S.T.R.E.E.T - A simple framework for Project Decision Making
A cost-benefit analysis is one of the most fundamental concepts and methods in project decision-making. How do you pick up a project as opposed to any other - Every manager faces this decision, and the results of this decision can make or break projects companies and careers. Although seemingly quite an easy concept to grasp as it mimics basic human decision-making in terms of picking projects and prioritizing work, it can get as complex as it could get. Think about the various priorities that you must assign in your day-to-day life. As humans our brains are constantly evaluating options, and this is a natural part of reasoning and thinking. Yet in a professional context it helps to have a framework for evaluating investments in time, money, and efforts to continuously make better decisions.
Another important idea we need to explore in this context is that of return on investment (ROI). Basically, the return on investment is the net benefit divided by the total cost of the opportunity expressed in percentage terms. So, the cost part is somewhat easier to determine because it's mostly expressed in dollar terms for e.g. you buy hardware, software, SaaS, cloud everything is quite easily expressible in money terms because that's how the buying process works. But expressing the benefits in monetary terms can be quite challenging because benefits can be tangible or non-tangible and it is an estimation of the future so that makes it inherently harder. This makes it as much of an art as a science.
Also, these estimated benefits can be subject to many kinds of manipulation and fudging by interested parties, so it is critical to have an objective analysis of the benefits making it an essential part of project planning and management. Below is a simple framework outlining some of the key factors which we can consider before making a choice -
S – Does the Project Save Money ( Can it be Quantified?)
T – Does it save Time? If so, how much ( Can it be Quantified?)
R – Risks – Goes without saying- Are we going to be in a better place once we implement the project or it is likely to cause more damage ( Can the risk be quantified?)
E – Does the project improve efficiency ( Basically operational efficiency is the number of resources committed vs the gain received from the activity? Again, can it be Quantified?)
E – Estimation – Is this project or initiative easy to estimate. This should be a primary consideration. Also do we have the right people to be able to provide good estimates.
T – Does it directly add to the top line ( Help us generate revenue for the company or division?)
In addition, this evaluation process should not be a one and done but must be continuous throughout the project life cycle. Most Organizations have a process to greenlight projects and usually most of the bigger and complex decisions are made through collaboration but as managers we are constantly having to make decisions both big and small. Hopefully this is something that is a quick and easy framework to apply and leads to better quality of decisions for you and your organization.
Chao for now,