Project Prioritization: The Ultimate Guide
Effective project prioritization is the foundation for successful project delivery. It's how you align your portfolio to your strategy. It's how you win executive sponsorship. It's how you ensure key projects are resourced. It's also how you identify and eliminate waste.
Conversely, poor prioritization perpetuates PMO pain. It increases the odds of project failure. It grinds down the morale and productivity of delivery teams beset with too many projects. Critically, it also frustrates the CEO who has to explain to shareholders why her strategy hasn't happened, and this tends to be bad news for everyone.
TransparentChoice has helped manufacturing companies, financial services companies, government departments, life science companies, technology companies and charities around the world improve the effectiveness of their project prioritiaztion processes, and we've learned a lot about what works and what doesn't.
That’s what we want to share with you in this document: the real story of how to prioritize projects properly and how to avoid the common mistakes.
We’re going to dig deep into project prioritization, but feel free to jump ahead:
- What is Project Prioritization?
- Why Prioritize Projects?
- 10 Signs of a Broken Prioritization Process
- Project Prioritization Methods
- Best practice: Analytic Hierarchy Process
- How to Prioritize Projects
- The Importance of Criteria in Project Prioritization
- Project selection - 7 key overlays
- PMO toolkit - why you need software
- The Business Case for Prioritization
- Getting Started - Next Steps
We've done our best to pack in as much as we can to this guide, but we're always happy to speak - just book a meeting with us and we can connect.
What is project prioritization?
Prioritizing projects is one of the most important capabilities for any organization. It is where the entire success of your portfolio begins, and enables you to:
- Align projects with strategy
- Quantify which projects add most value
- Say "no" to low value projects
- Identify and resolve resource prioritization challenges
- Gain buy-in from both stakeholders and delivery teams
- Balance the portfolio of projects in the backlog
- Build an achievable portfolio roadmap
In plain English, prioritization is a process where you work out which projects are the most important so you can focus resources on successfully delivering them.
There are good ways and bad ways to prioritize projects. This guide will show you a proven solution built on Decision Science. It will also highlight common traps that drive poor prioritization in many organizations.
Why prioritize projects?
It’s no longer enough for a PMO to focus on training, process, templates and reporting. They also need to own the quality of the projects going into the delivery team, because this unlocks important benefits for any organization. We will explore 5 key benefits of prioritization:
- Better financial returns
- Better project delivery KPIs
- Foundation for good governance
- Drive Buy-In to the plan
- Keep the Boss happy
Prioritization improves financial returns
Getting more for less is central to the success of any PMO, and prioritization is proven to provide outstanding returns:
- McKinsey research indicates that organizations that invest in strategic prioritization will deliver 40% more value, compared to companies who allocate funds based on a ‘same as last year’ approach.
- Forbes analysis tells a similar story, with S&P 500 performance in 2021, where 82% of the growth in value came from 20% of the companies in the index. The Pareto effect is real and works for investment, and underlines the importance of moving resources to where they add most value.
- PMI analysis shows that 20% of the typical portfolio is waste. Stop this today to achieve an instant boost to the return on your investment.
Have these stats handy when you talk to the CFO with our exec-ready slide deck here.
Prioritizing projects improves project delivery KPIs
The PMI have researched this space and produced revealing KPIs that show that the biggest potential win for a PMO is not how projects are executed, but how they are selected. They measured that projects which are aligned to strategy are:
- 57% more likely to succeed
- 50% more likely to complete on time
- 45% more likely to be on budget
These stats should be enough alone to convince your manager this is a good idea. Check out this must have slide deck if you're pulling together your business case.
Prioritization enables effective governance
Challenging mediocrity at the planning stage of a portfolio means better performance during delivery for 4 main reasons:
- Improve Accountability, which cannot exist without prioritization. Without clearly determining which of their projects are resourced, how can leaders commit to their deliverables?
- Reduce conflicts. There will always be tough choices to make, and curveballs to deal with. Having clearly prioritized projects will make this far less political, enabling sensible escalation and data-led decision making.
- Boost project flow. Removing resource log-jams is much easier when you have a clear picture of which projects take priority and reduces the risk of high-value projects losing momentum. Read more: Optimize Project Flow: Make projects go faster by slowing down!
- Proactively reduce risk. Dramatically reduce resource contention before you hit a milestone disaster. Identifying and resolving bottlenecks at planning stage means less stressful delivery.
Put simply, prioritization is the foundation upon which you build best-in-class governance. To explore this concept at greater depth check out this webinar with our partner at Deep Team.
Prioritization builds buy-in for the plan
Good prioritization gets everyone marching to the same drum beat, and with shared purpose comes better outcomes:
- Alignment increases productivity. Involve people in scoring, show them the process is well built, and they are more likely to commit to delivery. Check out this video from Stanford University.
- Low value projects drain morale. Conversely, nobody gets excited by working on a pointless assignment that probably won't ever go live. Their productivity will suffer, according to research from Adam Grant.
- Fair prioritization reduces rogue behavior. Stop shadow portfolios and ‘corridor conversations’ that circumvent the approvals process. They indicate that people don’t trust the process.
- Close the Strategy Gap. A shocking 95% of colleagues don’t know how their work fits with the company strategy. Inclusive, well-communicated prioritization helps solve this.
