Value-Based Prioritization: A Better Way to Select Projects

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Join celebrated Program Management author Dr James Brown, as he explains how value-based prioritization works, and why it is a must-have for any forward looking portfolio manager.

Watch the recording below. It could just be the most productive hour you spend this year.

 

Too Many Projects means less productivity

If your boss tells you everything is priority, then they are a slacker! Basic math says that if you pick everything then you pick nothing. If you then approve in too many projects then you're going to destroy productivity.

Research shows that if utilization gets >90% then productivity starts going backwards. We've explored this topic before with another partner, Michael Hannan.

Moreover, if leadership don't prioritize properly then someone will pick what to work on, typically based on:

  • What they like
  • What someone shouts about
  • Short term thinking

So we need a solution to align project prioritization to the values of the organization, and fortunately we have one...

AHP is the basis for Value-Based Prioritization

Let's start with the wrong way of doing this - ROI and financial projections: 

  • The definition of "value" is too narrow: even a commercial organization has to worry about more than just dollars and cents, let alone service organizations such as government agencies.
  • There is no link to strategy, to the direction the organization want to travel; ROI is simple a hurdle rate metric.
  • They're based on projections, which are inherently unreliable, especially for long-term projects.

We explore this (and other wrong ways to prioritize) in another blog.

Do not despair. AHP, Analytical Hierarchy Process, is simple to understand, simple to use and proven as a powerful way to prioritize. There are 5 key reasons why this works: 

  • Forces executives to pick between competing criteria using a pairwise review, so they have to differentiate between their true preferences and their not-so-true preferences. 
  • Don't let the squeaky wheel dominate: they are wrong a lot of the time despite their confidence.
  • Get people working together: teams make better decisions than individuals, given the right structure to avoid debate paralysis and group think.
  • Invest time clarifying goals. Without documenting a definition of value, you can never hope to prioritize for value. For example.. what is safety? 
  • Combine qualitative and quantitative factors. Financial projections do matter - but let's also build in strategic alignment, risk, stakeholders and other 'soft' value drivers.

What you need to build an AHP model

If you're ready to commit to giving AHP a go, then you'll need these 6 vital ingredients to cook up your gourmet prioritization model:

  • Leadership participation: The senior decision makers have to own the values and buy into new ways of working. Don't be shy about demanding participation.
  • Common definitions: Taking time to align on what things mean is critical. If people don't agree on this then every debate that follows is going to hurt, again, and again and again...
  • Quantified values: Build a framework (with pairwise) and then ask - does this feel right? It could be that what matters most is surprising, but true. Amazing progress!
  • Gold standard projects: What does the ideal project look like for each criteria in our framework? Use this as a benchmark to determine the relative value of all future projects.
  • Cost: Normalize the value of your projects by overlaying what they'll cost, so you're actually selecting projects based on Benefits Cost Ratio, i.e. bang for buck.
  • Cost groups: Split projects into buckets so you get a spread of small projects and mega-projects. This will help you pick a balanced portfolio. Don't be that organization that ignores maintenance because it's not 'strategic'.

And the good news is this doesn't have to take months to get started. Learn more: 'AHP - The foundation for a great portfolio in just 8 weeks'

Common Pitfalls

If this sounds simple... it's because it is! But it doesn't mean it's easy, as there are some common mistakes people make when they try to implement Value Based Prioritization:

  • Over complication: AHP models should be simple. Adding in too many sub-criteria can turn it into a heavy process. 
  • Poor Communication: Trying to rush through definitions, letting ambiguity into your model for the sake of sticking to a timeline. 
  • Predetermined Outcomes: Don't use AHP as window dressing to an outcome you've already decided. This is especially true for budget allocation.
  • Lack of Buy-In: AHP works best as a team sport, so don't ignore key stakeholders, even if they're tricky. There's value in the journey as well as the destination.

Here at TransparentChoice we might add trying to do this in a spreadsheet too. There's a lot of work to be done getting people to engage with prioritization so why add the task of re-investing the wheel for your data capture and visualization?

Value Based Prioritization saves time

Building an AHP model takes more time than getting everyone together in a room and thrashing out a decision. Or does it? Consider the time spent building alignment versus the time wasted with poor prioritization:

  • Value structures last for years: embed them as your north star to create alignment that drives accountability deep in the organization.
  • Stop wasting time on politics by investing time building consensus. That's fewer meetings talking at cross-purposes and rehashing the same disagreements time and again.
  • Don't waste time agreeing: Value Based Prioritization generates an analytical framework that zooms right in on what needs sorting. If something is a no-brainer don't waste the time,
  • Don't waste productivity by overloading projects onto your delivery team. If utilization is >90% then they deliver less; so to get more work finished, you must learn how to start less.
  • Don't waste resource on the wrong projects that have snuck into the backlog because some slacker said that everything was priority 1

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