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Benefits Management Cycle Tutorial

1 Benefits Management Cycle

Slide 1: Introduction This lesson focuses on the benefits management cycle and the steps involved in the process. Let us begin with the objectives of this lesson in the next screen.

2 Objectives

By the end of this lesson, you will be able to: Identify the steps involved in the benefits management cycle Discuss the benefits map Explain the benefits management strategy Describe the various stages of benefits realisation Let us move on to the next screen to discuss the benefits management cycle.

3 Benefits Management Cycle

Benefits management cycle is a four-step cycle for managing benefits in any programme. The benefits management cycle is continuous and iterative throughout the programme. The cycle is supported by continual activities to optimise and identify more benefits. The following are the four-steps of benefits management cycle. The steps involved in benefits management cycle are ‘identify benefits’, ‘plan benefits realisation’, ‘deliver benefits’ and ‘review benefits’. Each of these steps are covered in detail in the forthcoming slides. Let us start with ‘the first step in the next screen.

4 Identify Benefits

Following are the steps involved in identifying benefits. Benefits management cycle should start early in the lifecycle of a programme. Identifying likely benefits and mapping them from corporate objectives to project outputs is the first step of this cycle. This should ideally start in ‘identifying a programme’ when developing the programme brief. An optimal way to identify benefits is to engage important stakeholders who can provide different perspectives on where benefits might be realised. These perspectives and insights should help to generate an initial list of benefits. Once the benefits are identified, they are categorised. Once categorisation is over, the programme can analyse the overall mix and adjust its scope to ensure that it will deliver the required balance of benefits. Some benefits that have high associated risks may be tracked as risk opportunities if there is insufficient justification to develop a benefit profile. The same applies to benefits identified as a result of major change in the programme direction. The key is that the opportunity is recorded and tracked. In next screen, let us discuss benefits maps.

5 Benefits Map

Benefits map shows the relationship between outputs, capabilities, outcomes, benefits and objectives. It is important because benefits typically do not happen in isolation and there is a cause and effect relationship between the elements in a programme. Failure to deliver a specific output or capability may appear to have a minor effect from project perspective but it will have a massive impact on benefits realisation. Benefits map should also include dependencies that are outside the boundary or control of the programme. Benefits map should be created working from corporate objectives to include long- and short-term benefits. It should then define project outputs and required organisational changes. Now let us look at the image given here. To ensure mapping from corporate objectives, we will study the figure from right to left. Moving from right to left, we will find the corporate objectives on the right, which is reduced personnel cost. There are several long-term benefits of this objective, such as increased productivity, improved continuity, fewer HR staff, and low requirement costs. Before we reach these long-term benefits, we get several short-term benefits like better staff retention, higher staff morale, increased HR staff efficiency and fewer vacancies. These short-term benefits are delivered by outcomes like delays for application reduced and applications processed faster. The capabilities are new requirement process and restrained managers whereas the project output is new HR IT system. Let us focus on benefits management strategy in the next screen.

6 Benefits Management Strategy

Benefits management strategy defines the programme framework for realising benefits. It is a key component of the programme’s governance. It prescribes rules on how to identify, design, monitor and review the benefits management cycle. Strategy should define ‘what is a benefit’ for the organisation, specific measures for achieving the benefits and standard ways to calculate them. The strategy should also prescribe how to ensure that benefits have not been double counted. Double counting the benefits will increase their expected value and may create issues with estimations and expectations. Strategy must also provide the context within which the projects will operate, how they will reference and contribute to programme benefits. It also prescribes the controls that will be put in place and how assurance will work. Projects are critical in providing capability that the operations will need in order to realise benefits. If capability is inadequate or inappropriate, the potential benefits will be undermined. Strategy should include defined measures to evaluate benefits. It should also include details on reporting frequencies. In the subsequent screen, let us discuss benefits profiles.

7 Benefits Profiles

A benefit profile describes a single benefit or dis-benefit, with its attributes and interdependencies. It also supports the building of a detailed benefits realisation plan. As soon as the benefit is identified, a profile including a description and an operational owner is created. Other details about benefits and their impacts can be included as part of stakeholder engagement. It is essential to create benefits profiles for all major benefits. Concentrating on a few core benefits will reduce the overhead of creating, maintaining and pursuing numerous benefits. The Business Change Managers or BCMs are responsible for identifying, developing, validating and managing the delivery of benefits. They are also responsible for creating benefits profiles. However, they may work closely with a large number of individuals across different functions to develop the profiles. The Senior Responsible Owner or SRO is accountable for the overall set of benefits even though the BCM is responsible for creating the benefits profiles. In the following screen, let us understand plan benefits realisation.

