Chapter 5

Checking the Justification and Benefits

In This Chapter

It’s not just about benefits – looking at different justifications

Being clear on benefit types, including non-quantifiable benefits

Help to think through the possible benefits for your project

The Business Case focuses on the justification for the project, including listing any business benefits that will result from the project. This chapter helps you check the justification for your project and write a sound Business Case.

Project Justification Checklist

It’s easy to be too focused on benefits, or even a given level of financial benefits, when you’re thinking about whether a project is justified or not. However, while achieving business benefits is the most common project justification, it isn’t the only one. Have a look at this list to check your project out.

• Benefits: Okay, the most common justification first. The project will pay back with business benefits which outweigh the cost and effort involved in running the project.
• Compliance: You have to run the project whether there are benefits or not. That might be compliance with legal requirements or something like an HQ instruction that ‘All regional offices will run a project … ’
• Enabling: The project itself won’t deliver benefits, but it will put something in place that will allow other projects or operations to deliver benefits. Infrastructure projects often fall into this category, such as a project to install a new computer network.
• Maintenance: The project just has to be done, even though there is not any benefit in the normal sense of the word and it’s not mandatory (where it’s needed for legal compliance). Replacing worn out equipment or redecorating the HQ building are often just ‘maintenance’ projects.

A senior UK police officer once asked me for advice on the Business Case for his project. He said he’d been working for a couple of days to identify benefits but he couldn’t find any and so couldn’t see how he could write the Business Case. I asked him why the police force was considering running the project and he replied ‘Well, the Home Office has told us to.’ (the Home Office is the UK government department that oversees police forces). I advised the officer that the main part of his Business Case – the justification – was ‘The Home Office has told us to.’ The project justification was ‘compliance’ based and very simple.

You may find that your project has a combined justification. Perhaps you must run the project anyway (compliance) but actually it will deliver a few benefits along the way which, although not completely offsetting the cost, will nevertheless contribute.

Benefit Types Checklist

Even where your project is benefits justified, you must be clear on what type of benefits those are. There are three different types and you need to be very aware of them because for sure your Finance Director will be.

The first distinction between benefits is whether they are measurable – quantifiable – or not. If a benefit can be measured, the next divide is whether it will be a financial gain or something else that is quantifiable. This breakdown is illustrated in Figure 5-1.

• Quantifiable – financial gain: Cash savings are involved. If you replace a high-maintenance machine with a low-maintenance machine then you’ll be able to see the unspent money in the maintenance budget. The ‘financial gain’ benefit is real money and is of particular interest to your Finance Director and to business managers.
• Quantifiable – other measurable gain: You can measure the benefit, perhaps even in financial terms, but isn’t real money that you could draw out of an account and hold in your hand. Perhaps your project will improve the delivery schedule so customers get their orders in two days rather than the present four-day turnaround; that’s a measurable benefit.
• Non-quantifiable: A benefit that you cannot measure meaningfully. In some cases it’s pointless to try to measure something where the resulting figure will be vague or even misleading. In other cases you can see that you have no hope of accurately measuring the benefit at all. It may still be an extremely important benefit though – see the warning below.

Don’t ignore non-quantifiable benefits, and be especially careful if you are using a method (such as the leading UK project method) that plays them down as if they don’t matter. Non-quantifiable benefits can be incredibly important to the point of justifying the project without need for anything else. For example, running a project to improve the design of a commercial product may be essential so that you keep pace with competitors and hold market share. But it’s hard to prove how many customers then bought your product solely because of the improvement; some would have bought it anyway and your sales were still good before the project. On the other hand, because they aren’t measurable, it’s easy to fool yourself that you’ll get all sorts of wonderful non-quantifiable benefits when really you won’t. Be brutally realistic then and try not to understate or overstate the non-quantifiables.

Benefits Consultation Checklist

You may have identified a lot of the benefits of running the project, but it can help to check things out with other people too. Sometimes they will see extra benefits that you didn’t, and that could end up with your project being better justified than you’d realised.

Talking to other people can often make for a better project too. Someone may identify substantial benefits in a related area that you don’t currently intend to include in the project scope. Yet you could easily take in the additional area and make the project very much more effective in the process.

Tom Peters, the American management guru, has said that all projects should be ‘wow’ projects. If any project isn’t ‘wow’, he argues, you should rethink and reframe it until it is. I don’t agree that every project can be a wow project. Being American, I’m sure Mr Peters doesn’t know about projects to change the VAT rate across an organisation, for example, but I do think that he makes a valuable point. You can sometimes improve the value of the project considerably by adjusting the project boundary even if that adjustment doesn’t result in the project being an organisation-changing watershed. The time to make such scope adjustments is now, during Kick Off, when the project documentation is still in sketch form and making changes is relatively easy. If you’re interested in Tom Peters’ take on this, have a look at his book ‘The Project 50’, part of the ‘reinventing work’ series published by Alfred A. Knopf.

