Magazine article PM Network

Soft Benefits Are Real

Magazine article PM Network

Soft Benefits Are Real

Article excerpt

Failure to recognize the impact of the intangibles can distort the picture of a project's true business impact.

I am a huge proponent of conducting a financial analysis on all proposed projects as a method for. prioritizing and pursuing those that generate a positive return. It just makes good business sense.

An increasing number of companies are recognizing the value in routinely conducting such financial analyses, but some use a flawed process due to their inability or unwillingness to properly handle the so-called soft benefits. Failure to account for soft benefits increases the risk that an organization will reject many potentially lucrative projects.


Most projects produce some combination of "hard benefits" and "soft benefits." It is easier to agree on the existence and value of hard benefits. This type of benefit is real, tangible and measurable. Examples of hard benefits include:

* Increase in product sales, service revenues and/ or market share

* Reduction in rework and/or head count

Calculating the financial worth of hard benefits tends to be straightforward. It's not quite that easy for soft benefits, or "intangible benefits," which can be challenging to quantify financially. Examples of soft benefits include:

* Increased customer or user satisfaction

* Improved product quality

* Service excellence

* Increased employee productivity


In many cases, organizational managers are uncomfortable with the process of converting and/ or verifiably measuring soft benefits in financial terms. They instead choose to view soft benefits as a kind of bonus, if they are realized. This kind of overly conservative stance seems like a low-risk approach, but it actually produces significant business risk. By using a "hard benefits only" approach, it's likely that many potentially lucrative projects will not be approved because a portion of their financial benefit is simply not incorporated into the analysis. …

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