Strategic priorities and PMO functions in project-based firms

Introduction

Project business is an emerging research field that addresses how project-based firms organize their internal and external activities to support the business objectives of projects, firms, and the network of firms (Kujala & Artto, 2008). In this paper, we continue this stream of research by focusing on how project-based firms support their customer project deliveries to achieve business objectives. Our aim is to contribute to the existing research on project-based firms (PBFs) by looking at the specific problem of organizational solutions for project support in such firms. There is an emerging field of research addressing the management of project-based firms. In general, we use the term “project-based firm” (Whitley, 2006) to refer both to firms that conduct just part of their operations in project form (“project-led, “according to Hobday, 2000) even while their primary productive activity might be volume-based or operations-oriented. We also use it for firms that organize most of their internal and external activities in projects (“project-based,” according to Hobday, 2000; Lindkvist, 2004). Both technology-based and service-providing firms increasingly organize their operational activities in customer delivery type projects (Lindkvist, 2004; Artto & Wikström, 2005; Whitley, 2006). Project-based firms and organizations are found in a wide range of industries, such as consulting and professional services, cultural industries, high technology, and complex products and systems (Sydow, Lindkvist, & DeFillippi, 2004). Firms in creative industries such as entertainment and filmmaking also organize their activities into projects (DeFillippi & Arthur, 1998; Sydow & Staber, 2002) and many firms are project-based in terms of integrating their diverse and specialized intellectual resources in innovation and R&D projects (Gann & Salter, 2000). For the purposes of the empirical study in this paper, however, we adopt the viewpoint of a special type of a project-based firm, i.e., a project contractor firm. All three case companies in the empirical study are project contractors that deliver systems, services, and solutions to their external customers through projects.

Project management offices (PMOs), as an organizational unit that supports projects and management of project-based firms, has been under increasing interest within academic discussion (Hurt & Thomas, 2009; Pellegrinelli & Garanga, 2009; Aubry, Hobbs, & Thuillier, 2008; Hobbs, Aubry, & Thuillier, 2008). Previous studies have contributed to our understanding of what kinds of functions and services PMOs may provide for organizations (Crawford, 2002; Hobbs & Aubry, 2007) and how PMOs differ from each other (Hobbs & Aubry, 2008; Desouza & Evaristo, 2006). Moreover, some studies have revealed the positive effects a PMO may have on project performance (Dai & Wells, 2004; Curlee, 2008; Martin, Pearson, & Furumo, 2007), and it has been shown that a PMO has an active role in fostering interproject learning (Julian, 2008). However, it seems that our understanding of the potential benefits of a PMO is ambiguous and limited by the project management centricity. The existing research on PMO benefits has, with some exceptions (Hurt & Thomas, 2009), focused on identifying the affects a PMO may have on project performance, and there is only limited understanding on how a PMO relates to project business and how the “parent organization” profits from the PMO.

In this paper, we examine how the project management office (PMO) in project business and project-based firms benefits the parent organization, how these benefits are created, and how what kinds of factors enable and prevent the realization of the benefits. Based on the existing literature, we first describe contingent interplay between PMO functions, organizational priorities, and PMO benefits. We argue that PMO benefits are not universal in nature but are moderated by the organizational priorities. We then report on a comparative study of PMOs in three project-based firms.

Analysis of Existing Research on PMOs

Existing research and studies have put enormous efforts into defining and clarifying the concept of PMO. The fact that researchers have not been able to develop a unified and commonly accepted definition for a PMO reflects the complexity of the phenomenon that is studied. The Project Management Institute (PMI) defined a PMO as “An organizational body or entity assigned various responsibilities related to the centralized and coordinated management of those projects under its domain. The responsibilities of the PMO can range from providing project management support functions to actually being responsible for the direct management of a project” (PMI, 2004). Another study defined PMOs as “an organizational entity established to assist project managers, teams and various management levels on strategic matters and functional entities throughout the organization in implementing PM principles, practices, methodologies, tools and techniques” (Dai & Wells, 2004). Pellegrinelli and Garagna (2009) said that “PMOs are organizations’ responses to their needs and environments—unique structural arrangements designed to fulfill a specific purpose.” In a similar vein, several attempts have been made to identify the functions and to classify PMOs based on the services, structural characteristics, or organizational level in which they are embedded. For example, Hobbs (2007) identified through empirical research 27 functions for PMOs ranging from report statuses to upper management to recruitment, selection, and salary definition for project managers. Dai and Wells (2004) identified six categories of PMO functions: developing and maintaining project management standards and methods; developing and maintaining project historical archives; providing project administrative help; providing human resource staffing assistance; providing project management consulting and mentoring; and providing or arranging project management training.

In this research, we define the project management office as an organizational entity that supports the management of a project-based firm, management of external customer delivery projects, and/or management of internal development projects. Prevalent literature makes distinctions between single project PMOs and multiple project PMOs (Pellegrinelli & Garagna, 2009). Single project PMOs are established to support the manager of single project entity, whereas multiple project PMOs are dedicated to support project management practices in several projects. In this study, we focus on the latter type of PMOs, those that are set up to serve several projects in the organization.

