Assignment – Unit IV, Part 1, 2
(*) note: the following answers are for reference only& less than 200 words (the current Unit Assignment requires min 200 words) and these are extracted from “printotif” documents sent by CSU.
(*) words in italic & not bold are reminded from the textbook or explained by TA, also for reference
CASE STUDIES 3.1 & 3.2
Case Study 3.1: Keflavik Paper Company
Keflavik Paper is an organization that has 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 result of some projects yielding good returns and others losing money. They have hired a consultant to investigate some of the principle causes underlying these problems, and he believes that the primary problem is not how projects 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 to invest in a new project.
Questions:
1) Keflavik Paper presents a good example of the dangers of excessive reliance on one screening technique (in this case, discounted cash flows). How might excessive or exclusive reliance on other screening methods discussed in this chapter lead to similar problems?
A: Some measures that allow us to screen projects may lead to the wrong conclusions; for example, suppose that we selected projects in construction settings for their aesthetic appeal and ability to promote our name across the industry. If insufficient attention was then paid to issues such as cost of the project or safety concerns, we may be selecting projects that will ultimately damage our reputation or drive us out of business. Instructors should probe various screening techniques for their strengths and weaknesses to ultimately demonstrate that effective screening methods usually rely on multiple complementary measures for selecting projects.
(*) Some of the ideas of discussion questions below: drawbacks of or difficulties in using each selection model can be used to enrich your response in case 3.1.
Screening models learnt from text book: checklist, scoring, AHP, Profile, and financial models including Payback period, NPV, IRR. Each of them has drawbacks that can lead to wrong selection if we reply on it excessively or exclusively.
2) 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.
Ref for A: Students can use this as a brainstorming exercise. Among the criteria they could list are: 1) the relationship to current projects or products the company carries; 2) the new market penetration potential; 3) technological feasibility; and 4) the cost of development. This is a short list and students could potentially add several other criterias to it.
(*) Students can refer to any of the following to figure out other criteria:
- 6 criteria when selecting criterion in evaluating screening models: realism, capability, flexibility, ease of use, cost & comparability;
- a mix of numeric models & nonnumeric models;
- both financial models and non-financial models;
- Prioritization criteria: Cost, opportunity, top management pressure, risk, strategic “fit”, desire for portfolio balance (3.4, p.99)
3) What does this case demonstrate about the effect of poor project screening methods on a firm’s ability to manage its projects effectively?
A: The firm’s ad hoc approach to project selection demonstrates that even taking on projects that could yield strong cash flows may injure the organization due to its inability to manage them well. Further, it highlights the dangers of using either a single or one heavily-weighted criterion for project selection. Successful project portfolios are consciously constructed and managed as a coherent whole, not simply a collection of diverse opportunities.
(*) The key to project selection lies in being objective about the process. If you operate according to the “GIGO” principle—garbage in/garbage out—you’ll soon be up to your knees in garbage. (p. 96)
(*) some more ideas:
? Project management (P. 98) is a systematic process of selecting, supporting, and managing a firm’s collection of projects.
? The key to portfolio management is realizing that a firm’s projects share a common strategic purpose and the same scarce resources
? The concept of project portfolio management holds that firms should not manage projects as independent entities, but rather should regard portfolios as unified assets. There may be multiple objectives, but they are also shared objectives
? Or students can use Cooper’s four goals to defend your ideas (3.4, p. 96, paragraph 2)
Case Study 3.2: Project Selection at Nova Western, Inc.
This case presents an example that is common, one in which different screening methods may yield different findings. In this case, two projects are competing for funding; Project Janus, championed by the organization’s software development group, and Project Gemini, which has the backing of their business applications organization. Using a weighted scoring model, it appears that Project Gemini offers the best alternative in terms of the criteria employed. On the other hand, when a discounted cash flow approach is used, the results suggest that Project Janus will earn greater returns on initial investment. Instructors can use this case to illustrate the fact that many times, selection models will point to conflicting results, particularly when financial models are paired with non-financial approaches.
