Reference no: EM13326686

In many organizations, each integrated project team uses the same economic analysis tool to develop financial projections for alternative solutions to performance improvement problems. The teams then compare the financial projections and, taking into account cost and risk, make a decision about which alternative solutions should be recommended for funding. Each team sends its recommendation to an executive committee that makes the funding decisions. Here is a case in which one organization that used this approach encountered a vexing problem.

The Case: An organization had a policy of requiring all integrated project teams (IPTs) to use the same professional economic analysis tool. The objective was to generate results that could be compared. In general, proposals with the most attractive risk-adjusted financial projections were selected for funding. The executive committee became concerned when IT projects were not achieving the financial returns promised in their proposals, and the gap between the projections and the actual results seemed to be widening. The executive committee decided that steps must be taken to increase the accuracy of the financial projections so they will more closely match the results that are achieved.