organizational project management and the strategic PMO
Much as it creates a plan for movement and adjustment in a championship chess match, strategy sets the direction for the future of an organization; it is a living plan of action for achieving the vision and mission of the organization. Stated differently, the goal of an organization's strategy is the translation of its vision and mission into those actions that will deliver maximum value to its stakeholders, thus ensuring continued growth in business results, and a sustainable competitive advantage in its chosen market(s). In today's increasingly competitive global environment, organizations are constantly seeking ways to improve their capabilities and performance in the delivery of strategy. Organizational Project Management (OPM) provides organizations the means to this end.
Regardless of the environment within which an organization competes, it will deliver its strategy through a portfolio of programs and projects that represent priority initiatives and changes deemed necessary to realizing its vision and delivery of business goals. OPM is a flexible, business-driven approach for fitting the knowledge and capabilities of PMI's globally recognized standards for portfolio, program, and project management to the unique needs and circumstances of an organization to maximize its delivery of strategy. It also provides the foundation for maturing the organization to increase innovation and adaptability in a rapidly changing global environment.
The goal of this paper is to give everyone in the organization who participates in the development and implementation of strategy an overview of the approach and benefits of OPM. It will also describe how a strategic project management office (PMO) is positioned to extract the full potential of OPM for maximizing organizational performance and the delivery of strategy. To accomplish this goal, the following topics will be covered:
- An overview of organizational strategy
- A description of OPM
- The role of a strategic PMO
- Operationalizing OPM
- Who should be interested in OPM
An Overview of Organizational Strategy
In their book, The Project Manager's MBA: How to Translate Project Decisions into Business Success (2001), Cohen and Graham state that “the central purpose of most businesses is to add value for their stakeholders, anyone who has an actual or potential stake in the business.” In the introduction, we proposed that the goal of an organization's strategy is the translation of its vision and mission into those actions that will deliver maximum value to its stakeholders and desired business results for the organization. What then are the actions that an organization must undertake to achieve this goal? Although the many volumes written about strategy list a number of crucial actions for the effective development of strategy, we will focus on the following attributes for our overview:
- Change imperative
- Market discipline and value proposition
- Stakeholder management
In addition to these important attributes, we will discuss the role and influence of organizational context in the development and implementation of strategy.
In their book, The Execution Premium (2008), Kaplan and Norton note that a “vision statement provides a target and high-level description of how the organization intends to create value in the future,” whereas its strategy “compares the current status of several organizational structures, capabilities, and processes with what they need to become” to create value in the future. To paraphrase this, change is imperative and central to an organization's ongoing creation of the value necessary to ensure its continued growth and a sustainable competitive advantage. Whether directed to internal or external stakeholders, constant change to the current state of the organization is essential to its continued survival.
Market Discipline and Value Proposition
Although change is central to strategy, an organization must establish a number of other strategic attributes to ensure its continued relevance and delivery of future value. Among these, market discipline and value proposition are two of the more important attributes. To paraphrase Cohen and Graham, market discipline is a way of grouping or categorizing customers based on what they value in the marketplace. Many recognized business authorities have developed categories based on their research; for this paper, the three disciplines of Customer Intimacy, Operational Excellence, and Product Leadership (Treacy and Wiersema, 1995) are used to support our discussion.
Treacy and Wiersema recognize that some elements of each of their disciplines will exist in every organization, but stress that an organization should embrace only one as the primary discipline for its orientation to the marketplace. Customer Intimacy focuses the organization on meeting all of the special needs of a select group or type of customer. Customer loyalty and repeat business are their primary strategic drivers. Nordstrom is an example of an organization focused on customer intimacy.
Organizations choosing Operational Excellence as their core discipline focus on customers seeking the best possible value for the cost of ownership. Quality, price, and accessibility of the product and/or service tend to drive their strategy. Amazon is an example of operational excellence. Finally, organizations engaged in Product Leadership focus on development of “bleeding edge” technology for customers seeking the latest and greatest products and/or services. Apple provides a highly recognized example of product leadership. Whatever discipline an organization pursues as the basis for its strategy, it must, as Andrew Grove, CEO of Intel, states, “understand what it is they are better at than anybody else and mercilessly focus on it” in order to sustain growth and a competitive advantage.
With market discipline and value identified, an organization must factor for competition, both direct and indirect. Direct competition will be those organizations that produce the same or a very similar product and/or service. Indirect competition will be those organizations that produce potential substitutes for the organization's products and/or services. Many organizations fail to recognize indirect competition that can signal a trend away from their primary value proposition. In addition, an organization must be aware of cultural differences that impact customer preferences and value, because there is no such thing as one size fits all in today's global environment. Failure to account for such differences will open the door for competition in respective markets, eroding an organization's overall strategy.
