by Derek Lidow
Republished from Harvard Business Review, February 13, 2017
Smart leaders understand that their job requires them to identify trade-offs, choosing what not to do as much as what to do. Grading the importance of various initiatives in an environment of finite resources is a primary test of leadership.
To meet this challenge, leaders often turn to rank ordering their priorities; it is natural and easy to make a list. When I work with leaders on the crucial task of priority setting, however, I caution against rank ordering. It can be tremendously demotivating to managers to be assigned a rank, and it all but guarantees dissension and turf wars among team members.
A better way to establish priorities is to put rank ordering aside and return to first principles. To wit: There are three interdependent variables that are essential for executing any initiative — objectives, resources, and timing. You can’t produce the desired effect of a project without precise objectives, ample resources, and a reasonable time frame. If you push or pull on one leg of this triangle, you must adjust the others.
All three variables are important, but resources reign supreme. Resources are what enable an objective to be accomplished within a set time; without dedicated means, an initiative is pure fantasy. Once a leader decides what resources will be allocated to achieve which objectives over what periods of time, she has no more need for ranking. She will be forced to acknowledging three kinds of priorities: critical, important, and desirable.
A critical priority is an objective that must be successfully accomplished within a specified amount of time, no matter what. For example, it might be critical that a company wins a new order (which will be awarded on a given date) from a major customer, or gets a factory fully operational by a certain day. If the objective of winning the order is set and the timing is nonnegotiable, then the only element you can manipulate is resources (money, people, equipment). If the leader is sincere about the priority, then she must make available to the project manager all the resources requested. Though leaders may not realize it, declaring a project “critical” implies that it must be accompanied by a de facto blank check, enabling the manager to draw on all other available resources within the organization. And all critical priorities are, by definition, equal within the category.
An important priority, on the other hand, is an effort that can have a significant positive impact on performance. For these initiatives, resources are fixed and the variable is either time or the objective. For example, an organization may have an aspirational objective but fix the resources that it feels it can afford to invest over a specified time. A leader might say, “Let’s assign Miguel and Aisha to this project full time for the next quarter.” The organization, if it is operating rationally, should be willing to accept however much improvement it can get from that fixed investment. Alternatively, an organization may declare that it will invest a specified amount of resources for as long as it takes to achieve an objective: “We’re going to assign Miguel and Aisha to install the new software, however long that will take.” An important priority implies that the organization be understanding when the objective is variable and patient when time may vary.
A desirable priority is an effort in which resources and time are both variables. The organization desires an outcome but cannot absolutely commit specific resources over any specifiable time period. “Whenever Miguel and Aisha are not required on our critical product launch they will work on installing the software upgrade.” Progress will be made only when and if resources become available.
Because resources are fixed for all critical and important priorities, the potential “blank check” resources that may be required to hit a critical project must all come from desirable projects. You cannot in good conscience set a critical priority unless you also designate desirable projects from which resources will be immediately transferred to the designated critical project when required.
Once you have identified critical, important, and desirable projects, you can begin to identify appropriate objectives, resources, and time for each project. I encourage leaders to follow a four-step process:
List in one column the resources (people, money, highly constrained elements like a sample bus for demonstrating products) available for all proposed projects. For example, you might have 10 salespeople on the East Coast, seven on the West Coast, four in the Midwest, and three in the South; a travel budget of $10,000; and one sample bus.
List across the top row the projects, improvements, or initiatives you want to accomplish with those resources with any existing time constraints. For example, you might write, “Renew clients in all four regions; win a contract with IBM by the time your new plant opens on March 1; get Salesforce.com in all regions but on a staggered schedule.”
Indicate in the appropriate cell how the available resources would be allocated in a scenario where everything proceeds as expected. For example, three salespeople in each region might be devoted to renewing customer contracts, while seven salespeople, the sample bus, and half of the travel budget might go toward winning the IBM contract.
Declare which one or two projects are critical, designating which additional resources from the matrix can be called upon by the critical projects when and if needed. (If you declare more than one project critical, you must keep in mind that they cannot potentially depend upon the same pool of on-call resources.) For example, if the IBM contract is critical, you would ask the project head — in this case, your lead IBM salesperson — what additional resources might conceivably be needed if the going gets tough and where those resources might come. That could include some of the IT resources from the Salesforce implementation on the East Coast, which means that the Salesforce effort is now categorized as desirable and that you cannot expect your people to fulfill the objective by a certain time. Projects that are not critical but aren’t on call to potentially provide resources to a critical project now fall into the important category, where time or the objective is flexible.
As the projects and resources are listed and the group figures out how best to allocate resources and time constraints among the potential initiatives, this matrix becomes a strategy document. As projects are completed, leaders can revisit the process to reallocate resources that have been freed up. They can also reallocate resources if a crisis occurs — which by definition creates a critical priority. The same is true with a change of strategy.
The transparent allocation of resources and the specifying of responses to changed conditions align the team and head off dissension. Managers no longer feel that giving up resources reduces their status. They are playing an essential role in executing a critical priority. And they are content to be governed by the fair, inexorable logic of realistic priority setting instead of rank ordering that doesn’t add up.