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The Business Case When You're Not in "Business"

How do businesspeople in government prove that proposed actions deliver tangible, measurable business value?

Professionals in government and nonprofit organizations who must produce a cost/benefit study or business case analysis come face to face with a unique challenge. That challenge is entirely unknown to their counterparts in private industry.
They ask questions like these: How do you:

  • Write a business case if you are not in business?
  • Find financial benefits for a government organization besides cost savings?
  • Use financial metrics such as NPV, IRR, or ROI when you don’t have economic benefits?

Before getting to the special issues for government and non-profit business analysis, start with a clear definition for the output of a serious business case analysis: A Business Case.


Define Business Case

The Business Case is an analysis that delivers two kinds of information about the consequences of an action or decision:

  • Forecasts. The business case asks "What happens if we take this or that action?" Case results answer in business terms: business costs, business benefits, business risks.
  • Proof. Reasoning and evidence make the case for choosing one action over another. The case proves in compelling terms why the chosen action is the better business decision.

Decision Makers in business, government, and non-profits alike rely on business case results for building the confidence they need to choose a course of action, authorize funding, set objective—and prove they are acting responsibly.

The Government Case-Builder's Dilemma

As for the non-profit and government-specific questions above, case builders in these organizations know well the underlying dilemma:

  • On the one hand, government organizations increasingly have to justify spending decisions with business case analysis. They face a steady stream of new laws, directives, and guidelines requiring responsible decision making and business case accountability.
  • Governments, on the other hand, are not in business to grow sales, increase earnings or build owners equity. Sales and earnings are primary sources of business case benefits for profit-making companies, but they do not qualify—usually‐as legitimate business case benefits for the government organization trying to justify funding proposals, projects, or initiatives.

Government organizations exist and operate to deliver services, not profits. But where is the business value—especially the financial worth—of service delivery?

Funding requests and project proposals from government groups often do aim for cost savings. A Navy, for instance, might propose funding a project aims to lower the daily operating cost for ships at sea. More often, however, the government request or proposal has objectives such as "Improved Response Times of Emergency Medical Services," or "Increased readiness of a military unit." They define success criteria for such goals in terms of essential nonfinancial performance indicators, without referring to financial goals.

When cost savings and other financial benefits are nowhere in sight, however, government case builders ask: Is there still a business case for going forward?  For the case builder limited to procedural-based business case methodologies, the answer is only “Maybe.” For the case builder in command of principle-driven case-building knowledge, the answer is a  firm “Yes.

The Principle-Driven Government Business Case

Sections below show how building a successful government or non-profit business case begins by defining and articulating:

  • The target population or constituency the organization serves. This information answers the question "Whose benefits belong in the business case?"
  • The organization's mission, strategic objectives, metrics it uses to measure progress towards these objectives. The government or non-profit business case depends on the case-builder's ability to show that reaching these objectives has value for the organization.


Related Topics

  • For a complete introduction to business case analysis and building the business case, see the article Business Case.
  • For more on identifying, legitimizing, and valuing business benefits for the business case, see the article Business Benefit.


Question 1: Whom Do You Serve?

Government organizations exist to deliver specific services to a target population. Each organization has a mission statement describing its strategic objectives in those terms.

For that reason, business benefit beneficiaries in the government business case include the population served. "Population served" may be the entire population or a population subset or group. Stakeholders outside the government may also realize benefits—and these benefits belong in the business case.

The principle-driven business case begins with a focus on the principles of strategic alignment and stakeholder support. For this reason, the principle-driven case recognizes the target population as stakeholders and, as a result, captures value delivered to stakeholders as legitimate business benefits to the business case.

Case Study 1: The Government IT Director's

Was the Director's Job On the Line?

Several years ago we worked with an IT Director in the Federal Government of Canada, who faced an urgent financial Justification problem. This director manages a nation-wide database system that provides data on criminal activity, criminal convictions, and prison records, to police, to court systems, and to the federal immigration agency. 

