Committed Project Results and Budgets

Description

• Firm commitment by organisation executive sponsors to support the project implementation and to provide dedicated resources and funding, based on a final financial assessment (+/- 10 percent).  This support includes the formal assignment of accountability to organisation project managers for delivering project results on time and on budget.  (As such, Organisations are considered accountable for the success of the project.  Specific rewards and consequences are often put in place to motivate the appropriate actions.)
• In its most formal state, this deliverable takes the shape of a "request for capital expenditure", which management presents to the board of directors justifying the needed investment. The approval of such a document serves as a binding contract for senior management and  project management to deliver on the investment.  (Given the prospects of a binding contract, the seriousness with which this deliverable should be taken is clear.)

Business Value

• This deliverable provides senior management with a final, refined estimate of the investment and recurring support cost required to attain the expected results, before the actual solution is enacted.  As such, it provides the last “go/no-go” decision point.  It also provides a clear picture of what assumptions still exist; what is needed financially for success; and what success will mean to the organisation.
• This deliverable establishes organisation ownership of the project, commitment to its results, accountability, sponsorship and funding with specific milestones, dates, results, rewards and consequences.
• Not establishing these commitments at this stage significantly increases the risk of the project being jeopardised during the Build and Implement phases by inevitable costly surprises, that dissolve management’s will to support the project.

Approach

Senior managers are generally willing to make such commitments only when a high degree of confidence exists in the forecasted benefits and costs.  This level of confidence is possible at the end of the Design Details phase because by this point:

• Project details have been fully thought out
• Impacts on the organisation are understood
• Acquisition costs are known
• Development and support components for the business solution are identified
• An initial Implementation Plan exists.

The deliverable is primarily financial in content, and it is an extension and refinement of costs and benefits postulated in the Business Case.  By this time the project, as a component of the overall Migration Plan, has been well-researched, designed in detail, and planned out.  Its costs are thus well-understood and can be accurately calculated.

Each deliverable in the Design Details phase has a cost component that is incorporated into the Committed Project Results and Budgets.  At this point, assumptions used in the Business Case have been tested, costs of equipment are now secure, and terms with suppliers and builders have been established—enabling a far better prediction of costs, timing of outlays and expenses versus capitalisation.  Profit/loss and cash outflow projections are also known.

In most cases, however, “benefits” anticipated from the recommended business solution will still remain only rough estimates (+/-30 percent accuracy).  To obtain more precise estimates of benefits, it is necessary to identify the origins of these benefits in the business cycle, the specific accounts from which they will be tracked and their timed realisation.  It is also helpful to re-validate the expected level of benefits with affected employees, since they are often closest to the action and will be compelled to live up to management’s expectation of these results.

To ensure the “human element” of the project migration is also being addressed, a formal strategy to shift behaviours in ways that help the organisation realise the benefits must be in place.  This requires conducting sponsorship events and communications activities, setting expectations and measuring performance (including rewards and consequences). All of these actions must be thought out and included into the initial Implementation Plan, with all of the financial implications incorporated the Committed Project Results/Budgets.

Typical work steps for this deliverable are as follows:

