Do you really want your PMO to survive?

EM2014INP01

 

Abstract

Project management offices (PMOs) should play a significant role in each organisation. Despite a common theoretical understating of their importance, practice reveals that a number of PMOs are struggling to survive in organisations.

In this paper, I explain the complicated nature of PMOs. Based on the empirical studies, I discuss PMO survival rates and give advice on what should be done to avoid shutting down a PMO within four years of its initiation.

My observations on the nature of PMOs and their domains are based on the literature review. Furthermore, I present empirically grounded worldwide studies on the sample of more than 400 PMOs in order to discuss the PMO survival rates and key functions that a PMO should serve from the company's needs perspective.

Finally, in the conclusion, I give some advice on what you should focus on if you want your PMO to survive. This advice is split into crucial things to do and recommended sets of PMO functions that are important from the entire company's perspective. Following this advice should enable you to significantly increase the survival rate of your PMO.

Keywords: project management office (PMO), survival, success, empirical study, worldwide

Introduction

Companies are managing an increasing number of projects on a yearly basis in modern times. The significant increase over the last two decades has generated new challenges that companies need to deal with. In response to that need, the notion of a project management office (PMO) was developed (Kerzner, 2004). At the very beginning of the PMO concept formulation, it looked like just a new body in the company's organisational structure that should undoubtedly help companies manage projects (Bucur & Onete, 2008). However, with the passing of time, it looks like there are still a lot of doubts about as to whether a PMO is needed in the organisation (Molyneaux, 2005). This situation results in many misunderstandings about the purposes of PMOs and whether they add value or not. This scepticism influences decisions concerning continuous changes in PMO structures, leading, in quite a significant number of cases, to the definite cancellation of the PMO. In this paper I discuss the survival rates of PMOs and suggest some ideas for what to do if you really want your PMO to survive longer than four years after its initiation.

The Complicated Nature of Project Management Offices

PMOs are important entities in each company operating in the multi-project environment (Spalek, 2012). They can also be part of a temporary project or program where “programs are grouped within a portfolio and are comprised of subprograms, projects, or other work that are managed in a coordinated fashion in support of the portfolio” (PMI, 2013, p. 30). In the latter case, PMOs are temporary bodies that are dissolved when the project or program ends. In this paper, I focus on the PMOs that should intentionally be a part of the organisation and of other departments (e.g., accounts) and should assist with different phases of company operations such as planning and execution (Aubry, Richer, Lavoie-Tremblay, & Cyr, 2011; Martin, Pearson, & Furumo, 2007; Zhang & Bi, 2010).

One of the difficulties in investigating PMOs is the fact that they can have many different names. In their paper, Hobbs and Aubry (2008) outline different names associated with PMOs. The most common is project management office (59%), then program management office (12%), followed by project support office (7%). It is significant that the remaining 22% of PMOs operate under a variety of different names. Among them are, but not limited to: project office, project management group, project management center of excellence, and directorate of project management. Therefore, it is better to focus on the function that the PMO should serve instead of its name. This is in line with the approach of several authors who discuss PMO constructs (Andersen, Henriksen, & Aarseth, 2007; Singh, Keil, & Kasi, 2009; Spalek, 2013).

The Domains of PMOs

PMOs can serve different functions. They can operate on the operational, tactical, or strategic level. Moreover, they can support data gathering needs, serve as more of a control function, or act as a data repository for the decision makers (Ajayi, Iyagba, & Ogunsanmi, 2007). Additionally, they can take an active role in managing projects, from single ones to complex project portfolio management (Beringer, Jonas, & Gemunden, 2012). In general, we can distinguish the following major domains in which PMOs operate, as shown in Exhibit 1: data management, standards and tools, human resources, managing projects, and portfolio management. Within each domain, we can have sets of detailed functions that a PMO can serve.

