The practices of the Investment Management Standard can support a range of functions that organisations undertake to improve the way they operate and manage new investments. The options below have been selected as a useful mix of common functions the practices can support.
Shape a new investment - Shapes an investment that will deliver maximum benefit to the organisation
Prioritise investment proposals - Identifies the major problems a new investment must address and establishes the criteria it then uses to select the most sensible investments
Develop new policy - Defines the need for new policy and specifies the best strategic response
Monitor and measure the delivery of benefits – Provides a continuous focus on benefits during the implementation of an investment and determines whether the expected benefits were delivered
Evaluate a program of investment - Provides an understanding of whether the outcomes sought by a program of investment were actually achieved
Refocus an organisation to improve its effectiveness - Establishes a shared understanding of why an organisation exists, assesses its current effectiveness and identifies the changes that should be made to become more effective
Monitor an organisation’s outcomes - Establishes a shared understanding of why an organisation exists, identifies the measures and targets to be used as evidence of its success, and monitors its progress against those measures.
The only reason an organisation makes an investment is to obtain some benefit – either by solving a problem or taking a new opportunity. If we didn’t have a problem or wouldn’t receive any benefits, what would be the point of making an investment?
The New Zealand Government has adopted the business case as the way that potential investments articulate and justify the case for an investment. In common practice, business case documents have a strong focus on the solution that is planned to be delivered. However, they often fail to adequately describe the problem, explore the strategic options or specify the benefits that the investment will produce. The Investment Logic Map forms part of the Strategic Assessment phase. These practices have been used extensively since 2005. They have been found to:
- shape investments that are more strategic and drive better outcomes;
- establish the logic and key content of the business case;
- reduce the time and cost taken to develop business cases, and
- improve the chances that an investment will be funded.
This practice is suitable for investments of any type or complexity. Irrespective of the complexity they will all be required to follow the same ‘line of enquiry’ as they develop their respective investment stories. However, the number of informed discussions (workshops) required will be different. Very large or complex investments will require up to four workshops that will produce four documents that complement a business case. Small investments may be able to complete the investment story in just one discussion that would only produce an Investment Logic Map. This guidance may help you anticipate the number of workshops your investment might require.
The four steps involved in this practice are depicted below.
Four documents are produced through these discussions:
- Investment Logic Map (initiative);
- benefit management plan;
- strategic options analysis; and
- investment concept brief.
The workshops involved in this exercise are best held at two-weekly intervals. Experience has shown this provides sufficient time for the thinking of the previous workshop to be absorbed and is not so distant that the momentum is lost.
While the practices of the IMS were originally used for single initiatives, they are increasingly being used to establish the logic for programs of investment. This guidance will assist in deciding which type of Investment Logic Map is most appropriate to your need.
The Investment Logic Map (ILM)
Many potentially valuable investments are unsuccessful because:
- the core need for the investment was never really understood; or
- the people who were crucial to driving its success were not properly engaged.
Both of these issues are addressed here.
What questions are to be answered?
- What is the problem that is driving us to consider a new investment (both the cause and effect)?
- Is there evidence to confirm both the cause and effect of the problem?
- What benefits can the organisation expect in successfully responding to the problem?
Who should be there?
The key person is the investor – the person who has the business problem and will be responsible for delivering the benefits. The investor would bring together those people who understand the problem(s) and can provide the evidence that will validate that the identified problem(s) are real.
This workshop also provides an opportunity to include key stakeholders who will be important to making the potential investment successful.
The number of people involved will probably be between five and eight, depending on the nature of the investment but could be anything up to 15.
What preparation is required? None. It is expected that the people present will have adequate knowledge to support this discussion.
This uses the structure of an informed discussion of two hours’ duration and should be led by an accredited facilitator. Most time in the discussion will be spent identifying and articulating the problem(s). The problem(s) must be expressed in simple language and communicate both the cause and the effect. Problems must be supported by evidence.
When the problems have been agreed the discussion will then identify the benefits that could be expected to be delivered if the problem is successfully addressed.
In the 48 hours following the discussion, the decisions that have been made will be depicted and circulated among the participants for discussion and finalisation.
What is produced?
A single-page depiction of the problems and the benefits and their relationship to one another. This is in the form of an Investment Logic Map (initiative).
Links to supporting documents:
While this will have provided a clear articulation of the problem and the benefits that will be delivered by successfully addressing the problem, before deciding how to respond it is necessary to specify the evidence that is required to demonstrate that benefits are in fact delivered.
The Benefit Definition
In the past, benefit management plans were developed (if at all) after the solution was known. The development of the plan was an exercise in ‘how can we make the case that this is a good idea?‘.
