Professional Documents
Culture Documents
ACCA SBL Unit of Innovation, Performance Excellence and Change Management 2021
ACCA SBL Unit of Innovation, Performance Excellence and Change Management 2021
1) Fintech
= financial technology
2) cryptocurrency
i.e. the virtual coins technology that changes the products
introduced to the market are useful the
way the industry, the people works and lives
~ being set up
~ organization structure
Enabling success: organising
you ought to know the pro and con of the
respective structure in order to be able to
conclude whether a particular structure is most
suitable for the scenario give.
Re-organization of an organization’s structure and
internal relationships to deliver a selected
strategy
Establishing Organisation
1. Objectives
2. Systems, Policies and Procedures
Channels of 4. Delegation of Authority
Communication
6. Accountability
3. Division 5. Establish
of Labour roles and
Marketing Finance Operations Human responsibilities
Resources
Organisation Structures
• Types of Structures
– Functional
– Multidivisional
• Products/Service
• Geographical
– Holding Company
– Matrix
– Transnational
– Team-based
– Project-based
Organisation Structures
• Functional Structure
CEO
Human
Production Marketing Finance
Resources
Organisation Structures
• Functional Structure
– Advantages
head of the respective department
• Specialists at middle management levels
• Reduces/simplifies control mechanisms control is straight forward as they all report
to the CEO via weekly or monthly meeting.
• Clear definition of responsibilities; increases accountability
• Senior management in touch with all operations
corporate parenting role likely to be parental developer
i.e. CEO closely involved in monitoring the functioning of the
respective department.
Organisation Structures
• Functional Structure
– Disadvantages day2 running of the department
– Geographical
CEO
procurement
~ warehouse central Central
~ central marketing Services
• Multidivisional Structure
– Advantages
because each division is a separate entity
• More flexible (company can add or divest divisions).
• Ownership of strategy is handed down to the business unit
managers. owners empower the division manager to operate the division independently.
the corporate parenting style is likely to be portfolio manager
• Control is normally by monitoring performance (parenting roles).
• Better development or specialisation of competences within each
division. suitable for grooming successor. Division manager who has proven themself will be promoted
to work in corporate office.
• Training for managers at the business level before they move on to
the corporate level
Organisation Structures
in each division there is duplication of resources i.e. in each of 99 speedmart
• Multidivisional Structure store. the same type of personnel exist due to no sharing of resources as seen
in functional structure.
Multidivisional structure : suitable for companies that purse the direction of market development
divisions are opened at the targeted market nation-wide or world-wide.
Organisation Structures
similar to multi-divisional structure except
• Holding Company Structure that the divisional are company on its own i.e. subsidiary
• Holding Company Structure = Both advantages and disadvantages are similar to multi-divisional structure.
– Advantages
• Extremely flexible
• Allows the bringing in of outside shareholders as partners.
• The parent may buy or sell subsidiaries as conditions change.
• Subsidiaries can gain access to investment capital and talented
managers from inside the company.
• Parents can add value.
Organisation Structures
emphasizes on selling
similar product
Organisation Structures
• Transnational Structures
– Multidomestic
• Aims to meet the needs and requirements of the local markets
worldwide by customizing and tailoring their products and services
extensively. In addition, they have little pressure for global
integration.
• Have a very decentralized and loosely coupled structure where
subsidiaries worldwide are operating relatively autonomously and
independent from the headquarter.
• Nestlé is an example of a multidomestic company. It uses a unique
marketing and sales approach for each of the markets it operates
and adapts its products to local tastes by offering different
products in different markets.
Organisation Structures
• Transnational Structures
– Global
• Offers a standarized product worldwide and have the goal to
maximize efficiencies in order to reduce costs as much as
possible.
• Global companies are highly centralized and subsidiaries are
often very dependent on the HQ.
• Main role is to implement the parent company’s decisions and to
act as pipelines of products and strategies.
• Pharmaceutical companies such as Pfizer can be considered
global companies.
Organisation Structures
• Transnational Structures
– Transnational achieves the best of both worlds
in each country the company sell products that match the preferences of the local people so that,
the product will appeal to them.
However, at the group level, they practice bulk purchase of those ingredients that are common in making the differentiated.
So as to reduces the cost.
Organisation Structures
• Transnational Structures
– International
• Has little need for local adaption and global integration.
