How can a project management office (PMO) survive in a worldwide scenario where PMOs are being continually challenged to deliver value to their organizations? This paper presents an innovative framework named PMO Value Ring, the result of a six-year research program developed with the participation of 82 experienced PMO leaders. This framework was created in order to support the implementation or re-energizing of PMOs with a focus on creating perceived value for the organization, the most important objective for the survival of a PMO nowadays. The framework consists of eight steps, each supported by a particular model, substantiated by the experience of professionals who are on the “battlefield.” Thus, the PMO Value Ring framework proposes a new vision of the PMO phenomenon, breaking with traditional approaches commonly found in the literature.
Generating effective value to the organization is and always will be the greatest challenge of any PMO. And in hard times, this reality becomes even more critical. The way to overcome this challenge is to generate effective and perceived value to the organization.
In this paper the reader will get to know a powerful framework, constituted by models that represent, as a whole, one of the most innovative contributions developed on the subject of PMOs, a result of the joint work of 82 experienced PMO leaders on three different continents.
With this framework, we expect that your vision about PMOs can be expanded, contributing significantly to your becoming a protagonist in overcoming this challenge, whether you are a senior manager, a PMO leader, a PMO staff member, a consultant, a professor, or even just a professional interested in entering this fantastic—and complex—world of PMOs.
The research program that led to the results presented in this paper was coordinated by Americo Pinto and was initiated in January 2009, with completion scheduled for October 2015, when it will be officially released as a website dedicated exclusively to PMO professionals (www.pmotools.org), where the framework will be automated and available for full use by the project management worldwide community.
It is noteworthy that the framework proposed in this paper is not derived from the opinion or experience of a single person or organization. Rather, the findings here are the result of a large and collaborative work, including statistical evaluations and the mapping of the perceptions of a significant number of professionals who work in PMOs daily, thus collecting a good deal of experience in the area.
The PMO Phenomenon
In the past decade the organizational phenomenon PMO has established itself as a reality in leading organizations around the world (Dai & Wells, 2004; Hobbs & Aubry, 2007). Because it is a main focus of study in research conducted by renowned universities and researchers, much has been discovered about this organizational entity; however, after every discovery, new questions comes up, showing that there is still much to understand about the PMO's behavior in organizations.
Much of this complexity is explained by the diversity of structures found in different organizations. It is not difficult to see that PMOs differ considerably from organization to organization, moving through different settings that make them unique in the organizational structures to which they belong.
Given that we recognize these entities are so different from one another in form and objectives, even though they share the same name “PMO,” we might hastily imagine that it would be impossible to universalize certain conclusions regarding this phenomenon. However, an important key concept discovered in this research program and used as the basis of the proposed model, gave us the flexibility needed to allow comparisons between different structures. We call this key concept “The PMO Service Provider.”
A PMO Service Provider has clients in the organization to which he or she belongs, and those clients may be diverse. The most common clients are senior management and project managers, and also include team members and functional managers, among others.
Each of these clients has different needs and expectations about the PMO's work. The successful PMO will remain ever mindful of these demands, which may change due to common changes in organizations such as executive exchanges, changes in strategy, and even the evolution of the maturity of each PMO client, which will cause changes as their needs become increasingly sophisticated.
It is possible to summarize the concept of PMO as follows: A PMO is an organizational entity, physically established, which centrally runs functions related to project management activities, programs, or portfolios, which are defined according to the specific needs of its clients, making it unique in its structure and configuration.
The functions performed by a PMO are what we call “services” in this paper. Providing these services, the PMO aims to deliver results that meet the expectations of its clients. And the better a PMO delivers its services, and only those services related to the clients’ needs, the higher the perception of its value will be, as was identified by Thomas and Mullaly (2008), who introduced the concept of “fit.”
Among these services it is possible to highlight some, such as providing methodologies and tools for project management, supporting portfolio management, providing mentoring, supporting top management with executive reports, supporting project planning and control, and even managing certain projects considered strategic for the organization. These and other services that are used as basis for all the models developed in this research program were identified and adapted (see Exhibit 1) from the most frequent functions found in 500 PMOs worldwide, in a study conducted by Hobbs and Aubry (2007).
The Value Generation Challenge
Creating value for the organization is the primary objective of any PMO, even for a simple matter of survival. Not meeting this goal results in medium- and long-term loss of support, reductions, and even the elimination of the PMO.
International research reinforces the notion that the existence and continuity of these organizational entities has been constantly questioned in many organizations, as identified by Hurt and Thomas (2009), when they report “a tenuous issue of sustainability of PMOs” (p. 55).
Significant variation in the perceived value of PMOs was also noted by Hobbs and Aubry (2007) and deepened by Aubry, Hobbs, and Thuillier (2008), analyzing the story of four PMOs and realizing that a complex transformation phenomenon of these entities occurs on average every two years, requiring a constant and true “reinvention” of these PMOs to adapt to new demands.
In this context, this research program aims to create a framework consisting of models and tools that allow PMO leaders and consultants to implement or re-energize PMOs with a focus on value creation.
The following exhibit shows the PMO Value Ring framework (see Exhibit 2), comprised of eight steps required to establish a PMO that is committed to generating value for its clients and organization. Those steps are grounded on models and databases created from the experience of a large group of experienced PMO leaders.
We summarize the questions that motivate the creation of each step, as well as some basic characteristics that define how each problem is addressed in the framework.
1 – DEFINING THE PMO SERVICES
Are the services that your PMO provides those that your clients and your organization really need? How do you find out which services best meet PMO clients’ needs?
In this step the priority benefits for each PMO client will be identified. By means of a database that relates the probability that each PMO service will generate each expected benefit, it is possible to establish a priority list of services, considering the set of needs of PMO clients. The model that supports this step is called the PMO Mix Manager.
