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Achieving Realistic Business Goalsby Defining Project Benefits
Julie BrignacVice President – Quality and Six SigmaBrambles Industries Limited
October 2006
Copyrighted Material – Brambles 2006
Discussion Items
Who is Brambles?
Who is Julie?
How does she know about project benefits?
What can she share with me to help me better capture benefits in my organization?
Copyrighted Material – Brambles 2006
Who is Brambles?
1875 Walter Brambles began his career in Newcastle, north of Sydney, Australia
1925 Private company WE Bramble and Sons Ltd first formed
1954 Brambles Industries Limited first listed in Australia
1958 Commonwealth Handling Equipment Pool (CHEP) purchased by Brambles from the Australian Government
1975 CHEP’s international expansion began in the UK by means of a joint venture between Brambles and GKN plc
1999 Records management established as an international business under a global brand, Recall.
2005 Unify its dual-listed companies structure by the creation of a new single holding company focused on its premium growth businesses, CHEP and Recall. All other businesses divested.
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Company Statistics
Headquartered in Sydney, AustraliaMajor offices in Orlando, Florida; Atlanta, Georgia and London
Dual Listed on Australian and London stock exchanges
Approximately 13,000 employees in over 45 countries
FY06 Revenues = US $3.5B
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Who is Julie?
Read the biography, BUT………….
15 years experience between
• DuPont• Honeywell (AlliedSignal)• Newell Rubbermaid (Sanford Brands)
Supply Chain Management, Sourcing, Operations & Manufacturing, Six Sigma
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How does she know about Project Benefits?
Early career in DuPont with Malcolm Baldrige focus on process improvement
– Engineering Finance & Project Management
AlliedSignal Honeywell– Learned Six Sigma and Lean
Supply Chain Operations career until……….
– Director, Six Sigma – Integrated Supply Chain (Honeywell)– Six Sigma Deployment Leader (CHEP) – VP Purchasing/Material Productivity (Newell/Sanford)– VP Quality & Six Sigma (Brambles)
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How does she know about Project Benefits?
Process excellence experience from DuPont
Early learnings supporting capital and maintenance projects in Finance
Manufacturing and Operations based experience driving Six Sigma and Lean excellence
Started driving (re)deployments to revitalize or institutionalize in organizations
Had to define each organization’s success around project benefits
– Depending on the unique key metrics
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IMPACTing Business Improvement
Equipment Pooling Document Management
Quality and Business Improvement
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What is IMPACT?
Give Brambles a single identity to describe our business improvement efforts and commitment to world class excellence
Involve ALL projects for all functions that drive improvement in the business
Include a new consolidated focus on project management skills
Standard methodology with varying toolsets, such as Six Sigma and Lean, depending on the area, activity and need in the business
Total Quality and Project Management Expertise – not just Six Sigma or LeanSigma
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IMPACTing Project Benefits
First………..UNDERSTAND your businesses main drivers and metrics
Develop a path and link your projects ultimately to those metrics
Second…………Encase your project benefits definitions around your organizational structure
– e.g., IMPACT involves all projects (6 sigma, Lean, IS, Just-Do-It) so validation and guidelines must address all of those items
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How can this help me?
Key elements to developing a good project benefit infrastructure
Develop a global council to define definitions and models
Develop company wide project benefit guidelines that link to your business’ KPIs
Develop a matrixed network of financial representatives ACCOUNTABLE for projects in their respective areas
Designate a global focal point for the network to drive the efforts and hold the businesses accountable
– Who has the final word!!!!!
Copyrighted Material – Brambles 2006
How can this help me?
More key elements to developing a good project benefit infrastructure
Define what a project is
Have a consistent Project Governance Process
Support an electronic central project repository that mirrors your governance process
Build a process that defines a reconciliation process of project benefits to the business’ bottom line (or not)
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Key Definitions
Benefits Assessment – the process of ensuring that benefits are included on project requests, that they are correctly and consistently calculated, and that the requestor understands the financial impact in the validation process.
Benefits Validation (tangible) – the process of reconciling project benefits from a completed project to the financials or metrics to ensure project benefit delivery.
Benefits Validation (intangible) – the process of reconciling project benefits from a completed project to business metrics wherever possible to ensure project benefit delivery.
Tangible Benefits – benefits that impact the financials, improve productivity, or change cash flow. All are measurable and can be validated and reconciled.
