Project Selection: Definition, Methods, Criteria & Process

Organizations cannot afford to chase every opportunity and exhaust all their resources. They have limited resources that must be implemented judiciously to achieve the maximum output out of any plan. 

Some projects may appear lucrative but might end up in a mishap for the organization. Project selection helps a company decide which project has the highest priority to attain accomplishment. The right project selection method can help organizations make informed decisions while choosing projects. It also gives all the stakeholders a better view of the goals that are to be achieved through the project, the strategies that will lead to the completion of the project, the timeline, and many more. 

This article discusses some project selection methods, the steps, and the tools involved in the process, which help organizations decide which project to proceed with.

What is Project Selection?

Project selection in project management refers to the process of an organization choosing one out of many projects so that the project can reap the most benefits. Projects should be able to align with an organization's goals and ensure that the resources are not misused. 

This is one of the most crucial actions for an organization. Choosing the right project is not sheer luck, and it is about analyzing data-driven insights to follow the most beneficial approaches and choose the best project that reaps the most benefits for the company. A Project Management Training Program can teach you the technicalities associated with project selection.

Project Manager Role in Project Selection

Due to their experience in project planning, execution, and delivery, the project manager plays an important role in the Project Selection process by providing input and recommendations to senior management on the feasibility of proposed projects. The project Manager must ensure that the projects chosen are in line with the organization's overall strategy and are feasible given the available resources and timeline.

Project Selection Methods

Choosing the wrong project can cause havoc to an organization and hinder its growth. Listed below are some of the most popular project selection tools organizations can use to understand which project they should proceed with.  

A. Benefits Measurement Methods

1. Cost-Benefit Analysis   

This is one of the most important tools for project selection which helps organizations analyze which decision they should proceed with and which one they should let go of. This process involves adding up the potential earnings that are expected from action and then deducting the costs incurred as input costs while taking action. 

This tool measures tangible aspects like financial metrics, including the cost saved or revenue earned during a project, and intangible aspects, such as customer satisfaction and employee morale. Based on the conclusions drawn, an organization decides whether to proceed with or forego a project. 

2. Payback Period 

As the name suggests, this method of project selection helps determine the time in which the initially incurred costs while starting a project can be recovered. The sooner the initial investment can be recovered, the more desirable it is for the company to proceed with the project. 

3. Discounted Cash Flow   

This project selection tool helps determine an investment's present value by considering the estimated revenue generated compared to the investment in the coming years. In this method, the value of an investment is determined based on future cash flows. If the DCF of a project is higher than the initial cost incurred, then the project is considered profitable.   

4. Opportunity Costs 

Opportunity costs are a great tool for project selection that organizations can use to make informed project choices. Opportunity cost refers to the highest value organizations have to give up to opt for their choice of project.
To put it in simple words, opportunity cost helps to determine the opportunity which might be overlooked when an organization chooses one project over the other. 

5. Ranking Method   

Organizations use this simple method of project selection to prioritize the projects that will earn them the most profits. Projects are ranked based on their importance. This is a comparatively quicker and easier approach as it helps the companies identify the top-most priorities at the earliest. 

6. Scoring Model 

In this method of project selection, there is a list comprising all the criteria that need to be considered while choosing a project. A dedicated committee is assigned the task of weighing the list with respect to the priorities and importance of all the projects under consideration. The redeemed values are thus evaluated, and the project that secures the highest score is selected. 

7. Analytical Hierarchy Process 

This analytical hierarchy decision-making method is used in project selection where the environment is complex and has multiple alternatives and criteria. The decisions are made using psychology and mathematical algorithms. A scoring system is implemented to make unbiased decisions on potential projects an organization should proceed with. 

The analytical hierarchy process of decision-making involves three steps. At first, the problem is identified, then the probable alternatives are analyzed, and finally, the best option is chosen. 

We hope this offers you a detailed insight into the different tools to help an organization arrive at a fruitful and concrete project selection decision. The article's next section deals with the different project selection process steps.

B. Constrained Optimization Methods

1. Linear Programming

Linear Programming (LP) Constrained Optimization is a technique that involves maximizing or minimizing an objective function while keeping a number of constraints in mind. It has a wide range of applications in operations research, management science, and economics.

