One of the common denominators for all companies is that they have scarce resources. Time, money, and personnel are just some of the things that are often in limited supply. Companies have developed comprehensive cost saving measures and other means of utilizing their assets most efficiently, however many companies fall short when determining what opportunities to pursue, creating waste in the process.
Many companies fall into the trap of trying to be everything to everyone with projects selected based upon intuition and few practices in the decision. What results are higher priority projects being neglected due to lack of capacity. Educated companies are now employing sophisticated project selection criteria in attempts to avoid this.
I work for a construction company who had struggled in this arena when determining what projects to pursue. In the recent past we have made considerable improvement and growth by creating and utilizing a simple tool incorporating selection criteria. Two of the basic groups of criteria that we incorporated fell into two groups: Project Fit and Return on Effort.
Project Fit is more or less based upon strategy. We first developed a list of questions that we could answer in the initial determination phase. Some of the items that were included were quantity of past business with the client, amount of competition, and how the project fit within our core competencies. We formulated an excel spreadsheet that allowed us to generate a numerical score that would depict how well the opportunity fit the business that we are in. We could also compare the score to other opportunities.
We had a similar approach in creating our Return on Effort metric, which is primarily concerned with financial information. Such items as projected revenue and profit are compared with costs of selling and estimating the project. Projects that are more lucrative receive a higher score. The intent here is to eliminate those projects that would consume numerous resources and not provide a large financial benefit. It was interesting to see how this is not always obvious without a detailed analysis. Projects that I would have otherwise thought would be profitable would score low.
This overall process has helped us gain some direction when prioritizing projects. We have had less wasted time, more adherences to strategy, and clearer priorities. However, I believe that we still have some room for improvement. For an example, one shortcoming that I have observed is salesmen manipulating the tool to generate a higher priority project than it would otherwise have.
We are working on trying to further standardize the process, but I would like to see if any of you have had similar experiences with the ambiguity effect on the scoring, and would be able to offer some tips on how to deal with this. I would also like to see if you have any tips on different selection criteria or methods of evaluating our projects?