Mastering Project Portfolio

Management
A Systems Approach to Achieving Strategic Objectives

Chapter 7
Prioritizing Candidate Projects

Overview --Chapter 7
1. Introduction
2. PPM Role in Prioritizing Alternatives
3. Prioritizing Candidate Projects Overview
4. Structure the Model
5. Measure by Conducting the Evaluation
6. Synthesize to Derive Priorities for the Alternatives
7. Iterate as Necessary
8. ABU Campus Revitalization Program Example
9. Present Results & Maintain Governance
10.Prioritized Projects A Major Step
11.Summary
12.Next Steps
Mastering Project Portfolio Management -Chapter 6

Introduction
Pre-screening and screening have reduced the
number of projects to a list of candidates and the
alignment matrix
Difficult decisions still need to be made to evaluate
the anticipated benefits of each project and begin
the portfolio selection process
In this chapter, candidate projects are prioritized
by:
Transferring approved project alignment matrix into
evaluation model
Identifying personnel to evaluate the projects relative
contribution to achieving organizational objectives
Performing sensitivity analysis to determine the signs of
rightness of the evaluation results

When the proper

tools are used, the prioritized list
Mastering Project Portfolio Management -3
Chapter
7
of candidate projects contains the ratio-scale

Introduction
PPM
Phase

Activities

Output
Iteratio
n
PPM
Area

Strategic
Phase

Screening
Phase

Define
Mission

Pre-Screen
Proposals

Develop
Vision

Create
Business
Cases

Establish
Goals

Determine
Screening
Criteria

Determine
Objectives

Establish
Assumptions

Prioritize
Objectives

Screen
Potential
Projects

Prioritized
Objectives

Candidate
Projects

Strategic
Planning

Selection
Phase
Align
Projects
Determine
Project
Benefits
Select
Initial
Portfolio
Analyze &
Evaluate
Scenarios

Optimal
Project Portfolio

Identify, Evaluate & Select

Project Portfolio

Implementation
Phase

Evaluation
Phase

Establish
Governance
& Roles

Synthesize
Benefits /
Performance
Measurements

Establish
Structure
& Metrics

Evaluate
Strategic
Performance

Measure
Project
Performance

Determine
Portfolio
Adjustments

Implem
ent
Correcti
ve
Action
Portfolio
Governance
and Project
Metrics

Implement
Changes

Portfolio
Metrics and
Adjustments

Monitor, Evaluate & Control

Mastering Project Portfolio Management -Chapter 7

PPM Role in Prioritizing

Alternatives
The PPM Role in prioritizing alternatives
is to:
Act as a facilitator
Oversee the processes of
Preparation of the evaluation model
Selection of evaluators
Analyzing results

Review the outcome with executives and

PMB
Mastering Project Portfolio Management -Chapter 7

Prioritizing Candidate Projects

Overview

Not all projects that make it through screening are of equal

importance in achieving objectives some objectives contribute
more
In Chapter 4, we saw the importance of prioritizing the
objectives so that evaluators can make informed and reasoned
judgments about the relative importance of objectives
The objectives hierarchy in the evaluation model is a direct
representation of the strategic plan
The alignment matrix shows which candidate projects support
which objectives
The evaluation model provides direct traceability of each
candidate project back to the objectives it supports
Once the model is updated to include candidate projects,
participants are selected to evaluate the relative contribution of
each project
Participants then evaluate each project against each other in
Mastering
Management
terms of how effective
itProject
is inPortfolio
supporting
a --given objective
6
Chapter 7

Structure the Model

The first step in prioritizing the alternatives is to structure the
model:
1. Adding Alternatives to the Model
Evaluators must understand organizational objectives
Evaluators have a common understanding of alternatives
2. Map alternatives to Objectives to Establish Contribution
Map alternatives to objectives they support (alignment
matrix Table 7.1)
This matrix helps to maintain a structure consistent with the
strategic plan
3. Specify Evaluators and Their Roles
Have PMB work with the ERP to identify personnel to
perform evaluation
These people must understand firm goals and the candidate
projects
Mastering Project Portfolio Management -Chapter 7

Structure the Model

(Specify Evaluators and Their Roles)
Evaluators can be assigned to evaluate some or all
projects
Those evaluating all projects are in senior positions with a macro
view of the organization and complete understanding of the
strategy
Others are carefully selected people with a strategic perspective
as well as expertise in their specific domains; e.g., construction
or IT, for consistent, credible judgments

Assign all judgments to all evaluators in circumstances in

which they all understand the strategy and the candidates
Multiple portfolios might have different teams of
evaluators
Assign roles consistent with participant perspective
Mastering Project Portfolio Management -Chapter 7

