Imagine your programme is pickling a shark. Do you know what the shark is worth?
This is one of those analogy things so please suspend your disbelief and work with me. It should all make sense in the end. I’m going to apply some ideas from the World of Art to the world of intangible benefits, the ones that don’t result in an easily counted bag of cash.
As a Benefits Manager, part of my job is to work out if / why Plan A is the best use of our scarce resources, what makes it better than Plan B and all the other plans we could spend on. This isn’t helped when there is no common understanding of Plan A’s added value, how much its benefits will outweigh its costs.
Part of the reason we struggle to value any intangible product / service is because we don’t think about the market where it’s bought and sold. Our programme is going to create something of value, a solution that realises benefits worth more than its costs. Think of it as our Masterpiece. It’s a work of art, not a commodity. Its value will be set by a select few stakeholders in the art market, not by hundreds of traders in the stock market.
It’s bespoke, complicated and unique. Other programmes’ outcomes may be similar, but they are not exactly the same. It’s not so much one barrel of oil out of millions, it’s more like Damien Hurst’s big dead shark in a tank of formaldehyde. It is considered an exemplar of artistic skill (by the people who like that sort of thing). It’s made from relatively cheap materials, so there’s no scrap value worth talking about. If it succeeds, then it’s a priceless art. If not, it’s worthless junk. It’s original and outside any established school or style so there’s no benchmark against which to compare it.
Like the dead shark, it could be worth £millions, but it will depend on who you ask and how you ask them. Pricing your programme’s intangible benefits is like selling a work of art, so let’s look at our stakeholders in some different art markets. Our market for the Masterpiece consists of four stakeholder groups:
- The one client who wants to buy the Masterpiece and has the funds to pay for it
- One or more suppliers who want to build the Masterpiece
- Consumers who will use the Masterpiece or the system that delivers it (e.g. our staff and their customers)
- Influencers who have opinions about the Masterpiece and the alternative ways to spend the money
The value of the Masterpiece will be determined by these four groups. It’s going to sit at the balance point between each group’s understanding of value and their influence / power over the others. The market is where they come together to set the price. So, from an art world point of view what sort of markets could apply here?
The Private Commission
This deal is done in private. The client wants something personal and has money burning a hole in their pocket. They find a supplier (artist) they like, and a deal is done between them. No-one else is involved. There are no consumers to work the system between client and supplier and no influencers to affect the price. There is only one benefit, the client’s happiness. The client says that their satisfaction is worth the price they paid.
The Art Gallery
This time, the client may not have a single supplier in mind and goes shopping for an artwork. The consumer is the gallery owner who introduces artists to buyers, brokers the deal between them and takes a commission from the sale. The supplier is our artist with an established reputation for high-class modern art. Influencers are a small community of gallery owners, art critics and competing art buyers with money to burn.
If it’s not a private sale, say the client is buying something to put in a public gallery, then influence expands to people with an opinion on how the client is spending their public money. Or at least, to those people whose opinion the client cares about. The client acts in anticipation of what these stakeholders will think and do.
The client still decides the value, but that decision is heavily influenced by their understanding of the competition. “I want it because I want it. If I don’t pay £££s, then I will lose it to someone else. I’m comfortable paying £££s. And if it’s not my money, I think I can justify my decision to the press, public, auditors, etc.”
The Online Auction
This time, the sale has been advertised world-wide so many more influencers know the art is for sale. Everyone can see the value change in real time as the bids come in. The client still decides the value, but this time they’re better informed. “I paid the market rate for it (which was a lot) but I’m comfortable paying that price.” Or “Bidding stopped much quicker than I expected. I got a bargain…or maybe everyone else knows something I don’t.”
The Street Market
Our supplier, the artist decides to ditch the bourgeois art world and take his work to the people, so he hires a market stall for the day and sets up his masterpiece.
On a busy Saturday there are lots of people passing by who will see his work, but no motivated clients with huge budgets looking for art, maybe the occasional tourist with a bit of spending money. There are certainly lots of influencers around who are happy to voice their lay person’s opinion on the merits of modern art and this piece in particular. Assuming it actually sells, the price will be nowhere near what the gallery could have got.
Even though we’re talking about the same work of art, the different markets involving different stakeholders come up with vastly different values. The same applies to the intangible benefits of any project / programme. The stakeholders, their beliefs, needs, expectations, resources and power all affect the value they put on the results.
The Programme as Art
Very few Benefits Managers get brought in at a programme’s inception to advise on the wisdom of the investment. Usually, the core decision has been made long before the costs and benefits get analysed. The programme sponsor / Senior Responsible Officer, the client in my story wants something big and striking, they’ve cleared the space for it and they’re ready to spend. They’re toying with buying the business equivalent of a pickled shark and want to know if it’s worth the asking price.
What market forces will affect their decision? Think about the context of the programme and the stakeholders involved, its governance and evaluation arrangements. Who are the four stakeholder groups and how do they interact to determine the programme’s value?
It could be a privately commissioned piece where the sponsor has a requirement to meet and the cash to spend. They make a deal with the supplier and don’t involve anyone else. They decide if it’s all worthwhile. This is only going to happen for the small stuff within spending limits. Unless you own the company, there will be rules to stop you making big private deals.
A gallery sale involves the supplier’s sales team in bringing sponsor and supplier together, “What you need is a big dead shark. And we know just where we can get you one.” Once again, the sponsor sets the value. This time though, including the sales team will add a bit to the cost and trim the value.
Most likely, it will be an auction sale, a job put out to tender within procurement rules. More stakeholders are involved, but they’re all professionals and specialists. They may set boundaries, “You cannot spend more than this. That supplier is not acceptable…” Governance and evaluation influence the choices made and so affect the value. It’s no longer the sponsor’s sole opinion.
The street market may be a supplier with a solution in search of a problem, “I’ve invented this wonderful app, who wants to buy it? Anyone?…” More likely, it’s supplier and client working together to spread the cost, risk or blame for a choice they’ve already made. “See, it’s not just us. We showed it to everyone and lots of other people thought it was good and wanted a bit of it.”
At the end of the day, the purpose of Benefits Management is to lend an air of rationality to the exercise of power, and all benefits are a result that a stakeholder perceives to be worthwhile. When it comes to the intangible stuff, there are no simple right or wrong answers, and stakeholder perception is everything. We bring in the rationality by considering the key stakeholders, how they interact and the context in which they operate together, i.e. their market. And hopefully, we get them to agree on a reasonable value for their benefits.