Week 4 Flashcards
what is Project management maturity?
This is the development of project management
capability and expertise within the organisation, those who have it have increased project success rates but no standard way of measuring project management maturity
what is Dinsmore (1998) project management maturity meausre?
- initial: where firms have no process for managing projects
- repeatable: have info on planning and scheduling but info isnt shared with whole firm
- defined: have systems to manage projects but only used by specific people
- managed: firms have the project systems and everyone uses them
- optimised: firms have data on past projects and use for future improvements
what is Remy’s (1997) PM3 model for project management maturity?
- Ad-Hoc: firms here are unorganised and have accidental successes but more failures
- abbreviated: firms here have some type of system but still suffer from poor management = poor results
- organised: more standardised procedures and better results here
- managed: firms have controlled systems and results and are in line with project plan
- adaptive: firms here always try to improve their practices and so better results
what is Ibbs and Kwak (2000) project management maturity meausre?
- ad-hoc
- planned
- managed
- integrated
- sustained
- similar to previous measures, models aid in showing where they are in PM maturity and how to improve therefore
how are projects selected?
the process of evaluating potential projects before choosing the best one as projects are chosen based on the firms strategic goals
- PM’s arent part of this process
- firms can use models to help decide based on resources and whether it increases profits/market position
what is the 6 criteria for selecting a model?
- Relevance - model should reflect firms current objectives
- Capability - model should include external and internal factors eg strikes
- Flexibility - model should be easy to modify eg tax changes
- Ease of use - results should be easy to understand
- Cost - should be low
- Ease of computerisation- easy to collect, store and manipulate data
what is the first project selection model?
SWOT which lists projects strengths, weaknesses, opportunities and threats,
- there are two types: numeric and non-numeric but models dont make the decisions as they dont fully describe the situation as it only works on the inputs provided by PM
what are the first 3 non-numeric selection models?
Non-numeric Selection Models
1. Sacred Cow
- Project is suggested by a senior (and powerful) official in the organisation eg new product, but this model means PM can’t say NO to snr person
2. Operating Necessity
- The project is required to keep a particular system operational, eg. saving lives and / or property
3. Competitive Necessity
- Project is necessary to sustain a competitive position, eg universities revamping their degree programmes
what are the last 2 non-numeric selection models?
- Product Line Extension
– Projects are judged on how they fit with the current product line, fill a gap, strengthen a weakness, or extend the product line in a new desirable way - Comparable Benefit Model
– Several projects are considered and those with the most benefit to the firm are selected. follows this process: - form selection committee
- divide projects into good, fair and poor
- order all projects from best to worst based on potential firm benefit
- select best project
what are numeric selection models?
Advantage of these models is that they create a numeric value for each project that can then be compared with other projects to aid in the selection process
* Most popular types of numeric models include:
1. Profitability models
2. Weighted Scoring models
what are profitability models?
Evaluate projects based on profitability they will potentially give to the organisation
- Include:
1. Payback Period
2. Net Present Value
3. Profitability Index
how do you calculate payback period?
fixed investment (cost) of project divided by estimated annual cash inflow from project
- good at highlighting risk of a project eg longer return means more risk, model doesn’t consider time value of money eg interest and inflation, also uses an average value which isn’t good for long term projects
how do you calculate net present value?
also known as discounted cash flow
- Calculates the value (in present day terms) of the project cash inflows and outflows expected to arise at different periods in the future
- Sum of the equivalent cash flows gives the NPV
- If NPV is positive = the project is acceptable
- If NPV is negative = the project is not acceptable
- see EQUATION SHEET
how do you calculate profitability index?
also known as cost-benefit ratio
- NPV of all future expected cash flows is divided by initial cash investment
- if ratio is greater than 1, project is good, but some projects might be good in some models and bad in others so PMs have to decide ultimately
what are the ADV and DISADV of profitability selection models?
- Advantages:
-Simple and easy to use / understand
- Data is easy to collect
- Gives decision makers a clear recommendation
- Can be amended to take risk factors into consideration
* Disadvantages:
- Only look at monetary factors
- Short-sighted, payback period ignores time value
of money, and cashflows beyond
payback period
- Heavily reliant on quality input data
