Managing Multiple Project Constraints
In today’s dynamic business environment, capital investment projects cannot be evaluated in isolation. Organizations face multiple constraints that require a comprehensive and interdependent approach to project selection and execution.
Key Constraints in Project Selection
1. Project Interdependence
Certain projects cannot be accepted or rejected independently, as their outcomes affect others. This interdependence is classified into three types of economic dependency:
- Mutual Exclusiveness: Selecting one project precludes the selection of another.
- Negative Dependency: Acceptance of one project reduces the value or feasibility of another.
- Positive Dependency: Acceptance of one project enhances the value or feasibility of another.
2. Capital Rationing
Capital rationing arises when available funds are insufficient to undertake all profitable or acceptable projects. This limitation may be due to:
- Internal Constraints (e.g., management policies, strategic priorities)
- External Constraints (e.g., market conditions, credit limits)
3. Project Indivisibility
Some projects are indivisible, meaning they cannot be partially accepted. A project must either be undertaken in its entirety or not at all.
Project Comparison Methods
When faced with capital constraints, project interdependencies, and indivisibility, it becomes essential to compare and prioritize projects effectively. The following are two key approaches:
1. Ranking Method
Originally proposed by Joel Dean, this method involves:
A. Ranking Projects
Projects are ranked in descending order using one of the following financial metrics:
- Net Present Value (NPV): Assumes reinvestment of cash flows at the firm’s cost of capital.
- Internal Rate of Return (IRR): Assumes reinvestment at the IRR or higher (Fisherian rate).
- Benefit-Cost Ratio (BCR): Assumes reinvestment at a rate greater than the Fisherian rate.
Projects are selected in rank order until the capital budget is fully allocated.
B. Feasible Combination Procedure
This step involves identifying all viable project combinations, given capital and interdependency constraints. The combination with the highest total NPV is selected.
Challenges with the Ranking Method:
- Conflicts may arise due to differences in the results provided by NPV, IRR, and BCR.
- Indivisible projects complicate the ranking and selection process.
2. Mathematical Programming Approaches
These methods are used to model and solve complex project selection problems involving multiple constraints and interdependencies.
A. Linear Programming (LP)
- Assumptions: Both objective function and constraints are linear; decision variables are continuous.
- Limitation: Cannot handle indivisible projects or binary decisions (e.g., accept/reject).
B. Integer Linear Programming (ILP)
- Decision variables are binary (0 or 1), enabling acceptance or rejection of entire projects.
- Advantages:
- Addresses the issue of project indivisibility.
- Can model complex project relationships (mutual exclusiveness, contingency, complementarity).
C. Goal Programming
- Focuses on minimizing deviations from pre-set goals in a prioritized order.
- Useful for organizations with multiple, often conflicting objectives.
Multi-Tasking and Its Impact on Project Execution
Why Projects Take Too Long (and Still Miss Deadlines)
In many project environments, multi-tasking is a common yet underestimated cause of project delays, extended durations, and reduced throughput. While often perceived as a valuable skill, multi-tasking frequently leads to inefficiencies and suboptimal outcomes.
Understanding the Problem
Organizations typically give individuals multiple tasks or projects at once. When employees have more than one task on their desks, they are likely to switch between tasks a practice that introduces delays due to:
- Context switching
- Loss of focus
- Interruptions
This behavior is often driven by competing demands from different project managers, each prioritizing their own project. The pressure to “do it all” leads to:
- Delayed task completion
- Disruption in project flow
- Increased coordination overhead
The Vicious Cycle of Multi-Tasking
- Resources begin multi-tasking under pressure.
- Projects fall behind due to divided attention.
- Managers reprioritize tasks to compensate.
- More multi-tasking is introduced, worsening delays.
This cycle becomes systemic, especially in companies where employees involved in projects also support daily operations (e.g., QA, engineering, production, customer service). Unexpected urgent tasks divert attention, causing further delays and reinforcing the cycle of bad multi-tasking.
The Bottom Line
Most organizations not only have the opportunity for multi-tasking they have institutionalized it. Breaking this cycle requires:
- Awareness of the hidden costs of multi-tasking
- Better prioritization of tasks
- Resource planning that minimizes task switching
Conclusion
Managing multiple project constraints and understanding organizational behaviors like multi-tasking are essential for successful project execution. Whether selecting the right projects under capital constraints or ensuring timely completion, organizations must adopt structured methods and actively manage resource behavior. The payoff is substantial shorter project durations, higher completion rates, and improved strategic outcomes.
FAQ's
Why can’t organizations evaluate projects independently?
Because projects often have interdependencies, shared resources, and limited capital. Selecting or rejecting one project can impact others financially or operationally making isolated evaluation impractical.
What is project indivisibility?
It refers to projects that cannot be divided or scaled. These projects must be accepted or rejected in totality.
What’s the difference between Linear Programming and Integer Programming in project selection?
- Linear Programming: Assumes partial project selection is allowed.
- Integer Programming: Only allows whole project selection (0 or 1), making it more suitable for indivisible projects.
