Program Benefits Management Tutorial

Program Benefits Management

 
Welcome to the fifth chapter of the PMI-PgMP tutorial (part of the PMI-PgMP® Certification Training.)
In this lesson, we will cover program benefits management, which is the second of the
five performance domains that will be covered as part of this PgMP certification course.
Let us begin with the objectives of this program benefits management tutorial in the
following section.
Objectives
After completing this lesson, you will be able to:
  Understand how the life cycle of the program overlaps with the benefits
management activities
 Discuss the five primary activities within benefits management
 Explain how to identify the benefits that will be delivered by the program
 Classify the responsibilities during the benefits analysis and planning and the
benefits delivery activities
 Identify the tasks to ensure the transition of benefits to the receiving organization
Let us find out what benefit is in the next section of the program benefits management
tutorial.
What is Benefit?
Before we start discussing benefits management, let us define benefit. A benefit is that
which provides value, utility, or a positive change of some kind to an intended recipient.
A benefit could be tangible or intangible.
Tangible Benefits
Tangible benefits can be seen, perceived, and easily explained.
Intangible Benefits
Intangible benefits are harder to track as they can only be felt. Also, the payoff from
intangible benefits occurs in a different time frame.
Now, let’s see how the benefits that a program may be able to deliver can be
categorized.
Creation of New Products
First, they could result in the creation of new products, product suites, or a service.
Creation of an Alternative
Secondly, they could result in the creation of an alternative.
For example, if only road transportation is available for a certain destination, the
construction of a railway line to that place would mean that an alternative means of
transportation has become available.
Improvement in Financial Parameters
Third, they could lead to improvement in some financial parameters such as producing
a certain revenue figure or creating a certain profit margin.
Saving a Scarce Resource
Fourth, they could be saving a valuable or scarce resource. In a drought-prone area,
any program that can achieve a reduction in water consumption can provide a critical
benefit to the region.
A benefit could also be assistance in recovery from a calamity, disaster, etc. Relief
programs that help in earthquake or flood prone areas to recover from the disaster
would be an example of such value. There could be many more such categories that
you can probably come up with.
The key point to understand is that the program manager must be open to the possibility
of providing benefits to the organization in line with the strategy.
In the next section of the program benefits management tutorial, we will look at some
examples of benefits.
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Examples of Benefits
Examples of benefits could be a 20 percent improvement in profit margin, which is a
financial benefit, or improvement in customer satisfaction, which is somewhat of an
intangible benefit.
Note that an intangible benefit can be of critical importance because satisfied customers
lead to business results.
Even improvement in team morale is intangible, but we all know that a team with high
morale can potentially achieve great results.
The other point to remember is that the benefits from some programs are not realized
until the very end of the program when the outputs of all components come together
and are integrated.
For example, there is no value from a bridge or a railway line until all the pillars,
roadworks, signaling systems, etc., are completed.
In some other programs, it may be possible to realize some value sooner.
For example, if you are making a software product, you can probably release the first
version of the product, which may not contain some of the fancy features, but can still
unlock some value for the customers.
In the next section of the program benefits management tutorial, we will understand the
relationship between program life cycle and program benefits management.
Relationship Between Program Life Cycle and Program
Benefits Management
In this section, we will map the benefits management activities to the program life cycle.
In the subsequent sections, we will discuss each of these activities in detail.
Benefits Identification
During the program definition stage, the first step is benefiting identification. Benefits
identification is about identifying and qualifying the benefits that the program intends or
is expected, to deliver.
As seen before, the benefits could be tangible or intangible – that is, anything that is or
is perceived to be valuable to the organization. It is very important to understand the
expectations regarding benefits at an early stage clearly.
Benefits Analysis and Planning
The next step is benefiting analysis and planning. Once we know what benefits we
intend to deliver as a program, we need to establish how those benefits will be
achieved. This has to be tied to the components of the programs and specific activities
within those components that will help realize the benefits.
Therefore, the program manager has to define and prioritize the components in line with
the contribution of the components to the planned benefits. At the planning stage, the
program manager also has to define appropriate metrics that will help derive the
benefits.
The program manager establishes a benefits realization plan, which specifies how,
when, and in what quantities the benefits will be delivered, and how they will be
monitored.
The program manager needs to map the benefits to the overall program management
plan.
The next step is the benefits delivery phase.
