SMART Resources
SMART Choices – Allocating Resources to Maximize Value Creation
Today the question isn't just whether projects complete on time and on budget, but whether the right projects are selected, projects that will improve performance, generate value and support the achievement of company goals. But how does a company ensure that they pick the right projects? Aligning projects with your company's mission goals necessarily begins with the strategic planning process, but to consistently make SMART Choices requires a robust governance process, with review gates and active decision making based on objective success criteria. To begin with project charters need be focused on outcomes not on solutions; they need to answer the question, "Why are we doing this project?" Next projects should be approved based on the strength and not the length or weight of their business case. Let's consider how many companies determine which projects they will do.
When to pull the plug
During their annual budgeting process companies establish a budget and ear mark dollars for a portfolio of projects. In the absence of a corporate strategy and robust governance process many companies resort to compiling a bottoms-up list of projects from last year's unfunded wish list, the inevitable carryover projects and laundry list of new ideas from across the company. Rationalizing the list of projects is a time consuming and ineffective process that fails to screen out projects with ambiguous, differing or competing objectives that are unlikely to create value-added.
When eventually a cap is put on spending, it becomes obvious that demand far exceeds the available resources or capacity. Stakeholders begin the game of exaggerating potential benefits and understating costs in order to get their projects into the budget, and if their projects "make the cut" they feel entitled to funding. Seldom does anyone take a second look at their fuzzy business case or hold them accountable to tracking the promised benefits. When these projects are allowed to proceed despite the lack of SMART success metrics they rarely meet expectations. Moreover they struggle to stay focused, the scope grows and frequently they request more time and money. These requests are leading indicators that you may need to pull the plug. Do an honest reassessment of the project. Resist the temptation to salvage a sunken investment by throwing good money after bad.
When to just say "No"
A strong business case contains compelling SMART success metrics, in other words it describes what specific measurable improvements will be realized, by when and how they will be tracked and proven. Project ROI (Return on Investment) is a CFO's favorite type of SMART metric, but it isn't the only valid metric nor should it be the sole focus. Productivity and quality improvements, for instance, are easily measured and equally important because they impact company performance and indirectly affect the bottom line. Developing SMART Metrics is a skill and isn't always easy. The process of defining project success metrics surfaces expectations, tests assumptions and clarifies scope. SMART Metrics essentially tell you what your project investment will buy you and reduce project risk. Companies should just say "no" to projects when success metrics are missing or when they fail to align with company priorities or to justify project costs.