Project Management Practices

Project Management Practices

Link for reference to answer question: https://www.projectsmart.co.uk/business-case/

Is this really worth the
effort? The need for a
business case
CONFERENCE PAPER ǀ 2009
Herman, Brian | Siegelaub, Jay M.
How to cite this article:
Herman, B. & Siegelaub, J. M. (2009). Is this really worth the effort? The need for a business
case. Paper presented at PMI® Global Congress 2009—North America, Orlando, FL.
Newtown Square, PA: Project Management Institute.
Sr. Manager – IT Programs and Projects, Amazon.com
Jay M. Siegelaub MBA, PMP, PRINCE2™
Practitioner,
Boston University Corporate Education Center
Introduction
The classical definition of project success centers on achieving results on time, on
budget, and producing the agreed deliverables: the triple constraints of time, cost,
and scope. Yet, over the past decade there has been a growing recognition that
creating the requested deliverables does not ensure “success.” An increased
emphasis on results has brought businesses—and non-commercial
organizations—to focus on the “value” projects bring to the organizations that
commission them. Not just “what did you build” but “did what you built justify
the investment in the time and resources to create it.” With a sputtering world
economy, an organization cannot afford to spend limited resources without
assurance that it has used those resources wisely.
The formal name for this justification is “Business Case.” While the term
“business” is used, the concept is as relevant in non-commercial
environments—governments, not-for-profits, NGO’s, etc.—where it may be
known as a “case statement” (or similar terminology).
Why We Do Projects
Projects are done to fulfill business/organizational needs. The organization has
some “problem” it needs to solve, so a project is initiated to resolve that situation.
It might be a new initiative, an extension of existing operations, adding a new
product to an existing product line, or something that needs fixing.
Related Content
FOUNDATIONAL STANDARDS
ǀ 2018
The Standard
for
Organizational
Project
Management
This newly-created
standard provides a
framework to align
project, program, and
portfolio management
practices with
organizational strategy
and objectives.
ARTICLE ǀ Skill Development ǀ 1 June 2018
Project Management Journal
Tackling Project
Management
Competence
Research
By Nijhuis, Steven | Vrijhoef,
Ruben | Kessels, Joseph ǀ The
vast amount of previous
research on project
management competence does
not provide a basis for
educational needs. Analyzing
previous research poses two
challenges: the lack of a
uniform list of…
ARTICLE ǀ Complexity ǀ 1 June 2018
Project Management Journal
The Need for a Business Case Page 1 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018
When the development of a project focuses on its deliverables, the implication is
that as long as the project creates what was asked for, it has been successful. If
and how the outputs are used is of no specific concern of the project team. This is
an extension of the idea that project delivery is primarily a technical operation
(hence, the common assumption that the ideal person to lead a project is the one
with the most technical knowledge of the content).
The organization wants to see results—have the problem solved—so it can move
forward and deliver its strategy. Having an “elegant” technical solution does not
help the organization if the products are not used to deliver the expected benefits.
PRINCE2™ (the internationally recognized project management methodology)
identifies these key elements of a project that support benefits delivery:
• A project’s output is any of the project’s technical deliverables (whether
tangible or intangible)
• An outcome is the result of the change derived from using the project’s
deliverables
• A benefit is the measurable improvement resulting from an outcome that is
perceived as an advantage by one or more stakeholders (PRINCE2™, 2009 edition,
Section 4.2.2)
Here is an example:
Output: A new production plant is constructed and brought into operation.
Outcome: More of the company’s products can be manufactured in the same time
period.
Benefit: The company can deliver more products to its customers, and sales
revenues increase by 20%.
The ultimate goal is to increase sales—so the construction of the plant, by itself,
delivers no value to the organization. It is just a building filled with equipment. If
the organization were unable to use it (or if it no longer had a need for it), then it
would sit there as a big expense with no counterbalancing income derived from
it—even it were built perfectly according to specifications!
With these elements in mind, the project manager’s role must go beyond
managing a technical development effort. If the primary purpose of the project is
to deliver value, then the project manager’s role is to help ensure that value is
delivered. Clearly, the project manager does not have control over many factors
that contribute to the successful use of deliverables—for example, the people who
will define what the value is; or those who will actually work with the deliverables;
or those who have to make sure the deliverables operate properly. But the project
manager is responsible for helping to keep all parties—especially those paying for
the project, those who have to use the deliverables, and those doing the
development work—focused on this expectation.
The project manager’s role must go beyond “creating the correct technical
product” and become “delivering a solution to the organization.”
Why the Organization Needs a Business Case
If a project is commissioned without consideration for the value it will deliver (i.e.,
without a Business Case), a number of serious problems can arise:
(1) The organization wastes valuable resources on projects that don’t help the
organization achieve its objectives. This leaves fewer resources available for more
valuable projects.
