In the business dictionary, there are three definitions of the word “benefit”. The first definition is “advantage, privilege, right or financial reimbursement”, the second is “desirable and measurable outcome or result from an action, investment, project, resource, or technology”, the last is “desirable attribute of a good or service, which a customer perceives he or she will get from purchasing. Whereas vendors sell features, buyers seek the benefit”.
According to the Project Management Institute (PMI)1, “Projects are a key way to create value and benefits in organisations”. Furthermore, the PMI stated that “successful business value realisation begins with comprehensive strategic planning and management” and continued “In order to bridge the gap between organisational strategy and successful business value realisation, the use of portfolio, programme, and project management techniques is essential.” in the “A Guide to the Project Management Body of Knowledge”.2
The primary aim of this article is to develop end-to-end benefits realisation process through integrating portfolio management with programme and project management. In order to achieve this, the author conducted deep research about benefit management based on PMI’s perspective and will explain them in the background section. Then, the relationship between portfolio management, programme management and project management will be developed and a new end-to-end benefits realisation process will be proposed.
In the last few decades, the awareness of benefits realisation has increased. Ginger Levin argued that “although much has been written on benefits realisation since the 1980s, primarily regarding return on investment in the information systems field, it began to be discussed in the project management field in the 1990s in programme management”3.
PMI stated in the Pulse of the Profession report that “the traditional measures of scope, time, and cost are no longer sufficient” and a project must deliver the expected benefits4. Benefits realisation management (BRM) is a way to achieve this through aligning projects, programmes and portfolios to the organisational strategy5.
The purpose of this article is to develop and visualise end-to-end benefits realisation process based on the PMI’s view. In order to achieve this, the author will explain the key word “benefit” in the background section. Then, the benefit management will be discussed in detail from the project, programme and portfolio management perspective. Finally, a new process will be proposed through visualising the relationship between portfolio, programme and project management.
As stated in the abstract section, the word “benefit” has three definitions in the business dictionary. The first definition is “advantage, privilege, right or financial reimbursement”, the second is “desirable and measurable outcome or result from an action, investment, project, resource, or technology”, and the last is “desirable attribute of a good or service, which a customer perceives he or she will get from purchasing. Whereas vendors sell features, buyers seek the benefit”.
PMI defined benefit as “the gains and assets realised by the organisation and other stakeholders as the result of outcomes delivered by the programme”.6 “Programmes are conducted primarily to deliver benefits to the sponsor organisations or constituents of the sponsoring organisation”6, and “for a benefit to have value, it needs to be realised to a sufficient degree and in a timely manner”.6
Benefits are varied such as: expanded market presence, improved financial performance, operational efficiencies, enhancing current capabilities, facilitating change, creating or maintaining assets, offering new products and services, or developing new opportunities to generate or preserve value.
In the PMI’s view, projects create value and benefits in organisations, and the net quantifiable benefit derived from a business endeavour is named “business value”. “The benefit may be tangible, intangible, or both.”1 A project manager uses two important business documents during managing a project: the project business case and the project benefits management plan.
The project business case is used “to establish the validity of the benefits”.1 The evaluation statement in the business case explains “the plan for measuring the benefits the project will deliver. This should include any ongoing operational aspects of the recommended option beyond initial implementation”.1
The project benefits management plan defines “the processes for creating, maximising, and sustaining the benefits provided by a project” and includes the following key information: target benefits such as net present value calculations, strategic alignment, timeframe for realising benefits, benefits owner, metrics, assumptions, and risks. It is developed prior to the project being initiated, and maintained iteratively throughout the lifecycle of the project. “The project manager works with the sponsor to ensure that the project charter, project management plan, and the benefits management plan remain in alignment throughout the lifecycle of the project”.1 This plan is one input of the following project management processes: develop project charter, identify stakeholders, determine budget, plan procurement management, close project or phase.
The benefits management plan is a way to develop more understanding about the expected benefits during developing the project charter.
Then it is used as an input to the stakeholder identification process. PMI stated that “it may identify the individuals and groups that will benefit from the delivery of the outcomes of the project and are thus considered as stakeholders.”1
In the planning stage of the procurement management process, the plan “describes when specific project benefits are expected to be available, which will drive procurement dates and contract languages”.1
Finally, during the closing project or phase, the project manager measures whether the benefits of the project were achieved as planned through using the plan. The output of this process is a final report, which consists of a summary of project performance. “If the benefits are not met at the close of the project, indicate the degree to which they are achieved and estimate for future benefits realisation”.1
According to the PMI, one of the project objectives is to complete the project benefits management plan. Another objective is to meet the agreed-upon financial measures, such as the benefit-cost ratio (BCR) documented in the business case.