The method entails graphically representing the problem and using algorithms such as the Simplex Method or the Interior Point Method to find the best solution.

2. Non-linear Programming

Non-linear Programming (NLP) Constrained Optimization is a technique for optimizing non-linear objective functions that are constrained in some way.

This method is useful when the objective function and constraints have non-linear relationships, and the optimal solution cannot be easily found using linear programming methods. To find the best solution, the method employs iterative algorithms such as the Gradient Descent Method or the Newton-Raphson Method.

3. Integer Programming

Constrained Optimization with Integer Programming is a technique that involves optimizing an objective function subject to a set of constraints, with the additional requirement that some or all of the variables take integer values.

The Integer Programming method is extremely useful when the decision variables have discrete values, and the optimal solution cannot be easily found using linear programming methods. To find the best integer solution, the method employs algorithms such as the Branch and Bound Method and the Cutting Plane Method.

4. Dynamic Programming

Programming Dynamically Constrained Optimization is a technique for optimizing a function over time. This method is useful for problems where the optimal solution is determined by decisions made at each stage as well as decisions made earlier in the process.

The method entails breaking the problem down into smaller sub-problems and solving them iteratively to arrive at the best solution. The Bellman Equation is frequently used in dynamic programming to find the best solution.

What are the Steps in Project Selection?

Here are the steps in project selection: 

• Identify Potential Projects: The first step in project selection is to identify potential projects that are aligned with the goals and objectives of the organization. 
• Evaluate Projects: Assess the feasibility, potential benefits, risks, resource availability, stakeholder management, and regulatory compliance of potential projects. 
• Project Prioritization: Arrange the evaluated projects in order of importance to the organization and potential impact on organizational goals.
• Choose Projects: Choose projects that have the greatest potential to add value to the organization while also aligning with its goals and objectives. 
• Create a Business Case: Create a business case outlining the benefits, costs, risks, and timeline for the selected projects. 
• Obtain Approval: Obtain approval from senior management or the project sponsor for the selected projects.
  

Project Selection Criteria

Project selection criteria are a set of guidelines or standards used for evaluating and prioritizing potential projects based on their strategic alignment with organizational goals, feasibility, potential benefits, risk assessment, resource availability, stakeholder management, and regulatory compliance. 

These criteria serve as a decision-making framework during the project selection process, ensuring that selected projects are aligned with the organization's objectives and have the greatest potential to deliver value.

Project Selection Process

The project selection process has to follow a list of concrete steps to ensure quality is not compromised at any stage of the selection process. The project selection steps are discussed below. 

• Create a List of Projects: This is the first step to beginning your selection process. You will have to create a list of all the projects the organization struggles to decide on. 
• Compare the Projects: Once you have gathered all the projects in one place, start comparing them. Utilize the above-mentioned tools that can help you execute your project selection and planning accurately. Shortlist the projects that will help your organization reap the most benefits while exhausting minimum resources. 
• Analyze the Results: Once you are done comparing, it is time that you analyze the results. Look for the projects that ensure optimum utilization of the organization's resources and derive the most profitable outcomes. 
• Select the Project: After thoroughly comparing the projects and their Analysis, you will be able to identify the most profitable project to proceed with. Therefore, decide the project that you wish to take up following the obtained insights from steps in the project selection process and obtain the best results. 

Who is Responsible for Project Selection Process?

In most organizations, senior management, specifically the project sponsor or portfolio manager, is in charge of the Project Selection Process. They are in charge of identifying potential projects, evaluating them against the organization's strategic goals and constraints, and selecting the projects with the greatest potential benefit.

Common Management Focus Areas in Project Selection

Here are the common management focus areas in project selection: 

• Strategic Alignment: Projects should align with the organization's overall strategy and goals. 
• Feasibility: The proposed projects should be feasible within the available resources, budget, and timeline. 
• Business Benefits: The selected projects should offer tangible benefits to the organization, such as increased revenue, improved customer satisfaction, or cost savings. 
• Risk Assessment: The potential risks associated with each project should be assessed and managed effectively. 
• Resource Availability: The availability of necessary resources, such as personnel, equipment, and funding, should be evaluated before selecting a project. 
• Stakeholder Management: The needs and expectations of stakeholders should be considered when selecting a project. 
• Regulatory Compliance: The projects should comply with relevant laws, regulations, and ethical standards.
  