• The majority of the value chain activities will be maintained at
the headquarter with products being produced in the company’s
home country and send to customers all over the world.
• Subsidiaries, if any, functioning more like local channels through
which the products are being sold to the end-consumer.
• Large wine producers from countries such as France and Italy
are examples of international companies.
Organisation Structures
– Advantages
• Expanding the company into new countries creates access to
new markets with new customers.
• Benefitting from different regulations that allow manufacturing a
product in another community where compliance costs are lower
and then export it back to the home country or alternatively
selling a product legally in other countries when it is not eligible
for sale in one’s own country.
• Taking advantage of lower cost of labour thereby maintaining
cost-competitive pricing while staying profitable.
cost globalization: establishing business in country where the cost is the lowers
Organisation Structures
• Transnational Structures
– Advantages
• Saving in taxes by organizing the company so that they earn profits
in a subsidiary located in a foreign country with lower taxes while
shifting expenses back to the home country.
• Avoid trade barrier imposed by different governments such as
quota restriction on import goods, government's policies and so
on.
• Secure supply of raw material by injecting capital in the supply
countries as an exchange transaction.
set up operation in country where the suppliers exist to
minimize the lead time as well as the purchase cost
• Matrix Structure
Manager A
Manager B
Manager C
the project team members
come from the respective
specialized department
Organisation Structures
Matric Structure : continuity is assured i.e. when one project is completed, the project team members
will be assigned to another new project. i.e. the team members employment is not terminated following the completion of
the project
Organisation Structures
• Matrix Structure
– Advantages:
• Placing employees in functional areas allows them to specialize in
a particular field thereby excel at tasks in their field of focus.
• Employees have constant contact with members of other
functional areas via their membership in project teams which
enable them to develop a wider set of skills than they would in a
purely functional structure.
• The collaboration between functional areas allows a project team
to better handle complex challenges and objectives.
• Functional areas maintain a stock of talented employees to meet
projects' requirements which allows for human resources to be
shared flexibly across different projects or products.
Organisation Structures
• Matrix Structure
especially when a two superior from the functional area and project team
– Disadvantages: do not agree on certain matte. the project team member will find
themself sandwiched in between
Knowledge
Control Change Globalisation
Sharing
Configuring an Organisation
• Mintzberg’s Organizational Configuration helps business owners and
managers set up their operation according to what they wanted to
accomplish. According to HENRY Mintzberg, own organization is a combination of 3 components namely :
Structures
i.e. orgnisational structure
Relationships Processes
i.e. internal, external
Configuration
Structure, design, processes and relationships
technostructures:
people drafted the SOPs in order to
standardised the processess are well
an those involve in monitoring the
complaince
ie.e internal auditor
Structure, design, processes and relationships
– Simple configuration
• A very simple, straightforward design and decision making process
• Characterised by having one owner – or maybe a few owners –
who make all of the decisions.
• Suitable for newly start-up business.
– Machine configuration/bureaucracy involves following a list of procedures
Machine Standardisation of
Simple/static Techno-structure
Bureaucracy work SOPs
Professional Standardisation of
Complex/static Operating core
Bureaucracy skills
training
Simple/static Standardisation of
Divisionalised Diverse
Middle line
outputs
Operating core
Adhocracy Complex/dynamic
Support staff
Mutual adjustment
want freedom
performance target
expectation of the
respective division
Relationships
Centralised
Internal
Decentralised
Relationships Outsourcing
Alliances
External Virtuality
Networks
Internal Relationships
High Centralised corporate parenting
style
~ parental
developer
Strategic Planning
synergy
Level of control of manager
involvement of
Corporate Parent Strategic Control corporate
parent is
situational
i.e. not complete
corporate
parent set
financial
targets for the
Financial Control portfolio
manager
organization to
be achieves
Decentralised
Internal Relationships
• Centralisation vs Decentralisation
• Strategy of corporate centre
– Strategic Planning (most centralized)
• Acts as sole planner of company
• SBUs have low autonomy of decision making
– Strategic Control (a mix of the other two)
• Acts as shaper of business units
• Sets both financial and strategic targets
• Suited for synergy manager and parental developer
– Financial Control (most decentralized)
• Banker for SBUs
• SBUs have autonomy to design strategies
• Portfolio manager
