People have a tendency to compare and prioritize all sorts of things regardless of how important or difficult it might be. We automatically make judgements: it is an inherent aspect of human psychology. For example, if we listen to a variety of classical musicians, we inevitably make judgments about which musician is superior. Most of us find it quite enjoyable to sit around and discuss and debate these sorts of subjective preferences. However, in many cases such as classical music, it really takes some expertise to distinguish between the qualities of performances of professional musicians. In other cases, we do this intuitively such as the case in a fire; most of us would automatically prioritize invalids and children for evacuation as they are the most vulnerable. In project management, we also prioritize different projects and risks, but often do it intuitively without analysis, so while the results are often acceptable, this can lead to inconsistencies. In previous blogs, we discussed how to prioritize project risks, we will now see how we can extend this process to the actual projects within a portfolio.
Why should we prioritize projects? Here are three important reasons. Fist of all, projects may require additional resources, which require immediate attention. Also project priority can be used to calculate the risk score for the project. Finally, risk ranking in an enterprise risk register depends on the priority of project to which this risk is assigned. Projects with higher priority will be given a higher weighting when calculating the risk impact.
There are different approaches on how to prioritize projects. The simplest method is to simply assign different priorities to the project. What are the most important projects for Everest Climbing portfolio? It depends on what do you want to achieve, or your portfolio objective. For example, if your primary goal is to reach the summit, all projects are important with exception of “Descent back to base camp”. However, if the primary goal is to ensure you arrive at Base camp, and if conditions allow, you may attempt the summit, all projects before “Actual Climb” have higher priority. If this was the case, you might assign “Pre-Climb” projects a priority of 100% and the “Actual Climb” priorities 80%.
For more complex portfolios a more sophisticated approach is required. In our blog on multi-criteria decision making, we discussed how we can use the analytic hierarchy process to prioritize risk categories using pair wise comparison. We can also use this process to prioritize projects. At its most basic level, you can ask which project is more important: “Descent to Base camp” or “Trek to Base Camp”. You can perform this for each pair of projects in portfolio and calculate the relative priorities as described in link above.
Another process you can use for complex portfolios is Multiple-criteria decision-making (MCDM) or multiple-criteria decision analysis (MCDA). For example, if you assemble an airplane or construct a skyscraper, these may require aligning projects with different objectives, and for each objective, a project may have its own priorities. Examples of these objectives might be, complete all projects on time and on budget, retain personnel, improve organizations capabilities, develop new technology that can be applied to future projects, provide high return on investment (ROI).
With these objectives defined, we can then prioritize the objectives. Finally, we can rank projects on how well they satisfy certain objectives. This will allow us to calculate overall ranking of projects within a portfolio.