Contractual
Complexity in
Construction
Projects
By Wang, Wenqian | Chen,
Yongqian | Zhang, Shuibo |
Wang, Yu ǀ Building on the
multifunctional perspective
from current contract theory,
we conceptualize contractual
complexity as a threedimensional construct to depict
the explicitness and
elaborateness of…
ARTICLE ǀ Skill Development ǀ 1 June 2018
Project Management Journal
The Influence of
Behavioral
Competencies on
Project
Performance
By Gruden, Nika | Stare, Aljažǀ
To raise awareness of the value
of behavioral competencies of
project managers, we carried
out a quantitative survey to
identify the importance and
influence of competencies on
efficient project…
ARTICLE ǀ Skill Development ǀ 1 June 2018
Project Management Journal
Project Managers’
Competences
By Saunders Pacheco do Vale,
João Walter | Nunes, Breno |
Carvalho, Marly Monteiro de ǀ
This article investigates the
individual competences of
project managers through a
methodological approach that
combines a systematic
literature review and an
analysis of employment
opportunities. A…
The Need for a Business Case Page 2 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018
(2) The organization has no clear basis to prioritize projects, for establishing what
is important. Without a Business Case—and some organization-wide agreed
measure of “value”—there is no means of determining which projects are
important, and which are less so. Many organizations use “the loudest voice”
approach, in which the managers who yell the loudest (or who have more
influence, or are more intimidating) get what they want—even when their projects
have no relationship to the organization’s objectives! The organization needs a
more rational and effective means of allocating its limited resources. Without this
the organization’s strategy languishes with no clear assurance that the strategy is
being progressed by any particular expenditure of resources.
(3) There is likely to be disappointment after the completion of the project, as the
stakeholders wonder why the project is not giving the great results they
imagined—very likely because the project manager didn’t know what those
expectations were, or was focusing predominantly on what was being built, rather
than on how it would be used.
(4) No target is established for why the project’s deliverables are being
created—other than the meeting of technical specifications. This allows the
project team to get over-engaged in technical details, losing sight of the goals of
the project. At project completion there is no clear way of determining whether
the project delivered value. Both occur because no benefit goals were established
before the project began.
(5) The organization has no opportunity to improve its project management
maturity. One key learning from each project should be: “how well did the
resource usage support the organization’s goals?”
How Does a Business Case Work?
The Business Case is a reference point before, during, and after a project.
As the project begins the Business Case establishes the ultimate goal of the
project for all stakeholders—including the project manager and sponsor. There are
invariably concepts in the minds of the key project participants of what they
expect the project to accomplish. Creating the Business Case draws the discussion
from “What do we want to build?” to “Why do we want to build it?” This provides
the justification for starting the project. A written and agreed Business Case
makes those expectations explicit. If there is lack of understanding, or
disagreements over those goals at initiation, it is far cheaper to resolve them now,
rather than after valuable resources have already been expended. (Quality
reminds us that it is more economical to prevent this problem than fix it later.)
As the project progresses, the Business Case becomes the “guiding light”—the
beacon toward which everyone knows the project is directed. It will often help
inform the project manager as to which approach to take when alternative
technical options present themselves. With a clear Business Case the project’s
stakeholders can monitor both the project and the project’s environment to
determine if the project continues to makes organizational sense.
After the project is completed—after the deliverables have been applied and are in
use—the Business Case becomes the measure to assess how well the organization
did with its planning and implementation. This is the learning linchpin for
organizational improvement, for at that point we can ask: “did the project deliver
the value we anticipated?” If it has, it is likely because the project management
team (project manager, sponsor, key stakeholders) kept its focus on that value. If
not, then there are critical organizational lessons to be drawn from the
experience:
The Need for a Business Case Page 3 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018
• Did we incorrectly estimate the expected benefits?
• Did we develop all the associated deliverables that were really needed to
provide the expected value (e.g., did we roll out a new technical product, but
didn’t supply enough help or training support?)
• Did we develop the wrong deliverables?
• Did we get too caught up with the technical aspect and not make the
deliverables usable enough to deliver the value we wanted?
• Did something happen within the project or the environment that we should
have taken into account?
There are many other questions that can be explored—but none of them can be
answered intelligently without a referent Business Case.
Business Cases Are Good Business/Organization
Practice
In an article on “Broken Promises” (PM Network, February, 2006) it was noted
that “Success [for Boards] is increasingly being defined as achieving the promised
benefits, as opposed to the traditional focus on time and budget measures. The
‘promised benefits’ [the source of the title ‘Broken Promises’] refer to the ability
of completed projects to deliver the intended specifications: a certain level of
process improvement, cost savings, productivity gains or some other business
goal.” The article adds “results indicate that while companies are delivering some
value back to the organization, benefits are being leaked away. Without a sound
program management function, project costs overrun, timescales slip, and the
planned benefits lose their focus.” Organizations are looking for more than
deliverables—the planned benefits must be defined as part of the project’s
Business Case. The Fourth Edition of A Guide to the Project Management Body of
Knowledge (PMBOK Guide) now takes greater notice of the Business Case
(4.1.1.2 Business Case) but does not yet expand its explanation and discussion to
take full advantage of the value of a Business Case to the project and
organization.
