Five ways to boost your and your PMO's value
Managing Director, ESI International-Asia
Many Project Management Office (PMO) directors want to provide value and actually think the value is based on their “inside-out” view of the world. The “outside-in” perspective tells a completely different story, one that for many unsuspecting PMO directors will have a very bad ending: their PMO will be disbanded and they will be looking for work. For the past two years, ESI International has conducted comprehensive global surveys of the state of the PMO, and has analyzed scores of others. For more than four years we have engaged PMO heads from every industry sector in roundtable events. And what we have found will startle, and educate, PMO heads in every geography and sector. In short, what you, as a PMO head, think you should be doing is, in fact, the last thing you should be spending your time on.
While many surveys generally cover the same old ground, our work looks at the PMO from many different perspectives. For example, we surveyed those who work directly for the PMO, as well as those who are impacted by PMO decisions. We have looked at the role of the PMO in training, the use of agile tools, the degree and value of coaching, and where a PMO falls on a maturity scale, as well as how to advance to the next level. Our multidimensional look at the PMO has yielded insight not found in most surveys.
This paper (and associated presentation) boils down the responses of more than 5,000 participants hailing from around the world and active in all industry sectors to the five things that you can do to make sure that your PMO is not only providing value, it is advancing your business in quantifiable and concrete ways that executives care about. We are able to pinpoint, with a very high degree of accuracy, where your time should be spent, with whom, and doing what kinds of things, to boost the value of your PMO. In so doing, you will also boost your own value.
Don't go into building a PMO blindly thinking that the techniques of the past are the keys to the future. Our research findings will give you a fighting chance to not only get off on the right foot, but you'll also go the distance.
Who Determines the PMO's Value?
It is clear from our work in the area of PMO startup and development that there are three key stakeholder groups that determine the PMO's value. They are the—
- Executive(s) under whose organization the PMO function and responsibility reside
- Project and program managers who either directly report to the PMO or who are heavily influenced by it
- Clients (internal or external) who are serviced by the project and program managers who deliver the new product or service resulting from their effort
The key question each PMO head has to answer is “what do each of these groups value?” In other words, what are they looking for from the PMO to facilitate their work and provide contributions to the organization? In our experience, PMO heads often fail to answer this question either because they think they know what each group needs, or they assume that all key stakeholder groups’ needs are the same. In fact, this is not the case.
The needs of the executive are entirely different from those of the project and program managers; in fact, the executive's perspective is actually more aligned with those of the clients than with the project and program managers, whose views tend to be somewhat more focused on the work effort itself rather than broad organizational gains. Thus, this difference of perspective is where we can look to gain helpful insight into ways that the PMO head can boost not only his or her own value in the organization, but the PMO's as well. In fact, the two are generally considered inseparable.
PMO heads must always keep in mind that the most important stakeholder is the executive; after all, it is the executive who supports the notion that a PMO is an important organizational asset and who provides the needed funding so that the PMO can hire the professionals necessary to its operations as well as invest in tools, processes, and methodologies to support organizational project management (Project Management Institute, 2013b). Without executive support, the PMO would not exist.
With this as our context and perspective, let's now review the five ways a PMO head can increase value to the organization while boosting his or her own value at the same time.
Number 1: Measure and monitor the PMO's performance on a regular basis
In ESI's most recent global survey on the PMO (2013), we were startled to learn that only 54% of project and program managers reporting directly to the PMO said that their PMO measured its own performance. Thirty-two percent said their PMO did not measure their performance, and an alarming 14% said they did not know if their PMO measured its own performance. It is difficult for us to comprehend that 14% of the project and program professionals who report directly to the PMO head did not know if their PMO measured its own value. Obviously, these are project professionals who are not in the communications loop as regards their own PMO's activities. Clearly, the PMO head needs to do a better job of communicating activities to the staff.
We see two problems here. First, every, and we mean every PMO should be measuring themselves on a wide assortment of metrics to see if they are providing value to the organization and key stakeholders. Second, it is absolutely imperative that all project professionals know whether their PMO is measuring itself, and if so, what metrics are being used. And, it is the clear responsibility of the PMO head to make sure everyone knows what those metrics are.
It is incomprehensible to us that a PMO can claim to be providing value to an organization if it doesn't measure itself. It's a data driven world today. Anecdotal evidence, “gut feeling,” and “hearsay” just don't count when a PMO head is talking to an executive. Executives want facts to make “data driven” decisions. A PMO head who cannot produce the facts will not be able to convince or persuade any stakeholder that the PMO is performing as planned. There is an old saying in the quality management business that goes something along the lines of “what gets measured gets done.” Measure your PMO and what you measure it on will get done. What are those metrics? Let's look at Number 2.
