The Sacred Cow The project is suggested by a senior and powerful official in the organization. Often the project is initiated with a simple comment such as, "If you have the 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 installation of a new decision support system, for the adoption of Material Requirements Planning, or for some other project requiring an investment of the firm's resources. The immediate result of this bland statement is the creation of a "project" to investigate whatever the boss has suggested. The project is "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. Republic Steel Corporation (now a part of LTV Corp.) has used this criterion (and the following criterion' also) in evaluating potential projects. 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? If the answer is yes, project costs will be examined to make sure they are kept as low as is consistent with project success, but the project will be funded.
The Competitive Necessity Using this criterion, Republic Steel undertook a major plant rebuilding project in the late 1960s in its steel-bar-manufacturing facilities near Chicago. It had become apparent to Republic's management that the company's bar mill needed modernization if the firm was to maintain its competitive position in the Chicago market area. Although the planning process for the project was quite sophisticated, the decision to undertake the project was bas H on a desire to maintain the company's competitive position in that market.
In a similar manner, many business schools are restructuring their undergraduate and MBA programs to stay competitive with the more forward-looking schools.
In large part, this action is driven by declining numbers of tuiton-paying students and the stronger competition to attract them.
Investment in an operating necessity project takes precedence over a competitive necessity project, but 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 would be 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 Assume that an organization has many projects to consider, perhaps several dozen. Senior management would like to select a subset of the projects that would most benefit the firm, 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 set up a daycare center for employees with small children). The organization has no formal method of selecting projects, but members of the Selection Committee do think that some projects will benefit the firm more than others, even if they have no precise way to define or measure "benefit."
The concept of comparative benefits, if not a formal model, is widely adopted for selection decisions on all sorts of projects. Most United Way organizations use the concept to make decisions about which of several social programs to fund. The comparative benefit concept is also commonly used when making funding decisions on fundamental research projects. Organizations such as the National Science Foundation, the Office of Naval Research, and a great many other governmental, private, and university sponsors of research usually send project proposals to outside experts in the relevant areas who serve as "referees," a process known as peer review. The proposal is evaluated according to the referee's technical criteria, and a recommendation is submitted. Senior management of the funding organization then examines all projects with positive recommendations and attempts to construct a portfolio that best fits the organization's aims and its budget.
Of the several techniques for ordering projects, the Q-Sorf [26j is one of the most straightforward. First, the projects are divided into three groups—good, fair, and poor—according to their relative merits. If any group has more than eight members, it is subdivided into two categories, such as fair-plus and fair-minus. When all categories have eight or fewer members, the projects within each category are ordered from best to worst. Again, the order is determined on the basis of relative merit. The rater may use specific criteria to rank each project, or may simply use general overall judgment. See Figure 2-1 for an example of a Q-Sort.
The process described may be carried out by one person who is responsible for evaluation and selection, or it may be performed by a committee charged with the responsibility. If a committee handles the task, the individual rankings can be devel-
Results at Each Step
1. For each participant in the exercise, assemble a deck of cards, with the name and description of one project on each card.
2. Instruct each participant to divide the deck into two piles, one representing a high priority, the other a low-priority level. (The piles need not be equal.)
3. Instruct each participant to select cards from each pile to form a third pile representing the medium-priority level.
4. Instruct each participant to select cards from the high-level pile to yield another pile representing the very high level of priority; select cards from the low-level pile representing the very low level of priority.
5. Finally, instruct each participant to survey the selections and shift any cards that seem out of place until the classifications are satisfactory.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.