Better Business Cases. Managing Benefits from Projects and Programmes

Transcription

1 Better Business Cases Managing Benefits from Projects and Programmes M ay 2014

2 Crown Copyright This work is licensed under the Creative Commons Attribution 3.0 New Zealand licence. In essence, you are free to copy, distribute and adapt the work, as long as you attribute the work to the Crown and abide by the other licence terms. To view a copy of this licence, visit Please note that no departmental or governmental emblem, logo or Coat of Arms may be used in any way which infringes any provision of the Flags, Emblems, and Names Protection Act Attribution to the Crown should be in written form and not by reproduction of any such emblem, logo or Coat of Arms. ISBN (Online) Internet The URL for this document on the Treasury s National Infrastructure Unit website at May 2014 is

3 Contents About this Guidance... 1 Questions and Feedback... 1 Further Information... 1 Overview... 2 What is Benefits Management?... 3 Outline of Benefits Management... 3 Benefits Management in the Wider Context... 3 Benefits Management... 7 Overall Framework... 7 Benefit Identification... 7 Benefits Analysis... 9 Benefits Planning Benefit Realisation and Reporting Expectations Regarding Benefits Management in the State Sector Managing Benefits Guidance from APMG Appendix A: Glossary Appendix B Benefits Profile format (example) Benefit [Benefit Name] [Weighting] Key Performance Indicators Dependencies Risks and Issues Appendix C Benefits Map Format (example) Managing Benefits from Projects and Programmes: May 2014 i

4 Appendix D Benefits Strategy Format (example) Overall Approach to Programme Benefits Realisation Scope Benefit Priorities for the Project Measurement Methods and Processes Tools and Information Sources Review and Assessment Functions Roles and Responsibilities Reviewing Critical Success Factors (CSFs) for Benefits Realisation Definitions, Acronyms and Abbreviations Referenced Documents Appendices Appendix E Benefits Realisation Plan Format (example) Executive Summary Schedule Activities for Benefits Realisation Roles and Responsibilities Links to Other Programme Documents and Plans Definitions, Acronyms and Abbreviations Referenced Documents Appendices Appendix F Benefits Register Format (example)... 1 Benefit Summary... 1 ii Managing Benefits from Projects and Programmes: May 2014

5 About this Guidance This guidance document sets out, at a high level, an approach to benefits management that is compatible with the Better Business Case guidance and the way projects and programmes are generally undertaken in the New Zealand State Sector. This benefits guidance can also be applied to programme and projects in the wider public and private sectors. This guidance document should be read by those people within an organisation who are involved with any aspect of benefits management, and who are looking for a framework to tie it together. The guidance outlined in this document applies until this document is updated or replaced. This document has been written as part of the suite of Better Business Case guidance. Questions and Feedback General enquiries about the information contained in this guidance, not addressed in this guidance, can be directed to betterbusinesscases@treasury.govt.nz For Government agencies, any agency-specific questions should be addressed to your Treasury Vote team. Any comments as to how we could improve this guidance can be directed to guidance@treasury.govt.nz Further Information This document is part of the Better Business Cases suite of guidance available at the Treasury National Infrastructure Unit website Managing Benefits from Projects and Programmes: May

6 Overview The information contained in this document is a guide, and has been produced in response to requests for coherent information on how all the parts of benefits management work together. It is written in the context of the Better Business Cases (BBC) process in New Zealand, can be applied more widely than BBC, and references other tools used in that process. This is also an early signal that benefits management will be an area of greater focus in the future. 2 Managing Benefits from Projects and Programmes: May 2014

