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About this lesson

The organization needs to establish a management discipline for selecting and approving projects.

Quick reference

Project Selection and Approval

The organization needs to establish a management discipline for selecting and approving projects.

When to use

Projects should not be initiated without the appropriate stakeholders making a decision to devote resources to the project.  At the time of project initiation, a project does not need to be selected for completion, but rather it can be selected to just proceed to the next phase.  When a project is only approved for one phase, it must come back to the stakeholders for approval to proceed to the next phase. 

Instructions

Stakeholders should be deciding whether to expend resources upon project activities.  Typically they will be using a combination of criteria such as:

  • Strategic alignment.
  • Adequate Return on Investment (ROI) – both project and portfolio.
  • Clear goals and objectives.
  • Realistic and achievable project plan or project approach.
  • Resources available to do the project work.

In most organizations, a Stage and Gate process is used to approve projects and periodically review progress to ensure that the project should be continued. 

If an organization has never cancelled a project, then either they are being much too conservative on project selection and planning, or they are wasting resources.  There is enough uncertainty in project execution and the organizational environment changes often enough, that it is highly unlikely that every project stays within its boundaries and lives up to the original expectation.   

Formal

A formal process is normally used for large projects or those involving the purchase of capital equipment.  The formal process involves the review of the project charter or status by management and stakeholders.  The stakeholders assess the project with respect to other projects and select projects that are most likely to meet the organizational objectives and for which they have resources.  The stakeholders often review large projects several times during the life of the project.

Informal

Small projects are often approved by stakeholders at staff meetings or informal meetings where the manager of the resources directs the project team, or team leader, to “just do it.”  Unless the project leader discovers a major risk or problem, they consider the project is approved and does not need to be reviewed again by the stakeholder.

Hints & tips

Canceling a project should not be viewed as a project management failure. If a project is no longer aligned with a changed organizational strategy, it should be cancelled regardless of how well it was planned or executed.

