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ORGANIZATION STRATEGY &

PROJECT SELECTION
TEXTBOOK T1 CHAPTER 2

TOPICS
NEED FOR STRATEGY
ROLE OF PROJECT MANAGER
STRATEGIC MANAGEMENT PROCESS
PROJECT PORTFOLIO MANAGEMENT
PROJECT SELECTION MODEL
MANAGING PORTFOLIO SYSTEM

NEED FOR STRATEGY


IDENTIFY A PROJECTS PRIORITY AND LINK

WITH ORGANIZATIONAL STRATEGY


EFFECTIVE UTILIZATION OF RESOURCES:
PEOPLE, MONEY, EQUIPMENT AND CORE
COMPETENCIES
CLEAR ORGANIZATION PROCESS, BEST USE
OF SCARE RESOURCES AND IMPROVED
COMMUNICATION ACROSS PROJECTS USING A
PROCESS THAT IS OPEN AND TRANSPARENT

ROLE OF PROJECT
MANAGER
UNDERSTAND ORGANIZATIONS MISSION AND

STRATEGY OTHERWISE PROJECT MANAGER


WILL TEND TO
FOCUSING ON PROBLEMS OR SOLUTIONS THAT

HAVE LOW PRIORITY STRATEGICALLY


FOCUSSING ON THE IMMEDIATE CUSTOMER
RATHER THAN THE WHOLE MARKET PLACE AND
VALUE CHAIN
OVEREMPHASIZING TECHNOLOGY

SOLVE EVERY CUSTOMER ISSUE WITH

PRODUCT/ SERVICE
ENGAGING IN PERFECTION FOR JOBS WHICH
ARE NOT IN PRIORITY

DEMONSTRATE SENIOR MANAGEMENT HOW

THE PROJECT CONTRIBUTES FIRMS MISSION


EXPLAIN TEAM MEMBERS AND OTHER STAKE
HOLDERS : OBJECTIVES AND PRIORITIES

STRATEGIC MANAGEMENT PROCESS


REVIEW

AND DEFINE THE ORGANIZATION

MISSION
SET LONG TERM GOALS AND OBJECTIVES
ANALYZE AND FORMULATE STRATEGIES TO
REACH OBJECTIVES
IMPLEMENTATION OF STRATEGIES THROUGH
PROJECTS

MISSION STATEMENTS
MISSION STATEMENTS IDENTIFY THE SCOPE

OF THE ORGANIZATION IN TERMS OF ITS


PRODUCT AND SERVICE
EVERY ONE IN THE ORGANIZATION SHOULD
BE AWARE OF MISSION
IT INCLUDES ORGN. PHILOSOPHY, KEY
TECHNOLOGIES,
PUBLIC
IMAGE
AND
CONTRIBUTION TO SOCIETY

EXAMPLES
PROVIDE HOSPITAL DESIGN SERVICES
PROVIDE VOICE/DATA DESIGN SERVICES
PROVIDE INFORMATION TECHNOLOGY

SERVICES
INCREASE SHARE HOLDER VALUE
PROVIDE HIGH VALUE PRODUCTS TO OUR
CUSTOMERS

LONG RANGE GOALS AND


OBJECTIVES
OBJECTIVES

TRANSLATE
MISSION
INTO
SPECIFIC, CONCRETE, MEASURABLE TERMS
OBJECTIVES COVER MARKETS, PRODUCTS,
INNOVATION,
PRODUCTIVITY,
QUALITY,
FINANCE, PROFITABILITY, EMPLOYEES AND
CONSUMERS
SMART
GOALS (SPECIFIC, MEASURABLE,
ASSIGNABLE, REALISTIC AND TIME BOUND)

SPECIFIC : BE SPECIFIC IN TARGETING AN

OBJECTIVE
MEASURABLE: ESTABLISH A MEASURABLE
INDICATORS OF PROGRESS
ASSIGNABLE:
MAKE
THE
OBJECTIVE
ASSIGNABLE
TO
ONE
PERSON
FOR
COMPLETION
REALISTIC: STATE WHAT CAN REALISTICALLY
BE DONE WITH AVAILABLE RESOURCES
TIME RELATED: STATE WHEN THE OBJECTIVE
CAN BE ACHIEVED

