Consulting Journal: Methods - Evaluating business cases (2)

Methods: Evaluating business cases (2)

by David Blakey

Moving on to the possible alternative courses of action and their evaluation.

[Monday 8 March 2010]

Once you are happy that the business case is justified, on the grounds that it

has a clear objective,
deals with a real problem, and
addresses the real cause of the problem,

you can move on to the next step of your evaluation.

This step is validating the action plan that is recommended.

Convincing

The business plan must be able to convince people that it recommends a sound course of action. The best way for it to do this is for it to demonstrate that all possible alternative courses of action have been examined, and that the writer of the business plan can provide sound reasons for selecting the one recommended course of action

Alternatives

Fairness

Each alternative must be presented fairly, and with an equal amount of detail. That does not mean that all the alternatives need to be described in the same number of words. Some alternatives will take longer to describe than others, even in summary. The writer of the business plan must present each alternative with an equal amount of detail, regardless of length.

Understanding

Each alternative must be presented to demonstrate than the writer understands it. There should not be any areas that are cloudy because the writer does not understand them. If the writer appears to skip over the detail of an alternative, it implies that the alternative has not been fully understood and that it may have been rejected without cause.

Logic

Each alternative must make sense. If any alternative is off the wall because it is not technically possible, or it requires resources that are not available, or it is obviously too expensive, then it should not appear in the list of alternatives. If the writer does want to demonstrate that such an alternative has been given serious consideration, then it would be better if they added it later, in a short section of other alternatives. This may occur when the alternative has been suggested by the client. In instances where the client has advocated the alternative strongly, the writer might consider including it amongst the more serious alternatives. If this happens, the writer must treat it in the same way as those alternatives.

Evaluation

There must be a defined set of evaluation criteria, and the recommended plan must more closely satisfy those criteria than any other alternative.

There are two separate checks here:

ensure that the evaluation criteria fit completely and comprehensively with the required result; and
ensure that the recommended alternative best fits those criteria.

Criteria

The evaluation criteria must be linked to a result or a resource that is relevant to the required result. As far as possible, each result and resource should have at one criterion linked to it. One resource that is always required is a financial expense. There should be a criterion that links to financial expense.

Each criterion that links to a resource should also link to at least one result. In the case of the financial expense, it would be useful if each alternative was evaluated on the financial expense of acheiving a percentage of a result. An example of this is a criterion for financial expense. One alternative action may produce 80% of the result for $100,000; a second may produce 75% for $80,000. It is important that people reading the business case should be able to see criteria that place each alternative on an equal footing. Simply stating expense as $100,000 or $80,000 is not enough.

Best fit

If the criteria have been set up as I have just described, then finding the best fit should be easy. Where criteria do not reference results, evaluation can be more difficult. In some instances, the justification for the chosen alternative may be obscure.

You should ensure that the logical process of finding the best fit is completely clear and completely logical.

Responsibilities

As a consultant reviewing a business case, you will not usually be called upon to make a choice of one of the proposed alternatives. You will usually be asked to make sure that the business case has been properly prepared and that it gives a fair and logical view of alternatives, their results, their use of resources, and their risks. You will be asked to test whether the evaluation criteria are fair and complete. You will be asked to check that the evaluation process is sound. In order to complete these tasks, you must analyse the business case in the detail that I have described.

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