Transforming your project management office into a center of excellence

Abstract

This paper covers the areas to be considered in transforming an existing project management office (PMO) into a project management center of excellence (COE). Possible triggers for this business decision are suggested and the differences between a PMO and a COE are outlined. The functions of a COE in support of a business are listed and key prerequisites for the successful implementation of a COE are summarized together with basic considerations for managing the organizational change. Finally, cautionary advice on managing expectations is included to help minimize the risks associated with a COE implementation.

Current Economic Conditions and the Value of Project Management as a Core Business Process

Economic conditions at the beginning of the second decade of the 21st century continue to challenge organizations worldwide. Governments and corporations are faced with the impacts of reduced budgets, nervous investors and customers, and a new vulnerability to influences on corporate performance by the inter-connectedness of the global economy. Financial trauma in the United States and in Asia has significant international implications and is no longer limited to national borders.

Organizations worldwide are becoming increasingly attentive to internal organizational supports for increased efficiency in safeguarding vital revenue and funding streams, for innovation, competitive differentiation, and good governance in their private or public service environments. Project management is one of these supports. The frameworks, methodologies, processes, checks, and balances that are fundamental to our profession provide necessary business process reinforcement that can help executive teams steer their organizations through periods of economic instability, and better times likewise.

It has been understood for a long time that project management organizational structures sometimes reflect the maturity of the organizations in which they are located and sometimes the maturity of project management as a functional discipline in the organization itself, and, often, both of these together. Project offices, project management offices (PMOs), and project management centers of excellence (COE) are just three examples of the rich variety of organizational options available to companies seeking to leverage the value of project management in support of divisional and corporate strategy.

Organizations are realizing, however, that “one size does not fit all,” and that the project management model they use must be carefully aligned with the needs of the enterprise.

Fitness for purpose in connection with a project management organization must be a key consideration, once the purpose itself has been clearly understood, defined, and committed to by the executive leadership of the enterprise. Project management will not yield its full benefit to any organization until it is viewed by executive teams as a vital business process rather than niche functionality buried within system and technology focused pockets of the enterprise (IM/IT, network services, product management, etc.). It must be viewed as of equivalent value to, and not the “poor cousin” of, other core and centrally managed business processes such as finance, procurement, legal, and regulatory services, etc.

In some cases, as an enterprise makes the decision to move to the most mature organizational project management model, the transformation of an existing divisional PMO into an enterprise level COE will be a necessity. It would be helpful to understand the differences between a PMO and a COE.

CPMOs, COEs, and PMOs

According to Dennis Bolles in Building Project Management Centers of Excellence:

The CPMO (Corporate Project/Program Management Office) is accountable for enterprise-wide distribution of project management best practices. The CPMO is a corporate business function with the title and responsibility similar to traditional business functions such as finance, engineering, marketing/sales, manufacturing, information technology, etc., which provide leadership and have “ownership” of their respective functional disciplines

The PMCoE (Project Management Center of Excellence) is an alternative title for the CPMO…and can be applied when the function is not positioned at the corporate level but has the same responsibilities. Its primary focuses are strategic forecast planning and the establishment of corporate standards that include the effective use of a common project management methodology, processes, tools, templates, education, training, and project management competency.

The PMO is responsible for tactical master planning within major divisions, business units, regions, etc., overseeing the effective application of the project management standards established by the PMCoE within their respective sphere of responsibility. (Bolles, 2002, p. 8)

Gerard Hill (2008) added the following:

The center of excellence is usually designated as a separate and distinct business unit within the relevant organization and it may even have responsibility for enterprise wide project management operations. Notwithstanding, the PMO functionality described for the center of excellence has a focus on strategic business interests across the relevant organization or enterprise.

Although it appears at the top of the PMO competency continuum, the center of excellence is a unique project management entity. The center of excellence does not necessarily perform all of the prescribed lower-level PMO functionality; but it could. There are two perspectives on how a center of excellence can be established. First, it could be created as a result of the growth and expansion of a lower-stage PMO, which would normally be the case in a small-to-medium sized organization. Conversely, it could be established independent of any existing PMOs, with the objective of providing strategic business guidance and direction to those subordinate PMOs. This would likely be the case in a large, global organization where the center of excellence provides some aspect of oversight, control, and support to PMOs serving regional business interests. (p. xxvi)

The Key Functions of Your COE

In addition to Bolles’ and Hill's summaries, we might add that the COE:

1. Is a project management standards and compliance authority.
   
   The leadership of the COE are guardians and communicators of corporate project management standards. The definition and implementation of standards is a key unifier and stabilizer for project management across the enterprise. Compliance with these standards should be verified by periodic COE led audits of work being performed, adherence to project documentation standards and the use of project management standard or best practices as defined and communicated by the COE.
2. Manages the intake and authorization process for new business opportunities.
   
   A “new business development (or opportunity) pipeline” should be under the jurisdiction of the COE. The documentation, qualification, approval, and project initiation of new business opportunities is a vital component of the work of a COE, and should not be decoupled from the project stage gate process. The development and materialization of business opportunities is the front end to the (approved) project stage gate process.
3. Manages corporate/enterprise/divisional activity at the portfolio level.
   
