Process Improvement
Guidelines
with
Project Proposal Template
Contents
Project Improvement Guidelines .................................................................................................................. 1
Step 1- Define the Problem ................................................................................................................................................. 1
Step 2 – Research Causes .................................................................................................................................................. 1
Step 3 – Analyze Alternatives.............................................................................................................................................. 2
Step 4 – Design Solution ..................................................................................................................................................... 4
Step 5 – Develop Recommendations .................................................................................................................................. 5
Step 6 – Implement Project ................................................................................................................................................. 7
Step 7 – Measure Performance........................................................................................................................................... 8
Process Improvement Summary ............................................................................................................................................. 9
Project Proposal Template ......................................................................................................................... 10
Section 1 – Background And Problem Statement ............................................................................................................. 10
Section 2 – Current Environment ...................................................................................................................................... 11
Section 3 – Proposed Environment ................................................................................................................................... 13
Section 4 – Implementation Scope .................................................................................................................................... 14
Section 5 – Estimated Costs ............................................................................................................................................. 15
Section 6 – Expected Benefits........................................................................................................................................... 18
Section 7 – Financial Analysis ........................................................................................................................................... 22
Section 8 – Competitive Impact ......................................................................................................................................... 24
Section 9 – Business Alignment ........................................................................................................................................ 25
Section 10 – Risk Assessment .......................................................................................................................................... 26
Section 11 – Key Assumptions .......................................................................................................................................... 27
Section 12 – Major Issues ................................................................................................................................................. 28
Section 13 – Alternative Solutions ..................................................................................................................................... 29
About Us ................................................................................................................................................................................ 30
 2009 Peter DiSantis Consulting Associates, PLLC
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Process Improvement Guidelines
Project Improvement Guidelines
Step 1- Define the Problem
During this initial step, the basic groundwork for all further analysis is established. The key activity at the start
of the business analysis process is to clearly understand the real problem at hand and determine what the
desired result should be. At this point, the overall scope of analysis should be agreed upon. The objective of
this step is to complete a clear problem statement, which includes two parts:

a description of the current problem

a definition of the desired state or result
In order to complete the problem definition, data must be gathered to support the assessment of the current
condition. in many cases, weak problem statements stem from a lack of meaningful information about the
current environment or the performance of that environment. If not enough meaningful information is available,
develop a plan for gathering enough facts to validate that a real problem exists.
A clear problem statement helps to focus the efforts of those trying to solve the problem and will help
management clearly understand the scope and magnitude of the issue at hand. Byknowing both what the
problem is, and the desired result, it becomes much easier to identify obstacles that must be overcome in order
to achieve an effective solution.
There are several points that will help you develop a clear description of the current problem:

Be as specific as possible

Do not try to define the causes of the problem

Don’t include solutions or potential solutions

Keep it focused—the scope should not be too broad
Similarly, there are several points to keep in mind when describing the desired state or result:

Be clear and unambiguous

Use measurable terms - so that an independent observer would be able to confirm that the
desired state or result had been achieved
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Process Improvement Guidelines
There will be times, however, when defining specific results may be premature. For example, you may be
assigned to find the “most cost-effective” solution to a certain problem. In these situations, defining the
expected outcome in specific, measurable terms is not feasible. You don’t know if a ten percent reduction in
overall cost per unit is either achievable or optimal. In this case, the definition of measurable results (i.e., a
12% reduction in cost per unit) is delayed until Step 4, when more detailed cost and benefit information is
available .
When the problem statement is complete, get it approved by your manager before proceeding. It can save you
valuable time spent solving the wrong problem. It is much more efficient (and less frustrating!) to refine your
scope and objectives now, rather than after you’ve completed your research and analysis.
When solving capacity related problems:

Clearly define the demand

Forecasts

Units per period

Define current resources and capacity

Alternative solutions

Estimate resources required to meet demand
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Process Improvement Guidelines
Step 2 – Research Causes
Once the problem statement has been approved, more information must be gathered to fully understand the
nature and extent of the problem. There are many sources for information that can be used during this phase
of business analysis including observation, interview, questionnaires, data collection and group brainstorming
sessions.
Identify as many potential causes of the problem as you can. Then, use thorough investigation to confirm or
eliminate specific causes. if you find that you cannot identify causes for the problem, the problem definition
may not be clear enough. If so, go back to step one and revise your problem statement.
Once you are comfortable that you have identified the actual cause, or causes, of the problem, begin the
search for ways to either eliminate or reduce the problem. There is no “one way” to find solutions. Developing
ideas for potential solutions can be based upon previous experience, interviews, research, and looking for
similar or parallel problems/solutions elsewhere. Use whatever imagination and ingenuity you can muster to
identify potential solutions.
In some cases, use of group sessions is an excellent way to quickly derive lists of potential solutions. These
can be as simple as “brainstorming” sessions where multiple ideas are gathered quickly and without critique or
analysis, or more formalized approaches that utilize trained facilitators.
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Process Improvement Guidelines
Step 3 – Analyze Alternatives
As soon as the group of potential solutions has been identified, the next step is to begin the evaluation of each
alternative. The first activity is to determine how you will evaluate the alternatives. List those factors that will
differentiate a good solution from a bad solution. Some potential evaluation factors include:

Business Requirements—does the solution fulfill the stated requirements?

Effectiveness - how well will it solve the problem?

Customer Satisfaction—will the customer (internal or external) be satisfied?

Quality—will the results meet or exceed expectations?

Time—how long will it take to implement and to receive fun benefits?

Acceptability—will the solution be accepted or will compliance be an issue?

