Best practices to prioritize projects.
Suppose your organization’s annual planning exercise comes up with 50 projects that would cost perhaps $10 million, but you have the capacity and financial resources for only $2.5 million, you are in great shape, right? You have a wealth of possibilities from which to choose. Well, nonot in great shape yet.
If you choose the “right” projects, those of the genuinely top priority, you position yourself for maximal benefit. But if your organization’s process of prioritizing and selecting projects isn’t up to the tasksay, because decisions like this are too decentralized, or too political, or because your colleagues select $15 million worth of projects and get stuck in rancorous disagreementyour potential benefits can become a litany of missed opportunities, high project failure rates, and dissension.
That happens all too often because prioritizing and selecting projects raises some of the most fundamental, strategic, and complex issues your organization faces. Those issues are highlighted in the statement of the problem itself. What are the “right” projects? In other words, what are your organization’s goals? What is its strategy for achieving those goals? How do those goals translate into criteria for prioritizing projects? Do you have an agreed process of prioritizing? An agreed process of mediating competing evaluations of priority?
Cumulatively, business firms and other organizations have a great deal of experience with prioritizing projects. After all, everyone does it. Models for prioritizing projects abound, but they can present radically different choices. One parameter on which models differ is their reliance on the participants intuitive evaluative strengths versus a more quantitative, “data-driven” approach.
Another difference is how project prioritizing is built into the company? Increasingly, companies have full-time project-management offices (PMO) with staff and budgets to pursue project planning, management, and evaluation full time.
And another pivotal difference is their adoption of project management software platforms, which increasingly have transformed the ratio of input (budget, personnel, time, other resources) to output (project success, the margin of return, profit). In other words, project prioritizing today is not limited to the equation between capacity and budget, on the one hand, and a possible project list on the other. By aligning available resources such as time, money, expertise with the right projects and the right project mixand then accelerating projects by efficient management, on-time provision of resources, and targeted troubleshootingproject management resources make more projects possible, a higher success rate, and a more favorable ROI.
The project prioritization models
Let’s look briefly at three frameworks or models for prioritizing projects. We can then look in more depth at the questions that any approach to prioritizing must address in some form.
To an extent, the method you select will depend upon how many proposals you are prioritizing. A list of 50 possible projects is not just longer than a list of 10. It is a different type of problem.
This could be called almost “automatic” or “natural,” the way we call our latest heartthrob a “10.” We are creating a scale, but it will mean little unless we are clear about our criteria for ranking, apply the same criteria, know each criterion’s relative importance, and then pose and answer specific enough questions to give our application of the criteria some objectivity. So, in fact, the ranking may not be so simple...
Assigning a score
Ranking a dozen projects by two criteria (How badly do we need this project? Is it within budget?) can be almost intuitive. But when many selection criteria must be weighed, we might want to assign a score to each projectand a final score when we average the individual scores of our colleagues. Here the criteria and the weight to attach to each one are explicitly listed.
Where the list is long, this is work for the PMO or an ad hoc project-prioritization committee. If the projects differ widely, not only in degree but also in type, applying the criteria can get subjective (apples to oranges?). One precaution often suggested is to use the proposed scoring method on projects your organization has already completed. Call it a thought experiment: Put yourself back when we were prioritizing these projects. Would we have chosen what implementation later showed to be the winners?
Analytic Hierarchy Process (AHP)
AHP is a prioritizing or decision-making process ready to use. Since it was developed in the 1970s, it has been continuously refined. It is explicitly intended for tackling complex decision-making by combining psychology (the subjective side) and mathematics into a model that can handle a long list of criteria for selection. It bills itself as a “holistic” technique superior to ranking or scoring.
AHP proceeds from making a head-to-head comparison of two criteria (apples to apples) and then feeds the results into the quantitative analytical engine. Claims for the power of AHP derive from converting an abstract problem into numbers that are systematically crunched to yield a result by a transparent (explicit) process.
If that sounds like work, it is, but much of it is automated, and AHP tools can be powerful. It does not banish subjectivity and guesswork; it doesn’t even claim to do so. And like the scoring model, AHP can be put to the same back-testing exercise on your completed projects.
Some essential (inescapable) questions
Whatever the model (and they are not mutually exclusive), it must answer specific questions–in whatever form those questions may be posed. It is useful to understand these basics. (After all, we have to prioritize the selection models, too.)
Not all questions apply to every type of organization. “Profit margins” and “return on investment” are not the explicit vocabulary of nonprofit organizations or governments. But the fundamental concepts still apply (how much does this project give us for the effort required?).
Why are we doing projects?
Answer: to reach your organization’s objectives, optimize the fulfillment of its mission. To keep improving performance in your chosen role. The more clearly you can articulate mission, objectives, and long-term strategy, the better your chance of selecting projects that truly align with them.