It's also important to remember that prioritization must value people as far more than just resources if it is to unlock their full potential for the organization. Read more about that here.
Your CEO will love you
Good prioritization is key for leadership, even if they don’t realize it (yet).
- Better control of resources, while reducing the need to micro-manage detailed requirements. Leaders need to focus on the big calls, and prioritization lets them do just that.
- Build alignment around what matters. Done well, the process of setting prioritization policy fosters empathy and alignment within the C-Suite.
- Make data-led decisions with clear actionable insight on project value. Rational choices with super-fast scenarios and easy-to-read data. What’s not to like?
- Grow organizational agility. When the world changes, it is the C-Suite who must lead the response. Achieve a no-fuss pivot to face into the new normal.
Don’t assume that because you’re not being told to sort prioritization right now that it’s not important. Many senior leaders simply expect this to happen, and only realize it’s not when things go badly wrong. This slide deck will help start that conversation, or book a meeting if you'd like to discuss this with one of our team.
10 signs of a broken project prioritization process
At some point on this change journey someone will challenge you - do we really need to bother about this now? It's important to look inwards and articulate the reasons you need to address project prioritization and why the time to do so is now.
Here are some classic signs that you have a problem, presented as a pop-chart count-down (why not).
Number 10: A lot of projects fail
According to the PMI, 44% of project failure is due to a lack of clear alignment between project goals and organizational objectives. Conversely, projects aligned with strategy are 57% more likely to achieve their business goal.
Of course, this assumes you are in the minority of organizations who measure project outcomes. Many people we speak with don't really know what their fail rate is, but suspect it's not great, because they do know that they're delivering projects that leave stakeholders underwhelmed (the 'meh' factor). They also know the pain of epic budget fails, and the feeling when milestones turn into millstones.
What's even worse is that failure becomes an expectation. 75% of business leaders believe their (IT) project is doomed from the start. They simply don’t trust the delivery team to “get stuff done.” Now, if you're an IT leader reading this, consider the impact you could have by turning this around, and making the ability to deliver the right technology a source of competitive advantage.
Number 9: I don’t even know how many projects we have
Consider Schrodinger’s backlog. If projects are scattered across teams, undocumented, locally ‘owned’ and not subject to any consistent evaluation then can they truly be considered to exist?
The answer of course is yes. There are people on payroll doing ‘stuff’ (one assumes) and money is being spent. But they could be delivering far more value if you had better governance… which starts with (wait for it) better prioritization! For some, this simple step of getting all the projects in one place is a huge value step in its own right, even before you apply prioritization rigor.
Also consider the value of consolidating shadow portfolios of work, squirrelled away as 'business as usual' to support the agenda of a specific director, when they could be used to drive the strategy of the business.
Number 8: No clear process or criteria for selecting projects
We often ask people how they currently do prioritization. Then we get a slightly awkward pause, before they tell us that (basically) they muddle along until things go wrong (which is when they talk to us).
Or perhaps they have a review process that hangs off the side of budgeting. So not a prioritization process, more a horse trading exercise swapping headcount for projects, as frustrated execs attempt to deliver their agendas.
The key is that they skip the step where they align on objectives, and dive straight into a land grab / beauty parade, often leaving the delivery team to 'multitask' at >100% capacity, or make their own judgements based on who they want to annoy least.
Critically they usually decide setting criteria is 'too much work'... when in fact aligning the exec team behind a selection framework is an invaluable step that saves tons of time by giving clarity to the business. The key here is that disagreements don't get solved by ignoring them, they come from grown-up discussions that give everyone the chance to contribute.
As one CEO put it – “we should have done this years ago”.
Number 7: Resource allocation is painful
Let's assume you have a set of projects agreed. This is only half the prioritization battle, because now you've got to figure out how to get them done.
Naturally the stakeholders are chuffed that their projects are approved, and expect work to commence immediately. The nitty-gritty of 'having people to actually do the work' is someone else's problem (probably yours...) But what do you do when 5 projects all need the same person now? Which 4 stakeholders get told to wait?
Good prioritization provides a simple answer by flagging the highest value work. Brilliant prioritization goes further, flipping the question to be, how can we schedule projects to maximize value, given our resource bottlenecks?
Number 6: Disjointed local priorities
At number 6, is an old favorite: “Let’s push ownership to individual departments”. By letting them prioritize their own projects, surely their selections reflect the needs of the guys on the ground…?
The problem is that you end up with disjointed portfolios that reflect local drivers rather than overall strategic goals… if you’re lucky. Moreover, department managers are not usually experts at prioritizing so they’re also liable to fall into all the traps we’ve talked about.
Then you try and get these siloed teams to work together, and the complexity starts to get exponential as multiple creaky prioritization approaches try to knit together to get things done. No wonder frustrated execs end up mandating “special projects” to get anything important done.
We also hear a lot about two teams working on the same problem without talking to each other, forcing leadership to step in and resolve matters. Surely harnessing that drive to deliver via a joined up plan would be a far better use of executive energy?
Oh, and how do you decide what each department’s budget should be? Without a systematic way to compare backlogs it tends to revert to a combination of “he who presents the best slides” and “last year plus a bit”, which we know is not a winning formula.
