Bridging the gap: A people's approach to maximizing benefits realization and ROI
Senior Deputy General Manager for Strategy & Change Management, Banque Misr
Delivering projects, programs, and portfolios is different from seeing their benefits realized and return on investment (ROI) maximized. Many times, we have seen projects completed and celebrated and teams adjourned only to discover months later that the benefits intended have not been realized. This happens in all kinds and fields of projects, programs, and portfolios, such as mergers and acquisitions, IT systems implementation, business process engineering projects, and major culture transformation projects.
This is where change management can help as change management closes the value gap (i.e., the difference between which benefits were intended and which were actually realized). It does this by addressing the soft (people) side of projects, looking into how they both impact and are impacted by the change; which strategy and plan to follow to make sure they embrace, adopt, and engage in it; how ready they are to do so; and how to make sure the changes are sustainable in the long term. As illustrated in PMI's standards, change management is embedded within the life cycle of projects, programs, and portfolios across several processes and knowledge areas, including stakeholder management and communication management. However, most project, program, and portfolio managers manage tasks and metrics around the hard side of the change—cost, time, quality, and scope—with little emphasis on the soft side.
This paper explores the role change management can play in closing the value gap in your projects, programs, and portfolios towards maximizing benefits realization and ROI using a people-centered approach. The paper also reviews several change management techniques that you as a project manager can apply, the project manager's role as a leader, and how to use Kotter's eight-step model as a framework for planning and executing the benefits realization plan. Finally, it also covers how to sustain the realized benefits after the completion of your project, program, or portfolio, and on a higher level, how to create a culture of value, change, and accountability to ensure ongoing success in realizing benefits.
Delivering Projects Versus Realizing the Benefits
Delivering a project does not guarantee realizing the project's intended benefits and achieving the planned ROI. Many times projects were delivered and teams celebrated success only to later face the brutal reality that there was a gap between what was planned and what was realized. This occurs in almost every type of project across different industries, such as automation projects that do not deliver the savings in time or resources planned for, IT systems that do not streamline processes, mergers and acquisitions that fail to realize the financial savings that they were made for, and major cultural transformational efforts that falter midway through the process. In fact, PMI's Pulse of the Profession™: The High Cost of Low Performance (PMI, 2014) outlines that poor performance results in losing $109 million for every $1 billion invested in projects and programs or 10.9%, and that poorly performing organizations completed only 36% percent of their projects successfully. Most importantly, high performance in organizations was largely attributed to paying attention to people and having strong change management practices.
It's All About People
Projects, programs, and portfolios are means to execute organizational strategy that brings change to the organization (PMI, 2013b). Research has confirmed that there is a strong correlation between meeting project objectives and change management effectiveness (Prosci, 2014), as illustrated in Exhibit 1. Furthermore, in Prosci's Best Practices in Change Management (2014), the greatest contributors and obstacles to success are identified as follows:
Greatest contributors to success:
- Active and visible executive sponsorship
- Structured change management approach
- Dedicated change management resources and funding
- Frequent and open communication about the change and the need for change
- Employee engagement and participation
- Engagement and integration with project management
- Engagement with and support from middle management
Greatest obstacles to success:
- Ineffective change management sponsorship
- Resistance to change from employees
- Insufficient change management resourcing
- Division between project management and change management
- Middle management resistance
Clearly, people issues are the main challenge, as they represent four of the seven greatest contributors to success and three of the five greatest obstacles. That has also been confirmed by several other studies including Deloitte's Putting People First: The Driving Force for Sustained Transformation (2006), which states: “People-related challenges are the most significant barrier to organisational transformation.”
In order for project, program, and portfolio managers to realize the intended benefits and maximize the ROI of their projects, programs, and portfolios, they need to lead two kinds of people or stakeholders:
- Leaders and sponsors: Project, program, and portfolio managers need the commitment to lead and sponsor the efforts from this group of stakeholders.
