I remember the moment vividly. Twelve executives seated around the boardroom table, each passionately advocating for their project. Every initiative was labeled “urgent,” “strategic,” or “transformational.” The CIO turned to me and said, “Bruno, which ones should we fund?”

Silence.

Why? Because no one had crunched the numbers. No one had compared long-term returns, costs, or value delivery. We were flying blind.

If you’ve been there, you know the feeling. PMO leaders are often asked to bring order to chaos—but without a financial lens, prioritization becomes guesswork.

So let’s fix that.

This article will show you exactly how to use some important financial concepts— Net Present Value (NPV), Return on Investment (ROI), and Payback Period—to compare projects and prioritize with confidence. But it will also clarify where these metrics fall short—and how to balance them with strategic, regulatory, and reputational needs.

Metric 1: Return on Investment (ROI)

ROI tells you how much you’re getting back compared to what you’re spending. Think of it like this: if you spend $100 and get $200 back, your ROI is 100%. Easy, right?

Formula: ROI = (Total Benefits – Total Costs) / Total Costs

In simple terms: It’s a simple percentage that compares the gain from the project to what it cost. The higher the ROI, the more attractive the project—at least financially. ROI is great for comparing multiple projects of similar size. It gives you a sense of bang for your buck.

Example: The project costs $300,000 upfront and is expected to generate $100,000 per year for 4 years.

Total Benefits = $100,000 x 4 = $400,000

Total Costs = $300,000

ROI = ($400,000 – $300,000) / $300,000 = 33.3%

This means that for every $1 invested, the organization gets $1.33 back. It’s a decent return, especially when paired with a positive NPV (more on this soon!).

Metric 2: Payback Period

Payback period answers one question: how long until we get our money back?

Formula: Payback Period = Initial Investment / Annual Cash Inflows

In simple terms: It tells you how many years it will take before your project has returned enough value to cover its own costs. After that, you’re making a profit. Projects with a quick payback help free up cash sooner, which is great if your budget is tight or uncertain.

Example: Using the same project again—$300,000 investment with $100,000 annual benefits—the Payback Period is:

Payback Period = $300,000 / $100,000 = 3 years

So the project will pay for itself in 3 years. From year 4 onward, the benefits are pure value to the organization.

Metric 3: Net Present Value (NPV)

NPV helps you understand whether the money you’re putting into a project today will be worth more than what you get back in the future.

Imagine someone offers you $100 today or $100 five years from now. You’d likely take it today, because money now is more valuable—you can invest it, save it, or use it. NPV applies that logic to projects.

Formula: NPV = (Cash flow in Year 1 / (1 + r)^1) + (Cash flow in Year 2 / (1 + r)^2) + … – Initial investment

Where:

• “r” is the discount rate (your organization’s cost of capital or required rate of return)

• Cash flows are the expected yearly benefits from the project

What is the discount rate? The discount rate reflects how much future money is worth today. It’s based on the idea that a dollar today is more valuable than a dollar in the future because you could invest it, earn interest, or use it in ways that provide immediate benefit. Organizations use a discount rate to account for time, inflation, and risk.

Think of it like this: the discount rate helps adjust future cash flows so that everything is measured using today’s value. This makes it easier to compare projects with different timelines.

Your finance team usually sets this rate based on the company’s cost of capital or required rate of return—commonly somewhere between 6% and 10%.

In simple terms: If a project has a positive NPV, it’s expected to give back more than it costs—adjusted for time and risk.

Example: Let’s say your project will cost $300,000 upfront. In return, it will generate $100,000 in benefits every year for the next 4 years.

Let’s use a discount rate of 8%. We apply this rate to each year’s cash inflow to determine its present value:

• Year 1: $100,000 / (1 + 0.08)^1 = $92,593

• Year 2: $100,000 / (1 + 0.08)^2 = $85,735

• Year 3: $100,000 / (1 + 0.08)^3 = $79,389

• Year 4: $100,000 / (1 + 0.08)^4 = $73,518

Total Present Value of cash inflows = $92,593 + $85,735 + $79,389 + $73,518 = $331,235

Now subtract the initial investment: NPV = $331,235 – $300,000 = $31,235

Because the NPV is positive, the project is expected to return more than it costs—adjusted for the time value of money.

This helps you compare it fairly with other projects that might cost the same but deliver benefits more slowly—or more quickly.

🧠 Pro Tip: For longer-term or large-scale projects, consider using discounted cash flows for more precise ROI and Payback calculations. This adjusts for the time value of money—just like NPV does.

The Limitations: Financial Return Is Not Everything!

Financial metrics are powerful—but they don’t tell the whole story.

Some projects have little or no direct financial return but must be done:

• Regulatory compliance projects (e.g., privacy laws, tax rules)

• Security upgrades and risk mitigation

• Reputation management (e.g., brand protection, ESG initiatives)

• Foundational IT investments that enable future capabilities

These projects should be assessed using qualitative factors:

• What is the consequence of not doing it?

• Is there a legal, reputational, or operational risk?

• Does it enable strategic goals down the line?

A good prioritization model balances both:

• Financial returns (NPV, ROI, Payback)

• Non-financial imperatives (Compliance, Risk, Enablement)

Building a Balanced Prioritization Model

Step-by-Step:

1. Estimate Capex and Opex for each proposed project.

2. Use NPV, ROI, and Payback Period to understand financial value.

3. Layer in strategic alignment and risk factors for a full picture.

4. Use a scoring matrix or dashboard to visualize tradeoffs.

5. Justify exceptions transparently—some projects will rise because they must, not because they pay.

Final Thoughts: From Guesswork to Governance

You don’t need more meetings. You don’t need another round of endless prioritization debates.

What you need is clarity—powered by both financial insight and strategic context.

With just a few financial metrics and a healthy respect for non-financial drivers, you can change how your PMO makes decisions.

From political to practical. From reactive to respected. From firefighting to foresight.

And you can start today.

Want Help Implementing This Framework?

If this article resonated with you, and you want to bring more financial discipline into your prioritization process—without ignoring the bigger picture— we can help.

At JBF Consulting, we help PMO leaders build simple, transparent frameworks that prioritize what matters and deliver real value.

👉 Schedule a free 30-minute strategy call

Let’s make your PMO a strategic force—not just a delivery machine.