An organization's journey to achieve business excellence through OPM maturity
Sreeramamurthy Yellayi, CSM, MSP, Senior Consultant, Siemens Corporation, Corporate Research & Technology, Princeton, NJ
Steve Clark, MSP, Director, PMO, Siemens Industry, Industry Automation, Norcross, GA
This case study discusses the experiences, benefits, and challenges of Siemens Industry, Industry Automation (I IA [US]), a business division within the Siemens Industry sector, as it undertook the challenge to accelerate its organizational project management (OPM) maturity. Of specific interest in this case study has been the organization's approach to conducting the improvement initiative as a program that was focused on the delivery of business benefits and organizational change, not solely on the development of OPM capabilities alone. Methods discussed include program management, practical application of multiple maturity models (e.g., CMMI®, OPM3®) and an analysis of expected and achieved benefits. This approach delivered improved and sustainable business performance as well as establishing the strategic business relevance of the project management office (PMO). Also discussed are lessons learned by the OPM maturity practitioners involved in the program. The result has been an organization that has not only improved its business performance over one of the more difficult economic periods in recent times, but also has done so through multiple re-organizations while continuing to sustain that performance over three years.
With more than 50% of Siemens revenue generated by projects, OPM maturity at Siemens has global operational significance. Since 2000, the executive board has established and supported an organizational project management improvement initiative to systematically and continuously improve performance regarding Siemens’ projects. This initiative is known as [email protected]. Siemens Corporate Technology (CT) is tasked with the development and maintenance of an internal OPM maturity model known as the Siemens Maturity in Project Management (MPM) model. Siemens CT is also responsible for the performance of MPM assessments around the globe and in all Siemens businesses engaged in projects.
As part of the MPM and [email protected] initiative, more than 220 organizational project management maturity assessments have been conducted as well as many at the project and program level. Due to the engineering nature of all Siemens projects, successful project performance not only depends on effective project management, but also sales, purchasing, quality, senior management, and engineering. To enable and assess excellence in these areas, the Siemens MPM model is collaborative model using elements of OPM3®, CMMI® and internal [email protected] recommended practices.
Conducting the Improvement Initiative as a Program
Sustained improvement requires a change in the organization's culture and the environmental factors of the organization. Change at this level is not possible without a commitment from executive leadership and organization support. More importantly, the objective of the initiative must be focused beyond establishing the new capabilities and processes needed. It must be driven toward the achievement of organizational strategic goals, which are defined as the program benefits. The strength of project management is in capability delivery. Program management, as its complement, is focused on the realization of benefits to be delivered by using those capabilities and on effectively transforming the organization's culture to sustain the benefits. The establishment of an OPM improvement program, alignment of the capabilities to organizational objectives, interpretation of the maturity models and coaching in this transformation is the valued and critical role of the OPM consultant. As a program management methodology, The UK Cabinet Office's (2007) Managing Successful Programmes (MSP) was adopted in practice in this case. However, the Standard for Program Management (PMI, 2008) could also be used. A more detailed discussion of the program management approach can be found in Sopko and McDevitt (2009) and Sopko and Strausser (2010).
The Business Case for Improving OPM Maturity
As stated by Sopko and Strausser (2010), the business case for OPM improvement can be summarized by answering this question: What is the value lost by the organization for not delivering on project commitments (e.g., planned cost, time, or scope)? This is often recognized by project profit margin erosion (e.g., the difference between planned and actual project profit margin) or by time-to-market effects of late delivery for new product development (e.g., lost market share or net present value). Longer projects almost always cost more. Longer projects also utilize resources beyond the planned completion date, restricting them from working on other projects in the portfolio, which may in turn cause additional delays, add risk and weaken the portfolio. Internal improvement projects, even though not typically associated with generating revenue directly, are key enablers for a business. Delay of key capabilities can add to the cost of productivity and eventually loss to the bottom line or market performance. The general term used to quantify the summation of costs or value lost due to deviations from the plan is non-conformance costs (NCCs). In the extreme case, entire project costs may be considered as an NCC if the project objective was not met and costs cannot be recovered. This is a strong case for improving organizational project management to effectively manage a project and accurately predict the project's outcome and business impacts.
Exhibit 1 shows the relationship of non-conformance costs to statistical delivery performance for organizations at various levels of OPM maturity. Closing the gaps between actual and planned schedule/costs/scope and recovering lost opportunities is the value to be exploited by improving OPM maturity. The quantity and trends of project related NCCs are excellent metrics for OPM maturity program dashboards.
Exhibit 1 – Non-Conformance Costs (NCCs) and their relationship with OPM maturity. Maturity scales are shown for both the Siemens MPM model (Maturity Levels) and approximately for OPM3® (SMCI stages). The “Target” represents the planned project goal in terms of costs, schedule or scope. The distribution curve is a representation of typical organizational project delivery performance at the respective maturity levels relating to accomplishing these objectives.
Case Study – Siemens Industry, Industry Automation US (I IA [US])
Identifying the Program
In 2008, Siemens Corporation in the US sponsored an initiative to improve the OPM maturity of Siemens US businesses. Part of that initiative was sponsored support from Siemens CT Project & Risk Management (PRM). One division of the US Siemens Industry sector, I IA (US), embraced the opportunity and became an early adopter of the recommended program management approach and took immediate advantage of the OPM coaching provided by Siemens CT PRM. The improvement program was named [email protected].
In MSP, program identification is a stage where the vision is evaluated and the program brief is formed. Depiction of the MSP Transformational Flow and the supporting Governance Themes are shown in Exhibit 2. At this step, the program organization is also established and the feasibility of conducting the program is evaluated. As part of this feasibility evaluation, a high level business case is developed. For Siemens I IA (US), the principle target to be achieved was the recovery of project profit margin that had eroded from the planned margin due to late or poorly managed projects. As an example, average erosion of a few percentage points in expected project profit margin when compared against the total business revenue through projects may be significant. This can easily justify the expenses of an OPM maturity improvement program if it is effective in improving project performance to deliver according to plan.
Exhibit 2 – MSP Transformational Flow and Supporting Governance Themes (© Crown Copyright 2007 reproduced with permission of the UK Cabinet Office and Core I.S., Ltd.)
In MSP, the program board (Exhibit 3) consists of a Senior Responsible Owner (e.g., Program Sponsor or Executive), the Program Manager and Business Change Manager(s). In the case of I IA (US), the SRO was the Business Excellence Director acting directly on behalf of the VP of Finance. The Program Management Office Director acted as the OPM Improvement Program Manager. The Business Change Manager (BCM) role is responsible for helping define capability requirements, accepting the new capabilities delivered by the program's projects, transitioning their use in the organization, and achieving the expected benefits for the program. BCMs are typically respected change agents from the operations-as-usual part of the business. In this case, the BCMs were selected to be the lead project management functional managers for the constituent businesses of the I IA (US) division that had to implement the new OPM processes. This program governance approach is supported by multiple OPM3® best practices, specifically 5340, 6980, 7035, 7075, and 7405.
Exhibit 3 – Program Organization and Roles in MSP. In MSP, the Program Board consists of the Program Executive or Senior Responsible Owner (SRO), Program Manager and the Business Change Manager (BCM). The Program Board provides the governance for the program (UK Cabinet Office, 2007).
Defining the Program
Program definition involves developing the program strategies and detailed plans required to deliver the program vision and benefits. Formal definition of the benefits as well as the future state of the organization that is needed to deliver those benefits are developed. The future state, or blueprint, is defined in terms of the processes, organization, technology, and information capabilities required to deliver the benefits. Once the future state is defined, the Siemens MPM assessment was used to evaluate the capability gaps between the current and future state model. In terms of OPM3® or CMMI®, a default future state is often established as a Standardized or Maturity Level 3 organization, respectively. Post-assessment, projects were formed and prioritized to fill selected capability gaps and enable the organization (e.g., doing what the global practice standards recommend). Benefit profiles are developed defining the description of the benefits, alignment with enabling program capabilities, and how they are to be measured and observed. Benefits were also mapped to the enabling capabilities to help with planning, business case development, and project prioritization. Benefits metrics and their analysis map to OPM3® best practices 7315, 7325, 7335, 7345, and 7355.
In Siemens I IA (US), benefits to be achieved were selected by senior management and relevant to the executive's business targets. These were:
- Project profit margin
- Customer satisfaction
- Project delivery performance (e.g., delivery to plan)
Selection of benefits that were also executive business targets establish business relevance of the program organization that was tasked to deliver them. In this regard, the PMO was instrumental to the program's success as a leader of this program and making the connection between the global standard practices and business performance. As a result, the PMO became an essential enabler of the business strategy. Benefits were baselined as the performance of the division in these areas during 2008. All benefit metrics in following years were measured against the 2008 performance baseline.
First Year Results
Given the fact that Siemens I IA (US) began this program in 2008, they were also about to experience one of the most significant downturns in the economy and market in their history. This also became an opportunity. With a weak market, the organization looked to improving OPM maturity to help recover and sustain their place in the market. Return-on-investment (ROI) for the program was ~8:1 in the face of this downturn. Exhibit 4 depicts the first year accomplishments of the OPM Improvement Program:
Exhibit 4 – OPM improvement program results after initial phase of the OPM improvement program at Siemens I IA (US).
An additional benefit was noticed by the organization. Due to the economy, the number of employees was in reduction to offset market impacts. Due to the margin recovery, jobs were indeed saved and the organization was able to retain key resources that it would have otherwise lost.
The benefits of organizational change in concert with capability development were evident. Project profit margins, customer satisfaction ratings and project delivery performance continued to be sustained at the 2009 improved levels through 2011. Further, a significant reorganization took place that shuffled the divisions businesses to include a stressed organization that had not previously participated in the initial OPM maturity improvement effort ([email protected]). The added benefit of business scalability was realized as the new business recovered from a position of significant project profit deterioration to one of delivering a 1% improvement above planned expectations within one year. Benefit metrics into 2011 continue to sustain a significant improvement trend at the division level. With planned benefits sustained, the organization is currently planning the next phase of the improvement program to deliver the next increment of benefits for the organization. Additionally, the I IA (US) PMO is now credibly established as a business relevant entity that has been instrumental in delivering the organization's vision and strategic goals. For their contributions to their business, the Siemens I IA (US) PMO and the extended contributors of the OPM maturity improvement program were selected as the Project Team of the Year for their division in 2011 and was a runner-up in 2010.
OPM Maturity Practice Lessons Learned
1. Establish Organizational OPM Policies
Whether you subscribe to CMMI® or OPM3®, one of the early generic practices (CMMI GP2.1) or organizational enablers (OPM3 Best Practices 1000 and 5290) recommend establishing organizational policies. There is a good reason—organizational policies establish senior management buy-in, a basis for directing resources and set the stage for culture transformation. Organizational policies must be defined and communicated in order to set the expectations at the very beginning for the OPM processes in the organization. These policies must be visible to all affected parties and must have approval and commitment from the senior management of the organization. They may not always be called “Policies” directly, but they are essential to the success of the OPM maturity program. It is quite possible that in the absence of clear policies, organizations may still develop processes to reach a particular maturity level, or may not develop a process due to lack of the same. The organization must take complete advantage of this option given by the CMMI and OPM3® models to clearly capture what the policies for process implementation are and direct the organization accordingly. This not only benefits the organizational practitioners in process implementation but also provides appropriate guidance to the OPM maturity assessors who evaluate the maturity of the processes in the organization—it defines what is important to the organization. At I IA (US), the development of policies and a process framework at the division level was a key driver to encourage OPM practice, even as the detailed processes were being written and evaluated.
2. Measurement and Analysis—Process Effectiveness Metrics
If you can't explain the intended benefit that a process will deliver for the organization, how can you write a good process? For example, if an organization implements a new project planning process that takes six weeks instead of the typical four weeks—is that good? Even though “Measured” is the second step on the OPM3® SMCI maturity ladder, CMMI® recommends Measurement and Analysis as a an earlier step as you are writing the processes. More often, this topic is misunderstood and not effectively implemented.
It is quite common for organizations to think that with the measures they currently have, they have a fair understanding of their process behavior and its effectiveness. This is not always the case. Process behavior is understood when the process is fairly stable and the measures are systematically defined, developed, collected, analyzed, and managed. The definition of measures, their storage, analysis, etc. provide us with a foundation for understanding the process behavior is addressed at later maturity stages. In our case study lessons, earlier definition of process effectiveness metrics is a better practice and helps the organization not only create a more effective process, but also a more efficient (e.g., lean) process
3. Process Maturity Versus Process Complexity
The same process may be adequate for some projects and not sufficient for others. In Siemens, there exists a wide range of diversity in project complexity. A project plan for a large complex project will typically be unique and highly detailed. For small projects, a project plan can be repeatable and as simple as a checklist as long as it is effective and standardized. Process maturity is mostly focused on the standardization of the process whereas process complexity is focused on the adequacy and effectiveness of the process. Both must be considered by OPM maturity practitioners.
