Benefits management in complex defense programs

Abstract

Today, especially on complex development programs, strategic goals and associated needs are seen in vide variety and complexity. Therefore, the standard project management practices will not be sufficient for meeting the requirements/needs of both acquisition organizations and companies who supply goods/services to them. It is required that the companies have to align all their resources to realize the strategic goals and targets as well as integrity of the ongoing projects. The company portfolio, which consists of programs and projects, give a clear visibility on company's vision, mission, and goals. Programs coordinate the projects (and, sometimes, operation) to supply more benefits and governance than singular projects may supply. The benefits can be the ones that the company may have during and/or at the end of the programs, and also can be the benefits may any stakeholder supplies to program.

The primary benefits has to be considered for; customer, supplier (company) and also the industry. Therefore, new knowledge performance indexes (KPIs) have to be established together with already known schedule performance index (SPI) and cost performance index (CPI).

This paper will discuss the benefits, their management, and realization measurement for primary stakeholders.

Program Management

Portfolio vs. Program vs. Project Managements

It is highly crucial for companies to optimize the overall resources and integrate them with ongoing activities (operations) in line with strategic goals and targets. To reach them, a careful and deep investigation has to be performed. Each and every project that a company undertakes must address at least one strategic target.

The Companies Portfolio, and associated Program(s), Project(s) and Operations is one of the key indicators to correctly measure the achievement of vision, mission and goals.

The Portfolio provides an instant snap-shut to the upper management. This snap-shut can be used;

  • to decide where and when to invest,
  • to define the criteria and how the priorities given for resource allocation based on these criteria,
  • to provide guidance how strategic and tactical priorities determined.

The program, on the other hand, is defined in The Standard for Program Management – Third Edition, as “A group of related projects, subprograms and program activities that are managed in a coordinated way to obtain benefits not available from managing them individually” (PMI, 2013, p. 4). Program management can be considered as the management of a business to reach the strategic benefits and goals of the company in a coordinated manner.

Programs deliver benefits to companies to gain new capabilities or enhance the existing ones. These deliveries of the benefits are processed in a long term, and through a careful planning providing a network between strategic goals and projects.

This long-term effort can be performed in five phases; feasibility and setting up the management (governance) model, initiation, planning, delivery of benefits, closing.

The interrelation of each benefit to be delivered through program and coordination are performed by means and methods as described in the governance model of the program.

Governance

Governance is used as a term to define the will, power, and processes needed for the management activities. Program governance, within this context, can be defined as an integrated approach that is taking into consideration the rules and management assets of the company. Those rules and assets are covering the technical requirements, their interdependencies, cooperation, involvement, and allocation of management processes.

As being the soul of the program management, governance administrates the program components (subprograms, projects, operations) by using the benefits (in a very short description the positive effects of the change), which may be treated as the ultimate goal of the program.

Benefits Management

What is a Benefit?

Especially on new product/service development programs, program, and as a result, benefits management approach, will support the maximization benefits defined at the beginning.

Here, the term “benefit” used to cover not only the managing organization of the program but also all stakeholders naturally including the customer.

During the identification of stakeholders; their needs, implicit and explicit benefits have also been identified and analyzed.

What is Benefits Management?

The benefits management is defined in The Standard for Program Management – Third Edition, “ as a process to clarify the program's planned benefits and intended outcome and include processes for monitoring the program's ability to deliver against these benefits and outcomes” (PMI, 2013, p. 33).

The main purpose of the benefits management is to manage the expectations of stakeholders through benefits. The program manager has to ensure that all requirements and needs of the stakeholders should be addressed and continually monitored during the execution of several components of the program. It is clear that, the program manager needs a complete benefits management plan and set of metrics to monitor the progress of the components in terms of benefits delivery.

Specifics to Defense Programs

The generic benefits of three main stakeholders on any defense program can be listed (non-exhaustively) as:

  • Customer:
    • The deliverables of program/project
    • A potential for more complex and advance needs
  • Supplier:
    • New/extended capability
    • New technology (know-how)
    • Increase in market share
    • Finance for indigenous products and R&D resources
  • Industry
    • Gain regional and/or global center of attention
    • New technology (know-how)

Benefits Realization KPI

How Can We Define a Measure for Benefit Realization?

The complex programs, like in the defence industry, require further indicators to measure the success of the program. The effective use of the budget can be measured through the CPI, and the effective use of time can be measured through the SPI.

But programs have something beyond their projects can deliver individually: The overall benefits expected to be delivered via program. Therefore, it is highly important to define, analyze, plan, realize, and transfer the benefits during the program phases. To measure how much and how effectively the initially defined benefits are transferred, we need additional set of indices.

