Implementing organizational project management (OPM) maturity
the good, the bad, and the ugly
Glenn Strausser, PMP, MSP, MBA, MoR, SSBB, OPM3® Professional
Director, Engineering, Procurement & Construction, USEC, Piketon, OH, USA
Stephen Barney, MSP, MoR, PRINCE2, P30, Director, Core IS, Andover, UK
The benefits of improving organizational project management (OPM) maturity in organizations that conduct projects are often implied or understood to be an obvious result of a project management improvement initiative. Although an organization will be better positioned and capable of delivering on project commitments as it moves up the maturity ladder, research shows that quantifiable benefit realization is often not automatically achieved and a significant number of improvement efforts partially or completely fail (i.e., they do not deliver the planned benefits). This paper will discuss the value of using a program management approach to systematically manage and deliver OPM improvement benefits and will identify some of the lessons learned from implementation efforts.
Understanding the Business Case for OPM Maturity
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)? Longer projects almost always cost more and use resources beyond the planned date, restricting these resources from working on other projects in the portfolio, which may in turn negatively impact other projects in the portfolio. For project businesses that are contract based, a common metric is project margin (or profit) erosion—the difference between planned and actual project margins. In new product development projects, time-to-market can either make or break a product line business. The effects of being late to market such as sales volume changes, lost market share, or net present value (NPV) are well known by marketing professionals. Internal projects, even though not typically associated with generating revenue directly and often overlooked, are the key enablers of a business. The delay of key capabilities can add to the cost of productivity, loss of a competitive advantage, and eventually loss to the bottom line. 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 an extreme case, entire project costs may be considered as an NCC if the project objective was not met and costs could not be recovered.
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 are the values to be exploited by improving OPM maturity. These summary lost value metrics are ideal for the executive dashboard of an OPM improvement program.
An interesting note is that NCCs are the net effect between negative costs to the project (e.g., risk occurrences, rework, and lost opportunities) and positive effects (e.g., risks averted and opportunities that were enhanced or realized). Very often, as an organization improves in maturity, not only are negative aspects eliminated, but positive opportunities gained become visible. In a Siemens case study by Sopko and McDevitt (2009), the subject organization had experienced a margin recovery that was twice the measured margin erosion prior to the improvement effort. Another key aspect of that study was that as an organization achieves an organizationally “defined” or standardized stage of maturity, the benefits become sustainable because they are commonly implemented in practice throughout the organization and benefits of OPM improvement tracked by the PMO.
Defining the Benefits of Organizational Project Management Maturity Improvements
Benefits may be tangible or intangible in nature. The measurement of benefits isn't always obvious and, in some cases, the very first project an OPM improvement program may undertake is to develop effective benefit metrics as well as a performance baseline. Following are examples of tangible benefits:
Lower non-conformance costs (NCCs)—often the key drivers
Project margin improvement/recovery
Increased market share capture
Improved cash flow
Improved customer satisfaction
Improved time-to-market execution
Improved safety, health, or environmental performance
Improved service delivery
Improved operational capability or availability
Organizational Maturity Improvement: Project or Program?
You cannot easily improve organizational maturity by running it as a traditional project. The case studies, as reported over the last few years by Strausser, Sopko, McDevitt, and Barney, all point to the use of program management as one of the key success factors. The four key success factors identified and reported by Siemens are: (1) executive support, (2) project management office, (3) process management infrastructure, and 4) program management best practices.
Good traditional project management dictates that we determine all the deliverables required to bridge the gap and then define them in detail, including all of the acceptance/quality criteria that are required for our “customer” to sign off on as they are finished. Logic dictates that if we produce all of the deliverables and each is signed off as fit for purpose, we should have succeeded.
The problem is that in so many cases the brief or stated objective is too vague for this. Change is often described more in terms of a vision of the future (e.g., “We want to be better/faster/etc”). Often there is much work involved in defining terms such as “best” and the real meat of delivering the required change cannot begin until the brief is understood; often a project is the wrong vehicle for the delivery of such goals because of its precise nature. Improving organizational maturity is an objective that does not lend itself to project management tools and techniques.
Let's be clear: For those hardened project managers among you who can feel the hair on the back of your neck rising with the last statement, you are not the problem! In fact, you are an essential part of the solution, because good project management is the only way to deliver the capabilities needed by these change initiatives and any program. Projects need to be given better focus. If we run smaller, shorter, and more focused projects, each will stand a much higher chance of success, especially if we use program management to map the uncertainty between the “vision” and the ultimate blueprint for the change.
