The project selection process by an organisation or department is fundamental to success. With many organisations experiencing budget cuts and headcount reductions, the selection of the “right” projects is even more important than ever.

I can however think of a number of well-known & profitable organisations that in the past have taken a surprisingly simplistic & informal approach to selection. There is no room for such an approach any more as the generous budgets have gone and for some this year has been somewhat of a wake-up call.

Each project should be supported by a business case

Every internal project should be supported by a business case. Why are we suggesting we should put time, effort (and therefore money) into undertaking this piece of work? Should we invest funds in this, something else, or nothing at all?

Particularly in larger organisations, the link between undertaking a piece of work and money is often forgotten, “well, we have a department of people that are already paid for so this project doesn’t actually cost anything”…what?! Of course, it costs something, but you would be amazed at how many organisations will not even consider the costs of their own internal resources when assessing the cost of a project.

The business case must outline the true cost of undertaking a project if we are to make an honest assessment of the potential benefits and therefore return on investment (ROI).

These benefits fall into two categories, financial and non-financial and number crunching financial benefit is much easier; “we invest in this new payroll software and can reduce our HR headcount by 2, therefore save x”.  It is much easier to think of these tangible costs & benefits rather than the less intangible non-finance costs and benefits, but these must be assessed in order to understand the true and full position.

So, even if it is a simple two-page document, every proposed internal project must be supported by a business case to enable some level of governance. Let’s compare apples to apples to understand which investment makes the most sense for the organisation.

How to pick the right projects for your organisation

How are projects currently selected within your organisation? Is selection based on the views of a few senior managers? If I thump the desk more do I get my own way? Is selection based on “gut feel” (in other words, guesswork with no structured analysis whatsoever)? Are you currently running pet projects that just won’t die?

Now that resource and budget are more limited the organisation can no longer afford to run these pet projects. Projects must be strongly aligned with corporate strategy. What are the strategic goals of the organisation? Does this project help us achieve our strategic goals? These must be the first questions addressed by any business case.

 There are three key steps to the project selection process:

List the (strategic) goals of your organisation or department, for example, “improve employee satisfaction”, “expand into new markets”, “reduce cost base by 10%”.  Then have the senior management team rate these strategic goals against each other, for example, “expand into new markets” is more important that “improve employee satisfaction”.

The first win is making the management team understand how their interpretation of the relative importance of these goals stack up against each other.  There must be consensus within this team for the organisation to work effectively towards achieving common goals.

Assess each proposed project against these strategic goals and other criteria such as cost, benefit, level of risk (we have never attempted this type of project before, therefore ranks as high risk), dependencies with other proposed or running projects. We now have the ability to make apple to apple comparisons and the business case documents should support this consistency in approach.

Rank the projects against the strategic goals.  Which projects align closest with the most important goals of the organisation? Of these, which bring in the best ROI?  OK, why would we approve any other project then (unless for legal or compliance reasons – these projects have to be “forced-in”, fair enough)?

Selection of projects should be based on clear transparent criteria and this is more important today than ever. The argument for pet projects has long gone.

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Monthly Newsletter

By: Vince Hines

Vince Hines
Managing Director BSc, MAPM, MACostE, MIoD, MCTS, MCITP, MCT PMO-CP, PRINCE2 & P3O

Published: 3 September 2009

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