Project & Resource Management

Annual Project Planning Done Smarter


Organizations spend a lot of time and effort on their annual planning cycles. Ideas are developed and enhanced, business cases are developed, reviewed, revised and adjusted, and then of course there are the meetings at the executive level to decide which projects will be approved and which will be rejected.

This effort is worthwhile because it results in the portfolio of initiatives that will help to shape the organization’s success (or failure) for the next twelve months. However, for many organizations, the process is inherently flawed. There are problems built in to those organizations’ annual planning approaches and those problems drive additional costs in the form of an excessive portfolio change, as well as in work and money being expended on the wrong projects. They also result in delays in committing resources where they are needed. Most of these problems are easily fixed with a commitment to ‘plan smarter’ and that’s what I want to explore in this article.

For most organizations, the process of project selection is about developing and reviewing business cases and then discussing whether a proposal should be included.  Once all projects have been reviewed there is then a final elimination process to reduce the projects down to those that the organization has the budget to pursue.  While leaders believe this is an objective process, the truth is that it is highly subjective.  Business cases are developed by the groups that want the project to be approved and are frequently ‘sales pitches’ rather than unbiased analyses of the cost and benefits of the proposed initiative.  Further, most organizations struggle to measure the benefits realized from projects or to hold owners accountable for those benefits.  That results in inflated benefits claims during business casing, which further clouds the ability to remain objective.

The presentation of initiatives for consideration is also flawed.  Department heads are encouraged to champion their own proposals and frequently there is ‘backroom dealing’ before the project selection meetings where department heads agree to support one another’s initiatives in order to ensure they get their share of the budgets.  This is inevitably done in a way to protect and promote departmental interests, which aren’t always the same as the larger organizational interests.

Standardize planning

The first step organizations can take to improve project planning is to standardize the proposal development and review process, ensuring that an objective focus is retained and that personal biases are eliminated.  Part of that can come from standard business templates and independent review of numbers by finance, but the biggest benefit comes from the way that organizational leadership reviews and compares proposals. Effective project selection comes not from deciding whether project A or B is ‘better’, but by comparing both projects against predefined criteria to confirm alignment with the larger strategic priorities.

This is effectively a scoring process that establishes the targets the organization is trying to meet with the approved projects – alignment with goals, minimum rates of return, maximum payback periods, ability to deliver with existing resources, etc.  A simple 1 to 5 score (or similar) can then be given to each of those categories and projects ranked based on their overall score.  Any initiative that fails to meet a minimum score is immediately rejected and those projects that do reach the threshold can be further analyzed.

The second level of analysis will need to consider projects as part of a potential portfolio – no longer looking at each proposal as a standalone initiative, but rather as part of the larger group of projects.  An example of the type of consideration in this section is a risk. The risk may be a scoring criterion at the individual project level, but risk becomes a far more important consideration at the portfolio level. For portfolios, organisations must consider the distribution of risk across business areas, the collective exposure to specific risks or specific categories of risks, and the additional risks created by the overall investment proposal.

Both of these levels of analysis can be supported by choosing the right project portfolio management (PPM) software solution.  Organizations should be looking for a solution that integrates with their existing enterprise software platforms and can seamlessly layer this additional level of decision support on top.  A PPM suite that can provide a ‘leaderboard’ of proposals with their scores relative to the threshold and one another, and can support more detailed analysis of risk, resource requirements (numbers, distribution, skills), contribution areas (geographic, customer segment, product line) and similar variables can become a powerful ally in annual planning.

It is important to retain subjectivity in the project selection process; leadership cannot choose decisions based solely on objective criteria. Organizations that remove executive judgment from decision-making and rely solely on objectivity will lack vision and never be able to take advantage of ‘game-changing’ opportunities simply because those initiatives will generally not score well.  However, a strong objective foundation, with a scoring matrix and appropriate decision support tools can provide leadership with the confidence that they have developed a portfolio that is capable of delivering results, and that the organization is able to deliver. That provides them the freedom to add a number of visionary projects to the mix that has a higher risk vs. reward ratio, but that could be significant contributors if things go well.