Next, organizational strategy must comprehend the full scope of stakeholders that have either a direct or indirect stake in the vision and mission of the business. This involves more than just customers; it includes the workforce, shareholders, regulatory bodies, alliances, and others stakeholders who, according to Cohen and Graham, have “an actual or potential stake in the business.” Losing focus on those who can influence the direction of the business and/or access to certain markets has brought down many successful companies. As the global marketplace has grown, and the number of those who have an actual or potential stake in the business has increased, the need to become even more aware and responsive to stakeholders has also greatly increased.
Finally, the context of an organization must be factored into its strategy. According to Thomas and Mullaly in Researching the Value of Project Management (2008), context represents the environments in which an organization is situated and how it structures itself to respond to these environments. Most obvious among these “environments” is the industry or industries in which the organization operates and competes as well as the industries it serves; other factors include the structure, size, and geographic distribution of the organization. The nature and influence of context on an organization are too great to elaborate on in this paper. For a comprehensive understanding of context and its effect on strategy, one should consider reading Best Industry Outcomes, by Crawford and Cooke-Davies (2012), and Researching the Value of Project Management, by Thomas and Mullaly (2008); both books are publications of the Project Management Institute.
Regardless of the care and attention given to the development of its strategy, it is of little or no value to the organization if it is not effectively implemented to become a living plan for action. To paraphrase Rummler and Brache from their book, Improving Performance: How to Manage the White Space on the Organization Chart, Second Edition (1995), many well-conceived strategies fail because they are poorly implemented. This point is reinforced by Crawford and Cooke-Davies in their book, Best Industry Outcomes (2012), when they state that “Often, the strategies of competing firms are very similar—the key differentiator is each firm's relative ability to deliver the strategy.” OPM is how strategy can be effectively implemented to help an organization achieve differentiated performance in the delivery of its strategy.
Organizational Project Management
In the forthcoming (January 2013) editions of its core or foundational standards, PMI describes OPM as “a strategy execution framework utilizing project, program, and portfolio management as well as organizational enabling practices to consistently and predictably deliver organizational strategy producing better performance, better results, and sustainable competitive advantage.” OPM joins the knowledge, processes, tools, and techniques of PMI's globally recognized standards to create a platform from which an organization can flexibly fit these proven capabilities to the unique needs and circumstances of its strategy. A business model for operationalizing OPM will be described later; for now it is important to understand the “strategy execution framework” that OPM creates for an organization.
Figure 1 – Strategy Execution Framework – Integration
First, as Figure 1 illustrates, OPM integrates talent, process, and knowledge resources across the organization to ensure the engagement of all functions and stakeholders in the delivery of its strategy. Regardless of its market discipline, every organization delivers its strategy through the projects that represent priority changes to operations and the products and/or services it delivers to its customers. As mentioned at the beginning of this paper, it is only through change that an organization grows and achieves a competitive advantage. Projects are the means by which change is delivered. Integrating the resources of the organization across functions and stakeholders is essential to ensure that “the right combination of the right projects [is] done right” (Dinsmore & Cooke-Davies, 2006, p.2) to deliver the value embedded in its strategy. OPM does not replace the management systems necessary to effectively lead and manage the business; rather, it ensures their effective integration to maximize their engagement and contribution to the delivery of its strategy.
Completing the “strategy execution framework,” OPM aligns the organization to maximize its delivery of strategy. As Figure 2 illustrates, OPM aligns the development of strategy with implementation through the deployment of its portfolio of programs and projects for the creation and delivery of strategic business results. Alignment also harmonizes the strategic goals of the organization with operations or business-as-usual to ensure optimum assignment of talent, knowledge, and capital resources.
Figure 2 – Strategy Execution Framework – Alignment
Again, OPM is a business approach to the deployment and delivery of organizational strategy through the effective implementation of project, program, and portfolio management. It must be stressed that OPM is an adaptive approach for fitting the capabilities of project, program, and portfolio management to the unique circumstances and needs of the organization. Process improvement principles, such as those documented in The Guide to Lean Enablers for Managing Engineering Programs (Oehmen, 2012) and other sources already referenced, can be applied to all of the disciplines of OPM to achieve the benefits of fit.
The Role of a Strategic PMO
The key to effectively fitting and maturing the capabilities of OPM is a strategically positioned and practicing Project Management Office (PMO)—or, for the purpose of this paper, what we will call a Strategic PMO—that can utilize all the described resources to bridge the gap that exists between having knowledge of OPM and realization of the potential it offers an organization.