His problem was that he had just spent $4 million for server system upgrades and software enhancements and now—after the fact—the Minister he reports to was asking for financial justification. In his first-pass analysis, the Director could only find about $3 million in cost savings. The Director was due back in the Minister’s office in 4 days from the time he first phoned us, and he urgently needed a better business case to would justify his spending decision. He asked: “Can you get to Ottawa by this afternoon?” It is not an overstatement to mention that everyone in his organization knew the director’s job was on the line.

Building a compelling, credible business case in three days is possible if the case builder is in command of a principle-driven case building framework, and if subject matter experts and relevant source data are immediately available. In this case, we sent the IT Director into the Minister’s office in time with a document establishing $114 million in substantial benefits to result from his $4Mexpenditure—much better than the original $3M benefit estimate. And, that was an extremely conservative “worst case” estimate.

Apply the Principle: Support the Stakeholders

What accounts for the difference between the IT Director’s First Pass $3M benefits estimate and the $114M estimate he presented to the Minister? In our first meeting with the Director and his staff, we asked how he had produced the original $3 million cost savings estimate. He had calculated that from labor savings estimates among his own IT staff and employees, for three years work refreshing the distributed database, improving the data-access “front end” for users, and for providing 24 x 7 user support online.

However, when we asked "Whom do you serve?, the Director immediately saw that his IT action would deliver value to about 100,000 police, court system workers (including judges and lawyers), and personnel in the Immigration and other agencies. All of these stakeholders need access to these criminal data, often. Thousands of ordinary police, for instance, need data access whenever they seek to obtain arrest warrants. Immigration authorities need access when deciding whether or not to grant visas or resident permits.

Ask: What is the Impact on Stakeholders?

With the old hardware and software, however, the database had to be offline 36 hours a week for maintenance and update and this, in turn, meant that users often had to rely instead on paper records, or anticipate future data needs well in advance.

With the new hardware and software, however, users had 24 x 7 access, data-refreshes were continuous and non-disruptive. And, improved data accuracy with the new system meant fewer costly decision errors in granting arrest warrants, court judgments, or immigration permits. The Director now estimated savings in professional labor time, and expensive mistakes very conservatively as $114M.

Question 2: What is Your Mission?

Procedural-based case building methods typically define business benefits simply as cash inflows resulting from an action or decision. This definition creates a severe problem for government case builders because the purpose of most government projects is something other than bringing cash inflows.

The Principle-based case building framework, by contrast, directs case building methodologies in pursuit of the principles such as validity and materiality. The principle-based case counts benefits when they result in confirmed value to the organization, and that occurs wherever the results of action contribute to meeting business objectives. The principle-driven case builder, in other words, defines business benefit as a measurable contribution to achieving a business objective.

Deciding whether or not a given outcome for your government business case is, in fact, a business case benefit, is primarily a matter of asking if the result can help you:

  • First, accomplish your mission
  • Second, meet other essential objectives?
  • Third, improve service delivery efficiency?
  • Fourth, improve service quality?
  • Fifth, deliver new services?
  • Sixth, lower the risk of failure?
  • Finally, solve known problems?

If the answer is Yes to any of these, the outcome is a legitimate candidate for consideration as a potential business case benefit.

Case Study 2: The Colonel's Training Facility

Cost Savings Alone Do Not Make the Case

A few years ago, we worked with a Colonel in the US Army Medical Service Corps, at the US Army Medical Services Training Center at Fort Sam Houston, Texas. This Colonel had a very particular case-building need: He needed a  business case to support a funding request for a new medical training facility.

The Colonel was trying to justify the new building entirely with cost savings. The old site was costly to maintain, and it was too small. The Army was currently renting the expensive classroom and clinical space off base to meet high volume training needs. A new building designed specifically for the purpose should be less costly to run. And, a new building would do away with the use of outside rentals.

