2. Literature survey
2.5. Business value
2.5.3. Benefits realisation management to achieve business value
Chapter 2: Literature survey
“Reductionism: amongst all the different impacts, some can be isolated as the most important ones for decision-making”;
“Split between thinking and doing: there is a distinction between the benefits planning process and the implantation of the activities which will lead to the benefits”;
“Control: The appraisal process is a means of achieving management control over resources”.
The importance of an effective corporate performance system in driving strategy execution cannot be overemphasised. It needs to support the strategic management process from strategy planning through to evaluation and review. It is the seamless integration of the different phases of the strategy process as well as the measurement of performance at each phase that would shed light, through the information that is gathered, on where the organisation is doing well and the areas that need improvement.
Chapter 2: Literature survey
It goes without saying that the process of benefits realisation management is critical not only for project management but for project portfolio management and ultimately to demonstrate the value created by the organisation through projects that were executed to realise the corporate strategy. This sentiment is echoed by Chih & Zwikael (2015) who said that successful realisation of project benefits is strongly associated with organisational performance. They pointed out the importance of formulating project target benefits since they are regarded as the first and critical step in the benefit management process. They also concur that projects are initiated to implement organisational strategies and as a result their target benefits should align with organisational strategic goals.
This will enable the strategy evaluation process since performance will not only be measured against the outcomes achieved in the project but the extent to which the outcomes contribute to strategy realisation. Chih & Zwikael (2015) echo this sentiment and said that formulating and appraising project target benefits are considered the first and critical step to ensure successful benefit realisation. Once approved, target benefits become the basis for ongoing project performance review. A proper formulation and appraisal of such information is thus essential.
It was a finding in the study by Serra & Kunc (2015) that organisations fail in implementing their strategies even though they employ project, programme and portfolio management techniques. It is anticipated that the use of benefits realisation could contribute toward improving this observation. Serra & Kunc (2015) introduce Benefits Realisation Management (BRM) as a set of processes structured to close the gap between strategy planning and execution by ensuring the implementation of the most valuable initiatives. However, they indicate that they were not able to locate empirical evidence of the effectiveness of BRM. It is the intent of the author to test this observation during the research.
The Office of Government Commerce (OGC) (2011) defines a benefit as a measurable improvement resulting from an outcome perceived as an advantage by one or more stakeholders, which contributes towards one of more organisational objective(s). The OGC also advocates that there is a need to equally quantify dis-benefits, which are defined as measurable decline resulting from an outcome perceived as negative by one or more stakeholders, which detracts from one or more organisational objective(s).
The OGC acknowledges that the definitions recognises that there will invariably be winners and losers, however, benefits should be delivered while recognising the sensitivities of the stakeholders.
Value is a nebulous concept as it means different things to different people. In the business concept, it becomes easier for stakeholders to grasp what is meant by value when it is defined in terms of benefits that need to be achieved to demonstrate that value has been either created or destroyed. Benefits could therefore be analysed to assess the extent of value generation and its management. These benefits could be
Chapter 2: Literature survey
defined and organised into categories such as (Office of Government Commerce (OGC), 2011):
“Economic benefit: A financial improvement, realising cash, increased income or the better use of funds”.
“Effective benefit: Doing things better or to a higher standard”.
“Efficiency benefit: Doing more for the same or the same with less”.
It is equally important to define what one means by benefits management to provide context to how the concept is applied in this study. Baccarini and Bateup (2008) cites Ward and Griffiths (1996) who defined benefits management as the process of organising and managing business activities such that potential benefits can be identified and the necessary changes made to deliver those benefits. They point out that benefits models have been developed which involves:
“Benefit identification: Benefits identification documents benefits that must be achieved which are triggered by the business need for change”.
“Benefits planning: This is the process for developing the benefits realisation plan. Benefits planning explicitly stipulating the means by which benefits are to be achieved. The plan is essential to effectively realise business benefits. Key performance indicators are defined for each target benefit so that the organisation can continually monitor the achievement of the benefits”.
