In this blog post, I explore how assigning economic values to objectives can help organisations and teams make more effective prioritisation decisions.
Organisations initiate programmes and projects to help them achieve strategic objectives. They often produce tables like Table 1 below to aid in prioritisation and ensure they have a balanced portfolio of work.
Table 1 indicates that initiative 1 is more valuable than 2, that 2 is more valuable than 3. It follows that they should be prioritised in that order. This is based on the assumption that all objectives are of equal value. In my experience, this is rarely the case.
In Table 2, each objective has been assigned a:
- money value, which represents an estimate of how much benefit it could deliver to the organisation per annum once delivered. Benefit could include more profit, cost reduction or social benefit (if you’re in the public sector or a charity).
- percentage value indicating the contribution of each initiative to achieving the objective. This doesn’t have to be exact. A rough indication of contribution is all that’s needed.
Table 2 gives us a very different result. Initiative 3 is more valuable than 2 (by quite a lot), and 2 is more valuable than 1 (marginally).
Putting numerical values on the value and alignment of initiatives to strategic objectives has two main benefits:
Benefit 1. It enables more effective prioritisation decisions. The new data provided by table 2 has reversed the priority order of the initiatives. It’s also clear what the difference in value is between them. Initiative 3 is as about as valuable as the other two combined. There will probably be some objectives that are 10 or even 100 times more valuable than others, and the more people in the organisation that know this the better. If teams understand these differences in value, they will be able to make more effective trade off decisions between competing priorities and local decision making will become more effective.
Benefit 2. Opening up information improves the accuracy of the information. Project and programme team members are enabled to understand what value the organisation has attached to an objective, how it was estimated and how much of that objective they are expected to achieve. So as they learn more about the problem they’re trying to solve and what benefits they expect to deliver, they can challenge assumptions and feed information back up to the leadership team. More accurate information leads to even more accurate prioritisation decisions.
What if you don’t know what each objective is worth? Make an educated guess. Be transparent about how you made the estimate so that others can understand, build on and challenge your assumptions. Even if your estimate is wrong, it will still be more accurate then making no estimate at all.
Interested in learning more? Joshua Arnold’s post on prioritising work across multiple teams is more thorough than this one. Give it a read!