Utilizing organizational change management best practices for the roll-out of an enterprise project management framework
Brenda K. Green, PMP, Duke Energy
The merger of Duke Energy and Progress Energy formed the world's largest publicly traded utility. With a service territory spanning six states and a commercial energy business in North America and Latin America, the new combined company, Duke Energy Corporation, found itself spending US$6 billion annually on projects. With the formation of the new company, there were no less than 40 different approaches for managing projects across the enterprise, and gaps existed in the areas of project certainty and predictability. This paper describes the establishment of an enterprise-wide Project Management Center of Excellence at Duke Energy, with a vision of creating the industry leader in project management by transitioning the corporation to one common project management framework. The paper will detail how Duke Energy utilized proven best practices in organizational change management to engage sponsors, and transform the organization through communication, training, and resistance management. The scope of this change management effort includes the roll-out of processes, tools, and a common career path for both project managers and project controls specialists.
The New Duke Energy — Envisioning Project Management Excellence
Through a merger of two utility giants, Duke Energy and Progress Energy, the world's largest publicly traded electric utility was formed. The combined company, Duke Energy, now serves 7 million customers across six states through its regulated business and features a commercial business with a substantial renewable and international energy portfolio.
The merger of the two utilities spanned approximately 18 months, including an extended regulatory review, and was approved on 2 July 2012. Over this period of time, merger and integration teams worked through a methodical process to analyze similarities and differences between the two legacy companies, and then identify the structure and key operating principles for the new company. As needed, sub-teams were identified and populated with subject matter experts from each legacy company to support the larger merger and integration effort.
Recognizing that each legacy company was in the midst of a large-scale capital investment program to upgrade aging infrastructure, one priority for the merger and integration team was to build a core competency in project management within the combined company. Both companies had experienced challenges with the execution of large, complex, and/or first-of-a-kind technology projects in their recent history. Knowing the combined company had a near term annual capital spend forecast of US$6 billion, the predictable execution of projects would be critical to the company's success. With these facts in mind, a merger and integration sub-team was formed to evaluate the various methods for project management across the enterprise and to recommend an approach for the combined company based on best practices and lessons learned.
This project management sub-team was formed with subject matter expertise from each legacy company, representing each of the major business units across the enterprise. One input provided to the team for evaluation was a “Deep Dive” study into project management performance. The study was chartered by the Chief Executive Officer (CEO) of Duke Energy in 2010 as a result of several challenged projects. The resulting findings and recommendations were highlighted in a message from the CEO to the company's project managers:
- Change is necessary in the project management discipline at Duke
- Establishing “the Duke way” of project management, provided it is scalable, is appropriate and necessary
- The optimal organizational approach is one that includes a centralized project management organization to work with other projects organizations throughout the company to define “the Duke way” and then effectively deploy and support it
The team recognized parallels in the findings and recommendations from this study with a similar effort undertaken by Progress Energy in 2007. Specifically, the Progress Energy Board of Directors had chartered an investigation following significant cost overruns on several large, complex projects, and the recommendations were closely aligned with those made in the Duke Energy “Deep Dive.” As a result of these recommendations, Progress Energy had established an enterprise Project Management Center of Excellence (PMCoE) and had noted improvement in project management performance from this effort. With a proven means to address enterprise project performance issues, the merger and integration sub-team had a framework to reference while building the recommendations for the combined company.
With parallels to the approach taken in 2007 at Progress Energy, the merger and integration sub-team recommended establishing an enterprise Project Management Center of Excellence — a team to promote collaboration and utilization of best practices in project management across the company – that would develop and deploy “the Duke way” of project management. The team then began working to establish the new enterprise project management framework and a high-level change management timeline. The team recommended a framework that included:
- Standards that incorporate industry and company best practices
- Scalable processes, tools, and templates
- Career paths, training, and qualifications
- Oversight of project performance
The required deliverables from the merger and integration sub-team for “day one” of the merged company were the project management standards and draft position descriptions for the project manager and project controls career paths that would be established in 2013. These deliverables were completed and included a set of 18 “shelf ready” draft project management standards and position descriptions for the two career paths, including six project management and six project controls positions.
On 2 July 2012, the merger was approved and the new Duke Energy Project Management Center of Excellence (PMCoE) was formed. The PMCoE began to build on the foundational elements put in place by the integration sub-team (Exhibit 1).
