Establishing a PMO
your way to success in business! A case study approach
Because the concept of project management office (PMO) is a relatively new idea, there are currently many different approaches that companies can take to establishing a PMO, as well as many different names for this new entity. Some companies fail to establish a PMO, while others report success in doing so. This raises the question of whether or not it is worthwhile to make the effort to establish a PMO. Does your company have any business reason for implementing this approach, especially when the organization wants to run more and more projects every year but has reached the glass ceiling? It therefore becomes crucial for the company to acquire new skills or support in project management. The solution could be a PMO, but prepared and established in a proper way. Therefore, a set of extreme characteristics is proposed to describe PMO. The application of this approach is presented based on a case study.
The Current State of PMO Implementation
In the article “From Crisis to Control: A New Era in Strategic Project Management,” Stanleigh (n. d.) says that “the research indicated that over 75% of organizations that set up a PMO shut it down within 3 years because it didn't demonstrate any added value.” He also notices (2005, pp.2–3) that many PMOs are terminated because of failure to report the benefits of the PMO to the organization, pointing out that lack of senior management support and clear vision regarding the scope of the PMO are the key factors of PMO failure.
This should give us an idea of how difficult it is to establish a proper PMO that creates added value for the company. However, there is also evidence that some aspects of the implementation of PMO are beneficial for companies. The study conducted by Yong (2006, p.2) shows that there is a positive link between the establishment of a PMO and improvement in the nine project management Knowledge Areas. He points out that the activities done after establishing the PMO are performed with better efficiency compared with the period prior to the PMO's creation (Exhibit 1).
Exhibit 1: Functionality of PMO.
Note. Based on the data from The Effect of PMO on IT Project Management, by W. L. Yong, 2006, Hawaii Pacific University, (pp. 3-4)
There are many approaches to project management offices (PMOs) and, even though there are different definitions of what constitutes a PMO, one could say that each PMO is as unique as the projects themselves.
In A Guide to the Project Management Body of Knowledge (PMBOK® Guide)—Fourth edition (Project Management Institute [PMI], 2008), we can find the following complex definition of a PMO:
“A project management office (PMO) is an organizational body or entity assigned various responsibilities related to the centralized and coordinated management of those projects under its domain. The responsibilities of a PMO can range from providing project management support functions to responsibility for the direct management of a project. The projects supported or administered by the PMO may not be related other than by being managed together. The specific form, function, and structure of a PMO are dependent on the needs of the organization that it supports. A PMO may be delegated the authority to act as an integral stakeholder and a key decision maker during the beginning of each project, to make recommendations, or to terminate projects or take other actions as required to keep business objectives consistent. In addition, the PMO may be involved in the selection, management, and deployment of shared or dedicated project resources” (PMI, 2008, p.11).
Although this definition is rather lengthy, it shows how flexible the term PMO can be and how many different approaches to a PMO can be taken by a company.
Also, PMO SIG, in the document PMO Accord (2008), distinguishes among various types of PMOs (Exhibits 2 and 3).
Exhibit 2: Different types of Project Management Office.
Exhibit 3: Outsourced PMO
Note. From Global Project Management: Communication, Collaboration and Management Across Borders, by J. Binder, 2007, Aldershot, UK: Gower Publishing. Copyright 2007. Adapted by J. Binder in PMO ACCORD paper (p.47).
The matter is more complicated when we check the scope of work that can performed by a PMO, which is described in the PMBOK® Guide (PMI, 2008, p 18) as:
- Managing shared resources across all projects administered by the PMO;
- Identifying and developing project management methodology, best practices, and standards;
- Coaching, mentoring, training, and oversight;
- Monitoring compliance with project management standards, policies, procedures, and templates via project audits;
- Developing and managing project policies, procedures, templates, and other shared documentation (organizational process assets); and
- Coordinating communication across projects.
The above statements are only examples and could be expanded in the organization.
In his study, Yong (2006, p. 8.) indicates that the range of functions that a PMO can conduct in practice varies widely and consists of ten different types of activities, as listed in Exhibit 4.
Exhibit 4: Functionality of PMO.
Note. From The Effect of PMO on IT Project Management, by W. L. Yong, 2006, Hawaii Pacific University, (p. 8)
All of these activities show how difficult it is to determine the final shape and functionality of a PMO, and PMOs can vary markedly while operating under the same name.
The above statements are so impressive that one can be confused as to the complexity of creating a PMO. The question becomes, “How to do it properly?” or “Which way to choose?”
