Test Answers on Project Management Chapter 3 – Flashcards
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The projects overall goal and measure of success. It must align with the organization's objective, mission, and goals. The MOV MUST: *Be Measurable. *Provide Value to the Organization. *Be Agreed Upon *Be Verifiable
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Measurable Organizational Value
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A vision statement articulates and inspires purpose
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Vision Statement
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A solid project plan based on clear goals and identifiable tactics/tasks to reach them. Easier decision-making during the project (e.g. Does this feature/functionality align with our overall strategy?). Money saved with internal or external team efforts by reducing costly change requests or budget overruns caused by "surprise" variables.
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Project Alignment
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Statement that clarifies what the organization does, who they do it for, and how or why they do it.
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Mission Statement
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1. Identify the desired area of impact *Strategic *Customer *Financial *Operational *Social 2, Identify the desired value of the IT Project Better? Faster? Cheaper? Do more? 3. Develop an Appropriate Metric (numeric) âȘprovides the project team with a performance target or directive âȘsets expectations among all stakeholders, and âȘaffords a means for evaluating whether the project is a success later on. Marchewka, Jack T.. Information Technology Project Management, 5th Edition (Page 64). Wiley. Kindle Edition. 4. Time Frame for achieving MOV 5. Verify and Get Agreement from Stakeholders 6. Summarize the MOV in a clear concise statement The project will be successful if ______ Or use a time table (in year ___ we will ____, and so on)
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Six Basic Step for MOV
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Time Period MOV 6 months 1 year 2 years
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MOV Statement Format
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The business case defines why the project is being undertaken and provides the financial measurements
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Business Case
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âȘOwnershipâA cross-functional team can spread a sense of ownership for the business case for more buy in and less problems. âȘAgreementâIf you develop a business case in isolation, it is very likely that you will have to defend your assumptions and subjective judgments in a competitive or political setting. âȘBridge buildingâThe business case team may serve as an effective tool for handling critics of the business case.
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Advantages of Cross Functioning Team for Business Case
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1: Define Measurable Organizational Value (MOV) 2: Form a Cross-Functional Business Case Team âȘCredibilityâAccess to people from various organizational areas or departments can provide critical expertise and information that may not be readily accessible to others outside that particular area. involved who will ask the right questions âȘAlignment with organizational goalsâHigher level managers can help connect the business case with the organization's long-term strategic plan and mission. âȘAccess to the real costsâThe members of the business case team with certain expertise or access to important information can help build more realistic estimates with respect to salaries, overhead, accounting and reporting practices, training requirements, union rules and regulations, and laws. 3: Identify Alternatives 4: Define Feasibility and Assess Risk 5: Define Total Cost of OwnershipâThe 6: Define Total Benefits of OwnershipâSimilarly, 7: Analyze Alternatives 8: Propose and Support the Recommendation
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Steps for Developing a Business Case
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Focuses on what can go wrong or what must go right. âȘIdentificationâWhat can go wrong? What must go right? âȘAssessmentâWhat is the impact of each risk? âȘResponseâHow can the organization avoid or minimize the risk?
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Risk
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Should focus on whether a particular alternative is doable and worth doing. Consider the following: *Economic Feasability *Technical Feasability *Organizational Feasability âȘOther feasibilitiesâDepending on the situation and the organization, a business case may include other issues, such as legal and ethical feasibility.
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Feasability
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Total cost of ownership (TCO) is a concept that has gained widespread attention and generally refers to the total cost of acquiring, developing, maintaining, and supporting the product or application system over its useful life. TCO includes such costs as: âȘDirect or up-front costsâInitial purchase price of all hardware, software, and telecommunications equipment, all development or installation costs, outside consultant fees, etc. âȘOngoing costsâSupport, salaries, training, upgrades, supplies, maintenance, etc. âȘIndirect costsâInitial loss of productivity, time lost by users when the system is down, the cost of auditing equipment (i.e., finding out who has what and where), quality assurance, and postimplementation reviews.
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Total Cost of Ownership
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Include all of the direct, ongoing, and indirect benefits associated with each proposed alternative. life. Benefits can arise from: âȘIncreasing high-value workâFor example, a salesperson may spend less time on paperwork and more time calling on customers. âȘImproving accuracy and efficiencyâFor example, reducing errors, duplication, or the number of steps in a process. âȘImproving decision makingâFor example, providing timely and accurate information. âȘImproving customer serviceâFor example, new products or services, faster or more reliable service, convenience, and so on.
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Total Benefits of Ownershlp
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âȘChanging the existing business processes without investing in IT. âȘAdopting or adapting an application developed by a different area or department within the organization. âȘReengineering the existing system. âȘPurchasing an off-the-shelf application package from a software vendor. âȘCustom building a new application using internal resources or outsourcing the development to another company.
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Considerations for Alternatives
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Financial models focus on either profitability and/or cash flows. Cash flow models focus on the net cash, may be positive or negative, and are calculated by subtracting the cash outflows from the cash inflows. In general, one could view the benefits associated with a particular alternative as a source of cash inflow and the costs as the source of outflows. The most commonly used cash flow models include payback, breakeven, return on investment, and net present value..
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Financial Model
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1. Return on Investment (ROI) 2. Future value (FV) 3. Net present value (NPV) 4. Payback period 5. Internal rate of return (IRR) 6. Cost-benefit analysis 7. Alternatives 8. Risk analysis
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Business Case Financial Measurements
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Payback Period = Initial InvestmentâNet Cash Flow = $100,000â$20,000 = 5 years
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Payback
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Breakeven Point = Initial InvestmentâNet Profit Margin = $100,000â$5 = 20,000 units
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Breakeven
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Project ROI = Total Expected BenefitsâTotal Expected Costs Total Expected Costs = $115,000â$100,000 $100,000 = 15%
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ROI
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Net Present Value (NPV)âNPV focuses on the time value of money..
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Net Present Value
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The discount rate is the minimum return a company would expect from a project if the company were to make an equivalent investment in an opportunity of similar risk. Calculated using the formula: NPV = âI O + â( Net Cash Flow (1 + r) t ) Where: I = total cost (or investment) in the project r = discount rate t = time period
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Discount Rate (aka Hurdle Rate,
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Scoring models provide a method for comparing alternatives or projects based on a weighted score. Total Score = ân i=1 wi ci Where: wi = criterion weight ci = criterion score 0â€wi â€1
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Scoring Models
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âȘThe scoring model can combine both qualitative and quantitative criterion âȘWeights and scores can be subjective âȘFinancial models can be biased toward the short run âȘSome criteria can be reverse-scored âȘPast experience may help create a more realistic business case
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Benefits of Scoring Models
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âȘThe project must align with the organization's values, vision, mission, and strategies. âȘThe project must provide measurable organizational value that can be verified at the completion of the project.
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Project Selection Decision