Improvement at the organizational level often requires a change in organizational culture and the environment of the enterprise. Change at this level is not possible without a commitment from executive leadership and organizational 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—the benefits. Any effort that does not deliver benefits to the organization is not likely to receive support from the executive leadership or the organization that must embrace it, sustain it, and continuously improve upon it. In a nutshell, the strength of project management is in capability delivery. Program management, as its complement, is focused on the 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 are the valued and critical roles of the OPM consultant.
OPM3® (Organizational Project Management Maturity Model) Standardize, Measure, Control, and continuously Improve (SMCI) best practices can be considered achievable using an improvement project approach to implementing the capabilities defined by the model. However, without a program approach (i.e., focusing on organizational benefits and change), there is little reason for the organization to accept change and it is likely not to be sustainable. Furthermore, in today's ultra-lean resource environments, OPM improvement initiatives are in competition with many other initiatives, both voluntary and regulatory. When allocating scarce resources, the only fundable initiatives are those whose benefits are in direct alignment with the organization's strategy. In order to expect a successful result from an OPM improvement effort, a program business case based on strategically aligned benefits must be defined to balance against the cost of the program and to gain organizational support for change.
Project management has been around for a long time. It is proven, mature, and is often a default management model for unique, temporary initiatives or endeavors, but not everything is a project. If one is challenged with an initiative that has a vision with no clear path to the objective, coupled with the delivery of organizational benefits in its description, it then becomes a prime candidate for program management.
Program Management – Delivering the Benefits
Why a program? The benefits from OPM maturity improvement are not automatic. In research conducted by Thomas and Mullaly (2008), the degree of correlation of tangible benefits achievement with the organization's project management maturity stage was not evident in thirty-two of sixty organizations surveyed (53%). We have a new capability/service/product/process. Why can't we achieve the benefit it was intended to deliver? It is conceivable that improvement projects may deliver needed OPM capabilities (which may improve their maturity level or stage) only to fall short in the organization's ability to effectively use them and to achieve the intended benefits. Program management helps to ensure benefits are identified, measured, and delivered.
Program Management Methodology
Focusing on capabilities or maturity levels alone makes improvement initiatives appear have a cost to the business with intangible benefits as the identified return on the investment – “we will run projects better”. A business case for a project is typically a comparison of project costs with project scope, whereas a program business case is a comparison of program costs with organizational benefits. Capabilities such as a project planning process or project management software may be critical to the foundation for OPM best practices, but without formal alignment to organizational benefits, the efforts to create and implement these capabilities may be cut short due to cost reduction efforts. There is also a danger that if an organization focuses on “the number” (i.e., we must reach a maturity level of “3,” and the company motivates its staff/managers based on the number) that this will just cause them to dispute the assessment of their maturity rather than embrace any gaps and improve, which is magnified in cases where large bonuses are tied to achievement of a score. When program management is applied and the workforce is motivated to deliver the benefits of achieving the number, then the energy is focused more positively on achieving the strategic initiative.
As explained by Sopko and McDevitt (2009) and Strausser and Zeller (2010), Siemens has cited program management as one of the four key success factors for achieving benefits from OPM maturity improvement. Without a formal alignment to organizational strategy, improvement projects and the initiatives that sponsor them tend to fall short in delivering expectations. Even with the aid of a corporate directive to improve OPM maturity and an internal maturity model using global standards and best practices, the rate of improvement does not always meet expectations. Business leaders were not only interested in the capability development aspects of OPM maturity improvement, they needed to understand the benefits to their organizations. As in many organizations, there are many initiatives and usually not as many resources or funding. Specifically, executives were most interested in how these initiatives were actively helping in meeting their strategic business objectives.
Examples of Programs
A key discussion point in most early interactions with organizations is the clarification of “what is a program?” The definitions from OGC and PMI are good, but generic. A working definition is that if you can set up the scope, cost, schedule, and work breakdown structure baselines from the start, even if they are complex, then it is likely a project. If the first reaction to the mandate is “I’m not sure how to do that,” or “I have an idea how to start, but not how to finish,” then it may be a program. Programs are not just large or complex projects, although large and/or complex projects can benefit from program management methodologies. One of the comparisons used in Siemens is shown in Exhibit 3. Programs can be internal initiatives such as improvement programs, business change initiatives, or product development programs, or externally focused (e.g., customer programs).
Some examples of programs are SAP Implementations, SG&A Reductions; Reorganizations, Implementing a Project Management Office, Organizationally Adopting Six Sigma, New Product Development, and, of course, Improving Project Management Maturity. The best use of a program management approach is when a mandate tied to the organization's strategy is clear but the path is not well defined.