To standardize all of the approaches and make them more systematic, it is proposed that a set of characteristic features (CF) each PMO could possess be defined. These characteristic features are defined between so-called extremes in the following areas:
- The placement of the PMs in the company organizational structure (PMPL)
- Decision-making process (DMP)
- The involvement in the Projects realization (IPR)
- Project Portfolio Management (PPM)
- PMO placement in respect to organization structure (PMOPL)
There are two extremes in each of the areas mentioned above. When deciding on the final shape of our PMO, we should consider its definition by referring to these extremes (Exhibit 5). This does not mean, however, that we have to base it only on the edge values. Our definition could place some characteristics somewhere in between—e.g., 50% of project managers should be in a PMO, the decisions made are limited to some allowances (e.g., money volume), etc.
Once we have decided on the boundaries, we can establish the PMO knowing exactly what we should expect from this entity in terms of decisions, staffing, monitoring, control, and so on. Therefore, it would easier to establish clear outcomes for the PMO's activities and its contribution to the project's success and profits for the company.
Exhibit 5: Extreme Characteristics in PMO.
The additional factor that determines the position of the characteristic feature between each pair of extremes is the level of support of top management (LoSoM). In this way, the position (P) of each characteristic feature (CF) between the extremes is a function of the level of support of top management (LoSoM):
P(CF) = f(LoSoM)
The above dependency can be roughly shown on the chart (Exhibit 6).
Exhibit 6: Dependency of the position of characteristic feature and level of top management support
A Case Study of PMO
The following case study will aid in the understanding of how to correctly establish a PMO, using the extreme characteristics approach:
A decision was made to introduce project management principles into the company. An organizational change project was planned and implemented after approval from the board. The primary goals of the project were to align the company's strategic objectives with its operational and financial goals and to take the company from a functional to a composite organization. An approach to project management was designed during a 6-month planning phase. Actual implementation took only 16 weeks. The PMBOK® Guide (PMI, 2008), and still is, the basic set of rules on which the system works.
One of the main challenges was to build an IT system that supports work on both a strategic and a day-to-day basis. At present, the company is in the process of improving the system so we can share knowledge from past projects and continuously improve and develop current projects. The company's new structure is based on portfolio management with PMO principles (which are defined and built using the set of extreme characteristics) that provide both support for project managers and strategic direction for the board.
The company now operates in a multiproject environment with different levels of complexity, scope, budget, and schedule for each project. This provides the company with substantial hands-on knowledge of the benefits of project management.
It must be said that the benefits have been substantial. By introducing project management principles into the company's organizational culture, the company has seen significant improvements, including:
- A 20% reduction in operational costs
- A 60% increase in market share
- An increase in finalized projects to 500 per annum
- A 30% reduction in the amount of time it takes to run a project
By building up the company's position in the modern business niche, the company has created a brand image in a potentially lucrative market and has undercut its competitors' share of the industry. It has also managed to do this in a short amount of time. In addition, the company is able to exceed clients' expectations by offering them a more professional, higher-quality product. None of these activities would have been possible without the use of project management principles that now operate within the organization.
As they take on more and more projects, companies attempt to implement new approaches and strategies to make them successful. One such approach is implementing PMO, but unfortunately, in many cases, this idea is used as a standard tool, which it is not. The companies that try to implement the PMO as a tool usually end up abandoning it, seeing no business results from the effort of establishing and running their PMO. The PMO is rather a unique concept which needs to be carefully planned and designed before a decision is made to establish one. If we do decide to establish a PMO, while keeping in mind that a PMO can be described using the set of extreme characteristics, we increase the company's chance of success, which can be measured by the profits generated by the PMO in that organization.
Binder, J. (2007). Global project management: Communication, collaboration and management across borders. Aldershot, UK: Gower Publishing.
Bosschers, E., Boutelegier, R., Dierick, J., Fredriksz, H., & Krooshof, R. (2002). Handboek projectmanagement, de TIPI-approach, Netherlands: ISES International.
Program Management Office Special Interest Group. (2008). PMO ACCORD. Available through http://69wsm.m4gha.servertrust.com/ProductDetails.asp?ProductCode=ACCORD
Project Management Institute. (2008). A guide to the project management body of knowledge (PMBOK® guide)—Fourth edition. Newtown Square, PA: Author.
Spalek, S. (2004). Critical success factors in project management. Gliwice, Poland: Silesian University of Technology Press.
Stanleigh, M. (2005). The impact of implementing a project management office – Report on the results of the on-line survey. Toronto, Canada: Business Improvement Architects.
Stanleigh, M. (2009)From crisis to control: A new era in strategic project. Business Improvement Architects. Available through http://www.bia.ca/articles/pj-FromCrisisToControl.htm (October 2009).
Yong, W. L. (2006). The effect of PMO on IT project management. Hawaii Pacific University.
©2010 Seweryn J. Spalek, Ph.D.
Originally published as part of Proceedings PMI Global Congress 2010 – Asia Pacific Melbourne, Australia