Number 5: Stakeholders keep changing their minds
There is nothing quite as demotivating as creating something that nails the brief... only to find stakeholders have lost interest and have no intention of implementing the project. This may be because your stakeholders are idiots. But let's assume they are well meaning professionals, and ask how can we stop this level of waste from decimating the value of your portfolio.
The first point is to lock down what stakeholders need in order to deliver their objectives. Spend time to quantify this, and you'll save the hours many times over when it comes to not agreeing to work on the (seventeenth) 'great idea' the marketing director had over his cornflakes this morning.
Secondly, include stakeholder commitment as a criteria in your selection process. If there is clear sponsorship and a plan to extract value from the project then this should be recognized in scoring.
Finally, build a governance process which recognizes that value is not a static data point. Markets shift, understanding of problems evolves, and if the business case behind your project shifts too far south, then be alive to this, and be prepared to cut your losses on zombie projects.
Number 4: Most projects are priority 1
In at number 4 is “The Priority 1 Problem”.
One of our customers had a portfolio of 80 projects – “When 60 projects have top priority, there is no priority.” That’s a whopping 75% of his projects tagged as Priority 1. Little wonder his team didn’t know how to allocate resources.
This might be an extreme case but take a look at your portfolio. Specifically, look at the top-priority projects and see if they really are top priority. If some of them are not… well, it’s time you looked at your prioritization process.
Number 3: Pet projects
We asked about Pet Projects on a recent webinar. "Is there any other kind?" came one reply... this is a massive problem that needs solving.
What's going on here? Well, it comes down to prioritization and alignment. If you don't prioritize your projects properly, you end up doing the boss' pet projects. This happens for two reasons. Firstly, there is a disconnect between project selection and business KPIs. Secondly, there is no process to apply the brakes when the boss gets it wrong.
One famous example of this is the Amazon Fire Phone (what is that I hear you say... well exactly)
“We poured surreal amounts of money into it, yet we all thought it had no value for the customer, which was the biggest irony. Whenever anyone asked why we were doing this, the answer was, ‘Because Jeff wants it.’ No one thought the feature justified the cost to the project. No one. Absolutely no one.”
This is a particularly epic fail, but most portfolios have similar examples of their own, where a robust prioritization process would have stopped the waste.
Most leaders, when pushed, will value their goals ahead of their ideas. So if they have a bad idea, then the way to stop it is to show that it is not going to deliver their goals. We have seen this happen - directors happily surrendering their own pets when the data shows them they the wrong choices.
Number 2: He who shouts loudest
Imagine airport immigration without any queuing system. No line for families, no line for citizens, no portable barriers to control who's turn it is next. And definitely not enough staff on duty. Just a massive huddle of tired travellers all competing to get through as fast as possible.
That's your backlog without a proper prioritization process.
Every director is pushing their agenda. Deliver teams are desperately trying to avoid work because they're already stacked. Volumes rise, and eventually the winner is the Loudest Voice, the loser is everybody else.
Not only does this usually end up with the wrong projects, it also creates a culture which rewards poor behavior. The Loudest Voice gets promoted on the back of the results he gets from hogging resources, while more thoughtful leaders see their future elsewhere.
One note of caution for when you decide it's time to move to a proper prioritization process. Work out who is currently the Loudest Voice and make sure they buy into why things are not working, because for them things might seem to be working fine, so they might well (loudly) question the need for prioritization.
Number 1: Too many projects
Some people talk about having too many projects, others worry about having too few resources. These are the same thing - an imbalance between the volume of work and the resources available to deliver it.
This is toxic and leads to project failure. It's easy to see why; too many projects means people are job-swapping (inefficiently) and, because they're rushing you don’t get their best efforts. Little wonder that PMI research shows productivity drops 40% when PM's have to multi-task.
If you have too many projects your prioritization process is broken. There's no other reason. Your project success rates are probably lower than they should be, your people are stressed, yet the fix is quite quick and easy: a new project prioritization process.
It’s often said that less is more – you just need to know which projects to send to the back of the line.
Learn more: Too many projects - The Ultimate Guide
Project prioritization methods
The effective management of an organization's project portfolio relies heavily on a rigorous and systematic project prioritization process. This process ensures that resources are judiciously allocated to projects that strongly align with the organization's strategic goals. However, the selection of a suitable project prioritization method often poses a challenge to many organizations, potentially leading to inefficient investment decisions and strategic misalignment.
Various project prioritization methods have been employed over the years, each presenting unique benefits and limitations in capturing and aligning a project's value with an organization's strategic objectives.
Commonly used methodologies
These approaches have no Decision Science basis, but chances are you know at least one already:
- ROI Model. Traditional finance tool for determining value, loved by CFOs for decades, but liable to underplay the value of hard-to-quantify criteria such as strategic impact, stakeholder engagement and risk. NPV and Payback are similar finance orientated models.
- Product Methodologies. Lots of snappy sounding methodologies have emerged from the product management space - Kano, MoSCoW, Rice. While all have virtues in a contained product/feature backlog they tend to be too narrow to deliver strategic alignment, so they are not advisable for a broader PMO brief. We've seen people try and it wasn't pretty.
