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A blog that looks at all aspects of project and program finances from budgets and accounting to getting a pay rise and managing contracts.

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Benefits Realisation: The Basics Explained

Categories: benefits

Benefits can either be certain and quantifiable (like generating more money) or less quantifiable (like improving employee satisfaction), according to Carlos Serra, who presented on the topic at the PMI Global Congress EMEA 2015 in London this week.

“Benefits are a result of action and behaviour, and they provide something of value to someone,” he explained.

Benefits come from change

Each change we do as part of a project delivers benefits. We need those benefits because projects are supposed to move the business forward in terms of its strategy. Each benefit helps fill the gap between where the business is now and where it wants to be. Project benefits are little (and sometimes big) jumps towards hitting the ‘desired state’ of the business.

He showed a graph a bit like this:

In other words, the delivery of incremental benefits over time shift the organisation from the current state to the desired future position. And projects deliver those benefits.

Realising benefits

Carlos then went on to explain the term ‘benefits realisation’ and said that it wasn’t easy to understand. He’s from Brazil but now based in the UK and in his native Portuguese there are three different ways to translate ‘realise’. Even in English there are different meanings of the word including:

  • To become fully aware of something
  • To cause something good or bad to happen
  • To make money by selling something.

He asked the audience if other languages held the same difficulties and there were nods from around the room. Arabic, Dutch and Spanish speakers all confirmed that ‘realisation’ didn’t really translate easily.

Carlos defined benefits realisation like this:

“Benefits realisation is a process to make benefits happen and also to make people fully aware of them throughout the entire process.”

Benefits realisation management defined

Benefits realisation management is the third term that Carlos explained. This is a set of processes required to deliver benefits.

He said that the realisation life cycle starts way before the project and happens mostly after the project so the processes are far-reaching in terms of alignment with the project life cycle.

Finally, he concluded by saying that because of this it is not possible for the delivery of benefits to only be the responsibility of the project manager or team.

Actually, that wasn’t his final conclusion. He went on to say a lot more about benefits realisation management and I’ll be covering that in another article. Watch this space!

Posted on: May 15, 2015 09:04 AM | Permalink | Comments (4)

5 Facts from Benefit Realisation Management [Slideshare]

Categories: benefits


This presentation shares 5 facts from Gerald Bradley's book about managing project benefits: Benefit Realisation Management (2nd Ed).

Posted on: December 19, 2014 06:27 AM | Permalink | Comments (0)

8 Tips for better benefits management

Categories: benefits

You’ve got a great project with a ton of benefits coming your way. Everyone’s really happy. And then someone says: “Exactly how much are we going to get from this project?” Suddenly it’s no longer enough just to list benefits – you have to quantify them as well, and that means producing an accurate forecast. Ouch.

So what can you do to get that benefits forecast as accurate as possible? Here are some tips for building a more reliable outlook.

1. Strong leadership

This almost goes without saying. If you have your project sponsor encouraging you to be transparent and honest with the estimating process, challenging your assumptions and leading by example then you will get a better result.

2. Validate first

Don’t invent a way of measuring benefits (when they are realised) that you can’t test. Test your benefits capture mechanisms, and then change them when they don’t work the way you thought they would!

3. Account for them now

People are more inclined to produce accurate forecasts if they know they will be held to account. If you expect your project to deliver a certain financial benefit, put that in the right department’s budget today. If it’s a productivity benefit, build that into the team’s annual objectives or performance targets.

4. Be negative

Take the opposing view to challenge estimates. Think critically about the other side of the argument and what would happen if the benefits aren’t delivered as planned. This can help you avoid optimism bias and come up with a realistic range.

5. Get another opinion

Pick a trusted project management colleague or even someone in a different team to review your estimates. This independent challenge can give you another perspective and help you avoid getting sucked into a project team mentality in which you make unrealistic assumptions. An internal auditor could carry out this role for you, or someone from your PMO.

6. Don’t estimate alone

Use the Delphi technique or other group estimating tools – you’ll get a far better, more accurate result than if you came up with the benefits forecast by yourself.

7. Forecast a range

As with financial forecasts, predicting an amount in a range gives you more flexibility. Avoid single-point forecasts (“We’ll generate $689.52 extra revenue”) and opt for a spread of figures (“We’ll bring in between $550 and $700 in extra revenue”).

8. Review your estimates regularly

As your project progresses, go back to those estimate and make sure that they are still accurate. Your project will change and those changes could well have an impact – positive or negative – on the benefits forecast. Keep your forecast up to date and communicate any changes to the key stakeholders. A change too far in the wrong direction could mean your project is no longer viable. Linking back to the first point on this list, that’s the time when strong leadership comes into its own. It might mean cancelling the project or backing out some changes that have an adverse effect on the benefits profile.

Benefits are the reasons we do projects and programmes, so if the benefits aren’t there, you have to have a very good justification for continuing to work on the project. That’s why benefits realisation is important. More effective benefits realisation happens when estimates are good, people understand how they have been calculated and above all, they are realistic. It isn’t hard to do, but more often than not project teams and the organisations they work for don’t spend the time on the benefits planning stages to get good results at the end.

What does your company do? Let us know in the comments below.

Posted on: July 22, 2014 06:08 AM | Permalink | Comments (2)

Project selection: 4 more soft benefits to consider

Categories: benefits, business case

Last time I looked at 4 soft benefits that go into project business cases and are a factor in project selection. They were:

  • Increased customer satisfaction
  • Improved brand awareness
  • Better staff morale
  • Improved processes.

Today I’ll look at another 4. You may be able to include these in your next project proposal alongside the financial measures and with any luck they will help get your project approved.

