Creatively Balancing Benefits Realisation with Risk Mastery to Delive…

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Making sense of value

Creatively Balancing Benefits Realisation with Risk Mastery to Deliver Value

by Michel Thiry

Wednesday 20 November 2019

Event evening write up newstory page:

https://www.apm.org.uk/news/making-sense-of-value/

  1. 1. Michel Thiry, PMP, FAPM, PMI Fellow
  2. 2. 2 © Valense Ltd. & Michel Thiry, 1998-2019 Who am I?
  3. 3. 3 © Valense Ltd. & Michel Thiry, 1998-2019 Some VM Clients
  4. 4. 4 © Valense Ltd. 2019 What are we going to talk about? ▪ Where we are now: VM, RM and BRM ▪ An integrated Value-Based method ▪ Concept ▪ Practice
  5. 5. 5 © Valense Ltd. & Michel Thiry, 1998-2019 Current Situation Benefits Management (Benefits realisation Management; Management of Benefits) Alignment with strategic goals and objectives. Focuses on outcomes Not good at assessing achievability of initiatives Risk Management (Opportunity Management; Uncertainty Management) Identification and analysis of risk; development of risk responses Focuses on threats and analysis Not good at ongoing risk optimisation Value Management (Value Analysis, Value Engineering) Creative group method to enhance functions vs resources used to achieve them Focuses on cost reduction Not good at strategic value perspective
  6. 6. 6 © Valense Ltd. & Michel Thiry, 1998-2019 Current situation “Delivering benefits is the primary reason why organisations undertake change. A benefit is a positive and measurable impact of change.” APM Body of Knowledge, https://www.apm.org.uk/body-of-knowledge/delivery/scope-management/benefits-management/ “Overall project risk is a powerful idea, but the process, techniques and language to deal with it effectively are not currently well defined or widely used.” David Hillson, in: Project risk management, past, present, future View from the chair, 2012
  7. 7. 7 © Valense Ltd. & Michel Thiry, 1998-2019 A bit of background… Benefits Management ▪ The concept of benefits management is fairly recent (1990’s-2000’s) ▪ Benefits are often assessed against resources expended ▪ There are many forms of benefits. Benefits can be tangible or intangible, objective or subjective, direct or indirect, but should always be objectively verifiable (measurable) ▪ In business benefits are generally synonymous with money ▪ In projects, benefits are the consequences of project outputs ▪ Programs deliver benefits… portfolio aligns them strategically ▪ Expected benefits are often subjective, but should always be agreed
  8. 8. 8 © Valense Ltd. & Michel Thiry, 1998-2019 A bit of background… Risk Management ▪ 50,000 BC: Cavemen hunting parties ▪ 100 BC: Roman conquest campaigns ▪ 1600’s: Gaming and probability theories ▪ 1700’s: Concept of risks based on probability initiated by insurance companies ▪ 1950’s: PERT (Probabilistic Network Model) ▪ 1980’s: Regular use in Project Management ▪ 2000’s: Risks as threats and opportunities, uncertainty management ▪ 2010-Today: Risk appetite, risk thresholds, overall risk… ▪ 2019: Risk optimisation, Achievability?
  9. 9. 9 © Valense Ltd. & Michel Thiry, 1998-2019 A bit of background… Value Management 1999 European Value Management Standard 2000 European Governing Board (10 Member States)
  10. 10. 10 © Valense Ltd. & Michel Thiry, 1998-2019 But what is value, really?
  11. 11. 11 © Valense Ltd. & Michel Thiry, 1998-2019 and… value is in the eye of the Beholder
  12. 12. 12 © Valense Ltd. & Michel Thiry, 1998-2019 Achievability of Agreed Solutions Alignment with Expected Benefits Value is a ratio, or even better … a balance ▪ Real value consists of “realized benefits”. ▪ Therefore there are 2 dimensions to value: 1. The alignment with expectations: Benefits realisation 2. The achievability of alternative options: Risk optimisation Value
  13. 13. 13 © Valense Ltd. & Michel Thiry, 1998-2019 Value Mastery in Practice VM/BM Elicit Stakeholders Needs and Expectations (Expected Benefits) VM/BM (Functional Analysis) Organise Benefits Map (BBS) RM Identify Achievability Factors Assess Achievability VM Define Value Index BM Agree CSFs Measure Alignment BM Monitor Benefits Delivery RM Implement Risk Responses Monitor Achievability Issues PM Deliver & Transfer Outputs (Realise Benefits) VM Measure Value Achievement VM/BM Ideation of potential outputs VM/RM Optimise Risks (Feasibility) Value Management Task Benefits Management Task Risk Management Task Project Management Task Develop and select best options (Learning) Realize benefits (Performing)
  14. 14. 14 © Valense Ltd. & Michel Thiry, 1998-2019 Strategic Objectives Develop and select best options (Value Management / Programme Definition) Creative Ideation Achievability Elicitation/ Sensemaking Learning Cycle (Identify best options) Choice Expected Benefits Expected Outcomes DecisionMaking Define Value Index measures
  15. 15. 15 © Valense Ltd. & Michel Thiry, 1998-2019 Elicit and organise stakeholders’ expectations Functional Analysis (VM)/Benefits Map (PgM) HOW? (MEANS) WHY? (END) Operational ImprovementBusiness Value Operations Programme Vision Strategic Objective Benefit Outcome Output Capability Strategy Grouping into Projects
  16. 16. 16 © Valense Ltd. & Michel Thiry, 1998-2019 Measure alignment: Benefits Breakdown Structure (Benefits Management) Deliverables are linked directly to benefits
  17. 17. 18 © Valense Ltd. & Michel Thiry, 1998-2019 Identify Achievability Factors Assess Achievability (Optimise Risks) Four major categories to assess uncertainty and complexity 1. Financial factors 2. Parameters and constraints 3. Resourcing factors 4. Complexity factors
