How to improve strategic alignment and project success rates
Prioritizing projects is one of the most important capabilities for any organization that runs projects. It is where the entire success of your portfolio begins.
Project prioritization is where you:
In plain English, prioritization is a process where you work out which projects are the most important so that you can focus your resources on successfully delivering those value-added projects.
It is the first, crucial step in building a strong and balanced portfolio of projects and for making effective resource allocation decisions when executing those projects.
There are good ways and bad ways to prioritize projects. There are traps you can fall in to.
Many organizations think of project prioritization as a budgeting process, but prioritizing projects is so much more than that. Project prioritization lets you:
The data is compelling. According to PMI research, projects that are aligned to strategy are far more likely to succeed (see next section).
So, if you are responsible for delivering projects, prioritizing projects should be your first priority.
Good project prioritization ensures your portfolio is aligned to strategy, and strategically aligned projects are:
Organizations that fail to properly prioritize typically end up with too many projects. This reduces the efficiency of your team and increases project failure rates.
In contrast, prioritizing projects let you align resources to support those projects that are truly important ensuring their success.
Your portfolio exists to deliver strategic value to the organization, but what does “strategic value” mean? Whose definition should we use?
The process of prioritizing projects starts by bringing together your key stakeholders to brainstorm a (fairly short) list of strategic goals for your organization.
These goals become the criteria for scoring and prioritizing your projects.
Not all your criteria are equally important so they need to be weighted.
The problem is that each stakeholder will have a different view of the relative importance of each criterion. If you don’t take the time to really build agreement around the weighting of criteria - how the value of each project is going to be measured - then the decisions made based on these criteria will be wrong.
This step, in other words, is the foundation of all prioritization, project selection and project implementation. Get it wrong and everything else fails.
NOTE: This step, weighting criteria, is the one that trips up most organizations. There are many failure-prone methods of weighting criteria and independent research has shown that there are really only two suitable methods (see discussion on prioritization methods below for a more complete discussion).
Using AHP, you have your stakeholders compare pairs of criteria and ask “Which one is more important and by how much?”
Next, you compare the votes of your stakeholders and, where they disagree, you discuss, learn and come to agreement on what the overall balance of priorities is.
This is the critical step as it builds understanding and, crucially, ensures that the stakeholders “own the model” and are committed to action based on the model.
Working in spreadsheets or prioritization matrices, or even using PPM tools that don’t use AHP simply doesn’t achieve this level of support. This is, ultimately, the root cause of all the problems in project selection associated with non-aligned projects, too many projects and pet projects.
Once you know your evaluation criteria, you can start capturing project requests and evaluating them against your criteria and against your existing portfolio.
To do this, you need to:
In effect, this is documenting and setting out a business case for each project (even if it’s a simple one), but doing it in a way that allows quantitative, non-emotional assessment.
While it’s critical to have a business case for each project, there is a second reason for doing this work; we want to knock out infeasible projects quickly. If we can identify “no hope” projects early, we can avoid spending time doing lots analysis on these projects. In addition, by moving to a transparent, scoring-based system, everyone understands WHY projects are rejected which helps increase trust and support.
Many organizations do this “offline” using spreadsheets etc. which is tedious and error-prone work. Moving the whole process online can speed things up, allow greater automation, improve collaboration and deliver greater transparency /communication. TransparentChoice's prioritization software can help make this process both more accurate and quicker.
Now you’re ready to bring together the weighted criteria and the score for each project. This is simple maths. Y ou calculate the total score using a weighted sum model. In summary, you calculate the score for a project by doing the following calculation:
SCORE = (weight of criterion 1 x score for criterion 1) + ((weight of criterion 2 x score for criterion 2) +...
This will give you a score - a measure of the overall value to the organization - for each project. If you’ve engaged your stakeholders properly (see step 2) you are now ready to use this score to start selecting projects, figuring out how to allocate resources to current projects and more.
But selecting projects is not as simple as taking the highest scoring project and executing that one first.
Project prioritization gives you a score for each project. This score represents how much strategic value that project will deliver to your organization, but picking projects is about maximizing impact in a world where you have limited budget and resources.
In that world, value for money matters.
You can plot your projects on a chart with your priority score (from your prioritization process) on the vertical axis and the cost on the horizontal axis. Projects in the top-left are better value for money than ones in the bottom right.To calculate value for money, simply divide your priority score by the cost of your project.
Ranking projects based on value-for-money is a quick way to estimate what the “maximum value portfolio” will be given your budget constraints. This approach, however, only gives you a starting point for the discussion with your stakeholders.
There are other, more advanced optimization algorithms that will let you take into account not only budget, but also multiple other constraints... but even that is not the whole story.
