The EPMO

Introduction

The value of project management offices (PMOs) and enterprise project management offices (EPMOs) has been questioned for many years. They have been criticized as overhead and lacking tangible results. The “Great Recession,” while appearing to fuel these attacks, really presented an opportunity for EPMOs to demonstrate their value. Companies struggled financially during this period and funding for projects became very scarce. It quickly became paramount for organizations to be laser-focused in aligning their project investments with their strategic direction. Equally important was to execute on these investments and reap their full-intended value. For these very reasons was the concept of an EPMO created.

This paper will examine how an EPMO utilizing an approach called Strategy to Execution (S2E) has brought about the correct focus. It will follow how the advent of S2E introduced a number of different concepts, processes, and roles.

Making Strategy Come Alive

Prime Therapeutics, a pharmacy benefit management company based in Minnesota, established its EPMO in 2007. Over the years, the EPMO has remained as originally conceived with added enhancements based on targeted priorities. During the recession, the priority quickly became making the most of its investments by aligning them to corporate strategy and measuring their success in achieving the strategy. A high-level process flow was outlined with four distinct components (Exhibit 1). Effort was identified in each of these to achieve this objective and a program was launched in 2008. The program ran for six months.

Exhibit 1. EPMO Strategy to Execution process flow

Each component will be examined in relation to the changes introduced by the program. Major emphasis will be placed on Strategy to Execution where the most radical and impactful changes were made.

Strategy

The refreshing of the corporate strategy was enhanced by the introduction of two concepts: Value Maps and Investment Principles. The concept of Value Mapping was first introduced by W. Chan Kim and Renée Mauborgne (2005) in Blue Ocean Strategy. A Value Map depicts a company's emphasis, along with that of its competitors, across a selection of possible customer-facing attributes (Exhibit 2). It focuses a company on determining its customer value proposition and how it varies from its competitors. The Value Maps bring focus on areas where higher and lower levels of investment is required. The areas designated for higher levels of investment receive priority as will be explained in the Strategy to Execution section. This exercise was very enlightening to the senior executive layer and helped shape an altered strategic investment plan.

Exhibit 2. Value Map

Investment Principles are the basis for balancing the investments. The principles ensure that all investment is not placed on strategic initiatives, which would starve out compliance, regulatory, or infrastructure investments. Each has a targeted investment level for the fiscal year and each is utilized to prioritize projects competing for investment (see Exhibit 3). The number associated with each principle is its priority ranking. In the following example, Regulatory Compliance projects would receive the top priority. Setting Investment Principles is a very important exercise that must be conducted with senior executives. They should also be set in harmony with the Value Map. Once set, they should be revisited periodically to ensure they still represent the correct direction.

Exhibit 3. Investment Principles

Strategy to Execution

This component is more widely identified as the portfolio management function of PMO's and EPMO's. A more tailored approach was desired and Prime enlisted Accelare (a consulting partner) to participate. Prime utilized more classic portfolio management practices in the past, including these:

1. Gathering a ‘wish list’ of projects,
2. Scoring them based on a defined algorithm, and
3. Drawing a fiscal constraint line.

These practices resulted in competing departmental “wish lists” and approved projects not tightly aligned to corporate strategy. The new approach leveraged the concept of Capability Management as introduced by Accelare. Capability Management breaks down a company into Business Capabilities that are necessary to execute its business strategy (e.g., order fulfillment, deliver prescriptions by mail). This results in a major transformation of changing the thought process of a company from silos (finance, operations, IT) to Business Capabilities. Once accomplished, the type of projects proposed take on a completely new complexion. They are generally cross-functional with very focused objectives tied closely to the corporate strategy.

Leveraging Capability Management, the steps from strategy to developing an annual Project Roadmap was appropriately named Strategy to Execution. These steps include:

1. Defining the Capability Models for an organization,
2. Evaluating the performance of the individual Capabilities (Heat Assessment), and
3. Development of the Investment Roadmap.

Business Capabilities are physically represented as Capability Models (Exhibit 4). These models consist of a number of levels aimed at breaking it down for appropriate assessment and management.

