The Language of Benefits
In looking for business benefits most organisations face similar issues. Finding and driving out benefits is like a ‘leaky bucket’, in that once initially delivered they quickly become difficult to trace and qualify. The bucket empties faster than you can fill it up. Many organisations have a poor history of benefits realisation and find it difficult and risky to fund the initial lump of investment required to deliver the benefits they’re hoping for.
There are challenges that need to be understood and key amongst them is developing a mature understanding of the roles and differences between quick wins, silo-based and cross-cutting benefits. The key challenge is how to structure an affordable portfolio which is driven by efficiency, service, volume and capability.
The key objectives of any benefits management and realisation approach are:
- Realise a high % of targeted financial benefits and service improvements ;
- Seek to rigorously convert non-cashable to cashable benefits wherever possible ;
- Make any non-cashable benefits used to deliver tangible value, based on solid evidence ;
- Create the right sequencing and a balanced portfolio, and
- Develop an effective and joined-up approach to benefits realisation (delivery).
Language is important
Everyone involved in benefits driven projects should be aware of and use an agreed nomenclature. One such common naming convention is as follows. First, we need to differentiate between tangible and intangible benefits…
Tangible benefits are benefits that can be seen and felt. All tangible benefits can be measured, either in cash terms or by some other form of metric. Tangible benefits can be further subdivided, as follows:
- Definite: Definite benefits can be either cashable or non-cashable benefits, the value of which may be predicted with a high degree of confidence or certainty. Definite benefits and are not affected by external factors. An example of a benefit that is tangible, definite & cashable (the best defined type of benefit) is the agreement of a new sourcing contract with a supplier. This is a cost reduction measure the value of which is very well defined with regards to monetary value and delivery date. This type of benefit can be included in operational budgeted planning and realised immediately. The results of a business process improvement project, which delivers fewer process steps could be seen as a non-cashable benefit, even though it is tangible. It should be possible to include the impact of a definite cashable benefit in upcoming/ live budgets.
- Expected: An expected benefit can be either cashable or non-cashable where the value of the benefit may be predicted and estimated on the basis of experience or historical trends. Increased sales are a good example of a tangible, expected & cashable benefit. They may well be predicted based on experience but they couldn’t be ‘baked in’ to budgets until they have been realised. The delivery of training that delivery speedier performance of tasks may well be seen as a tangible, expected & non-cashable benefit.
- Logical: Cashable & non-cashable benefits that may logically be expected, the value of which may be estimated measurable but not predicted. Better management of risk that reduces insurance exposed should logically lead to reduced premiums.
Intangible benefits are benefits that may be anticipated but are difficult to substantiate and measure. An example of benefits in this category would be improvements in public image. It is very difficult to measure, track and substantiate intangible benefits.
Where quantification is difficult there is a tendency to avoid the difficult questions and to allocate benefits as intangible. However, there are a number tools that can be effectively used to estimate benefits such as the ‘Monte Carlo Box’ and ‘What if scenarios’