EGCM Company- Project Screening Methods and Selection, Decision-Making over the Project Life Cycle - Case Study Example

Project Screening Methods And Selection Name Institution Date Introduction EGCM is a medium sized prototyping company that has been in existence for the last ten years. The company is a family owned business and wants to undergo expansion in terms of upgrading and increasing its prototyping business. Since inception the company has achieved steady growth with a solid base of clients. It has come that time due to various social and economic changes in the market place, coupled with the latest technological advancement where new types of prototyping equipment is being invented. Options available Option one: Build on existing company practices on Prototyping The advantages of this option are that its low risk because the business has a working philosophy, a functioning structure and the requisite in manpower place. In addition there will be no need to train the staff because they know how the system works. So in terms of cost, this option is very efficient but when it comes to speed and efficiency it remains more or less the same. Option 2: Acquire New Technology This option requires the company to abandon the current model of business and choose the 3D technology that will translate to high speed and low cost prototyping. The risk of this option is high because it requires upfront capital to buy new equipment and the new software. It will also that the staff be trained afresh or be sacked all to gather so that those who understand this new technology be hired. Approaches to Project Screening and Selection According to Brown and Eisenhardt (1997)roject screening is a process of evaluating various options in order to acquire useful information which can then be used in making a decision among the many available options on the way forward (Saaty, 1996).Available literature shows that there are four main projection selection models. They include; the checklist model, simplified scoring model, profile models, and the analytical hierarchy process(Lehtonen, 2001). In this section each of these models will be discussed in relation to the EGCM case. 1. The checklist Model According to this model when a business is faced with a dilemma of choosing among various alternatives, they should think carefully what the criteria of they will use in determining the alternatives to settle. EGCM for instance needs to consider, cost, efficiency, returns, past business experience as well as the risks involved (Saaty, 1996). Then each of these criterions will be rated on a scale of high, medium and low. The option that gunner the most positive checks then becomes the best alternative. See for example; A Table Illustrating the Checklist Model Performance Option Criteria High Medium Low Option 1 Cost x Risks x Past Experience x Returns x Availability of Skills x Efficiency x Option 2 Cost x Risks x Past Experience x Returns x Availability of Skills x Efficiency x According to the table above option two is the optimal in this on the basis of the criteria employed. Howeveras Pinto and Millet (1999)Notes this model is not without weaknesses. For instance the use of the term high medium and low is very subjective and thus are subject to being misinterpreted or misunderstood. Additionally this model does not address the issue of trade-offs well and that affects the decision model. While that is the case, this model remains among the easiest to employ. 2. Simplified Scoring Model According toMian and Dai (1999)this a model where the criterion to employed is ranked in the order of their importance. For instance as stated above, EGCM’s criteria is based on returns, risks, past experience, availability of skills, cost and efficiency. These are therefore ranked depending on which is considered more important than the other. Afterwards they are subjected to a scoring model; The ranking will appear as follows: Criterion Importance Weight Cost 6 Risks 5 Past Experience 4 Returns 3 Availability of Skills 2 1 The next stage will be to assign to each criterion depending on whether it was rated high medium or low in the checklist model. As Dye and Pennpacker (1999) note even though adding a checklist here complicates the scenarios but at the same time opens our eyes to see more clearly on which option is more viable. Thereafter the scores will be multiplied with the weighted importance to get the score of each criterion. All the weighted score will be added to get the overall project score. The option with the highest score then becomes the best alternative. See the table below; Simple Scoring Model Option Criteria Importance Weight(A) Score (B) Weighted Score (A*B) Option 1 Cost 6 1 6 Risks 5 2 10 Past Experience 4 3 12 Returns 3 2 6 Availability of Skills 2 3 6 Efficiency 1 2 2 Total 42 Option 2 Cost 6 3 18 Risks 5 2 10 Past Experience 4 1 4 Returns 3 3 9 Availability of Skills 2 2 4 Efficiency 1 3 3 Total 48 The only limitation of this model is that while it looks more appeal but its use of numbers to rank the criteria raises some critical question. For instance Pinto and Millet (1999) argue that when the ranks are say 1 to 5; the assumption is that 5 is the best but sometimes the difference between sat 5 and 4 may not be the same as between 1 and 2. The model also fails to link the business objectives of the intended project to the weight importance of the criterion. However, the model is equally good because it combines various criteria thus enriching and in a way structuring the decision making process (Mian and Dai, 1999). 3. The Analytical Hierarchy Model This model was created by Thomas Saaty (Saaty, 1996) and its designed to deal with many of the technical as well as the managerial problems. This model has four main stages; to begin with there is need to structure the hierarchy of criteria and its subcriteria. For instance the criteria for GCEM arereturns, risks, past experience, availability of skills, cost and efficiency. Therefore the ranking will appear as follows; Hierarchy of Selection Criteria Selection Choices First Level Second Level Returns Short term Long term Cost Affordable Costly Past Market Experience Aware None Availability of Skills Need to acquire Use Existing Efficiency High Low The next step will be to allocate weight to the criteria. According to Elton and Roe (1998)the pairwise comparison option is the best alternative. The pairwise comparison allows comparison between two criterions. Thereafter the numerical dimensions are located numerical values which then allows for the final stage of project proposal evaluation. 4. Profile Models This model allows the management to weigh the risks and returns of every option available before choosing the alternative with the most return with less risk(Brown and Esenhardt, 1997). This model however has been criticised for the use of the term risk which in many cases is subjective and hard to measure (Lehtonen, 2001). In the case of GCEM each of the options is assigned a risk factor which is measured against the expected returns. Normally there are four types of risks that each organisation should look out for. They include; the technical, capital, goodwill and safety risk. The magnitude of each risk will be weighed by a predetermined scale like in this case from high (3), medium(2) and low (1). See the table below Risk Return Option 1 8 14% Option 2 12 26% Once the returns have been calculated then the two options will be plated against the existing options being used in GCEM. The table above shows that option 2 is the best alternative but before making a conclusion its important calculate the risk and returns of the current project then a comparison is made. This made is better because it allows the management to sieve the options as they make the final decision. However it can also be faulted on the grounds of its complexity. Conclusion In this report there are four project screening methods that have been presented for your selection. Each of them has its advantages and disadvantages. It’s the responsibility of the management to make the best informed choice by remaining as objective as possible. References Pinto,J.K.andMillet,I.(1999). Successful Information System Implementation: The Human Side, 2nd ed. Newtown Square,PA: Project Management Institute. Saaty, T. L. (1996), The Analytical Hierarchy Process.Pittsburgh, PA: RWS Publications. Mian, S. A. and Dai, C. X. (1999),“Decision-making over theproject life cycle: An analytical hierarchy approach,” Project Management Journal, 30(1), 40–52 Dye, L. D. and Pennypacker, J. S. (Eds.) (1999), Project Portfolio Management: Selecting and Prioritizing Projects for Competitive Advantage. West Chester, PA: Center for Business Practices. Elton, J. and Roe, J. (1998), “Bringing discipline to project management,”Harvard Business Review, March–April. Lehtonen, M. (2001), “Resource allocation and project portfolio management in pharmaceutical R&D,” in Artto, K. A., Martinsuo, M., and Aalto, T. (Eds.), (2001), Project Portfolio Management: Strategic Management Through Projects. Helsinki: Project Management Association, pp. 107–140. Brown,S.L.andEisenhardt,K.M.(1997),“The art of continuous change: Linking complexity theory and time-paced evolution in relentlessly shifting organizations,” Administrative Science Quarterly, 42(1), 1–34. Read More