Organizational Scope—is the solution within the control of the sponsoring group?
In many cases, an evaluation matrix can be a valuable tool to present the results of the alternatives evaluation
process. In the example below, the columns were completed using descriptive phrases and the factors were
weighted to give greater value to those areas that have the greatest impact on the business.
Weight
Alternative 1
Alternative 2
Alternative 3
Factor 1
High
Very thorough
Limited
Thorough
Factor 2
Medium
Strong
Strong
Weak
Factor 3
Medium
70% requirements
met
Meets all
requirements
Meets all
requirements
Factor 4
Low
Not Available
Yes
Yes
Etc.
Etc.
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Process Improvement Guidelines
The matrix can also be completed using numerical weights and rating scores. For example:
Weight
Alternative 1
Alternative 2
Alternative 3
0-5 scale
0-10 scale
0-10 scale
0-10 scale
Factor 1
5
9
4
7
Factor 2
3
8
8
3
Factor 3
3
7
10
10
Factor 4
1
0
8
8
90
82
81
TOTAL
Etc.
The evaluation of each alternative should be objective. Do not become pre-sold on any solution prematurely.
Try to view each alternative solution from both sides - why would this alternative be great? What might make
this solution fail? Use the experience and advice of other knowledgeable resources wherever practical.
As additional information is gathered and a fuller understanding of the alternatives emerges, continue to
develop a clear picture of the alternatives. Each alternative should be clearly described so that they can be
more easily understood and reviewed by others.
Based upon the evaluation criteria established, select two or three primary alternatives. It is best not to limit
yourself to a single alternative at this point because you may not know enough yet to make a definitive
selection. It is advisable to have at least one alternate (and acceptable) solution in case you uncover an
insurmountable problem with the first-choice alternative. Including too many alternatives, however, will expand
the work required to complete the rest of the analysis.
 2009 Peter DiSantis Consulting Associates, PLLC
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Process Improvement Guidelines
Step 4 – Design Solution
Using the primary alternatives developed in the Analyze Alternatives step, it is time to drive the solution to an
additional level of detail. During this step, a clear and detailed description of the proposed environment is
prepared. It should include business functions, process flows, and organizational roles and responsibilities,
requisite staffing levels, automated system requirements, equipment configurations, facilities requirements and
any other significant component of the overall solution.
Selection and recommendation of the “best” alternative Will be dependent upon the information that is
gathered up to this point. That selection is based primarily on four factors: financial performance, competitive
impacts, alignment with business directions and risk.
Of the four criteria, financial performance is normally given the highest relative weight. in order to properly
document the financial considerations, three major questions must be thoroughly answered:

What are the one-time costs required to implement the solution?

Once implemented, what will it take to support the solution on an ongoing basis?

What financial benefits will accrue once implementation takes place?
Chapter Two, Preparing 7he Project Proposal, provides more specific guidelines on how to estimate costs and
benefits, as well as providing a helpful checklist to ensure cost or benefit dollars are not overlooked. Use
appropriate resources or “experts” to help you gather the cost and benefits information—you don’t need to do
all the groundwork yourself.
You must also develop a high-level plan for implementing the solution. The detailed implementation project
plan is beyond the scope of the business analysis process and is usually assigned to the implementation
manager to prepare. But, a high-level plan is necessary to provide the timing information needed to complete
the financial analysis, i.e.

When will the equipment need to be purchased?

How soon will the expected benefits begin to accrue?

How soon will full benefits be achieved?
As you develop the high-level project plan, look for logical ways of breaking the work into manageable pieces.
Whenever feasible, find ways to implement those pieces of the overall solution that provide the largest benefit
first For large projects, you should include multiple management progress and funding reviews in your plan.
In addition to developing the financial analysis of the proposed solutions, you will be expected to assess the
primary alternatives according to the other factors identified above. More detail on these factors is included on
the next page and in Chapter Two.
 2009 Peter DiSantis Consulting Associates, PLLC
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Process Improvement Guidelines
Step 5 – Develop Recommendations
Once the best solution has been developed, it needs to be packaged into an appropriate project proposal to
submit for management approval- Since there are so many different types of projects at The organization, the
Company has adopted no specific formats for project proposals. There are, however, common topics that will
help define the problem, the solution, expected impacts and alternative solutions. This information should be
provided in every proposal. Chapter Two, Preparing The Project Proposal, describes each topic, or section, in
more detail.
The level of management approval required will vary with the size and scope of the proposed project. An
overview of the funding process for large projects (those over $100,000) is included in Chapter Three, The
Project Review and Approval Process. Smaller projects will follow somewhat different procedures—check with
your manager.
Management uses many factors and decision criteria to approve projects and to allocate funds between
competing projects. For those projects that require Executive Steering Committee review and approval, four
primary factors are used:
1) Economic Cost/Benefit - the expected impact of the project on corporate financial performance.
This includes net present value, return on investment and payback period.
2) Competitive Advantage - the impact that the project has in either gaining a competitive advantage
or in eliminating or reducing a competitive disadvantage.
3) Business Alignment - including:

Strategic Match - the degree to which the project objectives support the stated
strategic directions for the Company or business unit.

Management Information Support - the ability of the project to contribute meaningful
data or information that can be used to more effectively monitor performance and
manage Company activities.

