Project Prioritization in Portfolio Management using Quality Function Deployment

Abstract

Quality Function Deployment (QFD) is a system’s design method which focuses on the needs of the client. QFD assists the development team during the design stage of a system, a process, a product or a service, by translating the requirements set by the customer into engineering specifications. QFD is a recognized power tool and its use has been expanded into other disciplines/areas as well. For instance, there are many cases where QFD is applied in construction project management for identifying customer requirements during the design phase. Moreover, QFD is used to support strategic as well as operational decisions within a company.

Another interesting application of QFD is to prioritize the projects in the portfolio management of a company, which is a challenging process for a company, as people that are related to some projects and will benefit from their execution, tend to consider their projects more important and advantageous than the others. In order to avoid this kind of internal conflicts within a company, the QFD technique can be adapted and applied so that the projects will be prioritized regarding their contributed benefit to internal and external customers.

The five steps needed for the application of the adapted QFD technique are:

1. Formation of group of internal stakeholders.
2. Gathering of the projects, determination of benefits the projects provide to internal and external customers and use of Analytic Hierarchy Process (AHP) to prioritize benefits.
3. Determination of complexity criteria and characteristics and use of AHP to quantify the relative degree of complexity.
4. Development of adapted ‘House of Quality’ matrix and project prioritization.
5. Development of Benefits vs. Complexity matrix to assign people to projects.

Background

Quality Function Deployment (QFD) is a structured process-oriented system’s design method which focuses on the needs of the client. QFD is the most complete and convincing technique that assists the development team during the design stage of a system, a process, a product or a service by translating the requirements set by the customer into engineering language and subsequently into design specifications . Although it is mainly used during the design stage, QFD can assist the whole system development process, as can be used in defining marketing strategies, planning, product design and engineering, prototype evaluation, development of production processes, production and sales .

The 'House of Quality' Matrix

QFD has its origins in Japan, where it was developed in mid-1960s under the umbrella of Total Quality Management (TQM) to support product quality design. It was not before mid-1980s when the technique was appreciated, became popular and started being applied extensively by companies in the Western world (1). The transformation of customer’s requirements into design and quality assurance targets that were used later during the production stage, assured that the final product would meet the expectations of both the customer and the final user .

As QFD focuses on satisfying customer’s requirements and ensures a good and convenient communication between the customer and the design team, there is a possibility of trade-offs between what the customer needs and what engineering characteristics are affordable for the company to develop (6). Moreover, by targeting on meeting customer’s needs, the re-design or product/process modification time is decreased, which subsequently leads to cost reduction. As is claimed, the right implementation of QFD in a company can reduce engineering changes by 30-50%, design cycles by 30-50%, start-up costs by 20-60% and warranty by 20-50% .

However, QFD is not a method that can be applied easily. The application of QFD is based on the development of a series of interrelated matrices, which is a complex and time-consuming process. The most widely used matrix is the ‘House of Quality’, a matrix that enables the prioritization of the engineering characteristics by prioritizing customer’s needs. QFD correlation matrices can be also used for ranking competitors’ products by means of technical and customer benchmarking (6). Information about the customer requirements that need to be satisfied can be gathered by the marketing department through surveys, interviews, trade shows and journals, customer complaints, etc..

It is essential that QFD is implemented in the initial stages of product or service development to assure that all the design changes are done before production has started and before prototyping . The further analysis of the QFD results can be the basis of other tools and methodologies used during the design phase, such as Failure Mode and Effects Analysis (FMEA) or Cost-Worth Analysis (CWA) (7).

Other Applications

Although when developed, QFD was a method used in product design, nowadays there are many extensions and adaptations of QFD which make it an important management technique applicable in various fields and functions within a company for optimization of internal processes. For instance, apart from defining customer needs, QFD can be used in a company for decision-making, developing priorities, formulating annual policies manufacturing strategies, etc.

Since QFD is a popular and powerful method, it has been applied in all different types of industries, from automobiles and electronics manufacturers to government, healthcare, research and even education.

