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Research shows that many organisations struggle to manage their projects effectively, prioritize investment funds appropriately, and demonstrate a return on investment, in terms of strategic contribution or financial return. What’s the answer? Project Portfolio Management (PPM) is being touted as the next big thing, but the benefits are not automatic.
Stephen Jenner designed, implemented and operated the Criminal Justice System IT approach to Portfolio & Benefits Management in the UK. In this presentation he outlined the key issues to address if we are to maximize our chances of success, illustrated by examples from practical experience and research.
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Case Study Delivering Major Public Sector Change Managing The Portfolio Realising The Benefits 2 Stephen Jenner Version 2
1. Managing the Portfolio,
Realising the Benefits
BPUG Congress, 10th February 2009
Stephen Jenner
Stephen.jenner@cjit.gsi.gov.uk OR stephen.jenner@cabinet-
office.x.gsi.gov.uk
2. Framing statement
“I love money.
I love money more than the things it can buy.
There’s only one thing I love more than
money.
You know what that is?”
4. Change programmes - the rationale
“The fundamental reason for beginning a programme is to
realise the benefits through change.”
Office for Government Commerce (OGC), ‘Managing Successful
Programmes’
“It is only possible to be sure that change has worked if we
can measure the delivery of the benefits it is supposed
to bring.”
UK Cabinet Office, ‘Successful IT: Modernising Government in Action’
5. But the track record is not good…
“Implementation of IT systems has resulted in
delay, confusion and inconvenience to the
citizen and, in many cases poor value for
money to the taxpayer.”
Public Accounts Committee, 2000
“30-40% of systems to support business
change delivery no benefits whatsoever.”
Office of Government Commerce, 2005
“the committee has no confidence that the
amounts being assessed have any
relationship to the benefits anticipated to be
returned.”
US Senate Appropriations Committee, 2007
6. And ‘horror’ stories abound…
Cost overruns
• Concorde (1100%)
• Channel Tunnel (80% for construction and 140% for
financing costs)
• Scottish Parliament – 10 times over budget and late
• Jubilee line extension costs underestimated by £1.4bn
Benefits shortfalls
• The Dome visitors down by 5-6 million
• Eurostar passenger forecast in yr1 of full operations =
15.9m, actual = 2.9m
• Bangkok skytrain – demand 2.5 times over-estimated
• Humber Bridge – traffic 25% overestimated in yr1 of full
operation.
7. And empirical research concludes…
“There is a demonstrated, systemic tendency for project
appraisers to be overly optimistic. This is a worldwide
phenomenon that affects both the private and public
sectors…appraisers tend to overstate benefits, and
underestimate timings and costs.” HM Treasury
“it is found with overwhelming statistical significance that
the cost estimates used to decide whether such projects
should be built are highly and systematically misleading.”
Flyvbjerg
“Delusional optimism: we overemphasise projects’ potential
benefits and underestimate likely costs, spinning success
scenarios while ignoring the possibility of mistakes.”
Lovallo and Kahneman
8. Four explanations…
1. The technical explanation - our tools are
inadequate.
2. The psychological explanation – Optimism
bias, derived from cognitive biases.
3. The economic explanation – continuing with a
project creates work for project managers,
suppliers etc.
4. The political explanation – “Strategic
misrepresentation”?
9. Delusion or Deception?
“the planned, systematic, deliberate misstatement of
costs and benefits to get projects approved.” In short,
“that is lying”. And that’s because, “Lying pays off, or at
least economic agents believe it does.”
Flyvbjerg et al
“Figures don’t lie, but liars can figure”
Sharpe and Keelin
38% of respondents in one survey openly admitted to
overstating benefits to get funding with the traditional
investment appraisal process being, “seen as a ritual that
must be overcome before any project can begin”
Ward
10. The Result - Business Cases contain
‘assumptions masquerading as facts’
11. The Solutions
1. Be clear about the benefits you are buying.
2. Spend more time doing your homework.
3. Triangulate and Validate project proposals.
4. Appraise ‘Attractiveness’ in the context of
‘Achievability’.
