This presentation shares 5 facts from Gerald Bradley's book about managing project benefits: Benefit Realisation Management (2nd Ed).
8 Tips for better benefits management
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.
Last time I looked at 4 soft benefits that go into project business cases and are a factor in project selection. They were:
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!
This month on ProjectManagement.com 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!
It’s January. Budgets are stretched, it’s still a long time until pay day and if you haven’t given up on your New Year’s resolutions soon, you know it won’t be long until you do. How do you motivate the project team to give their best through the long, gloomy winter days (at least in this hemisphere) when you don’t feel very cheerful yourself?
The main challenge (complaint?) I hear from project managers about motivating their team members is that they have no authority to give financial reward. Project managers are not line managers. They have no control over salary and they don’t have the ability to authorise overtime payments, let alone bonuses. And we all know that money is a motivating factor, isn’t it?
Well, actually it’s not that much of a motivating factor as you’d think. Tom Kendrick writes about the work of Frederick Herzberg in his new book Results without Authority. You may have heard of Herzberg before – he’s the one who came up with the six motivating factors: achievement, recognition, the work itself, responsibility, advancement and growth.
You may also have heard of the ‘hygiene factors’ – the things that Herzberg considers pre-requisites for happy workers. Salary falls into this bracket, along with topics like corporate policy and working conditions. “If the hygiene factors seem okay, people mostly ignore them,” writes Kendrick. “However, when workers view these aspects of their jobs as inadequate, especially when compared with other available job opportunities, they are grump and uncooperative. Sooner or later, they vote with their feet and leave.”
Hygiene factors may be largely out of your control: you can’t set company policy or spruce up the office so it’s a nicer place to work. But if those are all okay, they won’t provide a problem for your team. So forget about the hygiene factors. Think about those motivating factors instead.
Achievement, recognition, the work itself, responsibility, advancement and growth. You can provide those for your project team, can’t you?
Achievement: create an environment where people can complete tasks. Don’t set anyone up to fail. Help team members by providing what they need to get the job done.
Recognition: another easy one! Say thank you. Put a note in your diary to thank someone weekly. Tap into corporate recognition schemes or local awards. Give credit in your status reports or presentations.
The work: make sure that the team members know why they are working on that particular project. Make the work meaningful by ensuring they understand the value of what they are doing and how it contributes to the organisation’s goals.
Responsibility: delegate. And don’t delegate everything to your right-hand man (or woman). Find a way to give responsibility for tasks to everyone in the team, so everyone feels accountable for their section of the project.
Advancement: this is a bit trickier. You may not be in a position to promote someone, but you can help them gain the skills they need to advance in their career. You could also provide direct feedback to their line manager to support their promotion or advancement. If the team member is really stuck for career prospects at your company, you can help them build their CV or resume and support them in their quest for a job outside your organisation.
Growth: everyone should get something out of the project on a personal level. Is the team learning something new? Building new skills? Trying out new technology? Find ways to highlight how the project is providing them with opportunities to improve and grow in their careers.
And the best thing about all this? It’s free! You don’t have to spend any money on motivating people if you understand how motivation works and you take the time to understand what motivates your team members.
How do you motivate your team?