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Benefits Management and Categorisation Tutorial

1 Benefits Management and Categorisation

Hello and welcome to lesson 8 of the Managing Successful Programmes Certification course offered by Simplilearn. In the previous lesson, we discussed leadership and stakeholder management. In this lesson, let us focus on benefits management which is one of the governance themes of MSP framework. Let us begin with the objectives of this lesson in the next screen.

2 Objectives

By the end of this lesson, you will be able to: Discuss benefits management Differentiate between benefits and dis-benefits Identify the various benefits management interfaces Explain benefits categorisation Let us move on to the next screen to discuss the MSP® framework.

3 MSP Framework

MSP® Framework represents the MSP® principles, governance themes and transformational flows. Benefits management is one of the governance themes which is placed in the second circle. Benefits management is an essential part of programme management. Programmes are primarily driven by the need for delivering benefits. Benefits are anticipated when a change is conceived and emerge with their associated risks. Realisation of benefits takes place within an operational environment. The programme will deliver new capabilities such as, business processes, new assets, systems, functions, and services. These are some of the benefits delivered by the programme. In the next screen, let us introduce the concept of benefits management.

4 Benefits Management Introduction

Benefits management is a process that starts with identification of benefits in a programme and lasts till each of the benefits are delivered. It is directly aligned to the principle focusing on benefits and threats to them and thus is integral to other governance themes. A programme may deliver benefits or dis-benefits. Programmes are initiated with the aim of delivering benefits. However, a programme will have some negative impacts as well as improvements. Benefits and dis-benefits are anticipated when a change is conceived and while there may be uncertainty related to the extent of change, benefit or dis-benefit is not a risk as it is planned to be realised. Benefit can be defined as a measurable improvement that results from an outcome identified as advantage by one or more stakeholders. Benefit contributes towards one or more organisational objectives. A dis-benefit is a measurable decline that results from an outcome identified as negative by one or more stakeholders. Dis-benefits detract from one or more organisational objectives. In next screen, let us look into benefits management interfaces.

5 Benefits Management Interfaces

Benefits management drives the following aspects of programme management: Benefits management qualifies the blueprint against the projects, activities, and associated organisational changes needed to deliver new capabilities defined within the boundaries. Benefits management drives the end of tranche reviews and enables decision-making that could make changes in the programme to take it forward. Benefits management defines the acceptable criteria for quality of the outputs and capability to be delivered. It defines fit-for-purpose capability, establishing the critical quality checking mechanisms throughout the programme and ensuring alignment with the requirements defined in the blueprint. Benefits management informs business case about the capability to deliver costs and ensures that the value of benefits is balanced. Let us continue to discuss the interfaces of benefits management in the following screen.

6 Benefits Management Interfaces (contd.)

Some more aspects of programme management driven by the benefits management are as follows: Benefits management helps in analysing and engaging stakeholders by identifying their interest in various benefits. Benefits management identifies dependencies in plans by prioritising benefits. This allows the programme to create maximum value under given constraints and make the right trade-off decisions if required. Benefits management identifies risks in the programme during realising benefits. In the next screen, let us focus on aligning benefits with corporate objectives.

7 Alignment of Benefits with Corporate Objectives

Organisations must evolve to grow and survive. All current and future change activities in an organisation form the corporate portfolio. Strategy provides the context and balance for planning, running, and completing a change portfolio. Individual programmes must link their intended benefits to corporate objectives to ensure that they are adding value to the organisation. Programmes are planned to deliver transformational changes. Some of the changes may cause dis-benefits. However, these changes also provide opportunities for additional benefits. Benefits may take longer to achieve compared to the programme’s life as benefits realisation will continue even after the programme is closed. It might be possible that though benefits have been realised, it might take longer to achieve the expected levels. The Business Change Manager or BCM (read as B-C-M) will continue to be responsible for benefits realisation, even after closure of the programme. Unexpected benefits should be captured and reported to ensure that full value of the programme is recognised. In the next screen, let us learn the differences between outputs, capabilities, outcomes, and benefits.