- Loudest Voice, aka Squeaky Wheel. Simply put a political bun fight typically played out through the budgeting process, that tends to favor those managers who are best at spinning up a compelling looking business case. Street smart managers may well like this approach, because they are good at it, but it creates an agency problem, whereby prioritization is as much about career development as it is doing the right thing. This is a terrible way to prioritize anything.
- Spreadsheet-based scoring and prioritization matrix methods. Define criteria in a spreadsheet, and score projects to produce an overall score for each competing project. This approach has the benefit of being flexible and delivering a quantified outcome. However, there are flaws with home-grown spreadsheets. Firstly, a criteria model built without Decision Science invites a series of structural mistakes. Then weights applied tend to be the arbitrary choice of the 'HIPPO', ignoring decades of Decision Science in favor of picking a number that 'feels about right'. Likewise, project scoring scales are often pretty random, creating plateaus in models. Add to this a lack of collaboration and you soon have a black box 'magic spreadsheet' which nobody trusts.
- Allocation of Budgets to Departments gives individual departments the autonomy to prioritize their projects. While this approach promotes departmental engagement, it risks creating a disjointed project portfolio due to potential misalignment between departmental and organizational goals.
- The CEO or COO Decision method offers a swift and clear decision-making process, with the highest-ranking executive making the final call. However, this approach can inadvertently promote projects based on personal biases or lobbying efforts, and may not truly reflect the diverse needs of the organization.
- The PPM Prioritization Module method, despite providing visually appealing charts and diagrams, lacks a credible methodology, posing a risk of misrepresentation and potential manipulation of outcomes.
Despite these methods' popularity, recent research from the University of New South Wales suggests the importance of adopting evidence-based project prioritization methodologies. The selection of a project prioritization technique should be guided by evidence-based research, decision science, and organizational strategic goals.
Validated by Decision Science
In case you don’t have time to review hundreds of methodologies for Project Prioritization, The University of New South Wales have done you a favor and narrowed down the field two recommendations:
- Analytic Hierarchy Process (AHP): AHP is a project prioritization method designed to minimize human error such as bias, noise, blind spots, and anchoring, while promoting outcome-oriented collaboration. It's easy to understand and straightforward to implement with the right tools. Besides these benefits, AHP offers a structured approach that aids the leadership team in defining what strategic alignment means. The scoring of projects is relatively simple, but attaining stakeholder alignment can be challenging. The most significant benefit, as noted by researchers, is achieving senior leadership alignment, which paves the way for many other benefits.
- Data Envelopment Analysis (DEA) is the other method that was discovered to be “suitable” for prioritization in complex organizations. While it’s a valid method, it is also rather difficult to implement successfully, so we don’t advise using it.
Given these reasons, AHP emerges as the best approach for project portfolio prioritization, and is the basis of our software design. It combines the best quality with high buy-in potential. When compared to other methods, AHP stands out as a clear winner on both fronts.
However, it's crucial to remember that recognizing the effectiveness of AHP is just the beginning. Organizations need to put effort into developing and implementing an AHP-based process for project prioritization.
AHP is best practice for Project Prioritization
Committing to use AHP is a fantastic decision, but it’s important to understand why it’s such a strong solution, so you can deploy it to maximum effect, and get your colleagues on-board.
Defining value is tricky
Every organization aspires to deliver ‘value’ - be it shareholder value for corporates, societal value for an NGO or public service value for government. But “value” is a vague concept that will mean different things to different people, even within the same team.
AHP turns it into a quantified framework that considers competing versions of the truth – we show you how below. With this clarity value stops being a buzzword and becomes a North Star.
Decision Science matters
AHP is built with academically validated mathematical features. We don't expect a PMO to spend a lot of time on eigenvectors, normalization or consistency scores, but simply ignoring them, and 'having a go' yourself in a spreadsheet is not best practice.
Likewise there are important lessons from psychology built into AHP. Again, the PMO doesn't need to know the details about noise, bias, anchoring or blind spots, but pretending they'll have no influence on their spreadsheet is a rather extreme example of optimism bias.
Collaboration needs scaffolding
Again, most progressive companies know that harnessing the insight and creativity of experts outside the boardroom delivers competitive advantage. But they also know that endless meetings can paralyze decision making.
AHP provides a format to deconstruct complex decisions into solvable chunks, encouraging debate but never at the expense of an actionable outcome. Again, this makes teamwork a reality rather than a box you tick while shouting / spending hours on a PowerPoint / building a spreadsheet everyone thinks is garbage.
Buy-in improves delivery
A bad model breeds bad behavior. Stakeholders operate rogue parallel processes to protect ‘their’ projects. Delivery teams second guess briefs, on the basis that they know leadership will change their mind next month.
AHP creates a platform for defining best practice that people can trust. When plans are published, they know they are aligned, fair and well thought through, giving teams confidence to focus on execution.
Check out this blog if you would like to drill into more detail or Book a meeting to talk it through with one of our experts.
How to prioritize projects
To implement brilliant project prioritization, we recommend a six-step process:
- Build a Plan
- Define Criteria
- Weight Criteria
- Collect Projects
- Score Projects
- Analyse Results
In this guide we’ll give you an introduction to how AHP-powered prioritization works. When you’re ready to learn more, why not check out our Transparent Talks series, where we explore these steps in detail in a series of webinars from our leadership team.
