The Power of the PMO – Part 2

This is part 2 of the discussion pertaining to the benefits of instituting a PMO within an organization.

As mentioned in the previous post, a PMO or ‘Project Management Office’ is a centralized resource within any organization that serves the broader purpose of defining and maintaining standards for project(program) management within that organization.

As statistics in the aforementioned post have alluded to, effective project/program management is absolutely vital to the success of the deliverables. To reiterate the statistic, 69% of project failures are directly attributed to a lack and/or improper implementation of project management methodologies.

So when it comes to the PMO itself, many may ask the question: how should an organization set up their own particular PMO?

As explained in the previous post, organizations are generally structured in three different ways:

  1. Functional – Direct line management of teams
  2. Projectized – Common pools of resources with project/program managers filling both the functional manager and project manager roles
  3. Matrix – A mixture of the functional and projectized structures with further granularity depending on whether the set up is a strong, balanced or weak matrix.

What is most paramount when attempting to set up a PMO for the first time within any organization is to ensure that the PMO adheres to the general culture and organizational structure of the company or business. For example, trying to set up a PMO with the notion of a projectized organization when in fact, the structure is functional will cause mis-alignment between the two entities. This will lead to further confusion and probably cause the whole PMO to become dead on arrival when it comes to trying to follow its mission statement.

Now there may be instances where the organization is making a conscious effort to re-align its corporate culture and internal structure. As such, it may adopt a more radical PMO style as a pre-amble to a broader re-organization effort. However, this is generally ill-advised. Reorganizations in general are often disruptive and stressful for employees within the company. By trying to essentially set up a PMO under the assumption of what you ‘think’ the organization might be is also a recipe for problems. It’s akin to trying to change too many things in a computer program at once and then attempting to debug. Smaller, incremental changes that validate the concept are far more effective. As is often said, baby steps before learning to run.

In general, a PMO within a projectized structure is usually the easiest to set up. In fact, most of the particulars will already be in place since the organization has made a conscious effort to be project based. As such, instituting a PMO that will serve in its core capacity will generally be relatively straightforward. There may be issues if the organization is broken down into areas with different projectized structures reporting into different lines of business. (More of a matrix) What may be prudent within that structure is smaller PMOs that align against the functional areas. A common PMO can be instituted that all the constituent PMOs will report into. This is not an uncommon set up and exists in many organizations that follow a functional structure. Ultimately, as stated before, do NOT attempt to structure the PMO against the grain of the corporate culture or internal structure. That will waste a large amount of time creating an agency within the company that will be treated as little more than an afterthought.

So once instituted, what exactly will the PMO be doing? In general, that can be itemized as follows:

  • Perform project support and guidance to project managers in business units (occurs mostly in functional structure)
  • Develop and institute a consistent project management methodology and standardized process
  • Provide training and consulting services as needed and/or collect requirements from external sources
  • Act as a ‘home’ for project managers that can be loaned out to projects as needed
  • Provide common project management tools to business units and maintain tools as needed
  • Provide portfolio management and ensure a staff of program managers is available to manage multiple projects that are related

When one thinks of a PMO, one should look at it in the same way they look at other ‘common’ resource entities within a company, such as a group that does integration testing, common document writers or a set of architect level engineers that are utilized as internal consultants for projects. It is a common resource designed to assist the organization in meeting its project deadlines efficiently and consistently.

So how does one gauge the effectiveness of their PMO? What benchmark(s) are used that can quantify the success or failure of the PMO?

While many in the business sphere love to focus on strictly monetary tangibles, these can often be mis-leading. Cost reductions or increased revenue can certainly be the result of a well setup PMO. But distinguishing between which attributes contributed to cost savings or revenue increases can often be vague. The PMO may have helped, but it may not have been the only factor.

As such, the following success criteria is usually considered the ‘best’ method to quantify the success of your PMO:

  1. Accuracy of cost estimates – Are the target costs and resultant costs of projects well aligned?
  2. Accuracy of schedule estimates – Are projects being completed at the milestones set by the project managers?
  3. Project stakeholder satisfaction – Does the PMO have a good reputation based on its service?

One final note before closing out this post: many business leaders often look for instant gratification when it comes to instituting any changes within their company. They will often look only to the next few quarters as justification for moving ahead with any initiative. But make no mistake, a properly done PMO is a long-term strategy. It ‘can’ produce short-term gains. But in the end, it will take some time to fully implement the concept and ensure it is aligning itself well with the company internals. There will always be some tweaking necessary and business leaders should not be dissuaded or disillusioned from moving ahead if a few bumps are met along the way. Over the long-term, studies have shown that a properly structured and efficient PMO will lead to improvements in all the aforementioned metrics. As an example, Sun Life instituted a new PMO in its organization during the Y2K timeframe. The resultant improvements were as follows:

  • Accuracy of cost estimates: 25% increase
  • Accuracy of schedule estimates: 31% increase
  • Project stakeholder satisfaction: 9% increase

Similar improvements have been noted at other companies who chose the PMO as a viable entity within their organization.

