Project Management Institute

PMOs under pressure

VOICES Peer to Peer
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Michael O'Brochta, PMP: Look at what's happened in the past five years with overhead functions in general: They've come under increased scrutiny with budget reductions and recessionary trends. Project management offices (PMOs) are not immune. The PMO's benefits have to outweigh the cost of running it.

The increased pressure is coming from business executives looking to lower costs by eliminating or reducing expenditures for areas that do not clearly contribute to the bottom line.

Calum Robertson, PMP: There's also a huge pressure to “make the ship go faster”—let's initiate more projects and complete them faster. But less attention is given to the rudder that steers the ship.

Mr. O'Brochta: We could call that “input-focused.” We should be worried about the output—where are those projects taking us.

If the PMO exists in an organization where value is measured in money, it needs to justify itself in that measure. But other measures of value could be in play in an organization. The 2010 research report The Project Management Office (PMO): A Quest for Understanding showed the average lifespan of a PMO is only two years. PMOs repeatedly are going out of business because they're not demonstrating value in the eye of the beholder.

Mr. Robertson: That report emphasized the need for the PMO to be very closely aligned to the organization and executives, to understand business drivers and what's going on, and to consistently demonstrate value.

Mr. O'Brochta: But I think the increased pressure is completely justified. PMOs ought to be subject to the same standards as projects. We have to justify that we're filling a need.

Mr. Robertson: I think it's slightly more complex. If an organization completes its projects on time, on budget and within scope but is not achieving its goals, something is wrong.

We're called “project management offices”—but those are the wrong words because people immediately think of projects. It's better to relate PMOs to business strategy and investments. We have to dialogue at the executive level about achieving benefits and meeting strategic goals rather than just talking about projects.

One department I was involved with used the term “value management office.” Reporting to the executive team was about benefits realization, identifying strategic goals and mapping investments against strategies. Projects were the vehicles used to execute strategy, maximize value and achieve benefits.

Mr. O'Brochta: If we're lazy, we measure the success of a PMO based on project outcome. “The PMO did great last year. Six of the 10 projects were successful.”

For three decades, I managed projects for the U.S. Central Intelligence Agency (CIA). We grouped projects in various ways for the purpose of collecting intelligence for U.S. government use, and managed the project groups under what is commonly referred to as PMOs. At that level, the number of intelligence reports generated by the projects from the PMO was much more important than the individual performance of any one project.

But it's not a one-size-fits-all approach. The value added by PMOs must match the organizational and business needs. That could mean developing and implementing standard project methodologies, providing sets of standardized project management tools, or allocating resources between projects.

Mr. Robertson: Most people relate the word “portfolio” to finance. In finance, you would get a clear answer if you asked, “What's the value of this portfolio?” I wonder how many portfolio managers in PMOs are able to articulate the value of their portfolio.

Mr. O'Brochta: That paints a really vivid picture of the point we're making here.

Mr. Robertson: It all comes down to knowing the value we're getting from the investment. If we can articulate that, particularly at the executive level, we're having the right dialogue. If we're talking about projects and methodologies, we're missing the point.

Executive support always has been critical, and there's no difference now. That comes from demonstrating how a PMO can help executives execute their strategy and achieve their goals.

Mr. O'Brochta: This is what got us in trouble in the first place. I wonder if as many PMOs would have gone out of business so quickly if they had gotten the needed executive visibility on day one.

Mr. Robertson: That's a great point. It goes back to the placement of the PMO in the organizational hierarchy. If it's placed low down, perhaps hidden away in an IT department, then its ability to function is deeply constrained. The closer to the executive level, the better. If the PMO is seen as a support arm for executives achieving their strategic goals, you're going to get sponsorship and support.

Mr. O'Brochta: This discussion has used the term “the PMO,” as if we're talking about one PMO in an organization. But if an organization is big enough to support a family of PMOs, then we can talk about a useful need to have one “down in the IT department”—if it is linked to a superior-ranked one, perhaps on the executive level.

Mr. Robertson: It's absolutely fine to have multiple PMOs, but each has to have a clear mandate and understanding of what it is trying achieve and how they work together. Otherwise, you have PMOs fighting with each other and not providing value to the organization.

Depending on what the PMO is trying to achieve, the skill set required is different. If the focus of the PMO is project delivery, you need project managers. If you're looking at an enterprise-level PMO that deals with investment proposals and benefits realization, you need strategic thinkers and business analysts.

Mr. O'Brochta: For the last PMO I ran at the CIA, the measure of benefit we were held to was raising the competency level of project managers throughout the organization. It mattered less what individual projects I did or did not do to achieve that.

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Michael O’Brochta, PMP, is president of Zozer Inc., a project management consultancy in Roanoke, Virginia, USA.

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Calum Robertson, PMP, is the principal portfolio analyst at Auckland Council, a municipal agency in Auckland, New Zealand.

Mr. Robertson: The basic PMO requirements have not really changed in the past 15 years. It still comes down to four things:

1. Are we doing the right projects?

2. Are we doing them the right way?

3. Are we doing them well?

4. Are we delivering the outcome?

If we're able to measure all these areas, we know we're doing a good job.

But the PMO needs to speak the language of executives. The chief financial officer is measured on financial performance, so I talk to him about the PMO in terms of capex (capital expenditures), opex (operating expenditures) and ROI. When I'm talking to the chief planning officer, I talk about planning framework. If you know how people are being measured, then you can tailor the dialogue and language. PMOs that talk about methodology are using the wrong words.

Mr. O'Brochta: The discussion about value and benefits has to be around what is important to executives.

Mr. Robertson: If you're using their language, you'll get their support. If you use the wrong language, you get disengagement. PM

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK APRIL 2012 WWW.PMI.ORG
APRIL 2012 PM NETWORK

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