Instructors can fashion a debate from this case in which they assign one team to serve as champions for Project Janus and the other for Project Gemini. It is a valuable exercise for requiring students to commit to one approach or another, defend their positions, and also examine these competing models for their strengths and weaknesses.
Questions:
1) Phyllis has called you into her office to help her make sense of the contradictions in the two project evaluations. How would you explain the reasons for the divergence of opinion from one technique to the next? What are the strengths and weaknesses of each screening method?
Ref for A: The chapter notes several strengths and weaknesses of each project screening method that should be considered in this case. It is not uncommon for financial and non-financial screening methods to yield competing information; thus, an argument could be made that using only these two methods is insufficient and in fact, an enhanced screening model should be developed for Nova that considers these factors as part of an overall, larger model of choice. Those instructors familiar with Expert Choice™ software could set up this case as an exercise using the Analytical Hierarchy Process (AHP) discussed in the chapter.
(*) See also Case 3.1, answers in discussion questions mentioned above to enrich your defending for case 3.2.
2) Choose the project that you think, based on the two analyses, Nova Western should select. Defend your choice.
Ref for A: A reasonable case could be made for selecting either Project Janus or Project Gemini. For example, though Project Janus offers a higher net present value for the initial investment, the payoff period is two years longer than Project Gemini, suggesting that if the firm does not wish to tie its money up for too long, Gemini might be a reasonable alternative choice. Likewise, the weighted criteria model seems to favor Project Gemini. Students should be encouraged to consider the criteria Nova employed in project selection. Are they reasonable or should other factors be considered as well?
(*) Other possible financial methods (pay back period, IRR) can be deployed to have another view before you can make a choice & defend.
3) What does this case suggest to you about the use of project selection methods in organizations? How would you resolve the contradictions found in this example?
Ref for A: A successful screening model is often a comprehensive one. Simplistic models typically yield simplistic answers and their consistency from method to method is questionable. As the chapter demonstrates, the most effective screening techniques used in organizations today are complex, multifaceted, and comprehensive in nature. One simple solution to this case might be to use the results of the discounted cash flow analysis as an additional factor in the weighted scoring model, whereby the net present value becomes an additional selection criterion to consider along with the other factors already listed. Likewise, students should be asked to consider if any of the criteria in the scoring model represent “must” items that cannot be compromised, such as safety. Finally, students may point out that the potential profit factor ranks both projects identical. However, the DCF model shows that Project Janus might reasonably be ranked higher. Students can consider how this reevaluation might change final results.
(*) Students can refer to the following models:
- 6 criteria when selecting criterion in evaluating screening models: realism, capability, flexibility, ease of use, cost & comparability;
- a mix of numeric models & nonnumeric models;
- both financial models and non-financial models;
- Prioritization criteria: Cost, opportunity, top management pressure, risk, strategic “fit”, desire for portfolio balance (3.4, p.99)
DISCUSSION QUESTIONS
3.1 If you were to prioritize the criteria for a successful screening model, which
criteria would you rank at the top of your priority list? Why?
A: Of the criteria for successful screening models, realism would top the priority list. Realism requires that the model be in line with the constraints and objectives of the organization. The other criteria are based on how usable and applicable the model is. However, these measures would mean little if the model was unable to provide a recommendation that was usable within the resources available to the company (i.e., a realistic alternative).
3.2 What are the benefits and drawbacks of checklists as a method for screening project alternatives?
A: Project checklists are easy to use, based on a simplistic visual model with a basic scoring system. Using a checklist enhances the input and discussion during the screening process. Unfortunately, the model also has its shortcomings. The two most significant shortcomings are the subjectivity of the rating system and the lack of a weighting system. The weighting system is important in establishing trade-offs between criteria.
3.3 How does use of the Analytical Hierarchy Process (AHP) aid in project selection? In particular, what aspects of the screening process does the AHP seem to address and improve directly?
