Getting Priorities Straight

Getting Priorities Straight

Tough times have raised the profile of disciplined prioritisation of IT-enabled initiatives

Few initiatives are standalone IT projects any more. They are business initiatives with varying degrees of IT support so they need the wholehearted support of both business and technology executives. Prioritising projects is difficult, complex and contentious. To overcome this leading enterprises are adopting a formal prioritisation process that balances multiple evaluation criteria.

Establish a project portfolio management process. The first step is to define initiatives. Prioritisation decisions are only as good as the underlying data on which they are based. Many companies we spoke to use their Program Management Office (PMO) to help business units apply discipline. The PMO offers standard templates, trains people to develop preliminary proposals or business cases and even assists with the work.

Step two is to evaluate those initiatives. To ease comparisons, group initiatives with similar characteristics into categories. The evaluation criteria and weighting often differ among categories. Use financial and non-financial data as evaluation criteria, otherwise the portfolio will only include cost reduction initiatives.

The third step is to prioritise the initiatives. Many enterprises form an investment council - often a subgroup of the executive committee - to make enterprisewide project prioritisation and portfolio management decisions. Projects are then ranked within their category based on their scores.

Step four is to match the initiatives with available resources. This can be complex because there are so many constraints: budget, staff or skills availability, project interdependencies, mandatory implementation dates, vendor schedules and cash flow requirements. One way to determine how many approved projects can be funded is to match projects to resources until the resources are exhausted. Deferred initiatives are returned to the opportunity portfolio to be revisited during subsequent portfolio reviews. The drawback to this approach is that it considers funds availability but doesn't address staffing or skills availability. A rough loading of staff on projects can address these constraints.

The final step is to actively manage the portfolio. Investment councils don't manage individual projects but they do need to draw on the project repository to obtain project cost, schedule, resource, benefit and status information. Two-way communication between the council, project sponsor and project mangers must be formalised so that major portfolio-level and project-level decisions are synchronised.

Develop a prioritisation framework. Logical investment categories can help allocate resources intelligently. Objective evaluation criteria based on business drivers, familiar financial measures and risk can be used to rank initiatives within each category. Weighting indicates their relative importance in each category.

The simplest categorisation is mandatory versus non-mandatory (that is, discretionary). Mandatory projects should be treated as a separate category, but it is important to verify that they truly are mandatory. They use resources, so they are part of the portfolio and should be tracked in the project repository.

Choose objective evaluation criteria. To choose evaluation criteria, start with business drivers and strategic objectives. Typical business drivers include improving financial performance, product quality, service quality and improving business processes.

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