Step 1. Build a plan
You feel prioritization isn't working, but now you need to define exactly what it is you are going to fix. We recommend a simple checklist:
- Define portfolios. Prioritization works best when it is homogenous. You can't compare renovating the staff loos to transforming the marketing strategy, so put your projects into buckets.
- Get people engaged. Fixing prioritization is a change process, and it's critical to know who needs to join you on this journey, for both senior sign-off and peer group influencers. Create a compelling slide deck - you can use this to help.
- Fix milestones. Prioritization can be done well in 6-8 weeks if you focus. Or you can be more gradualist to build buy-in, but failing to set an appropriate cadence can lead to drift. We have a blog on this.
Step 2. Project prioritization criteria
Your portfolio exists to deliver value, but what does “value” mean? It probably means different things to everyone, so it’s key to define and align on what really matters. Bring together key stakeholders to brainstorm a list of portfolio goals. These will become the criteria for scoring and prioritizing your projects. When you are thinking about criteria it's really the pros and cons for doing projects.
Typically, Project Prioritization Criteria fit into these six themes:
- Short term goals: Objectives, Financial KPIs, service levels - stuff people get bonused on.
- Strategic goals: The CEO's vision, consultant's report, off-site slides, or formal policy statements. Strategic goals are usually written down, so build them into your model.
- Efficiency gains: Levers to pull to drive productivity - automation, eliminating duplication and increasing cadence for core processes, for example.
- Stakeholder support: Service is key for internal support functions. Commitments to colleagues, suppliers or the environment are all potential broader considerations.
- Business Risk: Reducing risk is another reason to do projects, whether that’s reputational, cyber, regulatory, tech debt, or something else.
- Project Risk: Some projects are riskier than others. Measuring potential for the likelihood of things going wrong will up-weight ‘safer’ choices in your portfolio.
Read more in this blog to understand these project prioritization criteria examples.
If you're ready to really get stuck in, then download this free e-book for project prioritization criteria examples.
Why not check out this webinar from award winning lecturer, Professor Robert Camanho?
Step 3. Weight project prioritization criteria
Not all criteria are equally important, so they need to be weighted to build a scoring framework. For this we recommend pairwise.
By asking your executive team about the relative importance of competing criteria you are forcing them to quantify what really matters. This is a critical step in building a scoring model capable to distinguishing critical projects from average ones. There’s critical Decision Science logic at play. People work better with relative judgements (which tree is taller?) than they do with absolute estimates (how tall are those two trees?)
This is why pairwise works better than coming up with a set of ‘gut feel’ weights (it’s 23.7!). Another mathematic benefit of pairwise is the ability to identify where your own value judgements are inconsistent with themselves – enabling scores to be fine-tuned to increase accuracy.
This is a big reason why AHP is better than a weighted scoring model in Excel.
Also note that we said executive team. Setting up weights is a team sport, and it’s where your leaders can put their empathy training to good use. Different directors will have different perspectives on what matters. By having a structured conversation, you can zoom in on areas of misalignment, then use your time to resolve these conflicts.
The result is not only an AHP scoring model for projects, it’s also better alignment within your C-Suite. That’s a real win-win. Read more about Pairwise here.
Step 4. Project prioritization data collection
Before we score projects, we need to collect them, along with useful data we'll need in our process. Here's a quick checklist:
- Project submissions. Do you need an ideation process, downloads from PPM tools or a project amnesty from the shadow portfolios hiding around your organization?
- Resource requirements. Ensure prioritization feeds seamlessly into how resources get allocated. Consider both funding (should we do this) and resourcing (can we do this).
- Contextual data. The basics are typically department, sponsor, and urgency, but every case is unique. The key question is do I need this data to either score projects, schedule resources or build a balanced portfolio? If no, leave it out.
- Stage gates & automation. Will you have a multi-staged review to weed out poor proposals, or a step to assign seed funding for research? A clear process is key if you have a large portfolio.
- Manage regulation. For regulated sectors why not add a "must do" model to identify the real mandatory projects. These don't need to be prioritized, just scheduled.
Step 5. Score projects
You now have an AHP model and projects to score, so you can start assessing:
- Score with hard data. Use 'hard' data to score some criteria, for example an output from an ROI model. This should keep your CFO happy.
- Make criteria score-able. Use quantified bands and precise language to create a scale - like a Likert Scale from a psychometric test.
- Fix accountability. Pick Subject Matter Experts or review all projects via a committee. We recommend 3+ people answer each question to improve data quality. Read more about why here.
- Review disagreements. Focus on areas of misalignment within your scoring. Resolving these points as a team will add huge value to your data.
At this point you’re basically documenting a business case for each project in a way that allows quantitative, non-emotional assessment. Which sounds pretty handy to me.
Step 6. Publish scoring model
You're almost ready to select your portfolio, but first it's important to socialize the outcome of your review, as buy-in is critical to success:
- Define Value for Money. This will be your North Star KPI, so it's key to decide how you will quantify the effort involved in delivery. A simple dollar value, FTE days or a blend all work. More on this next.
