Benefits Management Course Material

Transcription

1 the CENTRE for CHANGE MANAGEMENT C4CM Benefits Management Course Material

2 t h e C E N T R E f o r C H A N G E M A N A G E M E N T Course Material the CENTRE for CHANGE MANAGEMENT limited 4 th Floor, Bush House 72 Prince Street, Bristol. BS1 4QD enquiries@c4cm.co.uk Table of Contents Module Overview... 1 Content Map... 3 Context and Governance... 4 Identify and Map Benefits Profile and Validate Benefits Planning Benefits Realisation Deliver Outcomes Measure and Realise Benefits Completing the Workbook Additional Resources Index C4CM is a trademark of the Centre for Change Management Ltd

3 M O D U L E O V E R V I E W Section 1 Module Overview The learning structure of this module and how to use it. Module Purpose This module introduces a basic framework for thinking about Benefits Management. It is presented in the context of benefits driven change activities within an organisation. The driver is that benefits lead change and are the reason why change is being carried out. Hence managing benefits to ensure they are realised is probably the most important aspect of change management; everything follows from the benefits. How that happens is explained in this module. The material in this module is aligned with Best Practice, see the references on page 36 for more information. Learning Outcomes and Assessment Criteria Learning Outcome 1 Learning Outcome 2 Learning Outcome 3 Identify the purpose of benefits management in organisational change. Define and map benefits in a change. Plan the realisation of identified benefits. Learning Outcome 1 Learning Outcome 2 Learning Outcome 3 Assessment Criteria Describe the purpose of benefits realisation Identify the problems of realizing benefits from organisational change Analyse the main roles in benefits management Determine the main benefits of an organisational change Categorise the benefits Construct a profile for identified benefits Compose benefit relationships (maps) from outcomes and benefits Develop a benefits realisation plan from benefits profiles and map Design specific actions needed to realise benefits Construct appropriate responsibilities for benefits realisation actions Design review activities to track benefits realisation Assessment Assessment for C4CM qualifications is vocational. This means the evidence produced to demonstrate the candidate meets the learning objectives is based on their own work environment. This enables the candidate to clearly show that they can apply the relevant concepts, skills and tools to the real world. 1 Centre for Change Management Ltd 2011

4 M O D U L E O V E R V I E W The assessment will require the candidate to analyse a change situation in terms of the models used in the course and identify some tools that have been used. Based on the analysis the candidate will then identify some appropriate concepts and tools and show how they could be used to improve the effectiveness of a change. Exercises carried out as you progress through the material will lead you to capture evidence of the application of this material to your work place. These exercises are marked by the symbol on the left. This evidence is captured in a workbook (see appendix on resources). There is a list of the exercises at the end. Present your workbook to be formally assessed for the qualification. Send the workbook as an attachment in an to assessment@c4cm.co.uk, with your name and candidate number. A number of questions for reflection are placed in the text and look like this: THOUGHT EXPERIMENT This is a chance to reflect on the material and see how it might be applied to yourself or your organisation. Reporting problems with the material If you have problems with any of this material or online content then please enquiries@c4cm.co.uk. We also welcome feedback on the material and how well it meets your needs and your learning objectives; sent to the same address. How to use the material The material for the module has been broken down into sections, each section taking a chapter in this document. Markers have been placed in the document to help you identify tips, references to further material, reflection on using the material in your workplace, and short exercises. Ideally you should work through the material in the order presented in this document. However to help you navigate and later revisit the material a content map is provided at the start of the material. Your first step is a read through of the material. What next This material is a starting point for benefits realisation, it is not the whole story. More information is pointed to in the References at the end of the module material If you feel the need for additional training or support then please contact us. Acknowledgements This material has been developed with the extensive help and support of Ann Watts of The Change Emporium. Ann is an experienced practitioner and respected author on Benefits Management. 2 Centre for Change Management Ltd 2011

5 C O N T E N T M A P Section 2 Content Map The overall structure of the material on Benefits Realisation in this module. The contents of this module are built around a five step process for Benefits Management in organisational change. These five steps are cyclic and will be iterated many times during each change project or programme. FIGURE 2.1 THE OVERALL STRUCTURE OF THE MODULE 3 Centre for Change Management Ltd 2011

6 C O N T E X T A N D G O V E R N A N CE Section 3 Context and Governance The leading role of benefits in organisational change and the structures within which benefits realisation takes place. Why is benefit realisation important? B enefits are the reason why change is carried out in organisations. They answer the question: why are we doing this? Unfortunately, the ability to realise benefits after a change is very low in many organisations. There have been many surveys and reports about the ability of various organisations to deliver benefits following change and they all show an abysmal record. On average just half of all change delivers any benefits at all, most deliver only some of the benefits. Only the top 2% of organisations consistently deliver the benefits they predict from change. A typical story is: Benefits are defined in the business case for a change to seek approval projects are launched with benefits artificially created purely to justify the investment During delivery things change and there are some failures. After the change there is no consistent attempt to deliver, or even track, benefits. The organisation moves on to the next change, identifying new benefits, and forgets the old ones- accountability and ownership ceases The consequence is a huge amount of wasted investment in change that is poorly executed and delivers little or none useful benefits. Consistent success in realising benefits and delivering a business case requires more than just implementing a method. It requires a benefits led mindset and significant leadership across the organisation. There needs to be a benefits culture in the organisation; led from the top. A successful change and benefits delivery starts with realistic and achievable benefits in a realistic business case; then to drive the change with a total focus on realising the benefits. This is called benefits led change and leads to the key mantra for all project and programme staff: How does that affect the benefits? If the answer shows the benefits are affected then this is important, if there is no answer then the topic is not important! That is what being benefits led means. 4 Centre for Change Management Ltd 2011

