Organisations make investment trade off decisions every day. Assuming resources are scarce (cost/people/equipment…), decisions must be made about which projects (or investments) should be the priority. One answer to this is that the projects that return the most financial value should be done first, but there is also a need to consider which projects will help deliver the organisations strategic goals the fastest. In some cases, those two objectives may be in conflict.
Another factor that complicates this priority setting conversation, is of course people. Different members of the leadership team may themselves have priorities which will help them deliver their own business lines. As influential executives, their wants and needs are often taken into account in the prioritisation process.
1.0 The portfolio management layer
This lack of clarity around what organisational priorities should be, and therefore which projects should be delivered first, is a common problem in many organisations. Even in organisations with a reasonable level of project management maturity. It can be a case that the ‘squeaky wheel gets the oil’, and those executives that shout the loudest about the urgency of their particular projects are often the ones that get the first bite of the resource cherry, regardless of the overall strategic alignment or value return. In order to stop this from happening, and to bring a more level playing field to the discipline of portfolio management, it’s becoming more and more common to use a formal method to prioritise portfolios, for example using AHP, Analytic Hierarchy Process.
AHP is a structured technique for organizing and analysing complex decisions, based on both mathematics and psychology. It was developed by Thomas L. Saaty in the 1970s and has been extensively analysed and refined in the years since. The technique represents an accurate approach for quantifying the weights of criteria by seeking individual experts’ experiences and utilising them to estimate the relative magnitudes of factors through pair-wise comparisons. Each of the respondents must compare the relative importance between the two items under a specially designed questionnaire.
Despite being scientifically proven, it can initially be challenging to convince leadership teams to move across to a method which will not let individual biases influence the prioritisation outcomes. However, organisations that do make the leap into formal and controlled portfolio management reap the rewards almost instantly by utilising their pool of resources more efficiently to deliver the projects that return the value that they as a collective, deem to have the most strategic importance or value. This means no more ‘pet’ projects and no more conflict within the executive team around how scarce resources should be used, or which projects should be done first. It also provides very clear leadership to the delivery teams, which in-itself can improve morale and productivity.
If you would like further information about the AHP technique or about portfolio management generally, get in touch today!