Application of organizational project management to a live scenario
This paper describes the experience of developing and implementing a strategic project management environment to an European IT division of a Japanese corporation. Strategic project management targets to close the existing gaps between business goals and operation and the ongoing and strategic support by the IT organization.
PMI's definition of Organizational Project Management comprises Project Portfolio Management PPM, Program Management (PgM) and Project Management (PM), enabling the achievement of strategic goals of the corporation.
In the specific situation this paper is based on, a Business Transformation Center (BTC) as part of the business organization was established. It will be responsible for the major processes of PPM to ensure selection of projects aligned with business goals and long term strategies and prioritized along a defined set of criteria. After a project (or program) has been selected to be part of the active portfolio, it is managed under control of the overall Program Management System (PMS) of the IT organization.
The PMS' major purpose is to ensure benefits realization according to the decisions made by BTC during the portfolio selection process. Fundamental for this is to provide means for horizontal integration of projects and programs by for example providing an architectural board with final design authority for all projects and implementing common test and transition processes. Second, reporting and decision staging is controlled by the PMS to ensure that all stakeholders, sponsors and business organizations are involved in appropriate ways.
Together, Project Portfolio Management represented by BTC and Program Management represented by the IT organization build the core to improve Organizational Project Management in this client organization. As next steps to implement strategic project management a Project Management Board was established which eventually will develop into a PMO. In a further stage, OMP3® may be used to initiate a continuous improvement cycle and to compare regional organizations of this corporation globally.
Introduction to the situation of Japanese corporations in Europe
There are more than 300 Japanese companies with regional and/or national organizations in Europe. A large portion of these are manufacturing companies with strong headquarters in Japan and mainly sales organizations for ‘overseas’ operations. To name a few, these manufacturers include for automobiles Toyota, Honda or Nissan, for electronics Sony, JVC, Kyocera and for photography Canon, Olympus or Nikon.
While many of these companies represent globally known and respected brands, most of them still have a strong focus on Japan, in terms of business strategies, cultural background and management styles. These companies may have large and mature IT organization in their Japanese headquarters, who cover and support all aspects of operations, e.g. from research, manufacturing to sales and logistics. In contrast, regional or national IT headquarters are dealing only with parts of the company's range of operations, e.g. with the logistics and sales part of the supply chain. Regional HQs therefore have a different scope as their global headquarters and may also be funded mainly by regional operation companies. As the regional environment, dependencies, cultures vary from Japanese, regional IT Headquarters (HQ) have to be to a certain extend independent from HQ IT, as they have to adapt to these circumstances.
In consequence, if Japanese HQ have a high operational maturity level, e.g. in project management, this was achieved primarily by responding to the Japanese market environment, and with the full scope and funding from HQ. Regional HQ's operational maturity depends mainly on their own achievements. The situation is sometimes even more complicated when Japanese HQs try to impose best practices or organizational improvements to the regional environment without exactly understanding the prerequisites and impacts.
As some standards and guidelines are provided from HQ IT organization and certainly organizational goals are promoted globally there is often no defined overall approach to project management on tactical or strategic level.
On a tactical level, project management is often done on an ad-hoc base, some project management work products from previous projects or outside are used, but basic terms are understood differently (e.g. what is a project?), roles and responsibilities are not well defined in projects, some tools are installed, but not used adequately, plans may be developed but are seldom tracked. As a consequence, projects are not setup properly, project communication suffers, there are frequent scope changes, projects come in late, budgets are not met, and the project product is not accepted by clients.
On a strategic level, there might be the good example of the Japanese HQ, but regional HQs do not have resources and maturity to catch up in this benchmark. Project management standards are not defined, not implemented and not enforced. Tools and techniques are not adapted to standards and not available to support projects, which then have to develop their own project management systems. Roles and responsibilities of project stakeholders (e.g. project manager, sponsor) are not documented and understood differently throughout the organization. There is no project management career path and as consequence, no aligned education and skills development for project managers and no incentives for them to stay in this role and grow experience and knowledge for their own benefit and also for the benefit of the organization.
Background of Strategic or Organizational Project Management
Strategic Project Management in Research and Practice
In the past years solutions to the gap between organizational strategy and tactical implementation have been addressed by project management practitioners, research and consultancy. Some of the solutions bear well known names like, Enterprise Project Management' (EPM), Organizational Project Management' (OPM) (PMI, 2003), Strategic Project Leadership™' (SPL™) (Shenar, 2003), Project based Organizations' (PbO) or ,Management by Projects' . (Selvin, 2002)
Already the titles seem to show that the concepts behind them address more than the pure management of one project: strategies, organizations and benefits out of project management are becoming topics for project management.
