Forced ranking is a process by which you rank each component in your portfolio in descending numerical order in comparison to its
peers. It differs from prioritization in that each component is assigned an individual rank. Although multiple
components could be prioritized as high or medium, only one can be first, only one second, and so on. Forced
ranking can help you further differentiate between your components and make difficult funding decisions with greater
objectivity.
If your initial prioritization criteria and scoring are well-defined, the ranking may naturally emerge from that
exercise. However, it is possible that some components have equivalent scores, in which case you must decide which is
ranked higher.
Similar to simple prioritization, you base your ranking on a standard set of weighted criteria that might include
strategic alignment, expected returns, risk, investment cost, and so on. Keep the evaluation as objective as
possible. If no clear differentiation appears, consider using pair-wise comparisons (comparing projects
head-to-head, two at a time) to determine relative ranking.
Use the rankings to determine where you should place your investments and to what degree. Apply the rankings to a
bell curve. Those components that rank at the bottom of the curve - usually
the bottom 10% -
are not candidates for funding at this time. Conversely, those components at the top of the curve -
typically the top 20% - are
candidates for greater investment. Where components are very closely matched, the ranking can help you decide
which is truly more critical to fund.
There are several considerations and potential pitfalls in the use of forced ranking:
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You need a sufficient number of components for effective ranking. (In ranking personnel, [GRO05]
recommends 100 employees).
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As with prioritization, categorize components into pipelines or portfolios so that you are ranking similar
components.
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Ensure that the criteria are clear and can be evaluated objectively.
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If the results of ranking appear out of line with expectations, be open to questioning and reconsidering the
prioritization and scoring. In some cases, the mismatch may be due to portfolio members' preconceived or
subjective priorities, but in others there may be a valid concern to be examined.
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Over time, forced ranking may yield diminishing results, because you will have already eliminated the poor
performers.
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Product teams may change their behavior to achieve a better standing in the ranking. Although this could be
beneficial in some cases, in others, such as reducing innovation to better control risk, it might be undesirable.
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