Benefits management is the hottest thing to hit the project management world after Agile but it is often misunderstood or implemented poorly. One fundamental issue often contributes to the failure of benefits realization implementations: mistaking project benefits for project value.
So before you jump on your benefits management journey, let’s spend some time learning the key differences between the two concepts and why nailing these concepts down is important for your organisation.
Benefits and Value in Project Management
You often hear these two words being thrown around interchangeably in the project management sphere. When an organisation introduces benefits management into their processes, project managers and PMOs can often get tunnel vision and lose focus. While benefits management plays a role in realizing value, the two are not the same.
Remember, the ultimate goal of a project is not to only achieve benefits but it is to sustain benefits over the long term to attain value. Projects are the vehicle, benefits and project value is the prize.
So let’s define these two concepts in some more detail.
What is a project benefit?
The Project Management Institute defines benefits as ‘an outcome of actions or behaviours that provide utility, value, or a positive change to the intended recipient.’ They are achieved through the operations stage of a project and are defined during the early stages of the project proposal process.
Project benefits are not always financial or tangible. They can be divided into three different categories across a spectrum from Hard Benefits, to Quantifiable and Measurable Benefits, to Soft Benefits.
- Hard Benefits: The financial benefits of a project or activity that can be calculated through the application of a financial formula.
Example: Reduction in staff needed leading to reduced project costs
- Quantifiable and Measurable Benefits:
The benefits that can be either tangible or intangible but its value can be quantified with sufficient evidence.
Example: Reducing manual processing time by 15%
- Soft Benefits: these are often intangible benefits that can only be observed and depend on human experience or judgement to assess its impact. Soft benefits typically fall into two types – assessable (ie. through surveys or indirect assessments) or perceivable (ie. image, feeling or emotional changes determined by observations)
Example: Measuring the increase in staff morale and motivation
A benefit is thus a measurable gain or advantage. However, while activities and projects may have multiple benefits, this does not mean that they have value to the organisation.
An organisation can be completing projects that are achieving cost savings by reducing customer service staff. However, if the organisation’s goal is to improve customer service quality, this benefit loses its value.
While benefits are objective, value is contextual to an organisation and its strategy
What is project value?
Whenever project professionals evaluate a project, they consider its perceived value, not benefits, against the price. But as you can imagine, pinning down a definition for value is difficult due to its contextual nature.
The Project Management Institute defines project value as ‘the value a project creates for its stakeholders… [that can] be represented by a single or any combination of efficiency, technical effectiveness and the satisfaction of a project’s stakeholder with emphasis on clients and shareholders’. However, this definition may be slightly outdated and still clutches strongly onto the conception of project value being strictly functional.
In a time when environmental and social awareness is growing, value can no longer be bound to purely functional measurements. Almquist and others in the Harvard Business Review have expanded this concept of value to create a graph of 30 elements of value that are broken down into tiers of social, life-changing, emotional and functional value.
From this graph, we can see that value comes in many tangible and intangible forms and can only truly be defined in the specific context of an organisation.
For example, if an organisation is in desperate need to recover its image after a chain of negative scandals, it will find much more value in the life-changing value elements rather than the purely functional elements. With the strategic objective of improving their image in place, the understanding and measurement of value expand beyond the boundaries of the company itself and its direct affiliates to consider the impacts of their actions on broader stakeholders.
The Five Capitals Model also gives us an expanded understanding of value. In this model, all activities are not only evaluated based on their financial capital gains but also their human, natural, social and manufactured gains. Projects thus are measured, evaluated and selected based on a more holistic set of measurements of value.
Understanding that having a strict definition for project value is not necessarily helpful, the PMBOK Guide suggests that value is a concept that is unique to each organization and encompasses the total sum of all tangible and intangible ‘value elements’.
Taking this further, project value is thus the measure of the total sum of tangible and intangible ‘value elements’ that are gained through the project outcomes and benefits that are in line with the organisation’s strategic objectives.
Project value is the underlying ‘why’ that drives every project activity, while project management is how you achieve said value.
Why this confusion leads to failure
Hopefully, you can begin piecing together why the distinction between the two is important and how this can impact PMOs and organisations.
Project management professionals can often fall into the pit of believing that benefits realization processes can simply be added on to their pre-existing projects and frameworks with little to no barriers or issues. Sadly, many of those project professionals are left scratching their heads when they find out their benefits realization implementations are not getting the results they want to achieve. That’s because when you start defining benefits without first clearly defining and linking them to strategic objectives, you lose all the value.
We go into more detail about this problem and how to avoid them in our post here:
Read more: Don’t make these Benefits Management Mistakes
The era of benefits realization and value management
Benefits realization and value management are not just some hyped buzzwords in the project management world. In fact, they are markers for a fundamental shift in project management approaches, specifically in how project success is defined.
Kerzner describes this shift in project success definitions perfectly:
“Where the traditional definition focuses on the “completion of the projects within the triple constraints of time, cost and scope” the future definition needs to be “achieving the desired business value within the competing constraints”.
If organisations and project professionals want to truly step into the future of project management and make a shift towards value realization, understanding the distinction between benefits and value is the first critical step.
Tap into the power of benefits management with pmo365
Thankfully, you are not alone in your desire to tap into benefits management. In fact, we have been benefits management advocates for quite some time and we know how to do it right. Make sure to check out how we can help you tap into the power of benefits management by talking directly with our PPM experts.