- People impacted by the change: Project, program, and portfolio managers need to manage the resistance and get the buy-in from this group of stakeholders.
Change Management Closes the Value Gap
As illustrated in PMI's standards, change management is embedded within the life cycle of projects, programs, and portfolios across several processes and knowledge areas, such as stakeholder management and communication management (PMI, 2013c), and benefits management is one of the performance domains in the standard for program management (PMI, 2013a). Change management offers the tools that can help close the value gap (Miller, 2011) (i.e., the difference between benefits intended and what was actually realized, as illustrated in Exhibit 2). It does that by addressing the people (soft) side of projects, looking into how they both impact and are impacted by the change; which strategy and plan to follow in order to make sure they embrace, adopt, and engage in it; how ready they are to do so; and how to make sure the changes are sustainable in the long term.
The Soft Side Is the Hard Side
Most project, program, and portfolio managers manage tasks and metrics around the hard side of the change—cost, time, quality, and scope—with little or no emphasis on the soft metrics that cover the people side of change, such as adoption level or satisfaction. In addition, most of us have been trained on management science and skills (or the hard side of the change) with little or no emphasis on leadership and people skills (or the soft side of change).
Accordingly, most project managers focus on managing projects to deliverables rather than leading them towards benefits realization, which means they ignore the soft side and try to push the hard constraints along. This results in projects that are delivered with little buy-in, engagement, or belief from the end users or the people they impact. This leads to not fully realizing the benefits intended, less return on investment, or even unsustainable project deliverables and reverting back to the old ways of doing things.
A People-Centered Approach to Lead Projects
In order to address this issue and maximize benefits realization and ROI, project managers should move from managing projects to leading projects. This requires a different skill set from traditional management, and requires applying more people-oriented approaches that can help engage, influence, and inspire them to achieve the intended business benefits. In addition to the change management activities embedded within such PMI standards as stakeholder and communication management, several change management models and techniques can be applied to projects, programs, and portfolios in order to close the value gap and achieve the intended benefits and the calculated ROI:
- Force field analysis
- Change equation
- Kotter's eight-step model
- Benefits realization plan
- Change kaleidoscope
- The change curve
- Situational leadership
- Influencing and persuasion
Applying these sound models and techniques to any project, program, or portfolio will ensure that proper analysis of the people side of change has been made, the appropriate strategies to manage the people side have been put in place, and projects, programs, and portfolios are led to success and achieve their intended benefits.
Force Field Analysis: May the Force Be With You
The force field analysis was developed by Kurt Lewin and in summary states that, “In order to make change happen, driving forces for change must exceed restraining forces,” as illustrated in Exhibit 3. Project, program, and portfolio managers should analyze the forces in place during the very early phases of their projects and implement strategies to reinforce driving forces and reduce restraining forces. These strategies should be included in the change management plan, and executed and monitored in a continuous manner.
Solve the Change Equation
Another tool to understand change from a people perspective is the change equation (Beckhard & Harris, 1987), as illustrated in Exhibit 4.
The change equation states that in order for change to happen the product of several elements must exceed the existing resistance to change. These elements are:
- Pressure for change: Urgency for change may come from external drivers such as market or competition, or from internal drivers such as need to improve customer service. An understanding of why we need to change is important.
- A clear shared vision: All stakeholders should have a clear vision of the future state in terms of what will change, how things will be different, who will be involved, and when will it finish.
- Capacity to change: Does the organization have the necessary resources (people, financial, etc.) available?
- Capability to change: Do the resources have the necessary skills and competencies to achieve the vision?
- Actionable first steps: Do we have the needed support from sponsors? Are there allies? Do we have the necessary engagement?
Studying these different elements helps project, program, and portfolio managers take into consideration the organizational context in order to develop strategies to reinforce driving forces and reduce restraining forces. An important factor in the change equation is that ALL these elements have to exist and be strong or else resistance will prevail. Project, program, and portfolio managers should work to solve the change equation by including activities that ensure leveraging the supporting elements and monitoring them along the execution phases.