Importance of Project Selection

With proper project decisions and planning, organizations can use their resources optimally. The importance of project selection is discussed below. 

1. Higher success rate

When companies invest the right amount of time and employ the correct strategies to choose which project to proceed with, the projects are more likely to succeed. 

2. Better return on investment

Projects should be able to increase the return on investment (ROI) of the companies. During project selection, projects are weighted against one another using different project selection tools. This helps organizations proceed with projects that can deliver better returns on investment following a reliable data-driven approach. 

3. Smoother and more efficient execution

During project selection, just like companies assess the optimal implementation of resources, they also ensure that an organization has enough resources to proceed with a project and continue it till its completion. These resources may include budget, human resources, and available tech assistance. 

Therefore, it can be said that effective project selection can increase efficiency and eliminate the risk of hindrances in the course of the project. 

4. Alignment with the company's goals

A project that does not align with the organization's goals brings no value to the company. Project selection also makes sure that a project aligns with the goals that an organization is willing to achieve, adding to its overall reputation and value. 

You can study a few project selection examples to better comprehend how project selection helps organizations lay hands on the most profitable assignments. You can learn more about the different aspects of project management if you connect with PMP or PRINCE 2 training providers extended by KnowledgeHut.

Importance of Project Selection

With proper project decisions and planning, organizations can use their resources optimally. The importance of project selection is discussed below. 

1. Higher success rate

When companies invest the right amount of time and employ the correct strategies to choose which project to proceed with, the projects are more likely to succeed. 

2. Better return on investment

Projects should be able to increase the return on investment (ROI) of the companies. During project selection, projects are weighted against one another using different project selection tools. This helps organizations proceed with projects that can deliver better returns on investment following a reliable data-driven approach. 

3. Smoother and more efficient execution

During project selection, just like companies assess the optimal implementation of resources, they also ensure that an organization has enough resources to proceed with a project and continue it till its completion. These resources may include budget, human resources, and available tech assistance. 

Therefore, it can be said that effective project selection can increase efficiency and eliminate the risk of hindrances in the course of the project. 

4. Alignment with the company's goals

A project that does not align with the organization's goals brings no value to the company. Project selection also makes sure that a project aligns with the goals that an organization is willing to achieve, adding to its overall reputation and value. 

You can study a few project selection examples to better comprehend how project selection helps organizations lay hands on the most profitable assignments. You can learn more about the different aspects of project management if you connect with PMP or PRINCE 2 training providers extended by KnowledgeHut.

Important Factors in Project Selection Methods

Here are the important factors in project selection methods: 

• Business Needs: Projects should address a specific business need and align with organizational goals. 
• Feasibility: Projects should be feasible in terms of available resources, budget, timeline, and technical capabilities. 
• Potential Benefits: Projects should offer tangible benefits such as increased revenue, cost savings, improved customer satisfaction, or competitive advantage. 
• Risk Assessment: Potential risks associated with the project should be assessed and managed effectively. 
• Stakeholder Management: The needs and expectations of stakeholders should be identified and managed throughout the project lifecycle. 
• Regulatory Compliance: The project should comply with relevant laws, regulations, and ethical standards. 
• Project Priority: Projects should be prioritized based on their importance to the organization and their potential impact on organizational goals.

Conclusion

The best way to follow market trends and stay up to date with your project selection mechanisms is to upskill, and KnowledgeHut's best Project Management certificate programs can be one exceptional choice to attain that! You can sign up for Prince 2 or PMP certification courses, based on your preference. 

Learners can access these programs online, right from the comfort of their homes. The sessions conducted are interactive in nature. There are also doubt-clearing sessions where the questions of learners are addressed by industry experts. 

If you are looking forward to establishing your career as a project manager, the courses offered by KnowledgeHut will prepare you in a way that you can shoulder the responsibilities!