Measure by Conducting the

Evaluation
The second step in prioritizing the alternatives is to conduct the
evaluation:
1. Select Measurement Methods
Two methods: pairwise comparison and direct priority input
Pairwise comparisons results in large number of
comparisons
To reduce workload, evaluators may use:

Rating scales used to compare alternatives to a defined scale (see fig

7.2, p. 180)
Step Functions a graph that looks like a series of steps with a
constant on each interval but that constant is different at each level
(e.g. client charge structure is as follows: Less than 1 hour: $10, 1 hour
up to 2 hours: $20, 2 hours up to 3 hours: $30, 3 hours up to 4 hours:
$40.00)
Utility Functions ranks alternatives according to their utility to an
individual

2. Establish Measurement Options

Establish options
for evaluation function of PMB
Mastering Project Portfolio Management -3. Prepare the ParticipantsChapter 7

Measure by Conducting the

Evaluation
Measurement methods for alternatives

Pairwise Comparison
Direct Priority Input
Rating Scales
Simple Utility Curve
Step Functions

When number of alternatives is large,

use rating scales or other absolute
measurement methods -- remember (n
* (n 1)) /2
Mastering Project Portfolio Management
Chapter 4

10

Measure by Conducting the

Evaluation
Rating scales use words to represent
corresponding priorities (called intensities)
Priorities are themselves derived through
pair-wise comparisons, not arbitrarily, and
then normalized so the intensity with the
highest priority is normalized to 1.000
Default rating
scales are
provided with
software
Mastering Project Portfolio Management -Chapter 7

11

Measure by Conducting the

Evaluation

How well does Alternative 1 support Objective 1?

(this is what evaluators see for the rating scale)
Mastering Project Portfolio Management -Chapter 7

12

Synthesize to Derive Priorities

for the Alternatives
The third step in prioritizing the alternatives is to synthesize and derive
priorities:
1. Local and Global Priorities for the Alternatives

Local relative priority of element in cluster with respect to

siblings

Global relative priority of any node with respect to the goal

Figure 7.3 (p. 182) shows the local and global priorities 5
objectives

Figure 7.4 (p. 182) shows how the alternatives were evaluated
2. Ideal versus Distributive Mode

Ideal use when projects are added or removed from portfolio as

it does not impact remaining alternatives with respect to each
other (recommended)

Distributive if a new alternative is added, it changes total

benefit for original alternatives as size of pie becomes smaller
3. Consistency
Evaluators shouldMastering
be more
orPortfolio
less consistent
Project
Management -- in their judgments
13
Chapter
7
High
inconsistency
implies
evaluators
have
different

Synthesize to Derive Priorities

for the Alternatives
(Ideal versus Distributive)

Synthesis can produce results in two modes,

ideal and distributive (Comparion allows
toggling between the two)
When rating scales or other absolute
measurement methods are used, the results
are different
Ideal mode is recommended for synthesizing
project portfolios
Alternatives can be added or deleted without
changing the ratio of evaluated benefit for the
other alternatives
Mastering Project Portfolio Management
Chapter 4

14

Synthesize to Derive Priorities

for the Alternatives
(Consistency)

Accurate decisions are usually based on

consistent judgments
Some degree of inconsistency is tolerable (<=
0.10)
Reasons for inconsistency (Forman, 2001)
Clerical error
Lack of information or understanding (selecting
evaluators without the right knowledge)
Lack of evaluator concentration
Inadequate model structure
Inconsistency that exists in the real world
Mastering Project Portfolio Management
Chapter 4

15

Synthesize to Derive Priorities

for the Alternatives
(Evaluators)

Synthesis combines the evaluation

results from all participants, including
ratio-scale priorities for the objectives
and alternatives in the supported tool
Facilitator can review individual and
group results with participants
The results can be normalized in
several ways
Mastering Project Portfolio Management -Chapter 7

16

Synthesize to Derive Priorities

for the Alternatives
(Sensitivity Analysis)
Sensitivity analysis is used to understand how
sensitive the alternatives are to changes in the relative
priorities of the objectives or sub-objectives what if

Must have results for both objectives and alternatives

Some of the types of sensitivity analysis available in
EC software
Dynamic dynamically change the priority of an objective to
see the impact on the priorities of alternatives
Performance change the priorities of one or more
objectives to see changes in the list of projects with the
highest priority as a result
Gradient Change the importance of one objective and see
how the gradient changes for each project
Mastering Project Portfolio Management -Chapter 7

17

Synthesize to Derive Priorities

for the Alternatives
(sample data grid after synthesizing results)

Mastering Project Portfolio Management -Chapter 7

18

Iterate as Necessary
Facilitator reviews the results with evaluators
Discussion of validity of results
Do the alternatives with the highest priority seem right?
Is an alternative best on every objective (is there a
missing objective)?
When objectives and alternatives evaluators are the
same people, evaluate the alternatives first to avoid
iteration due to feedback (ABU example has different
evaluation team for each)

