Applying The 80/20 Principle To Portfolio Management

By |October 9th, 2014|Categories: time|Tags: , , , , , , , |Comments Off on Applying The 80/20 Principle To Portfolio Management

The 80/20 principle posits that 80% of organizational value comes from 20% of your projects. The 80/20 allocation seems to hold true for a lot of things: I know I wear 20% of my clothing 80% of the time, and I use my pots and pans the same way. Nevertheless, the 80/20 principle is a particularly handy concept when thinking about managing the projects in your portfolio.

First, using the 80/20 principle, think about which projects are critical, must-haves, and core to your mission (about 20% of the whole array), and set aside those that are discretionary or not vital. During this exercise, projects that should be eliminated altogether should be obvious. (Be ruthless.) Of the mission-critical projects, decide which should proceed and which should be deferred based on urgency and capacity. Considerations during your deliberations should include:

Second, having decided which projects should proceed, it is time to collaborate with the entire range of managers, from line managers to senior managers, to prioritize them. Each will contribute something to the debate, and it is better to debate now than waste valuable resources (time, money, and people) later. Line managers will have first-hand knowledge of processes and capacity; middle management will have a better view of the interplay and inter-relationships between departments and activities, and top management will possess the long view that encompasses the overall organization direction and strategy. And obviously, inviting greater participation overall means greater cooperation and commitment.

Third, once your projects have been prioritized, it is time to figure out who will be doing what. Streamlining your projects down to the vital few has the added benefit of not stretching the capacity you have, but concentrating it where it is needed most. Here I
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