IT leaders often struggle to assess the value of potential projects. Solely considering value according to a project’s expected financial return is not advised, as this evaluation may deprioritize many of the technological innovations that enterprises need to further scale their organizations.
The approval and initiation of a new business or IT project requires significant resources. Although these resources exist within an organization, they are limited and need to be used in a way that maximizes their value. An organization’s active portfolio is comprised of many several types of projects (e.g. maintenance, regulatory, strategic, enhancements). Each one competes for the same set of resources, staff, budget, equipment, and work space from the same source. So how does one introduce a new project into the active portfolio, when not all the necessary resources are available?
A structured and objective methodology can be useful in achieving consensus and balancing the needs of the organization and its clients and stakeholders. One such methodology or approach for making tough decisions, in an objective way, is by using a prioritization matrix.
What is a prioritization matrix?
A prioritization matrix is a simple tool that delivers an approach to sorting a diverse set of items into an order of importance. It likewise recognizes their relative importance by determining a numerical value for the priority of each item. The matrix provides a means for ranking projects (or project requests) based on criteria that are determined to be important. This empowers an organization to see clearly which projects are the most critical to concentrate on first, and which, if any, could be put on hold or discontinued.
Advantages of a prioritization matrix
A prioritization matrix supports structured decision-making in the following ways:
Helps prioritize complex or unclear issues when there are multiple criteria for determining importance;
Provides a quick and simple, yet consistent, system for assessing alternatives;
Removes some of the emotion from the process;
Quantifies the decision with numeric rankings;
Facilitates reaching agreement on priorities and key issues; and
Establishes a platform for discussions about what is essential and necessary.
Building and utilizing a prioritization matrix
Each organization determines its own unique criteria and weighs those criteria based on values, strategic direction, organizational goals, available resources, and so on. Projects are then scored and prioritized based on the criteria. Once projects are prioritized and those priorities are examined and discussed, the organization can evaluate the results to decide funding and resource allocation for the higher priority projects. A last step involves assessing how and when (or if) to fund the lower priority projects in the future if/when more resources become obtainable. Creating and using a prioritization matrix involves four simple steps:
1. Establishing criteria and rating scale
There are two components involved in rating the projects on an organization’s “to do” list: criteria for evaluating importance, and a rating scale. The first step is establishing the factors to utilize to assess the importance of each project. Selecting factors that will clearly set apart important from unimportant projects – these are an organization’s criteria (a group of 6-12 criteria is typical). Example criteria might include if the project is a mandate, the value it brings to the customer, etc. Then, for each of the established criteria, the organization would determine a rating scale to use in assessing how well a project satisfies that criteria. The following table provides some examples:
2. Creating criteria weight
Creating a weight criteria can be accomplished by placing the organization’s criteria in descending order of importance and assigning a weight. When a project is scored, the numeric rating the project receives for a criterion is multiplied by the criteria’s weight to generate a priority score.
3. Constructing the matrix
Constructing the matrix is achieved by listing the organization’s criteria down the left column and the weight and names of potential projects across the top.
4. Working in teams to score projects
An organization should review each project and rate the project on each of the established criteria. The next step would be multiplying the rating for each criterion by its weight and recording the weighted value. After evaluating the project against all the criteria, adding up the weighted values will determine the project’s total score. If participant numbers permit, it is useful to work in teams and to organize for each project to be assessed by two different teams. Benefits of this approach include:
- Working in teams can generate more objective results, since differing perspectives can be considered during the rating process;
- When there are various projects to assess, dividing them among multiple teams can speed up the task; and
- Insights into how clearly an organization’s criteria are defined and how objectively the rating scale is applied can be gained if each project is scored by two teams.
It’s generally good practice to go through the procedure with the entire group for a few projects to help establish a mutual understanding of the methodology and to ensure a good comprehension of the criteria and its significance.
Litcom provides project management expertise and skilled resources to assist our clients in a variety of project management capacities. To find out more about prioritizing projects, please contact Litcom at: email@example.com.