A Business Case can take many forms. The following are several examples:
• ROI (Return On Investment): Spending time and money in development is
expected to deliver far more money than went into the project.
• Strategic: The project supports the Organization’s Strategy and/or Mission
(which may not always be about short-term, or dollar-for-dollar returns).
• Investment: Developing new products in the laboratory, for eventual (“we
hope”) expansion into money-making products.
• Values: This is a variation on Strategy/Mission—where the organization’s
social values are agreed, as part of the corporate culture, to be one of the
organization’s common expectations and goals.
• Research: “We’ll probably lose money on this project, but we will learn a lot
that will help us set the organization’s future direction.”
• Efficiency: A variant of ROI, the project is done to improve the organization’s
operational processes.
• Compliance (Regulatory/Statutory/Fiduciary): A project is required for the
organization to comply with external regulations.
2
®
The Need for a Business Case Page 4 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018
What Does a Business Case Look Like?
A Business Case defines the value a project will deliver. Costs and benefits are key
reference points, but other elements contribute significantly to presenting a solid
and coherent Business Case. This section proposes its core contents, remembering
that this is a key driver for the project as a whole, and will be vital to guide the
project governance team (project sponsor and decision-makers) in making go/nogo assessments.
It is common to think that a Business Case is fixed, and should not change during
the project. In fact, virtually every section of the Business Case can change. Hence,
the sections of the Business Case have to be reviewed regularly (and updated as
necessary), so the key stakeholders have up-to-date information to determine the
project’s viability. As it is dynamic document, it is the responsibility of the project
manager and the owner of the Business Case (usually the project’s sponsor) to
regularly monitor those elements to determine if the justification for the project
has in any way been diminished (“should the project be stopped or reduced in
scope?”) or enhanced (“would it be worthwhile to invest more resources to deliver
this project”).
Additionally, a good Business Case contains more than the specifics of the
particular project. It also contains the context for the project. The context
provides an account of the “operational environment” in which the project’s value
is defined. If external forces change that context, then the foundation upon which
the Business Case is built may no longer support the need for the project itself.
Thus the context too may change during the project, and alter the justification for
doing the project. If the context is omitted, the project may continue along,
oblivious to the fact that it may not longer be relevant or viable.
Business Case Contents: The Basics
Reasons
What it is Why the project was considered in the first place—its context. The
problem or situation that initially led the organization to consider
doing this project; the project’s background.
Why it is needed To understand the context of the project.
Source The business requesting the project.
Why it might
change
The original circumstances can change or disappear, indicating that
the project is no longer necessary, or point to a better option that
was considered.
Options
What it is The possibilities that were considered in response to the problem
statement (Reasons), and their anticipated results. Always includes
“Do Nothing”, the minimum that could be done in response, and
other possibilities. Indicate which option was selected (i.e., this
project), and why it was selected.
Why it is needed To understand the options that were considered, and why this
project option was chosen over the alternatives.
Source The business that requested the project, often via a feasibility study
that came up with these options.
Why it might
change
Elements of the options that were not selected can change (e.g.,
lower costs, higher quality, changes in the business environment),
making a formerly less attractive option now more attractive than
the option originally selected.
The Need for a Business Case Page 5 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018
Benefits and Dis-Benefits
What it is Benefits are the expected value to be delivered by the
project, measurable whenever possible. Dis-benefits are
negatives to the organization, and the project would want to
minimize them.
This section should also include:
(a) The level of benefits expected (measureable/quantifiable
whenever possible);
(b) The timescale within which the benefits are expected to
be realized (and when the benefits should be measured);
(c) Any range of acceptability of a particular benefit (e.g.,
“we are looking for a return of between 18% and 22% on
our investment”);
(d) How the project will plan and help assess whether
benefits have been realized (this should be documented in a
separate “Benefits Review Plan”).
Expected benefits should be tied to organizational strategy.
Why it is needed These are what the organization ultimately wants to get out of its
investment. Not just deliverables—but deliverables that are used
and deliver value. This is a distillation of what the organization
wants to happen (from the sponsor), and what the project can
realistically deliver (from the project manager).
Source The business proposing the project, supported by information from
within the project.
Why it might
change
They can increase or decrease—affected by external circumstances
(e.g., a competitor coming out with a better product), or internal
factors (e.g., technical, cultural, legal) that limit what the project
can deliver.