5. ‘Gates with teeth’.
6. Independent review.
7. A ‘Clear line of Sight’ from Strategic Intent
through to Benefits Realisation.
12. The Solutions:
1. Be clear about the benefits you are buying
Beware staff time savings – they
are vouchers, they only have a
value when they are cashed or the
time is re-deployed to other value
adding activity.
13. The Solutions:
1. Be clear about the benefits you are buying
Beware ‘Strategic alignment’ as
an investment justification,
“Our CEO defines ‘strategic projects’ as
expensive projects without a business
case.”
Corporate Executive Board paper
14. The Solutions: 1. Strategic Contribution Analysis
Be clear about the benefits you are buying
Service Transformation Programme – High Level Strategy Map
Vision Strategies Metrics
Learning from citizens and businesses Government will monitor the customer
– Customer Insight, Customer Journey experience through journey mapping
Mapping, Customer Satisfaction and customer satisfaction tracking
To change public Measurement mechanisms at the front line (STA Oct
services so they 07)
more often meet the Grouping services in ways that are
needs of people and meaningful to the customer e.g. Tell Us
Key progress measures 1 - Reduction
Once, Directgov and Businesslink.gov
businesses, rather in the amount of avoidable contact. To
than the needs of achieve a 50% reduction by 31.3.11.
Rationalising services for efficiency and (STA Oct 07).
government, and by service improvement – online
doing so reduce the (Directgov and Businesslink.gov),
phone (contact centre accreditation); Key progress measure 2 - Building
frustration and stress
face to face and helplines better online services – citizen and
of accessing them. business e-services content migrated to
Directgov and Businesslink.gov. More
The result will be Making better use of customer than 95% of websites to have migrated
information public sector already holds: by 31.3.11. (STA Oct 07)
services that are a. Strategic level – Home Office lead on
better for the Identity mgt and MoJ on information
customer, better for sharing Efficiency savings – the value in
b. Tactical level – Tell Us Once recording the level of savings achieved
front line staff and by departments is recognised, and the
better for the CO will track these as this STA is
taxpayer (Service delivered. (STA Oct 07).
Linking local and central government
Transformation
Agreement, October Face-to-Face – The LGDC will develop
2007). a progress measure reflecting the
Engaging front line staff FOSS approach for later inclusion in
this Agreement. (STA Oct 07)
15. The Solutions:
2. Spend more time doing your homework
“It’s the Business Case,
stupid”
Failing projects don’t have
brilliant business cases
16. The Solutions:
3. Triangulate and Validate
Use more than one appraisal method, or ‘value
lens’:
• Combine financial metrics with multi-
criteria analysis and decision conferencing.
• Validate/book the benefits with the
recipients – before investment.
• Establish effective accountability for
delivery and benefits realisation.
18. The Solutions:
5. ‘Gates with teeth’
• Regularly requiring project teams and
business sponsors to ‘sing for their supper’.
• Presumption – if you exceed tolerance,
funding ceases.
• Concludes with a formal re-commitment to
benefits realisation.
• Challenge and Support.
19. The Solutions:
6. Independent review
“humans not only are prone to make
biased predictions, we’re also
damnably overconfident about our
predictions and slow to change them in
the face of new evidence. In fact, these
problems of bias and overconfidence
become more severe the more
complicated the prediction.”
Ayers
20. The Solutions:
6. Independent review
Ayers suggests an, “’Advocatus Diaboli’…
whose job it is to poke holes in pet projects.
These professional “No” men could be an
antidote to overconfidence bias.”
Davidson Frame proposes the use of “murder
boards” to pull a proposal apart to, “make sure
that arguments in support of project ideas do not
have built into them the seeds of their own
destruction.”
Steve Jenner - I suggest a ‘fool’ to ask the
questions others don’t dare to ask and identify
those, ‘assumptions that masquerade as facts’.