8 Plan Benefits Realisation

Once benefits have been identified, the programme will need to understand how they fit together, attribute responsibilities, validate that they are credible and plan for delivery. It is important to plan short-term benefits realisation to ensure sufficient on-going focus and commitment to the programme. Following are the three ways to plan benefits realisation. Benefits attribution defines accountability and responsibility for benefits, collectively and individually. It is a key requirement for successful programme benefits management. Each benefit should be defined by appropriate competent individuals who are then responsible for its successful delivery. Responsibility of benefits should remain with organisational units affected by benefits. Similarly, responsibilities for dis-benefits should also be clearly allocated. One way to make benefits attribution more meaningful is to link benefits realisation to personal performance. Now let us understand benefits validation. Benefits validation identifies four critical tests. They are: Description which answers what precisely is the benefit. Observable outcome that answers what are the verifiable differences that will be noticeable between pre and post programme implementation. Attribution which answers where the benefits will arise and whether the programme can realise its benefit. It also answers whether the accountabilities and responsibilities for delivering the change are clear and agreed upon. Measurement that answers how and when the achievements of the benefit will be measured. An identified benefit that does not pass these four basic tests is by definition not a benefit. Benefits realisation plan is a complete view of all benefits, their dependencies and expected realisation timescales and is derived from the benefits map. It is used to track realisation of benefits throughout the programme. Benefits realisation plan should be developed alongside the programme plan to ensure alignment across costs, risks and realisation of benefits. The development of benefits realisation plan should be closely integrated with stakeholder management strategy. Benefits realisation plan should also identify benefit reviews to formally assess the realisation of benefits. In the next screen, let us focus on delivering benefits realisation.

9 Deliver Benefits Realisation

The delivery of benefits realization is linked with the stages of benefits realisation. Benefits realisation includes three stages: Pre-Transition, Transition and Post-Transition. One of the key areas of focus during the delivery of benefits realisation is the measurement of benefits. Without this, the realisation of benefits cannot be managed. Benefits should always be quantifiable and measurable. There is a need to define a metrics to track progress towards meeting corporate objectives. There is often a tendency to be over-optimistic when defining and setting target measures for the expected benefits from a programme. Over-optimistic expectations can create buy-in and commitment from stakeholders, however, when the benefits are reviewed, the support will evaporate if what promised is higher than what can be delivered. The absence of a baseline of the performance from the time before the programme started, creates a problem while measuring the improvements. Use the “as-is” state defined in blueprint as baseline against which performance baselines are established. In the next screen, let us discuss the key performance indicators and benefits measures.

10 Key Performance Indicators

Remember to refrain from being over-optimistic or under-optimistic while setting target measures for expected benefits. It is important to choose suitable Key Performance Indicators or KPIs (read as K-P-Is) and adjust them as a result of operational changes, if needed. Some KPIs may not be suitable for benefits measurement. Such programmes may need to define new KPIs and provide processes and tools to support them. The current KPIs are needed to be supplemented by other measures to assess benefits realised by the programme. Performance criteria from relevant or affected contracts, service level agreements and compliance targets should be reviewed to ensure change congruence. For example, any penalty that might be incurred because of deterioration in performance should be reviewed. Some measures may be subjected to fluctuations from normal process variation or seasonal trends. It is important that this is understood and reflected in plans. During delivery, the Business Change Manager or BCM (read as B-C-M) should carefully monitor business performance metrics to ensure that changes are in line with the predictions. The BCM also monitors early warnings of significant issues, which could impact the whole transition process. In the next screen, let us discuss benefits reviews.

11 Benefits Reviews

Benefits reviews may be time or event driven. It takes place at the end of each tranche to ensure that benefits realisation is still on track. The outcome of benefits review might also require the programme to review the projects dossier to ensure that alterations in benefits realisation are considered. Now let us understand the objectives of benefits review. The main objective is to inform stakeholders and senior management of the progress in benefits realisation and help to identify any further potential for benefits. The next one is to frequently assess the performance of the changed business operations against baseline performance levels. The third objective is to, assess and update individual benefits profiles and benefits realisation plan to ensure that the planned benefits remain achievable and have not changed in scope or value. The next objective is to ensure that all benefits remain aligned to programme objectives throughout the programme. Reviews also assess the level of benefits achieved against benefits realisation plan. Finally, it is essential to review the effectiveness of way in which benefits management is handled, so that lessons can be learnt and improved processes can be developed and implemented. For example, refine the definition of benefits or improve the understanding of the organisation’s ability to deliver. In the next screen, let us discuss how to optimise and look for other benefits.

12 Optimise and Look for Other Benefits

The lessons learnt and opportunities to improve performance in any step of the benefits management cycle should be under continual improvement. Changing strategy and new organisational drivers mean that the programme must be responsive to changes and look for new opportunities to identify benefits, just as risks are continually reviewed and identified. When new benefits are identified, the cycle starts afresh for those benefits. During transition and benefits realisation, the Business Change Manager or BCM (read as B-C-M) will be in constant communication with different stakeholders. When stakeholders buy into the programme and its benefits, they are creative and informed enough to identify new benefits and also optimise realisation of existing benefits.

13 Summary

Let us summarize what we have learnt in this lesson: Benefits management cycle is a four-step cycle for managing benefits in any programme. The steps involved in Benefits management cycle are identify, plan, deliver and review. Benefits map shows the relationship between outputs, capabilities, outcomes, benefits and objectives. Benefits management strategy defines the programme framework for realising benefits. The three stages of benefits realisation are pre-transition, transition and post-transition Next, we will focus on benefits management and transformational flow.

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  • PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

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