Changing the PMO Status Quo:

Learn how Frank La Rocca Created an Enterprise PMO at Con Edison to Drive Greater ROI

Frank La RoccaDirector of Business Improvement ServicesCon Edison

Email: LAROCCAFR@coned.com

• Director of Business Improvement Services at Con Edison

• Responsible for Investment Optimization and the EPMO

• Prior to Con Edison Frank was VP of IT and CIO at Keyspan

Introducing Frank La Rocca

Agenda & Takeaways

• Con Edison Introduction• Challenges that Led to the Creation of

EPMO• Financial Intelligence is Key

• Optimization (Annual Planning) process• Management (Agile / Dynamic

planning)• Measuring Business Value• Phased Approach to Financial

Intelligence• Questions & Answers

Takeaways:1. Building an Enterprise PMO requires

you to view project’s as business investments and focus on financials and value creation

2. Relying solely on Annual Planning can result in significant loss in planned business value

3. Dynamic Planning (aka Sweep) helps optimize spend and maximize business value

Consolidated EdisonIntroduction

One of the nation's largest investor-owned energy companies, with approximately $12 billion in annual revenues and $41 billion in assets

Provides a wide range of energy-related products; including electric,

gas, and steam service in New York City and Westchester County

Consolidated Edison: Serves 3.3m customers throughout a 604-square-mile territory Operates one of the most complex electric power systems in the

world, with the highest level of reliability in the world. Distributes natural gas to 1.1 million customers Operates the largest district-energy steam system in the U.S.,

providing service to approximately 1,800 customers

Consolidated EdisonCorporate Landscape

• Increased Cost Control• Maintain our infrastructure/service at or below inflation• Stabilize our rates• Maximize our investments

• Enhance External Relationships• Enhance regulatory relationship

Challenging Questions… Led to the creation of our Enterprise PMO

How much are we spending on

projects / programs?

Are our investments inline with corporate strategy?

What is the Strategic Value

of the Portfolio?

Are we getting the appropriate

ROI & Value from the portfolio?

Do we have effective metrics to gauge financial

performance?

Are we utilizing our discretionary

budget in the best way?

Pressure to “Do More with Less”

Select the question below that your PMO struggles to answer

Poll 1

The Statistics Are AlarmingTraditional PPM is Failing to Deliver Anticipated Results

33%of projects fail to get completed or implemented

of completed projects experience cost overruns

54%46%

Unrealized Business

ValueRealized

Business Value

43%of all projects are delivered late or over budget

Standish Group

Standish Group PMI

33%of projects do not meet their goals or business intent

Gartner

18%

UMT360

Create Select Plan ManageEvaluat

ePromote Standardization through Defined Processes, Workflow, and Templates

Standardize business case

Determine Strategic Value

High Level Cost/benefit Estimating

Contingency Estimating

Risk Impact

Strategic Alignment

Cost Optimizations

Resource Capacity Planning

Selected Portfolio

Schedule Mgmt.

Resource Assignments

Detailed Cost/benefit Estimating

Funding Approval

Variance/metric Reporting

Re-Investment “Sweep” Process

Scope & Schedule Delivery

Budget Utilization

Health Status Reporting

Year-End Review

Cost Benefits Realization Analysis

Scope Realization Analysis

Lessons Learned

$2bn – Process Managed by 2 Employees

$200m Pilot – 4 Employees Expanding to $2bn

Building the Enterprise PMOInvestment Optimization & Management

Optimization Management

What is Portfolio Management?A question I have struggled with over the years!

Aggregate reporting across one or more portfolios?Alignment of spend with strategic priorities?

Portfolio Management gives you the …Ability to have timely financial insights into all your portfolios to make informed business decisions to

increase the overall ROI..