1. Increased user satisfaction

Customers are one thing, but it also pays to improve the experience for internal users. So if you are designing software for use in-house or for clients, improving their satisfaction with the product will be a significant project benefit.

Project selection should take this into account as (generally) happier users are more productive and are more likely to stick to the processes. If the products they are using are not easy to navigate, they will find ways around the processes in order to make their lives easier. This negates any benefits the software or process is designed to offer. In my experience, going outside the process means that data isn’t collected in a standard way so any measures are incorrect. Many user satisfaction improvements could be done to systems to improve data collection and make it less obtrusive for users – a better experience for them and a better standard of management information for others, so everyone benefits.

2. Improved corporate image

Improving brand awareness is one thing, but what if everyone thinks your brand doesn’t represent value for money? Or that it is not socially responsible? Some projects are designed to improve the image of your brand and while these won’t directly impact the bottom line they could result in more sales or a brand that is ‘worth’ more.

3. Increased safety

Safety measures at work normally cost money, so health and safety projects can find it difficult to justify the investment. But how do you put a price on the health and safety of workers? Projects that implement new measures or better processes that will help avoid accidents are essential in some cases.

And they do indirectly contribute financially: lower insurance premiums, fewer sick days so better staff productivity, better staff morale from knowing they are with a responsible employer and fewer court cases, one would hope. But putting a financial measure on this can be difficult: your finance department may have some models that will help, but otherwise it’s probably best to leave this as an intangible project benefit unless you can categorically link it to a financial figure.

4. Meeting regulation

As I mentioned in a footnote last time, sometimes projects are done for no financial benefit at all because change is required to meet new regulations. There isn’t much decision making involved in project selection when it comes to regulatory projects because you have to do them. You could make the link to financial benefits such as reduced risk of being fined by your industry watchdog, but in reality you are going to do the project anyway, so there isn’t any need to spend hours working out the financial figures – just get to work on the project!

Project selection processes differ from company to company depending on what your business considers important. For some it will be to make tactical changes, for others project choice will be limited by the resources available or by corporate strategy or by the technology available to support projects. All project selection should consider the chance that the project will be successful: there really is no point kicking off a piece of work that has very little chance to succeed as this is simply a waste of resources and time.

Selecting projects effectively, even if the business case is made up of ‘soft’ benefits, will ultimately benefit the firm financially as it means project teams will not be tied up working on initiatives that are wasteful, not a good fit for business strategy and that won’t contribute to the company. Pick your projects with care and use your project time wisely!

Posted on: April 21, 2014 06:48 AM | Permalink | Comments (0)

Portfolio management: important for project managers too

This month on we’re talking about portfolio management. Portfolios are ways to organise the business of change so that companies can achieve their strategic objectives. You are probably most familiar with portfolios made up of projects and programmes. The OGC, the group behind the PRINCE2 standard, defines portfolio management like this:

“Portfolio management is a coordinated collection of strategic processes and decisions that together enable the most effective balance of organisational change and business as usual.”

But portfolios can do more than just manage change as a result of projects. Portfolios can also be used to make investment decisions, and managing work by portfolio is one way to get a view of financial data.

Pat Durbin and Terry Doerscher, in their book, Taming Change with Portfolio Management, write this:

“No matter how you characterise your portfolio objectives, almost all portfolios include some form of financial data as one or more of the parameters used for analysis. Aligning financial information to the demand-related information structures offers you a way to improve the quality and visibility of information about money, the most ubiquitous portfolio characteristic.”

They go on to say:

“As a basic accounting practice, every organisation has a mechanism to allocate and track money based on how it is distributed to the organisation. While this organisational view of financial expenditures shows you how money is spent, it does not show you why.”

For most project managers, what happens at portfolio level is a bit of a mystery. We get on a do our jobs, delivering the stuff that is required for the project, and let other people work out how it all joins together into an organisational and business strategy. As a result, portfolios can seem a bit remote from what we do day-to-day.

However, you have to realise that whatever you do as a project manager automatically feeds in to the bigger picture. If you don’t know what that bigger picture is, you can’t be sure that you are achieving it in any way. That doesn’t mean that you have to have an intimate understanding of what is going on ‘way up there’ but I do think you should have some understanding of how what you do contributes to the organisational strategy.

This does work both ways. After all, as Durbin and Doerscher say, there is no way that portfolio managers can tell why money is being spent just by looking at a corporate balance sheet. The story behind the expenditure is your story. It’s project business cases and project budgets that explain why money is being spent. They can’t get to the bottom of where the money is going without your input. It is the project manager and the project team members who play a critical role in making all this happen. It’s your tracking that shows how the budget is being spent, if it is realistic and whether or not the project will meet its goals. It’s your evaluation and recommendations that may lead to a project being sped up so the company gets the benefits earlier, or slowed down if something else takes priority for the resources, or stopped completely. Numbers are just numbers – without the narrative, there is no way of telling whether the project, programme or portfolio is performing as you would expect.

Of course, those in charge of corporate financial portfolios may not agree with how the money is being spent. If that’s the case, there are routes to redeploy those funds and resources using the standard corporate governance channels like project steering groups and boards. It could result in your project getting shut down, and if that does happen you should ask why. It could simply be that the company has a higher priority project elsewhere and your project has drawn the short straw. Don’t take it personally.

Management by portfolio is becoming more and more common. As businesses shift towards managing knowledge work, portfolios become the sensible way to get things done. Project managers have a huge part to play in making sure that portfolio managers have the information they need to make the right decisions. Just make sure that when you tell your story it’s a good one!

Posted on: October 28, 2012 07:53 AM | Permalink | Comments (0)

"It is better to deserve honors and not have them than to have them and not to deserve them."

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