Number 2: Use the “right” metrics to measure and monitor the PMO's performance
We have defined three levels of metrics that a PMO head can use. While these are not presented as being exhaustive or all-inclusive, they can provide useful insight into various ways PMOs can measure their performance. Let's first look at Level 1, a favorite among many PMO heads.
Level 1 metrics include:
- Number of courses taken by each project and program manager
- Number of PMP®s or PgMP®s in the organization
- Use of a project management methodology
- Use of a project and program management (PPM) tool
Think about it. Do executives and clients really care about these metrics? Our experience and research suggest they do not. Yet, ESI's surveys repeatedly show that PMO heads find these very valuable. We do not disagree. Certainly, studies have shown that the use of a project management methodology can contribute to projects meeting their time and cost estimates, as well as having other beneficial impacts. However, we have come across few executives in our work who are consumed with whether project managers use a methodology. Executives expect that the project will be completed in accordance with the time, cost, and scope parameters, and will provide the anticipated benefits to the organization. Whether that project was delivered by a project manager with a PMP®, for example, is irrelevant to most executives.
Now let's look at Level 2 metrics. These can include:
- Reduction in troubled projects
- Better utilization of resources
- Improved processes
- Projects delivered to time and cost estimates
- Increased customer satisfaction
We are now getting closer to metrics that an executive would find of value. Certainly a client wants projects that run smoothly, that are completed to their satisfaction and in accordance with time and cost estimates. However, as helpful as these metrics are, they still fall short of what many executives say are real measures of business value.
What do executives want to measure? We call those Level 3 metrics and they include:
- Increased revenue and profit
- Speed to market (i.e., decrease in cycle time)
- Increase in market share
- Rising stock price and increase in earnings per share
- Lower costs of production
- Higher personnel productivity
- Improved quality
Given our assertion that executives are the most important stakeholders, doesn't it make sense to measure the PMO's performance on metrics they value? To state the obvious, of course it does. However, we realize that tying improved organizational project management to an increase in market share might be difficult. But that does not mean we shouldn't try. To quote J. LeRoy Ward, a colleague of mine, “when we have a PMO head bragging about how many project managers are using a PM methodology when an executive is looking for some level of financial return on the investment, we have people talking past each other. The loser in that game is going to be the PMO head EVERY TIME” (Ward, 2013).
To get started, the very least the PMO head should do to measure the value of the PMO is to ask the one key question that thousands of companies are asking right now of their clients and customers: “Would you recommend your company, product, or service to one of your friends?” This is the question that yields amazing insight according to Fred Reicheld in his popular book The Ultimate Question 2.0 (Reicheld, 2013). PMO heads can change this question to read: “Would you recommend your PMO to one of your colleagues?” I think many will be surprised by the results. It's a great way to begin a journey of measurement. As a PMO head, wouldn't you want to know if someone is willing to recommend you? Of course you would.
Number 3: Pay as much attention to the project and program managers you “influence” as much as you do to the ones who work directly for you
Again, ESI's most recent survey (2013) on the PMO reports that roughly 50% of the project and program managers who respond perform their duties under the influence of the PMO but do not have a direct line reporting relationship to it. As we know, matrix management can be tricky, and it certainly provides for an interesting dynamic in the relationship between a PMO head and those he or she influences throughout the organization.
Our surveys show that those project and program managers who are influenced by, but who do not work for, the PMO hold a more pessimistic view of the value of the PMO than those project professionals who report directly to the PMO head. For example, they provide a lower rating in each of the following categories than their counterparts who work directly for the PMO, and in some cases by a very wide margin. (ESI categorizes those project professionals who do not report directly to the PMO “Non-PMO-managed”).
Examples of certain areas that a PMO provides rated lower by Non-PMO-managed than PMO-managed project professionals are:
- Direct training in the use of methodology and tools
- Direct training in the “hard skills” of project and program management (e.g., scheduling and cost control)
- Training in “soft” project skills (e.g., leadership, critical thinking, team building)
When asked specifically who has questioned the PMO's value, more Non-PMO-managed professionals question its value than those who work directly for it. The data convinces us that one of the main reasons that Non-PMO-managed professionals are more pessimistic as regards the PMO's value is simple: the PMO head simply is not paying enough attention to these professionals. Comments in our surveys support this conclusion.