Technical Compliance - an assessment of how closely the proposed hardware,
software and networks match the future technical plans established for The
organization.
4) Project Risk - an assessment of both business and technical risks faced by the project. This is an
indication of the potential that the project will be unsuccessful in achieving full stated benefits or in
meeting established budgets.
Conduct a thorough review—before finalizing the proposal, it is a good idea to have a draft of the proposal
reviewed by experienced analysts or managers. Have someone play a “devil’s advocate” role—by anticipating
the tough questions, and developing specific answers to those questions, the quality and credibility of the
proposal is increased significantly.
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Process Improvement Guidelines
Prior to seeking management approval, make sure that you have a strong commitment from the people
responsible for implementing the project and from those accountable for realizing the stated benefits. For major
responsibilities, make sure that you know who will be accountable. Do they know what they are being asked to
do? Have they agreed to do it?
As benefits are derived and estimated, ask yourself—in which account and in what department will this dollar
benefit show up? Get that department to “sign up” to deliver those dollars. Defining how actual benefits will be
measured should be included as part of the process of obtaining commitment.
Remember that not all good projects get approved and funded. The organization has a limited amount of
resources that can be invested in any given period. During that time, management is continually making
choices between multiple investment opportunities. Providing clear and accurate estimates of a project’s full
impact is the analyst’s responsibility; selecting between competing projects is management’s role. The better
the analysis performed, the easier it will be for management to select the best of the available opportunities.
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Process Improvement Guidelines
Step 6 – Implement Project
After the proposed solution has been approved, it must be implemented. In many cases the detailed
development of the full solution ( i.e., writing detailed procedures, coding computer programs, and designing
forms) occurs after management has approved funding for that solution. Responsibility for the detail design
may shift away from the original analyst and be assigned to a project team with more specific technical or
development expertise. The activities included in implementation development closely parallel those in Step 4 Design Solution—only in more detail.
Large project implementation usually will be handled by a project manager and a project team. The project
manager’s role is to direct the development and implementation of the approved solution. The role of the
business analyst is to provide as much guidance and clear direction to simplify the project management
process. Factors identified at an earlier step may need attention and follow-up. For example:
Project scope must be controlled to avoid runaway project costs. Issues need to be tracked to keep them from
impacting the project schedule. Risks need to be managed to prevent unwanted surprises.
During the development phase it is very important to remain on target. Project costs. benefits and schedules
are commitments to management that should be treated accordingly. Delays in the project schedule don’t
come free—usually, they are accompanied by increased project implementation costs and the loss of benefit
dollars. If problems are encountered, they should be communicated to the appropriate level of management
attention for prompt resolution.
During implementation, business sponsors and managers must pay close attention to the progress of the
implementation efforts and must be ready to assist in keeping the project on track towards achieving the full
stated benefits.
 2009 Peter DiSantis Consulting Associates, PLLC
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Process Improvement Guidelines
Step 7 – Measure Performance
The focus of performance measurement can be linked directly back to the approved project proposal. In order
to prepare for project funding, estimates for each identified cost and benefit are developed and included in the
proposal. But, estimates are just that—once implementation has occurred, it is important to assess the results.
There are two major reasons for this measurement:

To provide a clear picture of accomplishments, including actual project costs, realized benefits
and the impact on ongoing expenses.

To capitalize on the experience gained through the process. By understanding where estimates
were off the mark, The organization is in a better position to improve the accuracy of future
estimates.
Measurement of actual results may be handled by another individual or another team. The role of the business
analyst is to be sure that as much of the definition as possible has occurred up front, so that meaningful
performance data can be collected from the very start of the new environment’s operation.
Also, performance measurement is critical for developing a continuous improvement mentality. It has been
demonstrated that what you measure—improves. Without measurement and evaluation, the Company has no
objective way of knowing if the solution was a success, to what extent it was a success, and whether or not it
introduced new problems that need to be resolved.
If new problems are created... if a new bottleneck shows up... or if an older problem now has higher visibility
and attention, the process starts over. Loop back to Define Problem and move through the business analysis
process again.
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Process Improvement Guidelines
Process Improvement Summary
>>>> START ...
Step 1 - Define Problem

Develop clear problem statement

Gather information on the current environment
Step 2 - Research Causes

Identify as many potential causes as possible; investigate them

Determine the actual cause(s)

