Enforcing an objective method for risk and reward evaluation is one method of eliminating those project requests that look good, but ultimately don’t deliver on their promises. For organizations struggling from the “too many projects, too few resources” issue, introducing such an evaluation process as an integral part of project selection can focus resources on fewer, higher valued projects.
However, as I wrote in a recent article on project termination, this is as far as many organizations go in assessing the merit of a project. Once the project is in a planning or execution phase, risk or expected benefits are rarely re-evaluated. The problem with this approach is that regardless of how detailed project planning was, for any project that lasts more than a few months it is extremely difficult to predict all the possible positive or negative influences that could impact the project.
While we know that the magnitude of project risks is greatest during initiation and progressively reduces over the lifetime of the project as our understanding of “unknown unknowns” improves, one can argue that the uncertainty around benefit realization risks might not decrease. For example, an organization change project might inspire some early resistance when first initiated, but this resistance might fade while the project team is executing the project. However, as the end of the project looms, the resistance “war drums” could start beating again as staff realize that the change is imminent. A product development project might appear extremely profitable based on a market analysis done during initiation or planning. However, if a competitor releases a comparable product ahead of the completion of your company’s launch, you may never recoup your development costs.
For the same reasons that drive the benefits of refreshing your project risk register at regular intervals over a project’s lifetime, it’s a good idea to re-assess overall project & business risk as well as expected benefits. This re-evaluation is a key input into portfolio evaluation and can be used by your governance committee(s) to decide whether to continue to invest in each active project.
A well-known indicator of maturing project management practices is a narrowing of the plan vs. actual variance for constraints such as cost and schedule. By the same token, one could compare initial risk & reward scores for projects with their final scores to assess improvements in project portfolio management capability.