7 What is Benefits Management? Outline of Benefits Management Benefits have the following four attributes: there is a beneficiary (eg, society, a group or an individual), there is a gain, it is attributable, and discernible. In the context of an investment proposal, the Better Business Case (BBC) guidance defines a benefit as: any gain to one or more stakeholders from achieving the change in state 1. Better Business Cases recognises that a successful investment in change by an organisation can result in both winners and losers, can be affected by external factors, and can result in gains that may not be measurable. Undertaking a project or programme and investing in change, should result in benefits of some kind (otherwise why do it?). Benefits can be considered as the return from the investment in undertaking the project or programme. Assessing the contribution of benefits to organisational outcomes is also a way to align initiatives with the organisation s strategy. These are both important considerations when assessing which initiatives are approved to proceed and which aren t. Benefits management is vital in ensuring that an initiative achieves what it sets out to do. It involves articulating what benefits are expected from the initiative, how it will be known that the benefits are achieved, and the assessment of what has eventuated against what was planned. Managing benefits extends beyond the lifecycle of a project or programme. It requires a structure that survives long after the project/programme team has disbanded. Benefits Management in the Wider Context Benefits management will become increasingly important over the coming years. Many organisation s have strategies that are premised on current or future investments realising direct monetary benefits 2 that will contribute to them being able to manage within their forecast out-year fiscal constraints (eg, business transformation programmes, and capital investment initiatives to reduce operating costs). These monetary benefits are being explicitly factored in to out-year financial forecasts that senior managers use for decision making, and are reflected in accountability documents such as the four-year-budget plans in the State Sector. It is essential therefore, that there is a close link between the benefits from individual projects or programmes, and the financial forecasting and modelling the organisation undertakes (usually held within their Financial Management Information System). It also means that 1 Refer to the Better Business Case guidance booklets at the Treasury website at 2 From an economic perspective, though benefits may be monetarised for comparative analysis, these are unlikely to all be able to actually be measured in monetary terms as having been realised. This is where the use of proxy indicators is useful. Managing Benefits from Projects and Programmes: May

8 senior managers will be looking at direct monetary benefits closely, as they will be held to account on their commitments to manage the fiscal pressures (and will need to amend their approach if their fiscal strategies are not tracking as planned). This is the link between benefits management and value management. Organisations need to understand what it is they are trying to achieve (what it is they value). Benefits that are aligned with where the organisation wants to go can contribute to value, benefits not aligned to direction, do not lead to value. The Government Chief Information Officer s (GCIO) All-of-Government ICT Projects and Programmes Assurance Framework has also picked up on the importance of benefits realisation. They now require that benefits realisation be included in the assurance plan (as part of the costed and resourced project plan). Benefits management can be applied to any significant initiative. This guidance uses the Better Business Case guidance as its reference point, which is a starting point and only part of a project or programme lifecycle. Benefits management extends beyond the lifecycle of any individual project or programme. Benefits management appears throughout the Better Business Case guidance, starting at the Strategic Assessment, and continuing through to the Implementation Business Case. 3 The following diagrams graphically represent what happens in benefits management, when activities occur, and additional sources of benefits management guidance. 3 Note that if there is a change in the expected benefits to be realised from the project (eg, through amended scope or changes in the operating environment), then the business case needs to be reassessed to ascertain if it is still desirable to proceed with the project. 4 Managing Benefits from Projects and Programmes: May 2014

9 Figure 1: Benefits management in Better Business Case guidance Benefits Management Benefits identification (APMG Identify & Quantify) Benefits analysis (APMG Value & Appraise) Benefits planning (APMG Plan) Benefits realisation and reporting (APMG Realize) Pre-project Start-up Initiate Implement Close Strategic Indicative Business Detailed Business Implementation Implementation Benefits realisation Assessment Strategic case: the case for change Case Strategic case: Agree strategic context Strategic case: determine benefits, risks constraints and dependencies Economic case Identify the long list of options and undertake initial assessment Case Strategic and Economic cases: revisit IBC and confirm short list Economic case: economic assessment of the short listed options Economic case: Intangible benefits and costs Economic case: preferred option and sensitivity analysis Management case: Benefits management planning Business Case Strategic Case: revisit the case for change Economic case: revisit the detailed business case options Management Case: finalise benefit management arrangements Management case: Finalise post-project evaluation arrangements Monitor and report benefits realisation Monitor and report benefits realisation Techniques Techniques Techniques Techniques Techniques Investment logic mapping (ILM) (incl benefits profiles and maps) Benefits profiles and mapping (ILM and Managing Successful Programmes (MSP)) Categorisation (Better Business Cases (BBC)) Options assessment Cost benefit analysis (Treasury, BBC) Multi-criteria decision analysis (Treasury, BBC) Sensitivity analysis (Treasury) Benefits plan and strategy (ILM, MSP, MoP) Benefits plan and strategy (ILM, MSP, Management of Portfolio (MoP)) Benefits mapping (ILM and MSP) Benefits tracking and reporting (ILM, MSP, MoP) Managing Benefits from Projects and Programmes: May

