CHAPTER 02 –

Project Selection, Initiation and Stakeholder

Management
Learning Outcomes
• How do Projects Evolve and get Selected
• Understand the Project Organization Structures
• Who is a Project Stakeholder and how do you analyze and
manage them
• Understand the Project Flexibility Matrix and its purpose
How Projects Evolve?
Strategy Planning (Annual Cycle)

SO1: Increase Sales SO2: Increase Market SO3: Reduce WC

by 50% Share by 20% Cost by 18%

Operational Operational Operational

Strategy 1.1@ Strategy 1.2@ERP Strategy 1.3@
Customer Satisfaction Systems Aggressive Marketing

Project 1.1.3
Project 1.2.2 Project 1.3.3
Project 1.1.2
Project 1.2.1 Project 1.3.2
Project 1.1.1
Project 1.3.1
Program 1.1
Project Portfolio for Strategic Objective 1

A strategic business objective leads to specific operational strategies that

result into set of programs that in turn comprises of several projects
Project Selection Process

• For the identified projects, a thorough FEASIBILITY ANALYSIS is

conducted which includes assessing the following:
– Technical feasibility (Prior experience, Technical Capabilities,
etc.)
– Economic feasibility (NPV, Payback, etc)
– Organizational feasibility (Culture and Change Management)
• Businesses create two critical documents for project
selection
– The Business Case Document along with appropriate feasibility
analysis.
– The Benefits Management Plan (documents stating how
benefits will be measured and realized)
• The business case often result in a Go / No-Go decision for the
shortlisted projects.
FEASIBILITY ANALYSIS

• New Gas Station in your locality

• Water Pumps Dealership
• Multi Cuisine Restaurant
• New Metro Line
• Coal Mining Licence for 20 Years
• Sponsorship for Telangana Tigers
Kabaddi Team
• Engine Components for Tejas Mark III
• BoT Basis Recreation Centre for a Hosing
Community
Project Selection
Factors for selection of projects especially when In a 2012 survey, responses
business funds are limited include: from more than 300
1.Focusing on broad organizational criteria: executives suggested
1. There is a need for the project – Eg. provide better
following criteria for project
communications, or improve customer service selection:
2. There are funds available for the project • investments that CREATE
3. There’s a strong will to make the project succeed REVENUE GROWTH is a
2.Simply by categorizing projects top priority (43 percent),
1. As a Problem, an Opportunity or a Directive • followed by IMPROVING
2. Time it will take to complete a project. BUSINESS PROCESSES (20
3. Overall priority of the project. percent),
3.Using Formal Decision Models • enabling BUSINESS
– In the form of benefit measurement models (like INNOVATION AND
Cost Benefit Analysis, Cash Flow Analysis (NPV,
EXPANSION (19 percent),
Payback, Discounted Cash Flow, etc.)
• LOWERING BUSINESS
4.By Expert Judgment
OPERATION COSTS (13
– Staff from other departments, internal/external
consultants, members of professional / technical percent), and
associations / industry groups
 Project Selection

• SSSIHMS wants to become a Leader in ‘Good

Medical Practices’ across India
• Many Suggestions like
– AI Focus
– Telemedicine
– Research Orientation
– Nursing Staff Training
– Linking to Government Hospitals and Schemes
– Awareness Generation
– Adding more specialities
– Etc.
are on your table for discussion with the Director
Portfolio and Programs - Definitions
• A Program is “a group of related projects managed in a
coordinated way to obtain benefits and control not available
from managing them individually”
– A program typically involves multiple projects working toward the
completion of a single deliverable.
– An example of a program is a new communications satellite system
with projects for the design and construction of the satellite and the
ground stations, the launch of the satellite, and system integration.
• In Project Portfolio management, organizations group and
manage projects and programs as a portfolio of investments
that contribute to the entire enterprise’s success

 Projects focus on delivering a product or service

 Programs focus on benefit realization and,
 Portfolios demonstrate investment strategy
Project Organizational Structures
• Predominantly, there are three different types of Organizational
Structures in which Projects and Project Managers operate.

