The PMO in hard times

adding value or adding cost?

Introduction

In today’s difficult financial environment, does your project management office (PMO) provide value or simply add to the cost of doing business? If you were to survey your “clients,” would they give you a thumbs-up, a thumbs-down, or, perhaps, a “thumbs-sideways”? To be sure, even in the best of times, the PMO’s value and benefits are often questioned; yet, when money gets tight and costs need to be cut, corporate executives often attempt to shave money by eliminating, or abolishing, the PMO. This paper will describe the functions that many PMOs perform and report on the key findings of a major research report funded by the Project Management Institute (PMI) and conducted by Dr. Brian Hobbs (2007) as regards the global state of the PMO. Additional data are presented from other studies, and the author’s own experiences working with Global Fortune 500 companies in a PMO establishment and operation. The paper concludes with the functions that certain PMOs perform that raise their level of value in their organization, functions that the reader may also want to consider.

Hype vs. Reality

It is very clear to me interest in the PMO has never been higher. Much to my chagrin, I remarked to several colleagues more than 5 years ago that the rising interest in the PMO was nothing more than a fad that would soon die out. Boy, was I ever wrong! One need only look on Amazon.com to see the number of books that have been written on the topic in the past 5 years alone (approximately 3,800). Attend any conference, such as this one in Milan, and it can be very difficult to get a seat at presentations on the topic. You’d think Eric Clapton himself (my hero, by the way!) was performing at these events!

The LinkedIn Group on the PMO, of which I am an esteemed member, has more than 7,000 PMO “geeks,” if I may call us that. PMI’s PMOSIG is busting at the seams, as well. So, if you’re having the PMO “blues” or just need someone to talk to, there are plenty of people out there to reach out to.

But the dead giveaway over just how popular this topic has become, and maybe, just maybe, having crossed the line into “hype” is the sheer number of “PMO of the Year” awards an organization can win. Perhaps it’s just me, but doesn’t it seem as if everyone is awarding these? I’m not suggesting they’re not legitimate, but given that everyone seems to be winning these, it’s as if you’re doing something horribly wrong if you don’t have a nice trophy on your bookshelf.

Current State of Practice

Dr. Brian Hobbs of the University of Quebec in Montreal, Canada, under a research grant from PMI, conducted a very interesting study on the PMO entitled “The Multi-Project PMO: A Global Analysis of the Current State of Practice” (Hobbs, 2007). The goal of the survey was to use the results as a basis for developing a global standard for PMO development. Aspects of the PMO examined were: value, organizational context, form and structure, and roles and functions. Based on the data, Dr. Hobbs concluded that PMI is unable to develop a global standard for PMOs given the level of practitioner disagreement concerning the form and shape of PMOs. In short, each PMO is unique and serves its organizations in multiple, and different ways, making the development of a standard impossible.

In fact, there was a lack of consensus regarding the

  1. o Value of PMOs
  2. o Structure of PMOs
  3. o Functions included in their mandate

However, the key finding in the report, according to this author, is that when asked “Has the relevance or existence of the PMO been seriously questioned?” half of the survey participants answered “yes,” indicating that a large number of PMOs suggest that their organizations want and need to see value but simply do not. Think of this another way: You’ve just boarded a plane, got settled into your seat, and the captain announces over the loudspeaker “Welcome aboard, we have only a 50% chance of making it to our destination”! We would not board a plane with those odds, and we shouldn’t be running PMOs with those odds either. So, how can we avoid this? To start, let’s look at the concept of value.

Based on Dr. Hobbs’ report, the picture that emerges of today’s modern PMO is best expressed by the following characteristics:

  • Is a relatively recent creation (>50% are less than 2 years old)
  • Is small (50% have 3 or fewer staff)
  • Has little decision-making authority (70%)
  • Took 2 years or less to implement (77%)
  • Is probably the only one in the organization (78%)
  • Has an equal chance of representing all or none of the organization’s projects (35%)
  • Has an equal chance of having all or none of the project managers in the organization reporting to it
  • Has its value questioned by half the people

Determining the PMO’s Value

Who sits in almighty judgment of what we do? I asked that question to many people, including the members of the LinkedIn Group mentioned above. Essentially, there are three groups that determine the PMO’s value. They include:

  • Executive management – The people who “pay” to have a PMO
  • Project managers – One major group that PMO is designed to support
  • Project “beneficiaries”– The business units whose projects are accomplished, or overseen, by the PMO

Each group is looking for something different from the PMO, and we, as PMO heads and staffers, need to know exactly what that “something” is. Only then can we determine how to deliver value. But what is value and how do you describe it? If the PMO is seen as an overhead cost, what are we delivering for that cost?

NYC Taxis

Exhibit 1 NYC Taxis

Let me give you an example of how I think of it … by taking a ride in a New York City taxi (Exhibit 1). Have you ever been in one? I’ve been to New York City countless times, and I would say, you get what you pay for; it’s not the world’s most comfortable ride, but you get to where you’re going (and fast, I might add) for what I would consider to be a reasonable price.

How could a taxi driver “add” value? After all, that’s what people and organizations are looking for these days, not just value but “added value.”

Madison County, Virginia Taxi

Exhibit 2 Madison County, Virginia Taxi

The driver could offer you a bottle of water, a newspaper, or discuss points of interest along the way. However, how about the taxi pictured in Exhibit 2 and its approach to adding value? I took this photo while stopped at a restaurant in Madison County, Virginia, the state where I live. “Gossip –Great Sense of Rumor”—now that’s adding value. Who wouldn’t want to have a ride with this driver?