7 C O N T E X T A N D G O V E R N A N CE The contents of this short course will show you the basic mechanisms, tools and process to ensure that your change does deliver the benefits it needs to justify the business case. Then you can clearly articulate why you are doing the change. THOUGHT EXPERIMENT What happens with benefits realisation in your organisation? Is there a typical story of benefits activity in change that you can relate? Do you think change activities are really benefits led by the projects and programmes? What is a benefit? The definition of a benefit A benefit is a measurable improvement from a change that is perceived as beneficial by a stakeholder. See the related course on Stakeholders & Communications The benefit must be beneficial, measurable and it must be assigned to a stakeholder! For instance the delivery of cashable benefits to cover the cost of the change is very important to the portfolio managers who will fund the change. However, other stakeholders may seek less tangible benefits: staff may want a better place to work, customers want a better service, marketing want a new web site to attract younger customers, and so on. The relationship between benefits and stakeholders is very close and is developed throughout the course. There are no benefits without stakeholders to help identify them and value them. See the section on Managing value. Not all the results of a change are beneficial, there may be some negative impacts; these are called dis-benefits. The definition of a dis-benefit A dis-benefit is a measurable degradation from a change that is perceived as negative by a stakeholder. Dis-benefits need to managed as much as benefits so that their negative impact can be mitigated as much as possible. For instance, a common dis-benefit from many organisation changes is for staff that lose their job. This can be mitigated by giving the process sufficient time and ensure that decisions are made fairly and openly and that the staff leaving are treated with justice. This does cost a little extra but is usually shown to be very worthwhile over several changes. Whilst benefits management is an activity within a change project or programme the benefits themselves are outside the project or programme; a point taken up later. Two other key components of benefits management are also outside the project or programme and are described below: stakeholders and strategic objectives. THOUGHT EXPERIMENT The association between a benefit and a stakeholder is very important in benefits realisation. Is this something you are aware of in your benefits activities? How is this association used in your organisation to manage benefits? 5 Centre for Change Management Ltd 2011

8 C O N T E X T A N D G O V E R N A N CE The organisation context Most change in organisations is delivered through projects and programmes. All the change in an organisation is usually managed by a group of senior managers who treat all change as an investment portfolio which contains the projects and programmes. The general relationship is shown in the next diagram. portfolio programme programme projects projects projects strategic project FIGURE 3.1 PORTFOLIO, PROGRAMME AND PROJECT RELATIONSHIP At the portfolio level the senior managers will optimise two scarce organisation resources against the value delivered by the change programmes and projects. These two resources are money (cash) and the available capacity for change in the organisation. In return for these resources a change programme or project must deliver better value than any other available change. The role of the portfolio group is to continuously monitor the value being promised by each programme and project. The value produced is described in the project or programme business case and is usually described in terms of benefits (see next section). Hence it is essential to continuously update a project or programme business case with the expected benefits so that the best decision can be made by the portfolio group. THOUGHT EXPERIMENT How much of the portfolio, programme and project framework or structure do you have in your organisation? Is there a corresponding set of levels of control asking the same questions about change and benefits? How well do you think this structure works? Evidence of it not working would be failed change activities. Managing value The value of a change does not have to be cash. A benefit is simply something that is valued by a stakeholder with acceptable cost. A useful way of thinking about value (especially for change) is to break it down into two parts: benefit and cost. 6 Centre for Change Management Ltd 2011

9 C O N T E X T A N D G O V E R N A N CE benefit VALUE cost FIGURE 3.2 COMPONENTS OF VALUE The value perceived by a stakeholder is the ratio of benefit to cost. For example, an employee going through change to achieve new working conditions and deliver improved service to customers (the benefits) will have to suffer the pain of going through the change, learning new skills, and a possible temporary drop in customer service during the change (the cost). The employee will balance up the future benefits against the cost to decide if the change delivers value to them. All stakeholders do a similar calculation when you discuss benefits with them the same process can be applicable to dis-benefits. Benefits management includes managing value. To deliver benefits through people (and most benefits have to be delivered through people) you will need to deliver value to stakeholders; which means reducing the cost as far as possible whilst increasing the future benefits and making their achievement realistic and sustainable. It is the perceived value that will motivate stakeholders to deliver the benefits you are seeking. Another approach is to line up the benefits and costs as opposing forces. This can be a useful workshop technique with stakeholders. benefits motivated stakeholder costs benefits un-motivated stakeholder costs FIGURE 3.3 BALANCING BENEFITS AND COSTS Strategic Objectives and Benefits The strategic objectives of the organisation are the main drivers for activity delivering strategic change. These strategic objectives are set at the portfolio level by senior managers to direct activity within the organisation. Every change project or programme should have a strong link to the strategic objectives and the way to do this is to align the main benefits from a change directly to the objectives. Each benefit must be linked to a strategic objective. This link is shown in a benefits map (see next section). 7 Centre for Change Management Ltd 2011