Is It…

Common Annual Planning Challenges… Driving Need for Portfolio Optimization

• Disparate methods of receiving projects• Non standard business case

• Disparate financial models and calculations

• Disparate cost estimating methodologies

• Disparate method of linking benefit of strategic value

• Disparate methods of classifying projects• Mandated

• Operationally Required

• Strategic

• Projects are chosen based upon who submits and how fancy the “slide ware” is vs. the financial merit and strategic value

• Small business units often lose• Impossible to compare financial value

from one project to the next (apples to oranges)

• Either cost over-runs or under-runs• Unable to distinguish between “lights on”

and discretionary

Common Challenges Typical Results

Portfolio Optimization ProcessA well documented best practice

Business Driver Definition

Business Driver

Prioritization

Consolidate Project

Requests

Develop Business

Case

Prioritize Projects Against Drivers

Run Constraint

Analysis

Portfolio Review & Approval

Detailed Planning /

Business Case

Create SelectStrategy Plan

Seni

or V

ice

Pres

iden

t Lev

elVi

ce P

resi

dent

Le

vel

How many of you have implemented a similar optimization approach?

Poll 2

Regulatory Mandated

Operationally Required

Strategic - with Cost Savings

Strategic - with Cost Avoidance

Strategic - Other

In Flight

Building Our PortfoliosClassifying & Categorizing Projects; do you have this data?

# Project Name Original Project Budget

SAC Sanctioned

Releases

SAC Sanctioned Redirects

SAC Sanctioned

Budget YTD Actual

YTD Budget (Original)

Variance Variance

% YTD Actual

YTD Forecast (Q3

Revision) Variance

Variance %

Organization 1

1 Project A $11,850,009 ($9,100,000) $0 $2,750,009 $1,372,189 $11,850,009 ($10,477,820) -88% $1,372,189 $2,750,009 ($1,377,820) -50% 3

2 Project B $1,815,007 ($130,000) $0 $1,685,007 $1,674,614 $1,815,007 ($140,392) -8% $1,674,614 $1,685,007 ($10,392) -1% 1

3 Project C $1,357,005 $0 $0 $1,357,005 $1,543,006 $1,357,005 $186,001 14% $1,543,006 $1,357,005 $186,001 14% 2

4 Project D $1,144,000 $0 $0 $1,144,000 $1,091,251 $1,144,000 ($52,749) -5% $1,091,251 $1,144,000 ($52,749) -5% 1

5 Project E $991,015 $0 $0 $991,015 $955,915 $991,015 ($35,100) -4% $955,915 $991,015 ($35,100) -4% 1

6 Project F $920,022 $0 $0 $920,022 $824,115 $920,022 ($95,907) -10% $824,115 $920,022 ($95,907) -10% 2

Project Organization, Portfolio & Name

SAC Sanctioned Information YTD Variance Analysis vs. Original Budget YTD Variance Analysis vs. Q3 Rev. Forecast Project Status

The Usual…RAG Reporting & Variance Analysis

2009 2010 2011 201250

100

150

200

250

300

350

400

70%

75%

80%

85%

90%

95%

100%

244211

180 188200 194

175 170

82%

92%

97%

90%

Total Project Portfolio –Budget Utilization

Original Budget

Actual Spend

Original Budget Utilization %

Millions *

Budget Utilization & TrendsBetter Utilization & Value

What was your budget utilization last year?

Poll 3

Poor estimating erodes planned business value

Original cash flow does not reflect

new/recent information

Often PMs did not create the original estimate and felt “hostage” to the approximation

No standard method of creating estimates and no

formal contingency estimating

Limited formal estimating or

Project Management

training

The static nature of the annual

planning process, thwarts their

efforts

Culturally, it is better to

dramatically under-run than

over-run slightly; generally leads to

inflated cost estimates

Feedback from Project Managers…Driving the need for Agile or Dynamic Planning

Dynamic Reallocation (Sweep) In ActionAgile Reallocation of Funds to Maximize Portfolio Value

Release New Redirect

Quarter 2 $188,096,540 ($17,813,000) $8,278,491 $7,853,662 ($1,680,847)

