In our day-to-day project management and PMO activities, the easiest and the most important thing missed is planning ahead for what happens AFTER we cross the finish line. So technically speaking, once project managers hand over the reins of the completed project to the business owner, their job is just half done. For a project to be considered complete, project managers must focus on the other half, which is “Benefits Realization”.
Benefit realization is the confirmation that the value a project was expected to generate really does get delivered. In our everyday project management lives it is easy to get buried in details around task management, risk mitigation, resource capacity, balancing budgets and all the other moving parts. We often forget why we set out to do the project in the first place: the delivery of a product or service, an enhancement or improvement, or a capability. For example to meet some new regulation, standard or market demand. But what if, after we deliver the goods, and did exactly what the customer asked for, we realize that all the effort and resources we used to deliver the project don’t amount to what they were supposed to? That’s exactly what benefits realization is all about.
We’ve all heard of ROI – return on investment. It is the concept of an investment of some combination of resources (people, money, equipment, etc.) yielding a benefit to the investor. A high ROI means the investment gains compare favorably to investment cost. As a performance measure, it is one of the best methods to evaluate the efficiency of an investment. ROI does not exclusively have to be in financial terms. It can easily be an operational advantage, an improvement in position, or other positive change. In order to compare the efficiency of a number of different investments we need to compare like measures, which is why a financial ROI is one of the most commonly used. Unfortunately, without benefits realization, our ROI is simply a guess. And that is why benefits realization is so important.
I’ve discussed with many of our clients about this and have found out that there is a need for a wide degree of maturity around the realization process. This is an indication that while the concept of realization is gaining interest, it is still far from a mature practice. Which presents a great opportunity for those organizations that are not doing it – now is a great time to implement this practice.
How to launch a benefits realization initiative?
One of the best approaches involves setting goals, tracking against those goals and including a ‘hand-off’ step, similar to the passing of the baton in an Olympic relay race. Tactical steps you can take include:
- Set your sights: using whatever calculation available, combined with experience and validated by results from similar projects, come up with a target for what the value you think the project will deliver. Set that as the initial estimate. Enlist the help of a financial leader or controller to help set the original estimates.
- Continual monitoring: Using the initial estimates or targets as a first guess, continue to refine the success factors throughout the lifecycle of the project. These are often called forecasts or committed values and are more accurate than the original estimates. It is best to continue revising these figures throughout the lifecycle of the project. The objective here is to have these forecasted numbers eventually match the actuals.
- Start tracking actuals now: some project can actually generate benefits even before the project is complete. What a great win for the project team to be able to report these.
- Put a plan in place: Add a milestone or stage beyond the Complete step called Close or ‘Realization’ and set a validation step 3, 6 or 12 months after the project is complete. It sets the expectation that the work is not over at Complete.
- It is outside of the project manager’s responsibility: As the project comes closer to its Complete or End date, engage the financial sponsor and the process owner (the person who is benefiting or owning the project’s or product’s outcome, improvement or change) and have them start validating and “owning” the numbers.
- Go back to the beginning: how accurate were your original estimates compared with your forecasts and your actuals? Take those learning and apply them to future estimates. This is called continual improvement – applying lessons learned and best practices to improve the entire PMO.
One last point is that it isn’t always about the money. Sometimes projects generate other value, such as an improvement in customer satisfaction, or increase market share by launching a game changing product. It is important to be able to quantify the value of these types of projects even if they do not generate direct revenue or cost improvements. Many organizations call these ‘Level 2” or “Indirect Benefits”.
Finally, is a project complete without benefits realization? To the project manager who’s already run their marathon and marked the project as complete, I expect their answer to be ‘yes’, but common sense tells us otherwise. As a best practice, one of the most important factors in a projects success isn’t “how we did it” – coming in under schedule or under budget – but “what we did” – that the project delivered what it set out to do.