Not all business-change projects require the same approach to justification. Gartner's project justification hierarchy is a spectrum ranging from required to experimental. The hierarchy also makes a strong distinction between hard and soft benefits.
Not all business-change projects require the same approach to justification. Gartner's project justification hierarchy is a spectrum ranging from required to experimental. The hierarchy also makes a strong distinction between hard and soft benefits. Hard benefits are quantifiable in actual dollars that will flow to the financial bottom line (e.g., reduced costs or FTEs). Soft benefits are difficult to translate into dollars, even if they can be measured; for example, customer satisfaction can be measured, but its impact on the financial bottom line cannot be directly quantified.
Each business change project falls into one of four categories along the spectrum:
Business necessity projects address "must-do" situations, so only the hard costs are significant. Examples include HIPAA security and privacy, other regulatory requirements, "must-do" competitive responses and "survival" projects. Include benefits; they could influence how the business necessity actually is met.
Vision, strategy and objectives (V/S/O) projects help achieve an organization's mission, but generally cannot be fully justified on a strictly financial basis. Approval requires both hard and soft benefits, with soft benefits typically providing much of the value. Some hard benefits usually exist and should be quantified, but most effort typically goes into developing the soft benefits, which close the cost-benefit gap and often determine approval. Soft benefits also depend on the approval authority's confidence that the benefits will be realized.
Discretionary and research (D/R) projects are exploratory, such as emerging or new-to-the-organization technologies or techniques (e.g., evaluating handheld devices for improving data capture). There is no specific expectation from the initial project of a direct financial return or other business benefit-the value will hopefully be realized in future projects since the exploration is intended to establish whether there is high potential value, more realistic potential value (narrowed expectations) or minimal potential value (avoid larger losses).
When applying the different justification approaches to business-change projects, consider:
Infrastructure and support functions, such as networks, platforms, middleware and help desk, might require a business necessity justification to establish/maintain minimal connectivity across the plan. Incremental upgrades whose hard benefits have a tangible impact on improving business operational efficiency probably would require a financial approach; major upgrades to improve efficiency, flexibility, reliability, integration and appropriateness will more likely depend on soft benefits and thus require a justification approach.
Core transactional applications (e.g., clinical, financial and administrative) usually require a financial justification approach, and are evaluated by their hard benefits to improve the effectiveness of business processes and support functions. Sometimes, they might require a business-necessity approach.
Informational applications, such as decision-support tools, data marts/warehouses and data discovery tools, often require a V/S/O justification approach. They are evaluated by their hard and soft benefits to improve decision-making or improve member/employee satisfaction.
New business initiatives such as e-billing typically require a V/S/O approach to justification. They are evaluated by the expected success of the strategic business initiative (primarily soft benefits). Occasionally, they may require a D/R approach if they depend on risky technology.
Visit http://gartner.com/healthcare/ or e-mail info@gartner.com
.
Conversations With Perry and Friends: Paul Fronstin, Ph.D.
May 9th 2025Perry Cohen, Pharm.D., a longtime member of the Managed Healthcare Executive editorial advisory board, is host of the Conversations with Perry and Friends podcast. In this episode, his guest is Paul Fronstin, Ph.D., director of health benefits research at the Employee Benefit Research Institute.
Listen
Conversations With Perry and Friends
April 14th 2025Perry Cohen, Pharm.D., a longtime member of the Managed Healthcare Executive editorial advisory board, is host of the Conversations with Perry and Friends podcast. His guest this episode is John Baackes, the former CEO of L.A. Care Health Plan.
Listen
Women PCPs Have Equal or Better Medicare Patient Outcomes Than Men PCPs in Value-Based Care Model
June 24th 2025Women primary care providers (PCPs) treating Medicare patients in a value-based care model achieved better patient outcomes and earned more per patient than male counterparts, despite receiving equal patient satisfaction ratings, highlighting a potential for value-based payment to help close the gender pay gap.
Read More
A Progress Report on Chronic GVHD. The Grades Are Not So Great
June 24th 2025There has been no or some progress in most areas since a National Institute of Health consensus development project in 2020, according to a group of experts. But exception is important: Prevention of moderate or severe chronic graft-vs.-host disease.
Read More