The first PMI Power Talks took place earlier in the summer in London and TwentyEighty Strategic Execution sponsored this new quarterly event which brings together key expert speakers – all talking about a particular subject matter – the first one was Strategy Delivery and Portfolio Management.
You can take a look at the agenda and format of that day here.
You can also see the whole afternoon event which was recorded by The PM Channel, it’s free to register and access that.
Portfolio Management – Influencing the Weather
Stephen was there to talk about the relationship between benefits management and portfolio management and kicked off with a statement, “it’s all benefits”. Everything we do with projects – scope, cost, requirements – it’s all about realising benefits.
It’s the reason we invest in portfolios, programmes and projects. To realise benefits.
We don’t do them for the sake of it – keeping our project managers busy – we do it to create value or deliver benefits to the organisation.
Types of benefits typically include:
- Increase revenue
- Reduce costs
- A contribution to our strategic objectives
- An improvement to the customer
- To maintain a system
- To reduce risk or bad things happening
Benefits are the measurable improvements that contribute to the organisation’s strategic objectives.
Benefits management in its self is very simple yet when we get into the real world it becomes very complex.
One definition from APM says that benefits “justify the project” in the first place and that’s where it goes wrong.
Benefits aren’t the way you justify the project – they should be the rationale for the project.
But in the real world, APM are right.
Stephen says, “That’s when the game begins, we go looking for benefits to justify the project when we’re going to do the project anyway”. A new aeroplane may cost £20M, and the school of thought is we need to find benefits worth £30M to justify it.
“There should never be a surprise that we don’t realise the benefits because half of them are made up to start with.”
Stephen also went on to quote the recent Pulse of the Profession Reports from PMI about the failure rates of projects – 50% – and how incredible it is when you consider all the good practice that has been surrounding the whole industry. He likened it to a hospital saying that half of their operations fail or schools failing half of the children.
You call yourselves professionals but half of what you do doesn’t work – it fails!
He also mentioned a report from Oxford University about large construction projects that are “strikingly poor”, not average, or sometimes going wrong but strikingly poor performance records worldwide.
The whole point is that our projects should be aligned to the organisation’s strategies.
But what does aligned actually mean? Anything can be aligned but what we really mean is strategic contribution, which is defined as:
“Understanding what the contribution of our programmes and projects will make collectively to our strategic objectives” which means we need to understand the strategy.
Stephen also gave a great quote, “If we want to get better at programmes and projects, it’s quite simple, do less programmes and projects” too many organisations do too many programmes and projects.
“Strategy should be the justification of last resort” was another striking statement, meaning that if we can’t justify a project or programme for any other reasons, we use the strategy card, calling it a “strategic project”. Too many organisations also fall into this trap.
If they were really “strategic projects” you would be easily be able to articulate what difference these projects will make. Unfortunately the difference these projects make can’t be articulated unless its a woolly statement.
Changing the Thinking
First step, breaking the portfolio up into strategic buckets or categories and not just treating projects in the same way – so how much money do we want to allocate to keeping the lights on – how much allocated to reducing costs, increasing revenues etc. It’s only until we have a clearer idea of where the budget is going in relation to the strategic aims of the business or the benefits we want to realise that better planning can start to happen.
Then there is tailoring the investment criteria so we don’t push all projects through the same investment appraisal process so we don’t try to rank or assess a project that is focused on keeping the lights on against one which is about increasing revenues.
With the benefits then, if a project has been instigated to reduce costs, the benefit is quite simple – did it reduce costs?
Also cost/benefit analysis also makes a lot of sense too – are we sure that the cost of the project itself will not outweigh the cost reduction benefits that the project is in place to deliver. When it comes to a project that is about a strategic contribution, we need to think about the benefits that are not necessarily in monetary terms. This is multi-criteria analysis. Which is about looking at things from more than one perspective.
But when it comes to projects that are about keeping the lights on – where we have to do things – how do we measure the benefits of that? The easy answer is – you shouldn’t have to.
There are only really two questions to answer:
“Do we really have to do it, is it really mandatory?”
And if it is:
“Is this approach or solution the most cost effective way of going it?”
The Benefits Map
Stephen introduced an example of the Benefits Map for the portfolio, which starts on the left hand side with the strategic buckets or categories. These categories are the biggest strategic drivers.
The benefits categories can then align to the objectives of the organisation (second left) before coming onto the benefits and projects.
In creating this – the place to start is identifying the benefits first – we start with the problem. What is the problem we are trying to solve – or the opportunity we are trying to exploit. If we solve the problem, what would the benefits be? Only then we sit down to work out what the solution should be to deliver those benefits.
Start with the end in mind.
And make sure the benefits are clear – easily articulated and understood.