ANALYZE AND FORMULATE


STRATEGIES TO REACH OBJECTIVES
DETERMINING

AND
EVALUATING
ALTERNATIVES THAT SUPPORT OBJECTIVES
SELECT THE BEST ALTERNATIVE
ASSESSMENT OF INTERNAL AND EXTERNAL
ENVIRONMENTS
SWOT ANALYSIS
OBJECTIVES
OR
TASKS
ASSIGNED
TO
DIVISIONS, DEPARTMENTS OR INDIVIDUALS

IMPLEMENT STRATEGIES THROUGH


PROJECTS
IMPLEMENTATION

REQUIRES

ACTION

AND

COMPLETING TASKS
ALLOCATION OF RESOURCES: FUNDS, PEOPLE,
TECHNOLOGICAL SKILLS, MANAGEMENT TALENTS
AND EQUIPMENT
REQUIRES FORMAL AND INFORMAL ORGANIZATION
THAT COMPLEMENTS AND SUPPORTS STRATEGIES
AND PROJECTS
PLANNING AND CONTROL
MOTIVATING PROJECT CONTRIBUTORS
PRIORITIZING PROJECTS

NEED FOR PROJECT PORTFOLIO


MANAGEMENT SYSTEM
IMPLEMENTATION GAP
CONFLICTS
FREQUENTLY OCCUR AMONGST
FUNCTIONAL MANAGERS AND CAUSE LACK OF
TRUST
FREQUENT
MEETINGS
ARE
CALLED
TO
ESTABLISH OR RE-NEGOTIATE PRIORITIES
PEOPLE FREQUENTLY SHIFT FROM ONE PROJECT
TO ANOTHER
PEOPLE ARE WORKING ON MULTIPLE PROJECTS
AND FEEL INEFFICIENT
RESOURCES ARE NOT ADEQUATE

ORGANIZATION POLITICS
POLITICS EXIST IN EVERY ORGANIZATION
INFLUENCES FUNDING AND HIGH PRIORITY
PROJECT SELECTION MAY NOT BE ON FACTS AND

SOUND REASONING BUT ON PERSUASIVENESS


AND POWER OF PEOPLE ADVOCATING PROJECTS
TOP MANAGEMENT SHOULD DEVELOP A SYSTEM
FOR IDENTIFYING AND SELECTING PROJECTS
THAT REDUCE THE IMPACT OF INTERNAL
POLITICS AND FOSTERS THE SELECTION OF THE
BEST PROJECTS.

SACRED COW: PROJECTS THAT POWERFUL,

HIGH RANKING OFFICAL ADVOCATES


NEW BABY: OBSESSION WITH PROJECT
SPONSORED PROJECT : SELECTION AND
IMPLEMENTATION OF PRODUCT INNOVATIVE
PROJECTS

RESOURCE CONFLICTS AND MULTITASKING


PROBLEM

OF SHARE AND SCHEDULING


RESOURCES ACROSS PROJECTS
MULTITASKING INVOLVES STARTING AND
STOPPING WORK ON ONE TASK TO GO AND
WORK ON ANOTHER PROJECT AND THEN
RETURN TO WORK ON ORIGINAL TASK
INEFFICIENT PEOPLE
CAPACITY OVERLOADING

BENEFITS
BUILDS

DISCIPLINE

INTO

PROJECT

SELECTION

PROCESS
LINKS PROJECT SELECTION TO STRATEGIC METRICS
PRIORITIZE PROJECT PROPOSALS
ALLOCATE RESOURCES TO PROJECTS THAT ALIGN
WITH STRATEGIC DIRECTION
BALANCES RISK ACROSS ALL PROJECTS
IMPROVES
COMMUNICATION
AND
SUPPORTS
AGREEMENT ON PROJECT GOALS
JUSTIFIES KILLING PROJECTS THAT DO NOT
SUPPORT ORGANIZATION STRATEGY

PORTFOLIO MANAGEMENT SYSTEM


ENSURE PROJECTS ALIGNED WITH STRATEGIC

GOALS AND PRIORITIZED APPROPRIATELY


DESIGN OF PMS
CLASSIFICATION OF THE PROJECT
SOURCES OF PROPOSALS
EVALUATING PROPOSALS
MANAGING THE PORTFOLIO OF PROJECTS

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, RESEARCH &
DEVELOPMENT PROJECTS ETC.

