PROJECI Chapter 2

2.1 Why Project Managers Need to Understand

Reasons Project managers need to understand their organization's mission and strategy:

• To make appropriate decisions and adjustments

• To be effective project advocates. Being able to:

  • Show senior management how the project supports the firm’s mission to secure continued backing

  • Explain to stakeholders why objectives and priorities are critical to gain buy‑in

  • Clarify project importance to motivate and empower the team (Brown, Hyer, & Ettenson, 2013)

2.2 The Strategic Management Process: An Overview.

Strategic Management: Process of assessing “what we are” (ika nga ni kei…what are we? EME). As well as deciding and implementing “what we intend to be and how we are going to get there” (tngina pang may relasyon toh ah).

• Iterative continuous process aimed at developing integrated and coordinated long term PoA (plan of action).

• Requires strong links among mission, goals, objective, strategy and implementation.

Two Major Dimensions of Strategic management:

• Responds to change in the external environment and allocates scarce resources to improve competitive position.

• Internal responses to new action programs are aimed at enhancing the competitive position of the firm. 

4 activities of strategic management process:

1. Review and define mission → Clarify “what we want to become” and scope of products/services

2. Analyze and formulate strategies → Decide actions, evaluate alternatives, select best option

3. Set objectives → Translate strategy into specific, measurable targets

4. Implement strategies through projects → Execute plans using available resources

The foundation starts with a Needs Assessment (Background, Problem etc.)

Why do we have to understand strategies:

• To make appropriate decisions and adjustments.

• To be effective project advocates

  • Vision - What you see the company will and can do; achieve

  • Mission - What your company does

  • Objective - The goal of the company (strategically aligned)

  • Strategy - action plan to reach objective aligned with the mission

    • Functional Implementations: Operating departments in charge of putting strategy into action

Dimensions of Strategic Management:

• Internal Environment (SWOT): responses to new action programs aimed at enhancing competitive position 

• External Environment (PESTLE/Porter’s Five): responding to change in external environment =allocating firm’s scarce resources to improve competitive position

= ADJUST and ALLOCATE to MAINTAIN COMPETITIVE POSITION

Characteristics of Objectives

• Specific - knowing the scope and boundaries; have a specific objective to target  

• Measurable - KPI’s; establishing a measurable indicator of progress

• Assignable - making the objective assignable to one person

• Realistic - what can be done with available resources

• Time-related - WHEN can it be achieved (duration)

Need for a project priority system

• Often connected to limited resources

  • Behavioral Biases

  • Implementation Gap

  • Organization Politics

  • Resource Conflicts and Multitasking

Problems needing a project priority system

Problem 1: Behavioral Biases → Includes optimism bias (overly positive outcomes) and uniqueness bias (seeing oneself as more unique than reality).

Problem 2: Implementation Gap → Lack of shared understanding and consensus on strategy among managers.

Problem 3: Organization Politics → Project selection driven by persuasion and power rather than facts; “sacred cow” projects pushed by powerful officials.

Problem 4: Resource Conflicts & Multitasking → Multiple projects create interdependencies and resource sharing, leading to task switching and inefficiency.

Benefits of Project Portfolio Management

• Builds discipline into project selection

• Links selection to strategic metrics

• Prioritizes proposals using common criteria, not politics/emotion

• Allocates resources to projects aligned with strategy

• Balances risk across all projects

• Justifies ending projects that don’t support strategy

2.4 Project Classification.

• Compliance (MUST do projects)

• Operational (departmental level; ex: HR ONLY, Sales ONLY)

• Strategic (include multidepartment)

Phase Gate model

Agile project management - passing through an order to be complete

• A series of gates a project must pass to be completed

• Ensures time and resources go to projects aligned with mission and strategy

• Each gate marks a project phase and decision point

• Gate outcomes: go (proceed), kill (cancel), or recycle (revise and resubmit)

Phase 1: Idea 

↓ Phase 2: Proposal 

↓ Phase 3: Screening and Selection 

↓ Phase 4: Implementation Plan 

↓ Phase 5: Progress Evaluation 

↓ Phase 6: Closure → End

Financial: Payback Model

• Definition: Measures time needed to recover project investment.

  • Desires shorter paybacks

• Formula (in years): Estimated project cost ÷ Annual savings.

• Limitations:

  • Ignores time value of money

  • Assumes steady cash inflow

  • Does not consider profitability

• Decision Use:

  • Shorter payback period preferred, especially with limited resources

  • Higher rate of return = preferred and better

Payback period = lower the better

Rate of return - higher the better

• Concept: Focuses on when investment is fully recovered; choose the shortest feasible payback period.

Financial: Net Present Value

• Definition: PV of inflows minus cost of investment.

• Formula: Initial Investment (

• Decision Rule:

  • Positive NPV → Accept

  • Negative NPV → Reject

  • If all NPVs are positive → choose the highest.

• Concept:

  • Uses management’s minimum desired rate of return (discount rate).

  • Prefers positive NPVs, higher is better.

  • More realistic: considers time value of money, cash flows, and profitability.

Non Financial Criteria

Strategic Objectives for NFC:

• Capture larger market share

• Make competitor entry more difficult

• Develop enabler product to boost sales of profitable products

• Build core technology for next‑generation products

• Reduce dependency on unreliable suppliers

• Prevent government intervention and regulation

Checklist Models → Use questions to accept/reject projects; flexible across divisions; but don’t show relative importance or allow comparison.

Multi‑Weighted Scoring Models → Use weighted criteria (qualitative/quantitative) to evaluate proposals; allow direct comparison among projects.

2.7 Applying a Selection Model.

Project Classification → Decide if the project fits organizational strategy.

Selecting a Model → Weighted scoring criteria preferred because:

• Reduce wasteful projects consuming resources

• Identify project goals and communicate them clearly

• Help managers understand why their project was selected, how it supports goals, and how it compares with others

Sources & Solicitation → Proposals can come from within the organization or via external RFPs (contractors/vendors).

Ranking & Selection → Evaluate proposals for feasibility, strategic contribution, and portfolio fit; accept/reject based on criteria; senior management prioritizes projects.

Managing the Portfolio System.

Senior Management Input:

• Provides guidance for selection criteria aligned with strategy

• Annually balances people and capital across project types

Governance Team Responsibilities:

• Publish project priorities

• Keep selection process open and free of politics

• Evaluate progress of ongoing projects

• Scan external environment to adjust focus or criteria

Balancing the Portfolio for Risks and Types of Projects:

• Bread-and-butter projects involve evolutionary improvements

• to current products and services.

• • Pearls represent revolutionary commercial advances using

• proven technology.

• Oysters involve technological breakthroughs with tremendous

• commercial potential.

• White elephants showed promise at one time but are no longer

• viable.