Successful business owners make effective decisions by setting priorities.
Modern Machine Shop, Wayne Chaneski
Running, improving and growing a business require prioritizing actions. Day-to-day decisions must be made about which processes to redesign, in which new capital equipment to invest, what products or services to market actively and which positions to fill in the organization. These decisions need to be based on priorities. Without an effective means of setting priorities, everything is important, which, in turn, makes nothing important.
A helpful tool for setting priorities is the “ICE” prioritization tool. ICE is an acronym for the three factors that should be considered whenever priorities are set: impact, cost and effort.
When considering impact, we are thinking of a relatively short time frame. In this rapidly changing world, we need things to happen quickly. Impact can be measured in sales growth, cost savings, quality improvement, better customer service and anything that benefits the company.
Cost must also be considered because it is a critical component of any operation. With limited funds, companies must choose wisely among various alternatives. Even the greatest idea might not be pursued if the cost is too high for a company to recoup.
Effort, the third factor of priority, must be considered in terms of resources available and time required. Companies are typically operating with fewer employees, which makes effective allocation of human resources critical.
The ICE tool uses weighted values for each of these three factors to help establish priorities in an objective, straightforward manner. The higher the total of these values, the higher the priority.
The tool uses a matrix format (see chart above) with impact, cost and effort appearing as column headings. Each of these factors must be evaluated and classified as either high or low. (Sorry, there is no neutral option here. You must make a distinct choice.) As you can see, if the impact is high, the numerical value is 2; if it is low, the numerical value is 0. In the next column, if the cost is high, the numerical value is 0; if it is low, the numerical value is 1. In the third column, if the effort required is high, the numerical value is 0; if it is low, the numerical value is 1. The rationale for valuing high impact greater than low cost and low effort is that an opportunity’s perceived impact typically drives business decisions. High-impact opportunities are likely to warrant attention by the organization and may be approved in cases in which the cost and effort is high. In some companies, anything with a low impact is relegated to “back-burner” status or challenged with the question: “What’s the point?”
Adding the numerical values associated with each of the three decision factors can yield five different scores, which appear in the “total” box. The highest possible score is 4, which can be classified as an extraordinary opportunity. It is considered extraordinary because it can generate a high impact with low cost and low effort. Such opportunities do not appear every day, so they must be acted upon immediately. The second highest score is 3, which represents a strong opportunity that can generate a high impact with either low cost or low effort. Opportunities like these should be acted on as soon as possible. The mid-level-priority score of 2 designates something that provides either a high impact with a high cost and effort, or a low impact that can be achieved at low cost and effort. Companies may want to address priority 2 opportunities as resources and funds become available. Any opportunities that score a 1 or 0 on the ICE prioritization tool likely will not be pursued in the near term. In fact, anything scoring 0 may never be pursued. However, a list of these opportunities should be kept in the event that technology, cost, business strategy or something else important to the organization changes in the future.
The ICE prioritization tool is useful for sorting through those various tasks that need to be accomplished but compete for the same resources or a limited pool of funds. Consider adding ICE prioritization to your continuous-improvement toolbox. You can use it as is, or you can customize it to suit your particular priority-setting needs.