Regardless of what such an organization is called, a PMO is sanctioned and launched to improve the organization’s project management results. Since every- one within the organization views results from their own unique, local perspective, the PMO can have a very different look and feel from one organization to another.
In today’s world, it is very rare to see organizations establish a PMO because they want to. Usually, they have to. They have tried other means to bring their projects under control. The PMO surfaces when senior manage- ment is feeling the pain. Unfortunately, this is often the beginning of bad positioning for a PMO entity.
There are many possible combinations of the determining factors of a PMO, as outlined below. These factors have implications for the ultimate PMO value to the organization. The success and influence of a PMO depend heavily on from where in the organization the PMO will operate. Should the PMO origi- nate from the market side of the organization or from the supply side? Oftentimes this is determined by the amount of current delivery pain being endured by the sponsoring management team, and where the sponsor for the PMO sits.
The major factors that describe the PMO functions and influence are discussed below and include:
■ Reporting structure
■ Themes
■ Models
REPORTING STRUCTURE
The reporting structure includes the supply side, the market side, and the se- nior executive(s) with responsibility for both the supply side and the market side.
What is a PMO and What Should a High Value PMO Do? 41 Most PMOs we encounter report to the CIO or another entity within the supply side of the organization. While the PMO sponsor can come from anywhere in the organization, we see this kind of reporting structure as setting the stage for bad PMO implementation. For the same reasons, a PMO that reports to the market side also will have limited results.
These comments are not intended to infer a negative connotation on the CIO or any other functional unit. Rather, what we see is that the PMO will ultimately fail due to lack of involvement from the most senior of the ex- ecutive team or negative influence from other organizational units.
The PMO must be able to influence scheduling and decision-making across all projects. Otherwise, some organizational units will see the PMO as their enemy or as a powerless entity. But the role of the PMO is not one of referee. The PMO must have enough influence to solve the constant re- source crises and project priority shifts permanently.
Therefore, the reporting structure that makes the most sense is to an executive with responsibility for both the supply side and market side of an organization, or what we term the business unit head.
CASE STUDY — A HEALTH INSURANCE ORGANIZATION A recent consulting assignment with a large health insurance organization involved the implementation of a new sales force automation system. The system had to be implemented within 3 months, due to significant legis- lated changes in this state’s health care system. The volume of incoming calls, new proposal generation and insurance policy changes could not be handled with the existing telemarketing staff, sales force and computer sys- tems.
This organization is a weak matrix organization where project manag- ers have no authority and all the responsibility. The EPMO in this case needed commitments and decisions made quickly to meet the deadline.
Decisions and firm resource commitments were needed from the vice presi- dents of sales, IT, marketing and operations. To whom should this EPMO report in order to ensure that all would cooperate by making this their top project?
The answer became obvious when the major reason for delays was ana- lyzed. Everyone on this project team wanted this project to finish on sched- ule. However, within each functional group, there were conflicting projects.
The conflicting projects were also important. Without the CEO becoming quickly aware of the conflicts and making decisions to remove the con- flicts, the EPMO would not be able to solve the problem. If this happens more than once, project managers within the organization stop paying at- tention to the PMO.
THEMES
The two themes, cost containment and throughput improvement, are cul- turally vastly different. We see most PMOs operating with one of these two themes.
Cost containment is traditional in nature. It focuses on the efficient use of resources and budgetary controls. It assumes that the solution to an organization’s project management problems is to enforce strict standards and controls. This approach often leads to a work environment where much PMO effort is spent collecting data, using authority and imposing negative consequences on violators.
The PMO resources are often applied to projects in financial trouble, where the motivation is to stop the bleeding. In addition to the resistance this approach creates across the organization, there is also a limit to the value of the PMO, based on how much cost can be contained. In this type of PMO, it is rare to see any concerted effort at cross-functional portfolio man- agement, one of the important emerging functions of an advanced PMO.
Throughput improvement focuses on driving down project cycle time dramatically, flowing more projects through the organization, and choosing a better project mix to meet the organization’s goals. With this theme, any projects that do not contribute to the organization’s goals are a waste. There- fore, although cost containment is not the primary mission, there is often better cost containment with the throughput approach. Waste becomes much easier to recognize when the focus is on throughput. There is also no im- posed limit on the value with this approach.
The main challenge with the throughput theme is in educating managers across the organization. The PMO must work hard to ensure that expecta- tions are changed among project teams. The throughput theme is discussed more thoroughly in the next chapter.
