the project management office - effectiveness and delivering value

The Project Management Office (PMO): Effectiveness and Delivering Value

White Paper May 2011

Matthew Hillhouse Managing Partner – PMP, MBA

Taleo Project Services Inc. www.expertsinfit.com

[email protected] 403-998-2262

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White Paper 2011 - The PMO: Effectiveness & Delivering Value May 2011

Copyright 2011 Taleo Project Services Inc. 1

Table of Contents

Executive Summary............................................................ 2 Burdensome or Beneficial?: The IT PMO.......................... 2 The PMO: Achieving Effective Implementation ................ 3

What is Value?................................................................................................................ 3 When?: Implementing an IT PMO for the “Right” Reasons .......................................... 3

Common Reasons for Establishing a PMO ................................................................ 5 Customized Implementation: Getting the Best Fit PMO for Your Needs ...................... 8

PMOs: Models and Types........................................................................................... 8 Obstacles to Success: Avoiding PMO Common Pitfalls .............................................. 10

Ineffective PMOs: Common Errors .......................................................................... 10 Sustainability Issues: Achieving an Effective PMO in the Long-term......................... 13

PMO Effectiveness Test: A Pre-Implementation Checklist ..................................... 13 Successful PMO Implementation ............................................................................. 13 Post-Implementation of the PMO ............................................................................. 14

Conclusion ........................................................................ 14 Taleo Project Services Inc. ............................................... 15 References......................................................................... 16



Executive Summary The business environment has experienced unprecedented changes over the last several years. Times are lean. Business has to act smarter than ever before. Doing more with less, and finding efficient and effective methods of achieving similar outcomes, is a central key to success. Adding to this need is the rapid increase in the number of IT projects businesses have to juggle. For these reasons and more, superior project management is essential. Any tool that rationalizes project management – ensuring projects run on time; to budget; satisfy clients; and, achieve objectives (all while being aligned with strategic organizational goals) – is an instrument that business cannot afford to overlook. This is where the Project Management Office (PMO) comes into question. The PMO, in its basic form, is an organizational entity, with a centralized presence, that coordinates and manages projects within the business. Despite their alleged ability to act as an outstanding business tool, a vast number of professionals do not recognize the value of the PMO. Instead, they believe they add to already heavy workloads, increase costs and reduce project speed. The purpose of this white paper is to explore whether this perception is justified. Or, is it possible to effectively leverage a PMO and, in the process, deliver value to the entire organization?

Burdensome or Beneficial?: The IT PMO Effective, streamlined project management has never been more important. In the recent economic climate of downsizing; the flattening of middle management; stricter competition; rapid market change; increasing focus on time to market, and, the considerable amount of project activity within modern Information Technology organizations, the need for formal project management knowledge and skills to bring rigor, consistency and accountability to project management efforts is seen by many as invaluable. Projects fail for all sorts of reasons, from a lack of standardized documentation, poor communication and no real sponsorship. This not only negatively impacts timelines and budget, it also impacts upon the effectiveness of the project – that is, the project does not achieve what it initially set out to achieve. The response to project failure, and the changing economic climate, has been a rapid rise in the number of Project Management Offices (PMOs) across all organizational configurations (i.e. size and type). Also referred to as a PO (Project Office); PSO (Project Support Office); PMCoE (Project Management Center of Excellence); Directorate of Project Management; Project Management Oversight; Strategic Project Office; and, Enterprise Project Office, a PMO is “an organizational body or entity assigned various



responsibilities related to the centralized and coordinated management of those projects under its domain.”1 The problem, however, is that the mere mention of a PMO continues to make many project managers’ eyes roll to the back of their head. For these managers, PMOs are viewed as burdensome and controlling, thereby: creating work; increasing costs; losing control; being policed; slowing progress; and, adding another layer of bureaucracy in an already busy world of too many meetings, emails and phone calls. The value of implementing an effective PMO is not often understood. This whitepaper examines the question of whether PMOs are, in fact, negative entities and lack organizational worth. Or, is it possible to effective leverage a PMO and deliver value to the organization? In order to explore this, four sub-questions are investigated: • When is a PMO valuable to the organization? • How do we implement the right PMO to meet our needs? • How do we avoid common pitfalls? • How do we sustain an effective PMO?