Quarter 3 $186,415,693 ($8,655,000) $3,104,000 $2,804,000 ($4,427,847)

Quarter 4 $183,668,693 ($9,099,260) $6,167,318 $4,359,839 ($2,999,950)

($35,567,260) $17,549,809 $15,017,501 -19% 9% 8%

(Surplus) / Deficit

Total Sweep for the year

Quarter Start Budget

2012 Common Portfolio

Sweep Process • 23 new projects were funded due to timely releasing of funds; this traditionally would have been “left on the table”

• “Not a spend it or lose it” mentality. Sweeps need to be strategic

Annual Budget Planning – Optimized Portfolio

EPMO: Monthly Summary Portfolio Report

MonthlyDynamic Re-allocation Sanction Process

(Bi-monthly)Senior Officer Committee

Organization XPre-Sanction meeting

EPMO, Cost Managers, and Project Managers

• Monthly sanctioning process• Releases – every month• Re-directs – every month• New – every month• Re-forecasting – quarterly

• Annual ‘proposal’ to selection and optimization budget process

• Monthly Project Deep Dive:• Project Status review• Red, amber, green reporting• Variance reporting• Scope review

• Governance review• Senior officer update

Organization ZPre-Sanction meeting

EPMO, Cost Managers, and Project Managers

Organization YPre-Sanction meeting

EPMO, Cost Managers , and Project Managers

Where does the “Sweep” Process fit?

“Sweep” Governance Process

Releases New Requests

Sanction Process

Re-directs

New

Revised SAC Sanctioned

Budget

Any remaining funds not allocated to projects go back to the “pot” for next month’s strategic reinvestment

Releases always

ApprovedRe-Directs

Yes

No

Approved?

2009 2010 2011 2012 201350

100

150

200

250

300

350

400

0%

20%

40%

60%

80%

100%

120%

244

211

180 188 178200 194

175 170 179

82%

92%97%

90%

101%

Total Project Portfolio –Budget Utilization

Original Budget

Actual Spend

Original Budget Utilization %

Millions

*

• Our budget utilization rates have significantly increased over the years

• In 2013, this portfolio “gave back” $33m, to the Corporation and came in at full budget utilization

Budget Utilization & TrendsSo how did we do?

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec($10)

$40

$90

$140

$190

$240

$9 $15

$25

$39 $52

$66

$74

$85

$103

79.641389964839

97.6939291466768

121.558810417515

137.9

168.2

190.6

$7 $15

$24 $35

$49

$66

$76

$89 $103

$118

$137

$173

212

2013 Actual YTD Spend 2013 Projected YTD Spend 2011 & 2012 Average YTD Spend 2013 Original Budget

Qtr 1revision

Qtr 2revision

Qtr 3revision

The EPMO in ActionTrend Analysis; using data to Better Predict the Future

2013 Forecasting AccuracyAn Art and a Science!

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec($10)

$40

$90

$140

$190

$240

$8.8$15.1

$25.3

$39.3

$52.2

$65.7$73.5

$85.7

$103.4

$127.7

$143.6

$179.1

$7 $15

$24 $35

$49

$66 $76

$89

$103

$118

$137

$173

212

2013 Actual YTD Spend 2011 & 2012 Average YTD Spend 2013 Original Budget

•Original Budget was $212M

•Through the dynamic reallocation process we ‘gave back’ $33m

•The YE Actual Charges were $179.1M, slightly above the 2 year trend, but very close to the November year-end projection of 179.6M

Producing Metrics is Key to the success of your EPMO

Organization 2013 Requested

2013 Approved

2013 Actual

Charges

2013 Original Budget

Actual vs. Budget November Forecast

Actual vs. Forecast

Organization 1  $27,404 $22,442 $14,869 $22,442 ($7,574) -34% $15,991 ($1,122) -7%