How do mission and long-term strategy translate into selection criteria?
Does the project present a comparative advantage over other possible projects: an advantage now–a cost-benefit advantage? A confident answer to those questions can make or break a project. The 2017 PMI report said 37 percent of project failures are attributed to a lack of clearly defined objectives and discipline in implementing strategy. Since the objectives of a project must align with and advance the mission and long-term objectives of your organization, this failure rate goes back to alignment with your mission. Indeed, one threat to project prioritizing is over-political decision-making that leads, for example, to “fudging” the project goals to win acceptance of the project.
Can you translate broad selection criteria into actionable tests? If your task is to align project priority and selection with your organization’s strategic goals, how do you “operationalize” those goals? How do you concretize what the strategy means in practice? Here are some common answers:
- Better return on investment (ROI) is the reason-for-being of profit-making organizations. Your company’s entire staff can function day to day without “regulations” because they refer to the common criterion: Does this increase profits? Each project that comes under scrutiny must rise or fall on its comparative prospects for ROI.
- Efficiencies mean better profit margins. Even a project initially selected may be canceled later because your organization’s chances of bringing it to a successful conclusion are compromised by too limited capacity.
- Wait, it works, but why are we doing it? As the case is made that the project can be executed to perfectionand even as this works out in practiceit can be challenged for not advancing the organization’s goals.
Is everyone on the same page?
The more transparent and widely understood in your organization are the criteria for project selection, the easier it is to communicate reasons for choosing some projects and killing or postponing others. Significant time and commitment are invested in conceiving and advancing projects. If staff make that effort with only a vague understanding of selection criteria, then you create unnecessary problems when projects are rejected. A PMO permanently available for consultation can shape good ideas into priority projects and head off significant personal investments in non-starters.
Can this project win the race to market?
Larger companies may feel their projects compete so hard for attention within the company that projects are at risk of losing their time-to-market edge. Prioritizing taking account of time-to-market can preserve a firm’s first-to-market advantage, getting to customers ahead of the competition.
Will this project be on-time, delivered-as-promised?
The effective selection and prioritization of a project list for your organization will have some go/no go criteria. If a project cannot be delivered successfully (on time, with a favorable cost/benefit ratio), then it’s “no go.”
Hunch, intuition, or data-driven?
We have been reviewing the criteria for project selection. But when those involved in project test planning and management sit down to apply those criteriae.g., does it meet the test of cost-benefit analysiswhat degree of rigor do they bring to the process? Experience helps, of course, and a commitment to objectivitybut to what extent will applications of the criteria be data-driven? Will arguments about capacities versus projected payoffs be quantified? Will the “race to market” concept be quantified with historical data on projects? Sure, the data can be questioned and interpreted, but it is a significant anchor of competitive analysis. How do you resolve these sorts of question:
- What is this project’s point of breaking even?
- How will our growth be affected?
- Where will we get enough resources of time, finance, expertise?
- What is the cost/benefit ratio?
You will agree, we suspect that these are essential questions that can be addressed only by data and information. Hunches and guesses will not do.
Project management software
Few, if any PMOs today, do their work without dedicated project management software platforms. Platform technology has been called the “fourth revolution” in information technology because it goes beyond specific computer applications to become the locus of the interaction of your executives, employees, customers, contractors, and other stakeholders in projects. But the right platform works in any organization of any size or type that handles projects.
Project management, either by a PMO or others assigned to the tasks, will need a software package with features such as task management, workflow management, and planning tools. That, of course, is just the beginning. When the prioritizing exercise is successfully completed, project management must collaborate with your project teams to understand how the projects timing and required resources impact the organization’s other projects. The project management platform brings information technology to the end-to-end planning, implementation, and evaluation process. A brief checklist of software requirements:
- It works in real-time, providing a view of what is happening now and collaboration with other teams.
- It facilitates an overview of the project portfolio on the screen to determine how projects relate to one another.
- It monitors specific projects and tasks to work toward standardizing processes and results.
- It facilitates aligning resources (staff, equipment) with projects to keep each project on schedule.
- It meets the challenge of balancing the available resources, so projects have what they need on time. The same type of challenge is balancing the workloads of individual managers and teams.
- Its product is the report to management, but also to project managers and teams, on the progress of every project and the project portfolio. The reports should be easy to download and to share.
Easy Projects project management software
Talk with our product specialists to discover how our project management platform supports project success at every stepstarting with prioritizing projects. Professional services, IT services, business consulting, marketing agencies, engineering: Our case studies of virtually every type of project-focused firm demonstrate the power that Easy Projects brings to your work.
But sure to check back here regularly for information, insights, and updates on how to manage projects efficiently and learn from articles and case studies what is happening throughout the field.
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