X1 - Evaluate the generated strategic value

What

This activity measures and records the actual benefits generated by ongoing and closed programs and standalone projects.

Why

We should do this activity for the following reasons:

• It’s a reminder for everyone that programs and projects are done to generate strategic value, and this should be considered when conducting them.
• It helps us understand our environment and make future programs and projects in the Value Generation Matrix more realistic.
• It can help us find ways to increase benefits with ad hoc tasks or structured changes (programs and projects).

Remember that it’s natural to have a few programs and projects that don’t generate the expected strategic value. If they all work as planned, you’re probably losing opportunities by being too conservative. This is especially the case for internal projects.

Who

This activity is done by the sponsor of each program or project, under supervision from the portfolio manager.

How

Benefits are measurable improvements that are desirable for the organization. In that sense, benefits are subjective, meaning that something that would be considered a benefit for one organization may not be so for another. Therefore, benefits must be evaluated with a good understanding of the organization, in a high management layer such as portfolio management, and in a holistic way.

Benefits should be measured against the hypothetical scenario in which the program or project was not run. Sometimes, the hypothetical scenario has a base benefit of zero, but sometimes, it has a positive or negative value, which can significantly affect the measured benefits.

This evaluation starts for each program or standalone project when it’s finished or as soon as it starts generating benefits during the execution. It continues as long as there’s a notable potential or actual benefit (usually, at least for a few years). The results of the measurement will be stored in the Value Generation Matrix. The measurement must include expected and unexpected benefits and disbenefits. The portfolio manager should ensure that sponsors measure benefits correctly.

Your program and project management systems may have similar activities (e.g., G01 in P3.express), which would be equivalent to this activity and form a common task. However, when multiple programs or projects have been done on the same product or on a set of related products that impact each other’s performance, it’s best to evaluate their generated benefits together in an integrated way.

There must be one and only one unit of measurement for investments and benefits of all programs and projects in the portfolio to make it possible to compare them. When there are multiple sources of value, they must be converted and combined into a single unit. It can be a monetary value adjusted for the value of money at a specific time, grams of gold, number of lives saved, etc. In some organizations, while not desirable, it may be necessary to use an abstract, relative unit and estimate or measure using techniques such as Planning Poker^®.

Make sure you’re not double-counting benefits. If multiple programs and projects enable a source of benefit, divide the resulting benefit among them based on their contributions.

When the benefits of all items are measured, their strategic value can be calculated:

strategic value = benefit ÷ investment

The Business Case of each program and project is a significant help in evaluating its benefits. However, sponsors shouldn’t limit themselves to a mechanical evaluation based on the Business Case.