Methods of Final Project Selection

The transition from a project opportunity to a bona fide project is performed in this final project selection activity. It’s a relatively straightforward process that involves the participation of executive and senior management-level decision makers. It’s inherently a part of the portfolio management process but is presented here because it’s an integral part of project selection activities that should include the project manager (see the Project Portfolio practice in the Project Business Management practice area).

Conceptually ...

The Final Project Selection practice provides the project manager, executives and senior management team, and the organization with the means to select projects that will be undertaken within the organization. This activity is high lighted by a senior management-level decision that connotes project alignment with the organization's business strategy and interests, and an assertion that adequate staffing resources and financial capability (funding) will be provided to conduct the project and ensure its success.

The purpose of this practice is to provide the means to identify, review, and select those projects that executives and senior management deem consistent with the business purposes of the organization. It includes the considerations of project opportunity, project business case, and project resource requirements. It’s essentially the first step in the project portfolio management process (see the Portfolio Management practice).

Final Project Selection is always done during project initiation (Profile Phase). However, elements of final project selection can also be applied, as needed, during later project stages or upon reaching project gateways as part of the project business validation and resource allocation review pro cess. It should be noted that, if the project opportunity is a competitive one that requires a proposal for customer review and award, then this selection activity simply confirms the organization's interest and intent to pursue that course.

Project Selection Principles

The Final Project Selection process begins with consideration of several principles that should be applied to the decision making process to support better project choices:

Principle 1-Be explicit about the selection criteria and ensure that all projects are held to the same standard, no matter how many interesting options may be available.

Principle 2-Be clear about the procedure for choosing -- projects and ensure that all projects are selected by the same method.

Principle 3-Be prepared to challenge (and defend) all assertions in a project business case, since overly rosy or incomplete predictions don’t promote success.

Principle 4-Convene a review group (e.g., project control board) of diverse stakeholders to examine candidate project opportunities, since the impact of selecting each project will transcend the organization and possibly even have impacts outside it.

Principle 5-Include the project management staff, as is consistent with organizational business practices and procedures, in the project selection process.

These principles are not established at or during each final project selection activity, but rather they are implemented as part of governance established relative to business needs identified in a supportive project management environment.

The remaining subsections of this practice present the prescribed steps for conducting the final project selection.

Determine Final Project Selection Methods

Over time, organizations have typically emphasized financial goals as indicators of performance, almost to the exclusion of other values in the organization. Benefit-cost ratios, return on-investment, and stockholder value have been typical quantitative measures employed. Increasingly, organizations are realizing that they need a broader decision framework than just financial performance for the organization to con tinue to survive and thrive in a more holistic but fast-paced business environment.

In general, project selection methods range from simple paper-and-pencil calculations to highly analytical and math ematical models, to value-driven and performance-based methods, to decision software packages. A thorough review of selection framework models should be conducted before a particular framework is adopted to ensure that a method is chosen that matches the strategic intention and business needs of the organization. Again, this framework is some thing that is established as a capability within the project management environment, not something that is done for each project.

The financial analysis discussed in the business case development practice covers several financial-based mechanisms for project selection. The project selection mechanisms presented in the following text illustrate a range of additional project selection mechanisms available to the organization.

The organization may choose one of these fundamental mechanisms, develop a combined mechanism, develop its own approach, or seek a more comprehensive project selection mechanism from among a variety of advanced tools and techniques available today.

New Project Classification Mechanism--This mechanism is a framework for project selection and evaluation that considers projects in four strategic classifications:

Breakthrough--projects that move the organization to new markets, new competitive position, or new competencies.

Evolutionary/Extension--projects that support the internal operational needs of the organization, such as human resource management systems, financial systems, information management, and decision support.

Infrastructure--projects that are an iteration of what the organization is currently doing, capitalizing on a core competency, or extending current product lines

Customer Service and Support--projects that focus on customer expectations, requirements, and improvements to better competitive advantage.

An organization can use these classifications to delineate the nature of work associated with each project and to determine what efforts are being pursued against specific strategic business objectives. Each ongoing and candidate project is listed by its focus and alignment within one of the four classification areas. Then, each project is ranked by importance relative to the achievement of strategic objectives within each of the classifications. This ranking can be supported or adjusted by further examination of sub-criteria within each classification (e.g., risk, resource utilization, and investment returns).

Balanced Scorecard Mechanism--This mechanism is a framework for project selection based on the balanced scorecard evaluation approach developed by Kaplan / Norton, and presented initially in * Kaplan, R. and Norton, D., "The balanced scorecard-measures that drive performance," Harvard Business Review.

** The Harvard Business Review. It presents a "whole organization" perspective in four evaluation areas:

Financial Perspective--Links financial objectives to organizational strategy for improvement of financial performance, and addresses timely and accurate reporting and management of organizational expenses and assets in the project management environment. It includes project management metrics that deal with increasing revenues, lowering costs, improving productivity, upgrading asset utilization, and reducing risk.

Business Process Perspective--Entails specification of internal business processes and activities necessary to support product and service value for customers and shareholders. Measures associated with project management can include such elements as project management and technical performance process time; process quality and process cost; and vendor and supplier selection, performance, and management processes.

Customer Perspective--Considers the customer and market segments that will deliver the revenue to meet the organization's financial objectives, and specifies the value proposition that will be applied to target customers and segments. Measures associated with project management that help an organization retain and expand its business with targeted customers include such elements as product and service quality, timeliness of project deliverables, degree of satisfaction in customer business relationships, and image and reputation in the marketplace and industry.

