Benefits management defines benefits, implements the necessary change and ensures the benefits are realised. Its goals are to:
- define benefits and dis-benefits of the proposed work;
- establish measurement mechanisms;
- implement any change needed in order to realise benefits;
- measure improvement and compare to the business case.
The realisation of benefits is the driving force behind any project, programme or portfolio. The definition of a benefit is broad – it is simply a positive impact of change. Since any change has the potential to have a negative impact, benefits management also covers the management of dis-benefits. These are negative effects of change that the host organisation is prepared to accept as part of the cost of achieving the positive benefits.
Some benefits are tangible and some are not. Examples of tangible benefits are ‘reduced costs’ or ‘jobs created’. Intangible benefits are things like ‘improved corporate reputation’ or ‘decreased risk’.
The value of benefits is a vital input to investment appraisal in the business case. The business case is owned by the sponsor who is, therefore, ultimately accountable for the realisation of the benefits in the business case.
Benefits are derived from outcomes through change management. Day-to-day responsibility for the implementation of change and realisation of benefits lies with one or more business change managers. The relationship between project or programme managers and the business change manager(s) is crucial. The delivery of outputs and the management of change must be closely co-ordinated.
The benefits management procedure has five main steps.
Planning explains how benefits will be managed. It sets out policies for aspects such as measurement, roles and responsibilities, priorities and key performance indicators. If the intended approach to benefits management has been defined in a broader scope management plan the planning step may simply involve reviewing and updating the relevant section of that document.
Once the work has been authorised the resources needed to perform benefits management are mobilised so that benefits management work can start. This is the initiation step.
In less complex situations (e.g. a project delivering a single benefit), the planning and initiation steps may be performed as part of an overarching scope management procedure. In programmes, benefits management will justify a dedicated benefits management plan.
Benefits depend on the delivery of outputs and the achievement of outcomes. The inter-relationships between these will have been defined during requirements management using techniques such as benefits mapping. Each benefit (and dis-benefit) then needs to be quantified and valued.
It is very easy to describe a benefit such as ‘increased sales’ but far less easy to accurately quantify it. Numerous studies have shown a tendency to over-estimate the quantity of benefits that will result from a change initiative. This step in the procedure uses techniques such as workshops, pilot studies or Delphi to compensate for individual optimism or organisational pressure.
Value can be expressed in many ways and benefits are often referred to as ‘financial’ or ‘non-financial’. Since most business cases are based on some form of financial investment appraisal, benefits should be valued in financial terms whenever possible.
While it may be relatively straightforward to provide a financial value for ‘increased sales’, it is less simple to calculate the financial value of ‘increased efficiency’ and difficult to do so for ‘improved customer satisfaction’. In an acceptable business case the quantifiable benefits will outweigh the costs. It is very dangerous to rely on the ‘feel good factor’ of intangible and unquantifiable benefits in a business case.
This step will apply various techniques to estimate the financial value of benefits so that these can be compared to the financial cost of realising the benefits.
It is important to apply the same rigour when quantifying and valuing dis-benefits as when performing those steps on benefits. Only then is that aspect of the business case robust.
Planning realisation involves capturing baseline measurements and agreeing targets. Baseline measurements identify the current performance of an operation so that improvements can be measured. A benefits delivery plan illustrates the timeline and milestones for realising benefits, including any dependencies on project outputs or interactions between benefits.
In many guides, the management of benefits is seen as a function unique to programmes. Praxis maintains that the benefits realisation process can be part of a project life cycle when the complexity of scope is low – e.g. where one output delivers one benefit.
Benefits are realised when something changes. This usually involves permanently changing attitudes and behaviours as well as physical changes. The failure to embed new attitudes and behaviours so that they become normal practice is often the greatest risk to the realisation of the benefits in the business case. A strong emphasis on change management is an essential part of the realise step.
A business change manager needs to ensure that changes are permanent and track realisation of associated benefits. The bulk of the benefits may only be realised after a project or programme is completed. Long-term actions and monitoring for continued realisation should be documented as part of the handover to business-as-usual.
While implementing change, new opportunities for additional benefits should always be sought.
Projects, programmes and portfolios
The majority of projects conclude with the handover of an output but where the relationship between output and benefit is less complex, the project life cycle may incorporate the benefits realisation process.
If a project is restricted to delivering an output it may or may not require the project manager to be involved in the realisation of benefits in some way.
Where a project is delivering an output to a client under contract the project manager usually has no formal involvement in benefits realisation. However, the project manager should be familiar with the client’s business case and may be able to suggest value improvements along the way.
Where a project is delivering an output as part of a programme or portfolio, the project manager must work closely with other members of the programme management team and business change managers in particular.
As objectives become more complex with multiple benefits, outcomes and outputs, the work is clearly in the category of ‘programme’. The management of this complex network of objectives is the primary goal of programme management.
A defining aspect of this is the hierarchy of business cases that arise. The overall programme business case may be broken down into tranche business cases and further sub-divided into individual project business cases. As with the objectives, these are inter-related in complex ways.
The attribution of benefits to individual project business cases can be a difficult exercise. Double counting of benefits across a programme can arise, particularly where investment approvals are involved. This should be approached in a pragmatic way and resolved through benefits mapping and stakeholder consultation. Where appropriate, the benefit should be attributed to a specific project based on the principle of greatest contribution.
A consistent approach to benefits management must be maintained across the programme, particularly for consistency of measurement. Without this, it is difficult to aggregate benefits across multiple projects and assess their collective impact on business performance.
The benefits of a standard portfolio revolve around the simple fact that projects and programmes managed and co-ordinated in a consistent way are more efficient.
Structured portfolios will have a set of objectives derived from strategic objectives – which it is fair to assume have been deemed to be beneficial to the organisation in some way. Other than the efficient management and co-ordination of projects and programmes, the benefits of the portfolio are delivered entirely through its component projects and programmes.
The portfolio’s role is to ensure that these collective benefits are consistent with the strategic objectives. Strategy mapping uses the principles of influence diagrams to ensure that investment decisions, and the scope of each project and programme, are driven by the contribution of benefits to achieving the operational, organisational or business strategy.
Just as with programmes, portfolios must ensure that the approach to benefits management is consistent across the portfolio, enabling the prioritisation and balancing activities in the portfolio management process to be effective. A well-defined and flexible, portfolio-wide, policy for benefits management will also reduce the work needed to develop management plans at project and programme level.
Portfolios are able to gather and assess longer term data on the performance of benefits management. This can be used to improve benefits management practices by sharing and applying lessons learned, ideally through a knowledge management system.