Business Project Management

MGT 172
Chapter 2:
Organization Strategy and Project Selection

UCSD MGT 172 - Business Project Management

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Slide 1

Class Roadmap

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Slide 2

Strategic Management Process Overview

Strategic management is the process of
assessing what we are and deciding and
implementing what we intend to be and
how we are going to get there.
Organizational strategy is implemented
through projects.
Every project should have a clear link to
the organizations strategy.
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Slide 3

Driving Forces of the Organizational Strategy

Global Competition
Shortened Product Life Cycles
Industry Consolidation
Accountability

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Slide 4

The Strategic Management Process:

An Overview
Strategic Management
Provides the theme and focus of the future direction
for the organization.
Responding to changes in the external
environmentenvironmental scanning
Allocating scarce resources of the firm to
improve its competitive positioninternal
responses to new action programs
Requires strong links among mission, goals,
objectives, strategy, and implementation.

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Slide 5

Strategic Management Process

Four of Activities of the
Strategic Management
Process
1. Review and define the
organizational mission.
2. Set long-range goals and
objectives.
3. Analyze and formulate
strategies to reach objectives.
4. Implement strategies through
projects.

FIGURE 2.1
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Slide 6

Characteristics of Objectives
S

Specific

State the specific action, behavior or achievement

desired; use concrete behavioral statements.

Measurable

Address quantity and quality. Clarify how much,

how well, or to what level or degree.

Assignable

Make the objective assignable to one person for

completion

Realistic

Make objectives potentially challenging but not so

challenging that the chance of success is small.

Time related

Set a deadline or frequency level. Clarify the when

of the objective.
EXHIBIT 2.1
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Slide 7

Exercise
Can you identify the companies with these power
slogans and taglines?
Do these mission statements appropriately describe
these well known Fortune 500 companies?
Based on the mission statement, what types of projects
would you expect the company to be focusing on?

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Slide 8

Project Portfolio System

Process of selecting a group of projects for
implementation
Balanced by project type, risk, and ranking by
selected criteria
Ensures that projects are aligned with the strategic goals
and prioritized appropriately
Provides information that allows people to make better
business decisions

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Slide 9

Portfolio of Projects by Type

FIGURE 2.2
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Slide 10

Exercise
You manage a hotel resort located on the South Beach on the island of
Kauai in Hawaii. You are shifting the focus of your resort from a
traditional fun-in-the-sun destination to eco-tourism. How would
you classify the following projects in terms of compliance, strategic
and operational goals?
a.
b.
c.
d.
e.
f.
g.

Convert the pool heating system from electrical to solar power.

Build a 4-mile nature hiking trail.
Renovate the horse barn.
Replace the golf shop that burned down when struck by lightening
Launch a new promotional campaign with Hawaiian Airlines
Convert 12 adjacent acres into a wildlife preserve.
Update all the bathrooms in the condos that are ten years old or
older.
h. Change hotel brochures to reflect the eco-tourism image.
i. Test and revise the disaster response plan.
j. Introduce wireless Internet server in the caf and lounge areas.
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Slide 11

Applying a Selection Model

Project Classification
Deciding how well a strategic or operations project fits the organizations
strategy.

Selecting a Model
Applying a scoring model to tie projects closer with the organizations
strategic goals.
Reduces the number of wasteful projects
Helps identify proper goals for projects
Helps everyone involved understand how and why a project is
selected

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Slide 12

Project Evaluation Process

Selection Criteria
Financial: payback, net present value (NPV)
Non-financial: projects of strategic importance to the firm.

Multi-Weighted Scoring Models

Use several weighted selection criteria to evaluate project
proposals.

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Slide 13

Financial Models
The Payback Model
Measures the time it will take to recover the project investment.
Shorter paybacks are more desirable.
Emphasizes cash flows, a key factor in business.
Limitations of payback:
Ignores the time value of money.
Assumes cash inflows for the investment period (and not beyond).
Does not consider profitability.

