New executive demands of projects and the PMO

Introduction

When you have been in the workforce for 33 years, you gain one of two attributes—senility or perspective. I hope you'll conclude from this presentation that I'm offering the latter.

My perspective is that the commonly accepted best practices, in any field, are often a step behind what the most successful organizations in any industry are doing. Why do I claim this and why is this vital for Project Management (PM) professionals today?

Let me first classify the most successful organizations as those who are in the top 10% in terms of meeting their goals. This means that they are doing at least a few things very differently than the other 90%. If “commonly accepted best practices” translates to “what most people are doing well,” this implies that the top 10% are doing some things that are not commonly accepted.

I've spent most of the last 15 years working directly with CEOs of companies. Many of them would sincerely tell you that they believe in what the Project Management Office (PMO) and PM best practices aim toward. Yet many of these same executives do not embrace these concepts. Why not?

In every company I visit, management is complaining about the number of projects that are on the go, and how unrealistic the executives are in due date demands. At the same time, from my experience, I can tell you that executives are not making demands to be hard-nosed. They are caught between a rock and a hard place, and are forced to escalate their demands, even without a softening economy. We must understand this, so that together with the executives, professionals can find a way to help the situation, going beyond “on time and on budget.”

The exciting new initiatives and advances in PM must be given life. The PMO is one excellent way to do this. With my perspective and insights on executive thinking, I hope I can help you gain executive support for this extremely important concept.

Symptoms of the Problem

What are some examples of events in organizations that tell us that we are lacking the right kind of executive support? I've chosen four diverse examples:

1. How many people, in the U.S. alone, are quite involved in projects today—to the extent that it has a significant impact on their working lives? Even if we are very conservative, and answer only 1%, then we should find at least 1–2 million PM professionals, just from the U.S. We should see many of these people at conferences, actively involved in PM organizations, and being constantly encouraged by executives to spend more time on learning. Most people involved in projects today are not encouraged to develop their PM professionalism. Why not?

2. Every organization I visit today could do their projects much more quickly. I see something much worse than what I'm describing as a symptom. I state that organizations fail to take actions to complete projects more quickly. In fact, what I see is executives taking actions that drastically slow down projects. Why?

3. Executives find it difficult to tie training and professionalism to bottom line results.

4. Projects are initiated in all functional areas or divisions but the people initiating the projects do not attempt to evaluate, in any detailed way, what the impact will be on existing projects and critical resources. This could be compared to a hospital taking in new patients who need surgery, without any regard to the availability of either the doctors or the operating room. A hospital operating this way would be in chaos within a week. What is the state of projects in many organizations?

Analysis of the Four Problems

I am going to share my analysis of each one of the problems I described above, and then show that they all boil down to one generic underlying problem.

Problem 1—Professional PM Organizations

Everyone in the organization has a common objective—to dramatically improve project management results. To do this, there are two necessary conditions. One is that we must improve the skills and quality of individuals. That's why people are encouraged to join professional organizations, read PM books and magazines, attend seminars, etc. The other necessary condition relates to the dramatic part of the improvement. To get dramatic improvement, and especially to get it quickly enough to meet executive quarterly goals, we have no choice but to look for and use something very out of the mainstream. This is where executives conclude that to find something better than currently accepted practices, they must look outside of what is found in large, professional organizations.

Rightly or wrongly, some executives see many procedures as bureaucracy rather than streamlining. They sense a focus on professionalism and quality for its own sake. They conclude that this will actually have a negative, not a positive effect on meeting their goals. No wonder, many executives do not support or encourage their people to join professional PM organizations. Some executives are simply ignorant of what some of the better PM organizations bring to the table.

Exhibit 1.Professional Project Management Conflict

Professional Project Management Conflict

Exhibit 2. Speeding Up Projects Conflict

Speeding Up Projects Conflict

Exhibit 3.Training Conflict

Training Conflict

Exhibit 4.Conflict Over Initiating New Projects

Conflict Over Initiating New Projects

Problem 2—Speeding Up Projects

What about speeding up projects? The common objective is the same—to dramatically improve results. However, the necessary conditions are different. To dramatically improve PM results, we must use individuals “productively.” Since most individuals assigned to projects are managed by resource managers, their definition of “productive” is “efficient.” Therefore, in order to use individuals productively, don't dare allow any resource inefficiencies. For example, never assign 10 people to a job that can be done most efficiently by two people.

