Defining Business Benefits: Hard and Soft

Easy to say, but a lot of project teams struggle to crisply and clearly define specific business benefits. One way to move the process forward would be to have a clear understanding of the types of business benefits you might claim.

Easy to say, but a lot of project teams struggle to crisply and clearly define specific business benefits. One way to move the process forward would be to have a clear understanding of the types of business benefits you might claim.

Your guess is as good as mine …

Soft benefits come from the strong belief of the business manager that the benefits will be there – but they may be hesitant to make changes to their budget. The hesitation may be there because there is some risk of attaining the benefits from other factors; or, the savings are based on unsubstantiated estimates (ie. “educated guesses”, aka onager heuristics). When claiming soft benefits, the business manager may not necessarily increase their revenue budget (or reduce their expense budget), hedging against other factors.

Productivity – Many systems projects involve automating manual processes and/or streamlining overly complex processes. Productivity is increased when it takes less time for fewer people to generate more work and more results.

Productivity benefits are quantified as a reduction in the total number of effort-hours per month required to perform a task. We often speak in terms of full time equivalents, or FTEs; to keep the math simple, one FTE is about 2000 hours of work per year.

Productivity is a soft benefit because we do not always remove people from the work force when implementing productivity improvements. Typically, the aim of any automation is to free people up to do other process management or analytical tasks. Note, however, that you can turn productivity into a hard benefit by reducing either overtime or headcount.

Note also that it is difficult to establish a common and fair hourly rate for a worker, due to many factors (including job type and geographical wage rates). For this reason, it is sufficient to express productivity in terms of labor hours saved.

Next: Marching down the P&L and the Balance Sheet