   This may evoke the strongest feeling and “push back” from PMOs (or de facto PMOs) within the enterprise that were used to full autonomy prior to the establishment of a COE. In spite of this, accountability for overall tracking, analysis, and reporting on the divisional or enterprise strategic project portfolio resides not with the distributed PMOs but with the COE. The PMOs may retain a considerable degree of autonomy for the areas for which they provide services, but there is accountability to the COE for strategic project delivery and performance.
   
   As much as is possible, a collaborative partnership between the COE and the distributed PMOs is advisable. This becomes a particularly complex and delicate exercise in diplomacy if a previous PMO is promoted into the role of divisional or enterprise (corporate) COE.
   
   Recurring meetings and events hosted by the COE can facilitate the strengthening of relationships among project management staff from different sections of the organization. In addition, the facilitation by the COE of coaching and mentoring partnerships across the work streams and business units is a further stimulant to the increase of cooperation and knowledge sharing across the enterprise.
4. Aligns all initiatives to strategy and organizational objectives.
   
   This cannot be effectively performed by the distributed PMOs. Strategic alignment is a core function of the COE, and is related (often) to the project intake and prioritization process (see no. 2).
5. Collaborates with business units on the definition of metrics and key performance indicators for projects (and operations as required).
   
   It is advisable to work with the business units in setting project and operational metrics and KPIs collaboratively. It is inadvisable to develop these for the business units without their participation as this will build resistance to, and bypassing of, the COE by the business units whenever they are able to do so.
6. Reviews, measures, and reports on corporate/divisional performance on defined portfolio and operational objectives.
   
   The ability to inform senior leaders of the health and performance of their strategic portfolio is a primary value that can only be provided by a COE.
7. Recruits, trains, and develops project management staff for the enterprise.
   
   The COE sets standards, in collaboration with human resources, for qualifications and experience associated with every project management role. The variety of roles recruited could include any or all of the following: PMO manager/director; senior program manager; program manager; senior project manager; project manager; associate project manager; senior project coordinator/analyst, etc.

With such a variety of specialized project management skill sets, the COE adds value in the recruitment process based on depth of understanding of all of these roles. The COE can also perform project resource orientation and training sessions to bring new hires “up to speed” on managing project activity in the context of the organization, highlighting special regulatory, procurement, legal, or industry requirements as well as business specific policies and guidelines pertinent to the performance of their jobs.

The Request to Transform Your PMO into a COE

Your PMO may be largely focused on the planning and execution of projects within a specific business area and you may receive the request to assume a strategic or an enterprise-wide mandate. The request might be based on past successes achieved by your PMO and the executive belief that your PMO can rise to the demands of a broader mandate. Occasionally a PMO is “pulled in” to address systemic weakness and inconsistencies in project management due to negative customer feedback or the chronic loss of revenue or funding through customer benefit delivery failures in sub-sections of the enterprise.

Whatever the business triggers may be for the transformation, benefits to customers, other stakeholders, and the enterprise are key concerns that must be factored into the decision. The decision to create a COE must not be driven by political expediency or short-term tactical reaction to fluctuating business conditions. The decision is a crucial strategic move that should be made by senior leadership after gauging the enterprise-wide impacts and implications for the decision, and its influence on business practices, policies, and guidelines.

It should be borne in mind that no decision that could result in outcomes that bring in to question the value of investing in project management should ever be entered into lightly. If the transformation of your PMO into a COE is not managed with wisdom and discretion, the consequences for your organization could exceed the discomfort or corporate dysfunction, which led to the decision to implement a COE in the first place. The transformation of your PMO into a COE may require a paradigm shift for your organization, a new way of doing business.

Four Vital Prerequisites to the Transformation

There are at least four vital prerequisites to beginning the transformation process:

1. The mandate and vision for the COE must be clearly defined.
2. The mandate must be understood and agreed upon by all members of the senior leadership team of your organization, and (as required) other key stakeholders.
3. The planned organizational location for the COE must be appropriate to the scope of its mandate.
4. The impacts to the enterprise and the change management requirements for the COE implementation process must both be identified and “socialized” with senior leadership and other key stakeholders. Executive approval for a change management plan is essential as multiple departments, divisions, business units, and regions could be impacted by the changes.

If there are gaps, deficiencies, or ambiguities in any of these four areas, the relevance and the full utility of your COE will be critically eroded, and the impact to the credibility of project management both as a profession and as a corporate functionality could be negative.

Full executive support is a critical success factor for effective implementation and operation of the COE. Tepid, mixed, or sporadic support will destroy the COE's chances of success.

In connection with organizational location, especially, the placement of a COE and its leadership too low within the organizational hierarchy could have the effect of rendering the policies, methodologies, processes, and services of a COE irrelevant or optional in the minds of business unit leaders who may view the COE's placement as indicative of limited executive support, and (by extension) authority.

