I. Overview

This is not an original piece of work, only a summarised guidance document drawing on literature on Benefits Management. All key concepts and definitions within this document are taken from ‘Managing Benefits’ by Steve Jenner 2nd Edition (2012)

What is a Benefit?

A benefit is a measurable improvement or change that satisfies at least 1 of these 2 criteria:

1. Perceived as positive by 1 or more stakeholders2. Contributes to organisational objectives

A distinction should be made between benefits and value, the extent to which benefits exceed the resources required to realise them.

What is Benefits Management?

Benefits Management is a discipline which intends to optimise benefits realisation; as opposed to maximising benefits realisation, the practice of optimising requires that benefits be realised to the highest degree within the given constraints.

Why do we need Benefits Management?

Improving our abilities to forecast and realise benefits more fully, assists projects to deliver on budget and on schedule, and also helps to provide a framework for the greater capture of emergent benefits.

Unfortunately, current research shows that there is a poor track record among change initiatives in realising the benefits they were established to deliver, due to the failure of effective forecasting and realisation.

This guidance will introduce the key principles to keep in mind when working with benefits, as well as something called the benefits management cycle, a tool which can be used to guide your management of benefits from a project’s inception to its lessons learned.

II. Principles

1. Align Benefits with Strategy

The strategy in question does not only apply to the organisation, but even to a programme or portfolio strategy; regardless we require clear and concise statements with which project benefits can be aligned with.

This also means that when recording benefits for a project, one should use clear and concise language that references or connects with specific organisational strategic goals.

2. Start with the End in Mind

Fundamentally in all projects, it should be the benefits which guide and lead. When first establishing a project, don’t use benefits to justify a pre-selected solution, and certainly keep an open mind if benefits appear to change throughout the project.

This concept of a Benefits-Led Initiative opposes a more traditional Activity-Centered initiative.

Activity-centred change initiative Benefits-led change initiativeThe initiative is adopted because it is ‘the right thing to do’ or a ‘no-brainer’. Where objectives are set, they are defined mainly in long term, non-specific or process-based terms, with no clear linkage from the activity to strategic contribution.

Benefits are identified and the contribution to organisational objectives is clear; there are measureable, specific, short-term performance improvement goals, even when the change effect is long term.

3. Utilise Successful Delivery Methods

This principle simply calls attention to the importance of good project management practices, and how they can aid benefits management.

A. Effective planning for business change; preparing benefits dependency networks.B. Allocating and documenting responsibilities for delivering the enabling and business changes

in benefit profiles and establishing a benefits realization planC. Ongoing participative stakeholder engagement.D. Adopting a portfolio approach to maintain a focus on business change and benefits

realisation, post-initiative closure.

4. Integrate benefits with performance management

Integrating into the organisation’s operational and HR performance management by:

A. Linking benefits to any ‘key performance indicators’B. Building benefits into business plans and budgetsC. Aligning responsibilities for benefits management with individuals’ performance objectives –

to provide clarity as to what people are responsible and accountable for.D. Aligning responsibilities for benefits with the reward and recognition process

5. Manage Benefits from a Portfolio Perspective

Managing benefits from a portfolio perspective does not dispense with the need to manage them individually, but it does ensure a more optimised approach for an organisation that engages in any sort of change initiative.

A. Align change initiatives with organisational strategic objectivesB. Enable good practices to become repeatable across all initiatives within a portfolioC. Minimise double counting, where the same benefits are claimed by, and used to justify more

than 1 initiative.D. Lessons learned are applied more widely

6. Effective Governance

Accountability lies at the heart of effective governance. Where there is no clear means of determining accountability, the result can be a ‘moral hazard’. This is a situation where people’s behaviour is altered because they are insulated against an outcome, such as non-realisation of benefits. (Just as those with insurance may not take as much care of their belongings as they would without insurance).

