A framework for strategy execution integrating the PMO and OCM

Abstract

In their quest to successfully execute their strategy, organizations across the globe have indulged in establishing units under various names, ranging from Office of Strategy Management (OSM), Project Management Office (PMO), and Organizational Change Management Unit (OCM). Many of these units have failed to achieve their intended objectives. This failure was due to the fact that short fallings within implementation of each of these standalone units hindered the realization of the main objective of executing the strategy.

In this paper, the author outlines a framework for strategy execution that integrates both project and change management models and methodologies. First, describing the various units PMO, OSM and OCM; their roles and functions, the structures and limitations of each; and then outlining the integrated framework with its processes and organization structure, highlighting the key challenges for this framework.

Implementing this integrated framework would help organizations achieve better strategy execution through maintaining strategic focus and alignment, providing the necessary tools to execute while ensuring people are in the heart of the whole process by keeping them aligned, embracing the change and motivated to execute.

Introduction

In their quest to successfully execute their strategy, organizations across the globe have indulged in establishing units under various names, ranging from Office of Strategy Management (OSM), Project Management Office (PMO), and Organizational Change Management Unit (OCM) that were responsible for formulating, executing and monitoring the strategy. Each of these units worked to transform the organization from a current state (status quo) as defined during the strategy formulation process to a future desired state (realizing the strategy) as shown in Exhibit 1, through offering tools and techniques to manage the execution phase.

Phases of Strategic Management Process

Exhibit 1– Phases of Strategic Management Process

However, with rates ranging from 60% to 90% of strategy execution efforts failing (Kaplan & Norton, 2005), and in a recent study 61% of respondents admit that their organizations often struggle to bridge the gap between strategy formulation and its day-to-day implementation (The Economist Intelligence Unit, 2013); in addition, 34% of projects do not meet their original goals and business intent (PMI, 2012a, p 8) and 85% of change initiatives fail. These statistics indicate that many of these units have failed to achieve their intended objectives and that failure was due to the fact that deficiencies within implementation of each of these standalone units hindered the realization of the main objective of executing the strategy.

In this paper, we will describe the various units (PMO, OSM, and OCM) with the functions, roles, structures and deficiencies in implementing them and then outline a framework for strategy execution that integrates both project and change management models on organizational and individual initiative levels, processes, organization structure and, highlighting the key benefits and challenges for this framework.

Different Models for Strategy Execution

Office of Strategy Management (OSM)

The idea of an Office of Strategy Management (OSM) emerged from the work of Kaplan and Norton, and organizations established this unit to help develop, manage, and review the strategy. The Office of Strategy Management (OSM) has nine cross-functional processes or roles classified into three groups (Kaplan & Norton, 2005) as follows:

- These core processes must exist within any Office of Strategy Management:

  • Scorecard management
  • Organization alignment
  • Strategy reviews

- The desired processes usually exist in organizations in different units and the role of the Office of Strategy Management in these processes must be increased:

  • Strategic planning
  • Strategy communication
  • Initiative management

- Integrative processes: The Office of Strategy Management (OSM) should ensure the alignment of these processes with the strategy:

  • Planning/budgeting
  • Workforce alignment
  • Best practice sharing

Further to that, the Office of Strategy Management (OSM) had three distinctive roles as illustrated in Exhibit 2:

  • The Architect: Define and clarify the philosophy of performance management and the processes required to execute.
  • The process owner: Define, develop and oversee the execution of processes required to manage the strategy (e.g.., Develop, Translate, Plan and fund, Review, Test and adapt the strategy).
  • The Integrator: Ensure the processes owned and run by other functional executives are linked to the strategy (e.g., Human Capital, Strategy Communications, Initiative Management and Financial Resource Management).
Roles of the Office of Strategy Management (OSM)

Exhibit 2 – Roles of the Office of Strategy Management (OSM)

In terms of Structure, according to Kaplan and Norton, the Office of Strategy Management (OSM) is usually a small unit of 5 to 15 employees irrespective of the size of the organization. The Office of Strategy Management usually reported to the CEO as illustrated in Exhibit 3 or to the VP of Planning or CFO, with dotted line reporting to the CEO (Kaplan & Norton, 2005). The time needed to establish the unit, hire people and develop processes was usually less than a year.

Office of Strategy Management (OSM) reporting to top management

Exhibit 3 – Office of Strategy Management (OSM) reporting to top management

The Office of Strategy Management (OSM) provided several advantages that helped organizations in formulating and executing its strategy, because it:

  • Provided clear strategic focus for the organization.
  • Offered a solid framework for developing and reviewing the strategy.
  • Had good portfolio management practices by helping management to select the right mix of projects and in prioritizing and balancing the portfolio to achieve the balanced objectives set by the Balanced Scorecard (BSC).
  • It helped in following up on both types of objectives, those that are performance based (e.g., increasing sales by 10% yearly) and the initiative/project based objectives (e.g., establishing a new business unit).
  • It usually enjoyed top management sponsorship and commitment.