• These are the Functional, Matrix, and Pure Projectized organizations

– In a Functional organization structure, the organization is grouped into
departments where people with similar skills are kept together in forms of
groups
– In a Strong Matrix structure, the project manager enjoys more power than
the functional manager. For example, the project manager has a say in the
allocation of resources.
– In a Weak Matrix structure, the functional manager reigns supreme and a
project manager works like a project coordinator. A project coordinator has
some say in the allocation of resources
– In a Balanced Matrix, both have equal power. Resources working on a project
can face communication difficulties due to the lack of clarity on whom to
report.
Portfolio, Programs and Projects

• Program and project management focuses on doing programs

and projects the “right” way;
– A program manager provides leadership and direction for the project
managers heading the projects within the program
– Program management harmonizes its program components and controls
interdependencies in order to realize specified benefits.
– Project management enables the achievement of organizational goals and
objectives

• Portfolio management focuses doing the “right” programs.

– Portfolio managers help their organizations make wise investment
decisions by helping to select and analyze projects from a strategic
perspective
– Portfolio management aligns portfolios with organizational strategies by
selecting the right programs or projects, prioritizing the work, and providing
the needed resources.
Video Resource

• https://www.youtube.com/watch?v=i9-
1v7ujvTk
Project Organization Structure..Contd

• It’s always helpful for a project manager to know in advance what

type of organization you are working in to better understand your
level of authority. Skilled project managers typically prefer a
projectized organization to others.
• Factors for fitment include:
– The length of the project:, long term projects are best served with a
strong matrix or pure project structure.
– Functional areas to be engaged: the more functional areas that need
to be engaged, the more advantageous the matrix or pure project
structure will be.
– Project resources needed dedicated (full time) project resources are
best served in a strong matrix or pure project structure.
– Project complexity : the more complex a project, the more flexibility is
needed in the structure, so a matrix or pure project structure would be
best.
– The technical or functional depth of the project: for technically deep
and functionally specific projects, the functional or weak matrix would be
best.
Project Organization Structure

• https://www.youtube.com/watch?v=Ocm4k
vLx6d4
Project
Organizational
Structures
Comparison
Table

Influences of
Organizational
Structure types
on Project’s:
 PM’s authority
and availability
 Shared or Full
time team
resource
availability
Project Management Office (PMO)
• The PMO is a specialized structure that has been implemented in many
companies in an effort to improve the overall success rate of projects.
• The ultimate goal of a PMO is to provide value to the organization,
the projects, and the project managers
• The primary purpose of PMO is to provide support to the projects and
Project Managers within an organization including:
– Own and provide support for the organization's Project Management methods and
processes
– Provide Project Management expertise and coaching
– Provide Project Management education support for the organization
– Support the organization's project tools and techniques
– Serve as a repository for best practices
– Provide standards for reporting and measuring project progress
– Conduct project audits
– Facilitate project reviews with Senior Management
– Assist with resource allocations across projects
– Assist with project selection and support the Project Portfolio management process
Project Initiation Stage

