PROJECT MANAGEMENT – I SEM

2023-2024
BITS Pilani Dr. ARUN MAITY
Pilani Campus
PORTFOLIO MANAGEMENT
SYSTEM
• Ensure projects aligned with strategic goals and
prioritized appropriately

• Design of portfolio management system

– Classification of the project

– Sources of proposals
– Evaluating proposals

BITS Pilani, Pilani Campus

CLASSIFICATION OF THE
PROJECT
 Compliance and Emergency: “Must Do Projects” to
meet regulatory conditions required to operate in a
region

 Operational : To support current operations e.g.

reduce downtime, improve efficiency, enhance quality
etc.

 Strategic: directly supports long run mission e.g. New

product development, Research & Development
projects etc.

BITS Pilani, Pilani Campus

SOURCES OF PROPOSALS

• Encourage and keep solicitation open to all sources:

- internal sources
- External sources

• Solicit ideas for projects when the knowledge

requirements are not available in the organization

• Request for proposal (RFP)

• Bid to design and build a new operating room that uses latest
technology

BITS Pilani, Pilani Campus

EVALUATION OF
PROPOSALS
• Ranking proposals

• Assess the value of the proposed project to the

organization and for future backup

• Evaluation form to prioritize and select new projects

• Impact of project on meeting a particular objective

BITS Pilani, Pilani Campus

PORTFOLIO MANAGEMENT
PROCESS
• PROJECT PORTFOLIO IDENTIFICATION
• Identification of programs and projects for meeting business goals
• Done by using standard processes supported by standard templates
• Initial cost-benefit analysis to support the evaluation process
• PROJECT PORTFOLIO SELECTION
• Analysis on the ideas and initiatives identified
• Detailed analysis so as evaluate the financial return on investment,
resources and budget needed
• Identify skill development programs and training to execute selected
projects
• Complexity Vs. Business Value
• Multitasking resources can result in schedule slippages, lower productivity
and project conflicts which can lower profits and missed objectives

BITS Pilani, Pilani Campus

• Project Portfolio Initiation

• Generation of Project charter

• Annual Project Budgets are consolidated
• Alignment of the project with business goals

• Project Portfolio Execution

• Portfolio follows the standard procedures of performance

management, status reporting
• Communication Plan
• Risk management across the portfolio

BITS Pilani, Pilani Campus

PORTFOLIO MANAGEMENT
TOOLS
• Project Prioritization Methods
– Checklist Method:
• A set of criteria is defined against which all projects
are evaluated. A project may only proceed when it
satisfies all criteria
• It is simple and quick.
– Paired Comparisons
• Compare each project against all others, one at a
time with the most favorable project scoring 1 and
the other scoring 0.
• Projects then be ordered, based on total scores

BITS Pilani, Pilani Campus

• Dynamic Rank - Ordered Lists

– A set of criteria Is defined on the basis of which projects are

ranked

– For each project, the average criteria ranking is calculated and

used to rank it overall

• Weighted Scoring Models

• Financial Measures

BITS Pilani, Pilani Campus

OPTIMIZING THE
PORTFOLIO
• Objective : Maximize the value of the launched products

– Few products with high average value

– Large number of products with a lower average value

– Reducing expenditure on projects through efficiency measures

or concentrating on low risk products

BITS Pilani, Pilani Campus

OPTIMIZING THE
PORTFOLIO BY TIME
• Analyze:

– Potential launches over time

– Number of launches x probability of their occurrences

– Monte carlo simulation: reasonable range of possible outcomes

(possible future launches)

BITS Pilani, Pilani Campus

OPTIMIZING THE
PORTFOLIO BY RISK
• Test key attributes of a product as early as possible

• Generate information that reduces future uncertainty

• Force early failure

• Minimize the damage from negative outcomes

• Maximize the return from positive outcomes

BITS Pilani, Pilani Campus

LINKING TO STRATEGY

• Linking Portfolio Management To Strategy

– In top - down approach, resources are allocated to areas of the

portfolio and projects are then prioritized within these

– Define the allocation split between early stage and late stage
development projects and then prioritize these separately

– In bottom – up approach, projects are considered in detail and

prioritized at this level

– The strategic fit of projects is addressed by including criteria for

strategic fitness into the project scoring models

BITS Pilani, Pilani Campus

CRITERIA FOR PROJECT
SELECTION
• Financial Models: Preferred Method To Evaluate Projects
– PAY BACK PERIOD (In Years) : ESTIMATED PROJECT COSTS
/ ANNUAL SAVINGS
– RETURN ON INVESTMENT (In %)
– NET PRESENT VALUE (NPV) : Uses Time Value Of Money,
Cash Flows And Profitability

