A key challenge for organisations in both private and public sectors is to realise benefits from any investment made.
Many agencies and organisations find that using a framework that manages investments is a way to successfully do more with less and deliver the intended investment benefits.
At Noetic, we have adopted the term ‘investment management framework’ to include the entire investment process, from understanding the business or policy problem through to harvesting the benefits identified.
Here are some simple steps to put investment management into practice:
1. Understand the problem
Before jumping to a solution, take the time to really understand the problem or to see if there is an opportunity.
It is important to be honest about the problem that exists – or even whether a problem exists at all.
Senior managers who use an evidence-based investment logic process will have a clearer idea about the problem they are trying to solve and where their limited resources should be used. They are most likely to prevent unnecessary expenditure because they understand their policy or business environment.
2. Identify the benefits
Many organisations fail to identify key benefits that will help their return on investment. Others poorly document the benefits they expect to achieve, making it difficult to assess them. If this happens, organisations will struggle to deliver on benefits with broad aspirational descriptions. It would also impede the delivery of any list of potential benefits made prior to solution building, some of which may have little or no applicability.
To help with the process, it is best to be specific about the benefits that are to be achieved. Focus on two to three key benefits instead of making a longer list of objectives that may yield only a small benefit. Once identified, ensure that the benefits are documented simply and consistently.
Ensure the benefits are measurable. If it cannot be measured, it is not a benefit.
Organisations with a shared language for describing benefits, clear key performance indicators, and identified targets will have the most success and greatest return for the use of their resources.
3. Decide on the best strategic response
Although organisations might understand the problem they face and know the intended benefits in solving these issues, it can be easy to overlook the full range of options available.
Sometimes, the best response is to improve something you already have or to partner with others for a greater shared outcome.
Organisations that consider the full range of business changes, including training and process improvement, will avoid the costly pitfalls of simply buying something new.
4. Systemise your priorities
Most organisations are faced with more investment proposals than they can afford but lack a way to organise their options or prioritise them. Often the loudest and most convincing voice at the table wins out, rather than the investment proposal that will provide the greatest return on investment.
Organisations wanting to invest in proposals that deliver the greatest public value will be more successful if they use a prioritisation model that is:
- Simple, easy to use, and able to cater for different complexity across investments
- Objective and based on transparent criteria
- Score-based but human-led to enable senior managers to bring their experience and business knowledge to decisions
- Weighted to reflect the relative importance of each prioritisation criterion such as strategic alignment, public value, investment risk, or capacity to deliver
The greatest value from investments occur in those organisations where senior managers are committed to and are consistent in using an agreed prioritisation model.
5. Be accountable
Typically, organisations understand that the investment decisions they make must return a benefit based on their agreed outcomes.
One way to maximise the outcomes is to have a benefits management plan with clear accountability. The plan does not need to be complex but it does need to assign specific responsibilities for benefits reporting and benefits realisation. Stakeholders, senior managers and teams all have a role to play in the investment management process. Each key individual needs a defined role and accountabilities in the overall process.
Accountability at all levels in an organisation will lead to better benefit reporting and benefits realisation. If there are shortfalls, in-flight adjustments can be made so that benefits can be delivered.
Successful organisations have a benefits management plan that enables real, measurable benefits achieved to be compared to the planned benefits.