10 Figure 2: Framework for benefits management Benefits identification (APMG Identify & Quantify) Benefits Management ILM Benefits profiles Benefits Categorisation Long-list options Short-list options Benefits map Benefits analysis (APMG Value & Appraise) Cost benefit Multicriteria Other analyses Preferred option Sensitivity analysis Benefits planning (APMG Plan) Benefits strategy Benefits Plan Benefits register Benefits realisation Benefits monitoring Benefits realisation and reporting (APMG Realize) Benefits reports 6 Managing Benefits from Projects and Programmes: May 2014

11 Benefits Management Overall Framework At a high level, the framework for benefits management is simple. Benefits are: Identified including defining their indicators and measures. Analysed including quantifying scale of benefits, comparing options, and assessing optimism bias. Planned for including stating how much of the benefits will be realised, by whom, and by when. Realised, monitored and reported including reporting on both benefit realisation, and risks to benefits not being realised. The framework should also provide lessons learned including inputs to future benefits analysis to increase accuracy. This is shown in the diagram on the previous page (Figure 2) in relation to the Better Business Case guidance. Benefit Identification Benefits identification can begin even before the Better Business Case process begins. Agencies may identify desired outcomes as part of their organisational planning processes, that require as yet unspecified change initiatives to help bring about the benefits the agency needs to reach the outcomes (refer to Better Capital Planning quick reference guide ( More usually, benefits will begin to be identified and defined at the strategic assessment stage of a project or programme business case development. The Better Business Case guidance uses Investment Logic Mapping (ILM) as part of developing the Strategic Assessment. Note that benefits management can be applied to projects and programmes with or without an ILM. ILM is drawn from the Victorian Government Investment Management Standard. One of the useful outputs of the ILM workshops is a graphic representation of the relationship between the problems, and the benefits that are expected if the problems are addressed. ILM is referenced throughout this guidance. Stakeholders Benefits relate to stakeholders different stakeholder groups can derive different benefits or dis-benefits from a proposal (a dis-benefit is a negative impact that might occur as a direct consequence of implementing a particular solution). It is important to identify dis-benefits along with the benefits of a proposed initiative to determine if the overall benefits of the proposal to the key stakeholders are worthwhile. The Better Business Case guidance has a stated preference (for State Sector expenditure) to analyse benefits from a national economy perspective rather than a narrower Managing Benefits from Projects and Programmes: May

12 all-of-government, agency, programme or project perspective 4. It is helpful to keep this in mind when identifying benefits as it will assist later on in the process. Benefits should also not be constrained to financial benefits. Although many benefits can be quantified financially, there are others that it is difficult, undesirable, or insensitive to put a financial value on (these benefits are called non-monetary). The flows of benefits to different capital stocks (eg, financial, physical, human, social and natural) should be considered. The Treasury s Living Standards Framework 5 is a useful reference in thinking about these flows. Benefits profiles Benefits profiles are descriptions of key performance indicators, measures and responsibilities for each benefit. Wherever possible, benefits should be stated as a measurable change, and the key performance indicators are the measures that demonstrate a change has come about. A format for a benefits profile can be found in Appendix B. For projects/programmes undertaking ILMs, the second ILM workshop generates early detail on the benefits in the form of benefits profiles). This table below shows the information required for each key performance indicator (KPI) and is from the ILM guidance (benefit plan). KPI: Insert KPI description here Measure Insert measure description here Baseline Value (dd/mm/yyyy) Target Value (dd/mm/yyyy) Interim target Are there interim targets to ensure things are on track (value, date mm/yyyy)? Source What is the source of the data to be used to measure this KPI? Reporting Forum Where will this KPI be reported? Start date When will the reporting start (dd/mm/yyyy)? Frequency How frequently will it be reported (monthly, quarterly, annually)? End date When will reporting finish (dd/mm/yyyy)? Responsibility for reporting Name Position Organisation Each KPI should be relevant, attributable, and measurable. The Better Business Case guidance suggests using the SMART criteria: Specific (must be clear and unambiguous). Measurable (has an existing baseline or can establish one; is cost-effective to measure progress). Achievable (the goal is neither out of reach nor below standard performance). Relevant (must be an appropriate indicator for the specific benefit). Time-Bound (grounded within a timeframe). 4 Refer to the Better Business Case Guidance at 5 Available from the Treasury website at 8 Managing Benefits from Projects and Programmes: May 2014