Perform any necessary iteration until evaluators

are comfortable results and intuition in the end
(not necessarily the beginning) are the same
Mastering Project Portfolio Management -Chapter 7

19

Iterate as Necessary continued

After synthesizing the evaluations, the PM reviews the
output to:
1. Discuss the validity of the results
2. Raise questions (e.g. whether alternatives with the
highest priority are the right choice)
3. Determine whether objectives might be missing
from the model
4. Conduct the evaluation after alternatives have been
evaluated as they influence objectives (intuition
can change during the experience)

Mastering Project Portfolio Management -Chapter 7

20

Present Results and Maintain

Governance of the Process
Once results are obtained, analyses performed,
adjustments made, and iterations are complete, the
next step is to have the PMB present the ERB with the
outcome
The PMBs purpose is to communicate the results and
obtain approval for the way forward
The most important results are the priorities for the
alternatives as they form the foundation for the
eventual selection of the optimal portfolio
The ERB:
1. Assigns actions
2. Approves path forward
3. Provides guidance to PMB about risks, assumptions,
resources
Mastering Project Portfolio Management -21
Chapter 7

ABU Campus
Revitalization
Program
Example

Mastering Project Portfolio Management -Chapter 7

22

ABU Campus Revitalization

Program Example
(Overview)

Output from screening process in Chapter 6

resulted in a list of portfolio candidate projects
The alignment matrix from Chapter 6 will be
used to evaluate the priority, or anticipated
contribution, of each project through pairwise
comparisons
The steps to perform these actions are
discussed below

Mastering Project Portfolio Management -Chapter 7

23

ABU Campus Revitalization

Program Example
(ABU Campus Revitalization Matrix)

Approval of matrix is
the final step in
screening
Matrix is used to
prepare evaluation
model for project
prioritization (Ch 7)
and portfolio
selection (Ch 8)
15 Projects mapped
against 5 Objectives
where:

An x means
project is aligned
with objective
An o means
Mastering Project Portfolio Management -project is no 24
Chapter 6
longer aligned

ABU Campus Revitalization

Program Example
(Prepare to Evaluate the Alternatives
Using AHP and Comparion)

The evaluation model for the ABU alternatives

is prepared in Comparion by adding to the
model created in Chapter 4
In this and the next few chapters, screen shots
with explanations are used to demonstrate
how the software supports the prioritization of
candidate projects
To reinforce concepts, it is best to log on to the
software and perform each step while reading
the material
Mastering Project Portfolio Management -Chapter 7

25

ABU Campus Revitalization

Program Example
(Structure the Model Overview)
Add the candidate projects to the model
Map the alternatives to their covering objectives
based on the project alignment matrix developed
during screening
A covering objective or terminal node is the lowest
level of objective or sub-objective that the project
supports
Mapping is done only at this level the priorities are
applied at the lowest level of the hierarchy and
aggregated upward to each parent level

Not all alternatives support every objective most

support only one or two objectives
Mastering Project Portfolio Management -Chapter 7

26

ABU Campus Revitalization

Program Example
(Structure the Model Add
Alternatives)

Mastering Project Portfolio Management -Chapter 7

27

Present Results & Maintain Governance

Present the outcome to senior executives
Obtain approval of the prioritized list
Define optimization steps and the path
forward
Identify organizational constraints
Identify assumptions to be made
resources
Assign risk to the alternatives
Identify multiple scenarios

about

Obtain approval for path forward

Mastering Project Portfolio Management
Chapter 4

28

Prioritized Projects A Major Step

Synthesized results of alternatives
evaluation provide the relative priorities
of the candidate projects with respect to
achieving the goal(s) of the organization
The relative priorities represent ratioscale anticipated benefit for the projects
The prioritized portfolio candidates form
the input for portfolio optimization
addressed in the next two chapters
Mastering Project Portfolio Management
Chapter 4

29

Summary
Used a methodical and disciplined rather than an
ad-hoc process
Involved the most appropriate people, well
established methods and advanced software
tools
Maintained traceability to the organizations
strategic plan
Produced a prioritized list of alternatives
Critical input to selecting the optimal portfolio,
but does not yet consider costs, organizational
constraints or risk
Mastering Project Portfolio Management
Chapter 4

30

Next
Steps
chapters)

(in

subsequent

Establish
scenario
assumptions,
funding levels and constraints
Apply risks for the candidate projects
Select the optimal portfolio for each
desired scenario
Analyze the scenarios and recommend
to senior executives iterate as needed
Obtain approval to launch
Mastering Project Portfolio Management
Chapter 4

31