/ Project Selection
Project Initiation
• After projects are finalized by the business, project initiation step kicks
off. It includes recognizing and starting a new project or a project phase
• The inputs to the Project Initiation process are:
– The business case and the funding availability
– The business Go-ahead
• Project initiation activities include:
– Identify all project stakeholders and analyze their goals or interests.
– Communicate with stakeholders to understand the vision / mission /
objectives and also to firm up their commitments.
– Define the project charter document
– Organize the assignment/recruitment/transfer of employees and / or
contractors to the project team.
– Acquire/set up space, equipment, and facilities for the project team.
– Conduct project/phase kickoff meeting.
– Conduct initial team orientation/training.
Project Charter
• A Project Charter is a document that formally recognizes the
existence of a project and provides direction on the project’s
objectives and management.
– Also Known As Project Data Sheet, Proposal, Plan of Record
– Charter enables management to let the rest of the organization know
of the project.
– Charters are normally short and include key project information and
stakeholder signatures.
• A detailed contract can also represent a project charter.
– Created and signed by Executive with the power and authority to
assign funding resources for this project
– The project charter authorizes the project manager to begin and to
assign project resources to it.
– The charter is a living document that is updated for each phase of a
project in both the initiation and planning processes.
Project Charter defines Vision, Mission, Objectives
• A Problem is an issue that needs to be resolved or
a gap between where one is currently and where
one wants to be, to reach the stated goal.
– A goal by itself is not a problem. Obstacles/Issues
must exist for a problem.
• Vision is what the final state will “look like.” It
defines what is “complete or done.”
• A Mission is what we do to achieve the vision. It Vision
answers the two questions
– “What are we going to do?” and
– “For whom are we going to do it?”
• An Objective specifies a desired end result to be
achieved.
• Objectives should be SMART – Simple,
Measurable, Attainable, Realistic and Time bound
 Key Elements of a Project Charter
1. Official Project Name, Project Sponsor and contact information, Project
manager, authority level and contact information
2. A Project Objective statement (defines business need and justification)
– POS are less than 25 words encompassing the purpose, schedule, scope and
resource targets; POS should be clear and unambiguous
3. Business case for the project - Reasons why the project needs to happen
4. Project overview that describes the business requirements and its phases.
– General statement of what are the requirements and how the team will approach
the project
5. Project organization which identifies roles & responsibilities
• The project manager, the executive sponsor, the steering committee, the users,
outside consultants and suppliers etc.
6. A description of major project deliverables
7. Basic timeline of when the work will be implemented
8. Project Success / Completion criteria or for current project phase
9. Key project assumptions and constraints
10.Project resources, budget, staff and vendors
CHAPTER-2-SUMMARY
Project Selection Process:
• Feasibility-Technical, Economic, Organisational
• Critical Document-Business Case Document and Benefits Management Plan
Factors for selection:
Organisational Criteria (Need, funds available and the will); Categorizing projects (opportunity, time, priority); Formal
decision models, expert judgement.
Others: Revenue Growth, Lower costs, Improving business processes, enable innovation and expansion.
Program: Group of related projects managed in a coordinated way to obtain benefit and control-not available from managing
them individually.
Project Organisation Structures: Functional, Matrix, Pure Projectized
Criteria for Strong Matrix or Pure Project Structure: Length, Resources and Complexity
Ultimate goal of PMO: Providing value, expertise and coaching; PM Education; supporting tools and techniques; repository
for best practices; provide standards; conduct audits; project reviews; resource allocation; support project portfolio
management process
Project Initiation activities: Stakeholder Analysis, Stakeholder communication, project charter doc, works related to project
team, project kick-off meeting, Team orientation/training.
Project Charter: Doc that recognises the existence, provides direction
Key Elements: Basic Details; POS; Business case; Project Overview; Project Organisation, major project deliverables;
timelines, Success/ Completion criteria, Key assumptions, resources, staffs, budget, vendors for the project
Project Stakeholder Management-impacted, contribute and benefitted
Types-Internal and External
Controlling Stakeholders Engagement: controlling level of engagement ; active participation; PM meet before actual meeting;
Related project schedule
Project Integration Management:
Processes and activities-Identify, define, combine, unify-coordinate various processes and PMA
PIM involves choices about-Resources, competing demands, examining alternative approach, tailoring the process, managing
interdependencies.
Project Stakeholder Management
• A Stakeholder is anyone who has a vested interest / stake in
the outcome of the project.
• The purpose of project stakeholder management is to
identify all people groups or organizations who are impacted
by a project, to analyze stakeholder expectations, and to
effectively engage and manage the stakeholders
• Identifying the stakeholders begins by asking three basic
questions:
– Who benefits from the project?
– Who contributes to the project?
– Who is impacted by the project?
• As stakeholders are key to a project’s success, they must be
engaged or involved in order for a project to succeed.
– Good communication between the project manager and the
stakeholders throughout the life of the project is critical for overall
project success.
Stakeholders Identification
• Two Types of Stakeholders
– Internal project stakeholders generally include the project sponsor, project
team, support staff, and internal customers for the project. Other internal
stakeholders include top management, other functional managers, and other
project managers because organizations have limited resources
– External project stakeholders include the project’s customers (if they are
external to the organization), competitors, suppliers, and other external groups
that are potentially involved in the project or affected by it, such as government
officials and concerned citizens
• The output is a Stakeholder Register document
– It is necessary to focus on stakeholders with the most direct ties to a project, For
example key customers and suppliers only
 Stakeholder Analysis – Influence / Impact Grid
• The Influence/Impact grid or
matrix, is a tool that helps you
understand which stakeholders
have the most influence and the
impact they can make on project
success.
– Influence is the level of involvement
the person has and impact is the
ability of the stakeholder to bring out
a desired change.
• By focusing on the key set of
project stakeholders, one can
prioritize stakeholders requests, Stakeholders that lie in the Manage
spend time as per influence and Closely quadrant can easily ensure project
impact stakeholders have, and failure, if you don’t manage them properly.
lead your project to a success
without stakeholder conflicts.
 Tool: Stakeholder Engagement Matrix