In order to provide holistic understanding on the current state-of-the art in PMO research, we have reviewed focal PMO studies between 2004 and 2009 on project management offices and the main contributions of each study (Table 1). The review shows that the understanding of PMOs is still in its early phases, even if PMOs have been a reality in many firms for several decades (Kerzner, 2003). The results of the reviewed studies (Table 1) reveal three interesting qualities related to PMOs. First, characteristics of PMOs seem to differ according to organizational context (Hobbs & Aubry, 2008). Second, the PMO is an interception or network of relations that connects an organization's strategy, structures, and projects (Aubry, Hobbs, & Thuiller, 2007). Third, the form and functions of a PMO co-evolves with the larger organizational system in which it is grounded (Pellegrinelli & Garagna, 2009; Hobbs et al., 2008). All these observations indicate that PMOs are inherently embedded in the surrounding contextual environment. This conclusion is supported and clarified by other studies. For example, Aubry et al. (2008) showed how PMOs evolve and are part of the organization's development process. Another study explains this evolvement by suggesting that organizational tensions are a major driver for change in PMO functions and structures (Hobbs et al., 2008). Taking all the important findings and observations from the existing studies, we offer the following questions: What are the elements in the context that affect the shape, form, and functions of a PMO and how should organizations design their PMOs?

Hobbs and Aubry (2007) proposed that PMOs need to adapt their functions to both organizational and strategic contexts. In their later article, Hobbs and Aubry (2008) studied the effects of organizational context on PMOs. From the eight proposed indicators, they found that the following four had statistically significant relationships with PMO characteristics: the type of project customers, form of organizational structure, level of project management maturity, and supportiveness of organizational culture. In addition, Pellegrinelli and Garagna (2009) emphasized the meaning of context in understanding the nature of PMOs through arguing, “PMOs are organization's responses to their needs and environments – unique structural arrangements designated to fulfill a specific purpose”. They proposed that the focal points of departure in understanding the form of PMOs are the nature of business in which the organization is engaged and the role of projects and programs in achieving business goals (Pellegrinelli & Garagna, 2009). The previously mentioned arguments seem to imply that the functions and structure of the PMO not only should but also need to be aligned with the logic of the organization's business in order for the PMO to be beneficial for the parent organization.

Research Problem and Research Question

The existing studies seem to emphasize that PMOs are inherently embedded in their surrounding organizational environment and co-evolve with the organization. Even if it seems evident that there is a strong linkage between PMO and its business context, we still have relatively little understanding of the mechanisms that connect organizational context to PMO functions and PMO functions to the benefits that organization will gain from PMO functions. The existing understanding on change drivers behind PMO structure and services is important and valuable, but it does not provide necessary advice for organizations to design their PMOs in forms of PMO functions. In order to understand and study this complex phenomenon, we have formulated the following research question: To which extent do strategic priorities and project priorities determine PMO functions and the related benefits from the PMO?

We approach this research question in this article by developing a conceptual framework and applying that framework in three project-based firms.

Table 1. Overview of Recent Studies on Project Management Offices

Introduction of the Research Framework

Previous research has proposed that characteristics of PMOs are dependent on the organizational context (Hobbs & Aubry, 2008). PMOs are organizational responses to their needs and environments (Pellegrinelli & Garagna, 2009) and serve as connecting instances between an organization's strategic priorities, structures, and projects (Aubry et al., 2007). In practice, this means that PMOs need to align their objectives and functions with the organization's needs and priorities in order to achieve expected benefits and operate efficiently (Hobbs & Aubry, 2007; Hill, 2004).

In order to clarify the prevalent academic discussion on PMOs, we have created a conceptual framework (Figure 1) that explains how strategic priorities, PMO functions, and the PMO are related. Our framework also includes concept project priorities that are expected to moderate the relation between PMO functions and PMO benefits. The content of the different concepts in the model are explained in the following:

Strategic priorities portray the logic of the competitive advantage of a firm. They include statements on how the organization competes and what that means from the operational perspective. The existing literature has identified several typologies that reflect the selected strategic priorities (see e.g., Porter, 1980; Miles & Snow, 1978; Treacy & Wiersema, 1995). In this paper, we adopt the typology by Treacy and Wiersema (1995). Their model states that in order to outperform competitors in the marketplace, a company must choose to focus one of the following: operational excellence, customer intimacy, or product leadership. None of these focus areas are exclusive to the others, but they can be complemented with other areas. Strategic priorities should define, however, which of the three options is the dominant one.

Project priorities describe the relative significance of different interrelated boundary conditions for projects, such as budget, schedule, quality, scope, and responsiveness to customer-driven changes. The priorities of these boundary conditions reveal the kinds of strategies projects adopt in order to achieve its objectives. For instance, having high importance in budget and quality restrictions may provoke the project manager to rather stretch the schedule or modify scope in order to meet quality and budget criteria.

PMO functions represent all formal and informal activities and practices in which the PMO directly or indirectly is engaged with projects. Hobbs and Aubry (2007) identified 27 PMO functions based on the empirical data and categorized these different functions into eight groups (Table 1). Examples of individual functions are report project status to upper management or monitor and control project performance (Hobbs & Aubry, 2007).

PMO benefits in our framework represent those benefits that the PMO produces for project business, i.e., business of project-based companies. The study assumes that benefits are highly context dependent and include those that affect the company's business or strategy directly (e.g., information on financial risks) and those that provide value for business indirectly through enabling successful execution of projects.