  18. 18. 22 © Valense Ltd. & Michel Thiry, 1998-2019 Using the Value Index: 2 options Size represents cost Choice between 2 or more mutually exclusive options Prioritisation of options in regards of availability
  19. 19. 24 © Valense Ltd. & Michel Thiry, 1998-2019 Using the value ratio to write the programme or project brief ▪ Alignment ➔ Defines Scope (Outcomes and deliverables) ➔ Ensures Benefits Realisation ▪ Achievability ➔ Defines Parameters ➔ Ensures Risk Optimisation
  20. 20. 25 © Valense Ltd. & Michel Thiry, 1998-2019 Realise benefits and generate value (Project Management / Programme Deployment) Execution Planning Control Performance Cycle (Deliver Results) Proposed Actions Proposed Deliverables Delivered Outputs DecisionMaking Monitor benefits realisation Monitor achievability issues Deliver & Transfer Outputs Measure Value Index Achievement Choice
  21. 21. 26 © Valense Ltd. & Michel Thiry, 1998-2019 Monitor Benefits Delivery (BBS → Benefits Register) Outputs (Level 4+) Capability (KPI) (Level 5+) Criterion Level Flexibility Deadline Accountabl e Dep’t Actual Result Variance Actual Delivery Date 2.1.1 Define selection criteria based on strategic objectives Implement Pj/Pg selection process (Based on SOs) % of projects selected using SO process 80% -5% 6 months Business Development 75% -5% 6 months 2.2.1 Define achievability criteria All Pg/Pj selected based on achievability criteria Achievability criteria approved by sponsors 100% 0% 2 months Finance / Portfolio Direction 100% 0% 1 month 2.3.1 Put in place governance forums (Decision-making) Governance System in place and agreed Governance system fully operational 6 months + 2 weeks 6 months CEO Office 24 weeks -1 week 24 weeks 2.3.2 Select pilot projects & test achievability criteria Project selection criteria tested and validated Achievability criteria tested on completed projects 50 projects -1% 10 months Project Management 50 0% 8 months 2.4.1 Use achievability criteria on all projects All projects selected using achievability criteria % of projects selected using achievability criteria 100% 0% 12 months Finance / Portfolio Direction 85% -15% 12 months 2.4.2 Monitor strategy alignment Governance decision forums regularly attended % of managers attending mandated forums 80% -5% 9 months Business Development 90% +10% 7 months
  22. 22. 27 © Valense Ltd. & Michel Thiry, 1998-2019 Monitor Achievability Issues (Overall Risk Register) Project Achievability Assessment Form Project Name/Ref No. Impact Criteria 10 5 2.5 1.25 0.625 Weighting* Score** Specific Factors Financial Factors Total estimated capital cost <5% of all projects 5-10% 10-15% 15-20% >20% of all projects 7 70 Impact on company cash flow <5% 5-10% 10-15% 15-20% >20% 7 70 Funding 100% internal availability 25% external 50% external 75% external 100% external 4 40 Expected Return/Benefits Short term Short-Medium term Medium term Medium-Long term Long term 5 13 Life-Cycle-Cost (optional) 0 0 Parameters & Constraints No. members in team 1-2 3-5 6-10 11-50 >50 4 20 Type of contracts Standard contracts <–> Some customized <–> All customized 3 7.5 Spread of work Single location 2 – 3 sites +3 sites Base team + virtual Fully virtual team 6 30 Schedule Acceptable timeframe <–> Tight timeframe <–> Inadequate timeframe 5 13 Budget Acceptable budget <–> Tight budget <–> Inadequate budget 3 30 Human Resources / People Factors Spread of resources Team (same division) Internal (2 areas) Team + outsourced All outsourced Internal + outsourced 5 25 Familiarity with resources All known <–> Some new <–> All unknown 3 7.5 Other critical work None Little Little but significant Major Major and significant 6 30 Customer perception Above expectations <–> As expected <–> Below expectations 2 5 Staff expertise Good skills/ expertise <–> Half with necessary expertise <–> Expert staff not available 7 70 Complexity Type of work / Innovativeness Known technique Variation from known Some new development Significant new development Breakthrough 7 18 Interdependency of deliverables Negligible Minor Significant Major Essential 6 30 No. of stakeholders one or two Few at project level Multiple at project level Multiple project / program Multiple internal & external 5 25 Stakeholders spread Similar business area < –> Multiple business areas <–> Large spread across environ. 6 15 Objectives, benefits & CSF’s Very clear Unclear Unspecified ndefined Unknown 6 15 Scope statement Very well defined Minor clarification required Some elements undefined Major elements undefined Undefined 3 7.5 * Considering programme / business level 100 ** Impact x Weighting Total Score/1000 540
  23. 23. 28 © Valense Ltd. & Michel Thiry, 1998-2019 Conclusions 1. Value is a ratio between expectations and achievability 2. Value management is a creative group decision process 3. The value index is a calculation of the ratio between alignment to expectations and achievability of the outcome 4. By setting a value index, one can compare options on ▪ Their capability to achieve expected benefits, and… ▪ Their overall risk factor, expressed as achievability 5. With the value index it becomes easier to monitor and track Value Generation throughout the project or programme
  24. 24. 29 © Valense Ltd. 2019 Michel Thiry, PhD, PMP, FAPM, PMI Fellow http://uk.linkedin.com/in/michelthiry www.amazon.com/author/michelthiry http://www.youtube.com/user/valensepartners? feature=results_main New York London Pune Sydney GenevaVancouver Madrid
  25. 25. This presentation was delivered at an APM event To find out more about upcoming events please visit our website www.apm.org.uk/events
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