Project management office
solving the puzzle
Robert A. Carek MBA, PMP, Project Manager, Cleveland Clinic
This paper is intended to provide guidance for those going through the transition from conceptualizing a project management office to developing it into a best-in-class organization. It takes the reader through an in-depth analysis of the processes of business strategy formation to portfolio development. It also illustrates the interaction of the projects within the portfolios and business strategies and the roles of the portfolio/project management teams. This paper teaches one how to link projects to business strategy, apply and maintain project strategy alignment, and understand the importance of managing expectations and the interests of the project stakeholders.
Many papers and presentations discuss the theory of project management office (PMO) creation and strategic management, but few explain how it is actually done. Choosing what principles will guide your project management office will have a profound impact on the culture of the organization. Understanding and communicating these principles helps promote the value of your project management office and the services it can offer to the organization. Using this framework, you can begin to understand your position in the organization's overall strategy and develop a methodology that supports strategic thinking. All of this requires change---change in both personal thinking and organizational thinking and acceptance. As professional project managers and agents of change, we must employ those techniques that make us successful in the project arena and advocate the cultural changes that will be profound. The adaptation of project management principles does not stop there. The mystique surrounding portfolio management can be unraveled by a simple process of de-evolution. What is the value statement? Can projects of like value be grouped (and managed) together? How is this different than project management? Finally, as the project management office matures and gains credibility, it moves upstream to participate in the strategy formulation and project selection processes. Encompassing the entire maturity cycle of the project management office is a willingness to improve, backed by processes that allow for continuous improvement.
The Project Management Office
The first step in project management office creation is determining what the project management office is designed to be. This is usually captured in a mission statement. For example “Our Mission is to provide project and portfolio leadership using a proven methodology to support the realization of strategic and operational goals.” The mission statement provides the basis for the guiding principles. Our project management office was founded on the principles that organizations want all of the projects that they undertake to succeed, and that many people run projects---not just those with the title “project manager.” On the basis of these principles, we wanted to support the project managers in the delivery of their projects to help ensure success. We wanted to educate and train project managers and provide visibility to their successes. Finally, we wanted to capture the institutional memory in order to continue to improve the processes and tools employed by project managers.
Operationalize Your Principles
The next step is to operationalize the principles into an organizational structure that supports the project management office's goals. We called this the 4 Cornerstones of Success©. (Exhibit 1) The four areas provide a basis for a scope of services that are used to promote the project management office to the rest of the organization.
Many people mistakenly interchange mission and vision. A mission is a broad, enduring statement of where you are today. It defines your business scope, identifies unique competencies (how you will compete), and the purpose that the organization fulfills. A vision is the long-term expression of the organizational goals---where you want to be. Strategy then is helping to bridge the gap between where you are and where you want to be as an organization. The structures employed, such as a project management office, must then be properly aligned to fit in as the stewards of the strategy. After all, to evolve the business involves change, and project managers are the leaders of change. Strategy can be visualized in this way:
Strategy definitions should include a statement as to what value the organization can expect to achieve if the initiatives are successful. Strategic project management brings an entrepreneurial focus as projects are designed and managed to create value faster for the organization and its customers by aligning and creating this expected value. Our project management office supports this by using the 4 Cornerstones of Success© as a basis for providing service to the project managers.
Strategic Project Management
As the maturity level increases, the project management office plays an expanded role in the strategy definition. Although it is hard to believe, many companies would not be able to describe a success state for a project, much less something as broad and complex as an initiative. This is in large part due to a lack of fundamental project management skills by leaders within an organization. Part of the strategic development should include a realistic appraisal of what the environmental variables look like when success is achieved. If the goal is operational excellence, then what about the operational environment will indicate success? Being unable to answer that fundamental question makes it difficult to align a project and its expected value to any type of structured, strategic approach. If everything goes well, then you simply improve. If everything does not go well, you are faced with unmet goals, declining employee enthusiasm from a perceived lack of improvement, and no clear answers of how to bridge the shortcoming. This is not an instant change but one that requires leadership at the organizational level to shepherd this change.
