4 out of 5 Information Systems projects fail to realise even 50% of the originally identified benefits.” Source: Management Today.
The major reason any project is given a green-light by executives is they deliver benefits to the business. So why is it that so many projects fail to deliver their identified benefits?
A project by its nature will bring change, and with this change comes inherent risks around disruption to the business, people not engaging in the outcome, and the promised benefits never eventuating. So when considering any project there must be suitable benefits available to compensate for this risk and disruption?
Even the simplest of projects should be put under the microscope to assess if it can deliver necessary benefits. If a project doesn’t achieve tangible benefits, why would you bother investing your time, energy and dollars? It is a practical and logical question, yet many projects still proceed without this feasibility assessment being completed. The math for assessing feasibility is really simple – the investment you make in the project must return benefits that outweigh the cost of doing nothing.
There are four main types of benefits you can use to build a compelling business case
- Increased revenue – Are the changes you are planning on implementing going to grow your business? If your analysis proves that there is an opportunity to increase your revenue based on a defined set of variables and assumptions, then the project probably makes good sense. This type of benefit will always be built on assumptions. You are relying on your customers reacting the way you expect and increasing their patronage of your services or products. Even programs to improve the engagement of staff or the customer experience are based on increasing revenue.
- Cost reduction – All good businesses focus not only on growing their businesses, but also on reducing their day to day operating costs. By achieving both of these benefits these businesses get the double whammy on their profit, with more sales delivered at a reduced cost to serve. However if you are in a business in a mature industry with not much room for revenue growth then you are more likely to be involved in a cost reduction project than one focussed on increasing revenue.
- Compliance – Legislative and regulatory compliance is a must for any business. If compliance requirements change, or are not being met by the business then there is no alternative but to make the necessary changes immediately. These are non-negotiable – if you want to stay in business you must make the necessary changes. That is a pretty compelling argument for your business case.
- Cost avoidance – These benefits are related to future costs that could be avoided by undertaking the project. A good example would be implementing new software so to avoid an expensive complete upgrade of the system in the future. Without doing the project you will definitely have to outlay for the upgrade, so it makes good business sense to pay less now.
Regardless of the type of benefits being promised, you need to ensure you have a structured benefits realisation approach and plan. As the project progresses, the commitments made tend to evolve into guides when the time comes to deliver the benefits. Without a signed off Benefits Realisation Plan you could open yourself up to a range of excuses as to why the benefits are no longer relevant and can’t be delivered.
Some of the main reasons why benefits fail to be realised in projects are:
- the benefits were identified in isolation to the business and the argument could be made that they never signed up to the benefits in the first place
- the benefits were overly optimistic at the outset, and were never tested to ensure they were achievable and realistic
- there is no link between the benefits and the original business requirements, so the business may dispute that they are able to deliver the benefits
- several business units unknowingly claimed the same benefits, meaning they were counted twice
- the focus on benefits ceases as soon as the project wraps up and there is no ongoing accountability for delivering them
- conflicting projects mean that quantifying the realisation of benefits is difficult e.g. a restructure affects staffing numbers around the same time your project benefits for staff savings were to be delivered
To avoid becoming another statistic in the 80% of projects that fail to deliver even 50% of their original benefits you could apply the following 10 steps.
- Centralise your benefit realisation – Either within the project team or in an independent business unit such as finance. This will provide you with the necessary due diligence around the benefits, however you will also need to ensure you have a strategy to maintain business ownership during the project and even more importantly once the project ceases to exist.
- Identify who benefits from the project – When you commenced the project the impacted stakeholders would have been identified. Meet with the business owners of each of these units and have them outline the benefits they will receive. Confirm the benefits in writing to ensure you both had the same understanding of the benefits.
- Define the benefits – Conduct workshops around the benefits they will receive. Usually there will be primary and secondary benefits that the business may achieve. Primary benefits are those that are directly attributable to the project, while secondary benefits are those that have been realised as a result of the primary benefits being delivered. An example is that if your project reduced the number of clients who defaulted on your accounts, then the primary benefits would be the increased cash flow and a secondary benefit could be the reduction in postage costs associated with chasing the debt. You should also investigate the ‘dis-benefits’ that may result. There may be some downsides to what you are doing and you should identify these so that you can highlight them in you assessment and also be ready to manage the impacts associated with them.
- Link the business benefits to business requirements –If your initial response to this point is “What business requirements?” then I suggest you immediately put a stop to the project and go back and identify the business requirements. If you don’t know what the business wants, then how can you be sure of the benefits, and where they are going to come from? You should be able to identify exactly which changes will deliver specific benefits right down to the detailed business requirements. Using a traceability matrix is very useful in mapping the business requirements back to the benefits. Ideally, once the project is finished you should just be able to go through the list and tick off the requirements with the business and they should be able to confirm that corresponding benefits have been delivered.