The Strategic PMO does not have to be a formal institution, department, or entity within an organization nor does it have to be called a PMO. What it must have at minimum is the authority to
- Align the portfolio of programs and projects to business strategy
- Customize program and project management practices
- Enhance governance and accountability
- Optimize the investment of the portfolio of programs and projects
- Manage talent
- Ensure stakeholder buy-in
- Drive needed change
- Proactively navigate risk
Without the executive-level support to accomplish the above, organizations will see the PMO at best as a functional support that follows up on the use of methodology and provides as-needed resources, or worse yet, will eliminate it all together. In order to avoid this travesty, much research has been conducted to demonstrate the value of the role of the Strategic PMO. Most notably, PricewaterhouseCoopers (PwC) has published a third global survey (2012) of more than 1,500 participants, from more than 30 industries and almost 40 countries, called Insights and Trends: Current Portfolio, Programme, and Project Management Processes (2012); in addition, PMI has released its annual Pulse of the Profession 2011 (2012), an annual survey (since 2006) of more than 1,000 project, program, and portfolio managers around the world. Both surveys unequivocally validate what has long been anecdotally reported: Strategic PMOs can be the vehicle organizations count on to move from business as usual, to making program and project management a central component of their strategy.
Aligning the Portfolio to the Business Strategy
The very first responsibility of a Strategic PMO is to ensure that all programs and projects are aligned with the strategic direction of the company. This step sets the stage and then carries through the entire process, because after selecting the right portfolio of programs and projects, the Strategic PMO must vigilantly monitor and continually adjust the portfolio as risks escalate, opportunities arise, and change occurs. Kathleen Hass, in her white paper, From Strategy to Action: Enterprise Portfolio Management (2005), pointedly states that “achieving organizational goals requires moving beyond strategic planning and conventional tactical approach to project management, to strategic management.” PMI has found that 49% of organizations have an enterprise-wide PMO that is focused on improving the delivery of business strategy through portfolio management. Both PMI and PwC have found that organizations that align their overall strategies with their program and project portfolios are more likely to have programs and projects that meet schedule, scope, quality, budget, and business benefits requirements.
Customizing Program and Project Management Practices
Another critically important role of the Strategic PMO is to ensure the value of OPM is fully realized through a customized approach to implementation that takes into consideration the underlying drivers of an organization's strategy. This concept is more fully explored in PMI's research on the value of project management, but at a high-level the Strategic PMO can accomplish this critical first step of implementing OPM by taking into consideration the internal and external contexts of an organization when defining a configuration of OPM or methodology that will deliver the most strategic value (Crawford & Cooke-Davies, 2012, p. 3). “Organizations adopting the surface appearances of implementation that worked for others, hoping that they will realize the same results, appear destined for disappointment” (Thomas & Mullaly, 2008, p. 360).
Enhancing Governance and Accountability
The Strategic PMO is tasked with ensuring that all of the programs and projects are carried out in an effective and efficient manner. Confusion, caused by ambiguity, lack of accountability, and poor coordination are prevented when the Strategic PMO is accountable for the governance and leadership of the practices, roles, and responsibilities, as well as driving integration of talent, processes, and knowledge. Analysis of the PMI and PwC survey data reveals an undeniable positive correlation between having a Strategic PMO in place and better performance. The higher the alignment between organizational and business needs, the higher the overall project performance.
Optimizing the Investment of Portfolio of Programs and Projects
In order to optimize the efficiency and effectiveness of the portfolio of programs and projects, the Strategic PMO must be involved in the following:
- Business decisions that result in new programs and projects
- Strategic program and project planning
- Setting of portfolio priorities
- Periodic program and project reviews that result in decisions to discontinue programs and projects (The PwC survey results highlight that program and project selection was one of the most critical capabilities of the Strategic PMO.)
The Strategic PMO must also be committed to the continuous improvement in the practices of program and project management, optimizing the utilization of resources, and guaranteeing the delivery of the anticipated business results to maximize the organization's investment in its portfolio of programs and projects. PMI and PwC survey results clearly demonstrate that the more mature the organization's program and project management processes are, the better the results. PMI's study reported 4% fewer programs and projects deemed failures, and 11% more programs and projects met their business intent, whereas the PwC survey found that: “When an organization has a methodology in place to improve [program and] project performance and management and focuses on continuous improvement, it will have a competitive advantage strategy in place to remain successful in the marketplace.”