The PMO: Achieving Effective Implementation To examine whether achieving effective PMO implementation adds value to the organization, “value” must first be defined.

What is Value? The value of a PMO, and successful project management, should extend beyond conventional measurement, such as adherence to timelines and budget. Of course, financial, time and scope considerations are essential (the project manager’s quintessential triangle); however, value can also encompass such areas as: the client (satisfaction, retention and share of the market); employees/contractors (turnover, satisfaction and motivation); project benefits (defining benefits, realizing benefits); and, project value (such as the quality or risk involved in undertaking the project). As such, PMOs can be responsible, or at least provide a support role, for an entire range of services – adding value in many more ways than just time/budget criteria.

When?: Implementing an IT PMO for the “Right” Reasons Implementing an IT PMO for the “right” reasons may seem commonsensical; however, the establishment of a PMO can be undertaken for a whole range of reasons (not all are positive), including: “just because”; to mimic others; or, because it is a trend. This only positions the PMO for failure, usually in the short term. It wastes valuable organizational resources and denies the true benefits PMOs have to offer. As such, organizations need to ascertain when a PMO is valuable and if it aligns with their needs – only then should establishment occur.



There is no denying that a well-operated PMO can make a positive contribution to the overall organization. In fact, the 2004 Hackett’s Book of Numbers 12th ed. stated that approximately 50% of leading global organizations used a permanent PMO to manage their IT projects.2 It was found their projects were 30% more effective at being on time, to budget and achieving objectives. According to Hill (2004), PMOs provide five key functions, including: practice management; infrastructure management; resource integration; technical support; and, business alignment (see Table 1).3 PMOs can contribute significantly more to an organization than just the cost/time measures so often associated with project management.

Table 1: PMO Functions

Taken from Hill (2004, p.48)



There are many reasons an organization will want to implement a PMO. The following provides some of the most common.

Common Reasons for Establishing a PMO • Achieving Consistency and Standardization

One of the main benefits of establishing a PMO is to achieve consistency and standardization across all projects within the organization. This is important for a variety of reasons, including: project selection; prioritizing projects; risk analysis; project delivery; reporting; obtaining a summarized view of all projects; and, project evaluation throughout the project’s lifecycle. By achieving consistency amongst all these processes, projects become streamlined; failing projects are recognized early; resources can be reallocated; and, historical records can be kept to know what worked and what did not. Overall, it provides more efficiency (less costs) and more effectiveness (to achieve goals). Tasks, Tools and Methods. Standardization replaces the fragmented organization, where each project manager undertakes their own thing in their own way. Standardized tools and methods also help in the important planning stage and throughout the operation. By standardizing methods and processes, the same resources can be utilized when undertaking all projects, contributing to economies of scale. Without the standardization of tools and methods, there are no consistent lifecycle and progress checkpoints to ascertain what stage the project is at and how it is performing (important for measurement against performance criteria). A lack of standardization also means there are no standards for project delivery and projects are more likely to overrun. Without standardization, project objectives often lack clarity. Reporting and Summarization. Standardization also allows reporting of outcomes in a consistent manner. This allows PMOs the ability to look back at historical records of completed projects. For example, the outcomes of the project, what worked, and what did not. Project comparisons can then be made. Standardization also provides consistency in the reporting of information and outcomes. As such, the development of information and also the delivery is in a standardized format. Without standardization of reporting, there is no way of viewing projects across the organization. Summaries of project outcomes or progress for higher management lack uniformity. Comparisons cannot be made and issues/risks cannot be uncovered easily. Quality can also suffer when there is no standardization. Without standard tools for reporting, inaccurate project status reporting is more likely to occur, leading to misinformation and increasing the likelihood of project failure. Project Selection and Prioritization. Without project intake and prioritization process standard tools, project failure is more likely to occur. Standardized methods for selecting projects ensure decisions are based upon organizational goals and strategies, as opposed to personal preferences or poor decisions.



