Benefits Realization Management

Strategic Value from Portfolios, Programs, and Projects

Carlos Eduardo Martins Serra

• Publisher: Auerbach Publications
• Year: 2016
• ISBN:
  9781315352336
• Edition: 1
• Topic: Commerce
• Subtopic: Gestion de projet

Benefits realization management (BRM) is a key part of governance, because it supports the strategic creation of value and provides the correct level of prioritization and executive support to the correct initiatives. Because of its relevance to the governance process, BRM has a strong influence over project success and is a link between strategic planning and strategy execution.

This book guides portfolio, program, and project managers through the process of benefits realization management so they can maximize business value. It discusses why and how programs and projects are expected to enable value creation, and it explains the role of BRM in value creation. The book provides a flexible framework for:

• Translating business strategy drivers into expected benefits and explains the subsequent composition of a program and project portfolio that can realize expected benefits
• Planning the benefits realization expected from programs and projects and then making it happen
• Keeping programs and projects on track
• Reviewing and evaluating the benefits achieved or expected against the original baselines and the current expectations.

To help project, program, and portfolio managers on their BRM journey, as well as to support business managers in executing business strategies, the book identifies key organizational responsibilities and roles involved in BRM practices, and it provides a simple reference that can be mapped against any organizational structure. A detailed and comprehensive case study illustrates each phase of the BRM framework as it links business strategy to project work, benefits, and business value. Each chapter ends with a series questions that provide a BRM self-assessment. The book concludes with a set of templates and detailed instructions to ensure successful deployment of BRM.

PART I

Benefits Realization Management and the Creation of Strategic Value to the Business

Chapter 1

Introduction

Organizations succeed by mastering the management of their strategic changes, with project, program, and portfolio management as the recognized set of processes and tools to manage such changes. However, projects still fail on a large scale. In parallel, it is suggested that organizations are not managing their projects in the way they should in order to ensure the achievement of their strategic objectives. This book aims, then, to present Benefits Realization Management ^* as a set of practices that has been shown to increase project success rates from a strategic perspective (Serra and Kunc 2015). These practices prioritize investments as required by business strategy and support effective delivery by focusing on creating strategic value for businesses. They also ensure business operations realize expected benefits, even after the end of program and project lifecycles.

This introduction begins with some background information that explains the relevance of this book in the present context. Then it provides a brief overview of the following chapters.

At the end of this chapter are a case study to illustrate the theory and end-of-chapter review questions to provide means for a self-assessment of the understanding. The answers to all questions can be found at the end of the book in Appendix A.

1.1 Making the Case: Relevance of Project Benefits for Business

The following background presents how high rates of project failure are currently challenging businesses success, and then it introduces Benefits Realization Management as an essential set of processes to ensure effective governance, project success, benefits and business success.

Subsection	Subject
1.1.1	High Rates of Project Failure
1.1.2	Business Success Depends on Project Success
1.1.3	Effective Project Governance Enabling Strategic Success
1.1.4	Benefits Realization Management for Succeeding in the Most Relevant Projects

1.1.1 High Rates of Project Failure

Many surveys performed in the last 20 years have found that between 60 percent and 80 percent of all organizations fail in executing their strategies by failing to deliver the expected outcomes of the changing process (Kaplan and Norton 2008). Project failure leads to the failure of business strategies. An overview of the market perspective on project success is provided in Table 1-1, which presents some relevant findings from six surveys performed from 2008 to 2015.

Their arguments indicated high levels of project failure. Although the majority of these figures clearly indicate the high incidence of project failure and consequent huge financial losses they cause, these figures clearly vary greatly by sector, market, and report. Furthermore, some sources of failure rates available in the market have been questioned regarding their reliability. An example is the reports issued yearly by the Standish Group, which may have presented exaggerated conclusions about failure rates (Alter 2006; Emam and Koru 2008; Eveleens and Verhoef 2010; Glass 2006). Nevertheless, although there are variations in the results presented by the various sources of data, and questions are being raised about the reliability of some of these sources, the scenario provided by the analysis of most sources unveils a clear dissatisfaction with project success and also exposes a clear need for the improvement of project success rates.

1.1.2 Business Success Depends on Project Success

The current economic environment is composed by organizations continuously changing to improve their processes in order to develop competitive advantage (Porter 1998). This concept, introduced by Michael Porter, an authority on competitive strategy and the competitiveness and economic development of nations, states, and regions, is widely recognized all across the globe. It is fundamental for understanding the relevance of Benefits Realization Management in supporting the successful execution of business strategies. It happens because in such a competitive environment, organizations need to have a structured way to manage change in order to achieve their business vision (Turner 2009). The management of all changes that are required to the achievement of the business vision can be called by the term strategy execution.

