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Many of you will know the famous Abbott and Costello comedy routine about who is on the various bases at a baseball game. Because the player is called “Who” there is great confusion as to who is on first base.

(see http://vintage.videosift.com/video/Abbott-and-Costellos-Whos-on-First-Routine)

Which brings me to this week’s topic — when evaluating project proposals, who’s on first? What dimension do you evaluate first?

The traditional approach has been to look at the financials first. Does it have a positive ROI? Are the financials believable and appropriate? If the project passes the ROI hurdle it gets a BIG tick. In some cases only if it fails this first hurdle do the other dimensions get evaluated.

But is this right?

Research by PWC found that 83% of project proposals had their numbers ‘fudged’ to get them through the evaluation process. You want a hurdle rate of 15%, we’ll give you a proposal with a return of 15.2%!

We recently found the CFO of a major organization fudged his project’s business case to get the requisite ROI figure!

The number of assumptions built into a project’s costings and benefits make many ROIs a guesstimate at best.

Also, as external to the project events can change the project’s value and therefore its ROI, the financials are the least reliable and consistent measure of a project’s (potential) success.

So, should they be the first evaluation measure? Probably not.

The first question should be “Does this project align with our strategic direction and priorities?” Is it helping us get to where we want to get to? Is it relevant?

There are projects that, financially, have a great positive ROI but which are totally irrelevant to the goals and focus of the organization.

Some years ago, a management team prioritised its projects and the project that was rated number two in priority disappeared completely when a strategic alignment overlay was added. It was totally irrelevant. The firm had a lot of key issues to address, and this project was not focused on any of them. It was cancelled.

This, of course, requires an effective and objective way of scoring strategic contribution. (Which we can provide.) Once this is in place, the management team can ask the following questions in the following order

• Why are we doing this? (What’s the opportunity/problem?)
• Why is this relevant? (What’s the strategic alignment and contribution?)
• What’s the value? (What are the financials?)
• Is it doable? (What are the risks and delivery capability requirements?)
• Is it doable now? (What are the resource and deployment constraints?)

What do you think? Add your comments below.