Why is it So Hard to Define Clear Criteria for Selecting Projects?

In this podcast, Ricardo lists the three main reasons why it is so difficult to establish criteria for selecting projects in a Portfolio Management. They are: the lack of clarity in the strategic objectives, the difficulty in measuring intangibles and the management of possible conflicts created by individual interests.

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Episode transcript

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Hello, everyone. Welcome to the five Minutes BM podcast today, back to discuss with your why it's so cool. Hard to define Clear criteria for selecting protests in a portfolio management. And they do, we are white people struggle to much in defining the right set of criteria, curious to apply to select. Basically I have two main reasons for that. The first one it's lack of understanding what is the real strategic intent of their organization, of the area of the Portfolio.

In what ways? I am telling this because it's so hard. We tried to define clear Criteria is if we don't know exactly where we want to go and how we want to go. So it's so important. People start thinking, okay, we need to put financial Criteria yes. If this is your intact, if this is your strategic intent, but if you are, the strategic intent is different. Maybe the financial result in the short term, it's not so relevant.

So it's very, very important. And, and second, we are afraid of billing and the handling intangibles. We love when it comes, you start talking about curricula. We just, but at the first moment, okay, return on investment results, profit and BV net present value, right? We'd never think about strategic fit complexity, because these are hard to measure and then we try to avoid them.

But what I want to propose to you is that there is a lot of techniques you can use to handle those intangibles. It's not perfect, but is much better than doing nothing. For example, then a little year RQ process AHB, we have discussed the dizzy, no other Podcast. It's so important that you understand this because maybe you can make comparison pair-wise and you can translate it. Something that is intangible in something tangible. So this could be something quite interesting for you.

When handling intangibles, you can create a thresholds, created a set of criteria that can help you are on Edison, this, and then the third one it's of course interest because some people, they don't want to create clear Criteria because they have a strong interest in manipulate the Projects on their behalf to increase the chances of having there juts moving up in the list. So they don't and to create clear cut here, because they will be, you do use a power or they want to use, or the criteria's two, bring them up, but they don't want to make this course dearest Clear for everyone.

So we can is very, very important because all the portfolio management is a very political, calm environment because are talking about Paul will be received in the funds who we'll be receiving and the support, the resources and the people they want to create. Criteria's where there is a bit and will move up and not necessarily their intent is the intent of the organization. We need to understand as Portfolio manager, that this is part of the business, this is why the business, we need to handle this political site.

And there's will be one of the major challenge. And just for us to create a reliable set of criteria is it's very important to understand this and that at the end all day Criteria must be agreed before you talk about the Projects. If I can give you only one advice, when you are thinking about Portfolio Management first, they agree on the Criteria second by the Criteria on the Projects. Why am I telling you this?

Because if you do this, you will have a much more fair process. If you do not, not agreed on this, people will start competing Projects and we don't want we weren't to competing what fits better in my intent. And based on the set of criteria, if we agree with the set of criteria, it will be quite simple to select projects, but if we can do not agree on what it will be archived, curious, Dan, we are in trouble because then where we use power, an audit things too, the site, and that at the end, the company and their strategic plan check, there will not be Matt by the Portfolio.

And then we'll say Portfolio Management is not working. And why is not working because you are not using the right Criteria but you are competing for Projects. You go with your list ready in your mind, and not with your clear mind to understand what is better for the organization. Think always about this. When you are doing portfolio management, I hope you enjoyed this podcast and to see you in next week with another five minutes BM Podcast.

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Ricardo Vargas

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Why is it So Hard to Define Clear Criteria for Selecting Projects?

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