Thursday, May 1, 2014

Is Balanced Scorecard the only Way to do Project Prioritization

A balanced scored board needs to provide the balanced view of business progress; perhaps it also has the "unbalanced" nature to do project prioritization. 

Statistically, there is a lack of strategic focus in the process of project prioritization. Ongoing projects and ideas are assessed with a lot of parameters and finally represented in a kind of chart or grid. So to what extent can the Balanced Scorecard be used to ensure strategic alignment of the project portfolio?

Facilitating decision making: Balanced scorecards for many organizations are the only way to represent the numerous and often conflicting project demands. They rarely however lead to the production of a perfect prioritization answer, but are very useful for facilitating discussions and ensuring decision makers understand the various trade-offs. You also need to consider, among other things: the overall strategic balance, dependencies and constraints between components, individual and overall risk exposure.

“Soft” variables: The key variable in actively using a Balanced Scorecard is always the attitude and culture of the organizations, the leadership traits of executives and decision makers. Even tacit agreement to the output of a Balanced Scorecard can be at odds with the subtleties of political behaviors. The resource availability is also needed, so that projects can be racked and stacked based on the scoring mechanism, resources being available to do the actual work; even if it's external resources, there will be availability issues to some extent.

Three sets of analysis: Balanced score cards have their place, but you need to combine with traditional estimation on cost / benefit and to add the third dimension which connects the projects to the strategies they contribute to and use pair wise comparison to give you a view on how they contribute.  And you have to validate on all three sets of analysis - did you achieve the cost / benefits, were your scorecards accurate and did you achieve the expected contribution to strategy? 

Unbalanced” nature: A balanced scorecard by definition must be "unbalanced" if it is to provide a sense of priorities to the organization. As project prioritization can be misleading since it implies that you can make a clear decision or choice about which project is more important. The factors missing from most scorecard systems are resource availability and project to project dependencies. What you really need to develop is a set of portfolio alternatives that support strategic direction. You shouldn't be picking projects. You should be picking portfolios. As a project that seems less than exciting when evaluated on its own may actually be a great choice for the organization because it provides a more support for lots of objectives. 

How to do project prioritization may also depend on the maturity of business. There are about 50% of companies want to take on benefits measurement and usually they are mature in their business area. In the other 50% of organizations, it's probably OK to focus initially on the strategic alignment and scorecards up front; they usually lack the size or maturity to do the benefits management although logic suggests they should. Either way, balanced scorecard should not be the only way to do project prioritization, but it's an important tool in PPM and business performance management.


Post a Comment