Project prioritisation is vital for any organisation in order to achieve its goals and targets. Selecting the wrong projects, which don’t provide the required return to its investment can have a significant impact to the bottom line. Therefore, it is crucial to spend time on the prioritisation and selection of projects and proposals in order to find the ‘right’ projects for the organisation.
Project prioritisation can be performed in many different ways. Below, I’ve outlined a method I’ve used, while working in the Financial Services Industry.
The project prioritisation process itself can be done in a couple of days – or, if the organisation is of a larger size, can take up weeks – trying to slice and dice the project portfolio within a given budget. I had cases, where the project budget was $40m but the proposed project proposals in the pipeline were worth $90m. So, how to decide, which projects are more important than others?
There are a number of project portfolio management tools out there, that can help you with this process, but I like to share my manual process, which I perform in MS Excel. Once you know how to do this process manually, it should be easy to perform similar steps within a tool. Let’s start:
1. Why should project proposals being prioritised?
There are different reasons on why an organisation would need to prioritise projects or project proposals. Typically these are:
- Limited number of money, resources or time to do all of the projects
- More project proposals have been submitted than the organisation can physically do or absorb (-> imagine the change the organisation need to go through)
- The company would like to achieve the organisational targets and goals with an optimised cost / benefit ratio
2. What to prioritise?
I would suggest prioritising any project proposal or activities that require budget and resources. You could narrow it down and suggest any activity that required more than x days of work or cost more than $ x. Again, it depends on the size of the organisation.
3. When or how often should a project prioritisation exercise be performed?
Many organisations perform a major prioritisation exercise once a year, which is aligned to their budgeting cycle. Once the Leadership / Exec team has decided on how much they are willing to spend on projects, the project proposal prioritisation can go ahead.
Minor project prioritisation sessions can be performed quarterly or twice a year in order to slot in new, upcoming projects which were unknown at the time.
4. Who does the prioritisation?
- From my experience, it works best when the PMO / Portfolio Manager collects, analyses and prioritises project proposals and provides a recommendation to the Leadership / Exec team of the organisation
- The Leadership / Exec team makes a decision on the proposed recommendation.
- Once the project portfolio has been finalised, the PMO will execute the approved project portfolio and provide regular updates on its performance
Please note, that once the project portfolio has been approved, each project still needs to provide a business case in order to access funding’s.
5. How to prioritise project proposals?
Below, I’ve outlined the process I use in order to prioritise project proposals. Please note, that this might not work in every organisation. But it can be used as a guideline in order to understand how the process works.
5.a. Establish evaluation criteria
Before the process can start, the Leadership / Exec team needs to agree on certain prioritisation criteria in order to assist with the process. These criteria’s should depend on the Strategy the company is following. Example criteria’s are:
- Project contribution to strategy
- Cost savings within x numbers of years
- Resources required to deliver the project (people)
- Complexity – new or current technology
- Improve customer satisfaction by w%
- Increase sales by x%
- Increase revenue by y%
- Increase market share by z%
- Any other criteria that is important for the organisation
Generally, there is a mixture of criteria or drivers an organisation would choose in order to perform the prioritisation exercise.
To provide a real life example: Below is a prioritisation table that was used to prioritise projects in a financial organisation:
You will notice that the values in the categories are very broad and still high level. This is because most of the project proposal data is at this stage unknown.
5.b. Develop template with established criteria’s for project proposal submission
Once the driver or criteria have been established and agreed on, a project proposal template needs to be setup to capture the project proposal data for the selected criteria.
The form itself should be no longer than 2 pages, outlining the project proposal including the agreed criteria.
Typically, anyone in a company can submit a proposal for a project, but the proposal needs to be approved by a Manager first, before it can be submitted to the PMO / Portfolio Manager.
5.c. Proposal collection and inventory
Once the proposals have been submitted, the proposals will be collected in a central place, which later becomes the project proposal inventory. This step can be performed with MS Excel or SharePoint.
5.d. Using Excel spread sheet for project prioritisation
Once all project proposals have been submitted and registered, the project proposal data with the evaluation criteria will be entered in the prioritisation table (see below).
Based on the entered values a project portfolio rank will be calculated.
For this Financial Service company the ranking criteria is based on: contribution to strategy, cost savings, payback period, resource requirements (people and skills) and complexity (e.g. new or known technology and number of systems to interface or change to organisation).
In our example, our selected project proposal 1, could have the following criteria:
- Low contribution to the strategy
- Cost savings less than <5m
- Payback of the investment is low
- It requires many resources
- And has a high execution risk e.g. uses a new technology, which the people have not trained in
So overall, project proposal 1 seems not very good. The overall rank for this proposal is 25, based on the values of the criteria’s (1-4 points) and their weighting (10% to 25%).
In order to provide a better graphical and visual representation, I’ve grouped the following columns together:
- strategy contribution + payback + cost savings = benefit
- resource requirements + execution risk = complexity
I plotted these values into a bubble chart which provides a graphical view of the ranking of the project proposals:
in this case, the projects we would like to select would be in the top right hand corner, which have the highest benefits and the lowest complexity. In our example, these would be the project proposals: 4, 5, 3 and 8.
These proposals would be the first selection of our project proposals pool.
6. Next steps
The next step would be to analyse these project proposals further based on: dependencies, compliance, impact on existing projects and other possible environmental factors. Several discussions with Business Sponsors need to take place in order to get down to the final proposal selection within the allocated budget.
Further tweaking is required before a list with final recommendations can be developed and presented to the Leadership / Exec team. Once the list has been approved, the PMO will be responsible for it’s execution.
I hope this process makes sense. As mentioned earlier, this process could take up a couple of days up to weeks in order to get to the final candidates; it really depends on the organisation.
If you have further comments or questions in regards to project prioritisation, please leave a comment below and I will get back to you.
P.S: I found a way to upload the prioritisation tool as excel file in this post – so here it is (click to download):