Learning and Growth Perspective--Provides the infrastructure and capability that enables the other three perspectives to be achieved. This includes a particular focus on capability to implement change for business advantage. For project management, this perspective considers such metrics and measures as tool implementation and utilization, training, quality elements of planning and performance, and application of lessons learned.

This mechanism for project selection focuses on project value relative to these four dimensions of business.

Organizational goals are listed for each of the four dimension categories, and measures for attaining the specified goals are added to the matrix. The projects under consideration or under way are listed according to the business goals they will achieve. The measures of the projects should match or be related to the measures of the business goals.

Rank Order Matrix Mechanism--This mechanism is a framework for project selection based on a method developed by M. Buss, as initially presented in the Harvard Business Review. It provides a benefit-cost approach that doesn’t rely on quantitative data but examines and ranks project benefits in four areas that could be interpreted as follows:

Financial Benefits--cost versus such metrics as revenue returned and cash flow impacts resulting from the project effort, expense reduction (or increase) resulting from the project management approach, and further business opportunities resulting from project success (or failure).

Technical Benefits--cost versus such metrics as opportunity for the introduction of new products and the potential for technical innovation or breakthrough.

Core Competency Enhancement--cost versus such metrics as demonstration of new or enlarged performance capability, expansion of project manager and project team member skill and experience.

Harmony with Corporate Culture--cost versus such metrics as achievement of business objectives that endorse or enhance organizational customs, traditions and values, fit and impact on the cultural aspects of the organization, and validation of individual affiliation with the organization.

While metrics have been suggested for the rank order matrix, the value of this project selection mechanism is found in the more intuitive nature of evaluating the project cost versus the discernable benefits to be gained.

Poor Man's Hierarchy Mechanism--Many executives have difficulty making choices when a whole list of options are offered but have less difficulty making a selection when pairs of choices are presented. The Poor Man's Hierarchy is a pairwise comparison method that reduces the need to make a choice from a long list of projects. This mechanism will facilitate review and prioritization of projects under consideration.

In a grid pattern, list all the projects on the left side of the page and copy the same list in the same order across the top. Cross out or place Xs or stars in the top left square and all the squares in the diagonal to the bottom right corner, since there is no point in comparing a project against itself. The project at the top left is compared for preference (or other criteria) to the second project named across the top row. If the project on the left is preferable to the project listed across the top, a '1' is placed in the cell. If the project listed across the top is preferable, a '0' is placed in the cell. Note, too, that comparisons need to be made only above the diagonal.

Then add the total scores across the row to determine the ranking of the projects. Tie scores may occur but can be assigned a priority.

Peer/Oversight Committee Review Mechanism -- Whether an individual or group has made project selections and regardless of the selection method, selected projects should be examined rigorously before they are ultimately entered into the portfolio. A peer/oversight committee review is a means used to challenge each project. The reviewers, comprising either a peer group or a cadre of stakeholders, should convene to confront all assertions and claims of progress, resources, and schedules and to address the alignment with strategic objectives. They should look for gaps, overreaching, and unclear detail in each project. Each project sponsor and project manager who has put the project for ward should be ready to defend the project.

The peer/oversight committee review has two important additional benefits beyond evaluating and clarifying projects. First, each reviewed project is challenged by a fresh perspective and a broad array of expertise; and second, the sponsor, project managers, and reviewers all become more committed to the projects evaluated as a result of delving into the details of each project. Ultimately, key personnel gain knowledge of and commitment to all of the projects in the relevant organization.

Conduct Candidate Project Review

The executive authority or project control board should conduct project selection reviews, beginning with an individual and independent review of the project information (perhaps even some preliminary plans) that is available to date. The board then convenes to apply the selection mechanism of preference. It will deliberate and discuss the merits of the business case and the resource allocations needed, making any adjustments deemed appropriate through consensus.

The selection authority review should focus on several key areas during the examination of project opportunity:

Consistency with strategic objectives -- Project opportunity business evaluation -- Business and project risk indicators -- Points of executive participation in business case review -- Subsequent decision points or project gateways for further project examination -- Recommended project portfolio position -- Decision appeal options (for the project sponsor or project manager) -- Conduct Final Project Selection

Following review and deliberation, this activity should lead to a decision for one of the following actions:

Select project and proceed. -- Begin project start-up administrative actions and proceed to convene the project team (or proposal team) for detailed project (or technical) planning.

Select project on contingency. -- Indicate that the project has been selected but is pending a project start date to be determined.

Defer selection. Indicate that a selection decision has not been made or otherwise finalized and is pending a request for more information and further review.

Non-select project. Indicate that the project was not selected and discontinue project opportunity evaluation.

This activity determines whether or not a project is selected for inclusion in the relevant project portfolio. The results of this deliberation could be either a mandate for the project manager to proceed, or it could be a recommendation of project selection to a higher approval authority. A project that is not selected is normally not reported to the higher approval authority.

The approved project selection decision should be conveyed to the relevant project manager and project sponsor, and communicated to key project stakeholders in the organization.

The final project selection represents the formal start of business and project management for the project. This is generally characterized by the start of the following activities:

Integration of the project into the relevant project portfolio represents executive and senior management involvement in the project (see the Project Portfolio practice).

Preparation of the project charter represents project manager, project sponsor, and other project leaders' involvement in the project (see the Project Charter Development practice).

Ongoing monitoring and attention to business issues and the start of project oversight, control, and support by the PMO, as well as general management oversight (see the Project Governance and Oversight practice).