The project approval process is part of an overall business process called portfolio management. Portfolio management encompasses the planning and scheduling of projects during the budget year, tracking the progress of approved projects, and measuring the effectiveness of projects as they complete.
In most mature companies, the project approval process occurs when the budgets are set for the following fiscal year. Development resources are limited, and the project approval process helps the company determine which projects receive funding and which do not in a way that benefits the entire business.
An effective project approval process
The following process proved effective at a large company where I worked. Senior management asked each business unit to go through this high process to determine their priorities for the coming one-year and three-year planning periods.
- Future State Analysis: First evaluate the future state of the organization and the marketplace. What is the vision for the organization in the next three to five years? What will the marketplace be like? If your company is doing this for the first time, this can be the most painful step.
- Current State Analysis: Evaluate where the organization is today. What are its strengths and weaknesses? What is the primary mission and strategy? Are you winning or losing in the marketplace?
- Gap Analysis: What has to happen to move the organization from where it is today to where it needs to be in the future? What capabilities need to be in place?
- Break the work into projects: What projects are needed to get the organization where it needs to be? For each initiative identified, sketch out the high-level costs and benefits.
- Prioritize the projects: Prioritize the projects based on urgency, value proposition, and expected payback. Some projects might be rejected altogether, but all others will end up on a prioritized list.
- Determine which projects will be funded: The projects with the highest priority to the organization are put forward for funding. For instance, the organization may have 20 prioritized projects but only funding and people for eight.
- Execute the projects: Projects that make it through the process should move forward. All others are put on an organizational backlog and are reviewed when the project approval process begins again.
Many times it’s not that formal
Although this high-level process makes sense, many companies don’t go through anything so formally structured. If you think about it, most IT projects are established to meet underlying business needs. Unless your shop has an unlimited budget and resources, it’s probably going through some type of prioritization process and then funding the projects with the highest priority.
Even if you prioritize the major projects on a yearly basis, unplanned business needs will surface during the year. You may not go through the formal process to prioritize these projects, but a similar though more informal and streamlined process is undoubtedly taking place.
How to get your project approved? Tell us about it, or post a comment below.