The other necessary condition to dramatically improve is to dramatically reduce project cycle time—not by 5% or 10%, but by 25–50%. The interesting finding is that there is a way to achieve the improvement in project cycle time, but with a catch. To reduce cycle time, we must allow some resources to be used in a way that resource managers consider very inefficient. For example, have a resource sitting idle for one to two days, waiting for the turnover of work. We'll look at another more common example shortly.

Problem 3—Training and Professionalism Tied to Bottom Line Results

We know that training and professionalism are necessary to improve project management results. That's just common sense. Looking at all of the best practices, every executive can find some best practices that they believe would benefit their organization. For example, I would doubt that any executive would argue that every individual project manager could benefit from more intensive risk management training, and even from training in how to handle people, resolve conflicts, motivate teams, etc. So it does make sense that to improve individual skills in those best practices, some training and focus on traditional practices is in order.

However, executives still need the breakthroughs—the ones that will unquestionably impact the bottom line this year. To accomplish this need, they demand that the focus be on methods that are not yet accepted or proven, but show promise. This is not clutching on to some fantasy. It usually is driven by executives hearing stories or talking with other executives who have succeeded by going off the beaten path. What it unavoidably leads to is total frustration from executives, when they try to steer professionals away from the accepted to unaccepted. They call it “resistance to change,” and they don't know how to overcome it. The clash between executives and professional managers becomes even worse.

Exhibit 5.Marketing Example of the Real Cost of a Late Project

Marketing Example of the Real Cost of a Late Project

Problem 4—Initiating New Projects Without Detailed Knowledge of Impacts

How does an organization tackle improvement? Typically, every functional area must initiate new projects, in order to meet their portion of the overall goal. If there is no central repository of project management data, then functional areas will initiate the new projects unilaterally. Even if there was some information available about needed resources being loaded, most executives consciously choose to ignore it. They believe that their projects must get done, or they will miss their goals, and their bonuses, and may even lose their jobs.

On the other hand, we can look at this from the point of view of the overall organization. Unless the organization's goal is to do 20% less than last year, most organizations know that they must complete many more “high value” projects. The implication here is that many projects are necessary to complete, but don't bring high value in terms of the organization's goals. To complete more of these projects, they must centrally approve and control the release of new projects into the system. They recognize that the system, today, is choked with too many projects that are not high value, or in some cases, not even directly linked to the organization's goals. What a painful conflict this becomes between functional managers, and between individual managers and the CEO!

The Greater Cost

Impact of Lack of Detailed Control on Speed to Market

If we don't centrally sanction and control the release of new projects, we start new projects independently, in each functional area of an organization. At some point in the project, there is always a big clash over resources, sometimes even within the same functional area, between projects. The typical response is to try to please everyone. This means that resource pools get split between projects, and are multitasked. If the project involves new product development, then new products take longer to develop. In these circumstances, the lucrative profits that come with being early to market are lost.

Impact of Resource Efficiency on Speed to Market

One of the big contributors to poor project performance happens in the name of efficiency. This chart shows the number of resources allocated to a project on the horizontal axis, and the elapsed and total hours on the vertical axis. We have a piece of work that would take 100 hours for one person to do. If we put two people on it, they can actually get the work done in about 45 hours elapsed time, or 90 hours total effort. In other words, it is even more efficient for two people to do this work than one person. Adding a 3rd and a 4th person however decreases per person efficiency. Total effort now went to 128 hours, but elapsed time went down to 32 hours. There will come a point where even the elapsed hours will start to increase (usually due to human communications issues). At this point, everyone agrees not to add any more resources.

Exhibit 6. Resource Efficiency vs. Project Results

Resource Efficiency vs.Project Results

The question that is so important is, “What is the value of finishing a project earlier”? If the project is being done to bring value to the organization in the first place, we must conclude that for most projects, the earlier the project is completed, the sooner the organization receives the benefits. In some cases, as in new product development, the benefits are huge.