10 C O N T E X T A N D G O V E R N A N CE The linking of project and programme benefits to the organisation strategic objectives has two purposes: It ensures that all benefits are aligned to the strategic purpose of the change. Any benefit not linked and aligned should be dropped. As long as all change activity is benefit led then the changes will be strategically aligned. If the strategic objectives of the organisation change during the lifetime of a programme or project then re-alignment of benefits will ensure that the change remains aligned. Any change activity not leading to a re-aligned benefit should be stopped or re-assessed. What is the purpose of benefits management in organisational change? Put your answer in section 2.1 of your workbook. What are the main barriers or problems to effective benefits management in your organisation? Put your answer in section 2.2 of your workbook. See the module on the Business Change Manager role. Roles and Responsibilities for Managing Benefits Implementing effective Benefits Management in an organisation requires the development of a benefits driven mind set. This cultural change is a reason why Benefits Management is not just implementing the mechanics which are described in this course. At the heart of the mind set are key roles in the delivery of benefits. The Sponsor Every change in an organisation needs a sponsor to drive the delivery of the change. In a programme this role is also known as the Senior Responsible Owner. The sponsor is accountable for the delivery of the change and its benefits. Accountable should mean there are positive inducements for success and sanctions for failure. In a benefits led change success means the benefits are delivered at an acceptable cost; i.e. the business case is fulfilled. A sponsor will usually be a senior manager in an organisation with the authority and capability to ensure benefits are realised from a change. The sponsor will provide leadership throughout the change to ensure that benefits are at the heart of all activity in the change. The mantra How does that affect the benefits? should start here. Business Change Managers A Business Change Manager (BCM) is a manager from a part of the organisation which is undergoing change who will direct the change so that benefits can be realised. The primary responsibility for the Business Change Manager is delivery of the benefits from their area of the organisation. They are given this responsibility by the Sponsor, to whom they report for this activity. To be able to realise benefits for which they are responsible the Business Change Manager will have to ensure that a successful and lasting change is achieved in their part of the organisation. To achieve the change they will need to plan and deliver the change using outputs from a number of projects. And, of course, effective change will depend on the quality of the project outputs. In effect, the Business Change Manager spends most of their time planning and delivering change hence the title. Business Change Managers must provide leadership in delivering benefits. With the support of the Sponsor they will take the benefits led approach into the organisation. Their leadership will bring along the line managers and staff essential to an effective change. Benefits Realisation Manager and technical support The BCM is chosen for their expertise in a particular area of a business or organisation, not their knowledge and skills in Benefits Management. To support both the BCMs and the Sponsor a benefits led organisation would have some benefits expertise in house. This is the role of the 8 Centre for Change Management Ltd 2011

11 C O N T E X T A N D G O V E R N A N CE Benefits Realisation Manager, or other benefits support say, in a Portfolio, Programme and Project Office. The Benefits Realisation Manager would design the governance for Benefits realisation across an organisation and ensure it was implemented in each change programme. They would be available to help run workshops and support BCMs with technical information about how to go about realising benefits. This is an important support role in an organisation that is hoping to be benefits led in its change programmes. What are the key roles involved in benefits management in your organisation? How do they relate in a control and governance framework? Put your answer in section 2.2(b) of your workbook. Governance of Benefits Management Within an organisation, programme or project the procedures, tools, skills, responsibilities and specific policies for benefits realisation are captured in a governance document. This document contains all the information needed to understand how benefits management will be carried out. For benefits management the governance document should contain information on: How benefits might be identified, using workshops, value management, stakeholder engagement, and business case development. How benefits will be analysed and priority allocated to them. Information that will be needed to manage benefits of different priority levels; this information will be kept in benefit profiles. The roles and responsibilities of staff within the project or programme for carrying out benefits management activities and maintaining benefits information. How benefits will be managed within the business and how line managers will be involved in benefits realisation. How benefits will be estimated and measured. How benefits will be represented in the business case. How we might categorise benefits: types (tangible, intangible; cashable, non-cashable; economic, efficient, effective; confidence levels; etc). How benefits will be validated and by whom (inclusion of a stakeholder matrix). Specific policies for managing benefits; for instance how to avoid double counting, shared benefits across different projects and programmes. How benefits realisation accountability and responsibility will be passed over to operations and line managers when the change programme or project is completed. This will include the need to protect benefits for the duration of their viability. (Often savings are accrued over a number of years to generate the cash needed for a business case these need to be protected from further change during that time). Much of this governance will be the same across all change activities. It is the responsibility of the programme manager or project manager to produce and use this governance for managing benefits. The Senior Responsible Owner or Sponsor of a programme or project will need to 9 Centre for Change Management Ltd 2011

12 C O N T E X T A N D G O V E R N A N CE ensure themselves that the Governance will deliver the benefits for which they are accountable to the organisation. THOUGHT EXPERIMENT Can you find the Benefits Realisation governance documentation in your organisation? In a change programme this may be called a Benefits Realisation Strategy. Does the Governance cover the main points described above? 10 Centre for Change Management Ltd 2011

13 I D E N T I F Y A N D M A P B E N E F I T S Section 4 Identify and Map Benefits How to identify the benefits resulting from a change in the business and use mapping techniques to explore the benefits space. Outputs, outcomes and benefits Within a programme benefits are realised at the end of a long process. Benefits are the final product of a change activity. The earlier steps in the process deliver important precursors of the benefits; two important precursors are outputs and outcomes. Project deliverable Pre-requisite for change output outcome New behaviours in an organisation Follows a change Result from new behaviours Lead to strategic objectives benefits FIGURE 4.1 OUTPUT OUTCOME BENEFITS SEQUENCE Outputs are the deliverables from projects within the programme. Typically they are the project products. For instance they could be a new building, IT system, or a design for a lean process, or a training programme to re-skill staff, or the purchase of new equipment. Where a number of project outputs are needed to start a change they represent a capability; for instance open plan offices, IT systems for remote access, and training to implement a host desking capability. Outcomes are the result of successful change within the business and will have clear boundaries and ownership. An outcome is represented by a change in behaviour of people in the business. It means doing things differently. For instance it could be a new process able to perform the 11 Centre for Change Management Ltd 2011

