Tag: Project Cycle
How a project is initiated, what is the first step in delivering a project from its conception all the way to the end? Just like all things in life, there is a birth, the life and then death, a life cycle as it is better known. This article will look at the processes which should be taken to get a project “off the ground” how to ensure the project has the legs to survive the life cycle. To understand this, it is best to start at the beginning.
Birth of a Project
The project birth process begins with an idea and ends when the idea becomes an approved and funded project attached to the appropriate portfolio.
For a project to begin there must be an issue which requires addressing, or there is an existing problem which needs resolution. Once identified, it is the responsibility of the person making the proposal or their staff to provide business validation or a concept that the project makes good business sense.
Normally the proposed project is documented with a one page concept statement. Once composed it is then submitted to the appropriate portfolio to be evaluated regarding its alignment to the portfolio strategy and its suitability for support. There are five parts to this document that contains;
Problem or Opportunity Statement
The concept document gives the initiator, a way to relate the idea to a known problem and to offer a full or partial solution. If the problem is serious enough and if the proposed solution is feasible, further action will be taken. In this case, senior managers will request a more detailed solution plan from the requestor.
Regardless of the reason for the problem or opportunity statement, it must be written in a business language as it will be read by executives. It should not contain technical references unless the people reading the document have a technical background, it is best at this instance, to understand the audience.
Elaborate within the first section of the document on the goal of the project, that is what is the project intending to address. The purpose of the goal or executive statement is to get management to value the idea enough to read on.
A project has one goal, that is the purpose and direction of the project. At a very high level, it defines the final deliverable or outcome of the project in clear terms so that everyone understands what is to be accomplished. The goal statement will be used as a continual point of reference for any questions that arise regarding the project’s scope or purpose.
Just like the problem or opportunity statement, the goal statement is short and to the point. The goal statement does not include any information that might commit the project to dates or deliverables that are not practical, as there is not much detail about the project at this stage.
The third section describes the project objectives, elaborating on the goal statement. The purpose of objective statements is to clarify the exact boundaries of the goal statement and define the boundaries or the scope of the project. In fact, the objective statements cover a specific goal statement, and are nothing more than a decomposition of the goal statement into a set of necessary and sufficient objective statements. That is, every objective must be accomplished in order to reach the goal, and no objective is superfluous.
The Success Criteria
The fourth section of the concept statement should answer the necessity of the project. It provides the measurable business value that will result from doing this project. This is essentially selling the project to management.
The document should cover the business outcomes used to measure success. It is also a statement of the business value to be achieved; therefore, it provides a basis for senior management to authorize the Project Manager and the client to detail planning. It is essential that the criteria be quantifiable and measurable, and, if possible, expressed in terms of business value.
No matter how the success criteria are defined, they all reduced to one of the following three types:
Increase revenue— as part of the success criteria, the increase should be measured in hard dollars or as a percentage of a specific revenue number.
Avoid costs— this criterion can be stated as a hard-dollar amount or a percentage of some specific cost. Caution should be taken here as often a cost reduction means staff reductions. Staff reductions do not mean the shifting of resources to other places in the organization. Moving staff from one area to another is not a cost reduction.
Improve service— this is a difficult metric to define, as it’s usually some percentage of improvement in client satisfaction or a reduction in the frequency or type of client complaints.
The best choice for success criteria is to state clearly the bottom-line impact of the project. This is expressed in terms such as increased margins, higher net revenues, reduced turnaround time, improved productivity, a reduced cost of manufacturing or sales, and so on. This is the criteria on which management will approve the project for further consideration and funding.
Management should look at the project’s success criteria and assign business value to the project. In the absence of other criteria, this will be the basis for the decision about whether to commit resources to complete the detailed plan or not.
Assumptions, Risks, and Obstacles
The fifth and final section of the concept document identifies any factors that can affect the outcome of the project. These factors can affect deliverables, the realization of the success criteria, the ability of the project team to complete the project as planned, and any other environmental or organizational conditions that are relevant to the project. The requestor wants to share anything that can go wrong and that management might be able to favorably impact.