 

Exhibit 1. Five domains in project management office operations

Regardless of the function that a PMO serves, some authors (Aubry, Hobbs, Müller, & Blomquist, 2010; Hill, 2004) argue that a PMO needs to evolve all the time, adapting to external conditions that can differ in nature. These factors have to be considered as coexisting with any domain or function of a PMO.

Investigating PMO Functions

The Research Method

To investigate the functions most common in PMOs, I conducted a study on more than 400 cases of PMOs worldwide using web-based questionnaires. The participants of the study were managers of different levels with a deep knowledge of the PMO story within their companies. The study focussed on both currently operating and cancelled PMOs in the organisation. The companies participating in the study were active in the following regions: Europe (45%), North America (37%), Asia and the Pacific (25%), Latin America (15%), and the Middle East and Africa (12%).

During the data-analysis process, only internal PMOs that were intentionally part of the company and served ongoing operations related to managing the projects were chosen. There were no temporary entities by design, and if they were shut down, it was due to previously unplanned decisions. As a result, the data from 403 PMO cases was further analysed.

Survival Rate of PMOs

The data analysis confirmed, to some extent, the findings from the other studies (Aubry, Müller, Hobbs, & Blomquist, 2010; Liu & Yetton, 2007; ESI, 2011; Forrester Research, 2011) that there is a significant number of PMOs struggling to survive in their “toddler age.” This study revealed that a PMO encounters many obstacles and complications up to the fourth year after its initiation. However, based on the data analysis, it was noticed that this period could be split into “up to one year after start-up” and “two to four years” time frames.

The data analysis revealed that nearly 15% of all studied PMOs were shut down within four years of their initiation and that 33% of them were closed within the first year, in comparison to 55% shut down two to four years from their initiation. This shows that if your PMO is among the struggling ones, it somehow has an 88% of chance of being closed within a four-year period.

It is very difficult to determine the common factors influencing the shutdown of PMOs because of the complex nature of different PMOs, environments, companies, etc. However, assuming the operation of PMO over a four- year time frame is an undertaking in itself, some commonalities can be noted. As a result of that assumption, the influence of the following factors on the survival rate was investigated:

  • Establishing the success criteria of PMO at or before its start-up. This could be a set of measurable goals you want to achieve by implementing a PMO in the company.
  • Definition of the scope of work that a PMO should be doing. This goes beyond general expectations that a PMO should improve the managing of the project. It is more about the shape of the PMO: strategic, tactical, operational. What domains it should cover: data management, standards and tools, human resources, managing projects, portfolio management or more specifically, what kind of detailed functions or needs it should fulfil.
  • Top management support seems to be obvious; however, it is often quite an understated factor.
  • The PMO's initiator, meaning whose idea it was to fund and run the PMO within the company. In this case, the initiators came from the following groups: top managers, project managers, middle managers, or an external source (e.g., consulting company).

Defining Success Criteria of a PMO

It is remarkable that, as the study showed, the success criteria was established at the PMO's start-up in only 38% of cases. Furthermore, in more than 51% of cases, it was definitely not done at all, while in nearly 11%, the answer was “don't know.” The low number of cases with set success criteria is surprising, especially if we consider the establishment of the PMO as a project itself. This could be a result of not treating the establishment of the PMO as a project or just ignoring the need for establishing success criteria.

However, regardless of the reason for not setting up the success criteria, its lack was linked with shutting down the PMOs within a four-year period. No significant differences were observed in the “up to one year” and “two to four year” periods.

Defining the Scope of Work of a PMO

Nearly 60% of companies defined the scope of work of a PMO before or during its early initiation phase, and 25% definitely did not. This result is better than defining the success criteria; however, it is far from the stated expectations. The failure to set clear functions that a PMO will be serving results in difficulties in the future objective assessment of PMO outcomes against expectations.

Moreover, the data analysis showed that the lack of defining scope of PMO work influenced the shutting down of the PMOs, both in the “up to one year” and “two to four year” perspectives.

