2.5 Project Screening and Selection Approaches

Recognizing the importance of corporate strategy also offers the key to understanding the means and motivation behind many choices organizations make when screening projects. Project selection is of critical importance to organizations. When done well, firms can create coherent portfolios of projects that not only support organizational goals and objectives, but also support each other. In other words, a coherent portfolio offers organizations economies of scale, the ability to exploit and most efficiently use scarce resources, and complementarity--the ability for projects to mutually support and benefit each other.

There are a number of useful methods for selecting and screening project opportunities to ensure that the best are selected while marginal ones are rejected. This section will examine some of the more common methods for project selection and screening, identifying the characteristics of these models and give some insight into how best to use them.

2.5.1 Method One: Selection Checklists

The simplest method for project screening and selection consists of developing a list of the various criteria that are important to the project choice decision and "squaring" them with the different project options. For example, if the key issues for selecting a project alternative are cost and speed to market, I would screen each project choice against these two criteria and make the choice that best fits the initial goals. To illustrate, consider the example in Table 2.2 showing a simple checklist model with only four project choices and three decision criteria. Under this checklist approach, after each project is given a performance check (either high, medium, or low), the project accumulating the most positive checks is deemed the optimal choice.

Based on this analysis, it is clear that Project Gamma represents the best alternative in terms of maximizing the three criteria of cost, profit potential, and safety. Among the obvious flaws with such a screening model is the nebulous nature of evaluating an item as either high, medium, or low on each of the dimensions. Clearly, terms such as these are inexact and subject to misinterpretation or misunderstanding, depending upon who is doing the evaluating and what assumptions they are making in coming to these conclusions.

Another problem with checklist screening models is that they do not resolve tradeoff questions. For example, is Project Gamma still better than Project Alpha when we consider that safety is the paramount criteria of concern in this circumstance? Likewise, if the criteria all are differentially weighted (i.e., some criteria are clearly more important than others in making the decision), how will that affect the final decision? The quick answer is that it can have a huge impact on our choice and, under the simple model shown above, yield potentially misleading choice information. Let us consider a slightly more complex screening model in which each criterion is assigned a simple weight to distinguish which criteria are more important and which are less.