14 I D E N T I F Y A N D M A P B E N E F I T S same work more efficiently that is using less people, resources, or equipment. Or it could be a completely new facility that was not available before. Outputs outcomes benefits these occur in that order and are linked by the change activity within the business. The simple process is as follows: 1. Projects deliver their outputs and transfer them into the business ready to start the change. 2. The business is then ready to go through change to reach the outcomes using the project outputs. Several project outputs represent a coherent capability. 3. When the change has been successful and the outcomes delivered then the benefits are realised. Benefits realisation may go on for a number of years after the outcome is delivered. An important point to understand is that outputs do not deliver benefits it is only when you train and educate people to deliver the outcome that you will start to see some benefit. The relationship is shown below for the Procurement Department example (see Additional Resources at the end) Outputs Outcomes Benefits Strategic Objectives Lean Process design Efficient time bound process Cash saving from reduction in staffing Multi-skilled staff Knowledge base Culture of customer satisfaction New help and advice service Reduce costs IT system Telephone help desk Easier access to progress information FIGURE 4.2 EXAMPLE OF OUTPUTS, OUTCOMES, BENEFITS AND STRATEGIC OBJECTIVES. Types of Benefits There are a number of classifications of benefits that help to understand a benefit and how to realise it. Economic, efficient and effective These three broad categories of benefits are useful at the strategic level when translating strategic objectives in to strategic benefits. Economic: these benefits deliver to the economic development of the organisation. For instance increased profits, improved rate of return on assets or improved management of capital. Avoidance of costs, such as fines for not regulations may be included here. 12 Centre for Change Management Ltd 2011

15 I D E N T I F Y A N D M A P B E N E F I T S Efficient: these benefits reflect improvements in performance. Usually this means doing more with the same resources or doing the same with fewer resources. Effective: these benefits identify new or better ways for the organisation to meet its customers needs. For instance improvements in quality, meeting new compliance requirements and doing new things. Very often an efficiency benefit or effectiveness benefit also leads to an economic benefit such as reduced costs or improved profit. When identifying benefits for a particular project or programme it can be useful to search for all three types of benefits to achieve a broad spread. Tangible and intangible, cashable and non-cashable Tangible benefits are those which can be directly measured, whereas intangible benefits have to be measured through proxies. A tangible benefit can be either cashable or non-cashable. benefits tangible intangible cashable noncashable FIGURE 4.3 TANGIBLE, INTANGIBLE AND CASHABLE BENEFIT RELATIONSHIPS A tangible benefit will be measured directly; usually from a key performance indicator (KPI) within the organisation. If the measure of a tangible benefit is cash or money then it is a cashable benefit and can be used in the business case to offset against costs. This makes tangible cashable benefits very important in the project or programme. However, cashable benefits tend to arise later in the benefits chain and often take months, sometimes years, to appear. Tangible non-cashable benefits are more likely to appear directly an outcome is achieved and often relate to improved performance or the successful implementation of a new feature or product. For instance effective implementation of time bound processes leads to an efficiency benefit which can be measured by the ability to do more work in the same time or the same work in less time. This releases capacity in terms of man-hours which is a quick tangible benefit. If we then go on and convert that spare capacity into a reduction in headcount then we can achieve a cashable benefit from a saving in salaries. An intangible benefit cannot be measured directly and is usually non-financial. However it is often possible to identify effects of the benefit that can be measured in an organisation. For instance an improvement in staff morale often occurs as a result of improved working conditions arising from a change. But we cannot measure staff morale directly so we might use some proxy measures such as staff turnover, or sickness absence as result a reduction in stress, or even use a staff survey. Each of these measures on its own has its problems and can be influenced by factors other than staff morale. So we might use all of these measures to eliminate other influences and indicate what we hope to achieve: an improvement in staff morale. All benefits have to be measurable if we are to demonstrate that they have been achieved. Care needs to be taken to be proportional; the time/cost/effort associated with measuring a benefit may be excessive and almost negate the value of the benefit itself. Sometimes the relationship of a benefit in a benefit map can used to infer it has been achieved in that earlier benefits have been realised if later dependant benefits have been shown to be realised. 13 Centre for Change Management Ltd 2011

16 I D E N T I F Y A N D M A P B E N E F I T S How to identify benefits There are a number of stages in the development of a full set of benefits for a project or programme. Initially the focus is on benefits for the business case. Later in the design of the programme or project benefits identification moves onto a stakeholder focus. Throughout the identification similar techniques are used. Business case development Early in the design of a project or programme the emphasis is on the justification of the change and that argument is captured in a business case. In early versions of the business case strategic benefits are identified without much detail. These strategic benefits are usually estimated and are of monetary value (cashable). Sufficient benefits are required to demonstrate to senior managers that the change is cost-effective; that is there is value in the change. These strategic benefits will be identified by senior managers and will often be based on their experience, and at this stage may exclude any dis-benefits. There will be little attempt to directly link strategic benefits to detailed outcomes. However these benefits will be aligned with the organisation strategic objectives. Benefits for stakeholders When a satisfactory business case has been established then benefits identification moves onto exploring additional benefits for stakeholders, which is an iterative process. These benefits have two purposes: See the stakeholders & communications course to provide a dialogue for engaging with stakeholders who are likely to be affected by the change, and to understand the nature of the value each stakeholder will get from this change. Workshops with stakeholders are an excellent way to explore benefits and value; they are a critical part of the process and should be as interactive as possible. They have a special value for the project or programme because they provide useful information on benefits (and dis-benefits) and the stakeholders attitude to the change through the discussion of value, as well as the beneficial effect on the stakeholder who feels involved in planning the change. Most projects and programmes have a very large number of stakeholders. If there are to be benefits for most stakeholders then there will be a very large number of benefits to be managed. The mechanism for managing a large number of benefits is to prioritise them. High priority benefits are carefully managed and low priority benefits get much less attention. Typically high priority benefits are associated with high priority stakeholders; so stakeholder analysis has a direct impact on benefit analysis. Identification workshops To help identify the range of benefits a project or programme requires a number of workshops will be required. These workshops need to be structured. Two techniques that can be used to structure a workshop are: Exploring appropriateness and value, as described in the previous chapter. Mapping benefits as part of the outputs, outcomes, benefits and strategic objectives chain. See the next section. Identify at least 10 benefits from a change going on in your organisation. Categorise the benefits into tangible, intangible, cashable and non-cashable. Make sure you have some in each category. Put your answer in section 2.3(a) of your workbook. 14 Centre for Change Management Ltd 2011