Before defining theses indices, first we should see how well the benefits are defined. As valid with all other requirements, the definition of a benefit has to be SMART:

Specific

Measurable

Attainable

Reasonable

Time oriented

With these attributes of a benefit, it will be easy to define an expected monetary value (EVM) of it. Here the value has to be in line with the monetary value used to measure the project performance net present value (NPV) or future value (FV). For more on EVM, you can refer to the risk management section of PMBOK® Guide – fourth edition (PMI, 2008, p. 273).

It is unlikely that each component (project, operation) contributed to a single benefit (Piney, 2011, p. 6). Therefore, a normalized matrix needs to be created to formulize the contribution. A sample matrix modified from Piney (2011) is show in Exhibit 1.

Benefit vs Component Matrix

Exhibit 1 – Benefit vs Component Matrix

How Can We Measure Benefit Realization?

The sum of the each component performance multiplied by its contribution to the benefit should give the benefit realization index (BRI).

BRI = sum of (component performance * contribution to benefit)

A practical measure to calculate the component performance is can be the combination of SPI and CPI. Companies may define their own component performance metrics. But, since the complex defense programs, mostly manage their components by EVM. These indices should already be available. Therefore, it is not needed to define another set of indices to measure the component performance.

Therefore;

BRI = Sum of ([component SPI * component CPI] * contribution to benefit)

An example for this calculation is given in the appendix.

Conclusion

Today, especially on complex development programs, strategic goals and associated needs are seen in vide variety and complexity. Therefore, the standard project management practices will not be sufficient for meeting the requirements/needs of both acquisition organizations and companies who supply goods/services to them. It is required that, the companies have to align all their resources to realize the strategic goals and targets as well as integrity of the ongoing projects. The company portfolio, which consists of programs and projects, give a clear visibility on company's vision, mission and goals. Programs coordinate the projects (and sometimes operation) to supply more benefits and governance than singular projects may supply. The benefits can be the ones that the company may have during and/or at the end of the programs, and also can be the benefits may any stakeholder supplies to program.

The complex programs like in the defence industry, requires further indicators the measure the success of the program. The effective use of the budget can be measured through the CPI, and the effective use of time can be measured through the SPI.

The BRI can be a way to measure the performance of a program to monitor the effectiveness of the benefits realization.

Project Management Institute. (2013). The standard for program management – third edition. Newtown Square, PA: Project Management Institute.

Project Management Institute. (2008). A guide to the project management body of knowledge (PMBOK® guide) (4th ed.). Newtown Square, PA: Project Management Institute.

Crispin (“Kik”) Piney, PgMP. (2011, May). The earned benefit method for controlling program performance. PMI Global Congress 2011, Dublin. Ireland.

Appendix: A Sample Calculation of BRI

At the program definition the contributions of each component are estimated as given in Exhibit 1. Also, at a given point of time, the monitoring system of the company given the CPIs and SPIs as below:

Project A:

CPI= 1,24

SPI= 1,12

Contribution: to Benefit A = 0,25; to Benefit B = 0,10

Project B:

CPI= 0,88

SPI= 0,86

Contribution: to Benefit B = 0,90

Project C:

CPI= 1,16

SPI= 0,96

Contribution: to Benefit A = 0,50; to Benefit C = 0,40

Project D:

CPI= 1,06

SPI= 1,22

Contribution: to Benefit D = 0,20

Operation A:

CPI= 1,10

SPI= 0,99

Contribution: to Benefit A = 0,25; to Benefit C = 0,60

Operation B:

CPI= 0,76

SPI= 0,86

Contribution: to Benefit D = 0,80

With above information, each Benefits BRIs are calculated as below:

Benefit A BRI

= (Project A perf * contr.) + (Project C perf * contr.) + (Operation A perf * contr.)
= (1,24*1,12*0,25) + (1,16*0,96*0,50) + (1,10*0,99*0,25)
= 1,17

Benefit B BRI

= (Project A perf * contr.) + (Operation B perf * contr.)
= (1,24*1,12*0,10) + (0,88*0,86*0,90)
= 0,82

Benefit C BRI

= (Project C perf * contr.) + (Operation A perf. * contr.)
= (1,16*0,96*0,40) + (1,10*0,99*0,60)
= 1,09

Benefit D BRI

= (Project D perf * contr.) + (Operation B perf. * contr.)
= (1,06*1,22*0,20) + (0,76*0,86*0,80)
= 0,78

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2013, B. Firat Dengiz
Originally published as a part of 2013 PMI Global Congress Proceedings – New Orleans, Louisiana

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