Performance Management

PROJECT MANAGEMENT
Justification of Adopted Projects (E)

What is the project? How to select and justify the project? How to plan and execute the project?

Posted: Sep 2010

After you have determined the value of the various projects that are being proposed and have discarded the projects that do not fit into criteria, you can proceed further with justification of adopted projects. It is necessary to investigate which project fit into company strategy and goals.

It is necessary to drill down and analyze all projects and to compare them in parallel. The projects should be assessed versus all important business parameters. They should be compared between each other at the same time. The list of business criteria that are necessary for project justification are typically the following:

The Company’s Strategy

A company’s strategy determines how the company will compete in the market, generate revenue and satisfy the needs of the customers. Some companies are focusing technological advancements; others are focusing on low costs, while others are heading for innovations and diversity. If the company is striving to be a high-volume, low-cost producer, then it is not in the company’s best interest to fund a project that is designed for low-volume production. The projects to be pursued should match the company’s corporate strategy or at least further its objectives toward meeting the corporate strategy. 

Financial Goals

Company increases the revenue through sales increase, increased productivity, or both. The corporate strategy is very dependent on the company meeting or exceeding its financial goals. Using the financial methods discussed previously enables a company to make sure that the projects it is considering meet or exceed its financial goals.

Side Benefits

The side effects cannot be easily defined, so the criteria for successful side benefit cannot be established. Simply, the side benefit is the additional feature of the project that contributes to overall chances to the project to be selected.

Competitive Implications

Any competitive advantage that is gained through the project is the argument in favor of that project. The innovations on project or the process that increase the competitiveness of the company in the market increase the chances of project to be selected. The longer the period of gained competitive advantage, the higher priority is given to the project.

Interdependencies

It will not benefit the company to implement only one of two projects if the second project is needed to realize the promised results from the first one.

The justification of the project is not just matter of financial comparison. The project validation should be done through cross functionally approach. This means that different angles should be used for project justification.

Continue on Project Management:
 
1. Project Management Overview 
2. 9 Areas of Project Management 
3. Project Lifecycle – 5 Stages of Project  
4. How to Determinine a Value of the Project? 
    4.1. Simple Payback 
    4.2. Average Return on Investment (ROI) 
    4.3. Net Present Value (NPV) 
    4.4. Internal Rate of Return (IRR) 
    4.5. Cost/benefit analysis 
    4.6. Time value of money 
    4.7. Present value of future payments 
    4.8. Justification of Addopted project 
5. Project Planning – Project Charter 
6. Work Cascading Structure (WBS) 
7. Project Scheduling ( Arrow-on-Arrow and Gantt Chart ) 
8. Project Scheduling  ( CPM and PERT ) 
9. The Responisbility Matrix 
10. Resources and Budget Planning 
11. Clasification of Projects