Reaping the benefits
BY MICHEL THIRY, PMI FELLOW, PMP, CONTRIBUTING EDITOR
Benefits are the ties that bind project results to organizational strategy. For example, if an organization decides to train its personnel with hopes of improving performance, benefits are measured not upon completion of the training but rather after employees have applied their new knowledge. To reap these benefits, however, organizations must first create a framework for them to take shape.
That is why benefits management, a system designed to ensure both financial and non-financial benefits are identified, agreed and realized, is becoming an essential knowledge area for global project-based organizations. Several groups—from PMI to the U.K.’s Office of Government Commerce—identify benefits management as a basic principle of program management. A more holistic approach to gaining value from projects is needed, however. Enterprises often fail at taking responsibility for benefits once the project is completed, according to the Project & Program Management System for Enterprise Innovation (P2M) used in Japan.
Some organizations are moving away from using a single method for measuring benefits. For example, many Fortune 500 companies are turning to a “triple bottom line” approach:
- Economic or financial benefits are calculated through cost-benefit analysis, cash flow, net present value, internal rate of return and economic value added.
- Social and community benefits encompass health and safety, functionality, sustainability, welfare and environmental impact.
- Corporate benefits include revenue and profitability, innovation, growth, market share, shareholder value, community perception and, more recently, stakeholder value.
And as of late, some organizations are embracing ethical benefits.
Benefits management is a top-down, bottom-up process. Many organizations, however, remain unclear on how to use benefits as a means of communication among corporate management, projects and operations. So how can project managers be more benefit-centric?
Start with strategy. Benefits management is often an abstract concept, but its effects can be measured. Tools such as the balanced scorecard help organizations make steps in translating strategic objectives into clearly defined success factors and measurable performance indicators.
Keep it clear. The portfolio management team needs to define program and project deliverables and clarify any ambiguity concerning how success factors and performance indicators relate to these deliverables. Project managers are responsible for supplying these deliverables, and program managers must ensure the deliverables produce the expected benefits.
Examine the outcome. It's up to the portfolio management team then to analyze program and project results and to assess any need for restructuring the portfolio or reformulating the strategy. Dynamic organizations will practice what authors Bob De Wit and Ron Meyer call “strategy formation” in their book Strategy: Process, Content, Context [Strategy Academy, 2004]. The process consists of a first phase of strategy formulation and a second phase of strategy reformulation based on analyzed results and set objectives.
Benefits realization is a team effort, but project and program managers can become more benefits-centric by asking the right questions and having the right information from portfolio managers and strategy managers. They must actively participate in a concerted communication effort to clarify the strategy and communicate results. PM
Michel Thiry, PMI Fellow, PMP, is managing partner of Valense Ltd. He has more than 30 years of experience in project-based organizations worldwide.
PM NETWORK | AUGUST 2007 | WWW.PMI.ORG