• Non-financial Criteria: Strategic, Less Tangible, Restore

Corporate Image, Enhance Brand Recognition

BITS Pilani, Pilani Campus

TWO MULTI-CRITERIA
SELECTION MODELS
Checklist Model:
– List of questions to review Potential Projects
– Determine acceptance or rejection
Advantage
– Flexibility in selecting different projects with some variations in
questions
Disadvantages
– Fails to answer the relative importance or value of potential
project
– Fails to allow comparison with other potential projects
– Room for power play, politics, manipulation

BITS Pilani, Pilani Campus

EXAMPLE

CRITERION WEIGHTAGE (0-3)

A. STAY WITH CORE COMPETENCIES 2.0
B. STRATEGIC FIT 3.0
C. URGENCY 2.0
D. 25% OF SALES FROM NEW PRODUCTS 2.5
E. REDUCE DEFECTS TO LESS THAN 1% 1.0
F. IMPROVE CUSTOMER LOYALTY 1.0
G. ROI OF 18% + 3.0

BITS Pilani, Pilani Campus

CONTRIBUTION VALUES TO EACH
CRITERION FOR EACH PROJECT

PROJECT A B C D E F G WT. TOTAL

1 1 8 2 6 0 6 5 66
2 3 3 2 0 0 5 1 27
3 3 0 10 0 0 6 0 32
4 1 10 5 10 0 8 9 102

• Highest Priority : Project 4, Then Project 1

• Project Screened Out : Project 2 And 3, If Criterion Is
Weighted Total Should Be More Than 50

BITS Pilani, Pilani Campus

APPLYING A SELECTION
MODEL
• Project classification: Project’s fit to organization’s
strategy
• Selecting a model: Multiple criteria to select the project
• Best use of human and capital resources to maximize
return on investment in the long run
• Researching new technologies, public image, ethical
position, protection of environment, core competencies,
strategic fit

BITS Pilani, Pilani Campus

MANAGING PORTFOLIO
SYSTEM
• Senior Management Input
– Guidance in establishing selection criteria
– Balance available resources with different types of
projects

• Priority Team Responsibilities

– Responsible for publishing the priority of every project
– Periodic priority review keeping organization focus

BITS Pilani, Pilani Campus

ASSESSING PROJECT
PORTFOLIO
DAVID AND JIM MATHESON SCHEME

BREAD AND BUTTER :

• Improvements to current products and services
• Easy to accomplish
• Produce modest commercial value

LOW RISK AND LOW PAY-OFFS

Example: Software Upgrades
Manufacturing Cost Reduction

BITS Pilani, Pilani Campus

BREAD AND BUTTER
PROJECTS
• These are easy-to-do projects that will produce relatively low
value, if successful.

• You need to invest in many of these projects to support

ongoing business needs.

• However, they seldom support high-impact innovation.

BITS Pilani, Pilani Campus

PEARLS

• Low risk development projects with high commercial

payoffs
• Revolutionary commercial advances using proven
technology

LOW RISK AND HIGH PAY-OFFS

Examples: Next Generation Integrated Circuit Chip

Surface Imaging to Locate Oil and Gas

BITS Pilani, Pilani Campus

PEARLS

• These are the relatively easy projects with big returns that the
board wants.

• Pearls usually come from oysters that have proven out.

Unfortunately, not all oysters produce pearls, which is why
you need to include a reasonable number of oysters (high
risk/high value) projects in your innovation portfolio.

BITS Pilani, Pilani Campus

OYSTER PROJECTS

High Risk and High Value Projects

• Technological breakthroughs with tremendous

commercial potential

Examples: Embryonic DNA Treatments

New kind of Metal Alloys

BITS Pilani, Pilani Campus

• These are risky projects

• They are hard to do but have potential to produce game-

changing returns.

• Model companies—those who excel in innovation—will have

a sufficient number of oysters in their portfolios to produce a
few pearls.

BITS Pilani, Pilani Campus

White Elephants Projects

WHITE ELEPHANTS:

• Projects that at one time showed promise but are no

longer viable

Examples: Products for a saturated market

BITS Pilani, Pilani Campus

White Elephant Projects

• These are projects that are hard to do and if successful,

produce relatively low return on the investment.

• Remove them from your portfolio to free resources to apply to

more valuable opportunities.

