Part 2: Establishing a solid foundation for benefits management
2.1
In this Part, we discuss how:
- investment objectives were clear and clearly linked to benefits; and
- benefits were relevant and feasible, and the measures were robust.
2.2
Organisations should set a clear purpose for a project or programme from its beginning. This includes establishing well-defined outcomes and objectives that provide a framework for all decisions, including strategy formation, programme prioritisation, and designing robust benefits and measures. Making these outcomes and objectives transparent can also demonstrate the programme’s value to Parliament, public, and other stakeholders.
2.3
For a programme of this scale and significance, we expected Inland Revenue to have well-understood processes and expectations that would guide the creation of the programme’s benefits and measures.
2.4
We also expected Inland Revenue to align the benefits and measures with the programme’s investment objectives and outcomes. Given the size of this programme, we expected Inland Revenue to have a robust approach to benefits management.
Summary of findings
2.5
Inland Revenue prepared a clear vision and strategy, and robust business cases, for the programme. Between 2011 and 2014, Inland Revenue regularly updated important stakeholders about the programme. This enabled Inland Revenue to demonstrate the value of its investment and provide clarity on the programme’s intended outcomes.
2.6
Clear and agreed outcomes and benefit areas meant that Inland Revenue had a strong foundation to develop the programme from, including the benefits management framework. In our view, Inland Revenue had a robust process for identifying and estimating the programme’s benefits and developing measures for them. This process was consistent with the Treasury’s guide Managing benefits from projects and programmes: Guide for practitioners.
Investment objectives were clear and aligned to benefit areas
2.7
Between 2011 and 2014, Inland Revenue developed and agreed on the programme’s investment objectives.
2.8
In 2011, Inland Revenue released IR for the future. This sets out its strategic vision to become a “world-class revenue organisation for recognised service and excellence”,14 with a streamlined revenue system and new digital services for customers.
2.9
Because Inland Revenue had limited experience with business transformation programmes, it appointed an international business consulting firm in November 2011 to review the organisation and help develop an approach to deliver its strategic vision. The review helped Inland Revenue to identify the challenges of its current business model that the programme would need to address.
2.10
This review included looking at the current state of Inland Revenue’s service delivery model and provided a customer perspective on developing the programme. It analysed customer complaints, created customer experience maps, and identified the points where Inland Revenue directly interacted with the customer and how they could be improved. We were told that customer focus groups were also part of this work.
2.11
In 2012, Inland Revenue produced a strategic assessment for the programme that set out the case for modernising the revenue system. The assessment described high-level benefits that Inland Revenue wanted to achieve. It also identified the need to transition to a whole new revenue system, including a new information technology platform, and way of operating that could future-proof its ability to deliver services and achieve its strategic objectives.
2.12
From the strategic assessment, and further investigation and planning, Inland Revenue produced the 2013 Programme business case for Business Transformation – Delivering New Zealand’s future revenue system (the 2013 business case). The 2013 business case supported Cabinet’s consideration of Inland Revenue’s proposed Business Transformation programme.
2.13
The 2013 business case set out the case for change and the programme’s investment objectives. It also identified broad benefit areas the programme was intended to achieve.
2.14
Inland Revenue then commissioned several external reviews of the work done on the programme up to 2013. These reviews included looking at the work completed by the international business consulting firm and the work used to inform the 2013 business case.
2.15
One of these external reviews was an independent quality assurance review to assess and provide advice on the appropriateness of the programme’s approach, deliverables, governance, and programme management practices (including benefits management).
2.16
The review assessed how well the benefit areas linked to the programme’s investment objectives. It also assessed the methodology used to identify and quantify the benefits. The review found that the benefit areas and key result areas were well aligned with the programme’s investment objectives. It also found that the financial values of the benefits presented in the 2013 business case were appropriate for that stage of the programme.
Benefit areas are relevant and feasible, and the measures are robust
2.17
Inland Revenue based the programme’s benefits and measures on the benefit areas that the 2013 business case identified. These were:
- reduced time to implement new policy;
- reduced risk of operational failure;
- easier for customers;
- improving revenue system integrity;
- financial benefit to the Crown (including administration savings and increase revenue for the Crown); and
- economic benefits to New Zealand.
2.18
Inland Revenue collected a broad range of information to identify and analyse the programme’s potential benefit areas and test their suitability. As a result, the process produced estimates that were based on the best available information and expertise.
A robust process to develop and establish programme benefit areas and measures
2.19
In 2014, Inland Revenue created a benefits management framework. The framework set out its expectations for benefits management for all of its projects and programmes.
2.20
These expectations were for baseline management (establishing and measuring baseline information), identifying benefits, quantifying benefits, and developing benefit measures. For example, benefits must contribute to Inland Revenue’s mission, vision, and investment objectives.
2.21
The framework also identified guides, tools, and templates for benefits management. The framework’s clear direction gave members of the programme’s benefit team confidence to carry out their work. In our view, this is good practice.
