LATEST POSTS

Building a Risk Management Framework

The ultimate success of your project will depend on resolving the issues and risks associated with implementing a PPM process and solution in your organisation as well as quantifying benefits and savings.  You need to be sure that the chosen solution is fit for purpose and will solve business issues - not add to your problems!  You need to ensure that the benefits and savings will work in various aspect before you procure and implement the system.

Typical areas to address include:
Technology
· Does the proposed system run fast enough?
· Will it require additional infrastructure?
· How easy will it be to transfer data?
· Does the software interface with existing systems?

Culture
· Will people find the new system easy to use?
· Does the system use familiar terminology?
· How does the system fit with existing or proposed procedures?
· Where does it fit within your project management maturity environment?

Answering these questions using traditional evaluation techniques can be difficult and proactive management of risk is vital.  Since PPM deployment is a change management project we recommend implementing a project based risk management framework.

Within the framework we establish possible events or circumstances that may have a negative effect on the project and put in place a contingency plan to reduce or eliminate the risk.

Some factors that need to be taken into consideration

· Description – the nature of the risk
· Precautions – consider what can be done to mitigate the risk
· Consequences – the possible effects if the risk occurred
· Identification – choosing unique identifiers for referring to the same risk in company or project documents
· Risk status – classification as new, ongoing or closed
· Risk escalation  - estimating the probability of the risk becoming a liability
· Schedule impact – estimating the consequences in terms of time/budget for the project

In order to manage project based risk it is essential that a risk management plan is drawn up for the project and that specific responsibilities are allocated for activities and tasks. Moreover the project risk database must be kept up to date and reviewed regularly to ensure that it takes account of any changes.

Kick Start the PPM Process Part 8 of 9

Establishing Proof of Benefit

What is Proof of Benefit?

A proof of benefit (PoB) is in effect a configurable test environment that enables the business to understand from a real-world perspective how PPM will be delivered to the business. The PoB brings together the software application and processes into one single environment. The software side of the PoB can be hosted as part of a SaaS offering which will obviate the need for an internal server installation and reduce costs and timescales.

The PoB exercise will involve:

Developing and agreeing PoB objectives and scope
Agreeing the issues concerning the existing status of the current processes such as:
time recording
milestone management
project management
resource management
management information production
scenario and project modelling
Agreeing the framework for delivery of the PoB around areas where the business can develop a PPM model and deliver it into the business
Assessing and testing the PPM model and delivering the results back to the business

A PoB Step Process

A PoB will typically involve the following key steps:
Step 1 Objectives and Goals
Step 2 Principles and Scope
Step 3 ‘Current State’ Assessment
Step 4 ‘Future State’ Assessment
Step 5 Gap Analysis Assessment
Step 6 Presenting the Results to the Business

Measuring ROI and ROO

ROI/ROO Analysis

The rationale behind any project carried out by a commercial organisation should be either to deliver cost savings, or an improvement in revenues, or both. However, it is only effectively managed projects that retain a link to strategic initiatives that can deliver on the above. Cost savings can either be delivered by a reduction in headcount, or savings gained through efficiency improvements can be used to enhance customer service, vendor management, or less tangible activities such as training, mentoring and the like.

This type of quantitative, financially based requirement for return is a very compelling driver for change, yet is only part of the overall picture when looking at both potential tangible and intangible benefits. Therefore return on opportunity (ROO) analysis helps organisations define and quantify potential top line benefits from deploying new business processes, including in respect of revenue, market capitalisation, an increased customer base and decreased attrition. ROO analysis is most effective when it crosses departmental boundaries, integrates disparate capabilities and provides capabilities that an organisation did not have or had not addressed before.

Using an ROI/ROO calculator model is an effective way of measuring the organisation’s key project and programme cost and time data to identify potential cost savings over five years.

Building an ROI/ROO model

Once the stakeholders have identified the common activity conducted within their control and understood the percentage split and breakdown of activity, time efficiency calculations can be made to identify the potential ROI and subsequently the ROO that are achievable. This is simply based on time savings against the ‘now status’ way of working and processes. These can be compared with representative savings once PPM has been implemented and adopted through an effective change programme.

Research has demonstrated that work practices without a PPM solution in place can incur a workplace productivity wastage of as much as £650 per person per month, which in turn could represent an annual wastage, within a department of 100 staff, of approximately £780,000. It is important to note that enterprises rarely cull people, but rather move savings into value creation activities such as a new or different corporate initative.

These are the steps that need to be followed:

1. Step 1: Work days and staff costs
2. Step 2: Project/programme related activity costs
3. Step 3: Calculating potential ROI
4. Calculating potential ROO

The Health Check

The health check is conducted in cojunction with the selected vendor, is the first step in assessing the needs and requirements of the business, and is designed to be a low risk engagement model. The health check allows the business to analyse key processes underpinning the delivery of projects within the organisation in order to make certain that the solution and process will deliver value.

A typical health check exercise includes:

• Review of a number of agreed key processes, typically including:
  - portfolio management
  - management reporting
  - project resourcing
  - milestone/delivery reporting
  - scenario modelling
  - project/programme management
  - time recording
• review of document processes, including inputs/oututs and data flows
• identification of timings for processes
• understanding and documentation of business issues and constraints

Business case considerations

Identifying the need for PPM comes from understanding how the business operates, its projects management maturity level, and the processes used.

The overall objective of any PPM process is to balance project investment and expenditure across the business so that the enterprise can quickly make decisions around trusted information, aiding the change of direction within the business. In other words, the purpose of PPM is to enable the enterprise to identify projects not aligned with agreed strategy, and redirect resources to other value creation activities within the strategy. Therefore a key component of developing the initial business case is providing a breakdown of business-as-usual activities compared with project-centric activities. Doing so will allow key sponsors to understand strategic alignment issues and those projects that provide value to the corporate strategy and objectives. Management’s goal should be to break up the investment into pots of tactical spend to support the strategy, making sure the spend is correctly directed into strategic value and stakeholder value coupled with shareholder value.

PPM should be delivered into the business as a change management project. The business case needs to explain how the scope of the proposed PPM project fits within the existing business strategies and develop a compelling case for change, in terms of the existing and future needs of the organisation. The business case then needs to balance the costs, benefits and risks of delivering PPM. It needs details of proposed commercial arrangements; a cost/benefit analysis ideally including analysis of ’soft’ benefits, in other words those that cannot be qualified in financial terms; preferred options and any trade-offs. Also needed is an assessment of affordability and available funding linked both to proposed expenditure and to available budget and existing commitments.

The business case also needs to address ‘acheivabilit’. It needs to set out the actions which will be undertaken to support the achievement of intended outcomes, including procurement activity such as the purchase of consultancy and software. This is supported with a plan for achieving the desired outcome, identifying the key milestones, dependencies, roles, contingencies, risks, skills and experience required.

Therefore the typical business case will take the following form:

• strategic objectives and scope
• benefits realisation
• resources required
• cultural impact
• revenue/savings
• capital and operating costs
• timescales
• appraisal

The development of any business case needs to address the following key issues and calculate their potential ROI and benefits:

• People, process improvement and productivity
• Profitability
• Performance
• Customer/partner satisfaction
• Management information