Very few, if any, projects are stared up without some sort of definition of what they are supposed to achieve. The expected results from a project may be described in terms of high-level outputs, outcomes achieved from these outputs and in terms of benefits (quantitative and qualitative) that tie in with the strategy of the organization. How well the project justification is specified and documented, how widely known and accepted this justification is, and the degree to which the project and its justification are kept aligned during the project’s lifespan does vary a good deal from organization to organization, and from project to project.
In some cases the justification, the Business Case, for the project is created at some level of detail at the start-up of the project, but then left untouched during the project. The business case may re-emerge once the project has finished and the project and/or the benefits are to be evaluated. However, the business case may stay missing in action, especially if the project has moved significantly away from what was at first envisioned.
Having a continually updated Business Case that reflects the purpose and justification for the project helps us determine whether the project should be started in the first place. The updated Business Case also helps us choose between different alternatives regarding risks and changes during the project. Not least, the updated Business Case helps us decide when to end a project prematurely, because the justification for the project cost is no longer present.
The Business Case
What constitutes a good and sufficiently thorough Business Case? There are a number of elements that should be present and as we move closer and closer to the start of the project the business case should have more and more flesh on its bones. The Business Case is owned by the head of the body governing the project, however that person may choose to delegate the creation and update of the business case.
The Business Case needs to make explicit why the project is to be run; how does the project, its outputs, outcomes and benefits fit in with the overall strategy in the organization and with other projects, programs and initiatives that run or are planned to run. Without strategic fit it is questionable whether the project should be started. Knowing the strategic fit helps the project governing body, the project manager and the project team better navigate in day to day project life (weighing options, making decisions, etc).
It is wrong to automatically assume that starting a project is the best response to a strategic business need. Other options should be considered and be presented. One option that is always available it to do nothing. This option will have pros and cons. Another option is to do the bare minimum to get by. Again, this option will have pros and cons. Finally, we can do something to answer the strategic need, e.g. we can run a project. The pros and cons of this option must be help up and compared with the first two options mentioned.
Benefits and Dis-benefits
The Business Case must state which benefits are expected from the outputs and outcomes the project is set to create. Each benefit must be measurable, and when, where, how and by whom it is measured should also be defined. Each benefit should be assigned to a person responsible for ensuring that the measurement takes place as designated. During the project’s lifetime this person may be a senior business representative or perhaps the project manager. Benefits that can only be measured post-project are the responsibility of the head of the body governing the project who may delegate the task but not the responsibility. For each area to be measured, the pre-project baseline value needs to be established.
The benefits must be aligned to the organizations strategy, and we must work to find ways to quantify each benefit; also “soft” areas like workplace environment and employee happiness. It can be difficult to pinpoint an exact number/value for each benefit and so it may be a good solution to define a range within which the realized benefit should find itself for the project to have succeeded.
We must also remember that running the project may create certain dis-benefits, such as a momentary drop in productivity, more service requests from users or fewer/more work assignments for a certain department.
Risks are opportunities or threats that can change how well, if at all, the expected benefits can be realized. The Business Case should contain a list of the current major risks, their probability and their impact on the project plus an summation of the overall risk picture. In this way, the project can be given the go-ahead if the risks do not endanger the benefits. The project can be redesigned or stopped if the risks outweigh the expected benefits. The risks to be considered can occur within the project period proper or after project close, as the project outputs have moved into operations and maintenance.
Time, Cost and Investment
The Business Case should state the time-span the project is expected to run, when it may start and end, when benefits are expected to be realized, the expected costs during the project and subsequently during operations and maintenance. All this information must be provided with an explanation of the assumptions on which it is based. If assumptions are proven incorrect during the project, the Business case needs to be updated.
When approving a project to start, the organization at the same time foregoes using money and resources on other projects or initiatives (opportunity cost). Therefore, the Business Case should also contain a comparison of the expected project, operations and maintenance costs with the expected benefits over a period of time. This will give an idea of the net profitability of the project which can then be compared to other projects that are proposed to run or currently running. It allows projects to be prioritized, selected and deselected, started and stopped based on economic factors.
In order to be sure that we start, run and end projects in a consistent way and not based on politics, biases or simple lack for information and overview, we need to have a Business Case that justifies the project.The Business Case needs to be a living document that is continuously kept up to date.
The Business Case follows the project from pre-start until the last measurements of benefits realized by the project outputs and outcomes has been carried out. As every stage/cycle of the project draws to a close the Business Case is revised. Any decisions about changes, issues or risks to be made are aligned with the project justification as documented in the Business Case. In this way we can keep projects aligned with company strategy. We can also be confident that our projects only continue as long as they are on the right track to achieve their objectives.