Benefit Realisation Guide

Written by Andy Heys

Enhance Management Consulting

Copyright © 2009 Enhance Management Consulting Ltd.

Introduction
Managing a project well and successfully handing over to the business are
key elements of managing successful change. But what the business really
cares about are the benefits.

The purpose of this paper (guide) is to provide a framework within which

management (project and business) can manage the realisation of anticipated
benefits available from business change projects.

Planning for the realisation of benefits is an essential part of any project

delivering change and should aim to uncover all activities, assumptions and
dependencies needed to make the business benefits happen.

Benefits realisation planning must therefore be undertaken from the outset of

a project and evolve through to the implementation phase to manage the
tendency of identified benefits to leak away. After all, the realisation of the
benefits is the reason the project exists.

Overview
Once a project is approved to proceed, it is the responsibility of the project
manager, reporting to the sponsor(s) and steering committee to ensure that it
is progressed successfully and that the expected benefits are delivered.

The reason that the benefits realisation process must be managed is that
many project benefits are the result of changes in business processes that are
enabled by the project or technology, rather than being directly attributable to
a successful implementation of the project itself.

For example, one of the business benefits associated with implementing a

new intranet based Management Information system is the potential to reduce
the amount paper used to distribute information to staff. This benefit will only
be achieved when business processes are reformed to ensure that all staff
have access to and have been trained in the usage of the new system and all
information to relevant business areas is distributed through this channel. In
summary, the conclusion of what is classically understood as the project
activity is necessary but not sufficient to ensure benefit realisation.

The initial subject examined in this guide is:

• benefit planning

This incorporates an overview of the whole cycle of benefits realisation from

project outset to implementation. Following this there is a more detailed
examination of the following components of that overall planning:

• benefit identification,

• benefit definition,

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 • benefit realisation, and

• benefit monitoring.

Benefits Planning
The first stage is to document and plan for the management of the benefits
that are expected to be delivered by the project. These are the benefits that
will be monitored throughout the life of the project, and achievement of these
benefits will be measured and reported at the end of the project.

Step 1 – Identify Potential Benefits

Project team, business users and relevant experts should identify high
level benefits, which are considered to be achievable through
implementation of the project. These benefits will usually be identified
through the initial business case.

Step 2 – Initial Valuation of Benefits

For each of the achievable benefits identified there should be an initial
valuation made. For quantifiable benefits this may include a preliminary
estimate of the monetary value of the benefits. Non-quantifiable benefits
should be related to business performance measures; preferably those
aligned with the business area’s Key Performance Indicators (KPIs) or
Critical Success Factors (CSFs). A single project may have both
quantifiable and non-quantifiable benefits associated with its
implementation.

Step 3 – Assign Responsibility for Realising Benefits

The project manager (programme manager) is responsible to the Project
Sponsor for ensuring benefits are realised and in consultation with users,
further refining projected quantifiable and non-quantifiable benefits.

Step 4 – Identify Business Drivers

The business objectives that are most strongly contributed to by project
delivery should be identified.

Step 5 – Analyse Business Processes

The business processes, which are going to be supported or impacted
by the proposed change, should be analysed and opportunities for
refinement or re-engineering of these processes identified. Where the
change is a technology enhancement, the greatest benefit will generally
arise through enabling a change in the way the area’s overall business
processes are done rather than simply automating existing manual
processes.

Step 6 – Establish Business Performance Measures

The key performance measures associated with the business process, or
expected to be affected by the implementation of the change, should be
identified and the impact upon them determined. The current levels of
the performance measures can be used to set benchmarks against

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 which future improvement can be targeted and measured. In consultation
with the involved business areas, targets should be established for
performance measures identified as relevant to the project. The targets
should also set a timeframe for achievement and an outline of action
necessary to reach the targets set. The Project Manager / Programme
Manager is responsible to the Sponsor for the performance measure
targets, timeframes and actions being adhered to.

Step 7 – Develop the Benefits Statement

A Benefits Statement should be developed which records the following
for each identified and defined benefit:

• a description of the benefit to be achieved

• the person responsible for realising the benefit
• the target date for the benefit to be realised
• the trigger or event that will cause the benefit to be realised
• the type of contribution to the business
• the assessed value of the benefit
• the ongoing accrued value of the benefit realised and the date
this is achieved.

The Benefits Statement forms a key element of the benefits realisation

plan which is a key appendix to the Project Initiation Document.

Step 8 – Confirmation and Review

Confirmation of the benefits should include reviewing original baseline
performance measures for accuracy and validity as the project
progresses.

As we know things change during the implementation of a project, a

review of the targeted performance measures of the benefits should be
undertaken to ensure that they can be achieved in the current business
environment. Quantifiable benefits should be recalculated based on
current business processes and targets, while non-quantifiable benefits
should be reassessed and re-valued according to the most current
business related measures.

Step 9 – Local Level Benefits Realisation Plans

Where appropriate, a local level Benefits Realisation Plan should be
created for each affected business area which records, for each benefit
identified, a set of workplace level actions, such as quality management
or redundancy/transfer that must be undertaken to realise the benefit.
The plan should identify the resources and timeframe required for each
action and any potential risks to achievement.

As stated in the introduction there are specific elements within this planning
cycle which warrant further explanation and guidance. These are detailed in
the following sections:

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Benefit Identification
For any project the business case must identify the business benefits
expected to be achieved by embarking on the project - even a scoping project
to identify potential benefits has an inherent benefit statement of its own. The
benefits must either support the corporate or business objectives or be in
response to an established imperative for change.