Non-PMO-managed professionals feel they are left to fend for themselves while their counterparts who work directly for the PMO are provided a wide range of support to help them in their demanding work. This is an area that PMO heads can quickly and easily remedy. By being more inclusive and reaching out to these professionals throughout the various business units, PMO heads can demonstrate their concern for the professional development of this group of people. People always respond very favorably when someone reaches out to them with offers of help and support, especially when it comes to the critical area of professional development.
The question is how to do it. This leads us to Number 4.
Number 4: The PMO should become the hub of professional development for all project and program managers.
ESI's surveys clearly reveal that many PMOs are not involved, to any great degree, in the professional development of the project and program managers in the organization. Even if that responsibility was not part of the original charter of the PMO, PMO heads are wise to interject themselves in this most critical aspect of PMO performance. Why? Well look at it this way: It is evident in our work with global Fortune 500 companies and large government agencies that one of the overriding reasons for creating a PMO was to improve project management practice in the organization. There are two components to quality improvement in project management: one is improving the quality of the project management process, while the second is the equally critical area of improving the quality of the project managers. That's where professional development plays a major role.
Even if the PMO head does not have explicit authority in the area of professional development, his or her goal of achieving an improvement in project management practice is illusory in the face of not being actively involved in the training of the project staff. It's the people who do the work, who execute the processes put in place by the organization, who cause one organization to excel at project management while another stumbles and falters.
What steps might a PMO head take to get started in this area? Here are some suggestions:
- Make a concerted effort to “own ” the core competencies and skills profiles for project and program management. If HR will not relinquish control, then make sure you work closely with them in this area. After all, if the right core skills are not defined, there is no basis for a structured and systematic approach to developing these professionals. Professional development will be ad hoc and may miss the mark completely.
- Provide equal training opportunities to both PMO-managed and Non-PMO-managed professionals. Not doing so creates a “two class” hierarchy of professionals that only promotes deep dissatisfaction in the ranks.
- Provide training in a wide variety of content areas important to project and program professionals. Do not simply focus on methodologies and tools training, areas where most PMOs spend their time. Executives among our clients lament the lack of leadership ability among the ranks of their project managers, yet ESI's surveys show that organizations provide far more training in the area of methodologies, tools, and the hard skills of project management than the “soft,” or leadership skills.
- Start softs kills training at the beginning of an individual's career. Most everyone can benefit by soft skills training, especially those new to project management, or indeed, the workforce itself. Colleges and universities educate students in the technical subject matter of their major interest. But little is done formally to develop an individual's leadership and interpersonal skills until they start their professional career.
- Measure training's impact. In a 2011 ESI survey (2011), only 20% of the respondents reported that the training offered by their PMO was measured for its effectiveness. Others reported that the only vehicle used to measure impact was the simple, and now outdated, end-of-course “smile” sheets. The discipline of measurement, especially as it relates to training, has advanced tremendously through the years. There are now ways to predictively measure ROI for training just weeks after the participant has attended a course. A PMO head who needs to demonstrate value to an organization had better begin using much more sophisticated tools to measure training's effectiveness than those instruments which ask questions such as: “How did you like the chocolate chip cookies?” or “Was the classroom temperature comfortable?”
- If your PMO is involved in PPM (project and program management) software selection and implementation, provide ample support and training in it. ESI's 2012 Global State of the PMO survey (2012) revealed that 88% of the PMOs responding have implemented PPM software in their organization. Yet, only 69% offered support in its use. What are the other 31% supposed to do when they need help? Organizations are leaving many people to figure it out for themselves by watching YouTube videos or “Googling” the problem. Others just say, “Read the user manual.” Software user manuals (whether hard copy or online) are laborious, complicated tomes whose sole purpose seems to be to discourage anyone from reading them. We need to give our project professionals a head start in using this sophisticated software. They need training at the outset and support along the way. If a PMO head is expecting value from the use of a PPM tool to help make the case for the PMO, it has to be used properly.
There are other ways that a PMO head can support the professional development of the project and program managers in the organization. For example, the PMO head might advocate that all project managers earn the Project Management Professional (PMP)® or any other of the many project management credentials available in the marketplace. He or she could form communities of practice within the organization and hold monthly meetings and annual events. Perhaps he or she could sponsor a Project of the Year, or Project Manager of the Year award to generate excitement, and a bit of healthy competition, in the ranks.
