Alternative Selection Best Practice 5 – Establishing Priorities

All organizations face resource constraints inhibiting the accomplishment of all proposed work. Some organizations resist prioritizing initiatives commonly resulting in the completion of lower value activities ahead of those with a higher return on investment. Such an approach diminishes the value returned to stakeholders and represents an abdication of management’s responsibilities.[wcm_restrict plans=”40789, 25542, 25653″]

A well constructed prioritization scheme helps ensure the optimal deployment of an organization’s resources; maximizing return on investment outcomes. That said, some priorities are driven by external requirements such as new laws and regulations. Initiatives to satisfy these requirements are typically not optional; resulting in the assignment of the organization’s highest priority to the activity.

Prioritization criteria should focus on the value each characteristic offers the organization in terms of contribution to the achievement of overall mission goals. Leaders must avoid establishing criteria based on organizational distribution of initiatives. (See the StrategyDriven article, Strategic Planning Warning Flag 1 – Business Unit versus Goal-Based Planning.) The following is a list of initiative characteristics commonly found within well-structured prioritization processes:

  • Legal (regulatory) Requirements – always the highest priority. These activities must be performed in order to avoid fines, censure, business closure, and other penalties
  • Commitment Requirements –those obligations entered into by contractual agreements with customers, the community, employee groups, and industry organizations
  • Total Value of Ownership – those initiatives where the lifetime benefits of ownership less the total lifetime costs of ownership returns the highest overall value
  • Cost – the total resource obligation for an initiative must not exceed the organization’s reasonable ability to meet such a commitment
  • Risk – both to the organization’s financial wellbeing, reputation, high performing/potential employee retention, etcetera
  • Mission Alignment – the degree of the initiative’s support for and consistency with the organization’s mission goals
  • Consumer Base – breadth and depth of the population of customers needing and willing to purchase the particular good, service, feature/option, or organizational characteristic developed through the initiative
  • Reputation Enhancement – the degree to which the organization’s standing and consequently that of its products, services, and employment desirability is enhanced and therefore are more easily sold, command a higher price, or are acquired more readily

Regardless of the number or definition of prioritization basis, these too must be prioritized one against another. It is, after all, a necessity to comply with statutory requirements. And not all other factors will contribute equally to the achievement of the organization’s mission goals. When ordering the prioritization characteristics, further emphasis can be gained by applying weighting factors to each characteristic; inflating or deflating its contribution to the overall prioritization value when calculated.

The value of each weighting factor should be reflective of the characteristic’s relative contribution to the achievement of the organization’s mission goals. One method of determining the weighting values is to estimate the relative monetary contribution a predefined amount of characteristic change will drive. A less quantitative method would be to assign the weighting factors on the collective experience of the organization’s leadership team.

Finally, each initiative should be assessed for its amount of contribution to each prioritization factor, the weighting applied to each factor, and an overall prioritization score tallied. Initiative prioritization scores taken collectively should readily reveal a priority based list of initiatives from which the alternatives to be selected are identified based on available resources from the implementation of the highest priority initiative to the lowest until all resources are exhausted, often somewhere mid-list.

Final Thought…

From experience, there will likely be those leaders who will attempt to ‘game’ the outcome of the prioritization process to suit their individual agendas. This gaming often occurs as either an over or under estimation of value contribution one or more initiatives has relative to the prioritization factors – inflating or deflating the initiatives’ overall prioritization value. To minimize such gaming, the prioritization process should be performed for each initiative individually and the consolidated list of prioritized initiatives developed by the independent strategic planning organization.

It is important to remember that StrategyDriven believes operational activities should always be included in the alternative selection process. Consequently, operational activities are included in the prioritization consideration. It is only when this is done that the above scheme for selecting prioritized activities based on total resources available works. If operational activities are not included, the selection must be done using only those resources set aside to work initiatives outside of the organization’s core operations.

Finally, StrategyDriven also believes alternative selection requires considerations beyond the mathematical. While the prioritization process is a valuable tool, executive judgment should be applied when making any final selections.[/wcm_restrict][wcm_nonmember plans=”40789, 25542, 25653″]

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