The Four Key characteristics of effective governance help not by attributing blame, but seek to influence behaviour by allocating clear accountabilities, and encourage transparent reporting of performance.

A. Clear Governance: - Who is responsible for what? This should be clear both at the portfolio and individual

level.- What decisions are made, where, when, and by whom? Use clear lines of delegated

responsibility, rules and routes for escalation, regular reviews of progress via reporting, stage/phase gates, and portfolio level reviews.#

B. Aligned Governance:- Responsibilities and Accountabilities should be aligned: top down or bottom up, through

programmes to individual projects and vice versa.C. Consistent Governance

- Premise governance on the consistent application of benefits management practices. Challenge the issue of ‘box ticking’ where people adhere to the letter rather than the spirit of the law.

D. Active Governance- Ongoing engagement of business managers – not just regular communication. Active

ownership is shown through via engagement of senior business owners, and by bringing the voice of the customer, user, or client into the heart of initiative development.

- Planning for success, rather than detecting failure and attributing blame. Put an emphasis on an active search for emergent benefits, and create value by leveraging existing capability rather than passive tracking to check that plans have been realised.

- Try to promote ‘Activist Accountability’ (Thorp, 2003), the concept that ownership applies to a continuous involvement in managing a program, and more importantly, clear ownership of each measurable outcome and the associated benefits.

III. Benefits Management Cycle

1. Identify and Quantify

Part 1: Identification

A. Benefits Mapping

A Benefits map is a visual representation of the business, which you can use to demonstrate how certain benefits contribute to organisational (strategic) objectives. They generally follow 1 or more of the following approaches:

- Logic Chain Approaches: Demonstrates how an initiative will result in benefits, which in turn contribute to strategic objectives

- Business Change Approaches: Where the focus is on identifying how enabling business changes can deliver benefits

B. Customer/User Insight

Bringing User needs and desires into the heart of the design of any initiative is a key element in identifying benefits. There are 2 methods that we can use to better capture user and customer insights to better identify benefits.

- Segmentation: Break up users into groups with common characteristics. While undertaking normal investigative actions like interviews, focus groups, and meetings, consider the characteristics of the users in question. The resulting insights should be used in identifying potential benefits, but can also be used to track and eventually evaluate whether or not benefits have been met.

- Customer Journey Mapping: Describe the customer experience of a service from need to outcome.

Figure 5.5 Customer Journey Mapping

Hotspot: Key points in the User journey that affects satisfactionJourney Steps: Outline the sequence of touch points between the customer and the organisationExperience at each step: records user experienceKey issues/opps: identify those items needing to be addressed

Part 2: Quantifying

Research shows that a substantial amount of projects fall short of delivering expected benefits due to misrepresentation, and forecasting plagued by cognitive biases.

A. Key Concept – Challenge and Scrutiny- Deliberately seek disconfirming evidence and ensure that business cases include

evidence both for and against a case.- Ensure forecasts are subject to robust and independent challenge and scrutiny- Utilise regular stage/phase gates at which benefits are subject to review, and do not be

afraid to re-forecast if required.B. Bronze, Silver, Gold Certainty Ratings

A Scottish council adopted the use of bronze, silver, and gold certainty rating to reflect the fact that confidence in benefits forecasts should improve as initiatives advance through the business change lifecycle.

Table 5.2 – Benefits Certainty Ratings

Features of Bronze Estimates Features of Silver Estimates Features of Gold EstimatesAre high-level estimates provided at the start of a project

Have not been broken down

Are provided once the scope of a project has been agreed

Will have been discussed with services and/or team

As the projects develops, the assumptions and plans will become further refined, resulting in benefits projections being firmed up

by service/team/individual

Are not rigorous enough to be factored into budgets

managers but not necessarily signed off

Are not broken down to the individual level, as the selection process may still have to be agreed

Can be factored into budgets but the expectation should be that they can change as the project develops. Any changes would be managed through the change control process

