Choose the Most Viable Project Using One of These 7 Popular Methods
Project selection methods are vital to businesses; they enable organizations to evaluate potential projects objectively, align them with their strategic goals, and allocate resources efficiently. Simply put, a robust project selection process ensures that businesses choose projects based on their feasibility, profitability, and potential impact on business growth.
That is why businesses look for project managers who are well-versed in project management and selection. Such professionals help businesses prioritize projects and make informed decisions about which projects to pursue or abandon. This further helps businesses better allocate resources, reduce the risk of project failure, and increase the chances of achieving business objectives.
What is Project Selection?
Project selection is a process used by businesses to evaluate and choose among various project proposals based on predetermined criteria, organizational goals, and available resources. The goal is to identify the most feasible projects that align with the business’s strategic objectives and also provide the best return on investment.
For example, consider a construction company that wants to upgrade its existing facilities and has received several project proposals for that purpose. It can therefore use project selection methods to assess each proposal’s feasibility, estimated costs, benefits, and alignment with the company’s strategic goals. The company is thus able to select the most viable project based on a set of objective criteria. Consequently, they can also allocate the right kind of resources to the project.
Doing so ensures that the company invests its resources in the most promising projects and avoids wasting resources on projects that are unlikely to meet its objectives.
Importance of Project Selection Methods
Project selection methods are crucial for businesses as they are essential for the successful completion and delivery of projects. By using a well-defined selection process, organizations evaluate potential projects objectively and see which ones are best suited to meet strategic goals.
Additionally, project selection methods also help organizations manage their resources efficiently. By selecting the most appropriate projects, for example, businesses can allocate their resources effectively, avoid waste, and maximize their returns. This, in turn, enables organizations to stay competitive and grow their market share. Overall, project selection methods are essential in helping businesses make informed decisions about which projects to pursue, based on which ones will deliver the maximum value to the organization.
What is the Project Selection Process?
This is a structured approach that helps organizations evaluate and prioritize potential projects based on a set of criteria. The project selection process typically involves a project selection committee or a Project Management Office (PMO) that oversees the process and makes the final decision on which projects to pursue.
Project Selection Criteria
Before beginning the process of selection, it is imperative to keep the following four factors in mind:
1. Strategic Alignment
The project must align with the broader strategy of the firm. It needs to give a high return on investment while also contributing to the long-term goals of the company.
2. Risk Assessment
Businesses must also analyze the project to identify any potential challenges to its success. Examples of such risks include overrunning costs, missed deadlines, and last-minute or unplanned resources to complete the project.
3. Feasibility
The project team must be able to finish the work within the allotted time, money, and resources.
4. Resource Allocation
Project managers must analyze the project in terms of the availability and distribution of resources. The right team must have the knowledge, skills, and experience to successfully complete the project.
ALSO READ: What is Project Management and How to Become a Successful PM
What are the Top 7 Project Selection Methods?
The following seven strategies can be of great assistance in making the best selection.
1. Cost-Benefit Analysis
The purpose of a cost-benefit analysis provides an estimate of the costs as well as the advantages that are connected with a specific project. This project selection method determines the most efficient and economical manner to carry out a project.
2. Scoring Models
When considering a project, the project manager or selection committee creates a list of criteria that must be met. Each criteria is assigned points according to their relevance and priority. This is the scoring model. This further provides a more unbiased perspective on the overall project and helps the team use this model to choose the right project. The one that scores the highest is the one that’s selected.
3. Payback Period
The project payback period is a method of calculating the ratio of total cash to the average cash period. Essentially, this helps businesses assess the time it will take to recover the initial investment made in a project. Therefore, the sooner the recovery, the better the project from the business’s perspective.
4. Net Present Value
The difference between the project’s current worth of cash inflow and its current value of cash outflow is called the net present value of the endeavor; the inflow-outflow difference gives you the value. Businesses use this method to select a project whose net present value is the highest after running the required analysis.
5. Internal Rate of Return
This strategy enables firms to evaluate and compare the potential profitability of projects by determining the point at which the present value of outflows equals the present value of inflows. This thus helps them make informed decisions about project selection.
6. Discounted Cash Flow
This method encompasses inflation. This refers to the probability that a certain amount of money held today will not have the same purchasing power in the future. Hence, project managers must consider this when estimating the cost investment and return on investment of a project.
7. Opportunity Cost
It helps select the better project option by comparing the potential costs of the projects. Essentially, project managers opt for the project with the lesser potential cost. This method simplifies the decision-making process and helps in maximizing the return on investment by choosing the most profitable project.
Explore a Project Management Career With Emeritus
Professionals can build their dream careers in project management with the right foundation, skills, and guidance. Begin by enrolling in the online project management courses offered by Emeritus. These courses can help you craft a successful lucrative career path in a relatively short amount of time.
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