Benefits Management – When Knowing The Costs Is Not Enough

Paul Naybour

In order to understand the true worth of a project and whether to carry on with it (or indeed even start it in the first place) it is not helpful to simply consider the costs. If the benefits exceed the costs then there is no reason why the costs cannot increase. What is important is that the benefits continue to exceed them.
In holding a review the organisation (and sponsor) are seeking to verify that these two components remain out of balance.
When we check the costs it is vital to also check the benefits also. We have things called cost centres where all the relevant costs are accumulated and stored and inevitably pored over, analysed, checked, reviewed, re-checked and so on. What about the benefits? When was the last time we saw a benefit centre?
What needs to be known about these benefits that may accrue sometime in the unknowable uncertain future? Next time you are on a project think about what might need to be recorded to ensure that they are properly understood in a way that can be reconciled against the costs.  We would suggest the following

  • Description of Benefit – a narrative that helps us to understand the scope of what we expect to get.
  •  When the benefit is expected to occur and over what period will realisation take place – benefits are rarely obvious immediately. IRR, NPV, Payback and other financial analysis works just as well with benefits as it does with cost.
  •  Measure for the realisation of the benefit and how it will be carried out – how will we measure the true value and particularly how can we measure it. Don’t forget to carry out an ‘as is’ evaluation as any improvements need to be measured against something.
  •  What costs are directly associated with the benefits concerned.
  •  The project that will deliver the outputs that will deliver the benefits.
  •  What risks might be associated with the journey to achieving the benefit
  •  Who will own and be accountable for the achievement of the benefits.

If you record these at the outset you will be well placed to account for the reasons for the project and be able to demonstrate its viability.

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