8 Differences between Outputs, Capabilities, Outcomes and Benefits

The following table displays the difference between outputs, capabilities, outcomes and benefits. Output can be defined as deliverable developed by a project as result of a planned activity. It helps to answer the question, what do we need to create to enable the change?. The output of several projects is needed to enable the change. Capability is a completed set of project outputs required to deliver an outcome. It will come into existence before the transition starts. It answers the questions, “What will we need to have in place to enable the new operating state?” Once capability is available, the transition is triggered. An outcome is defined as a new operational state achieved after transition of capability into live operations. This answers the question, “What is the desired operational state of organisation using these new things?” Benefit is the measurable improvement resulting from an outcome identified as an advantage by one or more stakeholders. Each benefit will contribute towards one or more objectives. It answers the question “Why is this justified?”, that is, it explains what a programme delivers. Thus, we can say that a combination of projects delivers capability, which leads to an outcome after transition, to deliver planned benefits. In the subsequent screen, let us discuss how benefits can be categorised.

9 Benefits Categorisation

Following are some of the categories of benefits categorisation Value: It implies what the benefits add to the organisation. Financial impact: It indicates whether the benefits are cashable or not, and how they can be converted to cash. Corporate objective: It indicates which benefits deliver certain corporate objectives. Stakeholder impact: It helps to find out which group of stakeholders are impacted by benefits. Timeline: It implies when the benefits will be delivered during a programme. Level of risk: It defines which benefits have higher levels of risk associated and which have lower levels of risk associated with them. Any categories can be applied in sequence or combined. For example, benefits can be categorised on timescales as they may need to be delivered in 6 months or 2 years. These benefits can be further categorised based on their financial impact and the risks associated with them. In any case, a programme needs to decide early on how it will categorise benefits. In the following screen, we will discuss benefits categorisation in terms of value.

10 Benefits Categorisation Value

Values can be further divided on the basis of three E’s. The first one of them is economic benefits. It can be financial improvement, cash released, increased income, or a good credit rating which implies better use of funds. The next ‘E’ is effectiveness benefits which relate to doing things better or with a higher standard, thus leading to fewer errors. The last ‘E’ is efficiency benefits which indicate the ability to achieve more benefits with the same effort and resources or the same benefits with less effort and resources. For example, you may produce more output in a field with the same amount of effort. These value types cover the vast majority of potential benefits and are useful for identifying potential programme benefits. Grouping each benefit under these categories will help to analyse the relationship between different benefits and changes. Let us focus on the benefits categorised in terms of financial impact in the next screen.

11 Benefits Categorisation Financial Impact

Financial impact can be further divided in the following ways. Based on financial impact, benefits can be categorised as cashable and non-cashable. Cashable benefits include benefits that can be realised in terms of money, for example, low supply chain costs, staff savings, or low running costs. The cashable benefits should be validated with the finance department. Non-cashable benefits include benefits that cannot be realised as cash but can be re-invested in improved services. An example of non-cashable benefits is staff time savings. To make non-cashable benefits real, it is important that they suit the relevant business area. For example, if we are planning to implement processes and tools that will save the time of the team working on payroll, then we must discuss the same with them and ensure that the team is working on more tasks to make use of the saved time. In the next screen, let us understand the benefits categorisation based on corporate objectives.

12 Benefits Categorisation Corporate Objectives

Benefits can be categorised by the type of corporate objective they support. Each organisation will have multiple objectives that may relate to benefits and each of these objectives may have an impact on three value types, namely, economic, efficiency and effectiveness. The following table describes the objective type and the categorised benefits. Increased flexibility delivers outcomes that allow an organisation to respond to strategic demands without incurring additional expenditure. Internal performance improvement provides changes that are internal to the organisation, such as improved decision-making or more efficient management processes. Enhanced personnel or HR management ensures better motivated workforce which may further lead to a number of other benefits such as flexibility or increased productivity. Policy or legal compliance enables an organisation to fulfil policy objectives or to satisfy legal requirements, and the organisation has no choice but to comply. Process improvements are ‘more with same’ or ‘same with less’ approaches that allow an organisation to do the same job with less resource, leading to reduction in costs, or to do more than required with the same resource. Improved revenue generation provides changes that enable increased revenue or the same revenue level in a shorter timeframe, or both. Other types of objectives can be enhanced quality of service, reduced costs, risk reduction or reduced environmental impact depending on the goals of an organisation. In the next screen, let us discuss benefits categorisation in terms of stakeholder impact.

