Project Management 9th Edition Meredith
Solution Manual
,
, Chapter 2
Strategic Management and Project Selection
CHAPTER OVERVIEW
Overview – This chapter discusses the process for selecting which of the many projects an
organization could pursue and it should pursue. It introduces techniques for evaluating and
making the selection. The chapter also introduces concepts of risk and applies them to the
analysis typically performed during the project selection process.
2.1 Project Management Maturity – Many organizations use maturity models to determine
their level of mastery of project management processes and skills. Examples include PMI-
OPM3 and PM3.
2.2 Project Selection Criteria and Models – Organizations should use consistent and rational
tools to select among the myriad of projects from which they have to choose. There are
many models for the selection process to choose from as well.
Good criteria for choosing the selection model are:
• Realism – The model should take the organization’s situation into account including
limits on people, facilities, and capital.
• Capability – The model should be capable of dealing with the complexities of the
organization’s environment.
• Flexibility – The model should work under a range of conditions.
• Ease of use – The model should be relatively easy to use and understand.
• Cost – The model should not be costly to use.
• Easy computerization – The model should be easy to capture and modify in a
computer.
2.3 Types of Project Selection Models
• Nonnumeric Models – These models do not attempt to reduce the evaluation
process to numbers, but instead look at other factors that make for “obvious”
choices for that organization. These models could include senior management
mandates and regulatory necessities. Examples include The Sacred Cow, The
Operating Necessity, The Competitive Necessity, The Product Line Extension,
Comparative Benefit Model, and Sustainability.
• Numeric Models: Profit/Profitability – These models analyze the potential projects
in terms of the single criteria of monetary return. The analysis may or may not
include the time value of money. These include traditional measures such as
Payback Period, Discounted Cash Flow (also referred to as Net Present Value), IRR,
and Profitability Index.
Solution Manual
,
, Chapter 2
Strategic Management and Project Selection
CHAPTER OVERVIEW
Overview – This chapter discusses the process for selecting which of the many projects an
organization could pursue and it should pursue. It introduces techniques for evaluating and
making the selection. The chapter also introduces concepts of risk and applies them to the
analysis typically performed during the project selection process.
2.1 Project Management Maturity – Many organizations use maturity models to determine
their level of mastery of project management processes and skills. Examples include PMI-
OPM3 and PM3.
2.2 Project Selection Criteria and Models – Organizations should use consistent and rational
tools to select among the myriad of projects from which they have to choose. There are
many models for the selection process to choose from as well.
Good criteria for choosing the selection model are:
• Realism – The model should take the organization’s situation into account including
limits on people, facilities, and capital.
• Capability – The model should be capable of dealing with the complexities of the
organization’s environment.
• Flexibility – The model should work under a range of conditions.
• Ease of use – The model should be relatively easy to use and understand.
• Cost – The model should not be costly to use.
• Easy computerization – The model should be easy to capture and modify in a
computer.
2.3 Types of Project Selection Models
• Nonnumeric Models – These models do not attempt to reduce the evaluation
process to numbers, but instead look at other factors that make for “obvious”
choices for that organization. These models could include senior management
mandates and regulatory necessities. Examples include The Sacred Cow, The
Operating Necessity, The Competitive Necessity, The Product Line Extension,
Comparative Benefit Model, and Sustainability.
• Numeric Models: Profit/Profitability – These models analyze the potential projects
in terms of the single criteria of monetary return. The analysis may or may not
include the time value of money. These include traditional measures such as
Payback Period, Discounted Cash Flow (also referred to as Net Present Value), IRR,
and Profitability Index.