Around the realization of such strategic ideas as Program- and Portfolio Management, and Multiprojectmanagement are being discussed as extensions for the well known tactical project management. Maturity models have been developed, to help organizations understand where they stand in respect to implementation of project management and what should be the next steps for improvement.
Program/Project Management Offices (PMOs) are being adapted by more and more organizations as a vehicle for enhancement of the maturity level of project management.
Problems with classical tactical Project Management
The tactical initiative ‘project’ may be successful and efficient (e.g. the defined goals are achieved within budget and time frame), but the benefits if the project need not to materialize. If the strategic goals behind a project charter are not achieved, the project is not effective, although it may fully reach its goals. What organizations really need, is strategic and effective project management.
This statement is being supported by the Australian research undertaken by Bennigton and Baccarini about ,Project benefits management in IT projects' (Bennington, 2004). Their surveys results showed that IT project managers have a strong tendency towards efficiency, instead of effectiveness. IT project managers would rather manage project deliverables instead of project benefits. Benefits should materialize from the deliverables created by a project.
The often cited Standish Group has undertaken research since 1994 about the status of IT Project Managements and publishes the results in their, Chaos Chronicles' (Standish Group, 2003). Similar to past studies, also in 2003 a major result was that only one third of IT projects could be considered as successful. The most significant factors for the success of IT projects are, according to Standish Group (in this sequence):
- Involvement of users of the systems to be developed
- support by top management
- experience of the project manager
- Clear business goals
- Minimized scope of the project
Most of these factors can be addressed and improved, if the project manager would address significantly the organization's strategic goals, whose achievement is also rational for the chartering of his/her project. The project manager then will:
- Address the target stakeholders of the product or service of his project and strive to involve them in project work
- Look for access to top management in order to obtain their support better
- Understand better the strategic goals that are relevant to his project
- Concentrate on this scope that is really important to achieve the business goals
Besides having problems with projects themselves, there are also issues with the way organizations are planning and controlling their portfolio of projects and how this portfolio is aligned to their goals. Kendall and Rollins (2003) document symptoms showing that projects and strategy of an organization are not well aligned:
- Project managers and line managers often have disputes about resources. The whole organization has too much work to do. Priorities often change and as a result, resources allocations are changed as well.
- Middle management may approve, start and stop projects on their own.
- Projects are started immediately after approval of a middle manager, regardless of availability of resources.
- Management often complains that realization of changes takes too long.
- Even if a strategic idea is being implemented, the expected benefits do not show up.
- There is no comprehensive and complete documentation of the alignment of all projects to strategic goals and plans.
- There are frequent changes in middle and top management.
- The strategic plan of an organization is documented as a list of ideas and initiatives. There is no mechanism to validate initiatives on base of strategic goals or to ensure that they are sufficient to reach the goals. No verifiable rational exists between initiatives and their expected effects on the organization.
- Interdependencies between initiatives and also with external events are not shown. As a consequence, priorities are not agreed to.
Classical tactical project management, as it is taken out by many organizations is everything, but perfect. Individual projects do not achieve their goals and many organizations initiate the wrong projects. An interaction between strategic goals, benefits to the organization and project definition is seldom seen.
Developments in Strategic Project Management
In the last 5-10 years Strategic Project Management, as an extension to classical tactical project management, is mentioned more often in literature and also used in organizations. One the one hand, the term is used in conjunction with realization of strategic goals of organizations, and, on the other hand, it is used when an organization strives to change itself towards a better utilization of project management standards and methods.
In their book, Creating an environment for successful projects' Graham and Englund (1997) describe 10 elements required to create the prerequisites for a Project based organization:
- Changes in behavior of middle management, representing the old organization and of project managers, who must play a core role in the new organization – this is also a shift in power and therefore resistance is to be expected
- Strategy of the organization and projects (and programs) must be linked, projects must only be initiated when there is a rational for them based on strategic goals
- C-level executives and project managers must establish and maintain communications and build understanding of each other from both sides
- Every project should have a cross departmental team (no silos)
- Organizational structures and reporting lines have to be adapted to project management
- A central project management information system must be created and used, enabling communication independent of time and location
- Project managers have to be selected and promoted by defined criteria (Career paths)
- The organization should develop itself towards a self learning structure, knowledge management has to be installed, lessons learned from projects have to be gathered and re-used in a structured manner
- There should be a continuous improvement initiative for project management culture and application
- Concepts and artifacts of project management should be valid for all organizational parts and units
According to the Project Management Institute's (PMI®) Organizational Project Management Maturity Model (OPM3®) standard (PMI, 2003) organizational project management has three major components: project management, program management and project portfolio management.
Program management is the area that extends the efficiency of project management to include effectiveness by primarily looking at alignment to business goals and benefits management.
