Concept: Forced Ranking |
Forced ranking is a process by which you evaluate each component in your portfolio against its peers.
Relationships
Related Elements | Balance and Authorize Portfolio Define and Prioritize Portfolio Prioritize Components
Main Description
Forced ranking is a process by which you rank each component in your portfolio in descending numerical order in comparison to its peers. It differs from prioritization in that each component is assigned an individual rank. Although multiple components could be prioritized as high or medium, only one can be first, only one second, and so on. Forced ranking can help you further differentiate between your components and make difficult funding decisions with greater objectivity. If your initial prioritization criteria and scoring are well-defined, the ranking may naturally emerge from that exercise. However, it is possible that some components have equivalent scores, in which case you must decide which is ranked higher. Similar to simple prioritization, you base your ranking on a standard set of weighted criteria that might include strategic alignment, expected returns, risk, investment cost, and so on. Keep the evaluation as objective as possible. If no clear differentiation appears, consider using pair-wise comparisons (comparing projects head-to-head, two at a time) to determine relative ranking. Use the rankings to determine where you should place your investments and to what degree. Apply the rankings to a bell curve. Those components that rank at the bottom of the curve — usually the bottom 10% — are not candidates for funding at this time. Conversely, those components at the top of the curve — typically the top 20% — are candidates for greater investment. Where components are very closely matched, the ranking can help you decide which is truly more critical to fund. There are several considerations and potential pitfalls in the use of forced ranking: You need a sufficient number of components for effective ranking. (In ranking personnel, [GRO05] recommends 100 employees). As with prioritization, categorize components into pipelines or portfolios so that you are ranking similar components. Ensure that the criteria are clear and can be evaluated objectively. If the results of ranking appear out of line with expectations, be open to questioning and reconsidering the prioritization and scoring. In some cases, the mismatch may be due to portfolio members' preconceived or subjective priorities, but in others there may be a valid concern to be examined. Over time, forced ranking may yield diminishing results, because you will have already eliminated the poor performers. Product teams may change their behavior to achieve a better standing in the ranking. Although this could be beneficial in some cases, in others, such as reducing innovation to better control risk, it might be undesirable.
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