The other day I was speaking with a CFO about Project Portfolio Management. I was describing how a more formal Demand Management process is critical to realizing corporate strategy as it ensures that limited resources are applied to the projects (investments) where they would have the greatest positive impact for the enterprise. At one point in the conversation he shook his head and said, “I wish I just had a simple way to say ‘No’”. I’m rarely at a loss for words, but at first, I didn’t know what to say.
If the CFO can not say ‘No’ to spending, who can?
He went on to explain that each time an enterprise goal is announced – “cost cutting” for example – suddenly every expenditure request that crosses his desk includes a justification of how it will save the company huge sums of money. If “customer alignment” is the goal, then every spending request will miraculously result in very well aligned customers. Sometimes, the claim is made in the form of a sentence or two – leaving lots of questions and little insight into the assumptions that were made. Other times, the claim is made in the form of a bewildering cost/benefit spreadsheet.
It soon became clear that he was not really asking for a way to say ‘No’ – he could do that well enough. What he was looking for was an easy way to hold project requestors accountable for the benefit claims they were making – to ensure that spending was justified via a realistic business case rather than by creatively linking it to the latest executive goal.
There are a number of ways to streamline the tedious task of developing Business Cases. And there are many ways to shape a process that ensures balanced arbitration, selection and prioritization of investments. But these steps will do little to keep the business cases realistic. To ensure they are realistic, the requestor must know they will be held accountable for what is written in the business case. And the key to ensuring accountability is … tracking. If the business case is only used to justify the project and then never referenced, its development can be, at best, inconsistent and at worst, an exercise in creative writing.
Even when standard financial analytics are used to objectively compare projects, requesters quickly learn how to game the system by conservatively estimating the costs and generously estimating the benefits. In many organizations, this process has become an art form.
Post-project tracking and review of benefits is an essential element in the effort to keep business cases realistic and to hold requestors accountable. But more importantly, it will greatly improve the odds that the enterprise will realize the benefits that it made investments towards. After outlining a typical Business Value Assurance process for the CFO, I noticed he had an interesting smile.