Project Selection Assignment

Project Selection Assignment

Project selection encompasses a thorough assessment of available projects to identify the best ones. Various selection criteria exist when gauging different projects. Some factors considered when making the selection bear more weight to the success of a project. The weighted scoring approach can apply when comparing the viability of the available project options. In this approach, each criterion of selection gets certain weights and is ranked per its importance. According to Ahmad and Ikram (2016), factors of high importance have a higher weight, whereas those with lower values are assigned lower weight. The assessment of projects helps a company concentrate its resources on projects that align with its objectives (Crispin, 2020). Thus, the selection process ought to be thorough to implement sustainable projects.

The assignment presents a Custom Bike Company which evaluates viable potential projects using the following matrix.

Question 1

The following data manipulation was done in Microsoft Excel, and all the projects ranked according to their weighted scores.

Formulas used in excel were as follows;

Weighted Total= SUM(B3*$B$2,C3*$C$2,D3*$D$2,E3*$E$2,F3*$F$2,G3*$G$2)

Ranking= =RANK(H3,$H$3:H7,(0))

With the presented data, the weighted total calculation entails multiplying each criterion’s variables by the weight and then summing the products for each project.

From the ranking, the highest-rated project was project 5, while project 2 became the lowest-rated. Project 5 ranked first, followed by projects 3, 4, and 2, respectively.

Question 2

The Strong Sponsor variable weight was changed from 2 to 5, and data adjusted in the excel file and the following changes were noted. Project 3 becomes the highest-rated as it had the strongest sponsor support, overtaking project 4. The lowest rated project with an increase in the weight of sponsor strength remains as project 2. The three highest weighed projects were projects 3, 5, and 1 in descending order, with weighted scores of 117,116, and 95, respectively.

Question 3

Different factors attain varied weights per their significance to the success of a project. Weights mirroring critical strategic factors ensures the selection of projects bound to succeed. Certain critical factors have higher determining power on the prosperity of a project in comparison to others hence deserve higher weights. In other words, project selection has to be based on central elements or factors that influence the project’s success or failure. These critical strategic factors that the weights of project preferences should mirror include strategic focus, operations, people, marketing, and finances.

The critical factor that is the strategic focus has five major components. The first is the defined vision, which provides a picture or the roadmap of the enterprise or the project team. This factor is represented by way of the vision statement, which outlines the thoughts, challenges, realities, and business competitions in a concise manner. After clarifying the vision, the project team has to outline a challenging mission, clarifying what the entity or the team has to do to attain a set of objectives. The mission should include such items as competition monitoring, customer attraction, continuous education, and wellness seminars, among others. Other components of the strategic focus include achievable goals, strategy for every goal, and a guidance system. Achievable goals put into consideration the nature of the business, the reality of the operating environment, and competition. Strategic alignment for every goal is vital to creating short-term wins and milestones that enable the project team to understand whether the specific objectives are being attained and establish methods of rectifying defects. The guiding system seeks to balance all major elements of the goal attainment process to prevent a scenario where the project team focuses solely on one dimension of the process.

By mirroring the critical strategic factors, the weights facilitate the adoption of a project that better leverages all available resources. For instance, under finances, the project team emphasizes competitive pricing, financial controls, decision-making based on financial data, flexibility, performance implications, and role definition. The people factor considers the staff suitability to the organization and expertise development through continuous learning. Operations aim at streamlining the work processes to ensure quality goods and services in a cost-effective manner. This implication on the production or running cost influences the extent to which flexibility, as it pertains to pricing, can be exercised. Finally, the marketing element integrates sales, consumer relationships, and responsiveness. This aspect is key to building a brand or a project with a good reputation, thus influencing the level of success.

When the weight mirrors the critical factors, it leads to the project’s selection that has a reduced likelihood of failure. One reason why projects fail is due to a lack of focus and prior analysis of the major influencers. For instance, one may consider the financial aspects of a project, disregarding the essence of people and the viability of the processes. This leads to a situation in which the selected project fails due to the misrepresentation of the weight. As such, a good project weight integrates all the critical factors.

Question 4

The question presents two software projects that were proposed for a young startup entity. The calculation of the payback period determines the viability of the projects. The payback period determines the safety of a project, ignoring any benefits of the occurring beyond the return period (Paltrinieri & Ḵẖān, 2016). The payback period considers the cash flow from each of the projects. According to Brag (2020), either the averaging or subtraction method can apply when calculating the payback period. The subtraction approach entails subtracting the cash inflow from the initial cash outflow to generate the period. I used the averaging period when calculating the payback period for each of the projects. It involves division of the initial amount injected into a project by the expected annual cash inflow.

For the Alpha project:  Initial cost= $150000

Annual cash inflow= $40000

Payback period= Initial cost/ Annual cash inflow = 150000/40000

Payback period for project Alpha = 45 months or 3.75 years

For Project Beta: Initial Cost= $200000

: Annual cash inflow= $50000

Payback period for project Beta= 200000/50000= 4 years

Considering the payback periods, project alpha has a shorter payback period of 45 months compared to project beta, with 48 months. This means that the alpha project is able to generate revenue at a higher rate and pay back the initial investment faster compared to the beta project. This scenario may be due to a number of factors, which include initial lower investment, higher demand by the target customers, and a balance between the investment amount and the demand. Regardless of the major determinant, the delicate balance between the variables of initial investment and cash flows means that project Alpha has a faster recovery period and thus becoming a better project.

Conclusion

Proper project selection proves vital to an organization because, without it, the entity can choose a project that is either not viable or unsustainable. The selection criteria vary with the organizational goals and objectives. For instance, people criterion may be central for a non-profit organization, while for-profit entities may lean towards financial and operational perspectives. A suitable project ought to return the investment and bring back profit. Such a project should also be sustainable, considering an organization’s financial capability. Therefore, this understanding calls for an integrated approach to project selection, which considers critical elements in weight determination.

References

Paltrinieri, N., & Ḵẖān, F. (2016). Dynamic risk analysis in the chemical and petroleum industry: Evolution and interaction with parallel disciplines in the perspective of industrial application. Amsterdam: Butterworth-Heinemann, an imprint of Elsevier.

Ahmad, B. & Ikram, H. (2016, June 15). Project selection techniques, relevance & applications in Pakistan. International Journal of Technology and Research, 4

Crispin, G. (2020, March 3). An Understanding of the Different Models used to select Projects in an Organization.  International Journal of Innovative Science and Research Technology, 5, ISSN No:-2456-2165.

Bragg, S. (2020, April 17). How to calculate the payback period. Retrieved from https://www.accountingtools.com/articles/how-to-calculate-the-payback-period.html.