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

BALANCING THE PORTFOLIO FOR RISKS AND

TYPES OF PROJECTS
RISK LEVEL, HIGH COST, KEY RESOURCES, NON-

REVENUE PRODUCING, LONG DURATION

BREAD AND BUTTER PROJECTS:

IMPROVEMENTS TO CURRENT PRODUCTS AND


SERVICES
SOFTWARE UPGRADATION
COST REDUCTION TECHNIQUES

PEARLS:

ADVANCES
ADVANCES

REVOLUTIONARY
USING
PROVEN

COMMERCIAL
TECHNICAL

SUBSURFACE IMAGING TO LOCATE GAS AND OIL

OYESTER:

TECHNOLOGICAL BREAKTHROUGHS
WITH HIGH COMMERCIAL PAYOFFS
NEW KINDS OF METAL ALLOYS

WHITE ELEPHANTS: PROJECTS THAT AT ONE TIME

SHOWED PROMISE BUT ARE NO LONGER VISIBLE


PRODUCTS FOR A SATURATED MARKET

HIGH
SUCCES
S

BREAD AND
BUTTER

PEARL

LOW
SUCCESS

WHITE ELEPHANT

OYESTER

LOW COMMERCIAL
PAY-OFF

HIGH
COMMERCIAL
PAY-OFF

INFRASTRUCTURE PROJECT
PHASES
PRE-FEASIBILITY PHASE
EVALUATION PHASE
TECHNOLOGY SELECTION AND ENGINEERING

PHASE
CONTRACTING AND PROCUREMENT PHASE
CONSTRUCTION PHASE
START UP PHASES

GENERAL CAUSES OF OVERRUN


PRE-FEASIBILITY STUDY PHASE
DELAY
IN
LAND
ACQUISITION,
FOREST
CLEARANCE AND ENVIRONMENTAL CLEARANCE
DELAY
IN CLEARANCES FROM FINANCIAL
/REGULATORY BODIES OF THE GOVERNMENT
LACK OF INFRASTRUCTURAL FACILITIES
FAILURE
IN
PLANNING
FOR
IMPORTANT
RESOURCES, FACILITIES, INPUTS NEEDED FOR
TIMELY CONSTRUCTION AND PUTTING INTO
OPERATION
SELECTION OF INCOMPETENT CONSULTANT

EVALUATION PHASE
INADEQUATE PROJECT STUDY
UNDERSTATEMENT OF SCOPE AND UNDERSTANDING OF

COST AND RESOURCES


CALLING FOR SUBSEQUENT CHANGES IN THE SCOPE OF
THE PROJECT
NON-FREEZING OF SPECIFICATIONS
REVISION OF BUDGETS
POLITICAL INFLUENCES IN SITE SELECTION
CONSULTANTS
AND
PROJECT
AUTHORITIES
INADEQUECIES, LEADING TO WRONG ECONOMIC STUDIES
MISLEADING FUND FLOW STATEMENTS AND PROJECTIONS
CAUSING FINANCIAL IMPEDIMENTS

TECHNOLOGY SELECTION AND


ENGINEERING PHASE
POOR

OR
OUTDATED
TECHNOLOGY
ACQUISITION
TECHNOLOGICAL
TIE-UPS
MORE
ON
CONSIDERATION OF CREDIT OFFERED BY THE
SUPPLIER RATHER THAN OF TECHNICAL
NECESSITIES
STARTING OF DETAIL ENGINEERING AND
PREPARATION
OF
PROCUREMENT
LISTS
BEFORE FINALIZING PROCESS FLOW SHEETS
AND LINE DIAGRAMS