To successfully respond to the problem it is first necessary to define what ‘success’ will mean. Without a clear understanding of the outcome sought how can a response be selected or different options be compared? (Further explanation of this is contained in the guidance, ‘Benefits shape solutions’)
This workshop will establish the basis for success of the investment in the form of the first draft of a benefit management plan, which will be amended as the investment is shaped.
What questions are to be answered
- What evidence will be needed to demonstrate that the identified problems have been properly addressed?
- What are the key performance indicators (KPIs)?
- Against the KPIs, what measures will be used?
- What is the current baseline, target values and timelines for these measures?
- Who will be responsible for delivering the benefits?
- How will the benefits be tracked and reported?
A Benefit Management Plan (BMP) is produced, which a short document that defines the pre-requisites for the delivery of each expected benefit, how the delivery of each benefit will be measured (KPI), and who will be responsible for measuring and realising each benefit.
Each time there is a need to consider a new investment there is also an opportunity to substantially improve the way things will be done in the future. Instead of just solving problems the way they have always been solved there is an opportunity to consider innovative approaches that are better and cheaper. This workshop aims to explore a broad range of potential strategic responses and decide which one is preferred.
What questions are to be answered
- What are the strategic interventions that could be taken to deliver the identified KPIs (and respond to the problem)?
- How can these interventions be packaged into a range of sensible strategic options?
- Which strategic option is likely to be the most suitable (on the basis of the benefits delivered, cost, timelines, risks and dis-benefits)?
Solutions are often developed with little knowledge of the organisation’s priorities, policies and strategies. It is only at the point of developing a business case as a precursor to obtaining funding that a ‘policy hook’ is sought to give the solution some credibility – this is the case of a solution looking for a problem.
The three previous workshops have established the need for an investment and the preferred strategic response. It is now necessary to specify a solution consistent with the strategic response – a case of a problem driving a solution.
What questions are to be answered
- What business changes will be needed to implement the strategic response?
- What assets (if any) will be required to support these business changes?
- Will the defined solution (expressed as the changes and assets) deliver the investment KPIs identified in the benefit management plan?
- What costs, risks, timeframes and dis-benefits are associated with the defined solution?
An Investment Concept Brief (ICB) is created in the third two-hour workshop that reviews and reshapes the solution depicted in the Investment Logic Map at the previous workshops. The likely timelines, costs, risks and dependencies associated with the solution are then extracted.
Service Logic & Investment Prioritisation (SLIP)
A Service Logic & Investment Prioritisation articulates the problems confronting the organisation or program in the mid-term and the criteria used to prioritise candidate investments. It then details how the candidate investments are prioritised. Most organisations operate an annual budget cycle where the need for new investment is considered, potential investments are identified, and decisions are made as to how the budget will be spent. The people charged with making these decisions sometimes do so without the benefit of a clear understanding of the challenges to the organisation or criteria to evaluate competing bids. In the absence of such criteria, investment decisions are often determined by ‘the loudest voices’.
Organisations that have used this practice have found it provides a range of benefits including:
- better engagement of senior executives and key stakeholders;
- improved articulation of the need for new investment and the establishment of strong prioritisation criteria;
- substantial reduction in the number of ‘irrelevant’ investment ideas;
- better investment solutions; and
- time and cost efficiencies.
There are five steps involved in this exercise as depicted below. Steps 1, 2 and 3 establish the need, the preferred strategic response and the criteria for selecting the best investments. Step 4 defines how the strategic response should be put into effect. When candidate investments have been shaped, step 5 uses the criteria developed earlier to prioritise them and make investment decisions.
Problem definition (program)
Benefit definition (program)
Strategic response (program)
Solution definition (program)
The physical output of these discussions is a ‘service logic and investment prioritisation’ (SLIP). While the practices of the IMS were originally used for single initiatives, they are increasingly being used to establish the logic for programs of investment. This guidance will assist in deciding which type of Investment Logic Map is most appropriate to your need.
Defines the need for new policy and specifies the best strategic response. The ability to identify the changing needs of society and develop policy that will best respond to these needs is central to good government. Policy is sometimes developed without a full and shared understanding of the need, without fully understanding the broader implications of the policy, or without having explored a range of innovative responses.
This practice will assist policy developers to:
- engage with those people who most understand the need for new policy;
- develop policy responses that are evidence based, innovative and practical;
- mobilise those investments that will best implement the intent of the policy; and
- establish the criteria to evaluate whether the policy, when implemented, is successful.
There are four steps involved in this exercise. These steps are the same as those undertaken to prioritise investments. While in that case the focus may be on the unmet service needs facing an organisation, the practice can also be used to develop policy within an organisation or across the whole of government.
Each step uses the format of the informed discussion.
- Problem definition (program)
- Benefit definition (program)
- Strategic response (program)
- Solution definition (program)
The physical output of these discussions is a ‘service logic and investment prioritisation’ (SLIP).