Internal Relationships
• Strategic Control: Parent adds value by
– Envisioning: Defining and shaping overall strategy
– Portfolio Manager: Deciding the balance of activities
– Synergy Manager: Fostering organisational learning between business
units
– Setting policies and standards
– Assessing performance of SBU
– Does not impose a master plan
– Uses bottom up planning process by agreeing with SBU on central
policies and guidelines
– Problem:
• Corporate may not know strategic intent of SBU
Implications of collaborative working, organization
process outsourcing, shared services and global
business services
External Relationships
• Outsourcing
– External party is hired to provide goods/services that it previously
produced internally
– An outsider may do better so may be good to outsource
– Value for Money? Cost benefit analysis is needed
– Should not outsource core competencies
– Advantages
• Concentration on core services
• Access to expertise
• Reduced overheads and freeing cash
• Economies of scale transferred to clients
• Predictable costs
External Relationships
• Strategic Alliances
– Cooperative agreement between two/more firms pursuing common
objectives
• Joint Ventures
• Consortia
• Licensing
• Franchising
– Issues:
• Trust
• Finding the right partners
• Transaction costs
External Relationships
• Networks
– Set of inter-organisational links and relationships required to create a
product or service
– Examples:
• Teleworking
• Federation of experts
• One-stop Shop
• Service Networks.
– Important factors that can make coordination work in networks:
• A compelling vision for the need for a network
• Unique resources or core competencies that holds the network
together. Something that people want to link with you
• Networking skills to sustain and develop the network.
External Relationships
• Virtual Organisations
– Held together by partnerships, collaboration and networking instead
of formal structure and physical proximity
– In-house resources are minimum
– Almost all resources and activities reside outside the organisation
– Problem: Highly outsourced and core competencies are diminished
Enabling success: disruptive technology
The potential impact of disruptive
technologies such as Fintech, including
cryptocurrencies
Disruptive technology
• Disruptive technology
– Technology that displaces an established technology and shakes up
the industry or a ground-breaking product that creates a completely
new industry.
– Examples of disruptive technologies:
• Email transformed the way we communicating, largely displacing
letter-writing and disrupting the postal and greeting card
industries.
• Smartphones largely replaced cell phones and personal digital
assistant (PDAs) and, because of the available apps, also disrupted:
pocket cameras, MP3 players, calculators and GPS devices, among
many other possibilities.
Disruptive technology
• Disruptive technology
– Examples of disruptive technologies:
• Cloud computing has been a hugely disruptive technology in the
business world, displacing many resources that would
conventionally have been located in-house or provided as a
traditionally hosted service.
• Social networking has had a major impact on the way we
communicate and -- especially for personal use -- has disrupted
telephone, email, instant messaging and event planning.
Disruptive technology
• Disruptive technology
– Impacts
• Implications for individuals and societies:
– Changes quality of life, health, and environment
– Changes in patterns of consumption
– Changes in the nature of work
– More accessible, affordable products or services for the
general public such as AirBnB.
• Implications for established businesses and other organizations:
– Creates new products and services
– Calls for good risk management practices, supported by
efficient risk management tools to counter disruptive
innovation.
technology replaced the work of several
– Changes in organizational structures employees resulted in the organization
structures becoming more flat
i.e. lesser segregation of duties.
Disruptive technology
• Disruptive technology
– Impacts
• Implications for Economies and Governments:
– Drives economic growth or productivity
– Changes comparative advantage for nations
– Poses new regulatory and legal challenges
– Affects employment
Disruptive technology
• Once miners have unlocked all the coins, the planet's supply will
essentially be tapped out, unless the particular coin's protocol is
changed to allow for a larger supply.
• A public key is akin to a school locker and the private key is the
locker combination. Teachers and students can insert letters and
notes through the opening in the locker. However, the only person
who can retrieve the contents of the locker is the one who has the
unique key.
Disruptive technology
• Cryptocurrencies
– The mechanism
• No central database that keeps track of a blockchain network’s
private keys. If a user misplaces their private key, they will lose
access to their Bitcoin wallet.
!) recruitment ~> create awareness among potential candidates such as by partaking in road shows, career fair, sponsorship event, firms
visiting.
2) deployment ~> refer to assigning the talents to perform tasks that match their competency level, personal character.
