The Case for Managing Benefits TM APM Group

The Case for Managing Benefits TM © APM Group Limited 2014 Managing Benefits™ is a trade mark of the APM Group Ltd. 1

Introduction 2

What is a benefit? • The measurable improvement from change, which is perceived as positive by one or more stakeholders, and which contributes to organizational (including strategic) objectives 3

What’s the problem? • 70% of all change initiatives fail (Beer & Nohria 2000) • ICT projects do not often deliver the financial and other benefits they promise (Gauld & Goldfinch 2006) • Most large capital investments come in late and over budget, never living up to expectations (Lovallo & Kahneman (2003) • Two thirds of public sector projects are completed late, over budget or do not deliver the outcomes expected (NAO 2011) 4

Why? • Strategic misrepresentation • Cognitive biases • Failure to make the necessary business changes • Delivery failure (scope, quality, cost, time) 5

The solution 6

Do you need it? • Do you always make the best investment decisions? • Do you always deliver the benefits in the business case? • Can you confidently attribute the benefits to a specific change initiative? • Do you have evidence? 7

The Managing Benefits guide Practical advice on how to avoid problems • A structure of roles & responsibilities • Steps to identify, value and realize benefits • Techniques to aid in those steps • Help in avoiding strategic misrepresentation and cognitive bias • Advice on establishing a benefits-led culture 8

Target audience • • • Change initiators Change leaders Change appraisers and evaluators Change implementers/enablers Change support staff 9

Objectives of benefits management • Optimize benefits realization by ensuring – Forecast benefits are complete, realizable and represent value for money – Forecast benefits are realized in practice – Dis-benefits are minimized – Emergent benefits are captured and leveraged • Be able to demonstrate the above – Accountability – To learn what works 10

Barrier 1. Measurement difficulties • Time lag between planning and benefits realization • Staff leave • Failure to collect baseline data • Benefits measures unrelated to the MIS • Some benefits are difficult to measure • Attribution • Initiative shut down before benefits are fully realized 11

Barrier 2. Common misconceptions Benefits management is not… • • A silver bullet An ‘out of the box’ solution Used to justify a preferred option Applied only at initiative level A linear/sequential process A specialism An additional bureaucracy Concerned with making the inevitable happen 12

Barrier 3. The ‘Knowing-Doing Gap’ 13

Barrier 4. Cognitive biases • • Over-confidence / The Planning Fallacy The sunk cost effect Confirmation bias Groupthink Availability bias WYSIATI Confusing correlation and causation, and mistaking the ‘arrow of causation’ 14

Towards a solution • • Benefits-led change (SWTEIM) Accountability Acceptance of failure Independent & regular review – Challenge forecast benefits – Understand results and their causes • Training • Apply the key success characteristics of effective benefits management… 15

Key success characteristics • • • Active Evidence-based Transparent Benefits-led Forward-looking Managed across the full business change lifecycle 16

The principles • • Align Benefits with Strategy Start with the end in mind Utilize Successful Delivery Method Integrate benefits with performance management • Manage benefits from a portfolio perspective • Apply effective governance • Develop a Value culture 17

The practices • • • Identify and quantify Value and appraise Plan Realize Review Techniques are offered for each of the practices 18

Identify and quantify • • Benefits mapping Accountability An honour code? Optimism bias adjustments 19

Value and appraise • Non-financial benefits – Willingness to pay/accept • Cost benefit analysis – Payback – Net present value • Multi-criteria analysis – Attractiveness – Achievable • Consistency 20

Plan • Prioritize the benefits – Pareto rule • Select appropriate measures – Efficient – Effective – Sufficient • Attribution problem • Unanticipated consequences? © APM Group Limited 2012 21

Realize • Realistic forecasts; enthusiastic targets • Active pursuit of benefits • Ensure behavioural change – Incentives – Power of conversations © APM Group Limited 2012 22

Review • • Self-serving bias Hindsight bias Outcome bias The Texas sharpshooter fallacy 23

Portfolio-based application • Benefits eligibility rules • Portfolio-level Benefits Realization Plan • Portfolio manages benefits post-initiative closure • Post-implementation reviews • Lessons learned used to improve forecasting and the benefits management practices 24