Project Justification in Project Management
Project justification is primarily project management. It means that one should undertake the project and confer resources after finding the viability and feasibility of a project. It ensures that the projects agree with the organizational objectives and also are promising enough to provide the expected benefits.
Benefits of Project Justification
1. Movement along the Lines of Organizational Goals
It ensures that the proposed projects are within the scope of the organization’s strategic goals and priorities. It prioritizes, with all those initiatives, those that will support the mission, vision, and long-term goals of the organization.
2. Resource Allocation
This is an efficient way of allocating resources by judging multiple programs on their gains and outlays. All this purposely directs limited capital into projects with drop-dead potential rate-of-return results.
3. Risk Identification
Project Justification brings out possibilities and anticipates assessing those very early risks. The existing exposure will help prepare plans for behalf exposure that either mitigate risk or minimize uncertainty and challenges the project might meet.
4. Stakeholder Engagement
The stakeholder identification, needs, expectations, and concern understanding during the justification period is very critical, as this supports the commitment along with engagement with the project over its life cycle.
Significant Modes of Project Justification
1. Cost Benefit Analysis
Cost-benefit analysis is an appraisal method wherein the costs of a project are compared with their expected benefits, which usually include both tangible and intangible aspects. This analysis informs whether the expected benefits justify the investment.
Example:
A new production process is assessed for capital investment by a company in this cost-benefit Analyzer in the costs of their equipment, training, and downtime, as well as their expected benefits, like increase in efficiency and reduction in waste among others. It is considered to be justifiable if the expected benefits exceed all costs.
2. Return on Investment (ROI).
ROI is a financial measure for analyzing a return from an investment when the anticipated benefits have been compared with the costs of a project. This helps prioritize the projects with the highest expected financial return.
Example:
An organization plans a marketing campaign for a new product. The ROI is calculated by comparing the expected revenue from the campaign with all its costs (advertising, production). If this proves above a certain threshold amount or is considered to be high by industry standards, that project is justified.
3. Business Case Preparation
The business case reveals that it has a thorough examination of what the project is intended to be, the benefits expected from the investment, the costs, and risks inherent in it, and the alternatives available for creating a powerful document for justifying the said project. It will therefore enable the stakeholders to assess the possibility of the project while making informed decisions.
Example:
A nonprofit is thinking about creating a community outreach program. A complete analysis of the objectives, expected social impact, required resources, and costs associated with the program is done within the business case. Alternative ways are outlined along with the feasibility assessment and the decision to proceed or not with this initiative by stakeholders is made.