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  • 00:05 Hi, I'm Ray Sheen.
  • 00:06 I'd like to talk with you about project selection and approval and
  • 00:10 in particular, about some of the practices for deciding whether to do a project and
  • 00:15 whether the organization is ready to start.
  • 00:17 >> When discussing project selection, the key is to make sure that you've
  • 00:22 selected the right project and not selected the wrong project.
  • 00:27 It is as important to know when to say no as it is to say yes.
  • 00:31 The organization does not want to waste resources on irrelevant or
  • 00:36 ill-conceived project.
  • 00:37 There's some criteria that you can use to ensure that you're selecting
  • 00:40 the right project.
  • 00:42 First, make sure that the project is aligned with strategy.
  • 00:45 The project takes the organization in the direction that it needs to go.
  • 00:49 In many organizations, a project ROI or return on investment is calculated
  • 00:54 to ensure that the benefit offsets the cost of the project.
  • 00:57 Just because a project is strategically aligned and
  • 01:00 has great potential benefits, it may not be the right time to initiate it.
  • 01:05 For instance, if it is not yet well-defined, goals, deliverables, and
  • 01:08 boundaries are not clear,
  • 01:10 there's some work to be done before full approval should be given.
  • 01:14 That or you need to use an adaptive or iterative approach.
  • 01:18 Also before an organization should say yes they should have an idea about
  • 01:23 what they're committing to.
  • 01:24 A high level budget and schedule should have been estimated.
  • 01:28 This is not a detailed project plan, that will come after initial approval is given
  • 01:32 and the project manager can assemble a team and start the detailed planning.
  • 01:36 The last consideration is the other projects that are in the pipeline.
  • 01:40 This project may be a great idea, well defined and understood.
  • 01:44 But the organization is already over allocated on other projects
  • 01:48 adding one more is not helpful.
  • 01:50 The project is not permanently set aside, but
  • 01:52 the start is delayed until there are adequate resources to do the work.
  • 01:57 Lets look at some specific criteria used when selecting a project.
  • 02:01 The project may be required because of compliance with laws or standards.
  • 02:05 When this is the case the organization may not have the opportunity of saying
  • 02:09 no to the goal of the project.
  • 02:11 But it can say no to a specific option for meeting the compliance requirement.
  • 02:16 The key here is to select the best option and not just the first idea.
  • 02:21 Many times, the projects are selected because of their strategic importance.
  • 02:25 They may not have the best financial return in the near term, but
  • 02:29 they reposition the organization to better align with the strategy and
  • 02:33 their completion enables other projects to be done.
  • 02:37 But considering the financial benefit, there are two ways to look at a project.
  • 02:41 The first is how the project improves the entire portfolio of business activity.
  • 02:46 A specific project may only have a small ROI, but
  • 02:50 it becomes an enabler for other projects and increases the ROI of the portfolio.
  • 02:55 It may open a new market, expand a facility or capacity, or
  • 03:00 provide a new system or technology.
  • 03:03 The second financial perspective is the return on investment
  • 03:07 of the specific project.
  • 03:08 Hopefully, it has an excellent ROI,
  • 03:11 the financial return more than offsets the project cost.
  • 03:14 The final criteria is the project pipeline.
  • 03:17 This could work both ways.
  • 03:19 Sometimes we approve or
  • 03:20 accelerate a project to fill in a pipeline and keep the organization fully employed
  • 03:26 even though the project may not be as well defined as we'd like.
  • 03:30 At other times, we delay or stop a project because there's not a enough resources or
  • 03:35 to prevent a conflict at a particular organization or facility.
  • 03:38 Consider both the total resources and potential collision of multiple projects
  • 03:43 hitting the same milestone at the same time.
  • 03:46 Once we decided to move forward,
  • 03:48 we now need to understand how we formally approve the project.
  • 03:52 Each organization has a different process.
  • 03:55 And it may vary depending on the type of project.
  • 03:58 While each organization is unique,
  • 04:00 there are a few best practices that can be employed.
  • 04:03 Let's talk about the formal approval first.
  • 04:05 A formal approval normally follows a formal review.
  • 04:09 This is usually based upon the review of a Project Charter
  • 04:12 by an executive management team.
  • 04:14 Executives are often reviewing many project proposals.
  • 04:18 They prioritize the projects,
  • 04:19 and based upon the resources available, will fund the highest priorities.
  • 04:24 Depending upon the organizational's project management methodology and
  • 04:27 life cycle, they may fully fund the project or only fund the first few phases.
  • 04:32 In which case, the project must come back with the results of the work they've done
  • 04:35 to receive the additional funding to complete the project.
  • 04:38 The executives may also impose constraints on the project, such as the methods that
  • 04:43 the team must follow, or the timing and resource constraints.
  • 04:47 Formal approval are great when we have it.
  • 04:49 And is usually formally documented by signing the charter or
  • 04:53 some other project authorization form.
  • 04:56 However, many projects are informally approved.
  • 04:59 This is usually done in the case of small, quick or ambiguous projects.
  • 05:03 These approvals may happen in a staff meeting or even a hallway conversation.
  • 05:08 There's still a review of a charter or a project approach,
  • 05:11 although often that charter is just an informal list of the project Ws.
  • 05:16 The what, where, why, when, who and how of the project boundaries.
  • 05:21 The approval is often given in an informal manner with the project leader
  • 05:24 being told to just go do it.
  • 05:27 Even when that is the case,
  • 05:28 I recommend that a follow up email be sent documenting the approval.
  • 05:31 A difficulty within formal approval for cross-functional projects
  • 05:35 is that the other departments may not be aware of the need for their support.
  • 05:39 The project leader must identify and recruit the resources that are needed for
  • 05:43 this project.
  • 05:45 If a project leader runs into problems getting resources, he or she must go back
  • 05:49 to the stakeholder to get further guidance for direction or to get their support and
  • 05:53 buy in, to ensure that they can get the resources that are required.
  • 05:57 >> Whether it's a formal approval or
  • 05:59 an informal approval it's important that the organization knows.
  • 06:04 What projects have been selected and why.
  • 06:07 It can then support those projects to successful conclusion.

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