3) development ~> refer to grooming the talents to assume higher level responsibilities by providing assistance in the area of career coach,
training, further education, etc.
4) succession planning having in place the next lines of leaders ready to assume the position left behind by existing leader due to accidental,
health issues or personal reason. so that disruption to smooth operation is minimized.
Contribution of talent management to supporting
organization strategy
Talent management
• Meaning
– Involves recruiting, developing and retaining people with the required
skills and aptitude to help an organisation meets current and future
needs.
– Operational objectives of talent management should align closely with
the company’s strategic goals.
• Drivers of talent management
– Correlation between better talent and better business performance.
– Talent is a source of value creation.
– The context in which we do business is more complex and dynamic.
– Workforce demographics are evolving.
– Employee expectations are changing which forces organizations to
place greater emphasis on talent management strategies and
practices.
Talent management
• Talent management cycle
– Recruitment
• Creation of job descriptions for employees to work on achieving
the company’s mission, vision, values and operational strategy.
• Recruiting activities include publishing job openings, participating
in career fairs, providing scholarships to schools and establishing a
presence in the community.
• Talent managers work with other human resources professionals
to match candidates with the right skills to available jobs in the
company.
Talent management
• Talent management cycle
– Development
• Development of the employees’ professional skills typically results
in higher workplace productivity, innovative approaches and
creativity.
• Take the form of rotational assignments, on-the-job training,
coaching, mentoring, leadership development and so on.
• The purpose is to retain and make employees more and more
valuable to the organization which will help reduce waste, fewer
product errors and higher customer satisfaction.
Talent management
• Talent management cycle
– Deployment
• Involves putting the right people in the right roles.
• Projects should be assigned to people who are selected on the
basis of merit i.e. someone who has earned that opportunity and
who is ready, willing and able.
• Sufficient time should be scheduled to coach the person both to
get the job done and fully leverage the learning opportunity.
Talent management
• Talent management cycle
– Succession planning
• Focuses on the broader requirements of a business.
• Identifies and prepares talented employees to step into key
positions and leadership roles by ensuring that they have the skills,
experience and knowledge to meet changing work requirements.
• Provides a guide to external recruitment to fill the gap in the
internal skills base of the business.
one of the 3 models for evaluating a company performance
organisation
• A Holistic Approach internal environment
1) culture
2) resources own are they unique ?
3) competency of the management ?
technology 4) organizational structure is it appropriate?
1) does the company take new 5) control
advantage of new technology 6) governance structure
to introduce improvised or
innovated product or services.
Organsiation
2) does the company existing it controls
capable of safeguarding it from any hacking
or leakage of coniendiatial info?
Process
1) efficiency
Technology 2) are the processes well connected so
people that there is not disruption.
1) competency level 3) customer friendly / convenient
2) attitude
3) motivated
4) sufficiency
i.e. is the company understaff
demotivation?
People Process
Organisation Change
to do so, we use Baldridge model that is more holistic than the earlier 2 model
The application of Baldridge model for achieving
and maintaining business performance
excellence
Performance excellence
• Baldrige Model
– Background
• A business excellence model that was named after the former US
Secretary of Commerce.
• Internationally recognised as both providing a framework to assist
the adoption of business excellence principles, and for measuring
the extent in which those principles have been incorporated.
• The model is holistic in that it focuses upon all areas and
dimensions of an organisation, and in particular, factors that drive
performance.
Performance excellence
• Baldrige Model
– Criteria for performance excellence framework
• Key questions
– What to change?
– What to change to?
– How to change?
– How to avoid failure in the change process?
Key Drivers of Change
• External
– PESTEL
– Porter’s Five Forces
• Internal
– Hard Issues
• Strategy, structures, systems, productivity, performance
– Soft Issues
• Culture, leadership style, behaviour, competencies, attitudes,
motivation
Key Drivers of Change
• Emergent change
– Change is continuous, unpredictable and constant adjustment to a
dynamic environment
– Flat organisations with bottom up approaches
Change Types
• Incremental
– Continuous progression
– Maintains equilibrium instead of achieving equilibrium
– Affects only one organisation part not the whole
– Effected through the current structure not with new
– Involves improved technology instead of breakthrough
– Involves product improvement rather than new.
