I have advocated “business-led” or “benefits-driven” project management since 1997 when the first edition of The Project Workout was published. I argued that a project should only be undertaken if it benefits the organisation. Looking back, it all seems so obvious. Why would anyone embark on a project with no benefits? This article looks to explore the importance of business cases.
At that time, however, project management was more concentrated on delivery. It was also very “contractor” focused and the idea of project management as a vehicle for directing and managing internal projects was, for many people, novel. For example, Section 3 of PMI’s Body of Knowledge is more about “project management” than holistic project management, where the role of the project sponsor and the business case is paramount.
So, how have things moved on? Well, the “bodies of knowledge” and significant methods now explicitly recognise projects should be aimed at realising benefits and linked to an organisation’s goals. They also recognise the importance of the project sponsor. The Association for Project Management (APM) incorporated the “sponsor” role in its 5th edition.
The 2010 version of BS6079, now has a focus, not just on delivery, but also on directing projects with a business emphasis. PRINCE2, whilst always focusing on “business case”, makes a bigger deal of the “executive” role (sponsor) and “directing a project”. Surely, there should be no excuse for ignoring the, “Why are we doing this project?” question.
But are our projects truly connected to “benefits”? Or is something going wrong? Simon Harris, in his recent article in Project Manager Today (March 2011), “About Face – Tackling Business Case Abuse”, certainly thinks there is room for improvement. Yet, it is not solely a problem of “process” but also one of human behaviour. Let’s look at some examples.
Facts, not justification
Often the sponsor is seen as an advocate for the project. On the face of it, this should be so, but this can lead to some unwarranted behaviours, with the business case being written to “justify” an already fixed proposal rather than presenting an unbiased appraisal of an investment decision.
Investment, not gamble
Betting involved placing a known amount of money (stake) with the book-maker, for a known return for a win, whereas in business cases, an unknown amount or approximate sum of money (it keeps changing!)is allocated to an uncertain return. This makes the business case sound worse than a gamble, doesn’t it!
Here is where good project governance comes in. When gambling, all of the money is spent NOW when placing the bet. A wise sponsor manages project risk by taking a staged approach and making incremental decisions as more information is gained during each project stage.
Commitment is only as far as the next gate, limiting the stake
That is the purpose of project lifecycles. A stage-gate is a decision point for starting the next stage of the project when the funding and resources are committed.
“Old World” project management defined gates as the end of stages but I have never seen a business leader make decisions, concerning what has already happened.
The place of portfolio management
The responsibility of those appraising business cases is to compare the return against everything is done or planned. Overall return and risk need to be balanced, bearing in mind scarce resources. This requires a “portfolio management” approach. Without a portfolio approach, there is no context for the project “go/no go” decisions – it is a mere “one at a time” game.
Money is easier to deal with than people
Oddly, money is usually the easiest thing to deal with. It can be stored and is, very simply, what it says it is – money. Naturally, accountants like to treat some as “capital” and some as “opex” but that is another game. If money is the only factor looked at when appraising business cases, then an organisation is in big trouble.
Unless there is the right number of skilled people to work on the project and operate/use its outputs, there will be no benefit, just cost. This is why government business cases look at “achievability”. “Cash-rich” organisations often start far too many projects which they can’t complete, as they haven’t taken into account the availability of the right resources.
Be sensitive to sensitivity
It can be taken as fact that any forecast of costs and benefits will be wrong. This why it is better to think in terms of ranges and envelopes, within which an investment is still viable. This is where sensitivity and scenario analyses come in. As time progress, the future should become clearer and the return on the “still to spend” amount stabilising. It’s all about risk management.
So, when you look at your next business case, consider:
- Is your business case set out and balanced, or is it just a justification for getting money for what you’ve already been decided to do?
- Is your project governance good? Are funds and resources being released on a staged approach or is the whole lot available at the start, when so little is known about the project?
- Is this project at least as good as all your other projects? How do you know?
- Do you know what your critical constrain is? Do you have the right resources?
- Have you planned for uncertainty by looking at your “envelope of viability”?
About Guest Contributor
Robert Buttrick has been providing project management advice and guidance since the publication of his best-selling “flagship” book, The Project Workout in 1997. This is now in its fourth edition with translations in French, Chinese, Korean and Russian.