Few organizations measure actual benefits realization— and that's a problem.
BY GARY R. HEERKENS, MBA, CBM, PMP
There is little argument that projects deliver benefits. But understanding the various forms and shapes that projects assume is more complex than you may think.
At the highest level, project benefits can be placed into broad categories, such as financial (generate a return on investment), strategic (increase brand awareness) or operational (improve process efficiency). Project benefits also can be viewed as quantitative (a 17.5 percent internal rate of return) or qualitative (easier access to company information).
Adding yet another layer of complexity, project benefits often are subdivided into the categories of direct (reduction in headcount) or indirect (improvement in service excellence). Other terms used to make this particular distinction are “hard” and “soft” benefits.
We could go into much more detail about the various types of project benefits, resulting in an actual taxonomy of benefits that may look similar to a work breakdown structure. And while it is important to understand the forms and shapes benefits assume, it is even more important to understand how to manage them.
Just about every company or public-sector entity understands that project benefits exist—no matter what form they assume. And some do a pretty good job of identifying and estimating the potential impact of benefits on their organization. But very few companies are successful at measuring whether they actually realize the benefits claimed when the project was proposed.
FROM A BUSINESS PERSPECTIVE
Imagine you just invested some of your own money in a variety of personal investments based on criteria you developed. What is one of the first things you would do?
You would begin tracking and measuring the performance of these investments, correct? As you begin to understand the gain—or loss—associated with the various investments, you would adjust your decision-making style and criteria for additional future investments.
Organizations that invest in projects should behave the same way, yet most do not. They often execute projects and hand off the resultant deliverables to a downstream customer. The project management community moves on to the next project while the customer does its best to derive value from the deliverables received.
What's missing here? No one is systematically evaluating through time whether benefits claimed match benefits received.
From a business perspective, this is a bad situation. There is no feedback loop to explain some very important things such as where benefits estimates may have been in error, where benefits claims ultimately were unsubstantiated or where benefits claims may have been dreamed up for the purpose of selling a project.
So with regard to understanding whether the organization selects projects that deliver the greatest benefit, there is no learning. As we all are aware, any time there is no organizational learning, we can reasonably expect that the same mistakes likely will be repeated.
Over and over (and over) again.
In my next column, I will address the methods and responsibilities related to tracking and measuring actual benefits realization. PM
Gary R. Heerkens, MBA, CBM, PMP, president of Management Solutions Group Inc., is a consultant, trainer, speaker and author, and has 25 years of project management experience. His latest book is The Business-Savvy Project Manager.
JULY 2012 PM NETWORK