Generate potential solutions
Step 3 - Analyze Alternatives

Define evaluation factors

Evaluate the alternatives

Select two or three primary alternatives
Step 4 - Design Solution

Develop a clear and detailed description of the proposed environment

Conduct financial analysis

Assess competitive impacts, alignment with business direction, and risk

Prepare a high level plan for implementation
Step 5 - Develop Recommendation

Prepare project proposal

Conduct thorough review

Secure commitments from key individuals
Step 6 - Implement Project

Detailed design and development of full solution

Manage scope, issues, schedules, and risks
Step 7 - Measure Performance

Collect meaningful performance data

Compare to approved project proposal
LOOP BACK TO START >>>>>>>
 2009 Peter DiSantis Consulting Associates, PLLC
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Project Proposal Template
Section 1 – Background And Problem Statement
Providing background information will help establish the overall context for the current problem and the
proposed solution. It can contain a chronology of events or a description of the overall business process—
whatever is necessary to set the stage for the problem statement.
The problem statement then creates the compelling reason to move forward. What is the real problem facing
the organization and why should action be taken now? When defining the background and problem statement,
it is important to focus on clearly describing the problem and not jumping to potential solutions prematurely.
The Business Analysis Process chapter provides advice on how to prepare a good problem statement—one
that clearly describes the problem and expected results.
Define the project scope clearly. Avoid bundling multiple disparate business issues into one large, unwieldy
project. Unrelated problems should be viewed separately. However, when business problems and appropriate
solutions are clearly tied to each other, combining the solutions into one project can be cost effective.
Relevant Questions to Ask:
What is the primary reason for this project? What do you hope to achieve by solving the problem?
Why is it important to do something now? What will happen if the current environment doesn’t change?
Is the identified problem really a symptom of a larger problem? Can the problem be broken down into more
manageable issues?
What is the overall cost or contribution of the function or group involved? Should the function be
performed?
What sequence of events led up to the current situation?
Potential Analysis Activities and Deliverables:
Interview business unit managers, customers, and/or key staff and summarize the results.
Gather data to validate the problem statement.
Compare current experience with historical trends to determine if the problem is growing or shrinking.
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Process Proposal Template
Section 2 – Current Environment
This section should provide a brief overview of how the business function is performed today. This would
include relevant processes and organizational responsibilities, as well as any existing automation, equipment
or facilities. Wherever possible, objective performance measurement criteria should be used to describe the
overall effectiveness of the current environment.
Answers to the “five Ws” should be provided: What is being done? Where does it happen? When does it
occur?-W-ho is responsible for making it happen? Why is it done?
Relevant Questions to Ask:
Why does it have to be done? What would happen if it wasn’t done?
What is the product or service in question?
Who is the service provider? Who is the customer?
What are the customer requirements? How do you know?
Have customer requirements changed? Why?
What steps in the current process add value? Are there processes that don’t?
How many times is the process handed off to someone else?
Does the process cross department boundaries? Which ones? Why?
What other groups within the organization perform the same, or similar, functions?
Are there regulations concerning the activity in question?
Are there existing policies that cover the process?
What are the causes of the defined problem?
What obstacles must be overcome to eliminate the problem?
What is working properly and shouldn’t be changed?
How is performance of the function currently measured? What are the results?
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Process Proposal Template
Potential Analysis Activities and Deliverables:
Interview current process participants and document the current or “as-is” environment using process flow
charts.
Describe organizational roles and responsibilities using organization charts and/or responsibility matrices.
Gather detailed information about the current environment (transaction counts, staff count, location
volumes, operating statistics, etc.). If possible, collect two years of data to provide meaningful trends
information. This information can be presented as reports, charts, graphs or spreadsheets.
Collect any existing performance measurement data and look for alternate ways the current environment
might be measured.
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Process Proposal Template
Section 3 – Proposed Environment
A description of the proposed environment is necessary to develop a clear understanding of the proposed
solution. Project sponsor and team members must be able to know where they are headed and what it will look
like when they get there. This should be a clear description of the “desired state” that would eliminate the
problem in question ... What will it look like? What impact will there be on organizational responsibilities,
business processes, automated systems and/or the physical environment?
The description of the proposed environment must take clear shape. It is important for everyone involved to
know clearly what is included “in the picture” and what has been specifically excluded from the scope of the
final solution.
Relevant Questions to Ask:
What would the proposed environment look like?
What are the fundamental differences between old and new? What wouldn’t change?
How do you know that the new environment will be better?
Has this solution, or one closely like it, been tried before? With what results?
What are the critical success factors associated with achieving the new environment?
How have other companies or competitors solved this problem? What. is different about The organization’s
approach?
Are all of the different components of the problem and solution directly related?
If you have eliminated a process bottleneck, where is the next bottleneck most likely to occur?
Potential Analysis Activities and Deliverables:
Develop and document new process flows using process flow charts and validate the new flows using
known transactions or functions.
Define data requirements and usage using data models and data flows.
Describe any changes to organizational roles and responsibilities. Include organization charts, staffing
summaries, organizational responsibility definitions, or function matrices as appropriate.
Prepare new facility layouts, equipment specifications or network configurations.
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Process Proposal Template
Section 4 – Implementation Scope
After the appropriate overall solution has been determined, review alternative ways to sequence the
implementation to maximum benefits early in the process. Are there ways of sizing the project effort to follow
the 80/20 rule, aiming for 80% of the benefits with only a portion of the effort? Phasing the project can
accomplish two benefits: 1) benefit streams from early phased implementations can help fund subsequent
phases, and 2) the commitment of investment in areas where returns may be marginal can be deferred until
more detail is known of actual costs and actual benefits.
There are tradeoffs; phased implementation can achieve a quicker benefit stream, but may introduce additional
costs associated with repetitive project tasks in subsequent phases. For example, if the same computer
program is changed twice it needs to be tested twice. Scope analysis tries to balance the benefits of a phased
approach with the economies of scale that might be possible with a single implementation.
Relevant Questions to Ask:
Are there separate components of the solution? is there a way to phase them in?
How can I get the most benefit immediately?
Is there a way to make the project self-funding after a point in time—where ongoing net benefits will fund
the required additional investments in later phases?
If only one piece was to be included, which would it be? If one had to go, which would it be? Why?
Is there any required sequence of acquisition, development or implementation? Are there pieces that must
be built upon other pieces?
Are there any required combinations of features or work processes that must be implemented together?
Would there be redundant effort if the project was split into multiple phases?
Potential Analysis Activities and Deliverables:
Analyze benefits by location, by business function, by customer group, etc. and rank the features from
most important to least important.
Evaluate the percentage distribution of volumes by location, function, or group, etc. Determine the
feasibility or benefit of geographical phasing.
Develop phased implementation plans - by feature or by location.
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Process Proposal Template
Section 5 – Estimated Costs
There are two primary categories of cost that need to be estimated for every project: 1) the one-time costs
required to develop and implement the recommended solution and 2) the recurring expenses associated with
ongoing operation of the proposed environment.
While the cost estimates for a project will always begin with very rough numbers, it is important to get the
numbers researched, refined and validated quickly. Ongoing analysis efforts will refine the estimates, but it is
important to be as accurate as possible, as early as possible, since under estimating project cost could lead to
projects with poor, or negative, return on investment.
Use actual cost data whenever possible. Gather historical information related to previous expenses. For new or
additional acquisitions or services, get estimates and quotes in writing and have the estimates based upon