Figure 1. Interrelatedness Between Strategic Priorities, PMO Functions, Project Priorities and PMO Benefits

Our framework (Figure 1) assumes that organizational priorities reflect the focal aspect of an organization's business context. Strategic priorities determine which of the possible PMO functions are necessary for an organization to reach its strategic and business objectives. If the adopted PMO functions are aligned with the organizational priorities, a PMO will produce expected benefits for the organization. The alignment between strategic priorities and PMO functions moderate the achievement of PMO benefits. Thus, if PMO functions do not align with the strategic priorities the expected benefits are not realized and the legitimacy of the PMO is questioned in an organization. This will lead to the reconfiguration of the PMOs’ functions and structure. Our framework also assumes that the relation of PMO functions and PMO benefits is moderated by alignment between project priorities and PMO functions. This is to say that if PMO functions do not serve the needs of an organization's projects, the PMO's benefits are not fully realized.

Research Method and Case Companies

This research applies a case study method that is appropriate because boundaries between phenomenon (PMO) and the context (PBF) are not evident, and the study utilizes multiple sources of evidence (Yin, 1994). Furthermore, we decided to use multiple case studies that enable us to confirm our findings through theoretical replication logic (Yin, 1994). In case selection, we tried to find cases that would differ in their strategic priorities. Three cases were selected based on our a priori knowledge on their competitive strategies. Case alpha was known to compete with operational excellence, case beta with technological excellence, and case gamma with customer intimacy. The case companies are strongly dedicated to the growth of their business and their processes are project-oriented. Table 2 provides a summary of the case companies and selection criteria.

Description of the Case Companies

Case alpha is a defense and aerospace company with international operations that deliver its customers competitive solutions based on specialist expertise and partnerships to its customers. The company has approximately 3,400 employees. The business of the company is 70% to 80% project-based, with the rest of the turnover coming from the life cycle services. Project products are technology intensive and expensive. The typical duration of the project is more than three years with a budget over € 100 million, and a product life cycle of 20 to 30 years. Volumes in the industry are low, competition is harsh, and resources are scarce. Our analysis focuses on the project unit that owns and is responsible for the delivery of projects. The project portfolio of the project unit includes on average 15 concurrent projects. Each project manager is responsible for and reports to a vice project unit leader on the result and return of his or her project. The project office is incorporated into the project unit. Its structure in the case company is rather light and serves as a connecting instance between projects, supportive functions provided by the parent company, and business managers. The operating principle of the PMO promotes flexibility. It provides the same support and services for each project, but the use of these services and support is dependent on the content and needs of each project.

Table 2. Summary of Case Companies and Informants

Case beta is a leading supplier of solutions, products, and services in the mining and metallurgical industry. It has knowledge on all phases of the process for processing minerals to metals. It has over 400 employees, and the company operates worldwide. There are more than 2,000 plants that use beta's technology. Its expertise covers most metals, but we have focused on the base metals division. With its proprietary technologies and profound process knowledge, it has developed a number of benchmarking technologies, and it is in a position to offer customers an extensive range of products from equipment delivery to technology packages to turnkey project deliveries. The size of a typical project varies from €3 million to €1000 million, and business is mainly based on product or technology package project deliveries, although company has a strong focus in developing services business.

Case gamma specializes in automation and information management application networks and systems, field control technology, and life cycle performance services. The main customers for automation solutions are energy, power, and oil and gas industries as well as the pulp and paper industry. There are more than 3,000 employees in the company. In this study, we focused on the process automation system business segment in a selected market segment, where case gamma has been able to fast develop position in oil and gas industry. The size of the business in this segment is 10 to 20 projects per year with size varying from €0.5 million to €5 million. The focus with case gamma is to provide customers with products and services over the whole project life cycle. In the selected business segment, life cycle services are growing, but project-based deliveries still dominate business volume.

Data Gathering and Analysis

The data gathering process included several data collection mechanisms and was conducted in three phases. The connection of different data collection instruments and elements of our research framework is summarized in Table 3.

The objective of the first phase in data collection was to validate our a priori understanding on the organizations’ strategic priorities and project business priorities. In each case, the company person(s) responsible for project business was/were asked to complete a questionnaire in which he or she compared pair wise different statements (in standardized scale) related to strategy and project business. The analysis of the questionnaire data followed the logic of the analytical hierarchy process (AHP) that is used frequently in organizational decision making (Saaty, 2008). Analytical hierarchy process offers a methodology to define weights (or priorities) for different criteria that are then used in evaluating potential alternatives in decision making. The process includes the following three phases:

1. Respondents are asked to compare statement with other statements through pair wise comparisons using standardized scale.
2. Pair wise comparison matrix is formed.
3. Priority values are calculated (for calculations see Saaty, 2008).

The analysis of questionnaire data was executed for each case according to the proposed process. In the case of several respondents, final priorities (weights for statements) were calculated as a mean of individual weightings

Table 3. Connection Between Elements in the Research Model and Data Collection Mechanisms

In the second phase of the research, in-depth semi-structured interviews were conducted in each case. The objective of the interviews was to identify PMO functions that organizations employ, to analyze the role of the PMO in the organizations’ business, and to discuss the benefits that the PMO produces for the organization. During each interview, notes were taken and each interview was recorded and transcribed. The interviews’ data was then coded and analyzed. Individual case descriptions were formed for each case before cross-case analysis.

