Project Management Tutorial

Project Selection: Definition, Methods, Criteria & Process

Organizations cannot afford to chase every opportunity and exhaust all their resources. They have
limited resources that must be implemented judiciously to achieve the maximum output out of any plan.

Some projects may appear lucrative but might end up in a mishap for the organization. Project selection
helps a company decide which project has the highest priority to attain accomplishment. The right
project selection method can help organizations make informed decisions while choosing projects. It
also gives all the stakeholders a better view of the goals that are to be achieved through the project, the
strategies that will lead to the completion of the project, the timeline, and many more.

This article discusses some project selection methods, the steps, and the tools involved in the process,
which help organizations decide which project to proceed with.

What is Project Selection?

Project selection in project management refers to the process of an organization choosing one out of
many projects so that the project can reap the most benefits. Projects should be able to align with an
organization's goals and ensure that the resources are not misused.

This is one of the most crucial actions for an organization. Choosing the right project is not sheer luck,
and it is about analyzing data-driven insights to follow the most beneficial approaches and choose the
best project that reaps the most benefits for the company. A Project Management Training Program can
teach you the technicalities associated with project selection.

Project Manager Role in Project Selection

Due to their experience in project planning, execution, and delivery, the project manager plays an
important role in the Project Selection process by providing input and recommendations to senior
management on the feasibility of proposed projects. The project Manager must ensure that the projects
chosen are in line with the organization's overall strategy and are feasible given the available resources
and timeline.
Project Selection Methods

Choosing the wrong project can cause havoc to an organization and hinder its growth. Listed below are
some of the most popular project selection tools organizations can use to understand which project they
should proceed with.

A. Benefits Measurement Methods

1. Cost-Benefit Analysis

This is one of the most important tools for project selection which helps organizations analyze which
decision they should proceed with and which one they should let go of. This process involves adding up
the potential earnings that are expected from action and then deducting the costs incurred as input
costs while taking action.

This tool measures tangible aspects like financial metrics, including the cost saved or revenue earned
during a project, and intangible aspects, such as customer satisfaction and employee morale. Based on
the conclusions drawn, an organization decides whether to proceed with or forego a project.

2. Payback Period

As the name suggests, this method of project selection helps determine the time in which the initially
incurred costs while starting a project can be recovered. The sooner the initial investment can be
recovered, the more desirable it is for the company to proceed with the project.

3. Discounted Cash Flow

This project selection tool helps determine an investment's present value by considering the estimated
revenue generated compared to the investment in the coming years. In this method, the value of an
investment is determined based on future cash flows. If the DCF of a project is higher than the initial
cost incurred, then the project is considered profitable.
4. Opportunity Costs

Opportunity costs are a great tool for project selection that organizations can use to make informed
project choices. Opportunity cost refers to the highest value organizations have to give up to opt for
their choice of project.

To put it in simple words, opportunity cost helps to determine the opportunity which might be
overlooked when an organization chooses one project over the other.

5. Ranking Method

Organizations use this simple method of project selection to prioritize the projects that will earn them
the most profits. Projects are ranked based on their importance. This is a comparatively quicker and
easier approach as it helps the companies identify the top-most priorities at the earliest.

6. Scoring Model

In this method of project selection, there is a list comprising all the criteria that need to be considered
while choosing a project. A dedicated committee is assigned the task of weighing the list with respect to
the priorities and importance of all the projects under consideration. The redeemed values are thus
evaluated, and the project that secures the highest score is selected.

7. Analytical Hierarchy Process

This analytical hierarchy decision-making method is used in project selection where the environment is
complex and has multiple alternatives and criteria. The decisions are made using psychology and
mathematical algorithms. A scoring system is implemented to make unbiased decisions on potential
projects an organization should proceed with.

The analytical hierarchy process of decision-making involves three steps. At first, the problem is
identified, then the probable alternatives are analyzed, and finally, the best option is chosen.
We hope this offers you a detailed insight into the different tools to help an organization arrive at a
fruitful and concrete project selection decision. The article's next section deals with the different project
selection process steps.

