Project Management Institute

On the case

by Marcia Jedd

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Best of Congress Papers

Poor decision-making has been at the root of more than one failed project. And as companies strive to more closely link projects with strategy, business cases can provide the information and analysis that organizations need to make the right call on whether to go ahead—or not.

“Business cases aren't just an exercise, but a decision-making tool,” says Pamela Robinson, CEO of Financial Voyages LLC, an Atlanta, Ga., USA-based firm specializing in business analysis and decision-support solutions. She defines a business case as a document based on in-depth analysis that offers a workable solution to the decision-maker. Unlike a business plan that focuses on a venture or growth initiative and typically seeks external financing, a business case seeks internal financing and addresses opportunities to help meet business objectives.

Although there's no single format for a business case, Ms. Robinson says the document typically should contain:

  • Executive summary
  • Background information
  • Case objective
  • Case for change
  • Overview of alternatives
  • Cost-benefit analysis and comparison
  • Risk analysis
  • Recommendations
  • Implementation plan.

Traditionally, business cases have been used for large-scale projects that need capital investment. Increasingly, though, organizations are developing the document to support projects with smaller budgets. In some instances, they're even required. “By law, IT projects with the [U.S.] federal government now require a business case,” she says.

The article is based on material in the white paper “Business Case Development,” presented by Pamela Robinson at PMI Global Congress 2006–EMEA in Madrid, Spain.

Making Your Case

When building a business case, Ms. Robinson recommends the following framework:

  1. Break it down. Decide on the requirements, including a skills assessment.
  2. Create the storyline. State the case objectives and scope.
  3. Collect the right mix of data. Incorporate quantitative and qualitative data so decision-makers can assess each feasible alternative presented.
  4. Soundly interpret data. Business case analysis must look at cost-benefit, risk and tradeoffs.
  5. Sell the case to key stakeholders. This includes stating the case for change and analyzing alternatives.

Not-So Risky Business

Compiling the best available information—and analyzing it thoroughly—is the backbone of a good business case. “But no matter how much data is collected, it won't be perfect,” Ms. Robinson says.

inside the business case

Not every business case is built alike, says Pamela Robinson of Financial Voyages LLC, but the document is typically:

1 Inspired by actual events. Business cases are developed because of a real-world need, such as compliance requirement, product development or business growth.
2 Based on facts. Quantitative and qualitative evidence is gathered and analyzed to determine viable alternatives to meet the case objective.
3 Time-sensitive. Decisions based on business cases need to be made in a timely manner to secure the funds and implement the recommended solution.
4 In written form. Depending on the complexity, the case document can range from a few pages to hundreds of pages with exhibits.
5 Helpful in making decisions. Using the business case as a decision-making tool will help an organization improve its strategic and operational assessments and ensure different ways to meet objectives have been analyzed.

The goal is to minimize the risk of a decision. The people developing the business case should communicate early on with executives and project sponsors to determine precisely what information they need to make the call. “Senior leaders and project sponsors are accountable for the resources and the outcome of the project,” Ms. Robinson says. “And the business case is where they need to get that information—how much risk are they going to have to absorb at what cost?”

Although business cases are often written by one person, Ms. Robinson says, “tap into a diverse knowledge pool when you build the team.” The group should include business analysts as well as people with experience in finance, procurement and project implementation.

Following project management methodology allows an enterprise to do more than simply support or justify projects; it allows sound implementation of projects. “Business cases can serve to bridge the gap between the project and business sides of an organization,” Ms. Robinson says.

“Often, those on the business side are developing the business case and hand it over to the project manager, who's told, ‘We need to implement this project,’” she adds. When project managers aren't involved in developing the business case or aren't privy to the business strategy behind the project, it can result in delays, cost overruns and poor resource allocation.

Done right, a business case can provide a road map for the project's initiation and planning phases. “You don't want to put all your energy into doing a full project plan before a business case is approved,” Ms. Robinson says. “However, you can't do a business case effectively without using project management methodology.”

A Case for the Bank

Laiki Group, a financial services organization based in Nicosia, Cyprus, frequently involves project managers in developing business cases. Christos Christou, PMP, a group project manager at the company, views the business case as his contract with the project sponsor or business owner. “We use business cases as a reference for everything we do or execute during the project rollout,” he says.

“Every three months, as a project manager, I'll prepare a benefits management report that points out what's going on with specific sections as approved in the business case,” Mr. Christou adds. “Project changes also are documented as attachments to the business case.”

In 2005, based on European Union legislation, the Central Bank of Cyprus, which oversees all of the country's banks and financial services organizations, required them to install and maintain systems to prevent money laundering and terrorism financing. The companies were given a December 2006 deadline and faced severe risk to their reputations and finances if they didn't comply. “It was a critical decision for our organization to set up a project to deal with this legislative issue and apply the changes to our systems and procedures in order to comply,” he says.

Laiki Group quickly established a five-person team to develop the business case. The group included representatives from the company's compliance, finance and IT areas, as well as Mr. Christou, the appointed project manager. The business case was broken into two parts—one for the IT component, and another for rules and procedures—but both focused on obtaining the necessary financial and resource commitment. “It is the only document that binds the organization to execute and pay for the project,” he says. “We took about two weeks to determine the business need— what must be done and why—the change in internal procedures, and a full financial analysis of expected cost including hardware, software and recruitment.”

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Business cases can serve to bridge the gap between the project and business sides of an organization.

—Pamela Robinson, Financial Voyages LLC, Atlanta, Ga., USA

Following the initial information-gathering phase, Mr. Christou led extensive meetings over a four-day period with representatives from each of the involved areas. He then wrote a draft document and presented it to the team. The financial business case was then presented to the group projects and technology committee, which directs and plans projects related to the firm's strategic initiatives. They were given one week to respond with any follow-up questions or concerns.

The business case was approved, and the project is expected to be phased in during December 2006 and February 2007 in Cyprus. Delivery to the other countries in which the bank operates—Greece, the United Kingdom, Serbia and Australia—is scheduled for June 2007.

Although Laiki Group has used similar business case preparation methods within its IT area for more than five years, Mr. Christou says the involvement of its strategic business units was not evident until the past couple of years. “Since late 2004,” he says, “the involvement and strict control of a Professional Project Management (PMP®) [credential holder] in developing a business case is a practice that has led to a number of benefits for Laiki Group, including strategic alignment with corporate strategy and control of the triple constraint of cost, time and quality.” PM

Marcia Jedd is a Minneapolis, Minn., USA-based supply chain and business writer.

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.

PM NETWORK | NOVEMBER 2006 | WWW.PMI.ORG

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