A program is a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may include elements of related work (e.g., ongoing operations) outside the scope of the discrete projects in a program. (PMI, 2003)
Programs are quite different from projects in several aspects:
Goal setting: Projects have to achieve a defined product or service while programs have to achieve strategic goals. Often it is not clear at the outset, which products or services have to be created to achieve these goals.
Duration: Projects are delimited in time; they have a set end date. Programs may be variable with the end date, if it serves the strategic goals. Also programs may extend their duration by providing additional benefits not seen at the start of the program.
Budget: Projects have a defined, limited, and approved budget. Programs need not to fulfill any of these criteria. Programs may have to create their own funding, or have no set budget limit (as long as benefits delivered are larger than budget spent). Strategic goals are not necessarily linked to budgets; they often focus on visions and changes. So do programs.
Focus of management: The project manager focuses on scope, budget and timeframes and the project product. The program manager focuses on integration of projects, interfaces between the parts of the program and with stakeholders and achievements of benefits for the organization.
Project portfolios comprise all the future and current work the organization (or a part of it) has to accomplish. A portfolio is a collection of projects and/or programs and other work that is grouped together to facilitate the effective management of that work to meet strategic business objectives. The projects or programs of the portfolio may be mutually independent or directly related. Project Portfolio Management (PPM) deals with managing one or more portfolios, and involves identifying, prioritizing, authorizing (selection), managing, and controlling (supervision) projects, programs, and other related work, to achieve specific strategic business objectives.
As projects and programs are identified, prioritized, and authorized by the PPM selection processes, these activities should be taken out by an adequately authorized organizational unit. Main objective with these activities is to ensure the linkage between business and IT (or another project delivery organization).
According to the proceedings from the GPM PMO conference 2003 (GPM 2000) Project Management Offices are supporting, implementing and ensuring success of project management in organizations and have a strategic character.
PMOs are staffed with specialized people who fulfill the organizations needs for project management. Specific roles, responsibilities and functions may be different for each organization, but some core functions have been shown up in recent years. PMOs serve all or some of these functions (Block & Frame, 1998, p 5):
- Administrative support of projects, e.g. maintaining plans, crating reports, archiving, providing software
- Consulting and mentoring for project management skills, e.g. with proposal development, at project startup, in critical situations, with risk assessments
- Methods and standards
- Education and project management careers
- Pooling and provision of project management resources
PMOs are centers of competence for project management (Dinsmore, 1997, p. 18). Dinsmore describes three types of PMO, which may build on each other: the supporting PMO, the center of excellence to improve an organizations maturity and the PMO with operational responsibility.
The improvement process
In the following paragraphs some lessons learned and future options from a live scenario are presented, based on a regional IT organization of a Japanese company in Europe. It is assumed that these experiences can be used at other similar environments, as communications and information from other companies show.
Help with a critical project on the tactical level
When a major project or program experiences severe problems, the opportunity for introduction of a change has come. As first step, an external program review results in several major findings, some only within the scope of the program at stake, but also some revealing root causes within the organization itself. While the critical program itself should be turned around within about 3 months, long term and sustainable improvements can only be initiated within this timeframe.
The main point here is to create an awareness of the existence and potential benefits of OPM by showing some practical artifacts. Project management has to prove its tactical benefits and in parallel claim to have strategic views and solutions.
Show root causes on organizational level and propose focused improvements
Major organizational root causes were found to be:
- Missing integration between projects and also between projects and ongoing operation, e.g. with missing systems design for performing operations and smooth transition of developed systems to operations, missing project standards, inadequate communication and documentation of project plans, tracking, meeting results and issues.
- Inadequate interfaces and communication to stakeholder groups like business functions, system user communities and sponsors. Communication paths were not defined, content was not standardized, which led to contradicting and wrong information to these groups.
- Linkage of project targets to the achievements to business goals was not sufficient and also benefits realization management by measuring key performance indicators was not established.
To address these root causes, a Program Management System (PMS) was implemented for the troubled project, but also designed to be a blueprint for other programs and eventually the organization itself. The PMS consisted of two layers: The existing base of projects within the program, the specialty teams and ongoing operations form the operational layer, where ‘the work is done’. There are rollouts to countries and organizations, new functions to be implemented, interfacing systems and, also, ongoing task as maintenance of productive system parts, operations of the productive systems and user support functions. Especially skilled teams needed by several projects or operational functions as for example, instructors or functional specialists also are part of the operational layer.
To support, to integrate these operational layer functions and to reduce and to combine and control interfaces to sponsors, business functions and other stakeholders, a strategic layer of functions was implemented.
