Lesson 10: Business Case, Part 6

This is the last lesson about the Business Case theme!

Based on AXELOS PRINCE2^® material. Reproduced under licence from AXELOS. All rights reserved.
Note: PRINCE2 2017 edition is now called PRINCE2 6th edition.

00:06 – Another benefits question. Some Senior Users may over-exaggerate their future benefits because they want to increase their chance of getting funding because they’ve got to fight against other potential Senior Users.
00:22 – So as a Project Manager, if you recognize that a Senior User is over-exaggerating, what can you do in this situation?
00:33 – Well, what I usually think is that it is not intentional and they are just over-confident on the idea because they are closer to the idea. Yeah. It’s human.
00:47 – Yeah. So what I do is I talk to them and I ask them more questions, and usually a good practice is to use three-point estimates instead of a normal one-point estimate.
00:59 – Okay. Can you elaborate? Yeah. You ask them for each part of the benefits assessment, you ask them what’s your optimistic estimate or forecast, what’s your pessimistic and what’s the most likely?
01:12 – When you ask it like this, then the output is more reliable. That’s good.
01:17 – It’s, yeah, more realistic and then you can combine the different formulas, you can combine them and come up with one number.
01:29 – That’s the main thing that we can do to help a little bit.
01:35 – The other thing is to talk to them and ask them to break it down for you to smaller things and then go back from there to the higher level benefits. That’s good. Yeah.
01:48 – Yeah, and then all the results of that then are added to the Benefits document because we realize how we can show how we gather the data.
01:58 – Yeah. The other thing that really helps is to really document it because then they have some type of commitment to that and the place that we document it is the Benefits Management Approach.
02:11 – Good. Good. Okay, so to recap, so that’s the main reason why we use the Benefits Management Approach.
02:16 – It’s used to extract that information from the Senior User and document it, and then, because they will be accountable to meet the benefits in the future, it’s good to have it on paper and get them behind it, so make sure that they know that they actually own it.
02:35 – Some organizations go as far, I know a few, that link future benefits to their performance in the company, so for their career. Yeah.
02:46 – I’m not sure about it. That’s not a good idea because, you know, it’s all about risk management and it’s about your risk capacity, your risk appetite, and the risk capacity and appetite of the people involved may not be the same as the company.
03:02 – Yeah, maybe. But a common question for any head of department will be, “Well, what are you going to accomplish in the next two years?” and part of that will be, “Well, to see the implementation of project X and are you going to deliver such and such?” So you can see how it can be easily incorporated into their goals.
03:21 – Yeah. I still think it’s not a good idea to connect it to the bonuses or something. Okay.
03:27 – You know, those measurements and encouragements are very sensitive.
03:34 – Managers should be very careful about all of them. Okay.
03:38 – Next question is to do with the success of the project or how do we measure the success of a project?
03:45 – So, in one scenario, another scenario, we have an Executive with a very strong financial background, so this guy loves numbers, and they say to the Project Manager the best way to measure the success of a project is if projects are delivered on time and within budget. Is this appropriate?
04:03 – A good way to measure the success of a project?
04:05 – I never expected you asking such a question because I remember we had this discussion two or three years ago.
04:12 – At the end of the discussion, we were in a conference, and at the end, we both came to the conclusion that it may not be even possible to measure the success of a project.
04:23 – Oh! Then I’ve changed my mind again. Oh really! Yeah.
04:28 – Okay. I’m allowed to do that. For that thing, measuring the success of the project based on time and money, that doesn’t work because it all depends on the initial estimate of time and cost. Correct.
04:44 – If you start with a different estimate, then your evaluation of the success will be different, which really doesn’t work.
04:56 – This is why I think that projects that go out to tender, you know, IT projects that go out to tender, that’s just a failure waiting to happen because you presume you’ve got everything required upfront, all your requirements upfront, then you put it out, that’s impossible to get right. First of all, your requirements are 30 or 40% known at the beginning because you don’t know everything.
05:20 – So lots of things will actually change and there is an idea there that you have everything and then you have an idea of the cost beforehand and that can just lead to failure, so that’s not good when that happens. Okay. Well So what I’m getting at more is it’s the wrong thing to focus on.
05:41 – So it doesn’t matter what the project costs in one way.
05:44 – If the benefits are always going to increase the cost by ten-fold, it doesn’t matter how much it’s going to cost, and that’s what we should be focused on, is the benefits.
05:55 – So that’s not the best way just to focus on are we delivered on time or within cost.
06:01 – For example, if we deliver a product which is unusable, and we’re on time and within cost, is that a successful project? I think not.
06:12 – That’s a good example of a failure.
06:16 – However, that may be a failure in the program management system, not the project management system because in the project management system, they define the product for the project management environment, and then they are responsible to deliver the product within the constraints that are set by the higher levels.
06:36 – So if that product doesn’t work and you’ve told them that it won’t work, then it’s not your problem, you know.
06:43 – Yes. That’s what I’m saying, not a problem with the project management system.
06:47 – Correct, yes. It’s a level above. Yeah. That’s why it is difficult. Yeah.
06:52 – So difficult. But that’s how they should be thinking.
06:56 – How they can judge the performance of a project that just happened, you know.
06:59 – Are we going to get the future benefits from that in the future?
07:03 – Yeah, in the wider scope of the organization.
07:07 – The best example I always give is the Sydney Opera House.
07:10 – I mean that was way over-budget, but when you look at it now, that was a fantastic investment. People keep talking about it.
07:17 – It’s been the postcard for Sydney for the last 30-40 years.
07:22 – That’s a good example, even though it was seen as a failure at the time.
07:26 – Yeah, but the question is was it by design or just they were lucky?
07:33 – Oh, I think a certain bit of luck came into there, you know.
07:37 – Maybe building upside down because it’s in Australia was not so easy, yeah.
07:43 – So, another example of a project let’s say that went 30% over time and budget, but it delivered the expected benefits over 10 years, that should be considered a good project.
07:57 – Okay, so that’s actually the end of the Business Case Theme questions.
08:02 – We have covered everything, yeah. So we’ve come to an end and hope you found the scenario questions useful, and that’s really a good example of the kind of questions that will come up in the exam.
08:13 – So, don’t have anything else to talk about? No, no. About the Business Case?
08:16 – No. We’re back with the Organization. So, don’t go away.
08:20 – Coffee. Bye for now. Bye.

So, we’re done with the largest theme. The next theme we’re going to talk about is Organization.

Scenarios/questions we’ve discussed in this lesson

Scenario: During the IP stage, the PM believes that a senior user is overexaggerating the expected benefits. The senior user is doing this to gain a better chance of securing funding ahead of other projects. What should the PM do in this situation?
Scenario: An executive with a strong financial background informs the PM that the best and perhaps only way to measure the success of a project is if the project is delivered on time and within budget. Is this an appropriate way to measure projects?

Lesson 10: Business Case, Part 6

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