Timescale, Costs
What it is Minimally, the time and costs to bring the project to its natural
conclusion; would include intermediate figures that might impact
project success. It may also include operational and maintenance
costs to bring the outcome to the point at which the benefits will be
realized.
Why it is needed These (along with risks and other factors) have to be balanced
against the expected Benefits to determine if the project is worth
starting or continuing.
Source The development and maintenance of the project’s schedule and
resources (actual and projected) from the project management
plan.
Why it might
change
These figures are constantly changing during a project. If revised
figures are out of line with original expectations, the project may no
longer be viable.
Major Risks and Opportunities
What it is The major threats and opportunities to the project.
Why it is needed They could endanger (risks) or enhance (opportunities) the
likelihood of the expected benefits being achieved. The weight of
risk, the cost of mitigating them and the level of management’s risk
tolerance could render a project not viable.
Source Project manager (internal), sponsor, and key stakeholders.
The Need for a Business Case Page 6 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018
Why it might
change
Risks and the costs to mitigate them are in constant flux, and
changes in their circumstance can cause a project to lose its
viability.
The project’s sponsor and stakeholders will take into account all the above
elements in determining whether the Business Case has viability. Some of these
elements will naturally evolve with the project—particularly time, cost, and
expected benefits. Before the project planning effort begins, time and cost are
broad estimates. With the creation of the project management plan, these
elements will be solidified upon more detailed investigation. However, it is only
during the execution of the project that the true costs and timescales (actuals) are
determined.
The benefits follow the same learning curve: broad estimates at first, then a
greater sense of real possibilities during planning and as the project progresses.
The true cost and time are only known after the completion of the project if
operational and maintenance costs need to be considered. Similarly, benefits can
only be assessed after some period of use (as defined in the Business Case).
Assessment and understanding of major risks is critical to the evaluation of
project viability. While it may seem that any one risk may be tolerable to the
sponsor and stakeholders, the aggregate of the major risks (both threats and
opportunities) have to be balanced against the benefits that the project is
expected to deliver. Those risks change constantly, and so that section of the
Business Case needs to be updated as well.
The Benefits Review Plan
PRINCE2™ (2009 Edition) suggests that a Benefits Review Plan should be
developed along with the Business Case. It should be updated as the project
progresses, and eventually becomes the “instruction manual” for performing the
benefits assessment—determining whether the identified benefits have been
realized. Such a plan would have (minimally) the following components:
• Benefits to be measured (drawn directly from the Business Case);
• Accountability for measuring them (Who is accountable for doing the
assessment—and who is accountable for delivering those results to the
organization);
• How benefits will be measured (What are the measures? What how will they
be calculated? What information will be needed to do those calculations?);
• When the benefits should be measured (When will the assessment take
place? How is that related to when partial and/or full benefits are expected to be
realized?);
• Who the resources are that will carry out the review (Who will perform the
assessment? How will we make sure that resource understands what is being
done, and has the proper skills to do the job?);
• Baseline measurements from which the improvements can be calculated
(What is the reference point for comparison? Will that information be developed
as part of the project, or is it already available?);
• How performance of the key deliverables will be reviewed (How the
“outcome” will be evaluated).
The Foundation for Project Success
The Need for a Business Case Page 7 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018
The Business Case sits at the heart of the project. It outweighs the technical
objectives, which only exist to deliver some defined value to the organization.
Developing and maintaining a solid Business Case will help ensure that (a) all
parties will have a common understanding of the value the project is intended to
produce; (b) the organization will have a clear, ongoing basis for determining
whether the project is worth continuing; (c) resources are used effectively (on the
right projects); (d) priorities are clearly established for the project manager and
the organization; and (e) there will be a clear basis (through the Benefits Review
Plan) for assessing project success. Working with a Business Case does not require
a business degree—but it does call on the project manager to be more attentive to
what the organization is seeking to accomplish through the project. When a
Business Case is planned and managed effectively, it dramatically increases the
likelihood of the project’s success—in the minds of all project parties.
References
Office of Government Commerce. (2009). Managing successful projects with
PRINCE2 (PRINCE2™) (Fifth Edition). London, UK: The Stationery Office.
Project Management Institute. (2004). A guide to the project management body
of knowledge (PMBOK Guide). Newtown Square, PA: Project Management
Institute.
“Stakeholders: Broken Promises.” (2006, February). PM Network, pp.6–8.
This material has been reproduced with the permission of the copyright owner.
Unauthorized reproduction of this material is strictly prohibited. For permission to
reproduce this material, please contact PMI or any listed author.
© 2009, Brian Herman and Jay M. Siegelaub
Originally published as a part of 2009 PMI Global Congress Proceedings –
Orlando, Florida
®
© 2018 Project Management Institute, Inc. USA
The Need for a Business Case Page 8 of 8
https://www.pmi.org/learning/library/need-business-case-6730 6/26/2018