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There are five major reasons that organizations choose the wrong projects: (1) biases and errors in judgment, (2) failure to establish an effective framework for project portfolio management, (3) lack of the right metrics for valuing projects, (4) inability to assess and value risk, and (5) failure to identify project portfolios on the efficient frontier. As a consequence of these shortcomings, organizations underestimate the value derived from projects; conduct too many small, low-value projects; don't kill failing projects soon enough; unknowingly take on high-risk projects; make project choices based on political considerations not in the best interest of the enterprise; and use inefficient decision-making processes that discourage trust and honesty. By my estimate, such errors cause organizations to obtain only about 60% of the value that could be derived from their project portfolios. Methods are available for overcoming the reasons organizations choose the wrong projects. Success requires cultural change, organizational re-engineering, improving decision competencies, and institutionalizing best-practice analytic tools. Organizations that address the reasons for choosing the wrong projects can dramatically improve performance and create a significant, competitive business advantage. |
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