Analysis of an organization’s culture using
Balogun and Hope Hailey’s contextual features
Type, Nature, Scope of Change
• Balogun and Hope Hailey
– Nature of Change: How big is the change?
• Incremental: Step-by-step
– Builds on existing skills, routines and beliefs
– More efficient
– Wins commitment
• Big Bang: Significant change
– In times of crisis: may be effective
– Need to respond fast
– Scope of Change: Will the business model change?
• Realignment
• Transformational
important
Realignment Transformation
Nature of Change
• Types of change
– Adaptation
• Incremental + Realignment
• No fundamental changes in organisation's thinking
– Evolution
• Incremental + Transformation
• Transformational change over a long period of time
Type, Nature, Scope of Change
• Types of change
– Reconstruction
• Big Bang + Realignment
• Requires overhauling of an organisation's policies but not
direction
– Revolution
• Big Bang + Transformation
• Fundamental changes to organisation's goals and beliefs
important
– Preservation: What aspects need to be preserved? scenario the strength of the company and they
should be retain them.
– Readiness: Is the workforce ready for change? if they are not ready, they will not
only reseat the change but also sabotage the effect made
by mgmt.
• Refreeze
– Occurs when the changes are taking shape and people have embraced
the new ways of working,
– Important that the changes are used all the time, and that they are
incorporated into everyday business so that employees feel confident
and comfortable with the new ways of working and a new sense of
stability would ensue.
Managing innovation and change management
organizational processes
The role of process in the organisation
Firm Infrastructure
Procurement
Primary Activities
The role of process in the organisation
proccess strategy
ll ll
is the process concerned complex & dynamic? is the process concerned of strategic
important to the company? profit centre
ll ll
As a rules of thumb, process that is both complex As a rules of thumb, process that is of
& dynamic should be outsourced strategic importance should not be outsources
Business Change
• Business Change
– Changing the way businesses work
– Requires
• Understanding of business capabilities (architecture) (SW)
• Understanding of the environmental changes (OT)
• Understanding implications of the options available in the
strategic planning process
– The need to implement the change by Alignment
• Business Change Project
– A project management process dedicated to managing the process of
Business Change.
Business Change
Business
Strategy
Business Business
Environment Architecture
Alignment
Business Process Change
• Paul Harmon (Born 1942)
Business Process Change Initiatives
• Levels of process change
– Process re-engineering
• Strategic level technique
• Rethinking of core processes
• Reconceptualisation of business process
– Process improvement
• Tactical level technique
• Incremental technique to existing processes that has few problems
• Problem solving approach
Business Process Change Initiatives
• Levels of process change
– Process re-design
• Appropriate for middle sized processes that require extensive
improvement or change
• Changed in job descriptions and the introduction of some
automation
• Between the two of the extremes.
Scope and focus for process change
• Harmon’s process-strategy matrix
– Helps in deciding how a process should be managed by considering
its strategic importance and complexity and dynamics.
– Strategic importance
• assessed by asking what would happen if the process is
abandoned.
• Considered as high strategic importance if it impacts the
business objective (Quality, cost control and reputation etc)
materially to the extent of threatening the business’ survival.
• Strategic importance can also be assessed by identifying the
key stakeholders who will be affected by the process.
Scope and focus for process change
• Harmon’s process-strategy matrix
– Process Complexity and Dynamics
• Process complexity is the difficulty of the process, which requires
more knowledge, skill, licenses and experience required to
carryout the activities.
• The more complex an activity is, the more controls are required as
complexities can lead to errors.
• Dynamics are the frequency of change required in the process.
• Suggest the course of action for a particular process given its
combinations of strategic importance and process complexity and
dynamics.
High Harmon’s Process Strategy Matrix
Straightforward, Static,
Straightforward, Static
Commodity
Valuable
Processes
Use automated ERP and/or
Automate to gain efficiency
outsource
e.g. Sales order processing
e.g. Payroll
evaluate
Ans : think of value chain model the improvement process
customer see value • Value-added analysis refer to identifying the activities that customer see value in them. therefore, willing
to pay for such activities. They should be retained as a result.
• Gaps and disconnects refer to removing the disconnection cause by separating the department as
seen in the functional structure which can cause disruption in the flow of
• Re-engineering information. to close the gap of disconnection we combine the departments into
one or include this department in the distribution list for report so that there is not
is similar to transformations disruption occur.