Shorten planning windows

The next area where organizations regularly create problems for themselves with planning is in the structure of the planning cycle itself.  For many organizations planning is a once-a-year activity to coincide with the yearly setting of strategic goals and objectives.  While that alignment makes sense in theory, in practice it results in project selection meetings several months prior to the start of the annual cycle and means that projects are approved that won’t actually start for well over a year. Organizations recognize these limitations and will conduct more detailed planning to correct and adjust cost and revenue projections before the project begins, but the issues are more fundamental than that.

Between project approval and the start of work, there will have been a number of changes to an organization’s priorities.  Those shifts may be as a result of changing external factors – competitors, the economy, and similar, or they may be to respond to internal changes within the business.  Regardless of the source, the projects that were approved may no longer be the right initiatives to deliver on the organization’s current priorities.  As a result, organizations will likely either drive substantial change into those projects, or they cancel the project entirely and select alternatives.  Both of those approaches drive additional cost and churn into the portfolio and result in a reduced return on investment.  Worse, organizations may not recognize the need to change those initiatives and will execute projects designed to deliver the goals and objectives that the organization used to have a far more costly outcome.

A much better approach is to view planning over a much shorter time horizon.  An organization will still set its goals and objectives on an annual basis, generally as part of a review of a larger five to seven-year plan, but not all of the portfolio budget should be assigned to initiatives to meet those goals and objectives upfront.  Instead, projects should only be approved when there are resources available to begin work on those initiatives.  There should then be a regular portfolio review process that reviews progress on projects and approves new work as initiatives complete, are canceled, or as resources are reallocated to maximize the return.

This review process should leverage the scoring approach that was discussed above.  By revisiting the scores of both planned initiatives and those currently underway against the evolving goals and objectives, an organization can help to ensure that it is investing in the work that stands the best chance of delivering success.  Further, they get an ‘early warning system’ of when work is beginning to diverge from the priorities and can make adjustments more quickly than would otherwise be possible.  Effectively an organization creates a backlog of projects, similar to the product owner backlog that we may see in an Agile project, but this time for enterprise initiatives and based on objective scoring criteria.

This approach to planning requires a much more engaged executive team than is traditionally the case, and also requires a strong portfolio management function to help manage and track progress and priorities. Again, the amount of effort involved can be managed through the use of an effective and appropriate PPM solution that can handle the reporting and tracking of progress on work as well as the shifts in scoring.  These suites also incorporate powerful analysis engines which will allow leadership to view projects from a number of different perspectives and to project the impact of a number of alternative adjustments within the portfolio.


Organizational planning is the cornerstone of project success.  Unless the right initiatives are chosen the likelihood of achieving the strategic goals that will define success to shareholders, boards of directors, and other executive stakeholders are severely diminished, perhaps eliminated.  Yet organizations continue to use politically driven, ineffective project selection and planning processes that rely more on strength of personality than it does on truly objective comparison of alternatives. The growth of portfolio management in recent years has placed an increased focus on the need to connect strategic planning with project execution, but until now the focus has been on improving the execution side of the equation.

As organizations realize they are failing to deliver the improvements they expect from portfolio management, the focus is beginning to shift to better planning, and the concepts discussed here are rapidly becoming executive expectations. Leadership teams that are unable to respond will find themselves losing out to competitors and individual department heads will find themselves under closer scrutiny. Those that can respond will find they not only have a better project review and selection process, they will also deliver improved enterprise results and gain a significant competitive advantage.

Read more about Effective portfolio planning – one step at a time.


Written by

My name is Dennis Kayser and I’m CEO and co-founder of Forecast. I enjoy helping our customers succeed by building great and innovative software that supports teams in their daily work.

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