Potential Project Benefits
The value of a new project to an organization can be shown by listing its potential benefits in the business case. There are two generic categories of benefit: tangible and intangible.
POTENTIAL PROJECT BENEFITS
he value of a new project to an organization can be shown by listing its potential benefits in the business case. There are two generic categories of benefit: tangible and intangible.
You can do a number of things to help you estimate the potential benefits of a proposed project:
- interview executives and find out what they want
- extract information from staff records to see what executives care about and what issues are important to them.
- talk to organizational neighbors to ascertain how the project will benefit them
- follow the money chain to see where savings can be made
- make sure that the project is effective and efficient -- this means that you will do the right thing and the do the thing right
- interview stakeholders at their workplace
A tangible benefit is a benefit produced by an investment that is immediately obvious and measurable.
The term tangible benefit is usually used to refer to benefits that are directly reflected in the improvement in the profit performance of the organization.
Intangible benefits are benefits produced by an investment that are not immediately obvious or measurable.
Benefits can be further classified as quantifiable or unquantifiable. A quantifiable benefit is one that can be measured. An unquantifiable benefit cannot be measured.
An increase in profits is an example of a quantifiable benefit.
An increase in customer goodwill is an example of an unquantifiable benefit.
A quantifiable tangible benefit, for example, is one that directly affects the firm's profitability and the effect of which is such that it may be objectively measured. For example, it may be a reduction in costs or assets or an increase in revenue.
An unquantifiable tangible benefit can also be seen to directly affect the firm's profitability, but the precise extent to which it does cannot be directly measured.
For example, imagine your company's top management present a business case to introduce complex research information technology. An example of an unquantifiable tangible benefit here is the ability to obtain better information through the use of IT.
Intangible benefits can also be sub-classified in the same way. A quantifiable intangible benefit is one that can be measured, but its impact does not necessarily directly affect the firm's profitability.
For example, installing research software would enable your company to obtain information faster.
Unquantifiable intangible benefits are benefits that cannot easily be measured and the impact of the benefit does not necessarily directly affect the firm's profitability. Examples include improved market reaction to the firm or potential employees' perception of the firm's product, or improved access to new staff.
Instructions for use: To use this tool, enter the benefits of a proposed project in the appropriate sections of the grid.
A benefit that is listed in the top left-hand section indicates a quantifiable tangible benefit. This is a benefit that directly affects the firm's profitability and the effect of which is such that it can be objectively measured. Examples include a reduction in costs or an increase in revenue.
A benefit that is listed in the top right-hand section indicates an unquantifiable tangible benefit. This can be seen to directly affect the firm's profitability, but the precise extent to which it does cannot be directly measured. Examples include access to higher quality market information.
A benefit that is listed in the bottom left-hand section indicates a quantifiable intangible benefit is one that can be measured, but its impact does not necessarily directly affect the firm's profitability. Examples include improved access to database information.
A benefit that is listed in the bottom right-hand section indicates an unquantifiable intangible benefit. This refers to benefits that cannot easily be measured and the impact of the benefit does not necessarily directly affect the firm's profitability. Examples include improved market reaction to the firm, or increased access to new staff.
BENEFITS MATRIX
| Measurable High | Measurable Low | |
|---|---|---|
| Tangible High | ||
| Tangible Low |
Imagine a sales company has installed a new IT system. The system has reduced staff and increased the processing of orders and the speed of sharing information throughout the company. The benefits to the company fall into a number of different categories. What do you think they are?
First, the reduction in staff and assets and the increase in sales are examples of tangible and quantifiable benefits.
In addition, the quality of information flowing through the company has improved, so this is considered a corresponding tangible, albeit unquantifiable, benefit.
The speed at which information can be transmitted and the improved staff morale due to greater efficiency are examples of intangible benefits, because they add to the company's profitability, but they are quantifiable.
The improved customer perception of the company's product is an example of an intangible and unquantifiable benefit.
QUESTION
A company has installed a new database search facility. The new facility automates searches and simplifies data mining. The system has reduced staff, and increased the speed of information-sharing throughout the company.
Match the benefits with the class of benefit that they represent. Use each letter only once.
- Reduction in costs and an increase in revenue
- Better information
- Faster information
- Market reaction and access to new staff
Targets:
- Tangible and quantifiable
- Tangible and unquantifiable
- Intangible and quantifiable
- Intangible and unquantifiable
This topic identified the costs that should be considered when preparing a business case and examined the techniques and benefits involved in creating a business case.
There are a number of techniques used to calculate financial ratios in cost-benefit analysis: 1) the payback, 2) the return on investment (ROI), 3) the net present value (NPV), and 4) the internal rate of return (IRR).
There are two generic categories of benefit - tangible and intangible. These can be further categorized as quantifiable or unquantifiable.
It is generally believed that cost-benefit analysis provides hard (tangible and quantifiable) measures of a company's financial performance over a period of time, while the other measures are soft (difficult to quantify and measure).
I have been teaching and training agents, team leaders, supervisors, managers and admins of call centers and other businesses in BPO related fields. This series, comes as a result of that experience. I have more than 4,000 modules that I plan on sharing here. This is # 006-09