- Shareable dashboards. Show stakeholders scores for their projects, so the dialogue isn't just 'computer says yes / no', it's a grown-up discussion of project value vs. project cost, which everyone can see is fair and thorough
- Fix Portfolio KPIs. Set resource limits to identify bottlenecks and provide a cut-off for project selection. For quantifiable criteria, such as revenue, add targets. These can become your portfolio OKRs – that’s one less job for later (you’re welcome).
- Add 'lenses' for balance. Identify relevant overlays. For example, Risk vs. Value for Money is useful, as is a simple funding split by department. More on this next too.
For more on visualization check out this blog or book a meeting to see how this process works in our software.
The Importance of Criteria in Project Prioritization
So, you’re going to make a decision to allocate a few million bucks to some projects. What selection criteria are you going to use? Go ahead, write them down.
Now look at the list.
Chances are you missed around half of the important criteria. Almost two thirds of us will have missed 4 out of the top 10 most important criteria. That’s like trying to win a game of chess with no queen, no bishops and no knights.
If you don’t know what your criteria are, then you’re relying on gut instinct to select your projects which probably won’t work out too well and your decisions can’t be transparent.
But there’s another aspect of criterion selection. If you put your five executives in a room and asked them to write down the criteria they think should be used, you’ll get five different lists. Sure, there is likely to be some overlap, but there will be some significant differences too.
If you don’t poll all your key stakeholders, your list will be plain wrong.
Sources of Criteria
You need a complete list of criteria...
First of all, brainstorming is a great tool for building a criteria list. Ask stakeholders what they think the criteria are. Everyone brings their own priorities to the table and applying a little structure to the brainstorming can really deliver a good list.
But you don’t need to stop there.
There are stacks of research out there that will help you identify criteria. According to Roberto Camanho, a researcher and consultant specializing in project prioritization:
“The research is deep and the criteria lists are useful. But you have to remember that researchers are looking for general patterns so they tend to come up with only top-level criteria. These are usually composed of sub-criteria and these sub-criteria are different for each business.”
For example, Camanho’s own research highlighted six top-level criteria that global companies based in Brazil use to prioritize projects; complexity, risk, technical feasibility, project performance, and stakeholder satisfaction.
Risk, however, might be made up of “Risk of cost overrun” and “Risk of failure”. In other words, high-level criteria are usually made up of sub-criteria and fleshing out these sub-criteria for your particular company is where you get the really “good stuff”.
Many analysts and consultants also have templates for project selection. Generally, we see some combination of financial return, risk, strategic alignment and time to results as the key criteria. But whatever you do, make sure your queen is on the board: build yourself a good list of criteria!
We have a list of more than 80 commonly used project prioritization criteria. These will help inspire you to come up with a list of criteria that is specific to your organization.
Project Selection – 7 key overlays
A scoring model quantifies project value - we now need to add contextual data to create a project prioritization framework.
While every process is different, there are 7 considerations we see clients using. Using all may be overkill, so decide which ones are most relevant for you:
- Portfolio prioritization
- Resource prioritization
- Budget allocations
- Project risk
- Strategic alignment
- Portfolio roadmaps
Project prioritization gives you a score for each project. It 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. The simplest option is to compare value against cost.
- Where value is high and cost is low, then it's a Star and should be your priorty 1 items. For high cost, low value it's a pet project. Killing these projects is a great way to prevent that 20% waste from entering your portfolio.
At the core of any credible prioritization solution is this chart. The key point of difference for AHP is that data for “value” and “costs” will be rock-solid; built using decision science and collaboration.
- The 'Efficient Frontier' ranks projects based on their value. This way you can identify the obvious winners, then work out how many more projects you can afford before the budget is gone. From this you can easily differentiate between 'Plan A' priorities and the long tail within your portfolio.
- Better yet, use data to inform you where the budget cut-off should be for a given portfolio. You might just find that you can cut significant budget without losing significant value – what a win!
This analysis brings to mind an old marketing adage, “I know half of my spend is wasted... I just don’t know which half”.
It’s the same for a portfolio... except now you do know which half before you’ve spent the money. So ask yourself this... If you cannot produce this view of your portoflio, are you doing prioritzation properly?
Check out this blog to learn more about how data drives decision making for portfolio management.
Projects fail if they do not have the right resources. Managing this risk starts during prioritization:
- Match work you take on with the resource available. Add a utilization buffer to protect deadlines with contingency, since we know “Murphy’s Law” will render our initial estimates wrong.
- Productivity starts declining after 80% utilization, so resist the temptation to stuff in 'just one more' project (even a wafer thin one) as it will dilute overall value delivery.
- Identify over-stretched resources early in the planning cycle and look for ways to increase bandwidth, for example outsourcing low value business as usual tasks or automation.
- Make smart calls about fungible resource - e.g. use open headcount to fix bottlenecks, rather than backfilling every role (CFO will love this).
- Where value for money is similar, favor projects which do not need key in-demand resource, therefore getting the most from the teams in place.
For more on this check out this webinar with our partner and project flow guru, Mike Hannan.
Effective budget allocation
When we split our project backlog into 'buckets' we implicitly decided to prioritize within each portfolio. However, we didn't make a call on the level of funding each separate portfolio would get. To do this is as much art as science, but clean data means options:
- First off, make sure you have a consistent definition of cost/ resource across your portfolios. If Team A talk dollars, and Team B talk people you're already in a tangle.
