program management outsourcing capability chain (pmoc2) - why program management outsourcing does...

Program Management Outsourcing Capability Chain (PMOC2)

Why Program Management Outsourcing does not work as expected

Moataz Y. Hussein, MEng, OPM3, PgMP, PMP, PMI-RMP, IPMA-C, AVS

OPM Consulting (OPMC)

November 23, 2015

QUICK OVERVIEW

OBSERVED ISSUES AND SUCCESS FACTORS

RESEARCH RESULTS AND DISCUSSION

RECOMMENDATIONS & CONCLUSION

AGENDA

It is assumed that the audience have already experience in Program Management, Program Management Outsourcing, Program Governance, Business Case, delivery models and compensation models, etc. These definitions won’t be discussed in the presentation.

2©2014 OPM Consulting, LLC (OPMC)

Program Management Consultant (PMC)

Client

Does “high-rise” refer to the building or the budget?

Program Management Outsourcing

Missing Capability (Challenge)

Capability (Success Factor)

Our objective is to identify and investigate


This presentation is based on a research study that has beenconducted on 2014 in collaboration with Dr. HomayounKhamooshi, a Professor in the Department of DecisionSciences at the School of Business of the George WashingtonUniversity (GWU). Dr. Homayoun is also the chair of theMaster of Science in Project Management program.

ACKNOWLEDGEMENT

©2014 OPM Consulting, LLC (OPMC)

Overview


+60%

Source: The McKinsey Global Institute (MGI), 2013

* Transport (road, rail, ports, and airports), Power, Water, and Telecommunications.

1995 2012 2013 2030

Global Infrastructure* Investment

$36 Trillion$57 Trillion


4%

SOUTH AMERICA

17%

NORTH AMERICA

5%

EASTERN

EUROPE

46%

ASIA

2%

AFRICA2%

MENA


24%

WESTERN

EUROPE

Source: IHS Global Insight and Bruce Shaw

Share of Construction Spending by Region in 2020

GCC Infrastructure Investment


Source: Meed, GCC Construction 2015 and MEED, MENA Projects Forecast & Review 2014

$2.4 TrillionGCC Construction Project Market

2005 2014 2015 2024

$1.1 Trillioncontracts have been awarded in the GCC

alone over the past 10 years $1.1 TrillionTotal of planned and un-awarded construction

projects in the GCC in the next 10 years

Clients go for well-known PMC’s


Competent Staff Previous Similar Experience

Delivering Programs on timeWorld-class tools & processes


Owner-managed, with PMC providing staff support

integrated owner and PMC team

PMC-managed

Organizational Models used when hiring a PMC


Program management at risk

% of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays.

Booz & Company, 2010

90%The clients go for well-knownPMC’s to transfer the risksresulting from programcomplexity and lack of skillsand expertise.

90%% of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays.


90%



How did things go with infrastructure programs?







90%



90%% of infrastructure programs suffer from some cost overruns and more than this percentage experience schedule delays.








90%



WHY?

% of infrastructure programs suffer from some cost overruns and more than this percentage experience schedule delays.



OBSERVED ISSUES & SUCCESS FACTORS


Incompetent Client staff

Poor coomunicationbetween client & PMC

Blame culture

Same mistakes again and again

More than one version of the story

No standard processes

Inefficient decision making

Fear of losing job

Fear of losing authority

Resistance to change old work practices

Resistance to cooperate with PMC

High risk profile

Conflict of interest

Improper performance

management

Client’s over control

Undefined

responsibilities

Poor contract administration

Poor program coordination & integration

Denial and avoidance state

©2014 OPM Consulting, LLC (OPMC)Field Observation

Effective change management

Regular client consultation

Reliable estimates Positive organizational culture

Clear prioritization of project goals by the client

Learning from previous experiences

Clearly written lines of responsibility

Client acceptance of plans

Feedback capabilities in the system

Awarding bids to the right designers/contractors

Mutual trust among project stakeholders

Creating accountabilities

Top management sponsorship

Building a balanced and winning team

Knowing what the client really wants

Competent project manager

WBS linked to OBS

Goals and priorities

Effective project planning and control

Proven methodology

Sufficient resources

Responsiveness of client

Strategic alignment

verify progress

Clear and detailed written contract

High quality workmanship

Factors that impact large scale-projects

“Professionals & Academics View”