2 – BALANCING THE PMO MIX OF SERVICES
Is your PMO able to generate perceptible value in the short term? What are the conditions necessary to sustain long-term actions, which will enable you to create lasting value? Is there is an ideal mix of services balance that responds to this set of needs?
There are services that generate perception of value in the short term, but may not lay the groundwork to make this a perennial value. On the other hand, there are services that will only be able to generate value in the long term but in the short term may worsen the perception of PMO performance. A database establishes the probability of each service generating value in the short-, medium-, and long-term.
In this step, the PMO mix of services will be balanced so as to generate perceived value over time. The model that supports this step is called the PMO Tune.
3 – ESTABLISHING THE PMO PROCESSES
Does each PMO selected service have its process formally and clearly defined, with inputs, outputs, responsibilities, and any necessary adjustments for an adequate adaptation to the reality of your organization? All services should be detailed in structured processes based on best practices observed in successful organizations.
In this step the processes are clearly defined, establishing the milestones needed for the establishment of “service-level agreements” with the PMO clients. The model that supports this step is named the PMO Process Guide.
4 – DEFINING THE PMO KPIs
Is the performance of your PMO being measured? Does the success or failure of the projects necessarily represent the success or failure of the PMO? How should the KPIs (key performance indexes) be adapted to the different configurations of PMOs?
Each service should be measured individually, considering a database created for this purpose, which brings together KPIs with all the required details, such as information about their way of measurement and the calculation formula, among other important features.
In this step, a set of performance indicators is established for each service offered by the PMO, considering that KPI may have a different and recommended weight. The model that supports this step is named the PMO Performance Guide.
5 – DEFINING THE PMO HEADCOUNT AND COMPETENCES
How do you define the headcount for a PMO? Can you set a general rule for any PMO, or is each case different? What kind of competences should the PMO team have? How can each PMO configuration influence the set of required skills?
Establishing the headcount for a PMO is a complex task, which directly depends on variables such as the number of PMO clients, the services offered, the number of projects under the mandate of the PMO, and even the level of complexity of those projects.
In this step, we will use a database that lists for each service the skills needed to perform it with excellence. It will be possible to identify the set of individual skills necessary for each member of the PMO, considering the current level of proficiency and, based on identified gaps, establishing actions plans for development. The model that supports this step is named the PMO Competence Model.
6 – IDENTIFYING THE PMO MATURITY AND PLANNING EVOLUTION
How should a PMO evolve its maturity? Is it to be an operational, tactical, or strategic objective or a consequence of clients’ needs? How do you establish a plan for the evolution of the PMO, and how can you measure it?
In this step the current level of maturity of each service offered by the PMO will be identified as well as the level that needs to be reached in the next evaluation cycle. It will be used a maturity model created exclusively for PMOs where each service is detailed in levels that reflect the evolution in sophistication and, hence, the ability to generate value for the organization. Comparing the current levels and desired levels of maturity, it is possible to establish action plans for development. The model that supports this step is named the PMO Maturity Cube.
7 – CALCULATING THE PMO ROI
After all, is your PMO able to generate a positive financial result? Do the investments and expenses of the PMO outweigh the benefits received? How do you establish a method for calculating the ROI (return on investment) of the PMO?
This step will assess the financial return of the PMO, considering what are the specific problems that generate losses to the organization and to what extent the services offered by the PMO are able to minimize or eliminate these losses. The mix of services offered by the PMO will greatly influence the ability to generate financial benefits compatible with the needs of the organization. Finally, strengthening the integration between the models presented here, both the level of maturity of the PMO and gaps on the PMO's competences will influence the PMO's ability to recover losses that financially justify its existence. The model that supports this step is named the PMO ROI Tool.
8 – ESTABLISHING THE PMO BALANCED SCORECARD
How is the strategic monitoring of your PMO done? What goals could be established in order to balance the performance and generation of value to the organization? Are the traditional perspectives of a balanced scorecard (BSC) exactly the same in a BSC for PMOs?
In this step the PMO will establish a scorecard based on a model of a balanced scorecard created exclusively for PMOs, in order to monitor strategically the contribution and evolution of the PMO. The strategic map of this BSC will bind all models used in the previous steps, setting a kind of control panel for the PMO's performance, with a focus on value creation. The model that supports this step is named the PMO Balanced Scorecard.
The PMO Value Ring framework, composed of these eight steps, should be repeated periodically, every 12 months at most. It is important to remember that whenever there is a significant change in the organization, it is essential to reapply the entire framework, to ensure the realignment of the PMO with the new needs. Examples of changes include significant changes in strategy, exchanges at the executive level, and even the evolution of the maturity of clients, which over time will have expectations and more sophisticated needs.
Much has been written about PMOs, but a careful analysis of the literature shows that most authors support the view of the existence of types of PMOs, which usually have specific names as Center of Excellence, Consulting PMO, or Strategic PMO.
The concepts and framework presented in this paper bring up a new point of view, avoiding establishing typifications that might lead to an understanding that one of the suggested types should be chosen. Actually, the secret of a successful PMO is rightly fitting the demands and expectations of its clients, regardless of the type that it will be. Thus, a discussion about what kind of PMO should be implemented is absolutely worthless. The PMO should be what its clients and organization need; therefore, many PMO types may be combined or a completely different configuration may be created.
The eight steps presented in this paper, components of the PMO Value Ring framework, rightly seek to provide support to professionals who want to implement or re-energize their PMOs without losing sight of the fact that each PMO should maintain its own characteristics, adapted to the demands and reality of the organization.
The PMO Ring Value framework is a contribution to the global project management community, establishing a new vision for the PMO phenomenon, grounded on academic literature and on the experience of those who are in the “battlefront,” managing PMOs that actually add value to their organizations.