Analysis of several methods of selecting the hotte

Analysis of several methods of selecting projects

Abstract: analysis of net present value, return on investment and payback period of investment financial consideration is often an important aspect in the process of project selection, especially in times of economic tension. Implementing the balanced scorecard, Dr. Robert Kaplan and Dr. davidnorton developed another method to help select and manage projects that are consistent with business strategies

method of selecting projects

organizations have identified many potential projects as part of their strategic planning process, and often rely on experienced project managers to help make project selection decisions. However, the organization needs to streamline the list of potential projects to select the projects that will bring the greatest benefits. Project selection is not precise and scientific, but it is a very critical part of project management. There are many ways to choose from potential projects. Here are five common technologies:

1. Focus on the main organizational needs

2. Classify it projects

3. Conduct net present value analysis or other financial analysis

what industries are universal material testing machines suitable for? What should we pay attention to when choosing? 4. Use the weighted scoring model

5. Implement the Balanced Scorecard

in practice, organizations often use a mixture of the above methods to select projects. Each method has its advantages and disadvantages, and the best method to select a project depends on the management to decide based on the specific organization

gathered in a wide range of organizational needs

senior managers must focus on meeting most of the needs of their organization when deciding what projects to carry out, when to carry out and to what extent to carry out the projects. Projects that meet organizational needs are more likely to win because they will be important to the organization. For example, a major organizational need may be to improve security, improve local customs, provide better communication, or improve customer service. However, for many IT projects, it is often difficult to make a strong judgment related to these major organizational needs. For example, it is usually possible to estimate the financial value of these projects, but everyone believes that these projects do have high value. As the old saying goes, "it is easier to measure the value of gold roughly than to count coins accurately"

one way to select projects based on major organizational needs is to determine whether they first meet three important criteria: demand, funding, and willingness. Do organization members think this project should be done? Is the organization willing and able to provide sufficient funds to implement the project? Is there a strong desire for the success of the project? For example, many visionary CEOs can describe a major need to improve some aspects of their organization, such as communication. Although they cannot accurately describe how to improve communication, they will allocate funds to projects that address this need. As the project progresses, the organization must re evaluate the needs, funds and willingness for each project to determine whether the project should continue, redefine or terminate

classify it projects

another way to select projects is based on various classifications. A taxonomy is to assess whether a project responds to a problem, opportunity, or instruction

problems are undesirable situations that prevent an organization from achieving its goals. These problems may be existing or expected. For example, users of an information system may have system login failures or fail to obtain information in time because the system reaches the capacity limit. In response, the company may launch a project to enhance the existing system by adding more access lines or using faster processors, and upgrading the hardware by reducing the use of plastic shopping bags in supermarkets and shopping malls that mainly consume offline by more than 2/3 or more storage space after five years of release

opportunities are opportunities to improve the organization

directives are new requirements imposed by management, government or some external influences. For example, the medical technology involved in many projects must meet strict government requirements

organizations choose projects for any of the above reasons. Generally, projects that solve problems or instruct are easier to obtain approval and funding, because the organization must respond to such projects to avoid affecting the business. Many problems and instructions must be solved quickly, but managers must think systematically and seek opportunities to improve the organization through it projects

another classification of it projects is based on the time when the project is completed or the date on which the project must be completed. For example, some possible projects must be completed in a specific period of time. If they cannot be completed within the set date, they will no longer be valid projects. Some projects can be completed quickly - in weeks, days, or even minutes. Many organizations have an end-user support department to handle small projects that can be completed quickly. Although many IT projects can be completed quickly, it is still important to prioritize them

the third classification method of project selection is to consider the priority of the whole project. Many organizations classify it projects into high, medium and low priorities according to current business conditions. For example, if the rapid reduction of operating expenses is critical, the projects that may help the most in reducing expenses will be given high priority. Organizations should always complete high priority projects first, even if it takes less time to complete medium and low priority B2B projects. Usually, at any time, there are always more it projects that can be done in an organization than can be done, so it is very important to do the most important workflow first

