Benefits tracking gsw
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  • 1. All you wanted to know about BenefitsTracking—but were afraid to ask March 1995
  • 2. Objective This panel set is targeted at Gemini consultants who are working on streams whichs delivery phase.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg -2-
  • 3. All you wanted to know about benefits—but were afraid toask . . . Contents • Why benefits? • What is your role? • Overview of Benefits Development • Key Elements • Tips for Effective Benefits Tracking • Benefits Checklist • Detailed Benefits Tracking GuidelinesDelivery Discipline BT00016/1246Ldn17Mar95Rp-mg -3-
  • 4. Why worry about benefits?
  • 5. One of Gemini Consulting’s strengths• Unlike other consulting firms, Gemini promises to deliver Performance Improvement which is MEASURABLE, whether in terms of: – Cost reduction. – Cost avoidance. – Revenue protection. – Revenue generation. – Operational improvement. – Capital reduction. In Gemini parlance, Performance Improvement = BenefitsDelivery Discipline BT00016/1246Ldn17Mar95Rp-mg -5-
  • 6. The concept of MEASURABLE Benefits is what makesGemini different• The delivery of MEASURABLE benefits is normally a contractual element of Gemini’s relationship with the client: – It’s what clients buy. – Delivery creates credibility and trust. – Delivery provides the basis for a meaningful and sustainable partnership with the client. It means we have earned the right to work on other issues. – If not a contractual obligation, the A&D will have set benefits expectations with the client. Trust = Credibility x IntimacyDelivery Discipline BT00016/1246Ldn17Mar95Rp-mg -6-
  • 7. But delivery of MEASURABLE benefits is much more thana numbers game...• Going for MEASURABLE Performance Improvement—i.e. the Benefits—is a powerful driver of change in the organisation. It focuses the attention of: – The client. – The joint team. – The sponsor. – Other relevant stakeholders. and, last but not least, of – The Gemini team.• The process of targeting, measuring and analysing performance improvement accelerates the pace of change: – Increases accountability. – Creates a bias for action. – Improves client understanding of cause and effect relationships. – Builds continuous improvement into change programme.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg -7-
  • 8. Focusing on the delivery of benefits provides theframework—“the glue”—for the project• Without adequate regard to benefits—and the associated benefits tracking process—the project may: – Lack vision. – Lack direction. – Not understand the impact of changes. – Create a sense of dissatisfaction or frustration.• It is imperative that the Gemini team—whether in a project lead, a stream lead or a stream member role—fully understands, supports and drives the benefits piece . . . . . . and that means right from the beginning of the project.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg -8-
  • 9. What is your role?
  • 10. Project structures and RACIs will of course vary. A typicalBenefits structure looks like Stream Stream A Project Management Stream E • Milestone Progress Monitoring • Integration • Benefits Management Stream Stream B D Stream C Stream Leader or Stream Benefit Focus on Team focus on • Setting up methodology • Identification of Benefits • Interface with Finance Department • Development of measures, • Project-wide reporting baseline, target • Quality control • Tracking benefits • Providing support and training • Stream ReportingDelivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 10 -
  • 11. You could be working in any phase of the BenefitsManagement Process . . . Benefits Identification Operational Benefits Cash Benefits and Target Setting Scoreboarding Benefits Estimation Realised Business Case Realised Development • Typically done • Typically, you • Generally, this • E.g. 40% • E.g. reduction on A&D phase will be phase is reduction in in manpower • Usually needs to expected to completed stocks, 30% • Can be be reconfirmed review and before improvement difficult for us in RD update the beginning to in productivity to control. forecast of implement • Focused on Client will • May be done what benefits • A scoreboard releasing make during RD on your stream large projects benefit capacity in decisions on will deliver on describes the the which and a regular benefit, organisation when basis identifiesill be resources are • Company can measured, use excess released baseline to be capacity to used and process more agreed targets volume for • It’s the “stake same costs or in the ground” realise cash benefit . . .so be sure to clarify expectations.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 11 -
  • 12. Your job is to proactively seek out the benefitsexpectations of your streamKey questions to ask• Is my stream expected to deliver tangible benefits or is it an enabler?• Do we have a target? Financial or Operational?• How are we defining benefits? Scoreboarded, Cash, Operational Benefits translated into financial benefit, etc.?• Is there a central benefits team (or function)?• Who will collect baseline details? Are there any financial assumptions we should use?• Has my client been pre-positioned? Don’t put it off! Waiting will only make it more difficult.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 12 -
  • 13. Overview of Typical Benefits Development Process