The third phase of data gathering comprised questionnaire survey that was send to projects managers. The purpose of this survey was to identify project priorities and analyze how important project managers perceive different PMO functions for their project success. The analysis of the questionnaire data followed the AHP process explained previously.

Strategic Priorities in the Case Companies

A priori understanding on the strategic priorities in the case companies was assured through interviews and pair wise comparisons of three statements that reflect different strategic approaches, respectively. In case alpha, the orientation towards one dominant strategic stance was weakest from the three cases. A priori understanding, however, got support from AHP comparisons where the relative importance of operational excellence got the highest weight (0.39). The second important strategic priority was customer intimacy (0.33), and the third most important was product leadership (0.28). Even the differences in priority weight are not enormous; the comparison process is reliable and shows the dominant strategy. In the interview with the vice president of case alpha, it was learned that the strategic priorities were as follows:

“At the moment, our orientation in R&D is towards more efficient solutions that at the same time satisfy our customer needs. But if we compare these two priorities (cost efficiency and customer intimacy), and we are to decide whether we change some component in our product to a technically better, more sophisticated one, I don't think we would in that situation change the part…you have to put these priorities in a certain time axis though. Now when we have a good and mature enough product, we need to have some reasonable period (in time), when we sell it as it is…the product needs to fulfill, however, the technical customer demands. If it needs to be technologically the most advanced one, is different I think, because that usually means that the costs are high and the price is too high as well” (Vice President, Case Alpha).

The interview results confirm and strengthen the outcome from the AHP analysis. They both show that at this moment, case alpha is engaged in operational excellence strategy. Analysis of the interview revealed another interesting observation as well. Case alpha seems to change its strategic priorities based on the maturity of its products. This would probably imply that these changes affect the PMO functions as well.

Case beta is a technological leader in its business segment. Both AHP comparison with the weight 0.62 and interview results confirm that the strategic orientation of the case beta is technology leadership.

“Our technological knowledge can bring additional value to the customer and gives us competitive advantage over large engineering companies who do not have deep technological knowledge. We can discuss with the customer complex technical problems and suggest solutions. We can, for example, provide customer performance guarantees, which our competitors can't usually do” (Director, Technology Transfer, Case Beta).

The business model of case beta was based on their dominant technological position, where small technology-based deliveries were appreciated compared to large delivery scopes with turnkey responsibilities. From a supplier perspective, they were low risk and had a usually reasonable margin. The ideal project case would first be to provide the customer basic design, which allows the customer to calculate feasibility of the project and to make the final investment decision. This approach reduces supplier risk and allows them to provide good pricing for the technology package. If a customer takes project responsibility, beta company can provide technological assistance during detailed design and site work supervision to ensure that everything is designed and implemented as planned from a technological point of view.

In case gamma, competitive advantage comes from being close to the customer. Based on AHP comparison, customer intimacy received by far the highest score (0.59). Technological leadership (0.25) was perceived as the second most important factor and little emphasis was placed on operational efficiency (0.17).

“Tailoring products and services to meet customer requirements is the most important factor. It is more important than having the most technologically advanced products, although we need to continuously demonstrate that technically our products are as good as our main competitors” (Managing Director, Case Gamma).

Case gamma has several large customers, for whom they have repetitive project deliveries, which are modified according project specific needs. Each customer has a dedicated sales contact and project managers, because an important part of the business is good personal knowledge of customer requirements and working methods during the project.

Project Priorities in the Case Companies

Project priorities reflect the management ideology possessed by the project managers. In this study, the project priorities were evaluated through pair wise comparisons of the following five project objectives/restrictions: adherence to budget, responsiveness to customer, adherence to scope, adherence to schedule, and high technical quality of the outcome.

In case alpha, adherence to scope was clearly the most important priority for project managers with an average 0.25 priority weight. The second priority was adherence to schedule, and the third was responsiveness to customer requirements. The two other priorities were clearly, on average, less important. High quality of outcome and adherence to budget had on average of 0.16 relative importance

In case beta, responsiveness to customer requirements was seen on average as the most important one with 0.24 relative importance. Adherence to schedule was seen, on average, as the second most important priority, and adherence to scope and adherence to budget were equally important priorities. Finally, high technical quality of the outcome was seen as least important from project priorities with an average of 0.17 importance.

The project managers in case gamma, as in case beta, seemed on average to value responsiveness to customer requirements highest with 0.26 relative importance. High technical quality was the second important priority in projects, and adherence to schedule was the third most important criteria. Adherence to budget was not seen on average as an important priority, and adherence to scope was seen as the least important priority in case gamma.

A closer look at the data revealed, however, that priorities seem to differ greatly depending on the project. This tendency could be detected in all three cases. The comparison of priorities in different projects shows that there was no clear pattern or dominant priorities that would be the most important characteristic for the case company. In other words, we could not find consistency in project priorities in any of these three companies. This is also seen in standard deviations that are relatively high compared to the average values of the priorities. Another observation from the project priorities is that only four projects in case alpha have clearly one dominant priority with a relative weight of 0.40 or more. In cases beta and gamma, none of the projects have single dominant priority that would have 0.40 or higher relative weight. This might be an indication of strategies in which projects need to balance between several almost equally important priorities.