This strategic layer included five (5) integrating and three (3) interfacing functions:
- A program management office is responsible for standards tooling, program repository, planning and tracking on program level, change control etc., within the program and, if extended, within the organization.
- Risk management and quality management have to be coordinated centrally and standardized within a program.
- In environments where external suppliers are involved in the program, also the requests, contracts, budgets, and billing for these have to be taken care of in a separate resource management function.
- Since there are several projects, and also ongoing operations, within the program, a centralized function takes responsibility of the overall business and system architecture. This should very soon develop into an organization wide architectural board.
- Because projects create products and systems, which then have to be operated in an ongoing environment, integration and final acceptance, test and transition from a project, and takeover by operations was supported by a separate function.
- Another interfacing strategic function ensures that any changes to the program's stakeholder's environment are proactively communicated and any questions, remarks and complaints of the stakeholders are being taken care of. This function includes and uses concepts from Organizational Change Management, Program marketing, stakeholder care and needs skills like organizational design, governance models, marketing skills, and intercultural balance.
- The third interfacing strategic function Relationship Management links the program deliverables and results to the respective sponsors. There may be several different sponsors for the different projects, countries, organization units, and ongoing operations of the program. The function presents the achievement of Service Level Agreements (SLAs) according to operations of systems (performance, availability, responsiveness, problem solution rate …), projects progress and budget status.
- It is mandatory that there is a linkage between the program, its projects and ongoing tasks, and the business management. This linkage is to ensure that business requirements and changes are understood and represented within the program and that they drive the program by business defined goals and objectives. Second, program benefits realization should be established, e.g. by measuring key performance indicators for the business and how the program results in their improvement.
After the establishment of some of the PMS strategic layer functions, its last function, the Business Transformation Center (BTC) was created initially outside of PMS, reporting to business line management (COO). This eased acceptance by business functions and authority to foster decisions about change requests. The BTC's first functions were to funnel all business requests and support decision making and prioritization about which requests to be considered for implementation. This task was a first step toward the selection processes within Project Portfolio Management. In a further development phase of BTC, formal ownership of the whole PPM processes (selection and supervision) should be achieved. In a later stage, the BTC was re-integrated into the IT organization.
Establish an organizational instance for project management: the Project Management Board
As next step, a Project Management Board is being established, whose responsibility starts with the agreement of an organization wide project management standard and the supervision of its implementation. The project management board consists of middle management and is owned by a management champion. In the beginning the board is supported by existing staff to create documents, presentations and reports as required. The project management standard is just compiled out of the different standards, that have been developed in different projects. It is assumed, that this standard will start as a 80% solution and will be enhanced continuously.
The first step for the board is to agree on a document that describes its purpose, goals, mode of operation, authorization and activities. The initial activities include monthly review meetings for selected projects, support/coaching for project managers by members of the board, approval of project management standards and templates, creation and maintenance of a list of issues regarding the implementation of project management, initiation of education for project managers and improvement projects, etc.
A problem with the board might be the different expectation levels and cultural backgrounds of its members. Some members might be previously working with Japanese HQ, others with European mature organizations, for some the concepts of project management might be new. Therefore the clear documentation of purpose, goals, mod of operation and authorization is crucial to success. Alignment of the members of the board, maybe supported by a specific management focused education is necessary.
Support and extend the Project Management Board by a PMO
When the Project Management Board achieves its first results and gets to a working mode, it probably will discover that improvement activities for project management and maintenance of the current portfolio of projects and group project managers need some permanent support, in order make success sustainable. It is then time to propose the establishment of a permanent organization wide Project Management Office (PMO). The functions of such a PMO should be selected from examples and best practices as shown above in this paper, balanced with the resources that can be made available.
Organizational Project Management is the systematic management of projects, programs and portfolios in alignment with the achievement of strategic goals (PMI, 2003). To achieve the implementation of OPM within regional HQs of Japanese companies it is important to show quick successes and build sustainable project management artifacts. While guidelines from Japanese HQ may be available to improve project management maturity, the regional HQ operates in a different environment in respect to scope of business, size of HQ and cultural environment.
In the live scenario used, a critical project situation opened up the communication to not only discuss how to save the current situation on tactical level, but also how to implement some concepts on the strategic level: The structures of a Program Management System (PMS) and Business Transformation Center (BTC) improve execution and the alignment of programs to business strategy. A Project Management Board (PMB) lays the foundation for instantiating project management as a strategic tool in the organization and has to be extended and supported by a PMO. Further consideration has been given to project management process improvements, resource development and implementation of a Project Portfolio Management (PPM) process, all of these supported by the PMO.
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© 2005 Tomas Walenta
Originally published as a part of 2005 PMI Global Congress Proceedings – Toronto, Canada