Organizational project management improvement initiatives are business change programs. They are characterized by the creation and standardization of processes, delivering new capabilities, transformation of the business, and embedding change in many functional groups with the goal of achieving program benefits. Although organizational maturity improvement efforts have been done many times with many business units and companies, each organization's specific path is unclear at the start of its individual program. The solutions and outcomes from an organizational maturity improvement effort will be very different from group to group as the target benefits change
Program Management Organizational Structure
A key element of program management from the United Kingdom's Managing Successful Programmes (MSP) standard is the organizational structure. Most organizations have the program (or project) manager role in place. The addition of the role of senior responsible owner (SRO) (or program sponsor) provides a key link to the senior management of the organization. The SRO is accountable for delivering the benefits to the organization and must provide support to the program manager and business change manager(s). The business change manager concept is also a key addition to the team. It is normal practice to hold the project or program manager responsible for delivery of the capability to the organization, and then the capability is supposed to be used by the organization as envisioned. This ad-hoc method does not always result in capabilities being used effectively by the organizations. The business change manager is responsible for taking the capability from the program manager and implementing it into his or her business and deriving the benefit(s) from its actual utilization. The business change manager(s) should come from the functional groups being impacted by the program. For example, when a Siemens business unit improves its project management maturity, the changes affect not only the project management group; the changes also affect many other groups, including sales and marketing, procurement, quality, financial reporting, configuration management, proposal teams, and engineering. Business change managers or change agents from each impacted stakeholder group are critical to successfully implementing these types of organizational changes. MSP provides many examples of ways to implement this role or function in various organizational configurations (Exhibit 4).
Lessons Learned – The Good, the Bad, and the Ugly
To illustrate some of the benefits of a solid program management approach it is helpful to look at a few examples of good, bad, and ugly scenarios. Lessons learned from various improvement efforts reinforce the four key characteristics.
Based on a review of assessment results and evaluation of global consulting experiences, the following key success factors were determined to be fundamental characteristics for implementing and sustaining organizational project management maturity:
Organizational project management office (PMO)
Process management infrastructure
Program management best practices
Aerospace Example – Ugly to Good
This company has a reputation for producing excellent products to the highest specification; however, their projects always seem to deliver excessively late and over budget. On examination, it was clear that there was a very low level of organizational project management maturity, senior managers let the project managers rule the roost with little to no checks and balances, and no one was measuring progress or success. Project members were frustrated that long cost and time overruns were mostly just shrugged off as normal.
These failures were mostly unnoticed since their customer was the parent company who just made allowances for the fact nothing was ever delivered on time or within budget. One reason for overlooking the failures was the exceptional quality of the product. The problem became significant when the company started to sell its product externally where the customer was not tolerant of cost and time excesses. The company decided to do some improvements to fix these problems and took on board a product development methodology.
Although a product development methodology is an essential part of this kind of business, it focuses on producing a better product rather than better control of the delivery. Since the product was already a really good product, making it better only addressed the specification control, not the time and cost controls; hence, the problems were not in the process for developing the product but rather in the control and management of those processes.
This is where the adoption of a program and project management method became an essential part of correcting the problem; the organization was able to control the work more effectively. The addition of program management gave the organization control over the benefits delivered by each initiative, allowing it to understand the gains and losses from late delivery and cost overruns and ultimately the value of a specific job versus its conformance to the plan. Project management added the delivery and cost controls to the individual outputs and ultimately prevented them from losing the new and vital external clients.
Worldwide Telecommunications – Project Focus Changed to Program Orientation
This organization wasThis company knew it had to do supplying products to the worldwide telecommunications market with customers in countries all around the world. One of their new products developed a fault in the field that seemed to occur at a specific time interval after commissioning. The organization set up a project to fix the problem and, after a year of trying, the project failed to find the root cause of the problem.
This is an example of a project focusing on a deliverable rather than the vision and benefits. The development team was so focused on finding the problem and fixing it that they lost sight of the goal, which was to keep the customer happy and maintain the organization's reputation for quality products.
When this organization decided to run the fix as a program, everything changed. The objective became solving the problems of angry customers and a failing reputation, rather than finding a specific failure point. By setting up a program, the organization was able to run a series of small projects, each tasked with finding a different solution to the problem, while one project was given the task of investigating the solution to the original failure. The mandate was to seek solutions and drop any that were discovered not to be viable as soon as it became apparent that they wouldn't deliver.
This method uncovered two viable solutions, both of which were put into production. The lessons we learned from this were: Often the focus of a project is on a specific output. By widening the focus from an output to a vision and concentrating on the benefit that needs to be achieved, it is possible to find a solution that is not constrained by a narrow focus that had not delivered in the past year and was unlikely to deliver in the future, no matter how many years were spent trying. This demonstrates the importance of the MSP flow.