analysis of net present value, return on investment and payback period

financial consideration is often an important aspect in the process of project selection, especially in times of economic tension. As denniscohen and Robert Graham said, "projects never end by themselves. They always end in a financial way, that is cash." Many organizations need to pass business cases before the project, and financial forecasting is a key component of e-commerce cases (see Chapter 3 for examples of business cases). There are three basic methods to determine the expected financial value, including net present value analysis, investment return rate and investment payback period analysis. Because project managers often have to deal with business executives, they must understand how to communicate in their language, which often comes down to the important financial concepts that our technical standards are absolutely true and reliable

return on investment

another important financial indicator is the return on investment. The return on investment (R01) is the result of the project income minus the project cost and divided by the cost. For example, if you invest $100 today and the investment increases to $110 in the second year, the return on investment = (110-100)/100, that is, 0.10 or 10%. Note: ROI is always a percentage, which can be positive or negative. When calculating the return on investment of multi-year projects, it is best to discount the cost and income

the larger the ROI, the better. 112% ROI is very good. Many organizations have required rates of return for projects. The required rate of return is the minimum rate of return required for each investment. For example, an organization requires a return of at least 10%. The organization is based on the required rate of return on its investment in other projects with comparable risks. The internal rate of return (1rr) of the investment is determined by finding the discount rate that causes the NPV of the project to be zero. You can use the target lookup function in Excel (use the help function of Excel to get more information about target lookup) to quickly determine the IRR. Just set the cell containing the NPV calculation to 0 and change the cell containing the discount rate

many organizations use ROI in project selection. Information Weekly asked 200 it and business experts how often they test the normal ROI of IT investment. Opinion polls show that 41% of organizations require R01 calculation for all IT investments, and 59% of organizations require ROI calculation for specific project startup. "

investment payback period analysis

investment payback period analysis is another important financial analysis tool used in the process of project selection. Payback period refers to the time required to compensate the total investment of the project in the form of net cash flow. In other words, the analysis of investment payback period is to determine how long it takes. The cumulative income equals the cumulative cost and subsequent cost. When the difference between the accumulated discounted net income and the cost begins to be greater than zero, the recovery is completed. The cumulative benefit minus the cost of year 0 is $140000. Adding this value to the discounted income and subtracting the cost of the first year results in $8800. Since this value is positive, investment recovery occurs in the first year

when the payback period begins, generate charts for more accurate display. Please note that the straight lines are slightly crossed after the beginning of the first year. The cumulative discounted income and cost are greater than the zero value of the straight-line intersection. It is generally considered very good that the payback period of investment is earlier than 1 year

many organizations have some suggestions on the length of the payback period. They may require that all it projects have a payback period of less than two years or even one year, regardless of the expected NPV and ROI. Rhondahocker, chief information officer of SanJose basedbeasystemslnc., said that intermediate equipment suppliers have a general principle, that is, the investment payback period of it projects should be less than one year. The company also hopes to limit the number of project teams and allow project teams with no more than 12 people to complete a task within four months. Considering the economic situation and the rapid changes in business and technology, the company must pay attention to the rapid release of positive financial results. However, when investing in technology, organizations must also consider long-term goals. Many important projects cannot be recovered so quickly or completed in a short time

in order to facilitate the selection of projects, the project manager must understand the financial expectations of the organization for the project. It is also important that senior management understand the limitations of financial estimation, especially for it projects. For example, for it projects, it is difficult to make good estimates of project costs and project benefits

use weighted scoring model

weighted scoring model is a systematic method for project selection based on multiple criteria. These guidelines may include many elements, such as meeting the needs of the entire organization; Ability to solve problems, grasp opportunities and respond to instructions; The time period required to complete the project; The overall priority of the project and the expected financial indicators of the project

the first step in building a weighted scoring model is to identify important criteria in the PDM Project selection process. It usually takes a lot of time to establish and reach agreement on these guidelines. Brainstorming meetings or exchanging views through team activities are helpful to the establishment of guidelines. For it projects, the optional criteria include:

● support major business objectives

● have strong internal sponsors

● have strong customer support:

● use practical technology

● can be in 1 year or more