The First Essential of Project Management: Benefits
By Russell Whitworth
This post is the first of a series of seven that will introduce The Seven Essentials of Project Management.
When I conduct a project healthcheck, I normally start quite informally by asking the project manager to tell me about their project. The response sets the tone for the rest of the meeting. Most PMs will dive into the “what?” of the project – what it is they are doing (scope), the challenges they face (risks), and the reasons they are behind schedule (plan). These are the topics that are worrying them, and without doubt need to be explored in the healthcheck.
The best PMs start by explaining the “why?” of the project. Why are we doing it at all?
There are several reasons why it is critical for the PM to understand and to be able to articulate the benefits:
- In managing the project, the PM (in conjunction with other senior stakeholders) will often need to make priority calls. Having a clear understanding of the project’s benefits will ensure that the right decisions are taken.
The PM is the prime motivator of team members. The PM should be able to talk knowledgeably and authoritatively about the reasons behind the project. Particularly when the time comes to call on the team to do something extraordinary – to “go the extra mile”.
The PM also needs to be motivated, and ideally is bought in and committed to the outcome. As one commercial programme manager of my acquaintance always says: “we need to behave as though this is our own money that we are spending”. With that level of understanding comes dedication and commitment.
Benefits are often about making money. But usually this doesn’t happen within the timescale of the project itself. So in most cases a project delivers a capability, that brings with it the promise of future revenue.
Projects can also deliver enablers to other projects, which in turn realize a business advantage. A billing system project, for example, might be an enabler so that some new and novel service (itself a project) can be charged to customers. In this example the benefits sit at a program level, relying on the contribution of multiple supporting projects.
Benefits are not always about making money. Other reasons for projects include:
- Doing something for regulatory reasons. Implementing a financial compliance system, for example, is an expensive undertaking and provides no revenue. However, the cost of NOT doing it would be a large fine and even a prison term for senior executives, and so there is a recognizable benefit to delivering the project.
All technologies ultimately reach end-of-life, in an ever-shortening cycle, so “technology refresh” projects are commonplace. Often there is no additional revenue – only a project cost. But many times the new-generation equipment is more efficient and cheaper to operate. Sometimes there is new functionality and the possibility of new revenue. So these projects will have a positive business case – and if they don’t, why do them?
Internal projects are – on the face of it – a pure cost to the business. To pick an example close to my own area, how do you justify a project that will deliver a “PM Excellence” development program? Clearly, the objective here is to develop project managers – and the ultimate benefit is that the organization will learn to deliver projects better, more efficiently, faster and/or at a lower cost than would otherwise have been the case.
The measure of the project benefits are to be found in the business case, where the costs and benefits are assessed in financial terms. A proper business case looks at capex, opex and revenue over several years (depending on the nature of the investment). There are well-known financial techniques to produce benchmark numbers (Net Present Value being one such measure) so that projects can be compared on a like-for-like basis, leading to sound investment decisions. Selecting and prioritizing projects in this way is the basis of portfolio management. Of course, all business cases rely on a forecast, which for a new service can be little better than a best guess. And business cases often stand or fall by just how optimistic yet plausible the revenue forecast can be made to be.
Much more can be found on the topic of benefits in numerous project management manuals, such as PMI’s PMBOK.
I place “Benefits” firmly as “The First Essential”, as it is the start- and end-point for every project, and should always be uppermost in the project manager’s mind.
Q2 Associates Managing Director, Russell Whitworth, is an experienced project/program manager and consultant who has worked in the telecommunications industry throughout his career. His employers have included a user organization, a vendor, a management consultancy, a telecommunications consultancy, and a major telecommunications operator.