Project Management Institute

Destination

competitive advantage

PMO TRENDS REPORT

Four executives discuss the next wave of project management offices and how they contribute to the bottom line.

BY ROSS FOTI

ILLUSTRATION BY
RAFAEL LOPEZ

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Slow and steady wins the race, right? Wrong.

In the business world, the hare beats the turtle every time. To remain competitive, organizations must constantly improve speed to market and flaunt their competitive advantages. That's where the project management office (PMO) comes in.

The PMO—a physical or virtual office that serves as a center for project management excellence—offers organizations methods to streamline project efforts without sacrificing quality.

YOUR PANELISTS

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ANDREW CHRISTIE is executive program manager with NCR Ltd., Dundee, Scotland. Over his 15 years with NCR, he has held various roles in manufacturing, product management and engineering development, where he helped create a PMO in June 2001. The engineering development area has 35 project managers with approximately 50 projects going on at any one time.

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STEVE NICKELS is the IT Program Management Office Manager for Hewlett-Packard's (HP’s) Enterprise Systems Group in Europe, Middle East and Africa. He has worked for HP (Compaq) since 2000 in various project and program management roles, including direct sales and e-business program management, IT project governance and PMO management. Prior to joining HP, Nickels led numerous operations, engineering/research and development, and consulting projects.

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KASTURIRANGAN RAJAGOPALAN, PMP, is vice president, Covansys (India) Private Ltd., Chennai, India. In his current position, he oversees all projects related to the automotive industry and has delivery responsibility for all NEC projects. He has experience managing projects in the financial services, government and computer software/ hardware sectors.

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JAIME VASQUEZ, project manager with Copa Airlines, Panama City, Republic of Panama, has held several information technology and project management leadership roles during the last seven years in consulting firms and academic institutions, and in the banking industry. Vasquez has provided leadership in Copa Airlines’ PMO for the last two years.

In the past, the PMO focused on the project level, overseeing consistent processes and offering project managers resources to achieve success. However, today's executives are tapping the PMO’s potential as a strategic tool. As best practices evolve, more changes lie ahead.

Four PMO leaders share insight on the current state of their organization and where to look for the state of the art.

PM Network: Specifically, how does the PMO work to increase project success rates? Would your company be as successful without a PMO in place?

Jaime Vasquez: The most important function of the PMO is to maintain a single proven project management methodology across the enterprise. This increases success rates, since all the project team members, sponsors and stakeholders are aligned and “on the same frequency.” This means that everyone involved in a project is more likely to be aware of project killers, such as scope creep and nonexistent risk management plans.

Steve Nickels: The PMO provides a knowledge network, and anyone in the organization with questions about existing projects, new opportunities, priorities or functionality can contact a single point. The PMO members then use their broad, high-level network of contacts to find answers. Individual project managers typically don't have such a broad or structured network.

The PMO drives commonality across projects by providing methodology, tools, processes and standards. Commonality facilitates clear communication and better collaboration within projects and across programs and organizations.

Andrew Christie: PMOs increase success rates by improving people, practices and systems. They “upskill” the project management community, getting people to perform a self assessment to identify strengths and weaknesses for further training and development.

The details of our PMO charter may help explain what it does: “To drive project management excellence through continuous improvement of people, practices, systems and organizational accountability in order to improve project performance.”

Our company would not be as successful without a PMO, as the maturity level of the project management community would not be as high. Kasturirangan Rajagopalan: Organizations can be successful without a PMO, but the presence of a PMO will increase the probability of success.

PM Network: Do you view the PMO as the ultimate authority in directing projects or as an executive-level tool to prioritize a portfolio?

Vasquez: The PMO should set standards for managing tactical-level projects and should have ultimate authority in managing strategic-level projects. The chief information officer and an executive-level information technology (IT) steering committee should perform portfolio management and prioritization.

The PMO should be an executive-level office to have the right amount of authority, separate from other business or IT units. This corresponds with a “strong matrix” organizational structure, in which project managers have access to human resources from all areas of the enterprise.

Christie: The PMO directs project managers, so indirectly, it directs projects, but it should never have ultimate authority for a project. The project manager has this, and to impinge on this responsibility would negatively impact the project manager and team.

It can be an executive-level tool, but not to prioritize a portfolio. It should be used to implement change and increase performance within the company's project management community.

