Project Classification Schemes

Project Classification Schemes
By Miley W. Merkhofer

Since it is useful to be able to monitor and control the mix of various types of projects within the project portfolio, a project classification scheme should be established. Projects can be classified in many different ways. Examples include: size; type/purpose (e.g., maintenance, growth, productivity, innovation); geographic location; skills or technologies required; sponsor, client or market served; asset class addressed (e.g., infrastructure, IT); and stage of the project life cycle (e.g., R&D, commercialization).

Multiple schemes can be used so that each project is classified in several different ways. No one approach is best for every organization. The key is to choose classification schemes that will yield information most useful for decision making. Knowing the various categories to which a project belongs helps to characterize that project and enables the construction of charts indicating how spending is distributed (see the figure below, for an example).

Sample chart for investment mix based on project classification.

Miley W. (Lee) Merkhofer, Ph.D., is an author and practitioner in the field of decision analysis who specializes in assisting organizations in implementing project portfolio management. He has served on advisory panels for several government agencies and has received grants and research awards for work in the area. Lee is an editor of the journal Decision Analysis.

Prior to becoming an independent consultant, Lee was a Partner of PriceWaterhouseCoopers, where he founded that organization’s capital allocation and project prioritization business practice. Lee is a founding partner of Folio Technologies LLC, a provider of web-based, project portfolio management software.

Lee received his Ph.D. in engineering economic systems from Stanford University. He is the author of the book Decision Science and Social Risk Management and co-author of the book Risk Assessment Methods..

Additional papers on project portfolio management can be found on Lee’s website, www.prioritysystem.com. E-mail: lmerkhofer@prioritysystem.com.