The project manager uses the assumptions, risks, and obstacles section to alert management to any factors that may interfere with the project work or compromise the contribution that the project can make to the organization. Management may be able to neutralize the impact of these factors. Conversely, the project manager should include in the project plan whatever contingencies can help reduce the probable impact and its effect on project success.
It should not be assumed that everyone knows what the risks and perils to the project will be. Planning is a process of discovery about the project itself as well as any hidden perils that may cause embarrassment for the team, they should be documented.
Although a concept document should be enough, some business processes call for a longer document. As part of their initial approval of the resources to do detailed project planning, management may want some measure of the economic value of the proposed project. They recognize that many of the estimates are little more than an order-of-magnitude guess, but they will nevertheless ask for this information. In which case the following two types of analyses requested frequently:
- Risk analysis
- Financial analysis
The following sections briefly discuss these analysis types.
The risk analysis is normally the most frequently used attachment to the concept document. Many business-decision models depend on quantifying risks, the expected loss if the risk materializes, and the probability that the risk will occur. All of these are quantified, and the resulting analysis guides management in its project-approval decisions.
Some organizations require a preliminary financial analysis of the project before granting approval to perform the detailed planning. Although such analyses are very rough because not enough information is known about the project at this time, they will offer a tripwire for project-planning approval. In some instances, they also offer criteria for prioritizing all of the concept documents that senior management will be reviewing. Following are brief descriptions of the types of financial analyses which may be requested.
The methodology to conduct a feasibility study is remarkably similar to the problem-solving method. It involves the following steps:
- Clearly define the problem.
- Describe the boundary of the problem—that is, what is in the problem scope and what is outside the problem scope.
- Define the features and functions of a good solution.
- Identify alternative solutions.
- Rank alternative solutions.
- State the recommendations along with the rationale for the choice.
- Provide a rough estimate of the timetable and expected costs.
The Project Manager will be asked to provide the feasibility study when senior management want to review the thinking that led to the proposed solution. A thoroughly researched solution can help build your credibility as the project manager.
Cost and Benefit Analyses
These analyses are always difficult to do because intangible benefits should be included in the decision process. As mentioned earlier, things such as improved client satisfaction cannot be easily quantified. It could be argued that improved client satisfaction reduces client turnover, which in turn increases revenues, but how is a number put on that? In many cases, senior management will take these inferences into account, but they still want to see hard-dollar comparisons. Opt for the direct and measurable benefits to compare against the cost of doing the project and the cost of operating the new process. If the benefits outweigh the costs over the expected life of the project deliverables, senior management may be willing to support the project.
This is a timeline that shows the cumulative cost of the project against the cumulative revenue or savings from the project. At each point where the cumulative revenue or savings line crosses the cumulative cost line, the project will recoup its costs. Usually senior management looks for an elapsed time less than some threshold number. If the project meets that deadline date, it may be worthy of support. Targeted breakeven dates are getting shorter because of more frequent changes in the business and its markets.
Return on Investment
The ROI analyses the total costs as compared with the increased revenue that will accrue over the life of the project deliverables. Here senior management finds a common basis for comparing one project against another. They look for the high ROI projects or the projects that at least meet some minimum ROI.
A project that does not meet the alignment criteria may be either rejected out of hand or returned to the proposing party for revision and re- submission. Projects that are returned for revision generally need minor revision and following the suggested revisions should meet the alignment criteria.
These four financial analyses are common. Their purpose is to help the financial analysts determine the risk versus reward for the proposed project.
Management has the power to accept or reject a proposal. All projects start from an idea, a concept which in turn need management acceptance to proceed any further. The more succinct and “Matter of Fact” the concept paper can be which identifies the need for the project and how it can assist the organization then the more chance of it being approved. If the idea is valid from an expected business value perspective, sell it on its own merits.