A: The Analytical Hierarchy Process (AHP) breaks the broad criterion categories of other selection models into smaller, more manageable pieces that each has a more defined focus. This allows the AHP to create a more accurate ordering of priorities than other models. It also enables a better demonstration of how potential alternatives meet organizational goals and strategy. Weighting that is absent or inefficient under the checklist and scoring model is improved. AHP allows weighting by main and sub-criterion, which eliminates the double counting of the scoring model. Finally, the AHP creates results that are easily compared between projects as well as within cost/benefit analysis.
(*) Some limitations of AHP: (i) model does not adequately account for “negative utility”, (ii) Powerful members of the organization with political agendas or pet projects they wish to pursue may resist such an open selection process
3.4 What are the benefits and drawbacks of the profile model for project screening? Be specific about the problems that may arise in identifying the efficient frontier.
A: The profile model is beneficial because it clearly outlines the relationship between risk and return of project alternatives. It also establishes a threshold for eliminating or qualifying projects. On the other hand, it may not be as effective for selecting alternatives because it limits discriminating criteria to risk and return only. Additionally, it can be difficult to accurately quantify risk.
3.5 How are financial models superior to other screening models? How are they inferior?
Financial models are superior to screening models in that they link project alternatives to financial performance. The results of financial models are non-subjective, meaning they are not subject to individual interpretation (i.e., a 10% return means a 10% return regardless of who is looking at it). Therefore, it becomes easier to compare the benefits of one project alternative versus another. The models do have some drawbacks. Due to the required information in determining NPV and IRR, it may be difficult to make long-term estimates accurately (i.e., one would have to estimate future inflation and interest rates). Economic conditions may be unknown or unstable; therefore, determinations made about the economic future may turn out to be invalid.
(*) IRR has some disadvantages.
? First, it is not the rate of return for a project.
? NPV employs a weighted average cost of capital discount rate that reflects potential reinvestment while IRR does not. Because of this distinction, NPV is generally preferred as a more realistic measure of investment opportunity.
? If cash flows are not normal, IRR may arrive at multiple solutions.
(Chapter 3, p. 96)
3.6 What are some of the key difficulties in successfully implementing project portfolio management practices?
A: There are several common problems that may hinder successful implementation of portfolio management. To begin with, top management may run into conflicts with technical staff. For instance, engineers may not want to alter or abandon a project that management finds too risky. Another difficulty is investment in projects that do not fall in line with portfolio priorities. Strategy and the portfolio must remain aligned for project portfolios to be successful. A highly detrimental (# causing damage or harm) occurrence revolves around unpromising projects wherein companies continue to pour money into projects even after there is no hope for the project’s success. Finally, project portfolio management may fail due to a lack of resource. Primarily, this happens when there are not enough personnel to support the implementation, or when there are not enough resources to initiate the desired set of projects.
(*) Most typical problem areas (3.4, p. 104)
- Conservative technical communities
- Out-of-sync projects &portfolios
- Unpromising projects
- Scare resources
Assignment – Unit IV, Part 3 - 6
Note: Guidelines by TA (words in italic and not bold, words innormal letters are extracted from the textbook or unit assignment)
Part 3: provide a brief description of your chosen project (among 5).
? Describe a big picture of your chosen project within company’s history & strategy, overall project scope with restrictions (time, budget, quality, and client acceptance), brief on current process/situation, specific purpose of the project, etc.
? This is just an introduction, no need to go into details.
Part 4: develop a statement of work for your chosen project (Part 3), using the format of (1) background, (2) task, (3) objectives, (4) approach, and (5) input sources. You may refer to the Integrated Project in Chapter 2 on page 72 of the text book for an example.
? Theory: 5.1 (p.150-151), table 5.2 – p. 152
? Project scope management (p. 146-147-148-149): overview to see all necessary elements (esp. table 5.1) & some examples for introduction, SOW, WBS
? Example: Integrated Project in Chapter 2 on page 72
More tips for writings:
1. Background—describes the project in very general terms; discusses why the project is beingpursuedand how it relates to other projects. It includes, as necessary, a summary of statutory authority or applicable regulations and copies of background materials in addenda or references.