In some cases it is also combined with other approaches or methods. Combinations of QFD with Analytic Hierarchy Process (AHP) were used for robot selection, rapid tooling process selection, improvement of education quality in academic institutions or identification of suitable teaching techniques.

Another field where QFD has started to be applied successfully and more extensively is the construction industry. Implementing QFD during a construction project has proven to accelerate the design process, as the identification of the client’s requirements saves time of possible future re-designs. This results in an easier decision-making process in the next phases of the project (8).

Application in Portfolio Management

A useful implementation of QFD in Portfolio Management is for the prioritization of a company’s existing projects and later on the assignment of each project to the most relevant persons. Without being structured and standardized across the different departments of a company, the prioritization of the projects can be a challenging and inefficient process. The challenges that occur during the prioritization are usually a result of the different individual priorities of the company’s internal stakeholders related to each project.

It has been noticed that managers of different departments within a company tend to assign key employees to projects without considering the work overload of the employees. This has as a consequence the prioritization of the projects being a task of the employees assigned to the projects, who are more likely to set as a priority a project that is more beneficial for them than the whole company. In other words, the employees prefer working on a project that will enhance their personal skills rather than working on a project which creates value for their department and subsequently for the company.

This fact shows how essential a structured prioritization process is for a company as it provides the managers with the ability to ensure that the projects that are defined as of high priority are these that actually add value to the company. At the same time it helps employees, who are able to be focused on the execution of the most beneficial tasks without losing time leaping from one project to another (2).

Implementation

The implementation of QFD in Portfolio Management for the prioritization of the projects can be described in five steps.

Step 1

To begin with, it is necessary the formation of a group of the internal customers of the company. This group includes people that are involved in the various projects and initiatives that need to be executed. For instance, this group is composed of managers from the departments of the company, project team leaders, technical staff and representatives of any possible group within the company that have any influence on the projects.

This group is formed in order to be in charge of the portfolio. That includes the prioritization of the projects, the reporting of the status for each project, as well as, activities as managing the available resources and deciding which projects should be canceled or postponed, when other projects more beneficial and with higher significance are in contention with strategic resources (2).

Step 2

Once the internal stakeholders group is formed, it has to gather all the projects to be executed and afterwards define all the benefits that these projects will bring both to internal and external customers of the e company when they will be completed.

Following the determination of these benefits, the AHP method is applied in order to prioritize them. The benefits that the execution of the company’s projects will bring to the company do not have the same value and do not affect the company in the same way. For that reason, it is necessary to rank them and be aware of the benefits that are considered to be these with the higher level of importance and gravity for the company, according to the internal stakeholders group (2).

To rank the benefits using AHP, a prioritization matrix should be developed. The benefits are listed in the matrix and they are compared two at a time with the use of a verbal scale that is presented below (9):

The use of AHP makes easier the comparison of a pair of benefits, as first the group uses a natural language to compare the pair and afterwards this language is translated into an ordinal scale. Finally, these ratings are converted into numerical ratio scale priorities which indicate which benefit is most important and by how much (2).

Step 3

In this step the complexity criteria need to be determined. These criteria usually have an impact on the completion of a project and determine the effectiveness of the person in charge. After establishing these criteria, the AHP method is used again in order to prioritize them and detect those that constitute the main challenges for the successful execution of the projects. The ranking of the complexity criteria is developed again through a prioritization matrix in the same way as Step 2 (2). The verbal scale that is used in this step is presented below (9):

The determination and prioritization of the complexity criteria will help later to choose the right person that will be in charge during the life cycle of a project.