Simplification Re-engineering
Process
redesign
patterns
Process redesign patterns
• Simplification
– Eliminates redundant process elements
– Improves processes eliminating redundancies and duplicates
– Processes are validated by evaluating need of processes.
Process redesign patterns
• Value-added analysis
– Looks at the value chain and decide which one can be cut or
improved to save cost and add value to the customer
– Eliminates activities that does not add value
– Challenges necessity of elements of cost
– Analyses the cost vs benefit of the process and decides if it should
be cut or added. If there are more costs than benefits, why do we
need it?
– Evaluates value creation
– Involves moderate efforts, time and costs.
Process redesign patterns
– Focuses on integration of cross functional processes look for opportunities to combine the
processes to make it more simplify.
• Organisational Feasibility
– Availability of capabilities to manage the redesign options
– E.g managerial talent, no of managers needed, monitoring and control
systems, leadership skills, culture that facilitates change?
• Technical Feasibility
– Hardware, software, support services, technical manpower available?
• Financial Feasibility
– Benefit more than costs?
Feasibility of process redesign options
• Social Feasibility
– Employee attitude towards change
– Preparedness of employees to go for training
– Labour union cooperation?
• Environmental Feasibility
– Carbon emissions
– Waste management
– Energy consumption
Feasibility of process redesign options
• Major considerations
– Estimated time for implementation
– Employee attitude towards redesign project
– Manpower required
– Training needs of existing employees
– Availability of technical services
• Secondary considerations
– Investments required for hardware and software
– Estimated cost of technical services
– Estimated cost of implementation
not important
= approach
Acceptability
~ return profitability
~ reaction NVP i.e. since both NPV are positive, in slighting that both project are equally acceptable.
Step 1 calculate sensitivity analysis of initial investment = NPV / variable x 100%
if initial investment were to increase by 13%, NPV would become zero. conclusion: higher NPV is more safe
it can absorb more changes before drop to zero
step 2 payback period year conclusion: faster Payback period the better
– Project management triangle (any deviation in the scope can result in customer rejecting the completed project. )
+ quality (input) ~ material to be use in the construction
(output) whether the finish product as per advertised or written in the agreement
• Scope specification required by the project i.e. the diminution of the property (number of rooms)
– Quality & volume of project
• Time needed to complete the project ~ deadline
(a) • Cost ~ contract price
Cost
Time
Scope
funds are limited in an organitsation
therefore not all the request may
by respective department are entertained
refer to a document that contain justification as to why
priority are be given to those project
a particular project should be given priority over other competing projects.
are of greater importance.
in exam, examiner either ask you to suggest the methods to be included in the PID or alternatively ask you to evaluate
a PID prepared by a junior member in the organisational.
whichever, approach taken by the examiner, you must be familiar with the contents of PID
Project Lifecycle
Project Definition
Project Design
Project Development
Project Lifecycle
Delivery
Design
Development
Definition
• Definition of
– Purpose
– Objectives
– Scope
• Project initiation activities
• Analysis of requirements and methods
• Feasibility studies
• Project selection
Project Lifecycle: Definition
• Answers:
– What opportunities and threats does the project present?
– What are the objectives?
– What are its potential benefits, costs and risks?
– What is the overall implementation difficulty?
– Who are the key stakeholders?
Project Initiation
• Stakeholder Analysis
– Names and organisations of stakeholders
– Their roles in the project
– Unique facts about the stakeholders
– Their level of interest in the project
– Their level of power in the project
– Suggestions for managing relationships with them
Project Initiation
• Business Case
– The business case is used to propose a course of action to senior
management for their consideration
– Project is driven by a business case
– Project will maintain focused and prevents mission creep
– It is a document that answers:
• Why the project is needed?
• What will it achieve?
• How will it proceed?