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus
High Complexity Dropped To be selected

Low Complexity Preferred

Low Business Value High Business Value

BITS Pilani, Pilani Campus

 BITS Pilani
Pilani Campus

PROJECT ORGANIZATION STRUCTURE

Lecture No. 3 CHAPTER 3 OF T 1
TOPICS

• Need

• Organization Structures

• Right Organization Structure

• Organization Culture

• Case Study

BITS Pilani, Pilani Campus

3. 0 Need

• A structure that facilitates the coordination and

implementation of project activities

• Create an environment that fosters interactions among

the team members with minimum conflicts

• Defines the authority by means of organization chart

• Designed in such a way that it is cost-effective with

minimum duplication of effort and overlaps

BITS Pilani, Pilani Campus

3.1 ORGANIZATION
STRUCTURES
• Traditional Functional Organization

• Dedicated Project Teams

• Matrix Structure

• Project Based (Projectized Structure)

BITS Pilani, Pilani Campus

3.1.1. TRADITIONAL FUNCTIONAL
ORGANIZATION STRUCTURE

• Organizing projects within the existing functional

hierarchy

• Different segments of projects are delegated to

respective functional units

• Coordination through general management channels

• Based on the nature of project, one functional area takes

the lead role

BITS Pilani, Pilani Campus

TRADITIONAL FUNCTIONAL
ORGANIZATION STRUCTURE

BITS Pilani, Pilani Campus

3.1.1.1 ADVANTAGES

• No change: Projects are completed within the basic

functional structure of the parent organization without
any change in design and operation

• Flexibility: Greater flexibility in the use of staff. Work can

be assigned temporarily. Staff can be switched amongst
different projects

• In-depth expertise: If scope of project is narrow,

functional areas can have in-depth study and knowledge

BITS Pilani, Pilani Campus

• Easy Post-project Transition:

• Normal career paths within functional divisions are maintained

• Specialists can advance their professional growth and

advancement

BITS Pilani, Pilani Campus

3.1.1.2 DISADVANTAGES

• Lack Of Focus: Each functional unit has its own core

routine work and targets. Project responsibilities are
pushed aside

• Poor Integration: Functional specialists may be

concerned only with segment of the project and not with
what is best for the total project

BITS Pilani, Pilani Campus

• Slow: Takes longer time to complete the projects, lack of
horizontal, direct communication among functional
groups contributes to rework

• Lack Of Ownership: Motivation is weak. Lack of

ownership discourages strong commitment to project-
related activities

BITS Pilani, Pilani Campus

3.1.2 ON-GOING PROJECTS
AS DEDICATED TEAMS
• Creation of independent project teams

• Project manager heads the group of specialists who

work full time on the project

• Team is physically separated from the parent

organization and given marching orders to complete the
project

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus
3.1.2.1 ADVANTAGES

• Simple: Functional organization remains intact with

project team operating independently
• Fast: Projects tend to get done more quickly, response
time is quicker as decisions are made within the team
• Cohesive: High level of motivation and cohesiveness
emerge within project team as they have common goal
and personal responsibility in completing the project
• Cross functional interaction: Specialists from different
areas work together to optimize the project

BITS Pilani, Pilani Campus

3.1.2.2. DISADVANTAGES

• Expensive: Duplication of efforts and loss of economies

of scale
• Internal strife: Dedicated project teams take on entity of
their own and a disease known as Projectitis (we-they
syndrome)
• Limited technological expertise: Creating self- contained
teams inhibits maximum technological expertise
• Difficult post-project transition: Assigning full-time
personnel to a project creates the dilemma of what to do
with personnel when the project is completed

BITS Pilani, Pilani Campus

3.1.3 ORGANIZING PROJECTS
WITHIN A MATRIX ORGANIZATION

• Hybrid organizational form in which a horizontal project

management is overlaid on the normal functional
hierarchy

• Two Chain Of Commands:

– Functional Lines
– Project Lines

• Project participants report to both functional and project

managers

BITS Pilani, Pilani Campus

3.1.3.1 ADVANTAGES

• Optimal utilization of resources by having individuals

work on multiple projects as well as capable of
performing normal functional duties

• Achieve greater integration by creating and legitimizing

the authority of a project manager

BITS Pilani, Pilani Campus

3.1.4 DIFFERENT MATRIX
FORMS
• Weak matrix: Balance of authority strongly favors the
functional managers

• Balanced matrix: Traditional matrix arrangement

• Strong matrix: Balance of authority strongly favors

project managers

BITS Pilani, Pilani Campus

MATRIX ORGANIZATION
STRUCTURE

BITS Pilani, Pilani Campus

3.1.4.1 WEAK MATRIX

• Functional managers are responsible for managing their

segment of the project
• Project manager acts as a staff assistant who draws the
schedules and checklists, collects information on status
of work and facilitates project completion
• Functional manager call most of the shots and decide
who does what and when the work is completed
• Likely to improve technical quality as well as provide
better system for managing conflict across projects
• Functional control is often maintained at the expense of
poor project integration