However, organizations that have established an Office of Strategy Management (OSM) were usually faced with the following shortcomings while implementing the model:

  • Communication was usually handled as a one-time big campaign to communicate the strategy and align the organization not as a continuous process. In addition, communication did not go deep down to lower levels of the organization.
  • In terms of execution, the Office of Strategy Management (OSM) did not offer any technical tools to help execute the initiatives; neither did it consider the people aspect of change and the impact of strategy execution on them.
  • Management support and commitment faded after formulating the strategy.
  • Support units were usually involved late in the process and that helped in establishing a lack of support within these units.
  • The required cascading of objectives to the lowest level in order to meet the high level organizational goals did not occur. Usually objectives were cascaded one or two levels only down in the organization.

Project Management Office (PMO)

Organizations establish a Project Management Office (PMO) in order to help them execute their strategic initiatives/projects and thus realizing the strategy. In a recent PMI white paper, “The Project Management Office In Sync with Strategy,” it states that while Project Management Offices (PMOs) share some common functions, PMOs vary based on their organizational context, structural characteristics and roles or functions (PMI, 2012b). Kendall and Rollins classify Project Management Office types as either Cost Containment or Throughput (value driven), where each supports different objectives and roles of the PMO with the Throughput type being more related to strategy execution and embodies intensive portfolio management practices (Kendall & Rollins, 2003, p 27). In PMI's Standard for Portfolio Management – Third Edition, PMI defines the organizational context of portfolio, program and project management and its relationship with strategy and operational processes as illustrated in Exhibit 4.

The Organizational Context of Portfolio Management (PMI, 2013a)

Exhibit 4 – The Organizational Context of Portfolio Management (PMI, 2013a)

The key roles and functions of a Project Management Office (PMO) usually included:

  • Delivery of initiatives.
  • Development and deployment of methodology and process.
  • Governance for projects.
  • Project portfolio management.
  • Performing of project audits at different points.
  • Performing project rescues for troubled projects.
  • Reporting progress of projects to management.

In terms of Structure, the Project Management Office had various structures, depending on the model used, size and complexity of the organization and also the number of projects under its umbrella. Reporting structure also varied significantly with over 50% reporting to functional units as for example IT and 41% reporting to top management (PM Solutions, 2012) as shown in Exhibit 5 and Exhibit 6.

PMO reporting within a functional unit

Exhibit 5 – PMO reporting within a functional unit

 

PMO reporting to top management, delivering strategic projects across multiple units of the organization

Exhibit 6 – PMO reporting to top management, delivering strategic projects across multiple units of the organization

The Project Management office helped organizations in executing the strategy as it provided:

  • Clear focus on execution of individual projects resulting in more projects on time and within budget.
  • Reduced project failures.
  • Improved productivity and increased cost savings.
  • Strong governance on projects.
  • Project and Program Management standardization and best practices.

However, some organizations that implemented a Project Management Office (PMO) to execute the strategy usually fell into the following pitfalls during implementation, which hindered realizing their main objective:

  • Lack of strategic focus, where efforts largely focused on delivering approved initiatives and methodology deployment rather than strategic value added.
  • Structural problems when PMO is housed within a department as IT, it lacks the link to strategy and access to Executive management, and is therefore affected directly by the departmental strategy as opposed to the organizational strategy.
  • Portfolio management focused only on reporting status and was not linked to strategy reviews.
  • Limited attention to Benefits realization when they are achieved several months or years after the project ends.
  • Inadequate metrics (e.g., success based around budgets and schedule, where the focus is on innovation).
  • Not suitable to manage performance based objectives (e.g., increase sales by 10%) thus cannot be relied upon alone to manage the strategy execution that usually consists of both initiatives/projects and performance based objectives. While Program Management covered this, not all PMOs utilized Program Management guidelines.
  • Limited attention to people aspects and changes are imposed rather than embraced.

