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.