Chapter 12 Flashcards
PM Maturity (Define)
“Maturity in project management is the development of systems and processes that are repetitive in nature and provide a high probability that each project will be a success.”
Project Management Maturity Models
-Maturity Models measure an organization’s project management maturity
- Models fall into three general categories
- Technical Delivery Process Models
- Project Management Process Models
- Total Organization Models
Driving Forces for Maturity
Capital projects Customer expectations Competitiveness Executive understanding and buy-in New product development Efficiency and effectiveness Survival
PM Maturity Levels
Level 1: Initial Process
Level 2: Structured Process and Standards
Level 3: Organizational Standards and Institutionalized Process
Level 4: Managed Process
Level 5: Optimizing Process
PM Maturity Level I
“Initial Process”
PM Process and Standards
-not established
Documentation
-loose and ad hoc
Metrics
-informal
Management
-sees need for PM
PM Maturity Level II
“Structured Process & Standards”
PM Process and Standards
-many exist
Documentation
-exists on basic processes
Metrics
-basic performance metrics
Management
-supports PM but no mandate
PM Maturity Level III
“Org. Standards and Institutionalized Processes”
PM Process and Standards
-standard
Documentation
-formal for all processes
Metrics
-performance evaluated among projects
Management
-involved
PM Maturity Level III
“Managed Process”
PM Process and Standards
-integrated with others
Documentation
-in place and supports decisions
Metrics
-many, used for decisions across projects
Management
-understands role and executes well
PM Maturity Level III
“Optimizing Process”
PM Process and Standards
-used to improve PM
Documentation
-improved through lessons learned
Metrics
-used for decisions for the future
Management
-focuses on continuous improvement
Learning Organization Defined
A learning organization is an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.
Building Blocks for a Learning Organization
- Systematic Problem Solving
- Experimentation
- Learning from Past Experience
- Learning from Others
- Transferring Knowledge
Systematic Problem Solving
- Rely on the Scientific Method (Plan-Do-Check-Act)
- Insist on data, rather than assumptions (Manage by Fact)
- Use simple statistical tools to organize data and draw inferences.
Experimentation
- Experimentation involves the systematic searching for and testing of new knowledge
- Ongoing programs – designed to produce incremental gains in knowledge
- Demonstration projects – to develop new organizational capabilities
Learning from Past Experience
- Lessons Learned
- Post-Project Appraisals
- Case Studies
- Computerized Data Banks
Learning from Others
- Benchmarking
- Customer intimacy
- Direct observation
Transferring Knowledge
- Reports
- Site visits and tours
- Personnel rotation programs
- Education and training programs
- Standardization programs
Project Portfolio Management
- Organizations have limited resources to devote to projects
- Like an investment portfolio, resources should be assigned to projects that promise the greatest “return” or benefit
- Less important projects should not siphon resources away from more important projects
PMO role in Portfolio Management
- Assist Project Review Board (PRB)
- Provide overview information about projects in portfolio
- Assist with portfolio decisions:
- Project prioritization
- Approval
- Cancellation
PMO role in Portfolio Management
- Ensure each project meets requirements for each gate
- Track resource allocation for all projects vs. requirements for current projects
- Provide status reports to PRB about relative performance for all projects (use dashboard,” etc.)
Project Portfolio and Strategy I
- Common Problems in Project Portfolios
- No link between business strategy and project selection
- Poor quality portfolio (weak, mediocre projects)
Project Portfolio and Strategy II
- Common Problems in Project Portfolios (cont.)
- Lack of focus (weak projects get resources; best projects starved for resources)
- Project trivialization (projects selection based on “low hanging fruit” – modifications, extensions, updates; nothing breakthrough or innovative)
Project Portfolio Management: Benefits of Portfolio Management I
Project proposals are assessed for costs, risks, benefits, and contributions to objectives
Decisions are made to authorize some projects, retain some on the “back burner,” and dispose of others
Scarce resources are allocated effectively to insure that priority projects get adequate funding and support
Project Portfolio Management: Benefits of Portfolio Management II
Projects are “balanced” in terms of high vs. low risk, large vs. small size, long-term vs. short term focus, etc.
Projects are continually tracked, compared, and managed collectively
Framework for Project Selection, and Portfolio Management
“Phase I” Pre-screening stage: to “pass
Projects must be justified in terms of either organizational survival or growth.
Survival projects: necessary for health and viability of the organization
Growth projects: offer organization opportunity for prosperity and expansion
Projects might require:
- feasibility study
- champion and sponsor
- documented expected benefits
Sometimes, simple checklist is employed to rate each proposal as excellent, good, poor, etc.
Framework for Project Selection, and Portfolio Management
“Phase I” Proposal Analysis Stage
-Employ a combination of quantitative and qualitative models and scoring method.
- Rate the proposal using diverse criteria, e.g.,
- -link to strategic objectives
- -financial value
- -compliance to constraints
-Proposal must exceed minimum cutoff value or score
Framework for Project Selection, and Portfolio Management
“Phase I” Proposal Screening Stage
Assess and eliminate projects that do not meet requirements for expected benefits, risk, or other specific criteria.
