Element Anchored Scales

Comparing projects is difficult in a dynamic decision-making environment. Comparing projects is sometimes akin to comparing apples and cows. They seem completely different. How does one place them on the same plane for decision making? Projects are at different stages of development. Projects are not independent of each other. The decision to fund one project takes away funds from another project. Projects do not stand still, and there is always more information to be sought. New opportunities are continually presenting themselves to the business. Our anchored scales are a communication and decision-making tool that provide the business team a process with which to evaluate projects with respect to strategic benefit, commercial and technical risk, and urgency. The numerical assessment obtained for each project allows ranking of the programs to develop a balanced portfolio.

These scales include several important factors affecting the decisions to assign resources for the budgeting process. These were developed internally to reflect our business's projects and situations that we experience most often or sought in our growth plans. Participation in the Research-on-Research Subcommittees of the Industrial Research Institute was especially helpful in the development of these scales.16 The scales use judgmental ratings based around anchoring words and phrases designed to capture our qualitative views as easily and as reliably as possible. The scales address these areas:

• Strategic fit, including nonfinancial business benefits

• Commercial risk

• Technical risk

• Urgency (initiation and completion)

• Financial rating

The last area of financial results is a temporary fill-in for calculations related to net present value, which can take time to complete accurately, especially for programs early on in the innovation pipeline.

The value in using anchored scales is not just the numerical ranking that results. Initially, rating the projects was done on an individual basis, and then a brief meeting was held to clean up the data where discrepancies existed. However, one process improvement the team made was to anchor all projects at the same time together. The cross-functional market teams or business teams rate the projects together. Consensus must be reached on a rating. In reaching consensus, many issues found value in that they were able to unearth information that might not have surfaced otherwise. Connections between projects, markets, and outside opportunities are realized. This communication is very valuable. Discussions about the project's risk tolerance are especially valuable. The conversation threads are usually captured in a document, including follow-up action items. Use of anchored scales is easily applied to a SWOT (Strength, Weaknesses, Opportunities, Threats) analysis and a C&E (Cause and Effect) Matrix. It is also a good team-building tool. The categories of anchored scales we use to rate projects are shown in Exhibit 9.1-2.

The scales consist of a simple scoring scheme, such as 1 (low) to 5 (high), such that each number is uniquely associated with a set of key business words or phrases that are the anchors. The scales have been drafted as much as possible to accommodate and reflect the likely ranges of projects and business situations that are typical for our organization. They are easily adaptable to other businesses with different issues and are currently being used by another division at Crompton. Responses are meant to be qualitative, not quantitative. As each project is scored on a specific scale, the responses should reflect the overall positioning based around one's sense of how the project is reflected in the anchoring words and phrases.

Additional anchored scales can also be used to examine the entire portfolio to determine whether their technology portfolios are aligned with the strategy of the businesses they serve.17

Exhibit 9.1-2 Anchored Scales for Rating Projects

1. Nonfinancial Benefits

1.1 Impact on Business

1.2 Importance to Competitive Positioning

1.3 Platform for Growth

1.4 Durability of Product/Solution

2. Commercial Risk

2.1 Marketing Risk

2.2 Clarity of Problem Definition

2.3 Commercial Risk of Missing Performance Targets

2.4 Material Usage Risk

2.5 Certainty of Market Need

2.6 Risk of Commercial Response

3. Technical Risk

3.1 Competencies/Skills

3.2 Complexity of Problem

3.3 Degree of Invention Required

3.4 Pilot, Scale-Up, and Manufacturability (internal or tolled)

3.5 Intellectual Property/Proprietary Position

4. Urgency

5. Expected Financial Results

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Project Management Made Easy

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