“Change is the essence of life, be willing to surrender what you are for what you could become.” (Andy Warhol, date unknown)
Many books have been published on managing change, as one can imagine. They all share some commonalities that can be used to approach the changes necessary to build a project management office and to sustain the new environment in the organization. First, you must establish a sense of urgency surrounding the changes. People must understand why you are changing, and you need to role model the changed behavior. An executive does not send a positive message when he or she talks about the need for cost cutting while redecorating the executive offices. Second, you must do your homework. A stakeholder analysis is critical for understanding who has the most to gain and who has the most to lose from the changes being proposed. Form a group of stakeholders that includes people with many different viewpoints to increase acceptance of the message. Third, you need to establish roles and responsibilities so that everyone understands their importance. Being part of the change rather than having change imposed upon you can increase acceptance. Fourth, you should celebrate milestones. Too many times the small changes that are made are ignored, making further change more difficult. By visibly demonstrating the successes, you encourage people to want to be a part of the change and you reward those who have sacrificed to accomplish the change. Finally, you cannot overcommunicate. The worst thing that can happen is for your message to be overpowered by rumor and conjecture simply because the message has not reached everyone. Any perceived lack of executive commitment will invalidate any efforts.
Portfolio Management Defined
Now that you have defined your project management office, you understand your strategy and have primed your organization for change. What is next? You have to understand the process and management of portfolios. So what is a portfolio? To understand a portfolio you have to understand its position in the strategy development.
The vision is broken down into initiatives. Initiatives have a value associated with them, such as a 10% reduction in total help-desk calls response time. The portfolios then are the grouping of projects that will return a like value related to help-desk call reduction. One portfolio may be technology upgrade projects that provide automatic assistance or better tracking. Another portfolio could be process changes that will contribute to improvement. Lastly, you may use organizational restructuring to align your resources better to your problem areas. Each portfolio is expected to contribute a certain amount to the overall goal. For example, we can expect a 5% improvement through technology upgrades. Therefore, the other 5% improvement must come from the other portfolios. What if the technology upgrade projects result in only a 4% reduction? Now we have a basis and mechanism for identifying a shortfall and planning for a recovery. If a project can be defined as the sum of its expected benefits to the organization, then a portfolio can be described as the sum of the expected benefits of similarly grouped projects to the organization.
Portfolio Management Guidelines
Understanding the primary reason why you group projects together leads to further discovery. To manage a portfolio, you must have a process to select and deselect projects for a portfolio. This process has to be robust enough to provide a method to balance projects in terms of risk, cost, timing, resources, and so on similar to what you would do with an investment portfolio. Portfolios should follow guidelines, just as a project does. Each portfolio should have a governing body or steering committee. A defined process for selecting and budgeting portfolios needs to be established. Agreement needs to be obtained on the expected strategic and operational goals. The portfolio manager needs to execute the portfolio as efficiently as possible to achieve maximum benefit. Finally, portfolio managers should provide timely and accurate information back to stakeholders to aid in decision making.
Benefits of Portfolio Management
Project management provides value to organizations by applying specific planning processes to reduce the cost, risk, and time associated with implementation. Portfolio management does the same thing, but on a larger scale. The quality is increased by virtue of the better information now being delivered to the project managers on project goals and better visibility of aiding and competing projects. Portfolio management can also enable a more creative decision making environment for project managers by increasing their organizational awareness. This also makes for a more solution-focused work force by providing more visibility into projects and correlations to other projects within the portfolio.
Roles and Responsibilities
With so much value to be gained, one might infer that new positions would be required. However, this not the case. Consider that most line managers and directors are already tasked with improvement of their respective areas. Most of the committee functions are just maturing processes that usually exist in a more informal state in the organization. The addition of a portfolio manager, someone accountable for all of the projects, is the one position that may be most foreign to an organization.
