Leadership Strategic Planning

We wrote in a recent blog (Weighing Risks) “we recommend that leadership develop and adopt a policy on the criteria and standards it will use in considering new investment decisions”. We then briefly introduced a tool we use to do just that within PGS, the Priority Matrix.

There was interest from our readers on learning more of the details about the priority matrix. So much so, we decided to write a couple posts focused solely on that tool. The first post briefly described a priority matrix and how to create one.  In this post, we focus on why, how, and when to use it.

Why use a priority matrix

The quick answer to “why” is the priority matrix takes into account the different tolerances for risk among those on the leadership team and blends them into a simple, clear tool that everyone can be comfortable with. The priority matrix can actually become the policy used to make investment decisions.

To add more depth to the quick “why”, however, here is the story behind how the priority matrix was originally developed at PGS. The board of one of our clients was pushing the CEO to bring them new opportunities for growing the corporation. Over an 18 month period, the CEO brought them 3-4 opportunities. He had done due diligence on each, presenting the risks, the potential, etc. However the Board rejected each of them.

During next year’s Vision Navigation strategic planning, the CEO basically said to the board “I will no longer research opportunities because you have rejected all those that I have brought you, each one for very different reasons. There is no pattern to the reasons for rejection, so I am left not really knowing what you want. I am chasing after what I don’t know, and my time would be much better spent doing more with the investments that we already have.”  The board needed to establish clear policy on what was important to them so that the CEO had guidance on what types of opportunities to identify and what due diligence to do for each to answer the board’s questions. We taught them how to create and use a priority matrix, and the tool was so well received and valued, that we rolled it into our Vision Navigation process as a whole.

prioritize your optionsThe key question a priority matrix answers is: What do you want your investments to do for you? The criteria, standards and weights are entirely based on the variables of what is important to the board or leadership. Common examples are level of risk, time to break even, and return on investment. Others that have been common with our clients include marketability, impact on the local community, shareholder hire or development, alignment to vision, etc. So the why? You need clarity on what is important to consider when choosing strategies.

How to use a priority matrix

The theory behind the priority matrix is that if you assess your opportunities on the basis of how they compare the criteria and standards you define, you will be able to select the best opportunities to move your organization forward. Therefore, that comparison between the opportunity and your criteria is essential for the tool to be successful.

For example, if your criteria is “return on investment”. Then for each opportunity, you will need to define the investment required to put the opportunity in place and maintain it, as well as the anticipated return over time. You need a sound, researched assessment that clearly defines the basis for your estimates of both cost and return. Once you have those numbers defined, you can easily score your opportunity against the criteria.

There are 2 approaches for completing this scoring that we use in Vision Navigation. The first, and our preferred approach is to have the management team complete the research and score the potential opportunities and then present and discuss scores with the board, who makes the ultimate decision on investments. The second is that management can take the opportunities to the board and have them score them.

When to use a priority matrix

The short answer is to use the priority matrix when you have several good opportunities to choose between, and you know that you cannot take them all on.  The priority matrix is invaluable in this situation because it takes bias and opinion out of the equation, and instead measures how the opportunity will perform against what matters to the board.

The longer answer is another story that demonstrates the value of using the tool to energize an organization.  A decade or so ago, we were working with a client whose management team were also the owners of the company. There was little involvement from staff and little enthusiasm for the process because management was looking to sell the organization. They weren’t interested in doing the hard work to research and score opportunities to grow the organization in the long term.  The decision was made to delegate the priority matrix research to employees who had an interest and a stake in the company’s future. Leadership gave them guidance on what to look for and clear definitions on the criteria and standards, then sent them off to do the work.  The younger employees were taught how to look at the strategic landscape and work up opportunities. The teams provided data and the then the management team finished the scoring. The unexpected result was that it totally energized the company. Everyone understood the opportunities, knew the criteria, had a stake in the plan.

End of the story

So what does this mean for you and your projects? There are terrific opportunities and not so terrific ones out there. Which ones you choose for your organization can have a tremendous impact on your future. Putting in place a prioritization tool like the priority matrix provides the solid base for making confident decisions.

If you need help or have questions, contact us for a free consultation.