13 Attribution is also something to consider when identifying benefits, consider the benefits that are likely to result as a direct result of the initiative, and those which the initiative contributes to but relies on other components as well. Benefits maps are a good way to show the relationship between interventions, benefits and higher level outcomes. Both ILM and the UK Government s Managing Successful Programmes (MSP) methodology include guidance on developing benefits maps. A format for a benefits map format is shown in Appendix C. Classification Benefits can be classified in a number of ways. Benefits can be: direct or indirect monetary or non-monetary, and quantifiable or qualitative (or non quantifiable). Direct monetary benefits to the organisation are analysed in the Financial case. All benefits, including benefits that are unable to be expressed in monetary terms, are analysed in the Economic case (using assessment techniques such as cost-benefit and multi-criteria decision analyses). Benefits Analysis Benefits analysis can be undertaken throughout the initiative s lifecycle. The level of benefits from any proposal will be formally or informally assessed to see if it is worthwhile pursuing. (One of the outcomes of an ILM workshop may be that it is not worth pursuing). More formalised analysis begins when considering either programme choices in the Programme Business case and/or the long list of options in the Indicative Business Case, when reducing it to a short list. Potential value for money is one of the factors to be considered (expressed in terms of net benefits (less costs) and allowing for risks), along with others such as strategic fit, provider capacity, affordability, and potential achievability. The comparative difference between these factors is what differentiates options, and informs decision makers. More detailed analysis of short list options is required in the Detailed Business Case. Treasury s Cost Benefit Analysis Primer (2004) ( The Primer is a good source of guidance on a range of tools and techniques to assist in analysis and elaborates on the Better Business Case guidance. Managing Benefits from Projects and Programmes: May

14 The primer includes: Cost benefit analysis Cashflows Discounting and discount rates Net Present Value (NPV) Internal Rate of Return (IRR) Payback period Benefit-cost ratio Optimism Bias Sensitivity Analysis Scenario analysis Multi-criteria decision analysis (MCDA) Note that, depending on scale and risk, the one form of analysis for comparing non-monetary benefits and costs is multi-criteria decision analysis (MCDA) 6. Analysis of the short list options assists in identifying and recommending a preferred option. Depending on scale and risk, this preferred option then undergoes sensitivity analysis that tests the robustness of the analysis and the assumptions and variables that it has been built upon. The assumptions the benefits are based upon may be challenged during this process. The economic case is reliant on the combination of benefits, costs and risks. Practitioners will find that putting the effort into good benefit identification up front can pay off in developing the business case 7. The Living Standards Framework can be usefully applied here too, as a way to understand the benefits flows to other capital stocks. Benefits Planning Benefits planning is the part of benefits management that details when benefits are expected to be realised from the preferred option, and who has what role in the realisation and reporting of benefits. Benefits planning begins during the development of the Detailed Business Case, where information on the relevant benefits for the preferred option (ie, in benefits profiles, maps, and economic case cost/benefit analysis) is used to document what is to be expected. It is further refined and defined in the Implementation Business Case. 6 Better Business Cases Indicative and Detailed Business Case Guidance. 7 In the State Sector, Treasury Vote Analysts check the economic case thoroughly within the Detailed Business Case. 10 Managing Benefits from Projects and Programmes: May 2014

