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PROJECT PORTFOLIO CRITERIA

A basic objective of project portfolio management (PPM) is to maximize the contribution of the projects to the firm with the use of project portfolio criteria. The decision-making process for portfolios prioritizes the best high-profitability, low risk and strategically aligned projects so that the allocation of funding is efficiently distributed. This process can terminate less profitable projects at the beginning or slipping projects in order to start a more desirable project.

This means finding the best mix of short- and long-term projects as well as maintenance, growth, or transformational projects. There are inherent risk factors involved with each type of project. For example the short-term projects usually have a higher success rate with lower rate of return than a long-term project. On the other hand, the long-term projects usually have a lower success rate with higher profitability than a short-term project. In addition, the sequencing of proposed projects should best achieve the organization's overall goals and strategies.

The portfolio budget for our SBU is $2,000,000 for this year. Our project criteria takes into consideration all of the above and the total projected costs, scarcity of resources, the magnitude and time of the benefits and inter-dependence of other projects in the portfolio:

Is this a short-term, long-term, maintenance, growth and/or transformational project?

What is the ratio of mix and number of existing projects in the portfolio?

What are the total costs and do we have enough money in the budget?

Do we have the resources to do this project?

What are the short- or long-term benefits?

Will this project improve the company's market share in its targeted market?

Is the risk factor above 80% and profitability above $1 million per year for long-term projects?

Is the risk factor above 90% and profitability above $250,000 for short-term projects?

Will the projected income increase our market share or profit by 10%?

Are there any forecasted conditions which might affect any of the projects? As an example frozen oranges will affect any new product line involving oranges.

Is the economy in a recession or a depression?

Is it nutritious breakfast food?

Does this project support our current strategic goals?

Will this grow and improve our breakfast products?

What are the opportunity costs?

Is this the most favorable use of our resources?

How do we create new products to fit in the right markets?

What are the disadvantages of creating the new cereals?

Project Proposal Process:

The project selection process for Kellogg will be conducted in two phases. Project proposals will only be accepted when they submitted by the Regional Manager of the division in the company.

The proposal will be for projects that the division wants to start the next sale quarter. Project proposals will only be accepted between week five (5) and week seven (7) of the sales quarter. The Regional Managers are to submit no more than ten (10) proposals per division.

In the first phase of the project selection process the Regional Manager is to submit a short project proposal, no more than one (1) page, to the Breakfast Division via email. In the proposal the Regional Manager should include, but is not limited to, the following information: