Project Management

The Danger of Fictional Benefits

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Steve Jenner gave a presentation at the PMI Power Talks recently – a set of TED-style short presentations hosted in the centre of London by the PMI UK Chapter. He spoke about portfolio management and benefits.

Benefits, he explained, are not just one dimension of project portfolio management. They are the rationale for the investment of shareholders’ funds.

Often, he said, benefits are used as the way to justify the project. He pointed out that isn’t correct: benefits are the rationale for the project. We “go looking for benefits to justify what we want to do anyway,” he said.

Then people are surprised that they didn’t realise the predicted benefits. How could the project have done that? The benefits were made up anyway.

“Strategic alignment means nothing,” he went on to say. You can align anything with anything. Anything can be aligned up front. It’s what happens later that matters. Strategic contribution, he said, is where it’s at.

When you can’t justify a project by any other means, people call them “strategic projects”.

So how do you get round the problem of fictional benefits?

Don’t treat all projects the same way

Steve explained that it’s foolish to treat all projects the same way. Tailor the investment criteria: don’t try to rank and assess projects that relate to keeping the business functioning in the same way that you would innovation projects.

If you are investing to save money or increase revenue then it makes sense to do a cost benefit analysis.

If you’re doing it to make a strategic contribution, then benefits aren’t always clear in cost terms.

For projects that are mandatory, there is only one question that matters: Do we really have to do it? If it’s a $200m mandatory project with justifiable benefits of $300m and the project cost goes up, then we won’t worry if it now costs $250m. But if we are doing the project to be cost effective, and it isn’t really mandatory, then the cost increase matters. A lot.

Avoiding Fictional Benefits

Here are some tips that Steve gave for making sure your projects are adequately justified.

1. Be clear about the benefits you are buying

Financial benefits can be cash releasing: you can use the money elsewhere for other things, or non-cash releasing: they save money but you can’t actually access the money.

An example of that latter category would be things like process improvements that might shave a minute off a process. You aren’t going to make a staff saving on that. Saving staff time is only a benefit if you do something with it, so Steve argued that these aren’t real benefits at all.

2. Link gate reviews to funding

If your project gate reviews – the steps you go through at the end of each project stage to validate that it’s OK to move to the next point in the project – are not linked to funding or project performance then they don’t serve a purpose.

All they’ll do is just slow projects down and add bureaucracy. Unless they are meetings and project reviews with teeth i.e. that they can stop your project, what’s the point? Your portfolio, Steve said, should be a funnel not a tunnel. In other words, you need to be stopping projects, or delaying funding, and taking those hard decisions because that’s your job and how you protect the funding.

3. Expect improvement

This was an interesting point: expect things to get better and they will. Create a culture where project improvement is expected. Where project control is expected. Where generally you just expect things to be better week on week, year on year. And don’t let lack of improvement go unnoticed.

I’m looking forward to the next PMI Power Talks: I think the quality of speakers was exceptional and it was a really well-organised event. This session by Steve was very thought-provoking.

Posted on: October 16, 2016 11:59 PM | Permalink

Comments (3)

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Good points

Every project is unique and had to certainly justify itself through a business case which takes care of the benefits be it in tangible or intangible form and should be reviewed at checkpoints. The point regarding the benefits the organization wants from its projects should be clearly defined is the key .

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