You might notice arrows that indicate that delivery and planning activities are cyclical.
Benefits Delivery
As we start delivering the benefits, we may need to revise the plan. This is natural
because the expectations may not always be realized, and therefore there is an iterative
process which is activated to fine-tune expectations with reality.
In benefits delivery, the program manager is expected to monitor the components, to
ensure that they are contributing to the benefits. The program manager will maintain a
benefits register and report on the benefits being delivered.
After the benefits are delivered, the program manager must arrange for benefits
transition.
Benefits Transition
Benefits transition is all about consolidating the coordinated benefits and transferring
the ongoing responsibility of the benefits to a receiving organization.
Benefits Sustainment
During and after the transition, the program must make arrangements for continued
benefits sustainment.
The program manager must make arrangements for active monitoring and
measurement of the performance of benefits on a long-term basis. The infrastructure
needed for continuous realization of benefits over a long term must be set up by the
program itself.  
As you can see, benefits management is a very pervasive theme with touch points at all
the stages of the program life cycle. A program manager’s whole purpose is to deliver
benefits, and therefore this is a domain that a program will spend a lot of time on.  
Let us understand how a program goes through the activities that were mentioned at a
high level.
The next section of the program benefits management tutorial deals with benefits
identification.
Benefits Identification
Benefits identification is the starting point of the benefits management life cycle. The
more thorough the program manager is with the identification of the benefits, the better
will be the experience of managing the benefits life cycle.
As we discussed earlier, benefits identification is all about identifying and qualifying the
benefits that the program stakeholders are expecting the program to realize.
The important activities that are included in benefits identification are as follows:
Define High-Level Objectives
First, we need to define the high-level objectives and the Critical Success Factors (CSF)
for the program. Without understanding the overall objectives, we cannot come up with
the expected benefits.
Identify Business Benefits
Second, we have to identify specific business benefits and quantify them.
Delivery of Objectives
We need to understand how the objectives translate into benefits and in what quantities
we need to deliver them.
Develop KPI’s
To baseline the expectations regarding benefits realization, we must develop
meaningful metrics and Key Performance Indicators (KPI).
Establish Specific Processes
Specific processes need to be established for each of the identified benefits at an early
stage. Also, processes to track and communicate around the planned and realized
benefits are created.
A good place to start benefits identification is the business case, which contains the list
of benefits that the program is trying to realize. Once the benefits are identified, they
must be captured in an artifact, called the benefits register.
We will look into the contents of the benefits register in the following section of the
program benefits management tutorial.
Benefits Register
Benefits register is a document that collects and lists the planned benefits from a
program.
It is a very useful artifact for a program manager because the success or failure of a
program is determined primarily by the benefits that were planned and actually
delivered.
The benefits register is created during the benefits identification stage and subsequently
updated and further refined. It is useful for measurement and communication.
The benefits register should include the following:
List of Planned Benefits
First and foremost, it should contain a list of the planned benefits. The more
comprehensive the list, the more complete will be the overall benefits management
activity within the program.
KPI
Secondly, it must contain the key performance indicators that will tell you if the benefits
have been realized.
Threshold
You can also add thresholds for the benefits. By setting the thresholds, we can answer
questions such as “what is the bare minimum expectation with regard to a certain
benefit?”
Measurement
The benefits register must also specify how a benefit may be measured. This may be
relatively straightforward for some of the tangible benefits; for example, we can set
financial measures for financial benefits.
However, for intangible benefits, it is not easy to come up with the right set of metrics to
track the benefit. This is where the program manager’s skill in coming up with the right
KPIs and metrics come into the picture.
The benefits register can also map the planned benefits to program components. That
is, it is able to trace which components, and which specific activities within the
components of a program are responsible for realizing a benefit. This clarifies the
ownership of the benefits of the overall program.
Status Indicator
The benefits register should have a status or progress indicator that will show how we
are doing as a program with regard to delivering that particular benefit. The status
indicator will be updated throughout the program.
Milestones
The benefits register should also contain significant milestones for the achievement of
the benefits, i.e. when a benefit will start to accumulate, when it is actually delivered,
and so on.
Identify Stakeholders
Finally, the benefits register should ideally identify the stakeholders who are responsible
for delivering the benefits.
Let us discuss benefits analysis and planning in the next section of the program benefits
management tutorial.