written specifications or assumptions. Cost estimates that are very preliminary or subject to wide fluctuation
should be identified.
Cost estimates should include peripheral expenses associated with the design, development, implementation,
and operation of the proposed environment. A Est of potential cost items is included at the end of this section.
The organization staffing costs associated with the development, implementation and ongoing operation of the
solution should be identified. When utilizing Systems Development department resources, all hours are
charged at the current “billable rate”. Business unit staff costs for development and implementation should be
included if incremental labor expense is anticipated—examples would include “back filling” behind an individual
assigned to the project team or use of incremental overtime to accomplish project tasks or required training. All
incremental business unit staffing costs should be included in the estimate of ongoing operational costs.
Business unit labor expenses should include the wages and benefits using standard rates supplied by Human
Resources.
Relevant Questions to Ask:
What could cause the expected cost to go up? or down? Are there ways to limit cost increases in the
future?
Is there a historical record of price performance for the given cost component? Was inflation factored in?
Where did the price estimate come from? Is the estimate reasonable? Are there contracts or purchase
agreements in place?
Was the price obtained in a competitive bid situation? What criteria were used to select the vendor? Was
the vendor with lowest overall cost selected? If not, why not?
Are there other contracts in place that can be leveraged for this project? Are there alternative vendors or
sources that might be less expensive in total?
Have all costs been included, including down stream or indirect costs?
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Process Proposal Template
Potential Analysis Activities and Deliverables:
Review the expense budget for the business unit—for each account number, determine if impacts are likely
and estimate the dollar amount of that impact.
Determine which business volumes drive ongoing expense and develop an operating cost model for the
proposed environment.
Use Request for Information (RFI) , Quote (RFQ), or Proposal (RFP) processes to obtain vendor price
information. Document the comparative evaluation using evaluation matrices. Always follow competitive bid
processes to ensure The organization receives the most favorable terms possible.
Potential Cost Items:
The following list identifies many categories of cost that should be considered. It is not meant to be allinclusive, but to serve as a “did you consider” checklist when completing cost estimates. One time project
costs and ongoing operating costs should be identified separately. The project sponsor is responsible to be
sure that all related costs have been identified and estimated. Cost estimates should be provided by
knowledgeable “experts” whenever possible.
Labor Expense
Development staff - use billing rate and estimated number of hours
Business project staff - use payroll cost plus benefits and number FTE
Division staff - use payroll cost plus benefits and number FTE
Other corporate staff - use payroll cost plus benefits and number FTE
Required Equipment
Systems hardware and/or software
Furniture, tooling and other equipment
Installation costs
Packaging, handling, freight, duties and/or taxes
Maintenance agreement fees - include any warranty considerations
Operating expenses - utilities, preventative maintenance, etc.
New use of existing computing resources (i.e., CPU, DASD), if significant
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Process Proposal Template
Professional Fees
Consulting expense
Contracted or professional services expense
Facilities
Construction or remodeling costs
Facilities acquisitions
Department relocations
Inventory
Incremental inventory requirements
Spare parts or supplies
Inventory disposal costs
Communications
New voice or data line installations
Line charges and other operating expenses
Other Expenses
Travel expense
Education - project team
Training - operating staff
Forms and supplies - include the cost of obsolescing old forms
Telephone expense
Advertising or marketing costs
Other miscellaneous costs
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Process Proposal Template
Section 6 – Expected Benefits
There are four categories of benefit related to the implementation of a new project: direct cost savings, indirect
or deferred cost savings, revenue enhancements and non-quantifiable benefits. Each category of benefit is
evaluated a little differently to better assess its potential financial impact on the Company. Some benefits are
discounted because there are many factors that could both diminish the project benefit and are outside the
control of either the project team or the sponsoring business unit.
When estimating benefits, it is important to be thorough in all steps of the analysis. Many analysts stop
collecting benefit information once they think that they have enough benefit dollars to justify the project
investment. But, if subsequent project review and analysis eliminates a large portion of estimated benefit, they
will have to start quantifying benefits over again, potentially losing valuable time.
It is important to note that not all Projects have quantifiable benefits - some projects are simply required to
support the needs of the business. In these cases, the emphasis is not on calculating benefits, but on finding
the lowest total cost solution that meets the business requirements.
Direct Cost Savings
Any expense reductions that can be obtained directly and would go straight to the bottom line should be
taken at 100% of their value if they can be validated. This validation should include an analysis of relevant
business transaction volumes and clearly identified improvements in productivity or decreases in cost per
unit.
Benefit numbers can be increased in subsequent years if there has been verifiable historical growth and
growth assumptions have not changed and there is a clear correlation between actual business volume
growth and the affected expense category. Increased shipment growth of 20% does not drive all expenses
up at the same 20% rate!
it is imperative that the project sponsor develops a plan to achieve the benefit and commit to the savings.
Projected expense reductions should be reflected in operating budgets. This is especially critical when the
actual budget for those expenses is not within the project sponsor’s control. Staff reduction commitments
should identify names and positions of those jobs to be eliminated and be communicated confidentially by
the project sponsor to the responsible senior executive.
Documentation of expense or staffing reduction commitments helps ensure that a detailed analysis of the
impact of the project has been completed and that the project sponsor is committed to achieve the stated
benefits. Actual implementation of the reductions can take a different form, as long as the same or greater
total benefit is achieved.
Indirect or Deferred Cost Savings
Increased productivity or elimination of required work steps will not always cause a direct reduction in labor
expense. Most frequently, the time saved is expected to yield an indirect or deferred benefit. For example,
fewer staff additions may be required in the future due to the increased capacity of the staff.
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Many times, however, the small amounts of time saved per day are too granular to collect—it will be
absorbed with minimal, if any, economic benefit to the Company. As a result, savings of less than ten
minutes per day per person are not considered meaningful and cannot be used as a labor savings benefit.
When the savings are greater than ten minutes per person per day, but no staff reductions are planned, the
project benefits will not occur until some future period. Unless the economic value of additional work
performed can be assessed, the only benefit will be deferred staff growth. The benefits associated with
deferred staff growth should be discounted by 50% to reflect the uncertainty in actually collecting the
benefit. The estimate should factor in staff growth rates, wage and benefit rates, transaction volumes and
transaction specific productivity improvements.
Growth assumptions (i.e., staff growth, transaction volumes) should be based on verifiable historical trends
and should be specific to the area of benefit being considered.
If a significant reduction in mainframe computer usage is expected, contact the Information and
Technology Services representative for assistance in calculating and validating the financial benefits
associated with any deferral of mainframe capacity upgrades.
Revenue Enhancements
There is a three-step process used to estimate the potential impact of additional revenue. The process
yields a benefit number that reflects the uncertainty of obtaining revenue and the costs associated with
servicing that business.
Step 1. Revenue estimates must be based upon documented demand for a product or service. Specific
customer examples are important. If customers are expected to shift from an existing product or service to
a new one, the revenue loss on the existing product must be estimated.
Step 2. Gross revenue estimates need to be discounted to reflect the uncertainty of obtaining the specific
business identified in Step 1. The amount of the discount should be appropriate based upon the level of
detail gathered when making the revenue estimate.
Step 3. Gross revenue must be burdened by the full-expected cost of servicing the customer. If there is a
track record of actual net profit from the service (after all support costs have been allocated), that net profit
percentage should be applied to the discounted revenue projection in Step 2. Assumptions related to
available capacity (i.e., mainframe computer or ABX aircraft lift) must be validated by the provider of that
capacity.
Potential Benefit Items
The project sponsor should ensure that all potential benefits are identified to properly reflect the full value
of the anticipated project. The following fist of potential benefit areas is provided to assist in capturing all of
the project’s quantifiable dollar benefits.
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Direct Cost Savings