15 The main components of benefits planning are: the benefits management strategy, the benefits realisation plan, and the benefits register. 1. The benefits management strategy establishes the approach to realising benefits and the framework for benefits realisation. It sets out the rules for engagement on how to identify, map, monitor and review benefits. A suggested format for a benefits management strategy can be found in Appendix D. An updated benefits map is valuable to show how the preferred option s benefits align with outcomes and agency strategies. 2. The benefits realisation plan is a complete view of all the benefits, their dependencies and expected timing for benefits realisation. It sets out what stakeholders can expect from the project or programme and is used as the basis for tracking against what is actually realised. It is useful to include complete benefits profiles for each benefit within the plan, to enable them to be monitored beyond the life of the project or programme. A suggested format for a benefits realisation plan can be found in Appendix E. Tolerances can be applied to benefits realisation, much like for a budget or timeframe (eg, +/- X% of target value), and these can be specified in the benefits realisation plan. This is useful when reporting on benefits, particularly on any concerns that levels of benefits may not be reached, as this may impact on the ongoing attractiveness of the project. 3. The benefits register is where the relevant information (eg, measures, timing, responsibility etc) from the benefits realisation plan is placed, actively monitored and tracked against the plan. This also means someone needs to be assigned the accountability for doing this. The register can be as simple as a spreadsheet that shows expected benefits against what was actually realised. Tracking of benefits can begin at the start of the implementation stage, and continue after the project has completed to the timeframe indicated in the benefits realisation plan. The benefits register is the source of benefits realisation reporting information. A simple benefits register format can be found in Appendix F The benefits realisation plan and the benefits register are part of planning for successful delivery. They can inform the Detailed Business Case and form part of the Implementation Business Case. Benefit Realisation and Reporting The benefits realisation plan identifies when benefits are expected to occur, and the benefits register is the place where achievement of the actual benefits realised against the plan are documented. It is important to establish baseline information for benefits, against which improvements brought about as a consequence of the initiative can be measured. The mechanisms for assessing the benefits realised should also be set up early to enable capture of the changes in measures over time. Managing Benefits from Projects and Programmes: May

16 Each organisation will have its own arrangements for monitoring actual versus planned performance information (using the KPIs) to indicate if benefits have been realised or not. This may be, for example, be part of an Enterprise Portfolio Management Office (EPMO), Finance or Planning and Reporting function. The structure for any benefits realisation reporting arrangements must be sustainable well after the project or programme has closed. The reporting on benefits should be timed to align with the benefits realisation plan and any other reporting requirements. When reporting, it is useful to indicate early if benefits are at risk of not being realised. This is where the tolerance levels, set in the benefits plan, can act as a trigger for when the risk of non-realisation of benefits should be highlighted and escalated. A simple reporting approach, integrated with other reports, may be used. Any proposed changes to the levels of expected benefits should be formally notified and discussed with any relevant monitoring agencies, as the changes could impact on the ongoing validity of the business case or wider work. Monitoring agencies should receive updates on benefits realised, and monitor these against the levels identified in the project s benefits plan. 12 Managing Benefits from Projects and Programmes: May 2014

17 Expectations Regarding Benefits Management in the State Sector As a minimum, Cabinet Circular CO(10)2 8 states clearly that there is an expectation that, unless otherwise agreed by Cabinet, chief executives of departments and Crown agents that seek Cabinet approval for proposals that are both large (ie, over $25 million WOLC) and high risk (as determined by the SSC Gateway Unit), must: 24.2: report to Cabinet (via the Crown agent s board where applicable) within 12 months after the in-service date of the Cabinet-approved proposal on the actual level of benefits achieved compared with those outlined in the Cabinet-approved proposal. As noted earlier, benefits management will play an increasingly important role in enabling an organisation to manage within its fiscal constraints. In today s environment Treasury expects chief executives to ensure that finances of significant projects and programmes are under control, costs are managed, value for money is optimised, the ambitions of the projects and programmes are achieved, and the benefits realised. Amendments to the State Sector Act, and Public Finance Act in 2013 reinforce taking a longer term perspective and not just managing current financial performance. This is strongly aligned with the concept of benefits management. Specifically, this longer-term focus is supported in legislation through: The Public Finance Act where section 34 of this Act states that the chief executive of a Department is responsible to the Responsible Minister for the financial management, financial performance and financial sustainability of the department. Section 35 of this Act states, inter alia, that the chief executive of a Department is responsible for the financial management of, and financial reporting on, assets, liabilities, and revenue managed by the department on behalf of the Crown, as well as advising the Minister responsible on performance for these items. The Crown Entities Act, where section 51 requires Boards of statutory entities to operate in a financially responsible manner (including prudently managing its assets and liabilities to ensure it long-term financial). Similar, responsibilities for Crown entity companies are implicit in the board duties under this Act and the Companies Act (eg, directors must act honestly in what they believe to be the best interests of the company and with such care as may reasonably be expected of them in all circumstances). The State Sector Amendment Act requires public service chief executives to take a stewardship 9 role in relation to their department or departmental agency (including its medium to long-term sustainability, organisational health, capability etc.), and the assets and liabilities that are used by and relate to the department or departmental agency (s.32). The Act also has requirements of chief executives (s.32) that include their department s responsiveness on matters relating to the collective interests of government. 8 Available at the Cabinet Office website at 9 The Act defines stewardship as active planning and management of medium-and-long-term interests, along with associated advice (s.2) Managing Benefits from Projects and Programmes: May