Step 4

The adapted 'House of Quality' Matrix

To create the matrix that prioritizes the projects within the project portfolio, with respect to the benefits that add value to the company and with respect to the complexity criteria that challenge the successful execution of the projects, an adapted ‘House of Quality’ is developed. (IMAGE)

In the rows of the matrix a list of company’s projects is entered while in the columns a list of the benefits and the complexity criteria determined in steps 2 and 3 respectively. Next, the relationship between each project and each benefit and criterion is rated using a 9-point scale. Multiplying the rating of each benefit with each benefit weight, calculated in Step 2, and adding all the results for each project, occurs a number which represents the absolute weight for each project. Likewise if the products of each criterion ratings and each criterion weight, calculated in Steps 3, are aggregated for each project, the number that occurs represents the absolute weight for each project respecting complexity. These are the numbers that indicate the priority of each project in the project portfolio, regarding the benefits and the complexity respectively. According to these calculated weights a project is classified as of Low, Medium or High priority and complexity (2).

Step 5

Benefits vs. Complexity Matrix

In the final step a ‘Benefits vs. Complexity’ matrix is developed in order to allocate the projects to the most relevant employees within the company, taking into consideration the level of significance and complexity of each project. To create this matrix, the benefit and complexity weights, calculated in steps 2 and 3, are necessary. The Project Benefits and the Complexity Level are set on the horizontal and vertical axes of the matrix and the projects are located in the right place within the plane that is formed.

The matrix that has been developed is divided into 5 quadrants, and each of those indicates the right project owners. The following list specifies the five categories of project owners and their basic characteristics of each one:

1. Project Management

The projects that are assigned to the project management team are characterized of medium-high benefits and medium-high complexity. That means that are essential projects which need to be completed on-time and on-budget, thus the implementation of project management methodologies is of high significance.

2. Component Owners

The projects that belong to the second quadrant are characterized of low-medium benefits but medium-high complexity. Usually they are short-term projects that do not require project management knowledge, thus they are assigned to individuals with strong technical skills.

3. Team leaders/Group Managers

These projects are of medium-high benefits for the company but of medium-low complexity and usually are improvement efforts to support production processes. Therefore, these projects are allocated to team leaders or group managers, who need to function as project managers for their completion.

4. Infrastructure Maintenance

Projects of medium-low benefits and medium-low complexity are usually small infrastructure projects that are assigned to technical project coordinators. Due to the low significance and complexity levels of these projects, in many cases many small projects are assigned to one coordinator.

5. Selectively assigned

When the projects belong to this quadrant which is the boundary between the other four quadrants, the benefit and complexity levels of each project as well as the resource constraints, need to be examined carefully before assigned.

Future Steps

In order to retain a prioritized portfolio, it is necessary for the internal stakeholders group to schedule regular meetings, for instance every one or two weeks, and rank the projects that have arisen respecting the benefits that will bring to the company if executed and its complexity level. This will lead to the identification of the projects with the highest priority and complexity, which the project management team will have to take care of, and the allocation of the rest of the projects to the appropriate staff.

Another important aspect regarding the rating of each project is the periodical reassessment and update of the benefits and the complexity criteria by the internal stakeholders group. Assuring that the benefits and the complexity criteria are aligned with the current goals and strategy of the company ensures that each moment the company is pursuing the execution of the right projects (2).

Implementation Difficulties & Drawbacks

As mentioned in the beginning of the article, QFD is not a simple method to apply. This is not only because of the structure of the method but because of the details that its implementation requires as well. In the case of the implementation of QFD in the project portfolio, difficulties may occur in the different steps described above.

The first difficulty may arise in the forming of the group of internal stakeholders of the company. If there is no balance between the number of the group members coming from each department of the company there is a high possibility that it will cause problems during the rating phase. This may happen because the representatives of a department will rate as more beneficial projects that its execution will affect positively their department. Moreover if there is lack of technical expertise between the group members, the complexity criteria and subsequently their rating might not be accurate.

Another important implementation drawback is the time that is required from the company to apply the QFD method. The identification of the benefits and the complexity criteria is a process that need to be thoroughly and always taking into consideration which are the overall goals of the company and if the identified data are aligned with the current strategy of the company. This implies that QFD is a time-consuming and consequently costly method.