All organizations integrate various functions to provide one or more products and or a services as demanded by the customer. A typical organization will be segmented in several functional groups some of them are performing primary activities such as inbound logistics, production, operations, outbound logistics, marketing, sales, and service while others perform support activities such as: creative, procurement, human resources, IT, finance, accounting, facilities, and management.

Where are we now? Where are we going? 

Regularly, the companies will respond to four  questions. These questions are: where are we now, where are we going, how are we going to get there and how will we know we have arrived. The first step is analyzing the current situation to determine the real position the company has on the market.  In this step, the company will assess customer satisfaction and future demand, internal strengths and weaknesses, market opportunities and threats, its current strategic issues and synthesize the data into a summary SWOT.   Next, the company will revisit its core purpose, also known as the mission statement, its core beliefs or values, its image of what success looks like in 5 years, also know as the vision statement, its competitive advantage, and establish the organization wide strategies for success.  Next, the company will be setting the priorities using SWOT, followed by setting short-to-mid term organizational goals along with key performance indicators to track progress, and cascading them to departments and individuals as action plans. Next, the strategy will be communicated to the whole organization, implemented and reviewed at the end of the year. Implementation of strategy is done through projects.

Types of projects

There are several types of projects in which a company will invest its resources. One type of project can be focused on achieving objectives determined during the business planning or strategic process. This is known as strategic project. They are frequently directed towards increasing revenue or market share, such as new products, research and development. Other type of project , known as operational project, will be undertaken to improve business processes. Lastly, a compliance project is a type of project needed to meet regulatory conditions to operate in a region.

Selection Criteria

Selection criteria are typically either financial or non financial. For example, a company may want to support projects that are profitable, focus on their core competencies as well as capture larger market share, make it difficult for competitors to enter the market, develop a new or improved core technology, reduce dependency on unreliable suppliers and/or distributors, meet regulatory requirements, improve brand recognition or corporate image, and support community development projects.

The most popular financial model is the net present value (NPV). To calculate the NPV, expected cash flow until completion and each year’ rate of return , discounted rate, need to be determined. the discount rate (return on investment hurdle rate) may differ for different projects such as whether the project is strategic or operational, riskier or safer, etc.

NPV = – initial investment + total cash inflow / (1+ rate of return) ^ number of time periods

The higher the positive NPV number outcome, the more advantageous the investment or project. Unfortunately, some important projects are impossible to measure their financial return.

Since no single criterion can reflect, companies develop their own multi criteria screening models. Weighted scoring models typically include quantitative and/or qualitative criteria. These criteria need to mirror the critical success factors of an organization. Each selection criterion is assigned a weight and , for any project, to each criterion a score is  assigned based on its importance to the project being evaluated. The weights and scores are multiplied to get a total weighted score for the project.