Exhibit 1 – History of the Duke Energy PMCoE
Organizationally, the PMCoE was placed into a major projects organization, but needed to interface with all other project organizations across the company. Forty such project organizations were identified that performed various types/scales of projects (nuclear, fossil, hydro, renewable, transmission, distribution, facilities, IT, finance, HR, etc.). In order to effect change across these departments, a charter was developed and executed by members of Executive Management, who serve as the PMCoE's executive sponsors. This charter charged the PMCoE to establish an enterprise-wide project management governing body, approve appropriate policy and standards, and establish career paths for project managers and project controls specialists.
To ensure cross department involvement and oversight, the PMCoE charter also established an enterprise-wide governing body. This included the identification of two co-chairs for this envisioned Executive Governance Committee (EGC). With the signing of the associated charter by the executive sponsors, the EGC was officially established and a platform was in place to launch the enterprise initiatives from the PMCoE.
One of the first acts performed by the EGC was to approve the PMCoE Policy that all projects in the company must follow. The policy established a compliance effective date of 1 January 2014 to give each organization an opportunity to read, train, understand, and incorporate the methods into their business processes. The PMCoE was tasked to make sure this significant change management effort was performed successfully.
While the merger brought a tremendous opportunity to leverage best practices from each legacy company to create the industry leader in project management, the opportunity did not come without challenges.
The scale of the new company and the diversity of its businesses led to inherent challenges such as cultural differences, differing work processes, physical distance, and even language barriers. Additionally, the 18 months of uncertainty leading up to the merger approval had proved trying on the employees. This fact, coupled with the organizational instability that was faced in the initial months following the merger, caused many employees to resist change. Fueling this resistance was “change saturation,” as a high volume of changes were planned over the coming months, including systems, processes, and pay structures that were being consolidated on or before January 2014.
These organizational attributes were representative of a change resistant organization. Considering this attribute and the large scale and potentially disruptive nature of the change, there was a high degree of risk for the PMCoE‘s change management efforts (Prosci, 2012).
The team sought to have the new project management framework effective on January 2014, a milestone where the majority of other changes across the enterprise would take effect. The following success measures were established for the change:
- Leadership is prepared to communicate the change details and answer employee questions
- All levels of the organization understand the drivers for and the vision and mission of the PMCoE
- PMCoE change efforts incorporate department specific needs where feasible
- Training is made available for 100% of the initially identified project management community
- Metrics are established and utilized throughout the rollout to effectively monitor and control performance
- “In-flight” projects are not adversely impacted during rollout of the PMCoE approach
- Means are established to effectively monitor compliance with PMCoE standards after 1 January 2014
To achieve these objectives in a challenging environment, it was clear that a thoughtful and thorough approach to change management would be required.
The Change Management Approach
Recognizing that rollout of “the Duke way” of project management was a large-scale change across a relatively change resistant organization, the PMCoE and the associated Executive Governance Committee recognized that successful roll-out would require a methodical approach, incorporating best practices in organizational change management. With this thought in mind, the change management strategy developed for the PMCoE rollout began with the following inputs:
- Proven principles of organizational change management and methodology
- Recommendations from Duke Energy change management subject matter experts
- Guidance from the Executive Governance Committee and other key stakeholders
- Lessons learned from the Enterprise PMCoE roll-out within legacy Progress Energy
Because effective change management begins with knowing and understanding the stakeholders for the change, considerable time was spent upfront identifying and then understanding the various needs of the stakeholder groups. These groups were identified as follows:
- Executive Leadership
- Department Management
- Project Management Community (Project Managers and Project Controls Specialists)
- Project Teams
- Key Interfacing Groups (i.e., Audit, Human Resources, Corporate Finance)
The resulting change management strategy recognized the varying needs of each stakeholder group while leveraging change management best practices.
Tailoring the Approach
During the stakeholder assessment, it became apparent that there were varying work processes, organizational designs, needs and preferences within the various departments that would prohibit a “one-size-fits-all” approach. With this in mind, enterprise governance was structured to provide the appropriate balance of specificity at the enterprise level, while allowing flexibility within each department to manage projects consistent with unique department requirements. Similarly, the resulting change management approach was crafted such that it could be adapted for each major group while maintaining a consistent message throughout the enterprise.
To minimize the amount of customization, the 40+ different organizations executing projects across the enterprise were evaluated for commonalities and were grouped into 14 different groups and change management activities tailored accordingly. These departments were segmented into such areas as Finance, Information Technology, Nuclear Generation, and Transmission.