My favourite example of taking a project to the next level is with a stationery supply company that put in a new computer system for customer orders. They realised that with small scope increase they could make use of the order data and make personalised special offers to customers, thereby increasing sales. So, suppose I buy a new fountain pen. On my next mailing from the company I see a tailored front page with a personal special offer on ink cartridges and blotting paper. I was impressed because that was a clever move; a lot of extra benefit from a relatively small amount of extra work using data that they were going to have to hold anyway.

As you’re thinking about who you might ask about the benefits and potential benefits of your project idea, check out this list.

• Business users: Those who will use what the project will deliver. Ask them if there is anything that would make the deliverables even better. For example, including additional storage facilities in the new building extension may save staff time because currently people have to go to a more distant area to fetch things. Listen carefully to staff, including junior staff. Often junior people have been making sensible suggestions for ages only nobody’s heard them.
• Operational and maintenance staff: Check out what ops and maintenance staff think about the project idea. They may be able to identify further benefits, or small changes that would lead to significant operational and maintenance savings, partly based on their experience of what’s costing a lot at the moment.
• Customers and sales staff: It can be helpful to ask customers what they would find useful, or at least sales staff who understand customer needs. Some relatively small extra things can have disproportionately high benefits to customers, and make a good impression at the same time.
• Managers: Organisational managers may find benefits in small additions, such as being able to get additional reports in a new computer system so they can do a better analysis of usage patterns for hospital consumables. This wouldmake buying more cost efficient.
• Senior managers: To see whether additional functions would help achieve organisational targets. It could be that it isn’t worth running a project just to hit one of those objectives, but adding that scope to yours would be a way of achieving it economically.
• Similar organisations: Particularly if you’re in the charity or public sectors, talk to other organisations to see if they’ve done something similar. Ask what the scope of their projects was and what benefits they found. While you’re at it, ask them if they would change the scope if they could go back in time and do the project all over again.
• Suppliers: Talk to suppliers, including internal suppliers within your own organisation, such as the IT Department. Draw on their experience of what would work well and make for an even better project, perhaps using new technology to give improved functionality or cheaper operations.

Measurement Points Checklist

Note against every quantifiable benefit that you list in the Business Case how and when it should be measured. It’s a common misconception that all benefits are measured after the end of the project.

Think about what measurement points are appropriate for your project in the context of the benefits that you need to measure and when they will come on stream. Here’s a summary of the main benefits review points.

• During the project: Some benefits may come on stream during the project. For example, if you replace a high-maintenance machine with a new low-maintenance machine early on in the project, you will start to see savings in the maintenance budget during the life of the project.
• At the end of the project: Particularly where you have a Closure Stage after the final Delivery Stage, the benefits from that delivery may be measurable before the project shuts down. In that case the benefits realisation can be included in the Project Completion Report.
• After the end of the project: Some benefits might not be clear for some time after the end of the project and so cannot be measured until then. For example, staff working on a newly introduced business procedure may not be working at normal speed for a few weeks while they get used to the new approach. It’s only when things have settled down that you can take a meaningful measure of the savings in staff time.
• Interim and final: You might decide to use the last two points in combination. You could take an interim measure at the end of the project to give organisational managers and the Project Steering Group an early indication of the level of a benefit, then do a later and final one to give a precise measure.
• At the end of linked projects: Where your project is linked to others (perhaps in a programme), it may be that some of the benefits of your project can’t be fully measured until after other projects have also delivered and the combined effect comes into play.

Benefits Checklist

Sometimes you may find it hard to spot all the areas of benefit, and if you miss benefits out then you’ll understate the justification for your project. Use this list to help think through whether you’ve covered all of the possible benefits. The list is in the two areas of savings and gains. As always, adjust the list to fit your sort of project, and if you spot a new benefit area that applies to you then be sure to add it on. That way the list will be all the more useful at the beginning of each project.

Savings

A lot of business projects involve making savings in one form or another. Have a look through this part of the checklist to help make sure that you’ve spotted all the possible savings.