Project Initiation see WhatsApp picture on PID
• Scope Statement
– Used to develop and confirm a common understanding of the project
scope
– Prevent scope creep (tendency of the project to expand)
– Usually several version and becomes more detailed as it progresses
– Should include a process for stakeholders to agree
– Contents
• Product or service requirements and characteristics
• Summary of all major deliverables
• The project success criteria
Project Initiation
• Kick-off Meeting
– Beginning of the project
– Stakeholders to meet to discuss future plans
– To clarify roles and responsibilities
– Project Champion to introduce Project Sponsor and Project Manager
– Manage any resistance
Business Case
• The business case is used to propose a course of action to senior
management for their consideration
• Part of project initiation process
• Purpose
– To obtain funding
– To compete resources with other projects
– To improve project management
• Planning
• Monitoring
• Controlling
– To provide information
• On how the project can contribute to the organisation capabilities
• To ensure that the investment is understood
Business Case not important
1. Introduction
2. Management summary
3. Description of the current situation Problems encountered that warrant the undertaking of the project
4. Options considered the problems can be overcome using more than 1 approach
5. Analysis of costs and benefits for each of the option that available.
6. Investment appraisals NPV analysis for each & every option / Payback period / Sensitivity Analysis
7. Impact assessment
8. Risk management overcome
9. Recommendations out of the many option, which one should the company pursue?
• Project Risks
– Possibility of occurrence which can affect project environment/
objective adversely
– Features
• Has negative impact
• Might be financial, operational or regulatory
• Arises due to uncertainty and interaction with environment
• Can be high/ medium/ low
Risk Management
• Project Risks
– Consequences
• Benefits are delayed or reduced
• Timeframes are extended
• Outlays are advanced or increased
• Output quality decreases
Project Lifecycle: Delivery and Control
the examiner would ask you to suggest the way in which the cost and benefits of a project can be
classified.
• Business case should be based on the ability to measure each cost and
benefit and estimate expected improvements.
• Purpose
– Identify the potential costs and benefits
– Understand how benefits can be realised
– Determine ownership of the costs and benefits
– Identify any issues that could delay the project or cause it to fail
– Produce an outline business case.
Identifying Costs and Benefits
• Costs and Benefits can be classified as
– Observable an be seen and felt but cannot be quanitfied
– Quantifiable
• Level of benefit can be reliably forecast (Increase in the number of
customers by a certain percentage)
• Can be measured before the change is actually made
by comparing the result pre and post the changes
the difference represent the consequences of the changes
Identifying Costs and Benefits
Cost Classifications
• Future Costs: Costs that have yet to be incurred by the business.
• Sunk Costs: Costs of resources that have already been incurred.
• Relevant cost: Future costs that will be changed by the decision.
• Irrelevant costs: Costs that will remain unchanged regardless of decision is
made.
• Avoidable Costs: Costs that may be saved by not adopting a particular
course of action.
• Unavoidable costs: Costs that cannot be saved whether the particular
course of action is taken or not.
Identifying Costs and Benefits
Cost Classifications
• Incremental costs/ differential costs: difference in total costs between the
new and existing levels
• Marginal cost: Additional cost of one extra unit of output.
• Opportunity cost: The value of the best alternative course of action that is
not chosen, or the opportunity cost of the resources. What best could
have been done with those resources?
Evaluating Costs and Benefits
• Payback Period
– Length of time it takes for an initial investment to be repaid out of the
net cash inflows from the project
• Accounting Rate of Return (ARR)
– Percentage return expected from an investment
• Net Present Value (NPV)
– The sum of the discounted value of the net cash flows from the
investment
• Internal Rate of Return (IRR)
– The discount rate that, when applied to its future cash flows, will
produce an NPV=O
Evaluating Costs and Benefits
Payback Period
Length of time it takes for an initial investment to be repaid out of the net
cash inflows from the project
Initial Investment
Payback Period =
Annual Cash flow
• Decision Criteria
– If the project payback is quicker than the company’s maximum return
time
– The quickest of the projects considered
Evaluating Costs and Benefits
• Payback Period
– Advantages
• Easy to use and understand
• Avoids problems of forecasting into the future where there is
uncertainty
• Offers liquidity insight
• Gives emphasis on early cash flow where greater certainty of its
accuracy
• Payback favours projects with quick returns
– Leads to company growth
– Minimises risks
– Maximises liquidity
Evaluating Costs and Benefits
• Payback Period
– Disadvantages
• Project returns may be ignored as cash flow after payback period
is not considered
• Project profitability is ignored (project may not pay early but a lot
in future).
• Time value of money is ignored
• Lack of objectivity on what is the minimum desired payback period
Evaluating Costs and Benefits
• Decision Criteria
– The ARR may be compared with the target return and if ARR is higher,
then the project is accepted.
