Online Community Specialist| PMINewtown Square, Pa, United States
Hello Yunisha - thanks for your very first post in our discussion forum! In order for us to assist you, may you please provide a specific example or scenario in your line of work that could assist others in the community to provide feedback? We are happy to help and look forward to your response!
Thomas WalentaGlobal Project Economy ExpertHackenheim, Germany
Hi Yunisha, welcome.
Think the question of accuracy depends not only on the method but also on the data available to feed the method and the situation you are in (social context, stability, time frame, ..). All methods make assumptions based on local experience or other biases. While they pretend to be rational and objective they indeed are very subjective.
Who sets the weights in the weighted method, who estimates income for the payback method, and who sets the time frames for NPV? No accuracy here.
Project selection criteria should go beyond financials, consider strategy contribution, risk levels and resilience, novelty, and capabilities, and must be supported by the leadership team. Saving Changes...
Accurate? When are you defining the expected results? They all involve estimating, and if you're not updating your estimates over the course of the project, your actuals may be wildly different from your estimates. At a certain level, it doesn't matter which approach you use, as long as you're consistent across all projects. Saving Changes...
Payback period and NPV are two descriptive statistics that only relate to expected financial performance. If your projects must consider other factors such as environmental impact or employee development, then they don't tell the whole story.
Weighted scores can provide a more complete evaluation, but they do come with issues such as how those weights are determined and can produce dubious results. That can be addressed by using fuzzy logic instead by asking stakeholders to rank various scenarios on simple rating scales, and using that survey to rank other combinations of variables without weighting each one. The series of questions take the form of, "If A is good, B is bad, and C is moderate, then the project value is (very good to very bad)." Saving Changes...
A lot depends on the make up of the portfolio and the strategic objectives underlying investments within it. If we are looking at a public sector portfolio such as the projects done by a health ministry or agency, the benefit metrics used to justify a project are likely to be quite different from those used in a for profit context.
Even purely looking at financial metrics, one is not necessarily superior to another. If a company is cash limited, they might focus more on the cost side of a project in the near term.
It may depend on the company's strategic objectives, project requirements, project industry, etc.
* Weighted score method: determines percentages of weight for cost, time, and quality, Percentages are used to state which criteria are more important to others. Then, we use numbers to rank project choices, according to the criteria. We combine the numbers ranked with the percentages and then summarize the punctuations of each project. The project with better punctuation is the chosen. This method could be used when you need the best results in overall aspects of the project.
* Payback period: This method determines how long it will take for you to recover the investment. You can select this method when your priority is making back the money you’ve invested.
* NPV: is the difference between the current value of cash inflow and the current value of cash This method takes into account the future value of money. It's good to evaluate the initial and ongoing investments. The higher the NPV number, the better. Saving Changes...
PMI Team Member
Community Champion