MODELS
Four value models exist within the two major themes. They are as follows:
1. Project Repository Model (a low or no value model)
2. Coach Model (a tactical model that can provide some value for a short time)
3. Enterprise Model (a strategic model oriented to central control of all major projects)
4. “Deliver Now” Model (a high-value strategic model focused on throughput, delivery acceleration and choosing the right projects)
What is a PMO and What Should a High Value PMO Do? 43
PROJECT REPOSITORY MODEL
The PMO serves as a source of information on projects, methodology and standards in this model. This PMO assumes that the enterprise has embraced a cohesive set of tools for project design, management and reporting. This model occurs most often in organizations that empower distributed, busi- ness-centric project ownership or with weak central governance.
We term this a low or no-value model because this PMO lacks account- ability for bottom-line results. It assumes that data and methodology have inherent value. Therefore, such an organization does not attempt to drive tangible, measurable value from its efforts.
COACH MODEL
The Coach Model is an extension of the Repository Model. It assumes a willingness to share some project management practices across functions and uses the PMO to coordinate the communication. Best practices are docu- mented and shared and project performance is actively monitored. Results are used to raise enterprise performance and train inefficient or new project managers. In the Coach Model, the PMO acts primarily as trainer, consult- ant or mentor. It also becomes a source of information on project processes.
In this model, the PMO often helps in project setup and post-project re- views.
This PMO, while providing meaningful tactical help, will always be second-guessed by the senior management team, especially during hard times. The executives, always challenged to provide a better bottom line, will constantly ask, “Do we really need this overhead? Sure, it’s providing some benefit, but is it worth the expense?” The reason this questioning oc- curs is that if a project is successful, the project manager, the team, and the functional sponsor grab the credit. The coach is often not awarded the credit.
However, if projects are not successful, the coach is given all of the blame.
Without the senior management team becoming primary customers of this type of PMO, our observation is that this organization becomes the top candidate for the next budget cut.
ENTERPRISE MODEL
This model usually implies a much larger investment and, therefore, usu- ally has a stronger mission, charter and support than the previous two mod- els. It enables risk management as projects initiate and mature in the devel- opment cycle. It plays a major role in multi-project management by identifying bottlenecks that hamper all projects. Often within this model,
there is some gathering of data to build the enterprise project portfolio (in- formation about the major projects that the organization has sanctioned).
The most consolidated version of this organizational model concentrates senior project management expertise and execution within the PMO. Some or all project managers are staffed within the shared service model and con- signed to projects as needed. The model assumes a governance process that involves the PMO in most projects, regardless of size.
While this model is heading in the right direction, we observe that most PMOs within this model have no direct link to the CEO or business unit head. There are no immediate bottom-line expectations of the PMO. If you take senior project managers out of a functional area, place them in such a PMO, and then farm them out again as project managers, has the PMO really added significant value to the entire organization?
From what we have seen, there is a large disparity between PMOs using this model. If the senior members of this PMO, outside of their project responsibilities, are able to get together, vet common problems, and imple- ment across-the-board solutions, then the value proposition is much greater.
In reality, from the PMOs that we have surveyed, we observe PMO re- sources either working hard on projects or focused on non-leveraged ef- forts.
“DELIVER NOW” MODEL
In this model, the emphasis is on delivering measurable value to the execu- tive team within each 6-month period. At initial startup of this PMO, the resources focus on accelerated project deliveries across all major projects.
This model has sponsorship at a very high executive level (CEO or Se- nior Vice President). Its metrics are tied directly to senior management per- formance. It seeks to deliver or influence at least some of the following within 6 months:
■ Strategic planning (choosing the right projects)
■ Project coaching for delivery acceleration opportunities and deliv- ery threat avoidance
■ Integrated project status reporting and scheduling with the portfo- lios
■ Knowledge transfer to selected resources
■ “Project portfolio” including relationship to organization goals and assets, current workload, tactical progress, status and correction plans
■ Monthly “operations plan and forecast” that identifies portfolio op- portunities and threats, top issues, top risks, projects over/under budget, and portfolio fiscal summary
What is a PMO and What Should a High Value PMO Do? 45
■ Global project prioritization model for all projects, current and pro- posed
■ Governance Board setup and/or modification that enables the force- ranking of the portfolio of projects
■ Project management training, coaching and mentoring on projects that are on the executive radar screen