Based on the definition in the organisational project management context, a programme consists of “a group of related projects, subsidiary programmes, and programme activities managed in a coordinated manner to obtain benefits not available from managing them individually” and programme management enhances the optimal delivery of programme benefits to the sponsor organisations or constituents of the sponsoring organisation1. PMI puts forward that benefits realisation is achieved incrementally throughout the programme or at the end or after the end of the programme and sustained. Mahon and Driessnack argued that “programme management harmonises its project and sub-programme components, and manages their interdependencies in order to realise specified benefits”.7
In the Standard for Programme Management, there are five performance domains: Programme Strategic Alignment, Programme Benefits Management, Programme Stakeholder Engagement, Programme Governance, Programme Life Cycle Management.
Programme Strategic Alignment is the first performance domain. In this performance domain, programme outputs and outcomes which aim to provide benefits aligned with the organisation’s goals and objectives are identified. Three types of documents exist: Programme business case, programme charter and a programme roadmap.
The programme business case is used to assess the programme’s investment against the intended benefits. The programme charter authorises the programme and expresses the organisation’s vision, mission and high-level benefits expected to be produced. “A programme roadmap is a graphical representation of the incremental benefits and provides a visual of when the return on investment may help fund the future programme benefits and outcomes”.6 It is useful when communicating the overarching plan and benefits to stakeholders and assessing a programme’s progress toward achieving its expected benefits.
The next performance domain is Programme Benefits Management. The phases in this domain are the following: Benefits Identification, Benefits Analysis and Planning, Benefits Delivery, Benefits Transition, Benefits Sustainment.
In the “Benefits Identification” phase, the benefits are identified and qualified through creating a benefits register, “developed based on the programme business case, the organisation’s strategic plan, and other relevant programme objectives.6” In the “Benefits Analysis and Planning” phase, the benefits management plan is established, and benefits metrics and framework are developed.
Based on the PMI, this plan should define “how the resulting benefits and capabilities will be transitioned into an operational state to achieve benefits, and to the individuals, groups, or organisations responsible for sustaining the benefits”.6 Furthermore, it is stated that “programme costs may continue after programme closeout as operational costs to sustain the benefits in the programme funding.”6 In the “Benefits Delivery” phase, the programme manager ensures to deliver the expected benefits through monitoring the organisational environment, programme objectives, and benefits realisation evaluating opportunities and threats affecting benefits, producing a defined set of reports or metrics and sharing them with the related programme stakeholders. During this phase, strategic alignment and value delivery are analysed and assessed. “For internally focused programmes, the benefits realisation processes measure how the new benefits affect the flow of operations of the organisation”.6
Another phase is “Benefits Transition”, which aims “to ensure that programme benefits are transitioned to operational areas and can be sustained once they are transferred” through defining the scope of transition, identifying the stakeholders, measuring the programme benefits, developing sustainment plans, and executing the transition6. The last phase is “Benefits Sustainment”. It is defined as “ongoing maintenance activities performed beyond the end of the programme by receiving organisations to assure continued generation of the improvements and outcomes delivered by the programme”.6 The sustainment ways of benefits are operations, maintenance, new components, or other efforts. Before programme closure, a benefits sustainment plan, in which the risks, processes, measures, metrics, and tools are identified, should be created.
The third performance domain is Programme Stakeholder Engagement. Five phases in this performance domain are listed as follows: Programme Stakeholder Identification, Programme Stakeholder Analysis, Programme Stakeholder Engagement Planning, Programme Stakeholder Engagement, Programme Stakeholder Communications. In this performance domain, the stakeholder interests should be balanced, the potential impact on programme benefits realisation should be considered, and desired benefits should be agreed upon.
The next performance domain is Programme Governance. The definition of this domain is “the framework, functions, and processes by which a programme is monitored, managed, and supported in order to meet organisational strategic and operational goals.”6 It is used to enable the effective realisation of programme benefits.6
Programme Life Cycle Management is the last performance domain. The definition of this domain is “to manage all programme activities related to programme definition, programme delivery, and programme closure”.6 The programme life cycle consists of three phases: Programme Definition Phase, Programme Delivery Phase, Programme Closure Phase.
Programme management is performed by the programme manager whose focus is to deliver organisational benefits aligned with the organisation’s strategic plan by:
A programme sponsor’s responsibilities are to ensure delivery of the intended benefits, secure the available positive benefits, and steward the handling of negative benefits.
“To provide capable governance resources to oversee and monitor programme uncertainty and complexity related to achieving benefits delivery”, “provide oversight and monitoring so programme benefits are planned, measured, and achieved”, and “review expected benefits and benefits delivery” are a programme steering committee’s responsibilities.
