The Beauty Behind Benefits Realization and Value Management
In 2009, I delivered a presentation for IPM Day where I predicted that, over the next ten years, we will see a shift from traditional project management practices to value-driven project management practices. Now, seven years later, that vision has become a reality.
What caused this change to occur?
Better Measurement Techniques
We knew more than fifty years ago that measuring the success of a project could not be done by looking at just time, cost, and possibly scope. We knew that there were other important metrics such as business value, business benefits, safety, customer satisfaction, risk mitigation, etc., but we did not have good measurement techniques at that time. So we took the simple way out and decided to report project performance by looking at only those metrics that were the easiest to measure and report; namely time and cost.
Today, with the advances in metric measurement techniques, we can measure just about anything. The problem has been that people responsible for performing the measurements did not know about the new measurement methods.
Business Case Development
Frequently, organizations refused to recognize the importance of creating a valid business case for each project. There was a valid reason for this, at least as seen through the eyes of some senior managers that wanted their “pet ” projects added to the queue without being questioned and given a high priority. Project requests were then added to the backlog of projects for delivery without appropriate assessment and with little concern if those projects were aligned with business objectives or would bring the right benefits and value upon full completion.
Projects were regularly submitted without any supplementary business case or clear alignment to corporate strategy. Some of those projects had business cases that were based upon overstated expectations and impractical benefits. Other smaller projects were created to tend to the whims of an executive. Of course, the order in which those smaller projects were to be completed was based upon the requestor’s title or rank. Just because management says “Get It Done” does not guarantee it will happen. The result was often project failure, a loss of indispensable resources, and left business value damaged instead of produced.
As the need for structured business case development grew, so did the need to make benefits and value components of the business case. A public utility in the Midwest employed a staff of 300 IT professionals to manage a $240 million budget for projects. All project requested were added to the queue and eventually completed. The company created a PMO and the first mission for the PMO was to create a template for a business case that included benefits and value. All projects in the queue were required to complete the new business case format.
In the first year, more than one third of the projects in the queue were eliminated because it became apparent that they were “pet ” projects and would not create business benefits and sustainable value. The company saved more than $80 million in just the first year and credit was given to the use of the new template.
Project governance was historically performed by just one person on each project acting as a project sponsor. Sponsors could, by virtue of their position power, establish their own priorities and assign their own critical resources to their “pet ” projects with little regard for other projects within the portfolio that were strategically more important.
As value and benefits became the drivers for establishing the portfolio of strategic projects, it became quite apparent that one person could not make all of the necessary supporting decisions on every project. Governance committees were formed in hopes that the committee would make decisions that would maximize the portfolio’s benefits realized and business value created.
One of the biggest challenges facing executives was “How much additional work can the company take on without over-burdening the labor force? ” Corporate capacity planning was an issue that could now be addressed. With a portfolio of projects designed to maximize business value and with committee governance, it was now much easier to assign the critical resources to the right projects, provided that three important questions could be answered:
- How many resources would be needed on each project?
- What skill levels would these resources need?
- Will the necessary resources be available to meet the time requirements of the projects?
In the past, projects were added to the queue with little regard for the answers to these three questions. But now, with everything being driven by benefits and value, it is apparent that project managers need to be involved earlier in the project life cycle than they were previously. Executives could not answers these questions, but project managers could answer them with reasonable accuracy.
Investment Life Cycle
Historically, project managers were brought on board projects after the project was approved. Many times, executives dictated to project managers what the budget would be and the time frame for completion. Project managers had to live with poorly documented business cases and constraints that were difficult to meet. Therefore, the project managers had little choice but to sacrifice benefits and value to meet, if possible, some of the unrealistic constraints.
By replacing the traditional life cycles with investment life cycles that focused more so on benefits and value, project managers are being brought on board the projects during project idea generation and business case creation. Project managers also participate in answering the three questions needed for effective project resource management to take place.
Everything I mentioned thus far in this blog is the result of companies recognizing the importance of benefits realization and business value management. Benefits and value have changed how we look at and manage projects. The landscape for project management has changed due to value-driven project management.
For those of you that want more information, please see my IPM Day 2016 keynote session on the same topic.
International Project Management Day (IPM Day) is IIL’s signature virtual conference where you can learn from over 25 speakers, earn up to 34 PDUs and 8 Category C SEUs, take 2 bonus courses and access plenty of downloadable resources. This year’s event is available on demand through February 3, 2017.
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