The White Paper Collection

A Recipe for Realisation of

W www.esightgroup.com.au
E info@esightgroup.com.au
P 02 9430-6676
Project Benefits
By Steve Pitt

Recipe
1. Take the 7 criteria to assess a project's benefits, and
2. Add a healthy dose of accountability
White Paper

Abstract
A combination of using a Benefits Scoring model and introducing accountability for
the realisation of project benefits can cast a whole new perspective about how
business benefits are stated and quantified in business cases. It sounds easy, so why
is it lacking in so many companies.

How many times have you seen a business case for a project that outlines
phenomenal business benefits that seem almost too good to be true? The sponsor is
excited about the project, extols its virtues and is a high-profile advocate to get it
approved and funded. Yet you almost need a search party to find them after the
project is implemented and its business benefits are nowhere near those projected in
the business case.

Surely there must be something wrong with the approval process? Are the benefits
over-stated in order to get priority over other company projects? More than likely
the answer is yes to both questions. Where is the accountability? In most cases it is
nowhere to be seen.

So what can be done about it? We need a process that levels the playing field so that
projects with real and tangible benefits get the go-ahead. Unless an objective
assessment or scoring process exists, with accountability for realised benefits at the
tail-end of the project, the status quo will remain – most projects will fail to deliver
their expected (and stated) benefits.

April 2010 For more information : Contact info@esightgroup.com.au

 Business Benefits Scoring Criteria
A fairly common approach is to assign a score based on agreed criteria to each project and use it as a basis for
decision-making.

Project manage theWe propose
web a similar
relocation approach but with one significant difference – accountability for the
project
outcome. From our experience here are seven key criteria that can be applied to any project for assessing
business benefits:

Develop new position descriptions for the IT management team, based on CobiT
1. Strategic Contribution
In general terms, all projects should contribute to the company’s strategic objectives, otherwise why do
them. Those projects that have a clear linkage to a strategic objective deserve close attention. Examples
include the introduction of new products and services, new distribution and access channels etc.

2 Increased Revenue
A popular excuse for a project, everyone wants more revenue. It is the expected increase in revenue that
will be a direct result of implementing the project. It is either an increase in new business, or an increase
in business retention, or both.

The business case should explain how the project deliverables will result in these benefits and it should
quantify these benefits in financial terms.

It may be difficult to quantify the contribution of a particular project towards a revenue target, when that
project is only one of a series of aligned business initiatives aimed at the same objective. Nevertheless,
the business case should attempt to quantify the benefit whilst pointing out the parallel initiatives to be
taken into account. The revenue increase may be a one-off increase or it may be an increase that benefits
the company ongoing. This too should be clarified in the business case.

3 Reduced Operating Cost

Another popular excuse for a project, it always get the attention of the CFO. It is the extent to which
business operating costs will be reduced as a direct result of implementing the project, and must be
specified in financial terms.

To claim this benefit, it is necessary to identify the actual ‘dollar’ reduction that will result, either through
reduced staffing or through the elimination, reduction or avoidance of other business expenditure.

The cost reduction may be a one-off reduction that affects the current year only, or it may be a decrease
that benefits the company ongoing. This should be clarified in the business case.

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 4 Regulatory Compliance
In the majority of cases a project that is regulatory or compliance-based:

• Can usually be quantified in financial terms relative to the costs and penalties associated
with non-compliance.

• Is usually non-discretionary, and

• Has a mandated timeframe for implementation.
For the above reasons, these projects will typically permeate to the top of the company’s list of projects.

5 Positive Client benefits

These projects are often difficult to quantify in financial terms and the benefits are sometimes described
as intangible. Intangible benefits include ‘increased customer experience’, ‘improved customer access to
products and services’, etc.

Whilst it may not be possible to easily quantify these benefits in financial terms, where they can be
measured in non-financial terms they should nevertheless be identified and articulated in the business
case.

6 Reduced Business Risk

To what level does this project reduce a business risk? Some projects are undertaken solely for the
purposes of solving a problem or reducing or eliminating risk. Examples are resolving data integrity
problems, resolving audit issues and improving system security. It is often not possible to quantify the
benefits of such projects in financial terms. In such cases, the project’s importance and its relationship to
‘risk reduction’ should be articulated instead.

7 Improve Process Efficiency

Does the initiative measurably improve a process? ‘Improving a process’ is often a nebulous statement
unless it can be measured and quantified. By definition a process occurs over a period of time and any
improvement should save time (measured in FTE). Therefore unless the process improvement can be
measured, quantified and will be ongoing, it is not a process improvement.

Each of the above criteria can be weighted and ranked to produce a benefits realisation score that can be used as
part of the assessment process to prioritise projects. (Weightings may be reviewed on a regular basis, probably
annually, by senior management).

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Now Introduce Accountability
What a novel idea to introduce some accountability into the equation. When coupled with the scoring process,
they become an effective method in improving the project initiation process. Therefore it is important to clearly
communicate to all project sponsors and those who develop the business case the following:

• The two criteria that always get a mention in a business case are “Increased revenue” and “Decreased
cost”. These always get the attention of the CFO and go a long way to explain why most CFO’s
generally have a high degree of disillusion with IT-related projects – they rarely deliver on stated
business benefits, especially the ones that interest the CFO. Despite the above scepticism, they are still
worthy criteria. Just communicate one important change about these two criteria:

If these two criteria are included in the business case benefits and the project gets
approval and funding, then upon completion of the project, the budget for the
business unit will be increased by the amount of the projected revenue component
and the budget will be decreased by the amount of the projected cost component.

• Further, upon completion of the project:

The executive sponsor will be required to present to the Senior Management team
a summary of the project benefits to confirm the benefits achieved or to explain
why the benefits were not achieved.

Our experience suggests that a whole new perspective will emerge about how business benefits are stated and
quantified in business cases.

Apart from the obvious – why do this? Technology resources – both people and funding – are scarce resources for
most companies. To ensure the most effective use of these resources only legitimate projects that deliver real
business benefits should get to the top of the crowded priority list.

The Outcomes
• More focus will be applied in preparing the business case – it’s no longer a rubber-stamped document;
• We predict a significant drop in the number of business cases that project big increases in revenue or
big reductions in costs;
• The project sponsor will pay close attention to what goes into the business case and will ask more
questions of the business unit about the real value of the project and the necessity for proceeding with
it;

• Fewer projects will go to the Steering Committee for approval but they will have real benefits – people
now have some ‘skin in the game’.

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