- Deal with mandatory projects first. Validate they are really must-do, then commit them into the plan. What’s left can then be prioritized.
- Build 'Plan A' for each portfolio based on eliminating the long tail of low value projects. This may be enough. If it is not you need to iterate to decide which portfolio to trim.
- Split the pot based on fair share. While not the most agile approach, this is probably closest to how things work in the real world today.
- Make a macro-level call informed by the efficient frontier for each portfolio so your budget goes where it delivers the best incremental value.
- Create one big company backlog. Bit radical, but you can put all the value scores into one model and see where the split comes out. Let forward looking value not 'last year' be your key budget driver.
Whatever approach it's likely to be an iterative process. Try offering leadership choices, where they can see which projects drop given different preferences, so it’s them saying no to projects not you!
Importance vs. urgency
The urgency of a project can be a key piece of data. However, 'urgent' does not have to mean drop everything to do it:
- A project’s value does not increase if it's urgent. A low value proposal is not worthwhile even if it's 'needed' NOW. This is why urgency is not a good criterion.
- A classic Eisenhower matrix approach would be to plot value (or value for money) vs. urgency as a lens on final prioritization.
- Urgency is subjective. Consider asking 3+ people their point of view to avoid being misled by a single over-excitable stakeholder (you know the one).
- Control the mix of mid-value 'urgent' items with higher value strategic projects to avoid getting stuck in a cycle of continually ignoring game changing opportunities.
- Use urgency to help inform your roadmap. Pin items in with specific deadlines, then build around them to maximize resource utilization.
Put simply, avoid being the busy fool – always overworked, but never delivering the big wins that really make a difference.
Managing project risk
For some portfolios the level of risk associated with a project is important. Project riskiness can be either a criterion inside the model or an additional lens on selection. Potential types of risk include:
- Disruption. If your project is likely to get in the way of BAU operations, it’s important to know this up front.
- Organizational readiness. Are stakeholders ready to realize the value of the amazing work you’re doing? If not, that is a critical risk in your model.
- Complexity. Projects that rely on multiple teams coordinating are simply more likely to go wrong. Quantify this risk in your model
- Dependencies. Critical dependencies add risk, especially if there's a third party involved.
- Reputational. Doing projects can generate negative PR, which is important to consider at the planning stage.
For complex portfolios, risk could be its own AHP model, for simpler models it could be one branch in the core model. Either way it’s about adding a step into selection that recognizes that risk is best identified before sign-off not after a governance car crash.
When you are only driven by the total value, it’s easy to end up with an unbalanced portfolio, one that neglects one of the criteria your C-Suite just told you was important.
- Check spending against each criterion in your model to see if you have good alignment between funds and goals. Don’t ‘miss’ one, while over-delivering on another.
- If you have no good projects for a specific criterion, then you have an ideation problem. Hold back budget, while iterating the plan to fill the gap.
- Track delivery against this same framework: this will show you where you are on-track and where your strategy is at risk.
Strategic planning is a huge topic, but having a quantified value model means you can approach it with confidence. Check out our Ultimate Guide to Strategic Alignment to learn more.
Scheduling projects is important. After all, starting all projects on January 1st will lead to all the problems associated with having ‘too many projects’. While detailed ‘bottom-up’ planning comes later (or not at all if you prefer agile), a high-level view of the year ahead has huge value:
- Front-load valuable projects to build momentum.
- Manage expectations on timing, giving leadership the chance to swap projects.
- Resolve bottlenecks proactively to reduce risk.
- Iterate plans with scenarios offering different trade-offs.
This won’t happen in a spreadsheet without a lot of (your) pain, so consider the value of prioritization software in enabling dynamic planning. Book a meeting to learn more.
Project prioritization tools
If you're building a prioritization toolkit you might be tempted to do so without specialist software. We believe that is a mistake for 5 reasons:
- Effective prioritization needs quality data
- Complex portfolios need structure
- Excel is the wrong tool for the job
- Artificial Intelligence is a practical way to improve planning
- Free solutions have hidden costs
Good prioritization is more than a number
AHP is more than a 0-100 number for a project. It's a data-led process that uses decision science to bring teams together. Most PPM tools will have a field for prioritization, or a way to tag projects based on strategic alignment but tend to suffer from the old adage - ‘garbage in, garbage out’.
Consider, the reliability of those numbers, then compare it to the awesome-ness of matching up your shiny new PPM tool with quality prioritization data. Think of it like putting the premium gas in your fancy new car (you just would, wouldn't you?)
Large portfolios are complex
Looking after a diverse set of projects and delivering a range of goals for multiple stakeholders makes prioritization tricky. The metaphor we hear most is like “herding cats”. Do any of these sound familiar?
- Competing departments with hard to reconcile success criteria?
- Cross-functional projects, where getting alignment feels like pulling teeth?
- Delivery teams and front-line teams at odds, with no escalation process?
- CEO has a strategy, but people find it hard to relate to their “To Do” list?
- Byzantine budget allocation process that makes you wince to think about?
We call this the ‘spaghetti-mess’ challenge, and solving it has huge upside. Pretending it doesn’t exist does not.
