How might excessive or exclusive reliance on other screening methods discussed in this chapter lead to similar problems?

Case Study 3.1 Keflavik Paper Company

Keflavik Paper is an organization that has lately been facing serious problems with the results of its projects. Specifically, the company’s project development record has been spotty: While some projects have been delivered on time, others have been late. Budgets are routinely overrun, and product performance has been inconsistent, with the results of some projects yielding good returns and others losing money. They have hired a consultant to investigate some of the principal causes that are underlying these problems, and he believes that the primary problem is not how project are run but how they are selected in the first place. Specifically, there is little attention paid to the need to consider strategic fit and portfolio management in selecting new projects. This case is intended to get students thinking of alternative screening measures that could potentially be used when deciding whether or not to invest in a new project.

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Questions

  1. Keflavik Paper presents a good example of the dangers of excessive reliance on one screening technique (in this case, discounted cash flow). How might excessive or exclusive reliance on other screening methods discussed in this chapter lead to similar problems?
  2. Assume that you are responsible for maintaining Keflavik’s project portfolio. Name some key criteria that should be used in evaluating all new projects before they are added to the current portfolio.
  3. What does this case demonstrate about the effect of poor project screening methods on a firm’s ability to manage its projects effectively?

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