4. What is the right maturity level/stage for a business?
The universal project management answer—“It depends.” An example process to consider is the Sequence Activities process in the PMBOK® Guide (PMI, 2008). Most organizations would consider it sufficient if they had a simple standardized way of doing this that logically enables critical path management. However, in markets or industries that have project business gains or losses measured in millions of dollars (or euros) per hour, they might invest heavily in a best-in-class scheduling capability. Another case is an organization that develops a best-in-class process only to find out that the market will not pay for that added quality. Due to the application of the project solution or product, it's not expected or required by the market but costs money and resources to maintain. Optimization of OPM maturity relies on benchmarking of similar suppliers in their respective markets and the requirements of the markets themselves.
5. Evaluation of Follow-On Assessments
If any organization conducts assessments over a period of time, it is natural to expect that the capability/maturity levels continuously improve. However, if an organization achieves the same maturity level over two successive assessments, it should not be considered as a negative point. Instead, evaluate the business results and interpret the assessment outcome in the context of those business results. If the organization is showing consistent and improving business results and continues to maintain same level on the maturity or capability scale, then that is a success. It may have to go back and prioritize the process improvement actions to ensure they make sense to the business. These actions should not be based on improving the maturity level alone, but should also add value to the business. And remember, even the maturity levels are limited. You cannot go to Maturity Level 6!
6. Focus on Organizational Benefits Versus Maturity Levels
One of the key attributes of conducting an OPM maturity improvement initiative as a program is the focus on organizational benefits. Alignment with realizing benefits is a key driver for business change. All program work is connected to the enabling, transition, and realization of benefits. This is supported by a number of OPM3® Organizational Enablers as well as recommendations of CMMI. As a result, the I IA improvement program was attributed to their organization's improved performance and delivering three years of sustainable performance excellence.
An interesting aspect of maturity models with clearly defined maturity levels is that they are easy candidates for executive incentive targets (e.g., achieve ML3). Often these incentives are directed out of good intentions, but without alignment of the maturity model capabilities with business benefits. If this is not performed as part of the definition of the incentives, there may be work effort in the program that is aligned solely with achieving a defined maturity level and may not be aligned directly with the benefits the program is to deliver. Outside of compliance programs (e.g., ML3 needed in order to compete in a given market), careful consideration should be given to the correct alignment of maturity model capabilities with the OPM maturity improvement program benefits. Even in these mandated cases, required maturity level capabilities should be consciously planned and aligned with organizational benefits and clearly communicated to the program team. When resources are in short supply, project prioritization (and the relevance of the program) will depend on the alignment with benefits.
The reverse can also true. Because of an organization's focus on benefits, the capabilities of the maturity model will and should be developed with regards to their business relevance, but the effort may fall short in achieving a specified maturity level. The lesson here is not that some of the capabilities of the maturity model are less important. Rather that the capabilities do take valuable and often scarce resources to develop and must be prioritized regarding their business impacts. Exactly how far or how fast an organization climbs up the maturity ladder is driven by its improvement strategy, the business environment and the business relevance of the capabilities. There may be other more important improvement areas for the organization to invest that may have a stronger business case.
OPM maturity improvement continues to be a significant contributor to business success when conducted using formal program management methods and practices to deliver the expected benefits. Benefits are realized when benefits are actively managed guided by a communicated strategy. Often overlooked, organizational policies and process effectiveness metrics are also key drivers in developing the correct, efficient and effective processes for the business. How much process maturity or complexity is required is a factor of the complexity of an organization's projects as well as market expectations and organizational strategy. As George Box is often quoted, “…all models are approximations. Essentially, all models are wrong, but some are useful. However, the approximate nature of the model must always be borne in mind…” (Box n.d.). Therefore the use of multiple maturity models is often needed in the diverse environment of project complexity that we work in. However, we should always understand the relevance of these models for a particular business and stay focused on their context and intended purpose. This is the benefit of an experienced OPM improvement team.
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“PMI and PMBOK are registered trademarks of the Project Management Institute, Inc.”
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Managing Successful Programmes and MSP™ are registered trademarks of the U.K. Cabinet Office.
© 2012, Joseph Sopko, Sreeramamurthy Yellayi, and Steve Clark
Originally published as part of the 2012 PMI Global Congress Proceedings – Marseille, France