  • 14. Development of BenefitsStage I:• Identify performance measures. N ClientProcess: Define deliverables Identify operational buy-in to and benefits measures measures Y What is the What are the best Do Champion and keyKey redesigned business measures to assess functional/business process/recommendat successfuless? managementQuestions: ion going to leave agree? behind? Are the measures currently used? If not, how will we collect measures?Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 14 -
  • 15. Development of Benefits Stage II: • Develop Operational Baselines and Targets. Develop Document Determine Develop Client the approach Targets for y Financial Value Y reporting Process: Estimate Baselines Each Operational Buy-in to Baselines of Operational and basis for Measures, mechanism Improvements and begin Measure & Targets? Baselines tracking and Targets • Against what will • What level of • How does • Do Champion and • Will we be able toKey performance performance operational key management explain the details improvement be improvement is improvement agree on of our approach inQuestions: assessed? feasible? contribute to P&L assessment of six months time? • Are we sure that • Is this sufficient or Balance sheet current and target • Is the approach our choice of to achieve improvements? performance and documented at the baseline will not financial or • Has Finance Dept. goals? appropriateof result in double balanced agreed to or given details to ensure a counting? scorecard us assumptions? solid “stake in the targets? ground”.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 15 -
  • 16. Benefits progress and variances must be analysed Rate of implementation Target slower than expected £ Actual Benefit calculation over-optimistic Time . . . so appropriate actions can be taken.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 16 -
  • 17. Key Elements
  • 18. So what are the key elements of the benefits framework?• A clear definition of the benefit (in English or whatever language you are happy with).• What you are going to measure from when—the baseline and the units of measurement for the area of performance in question.• What you are aiming to achieve by a certain date—the target for the area of performance improvement. This will often be expressed as an improvement in one or a number of Key Performance Indicators (KPIs).• How you are going to measure the progress from baseline to target—the benefits tracking system.• How you will translate the performance improvement to a financial benefit.• How you are going to communicate progress to all relevant audiences—the reporting methods.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 18 -
  • 19. Agreeing the baseline is one of the most essential tasks inthe whole benefits process . . .• Do it as early as possible: – It may have been agreed as part of the A&D process—but reconfirm it at the outset of RD – Ensure that a common understanding exists about definition, start-date, implications for other departments – Record, in writing, agreement on baseline details -and have the agreement signed off by the client If this is not done, the TWHA syndrome could strike . . .Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 19 -
  • 20. The TWHA—“This was happening anyway”—Syndromecan really undermine the project• There has to be a clear understanding and agreement as to the status of the operation being acted upon PRIOR TO INTERVENTION: – In this context it is also important to have clear agreement on the potential impact on the operation of any existing client initiatives. – Otherwise, performance improvements subsequently recorded can be the subject of futile and counter-productive Project v. Client wrangling . . . – . . . “This was happening anyway. We already had initiatives running to deal with this. The baseline was set to move up as a result of what we were doing” . . . Starting early will help to avoid this issue.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 20 -
  • 21. And what about baselining for intangibles?• Intangibles can be things like management style, organisational culture or effective business processes.• While it will usually be possible to document some sort of assessment of the As-Is, imputing a financial benefit to a change in culture or the introduction of an effective Plan-Do-Review process is much more difficult:• It is probably more fruitful to describe this type of benefit as an “enabler” to achieve all the other MEASURABLE benefits, or – It may be possible to update your As-Is assessment with surveys: • Would be less frequent than other measures the team would track due to the cost of survey and the nature of the topic. But remember to include the intangible gains in any overall benefits description.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 21 -
  • 22. The nature of the Baseline will vary depending on type ofBenefit Benefit Baseline Cost avoidance Need to demonstrate that money would have been spent or Capital e.g. £ allocated in Budget or Plan Approved Business Case Project already spending £ Revenue enhancement Historical volumes, historical or forecast prices Forecast volumes, historical or forecast prices Cost savings Historical spend Working capital reduction Ratios not absolute £’s eg. reduction in A/R, debtors e.g. Accounts Receivable in £ Sales in £Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 22 -
  • 23. Revenue enhancement opportunities are more difficult toBaseline }x Baseline may be lower than current due to: – Regulatory changes. – Impact of competition. – Optimism of competition. – Optimism built into forecasts. “Current” Baseline . . . due to greater impact of external factors.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 23 -