17 I D E N T I F Y A N D M A P B E N E F I T S Mapping benefits There are a number of frameworks and techniques for classifying and mapping benefits. You may also find that maps can also be referred to as benefit dependency maps/networks or benefit modeling or even strategy maps. The process explained below is generally the same; it is a matter of what you are trying to visually demonstrate. A note of caution: consider for what purpose are you producing a map, which is a very powerful and visual communication tool and once you have created it how will you manage it? Usually a large space, often a whole wall, is marked out in four broad columns: headed outputs outcomes benefits strategic objectives left to right. The benefits column is usually three or four times wider than the others. Items are put up using blu-tack or post-it notes. See the Resources section for more ideas about running workshops. A benefit map should ideally be started from right to left to show the benefits needed to achieve the strategic objectives. Then working backwards i.e. right to left populating the map with outcomes and outputs to get to a point where your map is showing you the outputs (projects) that are needed to be in place in order to drive the change and achieve the objectives. Once you get going the process is iterative as ideas are discussed and included. A key tip is that if you are running a benefits workshop for a benefits map you should ensure that you have a strong facilitator and that they have sound benefits management knowledge. It is not always obvious what the difference is between the items in different columns an expert will help clarify the definitions. The process of filling in the map can move anywhere; anything that is already known is put up straight away. Usually the main benefits, some of the outcomes, and the strategic objectives will be available from the development of the business case. Benefits are identified and links between benefits are added in. Some benefits will start to occur quite quickly after the outcomes are achieved, others will take some time to be realised. An example of a benefits map showing an expansion of benefits and mapping from figure 4.1 is shown below. outcomes benefits strategic obbjectives Efficient tiime bound processes Reduction in staff Payroll savings Telephone help desk Improved customer focus New help & advice service Less frustration for internal customers & suppliers Reduced operating costs Culture of customer satisfaction More knowledgeable staff Quicker procurement Increase in business efficiency Integrated IT and knowledge systems Progress information available online FIGURE 4.4 MAPPED BENEFITS FOR PROCUREMENT EXAMPLE 15 Centre for Change Management Ltd 2011

18 I D E N T I F Y A N D M A P B E N E F I T S This map is simplified to avoid a clutter of lines and boxes in a diagram for this section; outputs have not been included. A full map may be very large; it may involve several sheets of A0 paper. There is no correct selection of benefits or mapping relationships, it is what makes sense to the users of the map and you need to establish how you will use the map once it is created. If a proper time line can be added to the benefits map then it is well on the way to a benefits realisation plan! Building benefits maps is both a recording technique and an identification technique. It can also be a powerful communication tool. A map enables exploration of the space and adding in new benefits as well as making sure that the benefits do lead to strategic objectives and that the necessary outcomes are being delivered to enable the required benefits. It is not uncommon to realise that to deliver this benefit we need to make sure that the outcome includes. A problem of mapping is that the relationships can be difficult to lay out on a two dimensional sheet of paper. Hence a more sophisticated mapping technology may be needed for the information. Working backwards and forwards with a map Once an outline benefits map has been devised, possibly in a workshop, then a dual approach can be used to identify new benefits. This approach can be iterated until sufficient benefits have been found for engaging with stakeholders and to justify the business case. THOUGHT EXPERIMENT Do you use benefits maps as part of your benefits development? Is mapping a useful workshop technique in your organisation? Do you think benefits maps are useful, or do you prefer another mapping tool? What do you see as the advantages and disadvantages to mapping? Working forwards from outputs and outcomes In many change projects and programmes the outcomes, and sometimes the project outputs, are defined in advance of detailed benefits design if this is the case then you should always try to build your bridge between outputs and strategic objectives and resist the trap of creating benefits simply to justify the outcome or output. By thinking through what it will be like in the business to use these outputs and the implications of operating the new outcomes then additional benefits can be identified. Looking at different stakeholders in the business and their stakeholders will also help to identify who will be doing things differently and why. This is a good area to run workshops with business staff to explore the space. These workshops will generate new benefits maps which need to be integrated into a master map. Working backwards from Objectives The organisation strategic objectives and the main benefits from the business case are usually known before detailed mapping begins. You can also work backwards by thinking about intermediate benefits (quick wins) that might lead to these strategic benefits and objectives. It may be possible to find additional benefits addressing strategic objectives not yet included. Early benefits are very useful as they can indicate how realisation of strategic benefits is progressing and how much of the expected strategic benefit will actually be realised, they also provide confidence to stakeholders of progression. For instance in figure 4.2 how much shorter the procurement process will be is an indication of the potential for improved efficiency in other parts of the business using procurement. 16 Centre for Change Management Ltd 2011

19 I D E N T I F Y A N D M A P B E N E F I T S Using the benefits identified in the previous exercise (section 2.3(a) of your workbook) identify the outcomes that need to be in place to realise these benefits. Make sure your description of the outcome is different from a benefit. Now map the outcomes and benefits in a small benefits map. Put your benefits map into section 2.3(c) of your workbook. 17 Centre for Change Management Ltd 2011

