Why Be Concerned With Project Justification?

Why Be Concerned With Project Justification?

Some project managers will argue that justifying projects is not their concernthat once a project has been approved, their job is simply to deliver results. But delivering results means ensuring that the client enjoys the benefits used to justify the project. It also means being able to defend the project against cutbacks and to reevaluate the numbers when the scope or costs change.

Ensuring That Benefits Are Realized

Project planning includes implementation plans, which normally consist of training, parallel testing, handover, and phasing out existing systems. However, to really deliver results, the implementation plan must also describe, in detail, how the client will realize the benefits described in the project justification. For example, if the project was justified by the ability to reduce inventory by 15 percent, how quickly will inventory be reduced? Which items will be cut back first? By how much? How will suppliers be involved? What is the role of the system in making decisions on reducing inventory? What steps are needed to ensure that customer service will not be jeopardized? The implementation plan must answer these and similar questions for all targets that were set when the project was justified. If you do not understand the justification for the project, you will not be able to plan how the client will realize the benefits.

Defending Against Cutbacks

Business conditions, including executives, change. Frequently, new executives, or those converted to the gospel of cost reduction, will challenge a project in progress. If the original justification was well prepared, is reasonable, and, most important, actually justifies the project, it will be easy to defend. The project manager who protests that justification is someone else's responsibility will end up without any weapons to defend against cost cutting, and the project will rarely survive the exercise.

Reevaluating the Project

The costs, benefits, and scope of a project change: The costs usually go up, the benefits usually go down, and the scope usually grows. At some point, the costs may grow to exceed the benefits. One of your responsibilities is to identify this point and to inform the client that conditions no longer justify proceeding. Without a good justification, that task is impossible, and the project will devour resources, effort, and careers long after it should have been terminated.

Evaluating Scope Change Requests

When a project's justification is well defined, it can be applied to requests for change of scope. For example:

During a sales analysis development project, users request a change to the screens that will cost $10,000. Should the changes be made?

If the project was justified by increased revenue from better sales analysis, the question becomes, "How, and by how much, will this screen change contribute to increased sales revenues?" If the answer is, "More than $10,000," the scope change is justified. Otherwise, forget it. But if the justification was "to produce a state-of-theart sales analysis system," who can say whether or not the changes to the screens improve "state-of-the-artness"?

Establishing Client Attitudes

One reason that people are reluctant to set targets is the pain that comes with not achieving them. The more uncertain the target, the greater the potential for suffering. As a project manager, how can you protect yourself against the repercussions of not realizing a benefit?

It is critical to understand that your responsibility is not to deliver benefits, but only to ensure that they have been defined and that the work you have produced can be used to achieve them. For example, if a project was justified by a targeted 15 percent decrease in inventory levels, it is your job to produce a system that others can use to cut stock. It is the job of someone elsein this case, the inventory managerto actually pull products from the shelves.

When you discuss benefits with your clients, you must make it clear that the realization of these benefits is up to them, and that, unless they are willing to make you the manager of inventory (or human resources or marketing or operations or whatever area your project addresses), you cannot be held responsible for the results. Your role is twofold: to ensure that a benefit exists and to produce a product that can be used to realize that benefit.

What If?

The Client Does Not Want To Expend Resources Preparing a Plan For Realizing Benefits.

If the client does not plan how to realize benefits, they will not be realized and the project will be wasted.

Actions

Find out what the client's concerns are. Typically, they will be either financial ("I don't want to spend any money I don't have to"), organizational ("That's not your purview"), or schedule-based ("We don't have time to fool around with side issues").

If the client's concerns are organizational, agree. Then ask who will be preparing the plan. You will now manage that person's deliverable.

If the client's concerns are financial or schedule-based, prepare a set of arguments to establish that planning for benefits is not an irrelevancy, it is central to the project.

Review the list of people involved with the project and find one who is in a senior position and who has expressed a strong interest in the benefits. Approach that person with your arguments.

Consult with the steering committee and the executive sponsor (see "Who Are the Players?") and present your arguments to them.

If none of these actions are effective, indicate to the client, preferably in writing, that the project cannot be depended on to provide the benefits used to justify it. If you are comfortable with taking a really strong position, recommend that the project be terminated, since it will not provide the required value.

The Project Evolves To The Point Where Benefits No Longer Outweigh Costs.

If the project justification no longer applies because the costs have escalated or the benefits have evaporated, continuing with the project would be a further waste of the client's time and money, as well as diverting valuable staff resources into a losing effort.

Actions

Review the cost-benefit analysis to try to find some additional benefits or to increase the planned ones. This may sound like fudging the numbers, but new benefits usually arise during a project. However, you must be neutral in this exercise, or you will end up with insupportable numbers, which you will then be required to manage.

If the revised numbers are favorable to the project, report them to the client and continue. If they are not, the project is no longer justified and you must try to convince the client to end the project.

Revise the cost-benefit analysis to reflect the current position. Indicate the loss to the company if the project folds at this point and the potential loss if it is carried on to completion. Include any salvage value from the work to date that will reduce the current loss.

Determine where the project team would be assigned if the project were to fold, and try to place a value on this work. Here, you are trying to point out the positive side of ending the project.

Do not allow the client to take the position that the project has failed. Changing conditions have rendered it wise to back out before it eats up resources and careers and becomes a failure