Prioritization and Selection Techniques

By Craig A. Stevens, PMP, CC and his students

Table of Contents

1. Pareto Analysis 

2. One-to-one Comparison to Quantify Intangibles

3. Project Portfolio Management Project

Pareto Analysis Tool

This link go to a website that explains the purpose of a Pareto Chart. It tells what questions a Pareto Chart answers and explains how to construct one. http://www.isixsigma.com/library/content/c010527a.asp (Found by Tara W. Mullins, UoP 2005)

Simple way to get a simple, easy to calculate (and most of the time wrong) answer.

A better way follows.

One-to-one Comparison for Quantifying Intangibles

We have used this method to select employees, promotions, sites to build manufacturing facilities, sites for waste storage, cars and photos (to name a few). Example below for selecting a software package.

Criteria For Software Selection 

1. Cost 

2. Quality 

3. Time 

4. Service 

5. Easy to Use

Do the same for each of the other criterion.  Then add up as below. 

Pick the highest total number.  The interesting thing here is this.  If you "only" picked any one criteria as your selection criteria, then you would only have a 40% chance of getting the correct answer.

Project Portfolio Management Project

 Selection Tools and Techniques

Source, B V Dean, Evaluating, Selecting and Controlling R & D Projects (New York AMACOM, a division of American Management Association, 1968)

Projects within a company may be Dependent or Interdependent but not Independent in nature.

Projects compete for:

• Personnel

• Lab Space

• Equipment

• Finances and so on.

We can not do all projects so we should have some selection process because we do not have unlimited funds, time, nor resources.

Nonnumeric Models for Project Selections

1. Sacred Cow - project is suggested by a senior and powerful official in the organization

2. Operating Necessity - the project is required to keep the system running

3. Competitive Necessity - project is necessary to sustain a competitive position

4. Product Line Extension - projects are judged on how they fit with current product line, fill a gap, strengthen a weak link, or extend the line in a new desirable way.

5. Comparative Benefit Model - several projects are considered and the one with the most benefit to the firm is selected

Numeric Models for Project Selections

1. Payback period - initial fixed investment/estimated annual cash inflows from the project

2. Average Rate of Return - average annual profit/average investment

3. Discounted Cash Flow - Present Value Method Internal

4. Rate of Return - Finds rate of return that equates present value of inflows and outflows

5. Profitability Index - NPV of all future expected cash flows/initial cash investment

Example of Project Selection Check List

1. Compatibility with NSSTC objectives;

2. Compatibility with other long-term plans;

3. Availability of scientific skills in R&D;

4. Critical technical problems likely to arise;

5. Balance of R&D program;

6. Interaction with other R&D projects;

7. Competitors R&D programs;

8. Size of potential market;

9. Factors affecting expansion of the market;

10. Influence of government regulations and control;

11. Export potential;

12. Probable reaction of competitors;

13. Possibility of licensing and know-how agreements;

14. Possibility of R & D cooperation with consultants or other organization;

15. Effect on sales of other products;

16. Availability and price of materials needed;

17. Possibilities of ‘spin-off’ exploitation of innovation;

18. Availability of production skills and equipment;

19. Availability of marketing skills and experience;

20. Advertising requirements;

21. Technical sales and service provision;

22. Effects on organization’s ‘image’;

23. Risks to health or life;

24. Probable development, production and marketing costs;

25. Possibility of patent protection;

26. Scale and timing of necessary investment;

27. Location of new or extended plant(s);

28. Attitude of key R&D personnel;

29. Attitude of principal executives;

30. Attitude of production and marketing departments;

31. Attitude of trade unions;

32. Overall effect on company growth.

Merit Numbers

1. Checklist

2. Likert Scale

3. Criterion -- Given a Weighting (Relevance Tree, One-to-One Comparison)
   Includes cost, profits, and probabilities of outcomes

4. Calculate an Overall Merit Number

Other Methods of Project Selection Techniques:

1. Risk Analysis Models

2. Risk-Return Profiles

3. Business-Technical Profiles

4. Statistical Decision Analysis

5. Mathematical Programming

6. Techniques Decision Support and

7. Expert Systems

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