20 P R O F I L E A N D V A L I D A T E B E N E F I T S Section 5 Profile and Validate Benefits Building the information to manage benefits and checking them to ensure they are realisable and relevant. Benefit Management Information I f we are to successfully realise benefits then we will need to manage them carefully. To manage anything we need management information about it. The management information we need for benefits realisation is: A description of each benefit including its dependencies on outputs, outcomes and strategic objectives, how we will measure it, who is responsible for realising the benefits, who owns the benefit in the project or programme, and any other information that will be useful. The collection of benefit descriptions, or profiles, is kept in the profiles document. A map of the benefits showing their relationships and dependencies through which we can see the big picture of benefits realisation in this project or programme. This benefits map is particularly useful in communication with key stakeholders. A plan showing when we expect to realise benefits and over what period; any additional activities required to realise benefits not captured in any other plan and who will be responsible for each activity. This will help us understand what infrastructure needs to be in place in order to ensure benefits are realised. Normally there will be a standard template for a benefit profile and sometimes even to the benefits map and plan, in which case much of the information you require has already been identified. The problem is that not all the information is required for all the benefits. We should only keep sufficient information on a benefit to allow us to manage that benefit, which means information that enables us to make decisions about realising the benefit. If you can't see useful information especially relating to decisions then we should not keep it. High priority benefits will require considerable management and probably a lot of information; whereas low priority benefits will receive much less attention and require much less information. Prioritising benefits Having identified lots of benefits and mapped them out we realise that we have limited resources to deliver all these benefits. As in other situations where resources are limited we must prioritise our activities, and in this case that means prioritising benefits. Fortunately there is a simple technique for prioritising benefits and that is to map the benefits onto the relevant stakeholders. Our stakeholder analysis will already have prioritised the stakeholders so high priority stakeholders will identify high priority benefits and low priority stakeholders will identify low priority benefits. 18 Centre for Change Management Ltd 2011

21 See the module on Stakeholders & Communications to see how stakeholders are prioritised. P R O F I L E A N D V A L I D A T E B E N E F I T S A table mapping stakeholders to benefits is a useful piece of analysis linking stakeholders and benefits. It will enable us to directly identify relative priorities for benefits from the relative priorities the stakeholders. If we also include dis-benefits in our table then we can look down the column for a stakeholder and see the benefits a project or programme will deliver to this stakeholder. This will quickly enable us to see which stakeholders are net winners or net losers from our activities. This analysis will help us in our engagement with that stakeholder. low stakeholder priority high Procurement staff Company staff Suppliers Senior managers Sponsors Reduction in staff Improved customer focus More knowledgeable staff Progress info online Help & advice service Quicker procurement Payroll savings Less frustration Increase in business efficiency FIGURE 5.1 MAPPING BENEFITS TO STAKEHOLDERS Other methods of prioritising benefits may be useful in more complex change programmes. For instance, quick wins may be important at the start of a programme to demonstrate progress. Benefits that are relatively easy to deliver and have high value (essentially low hanging fruit) should be prioritised over those of low value and difficult to deliver. The Sponsor or Senior Responsible Owner should consider priority for benefits to meet the business case and ensure appropriate funding. Benefit profile contents A benefit profile contains the information needed to manage and realise an individual benefit. Typically this information will include: A description of the benefit which carefully separates it from any project output or business outcomes. Usually this includes some relative adjective such as improved, increased, reduced etc. Dependencies around the benefit. This includes any earlier benefits that this benefit depends on; specific outcomes or aspects of business change the needed to this benefit to appear; any projects on whose outputs this benefit depends either directly or 19 Centre for Change Management Ltd 2011

22 P R O F I L E A N D V A L I D A T E B E N E F I T S indirectly which will be obtained from the benefits map. It also includes the strategic objectives that this benefit contributes to. This makes it easier to identify benefits which are affected by change in the organisation strategic objectives. Any costs in realising the benefit that have not been captured anywhere else. These will need to be included in the full business case. Specific activities needed to realise the benefit and causing the costs could also be identified here. Risks and issues which have been identified relating to this benefit. Where in the organisation or business this benefit will be realised. Who will be responsible for realising this benefit, usually this will be a line manager in the organisation or business where the benefit will be realised. Who will own this benefit in the project or programme and be responsible for maintaining this benefit information. How this benefit will be measured, in particular which KPIs will be used. The target measurement of this benefit which we hope to achieve. The expected start and end date over which the benefit will be realised. The baseline measurement for this benefit taken before any change is implemented in the organisation. The measurement frequency and reporting mechanisms. Any problems or assumptions associated with the measurement this benefit, such as potential inaccuracies or perverse behaviour which could affect the benefit measurement. Choose one of the tangible cashable benefits identified in section 2.3(a) of your workbook and fill out a profile for the benefit using the headings in section 2.3(b). Validating benefits It is very important during benefits discovery to ensure the real benefits are identified. Hence every benefit should be validated against a four-point test: 1. Is the benefit describable? A good description is the starting point of a benefit profile, check that the description is not that of an output from a project or the outcome of a business change. 2. What will be observable in the business or organisation? If there is to be a benefit there must be something that is different in the organisation. What is that difference? 3. Where in the business or organisation will we observe that difference? The benefit must be in the business if it is to benefit the business. Sometimes benefits occur in the wider society or economy which benefits the society or economy but it can't be used in the business case to offset costs incurred by the change programme or project. 4. How is the benefit measured? A benefit must be measured if we are to demonstrate that it has been realised. A benefit that we wish to include in the business case for a project or programme should pass this four-point test. This does not mean that benefits to a wider society or economy are not of 20 Centre for Change Management Ltd 2011