Strategic PMOs recognized that engaged, experienced key staff leads to program and project success (69% of respondents to the PMI survey and 67% of respondents to the PwC survey believe program and project management training contributes to business performance). After all, “Methodologies and processes don't deliver [programs and] projects; people do.” (PwC) And, “if an organization is to undertake all the [programs and] projects necessary to implement the chosen organizational strategy, there must be sufficient people with the right competences, skills, attitudes, and know-how to deliver the full portfolio” (Dinsmore & Cooke-Davies, 2006). This is why Strategic PMOs are investing in the development of their program and project management competencies, providing access to training for their talent, and identifying opportunities for career advancement within the organization for those who want to grow.
Ensuring Stakeholder Buy-in
Much has been written on the topic of why programs and projects fail. At the top of every list is the lack of stakeholder buy-in, followed closely by any one and usually all of the following: hidden agendas, unmanaged expectations, and/or ineffective communication. The Strategic PMO is tasked with ensuring that the organization is aware of program and project management; identifying and supporting stakeholders (either positively or negatively) impacted by the programs and projects in the portfolio to help them understand that the change is necessary; and contributing to the creation of sustained long-term value for the organization. Evidence shows that the use of efficient and effective communication methodologies have a positive effect on the success of programs and projects (projects with efficient and effective communication methods were 17% more likely to finish within budget, according to PMI and PwC).
Driving Needed Change
There is a complexity to internal organizational dynamics, such as shared understanding of the strategy and how staff roles support its achievement; shifting priorities among and within the portfolio of programs and projects require an organization to evolve. The Strategic PMO is at the heart of driving and managing that organizational change through the portfolio of programs and projects—ensuring that organizational change management becomes a critical organizational enabling practice within OPM, and helping organizations adapt to change, uncertainty, and complexity so that strategy is effectively implemented and the expected benefits and changes are realized.
Proactively Navigating Risk
Last, but not least, the Strategic PMO creates a culture of proactive risk management by the identification and navigation of threats as well as opportunities—as supported by Accenture's 2011 Global Risk Management Study (2011) of almost 400 executives from 10 major industries: “To achieve effective enterprise risk management, organizations must focus on being proactive, rather than merely reactive.” The role of the Strategic PMO is to establish an integrated approach to risk management throughout the portfolio in order to support the organization in delivering value and differentiation from competition.
OPM and the Strategic PMO are inexorably linked. OPM gives the organization the capabilities to effectively implement the delivery of its strategy, and a Strategic PMO moves beyond the traditional functions of a PMO with executive-level support to effectively fit and successfully implement OPM.
As described earlier, OPM is a strategy execution framework that positions an organization to achieve better performance, better results, and a sustainable competitive advantage in the delivery of its strategy. Thomas and Mullaly note in their research, “the degree of value that organizations realize is determined by how well what is implemented meets the needs of the organization.” In this section, we describe the Value Chain of Strategy (VCS) as a business model for the implementation of OPM, fitting and maturing the capabilities of PMI's foundational standards to the needs and circumstances of the organization. For a greater understanding of the capabilities applied in the VCS, please refer to the current version of PMI's standards for portfolio, program, and project management as well as OPM3®.
As shown in Figure 2 and again in Figure 3, the development of strategy serves as input to the processes of OPM; however, Figure 3 reveals the transformational gap that exists between strategy and the realization of intended business results. It is this gap that a strategic PMO fills by using the VCS to operationalize the organization's delivery of strategy.
Figure 3 – Implementing the Delivery of Strategy with OPM
An organization's portfolio of programs and projects represents those investments in change that leadership believes to be most significant and necessary to succeed in its chosen market(s). Therefore, deployment of strategy into a balanced mix of priority initiatives is the first and most crucial step in the successful implementation of strategy. It doesn't matter how well an organization manages its programs or executes its projects; if they are the wrong initiatives, the entire effort will amount to a lost opportunity. Not only is the deployment of strategy into a balanced portfolio crucial, it is also the most leveraging step in the allocation of scarce organizational resources to ensure maintenance of efficient and effective operations or business-as-usual.
Strategy and deployment of the portfolio is not a once-and-done activity. Although a portfolio is typically deployed to represent a specific planning period, it must be reviewed periodically in the context of a rapidly changing global environment to ensure its continued relevance and ability to deliver intended business results. Accordingly, the mix of initiatives represented in the portfolio may undergo change during both the short- and long-term horizons. The ongoing monitoring and management of this important facet of OPM will be addressed shortly.
