During periods of economic uncertainty, organizations must exercise caution in selecting initiatives for their project portfolio. Learn four essential steps of project prioritization while remaining focused on your long-term goals.
Times of economic uncertainty are challenging for organizations as they try to maintain profitability. Businesses often have to cut costs or change up their active projects, and there is concern they might lose momentum on the most business-critical projects.
Many organizations will face making the same decisions: Which projects should they accelerate, pause, or stop altogether? Because the economic outlook moving forward is unknown, many companies may start reprioritizing projects based on fear. However, there’s a better approach: one based on strategy and your teams.
Risky Business: Project Prioritization
It’s challenging to determine which projects to stop or pause when you don’t know what you’ll consider normal in the future. What makes it even more challenging to decide, though, is that there is no shortage of methods for prioritization or portfolio rationalization as it is. Companies can choose to prioritize projects based on a current, short-term goal of saving costs or focus on risky, innovative projects that provide a competitive advantage.
An article from the Harvard Business Review shares that companies that emerged from the 2009 financial crisis in the strongest shape relied less on extreme cost-cutting measures, such as layoffs, and leaned more on innovation and operational improvements. The article suggests companies should consider projects that:
- Help management better understand the business, how the economy affects it, and where there’s potential for operational improvements.
- Are self-funding and pay off quickly.
- Make them more agile and therefore better able to handle the uncertainty and rapid change that comes during economic uncertainty.
Focusing solely on short-term goals can leave companies scrambling when the economy levels out again. Companies have to be well situated for when things turn around versus being reactive, losing focus on key strategies, and falling further behind.
Moreover, focusing on the wrong projects during this time could harm your teams. Hasty decisions can cause your team members to become more stressed at an already stressful time. Or, worse, you might have to lay off people because a project didn’t go as planned.
So, how do you find the right balance and discern which projects are the most business-critical in these uncertain times?
How to Prioritize Projects During Economic Uncertainty
To find stability, you need to pick a project prioritization method with criteria that align with your short- and long-term objectives and core values. Use your project management office (PMO) to facilitate the process of prioritizing your projects. They are uniquely positioned to enable cross-functional decision making that delivers a strategic project portfolio.
Here are four practical steps you can take:
Step 1: Articulate Your Objectives
Begin by defining your short and long-term objectives. These will inform your decisions about which projects align with your operational and strategic objectives.
The best way to do that is to consider what you need to do now to survive the economic downturn, what will keep your business running and growing after it is over, and what will instill confidence and trust from your teams. For example, do you need to save money right now? Is your long-term objective to become more competitive in your market? How will your decisions affect the morale of your teams?
If you have competing priorities, assign different weights for your objectives to help determine relative value and importance.
Step 2: Align Projects to Your Objectives
What projects are currently in your portfolio, and how do they line up with the objectives you wrote down in the first step?
If you have a project focused on creating a new product, it might fit better into your long-term objectives, or it could help you improve cash flow right now, depending on the project. To that end, a website update project dedicated to improving user experience could help customers decide to hire you right now, or it could be the perfect project to focus on in the future when economic conditions are more favorable.
Step 3: Assess Risks and Their Impact
The risk level associated with each project depends on your organization’s culture and tolerance of risk. Awareness of the risks of dropping a strategic project or if your company slows down, for instance, is critical.
Consider the impact of any decision on your teams, being especially mindful of the effect on people’s lives, emotions, and stress levels. And, be conscientious of the magnitude of the change you’re introducing. If you overlook these factors, it can cause anxiety for your teams or them to lose confidence in your decisions.
Lastly, understand that something that might be dicey for one company might not be as risky for another because of differences in company culture and agility. For example, if a particular project is difficult for you because it requires additional skills your teams don’t have, that might contain little risk for a company that is nimbler and more adaptable to rapid change.
Step 4: Prioritize Your Projects
Once you understand the risks associated with your project selections, you can prioritize them based on what’s most important and urgent for your business. Focus on the projects that will sustain your operations and best position you for success when the economy recovers.
Anticipating the Future
When it comes to project prioritization, especially during economic uncertainty or other crises, the best course of action is to avoid succumbing to fear. Fear can limit your perspective, narrow your choices, and obstruct your strategic path forward.
Instead, when selecting and prioritizing projects, let your short- and long-term objectives, the well-being of your teams, and the balance of risk and impact guide you. Then, once the economy recovers, you have positioned yourself to continue proactively growing your company.