Lee Merkhofer Consulting Priority Systems

Choosing the Wrong Portfolio of Projects — Abstract

There are six reasons organizations choose the wrong projects: (1) errors and biases in judgments; (2) failure to see the forest for the trees; (3) lack of the right metrics; (4) ignorance of methods for quantyng value; (5) inattention to risk; and (6) inability to find the efficient frontier.

Because of these reasons organizations conduct too many low-value projects; underestimate the value of difficult-to-quantify projects; don't kill failing projects soon enough; let politics distort project choices; unknowingly accept high risks; and use inefficient decision-making processes that discourage trust, transparency and honesty. By my estimate, organizations obtain only about 60% of the value that could be derived from a better managing project portfolios.

Organizations can learn to choose the right projects. Success requires cultural change, organizational re-engineering, improving decision-making competencies, and institutionalizing best-practice analytic tools. Organizations that successfully address the reasons for choosing the wrong projects achieve a dramatic improvement in performance and obtain a significant competitive advantage in the marketplace.