|30th May 2019||Fola Ikpehai|
At a recent working group session with Procurement professionals at the LUPC & SUPC Conference on 16th May, I was challenged (in a very nice way!) for stating that the act of implementing a new, more effective purchasing model was not a ‘benefit’. My assertion sparked so much debate that I thought it would make a great topic for a blog!
So, what is a benefit?
In programme management, a benefit is defined as “a measurable improvement resulting from an outcome that is perceived as an advantage by one or more stakeholders, which contributes towards one or more organisational objectives”- a rather wordy definition, I hear you say. I agree, and this can be summarised as: a benefit answers the “So what?” question.
If recipients of the ‘benefit’ have to ask “So what?” (or words to that effect) then the object being referred to is unlikely to be a recognisable benefit – it may be a output or an outcome, but not a true benefit. Although, as in the statement that sparked the debate I referred to above, it could lead to a benefit.
So, let’s start again with the hypothetical discussion below:
Procurement Team Member: We have implemented a new Purchasing Model that is much more effective. [This is a project output (new model) associated with a capability (more effective) – but not a benefit].
Business Unit Member: So what?!
Procurement Team Member: The new model leads to more efficient resource planning. [This is an outcome (a verifiable difference), but not yet a benefit].
Business Unit Member: So what?!
Procurement Team Member: Your business costs will reduce, the quality of procured services delivered to your unit will increase, and your supply risk will reduce. [Ahhh – benefits at last!]
Business Unit Manager: Great – what do I need to do to realise these benefits?
Okay – I know it’s not that simple but you get the message!
To really demonstrate a benefit, we must be able to measure the change from a defined start point. So, for the group of benefits above:
- What are your current business costs for that commodity or service?
- What is the quality measure that you will use to assess improvement?
- What is the level and description of the current supply risk?
Cost reduction is the easiest benefit to measure and it is what most people think about when they think of ‘benefits’. However, other categories of benefit are just as important. Benefits can be put into at least four categories:
- Cost Savings
- Productivity increases
- Performance improvements
- Reputational benefits
For example, if implementation of a new purchasing model results in enhanced brand awareness and buyer confidence for a commercial enterprise, this benefit is in the fourth category – a reputational benefit.
I hope that this explanation demonstrates the difference between an output, an outcome and a benefit; and that it helps our messages to focus on improving understanding of business outcomes from a new process – rather than the process itself. This should also help to ensure that key performance indicators drive a culture focused on outcomes and benefits and not process changes.
Speaking about key performance indicators to measure achievement of benefits, I see many examples of organisations measuring inputs, and outputs, possibly, because they are easier to measure than outcomes and benefits. The number of people who use a new system is easy to measure but does not necessarily demonstrate a benefit. On the other hand, the measurable reduction in time spent on a particular task due to the use of a new system is a productivity benefit; perhaps a subtle distinction, but one that can make a real difference to the way we communicate benefits to those who we are aiming to influence.
In implementing benefits-led change, we need to communicate a narrative that shows how the change adds value and ensure that the outcome lives up to this narrative and delivers the benefits promised.
If you need support with change management and benefits realisation, or specialist support with procurement projects, please contact us on firstname.lastname@example.org