TMC 470

Enterprise Planning
Chapter 3 – Project Selection &
Portfolio Management
Module 2 – Part 1
Agenda
• Review PT1 Results
• Chapter 3 – The Project Selection & Portfolio Management
– Project Selection
– Financial Concepts including Risk & Return – Part 1
• Homework Reminders
• Group Project Time

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PT1 Results – Group Charters & Project Selection
• Average Score – 23.6 / 25 points (94%)
• General Comments
– Decision Making Process – Consensus versus Majority, use of team
leader
– Meetings – some need more definition so there is no confusion
– Conflict Resolution Process
• Project Selection
– Good identification of projects
– Remember the goal for this class is to develop the Integrated Project
Plan that you will present to a “Management Team” at the end of the
semester

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PROJECT SELECTION & PORTFOLIO
MANAGEMENT

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Building the Project Pipeline

Integrated Product & Process Development – Systematic

Approach to Achieve Collaboration with Stakeholders for
Entire Life Cycle of Product
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Requires Methodology to Select Projects for Business Model

• Selection may be based on numeric or non-numeric

characteristics
• Six key criteria used for evaluating a project screening model:
– Realism – reflective of business objectives, strategic goals & mission
– Capability – flexible enough to respond to changes; long versus short-
term project; different technologies
– Flexibility – model should be easily adjusted due to changes in
exchange rates, tax laws etc.
– Ease of use – keep it simple so that everyone is able to use
– Cost – model needs to be cost-effective
– Comparability – needs to work for multiple projects and not have a
bias toward some projects over others.

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Important for a Organization to Decide on
Process/Approach to Project Selection
• Multiple issues relative to Project Selection – align with
Business Culture, Vision, Mission and Strategic Direction
• Key Issues to Consider:
– Risk – Factors that reflect elements of unpredictability: Technical,
Financial, Safety, Quality, Legal
– Commercial – Factors that reflect the market potential of the project:
ROI, Payback, Market Share, Cash Requirements, Generation of New
Business
– Internal Operating Issues – Factors impacting the internal operations
of the business: Hire/train employees, Workforce size or composition,
Locations, Global versus Domestic
– Additional Factors – Intellectual Property, Impact on Company’s
Image, Strategic Fit

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Approaches to Project Screening

• Four standardized models

– Checklist Models
– Simplified Scoring Models
– Analytic Hierarchy Process
– Profile Models

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Checklist Model
A checklist is a list of criteria applied to possible projects.
• Requires agreement on criteria
• Assumes all criteria are equally important

Checklists are valuable for recording opinions and stimulating

discussion.
 Checklist Model Example – Project Gamma Selected
Performance on Criteria
Project Criteria High Medium Low
Alpha Cost X
Profit Potential X
Time to Market X
Development Risks X
Beta Cost X
Profit Potential X
Time to Market X
Development Risks X
Gamma Cost X
Profit Potential X
Time to Market X
Development Risks X

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 Using a Checklist Model
• Selection criteria need “evaluative descriptors”
– For example – what is “high”, “medium” or “low” for each of the
criteria (cost, profit potential, time to market and development risks)
– Model can be subjective or variable based on the project
• Are all criteria the same weight or importance?
– In the example – maybe “time to market” is more important than the
cost
– Is there a trade-off?
• Most organizations use a scoring methodology versus the
simple checklist approach

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09/15/2020
Simplified Scoring Models
Each project receives a score that is the weighted sum of its
grade on a list of criteria.
Scoring models require:
• agreement on criteria
• agreement on weights for criteria
• a score assigned for each criteria

Score   (Weight  Score)

Relative scores can be misleading!

