Topic 3.9: Recommending a project
We started with an idea, visualised its potential and assessed the risk to the organisation of investing it
We then identified a range of different ways to deliver the same or similar outcomes
We reduced these options to two, three or four strong potential projects that could be compared against the base case of doing nothing
We estimated the financial and other impacts of proceeding with each remaining option
We now need to make a recommendation to our decision-makers on the best option and the way forward.
The good news is, as you can see, the hard work has been done.
All that is left is to summarise our findings in a way that highlights the optimal solution.
To do this, we use a technique called multi-criteria analysis (MCA).
As the name suggests, multi-criteria analysis can include any decision-making factor (or criterion).
When deciding which is the best project option (including the null option), the evaluation criteria might be specific to the outcomes intended by the opportunity.
For example, if the outcomes we desire include:
- Increasing market share
- Improving customer satisfaction, and
- Returning a profit to shareholders…
… then our criteria might explicitly ask to what extent does each option increase market share, improve customer satisfaction and return a profit.
At a higher level, when we are deciding which projects to add to our portfolio from the recommended business cases, we might have some organisationally predefined criteria, such as:
Net financial impact
Other intangible impacts
Risk to the organisation
The purpose of MCA is to give each criterion a score – it can be out of three, five, ten, or whatever scale you like – so that when you add each criterion score for each option, you are left with an obvious winner.
We will look at an example in the next lesson.
Based on our comprehensive analysis of the potential project costs, net financial and other impacts, and the risks to our organisation, we have given each option a score out of five for each criterion.
Click through the markers to learn more.
It is important to get stakeholder consensus on what appropriate scores might be, and be able to explicitly justify them when called upon to do so.
Indeed, good practice suggests that you should have clear definitions for each score and apply them consistently when preparing your MCA.
As always, the definitions proposed here are intended as examples only and you should also be updated to reflect the unique circumstances of your organisation.
You should also beware of double-counting criteria.
For example, if you include project costs as a distinct criterion for business case decision making, you should exclude those same costs from your analysis of risks to the organisation.
In the same way, project costs should be excluded from your net financial impact formula if you are separately evaluating the impact of outputs and outcomes (as we have done in this example).
Sometimes a more sophisticated approach is called for…
Let’s suppose that our organisation is a government or not-for-profit agency.
As such, it is more important to us to have a positive impact in the community than it is to make a financial profit.
How might these circumstances impact on the decision we just made in our example?
In this instance, our organisation might weight each criterion to reflect its priority to us.
Using these conditions, we could load the other impacts by a factor of three, reflecting how important a good community impact score is to the organisation.
We then multiply each ‘raw’ score by its weighting.
Use the scrub-bar below to compare the two.
As you can see, given the more complete operational context of our organisation, the in-house project option is now preferred.
What happens if we don’t get the result that ‘feels’ right?
Multi-criteria analysis is an aid to decision-making – it should not make the decision for you.
When choosing to initiate a project, you should always draw on the experience of your stakeholders in exercising your best judgement on how to proceed.
Nevertheless, MCA is a powerful tool that not only reveals how you came to your recommendation; it compels you to follow a best-practice process in arriving at the optimal project decision.
This is because we still need a lot more certainty about the project and its deliverables.
At a minimum, we want to reduce our business case margin of error of ±20% to a more manageable (for the organisation) ±10%.
By taking a deep, bottom-up dive into our project, we may also reveal new information that invalidates the assumptions of our business case.
For example, we may discover that:
- our cost estimates are wildly optimistic
- the delivery window is not practical
- certain scope elements will be impossible to produce
- legitimate stakeholder concerns were ignored, or
- other project or business demands conflict with our project.
In that case, we must return the project to initiation, inviting decision-makers to reconsider (or recommit) with the newly available information.
A good recommendation might therefore look something like this:
It is recommended that detailed planning commence on Option B.
A complete project plan is to be presented for Board approval in four (4) weeks time
The plan should continue the assumptions made in the business case, and include a detailed WBS, schedule, budget, stakeholder and risk registers and any other documentation deemed relevant by the project management office (PMO)
The PMO should also immediately appoint a suitably qualified project manager and project steering committee
If the assumptions of the business case are invalidated by the planning process, the Board should be duly advised and a new course of action recommended
It is proposed that a budget of $15,000 be allocated to planning the project, inclusive of all staff labour and expenses
Other recommendation detail might include:
High-level time, cost, scope and quality expectations
Critical success factors
For example: resource availability assumptions; other project dependencies; key stakeholder relationships; known project risks
Regardless of how you present them, your recommendations need to be SMART – something we will look at in the next topic.