Identification and Stabilization. With standardized measures, a PMO can discover early on the projects that are out of control. If there are no methods in place to assess and stop projects in mid flight, projects are more likely to fail, run over time and budget, clients will be dissatisfied, and projects will not achieve their initial goals. • Filling the Gap: Limited PM Expertise and the Flattening of Middle Management

The PMO sits in between organizational executives and the management of projects. Many employees in the organization possess significant content knowledge; however, they lack project management skills. This is often the case with IT projects and is where a PMO can really help. The flattening of middle management has also meant that senior executives are now in charge of more. They simply do not have the time to track all projects they are responsible for – a pivotal role of the PMO. • Attaining Alignment: Projects and Strategic Corporate Goals

One of the most important reasons for establishing a PMO is the lack of linkage between projects and strategic corporate goals. A project not aligned with an organization’s strategic direction is more likely to be ineffective or even fail. A study that examined the project management practices of 750 organizations around the globe, found that 80% “had no formal business case for the development of their PMO.”4 Moreover, project managers, typically, do not have, or work, with an enterprise view. They are more focused upon successfully completing their projects. PMOs can bring this strategic perspective. By being able to helicopter up and down, taking a project or enterprise view, PMOs ensure projects are aligned with organizational-wide goals. • Resources: Constraints and Reallocation

Even the largest projects have limited resources available to them. During the planning stage, PMOs identify resources that are required and conduct cost-benefit analyses. The PMO increases the likelihood of projects adhering to budget, ensuring they stay on track and focus on achieving milestones. They also uncover the amount of risk of a project, thereby directing selection and closing down projects where necessary (and reallocating valuable resources). • Project Overruns: Prevention and Minimization

A successfully functioning PMO can prevent and minimize project overruns. By initially setting out the scope of the project and clarifying objectives and definitions, a PMO enhances the probability a project will run on time and to budget. The standardization of methods employed also increases the probability that the project will be streamlined. By effectively managing various IT projects across the organization, adherence to timelines ensures cost savings.



• Knowledge Management and Sharing In essence, PMOs are a central information hub, storing knowledge and data. Apart from possessing information regarding standardization, they store data relating to current and past projects. By storing historical information about prior projects, PMOs reveal previous solutions that worked and share best practice throughout the organization. In effect, PMOs are consultants to project managers, providing information and knowledge related to their particular project. • Training, Learning and Mentoring

A PMO is also a hub for learning and training, providing all those involved in project management with the required skills needed. PMOs also mentor and guide teams/individuals throughout the organization, so project management best practice is applied. • Managing Client Discontent

Another reason for establishing a PMO is customer dissatisfaction or complaints. This signals the project is not working. As such, the PMO can identify and improve project management areas. PMOs are ‘customer-centric’ entities, ensuring customer requirements and culture is at the heart of project management. • Increase Awareness of PM Principles Throughout the Organization

A PMO can also promote the benefits and awareness of the principles, methods and procedures of project management throughout the organization. • Promoting Organizational Maturity

APMO can enable the organization to become more mature. By allowing best practice to permeate from the PMO throughout the entire organization, the business itself becomes more mature. • Increase Transparency

Decision making in the PMO (such as project selection or project prioritization) is transparent. Individuals are not able to base decisions on politics or covertly conduct activities. With standardization, all decision making is consistent and transparent. There are many reasons for establishing a PMO. By implementing centralized management, different projects within the organization – across time and departments – are handled more efficiently. Standardization promotes consistency and rigour, improving project performance in a great many areas (e.g. cost, time, scope and human management). Implementing an IT PMO only for the “right” reasons – only when the



organization can truly benefit – might seem rational; however, many have been established for the sake of it, only to fail. Another way of using a PMO to its maximum potential, and thus delivering value to the organization, is to ensure the PMO is tailor-made. Like a functional suit, PMOs need to be tailor-made; otherwise they are ill-fitting and ineffective.

Customized Implementation: Getting the Best Fit PMO for Your Needs There is not a one size fits all PMO model. Organizations are not homogenous, and, as such, there is a need for heterogeneity amongst the PMO models as well. An appropriate model for the unique culture of the organization should be implemented.

