The Cake Theory of benefits realisation
Earlier this year, I was delivering benefits realisation training on my birthday (lucky me!). So I decided to take in a cake.
Come coffee time, all of us needed caffeine and sugar, and we all bonded happily over the rather messy distribution of the chocolate fudge cake. That afternoon, we got onto the also rather sticky subject of how we deal with attribution in benefits. Cake seemed like the ideal analogy.
“There is only one cake,” I stated to the rather amused group in front of me. “And it’s only fair, if more than one person helped bake that cake, that they each get a slice of the cake.”
Let’s start with the principle ‘there is only one cake’. When an organisation doesn’t have a good grip on the overall picture of what’s going on in its various programmes, the risk of double counting is high. Multiple programmes could be reporting the same benefit, interpreting the shifts in their metrics as being down to their own actions, not someone else’s – or could even be measuring the same benefit in different ways.
Not only that, but our cake cutting starts right at the beginning with the business case. We may be shelling out money twice to get the same cake, with no understanding as to whether the two initiatives will enhance the benefits overall, have the same impact or even counteract each other. It takes a mature and proactive portfolio management office to deal with this effectively, from business case to post-initiative reporting.
So how do we actually divvy up the cake fairly? I’ve developed two methods over the years.
Initiatives with separately identifiable impacts on the same metric
The first and easiest cake to deal with is if you can tell how much each initiative is contributing and the two initiatives are not dependent on each other. Say our local hospital has two initiatives that they plan to implement in their A&E department: Initiative A and Initiative B. The government has set them a target of seeing each patient within four hours. Both of the initiatives should reduce the number of patients who have to wait longer than this.
Let’s say that Initiative A should mean another 80 people per week are seen within four hours. Initiative B expects to enable another 20 people per week to be seen on time. So, for any reduction in the number of people waiting more than four hours in A&E, initiative a should get 80% of the credit and initiative B should get 20%.
Intertwined initiatives with impacts on the same metric
Unfortunately, it’s not always that easy. There are so many things which make a difference to how quickly people are treated in A&E. You also get some circumstances where it is an all-or-nothing proposition: both initiatives are needed to get all the benefit. If you only implemented one of them, you wouldn’t get any benefit at all.
In benefits, we use a concept of ‘willingness to pay’ as a [last-ditch] attempt to put a monetary value on benefits. For example, if we are willing to pay an extra £10 a year in council tax for the potholes in the village high street to be filled in, that is how much value we place on the benefits of smooth roads.
In desperation, I took the concept and turned it around, applying it to attribution.
If the benefits really are all-or-nothing or too intertwined, the whole life cost of implementing those two initiatives are another way of cutting the cake.
Going back to our example, if Initiative A costs £1 million to implement and run for a year, and Initiative B costs £3 million, so in total they cost £4 million. The benefits are divided 25% and 75%, in proportion with the costs.
In this way, we can fairly share out the cake, ensuring everyone who helped back it gets a slice.
Have your cake and eat it
If you would like to share knowledge, experience and cake then why not book to attend APM Benefits Summit on 22 June. I will be facilitating one of six workshops and the programme for the day will include some really tasty presentations and case studies.
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Most people see the business case process as a form of medieval torture administered by accountants. They also, with some justification, question the quality and value of the business case once created.
Increasing complexity and uncertainty in our environment is bringing together traditional P3M with complementary disciplines and approaches to ensure success