36# - The Hierarchy of Purpose: A Framework for Prioritizing Your Projects

One of the most important challenges that organizations face today is how to prioritize their strategies, objectives, projects, and their day-to-day activities. 

Significant evidence exists that organizations with the strongest focus on prioritization outperform the competition. Their leaders are laser-focused, not afraid of making tough decisions, and highly disciplined in executing their strategies until goals are achieved.

Despite the strategic relevance of prioritization, the available methods for carrying it out are outdated and theoretical: They perform well in a test environment with a limited number of projects; they look good on paper; yet, when they are applied to a real work situation, with hundreds and thousands of programs and projects, they fail miserably.

To help me address this gap and my personal needs as head of portfolio management, I developed a prioritization concept - the Hierarchy of Purpose - that works in the field, which is useful for the senior leaders, but also for middle management, project leaders, and the people running the day-to-day activities. I describe this concept in an article featured in Harvard Business Review: "How to Prioritize Your Company's Projects"

Prioritizing is usually seen as an individual skill that some are good at, others not so much. We prioritize whenever we think about how we will spend our time today, this week, this month—or this year. However, the fact is, that prioritizing is also a key organizational capability. Indeed, how and why organizations prioritize their activities is vital to their success. Surprisingly, this is one of the least understood and most neglected areas of organizational life.

The word priority appears in the English language as early as the 14th century. The Merriam-Webster dictionary defines it as, ‘what matters most.’ In organizational terms, prioritization sets the agenda in terms of what really matters, which is reflected in how resources are allocated – especially the scarce resources: time and money.

Based on 20-plus years of executive experience with large corporations, I have found that one of the main reasons companies fail in this area is that they lack a clear sense of what is truly urgent and simply select the wrong priorities. The results can be calamitous, as evidenced by a classic corporate failure of recent times.

It wasn’t that Kodak didn’t foresee the rise of digital photography, but that it chose to prioritize the wrong things. In the 1990s, Kodak invested billions of dollars into developing technology for taking photographs using mobile phones and other digital devices. But in a classic case of Clay Christensen’s innovator’s dilemma, it held back from developing digital cameras for the mass market, because it feared that it would cannibalize its all-important film business. Meanwhile, the Japanese company Canon recognized the strategic priority presented by digital photography and rushed in.

If an executive team doesn’t clearly prioritize, middle management and employees will do so, based on what they think is best for the organization. At first, this might appear to be a good practice: empowering people to make decisions is something that has been heralded since the times of Peter Drucker. The key is to have a clearly prioritized set of strategic objectives to work from.

A Real-Life Example of the Implications of Lack of Prioritization

To illustrate this, let’s look at a real-life example. ‘Sam’ worked as a teller in a local bank, serving customers. He loved his job: his father had also spent his entire career in the same bank, but like many other banks, the company was struggling to survive due to low-interest rates, increased competition, and the burden of cumbersome regulation. The executive team worked for months to identify a new strategy that would help to turn the company around—eventually identifying two strategic priorities that they believed would secure the company’s future.

In a series of town hall meetings, the CEO informed staff—Sam included—that the new strategy was based on two priorities: a) improve customer satisfaction, increasing satisfaction by 20 percent; and b) increase efficiency by serving 20 percent more customers per day. The message was crystal clear: as long as Sam and his colleagues kept focused and met the two strategic priorities, the company’s future—and their jobs—were assured.

The following day, Sam was extra motivated, after hearing his CEO say that the company he cared so much about was, basically, in his hands. He kept in mind the two strategic objectives and started to serve customers as efficiently as possible, always with a smile. That worked fine until a customer started to talk about a personal loss and the terrible situation he was going through. He clearly wanted to talk with Sam, who was initially pleased with the idea as it would significantly increase customer satisfaction. However, after a few seconds, Sam froze.

But what about the second strategic objective, efficiency? If he spent a few extra minutes talking with this customer, his client-servicing rate would suffer. What should he do? He did not know for certain which objective was more important, but he had to make a decision. As did all the other bank tellers, every single day.

The executive team thought that it had clearly communicated the strategic objectives, but in fact, it had created an operational dilemma. The result: the bank did not improve performance and many employees who loved their jobs and worked hard to implement the new strategy, were fired. As this example indicates, all too often, there is a gap and lack of alignment between corporate strategic objectives and those of different business units and departments. 

The Hierarchy of Purpose 

To address the challenges of prioritization that I have confronted throughout my career, I developed a simple framework called the Hierarchy of Purpose. Following are its five principles.

• Purpose. What is the organization's purpose, and how is that purpose best pursued? What is the strategic vision supporting this purpose?
• Priorities. Given the stated purpose and vision, what matters most to the organization now and in the future? What are its priorities now and over the next two to five years?
• Projects. Based on the answers to the first two points, which projects are the most strategic and should be resourced to the hilt? Which projects align with the purpose, vision, and priorities, and which should be stopped or scrapped?
• People. Now that there is clarity around the strategic priorities and the projects that matter most, who are the best people to execute those projects?
• Performance. Traditionally, project performance indicators are tied to inputs (e.g., scope, cost, and time). They are much easier to track than outcomes (such as benefits, impact, and goals). However, despite the difficulty companies have in tracking, it’s the outcomes that really matter. What are the precise outcome-related targets that will measure real performance and value creation? Reduce your attention to inputs and focus on outcomes instead.

Think of your organization’s purpose and priorities. 

Have you experienced similar prioritization issues?

How did you solve them?

Thanks for reading and do not hesitate to reach out to share your views and suggestions.

Hasta la vista!

Antonio