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Unit 3: Strategic Management and Project Selection

critical values above or below which we might wish to reject the project. We will deal in more Notes
detail with these issues later in this Unit.
Clearly, no single project decision needs to include all these factors. Moreover, not only is the
list incomplete, it also contains redundant items. Perhaps more important, the factors are not at
the same level of generality: profitability and impact on organisational image both affect the
overall organisation, but impact on working conditions is more oriented to the production
system. Nor are all elements of equal importance.

Change in production cost is usually considered more important than impact on current suppliers.
Shortly, we will consider the problem of generating an acceptable list of factors and measuring
their relative importance. At that time we will discuss the creation of a Decision Support System
(DSS) for project evaluation and selection.
Although the process of evaluating a potential project is time-consuming and difficult, its
importance cannot be overstated. A major consulting firm has argued (Booz, Allen, and Hamilton,
1966) that the primary cause for the failure of Research and Development (R & D) projects is
insufficient care in evaluating the proposal before the expenditure of funds. What is true for such
projects also appears to be true for other kinds of projects, and it is clear that product development
projects are more successful if they incorporate user needs and satisfaction in the design process
(Matzler and Hinterhuber, 1998). Careful analysis of a potential project is a sine qua non for
profitability in the construction business. There are many horror stories (Meredith, 1981) about
firms that undertook projects for the installation of a computer information system without
sufficient analysis of the time, cost, and disruption involved.
Later, we will consider the problem of conducting an evaluation under conditions of uncertainty
about the outcomes associated with a project. Before dealing with this problem, however, it
helps to examine several different evaluation/selection models and consider their strengths
and weaknesses. Recall that the problem of choosing the project selection model itself will also
be discussed later.

Did u know? Expert judgement is one of the technique used, in project management to
accomplish various tasks, including project selection.

Self Assessment

Fill in the blanks:
1. A project is an allocation of ………………… and human resources to achieve time-specific
objectives.

2. ………………… requires a selection process that maximises the efficiency of scarce business
resources.
3. A project should be assessed for …………………, capability and cost.

4. The most ………………… option needs to be chosen, keeping in mind the goals and
requirements of the organisation.
5. ………………… analysis is used by several organisations to assist them to make their
selections.
6. There are ………………… basic types of project selection models, numeric and non-numeric.
7. The process of ………………… a potential project is time-consuming and difficult, its
importance cannot be overstated.

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