Effective project control mechanics

Good relationships with project stakeholders

Toor and Ogunlana, 2008


RESEARCH RESULTS & DISCUSSION


Client

PMC

Breakdown of respondents by organizational type

76.8%


4.6%

SOUTH AMERICA

Breakdown of respondents by region

17.6%

NORTH AMERICA

8.5%

EUROPE

16.2%

ASIA

4.9%

AUSTRALIA16.9%

AFRICA31%

MENA


73%65%

58% 53% 53%

86%76%

69% 65% 61%

Client-PMC CulturalDifference

Absence of PM &Audit Methodology

Lack of Client’s Competent Staff

ImproperCompensationModel & Risk

Allocation

Lack of GovernanceModel

Client PMCClient PMC

Client versus PMC perspective on the top ranked missing factors


Client PMCProgram Strategy

AlignmentGovernance Stakeholder

Benefits Management

Program Life Cycle Management

① The client / PMC cultural difference

② Absence of PMO and Program Audit

functions

③ Lack of Client's Competent staff

④ Improper PMC compensation model

& risk allocation

⑤ Absence of Governance structure

⑥ Poor Program Stakeholder

engagement*

⑦ Lack of a transition (Handover) plan

⑧ Unclear Roles, Responsibilities and

delegation

⑨ Lack of Client Support

⑩ Lack of Business Case

⑪ Improper PMIS

⑫Improper Program Management

Practices, Processes and

Methodologies

Mapping the 12 factors to to the responsible party and to

PMI program management performance domains

* Although the Stakeholder engagement is the responsibility of the PMC, however, the client must play a key role in the stakeholderengagement specially if he PMC is a foreign firm. It has been observed in the MENA region that leaving the stakeholder engagementfaction to a foreigner PMC firm leads to unfavorable results.


©2014 OPM Consulting, LLC (OPMC) 27

Which weak links have the most significant impact on the client’s investment (Cost over run, Schedule delay, poor ROI)?

Performed: PM Processes unpredictable, poorly controlled and reactive

Managed: PM Processes characterized for projects and are often reactive

Defined: PM Processes characterized for the organization and are proactive

Quantitatively Managed: The PM processes are measured and controlled

Optimizing: PM processes are continuously improved

Level 5

Level 1

Level 2

Level 3

Level 4

23%

47%

18%

5%

7%

Client Organizational Maturity


CONCLUSION AND RECOMMENDATIONS


53%Of the Clients’ respondents

Believe that their organizations lack competent staff and proper governance structure.

53.3%Of the Clients’ respondents

82%Of the

respondents

Believe that the Client-PMC cultural difference is the biggest challenge.


believe that their organizations don’t have a proper PM and audit methodology

75%&

100%

75% of the identified challenges are the responsibility of the client, and the top 5 challenges are also the responsibility of the client.


Believe that PMC is an added value to their organization

70%Of the

respondents

Rated the client’s organization maturity as either level 1 or level 2

Top 5Challenges

Client & PMC agree on the top 5 challenges that face program management outsourcing.


① Improving the organizational maturity and developing the client’s staff competencies

Recommendations

Fight the resistance syndrome before the commencement of the

program!

Assess staff competencies

Continuous Communication

with staff

Assessing OPM maturity

OPM improvement

initiatives.

Change Management

Program

Recruiting the right people to fill competency gaps.

Staff competency development

programs.

Project Management

Program Management

Portfolio Management

Strategy


② Developing Program Management and Program Audit Methodology

Recommendations

Setting up a PMO & Audit Office and positioning them in the top level of the organization structure does not

guarantee their success!

Clear Responsibilities & level of authority

of the PAO

PAO team ask the right questions

Clear Responsibilities & level of authority

of the PMO

Staff them with highly qualified

people

Guide the PMC regarding

organizational & environmental

factors

Have senior management

support.

PMO and the Audit Office are

independent business units


③ Developing a good contract with a proper PMC compensation model and risk allocation

Recommendations

The most critical part of the PMC contract is the financial structure,

it’s the client’s responsibility to do it right from the beginning!

Clear Contract that leaves no

space for imagination

Progress-based compensation, not resource-

based

The right outsourcing

model

Scope, Scope and Scope

A performance based risk-sharing contract is better

The PMC is NOT HR provider

The PMC is a delivery partner


④ Developing a proper governance model with clear roles, responsibilities, and delegation

Recommendations

Clients can definitely outsource program management, but they

cannot outsource Program Governance!

Clear Client-PMC accountability

Clarify the role of the PMO and the Audit office in the

program organization.

First thing in the program

Common agreement on the

success criteria

Agreed upon technical &

financial delegated authority

Agreed upon program change

management process

Common agreement on Performance management


The foundation of a successful Client-PMC PARTENERSHIP is the mutual trust and shared value

We are partners, so let’s build a mutual trust


Moataz Y. HusseinSenior Consultant, Program & Strategy Management

OPM Consulting (OPMC)

113 Barksdale Professional CenterNewark, DE 19711, USA

USA: +1 916-273-3331

Qatar: +974 66490135 [email protected]

[email protected]

https://www.linkedin.com/in/moatazyousif


mailto:[email protected]

mailto:[email protected]