13 Benefits Categorisation Stakeholder Impact

The outcomes and benefits of a programme have different effects on different stakeholders. These effects may be perceived as positive or negative. The benefit for one group of stakeholders can be considered as dis-benefit for another group. This complex nature of a programme seldom creates a simple division in stakeholder groups like the supporting or opposing groups. Stakeholders who perceive the programme as a threat will oppose it. So, the programme needs to minimise the risk of resistance. The programme needs to investigate very thoroughly the benefits it generates and their effects on stakeholders. Stakeholders, who perceive the programme as negative, will try to resist it. The programme should therefore explore organisational change options that allow it to minimise dis-benefits. If a programme fails to contain dis-benefits, it can make a business case unviable. In the next screen, let us cover benefits categorisation on the basis of timeline.

14 Benefits Categorisation Timeline

Benefits occur at different points during and after a programme’s life. Now let us understand the reasons why timing the benefits is very important. The first reason is that advantage of benefit may vary depending on when it is delivered. Some benefits may need to be created early so that they can assist the programme to go forward, for example, improved efficiency in operational environment. The second reason is the need to plan quick wins to keep stakeholders supportive. Stakeholders may not like to wait for years to see improvements getting materialised. So it is important to show stakeholders something to substantiate the claims and keep them happy. The third reason is that early benefits might be used to fund future tranches. This is especially true in case of complex programmes. But in these scenarios, the risks should be identified and managed where future tranches are dependent on successful realisation of benefits in earlier tranches. In the next screen, let us discuss benefits categorisation in terms of level of risk.

15 Benefits Categorisation Level of Risk

It is essential to identify levels of risk associated with achievement of the benefits. This contributes to understanding the overall level of risk for the programme. The best way to use this classification is to associate a numeric value with the level of risk and use this to factor the amount of benefit that is achievable. Now suppose, low risk implies that 90% of value is achievable. Medium risk implies that 60% of value is achievable. And high risk implies that 30% of value is achievable. Let us consider that the benefit of a programme is identified at $100,000. If we consider that the benefit comes with medium risks, then the worth of the benefit will probably be only $60,000. If we want to achieve complete benefit, then we might have to invest in risk mitigation. This helps to reduce uncertainty in the benefit value. In the next screen, we will focus on an example based on the concepts discussed.

16 Benefits Management Problem Statement

Allan Boyd has been identified as the new Business Change Manager for the programme, Nutri snack. He has shared a list of benefits with the Programme Manager, Chao Yin. Since Allan is handling this task for the first time, he has mixed up outputs, outcomes, capabilities and benefits. Following is the list of benefits shared by Allan to the Programme Manager: • New recipe for a healthy snack for sports personnel • Advertisement campaign • Better visibility • Expense of advertisement campaign and stock keeping • Increased profitability by 20% within 18 months of the launch Let us find out how Chao will segregate the outputs, outcomes, capabilities and benefits under different categories.

17 Benefits Management Solution

Following is the segregation of items into their correct categories, done by Chao, based on the list of benefits shared by Allan: Outputs are deliverables of individual projects. From the given list, we can identify the new recipe for a healthy snack for sports personnel and the advertisement campaign as outputs. Outcome is the new operational state achieved once a capability is put into operation. Better visibility fits the criteria as it is the result of the new recipe being advertised in the market. Please note that if this would have been “Increased visibility/ brand recognition by 15% after 30 days of product launch”, it would have been categorised as a benefit. Benefit is a measurable improvement and the statement “Increased profitability by 20% within 18 months of launch” fits the category. Dis-benefit is defined as the outcome which is perceived as negative. Thus the statement “Expense of advertisement campaign and stock keeping” is categorised as a dis-benefit.

18 Summary

Let us summarise what we have learnt in this lesson: Benefits management is an essential part of programme management. Benefits are anticipated when a change is conceived. Benefits are measurable improvements and dis-benefits are measurable declines, which are identified by stakeholders. The various benefits management interfaces are: it qualifies blueprint, conducts tranche reviews, defines acceptable criteria, informs business case, analyses and engages stakeholders, prioritises benefits and identifies risks. A benefit can be categorised based on value, financial impact, corporate objective, stakeholder impact, timeline and levels of risk. Next, we will focus on the benefits management cycle.

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  • PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

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