Benefits Analysis and Planning
After benefits identification, an important step in benefits management is the benefits
analysis and planning. This is where the benefits realization plan is established, and the
metrics and measurement framework for tracking the benefits is created.
The typical activities under benefits analysis and planning are as follows:
Identify Program Components
Benefits analysis and planning essentially establishes the plan to realize the benefits.
To create the benefits realization plan, one has to identify the program components that
will lead to or produce the benefits.
Define Priorities
According to the expectations regarding the extent and timelines for benefits delivery,
the program manager will need to define and establish priorities for the components tied
to the benefits delivery.
Define KPI
The next activity is to define the KPIs and establish the process for measurement of the
benefits.
Examine Feasibility
The program must examine the feasibility of realizing the expected benefits and through
discussion with the stakeholders, establish a performance baseline with regard to the
benefits.
Establish a Connection
The program will establish a connection between the benefits realization plan and the
roadmap of the program, i.e., at what point in the roadmap the benefits will be realized.
It also needs to establish a link between the benefits and the plans of the various
components.
Realization of Benefits
As the work of the components is completed, they should contribute to the realization of
the benefits.
Create a Plan forTransition
Finally, an important part of this step is to create a plan for transition and sustainment of
benefits over a long term.
In the next section of the program benefits management tutorial, we will focus on the
benefits realization plan.
Benefits Realization Plan
An important output of the benefits analysis and planning process is the benefits
realization plan. In this section, we would look at the contents of the benefits realization
plan.
Generally, the benefits realization plan formally documents the activities necessary to
achieve the planned benefits from the program.
The plan should achieve the following purposes:
Define Benefits
First, it should define the benefits and how the benefits will be achieved.
Link the Outputs
Second, it should link the outputs of specific components clearly to the program
outcomes. Then, it should define the metrics for measurement of the benefits.
Define Roles & Responsibilities
Next, it should define the roles and responsibilities of the overall benefits management
process. Soon after that, it should define how the benefits will be transitioned and
sustained, i.e., who will receive them and how they will be sustained.
Establish a Process
Last, it should establish a process to monitor the extent to which a program is able to
meet the desired benefits.
In the following section of the program benefits management tutorial, we will see a
typical design of cost and benefits.
A Typical Pattern of Costs and Benefits
The purpose of this section is to show a typical pattern of how costs are incurred in a
program and how the benefits delivery varies over a period of time. There could be
variations in this, depending on the industry and the nature of the program.
Typically, the benefits of the program start to be realized during the benefits delivery
phase. Till then, the program starts off and incurs some costs. The costs peak during
the benefits delivery phase, and then start to reduce the work of the program starts to
conclude.
Towards the end of the benefits delivery phase and into the closure phase, the costs fall
rapidly. The benefits should start increasing over a period of time after they begin to set
in and as the program closes, the responsibility for maintaining the benefits is
transitioned to another organization.
Let us discuss benefits delivery in the following section of the program benefits
management tutorial.
Benefits Delivery
After the analysis and planning are done, the program needs to deliver the benefits.
Typical activities during the benefits delivery stage are as follows:
Monitor Environment
The program monitors the external and internal environment of an organization and
maps it to the program’s objectives and benefits.
Manage Interdependencies
The program initiates, performs, transitions, and closes the components in line with the
program management plan and manages the interdependencies between the
components.
Benefits Timetable
The timetable for initiating, performing, transitioning, and closing has to also map to the
benefits timetable for the program.
Evaluate Program Risks
The program will evaluate program risks to the realization of the benefits and the key
performance indicators with regard to the benefits.  
Record Progress
The program will record the progress of the benefits realized in the benefits register and
report to the stakeholders in line with the communication plan.
Initiate Components
The program will initiate components and integrate the output of the components to
realize the benefits, as per the benefits realization plan.
Match the Expectations
The program will monitor and ensure that the accumulated and attainable benefits are in
line with the expectations and the overall strategy of the organization.
Let us move on to tracking benefits delivery of balanced scorecard in the next section of
the program benefits management tutorial.
Balanced Scorecard: Tracking Benefits Delivery
In the context of benefits measurement and tracking, let us look into an important
concept.
The balanced scorecard is an idea that helps us take a well-rounded view of the
benefits delivered by a program. The balanced scorecard divides the metrics into four
categories.
These are:
 Financial
 Customer  
 Internal process
 Learning and innovation
The idea behind this categorization is that a program should avoid being one
dimensional in focus.