Nickels: I agree that PMOs should not be the “ultimate” authorities. PMOs facilitate the processes and communication that lead to better knowledge transfer and negotiation between constituents.

PM Network: How autonomous should the PMO be? How much authority, responsibility and accountability should PMO staff have for project success?

Nickels: PMOs should be accountable for increasing the project management capability maturity of the organization. Project managers should be accountable for individual projects. As a history of the project portfolio is developed, the PMO should measure progress to ensure overall improvement.

    MINI CASE HISTORY
  COMPANY: Copa Airlines, Panama City, Republic of Panama
  PROJECT: Automated Upgrades for Elite Frequent Travelers
  HUMAN RESOURCES: 8
  COST: Approximately $250,000
  PMO BENEFITS: Ensured the project sponsors and stakeholders remained focused on the objective without any scope creep that could have delayed the implementation of this important strategic initiative.
  ROI: This project enabled annual benefits between $1 million to $2 million in additional revenues and lowered costs.
     

Rajagopalan: The PMO is a facilitating organization for the project management team. This implies the PMO should be an autonomous body.

Christie: I agree the PMO should be totally autonomous. It should be viewed as a group of internal consultants that can be used by senior management and the project management community to assist in achieving objectives. It shouldn't be the project “police force” that audits project managers’ activities. That's for quality assurance to do!

PMO staff should have authority, responsibility and accountability for the complete set of project metrics as a whole, however, not on a project-by-project basis.

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Organizations can be successful without a PMO, but the presence of a PMO will increase the probability of success.

KASTURIRANGAN RAJAGOPALAN, PMP, VICE PRESIDENT, COVANSYS PRIVATE LTD., CHENNAI, INDIA

 

YOU CAN’T AFFORD TO LOSE

The experts have spoken.

The top reasons to establish a project management office are improved project success rates, standard practices and lower costs, according to a joint Project Management Institute and CIO magazine survey of 303 representatives from companies with a PMO. Check the PMI Knowledge & Wisdom Center for a report based on the survey results.

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Despite these benefits, larger companies are more apt to have PMOs—52 percent of the companies with a PMO report revenues greater than $1 billion. “Do You Need a Project Management Office?” also reports:

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    MINI CASE HISTORY
  COMPANY: Covansys India Private Ltd.,
Tambaram Chennai, India
  PROJECT: Development of a banking product
  HUMAN RESOURCES: 300+
  COST: $5 million
  PMO BENEFITS: Consistent processes, metrics, tools and techniques
  ROI: Resulted in winning additional large projects and accounts.
     

PM Network: How important is your PMO to managing change and improving upon best practices? What can a PMO do to advance strategic objectives?

Vasquez: Our PMO currently does not handle change management, but we plan to include this expertise soon. The business units that request projects handle acceptance of new initiatives in their respective areas.

Nickels: PMOs are important to managing change and can have both positive and negative effects on best practices. A PMO’s role is not to facilitate best practice; it is to facilitate common practice. More advanced groups may create many best practices but are unlikely in the interest of the organization as a whole to adopt them immediately because other groups are not mature enough to incorporate them.

From this standpoint, the PMO actually holds back best practice until the organization is ready to adopt it. However, once the entire organization is ready, a PMO can best drive acceptance. Rajagopalan: The PMO could contribute to best practices by recognizing and institutionalizing them across the organization. Managing change only should be facilitated and must be the primary responsibility of the project management team itself.

PM Network: Which industries have been quicker to adopt a PMO strategy? What do these industries value above and beyond other professional areas?

Vasquez: Finance, insurance, medical and government firms are quicker to adopt a PMO strategy because they are generally more regulated, or focused on ROI or increasing efficiency.

Nickels: These organizations also have a strong requirement for accountability and capability for independent audit.

Most project failures in other industries have only internal ramifications. Capabilities for accountability, reporting and auditing are not critical. This likely will change after Sarbanes-Oxley. [Editor's Note: The 2002 Sarbanes-Oxley Act creates an independent auditing oversight board under the U.S. Securities & Exchange Commission; increases penalties for corporate offenders; requires better financial disclosure; and gives shareholders opportunities for recourse.]

PM Network: Why do you think larger companies are more likely to have a PMO? If a PMO enables growth and strategic objectives, wouldn't it make sense for smaller companies to take notice of PMO benefits?

