Answer:

In the overall roadmap for project selection, the first step is to identify a list of issues for improvement that are important to the organization and/or its customers (internal or external). This list can be culled from a variety of sources—strategic goals, end-to-end value streams, cost savings or revenue enhancement objectives, end-user requirements—the list goes on.

Prioritizing these issues is the second step. Using an “Impact vs. Effort Matrix” (see Fig. 1.1 below) is a proven method for converting your list of business problems into a prioritized list of actionable projects.

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Creating the Impact vs. Effort Matrix

1. First, identify the factors that contribute to the project’s “Impact” (e.g., customer satisfaction, business strategy, environmental impact, revenue growth, cost reduction, working capital reduction and community impact). List these across the top of the matrix.

2. Assign weights to each factor so that the total of all Impact factors is 1.0. List these just below the Impact factors on the matrix.

3. Identify the factors that contribute to the project’s “Effort” (e.g., project duration, risk, resource availability, regulatory hurdles, environmental consequences, data availability, and capital availability). List these across the top of the matrix, next to the Impact factors. Be sure to label each section “Impact” or “Effort.”

4. Assign weights to each factor so that the total of all Effort factors is 1.0. List these just below the Effort factors on the matrix.

5. Specify a name or description for each issue. List these down the side of the matrix.

Evaluating the Issues Using the Impact vs. Effort Matrix

1. For each project, assign a “correlation” number for each Impact and Effort factor

(0 = no correlation, 1 = very small correlation, 3 = small correlation, 5 = medium correlation,
9 = high correlation). List the numbers in the corresponding cell below each factor.

2. Calculate the Total Impact value for each project by multiplying the correlation number against the weight factor, and then adding these together to get the Total Impact for the project. For example, the Total Impact for “Project 1” below (see Fig. 1.2) is calculated as follows:

1 x .20 = .20

3 x .20 = .60

1 x .15 = .15

0 x .10 = 0

9 x .25 = 2.25

1 x .10 = .10

.20 + .60 + .15 + 0 + 2.25 + .10 = 3.30

Fig. 1.2 – Impact vs. Effort Matrix with sample correlation numbers and totals

3. Next, calculate the Total Effort value for each project by multiplying the correlation number against the weight factor, and then adding these together to get the Total Effort for the project.

4. After calculating the Total Impact and Total Effort for each project, plot the projects on an “Impact vs. Effort Grid” (see Fig. 1.3 below). Projects in quadrant one (Q1) are your first priority, as they exhibit high impact with low effort. Projects in quadrants two and three (Q2 and Q3) should be your second priority. Projects in quadrant four (Q4) are the lowest priority, as they represent the lowest impact but the highest effort.

Fig. 1.3 – Impact vs. Effort Grid

As an example, the projects from Fig. 1.2 above would be plotted as follows:

In this case, we would begin with project six (P6), followed by project four (P4), because these projects will have the most impact with the least amount of effort required. We might defer projects seven and eight until later because of the amount of effort involved, or we might decide not to do these projects at all. We could do the remainder of the projects (from quadrant three) in order of impact (beginning with P10 or P9). Or, we may decide to prioritize these projects further, based on additional criteria.

Either way, the Impact vs. Effort Matrix/Grid provides an objective, repeatable method for determining which projects to do first, next or not at all.