“Benefits control: Benefits control is a set of actions to realise planned benefits through ongoing monitoring to ensure that they are being achieved. Benefits monitoring is required because it is almost impossible to identify all of the benefits in advance and if there were no monitoring processes, any change or new benefits would never be identified”.
“Benefits realisation: Benefits realisation is comparing actual benefits to predicted benefits to see whether planned benefits have been realised or not.
The review allows for the identification of any new benefits that may have arisen over time”.
The process of benefits management is critical to informing management on how to direct the execution of the individual projects in the project portfolios in order to achieve both project objectives and portfolio objectives. The effectiveness of project execution has a bearing on the outcome and the realisation of the benefits that are expected from the individual projects which would then have an impact on the project portfolios which they belong to. The Office of Government Commerce (OGC) (2011) advises that there is a need for benefits and dis-benefits to be profiled in order to provide a detailed understanding of what will be involved and how the benefit will be realised. In this case, a benefit management strategy needs to be defined in order to establish an approach that should be followed to realise benefits and the framework within which benefits realisation will be achieved. A generic four-step cycle for managing benefits is defined that involves, identifying the benefit, planning for the benefit, delivering the benefit and
Chapter 2: Literature survey
reviewing the benefit. The Office of Government Commerce (OGC) (2011) encourages that a benefits realisation plan is key to track the realisation of benefits and for setting review controls along the journey.
Benefits are the basis on which the returns that are expected from projects could be assessed. They provide an indication of the extent of the validity of the assumptions that are made in the business case when projects are motivated for execution. Pina, Romão & Oliveira (2013) say that business management is closely linked with investment management and is driven by business strategy. They highlight that benefit management is more useful in organisations where there is the ability to deal with the interdependencies and risks associated with the projects aimed at delivering the benefits and their respective value. They also stipulate that benefit management is driven by two interconnected challenges, the need to assess the benefits achieved in relation to the investments and the need to establish appropriate means to monitor the process of change management. It is therefore important that the benefits that are expected from projects are closely and regularly monitored in order to improve the likelihood of achieving them. The monitoring process will enable management to make proactive decisions where there appears to be indications that the expected benefits may be eroded as a result of project risks and issues.
The study conducted by Chih & Zwikael (2015) report that literature places an increasing emphasis on the management of project benefits to ensure organisational strategic goals are achieved. They also support the point that properly formulated target benefits can support informed project funding decisions when business plans are presented for investment and also ensure appropriate strategic attention from project managers and team members. They add that target benefits must be measurable so that they could be quantified when they are realised. They recommend that there should be a formal benefit formulation process to ensure successful benefit realisation.
Benefits realisation advocates that whatever is done within the organisation be geared towards achieving the expected benefit. A proactive approach drives the actions and decisions that are taken throughout the different levels of the organisation. In order for the benefits to be managed and realised, it is critical that there is a clear understanding of what these benefits are, how they are going to be realised, how they should be measured and how their realisation should be managed.
It was noted during the review of the literature that even though the area of BRM is gaining attention, there is still a need for further work to gain better understanding of how it is managed empirically. It was noted that since some of the benefits may take a while to be realised given that they occur post project closure. Therefore management of the benefits realisation process, once a project is closed, need to be improved. It is anticipated that the effective link of project portfolio management and project management would contribute in this regard.
Chapter 2: Literature survey
Literature available on the link between benefits management or benefits realisation management and strategy execution is limited and most of what is available pertains to information systems or information technology projects. It is therefore more on programme and projects management as the need to demonstrate value for the quantification of the return on the investment made. References were made in the literature, cited in this sub-section, on the potential relationship between strategy and organisational objectives but very little could be evaluated to assess the views of contributing authors on effective strategy execution. This area is one of the critical areas that need further research given the need to identify methods used to quantify value created by organisations as strategy is executed. This is another area, which this study seeks to contribute to, through demonstrating how benefits realisation management could be integrated into strategy execution.