PMO Functions in the Case Companies

The existing formal and informal PMO functions in the case companies were identified through interviews in each case organization. A summary of the most important PMO functions in each case company is described in Table 4. In case alpha, the PMO, or “project unit” as they call it, is closely embedded in the organizational structure. The vice president described the role and functions of the project unit, or the PMO, as follows:

“Rather than creating a strong (PMO) organization, we try to create functions, in which the PMO has role, entity, so that the PMO is integral part of the organization. In the PMO, we have the ownership of the project portfolio and from the support functions we only are responsible for collecting and formulating overall view of the situation… we aim to (support projects) through collaboration, i.e., from the organization's administration we get controller functions, system support, safety, and information security issues (for projects). Other project management support services that we provide through our management system… as I am the supervisor for (all) project managers, I am responsible for their skills and competencies (development). I am (in supervisor's role) also responsible for their results and achievements, and then we kind of have the single point of responsibility, for example, if we do not have enough skilled resources and project managers, to complete ongoing projects, I can directly (without contacting someone) go myself and acquire more” (Vice President, Case Alpha).

The project management office in case alpha seems to be integrating elements for different support services for projects. The PMO is devoted to building up administrative support and creating advantageous conditions for project execution. In addition, the PMO is responsible for cost structure in projects. In-depth and careful planning and follow-up of costs is extremely important in capital-intensive projects that are typical in case alpha. Following the projects’ situation and forecasts are part of the PMO's functions in case alpha. The PMO creates overall and holistic understanding of the organization's projects. The primary concern is to balance project portfolio according to profitability and risks. As the profitability is the main concern along with financial risks, efficient usage of resources is critical. Creation of overall understanding of portfolio of projects is highly participative and regular practice for all project managers.

“We cannot commit ourselves for sub-optimization…we need to look at the larger picture (an overall situation)…if we think about the development function of our PMO, we sit down together with all project managers, and spend half a day in every month in order to understand what is the overall (resource usage) situation in projects) …by doing this we avoid resource conflicts between projects. Of course it requires open culture, and because people (project managers) tend to have their own goals. It is good to know what priorities we have in this organization” (Vice President, Case Alpha).

The interview revealed that the role of the project management office in case alpha seems to include two underlying focal objectives: to ensure efficient usage of resources in projects and to follow and manage actively project risks and profitability.

In case beta, functions usually associated with the project management office were integrated with management, and case beta did not have a separate project management office. Project support functions included normal administrative functions such as cost management and coordination of resources to increase project efficiency. A lot of emphasis in PMO in case beta was placed on supporting technology transfer to projects: support utilizing experiences from previous projects with similar technology and scope, project board meetings with personnel from different disciplines, use of technological review meetings and use of a product specialist to bring required technological knowledge to a project. Case beta had a large technological center to support the technology development, but small improvement to current technology and its applications were done in most of the projects as described by the project manager, “It is quite rare to have a project in which there is no product or process development activities” (Project Manager, Case Beta). However, many of these minor improvements were before implementation in the project first tested in the research centre. The findings from the case beta reveal that the principal focus of PMO functions seems to be in ensuring technological competence and technology transfer in projects.

Informants in case gamma did not recognize the term project office as such, but during the interviews, they described functions that have been associated with project management support. However, the main emphasis seemed to be organizational arrangement, which supports management of key customer accounts. For example, learning from a project occurred mainly between projects to some customers, “If we do more projects with the same customer, they are usually rather similar and we can copy and use experiences from previous projects” (Head of Project Management, Case Gamma).

In order to create and maintain close customer relationships, sales managers, project managers, and key resources were usually dedicated to specific customers. Senior management of the case organization spent most of their time to strengthen customer relationships.

Alignment of Strategic Priorities and PMO Functions

Alignment of strategic priorities and PMO functions were evaluated based on the interview data and questionnaire responses in each case. Table 4 provides an overview of strategic priorities, the most important PMO functions, and their alignment in each case company. In case alpha, the AHP process results and interview data show clear dominance of operational excellence as a strategic priority. In operation excellence strategy, the focus is generally on low costs, standard quality, and standardized service. The same emphasis can be easily identified from the PMO functions mentioned in the interviews. From the mentioned PMO functions, the majority promotes for cost efficiency in resource usage. For example, the cost monitoring function, follow-up and reporting on project profitability, monitoring of financial risks, optimization of resource allocation in project portfolio, support in resource acquisition, and solvency of resource conflict are all functions put into place to support operational efficiency in projects. In addition, the vice president of the project unit in company alpha mentioned cost efficiency of resource usage and project organization as one of the key success factors in project business. He describes the cost efficiency in projects through following example:

“…in the project execution phase we try to build project organization as efficient as possible and using the time we have in most efficient way…for example, we try to minimize concurrent projects in order to minimize resources we need in projects…in fact if we do things concurrently, they will probably all be delayed due to necessary set up time when changing task…” (Vice President, Case Alpha).