If you can’t balance your portfolio, you will quickly see project failure rates (and frustration with the team delivering projects) rise. When you are only driven by the overall value, it’s easy to end up with an unbalanced portfolio. For example, if you are only driven by value you could (even though it’s unlikely) end up with one business unit being left unsupported - that is unlikely to be a good thing!
Balancing lets you:
The key to being able to select a strong, well balanced portfolio is to ensure that your stakeholders feel a strong sense of ownership over the scoring model. The best way to ensure this happens is by using AHP to prioritize your projects.
It’s also important to be able to see “balance” of project demand vs. resources as well as across organization departments, key themes or KPIs, etc. This not only helps make a better decision, but also drives buy-in and support for your portfolio.
Now it’s time to roll your portfolio out to the project teams to execute. This is a great opportunity to share with the team your list of goals / criteria. This can really help project delivery teams make better in-project decisions simply because they know what you’re trying to achieve.
Having a clear picture of which projects are most important means that resource managers can make quick and effective resource-allocation decisions. These decisions are based on data rather than being based on who’s shouting the loudest.
Having a strong process for prioritizing projects means that each project is handed off to the delivery team with a clear statement about what the project is for, what value is expected from the project. This can be a really powerful tool to help a project manager manage the scope of the project reducing scope creep.
Putting this together, you now how important projects that are well-resourced with clear goals and strong executive support. And that is why well-aligned projects are 57% more likely to be successful in delivering the intended business value.
But it doesn’t end there. Now you can turn your governance meetings into portfolio reviews as well. Simply update data on live projects, add in new project requests and you can keep your portfolio both strategically aligned and balanced in an environment where priorities and resources can change overnight.
Before you rush off and open up a spreadsheet, we have a warning - your spreadsheet model is not “suitable” for prioritizing projects.
Academics have looked at project prioritization in detail over the last few decades and have come to the conclusion that there are only two “proper methods” for prioritization.
They are called:
Project prioritization is a tough problem. You have multiple criteria and multiple stakeholders, each stakeholder has a different view of what’s valuable and failing to align these interests will undermine the whole project selection process. According to researchers, AHP and DEA are the ONLY methods that are “suitable” when prioritizing projects.
So what happens if you don’t use one of these methods?
Simply put, you end up with a prioritization model that your stakeholders don’t really trust. If they don’t feel ownership of your model, if they don’t trust it, they will start trying to “add just one more” or to promote pet projects. This is why organizations with what appear to be quite mature processes still end up with too many projects in the portfolio, with projects that fail and even with obsolete projects being executed.
Anecdotally, we see “waste” typically sitting in the range of 10% - 40% of the portfolio.
So, this isn’t just a bunch of academics wasting time coming up with new ideas. It’s about delivering more business value more reliably, and it starts with a solid prioritization process.
There are some good tools to help. AHP-based project prioritization software can make this a much quicker and simpler process than trying to prioritize in spreadsheets.
In other words, criteria weighting spreadsheets, prioritization matrices and PPM-vendor tools are simply not good practice. Only AHP and DEA should be used.
The point of running projects is to deliver strategic value to your organization. Of course, the definition of value will vary from organization to organization, but the point of doing projects is always about delivering that value.
There are only two levers you have to increase the value you deliver. First, you can make sure you’re delivering the right projects.
The other lever is to improve the process of delivering projects. It seems obvious that, to improve project success rates, you must improve your delivery methodology.
Improving project delivery, however, involves changing the way your project delivery teams work - that’s a lot of people across your organization. It may involve implementing new PPM tools, deploying new methodologies, retraining all your project delivery teams.
In short, it’s a big investment. And it’s slow.
In contrast, prioritizing projects is a very quick and easy win. It affects only a few people in a couple of meetings and can be implemented in just a few weeks. Prioritization has a massive impact as well; we’ve already seen that aligning your projects to your strategy dramatically increases project success rates.
Of course, you also need to focus on the project methodology, but prioritization is a quick win for any organization that delivers projects.
Effective project prioritization is a quick win for any project delivery organization, but it will never happen if you don’t take the first step.
We have scattered various links to resources throughout this page - I hope you found them useful.
The business case for high quality project prioritization is very clear. Deliver more projects on time and on budget, sure. But more importantly, deliver the business benefit more often and with lower risk.
The first step should be to evaluate your current portfolio so you can set clear goals for improvement. You should ask the hard questions:
To help, we have created the Portfolio Audit. It is designed to help you see how you're doing today and to identify quick wins. You can then make clear recommendations, along with an explicit business case, to your leadership team.
The output of the audit is a report telling you:
Once you have a base-line of information, you can use it to build a business case for improvements in project prioritization.