23 P R O F I L E A N D V A L I D A T E B E N E F I T S value to some stakeholders, but they cannot be set against costs charged to the organisation in the business case. THOUGHT EXPERIMENT Do all of the benefits in your workbook section 2.3(a) pass the validation test? Does it appear to be a good test for these benefits? What other tests would you use on a benefit to ensure it was going to make a contribution to your organisation? Optimism bias It is well-known that humans tend towards optimism when identifying benefits and especially when considering the value or target level of a future benefit. This feature is particularly useful when generating business cases because the real value of future benefits is just a guess and subject to a lot of assumptions. The validation test should ensure we have real benefits but does not counter any optimism bias. The people responsible for the details of a benefit should attempt to manage this bias by identifying a possible range for a benefit result. For instance, identifying a worst-case, best case, and most likely result. A simple estimate of the likely value of a benefit would then be the average of these three values. Another mechanism for managing optimism bias is to ensure that the owner of a benefit is also responsible for delivering the benefit. And that effective realisation of the benefit is part of that person s regular performance appraisal. Once someone realises that the delivery of a benefit affects their own remuneration they tend to be less optimistic about how much of that benefit can be realised. THOUGHT EXPERIMENT How is optimism bias managed in your organisation? Do you think it is a problem? If so, how would you deal with optimism bias? Benefits in the business case When using benefits in the project or programme business case careful analysis is required to ensure that realistic conclusions are reached and a fair argument made for the project or programme. Benefits will be subject to assumptions and risks (in practice assumptions should be treated as risks) and this will help to set out our worst-case and best case range from benefit value. The worst-case will reflect those risks with a more likely than not probability (>0.5) occurring, whereas the best case will be based on no risks occurring. Choosing the most likely value is a matter of judgment and the criteria used to reach the decision should be included in the business case. Our ability to manage risks will be reflected in our confidence for our estimates of the value we expect for each benefit. Some benefits models include categories for confidence. This means that the development of the benefit profile and in particular the assumptions risks associated with a benefit are very important in developing the business case. 21 Centre for Change Management Ltd 2011

24 P L A N N I N G B E N E F I T S R E A L I S A T I O N Section 6 Planning Benefits Realisation Producing and using the benefits plan with appropriate risk management. The benefits realisation schedule The outputs, outcomes, benefits sequence enables us to establish a schedule for benefits realisation by working forwards from project plans. The project plans will identify the earliest availability of the outputs which we need to start the business change. The start of the business change is a key milestone and decision point in a programme plan. The change team will estimate how long the change will take and when the outcome will be achieved. Once the outcome has been achieved in the business then the benefits should start to be realised. Project outputs produced Baseline measurements Ready for change Outcome achieved Business change Performance measured Benefits measured Additional realisation activities Benefits realised FIGURE 6.1 REALISATION SCHEDULE Benefits related activities will be occurring throughout the schedule. Whilst the projects are producing their outputs and preparing the transfer into the business a benefit owner will be establishing baseline measurements before the change takes place. Some measurements may need to be taken over a whole year or more. For instance if we wish to measure sickness absence as a proxy for staff morale then a single sample taken for one month will easily be affected by other factors; hence a full profile of one year or possibly more years will be required to understand seasonal factors and eliminate them. Whilst the change is taking place in the business the change team are working to deliver the outcome, and the benefit owner will be measuring KPI's to ensure the appropriate performance levels are achieved to provide the best basis for realising benefits. If performance levels are not being achieved then the change team and benefit owner may need to identify additional work to raise performance levels and achieve the required outcome. When the outcome has been achieved then the benefit owner will measure the benefit directly over the expected period when the benefit is being realised. This may mean at some point 22 Centre for Change Management Ltd 2011

25 See the course on Risk Management Confidence category P L A N N I N G B E N E F I T S R E A L I S A T I O N ownership for the benefit is passed to operations management as the project or programme is closed (see Passing responsibility for benefits to operations in section 8). Any additional activities required to realise the benefit will also be carried out after the outcome has been achieved. For example, running a voluntary redundancy campaign to reduce staff numbers and achieve efficiency benefits. It is very important to identify resources needed for these activities as they often come as a surprise. More than one HR department having just carried out its own downsizing has been bounced into hiring the staff back again to run a redundancy programme it did not know about. Working through this schedule, laying down the details of each benefit realisation and the additional activities for realising each benefit will enable a Benefits Realisation Plan. Often this plan is incorporated within a broader programme plan. Managing risks Whereas the Benefits Realisation Plan shows what we expect to happen we use risk management to explore what might happen. Some of the things that are not in the plan may lead to improved benefits, beyond those in the plan, and are treated as opportunities that we could exploit. Some things that can happen will lead to a loss of benefits so we treat these as threats to our benefits and work to mitigate their effect as much as possible. Both seizing opportunities to exploit them and mitigating threats are included in risk management. Threats to our benefits will affect the business case and should be reflected in the amount of each benefit we are including in the business case. The total risks to a benefit (threats and opportunities) will be indicated in our confidence and expected value for each benefit. The better we manage the risks the higher our confidence will be. Confidence level is another categorisation we can apply to benefits which enables us to map expected value into a business case. Here is an example three level confidence categorisation: Definite: we expect to achieve most of the value of this benefit because we have delivered the benefit before and understand how to do it. The risks are well understood and controlled. The expected value used in the business case could be 90% of the best case. Expected: we have managed similar benefits before and have the risks under control, though a few of them may have higher impact or probability than for the definite category. The expected value used in the business case could be 75% of the best case. Anticipated: we expect to achieve quite a lot of the value for this benefit but the risks are much higher. This might be because we have not delivered this benefit before (or failed to deliver in the past), the measurement is uncertain or problematic, or specific risks have high probability or impact. The expected value to be used in the business case could be 60% of the best case or less. By placing benefits into an appropriate confidence category it helps to set realistic expectations with stakeholders as well as develop a realistic business case. Both of which are good practice! THOUGHT EXPERIMENT Do you use confidence levels to discriminate between benefits and reflect your ability to realise them? Are they a useful idea in your organisation? 23 Centre for Change Management Ltd 2011

