How well do we identify and monitor achievement of client benefits on projects? Usually this occurs by accident. If we fail to manage business benefits, we can save a little time, but what are the consequences that are likely to hurt us the most? If we don’t keep clients focused on benefits, then they will focus on cost. By keeping clients focused on the much larger benefit number, it puts the cost number in perspective and makes it much more palatable. What if we are on a project that will cost $5 million and deliver $20 million in benefits, and what if the project is perfectly scalable so they can cut costs and benefits in half if they want, what is the result of cutting the costs in half? Answer: They save $2.5 million but lose $10 million in benefits. Morale of the story is that we must keep clients focused on benefits that mean a lot to them.
What benefits can we keep in front of them that make the cost investment a smart move? We often justify projects by indicating that things will be better, faster and cheaper, take less effort, have fewer errors, meet client expectations, provide better reporting and the like. While this might get our sponsors and managers excited, to Boards and top executives, this can often just sound like ivory tower hype. If we are going to help a client understand the impacts a project might have on cash, real hard benefit impacts, and we are referring to actual cash and not just smoke and mirrors numbers, what cash activities are we going to have to link our benefits to? I’m thinking of three operational cash transaction types:
- Collections (not revenue or sales, but actual cash in the door)
- Disbursements (not fund numbers or asset accounts, but actual cash out the door)
- Payroll payments (actual cash to the employees and their benefits)
What other less common cash transactions can we try to link our benefits to?
- Investments (actual funds flowing in or out, not just accounting numbers)
- Asset purchases/sales/scrap (cash transactions, not accounting numbers)
- Debt drawdowns/paybacks
- Interest payments (actual payments, not rates)
- Equity (cash from stock offerings, stock buybacks for cash, dividends paid)
So what should the Project Manager to fully deliver Business Benefits?
Initiating: Identify the potential value of this opportunity to the client. It will be critical to prioritize and ensure all stakeholders are in agreement as well as ensure that you do not commit to deliver things that are outside of your control.
Planning: Identify benefits to be achieved and how they will be measured. Establish procedures to monitor achievement of benefits. Benefits quantification requires establishment of baseline, which can be difficult and time consuming. It also means we have to work really hard to get past the hype and motherhood fluff, dig down to find out what favorable and unfavorable actual cash impacts may be involved beyond just moving numbers around, what impact might we have that would get the Board’s attention, like impact on earning per share, retained earnings, ROI, ROA, etc. Benefits planning and delivery should be aligned with the work/organization breakdown in the project so that individual teams know which benefits they are responsible for delivering.
Controlling: Benefits monitoring means that you will need to build a mechanism that ensures progress in this area is tracked and appropriate actions are taken to realize project goals. Benefits may increase or decrease as a project progresses, especially relative to other pressures and opportunities the client faces.
Closing: Inform client of the status of benefits, secure testimonials, and capture lessons learned.
Caution regarding Business Benefits and Value Realization programs.
While we should always quantify Value Realization and Business Benefits so we can properly manage projects, we rarely share our numbers with the clients as we can be held accountable for those numbers and get into serious legal trouble. Always get approval from your contracts or legal department before sharing these numbers. What we need to do is map out what numbers should be considered, and coach the client through them developing their own numbers, which will hopefully be close to ours. That way we are all thinking and believing the same way, but the client is accountable for their own numbers.
For more information, contact Tom Grzesiak at http://www.supplewisdom.com/