Keeping Projects on Track: Prioritizing Value in Project Management

THE CHALLENGE OF MONITORING AND TRACKING INITIATIVES

How do you know your project or programme is on track? You may use the earned value method to monitor progress against plan. Your initiative may be within budget or early. Unfortunately, this tells you nothing about its value or your likely return on investment (ROI). It is also possible to have a clear picture of the benefits that you expect to realise over time where each benefit has its own measurement schedule and reporting cadence. However, this does not determine the true value of an initiative as there is no linkage between benefits and the cost of delivery! The real magic happens when delivery milestones and benefit plans are in lockstep, for example, as finish to start dependencies. A delay in completing a predecessor initiative or task has a knock-on effect on starting the successor benefit. With many initiatives, this all becomes complicated to manage without a specialist strategic execution management tool. For every action there is a reaction. Once you have connected initiatives (delivery) and benefits realisation, then what happens to one will affect the other.

A rise in delivery costs or schedule delay are likely to have a negative impact benefits realisation and the true value of initiatives (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:

• V is VfM
• B is Benefits
• 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.

These relationships are dynamic. Add in a discount factor to derive Net Present Value (NPV)[i], and the situation becomes still more complicated. This time-factored financial analysis is important for major initiatives because the cash outflow in these cases can happen a considerable time before they realise any benefits. One factor that is not explicitly mentioned in the value equation is the impact of delay. In many cases, delays will cost you real money. Consider for example, an initiative where you plan to exit a lease by a particular date. If you are forced to wait, you will continue to spend money that will eat into planned recurrent benefit and reduce the value of the initiative.

GETTING TO GRIPS WITH TRACKING VALUE

A specialist strategy planning tool, such as Amplify, provides vital information in real-time via tailored dashboards, enabling those in charge to make timely decisions. Without Amplify, creating performance reports can be an enormous task. It is not unusual for a large transformation programme to be heavily dependent on spreadsheets. Two weeks' effort is required by the PMO to create monthly Board-level reports with associated issues of cost and data quality! If we intend to track the delivery of value, we need a specialist tool that will automate the heavy lifting of linking benefits realisation to project delivery. Alternatively, benefits (and value for money) 'melts away, shrinks in size or moves further into the future', says Tony Meggs, former CEO of Infrastructure & Projects Authority (IPA).

BENEFIT MANAGEMENT: LIMITATIONS OF THE EXCEL-BASED APPROACH

Many organisations use ii to develop individual benefit profiles. This is based on estimates of measurable improvement, e.g., from x to y over period z. Improvements may be financial or non-financial. With up to 15 or 20 benefits it might be do-able but once you start getting into the 100's it becomes a complete nightmare to manage. So, how do we combine them if we don't have the right tool to do the job? In Amplify we know the aggregated set of benefit profiles for an initiative as the Benefits Realisation Plan (BRP). We record actual data. We compare this with the plan. We update the forecast each time we record a new actual, enabling teams to adjust based on trends.

Matt Williams, CEO of Amplify, explains 'The solution to most data problems begins with Excel and it's fine until the solution reproduces. One, two, three spreadsheets slide into your inbox and the version number resembles 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 referring to, things unravel...' SO HOW DO WE KEEP PROJECTS ON TRACK? In summary, we keep a project on track by understanding the relationship between planned cost and expected benefit over time. For every action there is a reaction. The value equation provides a tight connection between the two. Delays in achieving a delivery milestone, such as the timely exit from a lease, will have a real impact on recurring benefits and the overall value of initiatives. The greater the scale and level of complexity of initiatives, the more labour intensive and riskier the Excel-approach becomes, whilst the case for investing in a specialist tool, such as Amplify, becomes increasingly compelling. So how do we keep projects on track? It's all about value! i Net Present Value - the value in the present of a sum of money, in contrast to some future value it will have when it has been invested at compound interest. ii Managing and monitoring our project – how do we know it is on track (Hugo Minney, Sept 2019)