Organization 2 $73,851  $62,864 $50,236 $62,864 ($12,628) -20% $48,050 $2,186 5%

Organization 3 $0  $0 $197 $0 $197 - $195 $2 1%

Organization 4 $11,105  $5,987 $3,650 $5,987 ($2,337) -39% $3,683 ($33) -1%

Developing Trends & MetricsForecasting Accuracy by Project

Developing Trends & MetricsForecasting Accuracy By Organization

Organization 2011 2012 2013Information Resources 18% 19% 12%

Facilities 41% 33% 27%

Organization A 23% 19% 12%

Organization B 26% 16% 26%

Organization C 23% 25% 8%

Organization D 43% 33% 40%

Organization E - 79% 3%

Organization F 55% 13% 3%

Organization G 64% 21% 28%

Organization H - 31% 61%

Total 38% 27% 26%

Dynamic Reallocation In ActionReasons for Releases by Organization

How to Measure Business ValueAssess Throughout the PPM Lifecycle

• Prioritization/ Optimization

• Strategic Value• Risk Reduction• Cost Benefit• Cost Avoidance

Execution – Calendar Year

• Value assessment• Year-end metrics• Budget utilization• Estimating accuracy• Forecasting accuracy• Degree of churn• Scope delivery• Financial savings

• Identify Continuous Improvement Opportunities

Annual Budget Planning Post Year-End Review

• Strategy change• Financial change• Scope changes

• Resource changes• Dynamic Re-allocation -

Sweep

OutputInput

CHURN

Developing Trends & MetricsPortfolio Churn Analysis

ReinvestmentTotal Over spendTotal Under spend

Original Optimized Portfolio

Give BacksQ1 Q2 Q3

Approved Increases Over-Runs New ProjectsUnder-Runs

Actual Portfolio = Original Portfolio – Give Backs – Under-Runs + Approved Increases + Over-Runs +

New Projects% Portfolio Churn = 1- (Original Portfolio – Give Backs – Under-Runs) / Original

Portfolio

$188M

$18 $9 $9 $14

$51M

27%

$15 $0

$15M

8%$17.5M

9%

$17.5

Developing Trends & MetricsPortfolio Churn Analysis

ReinvestmentTotal Over spendTotal Under spend

Original Optimized Portfolio

Give BacksQ1 Q2 Q3

Approved Increases Over-Runs New ProjectsUnder-Runs

Actual Portfolio = $170M

73% of Original Portfolio spent; 27% of Original Portfolio churned

$188M

$18 $9 $9 $14

$51M

27%

$15 $0

$15M

8%$17.5M

9%

$17.5

Financial Management. Foundation

Integrate with LoB Systems & Automate

Reports

Implement the Sweep Process

Establish Benefits Realization Framework

Phase 1 Phase 2 Phase 3 Phase 4

Portf

olio

RO

I Im

prov

emen

t (0

to 2

0%)

Incr

ease

Fin

anci

al M

atur

ity L

evel

(1 to

5)

20% -

15% -

10% -

5% -

- Level 5

- Level 4

- Level 3

- Level 2

A Phased Approach Yields ResultsIntegrated Project & Portfolio Financial Controls

Building A Credible Enterprise PMOFocus on Financials & Business ValueWhere we were

• Difficult to find a roster of all in-flight projects• Hard to track down the project managers• No formal tracking of start dates/end dates• No formal benefit estimating and limited follow up (except for large projects) • Limited project status reporting, no portfolio level reporting• No dynamic re-allocation process• No Project Management Society• No portfolio analytics/year-end reporting

• Budget utilization• Estimating accuracy

• Silo’ d budgeting vs. shared budgeting• Informal project manager training

While it may be hard to measure the power of the

PMO, each of these line items have increased the value we are getting from our portfolio

• Delivered value• Churn analysis

Thank Youvisit www.UMT360.com to learn more.

Frank La RoccaDirector of Business Improvement ServicesCon Edison

Email: LAROCCAFR@coned.com