The Generic Conflict

If we consider all four of these conflicts, we can generalize them into one underlying problem—the conflict between doing the nontraditional versus doing the traditional. By stating that this conflict underlies all the others, we are also implying that if we can only remove this conflict, we can remove all the others.

We must do the traditional, in terms of best practices, to get individuals and functional areas to improve their project performance. At the same time, we are forced to seek the nontraditional to get the high value breakthroughs, or we will certainly fail to meet all of the goals that the executives are measured on.

To get out of this constant dilemma, we must ask, “Why can't we do both—the traditional and the nontraditional”?

A Big Risk

No matter which side of this conflict we move towards, there is a huge risk. If we drive toward doing the traditional training and certification, and we do get improvement, the risk is inertia or complacency. For many organizations, if you are improving at a slower rate than the competition, even for a year, the company could suffer huge losses or even go out of business. That is why executives are demanding the seemingly impossible from project managers today.

Exhibit 7.The Underlying Conflict

The Underlying Conflict

If we move strictly towards the nontraditional, we could find some breakthrough techniques. But breakthrough techniques that are poorly executed also do not drive enough improvement. Poor execution often implies long or never ending learning curves.

Why Not Both Traditional and Nontraditional Approaches?

Each organization may be a little bit different here, on their assumptions. Some of the more common reasons that I hear are, “We don't have enough time or resources to try a bunch of different approaches,” or “It's not within our budget,” or “We can't live with two or three different approaches—that's what we have now, and they don't integrate well together.”

The PMO Solution

The PMO Can Deal With Part of the Conflict

The PMO is the key to dealing with some of the assumptions under this conflict, but not with all of them. This concept is often implemented as a central support group, with some authority over the project management methodology, training and sanctioning throughout the organization.

With this concept, the executive is supposed to give to the PMO the resources to improve the project management approaches and results throughout the organization. This means they are tasked to research and implement better methods, and to integrate new approaches with current practices.

Executive Concerns About the PMO

The problem with most PMO proposals to senior executives is that either they are turned down, or they are implemented without sufficient resources to make a real difference to the organization, or they are implemented with the wrong focus. Without the right focus, the results are not achieved, and a year later, we see the executives abandoning the concept. Once abandoned or turned down, the organization won't likely get another chance until the CEO is replaced.

A fundamental belief, reinforced by years of experience, is that any proposal for a new support infrastructure has one side of the equation that is absolutely guaranteed—the cost side. The executive experience shows that the other side of the equation, the benefits, are usually not achieved, either at all, or to the extent promised.

Therefore, to overcome executive concerns, the approach itself must show the proper focus, and must have a measurement associated with the PMO that will drive the right behavior of the PMO team members.

PMO Focus

Executives will be much more excited about a PMO solution if they see two things:

1. A promise to actively seek the nontraditional—the breakthroughs. This does not mean inventing something from scratch. As Marshall McLuhan, the great philosopher said, “You can see the future, because the future is now.” Any exciting new methods are already being tried, but only by a small percentage of the organizations. Eli Goldratt, the author of Critical Chain, states that “where there is a tail, there is usually a dog.”

2. An approach to traditional training that is focused on the biggest PM problems.

Most executives are scared of the “let's improve everywhere” approach. As the Wall Street Journal pointed out several years ago, “Over 80% of the efforts at TQM have failed to yield any tangible results.” Yet, the TQM concept is correct. The problem is, when enthusiastic followers of TQM try to apply it to parts of the organization where quality is NOT the constraint, the result is predictable. After a short time, workers give up on doing the work, because they are not seeing any good coming from their efforts.

By focusing on the biggest problem blocking improved project results, the PMO advocates will find it much easier to explain to executives how their focus will logically have the impact.

PMO Measurement

“Tell me how you measure me, and I will tell you how I will behave. If my measurements are unclear, no one can predict how I will behave, not even me.” This piece of wisdom, from Dr. Eli Goldratt, suggests an obvious set of measurements for the PMO, or for anyone charged with improving project performance in any organization.