Change Agents within each of these 14 departments were then appointed by senior leaders from each respective work group. Given the criticality of the Change Agents to the rollout, it was imperative the right individuals be selected. Senior leaders were asked to appoint individuals who were close enough to project execution to understand the issues that would need to be addressed, but also had sufficient authority to allocate resources and influence their organization. On average, second level managers (i.e., Directors or General Managers) were selected and tasked with the following responsibilities relative to the Change Management Plan:
- Serve as a single point of contact (SPOC) for the PMCoE relative to change efforts within their respective area
- Serve as the SPOC for their respective area during the open feedback period on the standards
- Provide the status of change efforts within their area and communicate to the PMCoE and department leadership, as appropriate
- Identify departmental stakeholders and processes that would be impacted, and ensure these are incorporated in associated change efforts
- Collaborate with department change management subject matter experts to ensure PMCoE change efforts were coordinated, as practical, with other changes
- Gather and communicate feedback from the Change Agent's respective area relative to the PMCoE change efforts
In addition to the above, a key task for the Change Agents was to work with the PMCoE to tailor the change management approach to fit their specific business needs. Department specific roll-out plans were crafted, each including standard major milestones designated by the PMCoE. These milestones were captured, along with the department specific scope and resource strategy in a department charter that was subsequently approved by the department's senior leadership. This charter was critical for ensuring alignment between the PMCoE, department leadership, and the Change Agents, and also provided a baseline to monitor and control performance during the roll-out. A sample charter is shown in Exhibit 2.
Exhibit 2 – Sample Department Specific Charter for the PMCoE Roll-Out
Change Management Work Streams
The Change Management Plan included a set of activities that were common across the enterprise and activities specific to the individual departments. In alignment with organizational change management best practices, the following work streams were each designed with activities that were generic across the enterprise and those specific to a department:
- Sponsor Engagement
- Coaching and Organizational Transformation
- Resistance Management (Monitoring and Controlling)
These work streams, along with select activities within each, are reflected in Exhibit 3.
Exhibit 3 – Change Management Work Streams
The number one obstacle to success for major change projects is employee resistance and the ineffective management of the “people side” of change. Correspondingly, the greatest success factor for managing the “people side” of change is active and visible sponsorship throughout the effort (Hiatt & Creasey, 2012). With this in mind, a key aspect of the Change Management Plan was the process of creating identifiable actions that senior leadership could take to sponsor the changes implemented by the PMCoE.
A core component of the plan was to leverage the support of the EGC members who were already actively engaged in the PMCoE roll-out. At the enterprise level, activities were coordinated for the co-chairs of the PMCoE Executive Governance Committee to actively and visibly support the roll-out, and also build a coalition of support among their peers across the corporation. Key activities included articulating the PMCoE vision and mission in executive leadership conferences/forums, and providing training to the company's senior executive leadership team.
At the department level, all members of the Executive Governance Committee were tasked with advocating the PMCoE approach in various engagements with department personnel, including their peers and the project management community. To ensure a consistent message, Change Agents and the PMCoE supported the EGC with key messaging for verbal and written communication.
Through this structured approach to sponsor engagement, the three most common mistakes made by senior leadership were avoided (Prosci, 2012):
- Failure to personally engage as sponsor for the change
- Allow priorities to change mid-stream
- Failure to establish and build a sponsorship coalition
Coaching and Organizational Transformation
During development of the PMCoE standards, a conscious effort was made to strike the balance between generic and prescriptive guidance so that consistency could be achieved across all aspects of the enterprise while still allowing for innovation and customization within departments. Achieving the right balance was critical given the various department specific cultures, processes, requirements, and procedures that existed. The PMCoE policy and associated standards were therefore structured in a hierarchical approach where these enterprise documents could be supported by lower tiered documents that could contain department-specific implementing instructions and/or additional requirements above and beyond those contained in the enterprise standards. These department-specific instructions are shown as “Tier 3” standards in Exhibit 4 (Moreci & England, 2012).
Exhibit 4 – Duke Energy Governance Hierarchy
Working through the Change Agents, the PMCoE supported departments in the development of their department implementation standards to ensure they were aligned with and met (or exceeded) the enterprise requirements. This approach yielded best practices within individual departments that the PMCoE was able to spread to other work groups and utilize for the development of future standards.
To ensure awareness, build desire, and provide reinforcement throughout the change process, a detailed Communications Plan was developed as part of the overall Change Management Plan. Communications were designed to ensure the right individuals in the organization understood the change, its implications, and when and why it would occur. The detailed plan was designed to ensure:
- Leadership was informed prior to employees of messages, which may result in a need for follow-up action
- Communication was relevant, consistent, and timely
- A variety of communications tools and channels were considered according to the message and audience
The majority of the communications from the PMCoE during the roll-out were standard across the enterprise to ensure a consistent message was delivered across the departments. This means of delivery also helped foster the development of a true enterprise project management community. Enterprise-level communications consisted of webinars, formal presentations, training sessions, company-wide messages, and targeted e-mails.
