Project portfolio management presents a complex set of challenges: Primarily multiple projects need to be configured and managed in a way to enhance the long-term strategic value of the portfolio while considering multiple criteria and interdependencies.
Value maximization has been stated as one of the key goals in project portfolio management. The starting point for value measurement is often through the firm's objective of long-term profit, return on investment, likelihood of success, or some other strategic goal.
While the definition of project value is not universally agreed upon, the traditional measure of value is the return on investment in financial terms. Financial measures are attractive due to the ease of generation and comparison of data; however, it is well recognized that financial benefits are only a part of project value. According to the critical project management view, a notable shift is underway from project management success measures (the ‘iron triangle’ of cost, time, and scope) to project success (project outcomes and benefits realization).
Nevertheless, let's see how to perform portfolio intake using the weighted scoring model.
There are several steps to this model.
1st - Identify the evaluation criteria
The criteria are dependent on the organization and the portfolio itself. You need to involve your team and stakeholders in the development of the criteria.
The criteria normally includes: Net present value, Strategic value, Risk, Compliance with regulations, or Resource capabilities.
2nd - Define a scoring system for the evaluation criteria.
1 to 5 is usually good enough.
You also need to define what each score means.
5 may equal - Exceeds all evaluation requirements.
4 may equal - Exceeds some of the evaluation requirements and meets all other requirements.
3 may equal - meets all evaluation requirements.
2 may equal - Does not meet all evaluation requirements.
Minimum change can be adaptable.
And 1 may mean - Significant noncompliance to evaluation requirements.
3rd - Assign a relative weight to each evaluation criteria.
The sum of the weights needs to equal 100%.
4th - Calculate the weighted score for each proposal
by calculating the weighted score for each criteria and summing them up.
5th - Take the total cost of the proposal
and divide by the weighted score.
The proposal with the lowest value is selected.
Even as this helps decide the projects that can be prioritized and picked up, more research is happening in this direction to make portfolio project management criteria and decision making model more effective and reliable.