DELAY IN COMPLETING DETAIL ENGINEERING


LACK OF DESIGN DATA
DELAY IN THE FREEZING OF DESIGN AND

SPECIFICATIONS
ABSENCE OF AN ENGINEERING SCHEDULE
LEADING TO DELAY IN THE RELEASE OF
DRAWINGS FOR PROCUREMENT
INEFFICIENT PROCEDURES FOR SCRUTINY,
APPROVAL
AND
TRANSMITTANCE
OF
DRAWINGS AND SPECIFICATIONS

CONTRACTING AND PROCUREMENT


PHASE
Delays, slipshod preparations of bid documents
Poor selection of vendors/manufacturers /

fabricators/suppliers
and
contractors
and
preferential
treatment
to
public
sector
enterprises, on the basis of Government s
guidelines
Delayed placement of orders
The practice of accepting of lowest quotations
of the vendor quality and/or contractors
competency

Delay in the issuance of import licence,

permits and various clearances


Delay in the opening of letters of credit and
issuance of various guarantees to foreign
suppliers
Time consuming procedures concerning the
procurement of imported raw materials and
hi-tech components by Indian manufacturers
of equipment
Inadequate expediting actions

Lack

of Integrated action plans closely


involving suppliers and contractors
Delay in the supply of critical equipment
Lack of proper quality control arrangements
stage and final, and consequent defects in
equipment
Changes and modifications without costbenefit analysis
Poor logistic planning

CONSTRUCTION PHASE
Very early starting of construction activities,

before ensuring the availability of working


drawings, storage and pre-assembly space,
sequential supply of equipment and materials
and adequate infrastructure
Delay and/or inadequacy in contractors
mobilisation
Poor planning by contractors
Lack of close coordination and owners
serious involvement

Failure to assure contractors of law and order

in the project area


Contractors low productivity and consequent
financial problems
Inefficiency of contractors, in both the public
and private sectors
Hold-up
resulting
from
delays
in
interconnected activities, because of the
absence of integrated management

Belated clearances
Indecisions and delayed decision making
Bad quality control
Lack of micro-level schedule control

with

reference to the macro plan of the project


Under treatment to contractors and suppliers
Delay in payments, supply of owners free
issues, provision of infrastructural facilities,
settlement of extras, changes and claims
Delay in replacement supplies

START-UP PHASES
DELAY IN INPUTS LIKE SPECIAL TOOLS, MANUALS,

SERVICES AND FEEDSTOCK


ABSENCE OF COMMISSIONING SPECIALISTS
FAILURE OF EQUIPMENT OR PARTS
DESIGN CHANGES
DELAYED ACTIVITIES OF PROCESS OWNERS /SUPPLIERS
OF MAIN EQUIPMENT/ COMMISSIONING CONTRACTORS
DEFECTS IN ERECTION AND INSTALLATIONS
TEETHING TROUBLES RESULTING FROM BAD QUALITY
CONTROL DURING ERECTION AND IMPROPER TESTING
OF EQUIPMENT

IN ALL PHASES
WEAK PROJECT TEAM
INDECISION
LACK OF MANAGERIAL TALENTS
DISCONTINUITY OF EFFICENT TEAM MEMBERS
ABSENCE OF PERSONAL ACCOUNTABILITY

AND COMMITMENT
UNDUE JOB SECURITY
INDISCIPLINE

AND

RESULTANT

LACK OF AWARENESS OF THE

TIME VALUE OF

MONEY
INADEQUATE
CONTROLS
AND
IGNORING
OF
WARNING SIGNALS
POOR QUALITY AWARENESS
UNWARRANTED CBI ENQUIRIES NOT OREINTED
TOWARDS PROJECT OBJECTIVES AND CONSEQUENT
WORKING ATMOSPHERE OF FEAR WHICH DEPRESSES
THE SPIRITS OF WELL-MEANING DECISION MAKERS
GENERAL IGNORANCE AND NON-IMPLEMENTATION
OF SOUND PROJECT MANAGEMENT PRACTICES

