Proj. Management (Topic 2)

What typically triggers the initiation of projects in organizations? (sources of projects)

Recognition of a problem, business need, or opportunity

Why should project selection align with business strategy?

To ensure resources are used effectively and objectives are achieved.

Types of project ? (2)

• Mandated

• Non - mandated

What are mandated projects

Projects required by CEO, legal, regulatory, or compliance reasons (e.g., safety, tax).

Do mandated projects undergo selection criteria? + why

No, they must be done regardless

What are non‑mandated projects?

Projects driven by other reasons

Give an example of a non-mandated project.

• Replacing IT systems with Customer Relationship Management (CRM) to improve customer interaction.

• Launch a new product to increase profit

List the reasons to do a project (8)

• Safety

• Increase profits

• Reduce costs

• Improve quality

• Compliance

• Corporate social responsibility (CSR)

• Customer requirements

• New product introduction

Additional reasons to do a project (8)

• Strategic opportunity

• Operational challenge

• Business need

• Customer requests

• Social need

• Environmental consideration

• Technological advancement

• Regulatory / legal requirement

Project selection example (Hospital case)

• Hospital case

A Regional hospital received a limited grant of €5 million to improve patient
care. The following projects have been proposed, and leadership must decide
between them:

→ Project A: Building a new cancer treatment unit with advanced
equipment.

→ Project B: Upgrading the hospital’s electronic health record (EHR) system
to improve efficiency and compliance.

→ Project C: Expanding the emergency department to reduce wait times.

Based on the project selection example (Hospital case), why are selection techniques needed here ? (2)

• Limited resources

• Competing strategic goals

what are the common project selection techniques ?

• Cost - benefit analysis

• Scoring models

• Risk assessment

What is the “Cost-benefit analysis” used for

Compare financial impact vs. patient benefits

What is “Scoring model” used for ?

Ranking projects based on criteria like patient safety, community impact, regulatory compliance, and ROI

What is “Risk assessment” used for, in project selection

Evaluate risks like construction delays or technology adoption challenges

What the project selection checklist (3)

• Does it fit business strategy ?

• Is there a business case ?

• Which project is the best selection given the limited capital resources?

Which comes first: Business strategy or Business case? + why

Business strategy

→ Helps businesses understand strategic landscape before making the case

What is a business case?

Justification for undertaking a project, evaluating costs, benefits, and rationale

What are the 4 perspectives of the Balanced Scorecard (BSC) ?

• Financial

• Customer

• Internal Process

• Learning & Growth

What does BSC stand for

Balance Scorecard

How does BSC support project selection

Links projects to strategic objectives and measures success through different angles - not just money.

→ e.g. (customer satisfaction, faster systems, innovation)

Types of business cases. (4)

• Strategic

• ROI

• Compliance

• Sustainability

What is a research-based business case?

A project pursued for learning, even if not profitable.

What is peer review in project selection?

Involves asking peers/experts to review your plan, give feedback on whether it makes sense and can succeed.

What is a murder board?

A committee that critically challenges a project to find reasons for rejection.

Name three benefit measurement methods.

• Weighted Scoring Models

• Economic Value Added (EVA)

• Cost–Benefit Analysis.

Explain EVA?

Is an estimate of the economic value a project creates beyond capital investments by the organisation.

What does a positive EVA indicate

That the project generates revenue more than the required minimum

What does a negative EVA indicate

That the project is not worth considering

EVA is expressed in __________ terms, not as a __________

Numerical, percentage

(e.g. → €12,000)

Formula for EVA

(Net Investment, €) * (Estimated ROI, % - Cost of Capital, %)

EVA Calculation example

A new handling, storage and retrieval system in a warehouse will cost €300,000.

→ The cost of funds for the project is 12%.

→ The reduction in time, labour cost and errors, and the improvement in turnaround time will mean an estimated return on investment of 16%.

Calculate the EVA for this project

Investment = €300,000

Estimated ROI = 16%

Cost of Capital = 12%

(€300,000) * (16% - 12%)

EVA = €12,000

What are the 3 main investment appraisal methods

• Payback Period (PP)

• Net Present Value (NPV)

• Internal Rate of Return (IRR)

Define payback period.

Time to recover initial investment from net cash flows

Why is a shorter PP attractive?

Faster recovery of investment

PP formula

PP = Initial Investment (€) / Expected return each year (€)

PP calculation example

3 projects, each requiring an investment of €1000.

Project A will have an annual return of €300

Project B will have an annual return of €200

Project C will have an annual return of €50

Which project should I pick based on PP ?

Project A: 1000 / 300 = 3.3 yrs

Project B: 1000 / 200 = 5 yrs

Project C: 1000 / 50 = 20 yrs

= Therefore pick A

Explain NPV

Is the difference between the present value (PV) of cash inflows and outflows over a period of time.

Formula of NPV

(Cash Outflows at PV) + (Cash Inflows at PV)

What does negative NPV indicate ?

Project is not viable

What is a program in project management

A group of related projects managed together

What is a portfolio

A group of programs / projects, related or unrelated, managed collectively

How do project, program, and portfolio managers differ ?

Project managers focus on single projects, program managers on related groups, portfolio managers on overall organisational success.