The objective with any of these activities is to promote and advocate for project management in the organization. In short, each PMO head should engage in activities that are designed to raise the visibility of project management, and those who practice it, within the company. By leading the charge, a PMO head will not only be promoting the good work of project management, he or she will be seen as a valuable member of the leadership team in the organization. After all, isn't that what the job of being a PMO head is all about?
Number 5: Accelerate the maturity of your PMO as fast as you can
A nominal maturity model for PMOs was developed over many years to help diagnose issues with PMO development and for purposes of our global state of the PMO surveys. The model has six stages, as follows (each successive stage indicates a higher degree of PMO maturity):
Stage 1: Gather and report on project progress data
Stage 2: Develop and enforce standards, methods, and processes
Stage 3: Manage, allocate, and control project management resources
Stage 4: Manage dependencies across multiple projects and/or programs
Stage 5: Track and report on project ROI and benefits realization
Stage 6: Manage the health of the project portfolio
A majority of respondents tell us that their PMO has fulfilled many of the activities required in Stages 1 and 2, have made progress in Stage 3, but are not making much headway on Stages 5 and 6; and yet, that's where most of the value is for senior executives and the organization itself. The fact is many PMOs struggle to increase their maturity level.
There are many reasons for this of course. Resources, finances, and competent personnel, all play a role in advancing a PMO's maturity. Those PMOs that are found at the higher end of the maturity scale tend to be those to which all the project and program managers report directly. An executive who expects a high level of PMO maturity but who only has a PMO consisting of two or three individuals will never achieve his or her objective.
For those PMOs who have the necessary human, physical, and financial assets, we recommend that they work hard to advance as quickly as possible to Stages 5 and 6. We believe Stage 6, portfolio management, is the absolute “sweet spot” for PMO value because there's a lot an organization can gain by having a PMO fully immersed in portfolio management activities.
The Project Management Institute (PMI) has uncovered through its research that 62% of projects at organizations that describe themselves as highly effective in portfolio management met or exceeded expected ROI. The institute further reported that in organizations where managers focus on strategic as well as departmental goals, 70% of projects meet or exceed their forecasted ROI, compared to 50% at organizations where managers rarely focus on strategic goals. More specifically, organizations that are highly effective in portfolio management demonstrated a 36% increase in completing projects on time, a 19% increase in completing projects on budget, an 18% increase in meeting projects’ original goals and business intent, and a 29% increase in forecasted ROI than those organizations who self-identified as being minimally effective at portfolio management (PMI, 2012).
It is very clear based on this research that a PMO head who accelerates maturity and becomes fully involved in the portfolio management aspects of the organization will undoubtedly demonstrate the value that executives not only need but also require.
A Final Thought
Every PMO is on a journey. The functions and responsibilities of a PMO evolve along with the organization in which it resides. Rarely does a PMO come into existence with the ability to satisfy all the requirements of the organization. It works towards each goal carefully and deliberately. However, we live and work in an age where time is being reduced to zero. Expectations are high, and there seems to be little patience or the ability to wait for results.
According to PMI, “PMOs are suffering an identity crisis” (PMI, 2013, p. 2). Accordingly, they need to transform themselves from tactical operatives to strategic thinkers and enablers, but still do the tactical stuff well! The five ways we have listed above can help bring about the transformation organizations are looking for in their PMOs. By following our guidance, a PMO head will increase the value of his or her PMO, and boost his or her own value at the same time. It's a win-win for everyone.
ESI International. (2011a). Global State of the PMO for 2011. Arlington, VA. ESI International.
ESI International. (2012b) Global State of the PMO for 2012. Arlington, VA. ESI International.
ESI International. (2013c) Global State of the PMO for 2013. Arlington, VA. ESI International.
Project Management Institute. (2012a). PMI's pulse of the profession™ in-depth report: Portfolio management. Newtown Square, PA: Author.
Project Management Institute. (2013b) PMI's pulse of the profession™ in-depth report: The impact of PMO's on strategy implementation. Newtown Square, PA: Author.
Project Management Institute. (2013c). The standard for portfolio management – Third edition. Newtown Square, PA: Author.
Reicheld, Fred. (2013). The Ultimate Question 2.0. Boston, MA: Bain & Company.
Ward, J. L. (2013). Why PMO directors and executives don't see eye-to-eye: It has to do with metrics. Retrieved from http://www.wardwired.com/2013/12/why-pmo-directors-and-executives-dont-see-eye-to-eye-it-has-to-do-with-metrics/
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© 2014, Raed S. Haddad
Originally published as a part of the 2014 PMI Global Congress Proceedings – Dubai, UAE