BITS Pilani, Pilani Campus

3.1.4.2 BALANCED MATRIX

• Project manager is responsible for

– Defining what needs to be accomplished

– Establishes the overall plan for completing the project
– Integrates the contribution of different disciplines
– Sets schedules and monitors progress

• Functional managers are concerned with how it will be

accomplished
– Assigning personnel and executing their segment of the project
according to standards and schedules set by the project
manager

BITS Pilani, Pilani Campus

3.1.4.3 STRONG MATRIX

• Create a feel of a project team within the matrix

environment

• Project manager controls most aspects of the project

including scope trade-offs and assignment of functional
personnel

• Project manager controls when and what specialists do

and has final say on the major project decisions

• Functional manager is consulted on a need

BITS Pilani, Pilani Campus

• Likely to enhance project integration

• Diminish internal power struggles

• Improve control of project activities and costs

• Technical quality may suffer

BITS Pilani, Pilani Campus

3.1.5 STRENGTHS OF
MATRIX MANAGEMENT
• Efficient: Resources can be shared across multiple
projects
• Strong project focus: Designated project manager
responsible for coordinating and integrating contributions
of different units
• Easier post-project transition: Specialists maintain ties
with functional groups so they can return after project
completion
• Flexible: Flexible utilization of resources and expertise
within the firm

BITS Pilani, Pilani Campus

3.1.5.1 WEAKNESS

• Dysfunctional conflict: Conflict between project and

functional managers

• Infighting: Competition for scarce resources

• Stressful: Project participants have two bosses: one

project manager and another functional manager

BITS Pilani, Pilani Campus

3.1.6 Project Based

• Project Manager has high level of authority to manage

and control the project resources
• Personnel are specifically assigned to the project and
report directly to project manager
• Project manager is responsible for performance
appraisal and career progression of all project team
members
• Strong project controls and centralized lines of
communication
• Strong sense of project identification and ownership

BITS Pilani, Pilani Campus

PROJECTIZED
STRUCTURE

BITS Pilani, Pilani Campus

3.1.6.1 Disadvantages

• Duplication of resources: Scare resources must be

duplicated on different projects

• Reallocating resources when project gets completed

• Resources may not be needed as a full time for the

entire length of the project

BITS Pilani, Pilani Campus

3.2. RIGHT PROJECT MANAGEMENT
STRUCTURE : FACTORS

• ORGANIZATION CONSIDERATIONS

• RESOURCE AVAILABILITY

• PROJECT CONSIDERATIONS

BITS Pilani, Pilani Campus

3.2.1 ORGANIZATION
CONSIDERATIONS
• If 75% of work involves projects, then organization should
consider a fully projectized structure

• If organization has both standard products and projects,

then matrix organization will be appropriate

• If an organization has very few projects, then less formal

arrangement is required

• Dedicated teams could be created on an as - needed

basis and the organization can outsource project work

BITS Pilani, Pilani Campus

• Resource Availability

– If resources need to be shared amongst multiple

projects then matrix type is preferred

– If critical personnel on individual projects cannot be

afforded then matrix type is preferred

– When resources are not available internally then

create a dedicated team but outsource project work

BITS Pilani, Pilani Campus

• Transition from functional to project matrix organization
begins with a weak functional matrix

• Many organizations create project management offices

to support project management efforts

BITS Pilani, Pilani Campus

3.2.2 PROJECT
CONSIDERATIONS
• Size of project
• Strategic importance
• Novelty and need for innovation
• Need for integration (no. of departments)
• Environmental complexity
• Budget and time constraints
• Stability of resource requirements

BITS Pilani, Pilani Campus

• Higher the levels of these factors, more autonomy and
authority the project manager and team need to be
successful

• Dedicated project teams should be used for urgent

projects in which the nature of the work requires people
working steadily from beginning to end

• Creation of flexible management systems that organizes

project according to requirements

BITS Pilani, Pilani Campus

3.2.3 PROJECT TYPES

• Advanced development project: High risk project:

involving creation of a breakthrough product or process

• Platform project: Medium risk project: involving system

up-gradation that yield new products and processes

• Incremental project: Low risk project: involve minor

adjustments in existing products and processes

BITS Pilani, Pilani Campus

3.3 ORGANIZATION
CULTURE
• Refers to a system of shared norms, beliefs, values and
assumptions which binds people together thereby
creating shared meanings

• Culture reflects the personality of the organization and

similar to an individual’s personality

BITS Pilani, Pilani Campus

3.3.1 CHARACTERISTICS

• Member’s identity: The degree to which employees

identify with the organization as a whole rather from their
type of field or professional expertise