– Projects that has the highest ARR will be chosen.
Evaluating Costs and Benefits
actual _ cashflow
PV of cash flow =
(1+ r)n
r = opportunity investing rate(in decimal)
n = number of years
Assumption: r is constant
• Decision Criteria
– Any project with positive NPV
– Projects with the highest NPV is chosen
Evaluating Costs and Benefits
é P ù
IRR = A + ê X(B - A)ú%
ëP - N û
NPV $
oversee the smooth running of the project by ensuring that the triple constraints are met
therefore, responsible for the project goals or objectives.
• Contents
– An overview of the project
– Project resources
– The detailed plan
– The evaluation plan
– The quality plan
– The dissemination plan
– The exit and sustainability plan
Project Plan
• Contents
– An overview of the project
• Aims and Objectives
• Overall approach
• Project outputs
• Project outcomes
• Stakeholder analysis
• Risk analysis
• Standards
• Intellectual property rights
Project Plan
• Contents
– Project Resources Plan
• Project management framework
– Organisation
– Reporting relationships
– Decision processes
– The role of the local committee
– Detailed Plan
• Project deliverable and reports
• When they are due
• The phasing of the work and any discrepancies
• Gantt Charts, Flowcharts etc
Project Plan
• Contents
– Evaluation Plan
• Listing of factors to evaluate
• Methods used to evaluate
• How success will be measured?
– Quality Plan
• Quality assurance procedures
– Dissemination Plan
• How the project will share outcomes and learning with
stakeholders with indications of
– Purpose
– Target audience
– Timing
– Key message
Project Plan
• Contents
– Exit and Sustainability Plan
• Explains what will happen to the project outputs at the end of the
project
– Knowledge
– Learning
• Responsibilities for closure
– Preservation
– Maintenance
– Documentation
Project Plan
3.0 Improve
1.0 Improve 2.0 Improve
Customers
products Customer Service
Communication
3.1 Set up
1.1 Understand
2.1 Staff Training customer relations
Customer Needs
department
subsequently, think of the ways in which the time, cost and scope could be monitors.
• Monitoring involves
– Comparing work done with
• Pre-established standards of performance
• Fixed milestones
• Quality attributes of project objectives
– Measuring performance
– Analysing the problems or deviations from planned
Monitoring of projects
• Cost monitoring
– Refers to comparison costs incurred with budgeted costs
(1)
– Any variances should be reported to project sponsor/ senior
management
– Tool for implementing cost control
• Earned value management
– Slippage should be compensated for by
(2) • taking cost cutting measures tendering / using substitutes that cost lesser
(3) • obtaining additional funding from senior management
applicable only if the additional cost incurred was
the result of customer making changes to the original scope
i.e. bill the project sponsor for the additional work done
(4) work-break down structures.
Monitoring of projects
• Time monitoring
budgeted time
• Project sponsor
• Project stakeholder
– Refers to quality of work done
– Quality measured by setting tolerance limits (2)
• Risk management
– Listing possible risks
– Rating risks based on severity and probability of occurrence
– Deciding countermeasures to reduce risk to acceptable level
• Specifying performance measurement standards
• Putting intellectual property rights clauses in outsourcing contracts
• Fixing
– Gates: Tests, reviews, performance measures
– Milestones: Check points, interim goals of project
Project risks, issues, slippage, changes
• Identifying Issues
– Poor management
– Poor planning
– Lack of control mechanisms
– Unrealistic deadlines
– Insufficient budgets
– Moving targets: project specification keeps changing
Project risks, issues, slippage, changes
2) the review too place several months 2) the review took place immediately
after the completion of the projects. after the completion of the project when
3) the objectives is to determine whether 3) the objective is to identify any slippage what
the desired business objectives as stated in that had occurred in order to find solution
the business case documents have been for them so that they wont recur in other
fulfilled. project.
Concluding a project
• Project Closure
– Step-by-step process for closing projects
– Defines the approval process for all project deliverables and how
records will be retained.
– To formalise the end of the project regardless of results obtained
– May be done after a provisional report to gather feedback before
Project closure report
Project Completion
• Project Closure
– Summary of outcomes
• Project objectives
• Summary of project results
• Original and actual schedule
• Original and actual budget
• Project assessment
• Continuing issues
Project Review