The document discusses how organizational value can be eroded throughout the project/program management lifecycle in three stages: value exaggeration, destruction, and decay. Value exaggeration can occur early in planning when benefits are optimistically estimated or stated without detailed understanding. Value destruction happens when delivery decisions are made based on cost/schedule alone without considering benefit impacts. Value decay results from failing to properly transition benefits realization after a program's completion. To prevent value erosion, the document recommends linking benefits to organizational value maps, systematizing benefits management processes, and improving collaboration between program, business, and finance teams.

1. Connexion Systems | White Paper | September 2014
Benefits-led decision making
drives value maximisation.
The benefits and value management process transcends organisational boundaries and
capabilities, requiring active and ongoing management that is embedded in the business culture.
A project business case ordinarily includes a comprehensive, analytically derived Cost/Benefit
Analysis. The basis for approval of a business case is that the capital investment required to deliver
the project scope will be outweighed by the financial and/or non-financial benefits that will be
delivered.
We need only ask ‘what would happen to organisational value if we don’t proactively and
collaboratively deliver program benefits?’ to appreciate that best practice corporate governance
must encompass a proactive benefits and value management regime throughout the business
case lifecycle.
While a multitude of PPM disciplines have helped develop tracking tools and better techniques
for administering benefits, there is still a lack of good guidance on governance and management.
For decades, the responsibility for benefits and value management has blurred the lines between
the business, finance and program or projects management (PPM) teams. Collaboration is about
creating enabling environments and cultures that foster collaborative teams, not designing
new governance processes. The creation of such environments requires an appreciation that
organisations differ in function and culture, so collaborative behaviours need to be fostered
rather than prescribed via boilerplate guidelines.
Below we discuss some of the key factors that contribute to the erosion of organisational value
throughout the PPM and benefits and value management lifecycle. This erosion occurs in three
stages, exaggeration, destruction and decay. We also highlight some of the preventative measures
that can help eliminate this value erosion.
Project/Program Management Lifecycle
Planning Delivery Realisation
Value Exaggeration Value Destruction Value Decay
1.

2. Connexion Systems | White Paper | September 2014
Value Exaggeration
In the early stages of program planning, the desire or need for change combined with the
enthusiasm that typically accompanies project endeavours, often leads to an optimistically
biased estimation of the business value that will ensue from the delivery of the program scope.
This, coupled with the need to secure funding can often lead to a behaviour known as ‘cost
matching’. Cost matching occurs where the cost of a program is first estimated and benefits are
retrospectively identified, within the defined scope, to match that cost. These behaviours can lead
to significant exaggeration of the program value.
Value exaggeration can also occur where a program has expressed strategic objectives in financial
terms, such as “increasing customer profitably” or “uplift in revenue streams” or improving “non-financials”
such as customer experience, safety or sustainability where reliable metrics for the
estimation of their value in financial terms are not readily available. In this instance, valuation of
benefits requires projections to be based on a number of forecast organisational assumptions
or hypotheses; which are often made at the highest level without detailed understanding of the
operational change required for realisation. Exaggeration can inadvertently occur when benefits
are stated in abstract concepts; remember, you don’t need to over analyse it but you do need to
understand it at the appropriate level of detail.
[Example: The marketing division of a clothing retailer wanted to implement a business intelligence (BI)
capability to help improve customer profitability. The cost of implementing the BI system was estimated
and the business case was approved based on research showing that an 8 to 10% increase in margin
could be achieved. It was realised soon after implementation that the targeted margin increase first
required 2 years of customer data which was not planned for and to achieve targeted margins would
require additional investment in supply chain processes.
The question must always be asked, ‘if we change our baseline, what value
are we adding or destroying relative to the savings we anticipate?’
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3. Connexion Systems | White Paper | September 2014
Value Destruction
The core origin of value destruction is the over-emphasis placed on cost and schedule in the
decision making process during a program delivery phase. The objective of any program is to
create organisational value, however during program delivery, decisions are largely made with the
objective of maintaining or even reducing program costs and timelines rather than on maximising
value generation.
Decisions to change program scope or timelines can be made solely on a cost basis without
conducting a benefit impact assessment. The question must always be asked, ‘if we change our
baseline, what value are we adding or destroying relative to the savings we anticipate?’
