In this interview with Ross Foti for the Project Management Institute PM Network Magazine Brian Coutanche explains the role of the business case.

PMI: What is the number one reason to draft a formal business case? Why should executives spend the time for this formality rather than leading by their gut?

The business case sets out the drivers for a project. When used effectively it provides a context for the executives to test out and confirm their views and then communicate that thinking to both those who will be responsible for making it happen and those who will be affected. In this sense one could therefore say that it is not the business case so much as the process of drafting it that is important.

PMI: There are a variety of different ways to approach business case writing—what do the best methods have in common? The worst? Can you give a real-world example with details?

The way in which business case is developed and presented will be sensitive to the organizational culture - some organizations will have highly formalized business planning processes while others may be quite informal. Whatever the context the business plan must engender the support of those with the necessary authority and resources to ensure the project’s outcome. Identifying and spending time with these players will help ensure that the case resonates with their perspectives. Beyond this a persuasive business case will usually relate project outcomes to the organization’s strategic aims (whether or not these are formally articulated). Decision takers need clear information that can be easily assessed. In many cases the outcomes are not easily quantified financially but the decision taker still needs to be able to make a judgment and a skilfully prepared case can help with this. The “value propositions” prepared by management consultants illustrate how the business case can be used to focus attention on these key issues.

PMI: In your experience, what are the major components of a winning business case and how does each contribute to the proposal? What is the best way to approach each component? How long does the process take and how many resources are involved?

Decision takers must prioritize projects in response to a changing business environment. The components of the business case should reflect of the information needed to do this. Particular attention must be given to presenting the intended outcomes in a way that allows the decision taker to compare with other priorities and the required resources must be identified. Whilst outcomes may be quantified in financial terms this needs to be handled carefully to ensure that the numbers are not misleading. For example if the rationale is about improving customer service to nurture loyalty the business may not have any precedent for expressing this strategic outcome in simple financial terms – yet some way must be found to draw out its significance. This is where the perspectives and judgments of the sponsors come into play.

In terms of resources the size of the task is related to the complexity of the project, the number of people that need to be consulted, the extent of the available information and the formal processes expected in the organization.

PMI: Have you ever drafted a business case and decided against a project? Can you give a concrete example/anecdote? What are the key factors that would make you pass on a proposal?

Just putting the business case together can be illuminating – the discipline of thinking through the benefits and the resource implications will sometimes show that what had been assumed to be a high priority is in fact less compelling. For example working with a private bank I put together a portfolio of projects. Once the business cases were all on the table and ranked in relation to their strategic impact it became clear that the current priority (a portfolio management application that was been vigorously championed by a key decision maker) actually ranked some way behind other projects. Because these cases had been put together with the key decision takers in a transparent process the new priorities were agreed by all parties.
More generally, organizations are always faced with limited resources and have to judge between projects against a changing business background. So the key factors are the relative merits of the alternatives and the linkage to tactical and strategic drivers.

PMI: When drafting a business case, how can you capitalize on successes or avoid failures of previous related projects? When leading a company in a new direction—either further defining a niche or refining strategic goals—is the business case more involved because you don’t have the benefit of history?

Lessons can often be drawn from previous projects – both successes and failures and where relevant these will inform the business case. But clearly greater care is required if you are heading into uncharted territory. This factor should come through clearly in the preliminary risk assessment and will flow through into practical implications for the way in which the project is structured and resourced.

PMI: How do you decide the level of acceptable risk vs. reward? How do you build risk management into the business case? What about accountability?

Risk is an important factor in the decision process. Project management methodologies provide some cues to help identify risks but it is unlikely that all the key risks can be quantified rigorously. The challenge for the business case is therefore firstly to identify all significant risks and secondly provide information on them but ultimately it will almost certainly be a judgment call for decision takers on where the project lies on the risk reward curve. Even if these judgments are written into the business case the project manager should be verifying them with the decision takers.

PMI: How do project managers fit into the equation, since they are the ones who will actually be delivering the effort? Should they be included in the business decision?

Whilst the project manager may do much of the groundwork in putting together the business case she will need to engage with others to obtain or verify the underlying business perspective and the significant judgments that are being made. The intimate involvement of the project manager should go a long way toward ensuring that she will be equipped to take day to day decisions on the project that reflect that context and effectively guide the project team.

The project manager may have a role in the decision process depending on where she sits in the organization and the perspective she is able to bring. Programme managers will be able to contribute to prioritization decisions based on their detailed knowledge of the projects and business experience. The key requirement is to ensure the right people make and then follow through the decisions.

PMI: Do project management skills help when writing a business case? If so, how?

A systematic, structured approach will help ensure that the all the elements are given appropriate attention. Good communications skills will help ensure that the business plan captures the key issues and metrics against which the project will be measured. Reporting skills will help ensure that the business case is well presented.

PMI: How do you get the right information from the key players at the right time? Are office politics involved? How do you cultivate a culture of openness concerning successes and failures?

Getting the right information from key players comes down to recognizing who the key players are and establishing effective working relationships with them. Interpersonal skills are important here and so is an awareness of organizational politics. There are tools that the project manager can use to help identify the key players, since these will not necessary correspond exactly to the organizational chart. These are part of the wider skill set needed to manage organizational change that complements classical project management skills.