2.22
After identifying the benefit areas, Inland Revenue ran workshops with staff from throughout the organisation to develop “assumptions”15 for the potential benefit areas. For example, for the “easier for customers” benefit area, the main assumption developed was that customers “can self-manage and have confidence and certainty in what [they] need to do”.
2.23
Inland Revenue also ran workshops focused on quantifying the estimated benefits of the programme. Estimates were developed by identifying the main elements needed to realise a benefit. The workshops produced clear rationales for the level of change from an estimated benefit and what was needed for that change to be achieved.
2.24
For example, the workshop on the “administration savings” benefit conducted in 2015 assessed the potential effect of the changes on the amount of work effort required. This helped to understand the effect on the size of Inland Revenue’s workforce, which is an expected result of the programme.
2.25
The workshop used a product costing tool16 to provide the base information for the estimates of the administration savings benefit. Using this tool, activities were broken down into discrete business processes. This allowed workshop attendees to estimate the impact of proposed changes on each business process and combine these estimates to produce a broad estimate of administration costs savings throughout the organisation. For example, the direct effort for correspondence about GST was 35.75 full-time equivalent (FTE) staff.
2.26
By examining the implications of proposed changes for existing business processes at a detailed level, the workshop estimated that implementing the programme could reduce the part of Inland Revenue that handles GST by 17.78 FTEs.
2.27
Benefit ranges, and descriptions were developed based on the information the workshops produced. Inland Revenue also collected insights from interviews with overseas revenue collection agencies that used the technology platform GenTax,17 which Inland Revenue was implementing as part of the programme.
2.28
Inland Revenue obtained information about overseas agencies’ experience of productivity gains, the level of digital uptake, the effect on revenue collection, changes to implementing legislation or policy, and information about customer responses to a new way of working.
Benefits were tested with the governance board
2.29
The information about benefit ranges and narratives, and interviews with overseas revenue collection agencies, was presented to the programme’s governance board and Inland Revenue’s organisational governance boards to consider.
2.30
We saw evidence that Inland Revenue’s governance boards, including the Executive Leadership Team and Executive Working Committee, challenged targets that they considered too conservative or not aligned with the investment objectives. Targets were adjusted in response to this feedback.
2.31
For example, the Executive Leadership Team did not accept the proposed benefit area “protecting Crown Revenue”. This was because one of the benefit areas in the 2013 business case was to increase, rather than protect, Crown revenue.
2.32
As a result, the measure for the “protecting Crown Revenue” benefit was amended in 2015 to include a target to increase Crown revenue. This demonstrated an appropriate level of engagement by the programme’s governance boards. It also demonstrated that Inland Revenue was open to setting challenging targets.
2.33
Throughout the process of estimating benefits, Inland Revenue used Independent Quality Assurance and Technical Quality Assurance reviews to assess aspects of its process.
2.34
These reviews looked at the approach Inland Revenue took to modelling costs and benefits. They included its process for determining business benefits, including identification, tracking, and realisation. The review that looked at the programme’s cost–benefit model found that it enabled an understanding of cost and benefits in enough detail at that stage of the programme.
2.35
The reviews were satisfied with Inland Revenue’s process for developing its benefits realisation plan, which was informed by the 2015 Programme update and detailed business case: Business Transformation programme – Implementing the future revenue system (the 2015 business case).
Benefit measures were based on existing performance measures
2.36
Inland Revenue decided that, wherever possible, the programme would use existing “enterprise performance measures” to monitor progress against each benefit area. Enterprise performance measures are the measures Inland Revenue report against as part of measuring its overall performance.
2.37
Using existing performance measures meant the programme could measure progress against established baselines. It also meant that programme monitoring could be easily integrated into existing performance management and reporting systems. This should enable Inland Revenue to monitor and report on the programme’s benefits after the programme has been completed.
2.38
Inland Revenue worked with its business leads and performance reporting staff to assess whether existing performance measures were suitable for measuring the programme’s benefit areas. In most instances, Inland Revenue was able to use existing performance measures for the programme.
2.39
An example is using the existing performance measure of “percentage of customers who find it easy to comply” for the benefit area “easier for customers”. This measure comes from Inland Revenue’s customer satisfaction and perception survey.
2.40
The measure was selected because the programme’s planning identified “key pain points” and potential improvements the programme could deliver. A measurable improvement in customer satisfaction would indicate that these pain points were being reduced.
2.41
Where existing performance measures were not appropriate, Inland Revenue created suitable alternatives. For example, to measure improvements in policy agility, Inland Revenue decided on a case study approach. It agreed this approach with the Treasury and the Ministers of Finance and Revenue.
2.42
In our view, the measures were based on the best available information at the time, established clear baselines to measure progress against, and, because they were aligned to Inland Revenue’s performance framework, are regularly tested and validated through standard internal and external assurance mechanisms.
