Author: Carlos Eduardo Martins Serra, MSc, PMP Supervisor: Martin Kunc, PhD
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1 Benefits Realization Management and its influence on project success, project governance, and execution of business strategy - Analysis of Brazil, the United Kingdom, and the United States of America This report is a summary of results extracted from a dissertation submitted in partial fulfillment of the requirements for the Degree of Master of Science in Programme and Project Management in August of 2012 at the University of Warwick. Author: Carlos Eduardo Martins Serra, MSc, PMP c.e.m.serra@warwick.ac.uk Supervisor: Martin Kunc, PhD martin.kunk@wbs.ac.uk 1. Introduction In the past decades, organizations have been strongly concerned in increasing their project success rates as well as in ensuring that their investments were resulting in the delivery of their strategic needs. Meanwhile, project, program and portfolio management have been studied and developed in order to have more effective and more strategy-focused portfolios. In spite of these efforts, several surveys are still presenting high project failure rates and a strong need for improving the alignment between project outputs and business strategies. In the past few years, due to the global economic crisis, organizations have an increasingly stronger need for more efficient project portfolios. Therefore, a management discipline called Benefits Realization Management 1 has been increasingly employed precisely to guide the conception and the management of projects, based on business needs, and to support effective governance. These practices are suggested as a link between strategic alignment and project success, supporting the management of a more effective project portfolio as well as ensuring the delivery of business needs. Then, in order to understand the relationship between these practices and project success, we assessed and analyzed experiences and perceptions of 331 project 1 Benefits Realisation Management (Bradley, 2010; OGC, 2007), Project Benefits Management (Melton, et al., 2008) and Benefits Management` (Jenner, 2010) are terms regarding to the management of a set of processes needed to ensure programmes, projects and portfolios delivering and embedding into the current day-to-day business all requirements of business strategies, in order to perform a meaningful and sustainable creation of value. 01/2013 Page 1
2 management practitioners as well as of 40 professionals in project governance. We identify project success rates, and the most influential project success criteria, as well as the utilization of key Benefits Realization Management (BRM) practices. We also analyzed the variation in the use of BRM practices between Brazil, the United Kingdom and the United States of America. The findings evidence that project success rates are higher in groups of projects where benefits realization management practices have been applied. In addition, we identify how much each practice is particularly influential. 2. Results The first group of objectives of this research is identifying project success criteria to evaluate project success from the strategic perspective, identifying project success rates using this set of criteria, and then identifying the relevance of each criterion. Seven dimensions of project success identified in the literature were employed to assess project success by using two different approaches, which are Project Management Performance and Creation of Value for the Business. The following chart presents the success rates from a random sample of 331 respondents, based on final perceptions of success as well as on the perceptions in each of seven dimensions. Figure 1 - Success Rates Consolidated However, in order to be able to assess different perspectives of project success, the research has identified three groups of roles that could have diverse perceptions, which are Program and Project Governance Professionals, Program and Project Management Practitioners and Benefits Owners. In order to make easier the comprehension, these three groups were associated to Project Sponsors, Project 01/2013 Page 2
3 Teams and Project Customers. The next chart presents the success rates obtained from the same sample, but split per dimension of success and perspective. Figure 2 - Success rates per dimension and perspective A high level of agreement on the relevance of these seven dimensions was found when comparing these results to the qualitative assessment of 40 governance professionals. A slightly higher relevance of Outputs and Outcomes between the seven dimensions was also identified. After identifying the seven dimensions and assessing the perceptions of success, we identify how much each dimension is able to predict the final perception. Although the seven dimensions and three perspectives are able to predict the final perception reasonably well, only Required outputs - Customer's perspective has capacity to predict success by itself. Alternatively, seven consolidated perspectives of those seven dimensions are also able to predict the final perception reasonably well, but this time only Schedule goals and Required outputs can predict success by themselves. Main findings related to perceptions and dimensions of project success: Required outputs - Customer's perspective, Schedule goals and Required outputs were the only perceptions with individual ability to predict the final perception of success. It evidences that organizations still prioritize Project Management Performance when evaluating project success, although previous surveys have identified increasing levels of utilization of benefits as criteria. Budget goals lacks the ability to predict project success by itself. Surprisingly, it has contradicted the high relevance of financial criteria identified by the literature review and the qualitative survey. Possibly, as suggested a few 01/2013 Page 3
