451 Consulting Trusted Advisors and Capability Partners to business and government since 2001 451 Consulting White Paper Series: Benefits Realisation PART 2: MANAGING PROJECTS FOR BENEFITS
Introduction The first paper in this Series has demonstrated the need to focus on benefits realisation. This is a young project discipline that specifically targets what is needed to raise the hit-rate between the benefits documented in the business case and those that actually accrue. What is the challenge? The reality is that many organisations that implement formalised benefits realisation processes fail to achieve a significant and sustained improvement in projects. However, these organisations often spend a significant amount of time and money trying to improve project performance, but end up stifling innovation, and increasing bureaucracy. Many organisations that implement formal benefits realisation fail Why do many organisations fail? The team at 451 Consulting has over 100 people years experience in project and program management. Our experience suggests the primary reason for failure is a lack of clear ownership by the people empowered to realise the benefits (who we call Benefits Guardians) to deliver specific benefits from the early stages of the project. This emotional contract is fundamental to success. A second emotional contract is required between the Benefits Guardian and Steering Committee. Emotional Contract #1: If the project manager delivers x, the Benefits Guardian commits to realise benefits y and z and. Emotional Contract #2: If the Benefits Guardian uses his/her best endeavours throughout the project to maximise the potential for benefits, but that these do not fully materialise for reasons outside their control, the organisation will be supportive. A formal benefits realisation process is typically implemented as part of the establishment of a Program Office (or Value Management Centre or Investment Management Centre). A catch 22 soon emerges as the disciplines and competencies needed to systematise a Program Office are quite distinct from the skills needed to foster the ownership in the business to understand and accept the emotional contract. Another way of making this point is that the Program Office often has an internal focus on templates and tools with the customer being the CEO or Executive Team. The key to establishing the emotional contract requires an external focus with strong organisational change management skills, with the customer being the operational managers who will be assigned the accountability for realising the benefits (Benefits Guardians). Our experience suggests the primary reason is a lack of an emotional contract with the Benefits Guardians from an early stage in the project. What problem are you trying to solve? It is fundamental to understand that benefits realisation requires a change in behaviour by project people and operational managers (who will need to deliver benefits). If this sounds like cultural change, you are right, and we all know cultural change is not easy and has never worked when driven by template based solutions. 451 Consulting Pty Ltd www.451consulting.com.au Page 2 of 5
The Top 7 points of failure and what to do The real world experience of 451 Consulting has found a number of common points of failure where organisations miss opportunities to create an environment conducive to realising benefits. {This excludes the basics of managing the natural tension between Scope, Cost, Quality and Organisational Change Management discussed in Part 1.} 1. Lack of benefits clarity & accountability in the business case. (emotional contract) Many projects do not have a chance of producing benefits as they are not clearly defined in the business case stage. This is not to say they need to be 100% accurate at that stage, but rather the benefit areas need to be defined and a guestimate of benefit targets are needed. The degree of confidence in the actual benefits will increase as the numbers are refined from the concept stage through to the end of the development stage. At that point, the final cost benefit equation is confirmed and locked in. An ideal way to commence the emotional contract is to identify each Benefits Guardian and physically ask them to sign the business case next to the benefits metrics to demonstrate their commitment. If the Guardian will not do this, it is a good idea to challenge if the project should continue. 2. Perceived inability to measure the benefit. (emotional contract) The transition to implementing a benefits management process is typically accompanied by comments from the business and project people alike saying they agree on the benefit measures, but as they are not currently measured, how can we set targets and how will we measure if they are achieved? We have observed seven points of failure that relate to either the emotional contract or the underlying benefits realisation methodology It is important to acknowledge it will take quite some time and investment to establish a measurement regime. The first step is to agree the performance measures which should be positively influenced from the project and negotiate with the Benefits Guardians the % change relative to current performance. This allows the business case to be evaluated and the project to continue. A stream of the project is then devoted to analysing how to estimate the current level of performance for the metrics and then to translate the targets into actual levels. For example, if a 10% reduction in staff turnover was specified in the business case, and the analysis shows turnover is currently 12% for the area, then a 10% reduction translates to 10.8% at a specific point in time. The other consideration is that all performance metrics should be aligned under the organisation s balanced scorecard to demonstrate how it will contribute towards strategic goals. 3. Lack of support by Executives if targets are not achieved. (emotional contract) It is all too easy to allocate blame if a benefit target is not achieved. However, this is probably the quickest way to disengage with Benefits Guardians and kill off new ideas as operational managers will be fearful of failure, rather than empowered and supported for innovation and success. 451 Consulting Pty Ltd www.451consulting.com.au Page 3 of 5