Table 1-1 Project Failure Reports

Survey	Relevant Findings
CHAOS Report (The Standish Group 2015)	19% of the software projects failed to deliver on time, on budget, with a satisfactory result. 50% are completed but late, over budget, and with unsatisfactory results. 16% of the software projects failed to deliver on time, on budget, and on scope. 38% are completed but late, over budget, and did not meet the target specifications.
Pulse of the Profession (PMI^® 2015)	On average, 64% of the projects are successful in meeting their goals.
Industrial Megaprojects (Merrow 2011)	“65% of all industrial megaprojects failed to meet business objectives.”
KPMG New Zealand Project Management Survey 2010 (KPMG 2010a)	“…70% of New Zealand companies have experienced at least one project failure in the past 12 months.” “…projects undertaken by New Zealand companies often perform poorly in at least one of the following areas—lack of timely delivery, cost (project runs over budget), or inability to achieve the stated deliverables.” “Over 50% of respondents stated that they do not consistently achieve stated project deliverables.” “Only 36% of organizations reported that their projects were consistently delivered on time.” “Less than half of respondents reported that projects were consistently delivered on budget.” “22% of organizations reported that less than half of their projects were delivered on budget.”
2010 Project Management Survey Results (First Line Projects LLP 2010)	“Confidence in project delivery is down. Only 24% of respondents could confidently tell a client that a project would be delivered on time. (2009: 28%)"
PMI^®-KPMG Study on Drivers for Success in Infrastructure Projects 2010 (KPMG 2010b)	“While modest strides have been made in enhancing project delivery, projects are still burdened by serious time and cost overruns, misconduct, wastage, all within an inflationary environment. Of the 1,035 infrastructure sector projects completed during April 1992-March 2009, 41% faced cost over-runs and 82% witnessed time over-runs.” “60% of our respondents comprising contractors feel that delays in completion of assigned tasks and damages claimed thereof is the main reason for disputes.”
Adapting to complexity—Global Major Project Owners Survey 2008 (KPMG 2008)	“…less than a third of projects are completed on time and under two-fifths come in on budget.”
Review of the Australian government’s use of information and communication technology (Australian Government Information Office 2008)	23% (45) were delivered over budget. 33% (64) were delivered over time. 44% (86) reported achievement of benefits but did not provide evidence of measurement. Only 5% (10) reported actual measurement of benefits and compared anticipated benefits with actual benefits realized. 45% (86) reported outcomes that were not measurable.

The management of regular operations and the execution of strategy are processes that need alignment, and although both are fundamental to business success, they are performed in different ways (Kaplan and Norton 2008). Within this context, business strategies are similar to maps to guide the changing process (Turner 2009), and project management has increasingly been recognized by organizations as the preferred way to manage work in order to implement these business changes (APM 2012; Buttrick 1997). Project management is the application of “knowledge, skills, tools, and techniques” (PMI^® 2013) or “processes, methods, knowledge, skills and experience” (APM 2015) that are the best ways to cope with changing processes, merely because the traditional organizational structure and management processes have not been conceived to manage changes, while project management, on the other hand, has been incrementally developed precisely to cope with them (Kerzner 2013b).

Projects are widely recognized by professionals and organizations across all industries and geographies as the structured way to manage the implementation of business changes (Dworatschek and Oekonom 2006; German Project Management Association 2010; PIPC 2005; PricewaterhouseCoopers 2007; The Economist Intelligence Unit 2009). Because project management is widely recognized as important in managing changes, it is easily conceivable that between 20 percent (PMI^® 2009) and 30 percent (Turner 2009) of the global economy is project based. These values can be more significant in developing economies, reaching 41 percent in China and 35 percent in India (McKinsey 2010), countries where the employment of project managers tend to increase respectively by 33 percent and 60 percent between 2010 and 2020 (PMI^® 2013b). An increasing pattern is perceivable, for example, in the increasing quantity, complexity and total budget of information technology (IT) projects (KPMG 2005).

Because of its recognition as the best way to manage changes and because of the clear dependency between performing changes and successfully executing business strategies, project success is widely recognized by organizations as a vital component of business success (PIPC 2005; PricewaterhouseCoopers 2007). Therefore, organizations clearly need to ensure the success of their projects in order to succeed in executing their strategy and in turning their vision into reality.

1.1.3 Effective Project Governance Enabling Strategic Success

Project governance is a management framework that takes place within wider frameworks of an organization’s governance processes. It ensures that a project is conceived and executed in accordance with the organization’s standards and policies and also with best project management practice. It defines the way decisions are made all across a project’s life cycle, which includes all relevant aspects of the decision-making process, such as the objectives of the decisionmaking process (why), the type of decisions to be made (what), the periodic or ad hoc events when the decision making happens (when), the place where the decision making happens (where), the roles and responsibilities involved in the decision-making process (who), and the ways decisions are made, recorded, and communicated (how). Project selection, authorization, prioritization and cancellation are all parts of project portfolio governance (PMI^® 2013c).

The effective governance ensures that important and relevant decisions are made at the correct time by the appropriate group of people according to a standard set of rules and that these decisions are appropriately recorded, communicated, and implemented. It enables a project to progress smoothly throughout its life cycle, by having its key decision points happening in...