PROJECT MANAGEMENT
‘If we don’t realise the benefits, then what’s the point?’
Stephen Jenner, who has 25 years’ experience in finance and programme management roles in the public sector, including as a member of the Senior Civil Service from 1999 to 2011, explains why 70% of projects fail.
T
he reason we invest in projects, programmes and portfolios is to realise
benefits – whether in terms of increased revenue, reduced cost, to comply with a legal or regulatory requirement or maintain business as usual, to reduce risk, or to contribute to an organisational objective.
And yet research evidence suggests most organisations struggle to realise the potential benefits from their projects and programmes – failure rates of around 70% appear to be the norm – and most don’t take the challenge seriously enough. One report for the PMI (Project Management Institute), for example, found that of 27 PMO (project management office) functions, benefits management came third from bottom in the percentage of PMOs where that function was important.
On time, to budget, to specification is important – but if we don’t realise the benefits, then what’s the point? The answer is to take an ‘investment management’ mindset.
This means having disciplined control over the start of projects and programmes – with the investment appraisal process considering potential initiatives in the context of the balance between risk and return and their impact on the wider portfolio.
Organisation must start with the end in mind – begin with the problem to be solved and the benefits that will arise from solving the problem. Then design the initiative to realise those benefits. We’re not buying kit, we’re buying benefits.
Realistic forecasts of costs and benefits are vital, so that investment appraisal and portfolio prioritisation is based on reliable data. Unfortunately, research shows that forecasts are often highly inaccurate, with benefits being systematically over-stated and costs under- estimated in order to get funding. The answer is to insist on a range of forecasts (optimistic, pessimistic and most likely) and what is termed ‘reference class’ forecasting; that is,
basing forecasts on actual past performance on similar initiatives. Continued investment must be reviewed on a regular basis at stage or phase gates, to avoid what Tim Banfield of the NAO has referred to as the ‘conspiracy of continuation’. Even better, release funding to a project or programme only when it successfully passes each gate review. Finally, the return on investment should be managed on an active and portfolio- wide basis, to capture learnings, spread best practice, identify and capture emergent or unplanned benefits, and to optimise the ratio of benefits realised to costs incurred.
Stephen Jenner FOR MORE INFORMATION
Stephen Jenner is the author of ‘Transforming Government and Public Services: Realising Benefits through Project Portfolio Management’. W:
www.stephenjenner.com
public sector executive Oct/Nov 14 | 43
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