Project Management Institute

Siemens, Munich, Germany

Two-year stints help an engineering conglomerate’s thousands of project management offices constantly prove measurable bottom-line results.

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Steve Clark, Siemens, Norcross, Georgia, USA

PHOTO BY STAN KAADY

If only it were always this easy.

The project management offices (PMOs) at Siemens, the global engineering and electronics powerhouse, have little trouble gaining stakeholder support for their endeavors. At any given time, the organization has several thousand pMos doing everything from overseeing massive programs to establishing enterprise-level standards and best practices for project management in individual business units and across the entire company.

“Project management is a core competency at Siemens,” says Kevin McDevitt, senior program manager of enterprise processes, and project and risk management at Siemens in Philadelphia, Pennsylvania, USA. He notes that more than 50 percent of the company's annual revenues come from managing and delivering customer-facing projects.

But more than just offering a project management framework, PMos at Siemens enable the company to advance its methodologies and strategic management maturity, says Craig J. Letavec, PMP, PgMP, Waynesville, Ohio, USA-based director of the North America solutions PMo for Siemens IT Solutions and Services, which was acquired by Atos Origin.

“Many PMos get mired in the tactical management of projects and programs,” says Mr. Letavec, author of The Program Management Office: Establishing, Managing and Growing the Value of a PMO [J. Ross Publishing, 2006]. While that may be a fine place for a PMO to start, it's not a sustainable long-term model for most large organizations. “You've got to elevate what you do so that the PMO structure is seen as continually driving value across the business,” he says. “You've got to get your arms around the tactical issues, then move on to the more strategic goals.”

> TIP

Create case studies that will help future PMOs define their own charters, goals and measures of success, suggests Steve Clark, Siemens, Norcross, Virginia, USA. “It helps other divisions see the benefit of going down this path.”

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PMOs at Siemens begin with standardized principles and guidelines that are the same across the organization. However, PMO directors are encouraged to tailor their processes to meet their group's unique needs. “Siemens provides the framework, and we implement it in a way that makes sense for our organizational needs,” Mr. Letavec says.

But with that freedom comes responsibility and accountability. Every PMO must be able to demonstrate the value it brings to the organization through measurable results based on the goals laid out in its charter. “If you don't have measures, you don't know your value,” Mr. McDevitt says.

That value must be delivered in a set time frame. At Siemens, it's recommended that every PMO be chartered for two years. At that point, executives reevaluate the PMO’s mission to be sure it has delivered the benefits it set out to provide, and that it continues to drive value.

“Most of our PMO leaders go in understanding they have about 24 months to deliver benefits,” Mr. McDevitt says.

If the reviews show that the PMO has met its goals, senior management then decides to either disband the office, or set new goals and expectations for the next 24 months.

“It keeps the PMOs aggressive, so they are always going after new benefits,” Mr. McDevitt says. That may mean focusing on Six Sigma training or lean principles, or continuing to make its business unit's processes more efficient.

“Our PMO model is dynamic, and it is driven by continued process improvement,” he adds.

A COURSE IN FINANCE

When the organization's project management methodologies aren't followed, non-conformance costs accrue.

Mr. Letavec came up with a strategy to combat this: He puts his project managers through financial lessons.

“Many of our project managers have bottom-line responsibility for executing projects to schedule and profit targets, so they have to understand their costs and what will impact those costs,” he says.

Finance lessons help them make the connection between project decisions and bottom-line results. Mr. Latavec also partners project leaders with a financial professional and/or a quality manager on major initiatives, so that together they can make decisions that balance quality, cost and schedule goals.

The PMO also tracks historic occurrences of issues that cause nonconformance on projects, and the costs of those issues. Then it creates process-improvement strategies to avoid repeating those mistakes. Having that baseline enables the PMO to identify opportunities for improvement that will deliver the most value, and track the actual monetary value of those efforts.

For example, the IT teams had a recurring issue with an online interface, leading to project delays. By identifying the cause, Mr. Letavec's team members identified technology as the driver of the problems and updated it to eliminate the problem on future projects.

Then they tracked the trend over time, showing the history of nonconformance costs before and after the solution was implemented.

“When you have that kind of data, it's easy to see the value of the PMO,” Mr. Letavec says.

FILLING IN THE GAPS

Over in its industrial automation division, Siemens launched a PMO in 2008 to deliver three benefits:

■ Improved customer satisfaction

■ Managed growth of profit margins

■ Standardized processes for reliable project delivery

The PMO started with a staff of one fulltime employee and one half-time, as well as team members in each business unit within the division. That lean operation oversaw a range of projects, from small US$100,000 equipment installations to US$100 million multi-year custom plant operation systems.

Despite limited resources, in the first 18 months, projects supervised by the PMO measured a 6.5 percent improvement in gross margins.

“That translated to a nine-to-one return on the improvement program to create the PMO,” says Mr. McDevitt, who acts as a coordinator and mentor over the U.S. network of PMOs at Siemens. Ongoing measures show that the industrial automation division has maintained an average of 5 percent improvement on 2008 project margin baselines for the last 12 quarters.

The improvements came through systematically identifying gaps in the project planning, delivery and risk-assessment processes that led to problems and nonconformance costs down the line, says Steve Clark, the Norcross, Georgia, USA-based manager of the industry automation division PMO.

For example, an issue arose when a customer chose a business interface solution within its price range but inadequate for its facility. Because the Siemens team agreed to the choice without determining whether the solution would work properly, it was held accountable when the solution didn't meet the client's needs.

“It cost US$175,000 to fix that problem, which came right out of our bottom line,” Mr. Clark says.

Those nonconformance cost items are managed in a common tool and loaded into the lessons-learned database. Now all project team members in the division can review the database, see if they are dealing with a similar situation and receive help in determining whether a solution is the right fit. They can also make clear to customers exactly what the technology can do for them—all before an agreement is signed. By tracking similar projects before and after the new processes were implemented, Mr. Clark's team can show reductions of these kinds of problems, which ties directly to improved profit margins.

“The good news is that we hear fewer and fewer of these stories,” Mr. Clark says. “We've seen a steady reduction of noncon-formance costs, improved reliability and improved project delivery thanks to better communication and process improvements.”

SPREADING THE WORD

Mr. Clark's PMO went through its two-year renewal in 2010, and the charter remains the same going forward.

“Our vision is benefits-based, but we are continually looking for ways to refine our processes as we achieve greater project management maturity,” he says.

And at Siemens, benefits realization is the driving principle for each and every one of its PMOs. “Without delivering tangible demonstrable return on investment,” Mr. Clark says, “you aren't doing what you need to do to achieve success.” —Sarah Fister Gale

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Despite limited resources, in the first 18 months, projects supervised by an industrial automation PMO measured a 6.5 percent improvement in gross margins.

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 2011 WWW.PMI.ORG

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