• Staff time: Staff time is expensive and often seriously so. Will your project mean that it will take fewer staff hours than the existing approach to operate a business or operational function?
• Ease of use: If something now needs fewer expert staff, your staff costs could be reduced.
• Maintenance: Check to see whether new equipment will be easier to maintain. You could find savings in three areas.
  • Engineer costs: The number of staff hours needed for maintenance work.
  • Maintenance materials: Service materials related to maintenance such as replacement oils and servicing kits.
  • Down-time: The amount of down-time being reduced because maintenance is faster and/or because it is less frequent.
• Durability: If equipment will last longer it will not need replacing so often, and that may be a significant saving.
• Disposal: If the final disposal costs of any new equipment would be reduced, perhaps because it is constructed of less hazardous material and, related to the previous point, because of less frequent replacement.
• Legal and compliance: Reduction in compliance inspections or, for example, no longer needing an annual licence for something.
• Materials: If you are bringing in a new design for a product, or something like new product packaging, you may get a saving on materials and thus on production costs.
• Consumables: Check whether your project will save on consumables, such as with electronic long term records reducing consumption of paper, ink and toner.
• Waste: See whether your project will reduce waste. That could bring two benefits. First, a better ‘green’ image for your organisation; second, a reduction in waste disposal costs. Both benefits are especially significant if the waste is hazardous.
• Energy consumption: Check whether your project will make a saving on energy costs, or could be altered to do so. With escalating energy prices, this benefit is not only financially significant but very high profile.
• Improved cash flow: Things that will get money in more rapidly, such as faster issue of invoices because your project is introducing electronic invoicing.
• Travel and overnights: Reducing the need for staff travel and accommodation, for example with a comms improvement project that provides video-conferencing. Or this benefit may be linked to improved product quality where better reliability means fewer service visits.
• Building accommodation: See whether your project will reduce the demand for space, such as by reducing the need for storage. However, be very careful to think this one through, and do take on board the warning below. Remember that the accommodation saving may be very much greater if, for example, your project is an office move to a new headquarters in a less expensive, out-of-town, area.

Think very carefully when you come to consider savings on accommodation. If your project frees up a large storage room it won’t save any money – an empty room in your headquarters building isn’t cheaper to run than one filled with files. However, if you can convert that space into office accommodation which will mean your organisation won’t now have to build that new office extension then perhaps you’re on to something. Also watch out for cramming staff together to save space. If staff performance levels drop as a result, it may end up as a cost rather than a saving.

If your project is to solve a problem, solving the problem isn’t the benefit. The benefit is the elimination, or reduction, of the negative impact(s) that the problem was causing. However, for the Business Case to make sense to organisational managers you’ll usually need to describe the benefits in the context of the original problem.

Gains

The savings in the previous section are, in effect, a negative view as you are seeking to lower costs. In contrast, this next part of the checklist is the positive side. Can you increase revenue or service with the project?

• Organisational objectives: Achieving something that the organisation has committed to, in the five-year strategy plan for example.
• Performance: Check whether the project will increase staff performance, perhaps by giving people better computer tools to do the job or reducing the time it takes them to find essential information.
• Service level: Such as cutting waiting times in a hospital, or achieving faster delivery to customers.
• Usability: Such as making it much easier for your customers to place orders, thereby reducing the number of customers who give up part way through the process (a surprisingly common problem on web sites).
• Production: Gains through faster machines, for example, that mean you can produce more units in a given time.
• Sales: Some projects, such as those involved with re-branding or product improvement, may be justified because they will boost sales.
• Quality: Improving the quality of something your organisation is doing or producing. That may be a non-quantifiable benefit but an important one to maintain or boost the image of your organisation. That boost may happen through better design or by increased reliability, for example.
• Staff facilities: An improvement in the staff working environment. This benefit will normally be non-quantifiable, but important. You probably won’t be able to measure a reduction in staff turnover that is due solely to the improvement in the working environment delivered by this project, but you know for sure that you’ll continue to lose people if the environment isn’t significantly improved by this and other projects.
• Image and reputation: Such as compliance where your project brings your organisation into line with ISO standards and codes of practice, and has a significant positive impact on your organisation’s public image. This benefit may be very significant if the project eliminates a problem that was in the public eye. An announcement that the problem is now resolved may do a lot to help restore a damaged reputation.

Disadvantages Checklist

Sometimes running a project brings disadvantages, though of course these should be outweighed by the advantages unless the project is mandatory. Don’t let people get taken by surprise with negatives but rather keep the Business Case realistic so that managers know what they are letting themselves in for, just as they do with project risk. Here are a few things that you might want to think about when warning of disadvantages as part of your Business Case.

• Disruption: Temporary disruption while the project is in progress, such as blocking an entrance to a building while extension work is done.
• Delay: Perhaps processing customer orders will be slowed down while the warehouse is being re-configured as part of the project.
• Loss of production: More ‘down time’ of computer systems or production line machinery while changes are made.
• Loss of functionality: Although things may be improved in one part of the operation, perhaps they are slightly degraded in another. For example, a new computer package that does most things a lot better but a few things that used to be automated will now have to be done clerically.

One project method refers to the disadvantages of running a project as disbenefits. However, that word isn’t in common use. When was the last time you said to your partner ‘If we go shopping at the weekend a disbenefit will be that it will take longer because the shops will be crowded.’? You’ll want to minimise communication problems in your project so the last thing you want to do is use terms that people don’t readily understand. For that reason you may agree with me that it’s better to stick with the word disadvantages as suggested in this checklist.

Don’t confuse disadvantages with what will happen if you don’t run the project. Disadvantages, as set down in the Business Case, are the negative things that will happen if you do run the project. Note too that these things will happen; there will be disruption if you rip out the main reception area of your HQ building and fit a new one. If something just might happen then it’s a risk.