26 earliest latest performance P L A N N I N G B E N E F I T S R E A L I S A T I O N Estimating realisation rates Benefits are usually realised over a period of time. For instance savings on a reduction of staff may be gathered over five years. This enables us to plan the earliest time a benefit can start being realised and the latest time. We have already discussed the idea of a range over which a benefit value might be realised (best case and worst case). If we use both of these ranges on a performance (benefit value) and time graph we get a target area for the benefit and possibly an expected value within the target area. See figure below. best case benefit target worst case baseline measure FIGURE 6.2 BENEFIT TARGET AREA The challenge in planning benefits realisation is how to work out a likely path from the baseline measure, which is known, and the expected value and time in the future. Depending on the nature of the benefit and the change that precedes it benefits may rise quickly and then tail off, or start slowly and rise rapidly later; or more likely, the realised value will rise and fall over the time period especially if they are require additional activities which have to be organised and resourced. Unless you have any evidence to the contrary the simplest approach is to draw a straight line from the baseline measure to the centre of the benefit target area on the graph. The purpose of estimating the rate at which a benefit will be realised is to track actual against planned to see if further intervention is required early on. The purpose of a plan is to check reality against a forecast and to act where differences occur. If a benefit is slow in being realised against the plan then the benefit owner should investigate the situation and carry out remedial action as necessary. Obviously, without a plan and estimate of realisation this action is not going to happen! Cash flow implications time The rate at which a benefit is realised over a period of time is very important for the cashable benefits. These benefits will be used in the business case to offset the costs of the project, programme, and change activities. The difference between the costs of the change activities and the realised benefits in each month represents the cash flow of the programme or project. Over the lifetime of the project or programme and the full benefits realisation period the total of the cashable benefits will usually exceed the costs; this is a basic definition of value for money in most organisations. The monthly difference during the whole period is the relative cash flow and is very important. 24 Centre for Change Management Ltd 2011

27 negative -- cash flow -- positive P L A N N I N G B E N E F I T S R E A L I S A T I O N Most change programmes have a negative cash flow in the early period, the costs exceed the benefits. This is because we must do the projects and change to achieve outcomes before we can realise any benefits and obviously the projects represent most of the costs. Where the cash flow is negative then the Chief Financial Officer (CFO) of the organisation has to find the cash to support the change programme or project (the project staff are expecting to be paid!). This cash has to be found and may come from other revenue, earlier change activities which are now delivering net benefits, or reserves. Where the cash comes from revenues then it is not being spent on customer facing activity, so is a drain on the ability of the organisation to do its day job. Hence the cash flow is more important to the CFO than the overall value for money. Every financial year the CFO will have to fund the negative cash flow for change activities. The estimates of cashable benefits realisation represent the expected positive cash flow of the change activities and at some point they should exceed the costs month on month. The ability to predict the cash flow requirements of the project or programme depends on the ability to predict costs and benefits. Most organisations are quite good at estimating costs but poor at estimating benefits. Additionally any positive bias in costs tends to reduce costs just as a positive bias in benefits tends to increase benefits. Overall any positive bias has a double effect on cash flow by reducing costs and increasing benefits! Poor estimates for cash flow produce poor estimates in financing, usually causing the CFO to find additional cash (because people expect their salaries to be paid each month!); or a reduction in resources for the usual business of the organisation; neither of which is desirable. costs benefits cumulative time FIGURE 6.3 EXAMPLE CASH FLOW The above figure is an example of what a cash flow (usually part of the business case) might look like for a change project or programme. Note the large negative value early on, but leading to a positive value later. The point where the cumulative cash flow moves positive (crosses the middle axis) is an important milestone in benefits realisation. Effective benefits realisation planning should lead to effective estimates of positive cash flow. Checking actual benefits realisation against planned can help improve future forecasts and provide the CFO with the earliest possible warning of cash flow problems. This is a specific example of managing realistic expectations of a stakeholder interested in a particular benefit. Benefits realisation planning helps to manage expectations for all stakeholders with respect to benefits. 25 Centre for Change Management Ltd 2011

28 P L A N N I N G B E N E F I T S R E A L I S A T I O N Using the benefits identified in section 2.3(a) of your workbook estimate the earliest and latest date they could be realised. Also identify the most appropriate person to be responsible for realising the benefit over this time period. List the benefits in order of the earliest date. Put your answer in section 2.4(a) of your workbook. 26 Centre for Change Management Ltd 2011

29 D E L I V E R O U T C O M E S Section 7 See the People Change course Deliver Outcomes Delivering change in an organisation to achieve an outcome leading to benefits requires planning, commitment to benefits, and stakeholder engagement. The benefit delivery schedule When all the planning is complete and work has started on the projects then the change team must work on the delivery of benefits. Most of the work on benefits delivery is devoted to changing the business to deliver the new outcomes; hence the reason why the team who do this work are called the Change Team. But, whilst most of the effort is in achieving change, the focus is still on the benefits. So the main responsibility of the change team and the thing they will be measured against is benefits realisation. The output, outcome, benefit sequence is the basis for this part of the benefits cycle. Delivering an outcome means making a change in the business; in particular it means people in the business behaving differently. That could include using new processes, new skills, new tools, new information, and even a new culture. planning execution sustaining change authorised outcome delivered benefits realised FIGURE 7.1 THE BUSINESS CHANGE SEQUENCE. Figure 7.1 shows the three basic steps in a change sequence with milestones. This process is applied for each organisation change leading to a specified outcome. How it is broken down will be part of the overall project or programme plan. 27 Centre for Change Management Ltd 2011