I rarely generate benefits statements by myself. In fact for years now I have done it almost consistently in collaboration with my clients. There are some good reasons for this:
- It has more gravity. The psychological dynamic works like this - if you (the consultant) say it then it might be true, if they say it then it is cast in stone!
- It is not enough to get benefits, you must be able to prove you got the benefits. So if the client works through this process with you they satisfy themselves that the work was worthwhile, and they gain a deeper appreciation of what you did for them. (Great for generating repeat work)
Calculating Benefits
I use this graphic not only after execution, but also in the sales and training elements of just about every area I consult on. (Which is growing fast by the way, surprising...)The basic premise is the following.
Benefits can be cashable (cash producing or saving) or they can be non-cashable.
Each benefit that you define has two principle effects from the consulting point of view. They provide a tangible (you can see it / feel it) impact, and they contribute to the momentum of the improvement effort.
Cashable
Cashable benefits show up on the bottom line either as savings or increases in earnings.
I work with engineering companies who are asset rich and expense poor generally speaking. They are also under an incredible amount of demand and competitive pressures right now.
So at this point in time the maximum benefit they can produce, like almost all other companies, is an increase to revenue. This will attract maximum attention from senior management, making it the king of momentum building benefits, and it is obviously tangible. More revenue is obvious.
Cost reductions are also very tangible, but they tend to have less of a momentum building effect. Why? Because they are generally a lot smaller principally. (often in my game a ratio of 1:10 is a good estimating tool) But they are real, they are tangible, and they hit the bottom line.
Non-cashable
The principle area of non-cashable benefits I regularly come across is that of risk mitigation. Reducing the risk of an undesirable event is something that will generate a lot of momentum among managers. But it is not generally tangible. You can sometimes calculate the financial impact, but it will never appear on the P&L or budget calculation of any of your clients.
it is simply the prevention of something that could have occurred.
The last area is that of knowledge increase. I see this as a gigantic area of potential improvement, with benefits that spread far into the future and impact on profitability, productivity and a range of other areas.
We all see it like this if we're honest.
But our clients do not always share that view.
So this area is often relegated to the least tangible, and efforts to calculate the impact can often take away from the value produced by producing misleading conclusions, and the least momentum building of all areas of benefit.
Summary
All work you do will be able to be categorized, in some fashion, in one of the quadrants of the benefits matrix. No doubt about that. And while I personally see risk mitigation and knowledge increases as being more important than potentially short term revenue increases... I am not the person who needs to justify, or decide, to spend thousands or millions of dollars.
Consistent benefit categorization and explanation will also give the company a common language when discussing the impact across all their departments and businesses.
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