Program Delivery White Paper: Benefits Realisation Series Also, it should be acknowledged that benefits realisation is a new skill which will take a couple of years to become embedded in an organisation with realistic expectations for benefits. That is, the initial portfolio of projects pioneering the benefits work will not be perfect, but rather will provide a great source of learning to recalibrate future project benefit expectations. 4. Failure to understand the benefits lifecycle extends past the traditional project lifecycle. (process omission) It is not realistic to expect project deliverables (outputs) to directly and instantaneously produce outcomes. (If this were the case there would not be a need to focus on benefits realisation.) Accordingly, a benefits map is needed which shows a time based flow of how benefits will be measured until 100% of each benefit type has been achieved. A simple example follows showing six projects (P1..P6) within a program of work must all deliver (time = 0) and an active process is needed by the Benefits Guardian to produce the benefits: The benefits lifecycle extends past the project lifecycle Lifecycles & benefits map Time 0 Qtr1 Qtr2 Qtr3 Qtr4 100% P1 P3 P5 Meet Customer Standards 80% 130pm time 100pm P2 P4 P6 Claims Throughput 15fte 10fte Staffing Typical Program/Project Lifecycle Typical Benefits Lifecycle 451 Consulting Pty Ltd 2003 5. Not differentiating between notional and harvestable benefits. (process omission) It may be stating the obvious, but it is frequently impractical to harvest parts of positions. For instance, a project may result in a 20% reduction in workload for 5 similar positions located in different offices. This is a notional benefit of one full time equivalent (FTE). However, it may not be practical or realistic to turn those 5 full-time positions into 5 part time positions of 4 days per week. Accordingly, this notional benefit of 1 FTE is real, but will not be realised (as a reduction in staff costs). However, if an organisational restructure can follow that redistributes the workload over 4 positions, the fifth position can be harvested and a reduction in on-going staff costs will follow. Freeing up a proportion of people s time does not in itself produce a harvestable benefit Therefore, in the business case stage each benefit should be tagged as either notional or harvestable to create similar expectations between the stakeholders. 451 Consulting Pty Ltd www.451consulting.com.au Page 4 of 5
6. Double dipping of benefits between projects. (process omission) Organisations constantly evolve by acting and reacting to internal and external stimulus. Multiple internal projects are carried out at the same time as other initiatives such as continuous improvement activities (including 6 Sigma, Business Excellence Framework), Business Process Reengineering (BPR), and other operational improvements. Accordingly, it is not uncommon for more than one change to impact the same area, and this creates the potential to double dip on benefits. That is, a number of initiatives making a claim on the same benefit. Double dipping is much more common than you might think, and it can become very heated when people s bonuses and other rewards are involved. Real world experience has also shown that in some cases the operational manager may not be able to attribute which project made the primary contribution to the benefit! The potential for double dipping is greatly reduced if the business case defines the performance targets up front and operational managers are kept informed. 7. Not managing project scope by benefits (process omission) Very few sponsors and project managers define and manage scope by those activities which are needed to deliver the benefits. Project scope is defined and refined from concept through to the end of the development phase with lots of words covering all streams of activities. This is a prerequisite, but not in itself sufficient. The Sponsor and Benefits Guardian (who are sometimes the same person), need to consider all changes to scope in terms of the potential to erode benefits. The Project Manager must also be cognizant of the hundreds of operational decisions he/she makes to ensure benefits are not jeopardised. Conclusion The value for organisations from focusing on realising benefits is massive. We all understand the project lifecycle has a number of stages: Concept, Development, Implementation and Finalisation. The benefits lifecycle is similar and needs to be synchronised to the project lifecycle in order to underpin the attainment of benefits. However, like many other management approaches, the implementation of the new paradigm is frequently underwhelming, with very modest increase in performance. The experience of 451 Consulting suggests the seeds for success can be distilled into two factors: establishing an emotion contract to realise benefits and ensuring your methodology (including processes) does not miss key areas. Authored by Gerard O Hara and Edited by: 451 Consulting Management Team If you would like to receive future copies of this White Paper Series please contact 451 Consulting on tel 07-3255-0457 or email info@451consulting.com.au This White Paper can be copied in part or in whole provided 451 Consulting is formally acknowledged as the source of the information. 451 Consulting Pty Ltd www.451consulting.com.au Page 5 of 5