The Money Files

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Good luck!

Benefits can either be certain and quantifiable (like generating more money) or less quantifiable (like improving employee satisfaction), according to Carlos Serra, who presented on the topic at the PMI Global Congress EMEA 2015 in London this week.

“Benefits are a result of action and behaviour, and they provide something of value to someone,” he explained.

Benefits come from change

Each change we do as part of a project delivers benefits. We need those benefits because projects are supposed to move the business forward in terms of its strategy. Each benefit helps fill the gap between where the business is now and where it wants to be. Project benefits are little (and sometimes big) jumps towards hitting the ‘desired state’ of the business.

He showed a graph a bit like this:

In other words, the delivery of incremental benefits over time shift the organisation from the current state to the desired future position. And projects deliver those benefits.

Realising benefits

Carlos then went on to explain the term ‘benefits realisation’ and said that it wasn’t easy to understand. He’s from Brazil but now based in the UK and in his native Portuguese there are three different ways to translate ‘realise’. Even in English there are different meanings of the word including:

• To become fully aware of something
• To cause something good or bad to happen
• To make money by selling something.

He asked the audience if other languages held the same difficulties and there were nods from around the room. Arabic, Dutch and Spanish speakers all confirmed that ‘realisation’ didn’t really translate easily.

Carlos defined benefits realisation like this:

“Benefits realisation is a process to make benefits happen and also to make people fully aware of them throughout the entire process.”

Benefits realisation management defined

Benefits realisation management is the third term that Carlos explained. This is a set of processes required to deliver benefits.

He said that the realisation life cycle starts way before the project and happens mostly after the project so the processes are far-reaching in terms of alignment with the project life cycle.

Finally, he concluded by saying that because of this it is not possible for the delivery of benefits to only be the responsibility of the project manager or team.

Actually, that wasn’t his final conclusion. He went on to say a lot more about benefits realisation management and I’ll be covering that in another article. Watch this space!

The PwC Global PPM Survey talks about the different levels of portfolio maturity. There are five levels:

Level 1: Tactical

At this introductory level investment decisions are made locally, and based on a case-by-case analysis. There’s no overall resource management and resources are allocated to projects and programmes at departmental level. There are governance controls but these are only around capital expenditure.

Level 2: Controlled

With a little bit more effort, companies can move to Level 2 on the maturity scale. Here, investment decisions go through a defined governance framework. There are businesses cases produced that justify the expenditure and someone keeps a master list of all the major capital projects that the company is doing.

Level 3: Managed

The biggest jump on the maturity curve is between Levels 2 and 3. At Level 3 you’d expect to see a standard method for measuring how aligned projects are to the overall business strategy. There is a central governance structure which includes the discipline of ‘portfolio management’. When projects are put forward, there is an initial risk profile done which helps prioritise the work in the portfolio and contributes to the decisions around whether a project should go ahead.

I imagine most companies fall into this category, or at least would like to.

Level 4: Optimised

Taking it further, at Level 4 you’ll see quantitative evaluation of initiatives using a standard model. Projects and programmes are prioritised taking risk and return into account, with a model based on numbers instead of gut feel. Planning future work takes capacity and constraints into account along with risk assessments.

Level 5: Maximised

Finally, the most mature organisations have a structured, consistent and integrated process for managing their portfolios. Initiatives have what PwC calls “multiple delivery versions including in-flight exit versions” (which I looked up and am still none the wiser but I assume means they are planning for what happens if the project has to change course and close early). The PwC model also says that businesses at this level map their portfolios against an “enterprise efficiency frontier” (which I also had to look up and believe means the tradeoff between risk and return).

Why portfolio maturity matters

While it’s nice to be able to point to the curve and select your level and know that you aren’t at the bottom, there is more to portfolio maturity than that.

In 2012, PwC reports that as many as 30% of programmes were in conflict with the overall business strategy. That means that one in three projects were delivering something that was contrary to what the business wanted to achieve. That’s a waste of money and a waste of resources. Even if you’re the best project manager in the business, you can’t help the company achieve its goals because you’re working on the wrong project: one that fundamentally doesn’t and can’t contribute to the future of the business.

In 2014 the picture is much better. The figures from last year show that almost 80% of projects are aligned to strategy, so the number of conflicting initiatives is dropping. That still means that one in five projects isn’t fully aligned to strategy.

I suppose we should ask whether being aligned to strategy is as important as all that. Does it matter that 20% of what we do isn’t strategic? Doesn’t that cover the smaller projects that keep things ticking over, the tactical initiatives, the departmental priorities that improve work/life balance but don’t necessarily contribute to the big ticket items set out in the annual report? Without knowing the details of which projects aren’t considered by the project managers to be ‘aligned’ we won’t know if they are incorrectly categorising their projects. Perhaps they don’t fully understand the strategy and can’t adequately make the call as to whether the projects are aligned or not.