Actual work force reduction - state FTE* number and dollar value

Actual overtime reductions

Contract labor eliminated

Direct reduction in operating expenses

Capital avoidance - if the capital cost is certain or in an approved budget
Indirect Cost Savings

Deferred staffing increases

Overtime labor increases avoided

Deferred reductions in operating expense categories

Capital avoidance - if clearly anticipated, but not certain
Revenue Enhancement

New services sold to new and/or existing customers

Existing services sold to new customers

Increased volumes (at current margins) from current customers

Increased revenues on existing services from current customers
**Note - Full Time Equivalent (FTE) is a better measure of benefit than head count since head count
can include a mix of full-time, part-time and/or casual employees.
Non-quantifiable Benefits
What is a non-quantifiable benefit? In many cases the benefits of implementation are either non-financial or
are so difficult to isolate and measure that it is best to describe them subjectively. These benefits should be
documented. but not included in the financial analysis Categories of non-quantifiable benefits may include
customer service, quality, regulatory compliance, or labor relations. For example, “the new process will
eliminate a call back to the customer, improving customer service.”
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Many analysts make the mistake of ignoring non-quantifiable benefits and do not include them in project
funding requests. While they will not be part of the financial analysis, they help provide a more thorough
picture of the overall solution and should be accurately described in the project proposal.
Measuring Benefits
For each benefit presented, there must be an established way to objectively measure the attainment of that
benefit. For expense reductions, clearly identify which budget account will be reduced and by how much.
Staffing reductions or deferred hiring should be just as specific—identify expected FTE levels within each
department. A benefit that “can’t be measured” stands a very high risk of not being collected!
Criteria for measuring total project benefits should be documented and agreed to before completing the
cost-benefit analysis. This lays the groundwork for a straightforward post-implementation project review.
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Section 7 – Financial Analysis
Financial analysis can become complicated very quickly as multiple economic and regulatory variables are
added into the equation. The goal of these guidelines is not to develop every analyst or manager into a CPA—
but to provide a working knowledge of some of the basics of financial analysis. The organization’s standard
financial analysis model provides a simple tool to conduct that basic analysis. When projects become very
complex financially, or have significant economic consequences, contact either the Corporate Treasury Group
in Seattle or the manager of Planning in Wilmington (ABX only) for assistance in accurately assessing financial
impacts.
Standardized Financial Analysis Model
Using standard financial analysis allows The organization management to compare different projects on
consistent terms. This analysis is required for all projects with project costs in excess of $100,000. This
financial analysis provides five key measurements:

Annual Net Benefit: The amount of total benefits received, less the costs incurred to receive those
benefits. This is the expected cash flow, year by year. It is not discounted to reflect the present
value of those dollars.

Accumulated Net Benefit: This figure is the simple sum of the Annual Net Benefit amounts for each
year in the established life span of the project.

Net Present Value: Each future Annual Net Benefit amount has a lower current value that reflects a
discount rate. The discount rate is set by the Corporate Treasury Group and is the same for all
projects. The Net Present Value is the sum of the present values for each of the Annual Net Benefit
amounts.

Internal Rate of Return: This is the discount rate that equates the present value of the expected
benefits (cash inflows) to the present value of the project’s expected costs (cash outflows).

