How do we keep projects on track? It’s the value stupid
The challenge of monitoring and tracking initiatives
Hugo Minney recently wrote an article entitled Managing and Monitoring our Project – how do we know it is on track? which highlights the use of the earned value method to track progress against plan. He concludes that it is perfectly possibly 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 net value!
Where the real magic happens is where 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 to the commencement of the successor benefit. And with many initiatives, comprising a myriad of tasks, with associated dependencies to other tasks, as well as to benefits this all becomes fiendishly complicated to manage without using a specialised 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 during implementation based on planned benefit realization.
Once initiatives (delivery) and benefits (realisation) milestones are interlinked, then the law of ‘action-reaction’ applies.
A 30-day delay here, or a 60-day delay there, has consequences. A rise in costs, in one or several initiatives, has consequences. A decrease in the planned or forecast amount of linked benefit(s) has consequences. All adversely affect the achievement of targets and goals (See earlier LinkedIn article Scenario Planning: the right tool for the job) and the true value of an initiative(s).
It's all about Value for money
We appreciate from the Value Equation that there are 5 ways to improve value for money (VfM) from an initiative (project), or collection of initiatives (programme) based on benefit and cost as follows:
- Where V is VfM
- Where B is Benefits
- Where C is (whole-life) cost
- 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 this interplay is 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 realized
ROI can, and should, be considered at a number of different levels within the initiative hierarchy, from an individual project-level up to Programme (scheme) and up to portfolio or strategic level.
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 ideal world this will be via real-time dashboards, and head-up displays to enable analysis and provide those in charge with the information necessary to make timely decisions.
Without specialized tools, this form of performance reporting can be quite a ‘big ask’ for the project and programme fraternity. By way of an example, a sizeable financial transformation programme (200+ team members), heavily dependent on spreadsheet, 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 tool that will automate the heavy lifting of linking benefits realisation to project delivery, (via the schedule). The alternative, as expressed by Tony Meggs, former CEO of Infrastructure and Projects Authority, responsible for the Government Major Projects Portfolio (GMPP) is that benefits (and associated value) simply ‘melts away, shrinks in size or moves further into the future’
What we can learn from pig farming
There is a proverb ‘that you don’t fatten a pig by weighing it.’ However, acting on what you know, for example the fact that the pig weighs less than you would expect at 6 months (benefit profile), and amount of feed consumed (cost plan), you might change its diet.
As a farmer what you are actually interested in is the NPV, or ROI of your porcine investment/profit that you will make when the pig goes to market! Information about costs or benefits, of itself, may be interesting but of itself is insufficient.
And if you are going to weigh the ‘proverbial’ pig you really should a clear idea what the pig should weigh at the time you put it on the scales, so you can take corrective action, if necessary.
[Spoiler alert: Don’t check Google at this point as I did find an article that explains how you can obtain a good estimate of a pig’s weight, without scales, by measuring its girth and length and doing some simple maths].
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 (Note that not all benefits are equal. Some will be financial, and if financial cash-releasing (of the ‘fattening a pig for market-type’), whereas others will be non-financial. So, how are we going to ‘weight’ (excuse the pun) them and combine them if we don't the right tool to do the job.
The combination of all benefit profiles (for an initiative(s)) is known as the Benefits Realisation Plan (BRP). Once actual data is recorded this is compared with plan, The forecast may be updated each time a new actual is recorded. The key question is how the actual compares with your estimated value as this particular point in time. or whether the variance from plan happens to be positive (an improvement) or negative (a deterioration).
Once actual data are recorded, and compared with the plan, it is possible to prepare a forecast showing whether the project is on track to deliver the ROI.
Having a robust Benefits Realisation Plan is vital, as the formal execution of that plan will determine the breakeven point and ROI of the costed initiative. The BRP serves to reveal the potentially high cost of borrowing (which is exacerbated where the actual cost turns out to be more than the initial baseline budget)
Matt Williams, CEO of Amplify™ CEO, 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 value-delivery lifecycle
Amplify™ cloud Strategy Execution software tackles the issue of effective monitoring and tracking head on. It uses profiles. There’s one type of profile for an initiative’s costs, and another one for each benefit.
It’s straightforward and tidy, as the software is designed to combine these profiles, in the right way, 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 central Master, database, a ‘secure single source of truth’, which can take inputs from multiple users (including using standard Excel templates - see below) from financial systems (SAP) and scheduling tools (Microsoft Project Online / Primavera P6), and can be viewed through a wide range of dashboards and visualisations (PowerBI), and output in customised reports.
So how do we keep our project on track?
In summary, we track value-delivery across the full lifecycle, including after the initiative has long since closed, and the benefits realisation plan has been executed (note that the Value Equation refers to 'whole life costs' of the asset which may be a product, service or piece of infrastructure.)
Whatever end point we chose, we know we should be measuring value delivery (NPV or ROI), i.e., the combination of benefit and cost plans and profiles, over time. It is not sufficient to measure only one, e.g., cost using the Earned Value Method, or benefit profiles organised into a BRP.
The greater the level of complexity of an initiative, for example a strategic programme or a business transformation portfolio, the more challenging, labour intensive and riskier the Excel-approach becomes and the more compelling the case for investing in a tool, such as Amplify™ that will help you keep your projects on track. Measuring only your spending won’t make you rich. So how do we keep projects on track? It's the value stupid! (to misquote the campaign slogan used by Bill Clinton in his 1992 presidential campaign)