Payback (years) = Estimated Project Costs

Annual Savings

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Slide 14

Financial Models (contd)

The Net Present Value (NPV) Model
Uses managements minimum desired rate-of-return (discount
rate) to compute the present value of all net cash inflows.
Positive NPV: the project meets the minimum desired rate of return
and is eligible for further consideration.
Negative NPV: project is rejected.

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Slide 15

Nonfinancial Criteria Examples

Long term survival is dependent upon developing and
maintaining core competencies
Reasons for launching projects:
To capture larger market share
To make it difficult for competitors to enter the market
To develop an enabler product
To develop core technology that will be used in next-generation
products
To reduce dependency on unreliable suppliers
To prevent government intervention and regulation

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Slide 16

Checklist Selection Model

Topic

Question

Strategy/alignment
Driver
Success metrics
Sponsorship
Risk
Risk
Risk
Benefits, value, ROI
Benefits, value, ROI
Objectives
Organization culture
Resources
Approach
Schedule
Schedule
Training/resources
Finance/portfolio
Portfolio
Portfolio
Technology

What specific organization strategy does this project align with?

What business problem does the project solve?
How will we measure success?
Who is the project sponsor?
What is the impact of not doing this project?
What is the project risk to our organization?
Where does the proposed project fit in our risk profile?
What is the value of the project to this organization?
When will the project show results?
What are the project objectives?
Is our organization culture right for this type of project?
Will internal resources be available for this project
Will we built or buy?
How long will this project take?
Is the timeline realistic?
Will staff training be required?
What is the estimated cost of the project?
Is this a new initiative or part of an existing initiative?
How does this project interact with current projects?
Is the technology available or new?
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Slide 17

Multi-Weighted Screening Model

FIGURE 2.3
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Slide 18

Project Proposals
Sources and Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external sources (contractors and vendors)

Ranking Proposals and Selection of Projects

Prioritizing requires discipline, accountability, responsibility, constraints, reduced
flexibility, and loss of power

Request for Proposal

Summary of needs and request for action

Statement of Work (SOW) detailing the scope and major deliverables
Deliverable specifications/requirements, features, tasks
Responsibilities: vendor and customer
Project schedule
Cost and payment schedule
Type of contract
Experience and staffing
Evaluation criteria
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Slide 19

Project Proposal

FIGURE 2.4A
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Slide 20

Project Screening Process

FIGURE 2.5
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Slide 21

Priority Analysis

FIGURE 2.6
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Slide 22

Exercise
Purpose:
Provide experience in using a project priority system
Used in industry for many purposes
Ranking job candidates, decisions within a project,

Profile
Film division for large entertainment conglomerate
Main offices in Anaheim, CA
Includes feature films, theme parks, home videos, television channel, interactive games, and
theatrical productions
Steady growth over last 10 years: last year revenues increased by 12% to $21.2B
Film division generated $274M in revenues (one year increase of 7%)
Profit margin was down to 3% to 16% due to poor response to five major film releases

Engaged in negotiations to expand its theme part empire to mainland China and Poland

Mission
Our overriding objective is to create shareholder value by continuing to be the worlds
premier entertainment company from a creative, strategic, and financial standpoint.
Film division supports the mission by producing four to six high-quality, family entertainment
films for mass distribution each year
CEO advocates that the firm take a leadership position in championing environmental
concerns

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Slide 23

Exercise
Company Must Objectives
Every project must meet the must objectives of strategic priority to the company
All projects meet current legal, safety, and environmental standards
All film projects should receive a PG or lower advisory rating
All projects should not have an adverse effect on current or planned operations within
the larger company

Company Want Objectives

Want objectives are assigned weights for their relative importance
Top management is responsible for formulating, ranking, and weighting the
objectives to ensure the projects support the strategy and mission.
Be nominated for and win an academy award for Best Picture of the Year
Create at least one new animated character each year that can start in a cartoon or TV
series
Generate additional merchandise revenue (action figures, dolls, interactive games,
music CDs)
Raise public consciousness about environmental issues and concerns
Generate profit in excess of 18%
Advocate the state of the art in film animation, and preserve the companys reputation
Provide the basis for the development of a new ride at a company-owned theme park

