Professional Documents
Culture Documents
Project Management
Module 2
Professor: Nadine Blaides
Agenda
1. Class Norms & BlackBoard Check-In
3. Organizations
• Project Selection
• Culture
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Class Norms
We will be on time - at the start of class, after the break,
and after small-group discussions
We will show respect to each other by; raising our hands to speak; giving
our attention to the speaker; not interrupting each other or shouting; not
engaging in any side conversations; and accepting multiple points of view by
not making disrespectful comments about different opinions and not taking it
personal when others disagree with our perspective
We will all be prepared and participate in this class – we will; share opinions,
experiences and opportunities; review assignments to clarify understanding
and expectations; and honor commitments made to each other
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Course BlackBoard site
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Where We Are Now
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Learning Objectives
1. Explain why it is important for project managers to
understand their organization’s strategy
2. Identify the significant role projects contribute to the
strategic direction of the organization
3. Understand the need for a project priority system
4. Apply financial and nonfinancial criteria to assess
the value of projects
5. Understand how multi-criteria models can be used
to select projects
6. Apply an objective priority system to project
selection
7. Understand the need to manage the project portfolio
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Chapter Outline
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Why Project Managers Need
to Understand Strategy
2. So, they can be effective project advocates. They have to be able to:
– demonstrate to senior management how their project contributes to the
firm’s mission in order to garner their continued support.
– explain to stakeholders why certain project objectives and priorities are
critical in order to secure buy-in on contentious trade-off decisions.
– explain why the project is important to motivate and empower the
project team (Brown, Hyer and Ettenson, 2013).
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The Strategic Management Process:
An Overview
• Strategic Management Defined
• Is the process of assessing “what we are” and deciding and
implementing “what we intend to be and how we are going to get
there.”
• Is a continuous, iterative process aimed at developing an
integrated and coordinated long-term plan of action.
• Requires strong links among mission, goals, objectives, strategy,
and implementation.
• Two Major Dimensions of Strategic Management:
1. Responds to changes in the external environment and allocates
the firm’s scare resources to improve its competitive position.
2. Internal responses to new action programs aimed at enhancing
the competitive position of the firm.
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Four Activities of the Strategic
Management Process
The sequence of activities of the strategic management process is:
FIGURE 2.1
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Characteristics of Objectives
EXHIBIT 2.1
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The Need for a Project Priority System
Implementation of projects without a strong priority system linked to strategy
create problems.
Problem 1: The Implementation Gap
• The implementation gap is the lack of understanding and consensus of
organization strategy among top and middle-level managers.
Problem 2: Organization Politics
• Project selection may be based not so much on facts and sound reasoning
as on the persuasiveness and power of people advocating projects.
• The term sacred cow is often used to denote a project that a powerful,
high-ranking official is advocating.
Problem 3: Resource Conflicts and Multitasking
• A multi-project environment creates the problems of project
interdependency and the need to share resources. Resource sharing
leads to multitasking—involves starting and stopping work on one task to
go and work on another project, then returning to the work on the original
task.
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Benefits of Project Portfolio Management
EXHIBIT 2.2
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A Portfolio Management System
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Portfolio of Projects by Type
FIGURE 2.2
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Phase Gate Model
Phase Gate Model
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Phase Gate Process Diagram
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A Portfolio Management System
• Selection Criteria
– Financial models: payback, net present value (NPV)
– Non-financial models: projects of strategic
importance to the firm
• Multi-Criteria Selection Models
– Use several weighted selection criteria to evaluate
project proposals.
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Financial Models
• The Payback Model
– Measures the time the project will take to recover
the project investment.
– Uses more desirable shorter paybacks.
– Emphasizes cash flows, a key factor in business.
• Limitations of Payback:
– Ignores the time value of money.
– Assumes cash inflows for the investment period
(and not beyond).
– Does not consider profitability.
n = Number of years
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Example Comparing Two Projects
Using Payback Method
EXHIBIT 2.3A
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Example Comparing Two Projects
Using Net Present Value Method
EXHIBIT 2.3b
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Nonfinancial Strategic Criteria
Topic Question
Strategy/alignment What specific strategy does this project align with?
Risk Where does the proposed project fit in our risk profile?
Benefits, value, ROI What is the value of the project to this organization?
EXHIBIT 2.4
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Sample Selection Questions Used in Practice
Topic Question
Organization culture Is our organization culture right for this type of project?
FIGURE 2.3
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Applying a Selection Model
• Project Classification
– Deciding how well a strategic or operations project
fits the organization’s strategy
• Selecting a Model
– Weighted scoring criteria seem the best alternative
because:
• Reduces the number of wasteful projects
• Helps identify proper goals for projects
• Helps everyone involved understand how
and why a project is selected
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Applying a Selection Model (cont’d)
FIGURE 2.4A
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Risk
Analysis for
500-Acre
Wind Farm
FIGURE 2.4B
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Project
Screening
Process
FIGURE 2.5
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Priority
Screening
Analysis
FIGURE 2.6
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Managing the Portfolio System
• Senior Management Input
– Provides guidance in establishing selection criteria that
strongly align with the current organization strategies.
– Annually decides how to balance the available
organizational resources (people and capital) among the
different types of projects.
• The Governance Team Responsibilities
– Publish the priority of every project.
– Ensure the selection process is open and free of power
politics.
– Evaluate the progress of current projects.
– Constantly scan the external environment to determine if
organization focus and/or selection criteria need to be
changed.
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Balancing the Portfolio for
Risks and Types of Projects
David and Jim Matheson studied R&D organizations and developed a classification scheme that
could be used for assessing a project portfolio. They separated projects in terms of degrees of
difficulty and commercial value. The four basic types of projects are:
• Bread-and-butter Projects
– Involve evolutionary improvements
to current products and services.
• Pearls
– Represent revolutionary commercial opportunities using proven
technical advances.
• Oysters
– Involve technological breakthroughs
with high commercial payoffs.
• White Elephants
– Showed promise at one time
but are no longer viable.
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Key Terms
Implementation gap
Net present value
Organizational politics
Payback
Priority system
Priority team
Project portfolio
Project screening matrix
Project sponsor
Sacred cow
Strategic management process
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