Intangible Benefits – benefits that may or may not be measurable or validated after project completion.
Copyrighted Material – Brambles 2006
Key Definitions
Baseline – prior year data that is used as a basis to compare data resulting from a completed project to determine the benefit delivered. In some cases, it may be applicable to use budget data as a baseline to forecast anticipated benefits.
EVA – the value generated by a business / project over and above the total cost of all capital it uses to generate that value. EVA = EBITA – Capital Charge
Completed Project – Project Sponsor has agreed that the project is complete and hasformally signed off.
Savings (Productivity) – Baseline data from previous year versus current year data
Example: if $10 is spent in 2003 and $9 is spent in 2004, there is a $1 cost savings, excluding any capital costs and/or charges. If there are capital costs and charges, then the productivity is defined as the net savings calculated.
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Benefit Categories – Tangible
Tangible Benefits – benefits that impact the financials, improve productivity, or change cash flow. All are measurable and can be validated.
Revenue Growth – Projects that improve operating margin due to incremental revenue from volume or price increases
Cost Savings / Reductions – Projects that result in year-over-year savings or cost reduction
Asset Productivity – Projects that improve the utilization of current assts (i.e., process or productivity enhanced so that capital expenditures for new assets are avoided)
Capital Expense Reduction or Working Capital – Projects that improve working capital (inventory, receivables, payables)
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Benefit Categories – Intangible Benefits
Intangible Benefits – benefits that may or may not be measurable or validated after project completion.
Risk Mitigation – Projects that reduce a business risk or threat and may or may not have a direct financial impact (can impact all benefit categories)
Cost Avoidance – Improvements are made that avoid additional costs to the current process, but do not take cost out of the process or have a direct financial impact (can impact all benefit categories)
Customer Satisfaction – Projects that improve customer satisfaction, but often have no measurable impact on financials or metrics
Controllership – Projects that deliver process improvements or other improvements that have no measurable benefits
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Project Benefit Guidelines
Purpose
The intent of this document is to give Quality Project Leaders and Financial Approvers in all Brambles business units guidelines to understand project benefit categories, the process for assessing benefits in a project, and the calculation of project benefits.
These guidelines apply to all Brambles Quality projects worldwide.
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Sample Guideline Contents
Definitions
Project Benefits Process & Roles
General Rules
Benefit Categories & Calculations
Tools & Templates
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Project Benefit Network
To provide project resources specific contacts who are responsible for validating their project benefits per the guidelines
Roles and ResponsibilitiesProject Governance Process should dictate a project benefit assessment at:
– Charter stage Build initial benefits model– Periodic auditing throughout project to clarify benefits– Final signoff by Finance of validated benefits
• Reconciliation to P&L, if applicable
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Sample Project Benefit Network
Region Person Position Assists With: Final ApproverUS Mickey Mouse CFO
Minnie Mouse Dir, F&P HR, Legal, Mktg, Finance XDaisy Duck Dir, Sales Finance Sales, Customer Svc
Donald Duck Dir, Ops Finance Ops, Log, Asset MgtGoofy Dir, Finance IS
EU Pluto CFOChip Dir, Finance All Functional Areas X
AME Dale Dir, Finance XCinderella Financial Analyst All Functional Areas
AP Snow White Dir, Finance XGrumpy Com'l Mgr All Functional Areas
CA Sneezy Dir, Finance All Functional Areas XLATAM Bashful Dir, Finance All Functional Areas X
PROJECT BENEFITS NETWORK
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Global Focal Point
In Brambles, there is a Director – Project Benefit Controller that reports to corporate Quality organization
If your organization is not corporately centralized, then suggest building a global council with rotating leadership every 18-24 months to keep the network accountable
ACCOUNTABILITY, ACCOUNTABILITY, ACCOUNTABILITY
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Define what a project is
If you have 30,000 employees in your company, you have 30,000 different definitions of what a project is
Important to clarify because…….
Determine whether an effort needs to travel through the governance process
– Hence requiring benefit validation
Also helps determine which projects go into your central project repository
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Consistent Project Governance Process
ProjectCharter
BenefitAssessment
ProjectApproval Project work
(controls & tollgates)Project
Complete
Generic Project Cycle
Reporting and Analysis
Trackand
ReportBenefits
Where Does Project Benefit Leadership Support?(And, what’s in it for me?)
