Sharing a Model for Project Prioritization
The problematic of Project Prioritization is a topic that is always present in organizations’ agenda. The following model can be a starting point to those organizations that have not yet found an adequate mechanism to overcome the prioritization challenge. This model consists of basically 4 steps, and the aspects of each organizational culture should be considered at the time of its implementation.
Step 1. Apply the 80/20 rule from the start
Following this rule helps to avoid that the small projects, not very attractive from the business case perspective, have the chance to be carried out, avoiding being displaced permanently in the priority.
The idea is that the 20% of the offer capacity is distributed among the different areas so that they define with absolute autonomy how to invest the resources. This enables that Projects of minor operational efficiency or improvement can be carried out.The rest 80% of the offer capacity then is subject to the prioritization model that will be applied to projects proposed by the different areas and business units of the company.
Step 2. Group the Projects based on its criticality
In order to overcome the subjectivity regarding what Project contributes more or less to the strategic focus of the company, it must be identified at a company level and at an area level, in a separate way, 2 types of projects: High Value projects and Nice to have projects.
This job requires the prior development of an orientation guide at a company level and at an area level on what is considered High value and what is considered Nice to have. Then, a matrix with 2 variables can be established:
a) Alignment to Strategic Focus at a company level and,
b) Alignment to the focus of the Goals at an area level of the area which proposes the project.
At the same time, the values of each variable will be:
1. High value
2. Nice to have.
As a result, four quadrants help to define the criticality of the different proposed projects:
1. Company High Value/Area High Value: Critical projects
2. Company High Value/ Area Nice to have: Projects of medium criticality
3. Company Nice to have /Area High Value: Projects of low criticality
4. Company Nice to have / Area Nice to have: Non-critical
Step 3. Prioritize the projects within each category of criticality
The priority of the projects or its rating ranking has to be performed within the framework of the 4 categories of criticality: Critical, Medium criticality, Low criticality and Non critical. The objective of assigning a quantitative value to each project is to see its position in the ranking of each category.
For this purpose, we should:
A) Define the value attributes. Among them, we can mention:
1. Contribution to the revenues
2. Cost reduction
3. Customer satisfaction
4. Contribution to the work climate
5. Avoid contingencies and/or risks
Establish with a 100 base, what is the value of each attribute.
B) Establish a range of value attributes. For example:
1. High
2. Medium
3. Low
4. Non-Contributing.
Establish on a base of sum 1 the value of each range.
C) Develop an orientation guide that describes in a double entry table what aspects describe the intersection of the value attributes and the value ranges.
D) Having in mind that a Project can respond or not to more than one value attribute and, in that case, for each of them in a specific range, we proceed to the weighted calculation of its value.
Example: A Project responds to 2 value attributes: Contribution to revenue and Customer satisfaction, the first in a high range and the second in a medium range.
The rating table of the company establishes that the projects that contribute to revenue are worth 50 and the ones that contribute to customer satisfaction are worth 20. The value table of the company is: High: 0,6, Medium: 0,3, Low: 0,1, Noncontributing: 0. The following calculation allows to obtain the quantitative valuation of the project: 50*0,6+20*0,3= 36.
This means that through this procedure, it is possible to rank each project within the category. The relative value of each value attribute is not fixed forever. On the contrary, as the strategic focus of the company changes, for example following economic cycles of growth and recession, the valuation table of the different attributes should be aligned.
Step 4. Conceptual validation of the quantitative method
The described scheme in steps 2 and 3 is dynamic because each new project has to be included in the priority ranking of each category through the previously explained procedure. A project is taken out of the ranking once its execution has begun. The execution will be always according to the order of the category and within it, the value ranking that it occupies.
The conceptual review of the framing of the priority of the projects in the different categories and ranking of the project portfolio is a fundamental step in the model. It ensures that the result of the application of the indicative and quantitative criteria is able to overcome a conceptual review of the priorities that have emerged from the process.
The way in which this conceptual review is manifested is by forcing, as mechanism of self-adjustment and balance of the subjectivities, that with each change that is made for the occurrence of new projects, the prioritized Project portfolio keeps a predefined percentage of projects in the four quadrants (For example: 60% critical, 25% medium criticality, 10% low criticality, 5% non-critical).
If someone claims that this can lead to a project being in the list never being executed for the emergence of new priorities, the answer is that precisely in that resides the adequate prioritization logic.
The list of prioritized projects is dynamic as the context in which the business of the company moves. Moreover, when a project loses priority, there comes a moment in which it may become unnecessary. At that time, it would be convenient to evaluate if it makes sense for the project to continue being part of the Project portfolio.
Hope it helps!