Every day organizational leaders need to make decisions about which solution to implement to improve a process, investing in a new product or service, selecting strategic goals, deciding what to eliminate to improve their financial situation, etc. Leaders need an efficient process to prioritize these important organizational decisions that utilizes decision criteria that are important to the organization’s future. The Risk-Value-Cost-Effort (RVCE) prioritization matrix considers four decision criteria to help categorize and prioritize competing priorities.
What are the decision criterias of the RVCE prioritization matrix?
These four decision criteria are summarized below:
1. Risk - potential of gaining or losing something of value.
2. Value – desirability or quality of something considered worthwhile
3. Cost - amount that must be paid or a parameter given up to get something in return
4. Effort - amount (quality and quantity) of resources needed to get something done
It is best used when an organization needs to prioritize a series of important issues and decide which ones it wants to focus on to achieve their strategic and operational goals. When using the RVCE matrix the leaders need to carefully consider what comes out of the prioritization and to use that information as a guideline and not a definitive answer. Look at the prioritization and make sure it makes sense based on your experience.
How to use the RVCE Matrix?
1. Convene a group of stakeholders for the issues to be prioritized.
2. Give everyone in the group a list of the issues to be prioritized with an explanation of what each issue title encompasses.
3. As a group, evaluate each issue in terms of the four decision criteria (Risk, Value, Cost, and Effort). Before starting the evaluation, develop a group consensus definition on what each of the criteria means to the organization and the stakeholders. This will help to have a consistent evaluation of each issue.
4. Draw the RVCE Matrix on a white board or flip chart as shown in Figure 1.
5. Evaluate each issue and rank them from high to low for each criterion and then place the issue in its appropriate place in the matrix.
6. Once each issue is evaluated, ranked, and placed in the matrix it is time to decide what you should implement.
a. Quadrant 1 - these issues should be avoided since they have high risk and cost plus low value.
b. Quadrant 2 - these issues you may want to consider in the future as other more important ones are implemented first. Consider these a second phase since they may be low level enablers for other more important things to get done.
c. Quadrant 3 – these issues should be prioritized to get implemented since they have high value and effort but low cost and risk.
d. Quadrant 4 – these issues are high in all four decision criteria but should be investigated since the payback in time and effort maybe substantial to the organization.
7. Assign members of the group responsibility for getting the prioritized issues in Quadrant 4 accomplished and then look at the issues in Quadrants 2 and 3.
8. Accountability for the success of the RVCE model output should be monitored and evaluated on a regular basis.
Examples in Practice (shown below)
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Implementing a new grants management processing system from manual to electronic. This is somewhat of a moderate risk for the agency. Grants could already be in process, or all processing would have to halt until the new system is in place. The effort would be significant and the cost for the new system would be moderate. The value of implementing this would be high – being able to implement and track grants quickly will allow work to be done with grantees in a timely manner. This project would fall under Quadrant 4.
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New communication methods for senior management to share regular information with employees. The goal is to improve transparency and consistency in communications. The risk in this situation would be very low, the cost would be minimal and the effort is above low, but not significant. The value to employees would be moderate. Given the first three variables of risk, cost and effort, this scenario would fall into Quadrant 2. Adding in the value of the transparency and increased trust among employees, this could easily shift more toward Quadrant 4 depending on the group discussion and prioritization.
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Implementation of a new contract management system. The risk in this scenario could be significant. Switching from an internal process using SharePoint or an Access database to track contracts to a more sophisticated software, contracts could get delayed in the process. Depending on the services or work associated with the contracts in process during the time of implementation; the level of risk has the potential to be significant. The effort would be high due to the identification of a new software, training for all employees on the new platform, creating a new standard operation procedure for consistent use of the process, as well as the detailed transition process and confirmation of contracts being successfully transitioned. The cost would be high to switch to a new software program and to pay ongoing vendor fees on an annual basis. The value of switching to an electronic contract management system would be high and the process would be more effective and efficient. The implementation of a new contract management system would be assigned to Quadrant 3 to investigate the return on investment further.
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Updating the organization’s strategic plan that was implemented one year ago. There is a new leader within the organization and they want to update the recently established strategic plan. There have been no real changes in priorities but they feel that the strategic plan is not representative of their goals for the organization. Employees from all levels within the organization recently started strategic planning implementation teams, these teams have been in process for almost 5 months. The risk in the scenario would be high – employees are just now getting on board with implementing the strategic plan and may not understand or buy-in to making changes this early in the 3-5 year process. They are also more likely to discontinue participating in the process given that the last few months of effort will have resulted in nothing being accomplished. Effort would be moderate – all members of leadership would need to reconvene for at least one day. Costs associated with this would be moderate to high – a consultant will need to be hired to facilitate the one-day session and to update all materials. All strategic planning materials and communications will need to be redesigned and reprinted. The value in updating the strategic plan after only one year would be low – priorities within the agency have not changed significantly in the past year. This scenario would likely fall under Quadrant 1 and the group would likely decide (if the group has the option) to avoid updating the strategic plan based on little to no return on investment.
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