“Value of an item must not be based on its price, but rather on the utility which it yields” – Daniel Bernoulli
A paradox of traditional project management practices is that project success is most frequently judged through three criteria;
- on-time or schedule achievement;
- on-budget or cost achievement; and
- met requirements criteria or scope achievement;
Yet the reason a project exists is to deliver value, either as benefits or outcomes, to an organisation. So why isn’t benefits realisation consistently part of the project success criteria yet?
We’ve all seen lots of cases where a project was deemed successful on the traditional project management criteria but failed to deliver the benefits to the organisation. Some research indicates only 21% of projects deliver their expected benefits.(1)
And the opposite? A project that failed on time, cost or quality, but delivered outstanding benefits.
Consider the Sydney Opera House. Regarded as one of the world’s biggest project management failures, construction took 10 years longer than expected and ended up being 1400% over budget.(2) But the scope was delivered.
Was it truly a failure? What about its benefits to Sydney and Australia?
- Sydney Opera House is considered one of the most iconic and recognisable buildings in the world
- It is a UNESCO World Heritage Site because of its architectural innovation
- Attracts more than 8 million visitors annually and has contributed significantly in the socio-economic development of Australia (and Sydney in particular)
- Generates funds from housing recording studios, cafes, restaurants and bars and retail outlets
- Plays a huge role in bringing art and cultural awareness
If we consider the benefits, Sydney Opera house has been nothing short of a resounding success.
So why are benefits not being recognised as effective project success criteria?
There are many reasons, but the most common we see occur early in the project:
- Business cases are written with the primary aim of securing investment. The benefits included in the business case seldom align to the actual problem the project is trying to solve but focus on supporting the funding argument.
- Focus on financial ROI by the decision makers and the measures of success for ‘soft’ benefits, which are not traditional physical metrics, are ignored. Project Management Institute research indicates 62% organisations can’t quantify intangible benefits (3).
- Often as a result of the two points above, insufficient rigour and divergent thought is applied to identifying potential benefits of the project. In many projects this constrained to both a constant set of benefits, bounding consideration only to the immediate problem, or not pursued once a financial or ROI threshold has been achieved.
- No metric alignment developed between Project KPI’s (Scope, Budget and Schedule) and the Business KPI’s (Benefits, Capability Uplift etc.)
- Tracking benefits is difficult. Mechanisms to effectively track the benefits post project may not even exist.
- Lack of clearly defined ownership for benefits realisation between the Project team and the Business team. Project managers are made accountable only for project deliverables and have limited role in benefits realisation during execution. On the other hand, business owner involvement may be limited in project development, but they live with the outcomes.
How does this affect your project?
Benefits are about assessing the value achieved (why we are solving the problem) rather than quantifying what makes up the solution. Not understanding this difference impacts your project in the following ways:
- Solving the wrong problem: Business case written only to secure investment often include benefits that the project is not designed to deliver. This almost invariably leads to the wrong problem being solved and defeats the whole purpose of the project.
- Project is ‘successful’ but benefits aren’t achieved: Rigorous analysis is required during the front end of a project lifecycle to identify how the project deliverable will help the business deliver the benefits. Without it, even if a project delivers the right outcome it will not translate into the intended benefits.
- Poor governance: Projects that do not have the correct measures of success identified for both ‘hard’ and ‘soft’ factors will not be able to track how a project is performing. In the absence of proper information wrong decisions are more likely.
- Inefficient solutions: Because the problems are not understood at the root cause level, solution designed don’t solve all the core issues.
What you can do to increase the chance of your benefits being realised?
It’s critical for project success to identify the problem the project is trying to solve and maximise value early in the lifecycle by tackling the right issues (see If you’re looking for project value through delivery, you’re already too late).
Through our complex projects research and Project Performance Diagnostic, Helmsman identifies 8 project control domains essential to ensure project success. Of these eight domains, Value Management is dedicated to value maximisation and defining benefits.
Value Management “ensures outcome definition, ambiguity resolution and performance measurement so requirements are right, the scope is managed and benefits delivered”
Value management is a critical phase in the evolution of a project. It is the underlying link between the project concept (problem) and assessing solution options against the outcomes sought. In addition to underpinning the business case, it also provides:
- Criteria to consider when exploring potential solutions to be considered.
- A frame of reference for assessing solution options against outcomes, and finetuning the selected option’s final design.
- A means of prioritisation for the project team and governance bodies in project decision making.
- An evidence base and multiple perspectives to execute effective stakeholder mobilisation.
- A reference point for the project team and governance groups when assessing and managing risk to the project.
Value management is multifaceted and goes well beyond quantifying benefits for a business case. Our approach to value management entails:
Problem Definition: Defining a clear problem statement means that there is an unambiguous understanding of the core issues that need to be solved to achieve the business outcome. These issues can then be disaggregated into outcome based workstreams. Doing this analysis upfront ensures the right problem is being solved.
Root Cause Analysis: Undertaking a mutually exclusive and collectively exhaustive (MECE) root cause analysis ensures that the right problem drivers are being addressed and actioned by the project and paves way for an efficient problem solution.
Measures of Success: Not all drivers have a traditional measurable metric, especially when it comes to soft factors such as organisational culture, relationships etc. But that doesn’t mean that measures for these can’t be established for a project. Absence of right measures of success can lead to ambiguity in the project, untested assumptions, and a lack of direction or control.
Value Case: Building a Value Case allows you quantify the value of solving the business problem and whether the investment needed is justified. This also includes an understanding between the Project Sponsor and the Business Owner that solving the problem (i.e. Project KPIs) will deliver the value defined in the value case (Business KPIs).
Benefits Tracking: Designing a fit for purpose benefits tracking mechanism allows the business and project to monitor and govern the project performance towards the business outcome, through and beyond the project’s life. Further, as possible changes emerge during the project, the impact of the change on the problem statement or benefits can be used as an tool to assess the impact of the change.
Systematically considering these ensures that the project (and its inevitable business case) stays focused the the outcome – the why, and provide a framework for the project to evolve with a view on benefits (get results), and not just get approved, funded or ‘done’.
If you’d like to know more about Helmsman’s Value Management offering, get in touch with our Project Performance team.
[1] KPMG, “Driving business performance”, Project Management Survey 2017
[2] Woodword, Hugh PMP, PowerPoint Presentation to NASA on March 2005
[3] Jack Keen, “Intangible Benefits Can Play Key Role in Business Case,” CIO, September 1, 2003, retrieved from http://www.cio.com/article/2442083/it-organization/intangible-benefits-can-play-key-role-in-businesscase.html