Kotter's Eight-Step Model
Several organizational change management models have been developed, but Kotter's eight-step model, illustrated in Exhibit 5, stands out as the most successful. The model was developed after analyzing the top reasons for transformation effort failures in over 100 companies (Kotter, 1996). Kotter's eight-step model can be applied in any organizational context at project, program, or portfolio levels. The model could be mapped on project management processes (initiation, planning, executing, monitoring and control, and closing), as illustrated in Table 1.
Kotter's model enables project, program, and portfolio managers to take a step towards leading rather than managing, as it works to engage and influence people through:
- Creating a need and sense of urgency for the change
- Building powerful allies and sponsors who can drive change
- Creating and communicating a compelling shared vision about the desired future state to engage employees
- Empowering people to act by removing obstacles to engage
- Planning for and celebrating short-term wins as a proof of concept to keep leaders committed, motivate early adaptors, and get more buy-in from resistors and use this success as a driver for more change
- Making change sustainable
|Kotter's Eight-Step Model||Project Management Processes||Plan/Document|
|Establishing a sense of urgency||Initiation||Business case, charter|
|Forming a powerful guiding coalition||Planning||Stakeholder management plan|
|Creating a vision||Planning||Communication management plan|
|Communicating the vision||Execution||Communication management plan|
|Empowering others to act on the vision||Execution||Human resources management plan, communication management plan|
|Planning for and creating short-term wins||Planning||Charter, project management plan|
|Consolidating improvements and producing still more change||Execution, monitoring and control||Progress reports, work performance data|
|Institutionalizing new approaches||Closing||Organizational process assets updates|
By applying this model, project, program, and portfolio managers can ensure they have engaged and committed stakeholders who share the vision of realizing and sustaining the intended benefits.
Benefits Realization Plan
During development of the business case, intended benefits are always defined in a quantitative way as part of calculating the financial returns of the project in the form of internal rate of return (IRR), ROI, or payback period, and are usually associated with a schedule for realization. However, in many cases, especially when the intended benefits are realized long after the closure of the project, little emphasis is put on the actual versus planned benefits realization or the sustainability of those benefits. Benefits management is one of the performance domains of program management (PMI, 2013a). Project, program, and portfolio managers should work to have a formal benefits realization plan, in which each intended benefit has its own schedule for achievement, review, and owner. The results should be documented and reported to top management, and reasons for any deviation should be documented for future reference as lessons learned.
In addition, leveraging the business realization plan with a sense of urgency and sharing a compelling vision as discussed in Kotter's model will help ensure more buy-in and engagement from all stakeholders involved and thus better benefits realized.
Change Kaleidoscope: There Is No One Model That Fits All
Developing a robust change management strategy and plan is an essential element for success. However, there is no single strategy that can fit all change situations. The context of the project, program, or portfolio needs to be assessed based on several factors that impact the change management strategy. The change kaleidoscope by Balogun and Hailey (2004), illustrated in Exhibit 6, assesses the context of the project, program, or portfolio within the organization, including factors as:
- Scope and nature of the change
- Time allowed for the change
- Readiness of the organization for the change in terms of capacity and capability
- Culture of the organization, what needs to be preserved, and the workforce diversity
Based on this analysis, project, program, and portfolio managers can make design choices that help shape the change strategy and change management plan in a way that suits the situation, resulting in better alignment, engagement, and commitment from employees and thus increased benefits realization.
The Change Curve: Change Happens One Person at a Time
A very important factor to consider is how change is handled on an individual level. Whenever there is change, each individual impacted by the change goes through a cycle depicted by the change curve illustrated in Exhibit 7. The Change curve is based on Elisabeth Kübler-Ross's work with people confronting grief and the stages people go through in response to change (Loh & Goodman, 2011). The analysis also revealed that people go through different phases of shock, denial, frustration, depression, experiment, and decision till they come to terms with or integrate this major change and accept the new situation. This curve applies to different change situations in organizations as well, and the intensity and duration of each phase varies from one person to another depending on his or her personality and the severity or impact of the change on this particular person. Leaders should work with their teams and followers in order to smooth the transition phase to the desired state.