  • 24. Targets can be reasonable, challenging and stretch• Whatever the nature of the target, the critical element needed to gain buy-in from the client, Gemini and other parties affected is an understanding of how the target was set.• Typical target setting approaches: – Internal best practice emanating from the A&D phase. – Benchmarking with the “best in class” externally. – Top-client judgement, based on experience. – Gemini judgement, based on experience. – Some combination of the above.• A stretch target is not an unachievable target but is one which will require significant change in the organisation.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 24 -
  • 25. Benefits Tracking may be a good way to introduce orsupplement the use of KPIs to the client . . .. . . but you need to ask a few questions about this area to clarify your role:• Are there any other streams working on measurement. The project may include development of a Balanced Scorecard, Business Management Process implementation, etc. which you should be aware of.• What are the stream’s responsibilities to develop KPIs as a part of the development of the “To-Be” process?• Does the client use KPIs? Many companies are familiar with the use of KPIs but may not use them effectively.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 25 -
  • 26. With agreement on baselines and targets in place, the nextarea to confirm is the benefits tracking system• Some principles: – The simpler, the better. – Agree the nature of the system. – Agree the tracking frequency. – Embed Plan-Do-Review in the tracking process. – Involve the client - they are their benefits; they should really be keen to measure them, BUT – Make sure that all Gemini consultants are involved in the process in one way or another.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 26 -
  • 27. As in all other aspects of any project, communicationabout the benefits approach and progress is crucial• A number of points have to be agreed on: – At whom is the communication aimed? – What is the most appropriate format for the communication? – How to dispel myths, e.g. “Gemini gets a bonus related to the amount of benefits”. – How often should communication be made?• Like the tracking system itself, communication must be simple, clear and to the point.• Be careful not to alienate the “line” when using communications to celebrate team wins: – We want to give the message that these are company benefits not project benefits. Look to your central benefits or project management team for guidance.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 27 -
  • 28. Tips for Effective Benefits Tracking
  • 29. Make sure your client and JTMs understand what Geminimeans by “Benefits”• Our approach is different. Most clients do not track benefits or use “Plan, Do, Review”: – They may define a benefit as an after-tax amount which is a product of a Cost/Benefit/NPV calculation. – They may expect to prove the benefit directly to the General Ledger (particularly the accountants!).• Emphasise that our approach – Is primarily a project management and change management tool. – (Generally) translates operational improvement into a financial benefit which approximates the general ledger benefit. – Focuses on performance improvement and the use of KPI’s. . . . but rememberDelivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 29 -
  • 30. Other tips to consider• Keep the team’s focus away from the financial translation: – Talking abut a 40% improvement in engineering productivity or a 50% reduction in product development cycle time is more meaningful. – Describe your benefits in annualised amounts: – E.g. £100,000 of annualised cost reduction.• You need buy-in from the Finance group but take care—conservatism is the basis of the accounting profession: – Finance can have trouble with the concept of stretch targets. – May have limited definitions of a benefit, e.g. “If we have never tried to measure it, it can’t be a benefit”.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 30 -
  • 31. Other tips to consider (cont.)• Be proactive about addressing potential double-counting issues. Don’t wait for the central benefits team to fix it.• If in the scoreboarding phase, make sure you have support for your ideas or recommendations before trying to convince the client to sign up to a benefits target.• Be careful when using Activity Based management amounts to translate your operational improvement to a financial benefit: – ABM methodology assumes that all costs are variable. – You must consider over what timeframe the resources are likely to be released and the benefits tracking horizon the project is using. – Reducing drivers will not automatically reduce resources.Delivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 31 -
  • 32. Resources to consider• Measure Up! The Essential Guide to Measuring Business Performance: Richard L. Lynch and Kelvin F. Cross 1991, Octopus Publishing Group A Good overall summary of measuring business performance.• Understanding Variation the Key to Managing Chaos: Donald J. Wheeler 1993, SPC Press, Inc. The focus of this book is the meaningful analysis, presentation and interpretation of data. It applies theoretical statistics to real business situationsDelivery Discipline BT00016/1246Ldn17Mar95Rp-mg - 32 -