Unfortunately, the colonel's savings estimates fell short of the new building costs, even when projecting across a thirty-year period.  The new building promised quite a few other benefits, of course, but the colonel was not sure how to bring them into a business case. The case, after all, had to survive scrutiny moving up the chain of command, and he was acutely aware that he might face a charge of "soft" benefits. So he focused on what everyone agrees is a "hard" benefit: cost savings.

Business Benefits Come from Business Objectives

In conversation with the Colonel, we had to put this question to him: "Do you mean to say that the entire mission of the Army Medical Service Corps is to save money?" He answered with a very quick: “Of course not!!!" The Colonel went on to say: "Our mission is to:

  • Provide Army Personnel with the best available healthcare.
  • Maintain high medical readiness in all conditions.
  • Provide trained medical specialists when and where needed.

And so on through a long list of impressive mission statements.
We then asked him: “Will the new facility help you do these things better?" When he replied “Of course!” we then asked "Can you prove that?" he replied “Certainly."
The Colonel showed in concrete terms how he could shorten the training cycle for several specialties with the new facilities. And he explained how medical staff could collaborate more effectively with the new facility. He also showed how they could reduce critical support skill shortages with the new building. And, he explained how it would be easier to recruit high-quality civilian staff with the new facility.

In conclusion, the Colonel had tangible evidence to make the case: The new building would help reach mission objectives. There is no better definition of a "hard" business benefit than that.

But What Are These Benefits Worth in Real Money?

The business case stands or falls on the strength of its reasoning, not its financial math. Assigning financial value to business benefits should be the last case building step, not the first.

To build the benefits list for the case, start with a focus on the validity principle and essential objectives. 

  • If you can show in concrete terms that your proposal helps meet objectives, the benefit is real.
  • If the leaders agree there is value in reaching the objective, it follows that the benefit has value.

That much of the structure is now stable. To give value to a nonfinancial outcome, then take two more steps:

  • First, agree on the economic worth of reaching the objective.
  • Second, ask: "What part of that value belongs to the beneficial outcome?

The Colonel found his superiors in the Army and Government were very willing and able to agree on the value of meeting goals. As a result, they readily agreed on figures for the worth of:

  • Fewer skill shortages.
  • Shorter training cycles.
  • Recruiting and retaining staff.

Now, there was only one more question. What part of this value belongs to the new building?

The committee reviewing the Colonel’s business case agreed that figure was not 100%, but they also agreed that it was much higher than 0%. Further, they affirmed that reaching the targets for these objectives was impossible without the building. That was more than enough to make the case.

What is a Principle-Driven Business Case?

The Principle-Driven Case is Uniquely Effective in Government

For the government organization choosing an approach for designing and building a business case, it is essential to distinguish between two possibilities: Principle-driven approaches, and Procedure-driven approaches

Defining Principle-Driven Business Case

With a principle-driven approach, the case-builder designs case-building steps individually to pursue essential case building principles. With this approach, the case-builder chooses and shapes methods to achieve target objectives for specific principles such as:

  • Strategic Alignment
  • Stakeholder Alignment
  • Efficiency
  • Comparability
  • Materiality
  • Credibility
  • Accuracy
  • Consistency
  • Adjustability
  • Validity
  • Risk Manageability
  • Project Controllability

Defining Procedure-Driven Business Case

With a procedure-based approach, the case builder chooses methods and prescribes task outcomes with a focus on deliverables for each step.

At least ninety-five percent of the case building methodologies in use today are procedure-based approaches.  Nevertheless, in our 25+ years experience working with organizations of all sizes and types to achieve business case competency, we find consistently that only the principle-driven approach delivers business benefits, cost savings, and project performance metrics of the magnitudes in Exhibit 1.

Where to Go From Here

Learn more about principle-based case building from our books, the Business Case Guide and the best selling business case authority in print, Business Case Essentials.

Learn more about principle-based case building from our books, the Business Case Guide and the best selling business case authority in print, Business Case Essentials.