At the department level, the PMCoE conducted over 50 informal engagements to various departments across the company to communicate the reason for the change, a high level overview of the change itself, and the timeline for the change. Additionally, department specific communications came from sponsors and the Change Agents to:
- Status the development of department implementation standards and associated change efforts
- Communicate specific training offerings
- Obtain feedback from the project community within the department relative to the overall change efforts
To build awareness and desire for the change, the messaging stressed the rationale and benefits of the change and reinforced the vision of the PMCoE to establish Duke Energy as the industry leader in project management.
To build the requisite knowledge, skills, and abilities across the enterprise, a detailed Training Plan was also developed as part of the overall Change Management Plan. The plan was designed to:
- Ensure high quality training materials were delivered to all audiences
- Provide relevant information to impacted stakeholder groups
- Effectively utilize training audience time
- Incorporate lessons learned from similar training offerings
- Leverage company expertise in the development and delivery of training materials
- Ensure visible support of training efforts by PMCoE staff and company leadership
With these core requirements in mind, three formal training offerings were crafted (Exhibit 5), each with varying content and duration, for specific stakeholder groups. In addition to courses for senior leaders and the Project Managers and Project Controls Specialists who would implement the new project management standards, this included an offering for middle managers, who are often cited as significant barriers for large scale change initiatives. This specific offering was crafted to ensure they were effective leaders of change and to ensure they delivered positive and effective communications to front line employees.
Exhibit 5 – PMCoE Standard Training Offerings
Prior to enterprise deployment, the standard training offerings were piloted with Change Agents as a means to ensure the content, materials, and delivery methods were thoroughly vetted. In addition to improving the quality of the training experience, these pilots served to further engage the Change Agents by increasing their involvement in the decision-making process through soliciting and gathering their input.
Another advantage of Change Agent participation in the pilot training is that it allowed the Change Agents to get an early look at the content. With the knowledge of department-specific project management processes that were being crafted, this allowed the Change Agents to better establish the scale and content of any department-specific training that would be required to augment the generic enterprise offerings. An example within one department was a half-day department specific training offering for project managers following completion of the PMCoE Performance Series offering; this training included a review of department implementation standards and their linkage to the enterprise standards. Care was taken with each department offering to ensure consistency with the enterprise standards while also minimizing any redundancy with the enterprise offerings.
Resistance Management (Monitoring and Controlling)
As with any project, means to monitor and control performance throughout the roll-out were needed to ensure risks and issues were identified to allow course correction prior to the effective date for the PMCoE standards. Specific areas monitored as part of the Change Management Plan included:
- Department process change status
- Training and qualification status
- Training and communications effectiveness
- Monitoring the adoption of PMCoE standards within various departments
- Monitoring the maturity of the organization with regards to project management
- Monitoring of the overall change management status by the EGC
Monitoring of the above items has been facilitated by dashboard style status reports including key performance indicators, burn-down curves, and milestone tracking. Such reporting facilitated active management by the PMCoE, Change Agents, and the EGC so that action could be taken as appropriate.
Furthermore, to ensure the continued adherence to the PMCoE standards post roll-out, an Oversight Plan was developed that leveraged reviews by PMCoE staff and corporate audit.
Realizing the Benefits of Structured Change Management
Through a structured approach to organizational change management, Duke Energy was able to ensure a smooth transition to a project management framework utilized by a community of nearly 2,000 project managers and Project controls specialists. Duke Energy was able to positively impact speed of adoption, utilization rate, and proficiency through the utilization of change management best practices and a focus on the “people side” of change.
To ensure all measures of success would be realized by the targeted effective date, specific activities were planned and executed, which centered on sponsor engagement, coaching and organizational transformation, communication, training, and resistance management (monitor and control). Through the successful implementation of these activities, the PMCoE team effected dramatic change while laying the groundwork for future project success across a project portfolio of US$6 billion annually.
Hiatt, J. M., & Creasey, T. J. (2012). Change management: The people side of change (2nd ed.). Loveland, CO: Prosci Learning Center Publications.
Moreci, J. A. & England, K. (2012). 4 Strategies for a Scalable Enterprise Project Management Framework, PMI Global Congress 2012—North America, Vancouver, British Columbia, Canada.
Prosci. (2012). Change management toolkit. Loveland, CO: Prosci Learning Center Publications.
© 2013, P. Brandon Lane and Brenda K. Green
Originally published as a part of 2013 PMI Global Congress Proceedings – New Orleans, Louisiana