PROJECT CLEARANCES
TECHNICAL REQUIREMENTS
STATUTORY REGULATED BY GOVERNMENT
ESSENTIALS OF GOVERNMENT POLICIES, PROCEDURES

AND
REGULATIONS
CLEARANCES
ALL

CONCERNING

VARIOUS

REGULATORY
REQUIREMENTS CONCERNING
CLEARANCES AND LICENSING WOULD KEEP CHANGING
FROM TIME TO TIME, ACCORDING TO CENTRAL
GOVERNMENTS INDUSTRIAL AND TRADE POLICIES

SOIL INVESTIGATION
REPORT
FOR

DESIGNING
FOUNDATION
AND
TALL
STRUCTURES : SOIL MECHANICS, ROCK MECHANICS,
FOUNDATION ENGINEERING, FIELD INVESTIGATIONS,
FIELD TESTINGS
DONE BY CENTRAL SOIL MECHANICS RESEARCH
INSTITUTE, DELHI
ROAD RESEARCH INSTITUTE, DELHI
CENTRAL BUILDING RESEARCH INSTITUTE, ROORKEE
SOIL RESEARCH STATIONS OF STATE GOVERNMENTS
ORGANIZED
SMALL
PRIVATE
PROFESSIONAL
INSTITUTIONS

MONOPOLIES AND
RESTRICITIVE TRADE
PRACTICES ACT
AFTER

LIBERALISATION,
ADVANCE
CLEARANCES HAS BEEN DONE AWAY WITH

EMPHASIS

ON
CONTROLLING
AND
REGULATING MONOPOLISTIC, RESTRICTIVE
AND UNFAIR TRADE PRACTICES

INDUSTRIAL LICENSE / LETTER OF


INTENT
MOST OF THE INDUSTRIES ARE EXEMPTED FROM

LICENSE
PROJECTS WITHIN 40 KM PERIPHERY OF THE
STANDARD URBAN AREA LIMITS OF A CITY
HAVING A POPULATION OF MORE THAN 10 LAKH
REQUIRES INDUSTRIAL LICENSE
SETTING UP NEW UNITS OR TAKE OVER OF
EXISTING UNITS, MANUFACTURE OF NEW
ARTICLE IN AN EXISTING SET UP, CHANGING THE
LOCATION
OF
AN
EXISTING
INDUSTRIAL
UNDERTAKINGS REQUIRE LICENSE

SPECIAL APPROVAL COMMITTEE FOR


NRI PROPOSALS
IT EXISTS UNDER CHAIRMANSHIP OF THE

SECRETARY, DEPARTMENT OF INDUSTRIAL


DEVELOPMENT
CLEAR
ALL
INDUSTRIAL
INVESTMENT
PROPOSALS EMANATING FROM NON-RESIDENT
INDIANS
MONITORS : INDUSTRIAL LICENSES, FOREIGN
COLLABORATION, IMPORT OF CAPITAL GOODS

APPROVAL OF FOREIGN
COLLABORATION
FOREIGN INVESTMENT
FOREIGN TECHNOLOGY AGREEMENT
AUTOMATIC

APPROVAL
FOR
IMPORT
OF
TECHNOLOGY IN HIGH PRIORITY INDUSTRIES,
PROVIDED ROYALTY PAYMENT DOES NOT EXCEED
5% OF DOMESTIC SALES AND 8% OF EXPORTS
SUBJECT TO TOTAL 8% OF SALES OVER 10 YEARS
FROM THE DATE OF AGREEMENT OR 7 YEARS
FROM THE COMMENCEMENT OF PRODUCTION

LUMPSUM PAYMENT
TECHNICAL KNOW HOW FEES
DESIGN, ENGINEERING, CONSULTANCY ETC.
USE OF PATENTS, BRAND NAMES, TRADE
MARKS
RECURRING ANNUAL ROYALTY
AS A PERCENTAGE OF THE EX-FACTORY VALUE
OF ANNUAL PRODUCTION, AFTER DEDUCTING
THE ALL-IN TOTAL LANDED COST OF IMPORTED
COMPONENTS
AND
THE
STANDARD
BOUGHTOUT COMPONENTS, IF ANY