Payback Period. This calculates the period of time it will take to fully recover the original project
investment from net cash flows. Net cash flows are not discounted.
The standard cost benefit model uses five elapsed years—starting with the date of Project funding approval.
Year I of the analysis starts at that point in time and ends twelve months later. Therefore, a project with a ninemonth implementation phase typically would have only three months of benefit in Year I and twelve months of
benefit starting in Year 2. If, however, there is a significant business reason that the project benefits would
accrue over a longer (or shorter) time period, use the more appropriate time period. Be prepared to justify the
use of that time frame.
Remember that not all projects will have quantifiable benefits or an internal rate of return; they are undertaken
to meet the needs of the business. When these projects are studied, the emphasis of the financial analysis is
on determining the lowest total cost solution.
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All analysis should be performed assuming that significant capital expenditures are purchased instead of
leased. The method of financing a particular project (lease vs. purchase or different sources of funds) should
not be considered in the standard cost/benefit model.
Unique Situations
For projects that require capital investments greater than $250,000, the Corporate Treasury Group should be
contacted to determine if an after tax cash flow analysis is required. This analysis will take appropriate
depreciation rules, tax credits, and corporate tax rates into consideration.
Systems development projects that are estimated to require over 10,000-development hours may be able to
capitalize their internal development costs. The option of capitalizing these expenses should be reviewed with
The organization’s chief financial officer.
Financing alternatives and determining sources of funds are the responsibility of senior financial management
(the treasurer and chief financial officer). If a project includes significant leasing and purchase options, the
Corporate Treasury Group should be contacted to perform a formal lease vs. buy analysis.
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Section 8 – Competitive Impact
Frequently, projects are undertaken to improve the Company’s competitive position in the market. To properly
assess the competitive impact of a project, the sponsor needs to know The organization’s current offering,
have a good idea of what the competitors offer, and understand what the customers want (and are willing to
pay for). It is important to note that not all projects will have competitive impacts—if there are none, simply
state that fact.
Relevant Questions to Ask:
What are the competitors currently offering in this area? What are they planning to offer? How do they
differ from The organization’s products and services?
What have customers specifically requested?
Is The organization losing business today? How much annual revenue? How many shipments? How do
you know?
Is the existing business profitable? How do you know?
What new customer requirements can be addressed?
What other product or service alternatives are available in the market?
How big is the market for this service? Is it growing? Will it continue to grow? How do you know?
Who controls what portion of the market?
Is this an effort to gain competitive advantage or to close a competitive disadvantage? How long would it
last?
Potential Analysis Activities and Deliverables:
Conduct customer surveys and market segment analysis.
Gather competitive intelligence through interviews, independent analyst reports or other “expert” opinions.
Review any industry research or published articles for relevant information.
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Section 9 – Business Alignment
Business alignment is assessed by comparing project direction and objectives with stated business
directions in three different areas: linkage with strategic business plans, support of management
information requirements and compliance with stated technical directions. Finding specific documentation
regarding current business directions may not be. easy. Frequently directional statements are imbedded
within other documents, i.e. mission statements, organizational objectives or technical architecture
definitions.
The strategic plans for the sponsoring business unit should be compared to the project goals. Strategic
alignment is an assessment of how closely the project objectives match, or provide support for, stated
strategic directions for both the company and the affected business unit(s). Not all projects need to be
directly linked to strategic goals. There are times when making shorter-term tactical moves to deliver
immediate benefits will outweigh the advantages of a longer-term fit with the strategic plan.
Assessing support of management information requirements is done by evaluating the key operational
performance data and/or any management reports provided by the proposed solution. Will there be any
significant increase in information availability, or accessibility, that will help The organization managers
tune the performance of the operation? In what ways win that data enable managers to make more
informed business decisions?
Technical compliance is a comparison of the proposed hardware, software and communications
technologies with the guidelines established in The organization’s Technical Architecture Principles. This
evaluation should be completed by the appropriate information systems representative, and then reviewed
by the project sponsor.
Relevant Questions to Ask:
Is there a strategic plan for the sponsoring unit? Are there aspects of the strategic plan that require
what the project is planned to deliver?
Where does the project fully support the plan? Where does it differ from the plan?
Are there pressing conditions that take precedence over the strategic plan?
What information is used today to manage the business function? What additional information would be
available? What is the potential impact of this information?
Are the technical components of the proposed solution consistent with The organization’s Technical
Architecture? What is the business rationale for any divergence?
Potential Analysis Activities and Deliverables:
Conduct management interviews and technical architecture component reviews.
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Process Proposal Template
Section 10 – Risk Assessment
Each project includes some level of risk: risks that project objectives will not be met, risks that cost
estimates will be overrun, and risks that benefits will not be achieved. Risk analysis tries to identify the
potential causes of problems, determine the likelihood of them occurring, evaluate the magnitude of their
impact, and develop management strategies that will minimize risk and monitor the situation. Risk is not
necessarily bad—projects with little or no risk are not likely to produce significant benefits. But, risks must
not be either under-estimated or under-managed.
Project risks fall into three major categories: size, structure, and technology. The greater the size of the
project effort (project team size, duration of the project, number of organizations or locations involved, etc.),
the greater the chance that the project will experience delays. Projects that have more complex project
objectives, multiple processes involved, or significant change being introduced, face a greater chance of
failure. And, when new or complex technologies are used as part of the solution, they add additional areas
for potential problems.
Relevant Questions to Ask:
How complex are the project requirements? Have they been adequately documented? Are they likely to
change?
Are external influences (competitors, customers, and governmental regulations) stable or changing?
Is the executive sponsor actively involved? Are there knowledgeable business representatives involved in
the project? How skilled and experienced is the implementation team?
Are there multiple business processes, organizations, or locations involved? Are multiple systems or
system interfaces required? Are multiple suppliers required to implement the solution? What problems can
be anticipated?
Is the vendor/supplier reputable, experienced, and financially stable?
What is the worst thing that could happen on this project? What can be done to prevent that from
occurring? If it happened, how would the project team or business unit recover?
Potential Analysis Activities and Deliverables:
Identify potential risk areas and document appropriate risk management strategies.
For Systems Development projects, the project sponsor and project manager should complete a project
Risk Assessment Questionnaire (see sample on the next page).
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Section 11 – Key Assumptions
For any given course of action, conscious and subconscious assumptions are made concerning the business
environment, as well as internal and external influences on the environment. Often, a change in even one
assumption can lead to significantly different conclusions. It is very important that assumptions used in
preparing the project proposal are:

clearly documented and

validated at appropriate levels within the organization.
Assumptions can be grouped into several categories, including: The organization trends (annual shipment
growth, staff growth, net profit margins), economic factors (market growth, inflation rates, fuel prices),
competitive situations (strategies, prices, customer related policies) or governmental regulations. Future
projections should be made by the corporate resource most knowledgeable about the topic. For example,
Human Resources should provide wage rate and benefit increase assumptions, Corporate Planning should
provide five-year shipment growth projections, and ABX Planning should provide aircraft fleet growth numbers.
In order to help standardize common business assumptions across the company, a fist of the frequently used
assumptions has been developed. These assumptions were determined by the appropriate corporate
department and are updated periodically. Contact either the Executive Steering Committee Coordinator in the
General Office or the Manager of Planning at ABX for a copy of the current assumption fist.
If, however, any of these assumptions do not make sense for a given project, the project team should develop
a more accurate value and be prepared to justify that value. The standard list of assumptions is meant to help
simplify the analysis process and not to enforce rigid standards.
Relevant Questions to Ask:
For each assumption, several questions should be asked: Who made the assumption? Is it reasonable?
Has it been validated by the appropriate business expert? What is the impact if the assumption is wrong?
Do any of the assumptions conflict with each other?
Potential Analysis Activities and Deliverables:
List all major assumptions, their source and how they were validated.
Conduct a sensitivity analysis - given a percentage change in a particular assumption, what resulting
change would it cause in net project benefits?
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Section 12 – Major Issues
Issues can have a significant impact on a project. Typical project issues include policy decisions,
organizational responsibilities, functional accountability, and pricing/exemption practices. When they are left
open, or inadequately resolved, they have the potential to delay the project, increase its cost, or reduce
benefits. The project sponsor has the responsibility to ensure that all applicable issues are clearly identified,
communicated, and resolved. If major issues are anticipated, plans can be put into place to address the issue
before it negatively affects the project.
Ideally, all major issues should be resolved prior to funding since they have a potential significant impact on the
project’s success and its return on investment. Too often, issues are ignored until they have caused delays or
unnecessary work. Frequently, issues are resolved at too low a level within the organization, and then get
re-opened at inopportune times. The attempt of this section is to focus attention on issues early—forewarned is
forearmed!
Relevant Questions to Ask:
What are the key issues that the organization must resolve to make the proposed project successful?
Who will be responsible for resolving those issues?
Is it reasonable to assume that the issues can be resolved by the implementation team?
By when does the issue need to be resolved?
What is the impact if the issue isn’t resolved?
What level of commitment exists within the organization to identify and quickly resolve the issues?
Potential Analysis Activities and Deliverables:
Interview project sponsor, executives, and key participants to surface potential issues.
Maintain an “issue list” (with both open and resolved issues) as a tool for assigning and tracking timely
resolution of the issues.
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Process Proposal Template
Section 13 – Alternative Solutions
The purpose of this section is to provide management with a summary of the major alternative solutions
that could be applied to this business problem. Remember that taking no act on can be a viable alternative.
Alternatives should include business process redesign, potential elimination of requirements or functions,
use of alternate technologies, outsourcing, and build versus buy options. The relative strengths and
weaknesses of the major alternatives should be presented.
Information on how to develop an alternative evaluation matrix is included in the Analyze Alternatives step
of The Business Analysis Process.
Special considerations are appropriate whenever external resources (i.e., vendors) are included in one or
more of the potential alternatives. It is imperative that the vendors are provided with clear, unambiguous
business requirements—this avoids costly surprises down the road. Vendor evaluations should be based
upon specific criteria that is formally documented. Rigorous competitive bidding is a must to drive down
overall acquisition and operating costs. Utilize your purchasing department—they have the professional
skills to help select qualified, reliable, and cost-effective vendors.
Since selected vendors will become business partners with The organization, it is important that the review
of alternative vendors should include consideration of the following factors: financial strength, market
position, technical competency, specific experience, ethics and references. These criteria are in addition to
normal evaluation of products and services based upon business requirements and technical
specifications.
Relevant Questions to Ask:
What happens if no action is taken?
How else could this be done? How are other companies within the industry solving this problem?
What parallels are there between the express shipment business and another business? How would
they solve this problem?
Potential Analysis Activities and Deliverables:
Talk to the front line! Use a team to brainstorm all potential alternatives.
Determine the evaluation criteria used to select among alternatives and develop an evaluation matrix to
“score” each one.
Research and collect data for each alternative, developing both pros and cons for each.
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About Us
As founder and CEO, of Peter DiSantis Consulting Associates, Pete has worked in various
management and engineering positions for over 35 years, for name brands such as UPS,
Federal Express and Airborne Express. So, he knows what a brown box is. Since he was
trained as an efficiency expert and has ridden with scores of delivery drivers and driven routes
himself, he knows the best way to get that brown box from point A to point B.
Productivity and service was transformed at those companies under his leadership. One of the
other transformative skills he adds as a great communicator is extraordinarily effectual
management and leadership trainings which he built for each of the above Fortune 100
companies.
After leaving the Fortune 100 in 2000, he dove head first into a local dot com company for the 5 most exciting months of
his career. Since then, Pete’s consulting practice has focused on working with companies who have not had the benefit of
industrial engineering or tactical operations training and support. He has assisted all size companies to identify and
improve their fundamental processes, paving the way for higher profitability, greater customer satisfaction and
empowered employees. He has been qualified by the Institute of Management Consultants as a Certified Management
Consultant. Mostly he is an efficiency expert and pain killer doing profit search and rescue.
As a results-oriented professional, Peter DiSantis brings over 30 years of operations management, training and industrial
engineering background in the logistics industry to corporate firms seeking a profitable competitive edge. Key to Mr.
DiSantis' success is his spirit as a team builder, innovator, communicator, planner, trainer, transformational agent,
motivator and personal producer. His personnel motivation skills have led to peak employee performance and
productivity. One who is able to instill an entrepreneurial spirit within a corporate structure, Mr. DiSantis has enjoyed
taking risks and succeeding at new challenges: establishing new organizations, introducing new products, services,
procedures and equipment.
The outcomes were dramatic improvements: revenue growth, cost reduction and higher customer satisfaction resulting in
increased profit.
Mr. DiSantis also inaugurated and defined the industrial engineering and training departments at a Fortune 100
transportation company. During his tenure, productivity exploded 15% through his authorship and enforcement of new
Standard Procedures and Methods.
Pete had volunteered many years at his church as a board member, board president and youth sponsor. He has now
been volunteering for Junior Achievement of Washington since 2006. Currently, he is teaching Economics and Success
Skills to high school juniors for JA.
In this age, there is a multitude of ways to contact us.
Phone - 425-440-8348
Email - pete@peterdisantis.com
Postal Address - 825 Sunset Blvd NE, Renton, WA 98056
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 2009 Peter DiSantis Consulting Associates, PLLC
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