2.43
The 2015 business case confirmed the programme’s investment objectives, benefit areas, and measures. In our view, the benefits and measures outlined in the 2015 business case were prepared using a robust methodology and the best available information at the time. They are also well aligned with the programme’s investment objectives.
2.44
Figure 1 describes the programme’s benefit areas from the 2015 business case, as approved by Cabinet. They were subsequently revised.
Figure 1
The programme’s non-financial and financial benefit areas, as described in the 2015 business case
| Non-financial benefit areas | Description |
| Easier for customers | Customers will find it easier to meet their obligations and receive their entitlements. |
| Revenue system resilience | The revenue system will be simpler, be more resilient, and recover from any failure quickly. |
| Agility to implement policy | The time and cost for Inland Revenue to implement policy changes will be markedly reduced. |
| Financial benefit areas | Benefit from 2015/16 to 2023/24 |
| Compliance effort savings | $1,200 million to $2,025 million |
| Additional Crown revenue and efficiency savings | $2,950 million to $5,960 million |
Note: The figures referred to in the 2015 business case exclude inflation, depreciation, and capital charge.
Source: Adapted from Inland Revenue Department (2015), Programme update and detailed business case: Business Transformation programme – Implementing the future revenue system, Wellington.
2.45
The 2015 business case also identified the benefit targets, how they would be measured, and the baselines they would be measured against (see Figure 2).
2.46
In our view, Inland Revenue’s approach to establishing the benefit areas and benefit measurements was supported by a clear understanding of the programme’s intended outcomes and objectives. Inland Revenue also clearly understood the processes for developing the programme’s benefit areas and benefit measures.
2.47
As a result, the process for estimating benefits produced reasonable estimates that were based on the best available information and expertise, and were appropriately constructed given the scale, complexity, and ambition of the programme.
Figure 2
The programme’s benefit targets, as described in the 2015 business case
| Investment objectives (primary) | Benefit area | Measurement | Measure description | Baseline | Programme 2023/24 (all products and services) |
|---|---|---|---|---|---|
| Improve customer experience | Easier for customers | Increase in the number of customers who find it easy to comply | Inland Revenue’s Customer Satisfaction & Perceptions Survey tool and are based on the net agree score (3-5) | 82% | At least 90% |
| Improve business perception that the revenue system requires less effort | From Better Public Services Result area 9, a key performance rating for government services to businesses are similar to those of leading private sector firms | 3.88 | 3.00 or less | ||
| Increase the secure sharing of information | Case-studies on outcomes of information sharing and security of information | Case studies used to demonstrate the reduction in customer effort as a result of information sharing and security of information | Baseline policy change examples | ||
| Improve customer experience | Reduction in customer tax compliance burden | The cost of compliance is measured in the hours taken to complete tax-related activities from SME compliance cost survey |
Total of 61 hours p.a. | 18-26 hours p.a. reduction | |
| Minimising system risk | Improved revenue system resilience | Increase in the mean time between failure for customer facing services | This measure records any incidents which impact the customers’ ability to interact with Inland Revenue’s systems | 17 Days for portal | 100 days for portal |
| Increase in revenue system resilience | Self-assessed end to end view of underlying revenue system resilience [encompassing technology, change, people and process] | Assessed to High | Target is Low | ||
| Improving agility | Reduction in the time and cost to implement policy | The case study approach will use examples of policy changes implemented that range from simple to highly complex | Current state case agreed | ||
| More effective services | Financial Benefits to the Crown | Increase in the number of correct customer obligations received on time | The purpose of this measure is to track the impact of the improvement of on-time compliance rates | 81.5% (GST) | 90% |
| Additional Crown revenue via improved customer compliance | An increase in the amount of assessed Crown revenue identified through discrete projects funded through the programme | Nil | Increase $1.5b p.a | ||
| Percentage of social policy customers receiving accurate and timely payments | Measures the percentage of all Working for Families Tax Credits payments which are made on time and assesses the accuracy of information received by Inland Revenue | 67% | 95% | ||
| Improving productivity | Financial Benefits to the Crown | Administrative savings for Inland Revenue | The benefits released through discrete projects funded through the programme | Nil | $95m to $110m p.a. |
Source: Adapted from Inland Revenue Department (2015), Programme update and detailed business case: Business Transformation programme – Implementing the future revenue system, Wellington.
14: Inland Revenue Department (2011), IR for the future, Wellington, at ird.govt.nz.
15: The Treasury defines an assumption as a “statement of the current understanding that could inhibit or simplify an approach. It is used to help provide context for planning. It is usually reserved for matters of significance that, if they change or turn out not to be true, there will need to be re-planning”. See the Treasury (2019), Managing benefits from projects and programmes: Guide for practitioners, Wellington, page 32.
16: A product costing tool provides an overview of the total full-time equivalent staff cost of administering a tax or social policy product.
17: GenTax is Inland Revenue’s new technology platform. It is a tax-processing software package.