Benefits Management: How do you do it?
From the The Money Files Blog
by Elizabeth Harrin
A blog that looks at all aspects of project and program finances from budgets, estimating and accounting to getting a pay rise and managing contracts.
Written by Elizabeth Harrin from RebelsGuideToPM.com.
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I’m working with organisations who are putting a lot of thought into benefit management at the moment – more thought than I’ve ever seen in past years. I know benefits management has always been something to consider on projects, but how many project/leaders/organisations actually truly do it?
I’m sure the larger projects are geared up for benefits tracking, but smaller initiatives? Those that might only deliver a few thousand pounds/dollars of benefit per year? Are those being tracked?
I think the trend is changing, and I think there is more focus on benefits tracking, particularly in programmes. Where there is a large programme of work, even small projects get to contribute.
So how do you do it?
The first step is to work out what benefits your project is going to deliver. For example, that could be:
- Cost saving
- Increased sales/revenue
In fact, benefits could be lots of things (shorter cycle times, more calls answered, higher customer satisfaction) but most often they can be reduced to money. Shorter cycle times should mean more projects delivered in a year, so more value achieved, or more widgets through the process, so more sales. More calls answered should convert to more sales, so more cash. Higher customer satisfaction results in more repeat purchases and more testimonials that drive new buyers, so more cash.
Even carbon savings and sustainability targets can often be represented as financial benefits. Carbon has a financial figure associated with it, so you can translate carbon reduction into money.
The trouble comes with trying to get stakeholders to agree on how these benefits will be calculated.
More calls in, for example, might not translate to more sales for several months, depending on your business timeframes and processes. You will need some rules and assumptions around how benefit numbers are going to be worked out where the maths is not straightforward.
For example: if we outsource a service, we can reduce headcount in function and probably make a saving on the cost to serve (budgets are part of the outsourcing decision, after all). That’s a straightforward cash saving: those individuals are no longer on our payroll (even if they were moved across to the outsourced party – the UK has TUPE rules for this).
But do we count that saving as a ‘pure’ saving, or do we have to take off the cost of buying the outsourced service? How long can we claim the service for before it becomes BAU? What happens when we need to add a head or two back in, where do those costs go?
We need assumptions to make benefit calculations work, like what’s the average cost of a sale (so if we answer more calls we should convert x% and make y% extra money as a result).
This first step of creating a model on which to base benefit calculations is the hardest part, in my opinion. There are experts to consult, finances teams to engage, data to gather so we have something to use as the baseline, and lots of maths and spreadsheets to test out so we can model what the benefits might look like.
Getting agreement on how the benefits will be worked out is hard. You need everyone to agree, and more importantly, to understand how it all goes together so they can repeatedly work out the benefit using the same calculation, month after month for as long as you decided to track it for.
That’s no small undertaking, especially for organisations starting out. Especially as many projects have multiple strands and multiple things contribute to the benefits.
What’s the journey like for benefits tracking in your organisation? Let us know in the comments what the biggest challenge is for you – I’m interested to see if you agree with me that it’s the setting up and creating the assumptions and rules for calculation, or whether there is something else that is the hard part.
Posted on: December 18, 2023 08:00 AM |
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Comments (9)
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Kwiyuh Michael Wepngong
Community Champion
Financial Management Specialist | US Peace Corps
Yaounde, Centre, Cameroon
Thanks for this.... talking about benefit management, you say "... most often they can be reduced to money."
Markus Kopko
AI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM
AI Coach| PMotion.ai
Hamburg, Hamburg, Germany
Dear Elizabeth,
Reflecting on your thoughts about the growing emphasis on benefits management in project management, it's clear that there's a real shift happening. It's fascinating to see this kind of evolution, where both big and small projects are being scrutinized not just for what they deliver but for the actual benefits they bring. This approach feels much more holistic, doesn't it?
You're spot on about the challenges of pinpointing and agreeing on how to measure these benefits. It often feels like walking a tightrope, trying to balance different stakeholders' perspectives, especially when the benefits are a bit abstract or don't show up immediately. It's almost like trying to capture a moving target. And yes, the financial aspect often takes the front seat, but it's intriguing to see other forms of benefits, like customer satisfaction or environmental impact, being considered seriously.
The whole process of setting up models for benefit calculations can be quite a maze. You've got to bring in experts, wrangle with finance teams, and then there's the task of gathering all that baseline data. It's like piecing together a puzzle without having the picture on the box. Getting everyone on the same page, ensuring they understand and agree on the calculations, is a Herculean task in itself. And you're right; it's not just about setting it up once and forgetting about it. It's an ongoing journey that needs constant attention and tweaking.
What's your take on this evolving landscape? Do you feel that the focus on benefits management is changing how projects are approached in your organization? It's always interesting to hear different perspectives, especially when it comes to something as dynamic as project management.
BR,
Markus
Great article! Thanks for sharing. I thoroughly enjoyed it.
@Markus, great question! I have added it to my list of topics to write about so watch this blog in February when it's on the calendar for me to do an article answering those exact thoughts. Thank you for the prompt and idea!
Markus Kopko
AI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM
AI Coach| PMotion.ai
Hamburg, Hamburg, Germany
Looking forward to it, @Elizabeth! Keep it up and all the best for 2024!
Steve Bormans
Portfolio Manager| Department of Mobility and Public Works @ Flemish government
Waregem, Belgium
Hi Elizabeth, thanks for sharing. As a government agency in Mobility and Transport we make a difference between project deliverables and societal benefits. We set mid and long term measurable societal benefits (such as road casualties, modal shift percentages, carbon reduction, etc.) and try to identify the best projects and initiatives to achieve these benefits. Every year, with more than 100 projects delivered, we measure progress against intermediate benefit targets. So we don't actually translate them into financial benefits, but we try to achieve our benefits by delivering projects with frequently reduced annual budgets.
Hakam Madi
Independent Consultant
Amman, Jo, Jordan
"Thank you, Elizabeth, for bringing this up. I completely agree with your statement! Building a strong benefits model is essential and requires a careful combination of financial knowledge and collaboration with stakeholders. It is a continuous process to ensure that everyone is on the same page when it comes to calculations. Within our company, we have found that adaptability is crucial.
I would like to know how you ensure that your benefits tracking remains up-to-date as projects develop?
I would appreciate hearing any strategies you might have!"
Shumaila Sadaf
Legal Advisor| Billions works SMC Pvt LTD
Karachi, Pakistan
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