• Team emphasis: The degree to which work activities are

organized around groups rather than individuals

• Management focus: The degree to which management

decisions take into account the effects of outcome in
people within the organization

BITS Pilani, Pilani Campus

• Unit integration: The degree to which units within
organization are encouraged to operate in a coordinated
or interdependent manner

• Control: The degree to which rules, policies and direct

supervision are used to oversee and control employee
behavior

• Risk tolerance: A degree to which employees are

encouraged to be aggressive, innovative, and risk
seeking

BITS Pilani, Pilani Campus

• Reward criteria: The degree to which rewards such as
promotion and salary increases are allocated according to
employee performance rather than seniority, favoritism or
other non-performance factors
• Conflict tolerance: the degree to which employees are
encouraged to air conflicts and criticisms openly
• Means versus end orientation: the degree to which
management focuses on outcomes rather than on
techniques and processes used to achieve the results
• Open system focus: the degree to which the organization
monitors and responds to changes in the external
environment

BITS Pilani, Pilani Campus

3.3.2 IDENTIFYING CULTURAL
CHARACTERISTICS
• Study the physical characteristics of the organization
– External architecture, offices, uniform of employees

• Read about the organization

– Annual report, mission statements, press releases, internal news letters
– Concern for people, concern for results and the bottom line

• Observe how people interact within the organization

– Pace, rituals, values, beliefs
– Meetings, conversation

• Interpret stories and folklore surrounding the organization

BITS Pilani, Pilani Campus

CASE 3.1: MOSS & Mc ADAMS
ACCOUNTING FIRM (M& M) Page:141

ORGANIZATION PROFILE:
• Corporate Audits
• Tax Preparation
• Consulting Business
• Result Oriented Management Style
• 160 Employees: Green Bay. Minnesota, Wisconsin
ORGANIZATION STRUCTURE
• MATRIX TYPE
• A manager is assigned to several accounts depending on
size and scope of work
• A manager assigned to 8-12 clients: Tax Preparation

BITS Pilani, Pilani Campus

PROMOTION SYSTEM

TIERED PROMOTION SYSTEM

• JUNIOR STAFF ACCOUNTANT

• SENIOR ACCOUNTANT

• ACCOUNT MANAGER

• PARTNER

BITS Pilani, Pilani Campus

CHARACTERS

• Mr. Bruce Palmer : Account manager: Leads audit to

Johnsonville truck project
• Mr. Zeke Olds: Double major in accounting and
computer science. Latest development in financial
information systems, innovative problem solving, interest
in consulting
• Ms. Ruby sands: Office manager doing HR work.
Assigns staff to multiple projects under the same
manager and sometimes to different managers
• Mr. Ken Crosby: Manage special consulting projects,
assigned to Springfield project

BITS Pilani, Pilani Campus

SUMMARY

• Olds was working under Palmer in Johnsonville Trucks

Project. Crosby was assigned a major consulting project
with Springfield Metals. Crosby wants Olds to work with
him as he has the required expertise

• Sands allowed Olds to work in both projects: Olds work

in the morning time with Crosby and afternoon time with
Palmer

BITS Pilani, Pilani Campus

PALMER RESENTMENT

• Crosby wanted Olds to work full-time on Thursdays

• Crosby flatly refused Palmer for any adjustments in lieu
of above arrangement
• Olds reaching late in office by 30 – 60 minutes
• Olds received e-mails and telephones from Crosby in the
afternoon when he was supposed to work with Palmer
• Olds badmouthing Johnsonville Projects to Crosby
during playing Golf and telling that the project is bored
one
• Olds asked for leave on one Friday to take his family to
Baseball game but Palmer did not allow him

BITS Pilani, Pilani Campus

• Sands visited Palmer’s office to find a solution and
explain Olds problems to Palmer
• Olds have hard time working with Palmer and Crosby’s
projects
• Difficulty in concentrating on audit and consulting
projects simultaneously
• Olds tried putting extra hours to meet both the projects
deadlines but resulted in tension at home
• Olds said nice things about Palmer
• Olds enjoyed consulting work more and found it more
challenging

BITS Pilani, Pilani Campus

SANDS DECISION

• Sands suggests Palmer to pull out Olds from

Johnsonville Project and put him In Springfield Project
• QUESTIONS
• If you are Palmer at the end of the case, how would you
respond?
• What, if anything, could Palmer have done to avoid
losing Olds?
• What advantages and disadvantages of a matrix type
organization are apparent from this case?
• What could the management at M&M do to more
effectively manage situations like this?

BITS Pilani, Pilani Campus