Phase I restricts the pool of projects entering Phase II to those that are the right projects.
Framework for Project Selection, and Portfolio Management
“Phase II” Portfolio Selection Stage
- Review proposed projects and existing projects together
- -Compare projects in terms of analysis scores or current performance
- -Rank-order projects
-Rank-ordering: to ensure that resources and funding are allocated to higher-priority projects.
Framework for Project Selection, and Portfolio Management
“Phase II” Portfolio Adjustment Stage
Decide which projects to accelerate, delay, or cancel to satisfy changing objectives, opportunities (new strategies develop, new RFP’s or proposals arrive), and resources.
Framework for Project Selection, and Portfolio Management
“Gating Process” Evaluate Current Projects
Reassess projects underway for expected benefits, performance, and costs
Terminate projects in trouble and not meeting minimal requirements
Pool remainder with new projects, rank-order, and reconsider which projects for portfolio (i.e., perform screening and selection stages).
Framework for Project Selection, and Portfolio Management
- Selection process: analogous to a funnel and a filter:
- -funnel takes in project ideas, proposals, and concepts
- -filter precludes all but the best from proceeding.
-Goal: design the process so funnel takes in lots of ideas; filter screens poor projects yet allows constant flow of quality projects
Methods for Project Analysis
Financial Models
- NPV
- Benefit / Cost
- Payback Period
Scoring Models
Project Analysis using Discounted Cash Flow (DCF)
Present Value (PV) = Future Value (FV) / (1+i)^n
Project Analysis using DCF (EXAMPLE)
What is the present value of 100,000 two years from now if the discount rate is 6%?
PV = $100,000 / (1 + .06)2 PV = $100,000/1.1236 PV = $ 88,999
Project Analysis using B/C
B/C provides a ratio between the financial benefits and the project cost. It is computed by dividing the financial benefits by the cost.
B/C = (50,000 + 100,000 + 150,000 + 200,000) / 200,000
= 500,000/200,000
= 2.5
Now consider DCF:
B/C = (47,150 + 89,000 + 125,943 + 158,419) / 200,000
= 420,512/200,000
= 2.1
Project Analysis using Payback Period
The Payback Period simply sums monthly cash flows until the initial project investment is recovered.
Project Analysis using Scoring Models
-Use a list of criteria with weightings.
-Rating Criteria examples
–Strategic Fit
–Strategic Leverage
–Probability of Commercial
Success
–Probability of Technical Success
Methods for Comparing and Selecting Projects I
Project Selection Approaches aim at:
Maximizing the value or utility of the portfolio
Achieving balance in the portfolio
Fitting the portfolio with organization objectives and strategic initiatives.
Methods for Comparing and Selecting Projects I
Multiple Criteria Methods Portfolio Balance Strategic Fit Cost-Benefit Grids Cost Effectiveness Analysis
Methods for Comparing and Selecting Projects (Portfolio Balance)
Balance between, e.g.,:
- High-risk and low-risk
- High-reward vs. low-reward
Balance displayed on a “bubble chart”
Methods for Comparing and Selecting Projects (Strategic Fit)
Management decides relevant ways to divide up projects
-These become “buckets.”
Management decides on desired spending (resource allocation) to each bucket
Projects are categorized into buckets, then prioritized within each bucket
-Priority criteria can be different for each bucket.
Projects in each bucket are tallied to compare actual spending to desired spending
If actual spending > desired spending, projects with low priority are killed or put on hold
Methods for Comparing and Selecting Projects (Strategic Fit)
- Bucket categories, e.g.,
- -Strategic goals
- –Defending product base, expanding base, …
- Product lines
- -A, B, C, …
- Project types
- -R&D, process improvement, maintenance
- Geography
- -NA, SA, Europe, Asia
Methods for Comparing and Selecting Projects (Cost-Benefits Grids)
Rate each project’s financial benefits as high, medium, or low
Rate its cost as high, medium, or low.
The outcome is displayed on a three-by-three grid.
Rating team should be able to justify why it rated one project high and another medium or low.
Methods for Comparing and Selecting Projects (Cost-Effectiveness Analysis)
“Effectiveness:”
-degree to which a project is expected to fulfill project requirements (value, utility, efficiency, and performance)
Involves consideration of multiple factors
- Rate factors subjectively (based on quantitative analysis and advice of technical experts)
- Weigh the ratings
- Sum them up
Integrate Portfolio Management with “Gating Process”
- Gating Process
Set up Process that:
-Requires serious market and technical analysis at front-end of process
- Requires at each gate pre-defined deliverable s and information necessary to make go/kill decisions
- Employs criteria that senior management has set to evaluate each project: strategic fit, feasibility, market attractiveness, competitive advantage, etc.
Integrate Portfolio Management with “Gating Process”
- Resource Capacity Analysis
Quantify all projects’ demand for resources versus resource availability
Ask: are available resources sufficient for current projects?
If no, must reduce project goals or acquire more resources
Integrate Portfolio Management with “Gating Process”
- Integrate Portfolio Management with Gating Process
Stage-and-Gate process addresses individual projects at life-cycle stages
Portfolio management process addresses (compares) all projects at same time
Must integrate the Gating and Portfolio processes