In addition to the interview, the business managers in case companies were asked to compare the importance of five different success factors characteristics for project business. The analysis of the comparisons followed the AHP process described in the Methods section. In case alpha, resulting relative importance of the success factors were as follows: flexible project model (0.13); competent project employees and project managers (0.29); active learning from projects (0.09); efficient usage of resources (0.40); and supportive project culture (0.10). These priorities confirm the findings from the interview data and support the view that efficient resource usage seems to be the dominant priority of PMO functions and well aligned with the strategic priority of operational excellence.

In case beta, technology leadership was identified as a dominant strategic priority. In the interviews, product data management and technology support from product managers was seen as key functions to ensure that latest technological solutions are applied in the projects. According to the interview, “Product managers participate in different parts of the project process starting from development of a quotation to project implementation. They ensure high quality of technological solutions and are able to convey experiences from other projects… Also project managers are to certain extent dedicated to specific technologies, which makes them very competent to discuss with customer” (Director, Technology Transfer, Case Beta).

In spite of strong organizational support, the technological competence of project managers and other employees was regarded very high, as shown in the relative importance of success factors of project business (0.36). Case beta has also a strong project culture (0.19), which is demonstrated, for example, with well functioning arrangements for having strong project reporting and follow-up practices and steering groups that have monthly meeting to discuss project progress. The relative importance of other three success factors were as follows: flexible project model (0.19); active learning from projects (0.12) and efficient usage of resources (0.15). The findings indicate that in case beta PMO functions support technological competence that is used to promote product leadership strategy. Thus, strategic priority and PMO functions seem to be well aligned in case beta.

Case gamma was customer oriented and had developed strong organizational arrangements to support flexibility and learning with each key customer. The strategic priority of customer intimacy is implemented in case gamma through establishing strong organizational and personal relationship with customer. Project managers were given quite a lot of responsibility, and they usually managed all delivery projects with same customer. Managing director provided continuous support for maintaining strong customer relationships with each customer. Interestingly, as in case beta, competent project managers and project personnel was seen as key project business success factor (0.32). This was supported by parent organizations training programs about generic project management practices as well as technology, which were complemented with market segment and geographical area based training programs. The culture that supports project-business was seen one of the more important factors for project success with 0.25 relative importance. Case gamma had for long a long time served as a link between standardized operations in the parent company and customer having specialized needs and way of operating. The efficient usage of resources was perceived relatively important as well (0.23), whereas active learning from projects (0.14) and flexibility in the project model (0.07) were not seen as important factors. The dominant strategic priority, customer intimacy, in case gamma seem to be aligned with the focus of PMO functions as many of the observed PMO functions promote customer engagement and customer-oriented culture in projects.

Alignment of Project Priorities and PMO Functions

The evaluation of alignment of project priorities and PMO functions was based on the logical reasoning and direct observations from the case data. The evaluation was done first by one researcher and then confirmed by another in order to increase the reliability of our interpretations on data. Table 5 provides an overview of project priorities, dominant focus of PMO functions, and their alignment in each case company.

In case alpha, project offices support functions promote cost efficiency and efficient usage of resources as shown previously. We reasoned that in project priorities cost efficiency would imply high importance in either adherence to budget to avoid cost overruns, adherence to scope in order to avoid extra costs, or adherence to schedule in order to avoid concurrent work inefficiencies. In case alpha on average adherence to scope seems to be the number one priority among the five investigated options (Table 5). Further analysis of the individual project priorities in case alpha indicate that from the 13 projects, five evaluate adherence to scope as the most important priority, one evaluates adherence to budget as the most important priority, and two projects consider adherence to schedule as most important priority. The priorities of these eight projects can be interpreted to be aligned with the priorities of PMO functions. The remaining five projects seem to employ strategies that are adverse to what PMO functions support. For example, 2 of the 13 projects in case alpha indicate that their number one priority is high technical quality of the project outcome. Another three projects seem to evaluate responsiveness to customer demands as their number one priority. These five previously mentioned projects are employing strategies that are not completely in line with the purpose of functions that PMO provides. Thus, we conclude that there is only partial alignment between PMO functions and project priorities in case alpha.

Table 4. Summary of Strategic Priorities. the Most Important PMO Support Functions and Alignment Between Strategic Priorities and PMO Functions

In case beta, support functions focused on maintaining technological competence in each project, which allowed the organization to respond difficult process related challenges in the project. We reasoned that in project priorities this would indicate emphasis on high technical quality of the outcome. On average projects in case Beta, however, seem to favor responsiveness to customer requirements (0.24) more than high technical quality of the outcome (0.17). Analysis of the individual project priorities in case beta shows that from the three projects studied, two indicate that their number one priority is responsiveness to customer requirements. One project in case beta seems to advocate slightly different strategy, having adherence to schedule as the most important priority. The small number of project cases limits our conclusions. However, based on the interview indications and results from AHP process we are entitled to conclude that none of these projects seems to fit completely with the purposes of PMO functions, which are set in place to advocate high technical and technological quality of project's products.

