Scoring Models & Calculating Payback Periods PDF

Choosing Projects  Prepared By Dr. Mario Woode  Scoring Models What is a prioritization scoring model How to use a scoring model Different types of prioritization scoring models How to calculate project priority Benefits they offer Steps to implement t...

Choosing Projects  Prepared By Dr. Mario Woode  Scoring Models What is a prioritization scoring model How to use a scoring model Different types of prioritization scoring models How to calculate project priority Benefits they offer Steps to implement these scoring models  What Is a Scoring Model in Project Management?  A scoring model helps you evaluate a project’s value in project management.  This also means that you cannot prioritize projects scoring models without portfolio management.  No matter what model you use, the aim is to maximize the value you deliver through programs, projects, or products.  How to Use a Project Scoring 1. Define your scoring criteria  Model The first step is to define your scoring criteria. Not long ago, financial benefits (like ROI) would rule these criteria, but things got a bit more sophisticated.  Most organizations use plenty of quantitative and qualitative criteria to determine the value they get from projects, and we also recommend that, instead of going with a single factor, you use a blend of both worlds.  Either way, your scoring model should have a value criteria and a risk criteria.  Value criteria should include: Strategic criteria: how a project measures up to your overall strategic goals. Financial criteria: ROI, earnings, net value, etc. Business criteria: customer satisfaction, NPS score, etc.  How to Use a Project Scoring Model Risk criteria should include at least the following: Complexity risk: experts working on the project, expertise available, project requirements. Resource risk: internal expertise availability, other resource availability Dependency risk: your project’s ties to other projects within your portfolio Naturally, you can expand on both main criteria. Each peculiar use case will demand different factors and scoring models. 2. Prioritize your criteria Once you have all your criteria identified, it’s time to compare and contrast them. This will help you determine the weighing of your criteria in your scoring model. Ask stakeholders and decision-makers to perform pairwise comparisons. This is done by plotting two criteria against each other:  How to Use a Project Scoring Model  3. Review your scoring model  After asking each stakeholder, it’s time to review and validate your scoring model. Pit all comparisons in separate tables. This should help you determine the weighting of each criteria defined earlier. In our example, complexity risk is likely to receive a high percentage in the risk main criteria.  4 Types of Prioritization Scoring Models Weighted Scoring  Weighted scoring is a widely used model that assigns relative weights to different criteria based on their importance. By multiplying the score of each criterion by its weight, this model calculates a weighted score for each option.  Depending on what percentage (or importance) you associate to each criteria, pairwise comparisons will yield a project score. This will help you easily prioritize based on score.  Types of Prioritization Scoring Models  2. Value vs. Complexity Model  Value vs. complexity models are often utilized to prioritize features or requirements. This model considers the value or benefit an option brings to the end user, juxtaposed with its complexity or effort required for implementation. By evaluating the trade-off between value and complexity, teams can make informed decisions that maximize the impact of their software.  When it comes to project management, this highly simplifies your scoring model. Your value and risk criteria are simplified into a 2×2 matrix:  Types of Prioritization Scoring Models 3. Kano Model Named after its creator, Dr. Noriaki Kano, and is commonly used to prioritize projects based on customer satisfaction. This model categorizes projects into 5 distinct categories: Must-have: Not having these will result in customer dissatisfaction. One-dimensional: These features are directly proportional to customer satisfaction. The more the merrier. Reverse: These annoy your customers. Having more of these projects (or products) will result in more dissatisfaction. Attractive: Not completing these projects don’t affect your customers. However, having them can be a game-changer. Indifferent: There’s hardly any emotion associated with these projects and their outcomes. WSJF (Weighted Shortest Job First) A slightly more scientific approach to prioritization is WSJF. This model requires you to determine the Cost of Delay (CoD) of your projects. If that’s done, the formula is quite simple: WSJF = Cost of Delay (CoD) / Job Duration The result of the calculation will help you rank your projects based on the weighted shortest job score. Its downside? CoD is a highly subjective score. On top of that, this formula will ignore some of your risk criteria and value criteria as well. Calculating Payback Period What is a payback period & why is it important? The time it takes for an investment to pay for itself. This is an important time-based measurement because it shows management how lucrative and risky an investment can be Formula Payback Period= Initial Investment Cumulative Cash Flow Eg= 100,000,000 4,500,000 per yr Equals 22.22 years  Resources Source  https://fibery.io/blog/product-management/prioritization-scoring-mode l/  Decision Matrix https://www.youtube.com/watch?v=j2HtqQjyt5s Calculating Payback period https://www.youtube.com/watch?v=ZmvbD0heOAA