PMOs: Models and Types It is extremely important to remember that the goals of a PMO will differ in timeframe and complexity (i.e. the functions). The functions of a PMO can encompass: enterprise functions (e.g. methods, risk and standards); project functions (e.g. metrics, mentoring and consulting); and, human resources (e.g. recruitment).5 PMOs are also referred to as PMO-light or PMO-heavy. Light PMOs might only perform a support role and have little control over project management. On the other hand, heavy PMOs can have significant and direct control over project outcomes.6 Hill (2004) explains this using the PMO Competency Continuum, where functional complexity increases as PMOs mature (see Figure 1).7



Figure 1: PMOs and Maturation

Taken from Hill (2004, p.46)

PMO models can also be described as centralized or decentralized. Centralized PMOs guide all project managers and coordinate services. With the decentralized model, however, project managers do not report to the PMO and the office plays an administrative role within the organization.8 PMO models can also be portrayed as having an: administrative; governance and support; or, command and control function. Within each one of these PMO types, responsibilities increase. For example, the administrative model is responsible for establishing templates, guidelines and also provides for the centralized storage of project documents. The governance and support model typically involves the coaching of proven processes/ methodology and standards that add value. On the other hand, the command and control style PMO is accountable for all projects and their outcomes. Another classification, demonstrating the differences amongst PMOs, includes: • Strategic (SPO) – identifies, selects and prioritizes projects. This is aligned with

organizational core strategies; • Directive (PMO) – is a Program Management Office. This office is responsible for

defining guidelines, standards and templates. These relate to tools, the software used in the project management, methods and best practices;

• Support (PSO) – this office provides support for the employment of tools, methods, software and best practice; and,

• Hybrid – is an office that combines the functions of any of the above models.9



Establishing a customized PMO should be guided by the consideration of the following steps: Step 1. Ascertain the organization’s needs. Step 2. What are the goals of the organization? Step 3. How will a PMO help to achieve these goals? Step 4. Ensure the goals of the PMO are aligned with the overall corporate strategic goals. Step 5. What type of PMO will help to achieve these goals? Apart from tailor-made solutions, there are also some common pitfalls that organizations should avoid or be watchful of when implementing a PMO. This will decrease the probability of project failure and ultimately provide value to the organization.

Obstacles to Success: Avoiding PMO Common Pitfalls Learning from past implementation experiences is perhaps the most effective method of leveraging a PMO and providing value to your organization. Knowing the obstacles to successful and effective PMOs allows organizations to enter forewarned and forearmed.

Ineffective PMOs: Common Errors • Model Generalization

As the last section maintained, applying a generic model, and believing that this will result in an effective PMO, is asking for too much. Organizations are diverse in many areas and PMO models must be as well. It is not uncommon for a PMO to impose only one type of methodology or approach to all projects. Of course, one approach will not be appropriate for all projects. In these instances, project managers are essentially forced to follow life cycles that are inadequate or do not deliver value. • Measurement Issues

If there is no method (or it is insufficient) for measuring the effectiveness of PMO performance, then there is no way of knowing whether it is achieving what it set out to achieve. This resonates with Peter Drucker’s quote: “if you can’t measure it, you can’t manage it”. In other words, a PMO has to be measured for it to be managed. A PMO must have standardized metrics – either qualitative or quantitative – to track progress and effectiveness. PMOs need to be held accountable also. If there is a lack of PMO metrics, an organization is simply wasting time and money.



• Organizational Culture: Resistance and Non-compliance

Organizational resistance and non-compliance to processes and methods implemented by the PMO is not unusual. Executives may feel power is being taken away or PMOs are akin to the project police. There are also instances where PMOs evolve into having too much power. In such cases, resistance can result in non-compliance and covert actions/projects that ultimately undermine and affect project success. Appropriate enforcement should be performed. As Kaufman & Korrapati (2007) state:

the success or failure of the PMO (and the changes it is mandated with providing) will be driven and determined by the strength and success of the organizational management of the concept rather than the strength of the concept itself or the internal management of the PMO.10

Resistance can also occur where PMOs are operating at lower levels within the organization as opposed to senior management. Consequently, PMO culture will not permeate throughout the entire organization because the message is not reaching the right people and it is not aligned with corporate strategies. • Lack of PMO Expertise