B. Constrained Optimization Methods

1. Linear Programming

Linear Programming (LP) Constrained Optimization is a technique that involves maximizing or minimizing
an objective function while keeping a number of constraints in mind. It has a wide range of applications
in operations research, management science, and economics.

The method entails graphically representing the problem and using algorithms such as the Simplex
Method or the Interior Point Method to find the best solution.

2. Non-linear Programming

Non-linear Programming (NLP) Constrained Optimization is a technique for optimizing non-linear

objective functions that are constrained in some way.

This method is useful when the objective function and constraints have non-linear relationships, and the
optimal solution cannot be easily found using linear programming methods. To find the best solution,
the method employs iterative algorithms such as the Gradient Descent Method or the Newton-Raphson
Method.

3. Integer Programming

Constrained Optimization with Integer Programming is a technique that involves optimizing an objective
function subject to a set of constraints, with the additional requirement that some or all of the variables
take integer values.
The Integer Programming method is extremely useful when the decision variables have discrete values,
and the optimal solution cannot be easily found using linear programming methods. To find the best
integer solution, the method employs algorithms such as the Branch and Bound Method and the Cutting
Plane Method.

4. Dynamic Programming

Programming Dynamically Constrained Optimization is a technique for optimizing a function over time.
This method is useful for problems where the optimal solution is determined by decisions made at each
stage as well as decisions made earlier in the process.

The method entails breaking the problem down into smaller sub-problems and solving them iteratively
to arrive at the best solution. The Bellman Equation is frequently used in dynamic programming to find
the best solution.

What are the Steps in Project Selection?

Here are the steps in project selection:

Identify Potential Projects: The first step in project selection is to identify potential projects that are
aligned with the goals and objectives of the organization.

Evaluate Projects: Assess the feasibility, potential benefits, risks, resource availability, stakeholder
management, and regulatory compliance of potential projects.

Project Prioritization: Arrange the evaluated projects in order of importance to the organization and
potential impact on organizational goals.

Choose Projects: Choose projects that have the greatest potential to add value to the organization while
also aligning with its goals and objectives.

Create a Business Case: Create a business case outlining the benefits, costs, risks, and timeline for the
selected projects.

Obtain Approval: Obtain approval from senior management or the project sponsor for the selected
projects.
Project Selection Criteria

Project selection criteria are a set of guidelines or standards used for evaluating and prioritizing
potential projects based on their strategic alignment with organizational goals, feasibility, potential
benefits, risk assessment, resource availability, stakeholder management, and regulatory compliance.

These criteria serve as a decision-making framework during the project selection process, ensuring that
selected projects are aligned with the organization's objectives and have the greatest potential to
deliver value.

Project Selection Process

The project selection process has to follow a list of concrete steps to ensure quality is not compromised
at any stage of the selection process. The project selection steps are discussed below.

Create a List of Projects: This is the first step to beginning your selection process. You will have to create
a list of all the projects the organization struggles to decide on.

Compare the Projects: Once you have gathered all the projects in one place, start comparing them.
Utilize the above-mentioned tools that can help you execute your project selection and planning
accurately. Shortlist the projects that will help your organization reap the most benefits while
exhausting minimum resources.

Analyze the Results: Once you are done comparing, it is time that you analyze the results. Look for the
projects that ensure optimum utilization of the organization's resources and derive the most profitable
outcomes.

Select the Project: After thoroughly comparing the projects and their Analysis, you will be able to
identify the most profitable project to proceed with. Therefore, decide the project that you wish to take
up following the obtained insights from steps in the project selection process and obtain the best
results.

Who is Responsible for Project Selection Process?

In most organizations, senior management, specifically the project sponsor or portfolio manager, is in
charge of the Project Selection Process. They are in charge of identifying potential projects, evaluating
them against the organization's strategic goals and constraints, and selecting the projects with the
greatest potential benefit.
Common Management Focus Areas in Project Selection

Here are the common management focus areas in project selection:

Strategic Alignment: Projects should align with the organization's overall strategy and goals.

Feasibility: The proposed projects should be feasible within the available resources, budget, and
timeline.

Business Benefits: The selected projects should offer tangible benefits to the organization, such as
increased revenue, improved customer satisfaction, or cost savings.