In closing, a PMO can be a valuable asset to any organization. When instituted correctly and effectively, the company or business can be assured of seeing large improvements to their internal project success rates, translating into better productivity and efficiency across its lines of business.

The Power of the PMO

pmo_diagramHaving project and program managers within any organization, corporation, non-profit or public sector utility is by no means a new concept. They have been a staple fixture within the world for decades.

But how exactly are those project and program manager’s organized with the structure? What ideas and suggestions exist for how any entity, corporate or otherwise, should leverage its existing project and program managers against their own specific product and portfolio offerings.

There are several schools of thought pertaining to how any agency is going to organize its internal structure. To understand this better, we will take a moment to review some of the more common organizational structures that exist today.

Invariably, ‘most’ organizations usually adhere to one of the following organizational styles for their internal structure:

Functional – A very common organizational structure where team members will work in a specific department or group, such as engineering, finance, marketing, etc. But they may also be loaned out from time to time depending on project. In this structure, project managers have very little influence or power and general merely serve to monitor the performance of the project and provide status updates.

Projectized – This type of structure is organized according to projects instead of functional departments. Generally speaking, the project/program manager is both the manager of the project and of the people. This is a highly empowered role for project/program managers and affords them the highest level of control.

Matrix – This is a hybrid organizational structure where individuals have both a functional manager and a clear chain of command while also simultaneously having a project/program manager for projects. This categorization is broken down further into the concepts of a ‘strong matrix’, where the project manager has more influence, a ‘weak matrix’, where the project manager has less influence and a ‘balanced matrix’, where power is shared relatively evenly between functional managers and project/program managers.

So which structure should one use? There is much debate as to which is the ‘best’ structure amongst the choices. And in the end, it honestly comes down to ‘it depends’. Various organizations sometimes prefer a more regimental structure of functional managers. In cases where little cross collaboration exists between teams, this may be a fine choice. Although it will often lead to silos being formed between teams and can also cause inefficiencies if teams are doing similar types of work, thus duplicating effort un-necessarily.

Other organizations prefer a much more projectized environment. You will most often see this structure in consulting and contracting agencies, that loan out talent. Because individuals often work across various project types, the lack of a functional manager is not a problem. Project/program manages will then be tasked with ensuring that resources are being effectively utilized.

And finally, a balanced matrix will often be the choice for organizations that still want some level of breakdown by roles, but also want to ensure that silos don’t form and the organization is running in the most efficient manner possible. As such, they will opt for the hybrid arrangement.

Regardless of style, the question is often invariably asked: how should the project and program managers be aligned within the organization? The answer almost always yields the same result: by being part of a Project Management Office (PMO).

So what exactly is a PMO? To draw the definition from sources like the PMI, it can be classified as follows:

A Project Management Office (PMO) is a group or department within a business, agency or enterprise that defines and maintains standards for project(program) management within the organization. The primary goal of a PMO is to achieve benefits from standardizing and following project management policies, processes, and methods. Over time, a PMO generally will become the source for guidance, documentation, and metrics related to the practices involved in managing and implementing projects within the organization.

In essence, the PMO is an entity that works to govern the standards across the primary lines of business. Often, product life-cycle documentation, process and workflow standards and general best practices will be part of the PMO’s sphere of influence.

The beauty of a PMO is that it can be instituted in any scenario, regardless of overall structure. i.e., a PMO can exist in a functional, projectized or matrix environment. What you will often see in the more projectized structures is that the project and program managers themselves are within a reporting structure that includes the PMO. This further ensures that process normalization and common adherence to best practices is maintained.

Now many may ask: is there truly a benefit and long-term success rate with instituting a PMO? And the answer is a resounding ‘yes’.

The Standish Group Chaos Report, performed in 1995, indicated the following:

  • 90% of projects do not meet time/cost/quality targets
  • Only 9% of large, 16% of medium and 28% of small company projects were completed on time, within budget
  • Inadequate project management implementation constitutes 32% of project failures
  • 69% of project failures are due to lack and/or improper implementation of project management methodologies

Just to reiterate that last point, over 2/3rds of project failures can be directly attributed to a lack or improper implementation of project management methodologies. This is a HUGE number when considered in context. The sheer number of lost man hours and wasted money is massive when taken over a broad spectrum.

And it is this fact that really drives the point home for giving credence to the need for a PMO. The main idea behind the PMO is making things more collaborative and standardized across any organization. The more standardized one is, the less likelihood that things occur differently, such as disparate metrics types or inconsistent process. A great analogy for this is to simply think about a company that was non-standard in things we take for granted nowadays. Such as the same calendar style (Gregorian) or usage of the same power utility type in the same region. All these became standard for a reason; greater consistency and less likelihood of problems arising due to mixups. The same can be said for project management. The more you have people on the same page, the better for everyone and the better to monitor consistently across the board.

(I’ll be adding a Part 2 to this post elaborating further on PMOs and how they might be structured within an organization)