Disscussion 1
Reflection and Discussion Forum Week 2
Reflect on the assigned readings for the week. Identify what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding.
Also, provide a graduate-level response to each of the following questions:
What are some of the key difficulties in successfully implementing portfolio management practices?
Discuss the concept of emotional intelligence as it relates to the duties of project managers. Why are the five elements of emotional intelligence so critical to successful project management?
Consider the profile examples on project leaders Sir John Armitt and Jim Watzin from the chapter. If you were to summarize the leadership keys to their success in running projects, what actions or characteristics would you identify as being critical? Why? What are the implications for you when you are given responsibility to run your own projects?
Respond to the post of at least two peers, using 100 words minimum each.
[Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion].
[Your initial post should be at least 450+ words and in APA format (including Times New Roman with font size 12 and double spaced). Post the actual body of your paper in the discussion thread then attach a Word version of the paper for APA review]
Disscussion 2
Activity 2
Case Study 3.1 Keflavik Paper Company
Keflavik Paper is an organization that has lately been facing serious problems with the results of its projects. Specifically, the company’s project development record has been spotty: While some projects have been delivered on time, others have been late. Budgets are routinely overrun, and product performance has been inconsistent, with the results of some projects yielding good returns and others losing money. They have hired a consultant to investigate some of the principal causes that are underlying these problems, and he believes that the primary problem is not how project are run but how they are selected in the first place. Specifically, there is little attention paid to the need to consider strategic fit and portfolio management in selecting new projects. This case is intended to get students thinking of alternative screening measures that could potentially be used when deciding whether or not to invest in a new project.
Questions
Keflavik Paper presents a good example of the dangers of excessive reliance on one screening technique (in this case, discounted cash flow). How might
Assume that you are responsible for maintaining Keflavik’s project portfolio. Name some key criteria that should be used in evaluating all new projects before they are added to the current portfolio.
What does this case demonstrate about the effect of poor project screening methods on a firm’s ability to manage its projects effectively?
Case Study 4.1—In Search of Effective Project Managers
This case involves Pureswing Golf, and illustrates the problems when organizations attempt to locate competent project managers without any systematic plan for identifying and training good potential candidates. They are discovering that the “voluntary approach,” whereby new project managers are solicited seemingly at random from around the company, simply does not work. Many of these individuals likely do not have the skills or a reasonable understanding of what it takes to manage projects effectively.
Questions
Imagine you are a human resources professional at Pureswing who has been assigned to develop a program for recruiting new project managers. Design a job description for the position.
What qualities and personal characteristics support a higher likelihood of success as a project manager?
What qualities and personal characteristics would make it difficult to be a successful project manager?
Project Management: Achieving Competitive Advantage
Fifth Edition
Chapter 3
Project Selection and Portfolio Management
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Learning Objectives
3.1 Explain six criteria for a useful project selection/screening model.
3.2 Understand how to employ a variety of screening and selection models to select projects.
3.3 Learn how to use financial concepts, such as the efficient frontier and risk/return models.
3.4 Identify the elements in the project portfolio selection process and discuss how they work in a logical sequence to maximize a portfolio.
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P M B O K Core Concepts
Project Management Body of Knowledge (P M B o K) covered in this chapter includes:
Portfolio Management (P M B o K 1.4.2)
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Project Selection
Screening models help managers pick winners from a pool of projects. Screening models are numeric or nonnumeric and should have:
Realism
Capability
Flexibility
Ease of use
Cost effectiveness
Comparability
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Screening and Selection Issues (1 of 2)
Risk—unpredictability to the firm
a. Technical
b. Financial
c. Safety
d. Quality
e. Legal exposure
Commercial—market potential
a. Expected return on investment
b. Payback period
c. Potential market share
d. Long-term market dominance
e. Initial cash outlay
f. Ability to generate future business/new markets
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Screening and Selection Issues (2 of 2)
Internal operating—changes in firm operations
a. Need to develop/train employees
b. Change in workforce size or composition
c. Change in physical environment
d. Change in manufacturing or service operations
Additional
a. Patent protection
b. Impact on company’s image
c. Strategic fit
All models only partially reflect reality and have both objective and subjective factors imbedded.
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Approaches to Project Screening
Checklist model
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.