- Confirm how the benefits are calculated – All too often there is no science behind how the benefits were calculated. It is critical that the benefit owners know how they calculated the benefits and that they can explain it to you to show that the number are defensible and the math is auditable. Document the formulas and be prepared to explain it to your executives, who will undoubtedly question all elements of the benefits. After all it’s their reputations are on the line as well as yours.
- Review the benefits for achievability –You need to be on the lookout to ensure that there has been no double counting of benefits across business units or business requirements, and benefits can actually be delivered. As businesses eagerly scurry to find benefits to support a business case they may end up looking at the same benefits, but from different angles. Be aware of this trap and ensure that there is no overlap.
Another issue you may come across when you work through the list of benefits is that the staff savings are not achievable. You may have identified operational savings of a day in one role, two days in another role and so on. Then, when you tally up all of these savings you may end up with a magical number that relates to the number of potential full time employee (FTE) equivalents that you believe could be realised. However, you need to be careful – you cannot save part of an FTE, unless they are willing to reduce their hours or take over some additional responsibilities. Remember, while a saving of 1 day is equivalent to 20% of a full time role (0.2 of an FTE), but if you deliver the 0.2 FTE, who is going to do the other 80% of the role? Another problem you could face is by aggregating the savings across several roles you may get to a whole FTE saving, but because it is across three unrelated roles, it may not be realisable, because employees in those roles are not cross-skilled.
- Quantify the benefits with your finance gurus – When you are quantifying your benefits you will want to ensure you are working from a single source of truth, numbers that will not change. Often the finance department will have details of all of the costs they add onto a role, information that managers may not have full visibility of, so work with the finance department to obtain the approved numbers. Another important advantage of working with finance to validate your benefits is that they will place them under the same scrutiny as the executive team will. So once you have their written endorsement you will receive a much better reception when you walk through the benefits with the executives.
- How will you realise the benefits? –Having confirmed the benefits with the business and had them independently verified, the next step is to plan how they will be realised. A well thought out Benefits Realisation Plan outlines the benefits and their relationship to the requirements, and also includes a schedule of when the benefits will be realised. One of the most effective strategies I have used is to have the budgets for the business units updated to reflect the realisation of the benefits. If the benefits were operational savings then the budget should be adjusted downward for the period they were due to be realised in. That way there is no debate about giving the money back, as the managers never actually received it to start with. If the benefits are increased revenue then the sales targets need to be also adjusted accordingly. Importantly make sure that the Benefits Realisation Plan is signed off by those responsible for delivering the benefits. This may be very useful to have up your sleeve when it comes time for the business to ‘cough up’ its benefits.
- Have the business present their benefits to the executive team – One of the most powerful approaches you can use to ensure the business is held accountable for delivering their benefits is to task them with presenting the details to the executive team. By having the business owners outline the origin of the benefits, how they were calculated and how they will be delivered. This leaves no room for confusion, and also shows the executive team that the business has been engaged all the way through the process and that they understand their responsibilities and the impact on them. It’s a ‘win-win’ strategy.
- Transfer the benefits realisation into operations – It is unlikely that all of the benefits will be achieved during the life of the project. Quite often the project will have been closed and the processes and systems transitioned back into the business as usual operations by the time the benefits are due. Ideally you will have identified an executive who takes ongoing accountability for ensuring the benefits are realised as per the signed off plan. The effort required to manage the Benefits Realisation Plan will be significantly minimised if you take the initiative to have the budgets adjusted in line with the plan prior to transitioning it back to the business.
Spending more time upfront in defining and confirming your benefits will ensure that you deliver what was promised in regards to the project benefits.
For more details on how to build a business case, refer to my recent blog “10 questions you need to answer for a successful business case”.
3 thoughts on “Benefits…. what benefits? 10 ways to make sure you achieve your project benefits.”
Where do you think that the project benefits should be discussed? In the project charter? In the project plan?
In any case, the “benefits” topic has rarely been discussed in the project management realm – usually people write about processes or best practices.
I think your post offers something new to project managers as it is written like a guide (to achieving project benefits). As such, I would like to republish your post on PM Hut where many project managers will benefit from it. Please either email me or contact us through the contact us form on the PM Hut site in case you’re OK with this.
Thanks for you kind comments. I would be honoured to have it republished, obviously with the appropriate credits. Thanks again Gary
Hi Pm Hut. I am one for reinforcing the benefits regularly throughout the project artefacts. That way you have consistency and continuity and it keeps it front of mind for all.
Btw could you in credit list me as Director of Talk Communicatons. Talkcommunications.com.au. Please let me know when you repost. Thanks Gary.