I recently heard a vice president at a Fortune 500 company discussing the challenges associated with evaluating investment decisions. This man stated that it was extremely difficult to do because every program labeled their benefits differently. Even if it was as simple as “Grow Revenue” or “Increase Revenue” it still was impossible to effectively and efficiently roll up results across the program, let alone across the investment portfolio.
Thus enters another reason to utilize standard benefits management practices across the enterprise.
If you consider a benefit to be an object (which it is) and objects have attributes (which benefits do) and the attributes can be stored in a benefits register (which they should) then you have the foundation for consistent reporting. Consistent reporting will allow executives to quickly see across all the investments, which ones for contributing to a specific class and how they are performing. It will also allow a sponsor or program management to do more precise reporting and analysis during program reviews. It is a win win.
It doesn’t have to be difficult. The first things many organizations will try to do is define a canonical list of all possible benefit classes. They end up mixing different levels of benefits and have scores of items on their list that end up being too confusing and thus unusable. The Benefits Classes should be structured in multiple levels with a high level defining HOW the benefit contributes value. There really are only a few ways this can happen. Ultimately you are increasing revenue, decreasing cost, or adding a new product or service to your customers. These should represent the highest level class. You may then use subclasses to further granulized the categories. And the benefit itself should be the lowest level of detail including the recording of the results and the expected value of the measured results after the change is implemented. But I digress.
Going back to the class level, I want to focus on what I consider to be the minimal set of tangible benefit classes you might have in an organization. These values should be mutually exclusive and assigned to a benefit. This list includes:
|
Benefit Class |
Definition |
Example |
|
Employee Value Add |
How does this help the employee do their job or increase their satisfaction. |
Improvement in an annual employee satisfaction score regarding accessibility to corporate medical forms. |
|
Customer Value Add |
A measure of customer satisfaction or willingness of the customer to tell others about you (in a positive manner). |
Net promoter score. What is the likelihood a customer will recommend you to another person? |
|
Cost Reduction |
A direction reduction in cost of buying a product or a service. |
Replacing a printer that has a $5K a month lease with one that has a $3K a month lease. |
|
Supply Chain Improvement |
This is where the realization of the benefit includes both your organization and another organization (business) to do something to realize value. |
Establishing electronic invoicing and payment with a supplier and thus reducing the overall quality of product delivery. |
|
Revenue Increase |
A direct item that increases revenue for a product or service |
By introducing an electronic ordering interface we expect to see increase total orders processed per store to increase. |
|
Business Efficiency |
This one gets a little tricky as it involves changing the people, the process, or the technology to reduce the unit cost in producing a product or providing a service. The tricky part comes in what was lost in the change and is that captured in the total benefit. |
Implement a new process for validating customer credit from a third party vendor, when it used to be done in house. |
Of course, I would be remiss if I didn’t reiterate that these classes represent the type of benefit measurement that will be utilized, not the benefit itself. The benefit is not a 10% reduction in time to process an order. The benefit is reducing time to process an order, the target measurement is 10% (and this is probably a class of Business Efficiency).
The power of this benefit class model is that it provides a high level category for macro reporting, but it can easily be used as a super class and the business define sub classes for further granularity. For example on Business Efficiency, you might have a subclass of Currency. This subclass may then be Time for measured per unit time, or it might be Financial for reducing cost of a part in the product.
This high level classification provides a capability to structure the benefits for reporting within the program and across all programs within a portfolio. Combining it with defined subclasses allows for a means of organizing your benefits and also ensuring that you have done due diligence on all types of benefits during your planning phases.
We're All In This Together !!!
Dave
