In our previous post we look at using NPV (net present value) to decide if a project was worth investing in or not. We also looked at why NPV cannot be used to prioritise projects or choose between competing projects.
Therefore the next tool in the PPM practitioner’s toolbox is strategic alignment analysis. Strategic alignment analysis involves examining each project’s match to the organisation’s underlying strategic drivers. Strategic alignment analysis is generally accomplished using a scorecard.
The advantage of using a scorecard is that they are easy to understand, quick to complete and can easily capture the multiple criteria used to select projects.
A scorecard consists of a series of questions and weighted answers. As the questions are answered a score for the project is calculated. Questions are ultimately tied back to the underlying strategy of the organisation relate to the key themes the organisation is looking to pursue.
So for example, questions may relate to project duration, customer service, level of risk, quality improvement etc. Here is an example scorecard from iPlanWare.
Once we have scored our projects we can then start analysing them.
A useful technique is to organise the scorecard so that separate risk and reward scores are calculated for each project then use an investment map to visually organise projects by risk and reward profile. Clearly the projects that have the highest rewards and lowest risks are the favourites to approve. The following screenshot is the investment map within iPlanWare.
Here we have constructed a project scoring and evaluation table showing NPV data in addition to risk and reward scores.