The lack of PMO expertise and/or leadership experience is another common obstacle to an effective PMO. As Mr. Pacelli – an author and former director at Microsoft and Anderson consulting – states, “one of the worst mistakes organizations make is putting a project manager in charge of creating a PMO and then treating it like a project.”11 Credibility issues surface and PMO benefits are never realized. One common mistake made by organizations in regards to the implementation of a PMO is that they select a couple of staff who have to start from scratch. Apart from needing leadership qualities, excellent communication skills and project management experience, PMO staff need to possess intricate knowledge of all areas where projects can make a positive impact. • Shortfall of “Real” Sponsorship

In many instances, sponsorship of a project should be assigned to a senior executive. Sponsors are ultimately responsible for the success of the project and need the authority and motivation to surmount organizational resistance. The problem, however, is that if they are not fully on board, or do not recognize the benefits themselves, there is no real sponsorship and projects are apt to fail.



• Lack of Alignment with Organizational Strategies

PMO implementation and actions must be directly linked to organizational strategies. If not, project selection and prioritization will not be conducive to the organization and ultimately require additional resources to complete. • Not Results Focused

PMOs must be focused upon results and should be grounded. Whilst concepts and abstract thinking are beneficial at directing PMOs, a PMO is a concrete, operational unit, and, consequently, must be results focused. Being too academic is another common pitfall of PMOs. • Lack of Role Definition and Accountability

Often the roles and responsibilities within project management are poorly defined or are lacking. Additionally, a lack of accountability will impact upon the effectiveness of a project. A formal, standardized tool, such as the RACI chart, will assist role definition and accountability. Roles must be clearly defined. • Poor Communication and Expectation Management

Weak communication is also an affliction of the ineffective PMO. This particularly relates to communicating what is expected from the project and what is expected from the individuals involved. • Overly Bureaucratic

PMOs can certainly become too bureaucratic. Over processing is a common error and is both ineffective and inefficient, while too much paperwork and processing produces avoidable overheads and the micromanagement of projects. • Lessons Learned & Best Practice Implementation

An entity that does not learn from past mistakes or successes is less effective. This is the case with PMOs also. Many PMOs do not retain this information or knowledge and repeat the same mistakes over. Establishing your PMO, as a historical knowledge archive, enhances project effectiveness. Avoiding or looking out for the common pitfalls when implementing a PMO ensures the organization will achieve more with less; however, achieving a long-term, sustainable PMO is an additional method of realizing value. A sustainable and successful PMO grows into a mature PMO, also developing the entire organization in the process.



Sustainability Issues: Achieving an Effective PMO in the Long-term Achieving an effective PMO in the long-term is the ultimate goal. Apart from establishing a PMO for the “right reasons”; customizing the PMO model to suit organizational requirements; and, avoiding commonly-made pitfalls; a pre- and post-PMO implementation checklist can promote a sustainable Project Management Office. Combined with a number of implementation steps, PMOs can achieve sustainability and deliver value to the entire organization.

PMO Effectiveness Test: A Pre-Implementation Checklist To promote long-term PMO success, consider the following prior to implementation: • The What: Reflecting and defining with key decision makers within the organization

on what the PMO can realistically achieve is critical. You need to have a comprehensive and common understanding of these Key Performance Indicators (KPIs) before getting started.

• The Why: Knowing what is only part of the solution. Understanding why will help you shape the exact services and activities that the PMO must be accountable for in order to make the desired difference.

• The How: With the foundation of what services the PMO will provide and what the desired outcomes are, details can know be crafted regarding exactly how you will do this. Much of the How details become the plan described further on in successful implementation steps.

The following steps can also promote successful implementation.

Successful PMO Implementation Step 1: Problem Identification. Determine why a PMO is being considered, what problems are we trying to resolve, what benefits will the PMO deliver Step 2: Project Objectives. Treat a PMO implementation like a project, establish specific objectives and a plan. Step 3: Ideal Models. Assess the best model appropriate for the desired goals and what the organization can realistically accommodate based on its project management maturity Step 4: Action Plan. Develop a plan for the initial implementation, ideally a 1 year timeline, consider what can be realistically done and how long to get to steady state Step 5: Roles and Responsibilities. The plan must include clarity on who is accountable for key tasks/outcomes versus who is responsible. Step 6: Change Management Plan. Only 1 in 5 attempted changes in an organization are successful, a comprehensive Change Management Plan including an impact assessment will go a long way to beating these odds. Step 7: Sponsorship. Without it you will not make it. Sponsorship from the highest possible level (ideally the “C’s”must exist, be engaged and be supporting the PMO implementation.



