Effective use of a second team or Reference Group can be the single most important step you take to build in business case credibility.
Create a second team to build in Business Case credibility.
The moment it is clear that decisions or plans call for a business case, an insidious, deadly temptation begins to operate on the project manager, product manager, consultant, or sales person responsible for the case. Even CFOs are not immune. The temptation sends this pernicious message: Do it Yourself, or Do it with your own staff.
The temptation has a seductive logic. If you build the business case yourself, you can be sure to end up with the right results. If you bring in outsiders, there’s no telling what you might come up with. And, it isn’t easy to get the time and contributions of people outside your own organization. After all, whats in it for them? Its better, the temptation says, to do it yourself.
Take the Unnatural Response
That logic is the natural first response of most people facing the need to produce a business case. In our business case seminars and publications we strongly urge case builders to take the unnatural response: recruit and use a group of people outside their own immediate organizations to help design, build, and review the business case. These are not the people do most of the hard, detailed case-building work. This is an advisory group. We call this group a Reference Group.
I learned, more than a decade ago, that effective use of this group can be the single most important step anyone can take to build in business case credibility and guarantee business case success.
A Lesson From the IT Directors Dilemma
Several years ago, I worked with the Director of Information Technology (IT) at a large commercial bank who had a problem: twice in a twelve-month period he had proposed a major IT project to the banks Executive Committee, and twice the Committee had said No to his proposal. Now he was preparing a third, final attempt.
The reason for the Committees No? Those proposals projected good financial results, but the Executive Committee did not fully believe them. One Senior Vice President had been especially negative in previous reviews. In his opinion, predicted benefits were soft benefits, total costs were underestimated, and there was little chance that everything could be installed and working on time. He expressed these views energetically during the earlier reviews, no doubt swaying opinions on the Committee and generally souring the atmosphere each time.
Forming the Reference Group
The project team for the banks business case was already formed when we started the final case project. These people would do most of the time-consuming hard work?digging into databases, budgets, business plans, vendor proposals, and the like, as well as interviewing internal specialists, external experts, IT users, and customers. Most of these people were on the Directors staff. Our first action, however, was to recruit a second team for the business case project?a Reference Group. This team played a critical role in improving the quality of the case and, more important, establishing credibility.
Team members were recruited with an eye to the history of the two earlier proposals that had failed. The highly critical Senior Vice President was the first person we recruited for the second team. We also went after high-level managers from Corporate Finance, Human Resources, and Marketing, as well as several branch managers and two members of the Presidents Strategy and Planning Group. The ten-member Group met three times during two-months of case building. By contrast, the project team poured many times more person-hours into the project. Both teams were essential to building a successful case, but the Group was indispensable for ensuring that case results were understood and believed by the Executive Committee.
A good Reference Group, properly led, brings credibility and accuracy in at least six ways.
1. The Group Provides Cross-Functional, Cross-Organizational Input
The Group can be a valuable source of information and guidance for the case designer. This is vital when the subject of the case has cross-organizational impact, or when the costs are focused in one organization but the benefits are realized more broadly.
Product proposals, technology proposals, and infrastructure proposals often fit that description. So do many other actions in a complex business environment. If the subject is bringing a new product to market, or closing a corporate site, or entering a new market, for instance, cost and benefit impacts may cross boundaries of many kinds?organizations, management levels, budget categories, and planning periods. In such cases, the Group can help define case boundaries and help fill in the cost model more completely and with more authority than a project team from a single organization or function.
2. The Group Brings Critical Expertise to the Table
The Reference Group can bring other critical expertise and information to the table:
- Line managers help in costing and valuing operational impacts in their own areas.
- Financial experts can connect the business case subject with the organizations long-range business plan (a vital connection, when assigning value to strategic benefits). They can explain budget issues, financial constraints, and how spending decisions are made.
- Human resource specialists can help assess the personnel impacts of a proposed action: job levels required, average salary and overhead costs, training requirements, hiring costs, for example. HR expertise is especially welcome when decision alternatives include, hire from within, hire externally, and outsource.
- Senior managers from the highest levels can help identify and prioritize organizational objectives?business performance objectives, financial objectives, operational objectives, and still other objectives. This provides a solid basis for estimating benefit values and for recommending actions.
In brief, the case will be a better case with cross-functional, cross-organizational input from the Group. That much of the teams role is obvious. Other roles for the team are less obvious but may be even more important.
3. The Group Spreads the Sense of Ownership
The Reference Group can be the vehicle for spreading a sense of ownership for your business case widely beyond the case-building project team. It is a simple reality that people who help build something naturally begin to feel some ownership for it. In meetings and discussions, team members contribute to case design and development. Inevitably, it becomes their case coming up for review instead of just your case.
A shared sense of ownership is desirable: People do not want what they work on to fail.
4. The Group Signals Methods, Rationale, and Expectations
Do not assume that your audience will automatically appreciate your business case on its own merits simply from reading the finished document or listening to a presentation of results. A case is not successful until it is communicated successfully, and a complete business case has a lot to communicate.
In order to properly evaluate a case, your audience must understand several important elements fully. They must understand:
- Which assumptions are most important. This means understand which assumptions play the major role in controlling results.
- Your cost model. This provides the rules for deciding which costs are relevant for the case.
- Your benefits rationale—the logic that legitimizes benefits for the case.
- Important risks and contingencies.
It is not easy to grasp these points with a single reading of a report or a short presentation by the author. The author can meet some of this challenge by using the Reference Group as a communications channel during the case-building project. It is better not to wait until the final results are in, to begin communicating important methods and rationale behind them.
5. The Reference Group helps Communicate
Why is complete communication so important? Case results depend on many arbitrary judgments and assumptions, and these are natural targets for criticism. They are targets especially if you reveal them only in the final presentation or completed document.
When bringing your case into a competitive or critical setting you do not want to have to announce and defend the arbitrary elements of your case at the same time. This means that your second team can be an effective channel for communicating several points long before the final results are in.
- Case design
- The rationale for including certain benefits
- Important assumptions
When review day comes, critics may still argue your interpretation of case results. However, you leave them little room to question your methods or data.
6. The Group Can Turn Damaging Criticism Into Constructive Contributions
Finally, you may need to use the Reference Group as a vehicle for handling people who are seriously difficult critics of your proposal. The Senior Vice President I mentioned is an example. If you face people who fit that description, you may want to bring one or more of them onto the Group at the outset. As members of the team, these critics will have objected and contributed everything they have to say before the final review. Through careful management of team meetings, you can show them, respectfully, that they are on the record.
Not every critic belongs on this team, of course. There are some people who—to put it plainly—simply do not respect the respect you give them. However, when your critics actually do contribute to case design, they may even develop some sense of ownership for the case. This should lead to fewer critical surprises late in the game.
I went to the IT Directors final presentation to the Executive Committee and you will probably not be surprised to hear he won their approval. By creating and using cross-organizational second team, we effectively de-clawed the cat, so to speak. And, as a result, the Director established an authority and credibility that would have been impossible to achieve had he stuck to the Do it yourself temptation.
Take Action: Build In Credibility!
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