1. Understand the organisation’s formal process for project funding and capital requisitions.
2. Review Business Case documentation, assumptions, constraints and risks.
3. Review the Migration Plan logic, assumptions and dependencies.
4. Accumulate and refine the cost information that was determined during the Design Details phase.
5. Define the result and benefit details, and the tracking mechanism, ensuring that answers to the following questions are clear:
1. What are the benefits (names, quantities)?
2. In which profit and loss accounts will they appear?
3. What is the base measurement?
4. How will they be tracked?
5. What formula will be used to value the improvement in monetary terms?
6. When will they begin appearing?
7. When will the full annual impact be realised?
8. How much per month or per quarter?
9. Will they appear on the bottom line?
10. Will they appear in cashflow reports?
11. Will they be immediately reinvested as increased capacity or more revenue?
12. How will they be monitored, by whom, how, and how frequently?
13. How will the tracking tie into company performance management?
6. Describe and think through the mechanisms that will help the realisation of benefits and will generate an initial Implementation Plan.  Ensure the following questions have been answered:
1. Who will drive the benefits?
2. How does the organisation know these gains will be achieved?
3. Who will set the expectations so that the employees will drive the benefits?
4. What will drive the benefits, who is accountable for the results?
5. Who will measure and analyse performance?  How?
6. How will we know, if performance is improving (especially over time)?
7. How will we know if affected employees understand their role in generating results?
8. Who will explain it?
9. Will they listen?
10. How do we know that the affected employees agree with the expected results?
11. Do they buy in?  How will counter-resistance be addressed?
7. Validate benefit potential and benefit drivers with representatives of affected employees.
8. Assess risks, constraints and assumptions for implementation.
9. Prepare the appropriate documentation and format.        
10. Prepare for the management review and approval meetings.
11. Review all with management.
12. Make adjustments based on feedback.

Guidelines

Problems/Solutions

• Be aware that, typically, organisation interest is in isolating cost as accurately as possible.  Few are enamored by enumerating results and benefits.  Thus, a organisation will resist accountability for results, as they will feel most comfortable controlling the cost of the project, when it is under their authority.  The intent here is to transfer responsibility for hard project results onto the project  manager and senior executives.  Realise that the goal is to place responsibility on organisations to deliver “results”, not “projects”.   Instill this discipline in the organisation.
• Organisation know-how in developing the benefit-tracking framework is most often non-existent.  (This is another reason why organisations tend to resist this activity.)  Intervene frequently with the sponsorship of the top organisation to cause this effort to begin and to begin on time.
• To be able to clearly describe and plan benefits, a thorough understanding is necessary of the “To-Be” design—specifically, how the environment will differ, what changes will occur and how work will be transformed.  These differences give rise to the results.  To value these results accurately, delineate exactly where the differences are and how they will be ensured.  The Detailed Process Descriptions developed in this phase provide significant insight into this topic.

Tactics/Helpful Hints

• Often projects are rolled-out during implementation and are considered a success, when all the technical and physical aspects function as planned.  The affected employees are expected to rejoice at the new world.  Thinking through implementation planning and focusing on the “human side” of the implementation will reveal multiple risks and barriers that will need to be overcome.  Make project managers directly accountable for the results of the project instead of the roll-out.  This will ensure that  a well-facilitated organisation will open his/her eyes to the potential obstacles, and will readily realize the value of result planning, driving and tracking.
• Assign the project manager the responsibility for delivering the project as defined, as funded and as timelined.   Make the project manager accountable not only to deliver the benefits, but to manage the benefit delivery, as well.  Since the manager’s job is on the line, management has the commitment it needs to see that mechanisms are in place to drive the expected results.
• Gain agreement from the target population on the benefit potential.  By this time, the employees are well aware of what is coming, what the general expectations are, why the change is occurring, etc.  They need to grasp the details of what is expected of them and specifically how different the environment will be.  Only then can they agree to the logic behind the results and benefits.  If possible, hold workshops with affected individuals, facilitated by their direct supervisors, with active participation  from sponsoring management.  Ensure that, in this workshop, employees learn and “experience” the new order.
• Present the cost/benefit information in the format that the organisation typi­cally uses, such as a profit-and-loss impact statement, or a graphical representation of cumula­tive costs and benefits, consistent with the Business Case.

Resources/Timing

• Use extended teams to develop detailed costs and benefits.  The information systems department can assist in estimating hardware, soft­ware development, and support costs.  The human resources department should have data on training development and delivery costs, both from inside providers and contractors.  Similarly, HR department involvement is crucial to assess the financial impact of job changes, recruiting, hiring, layoffs, etc.  Other depart­ments, such as purchas­ing, maintenance, quality assurance and various operational units may also provide needed information.  Co-operation and support from these areas is usually depen­dent upon the amount of advance notice given, and the extent to which these groups have received ongoing communications during the project.  Document carefully the assumptions and sources for all cost data.