Where next?

We can continue to monitor the outcomes of surveys like this and see if portfolio maturity and alignment to strategy improves over time. I think it will: it will have to as companies cannot continue to work in a way that puts key resources on initiatives that don’t add any long term value. However, statistics like this are missing a lot of key context. I’d like to know how mature these organisations are and how large they are because I imagine this is something that mid-size firms find particularly difficult to get right. Small businesses do it by default almost, larger ones through design, and medium ones will struggle to fit their governance processes to their size in an appropriate manner.

I speculate… What’s your experience? Let us know in the comments.

The fourth annual Global PPM survey from PwC highlights the fact that organisations use subjective information to make decisions about what projects go forward. That’s a kind way of saying that the executive team choose projects based on organisational politics and personal agendas rather than on what’s best for the company. As a result, many businesses start projects that should never have got off the ground.

Just over three quarters of C-suite execs feel that their projects are aligned to strategy, which is quite high (although you’d expect it to be 100%, otherwise why are you bothering to work on the project?). However, only 72% of project and programme managers – the ones who are actually doing the work – agree that there is a coherent relationship between the objectives of the programme and the company strategy. About one in ten employees report that projects receive budget approval but do not necessarily align to strategy in any noticeable way.

The story gets even worse when you look at PwC’s objective maturity assessments. By their reckoning, only 62% of programmes have a mature or established link to strategy.

And this is an improving situation!

While it’s pretty dire that so many projects are undertaken without a clear link to how they are going to help the business in any way, it did used to be worse.

PwC report that in 2012 as many as 30% of an organisation’s programmes were in some way conflicted with the overall business strategy. One in five didn’t have a correlation between the project portfolio and business strategy. So it is better today.

There is still a long way to go though.

What is the cost of getting it wrong?

The exact cost in money terms is going to depend on what projects and programmes your business kicks off that have no tangible link to business results. Of course, they might still be of use in some way, but that will be through accident rather than design. They might deliver some benefits, but another project might have delivered more benefit. That’s where data comes into the project selection process. As the report’s authors say, guessing is not a strategy for success.

They also talk about removing the option for people to game the system and using methodical approaches to prioritising and selecting projects. You only have a limited amount of money to invest. Make sure it’s being invested in the right projects.

What you can do about it

It’s fine to say that CEOs should be more strategic, have multiple planning horizons and be closer to the delivery teams, but project managers, programme managers and portfolio office managers can’t really influence how the CEO operates. This is what you can do.

Stop reporting on the past and focus on the future. The PwC survey shows that the two main focus areas for PMOs (and by extension, project managers) are reporting (63%) and monitoring (54%). To move up the maturity curve, focus on more proactive portfolio optimisation services. What can you do to spot trends and predict benefits instead of reporting on what has already happened?

Choose projects objectively. Use decent data to draw conclusions about which projects should go forward and which should be shelved. Use objective checklists and review projects thoroughly. No more organisational politics and directors’ pet projects, although I appreciate that is easier said than done. If you are a project manager, ask the questions: has your project been through the approval process and if not, why not?

Stop projects. If a project isn’t going to deliver the benefits, speak up. Recommend that it’s cancelled, or at least stopped for a bit to see if anything can be salvaged. You know your project best, and you’ll know if there is no visible link to anything strategic. If you want to be known as a project leader, act like a leader and have the difficult conversations.

Solicit new ideas for projects. Don’t rely on the old routes for project proposals, because those old routes are probably the directors who are used to skipping through the approval process and having their bright ideas delivered. Go out to your business colleagues and solicit ideas for projects. Make it easy for people to put forward suggestions so your pipeline of ideas is always full. The more you have to choose from, the easier it will be to choose the high-value ideas.

Get the right people on the team. One of the reasons, in my experience, why projects don’t get stopped is that the project team don’t know enough about the business area they are working in to be able to provide that level of consultancy. Get the right people on to the project team so you don’t have that problem. Second business experts to the project full time or part time so that you’ve always got a deep link to operational practice. They will be able to help you identify whether you’ve got a problem or whether the project is moving towards delivering something of value.

It is hard to get it right every time. Sometimes we don’t have the power to stop projects or influence those above us in the hierarchy to make the right decisions. But nothing gets better if project managers, programme managers and portfolio managers don’t try. We should adopt the attitude that projects should and do align to strategy and then be surprised when they don’t. It should simply be ‘how we do business round here’. If we don’t ask the right questions, we run the risk of working on low value, unstrategic initiatives that aren’t even delivering tactical benefit. What’s the point of that?