Monitor and measure the delivery of benefits. Provides a continuous focus on benefits during the implementation of an investment and determines whether the expected benefits were delivered. The only reason an organisation makes an investment is to obtain some benefit; this is therefore the prime consideration of investment decision-makers when considering an investment proposal. For this reason people seeking new funding for their proposed investment must articulate the benefits the investment is expecting to deliver.
Once funded, with the inevitable challenges and stresses that occur as the investment is implemented, the focus on benefits is often lost. This is exacerbated by the historic difficulty in measuring and tracking benefits and evaluating the real effectiveness of an investment.
The use of these practices will:
- drive more benefit from a funded investment;
- validate the success of a completed investment;
- provide lessons that will inform the shaping of future investments; and
- support better decision making.
There are two steps involved. However, they do assume that a benefit management plan was previously developed using the practice ‘Shape a new investment‘.
- Investment review
- Benefit reporting
The physical outputs of these steps are:
- amendments to or validation of the benefit management plan and the Investment Logic Map; and
- a benefit report.
Evaluate a program of investment. Provides an understanding of whether the outcomes sought by a program of investment were actually achieved. Government organisations continually develop new policy that aims to address an existing or emerging unmet need of society. Implementing the policy often requires a significant commitment of resources and takes a long time. There is always a risk that the original need has changed or the original interventions no longer make sense in a changed environment. This practice validates the ongoing need for the program and its design and, once complete, evaluates its effectiveness.
The knowledge gained in this exercise is then used to inform the development of future policy. This practice will assist those people involved in program evaluation to:
- understand the logic that formed the foundation of the investment program;
- direct or re-direct resources to ensure the policy intent is met;
- evaluate the overall effectiveness of a program; and
- provide new knowledge to those people responsible for developing policy.
There are two steps involved in this exercise. This practice assumes that a policy framework has been previously established using the practice Prioritise investment proposals.
Benefit validation (program)
The physical outputs of these steps are:
- as required, changes to the investment management documentation; and
- a program evaluation report that also lists the lessons learned for future program design and management.
Establishes a shared understanding of why an organisation exists, assesses its current effectiveness and identifies the changes that should be made to become more effective.
It’s easy for an organisation to keep doing the same things this year as they did last year and the year before. It worked then, so why shouldn’t it work now? But is the need the same now as it used to be? What outcomes is the organisation now creating and what value are these to government? What functions are being undertaken and how do these contribute to the outcomes?
This practice can be used to enable:
- the people responsible for steering an organisation to restate its mission and make the changes needed to improve its effectiveness and reset its direction; and
- teams to establish a strong sense of ownership of an organisation’s direction and empower them to work innovatively to that direction.
There are four steps involved in this exercise. An organisation does not need to complete every step to obtain value but may elect to do just the first, or steps 1–3. As each step builds on the previous one, they must be done sequentially. How far an organisation goes depends on what it is seeking to achieve.
As with all discussion of the IMS, the most important outcome is that the key people have come together, shared their thinking and agreed to the ‘investment story’. At the end of the discussion they are all ‘on the same page’.
The physical output of these discussions is a document titled ‘Organisation effectiveness’.
Establishes a shared understanding of why an organisation exists, defines the measures and targets to be used as evidence of its success and monitors its progress against those measures. Corporate plans, business plans, annual reports, monthly reports… organisations use a range of reporting methods to provide confidence to themselves and their stakeholders they are on the right track. These reports usually focus on things that can be easily measured but often provide poor evidence that valued outcomes are being achieved.
This practice will:
- support a cyclic program that validates whether an organisation or its parts are delivering benefits of high value to the organisation;
- help shape and support programs that enable an organisation to gauge the impact of any part of the organisation and then validate or adjust organisational strategies; and
- reduce the ambiguity of terms and measures used across an organisation in corporate planning and reporting.
There are four steps involved in this exercise. The first two steps define why the organisation needs to exist and how it is responding to this need. A set of measures and targets are then established to provide evidence of its success. The third step (benefit validation) is conducted as part of a corporate cycle to determine whether the outcomes are being delivered as expected. Step 4 is also a cyclic exercise that questions whether the responses taken by the organisation to deliver the outcomes are the most effective or if different approaches should be adopted.
Benefit definition (organisation)
Benefit validation (organisation)
Executed properly, this practice will bring together a diverse mix of people from across the organisation and should provide clarity of the purpose of the organisation to its employees and stakeholders.
Each facilitated session includes a pre-meeting or discussion, preparation, facilitation of the session, development and circulation of initial draft, and incorporation of feedback into final document/s.
A suitable room with an electronic whiteboard will be required for each session.
Numbers are best kept to between 6 to 8 participants. On the most part, participants should be the decision-makers and senior managers.