In a perfect world…
- Every company would have unlimited budgets to fund every project that its managers envision as strategic relative to the company’s success.
- Every project funded would see all of its intended outcomes achieved and promised benefits realized.
In the real world, however, unlimited budgets are not realistic. That is why astute companies use benefits realization to select which projects to undertake and to identify which completed projects were actually successful.
It’s hardly a new concept. Benefits realization refers to the planning, structuring, assessing and tracking of the benefits that a project generates during and after its completion. These benefits can be tangible (e.g., measurable cost savings, increased productivity or software that prevents phishing from penetrating an organization) or intangible (e.g., customer satisfaction, alignment to the corporate mission or risk mitigation).
An old concept, applied only sparingly
Many organizations, even those that consider themselves “mature” project management shops, overlook this critical component in their planning and execution. They spend tremendous sums of money funding scores of projects every year and declare a project successful because it was completed on time and on budget. Yet they fail to track whether the project met its measurable goals at six months, a year or more down the road.
Did Project A save the company $1.5 million by eliminating IT redundancies? Did Project B achieve the 6% reduction in expenses in year two as projected? Did Project C result in fewer product returns and increased repeat purchases?
If you cannot answer questions like these, how can you accurately determine whether your projects achieved its maximum return on investment (ROI)? You cannot—and if you cannot, there is a strong likelihood you have squandered at least some of your limited resources on projects that have not delivered measurable value to your organization.
Now think about the potential missed opportunities for funding projects that could have maximized their ROI.
What process does your organization use to decide which projects get the green light? How much of it is personality-driven? Did last year’s golden child’s or the perpetual squeaky wheel’s project get the rubber stamp over other solid ideas? Did the business case they presented have clearly defined and measurable benefits? Your organization needs a formal process of accountability in place to track and optimize the benefits they can achieve from a project and calculate the value delivered to the business.
“OK, Houston, we’ve had a problem here.”
Launching a benefits realization program in an established organization can be difficult, at best. It requires a conscious decision to create a structure that tracks project outcomes over months and/or years.
It requires a shift in culture. Benefits realization means holding your executive sponsors accountable for the value their projects are supposed to generate. Shocking as this may sound, not every executive is enthusiastic about having their projects interrogated in this manner. . You will most certainly meet with some initial resistance by adding a layer of discipline to the creation of project plans. But this is a crystal-clear case of the ends justifying the means.
There are logistical/staffing considerations. Project teams are typically comprised of individual employees or consultants across functional groups, from multiple geographies, who come together for only a defined period of time. Each member has a specific job to do, and unless you specify which team member is responsible for post-project tracking and analysis, that role—and the process—goes unfilled.
Realistically, many companies are not willing to make the necessary investments.
But if you want it, there is a path to implementation
If you’re unsure whether your company has the bandwidth to implement a benefits realization program, consider the following three-phased approach:
1. Obtain leadership commitment/backing. The decision to integrate a benefits realization program in your organization MUST come from the top. If your leadership team is not entirely on board, consider your program dead in the water.
Be prepared to sell the benefits (no pun intended) and the critical importance of a benefits realization program to your CEO and/or other senior executives. Emphasize how tracking project ROI can reduce the funding of bad projects and increase the value recognition of good ones.
2. Select uniform benefits realization metrics. Your company should agree on a list of both tangible and intangible measurements that will be applied to all projects, so an apples-to-apples analysis of candidate projects can be conducted at specific time points, not just at project completion.
With defined metrics, you can begin vetting and ranking the projects that offer the highest potential value and should be considered first during the next planning cycle. When that sexy $10 million project brought in from the squeaky wheel shows only a promise of $1 million in return, it’s easy to deem it low-value and not worth pursuing.
Metric measurements may be translatable (dollars versus percentage points), and they may change or be adapted over time. But they should continue to be uniformly applied to all projects up for funding consideration.
3. Establish a benefits realization team. The final step is typically more complex in nature and more long-term to formalize. Your organization will identify a specific group with the responsibility for tracking and reporting on the ongoing benefits realization for every project funded.
Once the team begins building a dossier of project benefits realization reports, it establishes its own value to the organization by creating a dashboard that lets senior executives easily identify which projects yielded the greatest ROI. The results can help companies avoid funding the types of projects that show low or limited value.
In a perfect world, every company would follow all three steps in creating a comprehensive benefits realization program. However, if you can implement even just steps one and two, you will have a strong foundation to begin identifying and tracking high-value projects in your organization.
The first step is getting started
No, that’s not a Yogi Berra bon mot. It’s a recognition that nothing is going to change in your organization without agreeing that change is needed. Once you take that first step, there are defined processes you can follow and outside consultants who can help you establish a benefits realization program so your organization can begin achieving greater value on the projects it funds.
If your company is like the many that run an annual project cycle, you’ll begin your project planning for 2021 in late summer/early fall. That makes now the perfect time to take that first step.