Change management must be worked through in detail. The following is a summary of areas of focus for managing the changes associated with transforming your PMO into a COE.

Change Management

1. Create a change management plan or ensure that the COE implementation project charter (and/or project plan) includes extensive change management content. The following are possible items to consider for change management/implementation planning.
   • • Create a comprehensive communications plan. The importance of transparency (to the degree possible) and of frequent verbal and written, formal and informal communications as tools for managing reactions to change cannot be overemphasized.
     • Articulate the rationale for the change stressing the benefits to customers, key stakeholders and staff, and a vision of the end state for the COE.
     • Benefits might include all or some of the following:
       • - Improved and consistent customer benefits management;
       • - Improved and expedited return on investment (ROI);
       • - Stable, standardized, and repeatable model for delivery and operationalization that increases customer confidence and increases the chances of winning new business;
       • - Ongoing enhancement of organizational project management capability;
       • - An enhanced and clarified career path for project management staff;
       • - Alignment of all initiatives with strategic objectives;
       • - Termination of projects in the portfolio not worth continuing due to poor ROI, misalignment with corporate strategy and commitments, or other relevant causes; and
       • - Consistent approach to recovery of high priority projects in trouble.
     • Identify and communicate changes that will occur and hold forums and/or issue surveys intended to:
       • - Seek staff input on further change necessary for the implementation and operation of the COE; and
       • - Facilitate staff adoption and support for the COE model.
     • To reduce fear and anxiety among staff and others, communicate progress to impacted stakeholders (staff included) regularly. A website dedicated to the project, or an e-mailed, recurring, newsletter through the life cycle of the project are possible tools for wider corporate information sharing on progress and issues related to the project. More information is better than less. The latter can drive a cycle of demoralization, which could affect customer service, customer satisfaction and revenue/funding continuity, in the worst cases.
2. Perform an “as is” assessment of PMO resources (people, tools, systems, processes, methodologies) and identify what can be reused at the COE level.
3. Determine what and who will need to be replaced, or upgraded for the COE.
4. Identify priority areas (teams, customers, other impacted stakeholders, public media, etc.) for special care or focused attention in the transition phases.
5. Create charter, hire an external project manager, and select full project team (include impacted external stakeholders, if appropriate).

The COE Implementation Project

The implementation of the COE should be treated as a project. To avoid any appearance, or actual experience, of personal conflict of interest, an external senior project manager or program manager should be recruited, with accountability to a member of the executive leadership team.

The project team members should be a mix of external consultants and internal staff characterized by significant area knowledge, positive adoption of the COE change, a strong team orientation, and credibility with their peers and the chain of command. The team will need to work as an integrated unit, and not in silos, and will need to weather the storms of reaction in the change management cycle.

Key Tasks for Transforming Your PMO into a COE

Thus far, we have considered the reasons for transforming a PMO into a COE and some of the concerns which would need to be addressed to manage the change. But what are the key tasks that need to be executed in the establishment and operation of a COE.

The following list is not comprehensive by any means, but is indicative of the kinds of things that have to be done.

• Define the COE's mandate, accountabilities, scope of activity and level of authority;
• Identify interdepartmental relationships for the COE and perform a full stakeholder sensitivity analysis;
• Validate and prioritize the project portfolio, aligning and classifying initiatives against enterprise strategies, objectives and commitments;
• Perform a detailed health assessment of the portfolio;
• Staff and organize the COE;
• Develop the executive dashboard(s) for the portfolio in collaboration with the business units, and any legacy PMOs and project offices in the organization;
• Implement a project management framework/methodology for use by all project managers in the enterprise/division;
• Implement project management standards and metrics;
• Define divisional/enterprise project and operational key performance indicators;
• Implement a centralized project documentation repository;
• Define the intake and authorization process for new business development/opportunities;
• Establish a standardized governance model for projects, programs and the portfolio;
• Implement a stage gate methodology for stable, well-calibrated transition through each phase of the project life cycle;
• Create and implement common project management tools and templates;
• Establish recurring monthly and quarterly meetings with all project management staff enterprise-wide to discuss practice management, standards, innovations and key project management objectives and concerns; and
• Develop and communicate a career path for project management resources in the organization and collaborate with project management staff on development plans (including internal educational options: lunch and learn sessions, mentoring, etc.).

Conclusion

When transforming a PMO into a COE, ideals can sometimes fall short of reality and its inherent constraints. On the one hand, the process of executing this transformation is a necessary disruptive change to the way things are. One might be tempted to push forward aggressively to implement what needs to be implemented, armed with executive support. On the other hand, sensitivity to current limitations, fears, legacies, and working conditions in the organization is a necessity if we want to maximize adoption and support from those impacted by the changes.

It is important to remember that any new system, process, and documentation requirements should improve service to customers and efficiency for staff. If the COE merely adds a significant administrative burden for the organization, the resulting build up of resentment and the rising dissatisfaction of key stakeholders will hamper the ability of the COE to meet its objectives. If the change management process and the implementation effort are effective, the COE will be perceived as a facilitator for superior business practice, and improved customer and employee satisfaction.