In the organisational project management context, “success is measured in terms of the aggregate investment performance and benefit realisation of the portfolio”.1 The focus of portfolio management is value, “the entire quantifiable and qualifiable benefits, worth and usefulness of the organisation”, and it can be defined “in terms of its short-, medium-, or long-term realisation. Value is created through the effective management of ongoing operations”.4
The portfolio manager should take into account financial and non-financial benefits and risks during portfolio strategic management and alignment, organisational change impacts on the expected benefits, provide oversight and feedback on the delivery of benefits, secure the available benefits leading to value realisation. The operational manager’s responsibility is to realise the outcomes and benefits from the successfully implemented portfolio components. The portfolio has a life cycle, “the ongoing processes and functions that occur to a set of portfolios, programmes, projects, and operations within a continuous time frame”.4 The stages of the life cycle are Initiating, Planning, Executing, and Optimisation. During the planning stage, portfolio strategic planning is realised regularly, and the portfolio business model is reviewed to ensure that it is aligned with customer values/benefits. The next stage is the execution stage in which benefits realisation potential based on component delivery is monitored. In the optimisation stage, “the portfolio manager facilitates discussions with stakeholders to ensure that the organisation realises the intended benefits for the remaining components”, and continued “benefit realisation from components that have been transitioned into the operational work of the organisation may also provide credible evidence for optimisation”.4
In portfolio management, there are six performance domains: Portfolio Strategic Management, Portfolio Governance, Portfolio Capacity and Capability Management, Portfolio Stakeholder Engagement, Portfolio Value Management, Portfolio Risk Management.
In the Portfolio Strategic Management, benefits are considered during the following sections: Portfolio Strategic Objectives, Portfolio Charter, Defining Key Portfolio Components, Portfolio Optimisation.
In this performance domain, a portfolio strategic plan is developed and aligned to the organisational strategy and objectives. PMI argued “that the summation of the initiatives’ outcomes under a specific strategic goal leads to 100% realisation of that strategic goal’s benefits.”4 The expected benefits are listed in the portfolio strategic plan. A portfolio performance management plan is “a subsidiary plan or component of the portfolio management plan that describes performance measures, reporting (on scope, cost, schedule, and resources), resource optimisation, and benefits realisation”.4
A portfolio charter is created based on the portfolio strategic plan, portfolio process assets and enterprise environmental factors to give authorisation to the portfolio manager. “A portfolio is built using a set of subsidiary portfolios, programmes, projects, and operational activities managed in a coordinated way”4. A key component in the portfolio is to realise the desired benefits. During optimising the portfolio, the benefits, risks, and resources are balanced and optimised.
The second performance domain is the Portfolio Governance Domain, “a set of practices, functions, and processes within a framework based on a set of principles that are fundamental norms, rules, or values that guide portfolio management activities to optimise investments and meet organisational strategic and operational goals.”4
The other performance domain is “Portfolio Capacity and Capability Management”. It is “a comprehensive framework based on a set of guiding consisting of a set of tools and practices to identify, allocate, and optimise resources for maximising resource utilisation and minimising resource conflicts in portfolio execution”.4 During managing capacity and capability, the portfolio manager should consider benefit realisation. There are four elements in capacity management: Capacity Planning, Supply and Demand Management, Demand Optimisation, Reporting and Analytics. The targeted portfolio benefits are achieved through using these elements during managing capacity. In Capacity Planning, benefits of portfolio components and their priority are considered while allocating resources. In Supply and Demand Optimisation, the mitigation strategies are developed, and metrics are measured for optimisation. In Capability Development, new capabilities are developed, and existing capabilities are sustained, and their benefits realisation is measured.
The fourth performance domain is Portfolio Stakeholder Engagement. In this performance domain, the stakeholder interest table is defined. The roles of Portfolio Governance, one stakeholder group, are to oversee the portfolio, set priorities, manage the spending, report progress, and manage the timely delivery of benefits. The interest of the portfolio sponsor is benefits and outcomes that meet the organisation’s goals.4
Portfolio value management is another performance domain. Assuring, realising, and measuring value are key concepts in this performance domain. “Value assurance is concerned with ensuring that the deliverables enable the intended beneficial changes”. (The Standard for Portfolio Management, 2017, p.81) To realise value, portfolio managers “need to ensure that the components receiving outputs from other components in the portfolio exploit those outputs effectively and deliver the targeted benefits so that the portfolio’s expected value continues to align with the requirement”.4 For measuring the value of the portfolio, a value measurement framework is developed.
Portfolio risk management is the last performance domain. The portfolio manager should manage portfolio risk and balance risk through taking a proactive approach. It is stated that “the sum of benefits among the component elements of the portfolio or the delivery of specific capabilities via projects or ongoing operations does not fully define the delivered value of the portfolio”.4
To understand the importance of benefits realisation, establishing a process that integrates portfolio management, programme management, and project management is essential for moving the organisation forward to realise its vision. This research represents the first step in achieving this goal. The proposed process provides end-to-end benefits tracking, developed based on the PMI standards. In the future, the research could be expanded by integrating other standards.
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