An Example of the Good – An Airline
This company knew it had to do something about its first-class service in order to compete in the world market; the problem was: What? It is very difficult to set up a project with the directive to “Make First Class Better,” because the word better can mean different things to different people. Some people thought that less may be better, so making it more opulent may not be the right way to go, which made this project scope very difficult to set up.
Here again we face the problem of a vague directive, which is more aligned with a vision than a statement of work. By focusing on the vision and the benefits, this organization was able to define a vision and a blueprint that was aligned with the strategic vision of the organization rather than a view that everything in first class should be made from gold and caviar.
The final program was able to restructure the service to fit what the customer wanted to buy, thus improving the corporate image rather than implementing a lot of cost overheads that did nothing to entice customers to continue to use the service.
Bad to Good – Banking Example
This banking organization tried several times to “do projects better.” There had been several initiatives to try to implement project management methodologies, all resulting in a familiar cry of “It won't work here,” or “That's all very well, but my company is different and that would never fit the culture.” These sorts of arguments are common to organizations that, when measured, often display an organizational maturity level of 2 or less, which is a symptom of a low-maturity organization.
Sadly, these objections are largely true. As observed by Sopko and Strausser (2010), there are four key requirements of any organization that wants to raise its maturity past a level 3: (1) senior management support, (2) ownership for standards in an organization such as a PMO or center of excellence, (3) the ability to develop standards and processes, and (4) a set of standard processes.
Most organizations think that requirement 4 (a set of standard processes) is the answer, but without the other three key requirements, methodology and standards do not take hold in an organization. The most critical requirement is the first: senior management support, without which, nothing will get better.
Once this organization realized the points made above, they were finally able to make the move up the maturity scale by implementing a corporate PMO to own the standards and support change; by making this change, mandated from the board down, it was well on its way to improving. The action that turned failure into success was the decision to run this maturity improvement as a program.
One of the Ugly that Tried to be Good But Ended Up Bad – Transportation
This organization is a US$75 million-a-year business in the transportation field, with significant manufacturing and related product sales, that was trying to convert to higher value solution sales and/or a large project delivery organization.
The chief executive officer (CEO) recognized a deficiency in organizational project management maturity and initiated an improvement program, with an outside consultant acting as the program manager. The first area addressed, which had the greatest pain and possibility for improvement, was sales and business development. The ugly part of this improvement effort was caused by a business change manager (BCM) who was not effective in this role. The BCM did not understand process maturity or how to implement a new program. In addition, because of a lack of understanding and leadership, even when new processes were created, the rollout lacked the force to embed the change in the organization. As a result, the desired benefits were not obtained; eventually, some benefits were obtained, but in a more haphazard manner. As this was the first area to be worked on, it also caused the program to start slowly and did not provide measurable results for the rest of the organization
Workarounds implemented: The program manager acted in the dual role of program manager and BCM (created the capabilities, developed the transition plan, and worked closely with the assigned BCM to implement the program), but without the active support of the BCM, the targeted benefits were not obtained or sustained.
The lessons learned:
The role of the BCM is critically important to success.
A BCM who is not a good line manager will not be a good BCM in that area.
Picking a stronger BCM, even in a more mature area, would have been better for the overall program.
There was very limited training provided on program management, and none on process improvement. This resulted in repeated individual training sessions, which were less effective and took time away from the overall program.
Projects deliver capabilities. Programs deliver benefits. Benefits encourage organizational change and support. For an OPM initiative to be successful, it must have the right organizational environment and the alignment of the OPM capabilities and practices it delivers to strategic benefits in order for it to succeed. There are four key requirements for any organization that wants to raise its maturity level: (1) executive support, (2) project management office, (3) process management infrastructure, and (4) program management best practices. Organizations and managers are typically not overly supportive of capabilities alone, especially is today's lean organizations, unless they are delivering benefits that help them achieve their organizational leadership goals. The alignment of capabilities with these goals defines the organizational relevance of the initiative and the organization that leads it. It is necessary for the organization to adopt new capabilities, embed them through organizational change management, and transition them toward the intended benefits. This often requires processes and infrastructure support beyond what project management alone delivers and focuses on benefits and organizational change, thus the importance of program management.
The lessons learned in real-world implementations, multiple industries, organization sizes, and different countries all support the four key requirements and much needed elements from program management.
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© 2011, Glenn Strausser and Stephen Barney
Originally published as a part of 2011 PMI EMEA Global Congress Proceedings – Dublin, Ireland