Finally, we need to examine the performance of our portfolios. Just like gated reviews for projects, portfolio reviews are used to decide whether to continue or to cancel projects or portfolios. Additionally, reviews are used to gauge whether new projects need to be identified in order to achieve the expected benefits. During the review, you can validate the assumptions in the business plan, confirm the priority of the portfolio/project, and assess the overall performance. Similar to a project, a portfolio should be closed when it is either completed or cancelled, and the closure should follow a prescribed process that helps capture institutional knowledge that was not captured during the execution of the projects within the portfolio. Answering questions such as whether a portfolio achieved the value proposition, met its objectives, and delivered all it was supposed to can help with similar projects and portfolios in the future. Ultimately, client satisfaction is the goal. Customers should feel that their projects were given the same consideration and support as any other project in the organization, and communication should have been prevalent throughout the process.
Project Identification and Selection
How does a project get to be a project? This single, important question will drive the development of a mature defined process that in turn drives the alignment of projects with the organization's strategy. Once projects become visible to the project management office, the first step is an assessment of the project. Assessments may differ depending on the type of project management office. Strictly delivery project management offices may be interested only in the triple constraint. In our service-based project management office, the assessment of the project attempts to align the project with a portfolio and initiative and then to determine the level of support necessary to deliver the project successfully. This has to be done consistently so that there is a basis for variance in the level of support offered. Common criteria used can be complexity, strategic alignment, expected benefits, and risks. These factors are combined to generate a recommendation of support (Exhibit 5).
Now that the project has been requested and assessed, the information is given to the executives to determine the disposition of that project. Notice no distinction is given as to what qualifies as a project. Too many times the discussion in less mature organizations hangs up on “what is a project.” In our project management office, anything that is going to use resources should be made visible. Through the process that is created, those projects that may actually be service requests are offered less support and tracking anyway, so there is nothing to be lost from considering all such as projects.. The executives use the information to agree consistently on what support the organization (not just the project management office) needs to employ to improve the success of the project. The end result is a listing of the projects that are going on within the organization, the expected benefits, and who the players are. When you talk about alignment and visibility, this is what you mean! This list can be used to promote the successes and contributions that you are making to the organization. The recognition that results for employees can lead to better performance on the next project and the next.
So what are the project criteria and how do you choose them? In our project management office, typical criteria such as cost, time, and resource utilization are considered, but the key is the inclusion and recognition of the factor that complexity plays in determining the opportunity for success. For example, certain projects may not have a high cost, but will have very strict needs for the controlling of the costs it does have. This results in a higher level of complexity that will require a higher level of support. Or perhaps there is a level of executive involvement that will require higher-level client management. These atypical factors combine with the typical to provide a consistent litmus test for assessing and selecting projects and how best to group and execute them.
One point that cannot be overstated is that, without proper executive buy-in, the organizational changes necessary will not happen. Getting executives to buy in requires solid guiding principles that describe in detail what your project management office will do, and, more importantly, what your customers can expect. You should operationalize your principles by defining the organizational structure and processes that will be employed to assess and align projects correctly in as short a time as possible. Be prepared to demonstrate the concept of portfolios and how they help to manage numerous projects at an appropriate level, increasing success and satisfaction. Remember: this is a huge change and, as with all changes, you need to be the role model and the leader and to have the patience and flexibility to mold into your organization, becoming a successful project management office.
Project Management Institute. (2004). A guide to the project management body of knowledge (PMBOK® Guide)-Third edition. Newtown Square, PA: Project Management Institute.
The authors wish to thank Michele Kneisel, Ed Arvay, Jackie Seymour, and Kevin Mattingly. Without the hours of spirited discussion and debate, this paper could not have been written and your patience and experience are greatly appreciated.
© 2008, Timothy P. Brogan and Robert A. Carek
Originally published as a part of 2008 PMI Global Congress Proceedings – Denver, Colorado, USA