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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
Relative scores can be misleading!
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Analytic Hierarchy Process
The A H P is a four step process:
Construct a hierarchy of criteria and subcriteria.
Allocate weights to criteria.
Assign numerical values to evaluation dimensions.
Determine scores by summing the products of numeric evaluations and weights.
Unlike the simple scoring model, these scores can be compared!
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Figure 3.1 Sample A H P with Rankings for Salient Selection Criteria
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Figure 3.4 Profile Model
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Financial Models
Payback period
Net present value
Discounted payback period
Internal rate of return
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Payback Period
Determines how long it takes for a project to reach a breakeven point.
Cash flows should be discounted.
Lower numbers are better (faster payback).
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Payback Period Example (1 of 3)
Table 3.5 Initial Outlay and Projected Revenues for Two Project Options
Blank Project A Revenues Project A Outlays Project B Revenues Project B Outlays
Year 0 Blank $500,000 Blank $500,000
Year 1 $50,000 Blank $75,000 Blank
Year 2 150,000 Blank 100,000 Blank
Year 3 350,000 Blank 150,000 Blank
Year 4 600,000 Blank 150,000 Blank
Year 5 500,000 Blank 900,000 Blank
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Payback Period Example (2 of 3)
Table 3.6 Comparison of Payback for Projects A and B
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Payback Period Example (3 of 3)
Table 3.6 [continued]
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Net Present Value
Projects the change in the firm’s value if a project is undertaken.
Where
Ft = net cash flow for period t
r = required rate of return
I = initial cash investment
pt = inflation rate during period t
Higher N P V values are better!
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Net Present Value Example
Table 3.8 Discounted Cash Flows and N P V (I)
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Table 3.9 Discounted Payback Method
Year Project Cash Flow* Discounted Undiscounted
1 $8,900 $10,000
2 7,900 10,000
3 7,000 10,000
4 6,200 10,000
5 5,500 10,000
Payback Period 4 Years 3 Years
*Cash flows rounded to the nearest $100.
Discount sum of cash flows by the company’s required rate of return to get a more accurate payback period.
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Internal Rate of Return
A project must meet a minimum rate of return before it is worthy of consideration.
Higher I R R values are better!
where
A C F t = annual after tax cash flow for time period t
I O = initial cash outlay
n = project’s expected life
I R R = the project’s internal rate of return
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Internal Rate of Return Example
This table has been calculated using a discount rate of 15%.
Year Discount Factor Inflows Discount Factor at 15% Discount Factor N P V
1 $2,500 .870 $2,175
2 2,000 .756 1,512
3 2,000 .658 1,316
Present value of inflows Blank Blank 5,003
Cash investment Blank Blank 5,000
Difference Blank Blank $ 3
The project does meet our 15% requirement and should be considered further.
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Project Portfolio Management
The systematic process of selecting, supporting, and managing the firm’s collection of projects.
Portfolio management objectives and initiatives require:
decision making
prioritization
review
realignment
reprioritization of a firm’s projects
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The Portfolio Selection Process
The portfolio selection process is an integrated framework of interrelated steps and activities.
Preprocess Phase
Methodology of selection and strategy
Process Phase
Prescreening, individual project analysis, screening, portfolio selection, and portfolio adjustment
Postprocess Phase
Project development, project evaluation, and portfolio completion
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Figure 3.8 Project Portfolio Selection Process
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Developing a Proactive Portfolio
The project portfolio matrix classifies projects into four types according to commercial potential and technical feasibility:
Bread and butter
Pearls
Oysters
White elephant
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Figure 3.9 Project Portfolio Matrix
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Keys to Successful Project Portfolio Management
Flexible structure and freedom of communication
Low-cost environmental scanning
Time-paced transition
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Problems in Implementing Portfolio Management
Conservative technical communities
Out-of-sync projects and portfolios
Unpromising projects
Scarce resources
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Summary
Explain six criteria for a useful project selection/screening model.
Understand how to employ a variety of screening and selection models to select projects.
Learn how to use financial concepts, such as the efficient frontier and risk/return models.
Identify the elements in the project portfolio selection process and discuss how they work in a logical sequence to maximize a portfolio.
Copyright © 2019, 2016, 2013 Pearson Education, Inc. All Rights Reserved
Copyright
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