For instance, it should avoid being excessively focused on (say) financial metrics,
ignoring all others. Such a bent focus would lead to an imbalance in the approach.
So it tries to classify metrics around the four primary drivers of growth, viz., containing
healthy finances, keeping customers happy, comprising an efficient and well-defined
internal process, and building a learning and innovative organization.
Under financial metrics, you could look at:
 Bottom line, i.e., profits or margin related metrics
 Topline, i.e., revenue metrics
 Operational cost or investment related metrics
 Return on investment
Margin refers to the difference between revenue and expenses.
Under customer related metrics, you could look at:
 Customer satisfaction ratings (through surveys or other means)
 Number of customers who renew contracts or give repeat business
 Number of repeats vs. new customers
 Market share captured
Under internal process metrics, you could look at:
 Employee productivity metrics like revenue/employee, etc.
 Process cycle efficiencies like the percentage of time spent on value adding vs.
other activities
 Energy consumption – To measure how energy efficient the operation is
 Process compliance
Under learning and innovation metrics, you could look at:
 New product ideas
 Generation of intellectual property like patents
 Number of publications in reputed industry journals
 Number of unique inventors
By creating a balanced scorecard, a program manager ensures effective and balanced
tracking of the program benefits and drives the program forward.
Let us move on to benefits transition in the next section of the program benefits
management tutorial.
Benefits Transition
In benefits transition, the program needs to ensure that the benefits produced in the
program are transitioned smoothly. The recipient of the benefits from the program is
typically an operational unit (such as sales or service).
The key consideration in transitioning is to ensure that the benefits realization will be
sustained. The process of transition should start before the program closes, and
continue even after the program closes.
During the transition, the program should evaluate the actual vs. planned benefits to see
how successful the program has been in benefits realization. If the realization and
transition of benefits require integration of the output of various components, then the
work must be completed successfully before the transition.
The program should make sure that if the transition requires changes to be made in the
operational unit, there is enthusiasm and willingness to make those changes.
The program should assess the readiness and approval of the receiving person or
organization (in terms of availability of resources, capabilities, and infrastructure), to
take over the benefits sustainment responsibility.
During the transition, the program will gradually release the resources. It is possible that
some of these resources will also be transferred to the receiving organization during the
transition.
In the next section of the program benefits management tutorial, we will look into
benefits sustainment.
Benefits Sustainment
Moving beyond transition, the benefits sustainment step refers to ensuring the
sustenance of benefits long after the program is closed.
It is important to understand that it is the responsibility of the program to ensure that
provisions for long-term sustenance are made. The responsibility for monitoring the
ongoing benefits sustenance then transfers over to the receiving organization.
This provision includes a plan for the changes necessary to the operations; any
financing and behavioral changes necessary to continue performance monitoring
(including training and enablement) are made.
The program should provide the resources (for example, people, a supply of spares,
etc.) and budget necessary for sustaining the benefits. The program should provide the
framework to monitor the performance of the outcome of the plan.
It should also monitor the continued suitability of the product or service, as the business
environment changes.
If the changes required at the receiving organization for benefits sustenance need new
components to be put in place, then such components must be initiated during this
stage to deal with changes.
Let us now take a look at a business scenario.
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Summary
Let us quickly summarize what we learned in this lesson.
 A benefit is a value, utility, or positive change that a program brings about for the
stakeholders.
  The five stages of benefits management are benefits identification, benefits
analysis and planning, benefits delivery, benefits transition, and benefits
sustainment.
 The program manager’s role in benefits management is to identify benefits and
link them to program roadmap, integrate the output of the components, and help
the organization to realize the benefits.
 The program manager has to measure, track, and report the benefits; and ensure
a smooth transition and long-term sustainment of the benefits.
If you look at the entire benefits management life cycle, it is clear that the program will
spend a lot of time and energy in managing the benefits, right from identification to long-
term sustenance. This requires a mindset shift in the program team, where they need to
worry more about benefits than about specific deliverables.
Irrespective of which process you are looking at – like change management or risk
management, the question should always be asked – what is the impact on the ability of
the program to deliver the benefits? If you keep this thought in mind, you will be well
positioned to answer many of the questions in the PgMP exam.
Conclusion
With this, we conclude the discussion on benefits management. In the next lesson, we
will discuss program stakeholder engagement.