Before proceeding with the description of the VCS, it is important to understand the distinction between project management success and project success in the delivery of organizational strategy. Project management success focuses on the delivery of the result or product of a project and is most typically measured by performance against time, cost, and scope. Although these are very important measures, they do not represent project success, which measures the outcomes and benefits of the project in relation to those specified in the business case justifying its inclusion in the portfolio of strategic investments. Together, project management and project success comprise the business life cycle of a project. Knowing this distinction will help in understanding the roles and relationships of program and project management in the VCS.
An important element of each investment in an organization's portfolio is the change and resulting benefits each project is expected to deliver to its respective stakeholders. It is the role of program management to map out and manage project results to ensure maximum realization of intended strategic outcomes and benefits. Although more comprehensive than this simple description, it must be understood that effective program management establishes the governance and processes needed to fulfill this role for the organization and should be measured by the achievement of strategic business results.
Projects deliver the results or products that must be integrated into operations to achieve intended business results. Although project management is focused on project execution, typically measured against time, cost, and the scope of project results, it is important for project managers to evaluate proposed adjustments in these measures relative to their impact on project success. To fulfill this role, project management must integrate with operations in the analysis of changes impacting project results and the full business life cycle for the project. Figure 4 illustrates the ongoing interaction between project, program, and portfolio management that focuses attention on the alignment with strategy and the delivery of optimum business results.
Figure 4 – Managing and Adapting the Delivery of Strategy with OPM
As Figure 5 shows, the final step in the VCS is a value performance analysis, returning actual versus planned outcome and benefit performance information, as well as lessons learned, to strategy development for evaluation and adjustment if needed. If an adjustment in strategy is indicated, it can be accommodated in a timely manner; however, information returned through this process will most likely signal adjustments in the portfolio or some other aspect of the business model to continuously improve organizational performance. As Will Rogers once said, “Even if you're on the right track, you'll get run over if you just sit still.” For this reason, continuous improvement in both the fit and maturity of the capabilities of OPM is crucial to achieving differentiated implementation and delivery of organizational strategy.
Figure 5 – Results Analysis and Learning with OPM
Who Should Be Interested in OPM
So, when all is said and done, who in the organization should be interested in OPM? First, senior leadership should be interested, because OPM cuts across the organization to provide a flexible, yet disciplined and systematic means of delivering strategy. It signals leadership's commitment to the process and establishes a business focus for integrating and aligning the organization to its purpose, fostering a culture of engagement and continuous improvement.
As noted earlier, a strategically positioned and practicing PMO should be interested because OPM provides it with the relationships and tools to help the organization realize its full performance improvement potential. By fitting and maturing the capabilities of project, program, and portfolio management to the unique circumstances and needs of the organization, the PMO can ensure the goal of OPM of better performance, better results, and sustainable competitive advantage through continuous improvement in the delivery of its strategy.
For portfolio managers, OPM provides a framework to align the work and resources of the organization to strategy while giving program managers greater visibility of the short- and long-term strategic goals. The VCS provides the PMO with the means to better define and manage the business of delivering intended outcomes and business results.
For project managers, OPM opens a path for professional development and career advancement through greater involvement in the organization's strategy through control of the full business life cycle of the project. Rather than being viewed purely as technical experts, they are recognized because of their role in the business decision-making process as having influence on both project management and project success.
Finally, the other management functions within the organization should be interested because of the positive ancillary effects OPM can bring to their operation. For human resources, the approach opens a powerful opportunity for talent development and a career path for building and retaining skills and knowledge essential to growth and a sustainable competitive advantage. For finance, OPM provides access to the critical business-focused measures and data that align the organization to meaningful performance, while giving operations the type of predictive view to be more proactive with conditions impacting the delivery of strategic value to stakeholders.
Organizations, regardless of their size or type exist to deliver value to their stakeholders. Whether it is a for-profit business, a not-for-profit service, or a government agency, it will need a strategy as the expression of its vision and mission to deliver its intended value. However, merely having a strategy does not automatically ensure the delivery value; only through the effective implementation of strategy will an organization gain the ability to achieve this goal.
Our focus has been on Organizational Project Management as a business approach and the Value Chain of Strategy as a model for effectively merging and maturing the capabilities of project, program, and portfolio management to maximize an organization's delivery of value to all stakeholders. Furthermore, we have underscored the essential nature of a strategically positioned and practicing PMO in ensuring the most effective implementation of OPM and maturing of capabilities that will deliver the organization's goal of better performance, better results, and a sustainable competitive advantage.
Finally, who in an organization should be interested in OPM? Everyone in the organization whose role and future are tied to growth and ongoing success of the business should be interested in the potential for OPM to engage them in the maximization of its strategy.
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