The second category of prioritization problems is risk tolerance mismatches. This category focuses on how organizations and teams balance the exposure of having people and resources in the wrong place or accepting work that fails to meet expectations. The process of work entry and prioritization matches the value and the risk of a piece of work to the needs of an organization. Every organization has a risk profile. Some organizations chase projects with very uncertain outcomes for high rewards. SpaceX and Blue Origin are examples. In the same industry, United Launch Alliance is far more risk-averse. The risk profile of the organization will impact the projects each firm takes. Accepting work that is outside of the risk tolerance yields stress and increases the likelihood of work that either does not meet the expected return or outright failure. Leading these types of projects can also be career-limiting. Three leading causes of mismatches are:
- Involving the wrong people in prioritization. Involve all relevant stakeholders in prioritization. Limiting involvement can lead to overweighting of bias. On the other end of the spectrum, too many is also a problem. Getting too many, less relevant stakeholders involved can change the basis of the group generating the wrong risk profile in the room. For example, if work for core lending systems for a Wall Street bank is being prioritized it would make sense to have some stakeholders interested in cutting edge technologies, but not a preponderance. The same would not be true for a fintech startup.
- Not explicitly addressing risk. Ignoring risk and uncertainty is … silly. Even if risk is not addressed openly each person will implicitly apply their risk bias which itself is an issue. One common cause for not explicitly exploring risk when prioritizing work is the lack of psychological safety. I have seen several scenarios where a minor stakeholder will bring up the risk of a piece of work only to be bullied and cajoled by a more powerful stakeholder that is championing the work (sometimes known as office politics). Pretending that risk doesn’t exist leads to the wrong work being selected or risks that are not mitigated.
- Not killing work when risk and uncertainty increase beyond what is acceptable. Once started most packages or work gain a life of their own. While countless books and articles stress the need to kill projects if they become too risky or uncertain it rarely happens. When canceled, it is usually because they balloon in cost or are well behind schedule (rare in any case).
Work entry at any level of the organization needs to explicitly recognize risk in the prioritization process and then periodically reassess whether the level of risk is acceptable (for example a quarterly risk review). If not, mitigate the risk or kill it.