Vasquez: A PMO requires an important investment in human resources, training and change management. This usually deters smaller companies from establishing a PMO. Also, these companies usually have fewer projects to handle or manage projects that are smaller in scope.

Christie: Introducing a PMO to a smaller company could arguably make a bigger impact than implementing it in a bigger company.

Even a single-person PMO could make a big difference to a small company. The key would be for the single-person PMO to implement what was appropriate for the small company and not attempt to drown staff in bureaucracy.

Rajagopalan: I agree the PMO can mean big overhead for smaller companies. In larger companies, the cost is distributed over many projects. Also, in smaller companies, various project teams work closely so that ideas and experiences are shared more easily.

The most important function of the PMO is to maintain a single proven project management methodology across the enterprise.

JAIME VASQUEZ,
PROJECT MANAGER, COPA AIRLINES, PANAMA CITY, REPUBLIC OF PANAMA

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PM Network: How do you justify an investment in a PMO? Have you measured bottom-line benefits your PMO has achieved?

Nickels: I would focus on justifying the improvement of the organization's capability maturity first. A PMO is a natural solution to this problem.

Have senior management invite a cross-section of functional managers into a closed-door session to give detailed status reports on work streams in their areas of responsibilities without use of any reports or tools driven by the PMO.

Keep the PMO’s activities few, focused and simple. Do not expect the PMO to solve all your company's failings, or you will be sadly disappointed.

ANDREW CHRISTIE,
EXECUTIVE PROGRAM MANAGER,
NCR LTD., DUNDEE, SCOTLAND

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Christie: You have to show the increase to company revenue. We do this by showing the improvement in hitting schedule dates and reducing development duration. Prior to and post-PMO implementation, we have a measure for project slippage and average project duration. Time is equated to increased boxes to sell, which is then equated to revenue.

Rajagopalan: PMO investment should be measured against a successive reduction in failure rates—this will show money gained due to success. Also, look at your productivity improvement by introducing tools and techniques.

PM Network: What advice would you give executives considering a PMO? How do you plan to capitalize on your PMO’s strengths?

Christie: When considering a PMO, do not attempt to implement and improve every aspect of the project management spectrum. There are lots of fancy tools and sophisticated systems available, but don't go out and buy them. Improve and develop what you have. Keep the PMO’s activities few, focused and simple. Do not expect the PMO to solve all your company's failings, or you will be sadly disappointed.

Nickels: You must change your organizational structure and/or people's thinking along with the addition of a PMO. You must “projectize” your organization. You must pre-sell the idea to functional managers and teach them how their jobs will adapt. Communicate clear roles and responsibilities.

Vasquez: Start small, use existing project managers to start a centralized office and begin building from there. Begin to create a companywide project-based culture and celebrate early successes to ensure buy-in from the rest of the enterprise. This helps avoid a “flavor-of-the-month” reaction from stakeholders who would kill the PMO initiative before the enterprise could reap its benefits.

Rajagopalan: Don't depend solely on the PMO for success. Executives must leverage the historic information maintained by a PMO and the experience of the PMO on similar projects or situations.

I plan to involve our PMO throughout our project life cycle to improve the success rate.

PM Network: How will the global economy affect businesses’ willingness to embrace the PMO concept? How do you expect your PMO to evolve in the coming years?

Rajagopalan: The PMO must evolve as a hand-holding agency for project teams, helping them in tools, techniques and processes. The global economic climate drives the project organizations to improve performance and reduce cost. This is only possible with a PMO.

Vasquez: In the current global economy, businesses that adopt a PMO strategy will leap ahead of their competitors due to better chances of having successful projects, translating into higher ROI and more efficient use of resources.

We expect our PMO will evolve into a true change agent, offering both project and change management to ensure the successful implementation of projects as well as higher acceptance rates of new initiatives.

Nickels: The need for PMOs will increase, since trends toward globalization and outsourcing both require increased coordination and communication. Tough economic times force an inward search for cost savings and tighter control, both of which also drive PMO proliferation. PM

To participate in an online discussion on PMOs with your colleagues, visit communities.pmi.org and go to the PMI Member Community.

This article is copyrighted material and has been reproduced with the permission of PMI. Unauthorized reproduction of this material is strictly prohibited.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK | AUGUST 2003 | www.pmi.org

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