From: Bizjournals.com
Photo: ISTOCK (PEOPLE IMAGES)

Organizations are wasting a disturbing amount of money on projects.

In fact, according to the most recent research, an average of $122 million per $1 billion spent on projects is wasted because of poor project performance, an increase of 12 percent over the figure from the previous year.

Why are companies having less success with realizing their intended project outcome? As the research tells us, when it comes to managing a portfolio of projects, there is too much focus on metrics and not enough emphasis placed on benefits.

When organizations embark on projects and programs, they do so with a clear mission: to add value, advance strategies and increase competitive advantage. While organizations are becoming more aware of the value associated with project management, most organizations are still missing significant opportunities to add strategic value to their project management framework because they lack a formal and focused approach to identifying and managing benefits.

Three stages of benefits realization management

Benefits realization management can be broken down into three stages: identification (determining whether a project can produce the intended business result); management (ensuring that the initiative remains aligned with the business objective); and sustainment (monitoring to be sure that the expected value of the project continues once the initiative is completed). When an organization uses this approach, it realizes the greatest results on a project.

1. Benefits identification: In organizations that identify benefits up front, 74 percent of projects meet goals versus 48 percent in organizations that do not.

2. Benefits management: Organizations that have a fully prescribed-process for benefits realization management report an average of 38 percent more projects that meet or exceed forecasted return on investment (ROI). Those that have fully-standardized documentation for reporting benefits realization metrics report an average of 19 percent more projects that meet or exceed forecasted ROI.

3. Benefits sustainment: Organizations that commit to the benefit transition and sustainment activities exhibit higher benefits realization management maturity (level of an organization’s ability to deliver benefits) than other organizations and see 69 percent more projects meeting or exceeding forecasted ROI.