Is it too early to start capital planning for 2015? Every fall, lines of business across corporate banks decide and document which technology projects receive funding for the next year. Many of these projects are already outlined in your three or five year strategic plan. This part of the planning is simply where you codify the details of each, projecting the cost estimates and hopefully the benefits.
If your organization is anything like the banks I worked for, this can be a stressful exercise that merges customer needs, revenue generation plans, cost cutting automation, new product development, compliance, and technical development for everything you can imagine (and some you may not want to, like disaster recovery.) Inevitably, there is a conversation on the total amount of investment your group should apply for, what goes “above-the-line”, and what lands “below-the-line” on the funding approval list.
When trying to plan what is best for your company’s growth, revenue, and customer experience, politics and chicanery can ensue with projects that are labeled as “strategic”, even when they are not. These same projects also provide interesting revenue/cost estimates that no lucid business person would agree to unless it was a “mission critical” project that cannot make the business case work legitimately. With all this in mind, I suggest a planning technique that will help you decide which projects to move forward with in your capital investment strategy for 2015.
Investment Selection Process
One solution to a good investment selection process is to score each project using a few metrics and a modified Six Sigma technique:
- Start with the scoring labels across the top of your Excel sheet and your projects down the left in rows.
- Include scoring areas for key decision criteria like revenue generation, cost savings, client experience, compliance, employee improvement, and strategy alignment. You can place more columns in your spreadsheet as needed; however, less is always better.
- Once you have selected the key and relevant categories by which to score, place the details of the projects in the rows with the requisite amount of detail for a team or group to score each project, such as description and key details of the initiative.
- For revenue/cost saving scores, enter in the actual 3 or 5 year revenue projections or use a representation score like 1 = $1 million in revenue, etc.
- For projects with subjective scores, use the 0, 1,3,5,9 method. Score projects based on how much it impacts that goal or category, with 9 being the most important action for achieving that goal/strategy.
You could even add scores for fit with core competencies or if significant outside expertise is needed to provide some appreciation for, or assessment of, the current organization’s ability to execute the project. I have seen projects with great strategic promise fail miserably because of limited ability to execute internally with current resources. You may even want to add a sub-project in the list to show this need for critical initiatives.
When colleagues use this process, they discover that only the projects with questionable value are typically below the line and can be cut. Critical projects usually rise to the top of the list because the gaps in the numbers. Some projects that had revenue or cost savings that did not fit the bank-wide strategy maybe de-prioritized given the low score in that area.
By scoring projects and prioritizing against strategic goals, the capital investment planning process becomes more straightforward and transparent. With that in mind, I say good luck in getting to that final list you submit for executive approval. Oh…by the way, don’t forget to consider which 15% of projects to kill once finance figures out each team has to take a haircut at the last minute, come November.