When you tell your executives that prioritization needs fixing, someone will most likely pipe up, “let’s just do this ourselves in a spreadsheet”. DO NOT AGREE
- A model put together in a spreadsheet will likely not follow all the rules of decision science. That’s why your execs then call out the project down at the bottom of your Excel table and promote it to “must do status”: your model doesn’t reflect reality!
- You could do basic AHP in a spreadsheet if you have the time to learn it. But don't forget that AHP works because it structures collaboration between stakeholders, building buy-in. Excel doesn’t.
- Excel can be brittle, so when you update your model there will be a lot of scope for a bug to mess up your results / career.
- Excel isn’t designed for version control and data collection, so accountability is poor, stress is high.
- Don’t re-invent the wheel. Prioritization is not a new challenge. Focus your energy on driving change, not becoming a spreadsheet jockey.
Check out this blog for spreadsheet war stories.
Unleash the power of AI
New technology, specifically artificial intelligence (AI), is changing the way organizations can use prioritization and scoring data. For example, TransparentChoice uses AI to find the optimal set of projects given your resource constraints. This not only allows you to eke out more value from those resources, but it also allows you to run multiple what-if resourcing scenarios then compare the optimized portfolio for each.
Your execs will love that, while the magic button will become your new best friend.
‘Free’ can be costly
Your portfolio represents an investment of millions of dollars. It only takes a small improvement in prioritization to generate a huge return. And we know that good prioritization can do so much more than small gains.
Remember, 20% of a typical portfolio is waste, so if you’re spending $10m a year on projects, that’s $2m waste. Ouch.
But it’s worse than that. That 20% should be generating strategic return – let’s say you expect an average of 3x. In that case, you’re missing out on $6m of extra value. Every year. Cumulatively...
That’s one expensive spreadsheet… so ask yourself, can your spreadsheet:
- Identify the 20% waste found in an average portfolio?
- Drive up delivery KPIs by reducing ‘too many projects’?
- Improve strategic execution with alignment to high level goals?
- Reduce opportunity cost of being late to market due to resource problems?
- Provide the basis for cumulative outperformance vs. competition?
If the answer to the above is 'no' then it's time to think about the business case for fixing prioritization, or book a meeting to talk through what a best-in-class prioritization tool could do for your portfolio.
The Business Case for prioritization
"Priorities change and, if managed successfully, have the capacity to fundamentally change organizations, but only if top management makes tough choices"
- Antonio Nieto-Rodriguez, Harvard Business Review
The process of prioritization are usually owned by the PMO or the business planning team. The titles vary, but there is a common theme: put in place tools and processes that enable leadership to direct resources to where they are most needed.
While this is never easy, these 5 simple steps are proven to work:
- Know your key pain-points. Effective prioritization delivers in many ways. This could be a focus on ROI, strategic delivery, process improvements, supporting people or best practice for governance; the key is to know the main things you are solving, and to prove that you can deliver.
- Quantify the win. Identify the levers for delivering a financial return. Typically, this comes from reducing waste, increasing productivity and being faster-to-market for high value projects. If your portfolio is large enough the up-front costs will be highly affordable.
- Identify quick wins. Find a portfolio to act as proof of concept. Show success, build momentum, scale prioritization. Don't get stuck trying to plan everything up front.
- Manage expectations. If prioritization isn't working, don't expect it to get resolved without time and money. Chances are this is not a new challenge, so be honest about why this needs to be on the agenda now. Discuss the change management component of delivering prioritization.
- Empower the PMO. The failure rate for new PMOs is startling (especially if you are a new PMO yourself...) To make sure this function is able to deliver there must be a commitment to resolving prioritization as a non-negotiable part of the PMO mandate.
Want help building your business case? We've helped many clients successfully negotiate even the fiercest of CFOs. Book a meeting now for a free consultation.
Next Steps for Fixing Prioritization
If you're still reading then I suspect you know you need to fix prioritization.
Here are 6 steps to get started:
- Prioritization healthcheck. This could be as simple as listing warning signals you recognize from our list above, or a full-on consultancy engagement (we have fantastic partners for this).
- Engage decision makers. You'll need the boss (and probably their boss) on board. Check out our handy slide summary of this guide to help make the case, or download the full guide as a PDF.
- Build a business case. Consider the opportunity cost of not fixing prioritization, and then ask yourself, is my spreadsheet really 'free'? ... and can I afford to ignore this?
- Identify criteria. Start with a simple review of projects' pros and cons & existing documentation. When you're ready for detail, check out our project prioritization criteria guide.
- Research project prioritization tools. We believe Transparent Choice is the best, but if you're shopping around here's what to look out for. Be wary of anything not based on Decision Science.
- Schedule a Demo. AHP is the best-in-class approach for prioritization. Better than a PPM tool, a spreadsheet, or even a magic-Eightball. Book a meeting to see how it could work for you.
Not feeling quite ready to start? Implementing quality prioritization is a change process, so it may be that you need to consider you're going to make that happen first - check out this blog for more.
Learn more about project prioritization from these free webinars.
- Transparent Talk series by Stuart Easton and Dan Dures
- Criteria made Simple by Roberto Camanho
- Value-based Project Prioritization: Getting Started by Dr. James Brown
- Why AHP-based project prioritization is different by Stuart Easton