Project management is rapidly becoming a standard way of doing business in many organizations. The key to productivity is often found in how we manage projects, which are the tools of implementing the business strategy of an organization.
Every project in an organization should contribute to its strategic plan. But how can we ensure this linkage? We need to make sure that we integrate projects within the strategic plan. This integration requires a process for prioritizing projects by their contribution to the plan. In this article, we will introduce the strategic planning process and how it relates to project management.
The strategic management process
In customer-driven organizations, mission and goals are set to meet the needs of the customers. The mission typically covers "what we want to become" and should be communicated throughout the organization. Goals translate the mission into specific, measurable, and tangible terms. The goals answer in detail where a corporation is heading or when it is going to get there. These goals should set targets for all levels of the organization. Each level of the organizational objectives should support the higher-level objectives in more detail.
The development of strategies to meet these needs and goals should focus on "what we need to do to achieve these goals." It requires an extensive analysis of the internal and external environments. Based on a political, economic, social, and technological analysis (PEST), we analyze the external environment to identify opportunities and threats. We analyze the internal environment by looking for strengths and weaknesses such as management, facilities, core competencies, product quality, technology, and financial resources. The deliverable of this analysis is a set of strategies designed to best meet the needs of the customers.
Implementation of these strategies requires actions and completing tasks, and should focus on how to realize these strategies. Implementation must include attention to the following key points:
- Executing the work requires allocation of resources such as funds, people, and equipment. Organizational resources are limited. In addition, multiple goals frequently impose conflicting demands on resources. This requires a mechanism for allocating resources based on organizational priorities.
- Implementation requires an organizational structure that supports projects.
- Project management processes for planning, executing, and controlling are essential to ensure that we are able to implement strategies effectively and efficiently.
- We need a project selection and priority system to ensure strong linkages between projects and the strategic plan.
The strategic management process and its relationship to projects is shown in Figure A:
|The strategic management process|
Need for a project selection and priority system
The need for a project selection and priority system stems from the following observations:
- Organizations frequently pursue many projects simultaneously. Almost inevitably, the number of small and large projects in a portfolio exceeds the available resources such as funds, equipment, and competencies.
- Politics exist in every organization and can have a significant impact on project selection. Many projects within companies are called “sacred cows.” We often use this term to describe a project sponsored by a high-ranking executive.
Without an effective project selection and priority system, the capacity overload coupled with project politics will lead to frustration, confusion, and inefficient use of resources.
Questions that need answers
Some of the questions that we need to tackle when considering a project selection and priority system are:
- How can we minimize the power of politics?
- How can we consistently prioritize projects to support the organizational strategy?
- How can we use the prioritized list of projects to allocate organizational scarce resources?
- How can the process encourage bottom-up initiation of projects that support organizational goals and strategies?
We are always going to have more potential projects or proposals than the capacity of the organizational resources would allow for. Thus, we need a systematic process that will select projects and allocate resources to these projects in order to maximize value added. Selection of projects from a slate of projects requires the use of a decision model in association with specific criteria.
The benefits of carefully selected criteria include the following:
- More effective planning of organizational resources
- More efficient utilization of organizational resources
- A portfolio of projects that balance opportunities and threats given available resources
- Keeping the organization stakeholders focused on the most critical projects
- Obtaining consensus as to which projects have the highest priority
Nevertheless, when we implement a project selection and priority system in our organization, we meet enormous skepticism and resistance.
Typical responses include:
- We all know which projects are the most important ones.
- All of our projects are important.
- Our business is changing on a daily basis. We do not need an extra layer of bureaucracy, which limits our flexibility.
Responses such as the above suggest a serious need for a project selection and priority system. Nevertheless, the development and the implementation of such a system does not materialize without the support and sponsorship of upper management.
A project management approach to business problems and opportunities is becoming the norm rather than the exception. Projects are the tools for implementing the strategy of the organization. Effective project management starts with selecting and prioritizing projects that support the organizational mission and strategy. The priority system focuses attention on the mission and major goals of the organization and fosters consensus to which projects are of highest priority. It results in a portfolio of projects that balance threats and opportunities and provides a better utilization of resources.
In the next article in this two-part series, we'll look at several tools and techniques you can use in selecting and prioritizing projects.