Organizational Change Management Office (OCM)

Generally, Change Management addresses the people side of change and organizations that established an Organizational Change Management Office (OCM) were looking to ensure that their strategic initiatives were embraced, adapted and used by people impacted by the change. There are several Organizational Change Management models; Cameron and Green in their book, Making Sense of Change Management, have matched these models with Organizational Metaphors (machine, political, organism, and flux and transformation) as listed below:

  • Lewin, Three Step Model: phases are unfreeze, move and freeze; can be used with machine and organism metaphors.
  • Bullock and Batten, Planned Change: phases are exploration, planning, action and integration; can be used with machine metaphor.
  • Kotter, Eight Steps: phases are establish a sense of urgency, form a guiding coalition, create a vision, communicate the vision, empower others to act, plan and create short term wins, consolidate improvements and produce more change, and institutionalize new approaches. Usually used in political, machine and organism metaphors.
  • Beckhard and Harris, Change Formula: for Change to happen, dissatisfaction with status quo x desirability of change x practicality of change must be greater than Cost of Changing. Used in organism metaphor.
  • William Bridges, Managing the Transition: phases are ending, neutral zone and new beginning; usually used in machine, organism, and flux and transformation metaphors.

Organizational Change Management scope is very wide, as illustrated in Exhibit 7 and very few organizations manage to fully cover the whole spectrum of the scope within their Change Management efforts.

Organizational Change Management Scope

Exhibit 7 – Organizational Change Management Scope

Irrespective of the chosen Organizational Change Management model, there were some common major roles or functions within an Organizational Change Management office (OCM) as follows:

  • Develop Change Methodology.
  • Perform Readiness Assessment.
  • Develop and execute Communication plans and Sponsor Roadmaps.
  • Develop and execute Coaching and Training plans.
  • Resistance Management.
  • Benefits Management.
  • Governance and Reporting.

In terms of structure, less than 20% of Organizational Change Management units (OCM) report to top management; the majority are established within Human Resources, Organization Development or Information Technology as shown in Exhibit 8. The size varies, depending on the scope but usually has less than 10 employees.

OCM reporting within a functional unit

Exhibit 8 – OCM reporting within a functional unit

The Organizational Change Management office (OCM) offered the following advantages for execution of strategy:

  • Higher levels of Strategy adoption.
  • Managed resistance.
  • Better benefits realization.
  • Suitable for both performance-based objectives and initiatives/projects.
  • Builds competencies and capabilities within the organization.

However, organizations utilizing the Organizational Change Management (OCM) fell into the following pitfalls during implementation:

  • Lack of strategic focus where efforts are focused on delivering initiatives and deploying methodology rather than on strategic value.
  • Lack of technical tools to support execution of the technical side of change.
  • Cultural and behavioral changes took a long time, thus delaying the strategy execution.
  • Lack of top level executive leadership and commitment usually hinders change efforts.
  • Structural problems when the Organizational Change Management unit (OCM) does not report to top management, thus lacking authority to affect changes in the organization.
  • There is usually no involvement in strategy formulation or in the selection of initiatives.

A Framework for Strategy Execution Integrating Project Management Office (PMO) and Organizational Change Management (OCM)

From what we have described above, each of the different models and units in its standalone form had its advantages and disadvantages when it comes to Strategy Execution. What is clear is that if the three models could be integrated together, organizations would get better strategy execution results as it would bring together the three dimensions of Strategy Management, People aspects and Tools and Techniques to execute, as illustrated in Exhibit 9. In this section we will outline a framework for strategy execution that integrates the Project Management office and Organizational Change Management.

Integrating OSM, PMO and OCM models

Exhibit 9 – Integrating OSM, PMO and OCM models

Process

Within this integrated framework, the Office of Strategy Management (OSM) will maintain strategic focus and oversee the overall process of formulating, evaluating and controlling the strategy. The Project Management Office (PMO) and the Organizational Change Management (OCM) units will be highly integrated together and involved very early in the strategy formulation process at the identification of goals and objectives as illustrated in Exhibit 10. This would give them higher strategic alignment and at the same time higher influence during the execution phase.

Strategy Formulation and Execution process

Exhibit 10 – Strategy Formulation and Execution process

The Project Management Office (PMO) and the Organizational Change Management (OCM) will implement a two-tier approach:

  • Organizational/Strategy level.
  • Individual Initiative/Project level.
Organizational Level Assessment

The Organizational Change Management (OCM) analyzes the impact of the new strategy on all aspects of the organization based on McKinsey's 7S Model (Strategy, Structure, Systems, Style, Staff, Skills and Shared Values), in order to create the change management strategy and plan, and define the supporting change management initiatives needed to implement the strategy that would be included in the strategic projects portfolio. The Project Management Office (PMO) will focus its efforts on the project portfolio to ensure selection of the right mix of projects, prioritizing the projects, portfolio balancing, defining of resource requirements and managing the dependencies among the different projects.