Many approaches dictate that benefits should be split into tangible (those that
can be quantified and measured in isolation) and intangible (those that are
delivered either as purely qualitative improvements or are so aggregated into
a combination of changes they cannot be easily separated). It must be
recognised that this guidance with respect to realisation applies equally to
both tangible and intangible benefits. If the project is delivering benefits that
warrant usage of a disciplined realisation approach this will usually centre on
delivered tangible benefits, however, the intangible benefits should be
included – too often some hazy notion or quantification of intangible benefits
is used to support a business case and because of this, actual benefit
realisation is compromised.

The purpose of this section of guidance is to provide a range of benefit

categories to assist in identifying all the possible benefits that could be
associated with specific business drivers:

Cost Reduction
A reduction in operating budget (or a need to make reduction) may drive
the need to undertake a change project. The benefits from this are direct
and realised through the business area’s success in reducing actual
costs whilst maintaining an acceptable service level. The current
operating costs need to be well documented, as do the proposed
reductions and how they will actually be achieved. Failure to reduce
budgets soon after a change will encourage benefits erosion.

Improved Effectiveness
It may be possible to quantify benefits in terms of time saved by the
business. If so, quantitative measures must be defined that will be used
to demonstrate that the benefits have been achieved. It may be
necessary to define qualitative indicators that can be quantitatively
assessed, such as customer satisfaction results and or complaints.

Improved Services
A business area providing a direct service (internally or to customers)
may wish to make an investment to enable it to provide a better,
customer focused service through change to its service delivery. Benefits
from such an initiative may include cost avoidance type savings to the
initiating business areas or its internal customers.

Business Imperative
The need for change is driven by a clear business imperative; which can
be either internal (e.g. new product range launched) or external (e.g.

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 regulatory change). Even though the implementation of the change may
be seen as mandatory it is still necessary to identify the benefits
involved. This will ensure that the most appropriate solution is selected
and that there are performance measures available against which the
success of the implementation may be measured. As with the Improved
Services initiatives outlined above, the main quantifiable benefit may be
avoidance of cost.

Technology Changes
In order to identify the benefits of replacing or upgrading both hardware
and software, it will be necessary to document all costs of the current
environment, all the costs of the proposed change(s) and the savings to
be derived. Then it will be necessary to demonstrate how these savings
will be realised. For example, will the savings be realised as a reduction
in ongoing costs or by increasing capacity to support extra services
within the existing cost / budget. In reality Technology Change benefits
usually are at least strongly associated with one of the other benefit
categories.

These categories are for guidance and are not intended to be exhaustive.

Benefit Definition
Benefits are broadly defined as either a reduction in or avoidance of cost of
performing business (cost related benefits), or as an enhancement to the
provision of services (service related benefits). The following is intended to
be a guide for defining possible benefits:

Cost related benefits

• increased revenue
• cost reductions
• reduced maintenance (e.g. maintenance contracts, repair costs,
reduction in downtime)
• reduced operational costs (non-staff) – rent, power, license fees,
communications, stationery, stock etc.
• cost avoidance
• increased service / same cost
• new service / same cost
• increased capacity / same cost

Service related benefits

• achievement of strategic objectives
• service enhancement
o faster service
o wider range of services
o tailored services
• better infrastructure
• improved productivity (can have a direct cost benefit associated)
• increased information accuracy
• faster decision making

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It should be noted that a productivity improvement by itself does not deliver a
tangible cost reduction benefit unless it can somehow be translated into actual
savings of staff numbers, avoided extra costs or reduced resource
requirements. Savings of small time increments, which cannot be aggregated
across many staff to provide realisable savings, should not be treated as
tangible benefits.

Benefits Realisation
It is the responsibility of the Sponsor (through the Project / Programme
Manager) to ensure:

• all activities identified in the local level Benefit Realisation Plans are
implemented, and
• the appropriate control structures necessary for benefits realisation are
put in place and handed to the business for implementation after
project closure.

Change management planning is regarded as a crucial element in project

success and should be undertaken in parallel with project implementation
planning. The Project Manager / Programme Manager should ensure that
any dependencies between the project implementation, the change
management and the benefit realisation activities are included in the plans.

Each of the key benefit areas should have a number of milestones developed
against which progress can be measured during project implementation, as
represented on the Benefits Statement.

Monitoring of progress against benefits realisation milestones should become

an integral part of project progress reporting and be incorporated in the
regular reporting by the project.

Benefits Monitoring
As the achievement of some benefit targets will rely on activities occurring
after project closure it will be necessary to ensure that post implementation
reviews (PIRs) check that benefits are being realised. These should include:

• an examination of achievement against benefit targets in the Benefits

Statement,

• a review of project plans to ensure all the benefit realisation related

activities were successfully completed, and

• a review of benefits realisation related to major change management

activities.

A full report on the achievement of benefits should be provided to the project /

programme Sponsor(s). Where benefits were fully achieved, or exceeded
targets, it will only be necessary (in terms of Benefits Monitoring process,
these clearly should be celebrated!) to record that occurrence. Where benefits
failed to reach targets by a margin of greater than, say, 15% (insert

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appropriate) the report should analyse the circumstances which caused the
shortfall and recommend whether remedial action is appropriate before the
project is closed. A full analysis will facilitate more accurate benefits estimates
for future projects.

Where remedial action can be put in place to manage benefit realisation after
formal project closure the Benefits Statement should be updated subject to
approval by the Sponsor(s) to reflect the newly agreed benefits targets. The
update should be supported by an analysis of the business benefits, which
were expected, and the reasons for the shortfall to ensure that the Sponsor(s)
is aware of any business impact arising from their non-attainment.

Copyright © 2009 Enhance Management Consulting Ltd.