Gold estimates are still made in advance of the project being implemented

Services and managers have signed off the figures, and they are built into budgets

Sourced from the benefits realisation case studies on the Scottish Programme and Change Management Group Community of Practice at http://www.communities.idea.gov.uk/comm/landing-home.do?id=888150

2. Value and Appraise

Value

Part 1: Financial Benefits

Financial benefits should not just be concerned about actual costs and savings, as techniques can enable you to consider different types of benefits in financial terms:

Costs Avoided: ie. The running costs of an existing legacy system are higher than if replaced by a new system, or improved service reliability resulting in less system outages or downtime. The latter here can be thought of also as a time saving, and consequently the focus should be on how the time saved could be used.

Efficiency Improvements: When considering time savings, or efficiency improvements in monetary terms several common risks present themselves:

A. Value attributed may be overstated compared with the benefits that are realistically realizable

B. Work to value benefits in terms of their true nature can be forgotten once the business case has been approved.

Risks like these can be mitigated by using some of the following tips:

A. Valuing staff time at the marginal cost of labour (ie. With no provision for overheads unless it is clear these overheads will reduce)

B. Applying a realistic conversion ratio based on the assumption not all time saved will be redeployed. You can multiply the time saved by a factor of 0 – 1 depending on the ability of the team to realise the time savings – ideally this should reflect the teams track record in realising such benefits in the past.

C. Work to identify some end benefits that will be derived from the staff saving time.

Part 2: Non-financial benefits

When capturing benefits in financial terms is not straightforward, like in ‘improved staff engagement, or user satisfaction’, there is still a possibility to monetary valuations can be elicited. Some ideas used are measuring an end users’ ‘willingness to pay’ or ‘willingness to accept’ outcomes of a project.

A. Stated Preferences: This can be done quite literally through the surveying of users, and extract an elicit estimate of a willingness to pay, or the construction of a choice model where estimates are derived from selecting a preferred option from a range of alternatives.

B. Revealed Preferences: When values are inferred from observed behaviour in a similar or related situation.

When incorporating these measures, you should consider some risks:

Risk 1: Where people are not aware of the benefits it is difficult for them to say how much they would be willing to pay to receive them

Risk 2: The effects of anchoring: Studies show that if you offer people a proposition of how much they might spend on a particular outcome, the act of anchoring them with a suggested price has a high impact on their decision. Aiming too low will cause some people to spend less than they might have, and inversely a large anchor consistently encourages higher bids

Appraisal?

Cost Benefit Analysis

Real Options Analysis

Cost Effective Analysis

Multi-criteria analysis

3. Plan

Seven Elements of the Plan Practice:

i. Validating the Benefits Forecast- Check to ensure that benefits claimed are consistent with organisational benefits

eligibility rules, i.e. have forecasts been adjusted for optimism bias. Essentially here you should performed a technical compliance check by asking whether they are reasonable and reflective of the benefits likely to be realised.

- Assess if any additional benefits have not been included. (Research has shown that up to 25% of potential benefits are ignored and not identified in the business case, Simms 2012).

- Check for overlaps and dependencies with initiatives elsewhere in the organisation, ie. whether there are planned or current initiatives that might impact on the benefits claimed, or whether there are any anticipated changes to strategic objectives that would impact the importance of benefits.

- Validate each benefit with the recipient or owner.

ii. Prioritising the Benefits- Use benefits mapping to relate benefits to the investment objectives to enable

identification of those benefits that make the greatest strategic contribution.- Consider what the primary investment objective activity is:

a. Increased Income: in which case the most important benefits will be those that contribute to greater income.

b. Save Costs: Benefits that yield cashable savings.c. Meet a legal or regulatory requirement: Most important benefits being those that

relate to whether the requirement has been met and therefore avoidance of the costs associated with non-compliance or system failures.

d. Contribute to the achievement of a strategic objective: The most important benefits being those that contribute most to strategic objectives or risk reduction.