To many, value is getting more than what you paid for …getting more than you expected. Is your PMO providing the equivalent of “Gossip – Great Sense of Rumor”?

The value of a PMO can be determined by three things:

  • What we do – In other words, the functions we perform in our PMO for the organization at large.
  • How well we do it – The level of overall performance as measured by ourselves and our “customers.”
  • How much it “costs” – And, of course, everyone is obsessed with costs these days

Let’s look closely at the first item. The Hobbs Report (2007) counted 27 functions that PMOs perform (only a handful actually did all 27) in five major categories as follows:

  • Monitoring and controlling project performance
  • Developing project management competencies and methodologies
  • Multiproject management
  • Strategic management
  • Organizational learning

And, the 10 most important functions performed by the PMOs, according to the Hobbs report, were:

  1. Report project status to upper management – 83%
  2. Develop and implement a standard methodology – 76%
  3. Monitor and control project performance – 65%
  4. Develop competency of personnel including training – 65%
  5. Implement and operate PMIS – 60%
  6. Provide advice to upper management – 60%
  7. Coordinate between projects – 59%
  8. Develop and maintain a project scoreboard – 58%
  9. Promote project management within the organization – 55%
  10. Monitor and control performance of the PMO – 50%

Doing all these is great, but note just how many PMOs perform the reporting status to upper management: a whopping 83%. Isn’t this really more of an administrative/clerical function? While it’s valuable, it’s hardly strategic. My take is this: if a PMO can demonstrate that it helps in such areas as time to market, increasing productivity, improving project success rate, helping to beat the competition, ensuring that project requirements are met, and increasing customer satisfaction, then isn’t it logical that the organization should see improvement in such areas as increased market share, increased profits, increased revenue, decreased costs and growth in customers? I suggest that more PMO heads and staffers need to make the critical link between their excellent work and the outcomes that their business demand. This is where value truly lies in PMO activities.

Quite frankly, I don’t know a project manager running a PMO who doesn’t want to get better and improve the value that the PMO is providing. How is this done? Through evolution, but not the type described by the great Charles Darwin (Exhibit 3). In fact, Dr. Hobbs discovered a co-evolutionary process underway with PMOs; in other words, they not only adapt to their environment, they change the environment in which they operate. Given this, let me ask, what part of the environment are you trying to change?

Charles Darwin

Exhibit 3: Charles Darwin.

Final Thoughts

Let me conclude with an example of a “client” who has gone through such an evolution. In fact, what follows is actually a consolidated description of several clients presented as one so as to protect the identity of any one client.

Our client, whom I will call Globulus Enterprises, started their PMO in response to a wide range of project-related problems. The three main goals of the PMO, at the outset, were to:

  • Establish a consistent project management practice
  • Provide for project management training in specific areas
  • Focus attention on one specific business unit

After about a year, when the above three areas were well underway and significant progress had been made, the PMO then started to provide centralized reporting services to the CIO and other executives.

Such reporting, which many PMOs do, provided visibility into the portfolio and highlighted projects that were “troubled.” Additionally, the PMO began providing for project management training for the enterprise and spearheaded the implementation of single-user PPM (project portfolio management) tool.

But their success didn’t end there. During the next couple of years, the PMO was instrumental in expanding their role in various “practice” areas of project management, including estimation, risk management, career path development, and the recovery of troubled projects. Of late, the PMO has taken the very strategic step of being the center of excellence for portfolio management guidance and benefits management.

One can see the “value” chain that Globulus Enterprises PMO started to build for itself. Its success rests on perceiving critical needs and addressing those before moving to the next step. But, each incremental step forward included more “strategic” activities associated with project management and the business at large. In this case, it is obvious that the Globulus PMO is indeed adding value.

I offer the following ESI PMO Value Continuum for your consideration, which, in effect, mirrors the journey that Globulus took to prove not just their worth, but indeed their value as well. As can be seen, as a PMO moves from project reporting through to benefits management and strategic alignment, its responsibility not only increases, but its value does as well. Where is your PMO on this continuum?

ESI PMO value continuum

Exhibit 4: ESI PMO value continuum.

In a research study conducted by ESI International EMEA Division entitled “The Challenges to Success for Project/Programme Management Offices,” one PMO executive of a global customer management and business services firm sums up the argument about cost versus value by stating:

“One of my goals for this year is to better publicize the PMO and integrate it with the project management practice. Often in times of downturn, organizations look at ways of cutting costs. I think that we need to turn this argument around and look at ways of spending budget more effectively on initiatives that will ultimately save us money in the longer term.” (ESI, 2009)

I couldn’t have said it any better myself. I wish you all the best, and have a great conference.

References

ESI International. (2009). The challenges to success for project/programme management offices. Arlington, VA: ESI International.

Hobbs, B. (2007). The multi-project PMO: A global analysis of the current state of practice. Newtown Square, PA: Project Management Institute.

All photos are royalty-free images from iStockphoto except the image of the Madison County, Virginia taxi, which is a picture taken by the author.

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 or any listed author.

©2010, J. LeRoy Ward
Originally published as a part of 2010 PMI Global Congress Proceedings – Milan Italy

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