Only priorities from two projects are available in case gamma. However, even these two cases reveal similar observations that in case alpha. The averaged priorities calculated from two projects propose that responsiveness to customer requirements would be number one priority with relative importance of 0.26. However, more in-depth investigation on individual projects draws slightly different picture. The first project in case gamma evaluates responsiveness to customer requirements as first priority in project. This is nicely aligned with the objectives of PMO functions that support tailoring services according to customer needs, and engagement of deep customer relations. Another project, however, evaluates adherence to schedule as its first priority and high technical quality as second priority. In this case, the priorities of the second project do not seem to be completely aligned with the purposes of PMO functions to engage projects to responsiveness to customer needs.

Although it is difficult to make any strong conclusion based on the limited amount of data, it seems that there is only partial alignment between PMO functions and project priorities in cases alpha and gamma. In case beta, the priorities of the projects do not seem to be aligned with the PMOF.

PMO Benefits

The benefits of the PMO were analyzed mainly from a business perspective in this study. In case alpha, the vice president of the project unit identified three specific benefits from PMO functions. He compared the situation of the company before having PMO functions in place and after having implemented them some time ago. The first and most important benefit is savings that are earned by executing projects efficiently. “These savings,” he says, “go directly under the line” (meaning company's result). Then he added that the second and extremely important benefit is to have analyzed understanding of the project business and project portfolio. The value added in this overall view is that the firm's management board gets a picture of business risks and understanding on what issues need specific actions or decisions. The third benefit is that the PMO gives is that it connects project decisions as part of logical and interrelated entity. The vice president explained, “We used to do decisions on projects that were not aligned with the previous decisions made in the same meeting.” The visibility on projects profitability and risks combined with the clear priorities enhances the quality of business decisions. Case alpha reveals that PMO functions enable the firm to better integrate their business knowledge and thereby achieve competitive advantage and avoid financial risks that are critical in business that is project based and capital intensive.

In case beta, projects received strong support from the organization with respect to technological solutions offered to the customer. This allowed it to differentiate from competitors and avoid fierce competition based on project price. For example, it could offer its customer additional value, which was demonstrated by performance guarantees, and main competitors could not give to their customers. A high level of technology allowed the organization to deliver low risk technological solutions with good margin. “Competing engineering firms often must buy core technology from a supplier like us” (Director, Technology Transfer, Case Beta).

In case gamma, the most important factor in doing business in the market segment was a capability to create a strong customer relationship through successful project deliveries. It requires competitive pricing and good technology, but in a quite mature industry, it was difficult to use them to differentiate from competitors. Learning from a previous project with the same customer allowed us to maintain good customer satisfaction and enable more cost efficient project deliveries.

In order of significance of the PMO for each case company, we asked those interviewed to evaluate how important the PMO is for the success of their business on a scale of 1 to 5, with 1 not being important at all and 5 being highly important. In all cases, the project management office was seen as very important for the business (case alpha, 5; case beta, 4.5; and case gamma, 5). Even if the responses might be slightly biased based on their responsibilities in companies, they still give some indication on the focal and established role of project management offices in project-based firms.

Moderating Effects of Alignments

In the analysis, so far we have been able to demonstrate through interview data that in the three investigated cases PMO functions are aligned with strategic priorities (SP) and PMO functions benefit case organizations (PMO benefits). Thus, the moderating effect of alignment between SP and PMOF seems to fit with our data quite well. As our cases do not provide possibility to examine the effects of not aligned cases we discuss and justify the moderating effect through secondary data, i.e., utilizing results of existing empirical studies that support strongly our argument (see e.g. Hobbs et al., 2008; Aubry et al., 2009; Hurt & Thomas, 2009). For example, the study of Aubry et al. (2009) provides good data for understanding this phenomenon. They reported 35 unique drivers behind PMO change in 17 cases. We reviewed these factors and clustered them according to how many of them would be logically related to change in organization's strategic priorities. From the identified change factors causing change in PMO, we reasoned that external factors (economic factors, such as production or consumption of goods; industry or market factors; political factors, such as change in government policies; and major changes in customer relations) would have strong relation to strategy and change in them would eventually lead to change in strategic priorities.

In addition, from the internal change drivers such as new strategy, new CEO, reorganization, a new executive board member, or a new owner or merger were reason to have major implications on organizational governance and goals and thereby those factors were reasoned to be logically linked to change in strategic priorities. Moreover, we reasoned that client and stakeholder relations and business performance issues might be also closely related to strategic priorities in organizations. Altogether, for 12 change factors from 35, we could find a strong logical linkage with strategic priorities. In addition, weak linkage to strategic priorities could be expected to found in issues such as new innovative ways of doing business. The analysis of secondary data seems to imply that changes in PMO functions are often related to changes in strategic priorities. Moreover, it is expected that in many cases strategic priorities in fact define the objectives and functions that PMO provides (Aubry et al., 2007). Thus, even if the changes in PMO are fundamentally caused by the reasons discussed above, we argue that their relation to changes in PMO functions is not as direct as suggested, but mediated by strategic priorities of organization. This means that change in PMO functions follows the changes in strategic priorities of the organization. Moreover, as long as PMO functions as aligned with the strategic priorities of the organization, PMO will produce benefits to the organization through supporting the implementation of stated strategy (strategic priorities), as showed our case data. In case of misalignment between PMOF and strategic priorities, PMO functions are not perceived strategically important by the organizations and PMO's role and real benefits are questioned, as can be seen from Hobbs and Aubry (2007).