Exhibit 4. Capability Model

A large investment in time and resources was required to develop all the Capability Models for Prime. In hindsight, the Capability Models could have been developed at a much higher level and still produce a large return. Once developed, they have been evaluated on a periodic basis (quarterly, annually) to assess whether they are performing at the desired level. Heat Assessments are developed for each capability (Exhibit 5). These assessments are tied to an algorithm that weights capabilities, per the Value Map, to compute “heat” associated with capability performance gaps. Heat results from gaps between desired performance and actual performance of a capability thus pointing to the possible need for a project. These projects are accumulated along with other projects that have been generated by day-to-day business activity (e.g., compliance, client requests). This conglomeration makes up the initial Investment Roadmap. Investment Principles are designated for each project and the roadmap is sorted by this designation resulting in a prioritized roadmap. Next, it is fiscally constrained. In other word, the desired annual spending threshold line is drawn. The merit of projects directly above and below the line is debated by an executive advisory board. Lastly, the Roadmap is capacity constrained. An evaluation is conducted to ensure no business areas have periods of unrealistic demand. The Roadmap is now ready for "firing.”

Exhibit 5. Heat Maps

A new role was introduced into the organization to facilitate the effort required for S2E. The role was titled Business Solution Architect (BSA), and it is housed in the EPMO. Individuals filling this role leverage a hybrid background including strategy, business process, project management, and technology. They are assigned to one or multiple business areas.

Execution
Prime had in place a project lifecycle much like other companies. It included four phases: initiation, planning execution and closure. Typically, the projects had a great degree of difficulty gaining traction in initiation. Project managers would be assigned to projects in business areas with which they had little familiarity. A significant amount of time would pass with the project manager gaining knowledge of the specific business function to allow for scoping the project, defining objectives and identifying governance roles. Leveraging the BSA role significantly reduced the time spent in the Initiation phase and moved projects more efficiently through the life cycle. The BSA's had been involved with the various business areas developing Capability Models, Heat Assessments and eventually the projects on the Roadmap. This put them in ideal position to initiate the projects since they had already been working them through the S2E process and had fully developed relationships with the business areas.

A subtle but significant change to the governance structure of projects was introduced. The change involved the accountability for the success of the project. The new governance structure assigned that accountability to the Project Owner. The Project Owner is a director or senior director assigned from the business area sponsoring the project. These Project Owners spend up to 80 percent of their time on their projects. If the project is large enough, their original position will be backfilled so that the Project Owner can devote the necessary attention to the project. They are involved in the day-to-day activity and decision making and speak to the status at executive meetings. These changes repositioned the project manager into more of an execution role. The balance tipped from subject matter expertise to professional project management expertise. This proved to be a boon to project manager capacity planning and assignment. Project managers did not have to matched up to specific demand and contract project managers could more easily be utilized to fill capacity gaps.

BSA's were also ideally positioned to introduce the concept of Project Success Metrics. Utilizing Success Metrics was a new way to define and measure the success of a project. They detail the business reason for executing a project. An example of a Success Metric would be, “The project will increase revenue by 7% per year in Segment A by December 2013. This is tied to Strategic Objective #5: Increase Corporate Revenue.” This is in contrast to previous project objectives like, “The ERP package will be implemented by June 2012.” Projects may have multiple Success Metrics, which fall into various categories (e.g., revenue, cost savings, or risk avoidance). This concept has proven invaluable when speaking to senior leaders. It has facilitated focused conversations on tradeoffs and project health. Revisiting whether Success Metrics will be met quickly grounds the conversation and drives to action. In fact, overall project status (green, yellow, red) is now based on the achievement of the Success Metrics.

Measure/Inspect

Upon reaching Closure, projects are evaluated against achievement of their Success Metrics. Some Success Metrics (e.g., return on investment) are required to be measured over several years. The EPMO compiles this information into periodic retrospectives for review by the executive leadership team. The Project Owner speaks to the performance of their respective project(s). Action items are assigned for corrective action or future improvements for upcoming projects.

Conclusion

The majority of these concepts were implemented through the EPMO in 2008 during the early stages of the recession. They proved to be very impactful immediately and continue to provide increasing value. Although these concepts have been improved and altered over the past years, they remain largely intact as they were implemented. Project volume on the Roadmap has doubled over the past year with continued growth forecasted. Roadmap projects have averaged a 90 percent+ achievement of their Success Metrics over the past year. The executive leadership team and the board of directors continue to be strong advocates and remain very involved.

These concepts introduced a considerable amount of organizational change. Prime had the advantage of not being a large corporate entity, making the change tolerable. Organizations not wanting to take on such a large change component could still benefit from leveraging individual concepts. The most impactful include:

• Value Maps
• Investment Principles
• Capability Management
• Business Solution Architects
• Project Owner Governance
• Project Success Metrics