What’s your sponsor’s benefits reliability rating?

 

Many of the companies I’ve worked with have invested significant effort in developing and implementing consistent project intake processes, often supported by fairly costly project portfolio management systems.

While these changes can reduce the occurrence of pet projects, they still won’t make a meaningful difference in portfolio value realization. Yes, increased effort may be spent in creating business cases than before and those business cases may get challenged by different levels of governance committees, but that doesn’t mean benefits will be realized as expected. Unless the requested funding is tremendous, the level of scrutiny the business case will experience is likely to be restricted to a quick review of assumptions, validation of SWOT analysis and other such sanity checks. To really validate the realism of the benefits model would require an investment of a similar (if not greater) level of effort which was spent on creating the original business case.

Most sponsors tend to display a strong optimism bias – if they didn’t, they’d be unlikely to sponsor transformational projects. However, this optimism bias can result in inflated expected benefits and the underestimation of the one-time or ongoing costs or the impact of external factors which could reduce benefits.

Without some sort of benefits management framework that insists on objective representation of expected benefits when baselines are committed and then regularly re-checks the likelihood of realizing those benefits, risky project investment decisions could still be made. And once a project is over, even if no benefits were realized, few organizations will hold the sponsor accountable for poor outcomes. While chronic offenders likely deserve some punitive action, I’m not a fan of tying compensation to benefits realization – while that creates “skin in the game”, it also might generate an overly conservative culture which could result in competitive disadvantage for a company.

This made me think about credit ratings – independently established metrics providing an objective method of evaluating the credit risk of an individual, organization or country. Could this approach not be adapted for assessing the benefits realization reliability of a given sponsor?

Similar to a credit rating, new sponsors would start out with a modest reliability rating. As they request project investment decisions and the benefits are realized (or not), their rating would increase or decrease. These ratings could then be used as an input into project intake reviews. Sponsors with good reliability ratings would be subjected to less scrutiny and have access to higher levels of project funding. Those with lower reliability ratings would have their business cases challenged more rigorously and could have more funding disbursement gates.

So who would calculate and publish such reliability ratings? This could be a job for your friendly, neighborhood PMO.

(Note: I checked the credit rating of this article when it was originally published in March 2015 on my personal blog, kbondale.wordpress.com)