4 qualitative responses, organizations have been flexible with budgetary restriction in order to prioritize the delivery of expected outputs on the required schedule. However, since no definite evidence was found, further investigation is suggested in order to develop a better understanding of this divergence. After identifying success rates and the most relevant criteria, the second group of objectives of this research is identifying levels of utilization of key Benefit Realization Management practices, which could support effective governance, and then increase project success rates. The list of eleven key BRM practices identified and assessed is presented in the next table along with their respective rates of utilization and relevance for organizations, both based on the assessment of the same two groups of professionals. Table 1 - Key BRM practices to support project success Key BRM practices Utilization Relevance for Org. Code Each initiative has its expected outcomes clearly defined. 76% 83% BRM 1 Project outcomes create a measurable value to the organization. Project outcomes support the achievement of clearly defined strategic objectives. Expected outputs, outcomes and benefits are described in the business case and approved at the beginning of the project. Project outputs and outcomes are frequently reviewed and realigned to the current expectations. Project reviews are frequently communicated to the stakeholders as well as their needs are frequently reassessed. Project outcomes adhere to the expected outcomes planned in the business case. Project s scope includes activities aiming to ensure the integration of project outputs to the regular business routine. Project outcomes are monitored by the organization after project closure in order to ensure the achievement of all benefits expected in the business case. The organization works in a pre-planned and regular way to integrate project outputs into the business routine from the first delivery to the project s closure. A BRM strategy defines the standard procedures for the whole organization. 69% 65% BRM 2 77% 72% BRM 3 68% 83% BRM 4 70% 80% BRM 5 76% 73% BRM 6 73% 70% BRM 7 76% 77% BRM 8 58% 45% BRM 9 58% 55% BRM 10 35% 51% BRM 11 01/2013 Page 4
5 Main findings related to BRM practices: The current utilization of BRM practices suggests a strong focus on defining the needs and delivering outputs and outcomes. However, they also reveal lack of focus on benefits realization. This is supported by qualitative results, which suggested that organizations do not keep track of benefits after project closures, and that they lack BRM strategies. Different levels of utilization of BRM practices between countries have been identified in three practices (BRM 2, BRM 3 and BRM 7). Further research is suggested to provide better understanding of these differences and their influences. Then, we identified how much the utilization of these key BRM practices is able to predict the final perception of project success, the perceptions related to each dimension and the unweighted sum of the seven dimensions. The next chart summarizes these results. Figure 3 - Ability of 11 key BRM practices to predict project success Main findings related to influence of BRM practices on project success: The utilization of BRM practices explains 16% of the final perception of project success. This result is enough to evidence BRM practices having positive influence on project success. BRM practices are more influential over dimensions related to the creation of value for the business. However, they also influence dimensions related to project management performance. Therefore, these results challenge the idea that BRM practices do not influence dimensions related to project performance. 01/2013 Page 5
6 No dimension of success related to the creation of value for the business significant influence on the final perception of success. BRM practices explain 44% of the perception of project success when considering equal weights for all seven dimensions of success. 3. Predictions and practical implications for organizations and professionals Main benefits of BRM for organizations based on the findings of this research: BRM practices reduce project failure rates, and then they reduce financial losses related to project failures. They ensure the execution of projects that deliver value to the business as well as perhaps being the best way to ensure strategically aligned project portfolios. A clearer identification of valuable projects supports organizations in being more efficient, and then in increasing their range of investment. Main practical implications of the findings of this research: Since many Project Governance Professionals affirmed their aim to implement BRM strategies in their organizations, these practices may face higher levels of utilization in the next few years. However, it will depend on the understanding of the benefits from these practices by high-level managers. Since BRM practices are strictly related to governance, the buy-in from the top-management is fundamental for any further development. In order to enable effective governance and strategic project success, organizations should increase the relevance of success criteria related to the creation of value for the business. Lack of relevance of these criteria may jeopardize any attempt to implement BRM practices. BRM practices increase the control and the traceability of investments as well as the accountability for results, which may cause some discomfort. They can also suffer resistance, because they make clearer the value of each initiative, and then they make more difficult the execution of non-valuable ones. 01/2013 Page 6
7 Organizations can develop actions to improve the alignment between perceptions of success from Team and Customer/Sponsor, and then avoid any negative impacts from the misalignment found by the research. Organizations need to develop their capabilities in measuring benefits, as revealed the qualitative results. Many organizations have weaker focus on the integration of outputs and outcomes into the business. Practices related to monitoring outcomes after project closure and development of organizational strategies to ensure integration should be employed in order to ensure the delivery of sustainable long-term benefits. The responsibility for these processes should transcend project structures. Departments of change management and corporate/strategic governance should be accountable for that integration. Project Teams, as suggests the literature review and some qualitative responses, should be made aware of the expected outcomes and their relevance to business strategies, because Project Teams are responsible to make changes happen, so they need to understand very clearly the organizations needs. Therefore, BRM practices should reach Project Teams and Customers, being not be limited to Program/Portfolio levels. External projects should deliver benefits to external customers as well as to their own organizations. Specific processes may be required in order to manage this kind of complexity. 4. Works Cited Bradley, G., Benefit Realization Management. First ed. Farnham: MPG Books Group, UK. Jenner, S., Transforming government and public services: realising benefits through project portfolio management. First ed. Burlington: Ashgate. Melton, T., Iles-Smith, P. & Yates, J., Project benefits management: linking your project to the business. First ed. London: Butterworth-Heinemann. OGC, Managing successful programmes. 3rd ed. London: TSO (The Stationery Office). 01/2013 Page 7
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