This matrix helps

with the overall
management of
stakeholders by
plotting current and
desired levels of
engagement.

The engagement
matrix acts as an
effective
complement to the
stakeholder register,
as it enables you to
plot the desired
engagement level
for each stakeholder
Managing Remote and External Stakeholders

• “Out of sight, out of mind.” - The distributed nature of our

project teams and stakeholders requires a full-time effort for
PM to manage these project situations.
– Invest time and effort in one-on-one interaction when working with
remote, external stakeholders.
• Remote, external project stakeholders always present unique
challenges.
– PM usually is forced to meet and communicate with these
stakeholders via teleconference, Internet, videoconferencing, Skype,
and using other technology.
• The project manager as leader utilizes trust as an invaluable
commodity in these project contexts.
Ways to Control Stakeholder Engagement
 You cannot control stakeholders, but you can control their level of
engagement.
 Engagement involves a dialogue in which people seek understanding and solutions to
issues of mutual concern
 Key stakeholders should be invited to actively participate in a kick-off
meetings and project activities rather than merely attending it
 The project manager should emphasize that a dialogue is expected at the
meeting, including texts or whatever means of communication the
stakeholders prefer. The project manager should also meet with
important stakeholders before the kick-off meeting
 The project schedule should include activities and deliverables related to
stakeholder engagement, such as surveys, reviews, demonstrations, and
sign-offs.
 Ensure that Stakeholders are communicated timely on the project related events and
status
Project Integration Management
• Project Integration Management includes the processes and
activities to identify, define, combine, unify, and coordinate the
various processes and project management activities within the
Project Management Process Groups.
– These actions should be applied from the start of the project through completion.
• Project Integration Management is specific to project managers.
– Whereas other Knowledge Areas may be managed by specialists (e.g., cost
analysis, scheduling specialists, risk management experts), the accountability of
Project Integration Management cannot be delegated or transferred.
– The project manager is the one who combines the results in all the other
Knowledge Areas and has the overall view of the project. The project manager is
ultimately responsible for the project as a whole.
• Project Integration Management includes making choices about:
 Resource allocation,
 Balancing competing demands,
 Examining any alternative approaches,
 Tailoring the processes to meet the project objectives, and
 Managing the interdependencies among the Knowledge Areas.
Project Integration Management Processes

CR – Change Request
WPD – Work Performance Data / Report
Approved Change Requests

The Project Integration Management processes are:

4.1 Develop Project Charter—The process of developing a document that formally authorizes the existence
of a project and provides the project manager with the authority to apply resources to project activities.
4.2 Develop Project Management Plan—The process of defining, preparing, and coordinating all plan
components and consolidating them into an integrated project management plan.
4.3 Direct and Manage Project Work—The process of leading and performing the work defined in the
project management plan and implementing approved changes to achieve the project’s objectives.
4.4 Manage Project Knowledge—The process of using existing knowledge and creating new knowledge to
achieve the project’s objectives and contribute to organizational learning.
4.5 Monitor and Control Project Work—The process of tracking, reviewing, and reporting overall progress
to meet the performance objectives defined in the project management plan.
4.6 Perform Integrated Change Control—The process of reviewing all change requests; approving
changes and managing changes to deliverables, organizational process assets, project documents, and the
project management plan; and communicating the decisions.
4.7 Close Project or Phase—The process of finalizing all activities for the project, phase, or contract.
Project Flexibility Matrix tool
A simple but effective tool that helps guide tradeoff discussions
on scope, resources and schedule with key stakeholders.
The matrix is derived from:
 Discussion and clarification with sponsor and key stakeholders
 May change over time and require validation
 Requires a conscious business decision to change
Scope Schedule Resources


Least


Moderately

Most 
Project Kick Off Meeting
A project kickoff is a meeting or a launch event to introduce the project to all
the stakeholders

Objectives: Purpose:
• Sets the tone for the entire • Successfully start the
project project
• Is friendly, yet authoritative and • Develop a common
organized understanding of project
• Used as a mechanism to assign goals and priorities
the ownership of the project to • Reduce front-end fuzziness
the team • Start team building
• Allows management to rally the • Begin development of
troops, organize the team and get project definition
everyone excited about the documentation
upcoming plans
• Enables the PM to convey to the
team the challenges on the
project and the rewarding
experience at its completion
Class Activities or Action Items

• Take a look at Project Organization Structures and

Project Management Videos
• Start Identifying a Project for your Mini Project
Assignment.
– As you go through each chapter, do think about the concepts
studied and start reflecting with regards to your mini project and
start updating your project plan document as per template
provided
• Identify all the Stakeholders for your project and do a
stakeholder analysis and map the stakeholders to the
stakeholder influence/impact grid
• Define the Project Charter (Vision/Mission and
Objectives – POS Statement for your project)
• Define a Project Flexibility Matrix
• BACKUP Slides
Technical Feasibility: Can we build it?
• Familiarity with application
– Users’ and analysts’ familiarity with business application area
• Familiarity with technology
– Have we used it before? How new is it?
– Is it the right technology for the business
– How will the new technology affect the users
– How soon will the technology become obsolete
– What are its likely impact on other organization systems and software
– How will this technology allow a business to be more productive and
competitive
• Project size
– Scale (number) of people/resources involved, time, and features
• Compatibility
– Extent to which new technology will work with existing technology
• Does the project have a reasonable deadline
– Projects cannot last forever
Economic Feasibility..Contd
• Financial Assessment Method
– Cost Benefit Analysis
• Identify types of costs and benefits
– Costs - development, operational
– Benefits - tangible, intangible
• Assigning values to costs and benefits and then conducting analysis
• Select project with highest benefits analyzed
– Payback period, average annual rate of return, etc.
• Payback period Calculation
– Project cost = 100,000
– Net cash inflow per year = 25,000
– Payback period = 4 years
• Select project with least payback periods
– Discounted Cash Flow
• Considers the time value of money, the inflation rate, and the firm’s
return-on-investment hurdle rate for projects.
• NPV (Net Present Value) = Io + ∑Ft∕(1 + k)t for t=1..n
– Io= The initial investment, which will be –ve
– Ft = The net cash flow in period, t
– k = the required rate of return or hurdle rate
– 100,000 + 25,0001 / (1+ .10)1
• If NPV is greater than zero accept the project. Also, choose projects that
provide high returns early in the project.
Project Business Documents… Contd
• Assess Organization Feasibility
– Strategic alignment
• How well do the IT project goals align with business objectives?
– Regulatory requirements
• Security or backup and recovery requirements
• Industry standards and regulations
– Organizational Cultural and Value Fitment
• The analysis are then compiled into a feasibility report or a Business Case
document and submitted for management review and approval
– Feasibility is reassessed from time to time throughout the project
• The project benefits management plan is the document that describes how
and when the benefits of the project will be delivered, and describes the
mechanisms that should be in place to measure those benefits.
– Benefits definition would include both tangible and intangible benefits
– Strategic alignment
– Timeframe for realizing benefits, benefits owner etc.
• The project sponsor is generally accountable for the development and
maintenance of the project business documents
 Net Present Value Analysis
• Net present value (NPV) analysis is a method of calculating the
expected net monetary gain or loss from a project by
discounting all expected future cash inflows and outflows to the
present point in time.
– Projects with a positive NPV should be considered if financial value is a
key criterion.
– The higher the NPV, the better.
• Return on investment (ROI) is calculated by subtracting the
project costs from the benefits and then dividing by the costs.
ROI = (total discounted benefits - total discounted costs) / discounted
costs
– The higher the ROI, the better.
– Many organizations have a required rate of return or minimum
acceptable rate of return on investment for projects.
– Internal rate of return (IRR) can by calculated by setting the NPV to zero.
NPV =∑t=1..n A/ (1+r)t