18 The Treasury also has wide powers to obtain information from departments under sections 79 and 80 of the Public Finance Act in relation to their financial management, financial performance, banking activities and management of the Crown assets and liabilities. The Government Chief Information Officer s (GCIO) All-of-Government ICT Projects and Programmes Assurance Framework requires that an assurance plan be developed (as part of the costed and resourced project plan). This assurance plan must cover areas including, but not limited to: governance, business case, procurement, service design, ICT, change management, implementation and benefits realisation. Various other guidance and directives to agencies set the expectation that good process and practice are followed in relation to the organisation having the right competencies, that risk is managed, that records are kept, that standards are followed, and reporting is undertaken that gives stakeholders confidence in the information. 10 Managing Benefits Guidance from APMG If you are using APMG International s (APM Group) Managing Benefits guidance, please be aware that there are some differences in the NZ context. For example, they use the term outcomes in the everyday sense (as in outcomes are a consequence of an action), whereas the term Outcomes are used in NZ Government Agencies to describe the future state they are aspiring to (these equate to corporate objectives in the Managing Benefits guidance). 10 For example, see section 6.1 of Treasury instructions Financial responsibility of Chief Executives 14 Managing Benefits from Projects and Programmes: May 2014

19 Appendix A: Glossary Benefit Any gain to one or more stakeholders from achieving the change in state Benefit-Cost Ratio. An alternative decision criterion. The benefit-cost ratio is given by the present value of benefits (cash inflows) over the analysis period divided by the Net Present Cost (NPC). Benefit Management Plan A short document that defines the pre-requisites for delivering each expected benefit, how the delivery of each benefit will be measured, and who will be responsible for measuring and realising each benefit. Business Case A management tool that supports decision-making for an investment. It considers alternative solutions, and identifies assumptions, benefits, costs and risks. Cost Benefit Analysis (CBA) A systematic process for identifying and assessing all (both direct and indirect) costs and benefits of a proposal. All costs and benefits are assigned a monetary value, allowing the calculation of the net benefits of different proposals as a basis for evaluating alternative options. (Intangible costs and benefits can be weighted and scored using Multi-Criteria Analysis (MCA).) Dis-benefit A negative impact that might occur as a direct consequence of implementing a particular solution. Discounted Cash Flow (DCF) The stream of costs (cash outflows) and benefits (cash inflows) for a given option, discounted by an appropriate discount rate to give present values in current dollar terms. Discount Rate Effectively a desired return, or the return that an investor would expect to receive on some other typical proposal of equal risk. The discount rate seeks to capture the sum of: i The rate of time preference. Most people prefer consumption undertaken now rather than later. A dollar available now is more highly valued than one received later. ii Uncertainty. There is necessarily some degree of uncertainty as to whether a future dollar will actually be received. Its value is lessened in proportion to the expected size of this uncertainty factor. Managing Benefits from Projects and Programmes: May

20 The Treasury advises the Public Sector Discount Rate12 for cost benefit analysis purposes. Note that this is a real discount rate and therefore should only be applied to cost and benefit flows that do not include inflation adjustments. IRR (Internal Rate of Return) The internal rate of return (IRR) is the discount rate at which the net present value of a proposal over the appraisal period is zero, when the present value of all discounted benefits equals the NPC. The decision whether or not to proceed should in principle depend on whether the IRR is higher or lower than a hurdle discount rate determined in advance and higher than alternative proposals. An option with a positive NPV will have an IRR above the discount rate, and in this sense the NPV and IRR decision rules give the same result. However, the IRR does not provide a reliable basis for comparing proposals of various sizes. Similarly a proposal may have more than one internal rate of return if the net cash-flows alternate from positive to negative more than once over the appraisal period. Hence the IRR is best used as a supporting indicator. Net Present Value (NPV) The sum of discounted net cash-flows over the analysis period. The difference between the net present cost (NPC) and the present value of a stream of benefits. Optimism Bias The demonstrated systematic tendency for people to be over-optimistic about key project parameters, including capital costs, operating costs, works duration and benefits delivery. Options Analysis A process in which a range of options (both asset and non-asset) are evaluated. The most cost-effective options are then selected for more detailed evaluation through a business case. Payback Period A method that determines the point in time at which cumulative net cashflows exceed zero. This method involves dividing the annual returns from a proposal by the initial investment amount. This identifies the number of years it will take for an investment to pay for itself. Under the method, projects with a shorter payback period are preferred. This method is easy to use and avoids the need for complex analysis. However, by itself, the payback period is an unsatisfactory decision rule, because it takes no direct account of the timing of benefits, assumes future cash-flows are fixed and, more seriously, because it takes no account of any costs or benefits occurring after the payback date. The payback period may have a supporting role in helping to illustrate particularly high returns or proposals with particularly high risks. 16 Managing Benefits from Projects and Programmes: May 2014