APPROVAL FOR APPOINTMENT OF


FOREIGN CONSULTANT
TO RENDER ENGINEERING SERVICES
SUPPLY OF PATENTED TECHNOLOGY AND
LICENSING FOR ITS USE
SCRUTINY OF DETAILED ENGINEERING DONE
AND SUCCESSFUL TRANSFER OF TECHNOLOGY
WITH PERFORMANCE GUANRANTEE
SERVICES ARE VITAL IN EQUIPMENT SELECTION
AND INSPECTION
QUALITY ASSURANCE AND OBSERVANCE OF
STANDARDS IN CONSTRUCTION
RECTIFICATION OF ANY EQUIPMENT FAILURE

FOREIGN EXCHANGE CLEARANCES


FOREIGN EQUITY INVESTMENT UPTO 49% MAY

BE ALLOWED IN THE PSU AND REQUIRES


GOVERNMENT APPROVAL
AUTOMATIC APPROVAL FOR DIRECT FOREIGN
INVESTMENT UPTO 51% IN HIGH PRIORITY
INDUSTRIES

IMPORT OF CAPITAL
GOODS
COMPRISING PLANT, MACHINERY AND

EQUIPMENT
CAPITAL GOODS IMPORT POLICY:
PROHIBITED ITEMS, RESTRICTIVE ITEMS
APPROVAL FOR SETTING UP EXPORT

ORIENTED UNITS

ENVIRONMENTAL / POLLUTION
CONTROL CLEARANCES
WHILE

UNDUE
OBSESSION
WITH
ENVIRONMENT
WILL
IMPEDE
OUR
DEVELOPMENT,
UNSCRUPULOUS
PROJECT
PLANS
WITHOUT
CARING
FOR
THE
ENVIRONMENT WILL GRADUALLY DESTROY
MANKIND ITSELF
CENTRAL POLLUTION CONTROL BOARD AND
BUREAU OF INDIAN STANDARDS HAVE
PREPARED
NON-STATUTORY
EFFLUENT
STANDARDS KNOWN AS MINIMUM NATIONAL
STANDARDS
(MINAS)
FOR
11
WATER
POLLUTING INDUSTRIES

CAUSTIC SODA PLANT


MAN-MADE FIBRE
OIL REFINERY
SUPER THERMAL POWER PLANT
COTTON TEXTILES
COMPOSITE WOOLLEN MILLS
CEMENT
ELECTROPLATING
DYES AND DYE INTERMEDIATES

CLEARANCE FROM THE


INTERNATIONAL AIRPORT AUTHORITY
LOCATION

OF PROJECT CLOSE TO AIRPORT


SHOULD BE SELECTED IN CONSULTATION WITH IAA

RAILWAY CLEARANCE: MARSHALLING YARD, RAIL

ROAD TO SITE, SIDING, HANDLING AND SPECIAL


TYPES OF WAGONS, WAGON ALLOTMENT
ELECTRICITY

CLEARANCE: CLEARANCE FROM


STATE
ELECTRICITY
BOARD
OR
CENTRAL
ELECTRICITY AUTHORITY: CONNECTED LOAD AND
MAXIMUM LOAD

EXPLOSIVE CLEARANCE: HANDLING

EXPLOSIVE MATERIALS
CHIEF CONTROLLER OF EXPLOSIVES, NAGPUR
INDIAN EXPLOSIVES ACT AND RULES
FOREST CLEARANCE
PROJECTS INVOLVING RESERVATION OF
RESERVE FOREST OR DIVERSION OR USE OF
FOREST LAND NEEDS CLEARANCE FROM STATE
GOVT. AND THEN FROM CENTRAL GOVT.

STATE - INDUSTRIES DEPARTMENT


CLEARANCE
CLEARANCE OF STATE LEVEL PROJECTS AND

SMALL SCALE UNITS ARE HANDLED BY THE


STATE DIRECTORATE OF INDUSTRIES
SALES TAX REGISTRATION: THE UNIT SHOULD

GET SALES TAX REGISTRATION BEFORE IT


STARTS PURCHASE OF EQUIPMENT

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