In order to survive, PMO is then forced to adapt itself into existing demands and expectations (strategic priorities) and thereby change the focus of its functions to serve strategic needs of the organization. The described relation between strategic priorities of the organization, PMO functions, and PMO benefits imply that alignment between SP and PMOF will moderate the relation between PMOF and PMO benefits. This is to say that PMO benefits are greater when PMO functions are aligned with the strategic priorities of the organization.

The moderating effect of alignment of PP and PMOF were studied by categorizing all 18 examined projects in three cases into two clusters. The first cluster included nine projects whose strategy was aligned with PMO functions and the second cluster included nine projects whose strategy was not aligned with the PMO functions. Then we compared the importance of nine different PMO functions (modified from Hobbs & Aubry, 2007) on achieving project success (as part of PMO benefits) in between these two categories. The small amount of projects in clusters prevents us to draw any statistical conclusions on the differences between clusters. However, as expected, we found that project managers’ perceptions on PMO functions importance for their projects success differ on average between the clusters. Surprisingly, we found that when evaluating the importance of nine PMO functions, seven from nine project managers whose project priorities do not align with PMO functions perceived that the project management office functions are more important for their project success than the project managers whose project priorities are aligned with PMOF.

In many of the comparisons, the standard deviations were so high that we cannot draw any reliable conclusions. However, answers for two items seemed to have rather consistent opinions: coordination, prioritization, and resource allocation for projects, and resource recruitment, evaluation, and compensation in projects. In both of these functions, projects with unaligned priorities (PP-PMOF) perceived these PMO functions on average more important for project success than aligned projects (PP-PMOF). The result is rather surprising, but partly confirms our initial idea that project priorities have moderating effect between PMO functions and PMO benefits. The findings indicate that PMO unlike the expected may benefit more for those projects whose priorities are not aligned with the purpose of PMO functions. In these types of projects, project managers may apply their own strategies for the project and utilize PMO functions in a way that they see would best serve the purposes of a project.

Table 5. Summary of Project Priorities, Dominant Focus of PMO Support Functions and Alignment Between Project Priorities and PMO Functions

Discussion and Conclusion

In our study, the focus was on understanding how project-based firms organize their internal activities to support external customer project deliveries. Specifically, we examined how the firm's strategic priorities influence the way PMO functions are organized and the benefits received from PMOs. We chose three project contractor firms with mature project management cultures as source of empirical data. The research question of this study was the following: To which extent do strategic priorities determine PMO functions and how are they organized?

The findings from the three case firms confirmed that strategic priorities seem to be an important contextual factor that determines what kinds of functions and services the PMO provides. The results of our study show that the alignment of strategic priorities and PMO functions have a positive impact on business benefits. The PMO benefits are highly dependent on the business and strategic priorities of the project-based firm. Moreover, PMOs seem to enhance the success of individual projects. However, as project priorities seem to vary depending on the project, the importance of different PMO functions for project success varies depending on the project in question. Our findings propose that the benefits of PMO in project-based firms are dependent on how well PMO functions are aligned with the strategic priorities of the organization. In addition, the results of our study reveal that project managers perception of PMO benefits is dependent on the alignment between PMO functions and project priorities.

Moreover, our findings suggest that in firms with high project management maturity, the PMO seems to be integrated with organizational structures. Indeed, any of the three project-based firms did not recognize the PMO as a familiar term in their organization, although they all were very professional by running business through delivery projects, with good responsibilities and practices for supporting multiple individual projects at any time in the firms’ organizations. Due to this, despite the non-use of the term PMO, we identified project support arrangements in those three case companies. From a research point of view, this suggested that in order to understand the role of project support functions in mature project-based firms the focus should be placed on investigation of organizational arrangements through which project support is organized rather than specific organizational entity such as PMO.

Our results are well aligned with the existing studies that bespoke for interrelatedness of organizational strategic context and PMO functions (Hobbs & Aubry, 2007). In addition, the results of our studies are supported by the emerging discussions on contingency thinking in project management and in project-based firms (Artto et al., 2008; Shenhar, 2001). Our study provides valuable insights for practitioners when setting up or changing their PMOs. The alignment framework used in the study provides an effective tool when designing PMOs or assessing the benefits of existing PMOs. Analyzing the priorities through the AHP process has already nurtured several valuable discussions and insights in the case organization examined in this study. Therefore, we encourage other companies with a PMO to do this exercise.

Since our study was exploratory in nature and aimed at increasing the understanding of PMOs in the light of new conceptual model, the results should be treated cautiously for several reasons. First, the small amount of cases reduces the generalizability of the results. Second, even if we found solid reasoning and empirical evidence for the most part of our conceptual framework, we could not test empirically the moderating effect of alignments between organizational (strategic and project) priorities and PMO functions on PMO benefits. Third, our study does not consider explicitly the effects of immature project management benefits from the PMO. Finally, this study focused on project-based firms; therefore, even if the framework is general in nature, we cannot guarantee its applicability as such in other types of organizations.

Potential areas of further research that emerged include examination of the effects of alignment between strategic priorities and PMO functions in less mature project environment and in other types of project environments. In addition, our study revealed that there is a need to study further the role of PMOs as knowledge integration entities and sources of competitive advantage in project-based firms.