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Slide 24

Exercise
Assignment
You are a member of the team in charge of evaluating and
selecting film proposals
Use the evaluation form to formally evaluate and rank each
proposal
Be prepared to report your rankings and justify your decisions

Assume all projects have passed the estimated hurdle rate of

14% ROI
Proposal is comprised of:
Brief film synopsis
Financial projections of the theater and video sales

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Slide 25

Business Project Management

MGT 172
Chapter 3:
Organization: Structure and Culture

Slide 26

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Slide 26

Class Roadmap

Slide 27

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Slide 27

Organizational Planning
Purpose
Identify, document, and assign project roles, responsibilities, and reporting
relationships
Ensure that the project organization structure is compatible with the work to be
performed
Link to communications planningimpacts project communications
requirements

Challenges to Organizing Projects

The uniqueness and short duration of projects relative to ongoing longer-term
organizational activities creates resource challenges
The multidisciplinary and cross-functional nature of projects creates authority
and responsibility dilemmas.

The best organizational structure balances the needs of the project with
the needs of the organization
Slide 28

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Slide 28

Three Types of Project Organization Structures

Functional
Dedicated Teams
Matrix Structure

Slide 29

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Slide 29

Project Organization: Functional

Different segments of the project are delegated to
respective functional units.
Coordination is maintained through normal
management channels.
Used when the interest of one functional area
dominates the project or one functional area has a
dominant interest in the projects success.
Team members have one clear supervisor
Advantages

Slide 30

Disadvantages

No Structural Change

Lack of Focus

Flexibility

Poor Integration

In-Depth Expertise

Slow

Easy Post-Project Transition

Lack of Ownership

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Slide 30

Functional Organizations

Slide 31

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FIGURE
Slide 31
3.1

Project Organization: Dedicated or Projectized Organization

Structure
Teams operate as separate units under the leadership of a full-time
project manager.
PM has a great deal of independence and authority
Clarity in customer interface
In a projectized organization where projects are the dominant form
of business, functional departments are responsible for providing
support for its teams.

Advantages
Simple

Expensive

Fast

Internal Strife

Cohesive

Limited Technological
Expertise

Cross-Functional
Integration
Slide 32

Disadvantages

Difficult Post-Project
Transition

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Slide 32

Dedicated or Projectized Organization Structure

Slide 33

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FIGURE
Slide 33
3.2

Dedicated or Projectized Organization Structure

Slide 34

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FIGURE
Slide 34
3.3

Matrix Structure
Hybrid organizational structure (matrix) is overlaid on the
normal functional structure.
Two chains of command (functional and project)
Project participants report simultaneously to both
functional and project managers.
Matrix structure optimizes the use of resources.
Allows for participation on multiple projects while
performing normal functional duties
Achieves a greater integration of expertise and project
requirements

Slide 35

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Slide 35

Project Organization: Matrix Form

Advantages

Disadvantages

Efficient

Dysfunctional Conflict

Strong Project Focus

Infighting

Easier Post-Project
Transition

Stressful
Slow

Flexible

Slide 36

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Slide 36

Matrix Organization Structure

Slide 37

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FIGURE
Slide 37
3.4

Choosing the Appropriate Project

Management Structure
Organization (Form) Considerations
How important is the project to the firms success?
What percentage of core work involves projects?
What level of resources (human and physical) are available?

Project Considerations
Size of project
Strategic importance
Novelty and need for innovation
Need for integration (number of departments involved)
Environmental complexity (number of external interfaces)
Budget and time constraints
Stability of resource requirements

Slide 38

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Slide 38

Organizational Culture
Definition: A system of shared norms, beliefs, values,
and assumptions which bind people together, thereby
creating shared meanings
The personality of the organization that sets it apart from other
organizations
Provides a sense of identify to its members
Helps legitimize the management system of the organization
Clarifies and reinforces standards of behavior
Helps to create social order within the organization

Slide 39

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Slide 39

Key Dimensions Defining an Organizations

Culture

Slide 40

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FIGURE
Slide 40
3.6

Homework for Next Session

Read Chapter 4
Read Manchester United Soccer Club Case (Page 126127) and answer questions #1-4.

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Slide 41