Project Selection Models

Project Selection
• Project selection is the process of evaluating individual projects or
groups of projects,
• and then choosing to implement some set of them so that the
objectives of the parent organization will be achieved.
• The proper choice of investment projects is crucial to the long-run
survival of every firm.
• Daily we witness the results of both good and bad investment
choices.
Criteria for Project Selection Model

1. Realism
2. Capability
3. Flexibility
4. Ease of use
5. Cost
6. Easy computerization
Numeric and Non-Numeric Models
• Both widely used, Many organizations use both at the same time, or they
use models that are combinations of the two.
• Nonnumeric models, as the name implies, do not use numbers as inputs.
Numeric models do, but the criteria being measured may be either
objective or subjective.
• It is important to remember that:
• the qualities of a project may be represented by numbers, and
• that subjective measures are not necessarily less useful or reliable than objective
measures.
Nonnumeric Models
• Nonnumeric models are older and simpler and have only a few subtypes
to consider.
The Sacred Cow

• Suggested by a senior and powerful official in the organization. Often

initiated with a simple comment such as, “If you have a chance, why
don’t you look into . . .,” and there follows an undeveloped idea for a new
product, for the development of a new market, for the design and
adoption of a global data base and information system, or for some
other project requiring an investment of the firm’s resources. “Sacred” in
the sense that it will be maintained until successfully concluded, or until
the boss, personally, recognizes the idea as a failure and terminates it.
The Operating Necessity

• If a flood is threatening the plant, a project to build a protective dike

does not require much formal evaluation, which is an example of this
scenario. If the project is required in order to keep the system operating,
the primary question becomes: Is the system worth saving at the
estimated cost of the project?
The Competitive Necessity
• The decision to undertake the project based on a desire to maintain the
company’s competitive position in that market.
• Investment in an operating necessity project takes precedence over a competitive
necessity project
• Both types of projects may bypass the more careful numeric analysis used for
projects deemed to be less urgent or less important to the survival of the firm.
The Product Line Extension
• A project to develop and distribute new products judged on the degree
to which it fits the firm’s existing product line, fills a gap, strengthens a
weak link, or extends the line in a new, desirable direction.
• Sometimes careful calculations of profitability are not required. Decision
makers can act on their beliefs about what will be the likely impact on the
total system performance if the new product is added to the line.
Comparative Benefit Model
• Organization has many projects to consider but the projects do not seem
to be easily comparable. For example, some projects concern potential
new products, some concern changes in production methods, others
concern computerization of certain records, and still others cover a
variety of subjects not easily categorized (e.g., a proposal to create a
daycare center for employees with small children).

• No precise way to define or measure “benefit.”

Numeric Models: Profit/Profitability
• A large majority of all firms using project evaluation and selection
models use profitability as the sole measure of acceptability.
Economic Analysis for Project
Selection
Investment Analysis
THE WORK BREAKDOWN
STRUCTURE
Simple Approach for Creating the WBS

• Gather project team

• Provide team members with pad of sticky-notes

• Team members write down all tasks they can think of

• Sticky-notes placed and arranged on wall

A Partial WBS (Gozinto Chart) for an Annual Tribute Dinner
Project
A Linear Responsibility Chart
◆ What is WBS ?
◆ What the WBS is used for ?
◆ Why and how to use the WBS
WORK BREAKDOWN STRUCTURE
Examples
Job creation process
Group WBS exercise
• What is WBS:
In planning a project, the manager must structure the work into small
elements. It is

• An outline of the work that is to be done to complete the project

• A way to organize and control the project
• A method to ensure that the plan is complete
• A basis for all of your formal project management steps
• Anything not in the WBS is not in the project
• WBS Terminology:

• WBS summary tasks

The categories organizing the work.
This is a higher level than the actual work packages

• Code of accounts
Uniquely identifies each element of the WBS.

• Work packages
A deliverable at the lowest level of the WBS.

• WBS dictionary
Includes work package instructions for the assigned team member.
• Example
• Landscape project

• 1. Design landscape
• 2. Lawn
• 2.1 Acquire lawn material
• 2.2 Install sprinkler system
• 2.2.1 Identify sprinkler locations
• 2.2.2 Dig trenches
• 2.2.3 Install pipe and hardware
• 2.2.4 Cover sprinkler system
• 2.3 Plant grass
• Summary Tasks:

• Lawn
• Install sprinkler system
• Code of Accounts:

• 1.
• 2.
• 2.1
• 2.2
• 2.2.1
• 2.2.2
• 2.2.3
• 2.2.4
• 2.3
• Work Packages:

• Design Landscape
• Acquire land material
• Install sprinkler system
• Identify sprinkler locations
• Dig trenches
• Install pipe and hardware
• Cover sprinkler system
• Plant grass
• Work Packages:

• Represent units of work at a level where work is performed

• Clearly distinguish work packages from others

• Assigned to a functional group

• Limit the work to be performed to relatively short periods of time

• Example: Job Creation Process:

• Task description
Hire new employee for Product Specialist position.
• Goals and Objectives:
Fill position by June 15, 2011 and have trained by end of July.
• Job Description:
Provide the job description here with performance criteria.
• Acceptance Criteria:
Mr. Jamal must provide approval of selected candidate before the job offer is made,
and provide acceptance upon completion of probationary period.
• Work packages should be…

• Relatively short in time span

• Measurable by cost
• Assignable to an individual, department, or company

• Two Approaches:
• Low-level WBS
Created from a perspective of activities or tasks expressed as
action verbs
Example: Low-level WBS

Making Chocolate cakes

1. Preparation
1.1 Read recipe
1.2 Check ingredients at home
1.3 Make shopping list
1.4 Go on shopping trip
and so on…
• High-level WBS

Based on products, requirements, or deliverables

Created from a perspective of the project scope
definition
Expressed as nouns

Example:
Program: New plant Construction and start up
Project 1: Analytical study
Task 1: Marketing/Production study
Task 2: Cost Effectiveness Analysis
Project 2: Design and Layout
Task 1: Product Processing Sketches
Task 2: Product Processing blueprints
• How should I break down the project?

• By geographically separated areas for product or activities

• By major chronological time periods
• By structural, process, system, or device components
• By “intermediate” deliverables required in the production of the “end”
deliverables
• By separate areas of responsibility, departments, or functional areas
• By geographically separated areas for product or activities:

Rock Tour

Europe USA Asia

New York
City

October
15, 2011
• By structural, process, system, or device components:

Airplane

Pilot
HVAC Engine
Controls

AC

Refrigerants
• By “intermediate” deliverables required in the production of the “end”
deliverables:

Software

Requirements Prototype Products

Interface

Graphics
Action Plan:
In the hierarchical planning system, the objectives
are taken from the project plan. these objectives help in
identifying the set of required activities for the objectives to be
met, a critical part of the action plan. Each activity has a specific
outcome associated with it, and these activities are further
decomposed into sub activities and sub events, which in turn
are further sub divided.
 Action Plan

Deliverables

Measure
Accomplishment

Key Constraints

Estimated Immediate
Tasks Estimated Duration Assigned to
Resources Predecessors
 Objective Career Day
Steps Responsibility Time Predecessor Resources
(weeks)
1. Contact Organizations
a. Print Forms Secretary 6 ----------- Print Shop
b. Contact Organizations Program manager 15 1.a Word Processing
c. Collect Display Information Office Manager 4 1.b
d. Gather College Particulars Secretary 4 1.b

Partial Action Plan for a

e. Print programs Secretary 6 1.d Print Shop
f. Print participant certificates Graduate Assistant 8 -------- Print Shop
2. Banquet and Refreshments

College Career Day

a. Select Guest Speaker Program manager 14 ---------
b. Organize Food Program manager 3 1.B Career
c. Organize Refreshments Director 10 1.b Purchasing
 Responsibility
WBS Project office Field Operations

Sub Project Task Project Contract Project Industrial Field Manager

manager Administrator Engineer Engineer

Determine A1
Need
A2

Solicit B1
Quotations

Legend
Write
Appropriate
Request
Notification
C1

C2

Responsible Approval
C3

“
Support
“
 Vice President

General Manager

Project Manager
Engineering
Manager
Software
Manager

Manufacturing
Manager
Marketing
Manager
Manufacturing
Manager
Subprogram
software
Manager
Subprogram
Hardware
Manager
Subprogram
Services
Manager
Subprogram
Establish Project Plan 6 2 1 3 3 3 3 4 4 4 4

Define WBS 5 1 3 3 3 3 3 3 3 3

Establish Hardware Specs 2 3 1 4 4 4

Establish Software Specs 2 3 4 1 4

Establish Interface Specs. 2 3 1 4 4 4

Establish Manufacturing Specs. 2 3 4 4 1 4

Define Documentation 2 1 4 4 4 4

Establish Market Plan 5 3 5 4 4 4 1

Prepare Labor Estimates 3 1 1 1 4 4 4 4

Prepare Equipment cost estimates 3 1 1 1 4 4 4 4

Prepare Material Costs 3 1 1 1 4 4 4 4

Make Program assignments 3 1 1 1 4 4 4 4

Establish Time Schedules 3 1 1 1 3 4 4 4 4

1 Actual responsibility 2 General Supervision 3 Must be Considered

4 May be Consulted 5 Must be notified 6 Final Approval
Simplified Linear Responsibility Chart