iii. Managing Pre-Transition Activity- Communication: Having a consistent message helps ensure that changes are embedded

as smoothly as possible.- Contingency Planning: Make sure that contingency arrangements are in place – for

example the ability to restore current systems should the replacement fail. - Allocation of Responsibilities and Accountability: This is a running theme. Do not

discount the practice of using a dependency network to track which business changes the benefits realisation is dependent on.

iv. Selecting Appropriate Benefits Measures

Table 7.2 – Types of Measure

Measure Type DescriptionQuantitative or qualitative Quantitative: measures expressed in

numerical terms, e.g. hours saved, income generated

Qualitative: measures expressed in descriptive terms, e.g. satisfaction ratings

Financial or non-financial Financial: measures expressed in £ terms, e.g. increased revenue, reduced costNon-financial: measures expressed, for example, in terms of increased production or customer satisfaction

Leading or lagging Leading: measures that ‘lead’ to attainment of an outcome or lag measure: e.g. completion of a user training program which leads to increased user satisfaction.Monitoring lead measures helps to provide an early warning where performance is deviating from the plan.Lagging: measures that ‘lag’ the change and which reflect the impact of something that has already occurred

Direct or indirect Direct: measures where there is a direct relationship between the measure and the

benefit that it is seeking to monitorIndirect/proxy: a measurement of one physical quantity that is used as an indicator of the value of another. For example, per capita GDP is often used as a proxy measure for the standard of living

v. Managing Benefits Threats

Think about risks to benefits and incorporate them into the wider risk identification log. Some common characteristics of Benefits Failures Include:

- Forecasting failure: benefits are not identified or over estimated- Initiative Delivery Failure: Failure to deliver the initiative with the planed functionality on

time- Business/Behavioural change failure: Necessary business/behavioural changes don’t

occur or are poorly scheduled.- Benefits Management failure: Problems arise in capturing and leveraging emergent

benefits- Value for money failure: Benefits are realised but at excessive cost

vi. Planning Effective Stakeholder Engagement- Stakeholder Segmentation: Customers, Suppliers, Influencers, and Governance. With

stakeholders segmented into generic segments like this, your benefits communication plan can more easily target appropriate stakeholders.

- Communication: Use communications not just to inform but also as a call to action: ensure that issues and proposed actions are clearly stated and addressed to those who are able to take the required action.

vii. Preparing Benefits Documentation

A Benefits Profile Template serves as an excellent tool to record and track benefits. Appendix B. 3

BENEFIT PROFILE FOR [Insert name of Project] No. Benefit Owner Profile Agreement Date Last Reviewed Benefit category/type Benefit description Scale of impact Scale of impact compared with baseline performance Ramp-up Trajectory from implementation of the change to full realization of the

benefit Lifespan Assumed lifespan of the benefit and any tail-off Benefits valuation Monetary value if relevant, and state whether cashable or non-cashable Measures Measures/indicators to be used to assess benefits realization Measurement Frequency Of each measure/indicator identified above Measurement Source Source of measurement data Stakeholders Major individuals or groups affected

Enabling changes One-off changes on which benefits realisation is dependent Business changes Ongoing changes on which benefits realisation is dependent Behavioural changes Behavioural changes on which benefits realisation is dependent Key assumptions Assumptions affecting benefits realisation scale and timing Threats to realisation of the benefit

Identify any specific threats to benefits realisation, and include a cross-reference to relevant risk register entry

Costs Costs associated with measurement of realisation Benefits history Record any revision to the benefit forecast with dates and body

authorising the change Agreement by benefit owner

Sign and date (indicates acceptance of accountability for realisation of the benefit by the benefit owner)

Notes: As with many standard templates, the above should be adapted to reflect the project circumstances.

4. Realise

Tracking and reporting benefits realisation and taking corrective action

5. Review

Service Excellence Benefits Tools