Consider the same example from Checklist Model

• Each criterion is ranked relative to its importance

Criterion Importance Weight
Time to market 3
Profit Potential 2
Development Risks 2
Cost 1

• Identify scores High, Medium, and Low scores

– High = 3
– Medium = 2
– Low = 1
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 Simple Scoring Example – Project Beta Selected
(A) (B) (A) X (B)
Project Criteria Importance Weight Score Weighted Score Total Score
Alpha Cost 1 3 3

Profit Potential 2 1 2

Time to Market 3 2 6

Development Risks 2 1 2 13

Beta Cost 1 2 2

Profit Potential 2 2 4

Time to Market 3 3 9

Development Risks 2 2 4 19

Gamma Cost 1 3 3

Profit Potential 2 3 6

Time to Market 3 1 3

Development Risks 2 3 6 18

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Advantages & Limitations of Scoring Models

Advantages Limitations
• Easy to use • Scoring process leads to
• Easy to comprehend for false assumptions – is a
most users score of 19 46% better than
• Decision making clear a score of 13?
• Accuracy of the weights –
need to make sure you have
collaboration from
stakeholders

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Analytic Hierarchy Process
The AHP is a four step process:
1. Construct a hierarchy of criteria and subcriteria.
2. ​Allocate weights to criteria.
3. Assign numerical values to evaluation dimensions.
4. ​Determine scores by summing the products of numeric
evaluations and weights.

Unlike the simple scoring model, these scores can be

compared!
 Sample AHP with Rankings for Salient Selection Criteria AHP Worksheet

• What are the key

selection criteria?

• How does this align

with business
objectives?

• Be able to calculate
project alignment
with these critical
factors for business
success?
Advantages & Limitations of AHP Models

Advantages Limitations
• Improve the process of • May not adequately
developing project account for negative utility
proposals • All criteria be fully exposed
• Reduces the potential for at the beginning of the
misleading scoring selection process
• Aligns with business
objectives

Template Provided to Calculate these AHP Model

Module 2 Folder on Canvas
AHP Worksheet Link

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Profile Model – Risk versus Return
Financial Models – Most Commonly Used Model

• Payback period
• Net present value
• Discounted payback period
• Internal rate of return

Template Provided to Calculate these Financial Models

Module 2 Folder on Canvas
Financial Return Worksheets
Financial Model Discussion
• Tuesday, September 10
• Review the Excel Template on Canvas
• In-Class Exercise to work with the template

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HOMEWORK REMINDER

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Homework for Module 2

• Individual Homework Assignment (PM1) – due

9/17/19 EoD (30 Points)
– Homework instructions on Canvas
– Exercises 3.21, 3.25, 5.3
• Meet with your Teams & Complete PT2 – due
9/19/19 EOD (25 Points)
– Complete Project Overview – Section 1.0
– Canvas Instructions: PT2 Assignment Link

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Group Project PT2 Assignment
Assignment Overview
Section 1.0 Project Overview:  This section is intended to provide a brief background
description of the project.  Guidance for this section is provided in Appendix C, page
539, 5th edition of the textbook.  The Group completes Section 1.0 with all sub-
sections.
Assignment Guidance
• First Page of document - Include Title of Project, Group # and Team Member
Names
• 2nd Page - Team Assignment & Evaluation Cover Sheet  3rd Page - Table of
Contents with page numbers
• Section 1.0
• References
• Save Document in PDF Format with File Name: PT2-Group #.pdf.  (example: PT2-
Group 1.pdf)

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 Group Assignment & Evaluation Sheet Microsoft Word
Part 1: Document

This cover sheet documents all team member’s accountability and acceptance for this work. In
addition, the team provides an overall Team Evaluation for each assignment.
The following team members for Group #, certify that the following document is our work and
that all material drawn from other sources has been fully acknowledged. Each team member
certifies that he/she possesses a copy of the attached work and has contributed to its content.

PRINTED NAME SIGNATURE DATE

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 Group Assignment & Evaluation Sheet
Part 2:

TEAM EVALUATION FOR GROUP PROJECT ASSIGNMENT – SP#

Each team member identifies the overall rating of this assignment based on the Group Contract
signed at the beginning of the semester. The rating scale is 5 (Highest) to 0 (Lowest). Please
add actions required to improve group teamwork.

OVERALL
GROUP
CONTRACT
NAME COMPLIANCE ACTIONS REQUIRED TO IMPROVE
(0 – 5 SCALE) PERFORMANCE OF GROUP
PROJECT LEADER

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QUESTIONS?
GROUP PROJECT TIME

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