Project, program, and portfolio managers need to understand the change curve and plan to lead their initiatives through the different phases by adopting appropriate styles. For example, applying an affiliative style in the frustration and depression phases and then moving into a pace-setting style in the experiment and decision phases would help people move through change and result in more quickly reaching the integration phase, representing the intended outcome or benefit.
Another factor for project, program, and portfolio managers to consider is that as time and degree of intensity vary from one person to another, flexibility needs to be built into plans to allow people to adopt change at various rates during the process as change happens one person at a time.
Situational Leadership: Adapt Your Style to the Context of the Change
There are many different leadership styles. Although they have often been tied to the personality and preference of the leader, Daniel Goleman's emotional intelligence model (Goleman, 1995), illustrated in Exhibit 8, implies that as the leader develops his or her self-awareness, self-management, and social awareness, he can better manage relationships (Cameron & Green, 2012). Situational leadership explains that selecting an appropriate style depends on the combination of:
- Willingness: of a group relates to the confidence, commitment, and motivation to accomplish a certain task
- Ability: the group knowledge, skills, and experience to accomplish a particular task
The most famous leadership styles are:
- Coercive: gaining immediate compliance from employees
- Authoritative/visionary: providing long-term vision and leadership
- Affiliative: creating trust and harmony
- Democratic: reaching group consensus and generating new ideas
- Pace-setting: leading by example and accomplishing tasks to high standards
- Coaching: focusing on the professional growth of employees
As project, program, and portfolio managers move into leading rather than managing, they need to further develop their leadership skills and emotional intelligence in order to select the appropriate leadership style according to the situation and context of the change. By doing so, they will improve their relationship management and be able to lead and influence others towards achieving the intended benefits.
Influencing and Persuasion: Pull, Not Push
Influencing is the process by which people successfully persuade others to follow their advice, suggestions, and orders. The outcome of influence attempts is one of the following:
Resistance can occur for many reasons, including misunderstanding the need for change, fear of the unknown, lack of competence, low trust, poor communication, connection to the old ways, and having no reward for the efforts needed to change. Resistance can take active forms, such as asking for more details, attacking, or wasting time, or it can take passive forms, such as silent resistance and increased absenteeism. Compliance will usually result in delivering the project but not realizing the benefits.
Influencing could be performed either in a push style (e.g., assertive persuasion, reward and punishment) or a pull style (e.g., participation and trust, common vision). Depending on the situation and the context, project, program, and portfolio managers should use more of a pull style in order to overcome resistance, engage people, and gain their active participation and commitment to the efforts, which result in improved benefits.
Moving Forward: Creating a Value Culture
Integrating the aforementioned techniques in project, program, and portfolio management processes will help deliver the intended benefits and maximize the ROI of a specific initiative, but replicating them in other initiatives is not guaranteed to be successful. In order to deliver the benefits realization and maximize the ROI, organizations need to work on embedding several values and attributes in their cultural DNA. Examples of such cultural values and attributes are:
- Trust and relationships
- Agility and flexibility
Projects, programs, and portfolios with little or no buy-in from people will result in resistance or lack of commitment and accordingly not fully realizing the planned benefits or ROI. Project, program, and portfolio managers need to adopt and use several change management techniques and integrate them into their project, program, and portfolio management processes in order to ensure that they are addressing the people side of change. In addition, project, program, and portfolio managers should transition into leading rather than managing initiatives in order to maximize benefits realizationand ROI, and ensure the sustainability of the results of their projects.
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© 2014, Ahmed Hussein Hassan
Originally published as a part of the 2014 PMI Global Congress Proceedings –Phoenix, Arizona, USA