Individual Initiative/Project Level

On an Initiative/Project level, Project Management and Change Management will be fully integrated to ensure successful execution. The Change Management Learning center has mapped the process (Change Management Learning Center, 2011) as shown in Exhibit 11:

Integrated Change Management and Project Management Process

Exhibit 11– Integrated Change Management and Project Management Process

In this integrated process, Project Management utilizes its tools and techniques as described in the Standard for Project Management – Fifth Edition, to deliver Business Case, Statement of work, Project Charter, WBS, Budget Estimates, Risk Management, Quality Management, Resource Allocation, Scheduling, Status reports and governance (PMI, 2013b). Change Management focuses on Individual Change model, Readiness Assessment, Communication Plan, Sponsor Roadmap, Stakeholder Management, Coaching and Training plans, Resistance Management and Benefits realization.

Structure

While we have seen that the processes of these units can be integrated together, the question now would be how to structure this unit in order to achieve the required results. We will begin by calling this unit “The Strategic Management Unit (SMU)”, and should be reporting directly to top management as illustrated in Exhibit 12, typically to the Managing Director or CEO.

Structure of the Strategic Management Unit (SMU)

Exhibit 12 – Structure of the Strategic Management Unit (SMU)

This unit should always remain a thin organization, with an average size of 10 to 20 employees distributed among the different functions as follows:

  • OSM: 3-5 FTEs
  • OCM: 3-5 FTEs
  • PMO: 4-10 FTEs

And should be characterized by a high level of coordination among its different functions, where the heads of each of these functions coordinate and work on the organizational level and the employees at lower levels coordinate and work on the individual initiative/project level. The establishment time for such a unit should be less than one year.

Benefits of the integrated framework

By implementing such an integrated framework, organizations would achieve better strategy execution results. The integrated framework facilitates strategy execution because it ensures maintaining strategic focus and alignment, having the necessary tools to execute and in the meantime ensuring that people are in the heart of the whole process keeping them aligned, embracing the change and motivated to execute. In addition, organizations would also enjoy:

  • Better organizational alignment.
  • Improved communication on strategy level and on individual initiatives level.
  • Higher speed of adoption.
  • Lower risks of failure and.
  • A single source for all strategy related information.
Challenges

The main challenges of implementing this framework are:

  • Skills: Finding people with the right mix of skills.
  • Timeframe: the timeframe needed to establish the unit and reach a certain maturity level.
  • Definitions of roles and boundaries within the new unit.
  • Getting executive buy in for the new unit with more responsibilities.
  • Overcoming organizational political resistance.
  • Defining KPIs for the new unit.

Conclusion

To help them execute their strategy, Organizations have established different units as Office of Strategy Management (OSM), Project Management Office (PMO) and Organizational Change Management unit (OCM). All these models were based on solid foundations and have helped organizations in their efforts by focusing on either strategy formulation in the case of OSM, tools to execute initiatives/projects in the case of the PMO, or people adoption to change in the case of OCM. Pitfalls in implementing those models and shortcomings of these models in a standalone mode have hindered achieving the main benefit of realizing the strategic benefits.

By integrating those three units into a single Strategic Management Unit (SMU) and integrating their roles and processes on both the organizational/strategy level and individual initiative/project level, we will capitalize on the advantages of each model and ensure maintaining strategic focus and alignment, have the necessary tools to execute and in the meantime ensure people are in the heart of the whole process, keeping them aligned, embracing the change and motivation to participate. When this happens, organizations will enjoy better strategy execution results.

Cameron, E., & Green, M. (2012). Making sense of change management – Third edition. London, UK: Kogan Page Limited

Kaplan, R., & Norton, D. (2005). Creating the Office of Strategy Management. Boston, MA: Harvard Business School.

Kendall, J., & Rollins, S. (2003). Advanced Project Portfolio Management and the PMO: Multiplying ROI at Warp Speed. FL: International Institute for Learning, Inc. and J. Ross Publishing, Inc.

PM Solutions (2012). The State of the PMO 2012. Glen Mills, PA: PM Solutions.

Project Management Institute (2013a). The Standard for Portfolio Management – Third edition. Newtown Square, PA: Author.

Project Management Institute (2013b). A guide to the project management body of knowledge (PMBOK® guide) – Fifth edition. Newtown Square, PA: Author.

Project Management Institute (2012a). Pulse of the Profession™: Driving Success in Challenging Times. Newtown Square, PA: Author.

Project Management Institute (2012b). The Project Management Office in Sync with Strategy. Newtown Square, PA: Author.

The Change Management Learning Center (2011). Unified Value proposition, Module 1 in the Integrating Change Management and Project Management series. Retrieved from http://www.change-management.com/tutorial-integrating-cm-pm-mod1.htm.

The Economist Intelligence Unit (2013). Why good strategies fail, lessons for the C-suite. London, UK: The Economist Intelligence Unit.

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.

©2013 Ahmed Hussein Hassan
Originally published as a part of 2013 PMI Global Congress Proceedings – New Orleans, Louisiana

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