? Make use of the description in Part 3
? Brief history of the organization or introduction to the root needs, including a problem statement (why Project is needed)
2. Objectives—provide a concise overview of the project and how the results or end productswill be used.
? Besides overview objectives in SOW, don’t forget Project smart goals and targets (example: p. 73)
? What get mentioned in the WBS is what gets one on the project. One goal or set of goals? (p. 154). Set of goals to monitor the progress of activities is a better approach.
3. Tasks or requirements—describe detailed work and management requirements, and alsospell out more precisely what is expected of the contractor in the performance of the work.
? Technicaldescription of the project can be highly descriptive (details) or general specifying final performance. Either waystudents use, it should give specific guidanceon both work requirements and the types of end results (p. 150).
4. Approach: methodologies to solve given problems.
? Refer to textbook, p. 72 for two general approachesand p. 152 to acknowledgesome more detailed approaches.
Tips (if you can do either of these two followings, you can figure out your approaches clearly): Alternative analysis, or strong business case clearly in support of a demonstrable business need will help provide feasible approaches/ methodologies to given problems
? Don’t stick to “one best approach” for solving a problem early, which can lead to a failure of project downstream.
? Choose some or list down all possible solutions and select some most appropriate approaches per your experience, consult experts’ ideas (if available), etc.
5. Input sources:
? Considering the Quadruple constraints, human resources, location, specialized requirements, milestone,and risks, etc.needed to complete your chosen project.
Other references:
? A sample of SOW (not full):
https://www.projectmanagementdocs.com/template/project-documents/statement-of-work/#axzz5f7krv3M3
? For approaches in project management (if you have more time to study, some of them are about to study, not yet study so far):
https://www.business2community.com/strategy/differing-approaches-to-project-management-0154472
Part 5: Create a WBS of your chosen project
? Theory: 5.2 (p.153-160)
? Example:Integrated Project in Chapter 5 on page 182
? To have a full WBS: using process as basic step & the logic of hierarchy or waterfall approach to identify all tasks relating to your chosen project.
? See Figure 5.2, 5.3 and 5.7 (upper chart) to clearly know how you can develop an appropriate WBS.

Tips:
Experience in brief to make WBS (just an alternative to start WBS from beginning):
o First: beginning with all first level tasks (using work-flow or process as a foundation) ? deliverables
o Second: identify supporting deliverables (if any) ? sub-deliverables; or sub-deliverables can be completed by bottom up approach (summary of certain sub-tasks).
o Third: identifyingsub-tasks to accomplish each task in 1st or 2nd step ? work packages/ or individual project activities)
o Check the interrelationship of tasks & subtasks, make adjustment (if any)
o Draft the final breakdown with coding (example, p. 182)
Note: don’t forget
? To seek for experts’ideas and/or historical experience to adjust the WBS for feasibility.
? Tasks in WBS should be more detailed &possibly aligned with those mentioned in SOW (Part 4) in your chosen project.
? WSB should include at least 1 task on approval
Part 6: Create a RAM for your chosen project
? Theory: p. 160-161, Figure: 5.10
? Example:Integrated Project in Chapter 5 on page 182
Tips:
? Use the abbreviation (R, A, N, S) for easy tracking before replacing with typical symbols in RAM.
? Get all deliverables & workpackages in Part 5, assign each team personnel (at least 4 fictional members) with direct responsibility (R) or other roles (A, N, S).
? One (1) workpackage with 1 R (not more than 1) is considered the best personnel selection.
? The role of Approver is needed in some important tasks or deliverables.
? Cross check your assignment (Part 3,4,5,6) again for the final version of all parts.
Finally, original source of referenceshas to be quoted in the writing when students use any extracts.
Updated: 2019.02.10 by VoThuy Ngoc