Top Management Support

There is a plethora of literature on the topic of top management support as a must-have factor in any project's success (Cooper & Kleinschmidt, 1994; Elbanna, 2013; Flynn, Schroeder, & Sakakibara, 1995; Jeyaraj, Rottman, & Lacity, 2006; Krishnan & Ulrich, 2001; Thong, Yap, & Raman, 1996). Moreover, Young and Poon (2013) argue that, under specific circumstances, this is the only sufficient factor for project success. Despite the common knowledge of how important top management support is, the surveyed companies reported that 83% of their PMOs had the support of top management at their initiation phase, while more than 11% had no support and nearly 6% “don't know.”

Not surprisingly, almost all of the “no-support” PMOs were shut down within four years of their start-up, out of which 90% were closed in the first year.

PMO's Initiator

The study revealed that the PMO was established in the company in most cases as the initiative of top management (66%). Middle managers and project managers were the initiators in 27% and 23% of cases, respectively. In 13% of cases, the idea to establish a PMO came from an external consulting company.

Data analysis revealed that the biggest chances of survival that PMOs have were that there was joint initiative coming from top managers and project managers, a broadly similar situation was observed for the combination of top management and middle management. PMOs have slightly lower chances of surviving when the initiator is solely one or more top managers. It is remarkable that all combinations of initiators without top management were highly unlikely to survive after their first year. Furthermore, it was noticed that top management support came in tandem with the top manager as co-initiator or initiator.

Exhibit 2 demonstrates a PMO's initiators by management groups, organisations, or individuals.

Exhibit 2. Initiators for establishing a PMO within the company's structures

PMOs’ Most Wanted Functions

The initial set of functions was determined based on the literature review and then narrowed down by analysing the responses from the companies. As a result, the core set of functions associated with PMOs that survived beyond a four-year period of time, called “matured PMOs” for the purposes of this paper, was determined:

  • To support the company strategy (business need).
  • More projects on time, within the budget, and within the scope (program/projects efficiency need).
  • Gathering data on project status (reporting need).
  • Access to historical data obtained and lessons learned (data repository need).
  • Maintain the project manager's career path, including training.
  • Prioritisation of the projects (project/program portfolio management).
  • Setting up and enforcing standards/methodology/templates.
  • Setting up and enforcing project management tools and techniques.
  • Support contractual negotiations.
  • Support project planning activities (e.g., resources, risk, etc.).
  • To handle the costs of running projects.
  • Following existing project management trends (copying others).

The respondents were to state which functions are served by the PMOs in their companies. The data analysis shows that there are groups of functions on the following incidence levels:

  • 60-70%: extreme importance group I of factors.
  • 45-55%: high importance group II of factors.
  • 30-40%: medium importance group III of factors.
  • 10-25%: the lowest importance group IV of factors.

Group I

The PMO functions indicated most frequently by the respondents were those related to:

  • Increased project efficiency in classic terms of time, money, and scope (understood as the iron triangle or triple constraints). This need addressed by the companies shows that by establishing PMOs, the company expects that the efficiency of ongoing projects will increase in classic terms, which could also be called “hard results” of the projects, as opposed to the “soft results” (e.g., client satisfaction).
  • Presenting reports from ongoing projects. This function is mostly dedicated to reporting the project's status from different perspectives: project manager, project sponsor, project client, and other types of stakeholders.
  • Setting the project management standards. This expectation concerning a PMO is about choosing the project management standards—for example, A Guide to the Project Management Body of Knowledge (PMBOK® Guide) or Organizational Project Management Maturity Model (OPM3®)—as the reference for managing projects in the company. It can also result in developing one's own standards, an approach that is also applied in organisations. In some cases, the solution is a mixture of adapted and homemade standards. In addition, the expectation is that a PMO will enforce the usage of standards and strongly encourage adherence to procedures related to project management. Moreover, it should control the application of standards and search for potential areas of improvement.