21 Post-implementation Review Reviews whether the planned outputs were delivered and benefits were achieved. Similar to a Close out Review when it is established how well the project was handed over to operations as business as usual. Sensitivity Analysis This is an examination of how the results of a calculation or model vary as individual assumptions are changed. Managing Benefits from Projects and Programmes: May

22 Appendix B Benefits Profile Format (example) Benefit [Benefit Name] [Weighting] Identifier (name and/or number) [Name] Description [Description] Key Performance Indicators KPI 1 Measure (including any calculation formula) Baseline value and source Target value for measure/s (interim and end target values) Date targets will be met Who is responsible for meeting KPI? (owner) [Name] [Position] [Organisation] Who is responsible for reporting? [Name] [Position] [Organisation] Frequency of reporting Source of measurement data 18 Managing Benefits from Projects and Programmes: May 2014

23 Starting date for reporting Date reporting will end KPI 2 Measure (including any calculation formula) Baseline value and source Target value for measure/s (interim and end target values) Date targets will be met Who is responsible for meeting KPI? (owner) [Name] [Position] [Organisation] Who is responsible for reporting? [Name] [Position] [Organisation] Frequency of reporting Source of measurement data Starting date for reporting Date reporting will end Managing Benefits from Projects and Programmes: May

24 Dependencies <Include here information on other benefits this benefit contributes to, and earlier benefits on which this benefit depends> Pre-requisites Dependencies Risks and Issues <Summarise the risks and issues related to realising this benefit. Refer to the Department s Risk Policy and Risk Toolkit. Full risk information should be included in the project s risk register> Risk Mitigation 20 Managing Benefits from Projects and Programmes: May 2014

25 Appendix C Benefits Map Format (example) Project output Business Change Benefit Intermediate outcome Business Change Project output End Benefit Strategic objective Business Benefit Change Business Project output Change End Benefit Strategic objective Benefit Intermediate outcome Legend Project output Business Benefit Intermediate End Benefit Change outcome Strategic objective Managing Benefits from Projects and Programmes: May

26 Appendix D Benefits Strategy Format (example) Overall Approach to Programme Benefits Realisation <Describe the approach to benefits realisation in a way that gives direction to subsequent benefits documents. For example: Is the management of benefits centralised or distributed? Is there a finite period that benefits are wanted to be realised within, or a time limit on benefits reporting? What is the relationship between the programme and those accountable for the benefits to be realised? What are the types of benefits that the organisation and programme is seeking (eg, financial, process efficiencies (speed), new service offerings etc)? What are the incentives and repercussions if at some point the benefits are no longer forecast as achievable? How will the interrelationships between benefits be managed?> Scope <Outline the boundaries of the project and provide an explanation of which areas of the organization are covered by the benefits management activity. For example: this strategy covers the XYZ Project, the benefits are related to change in the ABC workgroup, etc.> In scope Out of scope Benefit Priorities for the Project <Outline the priorities for the project in terms of benefit types (for example: financial savings, service delivery improvement etc), to inform and focus the filtering and prioritization process. Identify how these priorities relate to the organisation s outcomes.> Measurement Methods and Processes <Outline the types of measurement methods and processes that will be used to monitor and assess the realisation of benefits. The high level benefits will already have been identified in the Programme Brief, so a reasonable idea of how they can be measured should be known. For example: measurement methods include comparing monthly savings against targets, surveys and questionnaires etc. Processes can include measurement beyond the Programme through quarterly management reporting etc.> 22 Managing Benefits from Projects and Programmes: May 2014

