans: d

7. Real options seek to reduce which of the following risks in projects?

a. Political
b. Environmental
c. Technological
d. Inherent

Ans: c
8. Indeed, effectively executing the PM’s primary role ofmanaging trade-offs requires that the PM
make trade-offs in a way that best supports the _______.

a. organization’s overall budget

b. change management system
c. PM’s career interests
d. organization’s overall strategy

Ans: d

9. There are two basic types of project selection models, ____________________.

a. numeric and nonnumeric

b. numeric and random
c. binary and continuous
d. quantitative and criteria-based
Ans: a

10. In this type of project selection, a proposed project would be judged on the degree to which it
fits the firm’s existing product line, fills a gap, strengthens a weak link, or extends the line in a
new, desirable direction.

a. Comparative benefit model

b. Product line extension
c. Competitive necessity
d. Operating necessity

Ans: b

11. Through a financial ______, an organization or individual acquires the right to do something
but is not required to exercise that right.

a. option
b. gain
c. consideration
d. institution

Ans: a
12. With the ______ approach model, enough funds are allocated to the project todetermine if the
initial assumptions concerning costs, benefits, etc. were accurate. Whenthe funds are gone, the
assumptions are reevaluated to determine what to do next.

a. scoring
b. window-of-opportunity
c. discovery-driven planning
d. criteria-based

Ans: c
Concept Check: Section 2.3

1. Effective Project Portfolio Management attempts to link the organization’s

projects________________________.
a. exclusively to the budget
b. to the human resource constraints
c. directly to the goals and strategy of the organization
d. directly to the corporate culture

Ans: c
2.The main purpose of the ________ is to establish and articulate a strategic directionfor those
projects spanning internal or external boundaries of the organization, such ascross-departmental
or joint venture.

a. project council
b. project manager
c. portfolio council
d. portfolio manager

Ans: a