HOW DO WE KEEP PROJECTS ON TRACK? IT’S THE VALUE, STUPID
THE CHALLENGE OF MONITORING AND TRACKING INITIATIVES
Hugo Minney’s article, Managing and Monitoring our Project – how do we know it is on track?, highlights the use of the earned value method to track progress against plan. He concludes that it is perfectly possible to be within budget, or ahead of schedule, but of itself this says little or nothing about the true value of the initiative, or for that matter the likely return on investment (ROI).
Equally, it is possible to have a good understanding of the benefit(s) that you expect to realise over time, each with a clear measurement schedule and reporting cadence, but this too is insufficient to determine the true value of an initiative!
The real magic happens when delivery milestones and benefit milestones are interlocked, for example as finish to start dependencies. Delay in the completion of the predecessor initiative or task will have a knock-on effect for the commencement of the successor benefit. And with many initiatives this all becomes complicated to manage without a specialist project management tool.
As Kik Piney points out, in his paper Benefits for Projects – Adding a benefits dimension to the Earned Value Method, the Earned Benefit Method (EBM) needs to be expanded by the addition of Earned Benefit-Value. The extension of the EBM in this way provides a consistent means of monitoring a project’s performance based on planned benefit realisation management.
Once initiatives (delivery) and benefits (realisation) milestones are interlinked, then the law of ‘action-reaction’ applies.
Figure 1: Amplify™ screenshot showing project dashboard for a Customer Relationship management initiative with a link between an initiative task and benefit
Delays, a rise in costs or a decrease in the planned or forecast amount of linked benefits all have consequences. They all adversely affect the achievement of targets and goals and the true value of an initiative (See Scenario Planning: the right tool for the job).
IT’S ALL ABOUT VALUE FOR MONEY
The Value Equation shows that there are five ways to improve value for money (VfM) from an initiative based on benefit and cost as follows:
- Where V is VfM
- Where B is Benefits
- Where C is (whole-life) cost
Figure 2: Value Equation illustrating the impact of changes in the cost or benefit on value for money (VfM)
- Benefits stay the same, cost decreases, therefore value increases.
- Benefits increase, costs stay the same, therefore value increases.
- Costs increase but benefits increase more, therefore value increases.
- Benefits reduce but costs reduce more, therefore value increases.
- Benefits increase and costs decrease, therefore value increases.
We also know that these relationships are dynamic and will change over time. Add in a discount factor to account for future cash flows and derive Net Present Value (NPV), and the situation becomes still more complicated. This time-factored financial analysis is especially important for major initiatives because the cash outflow in these cases can happen a considerable time before any benefits are realised.
Figure 3: Amplify™ screenshot showing Net Present Value Dashboard for a Business Transformation Portfolio comprising multiple work-streams
GETTING TO GRIPS WITH TRACKING VALUE
Performance information, such as how we are doing against plan, should be readily available at each level in an initiative hierarchy, e.g. project, programme and portfolio. In an ideal world this analysis will be provided in real-time via dashboards and head-up displays, enabling those in charge to make timely decisions.
Without a specialist strategy planning tool, such as Amplify™, this form of performance reporting can be a big task. By way of an example, a sizeable financial transformation programme (200+ team members), heavily dependent on spreadsheets, necessitated two-weeks effort by the PMO to produce Board-level reports. Think of the cost and data quality issues!
So, if we intend to track the delivery of value, we need a project management tool that will automate the heavy lifting of linking benefits realisation to project delivery. The alternative, as expressed by Tony Meggs, former CEO of Infrastructure and Projects Authority (IPA), is that benefits (and value for money) simply ‘melts away, shrinks in size or moves further into the future’.
BENEFITS MANAGEMENT: LIMITATIONS OF THE EXCEL-APPROACH
As Hugo says, the standard approach to benefits management in many organisations is to use Excel spreadsheets to develop a collection of benefit profiles based on estimates of measurable improvement, e.g. from x to y over period z, whereas others will be non-financial. So, how do we combine them if we don’t have the right tool to do the job?
The combination of all benefit profiles for an initiative is known as the Benefits Realisation Plan (BRP). Once actual data is recorded this is compared with plan. The forecast is updated each time a new actual is recorded, and may increase, decrease or stay the same.
Figure 4: Amplify™ screenshot showing a benefit plan for increased revenue from number of private patients with baseline, plan, actual and forecast values
Matt Williams, CEO of Amplify™, explains ‘The solution to most data problems begins with Excel and it’s all well and good until the solution starts reproducing. One, two, three spreadsheets slide into your inbox and the version number begins to resemble the mass of the earth, in grams.
It’s about then that a new requirement emerges, which forces you to delve into the mind of the original author. As you try in vain to understand what the VLOOKUP is actually referring to, things begin to unravel…’
AMPLIFY™ SOFTWARE TRACKS VALUE
Amplify™ market-leading Strategy Execution Management (SEM) platform tackles the issue of effective monitoring and tracking head on, using profiles. There’s one type of profile for an initiative’s costs, and another one for each benefit.
It’s straightforward and tidy, neatly combining profiles to illustrate the cash flow (amongst other things), and to display the impact of a schedule delay, or an increase in costs on everything else.
With Amplify™ all the data is kept in a master database, a ‘secure single source of truth’, which can take inputs from multiple users, including using standard Excel templates, as well as financial systems and scheduling tools.
Figure 5: Amplify™ Screenshot showing Excel import/export template feature for cost and benefit for bulk upload of data
SO HOW DO WE KEEP OUR PROJECT ON TRACK?
In summary, we track value across the full initiative life-cycle, including after the initiative has long since closed, looking at the ‘whole life costs’ of the product, service or piece of infrastructure.
Whatever end point we chose, we know we should be measuring value on route, i.e. the combination of benefit and cost profiles over time.
The greater the scale and level of complexity of an initiative, e.g. a multi-million strategic programme or a business transformation portfolio, the more challenging, labor intensive and riskier the Excel-approach becomes, and the more compelling the case for investing in specialist project management software, such as Amplify™.
So how do we keep projects on track? To misquote the campaign slogan used by Bill Clinton in his 1992 presidential campaign, ‘it’s the value, stupid!’