27 Tools and Information Sources <Identify what systems, tools and sources of data and information are likely to be used in benefits measurement. For example: Financial Management System, HR system, staff number reporting etc> Review and Assessment <Document how the quality of the measurement will be checked. For example, peer review, audit check etc> Functions Roles and Responsibilities <Document who does what> Role Responsibilities Project Board Project Manager Project Executive Communications and Marketing Planning and reporting areas <etc> <Also note any guidelines for resolving issues where there is a potential overlap of roles> Reviewing <Document how the quality of the process for overall benefits management will be checked. For example, audit check, comparison against process performance metrics etc> Critical Success Factors (CSFs) for Benefits Realisation <Highlight what needs to be in place for benefit realisation to be successful (eg, benefits owners understanding their roles, mechanisms for benefit measurement beyond the life of the programme, capability to define benefits and profiles etc). Also identify how these can be put in place if they aren t in place now.> Definitions, Acronyms and Abbreviations <This section provides definitions for all terms, acronyms and abbreviations required to properly interpret this document. The information may reference a programme specific glossary, or any other external glossary, if relevant.> Managing Benefits from Projects and Programmes: May

28 Referenced Documents <Provide details on documents referenced (eg, organisation benefits strategy)> Document Version Material Referenced Appendices <Put any relevant, additional material in the appendices> 24 Managing Benefits from Projects and Programmes: May 2014

29 Appendix E Benefits Realisation Plan Format (example) Executive Summary <Provide a brief synopsis of the key points of this document.> Schedule <Use the table below as a basis for developing the schedule for when Benefits will be measured you may wish to expand this into an A3. The detail of the measurement is in the Benefits Profiles make sure that the Profiles are available as part of this plan (rather than repeating them)> FY 14/15 FY 15/16 Sep-08 Dec-08 Mar-09 Jun-09 sub Total Sep-09 Dec-09 Mar-10 Jun-10 sub Total <Benefit and number> Expected Benefit Realisation % 60% 65% Baseline Actual - - % of Baseline Target 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Variance to Target Benefit Realised - - Managing Benefits from Projects and Programmes: May

30 FY 16/17 FY 17/18 Sep-08 Dec-08 Mar-09 Jun-09 sub Total Sep-09 Dec-09 Mar-10 Jun-10 sub Total <Benefit and number> Expected Benefit Realisation % 80% 100% Baseline Actual - - % of Baseline Target 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Variance to Target Benefit Realised Managing Benefits from Projects and Programmes: May 2014

31 <Repeat as many times as there are benefits> <Alternatively, use the Benefits Register to record this information and link to the Realisation Plan.> Activities for Benefits Realisation <Document any handover or embedding activities and processes beyond the mere implementation of an output. For example, once projects deliver the capability, the Benefit Owner will be responsible for realising the benefits.> Roles and Responsibilities <Detail the roles and responsibilities around measuring and tracking the benefits realisation, both during and beyond the project> During the project Role Responsibilities Project Board Project Manager Project Executives Project Manager Communications and Marketing HR <etc> Beyond the project <Note that responsibilities may be different beyond the project, particularly around Benefit Ownership and therefore realisation monitoring. Review the responsibilities in the Benefit Profiles and note whether they will change post project> Role Responsibilities Project Executive <describe responsibilities of role > Benefit Owner <etc> Communications and Marketing HR <etc> Managing Benefits from Projects and Programmes: May

32 Links to Other Programme Documents and Plans <List any other important documents and their location.> The <xxxx> document for the programme is located at <identify where xxxx is located (eg, filename and path)> Definitions, Acronyms and Abbreviations <This section provides definitions for all terms, acronyms and abbreviations required to properly interpret this document. The information may reference a programme specific glossary, or any other external glossary, if relevant.> Referenced Documents <Provide details on documents referenced> Document Version Material Referenced Appendices <Put any relevant, additional material in the appendices> 28 Managing Benefits from Projects and Programmes: May 2014

33 Benefit ID Target Value Date Achievement Level Date Achievement Level Date Achievement Level Appendix F Benefits Register Format (example) <Benefits register should be able to reference each benefit profile for details> Benefit Summary Achievement Benefit Title KPI Managing Benefits from Projects and Programmes: May