Note that
totals are
equal, but
NPVs are
not
because of
the time
value of
money.
 Payback Analysis
• Another important financial
consideration is payback
analysis.
• The payback period is the
amount of time it will take to
recoup, in the form of net cash
inflows, the total dollars
invested in a project.
• Payback occurs when the
cumulative discounted benefits
and costs are greater than
zero.
• Many organizations want IT
projects to have a fairly short
payback period.
 Weighted Scoring Model
• A weighted scoring model is a tool that provides a systematic
process for selecting projects based on many criteria.
• Steps in identifying a weighted scoring model:
1. Identify criteria important to the project selection process.
2. Assign weights (percentages) to each criterion so they add up to 100
percent.
3. Assign scores to each criterion for each project.
4. Multiply the scores by the weights to get the total weighted scores.
• The higher the weighted score, the better.
Figure 4-5. Sample Weighted Scoring Model for Project
Selection
 Stakeholder Alignment and Communication Guide

Stakeholders are
many and varied,
and they are often
affected differently
by the project
deliverable.

They also have

varying levels of
technical expertise
and product /
project knowledge.
 Managing Multi Cultural Dimensions

Understanding
these dimensions
will help you build
trust.

• The five dimensions identify behavioral indicators within the working culture.
The tendency of individuals to use a similar combination of these
dimensions is what results in the formation of a unique culture.
• This can be a very useful tool for project managers when managing
stakeholder culture and to measure the dynamics and drive effective
stakeholder interaction.
Managing Stakeholder’s Disagreements
Four-step process when managing stakeholder disagreements:
• Step 1: Clarify your stakeholder’s position before you take action.
– Make sure you understand his concerns first
• Step 2: Describe the impact to the project that implementation of this
new idea will have. This is often an aha moment for the stakeholder and
can immediately diffuse the situation.
• Step 3: Alternative ideas can be persuasive if your stakeholder is firmly
entrenched. Offer pros and cons of each idea.
• Step 4: Transition to negotiation. Negotiating with stakeholders is a fact of
project life. Front-load all negotiations early in the planning stage but this
may happen all through the project life-cycle. Before you negotiate:
– Do your due diligence plan.
– Know what changes your project plan can and cannot absorb
– Manage scope creep by negotiating needed resources / time
– Win-win; find the common ground for the stakeholder and the project.