Move Your Organisation in the `Right` Direction for Success in 2023
Colin Thompson
Managing Partner Cavendish/Author/International Speaker/Mentor/Partner
Will They Believe Your Business Case??A Check List for Self-Evident Validity
The business case was successful!
My project?was funded
If your case supports a project proposal or a funding request, you may very well?agree with the statement above and define success?as "approval."?For senior management, however, there's more to it than that. A successful business case meets several criteria: The?successful case;
Is believed. The reasoning and projected results are credible.
Provides?decision makers and planners with the information?they need?to act with confidence.
Predicts what actually happens. Projections are accurate.
Fail?on any one of the above and your case fails.?Remember, however, that these three criteria are tested in the order given.??If the case is not believed, then it doesn't matter how it scores on the second two criteria. If it doesn't give decision makers enough confidence to take action, accuracy doesn't matter.
What can you do to?make sure?that your case scores high enough in credibility?to make it past the first hurdle??In `Building the Business Case Seminars`, we teach that a large part of the answer has to do with building "self evident validity" into the case.
Several features that contribute to this quality stand out even from a fast scan through the written report or a quick glance at the Executive Summary.
These features in fact make a good checklist to apply when you have a business case in front of you. For more on these points, see one?of our books,` Business Case Essentials`, `Getting Your Budget Approved` and `Business Case Guide`.?Think about cases you have seen, and cases you have produced. Ask:
Are the subject, purpose, and scope up front and clear?
A good business case report tells the reader immediately:
The main components of the action or decision that is the subject of the case.
Which business objectives are addressed by the subject.
Why the case exists (the purpose).
What is required to achieve the case purpose (financial metrics or other criteria).
Whose costs and whose benefits are included, across which time period (the scope of the case)
None of these points are adequately defined by simply naming the action, for example, "proposed marketing program," "computer system upgrade," or "choice of contractor." These elements of case design need to be specified before anyone can properly go looking for costs and benefits.
Are cash flow projections organized along a time line?
A typical business cases looks into the future across a time period that covers a few weeks, a few years, or even longer.
Case readers need to see the timing of individual cost and benefit items across this period. When data and results are viewed along a time line, management can begin to apply financial tactics (reduce costs, postpone costs, accelerate gains, and increase gains) to maximize or optimize returns from this investment.
Does the case present assumptions and methods for identifying benefits and costs?
Numbers alone do not make the case. Readers need to know how the data for cost/benefit estimates were obtained in order?to decide for themselves whether they mean what the?case builder?says they mean. Case readers need to know the rules for including or excluding cost and benefit impacts and how the financial values were estimated. In other words, they need to see the assumptions and methods behind the case.
Assumptions and methods explicitly spelled out for case builders and case readers are one of the author's best means for?ensuring that the case scores high in validity and credibility.
Does the case include all Important benefits and costs, including those that are non financial?
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Many cases are weak or misleading because they leave out important benefits and costs from the action under study. Why? You may know the reason already if you have heard people argue about "hard" and "soft" benefits or costs. The word soft usually means that someone doubts the reality or accuracy of certain line items in the case.
Case builders and case readers readily accept "benefits," for instance, when there is no question how to estimate their value. Benefits like "cost savings" and "increased sales revenues" usually fall into this category. These are sometimes called "hard" benefits because the rationale for estimating their worth is straightforward and easily defended.
In business, however, benefits like "improved customer satisfaction" or "enhanced branding," or "better employee morale," also have value, but some people see them as soft benefits that do not belong in a serious business case. For such benefits, the approach to making that value concrete is less clear, less prescribed. This makes some people uneasy and they drop such benefits from the case. Is this appropriate?
Leaving out a benefit or cost is not appropriate if the expected impact is both real and material to the purpose of the case. Every attempt should be made to assign financial value or, failing that, at least make the benefit tangible with some other measure. A benefit or cost omitted from the formal analysis will carry exactly zero weight in case results and zero weight in recommendations based on them. The irony is that some of the most important strategic benefits are often the hardest to quantify, and therefore omitted.
Does the case discuss critical success factors?
A good business case is more like a management plan than a simple prediction. Yes, the case builder may predict net cash flow gain of ￡20 million if the marketing program is implemented, for instance, but that single result assumes that many things have to happen. Some of these assumptions concern factors that can be managed or controlled to some extent: these are critical success factors for achieving predicted results.
Staff may need training, new products may have to reach the market by certain dates, partnership agreements may need to be in place, and so on. Many of these "critical success factors" have to be managed to a specified result in order for the main prediction (for example: A net gain of ￡20 million!) to appear.
For that reason, the author's conclusions and advice should cover more than a simple recommendation to act on the case subject: "Fund my proposal because the benefits outweigh the costs!" Instead, a good business case for a complex subject has a "Recommendations" section that identifies critical success factors that are manageable or partially manageable. The section describes who needs to do what, by when, in order for the predicted results to appear.
Does the case identify and measure risks?
Your business case readers will want to know the predicted financial result, of course, but they also want to know the likelihood of other outcomes as well. Case readers, in other words, must know how to assess the risks underlying predicted results.
Suppose the case builder predicts a net gain of ￡20 million from a proposed marketing program. In fact, everyone knows that the results will not be ￡20 million exactly. The actual net will certainly be something more or something less. But, will the overall result be close to the predicted value? Or could it be very different from that value? To answer such questions, the case builder performs a formal sensitivity and risk analysis. The case projections (a net gain of ￡20 million) will depend on many assumptions about factors that cannot be managed or controlled. In order to make the financial projections concrete, the case builder had to make assumptions about such things as market size, market share, customer preferences, competitor actions, economic trends (e.g., inflation), and other things. All these assumptions contribute to projected results and all are uncertain to some degree. Sensitivity and risk analyses produce two kinds of information about uncertainties. They determine:
Which assumptions are most important in controlling overall results.
This is sensitivity analysis.
The likelihood of other outcomes besides the most likely result.
This is risk analysis.
The author's recommendations should address both points. For instance, if sensitivity analysis shows that predicted results depend heavily on assumed market size, then the audience should be warned to pay close attention to this factor over the program life. If market size turns out differently from the assumptions, then predicted business case results will change.
Or, if management says that any investment in programs must return benefits at least 100% greater than program costs, then the business case author should use the risk analysis to estimate the probability that returns will be at least that high.
Take Action!
Take action! Learn more about the road to business case competency for your organisation from one of our books, the `Business Case Guide`, Getting Your Budget Approved` and `Business Case Essentials`.?Learn and practice proven methods for building credibility into your case at a `Building the Business Case Seminar`. Plus, take on board the powerful publications for success; `The Hidden Overhead` and `Document Management - Cost Savings Solutions`
`The Hidden Overhead` ?
`Business Plan for Your Success`........
`Document Management - Cost Savings Solutions`
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