Most organizations don't lack project ideas — they lack a disciplined way to choose between them. With limited time, budget and resources, the challenge is identifying the right combination of projects that deliver the highest returns.
What is project selection?
Project selection is the process of evaluating and choosing projects that both align with an organization's objectives and maximize its performance.
Prioritization refers to ranking or scoring projects, based on certain criteria, to determine the order of execution. However, organizations often use the terms "prioritization" and "selection" interchangeably, as the two processes are intertwined.
Selection and prioritization are important elements of project portfolio management (PPM), an approach that connects the execution of projects with high-level business strategy. PMI's project success research found that projects with a clear, well-communicated vision for value delivery see significantly higher success rates, which is exactly what strong selection and prioritization establish. This demonstrates how essential the PPM function is.
PPM implementation can be time-consuming, which is why establishing a project management office (PMO) that works on selection and prioritization can be beneficial.
Benefits of project selection and prioritization
Project selection and prioritization come down to a structured approach that balances capacity against strategy. When these are balanced right, companies gain clear advantages.
Better ROI: The fundamental outcome of any project selection process is to increase the ROI. Several selection criteria and prioritization methods, discussed later in the article, help weigh projects against each other based on their returns.
Increased efficiencies: Investing effort upfront to evaluate the project pool helps companies identify and eliminate inefficiencies before they compound during execution.
Strategic alignment: A project that does not cater to organizational goals, even if executed flawlessly, is a waste of time. The right selection helps companies stay on track with their goals.
Consistency and transparency: A standard selection approach helps the PMO benchmark projects against well-defined criteria rather than use ad-hoc processes that lead to inconsistent approvals. The upside of this consistent approach is transparent downstream communication, as project managers get clarity on why a certain project was approved or rejected.
Shorter time-to-market: As companies become larger, they struggle to maintain an aggressive time-to-market, with a sea of projects competing for attention. Prioritization of projects gives companies the first-mover advantage, enabling them to reach customers before competition.
Successful project delivery: Structured selection processes reduce project failures by giving teams a defensible basis for every go/no-go decision.
Project selection criteria for portfolio management
Ideally, deciding whether to go ahead with a project or not should be straightforward. But in reality, it's not. The difficulty often lies in leaving projects off the table, and it takes strong leaders with a clear vision to do that.
For example, if there are two projects – one that extends capacity or flexibility of a plant, and another that improves efficiency and expected lifespan of that facility – which one do you select?
The answer is not simple. It depends on which promises better ROI, the long-term goals for the organization and available capital. If there is an aim to expand the plant, the former is a sensible option. However, if the goal is to cut costs and increase longevity, decision-makers may prefer the latter option.
A few examples of project selection criteria are:
What is the payback or break-even point?
What is the impact to the organization's growth (e.g., customer volumes)?
Does the project contribute to innovation?
How much risk is involved?
Are there sufficient resources in terms of time, budget, infrastructure and people with relevant expertise?
What is the cost/benefit ratio?
Defining selection criteria is an important function of project portfolio management that's done in collaboration with various stakeholders such as customers, leadership team and project managers. Feedback from past projects also helps teams select the right criteria.
Project prioritization methods
Project prioritization is easier to manage with a small list of say, five projects. However, as this number grows significantly, the complexity can be difficult to handle, requiring more concrete methods.
Here are three useful methods for project prioritization:
1. Ranking method
The ranking method is a simple approach that arranges the projects on a scale of, say, one to ten, based on their importance. Start by asking the right questions before assigning a rank.
Some ranking method example questions are:
What is the project's rate of return?
What are the quantitative and qualitative benefits to the stakeholders?
How do efficiencies improve if we go ahead with the project?
Do we have the capacity and capability to execute the project? If not, how long would it take to onboard new resources?
The advantage of this method is its quick approach that enables identification of top priorities. It works effectively when there are limited criteria to evaluate and it's easy to assess the factors involved.
However, since it considers only one or two selection criteria, it is often too simplistic for complex project evaluations. In such cases, the scoring model may be a better fit.
2. Scoring model
The scoring model works when there are many selection criteria to consider and projects differ significantly. Rather than selecting one or two criteria as in the ranking method, the scoring model considers one or two groups of factors such as strategic alignment, benefits, ROI and risk.
In addition to assigning a rating to each criterion, every group receives a weight. For example, benefits may have a factor of 1.5, whereas risk may have 0.75. The weighted average score is then computed to arrive at the final project score.
The challenge with the scoring model is that its attempt to accommodate a long catalog of criteria not only creates more work for the PMO team but can also blur scoring. Along with that, the chance of biases and guesswork in the rating and weight criteria assignments makes it debatable whether the final score aptly reflects the project's priority. One way to design the model is to test against existing projects and see how accurate the score is.
Usually, the PMO tends to take a middle ground by applying the scoring model on a shorter list of weighted criteria.
3. Analytic Hierarchy Process (AHP) technique
AHP combines subjective elements with mathematical models to provide a more holistic technique than the ranking or scoring methods. Used commonly in many decision-making scenarios, it lends particularly well to complex project evaluations.
Similar to the scoring model, AHP works with a long list of selection criteria. However, it does a pairwise comparison, pitting every two criteria against each other, which reduces the possibility of errors and biases. After this direct pairwise comparison, the process normalizes values and computes the weighted score. (For more details on this approach, review this detailed example from PMI).
The analytic hierarchy process' strong reliance on quantitative techniques is its strength, as it translates an abstract problem into numbers and makes the reason behind a decision transparent. As the number of criteria increase, the math can grow complex. But this isn't something that the right PPM tool can't solve.
AHP is a more mature and recommended approach for complex decisions than the other two methods – it aims to understand the relative importance between two criteria rather than rank everything in absolute terms.
There is the possibility of guesswork in this technique, though. Teams can improve the model by incorporating multiple expert opinions and running it against existing projects.
Continuous monitoring in project prioritization and selection
Organizations often treat project prioritization as an initial step, a decision point before actual project execution. However, many variables may impact the selection criteria as the project progresses. Project prioritization should instead be an ongoing process where the PMO reviews and updates project scores during project development and at designated stage gates. As project definition increases, the scoring becomes more accurate and definite.
Even after a project has begun, a new industry regulation may affect resources, timelines and processes. The PMO needs to continuously monitor all dynamic factors and re-prioritize as needed.
The goal is to balance schedule stability with strategic alignment – achievable when the PMO has PPM tools and processes in place to manage the portfolio.
Take the next step
Effective project selection starts with the right tools and a clear framework. Whether your organization is evaluating five projects or five hundred, a structured approach to prioritization keeps resources focused on what matters most. Contact us to see how leading PPM solution, Octave Sequence Enterprise (formerly EcoSys), can help you manage your project portfolio with confidence.