The combined Net Present Value (NPV) of all projects must increase. The total days invested per NPV dollar must go down.

These two measurements can be combined into a measurement that I call Project Dollar Days. In other words, the focus is not just on dollars, and not just on days, but on dollar days. The measurement is calculated by dividing the combined total of all NPV dollars from all projects completed during the period by the total number of days of effort. The result represents the daily value of each day invested in projects across the entire company. We know we are on the right track when this measurement is trending upwards. Now, we only need to decide if this measurement helps us to permanently break the conflict between traditional and nontraditional resources.

Exhibit 8.The PMO and Measurement Conflict Breaker

The PMO and Measurement Conflict Breaker

If this measurement drives the PMO team to strive to meet both needs—the need for breakthroughs that drive high value and the need to improve individual and functional areas, and provides the necessary funding to do both, then the conflict is truly broken.

Consider how this measurement would cause people to react to quality or rework problems. A quality problem drives up the number of days of effort. It also drives up the labor cost and potentially other cost, reducing the NPV of the project. Therefore, this measurement would cause people to naturally take action to avoid rework.

Similarly, when you consider other issues, such as projects that have no NPV, or behavior related to risk assessment, the measurement encourages people to behave in a way that is good for the organization as a whole.

How to Get Started

The first step must be to unblock a clogged system. This means deactivating many of the currently active projects, and staggering the remaining projects in a way that avoids future problems.

When you look across all of an organization's projects, you will always find one resource that is more heavily loaded than others. You will find one resource type that impacts the cycle time of projects, more than any other resource. I call this resource the “critical resource” of the organization. Often, you find this resource in IT or in integration processes within engineering or product development.

Projects must be staggered according to the organization's critical resource.

Exhibit 9.A Non-Intuitive Way to Set Project Priorities

A Non-Intuitive Way to Set Project Priorities

Deactivating Projects

It's amazing, when you get executives to compile a list of all active projects in the organization, how many of those projects have no relationship whatsoever to the organization's goals. These are obvious targets for deactivation, if not outright killing.

The remaining projects must be viewed according to their impacts, and when those impacts are likely to occur. My experience is that when executives take these steps, there is no problem whatsoever in deciding which projects to deactivate.

Prioritizing Projects

For the projects that are left, after deactivation, we will not allow them to all be active simultaneously. We will stagger them, according to the organization's critical resource. This means that decisions must be made—which one will be done first, which one second, and so on.

Today, many executives prioritize projects on the basis of the total NPV of the project, and how soon they will get it. This means that two projects, both taking the same amount of duration, would be prioritized according to their total NPV contribution. The bigger the contribution, the higher the priority. This is incorrect.

If we accept the premise that there is a critical resource that affects the cycle time of all projects, there is another way of stating this assumption. The flow of projects through the entire organization is a direct function of the flow of projects through the critical resource.

On this basis, the NPV $ per month of the critical resource usage gives a better indication of the total project NPV results for the entire organization.

Client Examples

Since the time of delivering this presentation is quite different from the time of writing the presentation, I am not sure which client examples I will use. In any case, for people reading these proceedings, current examples are easily found on the following websites: www.speedtomarket.com, www.prochain.com, www.goldratt.com, www.scitor.com

Summary

When some of the biggest, high performing companies suffer the consequences of a soft market, the executive's jobs are in jeopardy. They need to complete more projects, on time and on budget, without increasing resources.

The PMO concept holds great promise for the future, but it must be proposed correctly or the executives will never support it. Two aspects of the word “correct” are a focus on the biggest PM problems, a commitment to seek out, evaluate and implement nontraditional approaches, and the Project $ Days measurement.

Organizations correctly implementing the PMO approach will accept the immediate need to deactivate many projects and to schedule all projects as part of one system, not separate functional areas.

Today, there are client examples that show great promise—better than 25% lead-time improvement, with double or triple the number of projects without increasing resources. Truly, the future is now. We just need to be open enough to look for it.

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 or any listed author.

Proceedings of the Project Management Institute Annual Seminars & Symposium
November 1–10, 2001 • Nashville, Tenn., USA

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