Additional value destruction comes in the form of delays due to the time-value of money. In larger
programs and those where significant benefits are realised in the shorter term, approving changes
based on the nominal value of the benefit can be misleading with respect to the actual value
created. Decisions being made during the program must be evaluated on the basis of cash flows,
and in real not nominal values.
[Example: 6 weeks before a new software game was due to be launched, the development team requested
that tutorials and help content be changed from online to “in game” as a result of internal technical
resource constraints. Because the change did not impact the schedule or cost it was approved by the
project manager. The game was launched but the benefits were not as projected, following analysis it was
discovered that the marketing department had made assumptions that the visits to the website to access
tutorials and help content would allow for cross-selling of game merchandise and earlier game releases
of the franchise]
While spreadsheets may be appropriate for small projects, they
will significantly contribute to data integrity issues, complex
and difficult to execute governance processes, administrative
overheads and inflexible reporting.
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4. Connexion Systems | White Paper | September 2014
Value Decay
The most common mistake made at the end of a program is the failure to properly transition the
delivery of benefits, and with it the realisation of their value, into the operational business.
While the finance division may often be tasked with maintaining benefit forecasts, tracking
actual benefits and highlighting variances to the ROI metrics, these tasks are usually performed
in isolation, instead of leveraging collaborative team and stakeholder inputs. This results in a
lack of corrective action or value optimisation actions post program closure and in turn leads to
value decay.
Even when a program has been completed for some time, the realisation of its benefits may well
be ongoing. Coupled with these benefits are the assumptions stated in the business case that
underpinned their logic to begin with, so any unforseen changes to these assumptions could
undermine the required value realisation. It is for this reason that benefits must be continually
evaluated and managed from within the business and from within the enterprise performance
management systems.
[Example: A new CRM system was implemented to help transition customers to an online portal; with the
desired benefit of reducing the cost of customer service operations. An assumption was made about the
organic rate at which customers would migrate. Six months later, the program was deemed a success due
to its completion on time and within budget. However the variance in the benefit realisation showed that
the organic migration rate achieved was far lower than forecast and the project benefits were significantly
less than anticipated].
While the finance division may often be tasked with maintaining
benefit forecasts, tracking actual benefits and highlighting
variances to the ROI metrics, these tasks are usually performed
in isolation, instead of leveraging collaborative team and
stakeholder inputs.
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5. Connexion Systems | White Paper | September 2014
5.
Conclusion
While many organisations may only experience one or two of the
issues discussed, these can lead to significant value erosion within the
organisation over time. To help counteract this value erosion, a number
of key preventative measures may be taken. These include:
• Linking benefits maps to a documented and agreed organisational
value map (also known as a “driver tree”). This ensures that when
benefits are workshopped and profiled, the organisational and/or
stakeholder impact of the change is fully understood and that each
individual benefit is unbiased in its financial projection. It also helps
with program scoping and removes the likelihood of double-counting
benefits;
• Systematising benefits management and governance processes
will reduce data errors and also improve the ability to make
benefit-led decisions during the program. This is especially important
for larger programs of work where there are many stakeholders.
While spreadsheets may be appropriate for small projects, they will
significantly contribute to data integrity issues, complex and difficult
to execute governance processes, administrative overheads and
inflexible reporting.
• Improved collaboration and integration of program, business and
finance teams involved in benefits administration and management.
Proactively and effectively managing benefits requires differing
perspectives and skillsets. Providing a collaborative, intuitive and
accessible benefits management environment not only improves
resource productivity but also increase the likelihood of benefits
realisation and value generation.
Connexion Systems
Connexion Systems is a results-driven organisation that is focused on providing innovative
systems that help organisations to:
• Deliver business outcomes consistent with corporate strategy.
• Optimise business process efficiency.
• Improve cost effectiveness.
The company provides best of breed software solutions in the following areas:
• Benefits Realisation Management
• Governance, Risk and Compliance
• Portfolio, Programme and Project Management
• Scheduling and Cost Management
Our business philosophy is based on working cooperatively with our clients, to generate better
business outcomes. Speak to us soon to learn how we can help.
Head Office:
Connexion Systems Pty Ltd
131-137 Adelaide Arcade,
Rundle Mall, South Australia
Australia: 1300 795 788
UK Office:
The Dowery, 22 Barker Street
Nantich, Cheshire CW5 5TE
P: +44 (0) 1270 653 111
www.connexion.com.au