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Consistent Project Governance Process
ProjectCharter
BenefitAssessment
ProjectApproval Project work
(controls & tollgates)Project
Complete
Generic Project Cycle
Reporting and Analysis
• Guidance withdefining benefits
• Ensure benefitsare included and calculated
• Track andreport benefits
Trackand
ReportBenefits
Assist withpotential changesin benefitsestimate
Copyrighted Material – Brambles 2006
Track and Report Project Benefits
ProjectCharter
BenefitAssessment
ProjectApproval Project work
(controls & tollgates)Project
Complete
Generic Project Cycle
Reporting and Analysis
What Does This Really Mean?
Trackand
ReportBenefits
Copyrighted Material – Brambles 2006
Track and Report Project Benefits
ProjectCharter
BenefitAssessment
ProjectApproval Project work
(controls & tollgates)Project
Complete
Generic Project Cycle
Trackand
ReportBenefits
Category4
Benefits Submitted
Category3
BenefitsAssessed
Category2
Benefits Cultivation
Category1
ActiveSavings
Phases Categorized ….
Copyrighted Material – Brambles 2006
Track and Report Project Benefits
ProjectCharter
BenefitAssessment
ProjectApproval Project work
(controls & tollgates)Project
Complete
Generic Project Cycle
Trackand
ReportBenefits
Category4
Benefits Submitted
Category3
BenefitsValidated
Category2
Benefits Cultivation
Category1
ActiveSavings
10 projects 5 projects 30 projects 15 projects$100 k benefits $ 500 k benefits $ 2.5 m benefits $ 3.0 m benefits
Projects Tracked Throughout the Pipeline …
Copyrighted Material – Brambles 2006
Track and Report Project Benefits
ProjectCharter
BenefitAssessment
ProjectApproval Project work
(controls & tollgates)Project
Complete
Generic Project Cycle
Project Reporting Delivered
Trackand
ReportBenefits
Category4
Benefits Submitted
Category3
BenefitsValidated
Category2
Benefits Cultivation
Category1
ActiveSavings
10 projects 5 projects 30 projects 15 projects$100 k benefits $ 500 k benefits $ 2.5 m benefits $ 3.0 m benefits
# Projects submitted X# Projects validated X# Projects WIP XX# Projects complete XX
Monthly benefit $ XXProjected benefit $ XX
CHEPRECALL
BRAMBLES
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Electronic Project Repository
RequirementsWeb-based access for all business unitsLifecycle management for all projectsEstimating model, particularly for capital intensive projectsRobust reporting including project dashboard, including benefit analysis12-month forecasting of project benefits for active and pending projects
MUST have governance process in place prior to systemA system will not drive your processThe system must MIRROR your process and meet your requirementsDon’t think of the system as antidote for your lack of processes
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Financial Reconciliation (or not)
Significance of building a model and process to reconcile the benefits to the bottom line
Refer back to definitionsTangible vs. IntangibleNot the same thing as Hard vs. Soft benefits
Key things to consider:Big arguments can occur regarding benefit buckets!
– Emphasizes importance of guidelines, global focal point(s) and reconciliation to P&Ls
It’s ok if everything doesn’t fall to the P&L– But you then understand better what does fall and what doesn’t
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Svgs Compared to
Plan/Fcst
Non Financial
Financial (Reduce
non-value added)
Financial (Cost
Avoidance) Cost Revenue CostCash Flow
Increase Volume XIncrease Price XDecrease Direct Exp XDecrease O/H Exp XReduce Inventory X XReduce Receivables XIncrease Payables X
Risk Mitigation Mimimize Risk XReduce Planned Costs XAvoid Unplanned Costs X
Customer Satisfaction Increased Sat. Cust. X XControllership Process Improvement X X
Revenue Growth
Cost Savings / Reductions
Asset Productivity / Capital Expense / Working Capital
Cost Avoidance
Savings Not Visible in Financial Statements
Savings Compared to Prior Period Actual Reporting
Project Opportunities Expected Productivity Result
Quick Reference Guide
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Summary
Define your organization that will be benefit assessed
Have a central governing council and focal point for project benefits
Important to have project benefit guidelines and a network corporate wide so everyone talks the same language and reports the same way
Let the process govern the system, not vice versa
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THANK YOU!