Group II

The following functions were determined to be of high importance to the company:

  • Portfolio management: This is the ability to analyse all projects run by a company and prioritise them according to their importance for the entire company. It is also about grouping them under specific labels, in order to improve the decision-making process and the deployment of limited resources.
  • Planning support: The company expects that the PMO would support the planning process of the new projects in order to improve costs, time, and scope estimates. The PMO, having a clear picture of all projects planned and run by the companies, should also forecast the resources that will be needed in the future. This means that the single project planning process should include input from the other project plans and possible interactions with running ones.
  • Supporting the company strategy: This expectation shows that top management sees the PMO as the body that should act as a supervisor for project goals and that these goals and their achievement support the overall company strategy. As the strategy can be changed, the PMO should react accordingly and advise on which project should be modified or cancelled, or whether a new one should be launched to secure continuous support for the company's strategy.
  • Providing project management tools: Once the project management standards are set in the company, the expectation is that a PMO will choose and apply the specific tools (mostly IT tools) to increase efficiency in distribution, application, and overall control over usage of standards in the company.

Group III

The following functions were determined to be of medium importance to the company:

  • Data repository: This could be used primarily as a record of the projects executed by the company. Above all, it should be used as a source of information regarding previous projects, which should be structured and used to support future projects’ activities. Through proper project knowledge management, the efficiency of new projects should be a continuous improvement process.
  • Cost cutting: This function resembles part of the iron triangle. In fact, it is dedicated not only to controlling the costs of a single project. It is more about trying to implement new solutions that should result in continuous cost reduction in running projects, with an even bigger reduction in forthcoming projects. This ability is especially important during times of economic downturn.

Group IV

The following functions were determined to be of the lowest importance, although still significant, to the company:

  • Career paths: The PMO should establish and run professional development paths of individuals. This should include acquiring certificates such as Project Management Professional (PMP®), or scheduling training sessions in keeping with the different needs of project participants. The sessions should include “soft skills” training as well. However, the primary expectation of a PMO is to systematically coordinate and deliver the core “hard competencies” training first.
  • Procurement management: This refers to establishing some procurement standards and supporting the projects executed by the company.
  • Following trends: This function is an interesting one, as it shows that some managerial behaviours are just copied from the competitors’ practices. What's more, this is also observed in PMO practices.

The frequency of occurrences of specific functions in PMOs is shown in Exhibit 3.

 

Exhibit 3. Functions served by the matured PMOs in the investigated companies

Conclusion

PMOs, especially for those companies operating in the multi-project environment, seem to be important entities. However, the practical applications of PMOs revealed several limitations. Due to the complicated and non- homogenous nature of PMOs, their detailed success factors are hard to determine. Therefore, in the study, I tried to focus on core factors or functionalities that could be crucial to or increase the probability of the PMO's survival rate. The study showed that it is possible to point out some commonalities, irrespective of the type of PMO, that should influence the survival of PMOs. However, those factors were possible to determine for the four-year perspective from PMO start-up, with a division into “up to one year” and “two to four year” periods.

Based on the study results, I can recommend that if you want your PMO to survive, at first you should definitely include the top management in the initialisation process and gain their support; otherwise, your PMO will most likely be shut down within a year of its start-up. Then, you should define your PMO success criteria and scope of work. If you neglect to do this, your PMO will most likely be cancelled within four years of its initiation.

The previously mentioned factors are crucial ones. Furthermore, if you want to increase the probability of your PMO lasting longer than four years, you should (a) Focus on increasing projects’ efficiency, creating status reports, and setting and enforcing project management standards; (b) Implement the project portfolio, actively support the planning phases of projects, establish mechanisms supporting the implementation of the company strategy through the projects’ goals realisation, and provide PM tools with a special focus on IT ones; (c) Establish and run a data repository for benefiting from lessons learned and implement cost-cutting procedures; (d) Manage career paths, establish procurement management, and finally just allow the convention of copying competitors’managerial behaviours in the project management area.

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© 2014, Seweryn Spalek
Originally published as a part of the 2014 PMI Global Congress Proceedings – Dubai, UAE

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