Project Management Institute

Narrowing the field

THE BUSINESS | of Projects

Since you can't do it all, at least do your best.

BY GARY R. HEERKENS, MBA, CBM, PMP

In my past two columns in the April and July issues, I addressed the need for organizations to create a strategy-driven, top-down project selection process to identify the most necessary and valuable project opportunities.

Here, I offer my final insights on the project selection process.

CAUTION: HEAVY LOADS

The most important element in good project selection is simply realizing it's not possible to pursue every project that has been identified. In a surprising number of organizations, I find this recognition never occurs.

The reason: While nearly every company understands the concept of financial limitations, most don't seem to understand the concept of human resource limitations.

The result is an environment where the number of projects concurrently executed is several times beyond the reasonable capacity of the available resources. This causes schedule delays, large-scale project inefficiencies, postponement of project benefits, and extremely unhappy (and stressed-out) project personnel.

Because this fact is overlooked, I would estimate, based on my experiences, that at least three-quarters of organizations are in a state of gross project overload. This is bad business.

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FINANCIALS FIRST

Understanding that there are limitations to human resources doesn't mean organizations know which projects to select as priorities.

No project should be selected unless executives or project practitioners can demonstrate it has the potential to generate a positive cash flow. In other words, any and all projects for prioritization (and ultimately for selection) should be financially justified.

Financial justification is the condition in which a project's cash inflows (financial benefits) exceed its cash outflows (total life cycle costs). Additionally, a project's financial strength—the extent to which inflows exceed outflows—should be a key criterion in any project selection model. One popular metric used for this purpose is net present value, which calculates the project's value over its length.

BEYOND THE BOTTOM LINE

While a project's financial strength is an important factor, it isn't the only factor for project selection. That's because many projects promise “soft” benefits:

■ Enhanced corporate image

■ Increased brand awareness

■ Enhanced customer satisfaction

■ Improved user satisfaction

■ Increased workplace safety

■ Improved employee morale

■ More efficient internal communication Therefore, a good project-selection process also incorporates nonfinancial criteria that can assume any number of forms, such as:

■ Alignment with strategy

■ Conducive to technology leadership

■ Potential for ethical concerns

■ Amount of resources required

■ Potential for patent infringement

■ Probability of success

By including the factors most important to them, organizations can improve their project-selection process and nix those that don't fit. With fewer projects, organizations can alleviate the strain on human resources and allow teams to focus on the ones that matter most. PM

 

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Gary R. Heerkens, MBA, CBM, PMP, president of Management Solutions Group Inc., is a consultant, trainer, speaker and author with 25 years of project management experience. His latest book is The Business-Savvy Project Manager.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK OCTOBER 2013 WWW.PMI.ORG

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