Challenge

The Project Prioritization Challenge

According to polls, managers say prioritizing projects is their number-one investment challenge. Increasing competition and the need to do more with less make choosing the right projects more important than ever. Given tens or hundreds of potential projects, it is easy to make the wrong choices. The prioritization processes used by many organizations:

Provide insufficient understanding of the costs, risks, and benefits of proposed projects.
Encourage biased estimates from project proponents.
Under-value spending by failing to account for the “soft benefits” of projects, such as new capability and knowledge.
Result in unjustified project portfolios.
Lose up to 40% of the value potentially available.

Quantitative Methods

Quantitative methods (see Mathematical Theory) may be used to prioritize projects. However, properly applying the methods requires accurately valuing project benefits.

Project Prioritization Software

More than 60 tools for project prioritization and project portfolio management are currently being offered (see Tools-Which Approach is Best?). But, most commercially-available tools use simplistic “rate-and-weight” methods that the National Academy of Sciences has called “unsatisfactory, inadequate, undocumented, and biased.” Better methods are needed to account for project interdependencies, project urgency, option value, and risk.

An effective tool must reflect the organization's unique objectives and means for creating value. Yet, even well-tailored software may not achieve organizational “buy in.” Unless all parties have confidence that the priority system will help them and their organization to succeed, insufficient effort will be devoted to providing inputs, and outputs will not impact funding decisions.