Risk Assessment: The potential risks associated with each project should be assessed and managed
effectively.

Resource Availability: The availability of necessary resources, such as personnel, equipment, and
funding, should be evaluated before selecting a project.

Stakeholder Management: The needs and expectations of stakeholders should be considered when
selecting a project.

Regulatory Compliance: The projects should comply with relevant laws, regulations, and ethical
standards.

Importance of Project Selection

With proper project decisions and planning, organizations can use their resources optimally. The
importance of project selection is discussed below.

1. Higher success rate

When companies invest the right amount of time and employ the correct strategies to choose which
project to proceed with, the projects are more likely to succeed.

2. Better return on investment

Projects should be able to increase the return on investment (ROI) of the companies. During project
selection, projects are weighted against one another using different project selection tools. This helps
organizations proceed with projects that can deliver better returns on investment following a reliable
data-driven approach.
3. Smoother and more efficient execution

During project selection, just like companies assess the optimal implementation of resources, they also
ensure that an organization has enough resources to proceed with a project and continue it till its
completion. These resources may include budget, human resources, and available tech assistance.

Therefore, it can be said that effective project selection can increase efficiency and eliminate the risk of
hindrances in the course of the project.

4. Alignment with the company's goals

A project that does not align with the organization's goals brings no value to the company. Project
selection also makes sure that a project aligns with the goals that an organization is willing to achieve,
adding to its overall reputation and value.

You can study a few project selection examples to better comprehend how project selection helps
organizations lay hands on the most profitable assignments. You can learn more about the different
aspects of project management if you connect with PMP or PRINCE 2 training providers extended by
KnowledgeHut.

Importance of Project Selection

With proper project decisions and planning, organizations can use their resources optimally. The
importance of project selection is discussed below.

1. Higher success rate

When companies invest the right amount of time and employ the correct strategies to choose which
project to proceed with, the projects are more likely to succeed.

2. Better return on investment

Projects should be able to increase the return on investment (ROI) of the companies. During project
selection, projects are weighted against one another using different project selection tools. This helps
organizations proceed with projects that can deliver better returns on investment following a reliable
data-driven approach.
3. Smoother and more efficient execution

During project selection, just like companies assess the optimal implementation of resources, they also
ensure that an organization has enough resources to proceed with a project and continue it till its
completion. These resources may include budget, human resources, and available tech assistance.

Therefore, it can be said that effective project selection can increase efficiency and eliminate the risk of
hindrances in the course of the project.

4. Alignment with the company's goals

A project that does not align with the organization's goals brings no value to the company. Project
selection also makes sure that a project aligns with the goals that an organization is willing to achieve,
adding to its overall reputation and value.

You can study a few project selection examples to better comprehend how project selection helps
organizations lay hands on the most profitable assignments. You can learn more about the different
aspects of project management if you connect with PMP or PRINCE 2 training providers extended by
KnowledgeHut.

Important Factors in Project Selection Methods

Here are the important factors in project selection methods:

Business Needs: Projects should address a specific business need and align with organizational goals.

Feasibility: Projects should be feasible in terms of available resources, budget, timeline, and technical
capabilities.

Potential Benefits: Projects should offer tangible benefits such as increased revenue, cost savings,
improved customer satisfaction, or competitive advantage.

Risk Assessment: Potential risks associated with the project should be assessed and managed effectively.

Stakeholder Management: The needs and expectations of stakeholders should be identified and
managed throughout the project lifecycle.
Regulatory Compliance: The project should comply with relevant laws, regulations, and ethical
standards.

Project Priority: Projects should be prioritized based on their importance to the organization and their
potential impact on organizational goals.

Conclusion

The best way to follow market trends and stay up to date with your project selection mechanisms is to
upskill, and KnowledgeHut's best Project Management certificate programs can be one exceptional
choice to attain that! You can sign up for Prince 2 or PMP certification courses, based on your
preference.

Learners can access these programs online, right from the comfort of their homes. The sessions
conducted are interactive in nature. There are also doubt-clearing sessions where the questions of
learners are addressed by industry experts.

If you are looking forward to establishing your career as a project manager, the courses offered by
KnowledgeHut will prepare you in a way that you can shoulder the responsibilities