Step 8: Monitoring and Adjustment. Assess PMO progress against objectives, KPIs, desired benefits and adjust the plan accordingly. Following implementation, a standard list of checks will also help to increase the performance of the PMO.

Post-Implementation of the PMO Ensuring a PMO is as effective as possible can be assisted by the application of a post-implementation or maturity level checklist. Some important post-implementation considerations include: • Are there PMO metrics or KPIs in place that are being tracked and assessed to

determine if PMO is achieving desired results? • Are systemic issues affecting project practices being tracked and resolved? • Can the consistency of project results be improved? • Is there accurate project reporting to senior management?

By answering these questions, PMOs can enhance the effectiveness of existing projects and learn from successes and mistakes (improving best practice in future projects). By conducting pre- and post-checklists, and by following a set of implementation steps, the customized PMO can be improved upon and sustained in the long term. The PMO is not a separate entity to the organization; it is an enabler, helping the organization to reach its next level. As such, alignment with strategic goals and continual monitoring of performance is fundamentally important.

Conclusion There is no question that Information Technology PMOs can be leveraged to deliver value to the organization in a myriad of ways. PMOs do not have to be the bureaucratic monster that project managers dread. A successfully implemented PMO can reduce work; decrease costs across the entire organization; provide support to project managers; increase productivity; increase project speeds; and, streamline project tasks – all within the strategic goals of the organization. If an IT PMO is implemented the right way – that is, only for the “right reasons”; customized to fit the organizational needs; avoids common pitfalls; and, achieves sustainability – they can be an outstanding business tool that no organization can afford to overlook.



Taleo Project Services Inc. Taleo is a Calgary based firm that provides exceptional contract services in project management and business analysis. The firm has a three step approach to exceeding client expectations and advancing the professional practice of project management and business analysis: • Provide well suited Taleo talent to address client’s needs based on skills, experience

and cultural fit. We recommend appropriate matches and solutions based on our assessment methodologies led by our management psychologist.

• All Taleo practitioners are supported by a senior, highly experience delivery team. Practitioners are supported to ensure assignments are on track and delivering desired results.

• Taleo active engages in the local professional community to support peer networking and knowledge development in the specific areas of project management and business analysis. These efforts include quarterly town hall engagements, senior IT leadership roundtables and complimentary lunch and learn series.

Our service offerings include: • Program Management • Project Management • Project Controls • Project Management Offices • Requirements Gathering • Process Analysis • Quality Assurance For more information or to review other white papers relating to project management and business analysis visit our website at www.expertsinfit.com or contact the author at [email protected] or 403-998-2262.



References 1 PMI (2004). A Guide to the Project Management Body of Knowledge. Project Management Institute, Newtown Square, PA. 2 Hoffman, W. (2005). Strong Signals. PM Network, 19 (8): 42-46. 3 Hill, G. (2004). Evolving the Project Management Office: A Competency Continuum. Information Systems Management, 21 (4): 45-51. 4 Stanleigh, M. (2006). From crisis to control: New standards for project management. Ivey Business Journal, March/April, 1-4. 5 Jedd, M. (2006). PMO on the Fast Track. PM Network, 20 (3): 64-69. 6 Singh, R., Keil, M., & Kasi, V. (2009). Identifying and overcoming the challenges of implanting a project management office. European Journal of Information Systems, 18: 409-427. 7 Hill, p. 46 8 Curlee, W. (2002). Modern virtual project management: The effects of a centralized and decentralized project management office. (doctoral dissertation). University of Phoenix. 9 Valle, Jose Angelo Santos do, da Silviera e Silvia, W., & Soares, C. (2008). Project management office (PMO): Principles in Practice. AACE International Transactions, 71-79. 10 Kaufman, C., & Korrapati, R. B. (2007). A Project management office (PMO): Framework for successful implementation of information technology projects. Proceedings of the Academy of Information and Management Sciences. Allied Academies International Conference. Jacksonville, 11 (1): 6pgs. 11 Hoffman, p. 44

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